2025 Year in Review: India - Maintaining the Momentum

While 2025 was a good year for the development of arbitration in India, with important judicial decisions to reflect on, the contemplated revisions to the Indian Arbitration and Conciliation Act 1996 (“Arbitration Act”) (see here) saw little progress over the last year.

Determining the parties’ choice of law

A preliminary question at the stage where the Indian courts undertake an investigation on whether the pre-conditions of arbitration are satisfied (section 8 of the Arbitration Act) or at the stage of constituting a tribunal (section 11 of the Act) is which law governs questions of validity and interpretation of the arbitration agreement. In Disortho S.A.S. v Meril Life Sciences Private Limited (discussed here), a 3-judge bench of the Supreme Court of India (“Supreme Court”) reasoned that the parties’ selection of Indian law as the lex contractus created a strong presumption that they had impliedly chosen Indian law to govern the arbitration agreement. In line with the Supreme Court of the United Kingdom’s decision in Sulamerica, the bench observed that the choice of a place of arbitration is not sufficient to displace or override the presumption.1

The Supreme Court was also tasked with identifying the lex arbitri, since the arbitration clause in dispute did not specify a seat, although it provided that the Rules of the Conciliation and Arbitration Center of the Chamber of Commerce of Bogota (“Rules of CAC Bogota”) would govern the arbitration and that the award shall conform to Columbian law. The bench found that Indian law applied (in addition to Rules of CAC Bogota) since the contract contained an exclusive jurisdiction clause in favour of Indian courts and Indian law governed the arbitration agreement.

Previous blog posts have taken the position that the Supreme Court ought to have confined the exclusive jurisdiction clause to non-arbitration litigation action and determined the lex arbitri in line with the separability principle and by reconciling prior judicial decisions.

Pre-requisites of an arbitration agreement

The Indian courts continued to grapple with questions concerning jurisdiction. In BGM v Eastern Coalfields, the Supreme Court found that a clause that gave the parties the option to agree to resolve their dispute through arbitration in the future (“the redressal of the dispute may be sought through”) did not constitute an obligation to refer disputes to arbitration and was merely an enabling clause. The Supreme Court found that such a clause could not constitute a valid and binding arbitration agreement.

In addition to the requirement of a clear intention to settle disputes through arbitration, section 7 of the Arbitration Act requires that the arbitration agreement be in writing. In another decision, the Supreme Court found that the lack of signatures does not impact the existence of an arbitration agreement where it can be prima facie shown that the parties were ad idem and it is clear from their conduct that they had accepted and acted on the agreement. Although the arbitration agreement in dispute provided for foreign-seated arbitration (part II of the Arbitration Act), courts are likely to adopt a similar approach to arbitrations seated in India and domestic arbitrations (part I).

Conflicting seats: subsidiary agreements cannot displace the primary agreement

In Balaji Steel Trade v Fludor Benin,2 the Supreme Court found that the Buyer and Seller Agreement ("BSA") between the disputing parties designated a foreign arbitration seat in the arbitration clause, which prevailed over the two other supply contracts subsequently executed that designated New Delhi as the arbitration seat. The Supreme Court identified the BSA to be the “Mother Agreement” on the basis that it defined the long-term commercial relationship between the parties and found that the parties did not unequivocally intend to substitute the Mother Agreement for the later ones, whose scope ended upon completion of delivery and payment under the respective consignment. Since the arbitration was seated outside India, the application to appoint an arbitrator under section 11 (part I) was dismissed.

Joining non-signatories to an arbitration agreement

Power of the tribunal to join non-signatories on own accord

Paying heed to the principle of competence-competence, the Supreme Court recognised the power of the arbitral tribunal to join non-signatories on its own accord, even in the absence of a direction from the court tasked with determining whether the dispute should be referred to arbitration (i.e., referral court). The Supreme Court took the view that the jurisdiction of an arbitral tribunal is derived from the arbitration agreement itself and not from the act of appointment by a referral court, which is merely an enabling mechanism to activate a tribunal whose jurisdiction is already latent in the arbitration agreement itself. The Supreme Court urged the Indian Ministry of Law and Justice to provide explicit statutory recognition to the power of joinder and address other procedural gaps in the Arbitration Act. The Ministry has yet to circulate a revised draft of the proposed amendments, even though more than a year has passed since the deadline for public comments.

Scope of the referral court’s enquiry under section 11(6-A) and its power to join non-signatories

Section 11(6-A) of the Arbitration Act restricts the power of the court to examining only the 'existence' of the arbitration agreement before proceeding to appoint an arbitrator. By way of obiter, the Supreme Court clarified that the question of ‘existence’ of an arbitration agreement, although related to the question of non-signatories being bound, is distinct in nature. While the former is a prima facie determination, the latter involves a more nuanced determination of the parties’ intentions, contractual relationships, and the broader context of the agreement, which is not confined to the formal text of the arbitration clause alone.

Another bench of the Supreme Court adopted a similar view regarding the scope of the referral court’s power to examine the existence of the arbitration agreement. The Supreme Court observed that the referral court’s enquiry does not contemplate a contested exercise to inspect and scrutinise the dealings between the parties. The referral court must however determine, prima facie, whether a party invoking or resisting arbitration is a veritable party. In the context of joining non-signatories, this involves examining parameters such as the mutual intent of the parties, relationship of a non-signatory with a signatory, commonality of the subject matter, composite nature of the transaction and performance of the contract.

No review of referral court’s order under section 11(6)

As discussed above, section 11(6) empowers the referral court to appoint an arbitrator failing party agreement. The text of section 11(6) of the Arbitration Act does not provide for an explicit power to review or recall an order of appointment of an arbitrator by the referral court. While High Courts possess inherent powers of review, the Supreme Court in Hindustan Construction Company v. Bihar Rajya Pul Nirman Nigam Limited clarified that their power cannot be invoked to revisit findings of law or reappreciate issues already decided. Accordingly, the only remedy available to challenge an order under section 11(6) would be to approach the Supreme Court under Article 136 of the Constitution of India 1950 or the arbitral tribunal under section 16 of the Arbitration Act. Note that a decision refusing to refer parties to arbitration under section 8 is appealable under section 37(1) of the Arbitration Act. This disparity has been previously highlighted by the Supreme Court.

Confidentiality extends to non-signatories

The Arbitration and Conciliation (Amendment) Act 2019 introduced section 42A, which extended the statutory mandate of confidentiality to arbitration proceedings. Notably, section 42A does not define the precise circumstances under which confidentiality may be breached. An opportunity to clarify its scope arose in Kamal Gupta v L.R Builders. The question before the Supreme Court was whether a non-signatory to the arbitration agreement could attend the arbitration proceedings. In answering this question in the negative by reference to section 42A, the Supreme Court observed that permitting a “stranger” to observe the arbitration proceedings would breach section 42A.

Seat court has no power to modify or vary an arbitral award

Putting to rest conflicting views, a two-judge bench of the Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies decided that courts exercising jurisdiction under Section 34 of the Arbitration Act do not have the power to modify or vary an arbitral award (discussed here). In doing so, the Supreme Court drew a clear distinction between setting aside and modifying awards. While the former nullifies an award on jurisdictional or procedural grounds, modification necessarily entails re-adjudication on merits, which defeats party autonomy and undermines the arbitral process. The Supreme Court went as far as to clarify that a party cannot invoke the court’s inherent powers under section 151 of the Code of Civil Procedure, 1908, as this would conflict with the statutory scheme which does not give courts the power to modify or vary an award. However, the Supreme Court clarified that the power to correct computation, clerical and typographical errors remained intact.

The decision strengthens the finality of arbitral awards and demonstrates the judiciary’s commitment to the principle of minimal judicial interference.

New India-UK FTA

After over three years of extensive negotiations, India and the United Kingdom (UK) signed the Comprehensive Economic and Trade Agreement (“CETA”) likely to come into effect in 2026.  Much like the Trade and Economic Partnership Agreement (“TEPA”) signed with the EFTA states (comprising Switzerland, Norway, Liechtenstein and Iceland), the CETA provides for a tiered State-State dispute resolution mechanism involving the establishment of a 3-member panel if consultations fail. This not only limits the role of arbitration to resolve disputes but also excludes investor-State arbitration, instead requiring that investors raise their claims through States. Negotiations for a separate bilateral investment treaty (“BIT”), including an investor-State dispute settlement mechanism, are yet to conclude.

• 1

  The English Arbitration Act now provides for the law of the seat to govern the arbitration agreement absent an express choice of law. The Indian Arbitration Act does not prescribe a default rule.

• 2One of the authors was part of a team representing Balaji Steel Trade before the High Court of Delhi. The views expressed here are the author’s own.