India: Year In Review: Key Decisions And Developments In Indian Arbitration Law In 2014

Last Updated: 21 January 2015
Article by Economic Laws Practice


The judicial developments in arbitration in India in 2014 have been both encouraging and curious at the same time. We briefly review some of the key decisions rendered by Indian courts this year and their impact on the arbitration jurisprudence.

Challenging foreign awards in pre-Balco arbitration agreements under Section 34 becomes increasingly difficult

Having overruled Bhatia International1prospectively, BALCO2created much curiosity in respect of the treatment that challenges to foreign awards from pre-BALCO arbitration agreements under Section 34 of the Indian Arbitration and Conciliation Act, 1996 ("1996 Act") would receive in Indian Courts. A rather encouraging decision this year (in the post-BALCO era) dealing with a pre-BALCO arbitration agreement is Reliance Industries Limited v. Union of India.3

The Apex Court followed Videocon4(a pre-BALCO decision) and held that choice of foreign seat coupled with a choice of foreign law governing the arbitration agreement indicates an intention by the parties to exclude the application of Part I of the 1996 Act, even if the contract was governed by Indian law.

The Court however went a step further and made the following noteworthy observations - "it is too late in the day to contend that the seat of arbitration is not analogous to an exclusive jurisdiction clause...."

Incidentally, another decision of the Supreme Court this year on a separate issue also confirmed this position. In Enercon,5 while granting an anti-suit injunction against proceedings brought in England, the Supreme Court held that, once the seat of arbitration was established, (which in this case was India) it was clear under Indian law, that the courts of the seat of arbitration would have exclusive jurisdiction to exercise supervisory powers over the arbitration.

Arbitral Tribunals can now determine issues concerning fraud

A decision that has long been controversial in India under the 1996 Act is that of Radhakrishnan,6which held that serious allegations of fraud can only be inquired into by a court and not an arbitrator. This decision had resulted in significant speculation as to the arbitrability of issues of fraud under Indian law.

Two decisions of the Supreme Court in 2014 have significantly weakened the impact of Radhakrishnan. First, the decision in World Sports7distinguished between domestic and foreign arbitrations, to hold that Radhakrishnan does not apply while determining an application under Section 45 of the 1996 Act, i.e. courts must refer parties to arbitration where the seat of arbitration is outside India, even if allegations of fraud are in issue. Second, the decision in Swiss Timing,8while dealing with a domestic arbitration, held that Radhakrishnan is per incurium.

In World Sport, the Court observed that, while considering an application under Section 45, "a court must refer disputes to arbitration unless the arbitration agreement is null and void, inoperative or incapable of being performed". The Court elaborated on the expressions "null and void", "inoperative" and "incapable of being performed". With reference to the expression "null and void", the Court recognized that the arbitration agreement must be treated as a "distinct agreement" and can be void or voidable only on grounds which relate directly to the arbitration agreement. It was held that allegations of fraud and false misrepresentations might make the contract voidable, but that by itself did not affect the arbitration agreement which is independent and severable from the contract. With reference to the expression 'inoperative', the Court held that it 'covers those cases where the arbitration agreement has ceased to have effect, such as revocation by the parties'; and that the expression 'incapable of being performed' applies 'to those cases where the arbitration cannot be effectively set into motion', for example where the arbitration clause is too vaguely worded. The Court observed that, 'where allegations of fraud have to be inquired into' does not fall within either of the aforesaid expressions of Section 45 and is not therefore a bar on the Court to refer disputes to arbitration.

While World Sport was a welcome breather in this controversy, the Apex Court drew a somewhat artificial distinction on this point between arbitrations seated in India and outside India – restricting the application of its ratio to foreign seated arbitrations. However, Swiss Timing came to the rescue a few months later when the Supreme Court categorically held that the decision in Radhakrishnan was per incurium on the grounds that it did not follow or distinguish the decision in Hindustan Petroleum Corpn. Ltd.;9 that it did not even consider the decision in P. Anand Gajapathi Raju & Ors;10and that it did not consider the provision contained in Section 16 of the 1996 Act. The Court has held that allegations that a contract is vitiated by fraud do not shut out arbitration.

The Supreme Court's decision in Swiss Timing has been questioned, since it is a single-judge decision departing from a two-judge bench decision. This problem magnifies from the perspective of lower courts as to which Supreme Court decision ought to be followed. When there are two divergent views expressed by the Supreme Court, then precedent suggests that lower courts should follow the larger bench decision (in this case, Radhkrishnan).11 The situation in Swiss Timing is tricky because it is not just a divergent view of the Supreme Court but it considers Radhakrishnan and declares it per incurium.

The treatment received by Swiss Timing in the Bombay High Court is revealing. The Bombay High Court rejected the argument that Swiss Timing ought not be followed being a single-judge decision whereas Radhakrishnan was decided by a two-judge bench.12 The Bombay High Court finally followed Swiss Timing to refer the disputes to arbitration. It may however, be too soon to conclude that Radhakrishnan is passé. The question whether lower courts will follow Swiss Timing or Radhkrishnan will continue to loom in the days to come until a larger bench considers the validity of Radhakrishnan.

Arbitral Tribunals have power to award Interest on Pre-Award Interest

Until recently, the decision of the Supreme Court in S.L. Arora13 held the field on the arbitrator's powers to award post-award interest on the sum awarded as interest for the pre-award period. This decision has been subject to some criticism given that, while such interest could be claimed if the dispute was brought to court, it could not if it was before an arbitration tribunal.

In 2013, S.L Arora was referred to a three-judge bench in Hyder Consulting14, for being per incurium certain previous Supreme Court decisions of equivalent benches.

The majority in Hyder Consulting has now held that an arbitrator indeed has the power under Section 31(7) of the 1996 Act to award post-award interest on both the principal sum and interest until the date of award, as such interest is to be considered as subsumed in the principal sum.

Scope of Public Policy expanded

The effect of the much celebrated case of Shri Lal Mahal15 which reinstated the Renusagar16position with respect to enforcement of foreign awards has been diluted with two decisions of the Supreme Court this year.

The decision in Associate Builders17 and Western Geco,18have once again unsettled the position with respect to the meaning and scope of the term 'public policy' under Section 34 of the 1996 Act affecting both domestic and foreign awards.

In Western Geco the Apex Court held that three 'distinct and fundamental juristic principles' form a part and parcel of "fundamental policy of Indian law": first, the court or adjudicating authority must adopt a 'judicial approach' when determining the rights of a citizen. This implies that it cannot act in an 'arbitrary, capricious or whimsical manner'; second, the court or quasi-judicial authority must determine rights and obligations of parties in accordance with principles of natural justice which encompasses that the authority deciding the matter must apply its mind to the attendant facts; and third, a decision which is perverse or so irrational that a reasonable person could not have reached such a conclusion may not be sustained in a court of law. Associate Builders has confirmed this position.

Consequently, parties will undoubtedly have a wider scope for challenging domestic awards. In particular, the Court's ability to interfere with awards on merits has been significantly broadened. In addition, since the Renusagar test includes inter alia the parameter of 'fundamental policy of India', these decisions we fear, will most likely give an impetus to recalcitrant parties to also delay enforcement of foreign awards.


1 Bhatia International vs Bulk Trading S. A. & Anr (2002) 4 SCC 105.

2 Bharat Aluminium Co v. Kaiser Aluminium Technical Services (2012) 9 SCC 649.

3 Reliance Industries Limited and Anr. v. Union of India (UOI) (2014) 7 SCC 603.

4 Videocon Industries Ltd v. Union Of India (2011) 6 SCC 161

5 Enercon (India) Ltd. & Ors v. Enercon GMBH & Anr (2014) 5 SCC 1.

6 N. Radhakrishnan v. Maestro Engineers (2010) 1 SCC 72.

7 World Sport Group (Mauritius) Ltd v MSM Satellite (Singapore) Pte Ltd (2014) 11 SCC 639.

8 Swiss Timing v. Organizing Committee, Commonwealth Games (2014) 6 SCC 677.

9 Hindustan Petroleum Corpn. Ltd vs M/S. Pinkcity Midway Petroleums (2003) 6 SCC 503.

10 P. Anand Gajapathi Raju & Ors v. PVG Raju (2000) 4 SCC 539.

11 State of UP v. Ram Chandra Trivedi (1976) 4 SCC 52

12 Avitel Post Studioz Limited v HSBC PI Holdings (Mauritius) Limited (2014) SCC Online Bom 929.

13 State of Haryana v. S L Arora and Co. (2010) 3 SCC 690.

14 Hyder Consulting (UK) Ltd. v. Governor, State of Orissa(2014) SCC OnLine SC 940.

15 Shri Lal mahal Ltd. v. Progetto Grano Spa (2014) 2 SCC 433.

16 Renusagar Power Co. Ltd. v. General Electric Co. (1994) Supp. (1) SCC 644.

17 Associate Builders v. Delhi Development Authority (2014) SCC OnLine SC 937

18 Oil and Natural Gas Corporation Ltd. v. Western Geco International Ltd (2014) 9 SCC 263

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Dhaval Vussonji & Associates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Dhaval Vussonji & Associates
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions