Analysis of Provisions related to permitted Judicial Intervention in Domestic Arbitration

Introduction

Today’s world is experiencing rapid growth in extraterritorial trade, leading to inevitable disputes among participating parties. Due to the value of time, parties often prefer resolving differences outside traditional courtrooms. With millions of pending cases, the courts are overburdened. Additionally, to preserve privacy and commercial relations, court intervention is generally avoided. Arbitration is the most recognized and practiced method of Alternative Dispute Resolution (ADR).

The Model Law on International Commercial Arbitration was introduced in 1985 by the United Nations Commission on International Trade Law (UNCITRAL). Countries seeking to improve their arbitration systems have adopted this Model Law. India enacted the Arbitration and Conciliation Act, 1996 (referred to as ‘the Act’) to govern both domestic and international commercial arbitration, modeled after the Model Law.

Arbitration allows parties to resolve disputes through a neutral third party, known as an arbitrator. Halsbury defines arbitration as the referral of a dispute to an entity other than a court, which decides the matter after a fair hearing. There must be animus arbitrandi—an intent to submit the dispute to arbitration.

The arbitrator’s decision, called an ‘Award,’ is binding and final. Though courts may set aside an award, this occurs only under specific circumstances. Court intervention may also occur during the arbitration process where necessary.

The Act, including its 2015 and 2019 amendments, was designed to ease the courts’ burden and accelerate dispute resolution, crucial for a developing economy. The legislation aims to facilitate faster commercial resolutions through arbitration while limiting court intervention.

This paper discusses the provisions under the Arbitration and Conciliation Act, 1996 that allow judicial intervention and analyzes their scope.

Research Objectives

• Investigate provisions related to judicial intervention in domestic arbitration.
• Analyze the impact of such provisions on party autonomy.
• Assess judicial safeguards in ensuring due process and fairness.
• Evaluate how judicial intervention affects arbitration efficiency and timeliness.
• Examine grounds for setting aside arbitral awards and their implications.
• Determine if judicial intervention provisions enhance or hinder justice access.
• Compare domestic provisions with international arbitration standards.
• Assess the transparency-confidentiality balance in arbitration.
• Compare judicial intervention with mediation and litigation for effectiveness.
• Propose reforms to improve domestic arbitration’s effectiveness and fairness.

Research Questions

• How does judicial intervention occur before arbitration proceedings in domestic arbitration? (with case laws)
• How does judicial intervention occur during arbitration proceedings? (with case laws)
• How does judicial intervention occur after arbitration proceedings? (with case laws)
• How does judicial intervention occur in appealable orders? (with case laws)
• What is the relevance and importance of the Doctrine of Separability in domestic arbitration?
• Is judicial intervention justified? (supported by case laws)

Research Hypothesis

The 1940 Act was revised under the 1996 Act but lagged in limiting judicial intervention. Amendments attempt to address this issue.

Literature Review

• Sneha Mahawar highlights how legislators incorporated constraints to minimize court intervention and promote speedy arbitration.
• Anushka Rastogi explains that judicial minimalism is encouraged, allowing limited judicial access to ensure the finality of arbitration awards.
• Sankalp Jain notes the various scenarios in which judicial authorities participate in arbitration under the 1996 Act.

Research Methodology

This study uses narrative and descriptive methods. It relies on secondary sources, including scholarly books and journal articles.

Analysis

Section 5 of the Act

Section 5 and its 2015 amendment clarify the boundaries of judicial intervention in Part I of the Act. Derived from Article 5 of the UNCITRAL Model Law, it states:

“Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.”

Judicial Intervention Before Arbitration Proceedings

Section 5 establishes limited court involvement. The Act prioritizes arbitration by overriding other laws. Courts can intervene only as explicitly provided. In Videocon Industries Ltd. v. Union of India, the Supreme Court noted limited court interference unless permitted by the Act. Similarly, Surya Dev Rai v. Ram Chander Rai emphasized judicial discretion based on conscience and experience.

Analysis of Judicial Authority

‘Judicial authority’ includes courts and tribunals with judicial powers. As seen in Roshan Lal Gupta v. Parasram Holdings Pvt. Ltd., civil courts may still hear disputes despite arbitration agreements if parties waive arbitration.

Forums like the District Forum, State Commission, and National Commission have also been deemed judicial authorities (Canara Bank v. Nuclear Power Corporation of India Ltd.).

Section 8 of the Act empowers courts to refer cases to arbitration if agreements exist and required documents are submitted. The Supreme Court affirmed this in Hindustan Petroleum Corpn. Ltd. v. Pink City Midway Petroleum and Rashtriya Ispat Nigam Ltd. v. Verma Transport Company.

Section 8(3) confirms arbitration may proceed despite a pending referral application.

Judicial Intervention During Proceedings

Section 9 allows courts to grant interim relief, distinct from Section 17, which empowers arbitrators. Courts ensure protection of parties’ rights and prevent delay of arbitration.

Relief requires establishing a prima facie case, risk of irreparable harm, and balance of convenience. Courts exercise discretion as in civil cases, aiming to avoid obstruction of arbitration.

Analysis of Judicial Authority

There are a few important cases in this area that merit discussion. The first cases that come to mind for a law student when trying to understand the meaning of the phrase ‘public policy’ and how important it is when determining whether an award can be overturned are Renusagar Power Co. Ltd. v. General Electric Co and ONGC Ltd. v. Saw Pipes Ltd. In these cases, it was decided that an award issued in violation of the fundamental policy of Indian law, the interests of India, justice, and morality would be considered to be against public policy.

In ONGC Ltd. v. Saw Pipes Ltd., the Hon’ble Supreme Court revised the definition of public policy. It was decided that ‘public policy’ encompasses a problem involving the common good and interest that evolves over time. As a result, the ground of ‘patent illegality’ was added to those mentioned in the Renusagar case’s justifications above.

In the same case, the Supreme Court cited the restrictive definition of ‘public policy’ established in Renusagar Power Co. Ltd. v. General Electric Co. In Phulchand Exports Ltd. v. OOO Patriot, the error was corrected by broadening the definition of ‘public policy.’

However, this sparked a wave of Section 34 lawsuits. Awards began to be contested on the grounds that they were unconstitutional or violated a statutory provision. The opportunity to examine the definition of the phrase ‘fundamental policy of Indian law’ was once again presented to the Hon’ble Apex Court in ONGC v. Western GECO International Ltd.

It was determined that ‘fundamental policy of Indian law’ encompasses three separate heads:

• The arbitral tribunal must take a judicial approach.
• The tribunal should act in accordance with natural justice principles.
• The decision should not be ambiguous or irrational to the point of preventing a fair trial or causing injustice.

In Associate Builders v. Delhi Development Authority, the court held that an award violating the ‘most fundamental principles of justice and morality’ is subject to being overturned. In Bfil Finance Ltd. v. G. Tech Store Ltd., the Hon. Bombay High Court declared that ‘public policy’ could not entail disobeying the letter of the law.

After the 2015 amendment, judges refrained from interpreting ‘public policy’ in such a broad sense. Only the grounds listed in Section 34 of the Act may be used to overturn an arbitral tribunal’s decision. No additional grounds may be used.

If the Act’s objectives are to be understood, the term ‘public policy’ cannot be interpreted broadly, lest every award be subject to appeal. The legislators intended for judicial intervention to be limited. Thus, efforts should be made to only challenge awards on the grounds that they are against India’s ‘public policy’ in appropriate circumstances.

While implementing its earlier position from National Highway Authority of India v. Progressive-MVR, the Hon’ble Supreme Court observed in State of Jharkhand v. HSS Integrated SDN & Anr that when the arbitrator’s position is plausible and/or when two positions are probable, the arbitral tribunal’s sensible position should not be interfered with under Section 34.

An arbitral award must be upheld in conformity with the rules of the Code of Civil Procedure. A domestic award must be enforced once the deadline for filing an application to set it aside has passed or after the application has been denied. Within three months of the award’s receipt date, an application to vacate an arbitral decision must be filed. The court may extend the time by up to 30 days.

Judicial Intervention in Appealable Orders

According to Section 37 of the Act, certain orders made under the Act may be appealed. There are two types of appealable orders:

Appeals against Court Rulings

Under Section 37(1):

• Refusal to refer parties to arbitration under Section 8
• Approval or rejection of temporary measures under Section 9
• Refusal to set aside an award under Section 34

Appeals against Arbitral Tribunal Rulings

Under Section 37(1):

• Acceptance of pleas under Sections 16(2) and (3)
• Approval or rejection of temporary orders under Section 17

As per Section 37(3), there may not be a second appeal to a decision made under this section. However, a party’s right to approach the Honourable Supreme Court remains unaffected.

Importance of Doctrine of Separability

The doctrine of separability states that an arbitration clause is distinct and autonomous from the parent contract. This avoids easy challenges to the tribunal’s jurisdiction on the grounds that the parent contract is invalid. The arbitration clause must be evaluated independently. Therefore, a contract defect does not automatically render the arbitration clause invalid.

However, this doctrine was rarely applied in India. In UOI v. Jagdish Kaur and India Household and Healthcare Ltd. v. LG Household and Healthcare Ltd., the Supreme Court concluded that if the contract was unlawful, the arbitration clause was also void.

Recently, courts have favoured this doctrine. The Supreme Court allowed arbitration processes in landlord-tenant agreements in Vidya Drola & Ors. v. Durga Trading Corporation, citing Himangni Enterprises v. Kamaljeet Singh Ahluwalia. According to Section 7(2), an arbitration agreement may be a separate agreement or a clause in a contract. Adopting this doctrine promotes the Act’s purpose.

Is Judicial Intervention Justified?

Some arguments against judicial overreach:

• Domestic arbitrations predominate in India, involving government or affiliated bodies, creating inherent bias risks.
• Justice can be influenced by power, money, or politics. Arbitrators may lack expertise or independence.
• The intent of arbitration law doesn’t match ground reality, defeating its purpose.

For example:

• In Delhi Development Authority v. R.S. Sharma, the Court modified an award for not following the contract’s escalation clause.
• In Hindustan Zinc v. Friends Coal Carbonisation, an award granting excessive compensation was overturned for violating contract terms.

Conclusion

The Act aimed to enable speedy, efficient dispute resolution through arbitration with minimal court involvement. However, judicial intervention has often been necessary to interpret ambiguities and uphold justice. While judicial activism is sometimes warranted, interference should be cautious and limited to exceptional cases.

The 2015 and 2019 Amendment Acts reflect the need for dynamic adjustments to the arbitration framework. Courts must guide, not dominate, arbitral processes. Their role should be to strengthen alternative dispute resolution mechanisms, enhancing India’s legal infrastructure and global arbitration profile.

Bibliography
Articles & Online Resources

1. Sneha Mahawar, Scope of Judicial Interpretation in Arbitration, available at: https://blog.ipleaders.in/scope-judicial-interpretation-arbitration/, last visited on 01-08-2025.
2. Anushka Rastogi, The Scope of Judicial Intervention during different stages of arbitral proceedings, The Law Brigade Publishers, Vol. 6, 2021, ISSN 2581-6551.
3. Jain, Sankalp, Judicial Intervention in Arbitration (November 27, 2015), available at SSRN: https://ssrn.com/abstract=2801454, last visited on 01-08-2025.
4. UNCITRAL Model Law on International Commercial Arbitration, United Nations Documents A/40/17, Annex I and A/61/17, Annex I.

Statutes

1. The Arbitration and Conciliation Act, 1996, Act No. 26 of 1996, §§ 5, 8, 9, 17, 34, 37, 75, 81.
2. The Code of Civil Procedure, 1908, Act No. 5 of 1908.

Cases

1. Hormusji & Daruwala v. Distt. Local Board, MANU/SN/0048/1934.
2. Videocon Industries Ltd. v. Union of India, MANU/SC/0598/2011.
3. P Anand Gajapathi Raju & Ors. v. PVG Raju (Dead) & Ors., MANU/SC/0281/2000.
4. Secur Industries Ltd. v. Godrej and Boyce Mfg. Co. Ltd., MANU/SC/1129/2004.
5. Surya Dev Rai v. Ram Chander Rai, MANU/SC/0559/2003.
6. Roshan Lal Gupta v. Parasram Holdings Pvt. Ltd. & Anr., MANU/DE/0146/2009.
7. Fair Air Engineers Pvt. Ltd. v. N.K. Modi, MANU/SC/0141/1997.
8. Canara Bank v. Nuclear Power Corporation of India Ltd., MANU/SC/1123/1995.
9. Hindustan Petroleum Corpn. Ltd. v. Pink City Midway Petroleum, MANU/SC/0482/2003.
10. Rashtriya Ispat Nigam Ltd. v. Verma Transport Company, MANU/SC/3491/2006.
11. N. Radhakrishnan v. Maestro Engineers & Ors., MANU/SC/1758/2009.
12. Vijay Kumar Sharma v. Raghunandan Sharma, MANU/SC/0072/2010.
13. Liverpool and London Steamship Protection and Indemnity Association Ltd. v. Arabian Tankers Company, 2004 (1) RAJ 311 (Bom).
14. Firm Ashoka Traders v. Gurumukh Das Saluja, 2004 (3) SCC 155.
15. Sri Krishan v. Anand, (2009) 3 Arb LR 447 (Del).
16. M/s. Sundaram Finance Ltd. v. M/s. N.E.P.C. India Ltd., AIR 1999 SC 565.
17. ITI Ltd. v. Siemens Public Communications Network Ltd., 2002 (5) SCC 510.
18. P.R. Shah, Shares and Stock Broker (P) Ltd. v. B.H.H. Securities (P) Ltd., MANU/SC/1248/2011.
19. M.P. Stock Exchange, Indore v. CMC Ltd., 2011 (103) AIC 675 (MP).
20. Renusagar Power Co. Ltd. v. General Electric Co., MANU/SC/0195/1994.
21. ONGC Ltd. v. Saw Pipes Ltd., AIR 2003 SC 2629.
22. Phulchand Exports Ltd. v. O.O.O. Patriot, MANU/SC/1217/2011.
23. ONGC v. Western GECO International Ltd., MANU/SC/0772/2014.
24. Associate Builders v. Delhi Development Authority, MANU/SC/1076/2014.
25. Bfil Finance Ltd. v. G. Tech Store Ltd., MANU/MH/0531/2002.
26. National Highway Authority of India v. Progressive-MVR (JV), MANU/SC/0162/2018.
27. State of Jharkhand v. HSS Integrated Sdn., MANU/SC/1438/2019.
28. UOI v. Jagdish Kaur, MANU/UP/1977/2006.
29. India Household & Healthcare Ltd. v. LG Household & Healthcare Ltd., MANU/SC/1253/2007.
30. Vidya Drola & Ors. v. Durga Trading Corporation, MANU/SC/0363/2019.
31. Himangni Enterprises v. Kamaljeet Singh Ahluwalia, MANU/SC/1307/2017.
32. Geo Group Communications Inc. v. IOL Broadband Ltd., MANU/SC/1833/2009.
33. Delhi Development Authority v. R.S. Sharma, (2008) 13 SCC 80.
34. Hindustan Zinc v. Friends Coal Carbonisation, (2006) 4 SCC 445.

List of Statutes

List of Cases

Table of Contents

Written By: Pratik Avinash Dahule – Final-year student at National Law University, Nagpur