Courts Have Sometimes Failed Arbitration In India; Judicial Interference Often A Cure Without A Disease: Supreme Court

The Supreme Court has recently criticized the over-interference by the judiciary in the arbitration proceedings, where, despite having secured an award in 2014, the award holder even by 2026 has not received the fruits of the award.

The Court observed that while arbitration as a dispute resolution mechanism has not failed in India, judicial intervention has at times undermined its effectiveness, adversely impacting confidence in the arbitral process and the country's ease of doing business.

The Court cautioned that inconsistent judicial approaches in arbitration matters can have far-reaching consequences. It noted that a single doubtful precedent in the field of arbitration could cast a shadow on the viability of the mechanism in India and affect the country's business environment.

Underscoring the importance of judicial restraint in arbitral matters, the bench remarked that courts have often interfered in alternative dispute resolution mechanisms without sufficient justification.

The bench further emphasised that judges dealing with arbitration matters must remain conscious of the foundational objectives of the arbitral framework, including predictability and finality.

“Arbitration in India has not failed, however Courts sometimes have failed arbitration in India. Even the Government's role cannot be ignored. A single doubtful precedent in the arbitration field has the potential to cast a shadow on its viability in India and its impact on the ease of doing business in India. There is no gainsaying that judicial interference in alternative dispute resolution has often been a cure without a disease in India. In this context, it is high time that judges realize that certainty, uniformity and finality are also cherished values.”, observed a bench of Justice JK Maheshwari and Justice Atul S Chandurkar.

While dismissing an appeal filed by Madhya Pradesh Road Development Corporation Ltd. (MPRDC) against an arbitral award of Rs. 49 crores plus 14.75% pre-award interest passed in favour of Jabalpur Corridor Pvt. Ltd. (JCPL), the Court observed that the case illustrated how arbitration proceedings, intended to provide a speedy and final resolution of commercial disputes, can become prolonged due to excessive judicial intervention and relentless attempts by losing parties to reopen settled issues.

The dispute began after MPRDC terminated the concession agreement in July 2007. An arbitral tribunal subsequently held that the termination was unlawful and awarded termination compensation to JCPL. However, instead of the award attaining finality, the matter became embroiled in nearly two decades of litigation.

A central issue throughout the proceedings concerned jurisdiction. MPRDC repeatedly contended that the dispute should have been adjudicated under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983, rather than through arbitration under the Arbitration and Conciliation Act, 1996. This objection was raised before the arbitral tribunal under Section 16 and was rejected. Thereafter, the issue travelled through multiple judicial forums, including the District Court, the High Court, and even the Supreme Court, which ultimately declined to interfere. A review petition was also dismissed.

Despite these proceedings, MPRDC attempted once again before the Supreme Court to challenge the tribunal's jurisdiction, relying upon subsequent developments in the law, particularly the precedent of LG Chaudhary II (2018) 10 SCC 826, where it was held that disputes arising from works contracts covered by the Adhiniyam were to be adjudicated by the statutory tribunal and not by private arbitration under the 1996 Act.

The Court found this to be an impermissible attempt to reopen a question that had already attained finality between the parties. The Court said that it is a settled position of law that when a later judgment changes the legal position, disputes that have already attained finality between parties do not automatically reopen.

“the present attempt of the Appellant to once again reopen the same question at the stage of Special Leave Petition, especially by raising it for the first time in rejoinder affidavit constitutes a clear abuse of process and an impermissible attempt to indefinitely defer the finality of the arbitral award”, the court observed.

Further, the Court rejected the Appellant's objection regarding the excessive pre-award interest rate, noting that a contractually agreed pre-award interest rate cannot be challenged or form the basis for setting aside the arbitral award on the ground of violation of the Public policy of India.

“It is in the holistic consideration of facts and circumstances that we do not see any reason to interfere with the saddling of the contractual and statutory interest rate on the Appellant, which is completely just and fair. Reliance in this regard may be placed on the recent judgment of this Court in Sri Lakshmi Hotel (P) Ltd. v. Sriram City Union Finance Ltd., 2025 LiveLaw (SC) 1118.”, the court observed.

Foreign Investors Are Deterred On Delayed Enforcement Of Award

Taking a reference from another ruling in State of U.P. v. Reliance Industries Ltd. 2026 LiveLaw (SC) 502, the judgment authored by Justice Maheshwari observed that since the respondent company was a special purpose vehicle backed by Malaysian investors, foreign investors expect stability and predictability in the enforcement of contracts and arbitral awards. Excessive judicial interference, the Court warned, can adversely affect investor confidence and India's ease of doing business.

“…this Court while discussing treaty obligations of India under investment treaties had held that transactions involving foreign investments and international element, come with an inherent expectation of stability in rule of law. Stability and uniformity in application of our domestic laws, especially those pertaining to dispute resolution, bring about reliability which is an important metric for ease of doing business and it is this reliability which attracts foreign investment.”, the court said, referring to State of U.P. v. Reliance Industries Ltd (supra).

“we need to note that arbitral awards and processes have to be treated with open judicial mind. There remains a hesitancy still for some Courts to accept alternative dispute resolution mechanisms. This hesitance is rooted in suspicion of the process which often leads to re-examination of evidence and re-interpretation of contractual terms at the stage of Section 34 and Section 37. This Court has to ensure that arbitration is accepted as a norm, and its true essence, which is party autonomy and equality is realized. Finality and uniformity in judicial processes associated with or arising out of arbitration, therefore, are ideals which are to be progressively realized by the judiciary as a whole.” the court added.

In terms of the aforesaid, the appeal was dismissed.

“the Registry of the High Court is directed to release the deposited amount along with accrued interest to the Respondent within two weeks from the date of this judgment. So also, the Appellant is directed to pay the remaining amount along with the accrued interest within a period of three months to the Respondent herein.”, the court ordered.

Cause Title: MADHYA PRADESH ROAD DEVELOPMENT CORPORATION LTD. VERSUS M/S JABALPUR CORRIDOR PVT. LTD.

Citation : 2026 LiveLaw (SC) 580

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Appearance:

For Appellant(s) : Mr. R. Venkataramani, Attorney General for India Mr. K.M. Nataraj, A.S.G. Mr. Prashant Singh, Advocate General Mr. Harmeet Singh Ruprah, AOR Mr. Yashraj Singh Bundela, Adv. Mr. Anvesh Shrivastava, Adv. Mr. Kanishk Sharma, Adv. Mr. Karan Singh, Adv. Mr. Swastik Singh, Adv. Mr. Vinayak Sharma, Adv. Mr. Abhishek Pandey, Adv.

For Respondent(s) : Dr. A M Singhvi, Sr. Adv. Mr. Vivek Tankha, Sr. Adv. Mr. Rishabh Sancheti, Adv. Mrs. Padmapriya, Adv. Mr. Nishant Kumar, Adv. Mr. Inder Dev Singh, Adv. Ms. Priyansha Sharma, Adv. Mr. Chaitanya Sharma Vipul Tiwari, Adv. Mr. K. Paari Vendhan, AOR