The last quarter of 2025 saw the streamlining of India’s arbitration landscape continue through meaningful judicial pronouncements by the Supreme Court and various High Courts. These crucial rendered decisions are central to the integrity, efficiency, and jurisdictional limits of arbitral proceedings, addressing aspects ranging from delay in pronouncing awards and the scope of interference at the execution stage, to the boundaries of Section 11 jurisdiction, Counterclaims in MSME arbitrations, quantum meruit, and the limits of tribunal authority over non-signatories.
This blogpost discusses these rulings, highlighting the courts’ continued emphasis on procedural discipline, party autonomy, commercial certainty, and the limited supervisory role of courts under the Arbitration and Conciliation Act, 1996.
Legal effect of an inordinate and unexplained delay in pronouncement of arbitration award
Scope of challenge to an arbitration award during its execution
In MMTC Limited v. Anglo American Metallurgical Coal Pvt. Ltd, the Supreme Court held that an executing court may interfere only if the award is a nullity for lack of jurisdiction or when the award is the by-product of a stark fraud. It applied the Business Judgment Rule and refused hindsight scrutiny of commercial decisions taken by the PSU’s directors, holding that such decisions were not unreasonable.. It held that vague allegations of fraud or breach of fiduciary duty cannot reopen a concluded award during its execution.
Application of principle of Quantum Meriut in arbitration proceedings
In Ramesh Kumar Jain v. Bharat Aluminium Company Limited, the Supreme Court held that in a situation where the contract is silent on a particular situation, it would be within the jurisdiction of the tribunal to fill the contractual gaps and award a reasonable relief to the aggrieved party. It held that the same can be granted under Section 70 of the Indian Contract Act, 1872 which embodies the principle of quantum meriut entitling the party to be compensated for a non-gratuitous act enjoyed by the opposite party. The Court further held that while exercising jurisdiction under Section 34 or 37 of the Act, the courts are not required to assess the probative value of the evidence used by the tribunal. Only in a situation where an award is based on no evidence at all can it be called to be patently illegal.
Maintainability of Section 11 application in a foreign seated arbitration
In Balaji Steel Trade v. Fludor Benin S.A., the Supreme Court refused to entertain a Section 11 petition in India where the agreement provided for arbitration at a foreign seat. The Court held that an arbitration clause which provides for an arbitration to take place in a foreign country coupled with another clause for substantive law of that country to apply to the dispute is akin to designation of that country as the seat of arbitration. It held that in terms of Section 2(2) of the Act, part 1 of the Act would not apply to a foreign seated arbitration and Section 11 petition would not be maintainable in such a situation.
Scope of review of an order appointing arbitrator
In Hindustan Construction Company Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd, the Supreme Court held that while the High Courts have the power to review an order passed under Section 11 of the Act, the power is to be exercised sparingly. High Courts may use this power only to correct an error apparent on the face of the record or to cure a procedural or patent error, and not to reopen interpretation of the arbitration agreement. The Court held that an order cannot be recalled merely because of a subsequent judgment taking another interpretation on a similar arbitration agreement. It further held that a party which participated in the arbitral proceedings and also filed a Section 29A application seeking extension of the mandate cannot later be allowed to file a review of the order appointing arbitrator.
Forum for counterclaims in MSME arbitrations
The Calcutta High Court in Macmet Engineering Ltd v. Mecgale Pneumatics Pvt. Ltd held that the MSMED Act overrides private arbitration agreements. It held that where a supplier’s claim and the buyer’s counterclaim arise from the same transaction, both must proceed before the Facilitation Council. The Court refused parallel arbitration proceedings, warning that separate references would risk conflicting findings and multiplicity of litigation.
Lifting of corporate veil by arbitral tribunal
In M/S. Sugesan Transport Pvt. Ltd. v. M/S. E.C. Bose & Company Pvt. Ltd, the Madras High Court held that an arbitral tribunal cannot pierce the corporate veil to bind a non-signatory in the absence of clear consent. The tribunal had invoked the alter ego doctrine to fasten liability on a related entity. The Court set aside that portion of the award, holding that arbitral jurisdiction flows strictly from consent.
It also refused to sustain damages awarded without proof of actual loss under Section 73 of the Contract Act. Applying severability principles recognised in Gayatri Balasamy v. ISG Novasoft Technologies Ltd, the Court upheld repayment of the principal amount while striking down unsustainable damages.
*This blogpost is the last in a four-part series exploring key aspects of the arbitration law in India.
