Arbitration: India
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Court judgements
Arbitration pact binds non-signatories too
Dec 7, 2023: The Times of India
‘Group Of Companies’ Doctrine Applicable: SC
TIMES NEWS NETWORK
New Delhi : The SC ruled that the ‘Group of Companies’ doctrine is applicable to arbitration proceedings in India and the definition of parties under Section 2(1)(h) read with Section 7 of the Arbitration Act includes both signatory as well as non-signatory parties.
‘Group of Companies’ doctrine provides that an arbitration agreement which is entered into by a company within a group of companies may bind non-signatory affiliates, if the circumstances are such as to demonstrate the mutual intention of the parties to bind both signatories and non-signatories.
A five-judge Constitution bench of Chief Justice D Y Chandrachud and Justices Hrishikesh Roy, P S Narasimha, J B Pardiwala, and Manoj Misra held that conduct of the non-signatory parties could be an indicator of their consent to be bound by the arbitration agreement and the requirement of a written arbitration agreement under Section 7 does not exclude the possibility of binding nonsignatoryparties.
It said the ‘group of companies’ doctrine should be retained in Indian arbitration jurisprudence considering its utility in determining the intention of the parties in the context of complex transactions involving multiple parties and multiple agreements. “At the referral stage, the referral court should leave it for the arbitral tribunal to decide whether the non-signatory is bound by the arbitration agreement,” the benchsaid.
“The underlying basis for the application of the group of companies doctrine rests on maintaining the corporate separateness of the group companies while determining the common intention of the parties to bind the non signatory party to the arbitration agreement,” it said
Unstamped arbitration agreements are enforceable: SC
Dec 14, 2023: The Times of India
A seven-judge Constitution bench of the Supreme Court overruled the verdict of a five-judge bench and held that arbitration clauses in unstamped or inadequately stamped agreements are enforceable. A bench of CJI DY Chandrachud and Justices Sanjay Kishan Kaul, BR Gavai, Surya Kant, JB Pardiwala, Manoj Misra and Sanjiv Khanna ruled that non-stamping or insufficient stamping of an agreement has nothing to do with the validity of the document as it is a curable defect. It said an arbitration agreement or its certified copy are not rendered void or unenforceable because it is unstamped or insufficiently stamped.
NEW DELHI: A seven-judge Constitution bench of the Supreme Court on Wednesday overruled the verdict of a five-judge bench and held that arbitration clauses in unstamped or inadequately stamped agreements are enforceable.
A bench of CJI DY Chandrachud and Justices Sanjay Kishan Kaul, BR Gavai, Surya Kant, JB Pardiwala, Manoj Misra and Sanjiv Khanna ruled that non-stamping or insufficient stamping of an agreement has nothing to do with the validity of the document as it is a curable defect.
It said an arbitration agreement or its certified copy are not rendered void or unenforceable because it is unstamped or insufficiently stamped. “Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable. Non-stamping or inadequate stamping is a curable defect,” the bench said.“An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The court concerned must examine whether the arbitration agreement prima facie exists. Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal,” the bench said.
India vis-à-vis the world
Singapore SC quashes ex-CJI Misra’s ‘copy-pasted’ arbitration award/ 2025
April 10, 2025: The Times of India
NEW DELHI: In a major embarrassment, Singapore Supreme Court has quashed an arbitral award against the special purpose vehicle (SPV) set up to manage dedicated freight corridors in India after finding that the tribunal headed by retired CJI Dipak Misra had copied 212 of 451 paragraphs from two earlier awards involving the same parties but on different issues.
Though the tribunal also comprised MP HC ex-Chief Justice K K Lahoti and ex-CJ of J&K HC Gita Mittal, a Singapore SC bench led by Chief Justice Sundaresh Menon said since the other two were not part of the earlier awards, it couldn't be ascertained whether they were even aware of Misra's "copy-paste" job.
The Singapore SC was firm that the copying compromised the integrity of the arbitration process and thus it did not adhere to the "principles of natural justice”.
The court said, "The patently substantial material derived from parallel arbitrations were extraneous considerations that hadn't been raised to the parties' attention. The material formed such a pervasive part of the award that it simply could not be overlooked. It was plain that it was neither contemplated nor agreed to by the parties that the award could be prepared by such a process. We agree with the (Singapore HC) judge there had been a breach of the fair hearing rule.”
By its award dated Nov 24, 2023, the Justice Misra-led tribunal had ruled in favour of the three firms which formed a consortium to bag the contract for Western Dedicated Freight Corridor in Aug 2015. A dispute arose because of the Indian govt's decision to raise labour wages, leading to the consortium demanding more money which was contested by the SPV, and the matter was referred to the Justice Misra-led arbitration tribunal.
Upholding the Singapore HC's decision to set aside the award, Justices Menon and Steven Chong in a 40-page judgment analysed the award, found it plagued by copying and in breach of the principles of natural justice. The Justice Menon-led bench accepted the SPV's arguments and rejected those of the consortium.
The SPV contended that Justice Misra, during the arbitration, had used extensive material derived from parallel arbitrations. "It is also common ground that the award was not drafted afresh. Rather, the parallel awards were used as templates, with adjustments made to account for what were thought to be the specificities of the arbitration," the Singapore SC said.
CJ Menon said the SPV had abandoned some of the submissions made in the parallel arbitrations and replaced these with new arguments unique to the arbitration at hand. "These new arguments arose because of the slightly different factual matrix presented by the arbitration: for instance, the difference in the length of delay between the issuance of the notification and the consortium's claim allowed the SPV to make additional arguments on estoppel," he said.
"Despite this, the parallel awards were used as templates in drafting the award to a very substantial degree. It is undisputed that at least 212 paragraphs from the parallel awards were retained in the 451-paragraph award. This has several implications," the Singapore SC said.
"We also consider that the expectation of equality between the arbitrators was compromised. While, as we have noted, there is no evidence as to what transpired between the members of the tribunal, it is known that the two co-arbitrators in this case were not privy to the parallel arbitrations. They would thus have had no direct access to any material or knowledge derived from those proceedings, but which appeared to have significantly influenced the outcome of the present arbitration. The integrity of the arbitration was, therefore, further compromised as a result," it said.
Courts can modify arbitral awards: SC, 2025
Dhananjay Mahapatra, May 1, 2025: The Times of India
New Delhi : Settling divergent judicial pronouncements on the scope of judicial interference in an arbitral award, a five-judge bench of Supreme Court said that to avoid protracted litigation, courts have powers to modify an award to sustain it by severing the ‘invalid’ portion from its ‘valid’ part rather than quashing it entirely.
A bench of CJI Sanjiv Khanna, CJI-designate B R Gavai and Justices Sanjay Kumar, K VViswanthan and A G Masih was grappling with a longstanding grey area — when the Arbitration and Conciliation Act, 1996, does not expressly permit courts to modify or vary an arbitral award, should courts strike down awards even when it could be saved by minor modifications? Under Section 34 of the Act, a court can only strike down an award.
Writing the 37-page 4:1 majority judgment, CJI Khanna said, “We are of the opinion that modification represents a more limited, nuanced power in comparison to the an- nulment of an award, as the latter entails a more severe consequence of the award being voided in toto.”
“The limited and restricted power of severing an award implies a power of the court to vary or modify the award. It will be wrong to argue that silence in the 1996 Act, as projected, should be read as a complete prohibition,” he said. Justice Viswanathan penned a 130-page dissent and said courts do not have the power to modify an award as the parties had eschewed the path of litigation to go for arbitration.
CJI Khanna said, “We are thus of the opinion that the court can apply the doctrine of severability and modify a portion of the award while retaining the rest. This is subject to parts of the award being separable, legally and practically.”
The majority judgment said courts can also correct clerical, computational and typographical errors apparent in the award and modify the postaward interest rate. CJI Khanna said striking down an award in its totality just because there was no agreement over rate of interest would cause grave prejudice to parties, who would then have to undergo a fresh round of arbitration.
“This limited power is significant, as it can help avoid further rounds of litigation. Without it, the court may be forced to set aside the entire award or order a fresh round of arbitration because of an erroneous interest rate rather than simply adjusting this rate,” the CJI said.
Referring to the extraordinary powers of SC under Article 142 of the Constitution, which enables it to pass any order for the purpose of doing complete justice, the five-judge bench sounded a caution and said this power must be exercised with great care and caution while dealing with arbitral awards.
The powers of the courts
Courts can’t modify arbitral awards: SC
July 22, 2021: The Times of India
The Supreme Court has said that a judge, while interpreting a law, should try to understand the intent of legislative bodies and quashed the Madras HC verdict which had held that the court’s powers to “set aside” an arbitral award under the arbitration law would also include the power to modify.
“Quite obviously if one were to include the power to modify an award in section 34 (Arbitration Act), one would be crossing the Lakshman Rekha... In interpreting a statutory provision, a judge must put himself in the shoes of the Parliament and then ask whether Parliament intended this result. Parliament very clearly intended that no power of modification of an award exists in section 34 of the Arbitration Act,” a bench of Justices R F Nariman and B R Gavai said.
The bench said it is only for the Parliament to amend the provision in the light of the experience of courts in the working of the Arbitration Act, 1996, and bring it in line with other legislations the world over.
The court passed the order on an appeal filed by the Centre against the HC order. Solicitor General Tushar Mehta said the Arbitration Act, 1996, being based on the UN Commission on International Trade Law’s Model Law on International Commercial Arbitration, 1985, has specifically restricted the grounds of challenge and the consequent remedy, which is only to set aside or remit in limited circumstances.
The case pertains to the litigation on land acquisition for national highways 45 and 220. The bench, however, dismissed the appeal on facts. “Givenhat in several similar cases, NHAI has allowed similarly situated persons to receive compensation at a higher rate than awarded, and given the law laid down in Nagpur Improvement Trust, we decline to exercise our jurisdiction under Article 136 in favour of appellants on the facts of these cases,” the bench said.
