DELHI HC: CLEAR REFERENCE NEEDED FOR ARBITRATION CLAUSE IN MULTI-

PARTY CONTRACTS

The Delhi High Court ruled that an arbitration clause from a prior agreement cannot bind new
parties without explicit reference in multi-party contracts.

In a significant decision, the Delhi High Court clarified that to incorporate an arbitration clause
in multi-party contracts, there must be a clear reference to the clause from a previous agreement.
This ruling was made in the case of Murari Lal Agarwal v. KMC Construction and Others,
where the court rejected the petition based on past rulings in MR Engineers and Contractors Pvt
Ltd v. Som Datt Builders Ltd (2009) and Mac Associates v. Parvinder Singh (2024).
Additionally, the court emphasized that a generic mention of “all terms and conditions” does not
suffice for arbitration clause incorporation, especially when the parties differ between contracts.
Moreover, the disputed contract lacked a specific arbitration clause and explicitly stated that
Delhi courts held exclusive jurisdiction.

SUPREME COURT CLARIFIES JUDICIAL SCRUTINY IN ARBITRATION

AGREEMENTS

The Supreme Court ruled that inadequately stamped arbitration agreements are not void under
the Stamp Act, emphasizing that stamping defects can be cured.

In the case of SBI General Insurance Co. Ltd. V. Krish Spinning, the Supreme Court clarified the
scope of judicial scrutiny under Section 11(6) of the Arbitration and Conciliation Act, 1996
(“Act”). The ruling overturned the Chhattisgarh High Court’s decision, which had denied an
application to form an arbitral tribunal due to improper stamping and delayed filing.

Relying on N.N. Global Mercantile (P) Ltd. V. Indo Unique Flame Ltd. (2023), the Court
concluded that inadequate stamping is a curable defect and does not render the agreement void
under Section 35 of the Stamp Act. The Court highlighted that the prima facie validity of an
arbitration agreement is sufficient for judicial intervention, while stamping issues should be left
to the arbitral tribunal. This decision reinforces the principle of minimal judicial interference in
arbitration matters.

CALCUTTA HIGH COURT AFFIRMS LIMITED JUDICIAL REVIEW IN

ARBITRATION AWARDS, UPHOLDS FINALITY AND EFFICIENCY

The Calcutta High Court ruled that courts should not re-evaluate evidence or reinterpret
contracts in arbitration awards unless there is a clear legal violation. This reinforces minimal
judicial interference, upholding arbitration’s efficiency, and finality.

In the landmark ruling, Great Eastern Energy Corporation Ltd. v. SRMB Srijan Ltd. the Calcutta
High Court has clarified for minimal judicial interference in arbitration that courts should not re-
evaluate evidence or reinterpret contracts when examining claims of patent illegality in
arbitration awards. Judicial intervention should only occur in a clear violation of the fundamental
principles of Indian law or legal provisions.

Further, the ruling addressed an arbitration challenge, where the award was contested due to
dissatisfaction with the arbitrator's evaluation of evidence. The Court ruled that such discontent
does not justify judicial review, reaffirming that patent illegality does not encompass mere
disagreements over the arbitrator’s interpretation of evidence or contracts.

This decision also aligns with the Supreme Court’s stance on minimal judicial interference in
arbitration by restricting courts from revisiting the substance of arbitral decisions unless there is
an egregious legal error. This ruling upholds arbitration's efficiency and finality, affirming its
viability as an alternative to prolonged litigation.

JUSTICE PRATIBHA ADVOCATES AI AND MEDIATION TO REVOLUTIONIZE

INDIA’S DISPUTE RESOLUTION FRAMEWORK
Justice Pratibha M. Singh, at the Commercial Legal Conclave, highlighted improvements in
India’s dispute resolution through the Commercial Courts Act, 2015. She advocated for AI tools
in the judiciary and emphasized mediation as a more effective alternative to arbitration in India.

Justice Pratibha M. Singh of the Delhi High Court, speaking at the Commercial Legal Conclave,
highlighted significant advancements in India’s legal system, particularly in the realm of dispute
resolution, while also forecasting future challenges. Justice Singh noted substantial
improvements in dispute resolution timelines, crediting the Commercial Courts Act, 2015
(“ACT”) for reducing the average case duration from seven years to one year. The Act’s
streamlined procedures have notably increased efficiency, particularly at the Delhi High Court,
which has implemented its provisions effectively. Furthermore, on the subject of Artificial
Intelligence (“AI”), Justice Singh emphasized its supportive role in the judiciary, assisting but
not replacing judges. She praised AI tools such as SUVAS and SUPACE, which aid in
translating judgments.

Therefore, while recognizing the challenges associated with arbitration in India, where many
cases still require court intervention for enforcement, Justice Singh expressed optimism about
mediation as a more effective alternative. She underscored the importance of platforms like the
Legal Conclave for promoting professional exchange and fostering growth in the legal field.

ARBITRATION BILL UNDER DETAILED REVIEW BY THE HOUSE OF LORDS

The Arbitration Bill, aiming to amend the Arbitration Act 1996, is under detailed review in the
House of Lords at the committee stage, focusing on refining language and introducing new
provisions. Key discussions include potential appeals from High Court decisions under previous
arbitration laws.

The Arbitration Bill, which seeks to amend the Arbitration Act 1996, is undergoing a detailed
and comprehensive examination in the House of Lords. The Bill, governing arbitration in
England, Wales, and Northern Ireland, is at the committee stage, where members are scrutinizing
each clause and proposing new additions.
Additionally, the discussions of the Committee are centred on refining the Bill’s language and
introducing provisions, including appeals from High Court decisions made under previous
arbitration laws. This stage allows for thorough evaluation, with potential changes to ensure the
effectiveness and clarity of the legislation.

NO POST-FACTO CHALLENGE TO ARBITRATION AWARDS

The Hon’ble Madras High Court has ruled that parties cannot challenge an arbitration award
post-fact if no objections were raised during the process.

The Hon’ble Madras High Court, in Ayyasamy v. Shanumugavel, ruled that a party cannot
challenge the validity of an arbitration award after receiving an unfavorable outcome, if no
objections were raised during the process.

Justice R. Vijayakumar clarified that Section 29A of the Arbitration and Conciliation Act, 1996,
does not provide a new defense for unsuccessful parties seeking to dispute an award after it has
been duly passed. In this case, the respondents challenged the award on the grounds that it
exceeded the period of 12-month mandated by Section 29A (1). However, the Court held that by
failing to object during the arbitration process, they had implicitly consented to the timeline.

Furthermore, the Hon’ble Principal District Court’s decision to set aside the award due to the
delay was overturned, with the Hon’ble High Court reinforcing that objection must be made
timely to preserve the right to challenge. Citing the Hon’ble Supreme Court’s precedent in Inder
Sain Mittal v. Housing Board, Haryana (2002), whereby, the ruling reiterated the legislative
intent to streamline arbitration and prevent post-decision objections. The award was thereby
upheld, preserving the efficiency of arbitration.

HON’BLE DELHI HIGH COURT CLARIFIES: ARBITRATORS AUTHORITY MUST STICK TO THE
SCRIPT OF ARBITRATION CLAUSES

The Hon’ble Delhi High Court has ruled that an arbitrator's jurisdiction is confined to the terms
of the arbitration clause, particularly regarding claim limits. It highlights the importance of
precise arbitration clauses to prevent jurisdictional overreach and ensure arbitration
predictability.

In M/S Talbros Sealing Materials Pvt. Ltd. v. M/S Slach Hydratecs Equipments Pvt. Ltd., the
Hon’ble Delhi High Court reaffirmed that an arbitrator’s jurisdiction is strictly limited by the
terms of the arbitration clause in an agreement, particularly concerning claims and costs.
The case involved a dispute where the claims exceeded the amount specified in the arbitration
agreement. The Court ruled that an arbitrator’s authority cannot extend beyond the limits set by
the arbitration clause. If the clause caps the monetary value of claims, any amount beyond that
threshold is outside the arbitrator’s jurisdiction.
This underscores the importance of precisely drafted arbitration clauses, ensuring that the scope
of the arbitrator’s authority is clearly defined. By reinforcing the contractual nature of
arbitration, the Court emphasized the need for well-structured agreements to avoid jurisdictional
conflicts and ensure the predictability of the arbitration process.