The second quarter of 2025 saw several key rulings clarifying procedural and substantive aspects of the Arbitration and Conciliation Act 1996 (the Act). Here’s a roundup of the most notable decisions.
Modification of Arbitral Awards
In the landmark decision of Gayatri Balasamy v. ISG Novasoft Technologies Ltd, the Supreme Court held that courts could modify arbitral awards in case of clear, objective and severable defects such as typographical, computational or clerical errors under Section 33. However, this power does not permit substantive merit re-evaluation or judicial review of arbitrators' decisions, marking a substantive shift from the earlier ‘set-aside or nothing’ approach under Section 34.
Impleading parties without section 21 notice
In Adavya Projects (P) Ltd. v. Vishal Structurals (P) Ltd case, the Supreme Court clarified that while a Section 21 notice is a mandatory requirement to commence arbitration, the failure to serve it to certain parties does not prevent an arbitral tribunal from impleading them under the doctrine of kompetenz-kompetenz (Section 16 of the Act). Arbitral tribunal may implead a party to a dispute even if it was not impleaded by the Court at the stage of Section 11 proceedings.
Clauses granting unilateral opt out rights
The Bombay High Court in Tata Capital Ltd. v. Vijay Devij Aiya case, upheld the validity of arbitration agreement containing a clause allowing one party to opt out of the arbitration if it opts for SARFAESI/ DRT proceedings. The court struck down only the unilateral opt-out provision, preserving the core agreement and such rights to both parties if retained.
Arbitrability of Commercial Fraud
In Arabian Exports (P) Ltd. v. National Insurance Co. Ltd. 2025 case, the Supreme Court ruled that settlements signed under financial duress does not preclude arbitration. The court clarified that allegations of commercial fraud or financial duress do not oust arbitrability unless they vitiate the arbitration agreement itself.
Seat of arbitration v/s multiple jurisdiction clauses
In the KLA Const. Technologies (P) Ltd. v. Gulshan Homz (P) Ltd. case,the Delhi High Court held that where an exclusive jurisdiction clause conflicts with a seat designation in arbitration clause, the seat prevails. In this matter, the court ruled that since the arbitration clause designated NOIDA / Delhi as the seat, it had jurisdiction despite other clauses granting exclusive jurisdiction to different courts.
Challenging Appointment of an ineligible Arbitrator
The Delhi High court in the case of M/s Mahavir Prasad Gupta and Sons v. Govt. of NCT of Delhi, held that unilateral appointment of an ineligible arbitrator under Section 12(5) of the Act read with the Seventh Schedule, is void ab initio, allowing courts to set aside such awards on public policy grounds, even if challenged by the appointing party. Without an express written waiver, mere participation in the proceedings cannot be treated as a waiver by conduct.
PMLA Attachment and Criminal Proceedings Do Not Bar Arbitration
In the case of Lata Yadav v. Shivakriti Agro Pvt. Ltd. & Ors, the Delhi High Court held that pending criminal proceedings or provisional attachment of assets under Prevention of Money Laundering Act 2002 (PMLA) do not bar arbitration. It was observed that mere allegations of fraud does not automatically make a dispute non-arbitrable. It distinguished between "simple" and "serious" allegations of fraud, which permeate the entire contract or involve arbitrary/fraudulent conducted against the State. Additionally, the tribunal's role is to determine the existence and validity of the subject Agreement, which is a contractual matter. Moreover, it was observed that the provisional attachment order under the PMLA is subject to confirmation and is not conclusive.
The Hon’ble Court also noted that a transaction can give rise to both civil and criminal proceedings, and the parallel existence of criminal proceedings does not automatically bar arbitration.
Arbitration Clause Alone Not Sufficient To Reject Plaint
In Din Dayal Agrawal HUF v. Capriso Finance Ltd. case, the Delhi High Court held that the mere existence of an arbitration clause is not a ground to reject the plaint. In the absence of an application under Section 8 and the arbitration agreement, the requirements for referring parties to arbitration are not triggered.
Section 8 Application Not Maintainable Once Right to File Written Statement Is Closed
In R. Santosh v. One97 Communications Ltd. case, the Delhi High Court held that an application under Section 8 cannot be entertained if the party fails to file its written statement within the time granted in the suit. Once the permissible time lapses, the application becomes non-maintainable.
Conclusion
The second quarter of 2025 witnessed several pivotal judgments that have shaped both the substantive and procedural contours of arbitration law in India under the Arbitration and Conciliation Act, 1996. The Hon’ble Supreme Court and various High Courts addressed critical issues, providing greater clarity on key aspects of arbitration. Collectively, these decisions underscore a nuanced approach to arbitration that balances the procedural rigour and substantive fairness, thereby contributing to the evolving jurisprudence in this domain.
*This blog is the second in a four-part series exploring key aspects of the Arbitration law in India.
