Month: February 2026

Termination for Non-Payment of Fees: Balancing Arbitral Autonomy and Access to Justice

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Termination for Non-Payment of Fees: Balancing Arbitral Autonomy and Access to Justice

MKBAC Blog February 28, 2026

  By Hruthika Addlagatta

About the Author:

Hruthika Addlagatta is a second-year B.A. LL.B. (Hons). student at NALSAR University of Law.

 

Abstract

The Supreme Court’s decision in Harshbir Singh Pannu v. Jaswinder Singh addresses an important issue by establishing that termination of arbitration for non-payment of fees under Section 38 of the Arbitration Act operates through Section 32(2) and must be challenged first via recall before the tribunal, then through Section 14(2) court proceedings. This piece examines the decision’s consolidation of termination power, recognition of procedural review authority, and construction of Section 14(2) as the judicial review mechanism. Through comparative analysis of institutional arbitration rules and critical examination of the framework’s application to the case facts, the article evaluates whether the framework achieves optimal balance between arbitrator compensation and access to justice for parties, while identifying unresolved questions regarding recall standards, review scope, and the urgent need for legislative reform.

Keywords: Arbitration termination, Section 38, arbitral fees, procedural review, Section 14(2)

I. Introduction and Context

How to ensure arbitrators receive reasonable compensation while preventing fee disputes from becoming barriers to justice? The Indian arbitration landscape has long grappled with this question, and the same was answered by the Supreme Court in Harshbir Singh Pannu v. Jaswinder Singh, which held that termination of arbitral proceedings for non-payment of fees under Section 38 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) carries the same legal status as termination under Section 32. Consequently, aggrieved parties must first seek recall before the tribunal and only thereafter challenge the termination before courts under Section 14(2).

This however raises a question whether insulating fee-related termination from immediate judicial scrutiny transforms arbitral fees into a gatekeeping mechanism that privileges those with deeper pockets. This article critically examines whether the Supreme Court’s framework strikes an appropriate balance, evaluating the Indian approach against institutional arbitration models.

The Arbitration Act structures fee payments through interconnected provisions. Section 31(8) enables tribunals to fix costs including arbitrators’ fees. Section 38 authorises tribunals to require the parties to deposit the fees. Schedule IV prescribes fees calibrated to the sum in dispute, ONGC v. Afcons, upheld its constitutional validity while mandating party consent for fee determination.

The dispute in Harshbir arose from a partnership healthcare venture. The P&H High Court appointed a sole arbitrator, directing fees be determined per Schedule IV or by mutual agreement. The arbitrator initially fixed fees at Rs. 17.01 lakhs based on the appellant’s Rs. 13.65 crore claim. When the respondent filed an Rs. 82.78 crore counterclaim, the arbitrator revised total fees to Rs. 37.5 lakhs using Schedule IV ceiling.

Both parties objected. The appellant argued that the counterclaim was inflated and claimed financial incapacity. The respondent contended it should pay only 25% matching its partnership share. The arbitrator rejected both positions, holding Section 38 requires equal fee-sharing. After the appellant declared inability to pay and the respondent refused to cover the appellant’s share under Section 38(2)’s first proviso, the arbitrator terminated proceedings.

A fresh Section 11 application seeking substitute arbitrator appointment was dismissed, with the High Court holding the proper remedies were recall or Section 14(2) challenge.

A. Consolidation of Termination Power in Section 32(2)

The Supreme Court held that Section 32(2) constitutes the exclusive source of tribunals’ power to terminate proceedings. Sections 25(a), 30(2), and 38(2) enumerate circumstances triggering that power but do not themselves authorise termination orders. This reading draws from the UNCITRAL Model Law’s legislative history, where the Working Group deliberately rejected automatic termination, requiring formal tribunal orders under Article 32.

Section 32(1) supports this: “The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2).”

The Court observed that the common thread across Sections 25, 30, 32 and 38 is that “although the arbitral proceedings may get terminated for varied reasons, yet the consequence of such termination remains the same i.e., the arbitral reference stands concluded, and the authority of the tribunal stands extinguished.” This eliminates arguments that Section 38 terminations permit simple re-initiation of arbitration.

B. Recognition of Inherent Procedural Review Power

Following SREI Infrastructure Finance Ltd. v. Tuff Drilling Pvt. Ltd., the Court distinguishes procedural review (inherent in quasi-judicial bodies) from merits review (unavailable absent statutory authorization). Termination orders fall within procedural authority, making them subject to recall if grounded in manifest error. A tribunal considering whether a party showed sufficient cause for fee default exercises legitimate procedural review. This creates a sequenced remedy: parties must first seek recall, affording tribunals opportunity to self-correct. Only after recall denial may parties approach courts.

C. Section 14(2) as Judicial Review Mechanism

Following Lalitkumar Sanghavi v. Dharamdas Sanghvi, the Court construes Section 14(2) expansively. Though Section 14(2) addresses arbitrator withdrawal or inability to perform, the Court reads “termination of mandate” to encompass situations where the mandate ends consequent to proceedings terminating under Section 32(3).

This responds to a statutory gap. Section 37 provides appeals from specified orders but not termination orders. Section 34 permits challenges to awards, but termination orders are not awards. Without Section 14(2), parties would resort to Article 227 challenge (foreclosed by SBP & Co. v. Patel Engg. Ltd.), or be left with no remedy.

The courts thus examine under Section 14 whether tribunals properly exercised Section 32(2) power. If termination was procedurally defective, courts may set aside the order and remand or appoint substitute arbitrators under Section 15.

A. The Undefined Sufficiency Standard

The Court recognises that tribunals may recall where parties show “sufficient cause” for fee default but provides no guidance on the standard. Is the test subjective (this party cannot pay) or objective (a reasonable party could not pay)? Does good-faith dispute over fee reasonableness qualify? The present case illustrates the gap acutely: the arbitrator dismissed the appellant’s financial incapacity claim without examining financial records, and the Court does not resolve whether initial consent to Schedule IV methodology extends to revisions triggered by a subsequent counterclaim.

B. The Ambiguous Scope of Section 14(2) Review

Section 14(2) review of “whether the mandate stood legally terminated” could mean procedural regularity (did the tribunal follow Section 38’s requirements?) or substantive correctness (was the incapacity claim credible?). Afcons forecloses substantive fee review, suggesting Section 14(2) is cabined to procedural compliance. Yet if termination is procedurally flawless but recall was denied without examining financial evidence, it remains unclear whether the court may review the reasonableness of that denial; the boundary between reviewing justification and reviewing fee substance is one the Court leaves unresolved.

C. The Rigidity of Binary Termination

The Court emphasises that termination carries permanent consequences absent successful recall or Section 14(2) challenge. Yet absolute finality may prove too rigid when parties genuinely dispute fee calculations or face temporary payment obstacles.

The present case illustrates this. The appellant claimed the Rs. 82 crore counterclaim was inflated to weaponize fees. The respondent was willing to pay its own share but refused to subsidize. The tribunal had no tools to assess whether the appellant’s incapacity was credible or strategic, whether counterclaim valuation was reasonable, or whether severing the proceedings, continuing on the original claim while suspending adjudication of the disputed counterclaim, might serve justice better than total termination. Two years of proceedings were extinguished because neither party would fund fees inflated by a counterclaim the appellant contested as tactical.

Leading arbitral institutions offer instructive contrasts. The SIAC Rules 2025 consolidate all termination scenarios within Rule 43, explicitly mapping each ground for termination, whether arising from procedural default, party withdrawal, or fee non-payment, to a single consolidated rule, eliminating interpretive disputes about which provision governs. Rule 56.5 separately distinguishes suspension from termination: the Registrar may suspend proceedings upon deposit default, setting a cure deadline after which the claim is deemed withdrawn “without prejudice,” preserving the claimant’s right to re-initiate if circumstances change. This structural separation, one rule for termination triggers, another for the suspension-to-termination sequence, provides the clarity that the Indian framework currently lacks.

The LCIA Rules 2020 centralise termination power in Article 22.1(xi) while Article 24.8 treats persistent deposit defaults as potential claim withdrawals but permits tribunals to set reinstatement terms. A party that later tenders fees may have claims revived if appropriate.

These models suggest two specific refinements, each of which the Indian framework currently lacks. First, termination decisions are placed with the institution rather than the arbitrator. The Indian framework however through Sections 38 and 32, vests termination authority exclusively in the tribunal itself. There is no institutional body empowered to intervene, no secretariat with independent oversight, and no mechanism to remove the conflict, which is a deficiency equally acute in ad hoc proceedings, where the absence of any institution at all means the sole arbitrator is simultaneously the creditor, the adjudicator of the default, and the decision-maker on termination.

Second, graduated remedies treat suspension as the mandatory first response to deposit default, with termination arising only after a specified cure period expires unfulfilled. The LCIA and SIAC frameworks operationalise this through explicit timelines. The Indian framework contains no such sequencing: Section 38(2) grants the tribunal a binary choice to suspend “or” terminate, and nothing mandates a cure period before termination. The Harshbir recall mechanism does not fill this gap. It operates post-termination, thus requiring the defaulting party to re-approach the same tribunal without any statutory standard for “sufficient cause,” time limit, or obligation to hold a hearing. A mandatory pre-termination suspension period would keep proceedings alive during hardship without subjecting the party to an undefined threshold before a potentially unsympathetic tribunal.

The Court grounds its framework in self-responsibility: parties choosing arbitration assume funding responsibility. Section 38’s equal-sharing requirement operationalizes this regardless of claim/counterclaim dynamics or merits success.

Yet self-responsibility has limits the framework does not address. It assumes equivalent party resources (when significant asymmetries render equal fee-sharing regressive); it presumes fair fee determinations (when fees driven by contested counterclaims may resemble procedural coercion); and it may conflict with access-to-justice in contracts where arbitration clauses are non-negotiable.

The framework’s limits are starkest precisely where self-responsibility rhetoric is most strained: where fee quantum is disputed, financial incapacity is genuine, and the claim driving costs is itself contested. The recall mechanism nominally permits tribunals to consider hardship but imposes no standard for evaluation. Section 14(2) review is capped by Afcons’ prohibition on fee reasonableness review.

For arbitrators, the decision necessitates developing explicit recall procedures: preliminary notices identifying grounds, hearings on termination, reasoned orders addressing sufficient cause, and clear specification of jurisdiction retention during recall periods. For parties, payment under protest combined with Section 34 fee objections is safer than outright refusal; arbitration agreements should specify fee caps, staged deposit schedules, and suspension rather than termination as the primary remedy.

Critical unresolved questions persist:

  1. When counterclaims filed mid-proceedings increase dispute sums exponentially, does existing Schedule IV authority permit automatic recalculation or must tribunals obtain fresh party consent? And does Section 38(2)’s proviso permitting termination “in respect of such claim or counter-claim” allow partial termination while continuing other claims?
  2. Can parties opposing recall seek immediate judicial review when tribunals grant recall and revive proceedings, or must they await an eventual award?

The Court’s critique of the Arbitration and Conciliation Bill 2024 deserves emphasis. After thirty years under the 1996 Act and persistent litigation over termination procedures, the Bill replicates problematic provisions verbatim. The Court observed it is “indeed very sad” that procedural issues of this kind have continued to plague India’s arbitration regime, and specifically recommended that the Bill explicitly provide for the nature and effect of termination insofar as the tribunal’s recall authority is concerned. The Bill’s silence perpetuates the very interpretive gaps this judgment laboured to fill through creative construction, gaps that could be remedied directly by codifying recall procedures with time limits and substantive standards, specifying the scope of Section 14(2) review, mandating graduated remedies, and expressly recognising conditional reinstatement authority.

Harshbir Singh Pannu constructs a coherent remedial framework by consolidating termination power in Section 32(2), recognizing inherent procedural recall authority, and channelling judicial review through Section 14(2). It harmonizes India’s regime with UNCITRAL Model Law history, balances arbitrator protection against party excess, respects tribunal autonomy while maintaining oversight, and forecloses strategic manipulation.

Yet the framework’s reliance on implied powers and expansive construction exposes systemic gaps the Court itself acknowledges. The recall mechanism operates without statutory foundation, time limits, or substantive standards. Section 14(2) extends beyond its original scope, creating uncertainty about review parameters. The absolute finality principle, while preventing strategic manipulation, may prove too rigid where financial hardship is genuine, fee calculation is disputed, or circumstances change after termination.

The decision crystallizes an enduring policy tension: balancing arbitrators’ compensation expectations against parties’ access to resolution. The Court’s answer gives primacy to procedural discipline while preserving safety valves for procedural unfairness. Yet as the present case illustrates, these safety valves may prove inadequate when fee disputes have arguable merit, when counterclaims allegedly inflate sums in dispute, or when financial incapacity claims require investigation the framework does not accommodate.

Fragmentation, Composite Disputes, and the Arbitration–Insolvency Conflict in India

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Fragmentation, Composite Disputes, and the Arbitration–Insolvency Conflict in India

MKBAC Blog February 26, 2026

  By Arjun Singh.

About the Author:

Arjun Singh is a 5th Year, BA.LLB (Hons.), SVKM’s Pravin Gandhi College of Law, Mumbai. 

Abstract

This article examines the jurisdictional fragmentation at the intersection of arbitration–insolvency frameworks in India. It argues that recent judicial developments have produced a structurally incoherent dispute resolution framework in which commercially indivisible, group-based disputes are forcibly split across arbitral and insolvency fora. While arbitration law has evolved to accommodate composite disputes and non-signatory participation, the insolvency regime remains rigidly entity-centric, leading to parallel proceedings, inconsistent fact finding, and remedial dissonance. The article further demonstrates how fraud claims and recovery mechanisms are jurisdictionally decoupled, rendering adjudication and enforcement forum-dependent rather than merit-based.

Keywords: Composite disputes, Insolvency, Arbitration

I. Introduction: Fragmentation as the Real Arbitration–Insolvency Conflict

Indian courts are increasingly grappling with commercial disputes that venture into both arbitral and insolvency fora. Once invoked, the IBC regime practically ousts the jurisdiction of the arbitral tribunal. However, for the purpose of this piece, the conflict examined is not of statutory priority, but of fragmented adjudication, where disputes, despite being commercially and factually indivisible, proceed in parallel before different forums.

Modern commercial disputes rarely arise within the confines of a single bilateral contract. They emerge from corporate groups which have layered holding structures, intertwined guarantees, upstream and downstream transactions, and coordinated conduct across multiple legal entities. The current arbitration landscape has evolved over the years to accommodate this reality by recognising that corporate groups often operate as “single economic units”, a principle crystallised by Hon’ble Supreme Court (SC) in Cox & Kings v. SAP India Pvt. Ltd. (Cox & Kings) and Mahanagar Telephone Nigam Limited v. Canara Bank and Ors. This framework permits the inclusion of non-signatory affiliates where common intention, composite nature of transactions, and conduct demonstrating consent are established. In contrast, IBC remains fixated to the legal personality of the individual corporate debtor (CD). Though courts have occasionally permitted substantive consolidation where group entities’ affairs are inextricably linked, there is no statutory recognition of this doctrine. This divergence is not coincidental but stems from fundamentally different regulatory objectives. Insolvency proceedings being in rem in nature, are inherently non-arbitrable, and the mandatory moratorium under Section 14 creates an exclusive jurisdictional space around the corporate debtor. This structure frequently results in the parallel adjudication of disputes that are commercially indivisible, notwithstanding their composite character.

This piece argues that recent judicial developments in this arena has produced a structurally incoherent dispute resolution system in which composite disputes are forcibly split across fora, fraud is jurisdictionally compartmentalised into contractual and statutory silos, and remedies arising from the same transaction are adjudicated parallelly with no mechanism for reconciliation. The result is procedural inconvenience, conflicting factual findings, and concomitantly a remedial dissonance. This fragmentation is a direct result of superimposing an entity-centric insolvency framework onto an arbitration regime that has recognised and devised mechanism for group wide dispute resolution.

[1] Indus Biotech Private Limited v. Kotak India Venture (Offshore) Fund 2021 SCC OnLine SC 268

A composite dispute involves multiple parties, including non-signatories to the arbitration agreement, where the causes of action are so inextricably linked that effective adjudication is impossible without their collective consideration. Indian arbitration regime has moved from the rigid non-bifurcation of cause of action approach adopted in to a group-oriented framework in Cox & Kings thereby recognising principle that consent to arbitration may be inferred from conduct and the economic unity of the transaction.

This doctrinal evolution culminated in ASF Buildtech Pvt. Ltd. v. Shapoorji Pallonji and Company Pvt. Ltd. (ASF Buildtech) where the SC affirmed the arbitral tribunal’s power to implead non-signatories where they were integral to the transaction and formed part of the same economic group. This was a conscious response to the inadequacy of bilateral arbitration clauses in capturing modern corporate risk allocation. From an arbitration law standpoint, ASF Buildtech restores coherence by ensuring that disputes are adjudicated in a single forum capable of addressing the entirety of the commercial controversy, an endorsement of consolidation that collides with the entity-centric architecture of insolvency law. Arbitration law thus moved decisively toward aggregation, consolidation, and group-level accountability.

IBC on the other hand, approaches the same disputes through an explicitly entity centric standpoint. On admission of Corporate Insolvency Resolution Process (CIRP), Section 14 imposes moratorium rendering the CD procedurally unavailable to all external adjudicatory processes and isolates all the consolidating claims within the insolvency process.

Despite recognition of group insolvency as a commercial reality (SBI v. Videocon Industries), IBC’s statutory design refrains from group level adjudication, treating each CD as a legally independent unit to preserve collective resolution and creditor equality.

The overlap of ASF Buildtech and Section 14 exposes a structural tension. While arbitration law endorses consolidation of composite disputes across corporate groups, insolvency law mandates separation. On admission of CIRP, proceedings against the subsidiary are stayed, However, the arbitration may continue against solvent group entities under the expanded Group of Companies doctrine. The problems with this fragmentation are clear: liability within corporate groups is often coextensive or derivative, arises from guarantees, integrated contractual arrangements and obligations. Adjudicating the liability of one entity in isolation risks inconsistent determination.

Consider a composite arbitration in which, a claimant initiates arbitration against a subsidiary (the primary obligor) and its Parent (the non-signatory guarantor) under the Group of Companies doctrine. Upon the subsidiary’s admission into CIRP, the arbitration against it is stayed by Section 14. However, the proceeding continues against the solvent parent. The claimant is now forced to prove the subsidiary’s underlying default before an arbitral tribunal to hold the Parent liable, while simultaneously proving the exact same debt as a “claim” before a Resolution Professional (RP) in the CIRP.

Comparative jurisdictions have adopted calibrated thresholds to prevent jurisdictional severance while preserving objective of insolvency legislations. For example in Singapore, the Court of Appeal in AnAn Group (Singapore) Pte Ltd v. VTB Bank adopted a “prima facie” standard as per which, the insolvency proceedings are ordinarily stayed if the debt is subject to a “prima facie” valid arbitration agreement. This approach gives priority to initial determination of the debt in the contractually designated forum, preventing insolvency proceedings from superseding arbitral adjudication at the threshold.

The position of United Kingdom was articulated in Sian Participation Corp v. Halimeda International Ltd, where, the Privy Council held that winding-up proceedings are displaced by an arbitration clause where the debt is genuinely disputed on substantial grounds. This approach distinguishes clear default from complex commercial disputes without permitting tactical obstruction. Globally, guidelines by United Nations Commission On International Trade Law i.e. UNCITRAL Model Law on Enterprise Group Insolvency (2019) recognises the need for coordinated adjudication across group enterprises. While the Indian judiciary in Videocon Industries has recognized the doctrine of substantive consolidation in exceptional cases, it remains subject to strict limits and is yet to receive formal statutory recognition. Consequently, a standardized legislative framework for coordinated adjudication remains absent in the Indian context.

This divergence is even more evident in fraud-based disputes. In Avitel Post Studioz Ltd. v. HSBC PI Holdings Ltd. (Avitel), the SC departed from the conventional view that fraud is per se non-arbitrable and held that civil or contractual fraud may be referred to arbitration unless it implicates public rights or affects the validity of the arbitration agreement.

On the other hand, Section 66 of the IBC treats fraud as a statutory wrong. It authorises the NCLT to order contributions to the insolvency estate from persons who have conducted business with the CD with intent to defraud creditors, with the focus on restoring estate value rather than compensating individual claimants.

Therefore, there might be a case where same transaction may give rise to two jurisdictionally distinct fraud claims one being a contractual fraud arbitrable under the Avitel logic, and other being a statutory fraud under the IBC, actionable exclusively before the NCLT. This bifurcation reflects differences in how fraud is addressed under arbitration law and the IBC respectively. Whereas the Arbitration Act addresses private disputes between parties, IBC targets the conduct that prejudices the collective body of creditors.

The limited scope of Section 66 exacerbates this jurisdictional fragmentation. In Glukrich Capital Pvt. Ltd. v. State of WB, the SC construed Section 66 as being strictly restricted to those “carrying on” the business of the debtor. Basis which, the courts have largely confined its application to directors and persons in management of the CD, excluding solvent third parties or group affiliates not formally involved in the management of the corporate debtor. Consequently, where funds are siphoned to related parties or third-party vendors, IBC lacks jurisdiction to bind all participants to a single proceeding.

The RP is therefore compelled to bifurcate enforcement pursuing statutory proceedings against management before the NCLT, while initiating civil or arbitral proceedings against third parties elsewhere, resulting in forum splitting and fragmented adjudication of a single fraud transaction before different fora.

From the perspective of remedies advanced, a fundamental tension exists between the collective, status-based nature of insolvency and the bilateral, contract-based nature of arbitration. While both fora offer a diverse range of reliefs, including specific performance and damages in arbitration or reorganization and liquidation in insolvency, their underlying objectives remain inherently at odds. This diversion becomes all the more contentious in light of recent jurisprudence on the allocation of recoveries from avoidance and fraud actions.

In Piramal Capital & Housing Finance Ltd. v. 63 Moons Technologies Ltd., the SC clarified that recoveries from avoidance transactions may accrue in favour of successful resolution applicant if the resolution plan provides so. This highlights proprietary transformation effected by resolution plans under which statutory recoveries are no longer automatically preserved for creditors whose claims gave rise to the proceedings.

Arbitration, by contrast, awards damages to the claimant, subject to the extinguishment of claims under the resolution plan. Thus, the same fraudulent transaction may yield a windfall recovery for a resolution applicant through insolvency proceedings, while leaving an individual claimant remediless in arbitration due to the “clean slate” doctrine. As a result, allocation of value becomes contingent not on wrongdoing, but on the forum in which recovery is pursued. This critique doesn’t dispute the legitimacy of insolvency finality or the clean slate doctrine per se, but its spillover effect in rendering parallel arbitral adjudication substantively and remedially otiose.

This disjunction spills even to enforcement stage. As held in Electrosteel Steel Ltd. v. Ispat Carrier Pvt. Ltd., arbitral awards based on claims extinguished by an approved resolution plan may be resisted at the execution stage, arbitral finality is therefore rendered contingent on subsequent insolvency outcomes, disconnecting adjudication from enforceability. Thus, Electrosteel further stretches the doctrine of jurisdictional nullity by treating statutory extinguishment of debt under an approved resolution plan as a jurisdictional fact. Consequentially, the MSME creditors, particularly those proceeding before Facilitation Councils may secure arbitral awards post-CIRP which are doctrinally valid yet effectively unenforceable in other words, merely “paper decrees”.

Together, these effects produce a system in which remedies and enforcement are fragmented across fora, governed by different objectives and insulated from coordination. The law offers no settled approach for reconciling these outcomes, compelling creditors to strategize around jurisdiction rather than merits.

Recent legal development demonstrates that conflicts between arbitration and insolvency extend beyond questions of statutory precedence. While arbitration law has evolved to accommodate composite, group-based disputes, insolvency law continues to operate through an entity-centric framework even where the transaction is commercially indivisible. Decisions such as ASF Buildtech and Electrosteel demonstrate how arbitral reach is expanded even as arbitral outcomes are neutralised through insolvency finality, producing jurisdictional fragmentation and remedial incoherence. In the absence of mechanisms for coordinated adjudication, the resolution of complex commercial disputes risks becoming forum dependent, leaving the reconciliation of these regimes an unresolved judicial challenge.

The Paris Court of Appeal Decision (17 November 2025): Rethinking the Role of Parties’ Conduct in Identifying an Arbitration Agreement

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The Paris Court of Appeal Decision (17 November 2025): Rethinking the Role of Parties’ Conduct in Identifying an Arbitration Agreement

MKBAC Blog February 25, 2026

  By Tarun Mishra and Shambhawi Tiwari.

About the Author:

Tarun Mishra and Shambhawi Tiwari are 3rd-year B.A., LL.B. (Hons.) students at the National University of Study and Research in Law (NUSRL), Ranchi.

Abstract

Is your signed contract truly the final authority? This post examines the Paris Court of Appeal’s explosive 2025 ruling in Keppel Seghers v. Ashghal. By prioritizing parties’ “common intention” over formal “Priority of Documents” clauses, the Court established that daily conduct can override written text. The article contrasts this French approach with the strict textualism of English and Singaporean jurisdictions. It further warns that mere silence in project management can now forge binding arbitration agreements, forcing a rethink of international contract drafting and enforcement strategies.

Keywords: International Commercial Arbitration, Contract Interpretation, Common Intention, Implied Arbitration Agreement, Parties’ Conduct

I. The Paradox of Consent: When Conduct Speaks Louder Than Words

At the heart of international commercial disputes adjudication is a paradox: arbitration is a consensual mechanism and a creation of the parties’ will, but most of the time, the realization of that will is hardly distinguishable from the urgencies of complicated commercial dealings. Traditionally, across legal systems, the inclination has been to closely identify the written text with the “four corners” of the contract from which consent at the most could be inferred. The strict enforcement of formalities creates friction with progressions in relationships that emerge over time in long-term infrastructure projects which, by their nature, are assembled around conduct rather than the original written text, leaving the written text a relic of fossils.

The​‍​‌‍​‍‌ decision of the Paris Court of Appeal has been the subject of considerable scholarly and professional discourse ever since it was rendered on 17 November 2025, in the case of Keppel Seghers Engineering Singapore Pte Ltd v. Public Works Authority of Qatar (Ashghal) is a major shift in this jurisprudential area. The Paris Court of Appeal ( hereinafter “the Court”), by annulling the International Chamber of Commerce (“ICC”) award which had declined jurisdiction on the ground of a strict reading of a “priority of documents” clause, has gone far to confirm that the “common intention” (commune volonté) of the parties takes precedence over contractual formalism. ​‍​‌‍​‍‌

This​‍​‌‍​‍‌ ruling puts into question the effectiveness of typical “hierarchy of documents” clauses that have been an unquestioned standard in the construction industry, and as a result, lead to a considerable difference in the respective approaches of main arbitral seats to the issue of law.

Paris is progressively adopting a practice-oriented approach for confirming arbitration agreements whereas judicial authorities in London and Singapore are still struggling to reconcile the contradictory relationship between text and context and consequently they very often come to completely different conclusions on the same ​‍​‌‍​‍‌facts.

To understand the doctrinal significance of the ruling in the case, it is necessary to go back to the tangled web of contractual arrangements that created the deadlock on jurisdiction. The dispute that is at the heart of the jurisdictional deadlock did not appear very quietly; it occurred in the hazardous sphere of public infrastructure in Qatar.

The issue involves a contract between Keppel Seghers Engineering Singapore Pte Ltd (“Keppel”) and the Public Works Authority of Qatar (“Ashghal”) for the design, construction, and operations of a large wastewater treatment plant (Para 1). The business association was regulated by a complicated set of documents, among which were “Particular Conditions” negotiated for the project and standard “General Conditions” imposed by ​‍​‌‍​‍‌Ashghal (Para 2). One of the most significant elements in the General Conditions was a standard dispute resolution clause that gave exclusive jurisdiction to “competent Qatari courts” (Para 2).

However, the parties exchanged drafts contemplating arbitration during pre-contractual negotiations (Paras.3-5, 37-38). They did not clearly state in the final contract that the arbitration agreement would override the litigation clause in the General Conditions (Para 36). Moreover, a “Priority of Documents” clause indicated that the General Conditions would prevail over the other non-integrated document (Para 68).

After​‍​‌‍​‍‌ the contract had been terminated, Keppel brought a case to the ICC arbitration in 2023 (Para 10). The panel, located in Paris, took a very literal interpretation of the text and refused to accept that it had jurisdiction (Para 13). In its view, the “Priority of Documents” clause was the one that was most close to being used and the General Conditions (which prescribe court proceedings) were of a higher level than the documents that Keppel had referred ​‍​‌‍​‍‌to (Para 13). Keppel subsequently challenged this award before the Paris Court of Appeal (Para 14).

The‍‌‍‍‌ main judicial problem revolved around the issue of the parties’ conduct being able to create an implied binding arbitration agreement that would have precedence over a conflicting written clause dealing with jurisdiction in a signed contract. The Court was to decide whether “shared intention” is just a means of clarifying vague points or a higher substantive norm that can replace formal contractual ‍‌‍‍‌hierarchies.

The‍‌‍‍‌ decision of the Paris Court of Appeal is a prime illustration of the “French School” of international arbitration that uses a substantive rule (règle matérielle) instead of a conflict-of-laws analysis. The Court emphasized that the arbitration clause is a separate juridical entity from the main contract and its existence is verified “under French mandatory rules and international public policy only, ascertained from the common intention of the parties.” ‍‌‍‍‌

The Court’s reasoning was anchored to the good faith principle which stipulates that a party cannot deny a commitment to which it is estopped even if such a commitment was created by actions, provided that the other side has relied on it. Furthermore, employing the principle of effet utile (effectiveness) the Court took the view that the intricate and negotiated references for arbitration were intended for practical use unlike the standard litigation clause.‍‌‍‍‌

‍‌‍‍‌Thus, the Court even disregarded the “Priority of Documents” clause, contending that the existence of the litigation clause in the general terms “did not influence” the existence of the arbitration agreement which was to be inferred from the parties’ mutual intention.”‍‌‍‍‌

The Keppel Seghers case illustrates a growing division between the conduct-based approach of France and the other principal jurisdictions where textualism is applied rigorously.

In England & Wales, In stark contrast to Paris, English courts maintain that where a hierarchy clause resolves a conflict, it must be enforced. The 2025 decision in Tyson International Company Ltd v GIC Re, India EWHC 77 illustrates this.

An‍‌‍‍‌ English Commercial Court issued an anti-arbitration injunction as a result of a “hierarchy clause” in the contract that referred the matter to the document containing a clause giving jurisdiction to the court in case of conflict between the arbitration clause. According to English law, the written hierarchy is final, and conduct will hardly change express ‍‌‍‍‌terms.

In India, Indian jurisprudence has travelled a similar path as France but through statutory interpretation. In the landmark Glencore International AG v. Shree Ganesh Metals (August 2025) case, the Supreme Court of India made it clear that the arbitration agreement was in effect even though the respondent had not signed the contract.‍‌‍ The Court ruled that the exchange of correspondence and performance of the contract (accepting goods) satisfied the “in writing” requirement of Section 7 of the Arbitration Act.

In Singapore, DMZ v DNA SGHC 31, exemplifies the High Court’s reaffirmation of the concept of party freedom under the written regulations selected by the parties. ‍

Although Singapore law permits arbitration agreements to be in any form, the judiciary usually demands that the actions be solidified in a written document. Singapore courts, when encountering disputing clauses, undertake meticulous interpretation as opposed to a wide “common intention” exception, frequently supporting the particular written provisions unless the opposing evidence is very strong.

The decision in Keppel Seghers v. Ashghal carries significant practical consequences for parties engaged in international commercial arbitration, particularly those that have selected Paris as their arbitral seat. These consequences warrant careful analysis across three interrelated domains: contract drafting, conduct during contract performance, and enforcement.

From a drafting perspective, the decision serves as a pointed reminder that “Priority of Documents” clauses cannot be treated as self-executing protective mechanisms in the French legal order. Where parties genuinely intend to exclude arbitration or confine dispute resolution to a particular forum, that intention must be expressed with clarity and consistency throughout the contractual documentation. It is no longer sufficient to rely on a hierarchical clause alone; parties must ensure that their written instruments do not contain competing references to arbitration, whether in correspondence, meeting records, or ancillary documents, which could subsequently be construed as evidence of a common intention to arbitrate.

On the question of conduct, the decision must be read with appropriate doctrinal precision. The Court did not hold that any unanswered reference to arbitration in correspondence will, of itself, give rise to a binding arbitration agreement. Rather, the Court assessed silence and non-objection as evidentiary factors within a broader analysis of the parties’ common intention, informed by the cumulative weight of pre-contractual negotiations, the structure of the final contract, and conduct during performance. This approach is consistent with principles of good faith interpretation and the doctrine of effect utile as applied in French international arbitration law. Practitioners should therefore understand the decision as requiring active vigilance: where a counterparty invokes arbitration in written communications and the existing contractual framework provides otherwise, a timely and unequivocal objection is essential to preserve one’s position.

Silence, particularly when combined with conduct consistent with the arbitral mechanism referenced, may be attributed significant evidentiary weight by a French court.

The enforcement dimension of this decision deserves equally careful consideration. While the Paris Court of Appeal annulled the ICC award for lack of jurisdiction and thereby paved the way for fresh arbitral proceedings, the enforceability of any resulting award in Qatar remains a distinct and uncertain question. A respondent domiciled in Qatar may invoke Article V(1)(a) of the New York Convention, arguing that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made. If Qatari courts apply their domestic law to assess the validity of the arbitration agreement, particularly given the uncorrected presence of Clause 20.4 in the General Conditions, the prospects of enforcement in Qatar may be limited regardless of the outcome in Paris.

This dynamic illustrates a broader strategic concern for seat selection: a seat that is favourable to the recognition of conduct-based arbitration agreements may produce awards that are difficult to enforce in jurisdictions with stricter formality requirements. Parties operating across such jurisdictions should account for this asymmetry at the drafting stage, giving careful thought to the alignment between their chosen seat, the governing law of the arbitration agreement, and the likely place of enforcement.

Regarding the position in Singapore, DMZ v DNA SGHC 31 reflects the Singapore High Court’s continued emphasis on party autonomy within the framework of the written rules chosen by the parties, a position that reflects a considered and distinct jurisprudential approach rather than an inflexible one. The divergence between the French and Singaporean approaches underscores the importance of jurisdiction-specific drafting strategies, particularly for parties whose projects span multiple legal systems.

The 17 November 2025 decision in Keppel Seghers v. Ashghal reaffirms the foundational principle of the French school of international arbitration: that the common intention of the parties, as evidenced by their conduct, may prevail over a rigid application of contractual formalism.

By declining to give determinative effect to the “Priority of Documents” clause, the Paris Court of Appeal confirmed that pre-contractual and post-contractual conduct, including correspondence and performance, constitutes relevant and admissible evidence in identifying the existence and scope of an arbitration agreement. It must, however, be emphasised that this approach is not without doctrinal limits.

Such findings remain inherently fact-sensitive and are contingent upon clear and consistent evidence of mutual intent, the application of seat-specific rules of contractual interpretation, and principles analogous to reliance and estoppel. Moreover, practitioners must remain mindful that a finding of jurisdictional validity before a French court does not guarantee enforceability in all jurisdictions, particularly those adhering to stricter formality requirements. For drafting and project governance purposes, this decision underscores the importance of ensuring consistency between the formal contractual hierarchy and the parties’ actual conduct throughout the life of a project, as divergence between the two may give rise to unintended jurisdictional consequences.

The Hidden Cost of Challenging Arbitral Awards: A Case for Rethinking Fee-Shifting Rules

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The Hidden Cost of Challenging Arbitral Awards: A Case for Rethinking Fee-Shifting Rules

MKBAC Blog February 17, 2026

  By Aryan Sharma.

About the Author:

Aryan Sharma is a 4th-year undergraduate law student at Maharashtra National Law University Mumbai.

 

Abstract

International arbitration promises finality and efficiency, yet permissive cost regimes in major seats allow losing parties to mount weak challenges with minimal financial risk. This creates incentives for delay and settlement tactics by forcing award creditors to bear heavy legal expenses. In this regard, this article argues for stronger fee-shifting rules through a comparative analysis of jurisdictions such as Singapore, France, the United States (U.S.), England, Hong Kong, and Dubai International Financial Centre (DIFC). It advocates for a presumptive indemnity costs model to prevent frivolous setting-aside applications and at the same time preserving access for meritorious challenges.

Keywords: set-aside applications, costs, fee-shifting, frivolous challenges

I. Introduction: The Arbitration Paradox

International arbitration is hailed as an efficient mode of dispute resolution for cross-border commercial disputes. Parties opt for arbitration because of its finality and enforceability under the New York Convention. However a paradox undermines these very principles, i.e., in major arbitration seats, losing parties face minimal financial consequences when mounting unmeritorious challenges to arbitral awards. Such an imbalance generates perverse incentives.

The party who faces an adverse ruling can delay enforcement for months through court proceedings and recover little of the award creditor’s legal costs, even when the challenge fails. On the other hand, the award creditor ends up paying heavy legal costs despite prevailing in the arbitration as well as the subsequent court proceedings.

This article examines the costs regimes across major arbitration seats and argues that current approaches in most jurisdictions deter frivolous challenges which undermines arbitration’s core purpose. It draws on comparative analysis and proposes that courts should adopt more robust fee-shifting mechanisms.

i. Permissive Approach

The majority of the seats are best described under what may be labelled a “permissive” cost regime. In Singapore, recoverable costs are awarded on a standard basis and recover between 40-60% of actual lawyers’ fees incurred. The Singapore International Commercial Court (SICC) has marginally improved recoveries, but even then, indemnity cost awards are rare. In France, there is wide discretion in allocating costs [including legal fees and indemnity] by applying a “costs follow the event” approach. This is given under Article 700 of the French Code of civil procedure.

The U.S. is an extreme example of this approach in practice. After the “American rule,” each party pays their costs in full, without recovering anything in successful cases. This applies similarly in the courts in DIFC in onshore courts, where only nominal court fees can be recovered.

England and Wales (E&W) occupy middle ground. The general rule there is that the losing party pays the winning party’s costs and costs are usually assessed on the standard basis, where the receiving party must show costs are reasonable. Indemnity costs may be awarded in limited circumstances, such as unreasonable conduct.

ii. Deterrent Approach

Hong Kong stands alone among the major arbitration seats in adopting a salutary practice: indemnity costs are awarded against unsuccessful challengers to arbitral awards, in case no special circumstances exist. This emerged from A v R, which held that parties should not be permitted to undermine awards through unmeritorious challenges.

A similar approach is taken by the DIFC courts, where substantial cost awards are regularly granted. This accords with not only the common-law underpinning of the DIFC but also its objective of attracting international commercial parties.

Such divergent approaches produce divergent outcomes. Hong Kong, despite being consistently ranked as the 3rd most preferred arbitration seat globally [and having a comparable caseload to Singapore International Arbitration Centre (SIAC)], sees fewer setting-aside applications. Over a recent seven-year period, Hong Kong heard just 27 reported challenges compared to Singapore’s 95.

The DIFC reports minimal challenges to awards, with zero successful applications in recent years. By contrast, Singapore has witnessed growth in setting-aside applications. Parties invoke creative grounds, mainly allegations of natural justice breaches that blur the line between procedural irregularity and problem with tribunal’s substantive reasoning.

i. Finality

Finality is arbitration’s foundational promise. The UNCITRAL Model Law provides only narrow grounds for challenging awards precisely because parties chose arbitration to avoid prolonged litigation. The U.S. Supreme Court emphasized in Hall Street Associates v. Mattel, Inc., judicial review of arbitral awards must be “exceedingly deferral.”

Yet permissive costs regimes undermine this policy. When an award debtor can mount a challenge knowing it will cost the award creditor US$150,000 in legal fees [of which perhaps US$60,000 might be recovered], the calculus changes. The debtor gains 18 months of delay at relatively low cost which creates leverage for settlement negotiations that extract concessions from the rightful winner.

Success rates for setting-aside applications hover around 15-25% across most jurisdictions. Across major arbitral seats, the vast majority of challenges to awards are unsuccessful, with success rates often below 40%, and in several jurisdictions below 10%. For example, only about 38% of challenges succeed in E&W, and single-digit success rates [8–11%] were observed in New York, Bahrain and onshore UAE courts. This means majority of challenges fail, yet in most seats, these unsuccessful challengers face limited financial consequences. The system thus subsidizes at the expense of award creditors.

ii. Fair Compensation

Award creditors already incur significant costs in the process of obtaining an enforceable arbitral award. However, if they must defend their arbitration award in court, it costs them significantly in attorneys’ fees. Even if the party succeeds entirely, it only offsets a percentage of the costs.

The situation worsens when the issue is considered in the context of access to justice. Well-financed award debtors can conduct an act of economic warfare through setting-aside actions, knowing that the costs of defending themselves [even if partly recoverable] will force creditors into an unfavourable settlement. This is even more concerning in disputes where parties are on a very different economic standing.

Moreover, certain grounds for setting-aside awards are prone to manipulation, such as violations of natural justice, due process, and public policy, as they can be alleged in basically any case. Although it is true that courts consistently reject such arguments when there is lack of genuine circumstances, but each allegation demands a response. In absence of a deterrence like imposition of costs, risk-averse award debtors that face substantial awards have no reason to try.

In France, where the practice of recovery of costs is limited, “public policy” challenges were invoked in 137 out of 222 cases examined [yet succeeded in only 6 cases, 4% success rate]. This shows over-pleading of a ground that rarely succeeds.

The first argument is that indemnity costs could deter meritorious challenges, which would result in a “chilling effect” on parties having valid grievances. Should parties seeking to set aside an award know that they faced a possibility of incurring the other party’s legal costs in full, would they still pursue a meritorious claim in challenging an award?

However, this concern is overstated. It is contradicted by empirical evidence from Hong Kong. Despite having a strong costs regime, their success rate for setting-aside applications is only 22%, very close to Singapore’s 23%. This suggests that a stricter costs regime does not necessarily produce a significant chilling effect on meritorious challenges.  However, success-rate comparisons alone cannot conclusively establish deterrence, as that would require behavioural evidence such as survey-based data.

Moreover, truly meritorious cases involve genuine irregularities or jurisdictional defects that should be apparent from the award and record. Parties with legitimate claims can make informed assessments of their prospects.

Second argument pertains to the fact that in the U.S., the tradition of parties bearing their own costs is a different conception of access to justice. Fee-shifting is seen as deterring rights-enforcement and creating barriers.

This argument has less weight in the setting-aside context. Setting-aside proceedings are a form of appeal from private adjudication that parties contractually chose. The policy considerations that favour broad access to initial dispute resolution do not apply with equal force to what is essentially an appeal of a privately-rendered decision. Also, even American law recognizes exceptions for bad-faith litigation. Courts possess inherent authority to sanction parties for frivolous filings under Federal Rule of Civil Procedure 11.

Courts in leading arbitration seats should adopt a presumptive indemnity costs rule for unsuccessful setting-aside applications, subject to carefully defined exceptions. The default rule should provide that unsuccessful challengers pay the successful party’s reasonable legal costs in full which can be assessed on an indemnity basis. Costs should be determined by reference to the complexity of the case, the amounts at stake, and the prevailing rates for qualified counsel in the market.

The presumption should yield in specifically defined circumstances. Firstly, where a challenge raises questions of first impression of an issue of law or involves genuinely unsettled law, courts should retain discretion to reduce [or eliminate] adverse costs. Secondly, where a challenge succeeds on some grounds but fails on others, courts should apportion costs accordingly. Thirdly, where the costs claimed are genuinely excessive relative to the case’s complexity, courts should award only reasonable amounts.

Additionally, cases that involve factual questions about the validity of the reasoning used in the tribunal’s decision which are disguised as procedural issues can be summarily dismissed, with the consequence of enhanced costs. Moreover, courts should be clearer in their reasoning in setting the costs in setting-aside matters.

The experience in Hong Kong illustrates that robust fee-shifting is a discouraging factor for frivolous claims, without chilling meritorious ones. Other arbitration seats should emulate this model by adopting presumptive indemnity costs for unsuccessful challenges against awards.

Such reform would strengthen the core principles of finality and efficacy that arbitration promises. It would also deter abusive tactics and ensure that parties who have successfully defended against arbitration are not punished for that success.

Mandate, Termination and Substitution: A Review of Mohan Lal Fatehpuria v. M/S Bharti Textiles & Ors.

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Mandate, Termination and Substitution: A Review of Mohan Lal Fatehpuria v. M/S Bharti Textiles & Ors.

MKBAC Blog February 10, 2026

  By Niharika Mehta.

About the Author:

Niharika Mehta is 3rd-year law student at the Hidayatullah National Law University, Raipur.

Abstract

The article reviews the recent Supreme Court judgement in Mohan Lal Fatehpuria v. M/s Bharti Textiles & Ors. The Court reinforced mandatory timelines under Section 29A of the Arbitration and Conciliation Act, 1996 and also held that once the statutory timeline under this provision lapses, the arbitrator’s mandate expires automatically, requiring judicial intervention for substitution. It also analyses the significant shift from procedural flexibility to strict accountability, comparing advantages of expedited proceedings against risks like compromised party autonomy, increased costs and potential abuse. It marks a pivotal shift towards a performance-oriented and time-centric arbitration mechanism in India. 

Keywords: Statutory timelines, Arbitral Mandates, Section 29A, Substitution of Arbitrator

I. Introduction: The Need for Speed

Designed to counter the inherent delays in traditional litigation processes, arbitration, a swift, effective and commercially viable mechanism, was introduced as a formal process to settle disputes out of court. India introduced the Arbitration and Conciliation Act, 1996 (“A&C Act”) to match its legal framework with global norms and reduce judicial intervention. However, this objective of the Act has largely remained unfulfilled due to chronic delays in arbitral proceedings. Repeated failures to adhere to timelines has undermined the efficiency of the Act and has drawn serious criticism. An arbitration process which cannot stick to timelines can prove to be a cure worse than the disease.

In order to curb these persistent delays, the 2015 amendment, later refined in 2019 introduced Section 29A in the A&C Act, reflecting a pivotal shift from casual procedural flexibility to legal responsibility. The Section lays down a mandatory timeline of twelve months from culmination of proceedings which can be extended by six months with the consent of both the parties to deliver arbitral awards. Also, under Clause (4) of this provision, if statutory timelines are not followed it will result in automatic termination the arbitrator’s mandate by operation of law unless the mandate is extended by the court itself. Furthermore, clause (6) of the provision states that the power to substitute the arbitrator and grant extensions to expedite the process lies solely with the court. 

Recently, this intent of legislature was reiterated by the Supreme Court (“SC”) in case of  Mohan Lal Fatehpuria v. M/s Bharti Textiles & Ors.[2025 SCC OnLine SC 2754] (“Mohan Lal Fatehpuria”). It was held by the court that once the timeline under Section 29A lapses, the arbitrator becomes “functus officio”, effectively losing all the authority. The mandate cannot be revived by the court without considering substitution of the arbitrator. The SC emphasised that this provision is not optional in nature, reflecting a decisive shift towards implementing rigid timelines and accountability. The judgement sends an unequivocal message that adherence to statutory timelines is a compulsory safeguard and a failure to meet them can result in substitution of the arbitrator to preserve integrity of the Act.

The dispute in the case of Mohan Lal Fatehpuria arose out of a partnership deed which contained an arbitration clause. Pursuant to the dispute between the parties, the Delhi High Court intervened and by a common order, appointed a sole arbitrator who entered the reference on 20 May, 2020. During the course of these proceedings, issues emerged regarding the arbitrator’s directions relating to administrative expenses. However, these directions were challenged by the other respondents under Sections 14 and 15 of the A&C Act  questioning the act of the arbitrator seeking his termination, which was later dismissed by the High Court in January 2022 which held that the arbitrator was neither de jure nor de facto ineligible and expense-related objections could be addressed before court.

The procedural course of the arbitration clearly demonstrates how proceedings can lose momentum. Owing to the Supreme Court judgement in Re: Cognizance for Extension of Limitation  the period between 15 March 2020 and 28 February 2022 stood excluded. After these exclusions came to an end, the legitimate timeline under Section 29A (1) began of 1 March, 2022, requiring the arbitrator to render an award within twelve months. However, no award was passed, no extension application was filed and the deadline to render award expired resulting in expiry of mandate of the arbitrator by operation of law, rendering him functus officio.

The delay in proceedings was increased because of administrative difficulties relating to demands for expenses. Despite this, the Court, while acknowledging the delay declined to replace the arbitrator and instead extended his mandate by another four months. Ultimately, this decision of the High Court set the stage for intervention by the apex court.

Section 29A of the A&C Act was introduced to address the chronic delays in arbitral proceedings by laying down mandatory timelines for rendering of awards. Prior to post-amendment jurisprudence, there was considerable reluctance from the side of judiciary in allowing lapse of arbitral mandates. Continuance of proceedings was prioritised over legislative regulation, making extensions under the provision a repeated occurrence rather than exceptional. It was a practical approach but it slowed down the deterrent feature of Section 29A. Nonetheless, the remedial nature of Section 29A and its application to pending arbitral proceedings was reaffirmed in the case of Tata Sons Pvt. Ltd. v. Siva Industries & Holdings Ltd, highlighting the intent of the legislature to minimize delays. Although, the mandatory nature of timelines was accepted, courts still continued to exercise wide discretion in allowing extensions, often without considering the reason for delay carefully or whether arbitrator should be replaced.

Moving on, the judgement of Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd. marked a pivotal shift by making it clear that under Section 29A termination is not absolute and courts still have the power to revive the mandate after expiry. Even though it was established by the Court that party autonomy will be protected and proceedings will not collapse due to technical reasons, there was a still a lacuna as to how the courts should treat persistent delays or delays caused by tribunal itself. This ambiguity was later removed by Mohan Lal Fatehpuria where it was held by the SC that no automatic revival of an expired mandate should be carried out and the courts should seriously consider Section 29A (6) to ensure a balance between flexibility and accountability. This decision has marked a significant shift in the existing jurisprudence from allowing regular extensions to a proper system of enforcing time-bound results. It is no more a rare practice to substitute an arbitrator but a powerful tool to assure time-centric arbitral proceedings. 

It can be observed from the SC’s decision that Section 29A of the Act has evolved moving from hesitant enforcement to a disciplined application. Judicial discretion is not supposed to weaken timelines instead promote time-centric and efficient dispute resolution.  The rationale laid down by the SC does not become evident in isolation, rather, it reflects the pinnacle of a developing judicial conversation as to how firmly Section 29A should be enforced.

While the case of Mohan Lal Fatehpuria restores statutory timeline discipline to arbitration, it has certain drawbacks. Firstly, a rigid timeline, if followed, without adequate flexibility may in certain cases undermine the very efficiency it aims to foster. In first instance, substitution of an arbitrator may appear to be an elegant solution. However, when applied practically, it is accompanied by procedural and practical complexities. Arbitration has never been a linear process, it includes prolonged pleadings, complicated hearings and voluminous documents. When substituted, a new arbitrator may not be able to seamlessly adopt to the existing record, majorly in complex disputes. Depending upon the stage of proceedings, the newly appointed arbitrator may be compelled to re-examine large portions of the record or rehear arguments to understand the underlying issue. So, what was established as a time-saving mechanism may result in additional delay of months, including the burden of paying arbitral fees more than once.

Furthermore, the legitimacy of an arbitral proceeding significantly rests on party autonomy as a foundational principle, namely the parties’ freedom to choose their own judge. Although party autonomy is necessarily subject to statutory limitations and public policy considerations, the rigid enforcement promoted in Mohan Lal Fatehpuria creates the risk of dilution of this principle, mostly in situations where parties consensually agree to limited delay due to complexity or good faith conduct of the tribunal. If courts are empowered to substitute arbitrators without the consent of the parties frequently, it may give rise to perceptions of increased court supervision, thereby shifting arbitration closer to court-monitored process. Such repeated intervention by courts could create the risk of a rigid and slow arbitral proceeding which may blur the line between a tedious litigation process and arbitration.

Another concern that arises is that the fear of substitution may force the arbitrators to priortise speed over substance. When faced with a strict statutory termination, the arbitrators may cut back necessary oral arguments or reject adjournment requests just to beat deadlines. It can worsen as it may pressurize the adjudicator to deliver cut-paste awards, judgement which is rushed, unreasoned or poorly drafted. While such awards may satisfy Section 29A, however, later on it can invite inevitable challenges under Section 34 of the Act. An award delivered on time but set aside later for lack of reasoning will not serve the ends of justice.

Finally, the ruling may also open avenues for strategic abuse. Despite availability of judicial safeguards, such as refusing substitution where delay is attributable to the applicant imposing costs, the termination of mandate under Section 29A can still be misused as a tactical device. A respondent who feels they are about to lose the case, now have a tactical incentive to manufacture delay through frivolous applications or procedural obstructions, only to invoke Section 29A later. Parties may use the expiry of the mandate not as a genuine grievance against delay but an excuse to oust a strict arbitrator hoping court would substitute a lenient arbitrator. It creates a risk of the provision being misused rather than acting as a safeguard, undermining its intended purpose.  

The pronouncement of the SC in Mohan Lal Fatehpuria proves to be not just a corrective exercise in understanding of the statute but also illustrates a significant shift in the way arbitral expediency will be regulated by judiciary in India. It lays a clear and concise future pathway in which courts are no longer passive spectators to delays but actively guard the timelines, ensuring preservation of credibility of arbitration as a swift dispute resolution mechanism. Automatic or routine deadline extensions  are no longer the norm. The courts are now responsible to address consequences of delay and treat the expiry of an arbitral mandate as a chance for assessment and not mechanical prolongation. Replacing an arbitral tribunal, once a rare step, is now considered as an acceptable practice and even a legitimate response to breach of statutory timelines.

Equally significant is the introduction of a performance-oriented concept of arbitral tenure. Arbitral proceedings are no longer protected from scrutiny merely because appointment of the arbitrator was valid at the start. The central component of a legitimate arbitral proceeding is efficiency. The court, by permitting substitution without the need to establish misconduct or incapacity, has lowered the threshold for intervention where delay is the main reason behind endangering integrity of the process.

From this judgement, a clear procedural pathway is established for revival of stalled or dead arbitrations by reaffirming the fact that termination under Section 29A is conditional and not absolute. Even after the expiration of the mandate of the arbitrator, courts retain jurisdiction to restore the whole process through extension as well as substitution, ensuring that valid claims are not defeated by procedural lapses. There has been a significant shift in the approach of the courts as they are moving towards real enforcement which can be seen through the non-negotiable six-month deadline given to substituted arbitrator. This marks a balance between fairness and procedural discipline guaranteeing a more time-critical dispute resolution mechanism where delays can lead to consequences.

The ruling by the SC in Mohan Lal Fatehpuria lays down the principle that statutory timelines are to be followed in an absolute manner. It was reaffirmed by the SC that speed is central to the Arbitration Act. It shows that the process does not end when a deadline is missed rather it resets it, sometimes by changing the adjudicator. It now completely rests on the courts if they will efficiently use the reset button to ensure that disputes are resolved fairly and in time-bound manner.

Arbitration Update: Arbitral tribunal’s mandate under Section 29A can only be extended by civil court of original jurisdiction, and not the referral court: Supreme Court settles confusion in Jagdeep Chowgule

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Arbitration Update: Arbitral tribunal’s mandate under Section 29A can only be extended by civil court of original jurisdiction, and not the referral court: Supreme Court settles confusion in Jagdeep Chowgule

MKBAC Blog February 1, 2026

By Aditi Bhojnagarwala.

About the Author:

Aditi Bhojnagarwala is a Research Scholar at the Milon K. Banerji Arbitration Centre.

Introduction

The decision of the Supreme Court in Jagdeep Chowgule v. Sheela Chowgule, has provided much-needed clarity on a procedural tug-of-war that has long divided various High Courts across the country. The central issue addressed by the Court was whether the power to extend the mandate of an arbitral tribunal under Section 29A of the Arbitration and Conciliation Act, 1996 (“A&C Act”), rests with the principal Civil Court of original jurisdiction, or the Referral Court (the High Court or Supreme Court) that originally appointed the arbitrator. By delivering a definitive interpretation of the term ‘Court’ within the scheme of the Act, the Supreme Court has reinforced the statutory boundaries between the appointment of arbitrators and the ongoing supervision of arbitral proceedings.

The dispute in this case originated from a Memorandum of Family Settlement (MFS) dated 11 January 2021, executed between members of the Chowgule family. Arbitration was invoked in May 2021 following further disagreements. The procedural history became complex when the presiding arbitrator resigned, leading the parties to approach the High Court of Bombay at Goa for the appointment of a substitute arbitrator under Section 11(6) A&C Act.

Simultaneously, an application for the extension of the arbitral mandate under Section 29A was filed before the Commercial Court. The Commercial Court allowed the application, extending the time for the tribunal to make its award. This order was immediately challenged by Respondent No. 1 via a writ petition, asserting that the Commercial Court lacked jurisdiction because the arbitrator had been appointed by the High Court.

The Single Judge of the High Court referred the matter to a Division Bench, which concluded that if a High Court constitutes a tribunal under Section 11, then any Section 29A application must lie before that High Court. Following this reasoning, the Single Judge quashed the Commercial Court’s extension order. The appellant then moved to the Supreme Court, contending that the Commercial Court is the only appropriate forum under the statutory definition provided in Section 2(1)(e) of A&C Act.

The Court held that applications under Section 29A must lie before the “Court” as defined under Section 2(1)(e) of the Act, i.e. the Principal Civil Court of original jurisdiction (or the High Court exercising ordinary original civil jurisdiction, where applicable). The fact that the arbitrator was appointed by the High Court under Section 11 does not alter this position. Their reasoning was grounded in three main pillars: the statutory definition of “Court,” the scope of a Referral Court’s jurisdiction, and the rejection of hierarchical perceptions in favour of the rule of law.

Statutory definition of ‘court’

The Court strongly reaffirmed the principle that a defined term must carry its statutory meaning unless the context clearly requires otherwise. Section 2(1)(e) exhaustively defines “Court” for the purposes of Part I of the Act.

The Court rejected the argument that “context” justified deviation merely because a Civil Court might substitute an arbitrator appointed by a High Court. Such reasoning, the Court held, is based on perceived judicial hierarchy rather than statutory command, and is antithetical to the rule of law.

Relying on Chief Engineer (NH) v. BSC & C JV, the Court held that curial supervision under provisions like Sections 14 and 29A must lie with the court defined under Section 2(1)(e).

Scope of referral court’s jurisdiction

The Court emphasised that Section 11 jurisdiction is special, limited, and exhausted upon appointment of the arbitral tribunal. Relying on SBP & Co. v. Patel Engineering Ltd. and subsequent jurisprudence, the Court reiterated that the role of the High Court or Supreme Court under Section 11 is confined to a prima facie examination of the existence of an arbitration agreement.

Once the arbitrator is appointed, the appointing court becomes functus officio, retaining no supervisory or continuing control over arbitral proceedings. Any assumption that the appointing court “watches over” the arbitration was firmly rejected as legally unsound.

Rejection of ‘conflict of power’ argument

The Court decisively rejected concerns about “jurisdictional anomaly” or “conflict of power” between High Courts and Civil Courts. Drawing from A.R. Antulay v. R.S. Nayak, it reaffirmed that jurisdiction flows solely from law, not from status, hierarchy, or institutional prestige. A Civil Court exercising powers under Section 29A does so not as an inferior authority reviewing the High Court, but as a statutory forum entrusted with a specific function by Parliament.

The Supreme Court thus set aside the judgments of the Division Bench and the Single Judge, restoring the jurisdiction of the Commercial Court to decide the Section 29A application.

This judgment is a major doctrinal clarification in Indian arbitration law. By resolving conflicting High Court decisions, it restores predictability and procedural certainty, both essential for arbitration to function as an efficient alternative to litigation.

The judgment resists the temptation to recentralize arbitration around constitutional courts. Section 11 is treated as a gateway function, not a supervisory one, aligning Indian law with international arbitral best practices. Additionally, the Court’s insistence on adhering to Section 2(1)(e) reflects disciplined statutory interpretation. Allowing “context” to be shaped by judicial discomfort with hierarchy would have opened the floodgates to ad hoc jurisdictional reasoning.

Furthermore, Section 29A was introduced to combat delay. Channeling every extension application to High Courts merely because they appointed the arbitrator would defeat this legislative purpose and overburden constitutional courts.

The judgment is significant not merely for resolving this conflict, but also for its reaffirmation of foundational principles of arbitral autonomy, statutory interpretation, and the limited nature of judicial intervention in arbitration. By rejecting a hierarchy-based and “contextual” deviation from the statutory definition of “Court”, the Supreme Court reinforces the Act’s structural coherence and reiterates that jurisdiction flows from statute, not judicial status.

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