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India’s Arbitration Contradiction: Building a Hub With One Hand, Dismantling It With the Other – An Analysis of the MoF OM, PWD Notification and MoRTH Circular

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India’s Arbitration Contradiction: Building a Hub With One Hand, Dismantling It With the Other - An Analysis of the MoF OM, PWD Notification and MoRTH Circular

MKBAC Blog July 13, 2026

By Aryan Sood.

About the Author:

Aryan Sood is a 5th Year Law Student pursuing BBA LLB (Hons.) from CHRIST (Deemed to be University), Bangalore.

 

Abstract

This blog examines the growing divergence between India’s stated ambition to become a leading arbitration jurisdiction and recent governmental measures restricting the use of arbitration in public contracts. It analyses the Ministry of Finance’s 2024 Office Memorandum, the Delhi PWD’s 2025 notification and the Ministry of Road Transport and Highways’ 2026 circular, all of which limit or exclude arbitration in public procurement and infrastructure disputes. The blog argues that these measures misdiagnose the causes of arbitral dissatisfaction and overlook the potential of institutional arbitration which risks increasing judicial burdens.

Keywords: Infrastructure Disputes, Institutional arbitration, Government Contracts

I. Introduction

There is a peculiar kind of contradiction at work in India’s approach to arbitration. The Government speaks of building India into the next global arbitration hub and pushes through legislative reforms, while simultaneously issuing circulars that strip arbitration out of some of the most commercially significant contracts in the country. The Ministry of Finance’s Office Memorandumof June 2024 (‘OM’) when read together with the Public Works Department (‘PWD’) notification of April 2025 and the Ministry of Road Transport and Highways (‘MoRTH’) circular of January 2026 reveals a contradiction in how the Indian state approaches arbitration.

The operative parts of the OM are worth stating precisely. It states that arbitration should not be “routinely or automatically” included in procurement contracts, particularly large ones. As a norm, arbitration should be restricted to disputes valued below INR 10 crore (this refers to the value of the dispute and not the value of the contract). Inclusion of arbitration for higher-value disputes requires the approval of a Secretary-level officer (or Joint Secretary with delegated authority) for ministries and the Managing Director for Central Public Sector Enterprises and public sector banks. Where arbitration is implemented, institutional arbitration should be preferred. For high-value disputes where arbitration is excluded, the OM recommends High Level Committees composed of retired judges and retired officers, which can either mediate, receive a negotiated proposal, or act as the mediator themselves.

The OM offers reasons as to why arbitration has, in its experience, failed to deliver. Each deserves individual scrutiny:

First, the OM acknowledges that “acceptance of an adverse award when judicial avenues are not exhausted is often perceived to be improper by various authorities.” This includes accountability of the Government to the Parliament (which in turn makes them answerable as to why certain actions available under the law were not taken after an arbitral award was rendered against the Government entity). Read carefully, this is an acknowledgment that the Government tends to challenge arbitral awards as a matter of institutional culture rather than on merit, and that it considers not challenging an award to be the default improper course. This is highly problematic as the OM then treats this as a failing of the arbitration mechanism itself. This is facilitated by the Indian arbitration regime which provides for multiple manners in which a Court can intervene after the arbitral award is rendered. The finality of arbitration is not undermined by arbitration as an institution but by the policy that litigates adverse awards. The best example for the same is Delhi Metro Rail Corporation Ltd. v. Delhi Airport Metro Express Pvt. Ltd. where a single arbitral award was subjected to proceedings under Section 34, Section 37, SLP and a curative petition, all filed by the Delhi Metro Rail Corporation, before ultimately being set aside. The recent decision in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. further expands the scope for post-award judicial intervention by recognising a limited power in courts to modify arbitral awards, which adds yet another route through which the finality of awards may be contested. The culture of the Government to challenge arbitral awards through every available procedural avenue, coupled with the Indian arbitration framework providing multiple layers of challenge undermines the finality of arbitral awards. The OM appears to proceed from the premise that adverse arbitral awards are themselves evidence of a malfunctioning arbitral process.

Second, the OM states that arbitration has become too lengthy and too costly, as much as “rivalling and often exceeding litigation.” This is a legitimate grievance in the Indian context. For example, the Law Commission, as early as August 2014, in its Report No. 46 titled Amendments to the Arbitration and Conciliation Act 1996 states that “although arbitration has fast emerged as a frequently chosen alternative to litigation, it has come to be afflicted with various problems including those of high costs and delays, making it no better than either the earlier regime which it was intended to replace; or to litigation, to which it intends to provide an alternative.” However, the OM itself, in paragraph 7(iv), recommends preferring institutional arbitration where appropriate. Institutional arbitration with expedited timelines, vetted arbitrators and structured fee schedules is the recognized global response to the cost-and-delay problem of arbitration. If institutional arbitration is the stated preference, then the policy response should be mandating institutional arbitration for large disputes rather than restricting arbitration for larger disputes. The OM holds both positions simultaneously without acknowledging the contradiction.

Third, the OM states that the “reduced formality, combined with the binding nature of decisions, has often led to wrong decisions on facts and improper application of the law.” Arbitration is flexible by design and this characteristic cannot be portrayed as a defect. The ability to depart from the rigid evidentiary and procedural rules of a court and to appoint technically qualified decisionmakers for complex matters, is precisely why arbitration is the preferred mechanism globally for complex commercial and infrastructure disputes. An increasingly difficult position to sustain is equating procedural formality with substantive correctness, which overlooks the possibility that a formally proper process may still produce an unjust outcome.

Fourth, the OM states the concern of “little accountability for such wrong decisions, if taken by arbitrators.” Notably absent from the OM’s diagnosis is any acknowledgment of the Government’s own contribution to the perceived accountability deficit. For example, the Hon’ble Supreme Court has identified structural concerns in the manner public sector entities appointed arbitrators. In Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), the Constitution Bench observed that while PSUs may maintain a panel of potential arbitrators, they cannot compel the opposing party to select an arbitrator from that panel. If the Government believed that arbitral outcomes were being distorted by deficiencies in the arbitral process, reforming appointment mechanisms would have been a logical response. Yet the OM does not engage with this issue at all and instead treats the problem as one inherent to arbitration itself.

Fifth, the OM contends that transferable officers place the Government at an informational disadvantage in arbitration. However, this is not unique to arbitration and applies equally to litigation. Government entities possess institutional records, legal departments and external counsel precisely to address such transfers. This concern is not addressed by suggesting for an exemption of arbitration. The OM therefore treats an administrative challenge as a justification for curtailing an otherwise neutral dispute resolution mechanism.

Sixth, the OM’s preference for mediation rests on an assumption that Government officials will be willing and able to settle disputes through mediation. This assumption uncomfortably exists along with the OM’s own acknowledgement that accepting adverse outcomes is often viewed as improper when there are legal avenues to challenge the award. The incentives that discourage Government officials from accepting arbitral awards are equally capable of discouraging them from approving mediated settlements. This affects the viability of mediation.

Further, the INR 10 crore threshold warrants specific attention. The threshold reflects a misunderstanding arbitration’s comparative advantage to litigation. When compared to court litigation, arbitration often provides a better platform in large, technically complex disputes involving specialized subject matter. The OM inverts this entirely by preserving arbitration for the disputes where it is least necessary and removes it from the disputes where it is most needed.

The OM is the source from which both the PWD notification and the MoRTH circular derive their justificatory logic.

On April 21, 2025, the Public Works Department of Delhi issued a notification that amended Clause 25 of the General Conditions of Contract to eliminate arbitration as a dispute resolution mechanism from all future PWD contracts. All disputes are now to be resolved exclusively through courts in Delhi. The PWD notification departs from the OM and goes on to impose a blanket exclusion. The notification does not offer any rationale for this and does not provide for any alternative ADR mechanism.

First, the notification raises significant concerns regarding its potential impact on investor confidence in India. The notification appears difficult to reconcile with India’s stated objectives to further India as an arbitration hub. The notification signals a reduced institutional commitment to arbitration in a major sector of public contracting which may weaken the predictability and trust that domestic and foreign investors regard as essential for long-term commercial engagement.

Second, the notification appears inconsistent with India’s sustained efforts to improve the ease of doing business and strengthen its dispute resolution framework. Over the past decade, legislative reforms through the Arbitration and Conciliation (Amendment) Acts of 2015, 2019 and 2021 have progressively reduced judicial intervention in arbitral proceedings enhanced procedural efficiency. Hence, a policy that exempts arbitration in public works disputes risks reintroducing uncertainty and may dilute the gains achieved through years of arbitration-friendly reform.

The Ministry of Road Transport and Highways issued a circular on January 12, 2026, providing that arbitration would not be available for disputes exceeding INR 10 crore under BOT, HAM and EPC contracts. Notably, it goes further to it state that existing dispute resolution clauses in all BOT (Build-Operate-Transfer), HAM (Hybrid Annuity Model) and EPC (Engineering, Procurement and Construction) contracts stand replaced with the revised clause with immediate effect. The only exception carved out is for ongoing arbitrations, which continue under the old regime.

First, the INR 10 crore threshold deserves specific scrutiny in the context of highway infrastructure. INR 10 crore is not a large sum. A single disputed variation order on a highway project can comfortably exceed this. The effect of the threshold is not to reserve courts for small disputes and arbitration for large one, but the reverse. Courts, in this regime, handle the most commercially significant disputes, while arbitration is preserved only for minor disagreements, in the context of such contracts, despite arbitration being in a position to offer more specialised arbitrators for such complex disputes.

Second, the MoRTH circular arrives at a particularly uncomfortable moment in India’s arbitration narrative. At the very time India is promoting itself as an arbitration-friendly jurisdiction through initiatives such as GIFT City’s arbitration ecosystem, legislative reforms and efforts to attract investment into its massive infrastructure pipeline, the Government has removed arbitration from the very disputes most likely to arise. Given MoRTH’s central role in administering one of the world’s largest infrastructure programmes, this acts as a signal to domestic and foreign investors about the state’s approach to contractual dispute resolution. If the Government’s repeated claims regarding the maturity of India’s arbitration ecosystem, the success of institutional arbitration and the effectiveness of recent reforms were genuinely reflected in practice, there would be little reason to exclude arbitration from high-value highway contracts.

Reading the aforementioned developments together against the backdrop of India’s stated arbitration policy produces a picture that is difficult to reconcile. Over the past decade, as per the aforesaid Lok Sabha response, the Government of India has sought to position India as a global arbitration hub. And yet, the PWD has exempted arbitration entirely and the MoRTH removes it from high-value highway contracts.

Ironically, many of the characteristics that make arbitration attractive in commercial disputes are even more valuable in Government contract disputes. Public procurement and infrastructure projects frequently involve complex technical questions relating to engineering specifications, variation orders, delay analysis, cost escalation and project execution, issues that generalist Courts may not be best placed to resolve efficiently. Arbitration allows parties to appoint decision-makers with relevant technical and commercial expertise.

What distinguishes the Government from an ordinary commercial party in an arbitration is that it does not participate in disputes solely as a market actor. Every decision to settle, pay, or accept an adverse outcome is filtered through layers of public accountability (as stated in the OM, such entities are accountable before the Parliament). A private party only bears the financial and reputational consequences of losing an arbitration and therefore has incentives to accept a binding outcome and move on. However, Government officers operate differently. Accepting an adverse award may attract scrutiny from audit, vigilance and parliamentary bodies as public funds may be on the line, whereas challenging the award signals institutional vigilance and carries little personal risk. The rational response is therefore to litigate further rather than settle. The OM itself acknowledges this problem and the MoF OM, PWD notification and the MoRTH circular are manifestations of the same problem. They are possible only because the Government is simultaneously the contracting party, policymaker and rule-setter, creating a structural temptation to redesign dispute resolution rules when the existing system begins producing unfavourable outcomes.

Another possible explanation for this stark divergence in the Government’s stance towards arbitration is the reality of the Indian arbitration regime. Despite Section 5 of the Arbitration and Conciliation Act, 1996 restricting judicial intervention, recent judicial developments like Gayatri Balasamy have arguably weakened the finality that arbitration is intended to provide. This has the effect of increasing judicial intervention in the arbitral process and creating yet another avenue for post-award challenges. The culture of the Government challenging arbitral awards in any manner possible, coupled with an arbitration regime that already provides multiple avenues of challenge, substantially vitiates the finality of arbitral awards. Seen in this light, the notification may be understood as a manifestation of the Government’s own scepticism towards arbitration in practice.

Ultimately, such policies end up increasing the burden on courts. Given the volume and nature of PWD contracts, such a policy would transfer a substantial category of disputes directly to the judiciary without addressing the underlying causes of delay. Where mediation or High-Level Committee processes fail to produce a settlement, disputes will ultimately proceed to litigation. Given the volume of Government procurement disputes and the existing backlog before Indian courts, diverting high-value commercial disputes, which arbitrators are better equipped to deal with, away from arbitration risks transferring an entire category of complex disputes into an already overburdened judicial system.

The solution to the problems identified by the OM is not the exclusion of arbitration. If concerns genuinely exist regarding delays, costs, accountability and the quality of arbitral decision-making, the logical response is to strengthen institutional arbitration rather than divert disputes into ordinary civil litigation. A more coherent policy response would focus on improving arbitration rather than excluding it. Instead of imposing an arbitrary monetary threshold on arbitration, the Government could mandate institutional arbitration for all high-value procurement and infrastructure disputes, ensuring access to established procedural rules and vetted arbitrators.

Equally important is addressing the incentive structure that encourages routine challenges to arbitral awards. The OM itself acknowledges that accepting an adverse award is often perceived as improper within the Governmental framework. Any meaningful reform must therefore focus on reducing unnecessary challenges rather than reducing arbitration.  For a country that has spent the past decade promoting itself as a credible arbitration jurisdiction, the divergence between its stated objectives and recent policy measures is difficult to ignore. Such inconsistencies risk weakening confidence in the stability and predictability of its dispute resolution framework.

Functus Officio by Design: Mandatory Substitution, Judicial Discretion, and the Unintended Costs of Section 29A after Mohan Lal Fatehpuria

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Functus Officio by Design: Mandatory Substitution, Judicial Discretion, and the Unintended Costs of Section 29A after Mohan Lal Fatehpuria

MKBAC Blog June 23, 2026

By Shourya Singh Sindhiya.

About the Author:

Shourya Singh Sindhiya is a 2nd year B.Sc. LL.B. (Cyber Security) student at National Law Institute University, Bhopal.

 

Abstract

In Mohan Lal Fatehpuria v. Bharat Textiles & Ors. (2025), the Supreme Court of India held that expiry of an arbitrator’s mandate under Section 29A of the Arbitration and Conciliation Act, 1996 renders the arbitrator functus officio, making substitution the sole post-expiry remedy and precluding judicial extension. This article argues that while the ruling is sound on principles, its categorical exclusion of any residual extension discretion is overbroad and may have more detrimental consequences to the objective of arbitration, i.e., speedy resolution of the dispute. By treating substitution as the mandatory and exclusive remedy regardless of the cause of delay, the Court incentivises strategic conduct to delay the arbitration by the losing party, and creates disproportionate prejudice in complex, long-running arbitrations. A contextual reading of Section 29A(4)-(6) supports a narrow fault-based exception preserving residual judicial discretion.

Keywords: Section 29A, functus officio, arbitral mandate, judicial discretion, substitution

I. Introduction

The twin objectives of the Arbitration and Conciliation Act, 1996: minimal judicial intervention and expeditious resolution of disputes may produce tension occasionally. Section 29A, introduced by the Arbitration and Conciliation (Amendment) Act, 2015 and substantially revised in 2019, was Parliament’s most direct attempt to resolve that tension in favour of speed: awards must ordinarily be rendered within twelve months of completion of pleadings, extendable by consent to eighteen months, and beyond that only by court order for “sufficient cause.”

In Mohan Lal Fatehpuria v. Bharat Textiles & Ors. (2025), the Supreme Court confronted what happens when that timeline runs out without an award. Setting aside the Delhi High Court’s order extending the mandate of a sole arbitrator after expiry, the Court held that an arbitrator whose mandate has expired under Section 29A is functus officio, that extension is impermissible post-expiry, and that substitution under Section 29A(6) is the mandatory and exclusive remedy. The ruling is significant: it resolves a circuit split between High Courts where the Delhi High Court had permitted post-expiry extension while other High Courts had refused it and sends a clear signal that temporal discipline in arbitration is non-negotiable.

Yet clarity purchased at the cost of nuance is not costless. This article argues that the Supreme Court’s categorical rule, however texturally defensible, creates three problems: it misapplies the common-law functus officio doctrine to a purely statutory context; it equates substitution with extension treating them as functionally interchangeable remedies; and it creates a strategic weapon for the dilatory party. A contextual reading of Section 29A(4)–(6), read alongside the Act’s objects, reveals that a narrow residual judicial discretion to extend post-expiry in fault-free circumstances is not only permissible but necessary.

Section 29A operates in three distinct temporal phases. First, the primary award-making window of twelve months from the completion of pleadings (Section 29A(1)). Second, a consensual extension of up to six months (Section 29A(3)). Third, a court-supervised extension for sufficient cause, available either before or after expiry, with the power to reduce the arbitrator’s fee by up to five percent per month of delay (Section 29A(4) and (5)).

Section 29A(6) then introduces a separate power: where the mandate expires and the court considers it necessary, it may “substitute” one or more arbitrators. This power, the Court held in Mohan Lal Fatehpuria, is “distinct and wide,” independent of Sections 14 and 15 which govern termination and replacement on grounds of inability or failure to act.

Two features of this architecture are critical to the instant debate. First, the text of Section 29A(4) is permissive in the direction that courts may extend “either prior to or after the expiry of the period.” The phrase “after the expiry” plainly contemplates post-expiry judicial intervention. The Supreme Court reads this as authorising only substitution but that reading imports a restriction the text does not express. Nothing in subsection (4) limits post-expiry intervention to substitution alone. Second, the phrase “if it deems fit” in Section 29A(6) makes substitution discretionary, not mandatory. A court that deems extension more appropriate than substitution in a given case is therefore, evidently not wrong in law.

The Law Commission of India’s 246th Report (2014), which preceded the 2015 Amendment, identifies the objective of Section 29A as curbing “unnecessary adjournments” and preventing arbitrators from “prolonging proceedings indefinitely.” Significantly, the Report does not contemplate the scenario of a party engineering delay to trigger expiry, a lacuna that the Court’s absolutist rule also ignores.

The Supreme Court’s holding rests on two pillars. First, that upon expiry of the mandate, the arbitrator is rendered functus officio and has no jurisdiction to continue. Second, that Section 29A(6) is the sole post-expiry remedy, operating independently of Sections 14 and 15. Both pillars deserve scrutiny.

On the first pillar, the functus officio doctrine originating in common law holds that once a tribunal has made its final determination, it is spent and cannot revisit its decision (Gary Born, International Commercial Arbitration, 3rd edn, Kluwer Law International 2021, p 3085). The doctrine is designed to protect the finality of awards, not to automatically strip a tribunal of jurisdiction the moment a procedural deadline expires. Its transposition into the Section 29A context is therefore inapt. When a mandate expires under Section 29A, the arbitrator has not rendered an award; there is no “final determination” to protect. The arbitrator is not spent in the doctrinal sense she is interrupted. The Court’s invocation of functus officio in this context conflates procedural deadline with jurisdictional exhaustion.

On the second pillar, the Court’s reasoning that substitution is the exclusive post-expiry remedy is premised on the view that Section 29A(6) is a self-contained code. But this ignores that Section 29A(4) expressly preserves judicial extension power post-expiry. If Parliament intended substitution to be the only post-expiry option, it would not have simultaneously empowered courts to extend after expiry. The two subsections must be read harmoniously. A court may choose between them depending on the facts.

The Court’s anxiety is understandable: permitting routine post-expiry extensions would render the twelve-month timeline illusory. But the appropriate check is the “sufficient cause” standard in Section 29A(4), not a blanket prohibition on extension. The standard already gives courts adequate filtering power. Strict application of “sufficient cause” refusing extension where delay is attributable to the arbitrator or a non-cooperating party achieves the Court’s objective without the collateral damage of mandatory substitution in every case.

The most consequential gap in the Mohan Lal Fatehpuria ruling is its blindness to the strategic conduct problem. Under the Court’s scheme, once the mandate expires, substitution is mandatory. This creates an asymmetric incentive structure: a party who prefers to start the arbitration afresh because the record has developed unfavourably, or because a new arbitrator may be more receptive can achieve this outcome by simply obstructing proceedings until the mandate expires. No adverse inference is prescribed; no cost consequence is imposed on the dilatory party; the slate is wiped clean.

This is not a remote possibility. Indian arbitral practice routinely involves parties taking repeated adjournments, raising fresh interlocutory challenges, and disputing procedural directions, all of which consume time against the Section 29A clock. Where one party is the principal architect of delay, compelling substitution under Section 29A(6) rewards that conduct.

This concern is not novel to the present ruling. The Supreme Court itself, in Harshbir Singh Pannu v. Jaswinder Singh acknowledged that the remedial framework under the Act must be alert to tactical abuse, cautioning against initiating a second round of arbitration through fresh Section 11 applications. Mohan Lal Fatehpuria is in tension with this caution: mandatory substitution effectively opens a back-door to a fresh start, with a new arbitrator unfamiliar with a potentially complex evidentiary record.

The Act’s own scheme does apportion blame in analogous contexts. Section 25 allows the tribunal to proceed ex parte where a respondent defaults without sufficient cause. Section 32(2)(c) permits termination where continuation has become unnecessary or impossible. These provisions are sensitive to fault attribution, and yet the Act does not impose the same consequence irrespective of who caused the problem. Section 29A, as now interpreted, stands as an outlier: it mandates the same remedy (substitution) regardless of whether the delay was caused by the respondent gaming the timeline, the claimant’s procedural inertia, or a force majeure event.

The problem is compounded in multi-party, multi-contract, and institutional arbitrations where the arbitral record witness statements, expert reports, hundreds of hearing days is substantial. Substitution in such cases imposes a cost, in time and money, that may itself constitute a denial of justice. The Court’s ruling does not engage with this scenario at all.

The foregoing critique does not invite a wholesale dismantling of the time-bound framework. The Court is right that the twelve-month limit must have real consequences. The argument here is that a court should retain a residual discretion to extend post-expiry, exercised sparingly, where three conditions are jointly satisfied.

First, the delay must be attributable to neither party nor the arbitrator arising from institutional failure, force majeure, or extraneous judicial intervention (such as a stay order). In such cases, the policy rationale for mandatory substitution deterring dilatory arbitrators and uncooperative parties is entirely absent.

Second, substitution must cause disproportionate prejudice relative to extension typically because the arbitration is at an advanced stage, near conclusion, where a new arbitrator would need to begin de novo, at significant cost and delay that ironically exceeds the delay the rule seeks to prevent. The near-concluded nature of the proceedings makes extension the more proportionate remedy: the marginal time saved by substitution is outweighed by the systemic cost of resetting the evidentiary record.

Third, extension must be consented to by both parties, or where consent is withheld the opposing party must itself have materially contributed to the delay. This condition resolves an apparent tension: it is not that party autonomy permits a unilateral veto, but rather that a party cannot simultaneously engineer delay and then rely on the absence of consent to force substitution. Where a party’s own conduct has frustrated the timeline, that party’s objection to extension carries diminished weight. This preserves party autonomy for genuinely non-culpable parties while preventing tactical weaponisation of the consent requirement.

A residual discretion of this kind is consistent with the “sufficient cause” standard in Section 29A(4), which is capacious enough to accommodate it. The phrase has no statutory definition and must be read contextually. A combination of fault-free delay, substantial record, and bilateral consent constitutes sufficient cause in any ordinary sense of the phrase. The Court’s error in Mohan Lal Fatehpuria is not in adopting a strict standard it is in treating the standard as satisfied by expiry alone, irrespective of surrounding circumstances.

Comparative reference is instructive here. The UNCITRAL Model Law (Article 14) and the English Arbitration Act 1996 (Section 24) both permit courts to remove or replace arbitrators who fail to act without undue delay, but neither mandates automatic termination or substitution upon deadline expiry. The English approach which requires the court to consider whether substantial injustice has been caused is precisely the kind of contextual, fault-sensitive analysis that the Indian framework is missing. This contrast underscores that India’s absolutist position is an outlier, and not because greater strictness was the Legislature’s explicit choice: the Act’s own text, as shown above, supports a more nuanced reading.

It is also worth noting that the Court’s reading potentially undermines institutional arbitration. Major institutions including the Mumbai Centre for International Arbitration and the Delhi International Arbitration Centre have procedural frameworks for managing delays, including provisions for extension and tribunal reconstitution. A blanket rule of mandatory substitution overrides these institutional mechanisms and may reduce the predictability that institutional arbitration is meant to provide.

The Supreme Court’s ruling in Mohan Lal Fatehpuria reflects a genuine and legitimate concern: Section 29A’s time limits must carry real consequences. An arbitral culture in which deadlines are routinely waived renders the twelve-month clock purely nominal, and the 2015 Amendment’s legislative purpose is undermined.

But a rule designed to deter dilatory arbitrators and uncooperative parties should not simultaneously create a mechanism for strategic mandate-termination by those very parties. The Court’s categorical holding that expiry renders the arbitrator functus officio in all cases and that substitution is the only post-expiry remedy goes further than the text requires and further than the policy justifies.

A contextual reading of Section 29A(4)–(6), attentive to the distinction between extension and substitution as qualitatively different remedies, and sensitive to the fault-attribution principles that run through the rest of the Act, supports a narrow residual judicial discretion to extend in fault-free circumstances where substitution would cause disproportionate harm. The instrument of statutory reform or at minimum a Constitution Bench reading of “sufficient cause” broadly remains available to correct the over-reach, and should be pursued before the consequences of mandatory substitution in complex arbitrations become fully apparent.

Blurred Lines – Mylandla on Estoppel and Sovereign Public Policy

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Blurred Lines – Mylandla on Estoppel and Sovereign Public Policy

MKBAC Blog June 9, 2026

By Shailraj Jhalnia.

About the Author:

Shailraj Jhalnia is a 3rd year student at National Law School of India University, Bangalore.

I. Introduction

The New York Convention provides two channels of objection in international arbtration. The losing party may either seek to set aside the award at the arbitral seat, or they may seek to resist its enforcement in other jurisdictions (van den Berg).

The Indian Supreme Court discussed this conflict in Nagaraj V. Mylandla v PI Opportunities Fund-I, in which the court adopted a pro-enforcement position (para. 1).

The Court formally appliedthe doctrine of transnational issue estoppel, which barred the award debtors from relitigating factual determinations that had already been settled in the Singapore seat court (paras. 57, 76).

While the judgment was correct, the reasoning is unclear on the application of issue estoppel to factual determinations, and the independent review of domestic law through a public policy analysis (Koh Swee Yen et al., p. 38). Such imprecision creates an unsound doctrinal gap to be filled by future cases, failing to demarcate the proper deference to a seat court or the proper protection of its own sovereign statutes (paras. 73-74).

Nagaraj V Mylandla v PI Opportunities Fund-I was a dispute where the promoters of Financial Software and Systems Private Ltd (FSSPL) did not pay the investors a mutually agreed exit (4-9). The SIAC tribunal thus granted the investors about 1,100 crores in damages, directing a share surrender on payment to avoid recovering twice (paras. 14-15). The case was dismissed by the Singapore High Court, which indicated beyond doubt that this forcing surrender was not an illegal buy-back (paras. 18-24).

In its Indian enforcement action, the promoters raised three grounds of public policy objection under Section 48 of the Arbitration and Concilitation Act, 1996: (i) the award granted an unlawful buy-back under the Companies Act, (ii) specific performance in addition to damages violated the SRA, and (iii) the promoters improperly invoked various remedies (paras. 28, 31, 33, 40-42). The Singapore seat court rejected the buy-back and multiple remedies objection (paras. 22-24, 86).

To preclude relitigation through issue estoppel, a foreign judgment must be final, conclusive, and rendered on the merits by a court of competent jurisdiction (Yukos, para. 147; Deutsche Telekom, paras. 63-64). The doctrine fundamentally requires a strict identification of subject matter between the prior and subsequent proceedings (Chong, p. 877).

Public policy, however, is inherently domestic. The English Court of Appeal in Yukos Capital SARL v OJSC Rosneft Oil Company emphasised that public policy standards vary considerably across countries. Consequently, one court’s ruling on public policy does not automatically answer the public policy questions of another (Yukos, para. 151).

The Indian Supreme Court acknowledged this reality in Nagaraj V Mylandla v PI Opportunities Fund-I (para. 69). The Singapore Court of Appeal has taken a similar stance, explicitly holding that transnational issue estoppel cannot arise in respect of a foreign judgment that conflicts with the public policy of the enforcement jurisdiction (Deutsche Telekom, paras. 86, 177(d)).

Issues engaging the enforcement forum’s international public policy or its overriding mandatory rules are therefore generally immune from issue estoppel (Chong, pp. 878-879; Hulley, paras. 72-74).

To overcome the hurdle of transnational issue estoppel, the award-debtors attempted to re-label a settled factual dispute as a violation of domestic public policy. A public policy challenge inherently contains both factual and legal components. In Nagaraj V Mylandla v PI Opportunities Fund-I, the promoters’ objection relied on the factual premise that the mandated share surrender was functionally a buy-back, coupled with the legal premise that such a buy-back violated the Indian Companies Act (paras. 22, 28-29).

However, the Singapore High Court had already evaluated the factual matrix and definitively concluded that no “buy-back” had occurred, characterising the transaction merely as a surrender of shares (paras. 23-24, 81). The Indian Supreme Court rightly held that an enforcement court cannot undertake a merits-based review to reopen factual issues already conclusively settled by the seat court (para. 76). The Court noted that a party cannot circumvent issue estoppel simply “by giving a different colour to a factual issue” to disguise it as a public policy violation under Section 48 of the Arbitration Act (para. 83).

This reasoning aligns seamlessly with international preclusion standards. Once arbitral awards receive judicial confirmation from the seat court, they definitively bind the parties to the established underlying factual predicates (Born, pp. 113, 120).

The analytical gap in Nagaraj V Mylandla v PI Opportunities Fund-I is most apparent in its handling of the SRA objection. The Supreme Court dismissed this statutory objection by loosely observing that the seat court “looked into it and concluded that there was no such violation,” thereby holding that no merits-based evaluation by the enforcement court was permissible (para. 86). The application of the SRA is fundamentally a question of Indian statutory interpretation, not a conclusively settled factual premise. A Singapore court’s view on an Indian legislative enactment cannot create a transnational issue estoppel that binds an Indian enforcement court’s independent public policy analysis.

The judgment’s primary failure lies in ignoring the vital taxonomy articulated by the Singapore High Court in Sacofa Sdn Bhd v Super Sea Cable Networks. That decision draws a bright line between “forum-connected issues”, which questions tied to the specific legal position in the forum court where the enforcement court retains exclusive competence, and “forum-neutral issues,” which encompass general arbitral procedures and factual predicates (para. 74).

While transnational issue estoppel rightly applies to decisions of a prior enforcement court when the specific issue concerns a forum-neutral issue, it should not automatically preclude an enforcement court’s review of forum-connected issues (Koh Swee Yen et al., pp. 76-77). By failing to cleanly apply this distinction, the Supreme Court blurred the line between factual preclusion and independent statutory interpretation.

The vagueness of the Court in not clearly distinguishing between unreviewable factual predicates and reviewable questions of domestic law poses a risk that bona fide public policy objections based on Indian statutes, like the Companies Act or FEMA, may be unjustly defeated through estoppel. The foreign seat court is not competent to consider Indian public policy. In case Indian courts blindly extend the transnational issue estoppel to such mixed questions, they are exposing themselves to abdication of their sovereign judicial responsibility (paras. 47, 55).

This ambiguity directly affects litigation strategy. Parties should pay close attention to the question of whether they should exercise their so-called active remedy of challenging the award at the seat or their so-called passive remedy of opposing the enforcement locally. In case the risk of challenging the award at the seat is that an issue estoppel will be applied too broadly, the parties may simply avoid seat court challenges altogether thus defeating the supervisory structure of the New York Convention (Koh Swee Yen et al., pp. 55-56).

Nagaraj V Mylandla v PI Opportunities Fund-I is a favorable move towards enforcing foreign arbitral decisions in India. The Court’s application of transnational issue estoppel serves the foundational purpose of finality in international commercial arbitration preventing award-debtors from converting enforcement proceedings into a second opportunity to relitigate the merits under the cover of a public policy objection (Section 48 of the Arbitration Act). By refusing to allow the award-debtor to paint a different colour over a factual issue to enable him to pass it off as a breach of a public policy, the judgment rightly circumscopes the limited ability of an enforcement court to review
(paras 57, 76, 83).

However, the analytical basis of the judgment does not lack its cracks. By over-ruling the objection about the SRA on the ground that the seat court had investigated it, the Court had confused an estoppable factual premise with a domestic statutory interpretation question. This imprecision leaves a gap in doctrine, not making clear where settled facts, which should not be relitigated, and questions of domestic legal policy, which should be left the prerogative of the court of enforcement, are the same.

Future Indian enforcement courts should adopt the stricter Sacofa taxonomy explicitly: where the public policy objection turns on the interpretation of a domestic Indian statute the Companies Act, FEMA, the SEBI Act, or any other mandatory regulatory enactment that question must be treated as a forum-connected issue immune from transnational issue estoppel, regardless of whether a seat court addressed the same facts.(Chong, pp. 878-879).

Finally, although the Mylandla judgment is right in protecting the enforcement proceedings by not subjecting them to a factual review of the merits, it is a warning to itself. The use of transnational issue estoppel is a very important mechanism in ensuring that international commercial arbitration is final and efficient. But it should not be applied to the detriment of the basic role of an enforcement court to rule upon its own public policy. Guarding the integrity of the arbitral process should not be at the expense of the sovereign right to interpret and apply domestic law (Koh Swee Yen et al., pp. 76-77).

The Fraud Threshold in Arbitrability: Reopening the Gates and Revisiting the Undefined Prima Facie Standard

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The Fraud Threshold in Arbitrability: Reopening the Gates and Revisiting the Undefined Prima Facie Standard

MKBAC Blog May 20, 2026

By Gurman Singh Narula.

About the Author:

The author is a fifth-year student at National Law Institute University (NLIU), Bhopal.

Introduction

In arbitration law, a recurring difficulty arises when fraud is alleged in the arbitration agreement itself: should such disputes be referred to a tribunal, or filtered out at the threshold? The Supreme Court has addressed this by distinguishing between fraud affecting the underlying contract and fraud directed at the arbitration clause, most recently reaffirmed in Rajia Begum v. Barnali Mukherjee. Yet, while the doctrinal position is settled, the method of its application remains unclear. Courts consistently invoke a “prima facie” standard as a signal of restraint, still its content is undefined, and there is no guidance on the evidentiary threshold, the degree of judicial satisfaction required, or how this inquiry is to remain distinct from a merits-based determination. This indeterminacy produces a structural flaw. A question that ordinarily demands rigorous evidentiary scrutiny is compressed into a summary threshold inquiry without principled limits, leaving outcomes to judicial discretion. In practice, this blurs the line between preliminary review and substantive adjudication, allowing courts to engage in deeper evidentiary assessment than the framework ostensibly permits. The result is a distortion of the arbitral process: the principle of kompetenz-kompetenz is weakened, and jurisdictional authority subtly shifts back to courts under the guise of a limited prima facie examination. To resolve this, this paper seeks to define the content of the prima facie standard by proposing a structured, constraint-based framework that preserves judicial restraint while ensuring principled and consistent adjudication of fraud at the referral stage. 

The decision in Rajia Begum v. Barnali Mukherjee exposes a structural gap in arbitration jurisprudence. While courts recognise that disputes involving fraud affecting the arbitration agreement may be non-arbitrable, they have not articulated a clear evidentiary threshold for determining this at the referral stage. The case arose from a disputed Admission Deed, through which one party claimed entry into a partnership and invoked an arbitration clause. At the same time, the other denied the document’s execution, alleging it was forged.  

The case is significant for the High Court’s contradictory procedural approach: it refused to appoint an arbitrator under Section 11 due to doubts about the agreement, yet referred the dispute to arbitration under Section 8 using Article 227. The Supreme Court resolved this by holding the dispute non-arbitrable, relying on doubts about the document, prior findings under Section 9, and concurrent lower court rulings, while also finding that the High Court exceeded its jurisdiction.

The judgment does more than resolve a factual dispute; it highlights a deeper systemic concern. By allowing courts to deny arbitration based on an open-ended prima facie assessment of fraud, the law risks inconsistency. Similar cases may yield different outcomes depending on how courts perceive the threshold, gradually weakening the standard over time. While the doctrine rightly recognises that arbitration depends on consent and cannot survive where the agreement is seriously impeached, it offers no clear method for determining when that threshold is met. The result is a framework that is conceptually sound but methodologically underdeveloped.

This article argues that the undefined and indeterminate prima-facie standard is not only a doctrinal gap but a fundamental defect resulting from the tension between the Arbitration Act’s mandate for summary judicial review and the inherently complex evidentiary requirements of adjudicating fraud in arbitral consent. 

To remedy this flaw while honouring the principle of kompetenz-kompetenz and minimal judicial intervention, it advances a rigorous three-stage analytical framework centred on a “manifest nullity” threshold. To address this, it advances a three-stage framework centred on a “manifest nullity” threshold, designed to maintain judicial restraint while ensuring that challenges to arbitral consent are evaluated in a structured, consistent, and principled manner.

The evolution of the Court’s approach to fraud and arbitrability reveals a persistent absence of a clear and coherent evidentiary standard governing how such claims should be assessed at the referral stage. While the courts have progressively clarified when fraud may render a dispute non-arbitrable, there is no fixed criterion for evaluating the evidentiary standard at the preliminary stage of a hearing. This article seeks to address this absence by proposing a structured threshold framework. 

In A. Ayyasamy v. A. Paramasivam, the Supreme Court drew a foundational distinction: mere allegations of fraud are insufficient to exclude arbitration, but “serious” allegations particularly those that go to the validity of the arbitration agreement itself, may render the dispute non-arbitrable. This marked a shift away from a blanket exclusion of fraud from arbitration toward a more nuanced, consent-based inquiry.

This approach was further refined in Rashid Raza v. Sadaf Akhtar, where the Court formulated a two-pronged test: first, whether the fraud allegation strikes at the arbitration clause itself, and second, whether it implicates broader public law concerns beyond the inter se dispute of the parties. This test sought to operationalise the distinction introduced in Ayyasamy, but still stopped short of specifying how courts should assess such claims at a preliminary stage.

Subsequent decisions, including Avitel Post Studioz Ltd. v. HSBC PI Holdings (Mauritius) Ltd. and Managing Director, Bihar State Food and Civil Supply Corporation Ltd. v. Sanjay Kumar, reaffirmed that allegations of fraud affecting the arbitration agreement raise jurisdictional issues. In such cases, courts are justified in declining reference to arbitration because the very foundation of arbitral authority party consent, is in doubt. 

Yet, despite this doctrinal continuity, a critical gap persists. These decisions, including Rajia Begum, identify when arbitration should be refused but do not clarify how courts should evaluate the sufficiency of material at the prima facie stage. The inquiry into consent remains conceptually central but procedurally indeterminate.

The doctrine, when examined closely, reveals a tension that the Court has acknowledged but never satisfactorily resolved. This conceptual tension underscores the need for a more precise threshold, one that can distinguish between mere suspicion and demonstrable invalidity without collapsing into a full merits-based inquiry. The non-arbitrability inquiry is cast as a preliminary jurisdictional exercise, one that must remain summary and avoid devolving into a mini-trial. Yet the question of whether an arbitration agreement is forged cannot be answered without the kind of detailed evidentiary scrutiny that a full trial entails: examination of original documents, expert testimony, and cross-examination. 

The “prima facie” standard thus operates as a judicially constructed compromise, but one whose contours remain undefined. This is evident in the Supreme Court’s articulation of the scope of intervention under Section 11. In Duro Felguera v. Gangavaram Port Ltd, the Court confined the inquiry to the existence of an arbitration agreement. 

At the same time, the Court’s acknowledgement of flexibility in A. Ayyasamy v. A. Paramasivam, which holds that no rigid rule can be laid down and that each case must turn on its facts, reveals that the prima facie test is not a fixed evidentiary threshold but a context-sensitive standard. This elasticity, while pragmatic, further underscores its lack of doctrinal precision. 

When read together, these decisions demonstrate that the jurisprudence on Section 11 does more than limit judicial intervention; it indirectly constructs the prima facie test as a procedural restraint rather than a substantive standard. The cases do not define what degree of satisfaction a court must reach; instead, they define what a court must not do, namely, conduct a detailed evidentiary inquiry. As a result, the prima facie standard derives its meaning negatively, through exclusion, rather than through any positive articulation of evidentiary sufficiency.

The decision in Rajia Begum v. Abdul Rashid illustrates this contradiction in concrete terms. The Court relied on circumstantial indicators, internal inconsistencies in the respondent’s narrative, the prolonged absence of the disputed deed from the documentary record, and contemporaneous banking documents describing her merely as a guarantor to cast a ‘grave cloud of doubt’ over the Admission Deed. These factors are undeniably persuasive. Yet, arriving at a definitive conclusion on authenticity would ordinarily necessitate a full evidentiary process: scrutiny of primary documents, expert analysis (such as handwriting examination), and cross-examination of witnesses. Without these tools, the court’s determination risks resting on an incomplete evidentiary foundation.

This highlights the ambiguity of the ‘prima facie’ standard. Courts invoke it to indicate a limited inquiry, but do not define its content. It is unclear whether it reflects a balance of probabilities, a triable issue, reasonable suspicion, or some arbitration-specific threshold. This uncertainty is not merely semantic, it leads to inconsistent application. Similar cases may be decided differently depending on judicial discretion, with some courts applying the rule of minimal doubt and others requiring stronger proof. 

At a deeper level, this exposes a fundamental dilemma within the doctrine itself: a court cannot confidently conclude that an arbitration agreement is forged without undertaking a detailed evidentiary inquiry akin to a trial, yet the statutory framework mandates that the referral stage remain summary and preliminary. The result is a conceptual impasse as the level of scrutiny required for adjudicative accuracy is inherently incompatible with the procedural constraints imposed on the court.

A more serious concern arises from how the Court treats the Section 9 proceedings. The court in the present case held that the High Court’s prima facie finding, questioning the genuineness of the agreement, had attained finality after dismissal of the SLP, and could therefore be relied upon in later Section 8 and 11 proceedings. While this may seem efficient, it raises a doctrinal issue. Section 9 is designed to grant interim relief, with courts undertaking only a summary inquiry and recording tentative findings. In Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd., the Supreme Court recognised the interim and provisional nature of such proceedings. Observations made at this stage are not intended to bind subsequent adjudication on merits. Section 9 is meant only for interim relief. The inquiry is summary, the standard is low, and the findings are expressly tentative. Courts routinely clarify that such observations should not affect later proceedings. Allowing a Section 9, especially one made without a full hearing, to block reconsideration at the Section 8 or 11 stage wrongly treats a provisional view as final. It effectively creates a form of estoppel not recognised by the statute. As a result, a party denied relief under Section 9 may also be denied arbitration, leaving them without any effective forum until a civil suit is finally decided, which may take years.

SOLUTION ONE: THE SCHEDULED CATEGORIES APPROACH

The core idea. Rather than asking courts to assess whether a fraud allegation is serious enough on an undefined prima facie standard, which is precisely where the doctrine fails, the law should enumerate, in advance, the specific and closed categories of fraud allegation that are capable of rendering an arbitration agreement non-arbitrable. Outside those specified categories, reference is mandatory. The scheduled approach replaces judicial discretion with a rule: the court does not assess the quality of the fraud allegation; it asks only whether the allegation falls within the schedule. This eliminates the evidentiary standard problem because the court is not conducting an evidentiary inquiry at all; it is performing a classification exercise.

This approach is supported by Vidya Drolia & Ors. v. Durga Trading Corporation, (2021) 2 SCC 1, where the Supreme Court addressed concerns of judicial overreach by replacing open-ended discretion with a structured four-fold test for non-arbitrability. At paragraph 76, the Court held that referral courts must not pre-empt arbitral jurisdiction except where invalidity is manifest, warning that extensive inquiry would undermine kompetenz-kompetenz. The court’s act of classifying four categories of non-arbitrable disputes furthered the approach of minimising judicial discretion and securing the tribunal’s jurisdiction. 

Therefore, this approach will solve the problem directly and is rooted in principles established in section 5 and 16 of the act respectively but taking this approach can lead to overarching of domain by the judiciary and this approach will also fail to include new and contemporary fraud patterns making the definitional carving of fraud matters ineffective to solve the problem fully, rather this solution displaces the discretion problem rather than eliminating it.

SOLUTION TWO: THE CALIBRATED THRESHOLD STANDARD (CTS): A PROPOSED TEST

The paper to highlight a key problem: the prima facie standard doesn’t clearly define the kind or amount of evidence required to show fraud. Because of this, courts often apply it inconsistently, leading to the probability of unsupervised judicial discretion. The test of manifest nullity tries to fix this by setting a much higher threshold. However, in practice, it can end up looking very similar to the prima facie test, just with a different label, without truly solving the problem. The mixed approach offers a better solution. Instead of replacing prima facie, it clarifies what the standard actually requires by grounding it in established judicial principles. At the same time, it introduces an upper limit inspired by manifest nullity, ensuring that courts do not overstep. As a result, this approach establishes a standard that is clearer in its requirements, has defined limits, and is consistent with Sections 5 and 16 of the Act.

The Calibrated Threshold Standard (“CTS”) is a two-phase test for pre-reference judicial inquiry where fraud is alleged against an arbitration agreement. It defines the prima facie standard and provides jurisprudential content while imposing a structural ceiling to prevent the inquiry from turning into a trial.

  • Phase One: The Ceiling: What the Court May Not Do

The court must first ensure its inquiry stays within strict limits. It may only consider material placed on record by the parties. It cannot draw inferences from missing documents, assess credibility, identify patterns in circumstantial evidence, or examine authenticity where expert analysis is needed. If resolving the fraud allegation requires any of these steps, the inquiry stops. The matter must be referred to the arbitral tribunal under Section 16 of the Arbitration and Conciliation Act, 1996.

  • Phase Two: The Floor; What the Resisting Party Must Establish

If the inquiry remains within limits, the burden shifts to the party resisting reference. That party must show that the arbitration agreement fails the ‘arguable basis’ threshold, i.e., no reasonable reading of the material supports the existence of an agreement to arbitrate. Mere suspicion, inconsistencies, or late production of documents are insufficient, as they require inference (barred by Phase One). The burden is met only where the material, on its face, makes the agreement implausible, not merely disputed.

The Tie-Breaking Principle

CTS adopts a clear pro-reference rule from Vidya Drolia judgment but applies it in a structured way. It comes into play only after the court has applied both Phase One (the ceiling) and Phase Two (the arguable basis test). If, after the two tests, the court is still whether there is fraud because the material allows more than one reasonable reading but does not clearly show that the agreement is implausible, then the matter must go to arbitration. This kind of ‘doubt’ is specific: it exists where the court cannot decide the issue without drawing inferences or weighing evidence, which it is not allowed to do.

This paper examines the structural flaw at the heart of India’s arbitrability framework: the undefined prima facie standard applied when fraud is alleged against an arbitration agreement. Beginning with the Supreme Court’s decision in Rajia Begum v. Barnali Mukherjee, it traces the doctrinal evolution from Ayyasamy through Vidya Drolia to demonstrate that while courts have progressively refined when fraud may exclude arbitration, the how of that inquiry remains conspicuously unarticulated. The paper exposes the methodological gap between the summary review mandate of Sections 5 and 11 and the evidentiary depth that fraud allegations genuinely demand, and proposes the Calibrated Threshold Standard (CTS) as a principled, structured resolution that preserves kompetenz-kompetenz while ensuring consistency.

The manifest nullity standard, drawn from French arbitration law and Article 1448 of the French Code of Civil Procedure, is theoretically appealing: it counsels courts to intervene only where the invalidity of an arbitration agreement is obvious and indisputable on the face of the record, thereby robustly protecting kompetenz-kompetenz. In principle, it aligns well with the CTS’s ceiling in Phase One. However, transplanting the manifest nullity standard wholesale into Indian law would be constitutionally incongruent. France has not adopted the UNCITRAL Model Law on International Commercial Arbitration, and its arbitration regime reflects a distinct civil-law tradition that operates independently of the Model Law’s framework. India, by contrast, has adopted the Model Law as the structural backbone of the Arbitration and Conciliation Act, 1996. Importing a standard specifically designed for a non-Model Law jurisdiction would create normative dissonance with Sections 5, 11, and 16 of the Act, which reflect the Model Law’s own calibrated approach to judicial restraint and kompetenz-kompetenz.

A more suitable comparative source lies in the approaches of Singapore and the United Kingdom, both of which are Model Law jurisdictions with strongly pro-arbitration cultures that have developed principled, structured frameworks for fraud-related challenges. As demonstrated in Swiss Singapore Overseas Enterprises Pte Ltd v Exim Rajathi India Pvt Ltd and Dongwoo Mann + Hummel Co Ltd v Mann Hummel + GmbH, Singapore’s courts have evolved a three-limb test requiring deliberate concealment, a causative link between the fraud and the award, and an absence of good reason for non-disclosure, all applied against a high evidential threshold. The United Kingdom similarly demands cogent proof of dishonesty under Section 68(2)(g) of the Arbitration Act 1996. Under the Arbitration Act 1996, UK courts enforce arbitral awards via s.66 but robustly intervene where fraud is established. In Contax v KFH [2024], the Commercial Court set aside an enforcement order after finding the entire arbitration agreement, proceedings, and award was fabricated, with sections of the purported award copied verbatim from an unrelated English judgment. Similarly, in Nigeria v P&ID [2023], an $11 billion award was set aside as the arbitration was contaminated by bribery and corruption throughout. English public policy favours enforcement, but fraud must be distinctly pleaded, proved on cogent evidence, and shown to have materially influenced the outcome a deliberately high threshold under ss.67, 68, and 103. India can integrate these features directly into the CTS framework. The “arguable basis” floor in Phase Two mirrors the UK’s triable issue standard, while the pro-reference tie-breaking principle reflects both Singapore’s and the UK’s strong presumption toward arbitration. Adopting this integrated approach would allow India to achieve doctrinal precision without departing from the Model Law architecture that underpins its arbitration statute.

Enforcement of Foreign Awards Cannot Be Resisted on Public Policy Grounds After Final Determination by Seat Court: Transnational Issue Estoppel Applies

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Arbitration Update - Enforcement of Foreign Awards Cannot Be Resisted on Public Policy Grounds After Final Determination by Seat Court: Transnational Issue Estoppel Applies

MKBAC Blog April 29, 2026

By Mahika Roy.

About the Author:

Mahika Roy is a Research Scholar at the Milon K. Banerji Arbitration Centre.

Introduction

The Hon’ble Supreme Court in Nagaraj V. Mylandla v. PI Opportunities Fund-I & Ors. has reaffirmed India’s pro-enforcement stance towards foreign arbitral awards by holding that enforcement under Section 48 of the Arbitration and Conciliation Act, 1996 cannot be resisted on “public policy” grounds where the same issues have already been conclusively adjudicated by the seat court. The Court recognised and applied the doctrine of transnational issue estoppel, holding that Indian courts cannot re-examine issues decided by a competent foreign court under the guise of enforcement. This ruling significantly limits the scope of objections under Section 48 and reinforces finality in cross-border arbitration.

The dispute arose from a Share Subscription and Shareholders Agreement between investors and the promoters of Financial Software and Systems Pvt. Ltd. The agreement contained a detailed exit mechanism enabling investors to realise their investment through methods such as secondary sale, buy-back, or strategic sale.

Following the failure of the promoters to provide an exit, arbitration was initiated under the Singapore International Arbitration Centre (SIAC) Rules, with Singapore as the seat. The arbitral tribunal rendered an award in July 2024 granting damages to the investors equivalent to the exit price and providing for a strategic sale mechanism in case of non-payment.

The award was challenged before the Singapore High Court, which rejected the challenge and upheld the award. Notably, issues such as waiver, buy-back, and alleged violations of Indian law were considered and rejected. No appeal was filed against this decision.

Subsequently, enforcement proceedings were initiated before the Madras High Court under Sections 47 and Section 49 of the A&C Act. The appellants resisted enforcement under Section 48, primarily invoking the “public policy of India” exception. The High Court rejected these objections, applied transnational issue estoppel, and enforced the award. The matter then reached the Supreme Court.

The central issue before the Supreme Court was whether enforcement of a foreign arbitral award could be refused under Section 48 on public policy grounds when the same objections had already been raised and rejected by the seat court. A related issue concerned whether Indian courts could re-examine the merits of the award or revisit findings of the seat court during enforcement proceedings.

A bench comprising Justices Sanjay Kumar and K. Vinod Chandran dismissed the appeals and upheld enforcement of the foreign arbitral award. It was held that the objections raised were impermissible attempts to reopen issues already adjudicated and to undertake a merits review under the guise of Section 48.

It was reiterated that Section 48 provides only limited and narrowly construed grounds to refuse enforcement of a foreign award. Enforcement proceedings were characterised as non-appellate in nature, where re-evaluation of evidence or contractual interpretation is impermissible. Reliance was placed on Vijay Karia v. Prysmian Cavi E Sistemi SRL to emphasise that Indian courts must adopt a pro-enforcement bias and discourage attempts to delay enforcement through expansive interpretations of public policy.

A central aspect of the reasoning was the application of the doctrine of transnational issue estoppel. It was held that where a competent court at the seat of arbitration has conclusively decided issues relating to the validity of the award, the same issues cannot be reopened in enforcement proceedings in another jurisdiction.

The objections raised by the appellants, including those relating to waiver, buy-back, and alleged statutory violations, had already been considered and rejected by the Singapore High Court. In the absence of any appeal against that decision, those findings attained finality. It was therefore impermissible for the appellants to reagitate the same issues in India under the guise of public policy. The doctrine was applied as a facet of comity, judicial discipline, and prevention of abuse of process.

It was emphasised that enforcement proceedings cannot be converted into a forum for rehearing the dispute. The objections raised by the appellants were found to be attempts to revisit the arbitral tribunal’s interpretation of contractual provisions and findings of fact. Such attempts were held to fall outside the permissible scope of Section 48.

It was further observed that objections which could have been raised before the seat court, but were not, cannot be permitted to be introduced for the first time at the enforcement stage, consistent with the principle of Constructive Res Judicata. Allowing such challenges would undermine finality and encourage tactical litigation.

The Court clarified that the “public policy of India” exception under Section 48 must be construed narrowly and cannot be invoked to undertake a review on merits. It was held that the concept of public policy refers to violations of fundamental and non-negotiable legal principles forming the core of Indian law, and not to mere errors of law or alleged inconsistencies with statutory provisions.

The contention that the award violated provisions of the Companies Act or the Specific Relief Act was rejected on the ground that such arguments did not meet the high threshold required to establish a breach of fundamental policy. It was further noted that such issues had already been considered by the seat court and could not be revisited. The Court emphasised that enforcement proceedings are not intended to serve as a second round of challenge to the award.

It was further observed that, even independent of the application of transnational issue estoppel, the scope of interference under Section 48 remains narrowly circumscribed and does not permit a review on merits. The Supreme Court has consistently held that enforcement proceedings are not appellate in nature and cannot be used to re-evaluate findings of fact or law.

However, the present decision goes a step further by holding that where such issues have already been raised and conclusively decided by the seat court, they cannot be re-agitated at the enforcement stage in India. In this sense, the doctrine of transnational issue estoppel operates as an additional layer of restraint, beyond the already limited scope of Section 48.

Even in a situation where no challenge had been mounted before the seat court, the scope of interference would remain restricted to the narrow contours of public policy. The present case, therefore, underscores that where a party has already invoked the jurisdiction of the seat court and failed, it cannot seek a second review under the guise of enforcement proceedings.

This judgment marks a significant development in Indian arbitration jurisprudence by firmly embedding the doctrine of transnational issue estoppel within the framework of enforcement under Section 48. The ruling strengthens India’s position as a pro-enforcement jurisdiction by ensuring that foreign awards are not subjected to multiple layers of judicial scrutiny. It clarifies that enforcement proceedings are not an opportunity to relitigate disputes or raise belated objections after failing before the seat court. For arbitration practice in India, the decision enhances finality, certainty, and efficiency in cross-border dispute resolution. It aligns Indian law with international arbitration principles by recognising the primacy of the seat court and limiting judicial interference at the enforcement stage. Ultimately, the judgment curbs dilatory tactics and reinforces the integrity of the arbitral process.

Substantive Justice Over Statutory Deadline: Section 29A After C. Velusamy

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Substantive Justice Over Statutory Deadline: Section 29A After C. Velusamy

MKBAC Blog April 9, 2026

  By Swarnava Sengupta & Namrata Ghosh

About the Author:

Swarnava Sengupta & Namrata Ghosh are fourth year law students at National Law University, Odisha.

 

Abstract

Section 29A of the Arbitration and Conciliation Act, 1996 (‘Act’) envisages time limit for completion of Arbitral Proceedings. Earlier, in Rohan Builders, the Supreme Court had held that an application to extend the time for making an arbitral award beyond the statutory mandate is maintainable even if filed after the expiry of the mandate. The Supreme Court recently, in C. Veluswamy v. K. Indhera (‘Velusamy’) expanded the maintainability of the application for the extension of the Tribunal’s mandate to situations where the arbitral award has been passed. This case clarifies the scope of the section in the post-award scenario in the backdrop of a tussle between substantive justice and procedural technicalities.

This post examines the implications of this judgment in three stages. First, it traces the factual matrix of the case and the judgment pronounced by the SC. Second, it focuses on the conundrum it creates for S. 29A and the doctrinal concerns it leaves unresolved. Finally, it evaluates the clarity Velusamy brings and how the judgment has tried to uphold party autonomy and the integrity of the Tribunal. 

I. From Appointment To Expiry: The Dispute In Context

A sole arbitrator was appointed by the Madras High Court on 19 April 2022. After pleadings closed on 20 August 2022, the 12-month period under Section 29A began, later extended by six months till 20 February 2024. Although the matter was reserved for award in September 2023, it was reopened for negotiation. When negotiations failed, the arbitrator delivered the award on 11 May 2024, after the mandate had expired. 

The Respondent challenged the award on Section 34 grounds that it was time-barred, and the Appellant on Section 29A(5) grounds that the award should be extended retrospectively. The High Court annulled the award and denied the extension. The Supreme Court ruled that an application under Section 29A(5) for extension of the mandate of the arbitrator is maintainable even after the expiry of the time under Sections 29A(1) and (3) and even after rendering of an award during that time. The power of the court to consider extension is not impaired and while considering the application, the Court will examine if there is sufficient cause for extending the mandate, and in the process, it may impose such terms and conditions as the situation demands.

This judgment envisages to promote procedural flexibility in arbitration by according primacy to substantive justice over technical formalities. The Court has tried to ensure that the invested time, financial resources, and evidence-based efforts of the parties in the arbitration proceedings do not go to waste. The verdict opined that if a reasoned award is deemed to be unenforceable solely on the grounds of delay, it will undermine the faith in arbitration.  

However, this judgment also raises concerns about the purpose of Section 29A, post award remedies, award enforceability and interpretive conflict.

Firstly, the verdict enables a party to file for a Section 29A application to seek an extension of the arbitral tribunal’s mandate even after an award has been passed by the tribunal after the lapse of 18 months prescribed period. It is unclear whether there would be any outer limit or limitation period for the Court to entertain such applications.

Notably, Section 34 is the only appeal mechanism under the Act, which has a limitation period of three months from the date on which the parties received the signed copy of the arbitral award. This judgment introduces uncertainty as to whether such proceedings would suspend, overlap with, or run parallel to the limitation clock prescribed under Section 34 by permitting post-award applications under Section 29A for retrospective extension of the tribunal’s mandate. Further, awards that were previously rendered unenforceable due to the expiry of the Tribunal’s mandate may now be revived through such application, encouraging parties to approach courts and seek retrospective validation. 

Secondly, the ruling has placed the status of an arbitral award passed after the expiry of mandate in a grey zone by characterising such awards as not non-est but merely unenforceable pending judicial extension under Section 29A of the Act. 

Thirdly, a bare reading of Section 29A of the Act states that if a tribunal fails to pass an award within a stipulated timeline, the tribunal’s mandate ‘shall’ be terminated mandatorily. As per the recent stance adopted by the Hon’ble Apex Court, minimal judicial interference is warranted and efforts should be made to sustain the arbitral awards passed by a tribunal. However, such approach should not be undertaken to validate an award passed by a tribunal which had previously become functus officio. This is further reinforced by the fact that the 1940 Act, provided for extension of the tribunal’s mandate irrespective of whether an award has been passed. The present Act, in absence of such provision indicates the legislature’s intention to exclude post award extension of tribunal’s mandate. Thus, accepting the contrary interpretation in the name of pro-arbitration policy would undermine the statutory discipline consciously introduced by the legislature through Section 29A.

Fourthly, this decision raises a conundrum when viewed in the context of the legal provisions pertaining to the mandate of the arbitral tribunal. Section 29A(4) of the Act has a proviso, wherein the mandate of the arbitrator continues till the extension application is disposed of. While Section 32(3) of the Act, on the other hand, provides that the mandate of a tribunal terminates with the termination of the arbitral proceedings. This decision affirms the court’s power to extend the mandate of the tribunal after the award and the termination of the mandate, creating tension due to the unclear implications of how a mandate, which has ceased to exist, can be revived or considered to continue. This overlap results in conflation of finality in the termination of mandate, thus broadening the scope of judicial intervention. 

Lastly, in Fatehpuria, the Court took a strong stance by ordering substitution to prevent delay and ensure the time-bound requirement under Section 29A of the Act, thus emphasising efficiency in arbitration. But Veluswamy expands the discretionary scope of substitution, thereby redefining it as an extraordinary measure to be taken with circumspection. This judicial development may weaken the deterrent against delay and even encourage laxness in procedure, thus defeating the purpose of speedy dispute resolution as embodied in the statute. 

This decision is a pivot move in jurisprudence of Section 29A. It would require rapid introduction of legislative changes to bring coherence and consistency between the emerging jurisprudence and the statutory text. In view of this, the Parliament should amend Section 29A to explicitly delimit the admissibility of post-award extension applications. In case such applications are allowed, an amendment should provide a reasonable time period within which they should be considered. Further, the retrospective application of the extension should be clarified specifically in order to identify whether it, implicitly, constitutes an automatic validation of the arbitral award. It is also crucial to determine the date of commencement of the Section 34 limitation period in case the award is rendered enforceable.

Moreover, to prevent the possibility of the misuse of such retrospective extensions to put back into life strategically deferred challenges, the Supreme Court should set out strictly defined parameters of what can be termed as “sufficient cause” in insofar as the extension of a mandate is concerned. Accordingly, the judiciary should exercise restraint in adjudicating such extension petitions, granting them solely under the most exceptional circumstances only.

Thus, Velusamy’s judgement should be made to serve as a safety valve and not as an alternative to bypass procedural discipline. Only through calibrated intervention can arbitration remain both efficient and just, without eroding statutory timelines or party confidence in the process.

The Doctrinal Pendulum – From Mandatory Substitution to Structured Discretion under Section 29A

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The Doctrinal Pendulum - From Mandatory Substitution to Structured Discretion under Section 29A

MKBAC Blog March 31, 2026

  By Ripudaman Rawat, Agrata Chaturvedi

About the Author:

Agrata is currently a 3rd year law student at Lloyd Law College and Ripudaman is currently a 2nd year law student at NALSAR University of Law, Hyderabad.

 

Abstract

Section 29A of the Arbitration and Conciliation Act, 1996 was built as a multi-layered deterrence mechanism against arbitral delay. In Viva Highways Ltd v. Madhya Pradesh Road Development Corporation Ltd (2026), the Supreme Court held that termination of an arbitrator’s mandate under Section 29A does not automatically require substitution which essentially was a departure from the “empowering and obligating” language of Mohan Lal Fatehpuria v. Bharat Textiles (2025). This comment asks whether treating substitution as an exceptional remedy protects procedural efficiency or quietly guts the statutory timeline’s deterrent logic. Drawing on comparative institutional practice and the legislative history of the 2015 Amendment, it proposes a graduated-response framework to reconcile time discipline with tribunal continuity and party autonomy.

Keywords: Section 29A, Arbitrator Substitution, Tribunal Mandate, Party Autonomy

I. Introduction

Section 29A [“S.29A”] of the Arbitration and Conciliation Act, 1996 was born from a specific diagnosis: delay as the greatest evil undermining Indian arbitration. Inserted by the 2015 Amendment, it imposed a twelve-month timeline for rendering awards, backed by escalating consequences i.e. fee reduction, and ultimately, substitution of the arbitral tribunal. Within a decade, two Supreme Court [“SC”] decisions have pulled that substitution mechanism in opposite directions, and the tension between them is more instructive than either decision alone.

In Mohan Lal Fatehpuria v. M/S Bharat Textiles [“Fatehpuria”], the Court declared that S.29A(6) “empowers and obligates” courts to substitute an arbitrator on mandate expiry. Barely two months later, in Viva Highways Ltd v. Madhya Pradesh Road Development Corporation Ltd [“Viva Highways”], the Court reinterpreted that language, holding that substitution would follow only “if the situation so warranted.” The Court held that this was not an overruling, but merely a clarification. But the clarification reversed the operational outcome, and that deserves attention.

The current debate surrounding S.29A centers on two conflicting approaches to an expired arbitral mandate. In Fatehpuria, the court enforced the rule of automatic substitution of the arbitrator, prioritizing strict adherence to statutory timelines, ensuring speedy resolution. In contrast, Viva Highways rejected this absolute mandate in favour of judicial discretion and allowed courts to extend the mandate without changing the tribunal, if the context warrants it. By moving away from automatic substitution, Viva Highways recognized a practical reality i.e. replacing an arbitrator without examining the underlying causes could be counterproductive.

The automatic substitution’s rule fails to distinguish between delays that are caused by an arbitrator’s inefficiency, party’s deliberate tactics or unavoidable systemic bottlenecks. Furthermore, forcing a newly appointed tribunal to restart the proceedings wastes both time and resources, ultimately undermining the very efficiency that S.29A aims to protect. However, replacing a strict rule with an unstructured discretion is only half an answer. Discretion without clear guidelines gives way to unpredictability, and unpredictability has its own costs for a provision whose logic depends on credible and consistent consequences, thereby neutralizing the deterrent effect. Therefore, the answer isn’t either Fatehpuria’s rigidity, or Viva Highways’ open-ended standard, but a graduated framework which focuses on context without leveraging the deterrent effect that S.29A was designed to create.

The 246th Report of the Law Commission of India identified delay as inherent in the arbitration process. Proceedings routinely stretched beyond a decade, and expeditious resolution has become a fiction. S.29A was the legislature’s response: not just deadlines, but a tiered structure of consequences.

S.29A(1) requires an award within twelve months from the date the tribunal enters upon reference; S.29A(3) allows parties, by mutual consent, to extend this by a further six months; Section S.29A(4) allows the court, on application, to grant further extensions, but where delay is attributable to the tribunal, it may order fee reduction of up to five per cent per month; Section S.29A(6) empowers the court, while extending time, to substitute the arbitrator(s).

The logic of this provision is inherently escalatory. The statutory time cap provides a structural baseline, escalating to financial penalties and ultimately substituting the tribunal. Each tier is designed to reinforce the one below it, therefore, if the threat of substitution is diluted by unpredictability, the entire disciplinary framework loses its teeth.

In Fatehpuria, an arbitrator appointed by the Delhi High Court had failed to render an award within the statutory period. (¶ 11) Rather than substituting him, the High Court simply extended his mandate. (¶ 12) The SC reversed this. Once a mandate expires under S.29A(4), the arbitrator becomes functus officio. (¶ 11) S.29A(6), the Court held, “empowers and obligates” courts to appoint a substitute. (¶ 13)  A new arbitrator was directed, with proceedings to continue from the stage already reached. (¶ 14) The decision treated substitution not as a discretionary remedy but as a structural consequence of expiry, an interpretation that left little room for judicial hesitation.

Viva Highways quietly dismantled this. The Madhya Pradesh High Court had done exactly what Fatehpuria seemed to require: on mandate expiry, it terminated the appointment and directed substitution. The SC set this aside, holding that the High Court had misread the precedent. (¶ 4) The Court clarified that “obligates” does not imply a blanket mandate, it simply means substitution is an available remedy when the situation demands it. It would follow only “if the situation so warranted.” (¶ 4)

The tension sits in that single word. “Empowers” and “obligates” are not synonyms, one gives a court an option, the other removes it. When Fatehpuria used both in tandem, the jurisdiction to substitute an arbitrator not only existed but had to be exercised. Reading “obligates” as simply restating “empowers” makes the word pointless. The practical effect of this is that it transforms a strict rule of automatic substitution into a discretionary standard where substitution only happens if the specific facts warrant it.

S.29A works through credible commitment, wherein, the legislature deliberately imposes a deadline precisely so that both, the parties and arbitrators take it seriously. If the consequence of missing that deadline is uncertain, with extension possible and substitution merely discretionary, the deterrent loses force. An arbitrator who expects accommodation rather than replacement has weaker reason to conclude within time. The ICC Commission’s work on controlling time and costs has noted that the primary cause of high costs and long durations in international arbitration is the unnecessary complication of proceedings. S.29A represents India’s attempt to break this cycle of delay, using the substitution mechanism as its sharpest instrument.

What makes India’s approach worth pausing on is how unusual it is. Neither the UNCITRAL Model Law, nor the English Arbitration Act 1996, nor the Singapore International Arbitration Act prescribes a statutory time limit on making an award, let alone a substitution mechanism triggered by its breach. India went further than virtually every major arbitration jurisdiction, and deliberately so. The delay in domestic arbitration is a genuine, documented problem for which the parliament brought about strict statutory deadlines, Viva highways suggests that the judiciary is moving towards sensitivity to context rather than imposing rigid and automatic consequences.

There is a genuine paradox at the heart of substitution as the remedy for delay itself causes delay. In complex infrastructure disputes, like that of Viva Highways, a substitute arbitrator must re-read voluminous submissions, re-examine evidence, and reconstruct a procedural context they had no part in building. Practitioner experience in institutional arbitration puts tribunal reconstitution at three to six additional months, with significant added costs. S.29A(6) anticipates this partially, providing that the substitute “shall continue” from the stage already reached and may rely on evidence already recorded. But there is a real gap between continuing from a stage and actually understanding a complex dispute at that stage. A tribunal that has heard witnesses, absorbed the cadence of arguments, and formed tentative impressions carries institutional memory that a handover can hardly replicate.

The downstream litigation costs compound this. Every substitution risks generating fresh applications, potential challenges under Sections 12 and 13, and further time-extension proceedings. Viva Highways is itself a good example, wherein, the SC had to intervene to correct a High Court that was itself trying to apply Fatehpuria correctly. If mechanical substitution produces more ancillary litigation than it prevents, the efficiency rationale for the strict rule starts to look weaker than it first appeared.

Neither the Fatehpuria rule (automatic substitution) nor the Viva Highways standard (substitution if warranted) is adequate on its own. The former is over-inclusive and the latter, under-determinate. S.29A requires structured discretion ,a framework that calibrates the consequence to the context.

Courts adjudicating S.29A(4) applications could be guided by –

  • Where proceedings are post-evidentiary and near completion, extending the existing tribunal’s mandate is proportionate. At an early, pre-evidentiary stage, the disruption cost of substitution is low, and substitution is appropriate;
  • Where delay is attributable to party obstruction or case complexity, substitution punishes the wrong actor or penalises no fault. Extension is the proportionate response. Where delay is attributable to tribunal inaction, substitution serves its designed function;
  • Where both parties prefer the existing tribunal, this preference, rooted in party autonomy, should weigh heavily toward extension. Where one or both parties seek substitution, the court should give that preference due weight;
  • Where substitution would cause greater delay than the original default, it is disproportionate. Where it would impose minimal disruption, it is the right remedy.

This preserves the deterrent core of S.29A wherein, substitution remains a live and credible consequence for tribunal-attributable delay, while avoiding the perverse outcome of a remedy that compounds the problem it was designed to cure. Where both parties prefer the existing tribunal and delay stems from case complexity rather than tribunal default, extension is the proportionate response.

Critically, courts applying this framework should record reasons for choosing extension over substitution, or vice versa. Over time, that body of reasoning will provide the guideposts Viva Highways currently does not.

Viva Highways shifts towards a more pragmatic judicial reality. Statutory deadlines, as helpful as they are, shouldn’t be allowed to wreck the very process they were meant to serve. But pragmatism alone can be unpredictable if it doesn’t have a clear structure. This ruling leaves us with an unanswered question which is when is the substitution actually “warranted”?

The answer lies in a graduated framework linking the choice of remedy to the stage of proceedings, the cause of delay, party preferences, and proportionality. S.29A’s deterrence structure need not be dismantled to accommodate contextual judgment; it needs to be supplemented with standards that give judicial discretion shape and transparency.

The real reform S.29A awaits is not a choice between Fatehpuria’s rigidity and Viva Highways’ flexibility. It is a framework that treats time discipline and tribunal continuity not as adversaries, but as co-dependent values in service of one objective i.e. arbitral justice that is both timely and just.

Set-Off in the Shadow of Insolvency: Exploring the SC’s Nuanced Approach in Ujaas Energy v. WBPDCL

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Arbitration Update: Set-Off in the Shadow of Insolvency: Exploring the SC’s Nuanced Approach in Ujaas Energy v. WBPDCL

MKBAC Blog March 30, 2026

By Manav Pamnani.

About the Author:

Manav Pamnani is a Research Scholar at the Milon K. Banerji Arbitration Centre.

Introduction and Background

Recently, the Supreme Court (“SC”) in its decision dated March 20, 2026, in Ujaas Energy v. West Bengal Power Development Corporation Limited (“WBPDCL”) held that an extinguished counter claim can be raised as a plea of set-off by way of defence in arbitral proceedings even after a resolution plan has been approved. This case involved a public sector power company (WBPDCL) that had floated a tender in 2017 under which Ujaas Energy was granted the contract. Ujaas subsequently went into the Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code (“IBC”). Despite the applicable moratorium, WBPDCL continued proceedings and invoked arbitration in December 2021. When the parties filed their claims in 2023, WBPDCL’s counterclaim included certain unpaid amounts. In October 2023, the National Company Law Tribunal (“NCLT”) approved Ujaas Energy’s resolution plan. WBPDCL’s claims were not included in that plan. On April 30, 2024, the arbitral tribunal issued an interim award dismissing WBPDCL’s counterclaim on the ground that, by virtue of the approved resolution plan (“clean slate” principle which ensures that a successful resolution applicant takes over a company free from all prior liabilities, debts, and legal claims), any claims not included in the plan stood extinguished. WBPDCL challenged this interim award in the Calcutta High Court, wherein a Single Judge upheld the dismissal. However, on appeal, a Division Bench in September 2024 allowed WBPDCL to continue arbitration. Ujaas then appealed to the SC.

The main issue before the SC was whether, after a resolution plan is approved under the IBC, WBPDCL could still pursue or enforce its claim, not included in the resolution plan, against Ujaas in arbitration. In particular, the question was whether WBPDCL could press its counterclaim or otherwise assert it in some form, or if the “clean slate” rule completely barred any such claim.

The Court unanimously held that once a resolution plan is approved under Section 31 of the IBC, any claim not forming part of that plan cannot be enforced as a separate claim in arbitration. Therefore, WBPDCL was not entitled to an independent counterclaim or affirmative relief on its claim after the approval of the resolution plan. However, the SC drew a crucial distinction. It allowed WBPDCL to use its claim in defence by way of a set-off. The SC held that even though WBPDCL is not entitled to independently pursue its claim by way of a separate counterclaim post approval of the resolution plan, it ought to be permitted to raise the plea of set-off at least by way of defence. This implied that WBPDCL could not obtain any money from Ujaas, but it could use its claim to reduce or defeat Ujaas’s own claims in arbitration.

The SC based its conclusion on the terms of the approved resolution plan and the well-accepted underlying principles of the IBC. It noted that Section 31 of the IBC makes the terms of the resolution plan binding on all parties and that a plan ordinarily extinguishes claims not included in it, reflecting the “clean slate” principle. In discussing this point, the SC relied upon the Ghanashyam Mishra & Sons Limited v. Edelweiss Asset Reconstruction Company Limited case which upheld this position. In the present case, the resolution plan expressly barred WBPDCL from seeking payment of its claim, since it was omitted. Therefore, WBPDCL could not obtain affirmative relief through a separate claim.

However, the Court observed that nowhere in the plan or the IBC as a whole was a set-off expressly forbidden. The plan’s language barred claims for the purpose of payment or settlement but did not explicitly exclude set-off as a defence. The SC therefore applied the expressio unius est exclusio alterius principle which means that the express mention of one thing excludes all others. Consequently, the SC inferred that WBPDCL should be allowed to use the claim defensively. In practical terms, this means that WBPDCL can raise its claim as a defence to reduce or extinguish Ujaas’s recovery, but only to the extent necessary. The SC emphasised that WBPDCL should not derive any positive or affirmative relief on that basis. For example, if WBPDCL’s claim exceeds what Ujaas is awarded, WBPDCL cannot pocket the difference. It can only avoid having to pay that amount itself. Therefore, the SC was clear that the set-off defence is limited to balancing accounts and not creating any new entitlement. The SC also noted that these conclusions were fact-specific and based on the plan’s exact terms and in no way changed or altered the settled rule that the approval of a resolution plan extinguishes omitted claims.

This decision is a major development that surfaces at the intersection between the Indian insolvency regime and arbitration law. It confirms that the IBC’s “clean slate” doctrine generally prevents enforcing claims that arise post the approval of the resolution plan. However, it introduces an important caveat that honest creditors may still invoke set-off as a defence in arbitration even if their claim was omitted by the resolution plan. By allowing WBPDCL to raise its claim as a defence, the SC struck a balance between the IBC’s overarching objectives of fostering the finality of claims and facilitating a fresh start for the debtor, and the need for fairness and equity by admitting genuine set-off defences. The SC clearly stipulated that refusing even a defensive use of the claim by strictly upholding the “clean slate” principle would unfairly defeat the rights of genuine litigants.

In terms of benefits to the stakeholders, this ruling provides concrete guidance. It clearly establishes that after a resolution plan is approved, creditors whose claims were excluded may not secure awards for those claims, but they can defend themselves using those claims. Going forward, in future arbitrations involving insolvent companies, parties should ideally carefully draft or review resolution plans to see if set-off defences are preserved or barred.

The decision implies that courts and tribunals should interpret IBC plans strictly. This means that if the resolution plan does not expressly forbid set-off, it will be allowed. Therefore, alternatively, in this case, if the resolution plan had barred set-off as well, it most likely would not have been permitted by the SC. The decision also reinforces that arbitration tribunals should not automatically invalidate proceedings or awards solely on the basis of existence of a moratorium under IBC and the “clean slate” doctrine applies only to affirmative claims and not to set-off as a defence.

Through this decision, the SC has reaffirmed the primacy of the resolution plan’s terms while preserving an equitable remedy through accepting genuine set-off defences. The SC itself emphasised that a resolution plan under Section 31 is the culmination of the CIRP and ordinarily excludes new claims. However, in the present case, equity demanded that WBPDCL be allowed to offset its dues in defence. This nuanced ruling will largely shape how insolvent parties and arbitrators handle counterclaims and defences in the future and will likely ensure that arbitration remains a viable forum for resolving disputes even in the shadow of insolvency.

Evolution in Law, Resistance in Practice: The NHAI Circular and India’s Infrastructure Arbitration Paradox

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Evolution in Law, Resistance in Practice: The NHAI Circular and India’s Infrastructure Arbitration Paradox

MKBAC Blog March 25, 2026

  By Yuvraj Singh Salh and Advaith Madhu.

About the Author:

Yuvraj Singh Salh and Advaith Madhu are second-year B.A. LL.B. (Hons.) student at National Law Institute University, Bhopal.

 

Abstract

Arbitration in India has undergone a visible doctrinal shift since the 2015 amendments to the Arbitration and Conciliation Act. Courts have steadily narrowed public policy review, removed automatic stays, and reinforced the authority of arbitral tribunals. Yet state practice in infrastructure contracting reveals a different instinct. In January 2026, the Ministry of Road Transport and Highways issued a circular directing the National Highways Authority of India not to refer disputes valued above ₹10 crore, as well as declaratory or non-monetary disputes, to arbitration, instead favouring conciliation or civil litigation. This article examines that tension and asks whether executive policy still reacts to an arbitration regime that the law itself has already transformed.

 

Keywords: Infrastructure arbitration; NHAI disputes; public infrastructure disputes.

I. Introduction

For the better part of this decade, India has committed itself to the goal of developing a modern arbitration regime. Reports such as the 246th Law Commission of India Report [“LCI Report”] have acknowledged excessive judicial involvement in the arbitral process as a key factor contributing to the steadily diminishing trust in arbitration as a dispute-resolution mechanism. The Report also proposed restoring autonomy to arbitral tribunals, a position that was reflected in the legislative intent underlying the Arbitration & Conciliation (Amendment) Act, 2015 [“2015”].

Courts clearly responded to these advancements in the field, narrowing the scope of public policy in order to reduce frivolous challenges to arbitral awards under Section 34. This approach has been coupled with the removal of automatic stays, as well as a conscious effort to promote institutional arbitration as a means of dispute resolution. India thus positioned itself as arbitration ready.

A deeper understanding, however, reveals the cracks in the system. The same State that amended the statute to reduce judicial intervention, now issues circulars restricting arbitration under high-value infrastructure disputes. The same framework that speaks of tribunal autonomy quietly redirects large public sector contracts back to the overburdened civil court system and to litigation. Infrastructure authorities rely on arbitration, yet express disapproval the moment adverse awards are rendered. Investor-State disputes follow a similar template: awards are resisted before they are honoured, and treaty frameworks retain arbitration but surround it with sufficient safeguards to postpone its effective implementation.

This article argues that India’s arbitration regime has evolved substantially from its pre-2015 form. The enforcement of arbitral awards has been strengthened, and tribunal authority has been clarified. However, a similar approach has not been adopted by the executive, which continues to rely on preconceived notions rooted in an earlier, more interventionist phase of arbitration law. This resulting disconnect produces an uneasy duality in which arbitration is projected as a symbol of reform but treated as a risk when awards run against the State. The metaphorical credibility of reform depends not on the language embodied in the statute, but on consistency when liability materialises.

Arbitration in India continues to be viewed through the same dated mistrust that characterised one of the main shortcomings of its pre-2015 framework, which was mired in constant challenges under Section 34, judicial interventionism, and a defeatist approach.

This doctrinal shift to the current arbitration framework is not merely cosmetic but strikes at the core of the problem by addressing the structural deficiencies in arbitration. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. [“BALCO”][1], was the first clear signal of this shift. By confining the scope of Part I of the Arbitration & Conciliation Act, 1996 [“The Act”] to India-seated arbitrations, the Court emphasised that judicial power flows from statute, and not from instinct. As a result, courts cannot extend the applicability beyond what Parliament has laid down in the Act. This marked a departure from an era where arbitral awards were treated as provisional until accorded judicial assent.

This contraction continued along Ssangyong Engg. & Construction Co. Ltd. v. NHAI [“Ssangyong”][2]. Public policy, which had expanded through ONGC v. Saw Pipes Ltd. [“ONGC”][3] and ONGC v. Western Geco International Ltd. [“Western Geco”][4] into an elastic and far-reaching concept, was subsequently pulled back into the narrow contours articulated in Renusagar Power Co. Ltd. v. General Electric Co. [“Renusagar”][5]. It was restricted to the fundamental policies of Indian law, along with basic notions of justice and morality, and nothing further. The Court made it clear that the interpretation of contractual terms must rest purely with the arbitrator, and that courts must not substitute their own construction based on preference, thereby consciously reducing the scope of their own power of review.

Then came NHAI v. M. Hakeem [“M. Hakeem”][6], arising in the specific context of large infrastructure awards against a government authority. The Supreme Court expressly rejected a holistic interpretation of Section 34 that would ascribe to the Court a power to modify or vary an award. If an award is flawed, the primary remedy would be its annulment, a position that was particularly significant for public bodies as it foreclosed the possibility of approaching courts to seek partial trimming of the award. M. Hakeem was, perhaps, the first sign of a souring of relations between the government and arbitration.

Against the background exhibited by M. Hakeem, Gayatri Balasamy v. ISG Novasoft Technologies Ltd. [“Gayatri Balasamy”][7] may seem to mark a departure. However, it does not do so in substance. Here the Supreme Court recognized a limited power to modify arbitral awards under hyper-specific circumstances. While the doctrine of severability was applied to these contentious agreements, manifest clerical or computational errors cannot, and should not, be corrected. The Court repeatedly emphasized that this is not an appellate review but a re-appreciation of evidence or a merit substitution. Hence, the scope is tightly bounded and clearly carved out by virtue of the judgment as a whole.

A thorough analysis of these judicial advancements shows that courts have signalled restraint and the enforcement framework has hardened. If executive policy continues to respond to arbitration as though it was still embedded in its earlier, more interventionist phase, it is responding to an outdated version of the law. Therefore, the question that follows is: has the policy position kept pace with the legal transformation?

[1] Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552.

[2] Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131.

[3] ONGC v. Saw Pipes Ltd., (2003) 5 SCC 705.

[4] ONGC v. Western Geco International Ltd., (2014) 9 SCC 263.

[5] Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644.

[6] NHAI v. M. Hakeem, (2021) 9 SCC 1.

[7] Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1.

Committee deliberations chaired by T. K. Vishwanathan continued along the same path as the LCI Report, but with greater focus on institutional arbitration, the use of technology and clearer jurisdictional boundaries. Lawmakers reflected the same view, describing arbitration as user friendly and capable of faster resolution. The establishment of the New Delhi International Arbitration Centre demonstrated the same long-sighted confidence.

Yet sovereign contracting practice, particularly in infrastructure, reveals a far more uneven reality. The National Highways Authority of India’s experience illustrates this clearly, with its Annual Report for 2022–23 recording 140 ongoing arbitration matters involving claims of approximately ₹1.16 lakh crore, alongside 219 court proceedings involving nearly ₹28,863 crore. These figures are substantial and outline the scale at which disputes arise within public infrastructure, with approximately ₹8,109 crore already deposited pursuant to judicial directions, which demonstrates that arbitration and litigation were ongoing realities rather than far-off risks. Within Highway projects alone, around 150 arbitration matters were identified, with claims exceeding ₹1.09 lakh crore. 95 awards had already been delivered while others remained pending, suspended somewhere between contractual and financial disagreement.

Institutional arbitration mechanisms have also been widely used, with more than 100 disputes referred under the Society for Affordable Redressal of Disputes [‘SAROD’]­­­­­– Highways, resulting in 47 awards and several others concluding through negotiated settlement. Individual outcomes could also be substantial, such as the ₹485.28 crore award in favour of PNC Infratech in relation to the Agra Bypass Project. These numbers show how common arbitration has become and how deeply it is integrated into infrastructure contracting.

However, these instances are not evidence of arbitral malfunction, since highway concession agreements structured under EPC (Engineering, Procurement, Construction), BOT (Build, Operate, Transfer) or HAM (Hybrid Annuity Model) models operate within unstable conditions. Land acquisition delays, regulatory approvals that shift midway and scope modifications are rampant. Arbitration does not create these disputes but resolves issues that arise from contractual realities already in place. The Comptroller and Auditor General of India noted that the Employees’ State Insurance Corporation failed to provision ₹138.29 crore linked to an arbitral award, understating liabilities and overstating surplus. The liability did not originate in arbitration. Arbitration simply forced its recognition.

Despite this, executive policy has moved towards restricting arbitration precisely in those disputes where it has been most visible. A circular issued in January 2026 by the Ministry of Road Transport and Highways directed that disputes valued at ₹10 crore or above, along with declaratory or non-monetary disputes, were not to be referred to arbitration. Instead, conciliation or civil litigation was to be pursued. A nuanced appreciation of the ₹10 crore threshold reveals that its effect is not merely just restrictive but exclusionary in substance. Infrastructure disputes arising from EPC, BOT and HAM contracts are inherently high value, as evidenced by the data reflected in the NHAI’s Annual Report for 2022–23. The Government’s rationale for this exclusion is problematic in nature as referring these high value disputes to conciliation and the court system is reactionary rather than solving the root of the problem. Hence, it can be stated that this circular does not operate as a selective filter but as a near substantive bar leaving arbitration to a category of disputes that rarely arise in practice. Therefore, arbitration exists in a limbo wherein it is rendered ineffective in dispute resolution mechanisms through no fault of its own.

This shift exposes a deeper institutional tension. Arbitration reform was premised on courts being structurally incapable of resolving complex commercial issues efficiently. Redirecting high-value infrastructure disputes back to courts risks recreating those conditions. It also recasts arbitration less as a dispute resolution mechanism and more as a forum where fiscal exposure becomes visible. This contradiction is further sharpened by statutory reforms that strengthen tribunal authority and repeated committee recommendations that signal internalising arbitration. Therefore, while it is present at the level of architecture, its adoption remains cautious when the financial consequences are immediate.

Investor-state arbitration reflects a similar pattern as observed in the dispute involving Cairn Energy. In December 2020, an arbitral tribunal directed India to refund retrospective tax collections along with interests and penalties, which was not immediately complied with. Cairn Energy, as a response, initiated enforcement actions targeting state-owned assets including aircrafts and diplomatic property. Only later did legislative change intervene where retrospective tax demands were withdrawn in 2021, and approximately ₹7,900 crore was refunded, though interest and penalties were excluded.

A related but somewhat distinct pattern appeared in the dispute between Antrix Corporation and Devas multimedia. Domestic courts annulled the arbitral award, citing fraud in the formation of the underlying contract, but the enforcement proceedings abroad did not treat annulment as automatically determinative. Foreign courts examined the reasoning behind the annulment, particularly weighing it against the international standards of due process. Therefore, the Hague Court of Appeal held that such setting aside of arbitral awards cannot be based on an annulment ruling which is procedurally deficient.

India’s treaty framework reflects comparable caution. The 2016 Model Bilateral Investment Treaty requires investors to exhaust domestic remedies before initiating arbitration along with structured consultation requirements. Arbitration remains available as an option under Article 14.4, but stays intertwined with multiple conditions such as an advance notice to the responding party, thereby weakening its promise of speed and neutrality. 

Taken together, these developments demonstrate that arbitration is strengthened as a system, yet its use is narrowed in situations where its outcomes carry immediate fiscal repercussions. Arbitration turns such consequences visible, making that moment of visibility generate a discomfort among the stakeholders.

Indian arbitration has structurally changed from its raw and pre-2015 state. Over the years, courts have increasingly exercised self-restraint, and Parliament has tightened statutory language, with the scope of public policy being correspondingly confined. It is precisely this evolution that exposes the present policy retreat as legally and logically unjustifiable.

Large infrastructure awards are not aberrational outcomes; rather, they represent financial systemic shortcomings, including deficiencies in contractual design, delays in land acquisition, misallocation of risk, and administrative fragmentation. Arbitration does not create these conditions but merely records them to adjudicate in an unbiased manner. When the State deliberately narrows arbitration down precisely at the stage when financial liabilities become visible, it risks mistaking fiscal discomfort for systemic malfunction.

The deeper concern is not confined to any single sector but relates to the coherence of the system as a whole. A country cannot divulge significant funds into arbitral architecture, promulgate institutional reform and seek international credibility while simultaneously acting hesitant where the outcomes challenge authority. International markets respond to observable patterns within a country, rather than to official rhetoric. If India genuinely seeks to position itself as a global powerhouse, it must back its ambitions with concrete action and demonstrate commitment to a credible dispute resolution framework.

Clarity for the Future, Silence on the Past : Supreme Court’s Interpretation of Section 29A

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Clarity for the Future, Silence on the Past : Supreme Court's Interpretation of Section 29A

MKBAC Blog March 23, 2026

  By Garv Sood.

About the Author:

Garv Sood is a final-year B.A.LL.B. (Hons.) student at University Institute of Legal Studies, Panjab University, Chandigarh.

 

Abstract

The procedure for extension of mandate of an arbitral tribunal had for long been mired by uncertainty, owing to an apparent divergence in opinions expressed by various High Courts on the question of jurisdiction. The article examines these divergent opinions and discusses the different interpretative approaches adopted by these courts. It further correlates this analysis of High Court decisions with the final verdict pronounced by the Supreme Court providing doctrinal clarity.
While the jurisdictional controversy largely stands settled, the article finally highlights a significant omission in the judgement i.e., the absence of any indication as to the effective date of operation of the ruling. In light of such omission, the article examines the potential impact of retrospective application of the ratio decidendi of this judgement on the domestic arbitration regime, particularly so on the finality of past arbitral awards.

Keywords: Section 29A, Extension of Mandate, Referral Courts, Substitution of Arbitrator, Prospective Overruling

I. Introduction

The Supreme Court has finally put to rest, the interpretative conundrum arising from the procedure for extension of mandate of an arbitral tribunal after expiration thereof, as enshrined under Section 29A of the Arbitration and Conciliation Act, 1996 (“the Act”).

The Apex Court in Jagdeep Chowgule v. Sheela Chowgule & Ors. (“Jagdeep Chowgule”), was seized of an appeal against a decision rendered by a Division bench of the Bombay High Court in Sheela Chowgule v. Vijay V. Chowgule (“Sheela Chowgule”)[i]. In the impugned judgement, the Bombay High Court had held that where an arbitral tribunal is constituted by a High Court, in exercise of its powers under Section 11(6), an application seeking extension of mandate of such tribunal would lie only before that High Court. The High Court further clarified that in matters of consensual appointment of arbitrator by the parties, such applications would lie before the “court” as defined under Section 2(1)(e) of the Act and to no other.  

The Supreme Court rejected this distinction and held that all applications under Section 29A must lie exclusively before the “court” falling within the ambit of Section 2(1)(e) of the Act and, that in no circumstances could such applications be entertained by referral courts.

This article entails an extensive inquiry into the root of the jurisdictional question arising from Section 29A and its subsequent resolution by the Supreme Court in Jagdeep Chowgule (supra). The article briefly touches upon the scheme of the provision and thereafter, proceeds to analyse the rationale adopted by various High Courts in rendering divergent opinions on the jurisdictional issue under Section 29A. It further evaluates the reasoning which formed the basis of the decision pronounced by the Supreme Court and lastly, attempts to examine the impact of the judgement on the domestic arbitration regime, particularly so, on the finality of arbitral awards.

[i] 2024 SCC OnLine Bom 5717

Section 29A was introduced to the Act through the 2015 amendment and prescribed statutory timelines for arbitration proceedings governed by the Act. These statutory timelines and the process of computation of the same, were further altered by the enactment of the 2019 Amendment.

The section provides that arbitral proceedings are to be concluded within 12 months from the date of completion of pleadings, while also providing for a 6-month extension of the same, subject to consent of the parties. Any further extension of the mandate, beyond this 18-month period, requires express sanction from a court of competent jurisdiction.

The pivotal question that arises therefore is, which court would be competent to consider such application for extension. Would it be the referral court exercising jurisdiction under Section 11(6) or the court as defined under Section 2(1)(e)?

The definition of the term “court” as provided under Section 2(1)(e) is fairly unambiguous, in that, it defines the same as the principal civil court exercising original jurisdiction in a district, including a High Court which exercises ordinary original civil jurisdiction. However, the question of interpretation primarily arises due to the usage of the phrase “unless context otherwise provides” in Section 2(1), which qualifies all definitions thereof and thus, creates room for contextual interpretation by the courts.

While some courts found it necessary to contextually interpret the term “court”, in order to decide the jurisdictional issue under Section 29A, others were satisfied with a textual reading of the provision. This ultimately resulted in a complete divergence in opinions expressed by different high courts, thereby splitting them into two broad groups. The High Courts belonging to the former category, subscribed to the opinion that applications under Section 29A would have to be filed before the principal civil courts exercising original jurisdiction i.e., the District Courts. The latter set of High Courts however, adopted the exercise of contextual interpretation which led them to hold that applications under Section 29A would lie before the constitutional courts which exercise the power of appointment of arbitrator under Section 11(6).  

1. High Courts Favouring Jurisdiction of Civil Courts

The line of reasoning adopted by High Courts belonging to the former category primarily draws support from the literal rule of interpretation of statutes and further, from the courts’ understanding of the jurisdiction vested with referral courts under Section 11.

In Dr. V.V. Subba Rao v. Dr. Appa Rao Mukammala,[i] a Division bench of the Andhra Pradesh High Court observed that the stage of Section 11 and the jurisdiction vested in referral courts thereof, is sui generis from the stage of Section 29A. Drawing reference to the ratio of the Apex Court in Nimet Resources Inc. v. Essar Steels Ltd. (“Nimet Resources”),[ii] the Division bench noted that once the power of appointment under Section 11 stands duly exercised by constitutional courts, they become functus officio and do not retain any residual jurisdiction over the arbitral proceedings.

While holding that an application under Section 29A would only lie before a “court” as defined under Section 2(1)(e) and not before itself i.e., a High Court sans ordinary original civil jurisdiction, the Bench rejected the need for contextual interpretation. In doing so, the Court held that exercise of powers under Section 29A by civil courts, would not impinge on the jurisdiction exercised by constitutional courts under Section 11 and thus, no jurisdictional anomaly would arise.

The Allahabad High Court also gave a comprehensive judgement on the issue in M/S A’Xykno Capital Services Private Ltd. v. State of U.P. (“M/S A’Xykno”),[iii] wherein it countered the need to contextually interpret the term “court” with reference to Section 29A. The Court drew reference from Section 2(1)(e) itself, and observed that the legislature conferred exclusive jurisdiction to High Courts in cases pertaining to international commercial arbitrations thereby, expressly excluding civil courts. Therefore, the Court reasoned that if the intent of the legislature was to exclude the jurisdiction of civil courts from exercising powers under Section 29A, it would have categorically expressed the same. The Court placed reliance on the amendment to Sections 47 & 56 of the Act to buttress this contention. Through the 2015 amendment, the legislature expressly ousted the jurisdiction of civil courts under Sections 47 & 56 and conferred such jurisdiction upon the High Courts. In light of the aforesaid, the Court observed that the exclusion of High Courts, not having ordinary original civil jurisdiction, was deliberate and intentional in Section 29A.

Akin to the Andhra Pradesh High Court, the Allahabad High Court also rejected the contention that a jurisdictional anomaly would arise if civil courts are permitted to exercise powers of substitution under Section 29A, to replace an arbitrator appointed by “superior” constitutional courts under Section 11(6).

The Allahabad High Court took a different approach to dismantle this contention. The Court observed that accepting this argument would imply that a jurisdictional anomaly also arises when civil courts exercise their powers under Section 34 and set aside an award passed by an arbitrator, duly appointed by a constitutional court under Section 11(6). Therefore, it would mean that even applications seeking setting aside of the award under Section 34 would need to be filed before the court which exercised jurisdiction under Section 11(6), in order to prevent a “jurisdictional anomaly”. The Court noted that this would inevitably result in a situation where once a constitutional court exercises the power to appoint an arbitrator under Section 11, it ousts the jurisdiction of all other courts in all curial matters. Ruling that such a situation would make the statute unworkable and fall afoul of the scheme of the Act, the Allahabad High Court rejected this contention.

The dictum laid down in M/S A’Xykno (supra) came to reconsidered by the Allahabad High Court in Jaypee Infratech Limited v. EHBH Services Pvt. Ltd.. The Court expressed its disagreement with the view taken by the Learned Single Judge in M/S A’Xykno (supra) and therefore, referred the question of law to a larger bench in light of conflicting decisions rendered by coordinate benches of equal strength.

Notably, even prior to Jagdeep Chowgule (supra), the Supreme Court had an opportunity to interpret the law and clarify its stance on the jurisdictional issue arising out of Section 29A. In Chief Engineer v. M/S BSC & C and C JV (“Chief Engineer”),[iv] the Court dismissed a Special Leave Petition and refused to interfere with an order of the Meghalaya High Court whereby, it had dismissed an application for extension under Section 29A for want of jurisdiction. The Apex Court held that as per Section 2(1)(e), only High Courts possessing ordinary original civil jurisdiction are empowered to entertain applications under Section 29A and since, the Meghalaya High Court lacked the same, it was not vested with jurisdiction under Section 29A. The Court notably observed that the power of substitution under Section 29A is only a consequential power, vesting in the Court which is empowered to extend time.

Seemingly, the Supreme Court had settled the jurisdictional controversy with its order in Chief Engineer (supra), however, this was not the case since the judgement came to be distinguished subsequent to its pronouncement thereby, keeping the question of law alive.

In conclusion, the Courts belonging to the first category have firmly rejected the occasion of any jurisdictional anomaly in case of exercise of powers under Section 29A by civil courts. Courts have primarily reasoned that since referral courts become functus officio after exercising powers under Section 11 and cease to retain any jurisdiction over arbitral proceedings, exercise of jurisdiction under Section 29A by civil courts would not impinge on the jurisdiction of the referral courts.

2. High Courts Favouring Jurisdiction of Referral Courts

High Courts belonging to the latter category however, have readily placed reliance on contextual interpretation in order to prevent, what they understand to be, a jurisdictional anomaly in the procedure under Section 29A. The rationale followed by the Courts in this category is that once the power to appoint an arbitrator under Section 11 is exercised by the referral court, being a “superior” court, it would be improper for a civil court to exercise powers of extension or substitution under Section 29A. Such an exercise, according to these courts, was contrary to the hierarchical structure on which the Indian Judicial system functions.

The Delhi High Court in DDA v. M/S Tara Chand Sumit Construction Co.,[v] held the power of substitution to be a subset of the wider power of appointment under Section 11. Thus, the Court observed that once a “superior” court exercises the power of appointment, powers of substitution under Section 29A would also vest in it. The Court found it inconceivable that the legislature would on one hand, confer jurisdiction to appoint arbitrators on constitutional courts and on the other, allow civil courts to substitute such arbitrators while exercising powers under Section 29A(6). The High Court interpreted this to be a conflict between the powers under Section 11 and 29A and thus, ruled that the power of substitution would only vest in referral courts.

In Sheela Chowgule (supra), the Goa bench of the Bombay High Court gave the judgement which was subsequently set aside in appellate proceedings before the Supreme Court in Jagdeep Chowgule (supra). The law laid down by the Division bench has already been discussed however, another pertinent aspect of the judgement in question is the part where the High Court distinguished the ruling of the Apex Court in Chief Engineer (supra).

The Court undertook a brief analysis of what constitutes ratio decidendi and consequently, attracts application of the Doctrine of Binding Precedent in terms of Article 141 of the Constitution. Placing reliance on a number of precedents, it noted that in determining the ratio, due consideration has to be given to the factual matrix before the Court and the context in which such decision was rendered.

Upon considering the facts of Chief Engineer (supra), the Court found that the arbitral tribunal therein, was constituted by mutual consent of the parties under Section 11(2), and there was no exercise of the power of appointment under Section 11(6). Therefore, in such a case, there was no occasion for any jurisdictional anomaly, as had been observed in cases where power of appointment is exercised by constitutional courts under Section 11(6) and thereafter, civil courts attempt to exercise powers of substitution under Section 29A. Thus, the Division bench was of the considered opinion that Chief Engineer (supra) could not be treated as a binding precedent in view of the peculiar facts of Sheela Chowgule (supra).

The Telangana High Court in Smt. Somuri Ravali v. Somuri Purnachandra Rao,[vi] upon a conjoint reading of Sections 2(1)(e) and 11, observed that the Act envisaged High Courts to be the focal point of all domestic arbitrations. It observed that High Courts are vested with exclusive jurisdiction to appoint an arbitrator, extend or terminate his mandate, and even exercise the powers of substitution. The Division bench opined that the provisions of the Act are hierarchy-sensitive and placed reliance on the judgement of the Bombay High Court in Sheela Chowgule (supra), endorsing the view expressed therein. The Court ultimately observed that applications under Section 29A are to be filed before High Courts, barring the exceptional situation where an arbitrator is appointed by mutual consent of the parties, in terms of Section 11(2) of the Act. Only in such a case would civil courts be empowered to entertain application under Section 29A.  

[i] 2024 SCC OnLine AP 1668

[ii] (2009) 17 SCC 313

[iii] 2023 SCC OnLine All 2991

[iv] 2024 SCC OnLine SC 1801

[v] 2020 SCC OnLine Del 2501

[vi] Order dated 10.04.2025 in Civil Revision Petition No. 739 of 2025

While deciding Jagdeep Chowgule (supra), at the very outset, the Apex Court rejected the distinction between arbitral tribunals constituted under Section 11(2) by consent of the parties and the ones constituted by constitutional courts in exercise of their powers under Section 11(6). The Court found the distinction to be artificial in nature since, neither the scheme of the statute, nor the provisions of Section 29A stipulated the same.

Thereafter, the Court clarified the scope of power exercised by constitutional courts under Section 11(6) and categorically rejected the line of reasoning adopted by the High Courts belonging to the latter category. It held that the powers of appointment under Section 11 cannot be conflated with supervisory jurisdiction over arbitral proceedings. The Court reiterated the ratio laid down in Nimet Resources (supra) and held that jurisdiction of constitutional courts stands exhausted upon constitution of the arbitral tribunal and that courts become functus officio upon appointment of the tribunal.

On the issue of whether contextual interpretation of the term “court”, for the purposes of Section 29A was warranted, the Apex Court answered in the negative. Applying the principles of statutory interpretation, the Court reasoned that a defined term must ordinarily bear the meaning assigned to it, unless the same leads to absurdity or renders the provision unworkable in the larger scheme of the act. In the marked absence of any such consequence in the present case, the Court held that there was no occasion to undertake such an exercise with reference to Section 29A, since the definition provided under Section 2(1)(e) was perfectly workable.

Lastly, the Court also rejected the contention that if a District Court is permitted to substitute an arbitrator, initially appointed by a High Court, it would lead to a jurisdictional anomaly, in that, an “inferior court” would replace an arbitrator appointed by a “superior court”. The Apex Court observed that no such anomaly would arise and held that courts cannot artificially supply “context” in order to deviate from a definition provided by the legislature. Since the contention was entirely rooted in the perception of status of courts on the basis of their hierarchy, the Supreme Court held it to be impermissible in the rule of law.

The law pertaining to jurisdiction of courts under Section 29A largely stands settled in that, all applications thereunder are required to be filed before civil courts exercising ordinary original civil jurisdiction in a district and before a High Court, only where such High Court exercises ordinary original civil jurisdiction. However, the application of this judgement raises significant concerns, particularly in the absence of any indication by the Supreme Court that the judgement would operate prospectively. In the absence of any express invocation of the Doctrine of Prospective Overruling, the judgement would ordinarily apply retrospectively.

The retrospective application of this judgement however, carries serious implications and has the potential to wreak havoc in the domestic arbitration regime. Orders granting extension of mandate of the tribunal passed by High Courts lacking ordinary original civil jurisdiction, would be rendered non est, having been passed by a coram non juris, in light of the judgement. Thus, failure to secure extension from a competent court would ultimately result in the termination of mandate of the arbitral tribunal under Section 29A.

This peculiar situation would have a cascading effect since, parties and arbitrators would continue with the arbitration proceedings, acting under the bona fide belief that the mandate of the tribunal stood extended in light of the order passed by the High Court. However, due to the operation of this judgement, all such orders would effectively become a nullity.  

These consequences assume greater significance in light of the judgement of the Apex Court in Mohan Lal Fatehpuria v. M/S Bharat Textiles, wherein it was held that where an application seeking extension of mandate of an arbitral tribunal is not preferred by the parties, the tribunal would become functus officio. Thereafter, it would not be permissible to let the same arbitrator continue to administer the arbitral proceedings and the courts would have to exercise the power of substitution of the arbitrator under Section 29A(6).

Accordingly, failure to file an application for extension of the mandate of the arbitral tribunal before a competent court would result in terminating the jurisdiction of the arbitrator. Thus, any proceedings conducted subsequently, in light of the extension granted by the High Court, would be sans jurisdiction. As a result, all awards, interim or final, arising out of such arbitrations would be liable to be set aside on the singular ground of the tribunal acting without jurisdiction, in light of not having secured a valid order of extension.

This position of law results in excessive uncertainty in that, it risks reopening cases decided years earlier in accordance with the procedure and practice in vogue at the time. Retrospective operation of this decision would hand another opportunity to parties aggrieved from the award passed by the tribunal and thus, hundreds of arbitral awards stand the risk of getting set aside.

This unsettling character of the judgement could have been mitigated by applying the Doctrine of Prospective Overruling. The Apex Court, in exercise of its inherent powers under Article 142 of the Constitution, possesses the power to mould relief in cases where the Court is of the opinion that allowing its judgement to operate retrospectively would result in reopening fully resolved cases and cause unnecessary hardships and complexities.

It is imperative that the Supreme Court invoke this doctrine and fix a date from which its judgement in Jagdeep Chowgule (supra) becomes operable, in order to prevent undue hardship to parties and avoid handing litigants another opportunity to reopen settled disputes, thereby undermining the finality of arbitral awards.

The doctrinal clarity provided by the Apex Court in Jagdeep Chowgule (supra) marks a significant step forward by finally settling the jurisdictional conflict arising from Section 29A. While considering divergent opinions expressed various High Courts, the Supreme Court has ruled that all matters of curial supervision such as conduct, continuation, extension, substitution, etc. are to be instituted before “court” as defined under Section 2(1)(e). In doing so, the Court has also provided much needed clarity on the scope of jurisdiction vested with referral courts.

The importance of this definitive interpretation by the Apex Court cannot be understated, however, its impact on the domestic arbitration regime remains to be seen in light of the concerns regarding operation of the judgement and its effect on finality of past arbitral proceedings.

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