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's Recent Arbitration Rulings Create , Says Former Justice Nariman
In a stinging critique delivered at the Arbitration Centre’s Arbitration Week , former judge Justice Rohinton F. Nariman declared that several recent decisions on arbitration have "not conduce[d] to certainty" and have instead created "" in Indian arbitration law. His remarks, which questioned the correctness and coherence of five major rulings, have sent a strong signal to the legal community that the highest court's approach to arbitration is causing concern even among its former members.
Justice Nariman did not mince words. He stated that the
, has "not fared particularly well" in light of these developments. According to him, repeatedly
is detrimental to the
that parties and practitioners rely upon. Some judgments, he submitted, were
"on the face of them not correct."
This rare public criticism from a former
judge underscores a growing unease about the direction of arbitration jurisprudence in India.
A Sharp Critique of the Apex Court
Justice Nariman focused on five rulings that have shaped arbitration law in recent years. He argued that instead of bringing clarity, these decisions have muddied the waters, making it harder for businesses and legal professionals to navigate the arbitration landscape. His speech was structured around specific cases, each illustrating a different facet of what he sees as or inconsistency.
The Group of Companies Conundrum:
The first case discussed was the five-judge bench decision in , which dealt with the "group of companies" doctrine and when a can be bound by an . Justice Nariman contrasted its reasoning with a subsequent seven-judge ruling on unstamped arbitration agreements, which described the Arbitration Act as a . He found this difficult to reconcile with , where the was considered fundamental to determining the existence of an .
He also questioned the reopening of the earlier five-judge decision in
by a seven-judge bench.
"Unfortunately, what was made certain by 5 judges was made uncertain,"
he observed, adding that it remains unclear whether the issue could be reconsidered by an even larger bench. This, he suggested, creates a never-ending cycle of judicial review that undermines
.
Delhi Metro Case: A 'Big Leap' in Interference
The former judge reserved strong criticism for the 's curative decision in the dispute between . In that case, the court interfered with the after finding that the earlier judgment upholding the award had resulted in a .
Justice Nariman questioned the extent of judicial interference, particularly where the issue involved
already considered by the arbitral tribunal. He pointed out that the tribunal had examined whether
had cured the defects and whether effective steps had been taken. Referring to the reliance placed on a safety certificate, he said:
"Now, that's another big leap, because a certificate by itself can show nothing; that again is something for the appreciation of the arbitrator."
He expressed grave concern that the judgment could open the door to challenges to arbitral awards on factual grounds even at the
.
"We have a major problem now with this case, because all arbitral awards now have this chance of hopefully being interfered with on fact at the fag end in a
if, finally, the court's conscience, so to speak, is shocked."
This, he argued, defeats the very purpose of arbitration, which is to provide a
.
Modification of Awards: 'One Big Jamboree'
Turning to the judgment in , Justice Nariman criticized the majority's recognition of a under Section 34 of the Act. He observed that the judgment did not expressly overrule , which had held that courts could set aside an award but could not modify it. Instead, the ruling effectively "tweaked" the earlier precedent.
He argued that Section 33 of the Act gives the arbitrator the power to correct an award, while Section 34 permits the court to set aside an award wholly or partly.
"The whole thing is one big jamboree. I don't understand how the law gets furthered by having this kind of a judgment which, again, doesn't conduce to either clarity or to any real forward advance in the law."
Justice Nariman also noted that Justice K.V. Viswanathan's dissent in
Gayatri Balasamy
was "clearly right."
Appointment of Arbitrators: Equal Treatment Questioned
Justice Nariman also discussed the ruling in
, concerning arbitration clauses that allow one party, particularly the government, to control the appointment of arbitrators. While he agreed with the conclusion that such clauses violate the principle of
, he questioned the majority's reliance on Section 18 of the Act.
"Strictly speaking, 18 won’t apply, because 18 is equal treatment to be given to parties after the arbitral process begins, not before. This is the appointment stage."
This technical misstep, he suggested, could have been avoided with better reasoning.
Proposed Reforms: A Full Appeal and Fixed Fees
Against this backdrop of judicial confusion, Justice Nariman proposed a significant restructuring of the mechanism for judicial review of domestic arbitral awards. He suggested that after 30 years of operation of the Act, the time has come for
"a
on both facts and law at one stage."
According to the proposal, such an appeal should lie directly before a
of a
, bypassing the existing
. The
should dispose of the appeal within one year.
Justice Nariman argued that the present system allows arbitral awards containing errors of fact or law to survive judicial scrutiny.
"You can’t have a system in which a wrong award, let’s put it that way, wrong on facts, wrong in law, still passes muster."
He emphasized that arbitral awards should be
"as accurate as a trial court judgment"
if confidence in the arbitration system is to be restored.
Additionally, he proposed reforms concerning arbitrators' fees. He suggested that fees should be fixed as a lump sum at the beginning of proceedings and deposited into an escrow account, with release only after the award is pronounced. This, he argued, would align incentives and reduce delays.
Conclusion: The Path Forward
Justice Nariman's remarks come at a time when the is actively shaping arbitration law, often with divided benches and conflicting opinions. His call for a full appeal against domestic awards is a radical departure from the current regime of . Whether the legislature or the court will adopt such a reform remains uncertain, but the message is clear: the current trajectory is unsustainable.
For legal practitioners and businesses, the takeaway is that arbitration in India is at a crossroads. The push for is colliding with the need for correctness. Justice Nariman's critique may well serve as a catalyst for a broader debate on how to strike the right balance. As he concluded, the goal must be to restore —the very foundations of a robust arbitration regime.
