By Shubham Singh
About the Author:
Shubham Singh is a 5th year law student at National Law University, Odisha.
Abstract
This article examines the Karnataka High Court’s decision in L&T Infra Investment Partners v. Bhoruka Power Corporation Ltd., which examined the effect of LCIA India’s closure on arbitration agreements referring to its rules. Situated within the framework of Indian procedural law under the Arbitration and Conciliation Act, 1996, the decision represents an important contribution to an evolving and inconsistent High Court jurisprudence on the consequences of institutional cessation. The Karnataka High Court’s reasoning, permitting the continuation of proceedings under the LCIA London Rules 2020, is considered alongside other rulings from different high courts, illustrating broader judicial divergence and the absence of definitive guidance from the Supreme Court.
Keywords – Institutional Arbitration, LCIA India, Arbitration Agreement Validity
Arbitral institutions play a vital role in arbitration, administering proceedings and managing operational aspects to ensure a smooth and efficient process. They also set their own rules governing both the proceedings and the institution’s functioning. However, they are also businesses that earn revenue mainly through the arbitration proceedings they administer. As business entities, they aim to expand their market but may shut down if their operations become unsustainable. For example, the London Court of International Arbitration (“LCIA”) ceased its operations in India because not enough people were using LCIA India clauses to make it worthwhile to maintain an office in the country.
When an arbitral institution ceases to exist, it can create significant uncertainty. A similar situation arose in the recent case of L&T Infra Investment Partners v. Bhoruka Power Corporation Limited (“L&T”). While the case involved multiple issues, this article will focus on the question addressed by the Karnataka High Court: whether the arbitration agreement stood frustrated due to the closure of the arbitral institution, namely LCIA India, and whether the arbitration could validly proceed under LCIA London or the LCIA Rules 2020, instead of the LCIA India Rules originally agreed upon.
In this article, we examine the reasoning adopted by the Karnataka High Court in the L&T case and situate it within the broader judicial landscape, addressing the cessation of arbitral institutions. The discussion extends to the divergent approaches taken by various High Courts that have addressed similar questions of institutional cessation. This article will also examine the underlying policy and procedural considerations that arise when an arbitral institution ceases to exist or undergoes structural transformation.
The dispute arose under a Compulsory Convertible Debenture (CCD) Subscription and Securities Holders Agreement dated 21.06.2013, which contained an arbitration clause. The clause required disputes to be resolved first through good-faith consultations and, if unresolved, finally settled under the LCIA India Rules then in effect. On 11.12.2024, L&T Infra (the appellant) invoked arbitration under Section 21 of the A&C Act, followed by a formal request to the LCIA on 10.01.2025. The respondents, Bhoruka Power Corporation Ltd. and its promoter shareholders, filed a petition before the Bengaluru Commercial Court, arguing that the arbitration clause had become void because LCIA India had ceased operations in 2016 and could not be extended to LCIA London. The Commercial Court accepted this argument and, by order dated 28.04.2025, restrained L&T from proceeding with arbitration. L&T appealed to the Karnataka High Court.
The High Court considered two main issues:
Furthermore, the CCD Agreement also specified the seat of arbitration as either Mumbai or Bengaluru, at the investor’s discretion (Clause 16.2), a fact that placed the arbitration within the framework of the Indian A&C Act, 1996 and materially influenced the curial law and forum considerations.
The Court upheld the validity of the arbitration clause despite the change in arbitral institution from LCIA India to LCIA London. It reasoned that arbitration rules are procedural in character and do not affect the parties’ substantive consent to arbitrate. Referring to the phrase “LCIA Rules then in effect” in Article 16 of the CCD Agreement, the Court held that the parties had agreed to be governed by whichever version of the LCIA Rules was operative at the time of invocation. Consequently, the shift from LCIA India to LCIA London and the application of the LCIA Arbitration Rules 2020 did not frustrate the agreement. The Court emphasised that these amendments were introduced by LCIA London itself, the parent institution, and not by the parties, and therefore did not alter the essence of their consent.
This reasoning aligns with the LCIA’s own transitional provisions, which stipulate that agreements made before 1 June 2016 referring to LCIA India shall now be administered by LCIA London under the LCIA Arbitration Rules 2020.
However, the limits of this logic are noteworthy. A change in institutional identity could frustrate an arbitration agreement if the institution ceases to exist without a successor body, if its rules become inoperative or inaccessible, or if the clause expressly ties the arbitral process to a local institution or enforcement mechanism. In such cases, the institutional designation might form part of the substantive consent, and the underlying agreement to arbitrate could be considered extinguished.
Parties must have chosen the LCIA India Rules and LCIA India as the arbitral institution not only for their reliability in handling arbitration proceedings but also for their monetary advantages.
For example, the LCIA India arbitration rates were very low. According to the latest price schedule, the price is more than 50 to 60 per cent higher under the standard LCIA rules 2020 compared to the previous LCIA India rules. For example, the hourly rate of compensation for arbitrators is capped at INR 20,000 per hour under the LCIA India rules, but in the LCIA rules 2020, it is capped at £450. The registration fee/case filing fee is £1,950 under the LCIA rules 2020, but it is INR 30,000 under the LCIA India rules.
This ruling will impose heavy financial pressure on parties, as arbitration clauses referring to the LCIA India Rules will now attract the higher costs under the LCIA Arbitration Rules 2020 and the 2023 Schedule of Arbitration Costs.
Although the seat was specified in this case, issues may arise where the seat is not expressly determined, and the parties have opted for the LCIA India Rules. Under Articles 16.1 and 16.2 of those Rules, if the parties disagree on the seat, the LCIA Court is empowered to determine it after considering all relevant circumstances and the parties’ written submissions. The arbitral tribunal, however, retains the discretion to hold hearings, meetings, and deliberations at any convenient location.
Following the discontinuation of the LCIA India Rules, the LCIA Rules 2020 now apply. Articles 16.1 and 16.2 of these Rules designate London as the default seat, unless the arbitral tribunal subsequently determines otherwise. Consequently, if parties choose the LCIA India Rules without specifying the seat, London will be treated as the default seat until the tribunal decides otherwise. Any party dissatisfied with interim relief, whether granted by an emergency arbitrator or the arbitral tribunal, must seek recourse to the English courts, which creates inconvenience due to both costs and a judicial disconnect arising from cross-border complexities.
In the past, different rulings have addressed situations involving arbitral institutions that have ceased to exist. Too mention few, in M/s Tata International Limited v. M/s Pragati Shoes (“Tata”), the Madhya Pradesh High Court, on 19 May 2025, while hearing an application under Section 11 of A&C Act, held that since the LCIA was no longer operating in India, the provisions of the A&C Act would apply and accordingly appointed an arbitrator, however, the respondent was not present during the hearing.
Similarly, in Danieli India Limited v. Mishra Dhatu Nigam Limited (“DIL”), although the case was not related to LCIA India, it involved a similar issue of an arbitral institution ceasing to exist. The India International Arbitration Centre took over the functions of the defunct ICADR, whose rules governed the parties’ agreement. The Telangana High Court held that even if an arbitration clause becomes unworkable due to drafting errors, the death of an arbitrator, or the closure of the designated institution, the parties’ intent to arbitrate must still be upheld under Section 11 of the A&C Act.
In Tata, before the court, the 2016 LCIA amendments were never argued, as the opposing party neither appeared nor argued, unlike in the L&T case. Given that LCIA India had ceased operations, the court inferred that the institutional mechanism was inoperable and converted the arbitration into an ad hoc process to preserve the intent to arbitrate and maintain neutrality, since allowing one party to choose an alternative institution could have affected fairness. The same reasoning appeared in DIL, where the court prioritised the preservation of arbitral intent over institutional rigidity. Thus, Tata and DIL serve as pragmatic contrasts to L&T, which treated institutional designation as integral to the parties’ agreement, while the former cases focused on preserving arbitration through judicial facilitation under Section 11(6)(c).
Now, mainly comparing the L&T case with Tata and DIL, it is evident that while these cases correctly identified the intent to arbitrate and allowed the parties to arbitrate, however, Tata and DIL removed the institutional aspect of arbitration, opting for ad hoc Arbitration.
Jurisprudence on the cessation of arbitral institutions varies across High Courts. Since neither the statute nor the Supreme Court has addressed this issue, it can create uncertainty in arbitration proceedings. To suggest a way forward, if parties approach the court after discovering that their chosen arbitral institution has ceased to exist, whether due to a change in its identity or permanent closure, the court should first inquire whether the parties can agree on an alternative arbitral institution within 15 days. This timeline should be strictly enforced to ensure procedural efficiency. If the parties fail to reach a consensus within the prescribed period, or if their conduct becomes hostile and begins to frustrate the arbitration process, the court should direct that the proceedings continue on an ad hoc basis, with the court making the necessary appointment under Section 11 to prevent further delay or deadlock. Furthermore, a special amendment could be introduced to Section 8 of the A&C Act, incorporating this 15-day timeline and a proviso expressly empowering the court to refer the parties to ad hoc arbitration if the prescribed time limit is not met.
The same approach applies to cases like L&T, where an arbitral institution ceases its services in a country but expects the parties to follow rules designed for another jurisdiction. This should be avoided because arbitration rules are tailored to the market and conditions of each location. Parties initially agreed to regulations because the rules were tailored for their jurisdiction; however, the use of regulations of a different geography may lead to sudden changes in currency, which increase the operational costs, and procedures for obtaining interim relief from tribunals or courts can create significant practical difficulties if the seat is not properly designated.
This approach keeps the parties in touch with their intention of institutional arbitration, encouraging them to reach an agreement. If the parties do not agree, the ad hoc system comes into play, as seen in the DIL and Tata.
Copyright© 2026 Milon K. Banerji Centre for Arbitration Law instituted at NALSAR University of Law, Hyderabad. All rights reserved.
