Gayatri Balasamy Vs. ISG Novasoft Technologies Limited, 2025 INSC 6050, (Supreme Court of India)
In a seminal ruling, a five-judge Constitution Bench of the Supreme Court of India, by a majority of 4:1, held that courts have a limited power to modify an arbitral award under Sections 34 and 37 of the Arbitration Act. The Bench made it abundantly clear that this power could be exercised only in limited circumstances, such as to sever and set aside the invalid portion of an award when the award is severable, to correct any clerical, computational or typographical errors, or to modify post-award interest. Justice K.V. Vishwanathan authored a detailed dissenting opinion, expressing the view that courts do not possess the power to modify an arbitral award under Sections 34 and 37 of the Arbitration Act.
The matter came up before the five-judge Constitution Bench upon reference by a three-judge bench which noted the conflicting decisions that existed on the issue of a court's modification powers. The fulcrum of the legal controversy, as the majority judgement notes, rests on the question of whether and to what extent Indian courts are jurisdictionally empowered to modify an arbitral award. Analyzing the judicial divergence on the issue of modification powers, the Bench examined the contours of Section 34 of the Arbitration Act and stated that modification represents a more limited, nuanced power in comparison to the annulment of an award, as the latter entails a more severe consequence of the award being voided in toto. The Bench thus undertook a purposive reading of Section 34 to locate a limited power of modification in Section 34, holding that a Section 34 court can apply the doctrine of severability and set aside the invalid portion of the award while retaining the rest, subject to parts of the award being separable, legally and practically.
In a similar vein, the Bench decided that a court considering an award under Section 34 possesses the authority to rectify computational, clerical, or typographical errors, as well as other manifest errors, provided that such modification does not necessitate a merits-based evaluation. These powers, the Bench observed, fell under the powers inherent to the court, even when not explicitly granted by the legislature. On the issue of post-award interest, the Bench observed that since post-award interest is inherently future-oriented and depends on facts and circumstances that unfold after the award is issued, it is appropriate for the Section 34 court to have the authority to intervene and modify the post-award interest if the facts and circumstances justify such a change.
Pertinently, the Bench also acknowledged that courts possess power under Article 142 of the Constitution to modify awards in exceptional cases to ensure complete justice; but cautioned against using this power to rewrite awards or interfere with its merits. The Bench held that the exercise of powers under Article 142 has to be in consonance with the fundamental principles and objectives behind the Arbitration Act and not in derogation or in suppression thereof.
In a balancing act, the majority ruling upholds the limited power of modification that can be exercised by courts under Sections 34 and 37 of the Arbitration Act but circumscribes this power by specifying limited circumstances of the invocation of modification powers. The judgement does occasion a risk of judicial overreach in that it reserves the Supreme Court's discretion under Article 142 to do "complete justice" in appropriate cases. However, if exercised judiciously, the intent behind this landmark ruling to avoid re-arbitration and protracted litigation can be realized, reimagining the previous 'set aside or uphold' approach in challenge proceedings.
Disortho S.A.S. v. Meril Life Sciences Private Limited, 2025 INSC 352 (Supreme Court of India)
In Disortho S.A.S. v. Meril Life Sciences Private Limited ("Disortho"), a three-judge bench of the Supreme Court has upheld the three-step conflict of law analysis postulated in Sulamérica Cia. Nacional De Seguros S.A. v. Enesa Engenharia S.A. & Ors., [2012] EWCA Civ 638, to locate the law governing the arbitration agreement- (i) parties' express choice, (ii) parties' implied choice and (iii) closest and most real connection. In making this three-step inquiry to identify the law governing the arbitration agreement, the Supreme Court ruled that absent express choice of law by the parties, a rebuttable presumption is created in favour of the proper law of the contract (lex contractus) which can be displaced in the face of contrary indicators.
Disortho S.A.S., a Colombian company, and Meril Life Sciences Private Limited, an Indian company, entered into an International Exclusive Distributor Agreement on 16 May 2016. When disputes emerged between the parties, Disortho filed a Petition before the Supreme Court of India under Section 11(6) of the Arbitration Act for the appointment of an arbitral tribunal. However, Meril Life Sciences contested this petition, arguing that arbitration should proceed under Colombian law, as stipulated in the agreement. The conflict stemmed from two clauses: Clause 16.5, which states that Indian law governs the contract and grants jurisdiction to Indian courts, and Clause 18, which mandates arbitration under the Arbitration and Conciliation Center of the Chamber of Commerce of Bogota, Colombia, with proceedings to take place in Bogota and further stipulated that "the award shall be in law and standard will be applicable Colombian law governing the mailer (sic matter)."
As a starting point, the Court referred to authoritative commentaries on arbitration law and decision of the English High Court in Melford Capital Partners (Holdings) LLP & Ors. v. Frederick John Wingfield Digby [2021] EWHC 872 (Ch) to distinguish between four choices of law– (i) law governing the arbitration, (ii) proper law of the arbitration agreement, (iii) proper law of the contract and (iv) procedural rules applicable to the arbitration. Pertinently, the Court highlighted the distinction between the proper law of the arbitration agreement (i.e., law governing the agreement to arbitrate) and the law governing the arbitration as a whole. The Court clarified that while the former governs the validity, scope, and interpretation of the arbitration agreement, the law of the arbitration itself is concerned with determining the courts which will possess the supervisory jurisdiction over the conduct of the arbitration proceedings such as grant of interim relief, challenge proceedings, removal of arbitrators, etc. The Court, however, cautioned that while the parties are free to elect to differentiate between the two parts of the lex arbitri (proper law of the arbitration agreement, and the law governing the arbitration itself), such a distinction should not be readily drawn unless the parties intend to preserve such a distinction.
The Court then proceeded to examine the pertinent question concerning the law applicable to the arbitration agreement, in the absence of express choice by the parties. To aid this determination, the Court drew from a wealth of significant judgements such as the decision of the UK Supreme Court in Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb, 2020 UK SC 38, English High Court's decision in Sulamerica Cia, Singapore High Court's ruling in BCY v. BYZ, 2016 SGHC 249, and decisions of the Indian Supreme Court in Enercon (India) Ltd. v. Enercon GmBH, (2014) 5 SCC 1, M/S Arif Azim Co. Ltd. v. M/S Micromax Informatics FZE, 2024 INSC 850. Appropriately guided by the principles settled in these judgements and applying the three-step test of Sulameria Cia, the Court ruled that in the absence of an express law governing the arbitration agreement, a rebuttable presumption is created in favour of the law governing the main contract i.e., Indian law. In the absence of any relevant indicators to displace this presumption, the Court found that Indian law governs the arbitration agreement. Further, notwithstanding the designation of venue of arbitration as Bogota alongwith the procedural rules of the Arbitration and Conciliation Centre at the Chambers of Commerce in Bogota, Indian courts would have supervisory jurisdiction over the conduct of the arbitration. Accordingly, the Court affirmed the applicability of Section 11(6) of the Arbitration Act.
While the ruling in Disortho sets out a clear exposition on the complex interplay between different legal systems in arbitration law, it falls short of clarifying the seat of arbitration, which is instrumental in deciding which courts possess supervisory jurisdiction over the arbitration proceedings. The judgement does not resolve the core dispute between the parties i.e., the determination of the legal seat of arbitration in light of the two conflicting clauses – the governing law clause and the arbitration clause. In our view, the Court could not have affirmed the applicability of the Indian Arbitration Act without first clarifying the seat of arbitration. Nevertheless, the detailed analysis on the identification of the law governing the arbitration agreement complements the existing jurisprudence on choice of law issues in international arbitration.
Gayatri Project Limited vs. Madhya Pradesh Road Development Corporation Limited, 2025 INSC 698 (Supreme Court of India)
A two-judge bench of the Supreme Court of India ruled on whether an arbitral award can be annulled solely on jurisdictional grounds when no such jurisdictional objection was raised before the arbitral tribunal. The Court reaffirmed that a plea of lack of jurisdiction ought not to be allowed to be raised, for the first time, at the stage of Section 34 of the Arbitration Act, unless a party makes out a strong and good reason for its failure to take such a plea before the arbitral tribunal.
In 2005, Gayatri Project Limited entered into a works contract with Madhya Pradesh Road Development Corporation (MPRDC) for road rehabilitation projects in Madhya Pradesh. On disputes arising between the parties, the parties entered into arbitration and the arbitral tribunal issued an award in favour of Gayatri Project Limited, granting INR 1.03 crore for additional costs incurred due to increased entry tax. MPRDC challenged the award before the Commercial Court and Additional Sessions Judge, Bhopal under Section 34 of the Arbitration Act, arguing that the Tribunal lacked jurisdiction because the dispute should have been governed by the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 ("MP Act, 1983"). The Commercial Court allowed the appeal which was later affirmed by the High Court of Madhya Pradesh. Aggrieved, Gayatri Project Limited preferred an appeal before the Supreme Court to determine whether jurisdictional objections, not raised before an arbitral tribunal, could be raised under Section 34 of the Arbitration Act.
Setting aside the decision of the High Court under Section 37 of the Arbitration Act, the Supreme Court ruled that once an award has been passed and no objection as to the jurisdiction of the arbitral tribunal had been taken at the relevant stage, then the arbitral award cannot be annulled by the High Court solely on the ground of lack of jurisdiction. The Court noted that although Lion Engineering Consultants v. State of Madhya Pradesh, (2018) 16 SCC 758, affirms that a plea of lack of jurisdiction, being a question of law, may be raised for the first time under Section 34 of the Arbitration Act, 1996, yet such a plea is nevertheless subject to waiver, as held in Union of India v. Pam Developments (P) Ltd., (2014) 11 SCC 366. The Court held that its decision in M.P. Road Development Authority and Anr. v. L.G. Chaudhary Engineers & Contractors, (2018) 10 SCC 826, squarely applies and reiterated that a failure to raise the issue of applicability of the MP Act, 1983 at the appropriate stage cannot be regarded as a sufficient reason for not raising it before the arbitral tribunal, and therefore the plea cannot be permitted at the stage of Section 34 proceedings.
This judgment underscores the importance of raising jurisdictional objections at the appropriate stage; ensuring that jurisdictional objections are not raised merely as a post-award strategy to annul otherwise valid decisions.
ASF Buildtech Private Limited Vs. Shapoorji Pallonji and Company Private Limited, 2025 INSC 616 (Supreme Court of India)
In ASF Buildtech Private Limited vs. Shapoorji Pallonji and Company Private Limited, a two-judge bench of the Supreme Court of India decided on whether an arbitral tribunal has the authority to implead or join non-signatories to the arbitration agreement. The Court ruled in the affirmative, holding that an arbitral tribunal is empowered to implead a non-signatory to the arbitration agreement on its own accord, in conformity with applicable legal principles.
Shapoorji Pallonji & Co. Pvt. Ltd. (SPCPL) was the counterclaimant in an arbitration initiated by Black Canyon SEZ Pvt. Ltd. (BCSPL) under a Settlement Agreement. SPCPL impleaded ASF Buildtech Pvt. Ltd. (ABPL) and ASF Insignia SEZ Pvt. Ltd. (AISPL), alleging all three entities constituted the cohesive "ASF Group" and were bound by the contract's arbitration clause under the 'group of companies' doctrine. ABPL and AISPL challenged their impleadment via separate applications under Section 16 of the Arbitration Act, which the Ld. Sole Arbitrator dismissed, holding that their roles evidenced by Comfort Letters and correspondence, raised mixed questions of law and fact requiring their participation. This was challenged before the Delhi High Court which upheld the impleadment of ABPL and AISPL, observing that the ASF Group functioned as a single economic unit with common management and interlinked project roles. The High Court treated SPCPL's claim as a counterclaim, set aside the bifurcation of proceedings, and directed that all claims proceed as a consolidated arbitration, thereby affirming the arbitrator's mandate. Aggrieved, ABPL appealed to the Supreme Court, contesting its inclusion as a non-signatory to the arbitration agreement.
The central issue that arose for the Supreme Court's consideration was whether the arbitral tribunal has the authority to implead non-signatories to the arbitration agreement on its own accord. The Supreme Court observed that there is nothing within the scheme of the Arbitration Act which prohibits or restrains an arbitral tribunal from impleading a non-signatory to the arbitration proceedings on its own accord. The Bench noted that so long as such impleadment is undertaken upon consideration of the applicable legal principles- including, but not limited to, the doctrines of 'group of companies', 'alter ego', 'composite transaction', and the like - an arbitral tribunal is fully empowered to implead non-signatories on its own accord. The Court noted that the impleadment of a non-signatory is fundamentally a question of jurisdiction and consent and absent any statutory prohibitions, falls squarely within the realm of powers of an arbitral tribunal. The Court underlined the arbitral tribunal is not a creature of mere procedural will but of substantive legal consequence flowing from the arbitration agreement. It derives its powers from a valid arbitration agreement itself that creates its jurisdictional foundation. The Court thus held that an arbitral tribunal has the implied power to implead or join a non-signatory to an arbitration, even absent an express provision in the Arbitration Act.
Relying on its recent judgment in Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd. & Ors., 2025 SCCOnline SC 806, the Court also clarified that mere non-service of a notice of invocation on a party would not nullify the arbitral tribunal's jurisdiction notice under Section 21 over such party, and that such party can be impleaded and arrayed in the arbitration proceedings if any claim or counter- claim is made against such party by the claimant in statement of claims or counter-claims, or by even amending the memo of parties of the putative statement of claims or counter-claims filed by it, provided that such party is found to be bound by the arbitration agreement either by virtue of it being a signatory, or where such party is a non-signatory, in terms of the decision of Cox and Kings Ltd. v. SAP India Pvt. Ltd., (2024) 4 SCC 1 .
Toward the end of the judgement, the Court notes that despite a catena of decisions of the Supreme Court as well as the various High Courts, the Arbitration Act expressly lacks the statutory recognition of such power of the arbitral tribunal to implead a non-signatory to the arbitration agreement. Accordingly, the Court urged the Department of Legal Affairs, Ministry of Law and Justice to take a serious look at the existing arbitration regime in India and bring about necessary changes while the Arbitration and Conciliation Bill, 2024 is still being considered.
Rashtriya Ispat Nigam Limited v. Rescom Mineral Trading FZE, 2025: DHC:4269-DB (High Court of Delhi)
A division bench of the High Court of Delhi, in an appeal under Section 37 of the Arbitration Act, remanded an order passed by the court under Section 9 of the Arbitration Act for fresh consideration, holding that the order lacked adequate reasoning for directing attachment to secure the Petitioner.
The dispute arose from an agreement dated 29 August 2023 for the supply of coking coal. The Respondent, Rescom Mineral Trading FZE ("Rescom") filed a Section 9 Petition before the High Court of Delhi, seeking interim protection to the tune of INR 139 crores. The Appellant, Rashtriya Ispat Nigam Limited ("RINL") disputed the claim, contending that the coal supplied was substandard and not in conformity with the contractual specifications. The Ld. Single Judge, through the impugned order, directed RINL to secure INR 69.5 crores (50% of the balance outstanding claimed) by attaching TMT Steel Bars of equivalent book value. Pertinently, the impugned order did not provide any reasoning to justify the attachment. Aggrieved, RINL preferred an appeal under Section 37 of the Arbitration Act, arguing that the impugned order only adverts to the merits of the matter and does not conform to the discipline of the principles contained in Order XXXVIII Rule 5 of the Civil Procedure Code, 1908.
The Division Bench held that the Single Judge had concentrated more on the merits of the claims between the parties and that the discussion on the financial justification for securing the amount was insufficient. Agreeing with RINL, the Bench held that the order lacked a reasoned basis for directing security of such a substantial amount. Accordingly, the Bench set aside the impugned order and remanded the matter to the Ld. Single Judge to be considered afresh, uninfluenced by the impugned order.
Through this decision, the High Court has highlighted the need for a reasoned, speaking order when granting attachment under Section 9, particularly where significant amounts are involved.
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