Arbitration Wrap: 25 Important Judgments on Arbitration Passed in 2024

January 24, 2025
Arbitration Judgments

By Nihit Nagpal and Muneeb Rashid Malik

In 2024, the Supreme Court of India pronounced a series of noteworthy judgments pertaining to the Arbitration and Conciliation Act. This write-up provides a detailed summary of the important judgments pronounced by the Supreme Court during the year 2024, highlighting the significant legal developments in the field of arbitration.

  1. Can arbitration be optional even if agreement provides an arbitration clause?
    Tarun Dhameja v. Sunil Dhameja & Anr., Civil Appeal No. 14005 of 2024.
    The Supreme Court emphasized the mandatory nature of arbitration clauses, ruling that such clauses cannot be considered optional. Once parties agree to arbitration in their contract, invoking the clause does not require mutual consent at a later stage. It was held that:-“Reliance placed on the second portion of the arbitration 3 clause, which states that if any dispute arises, the arbitration shall be optional and the Arbitrator will be appointed by the partners with their mutual consent, is not to be read in isolation but in the context of the earlier portion of the arbitration clause. This means that the arbitration clause can be invoked by an aggrieved party who wants to take recourse to arbitration. To this extent there is mutual agreement. Thereupon, the arbitrator can be appointed by mutual consent of all parties. This does not obliterate or write off the arbitration clause. In terms of the Arbitration and Conciliation Act, 1996, where parties cannot agree upon a common name as to who will act as an arbitrator, the court can appoint the arbitral tribunal. The arbitration clauses have to be read in a pragmatic manner.”
  2. Can sufficient cause for extending arbitration timelines under Section 29A be interpreted to facilitate effective dispute resolution?
    M/s Ajay Protech Pvt. Ltd. v. General Manager & Anr., Special Leave Petition (Civil) No. 2272 of 2024.
    The Supreme Court underscored the importance of extending arbitration timelines under Section 29A to facilitate effective dispute resolution. “Sufficient cause” must be interpreted liberally to uphold the purpose of arbitration. It was held:“The meaning of ‘sufficient cause’ for extending the time to make an award must take colour from the underlying purpose of the arbitration process. The primary objective in rendering an arbitral award is to resolve disputes through the agreed dispute resolution mechanism as contracted by the parties. Therefore, ‘sufficient cause’ should be interpreted in the context of facilitating effective dispute resolution”…………. While the statute incorporates party autonomy even with respect to the conduct and conclusion of arbitral proceedings, there is a statutory recognition of the power of the Court to step in wherever it is necessary to ensure that the process of resolution of the dispute is taken to its logical end, if according to the Court, the circumstances so warrant. It is in this context that the Arbitration and Conciliation Act adopts the well-known language of limitation statutes and provides that the Court can extend the time if it finds that there is sufficient cause.”
  3. Are Referral Courts limited to prima facie examination of agreements?
    GOQII Technologies Private Limited v. Sokrati Technologies Private Limited, Civil Appeal No. 12234 of 2024.
    The Supreme Court held that the Referral courts, while deciding Section 11(6) petitions, must limit their inquiry to whether an arbitration agreement exists. Detailed factual inquiries into disputes should be left to the arbitral tribunal. It was held:“The scope of inquiry under Section 11 of the Act, 1996 is limited to ascertaining the prima facie existence of an arbitration agreement. In the present case, the High Court exceeded this limited scope by undertaking a detailed examination of the factual matrix. The High Court erroneously proceeded to assess the auditor’s report in detail and dismissed the arbitration application. In our view, such an approach does not give effect to the legislative intent behind the 2015 amendment to the Act, 1996 which limited the judicial scrutiny at the stage of Section 11 solely to the prima facie determination of the existence of an arbitration agreement.”
  4. Does unconditional withdrawal bar subsequent arbitrator appointment applications?
    M/s HPCL Bio-Fuels Ltd. v. M/s Shahaji Bhanudas Bhad, Civil Appeal No. 12233 of 2024.
    The Supreme Court ruled that withdrawing an application for arbitrator appointment unconditionally bars subsequent applications on the same cause of action under Order 23 Rule 1 of the CPC. It was held:
    “One important aspect that needs to be kept in mind while applying the principles of Order 23 Rule 1 to applications under Section 11(6) of the Act, 1996 is that it will act as a bar to only those applications which are filed subsequent to the withdrawal of a previous Section 11(6) application filed on the basis of the same cause of action. The extension of the aforesaid principle cannot be construed to mean that it bars invocation of the same arbitration clause on more than one occasion. It is possible that certain claims or disputes may arise between the parties after a tribunal has already been appointed in furtherance of an application under Section 11(6). In such a scenario, a party cannot be precluded from invoking the arbitration clause only on the ground that it had previously invoked the same arbitration clause. If the cause of action for invoking subsequent arbitration has arisen after the invocation of the first arbitration, then the application for appointment of arbitrator cannot be rejected on the ground of multiplicity alone.”
  5. How can seat be determined in International Arbitration?
    M/s Arif Azim Co. Ltd. v. M/s Micromax Informatics FZE, Arbitration Petition No. 31 of 2023.
    The Supreme Court moved away from the “closest connection test,” holding that express designation of a seat in the arbitration agreement is crucial. The seat determines the procedural law applicable to arbitration. It was held:“…….only one place has been designated in the arbitration clause, and such place has been categorically fixed inasmuch as there is no scope for the place designated as venue to change in terms of Clause 26 (Arbitration Clause), and furthermore, the said clause has explicitly stipulated that the curial law would be the UAE Arbitration and Conciliation rules and there being no other contrary indicia let alone a significant contrary indicia, we are of the considered opinion that the Dubai, UAE has not been designated merely as a venue but rather as the juridical seat of arbitration in terms of clause 26 of the Distributorship Agreement……..It is the seat of arbitration which determines which court will have exclusive jurisdiction and not vice-versa.”
  6. Are unilateral arbitrator appointments in Public-Private Contracts valid?
     Central Organization for Railway Electrification v. M/s ECI SPIC SMO MCML (JV), Civil Appeal Nos. 9486-9487 of 2019.
    The Supreme Court struck down clauses allowing Public Sector Undertakings (PSUs) to unilaterally appoint arbitrators, citing a violation of Article 14 of the Constitution. The judgment also emphasized the importance of impartial arbitration. It was held:

    1. “The principle of equal treatment of parties applies at all stages of the arbitration proceedings, including the stage of the appointment of arbitrators.
    2. The Arbitration Act does not prohibit PSUs from empanelling potential arbitrators. However, an arbitration clause cannot mandate other party to select its arbitrator from the panel curated.
    3. A clause that allows one party to unilaterally appoint a sole arbitrator gives rise to justifiable doubts as to the independence and impartiality of the arbitrator. Further, such a unilateral clause is exclusive and hinders equal participation of the parties in the appointment process of arbitrators.
    4. In the appointment of a three member panel, mandating the other party to select is arbitrator from a curated panel of potential arbitrators is against the principle of equal treatment of parties. In this situation, there is no effective counter-balance as the parties do not participate equally in the process of appointing arbitrators.
    5. Unilateral appointment clauses in public-private contracts are violative of Article 14 of the Constitution.
    6. The priniciple of express waiver contained in the proviso to Section 12(5) also applies to situations where parties seeking to waive the allegations of bias against an arbitrator appointed unilaterally by one of the parties.
    7. The law laid down in the present reference will apply prospectively to arbitrator appointmnets to be made after the date of this judgment. This direction applies to 3-member tribunals.”
  7. Can clarification on an award be issued after the Tribunal Becomes Functus Officio?
    North Delhi Municipal Corporation v. M/s S.A. Builders Ltd., Civil Appeal No. 1878 of 2024.
    The Supreme Court observed that an arbitral tribunal retains limited jurisdiction to clarify or correct any errors in its award under Section 33 of the Arbitration Act, even after becoming functus officio (when its mandate has ended). This ensures that ambiguities or clerical mistakes in the award do not hinder its enforcement. It was held that:-“…….we are of the view that the clarification sought for and issued by the learned Arbitrator would be covered by the expression unless another period of time has been agreed upon by the parties appearing in Section 33 (1) of the 1996 Act. This is a case where court had permitted the respondent to seek clarification from the learned Arbitrator beyond the initial period of 30 days where after the appellant fully participated in the clarificatory proceeding. Therefore, the present case would be covered by the above expression. In the circumstances, contention of the appellant that the learned Arbitrator had become functus officio and therefore lacked jurisdiction to issue the clarification cannot be accepted and is thus rejected.”
  8. Can costs be imposed on parties abusing Referral Court jurisdiction?
    Aslam Ismail Khan Deshmukh v. ASAP Fluids Pvt. Ltd. & Anr., Arbitration Petition No. 20 of 2019.
    To prevent misuse of limited judicial interference at the referral stage, the Supreme Court ruled that arbitral tribunals can impose costs on parties abusing the process. It was held:“In order to balance such a limited scope of judicial interference with the interests of the parties who might be constrained to participate in the arbitration proceedings, the arbitral tribunal may direct that the costs of the arbitration shall be borne by the party which the Tribunal ultimately finds to have abused the process of law and caused unnecessary harassment to the other party to the arbitration.”
  9. Do eviction orders bar arbitration of contractual disputes?
    Central Warehousing Corporation v. M/s Sidhartha Tiles & Sanitary Pvt. Ltd., SLP (C) No. 4940 of 2022.The Supreme Court clarified that eviction orders under the Public Premises Act do not preclude arbitration proceedings for disputes arising out of contractual obligations. It was held:-“…..The Public Premises Act authorises the ejectment of a tenant in unauthorised occupation of public premises and for consequential directions. The original lease as it were, validly subsisted till 11.09.2015 and the dispute between the parties related to the period commencing from 12.09.2012 to 11.09.2015, when the lease expired. The Public Premises Act would not even cast a shadow on this period. In so far as the dispute relating to this right of renewal is concerned, it depends on the terms of the agreement. The Public Premises Act neither bars nor overlaps with the scope and ambit of proceedings that were initiated under the Arbitration and Conciliation Act.”

     

  10. Does Section 14 of the Limitation Act apply to arbitration?
    Kirpal Singh v. Government of India, Civil Appeal Nos.12849-12856 of 2024.The Supreme Court clarified that Section 14 of the Limitation Act, which excludes time spent in pursuing proceedings in the wrong forum, applies to arbitration. This liberal interpretation ensures justice by preventing undue penalization of genuine procedural errors. It was held:-“When the substantive remedies under Sections 34 and/or 37 of the Arbitration Act are by their very nature limited in their scope due to statutory prescription, it is necessary to interpret the limitation provisions liberally, or else, even that limited window to challenge an arbitral award will be lost. The remedies under Sections 34 and 37 are precious. Courts of law will keep in mind the need to secure and protect such a remedy while calculating the period of limitation for invoking these jurisdictions.”

     

  11. Is Post-Award Interest mandated under Section 31(7)(b) of the Arbitration Act?
    R.P. Garg v. The Chief General Manager, Telecom Department & Ors., Civil Appeal No. 10472 of 2024. The Supreme Court ruled that arbitral awards must include post-award interest, as specified in Section 31(7)(b) of the Arbitration Act, irrespective of any agreement to the contrary. It was held:-“The statutory scheme relating to grant of interest provided in Section 31(7) creates a distinction between interest payable before and after the award. So far as the interest before the passing of the award is concerned, it is regulated by Section 31(7)(a) of the Act which provides that the grant of interest shall be subject to the agreement between the parties. This is evident from the specific expression at the commencement of the sub-section which says ‘unless otherwise agreed by the parties’………………So far as the entitlement of the post-award interest is concerned, sub-Section (b) of Section 31(7) provides that the sum directed to be paid by the Arbitral Tribunal shall carry interest. The rate of interest can be provided by the Arbitrator and in default the statutory prescription will apply. Clause (b) of Section 31(7) is therefore in contrast with clause (a) and is not subject to party autonomy. In other words, clause (b) does not give the parties the right to “contract out” interest for the post-award period. The expression ‘unless the award otherwise directs’ in Section 31(7)(b) relates to rate of interest and not entitlement of interest. The only distinction made by Section 31(7)(b) is that the rate of interest granted under the Award is to be given precedence over the statutorily prescribed rate. The assumption of the High Court that payment of the interest for the post award period is subject to the contract is a clear error.”

     

  12. Can awards be overturned for better Appellate Court views?
    Punjab State Civil Supplies Corporation v. M/s Sanman Rice Mills, SLP (C) No. 27699 of 2018.The Supreme Court held that the appellate courts cannot overturn arbitral awards simply because they believe their view is better. Awards can only be interfered with for statutory reasons under Section 34 of the Arbitration Act. It was held:“In the case at hand, the arbitral award dated 08.11.2012 is based upon evidence and is reasonable. It has not been found to be against public policy of India or the fundamental policy of Indian law or in conflict with the most basic notions of morality and justice. It is not held to be against any substantive provision of law or the Act. Therefore, the award was rightly upheld by the court exercising the powers under Section 34 of the Act. The Appellate Court, as such, could not have set aside the award without recording any finding that the award suffers from any illegality as contained in Section 34 of the Act or that the court had committed error in upholding the same. Merely for the reason that the view of the Appellate Court is a better view than the one taken by the arbitral tribunal, is no ground to set aside the award.”
  13. Are fundamental policy of law violations required to invalidate awards?
    OPG Power Generation Pvt. Ltd. v. Enexio Power Cooling Solutions India Pvt. Ltd., Civil Appeal Nos. 3981-3982 of 2024.The Supreme Court held that mere legal violations do not invalidate awards. The violation must be against the fundamental policy of Indian law. It was held:“The expression “in contravention with the fundamental policy of Indian law” by use of the word ‘fundamental’ before the phrase ‘policy of Indian law’ makes the expression narrower in its application than the phrase “in contravention with the policy of Indian law”, which means mere contravention of law is not enough to make an award vulnerable. To bring the contravention within the fold of fundamental policy of Indian law, the award must contravene all or any of such fundamental principles that provide a basis for administration of justice and enforcement of law in this country.”
  14. Are Non-Signatory Parties bound by Arbitration Agreements?
    Ajay Madhusudan Patel v. Jyotrindra S. Patel, Arbitration Petition No. 19 of 2024.The Supreme Court held that non-signatory parties may be bound by arbitration agreements if their conduct or relationship with signatory parties demonstrates intent to arbitrate. It was held:“The mutual intent of the parties, relationship of a non-signatory with a signatory, commonality of the subject matter, composite nature of the transactions and performance of the contract are all factors that signify the intention of the non-signatory to be bound by the arbitration agreement. An important factor to be considered by the Courts and Tribunals is the participation of the non-signatory in the performance of the underlying contract.”
  15. Is time extension under Section 29A maintainable even after statutory periods have lapsed?
    Rohan Builders v. Berger Paints, Special Leave Petition (Civil) No. 23320 of 2023.The Supreme Court clarified that time extensions under Section 29A are maintainable even after statutory periods have lapsed, ensuring continuity in arbitration. It was held:“The word “terminate” in Section 29A (4) makes the arbitral tribunal functus officio, but not in absolute terms. The true purport of the word “terminate” must be understood in light of the syntax of the provision. The absence of a full stop after the word “terminate” is noteworthy. The word “terminate” is followed by the connecting word “unless”, which qualifies the first part with the subsequent limb of the section, i.e. “unless the court has, either prior to or after the expiry of the period so specified, extended the period.” The expression “prior to or after the expiry of the period so specified” has to be understood with reference to the power of the court to grant an extension of time……. we hold that an application for extension of the time period for passing an arbitral award under Section 29A (4) read with Section 29A (5) is maintainable even after the expiry of the twelve-month or the extended six-month period, as the case may be.”
  16. Should Referral Courts Avoid Complex Fact-Based Inquiries?
    Cox & Kings Ltd. V. Sap India Pvt. Ltd., Arbitration Petition No. 38 of 2020.The Supreme Court held that the competence-competence principle requires referral courts to limit inquiries to the validity of arbitration agreements without delving into complex factual disputes. It was held:“As discussed above, the respondents have raised a number of objections against the present petition, however, none of the objections raised question or deny the existence of the arbitration agreement under which the arbitration has been invoked by the petitioner in the present case. Thus, the requirement of prima facie existence of an arbitration agreement, as stipulated under Section 11 of the Act, 1996, is satisfied………Once the arbitral tribunal is constituted, it shall be open for the respondents to raise all the available objections in law, and it is only after (and if) the preliminary objections are considered and rejected by the tribunal that it shall proceed to adjudicate the claims of the petitioner.”
  17. Should contractual provisions be examined in arbitration proceedings?
    Pam Developments Pvt. Ltd. v. State of West Bengal, Civil Appeal Nos. 9781-9782 of 2024.The Supreme Court held that arbitrators must thoroughly examine contractual provisions when adjudicating disputes to ensure awards align with the terms of the agreement. It was held:“In fact, High Court did what the Arbitrator should have done. Examine what the contract provides. This is not even a matter of interpretation. It is the duty of every Arbitral Tribunal and Court alike and without exception, for contract is the foundation of the legal relationship…The Arbitrator did not even refer to the contractual provisions and the District Court dismissed the objections under Section 34 with a standard phrase as extracted hereinabove.
  18. When should conversion rates from Foreign Currency Awards to Indian Currency be determined?
    DLF Ltd. v. Koncar Generators, Civil Appeal No. 7702 of 2019.The Supreme Court clarified that conversion rates for foreign currency awards should be determined based on when the award becomes enforceable. It was held:“The statutory scheme of the Act makes a foreign arbitral award enforceable when the objections against it are finally decided. Therefore, as per the Act and the principle in Forasol (supra), the relevant date for determining the conversion rate of foreign award expressed in foreign currency is the date when the award becomes enforceable….When the award debtor deposits an amount before the court during the pendency of objections and the award holder is permitted to withdraw the same, even if against the requirement of security, this deposited amount must be converted as on the date of the deposit.”
  19. Can Interest upon Interest be granted under the Arbitration Act?M/s D. Khosla & Co. v. Union of India, Special Leave Petition (Civil) No. 812 of 2014.The Supreme Court ruled that granting interest upon interest is impermissible under the Arbitration Act, 1940, ensuring clarity on the scope of interest awards. It was held:“….it is evident that ordinarily courts are not supposed to grant interest on interest except where it has been specifically provided under the statute or where there is specific stipulation to that effect under the terms and conditions of the contract. There is no dispute as to the power of the courts to award interest on interest or compound interest in a given case subject to the power conferred under the statutes or under the terms and conditions of the contract but where no such power is conferred ordinarily, the courts do not award interest on interest.”
  20. Should Judges apply their minds to Section 34 Arbitration Act challenges?Kalanithi Maran v. Ajay Singh, Petition(s) for Special Leave to Appeal (C) No.14936/2024.The Supreme Court held that judges hearing Section 34 challenges must carefully consider the grounds raised and limit interference to statutory parameters. It was held:

    “Interference with an arbitral award under Section 34 must be confined to the grounds which are permissible under the statute. But equally, the Judge hearing an application under Section 34 must apply their mind to the grounds of challenge and then deduce as to whether a case for interference within the parameters of Section 34 has been made out. Reading the order of the Single Judge, we find no discernible reason which has weighed with the Single Judge. There has been no consideration of the arguments which were urged before the Single Judge.”

  21. Do Cheque Dishonor Proceedings constitute continuing causes of action for initiating arbitration?
    Elfit Arabia v. Concept Hotel BARONS Ltd., Arbitration Petition (Civil) No. 15 of 2023.The Supreme Court ruled that Section 138 proceedings under the NI Act do not extend timelines for initiating arbitration. It was held:“The initiation of arbitration and criminal proceedings under Section 138 of the Negotiable Instruments Act 1881 are separate and independent proceedings that arise from two separate causes of action. Therefore, the institution of the proceedings under Section 138 does not imply a ‘continuing cause of action’ for the purpose of initiating arbitration, as erroneously contended by the petitioner.”
  22. Are Full & Final Settlement Disputes arbitrable?
    SBI General Insurance Co. Ltd. V. Krish Spinning, Civil Appeal No. 7821 of 2024.The Supreme Court held that disputes over whether contracts are discharged through full and final settlements remain arbitrable, allowing flexibility in resolving such claims. The ambit of examination under Section 11 of the Arbitration Act is restricted to the presence of an arbitration agreement. It was held:“Although ordinarily no arbitrable disputes may subsist after execution of a full and final settlement, yet any dispute pertaining to the full and final settlement itself, by necessary implication being a dispute arising out of or in relation to or under the substantive contract, would not be precluded from reference to arbitration as the arbitration agreement contained in the original contract continues to be in existence even after the parties have discharged the original contract by “accord and satisfaction.”…….The scope of examination under Section 11(6-A) is confined to the existence of an arbitration agreement on the basis of Section 7. The examination of validity of the arbitration agreement is also limited to the requirement of formal validity such as the requirement that the agreement should be in writing.”
  23. Does Section 4 of the Limitation Act Extend Arbitration Timelines?State of West Bengal v. Rajpath Contractors, Civil Appeal No. 7426 of 2023.The Supreme Court held that arbitration appeals filed beyond three months from an award’s issuance cannot invoke Section 4 of the Limitation Act for extension. It was held:“The three months provided by way of limitation expired a day before the commencement of the pooja vacation, which commenced on 1st October 2022. Thus, the prescribed period within the meaning of Section 4 of the Limitation Act ended on 30th September 2022. Therefore, the appellants were not entitled to take benefit of Section 4 of the Limitation Act.”
  24. Should Bulky Pleadings be filed in Arbitration Appeals?
    Bombay Slum Redevelopment Corporation v. Samir Narain Bhojwani, Civil Appeal No.7247 Of 2024.The Supreme Court discouraged filing voluminous pleadings, emphasizing concise and effective submissions in arbitration proceedings. It was held:“When members of the bar take up so many grounds in petitions under Section 34, which are not covered by Section 34, there is a tendency to urge all those grounds which are not available in law and waste the Court’s time. The time of our Courts is precious, considering the huge pendency. This is happening in a large number of cases. All this makes the arbitral procedure inefficient and unfair. It is high time that the members of the Bar show restraint by incorporating only legally permissible grounds in petitions under Section 34 and the appeals under Section 37.”
  25. Can High Courts Without Original Jurisdiction Extend Arbitration Timelines?
    Chief Engineer (NH) PWD v. M/s BSC & C JV, Petition(s) for Special Leave to Appeal (C) No(s). 10544/2024.The Supreme Court ruled that only courts with original civil jurisdiction can extend timelines under Section 29A(4) of the Arbitration Act. It was held:“The power under sub-Section (4) of Section 29A of the Arbitration Act vests in the Court as defined in Section 2(1)(e) of the Arbitration Act. It is the principal Civil Court of original jurisdiction in a district which includes a High Court provided the High Court has ordinary original civil jurisdiction… In this case, the High Court does not have the ordinary original civil jurisdiction… Hence, there is no merit in the Special Leave Petition. The same is, accordingly, dismissed.”
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