Arbitration Newsletter | December 2025

Welcome to the December 2025 edition of our quarterly Arbitration Newsletter, where we delve into significant judgments that touch upon the interpretation of the relevant provisions of the Arbitration and Conciliation Act, 1996 (the "Arbitration Act") and its interplay with other statues.

Sugesan Transport Pvt Ltd v. E.C. Bose Company Pvt Ltd, 2025 MHC 2699, Madras High Court

Applying the law laid down by the Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. (2025) 7 SCC 1 ("Gayatri Balasamy") on the limited power of courts to modify arbitral awards, a Single Judge of the Madras High Court partially modified the arbitral award to grant interest at the rate of 12% per annum in favour of Sugesan Transport Pvt. Ltd. ("Sugesan"), where the tribunal had awarded only the principal amount. The High Court also held that the arbitral tribunal had exceeded its jurisdiction by lifting the corporate veil and imposing liability on a non-signatory to the arbitration agreement and accordingly set aside the award to that extent. The decision reflects the post-Gayatri Balasamy approach of permitting narrowly tailored judicial modification to correct patent errors, without reopening the merits of the dispute or expanding the scope of arbitral jurisdiction.

The dispute arose out of the Memorandum of Understanding ("MoU") dated 11.12.2015, pursuant to which Sugesan Transport gave financial assistance of ₹2.50 crores to be utilized by the respondent, E.C. Bose Company Pvt Ltd ("EC Bose") for providing a performance bank guarantee of ₹3.52 crores, in respect of a work order, to Kolkata Port Trust ("KPT"). This amount lent by Sugesan Transport was to be used as margin money by EC Bose Company and the same was to be returned to Sugesan Transport within 30 days, but not later than 89 days at any cost from the date of the MoU.

A promissory note was also executed between the Sugesan and EC Bose (collectively referred to as "Parties") to this effect, and a postdated cheque was given as security towards the financial assistance, by EC Bose Company. Further, the Parties also agreed to form an alliance through a special purpose vehicle ("SPV") to assist EC Bose in its performance of the work allotted under the work order issued by KPT. There was no stipulation of amounts to be paid by the Parties, should there be a breach of the MoU.

However, the post-dated cheque issued by EC Bose was dishonoured upon presentation, leaving the amount unpaid. Consequently, Sugesan initiated arbitration proceedings under the MoU, seeking a sum of ₹2.5 crores along with interest at the rate of 24%.

EC Bose filed a counterclaim against Sugesan seeking ₹75 crores along with interest, alleging that Sugesan was obliged not only to provide financial assistance but also to ensure the supply of equipment required for execution of the works under the work order issued by KPT, including through its sister concern, Collate Consultants Pvt Ltd ("Collate Consultants"). It was alleged that Collate Consultants had entered into two Memorandums of Understanding dated 09.01.2016 and 09.02.2016 ("Equipment MoUs") with EC Bose for supply of equipment for the SPV, but failed to do so, which led to KPT terminating the work order and encashing the performance bank guarantee furnished by EC Bose. On this basis, the arbitral tribunal lifted the corporate veil, treated Collate Consultants as the alter ego of Sugesan, and fastened liability on Sugesan for breach of the MoU, inter alia on the ground that both the MoU and the Equipment MoUs were executed by the same individual.

The tribunal found that neither Sugesan nor EC Bose had fulfilled their respective obligations under the MoU and accordingly directed EC Bose to pay ₹2.5 crore to Sugesan without interest. On the counterclaim, the tribunal awarded ₹3.52 crores along with interest at the rate of 18% per annum from the date of termination of the work order, relying solely on the fact that KPT had encashed the performance bank guarantee furnished by EC Bose due to the failure of Collate Consultants, an entity associated with Sugesan. Both parties challenged these findings before the High Court.

The High Court partly allowed the petition and held that the tribunal's finding based on the principles of alter ego was unsustainable and that the liability fixed by the tribunal lacked basis. The High Court while referring to the judgment of a Single Judge Bench of the Delhi High Court in Sudhir Gopi v Indira Gandhi National Open University (2017) SCC OnLine Del 8345, held that the jurisdiction exercised by the tribunal was circumscribed by the MoU between Sugesan and EC Bose, to which Collate Consultants was not a party. It held that the tribunal, which is a creature of an agreement between two parties, did not have the power to pierce the corporate veil to bind another entity, which was not a party to the arbitration agreement under the MoU. Therefore, such a finding will fall foul of Section 34(2)(b)(ii) of the Arbitration Act.

In relation to the counterclaim, the High Court noted that EC Bose had failed to plead or prove any actual loss or damage arising from the termination of the work order. While the arbitral tribunal had awarded ₹3.52 crore with interest at 18% per annum solely on the ground that KPT had encashed EC Bose Company's performance bank guarantee, the High Court held that, in the absence of any contractual stipulation on damages, a claim for unliquidated damages under Section 73 of the Indian Contract Act, 1872 requires proof of actual loss. Since EC Bose neither pleaded nor established such loss, the High Court held that it was not entitled to any damages, as granting the same would amount to an unjust windfall.

Accordingly, since there was no basis for awarding the counterclaim, by applying the principles propounded in Gayatri Balasamy, the High Court set aside the portion of the award allowing the counterclaim, and modified the portion directing EC Bose Company to pay ₹2.5 crores to Sugesan Transport, to include interest at the rate of 12% per annum from the date of the MoU till the date of actual payment.

The High Court highlighted two important aspects of arbitration law in India. First, the arbitral tribunal does not have the jurisdiction to lift the corporate veil and must strictly confine its jurisdiction to the arbitration agreement. Second, an arbitral tribunal cannot award an amount, which it may think just to a party in the interest of justice. There must be a basis i.e., pleading and proof of the claims for fixing the quantum of damages.

Chakardhari Sureka v. Prem Lata Sureka through SPA & Ors Civil Appeal No. 11840/2025, SLP (C) No. 20480 of 2025, Supreme Court of India

In a clear re affirmation of the pro-enforcement approach of the Arbitration, the Supreme Court held that in absence of a stay on the execution of the award, an execution court cannot defer the consideration of the execution application solely because an appeal is pending under Section 37 of the Arbitration Act against rejection of the arbitration award under Section 34 of the Arbitration Act.

In this case, the decree-holder, Chakardhari Sureka, had initiated execution proceedings since there was no stay granted against the operation of the award. The judgment-debtor, Prem Lata Surekha, had filed an appeal under Section 37 of the Arbitration Act challenging the dismissal of her Section 34 application. However, the Delhi High Court deferred the execution proceedings on the grounds that an appeal is pending against the order rejecting the Prem Lata Surekha's application under Section 34 of the Arbitration Act.

The Supreme Court held that the execution court is competent to hear objections when raised. However, execution proceedings cannot be deferred solely due to pendency of an appeal under Section 37 of the Arbitration Act when there is no interim order operating against the award. Therefore, the Supreme Court ordered the execution court to proceed with the execution proceedings in accordance with the law.

This decision reaffirms that execution of and challenge to an arbitral award are two distinct proceedings. Execution courts can continue execution proceedings in absence of a stay on the operation of an award.

Mecwel Constructions Pvt Ltd v. GE Power Systems India Pvt Ltd, 2025:DHC:9326, Delhi High Court

In a notable judgment, the Delhi High Court has ruled that an order terminating arbitral proceedings under Section 25(a) of the Arbitration Act does not qualify as an "arbitral award" under Section 2(1)(c) of the Arbitration Act and consequently cannot be challenged under Section 34 of the Arbitration Act.

The case arose from an order terminating the arbitral proceedings, issued by the tribunal on the ground that the petitioner, Mecwel Construction Pvt Ltd ("Mecwel") did not file its statement of claim and deposit the arbitral fees within the stipulated time ("Termination Order"). After the tribunal issued the Termination Order, Mecwel sought to reinstate the arbitration proceedings before the tribunal. However, the tribunal was of the view that since it had issued the Termination Order, the arbitration proceedings stood terminated. Therefore, Mecwel approached the Delhi High Court, under Section 14 and Section 15 of the Arbitration Act, to seek substitution of the tribunal and/or continuation of the otherwise terminated proceedings before the tribunal.

Before the High Court, the respondent, GE Power System India Ltd. ("GE Power"), submitted that the Termination Order constituted an arbitral award and that Mecwel's sole remedy was to challenge the same under Section 34 of the Arbitration Act. In contrast, Mecwel contended that the Termination Order was purely procedural in nature as it did not involve adjudication on merits and therefore could not be treated as an arbitral award which can be challenged under Section 34 of the Arbitration Act. Therefore, the primary question before the High Court was whether the Termination Order qualified as an award and could therefore be challenged under Section 34 of the Arbitration Act.

The High Court, referring and concurring with the decision of the Coordinate Bench in PCL Suncon v National Highways Authority of India, (2021) SCC OnLine Del 311 ("PCL Suncon"), held that, "an order terminating proceedings on failure of the claimant to file its Statement of Claims within the stipulated time, is also in the nature of an order under Sub-section (2) of Section 32 of the A&C Act and not an arbitral award because such an order does not decide any of the points on which the parties are in issue in the arbitration.", is the correct view.

Emphasising on the fundamental difference between termination of arbitral proceedings and adjudication of disputes, the High Court ruled that "For an order to qualify as an Award, it must decide, either finally or on an interim, an issue forming part of the dispute referred to arbitration. An order under Section 25(a), being procedural in nature and not addressing the substantive lis between the parties, lacks the essential attributes of an Arbitral Award.", and therefore cannot be challenged under Section 34 of the Arbitration Act. Consequently, the High Court directed that the arbitration shall continue before the tribunal already appointed by the High Court, before which the proceedings were pending prior to the issuance of the Termination Order.

Through this decision, the Delhi High Court clarified that an order terminating arbitral proceedings under Section 32 of the Arbitration Act is procedural in nature and does not constitute an arbitral award amenable to challenge under Section 34.

Hindustan Construction Company Ltd v. Bihar Rajya Pul Nirman Nigam Ltd, 2025 INSC 1365, Supreme Court of India

In a significant ruling reinforcing the finality of arbitral appointments, the Supreme Court has held that High Courts lack jurisdiction to review or recall their orders passed under Section 11 of the Arbitration Act. The Court further clarified that a party's participation in arbitral proceedings, including filing joint applications seeking extension of the arbitral mandate, amounts to a waiver of any objections to the appointment of the arbitrator, thereby foreclosing subsequent challenges and lending certainty to the arbitral process.

Hindustan Construction Company Ltd. ("Hindustan Construction") challenged before the Supreme Court, the Patna High Court's order dated 09.12.2024 dismissing its application for appointment of an arbitrator under Section 11 of the Arbitration Act ("Impugned Order"). The challenge arose in the context of an earlier order dated 18.08.2021, by which the High Court had already appointed an arbitrator and arbitral proceedings had commenced ("Original Order").

Despite having participated in the arbitral proceedings for nearly three years, Bihar Rajya Pul Nigam Ltd. ("BRPNL") filed a review petition in 2024 seeking reconsideration of the Original Order, inter alia on the ground that the arbitrator appointed by the High Court, had been appointed as a president of the Meghalaya Consumer Protection Commission ("Review Petition"). Pursuant to the review, the High Court directed the arbitrator to not proceed further with the arbitration and listed the matter for appointment of a new arbitrator. However, on the date fixed for such appointment, the High Court instead dismissed the Review Petition by way of the Impugned Order.

Aggrieved by the Impugned Order, Hindustan Construction preferred an appeal before the Supreme Court under Article 136 of the Constitution of India, raising, inter alia, the issues of whether a High Court possesses jurisdiction to review or recall its earlier order passed under Section 11(6) of the Arbitration Act, and whether the exercise of such power was valid in law.

Reaffirming the seven judge Bench ruling in Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899, In re (2024) 6 SCC 1, the Supreme Court reiterated that minimal judicial intervention is a foundational principle of arbitration law, and accordingly, referral courts must refrain from undertaking detailed fact finding or adjudication at the Section 8 or Section 11 stage. Placing further reliance on Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) (2025) 4 SCC 641, the Court emphasised that proceedings under Section 11 are strictly facilitative rather than adjudicatory, with issues concerning validity or jurisdiction being matters for the arbitral tribunal to determine.

The Court also referred to Grindlays Bank Ltd. v. Central Government Industrial Tribunal (1980) Supp SCC 420 to reiterate that the power of review is limited to correcting procedural errors and cannot be invoked to reopen questions relating to the interpretation of the arbitration agreement. Additionally, drawing upon Municipal Corporation of Greater Mumbai v. Pratibha Industries Ltd. (2019) 3 SCC 203 and Mohd. Anwar v. Pushpalata Jain & Others, SLP (C) No. 4820 of 2021 (5 April 2021), the Court observed that the scope of review remains confined to procedural irregularities and does not extend to reconsideration of questions of law.

Therefore, the Supreme Court held that the High Court lacked jurisdiction to review or recall its order appointing the arbitrator as the High Court became functus officio and could not sit in judgement over a decided issue. The only remedies available to BRPNL were challenging the Original Order Article 136 of the Constitution before the Supreme Court or raising objections under Section 16 of the Arbitration Act before the arbitral tribunal. Having consciously chosen to participate in the arbitration proceedings, BRPNL was in any case estopped from reopening the matter by way of review.

Since restarting the arbitration process de novo would be inequitable and inefficient, the High Court was directed to appoint a substitute arbitrator withing two weeks from the date of receipt of the judgment. The newly appointed arbitrator was to continue the proceedings from the stage at which they were interrupted and was to endeavour to conclude the proceedings within one year, subject to any further extension under Section 29A of the Arbitration Act, by mutual consent of the Parties.

Through this decision, the Supreme Court clarified that the power to review an order is narrow and is permissible only where an order has been passed in ignorance of fundamental facts. The Supreme Court reiterates that the role of a court under Section 11 of the Arbitration Act is facilitative and an order under Section 11 of the Arbitration Act which has attained finality, can only be objected to Article 136 of the Constitution before the Supreme Court or under Section 16 of the Arbitration Act, before an arbitral tribunal.

Municipal Corporation of Delhi v. Himalayan Flora and Aromas Pvt Ltd, 2025:DHC:8977, Delhi High Court

In an important judgment, the Delhi High Court delineated the limits of an Emergency Arbitrator's powers under the Delhi International Arbitration Centre (Arbitration Proceedings) Rules, 2023 ("DIAC Rules"), holding that an Emergency Arbitrator has no authority to extend or continue an emergency order beyond the 90-day period prescribed under Rule 14.13. The Court clarified that upon expiry of this period, the power to substitute, modify, extend, or vacate the emergency order vests exclusively in the duly constituted Arbitral Tribunal, and not in the Emergency Arbitrator.

The appeal arose under Section 37 of the Arbitration Act, challenging an emergency order dated 11.12.2024 issued by an Emergency Arbitrator ("Emergency Order") on the ground that the Emergency Arbitrator had extended the operation of Emergency Order beyond the 90-day period stipulated under the DIAC Rules. The appellant, the Municipal Corporation of Delhi ("MCD"), contended that the Emergency Arbitrator had acted beyond jurisdiction by extending the effect of the Emergency Order, as Rule 14.13 expressly limits the authority of the Emergency Arbitrator to grant interim relief only for a finite and specified duration.

In response, the respondent Himalayan Flora and Aromas Pvt Ltd ("Himalayan Flora") argued for a purposive interpretation of the DIAC Rules, submitting that an Emergency Arbitrator falls within the definition of an "Arbitral Tribunal" and therefore possesses the power to extend emergency relief beyond the initial 90‑day period.

The High Court rejected Himalayan Flora's submissions and, on a textual and contextual interpretation of Rule 14, held that the term "emergency" in "Emergency Arbitrator" is not merely descriptive but determinative of the nature and duration of the powers conferred. The High Court emphasised that such powers are inherently limited and time‑bound. The High Court further observed that the DIAC Rules deliberately maintain a clear distinction between an Emergency Arbitrator and a regularly constituted Arbitral Tribunal. Particularly, Rule 14.11 renders the Emergency Arbitrator functus officio upon the constitution of the Arbitral Tribunal and prohibits the Emergency Arbitrator from participating in the subsequent proceedings unless expressly agreed by the parties.

The High Court held that permitting an Emergency Arbitrator to extend interim relief beyond the 90‑day period would defeat the very object and purpose of emergency arbitration, which is designed to provide urgent, short‑term protective relief only until the Arbitral Tribunal is constituted. It further cautioned that reading powers vested in the Arbitral Tribunal into the role of an Emergency Arbitrator would undermine the statutory and institutional framework governing emergency arbitration under the Arbitration Act.

Accordingly, the Court concluded that the expressions "Emergency Arbitrator" and "Arbitral Tribunal" cannot be used interchangeably for the purposes of Rule 14 of the DIAC Rules, and that the Emergency Arbitrator's jurisdiction is strictly confined to the limited temporal mandate expressly provided therein. Consequently, the Emergency Order was set aside by the High Court.

This decision of the Delhi High Court clarifies that the powers of an emergency arbitrator under the DIAC Rules are inherently limited and time bound. Once an arbitral tribunal is constituted, an emergency arbitrator becomes functus officio and therefore, the expressions "Emergency Arbitrator" cannot be issued interchangeably with an "Arbitral Tribunal" for the purposes of Rule 14 of the DIAC Rules.

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