Latest news with #ArbitrationandConciliationAct
Mint
12 hours ago
- Business
- Mint
Missing link: Efficient contract enforcement will brighten India's prospects
Next Story Ashish Dhawan , Amrita Agarwal We must regain reform momentum on assuring everyone access to reliable mechanisms for the resolution of commercial disputes. Legal certainty is as vital as tariff certainty. India's judiciary, executive and legislature should work together to do what's needed. Legal certainty is as vital as tariff certainty. Gift this article Globally, efficient contract enforcement is a prerequisite for economic competitiveness. In India's case, conservative estimates suggest that legal uncertainty and procedural delays impose a direct cost of 1.5-2% of GDP each year. But the deeper wound comes from the opportunity cost—estimated to be two to three times greater—related to deferred investments. This acts as a hidden tax on enterprises. Globally, efficient contract enforcement is a prerequisite for economic competitiveness. In India's case, conservative estimates suggest that legal uncertainty and procedural delays impose a direct cost of 1.5-2% of GDP each year. But the deeper wound comes from the opportunity cost—estimated to be two to three times greater—related to deferred investments. This acts as a hidden tax on enterprises. Economies like the US and China that have enjoyed high investment and growth have made deliberate efforts to improve their dispute resolution systems. For example, the US has large-scale and specialized arbitration institutions. The US Supreme Court takes a pro-arbitration stance, supported by the The Federal Arbitration Act, and its enforcement of arbitral awards is efficient. Also, the court system focuses on building specialized expertise in the judiciary. States like New York and Delaware operate commercial divisions staffed by dedicated expert judges and backed by effective case management systems. Lastly, cross-border disputes are enforced under the New York convention and the US also has a specialized commercial court for international disputes. Also Read: The subordinate judiciary is an economic pillar India must fix India has also made efforts in this direction, especially between 2014 and 2018, with the passage of the Commercial Courts Act, amendments to the Arbitration and Conciliation Act and establishment of institutions like the Mumbai Centre for International Arbitration (MCIA). The average time for contract enforcement dropped from 1,445 days to 626 in Delhi and Mumbai courts. However, the reform momentum has slowed since 2019, with only a few reforms like the Mediation Act being implemented. India ranks poorly on global comparisons of contract enforcement. Thus, we urgently need to reinvigorate efforts to strengthen commercial dispute resolution mechanisms. A major challenge is an endemic culture of appeals. This is driven partly by the wide grounds for these and inadequate court strictness. The absence of a 'loser pays' regime with stiff penalties lets frivolous challenges go unchecked. Government agencies and public sector undertakings (PSUs) remain among India's largest litigants, frequently challenging awards and judgements. What India needs now is a second generation of reforms. Progressive state governments and the judiciary can drive these and help create a positive investment climate. We propose the following: Strengthen domestic institutional arbitration: Several challenges undermine the effectiveness of arbitration in India—lack of strong domestic institutions, over-reliance on ad-hoc arbitration and lack of a consistent pro-arbitration/enforcement stance by the judiciary. Large companies and investors escape inefficiency by using arbitration institutions in Singapore or the UK, which are known for quality procedures and have a better track record of enforcement. However, these forums are expensive and not accessible to all. Micro, small and medium enterprises (MSMEs) do not have easy access to arbitration. To overcome these barriers, first, the Union and state governments should strengthen independent domestic financial institutions with financial, case-load and branding support. Second, we need legislative reforms to narrow the grounds of appeal (e.g. public policy as grounds of appeal can be restricted or eliminated) and limit the role of the judiciary. Third, the judiciary should adopt a more pro-arbitration stance by strengthening award finality, dedicated enforcement and penalties for frivolous appeals. Fourth, governments and PSUs should by default have domestic institutions as arbitration seats for all contracts. Such appeals should be filtered by a committee to keep out frivolous ones. Turn commercial courts into centres of excellence: The Commercial Courts Act of 2015 marked a transformative reform. Yet, its implementation has not been effective. Many key design elements, such as structured case management, dedicated benches with expertise and threshold calibration to focus on high-value cases are either missing or inconsistently applied. Commercial courts are not seen as the final authority on complex cases, but as benches to examine all commercial cases. Instead, they must focus on the resolution of complex high-value cases in a timely manner and with expertise. They should be thought of as centres of excellence. Towards this, the first step would be to rationalize the monetary threshold. Current low-value thresholds result in a flood of minor cases that divert court capacity from complex, high-value commercial disputes. State governments and high courts must also invest in institutional capacity, including dedicated benches with longer tenure, trained judges, professional case managers and digital infrastructure. Further, the performance of commercial courts should be transparently benchmarked and monitored for the sake of visibility, discipline and accountability. Rethink cross-border dispute resolution: India's current regime for resolving cross-border investment disputes is restrictive. Since 2015, India has either terminated or not renewed 68 Bilateral Investment Treaties (BITs) and we currently have less than a dozen in force. In contrast, Vietnam and China have signed over 50 BITs each over the last few decades that are still in force. Lack of BITs has substantially weakened investor protection. As India negotiates new free trade agreements, we have a window to correct course. Key steps should include replacing inflexible exhaustion clauses with time-bound dispute resolution pathways and creating fast-track benches for enforcement of international commercial awards. Legal certainty is as vital as tariff certainty. India's economy stands at an inflection point. To sustain its growth, we need a reliable and timely mechanism for contract enforcement. The Indian judiciary, executive and legislature all need to come together and bring to bear the urgency and scale required for the task. The authors are, respectively, founder CEO, and operating partner, The Convergence Foundation Topics You May Be Interested In Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
United News of India
5 days ago
- Business
- United News of India
Serious fraud cases: SC rejects appeals against Patna HC order appointing arbitrators
New Delhi, Aug 7 (UNI) In a significant judgment, the Supreme Court today outlined the legal principles governing the arbitrability of disputes involving serious allegations of fraud, while dismissing a batch of civil appeals challenging the Patna High Court's decision to appoint arbitrators under Section 11 of the Arbitration and Conciliation Act, 1996. A Division Bench comprising Justice P.S. Narasimha and Justice Manoj Misra reiterated a set of guiding principles to determine when disputes involving fraud can and cannot be resolved through arbitration. The appeals stemmed from a challenge to the Patna High Court's orders allowing arbitration proceedings in multiple cases despite allegations of serious to justice for the enforcement of rights is generally through ordinary civil courts. However, Section 28 of the Indian Contract Act, 1872 saves contractual resolution mechanisms such as arbitration. Section 2(3) of the Arbitration Act restricts arbitrability in cases where other statutes explicitly prohibit arbitration. The Court clarified that the existence or possibility of criminal proceedings arising from the same facts does not automatically render a civil dispute non-arbitrable. Civil matters such as coercion, fraud, or misrepresentation under the Indian Contract Act can still be resolved through the precedent in Swiss Timing Ltd., the Court observed that permitting arbitration to proceed alongside criminal proceedings does not inherently prejudice either Between 'Serious Fraud' and 'Fraud Simpliciter' The Court reaffirmed that serious fraud, due to its public law implications, may exclude a dispute from arbitration, unlike 'fraud simpliciter,' which remains arbitrable. The Court laid out two tests, first when the arbitration agreement itself is in doubt, i.e., one party denies entering into it altogether. Second, when allegations are made against the State or its instrumentalities, requiring scrutiny beyond contractual issues, touching upon public law principles. Serious fraud allegations with potential criminal implications and broader public impact, such as corruption affecting governance or national security, are non-arbitrable. The Tribunal has jurisdiction to consider fraud-related disputes within the contract, even if the contract is terminated or challenged, the apex judiciary stated. However, fraud allegations directly targeting the arbitration clause itself are non-arbitrable. When fraud is alleged specifically against the arbitration agreement, the Tribunal lacks authority to adjudicate the issue. The party raising a plea of non-arbitrability bears the burden to prove it, the court said. UNI SNG SSP
United News of India
5 days ago
- Politics
- United News of India
SC clarifies law on arbitrability in cases involving serious fraud
New Delhi, Aug 7 (UNI) In a significant judgment, the Supreme Court has outlined the legal principles governing the arbitrability of disputes involving serious allegations of fraud, while dismissing a batch of civil appeals challenging the Patna High Court's decision to appoint arbitrators under Section 11 of the Arbitration and Conciliation Act, 1996. A Division Bench comprising Justice P.S. Narasimha and Justice Manoj Misra reiterated a set of guiding principles to determine when disputes involving fraud can and cannot be resolved through arbitration. The appeals stemmed from a challenge to the Patna High Court's orders allowing arbitration proceedings in multiple cases despite allegations of serious fraud. Access to justice for the enforcement of rights is generally through ordinary civil courts. However, Section 28 of the Indian Contract Act, 1872 saves contractual resolution mechanisms such as arbitration. Section 2(3) of the Arbitration Act restricts arbitrability in cases where other statutes explicitly prohibit arbitration. The Court clarified that the existence or possibility of criminal proceedings arising from the same facts does not automatically render a civil dispute non-arbitrable. Civil matters such as coercion, fraud, or misrepresentation under the Indian Contract Act can still be resolved through arbitration. Citing the precedent in Swiss Timing Ltd., the Court observed that permitting arbitration to proceed alongside criminal proceedings does not inherently prejudice either party. Distinction Between 'Serious Fraud' and 'Fraud Simpliciter' The Court reaffirmed that serious fraud, due to its public law implications, may exclude a dispute from arbitration, unlike 'fraud simpliciter,' which remains arbitrable. Contextual Assessment of 'Serious Allegations of Fraud' The Court laid out two tests: When the arbitration agreement itself is in doubt, i.e., one party denies entering into it altogether. When allegations are made against the State or its instrumentalities, requiring scrutiny beyond contractual issues, touching upon public law principles. Serious fraud allegations with potential criminal implications and broader public impact, such as corruption affecting governance or national security, are non-arbitrable. The Tribunal has jurisdiction to consider fraud-related disputes within the contract, even if the contract is terminated or challenged. However, fraud allegations directly targeting the arbitration clause itself are non-arbitrable. When fraud is alleged specifically against the arbitration agreement, the Tribunal lacks authority to adjudicate the issue. The party raising a plea of non-arbitrability bears the burden to prove it. The court's role in preliminary enquiry is that when a non-arbitrability plea is raised, the Court examines it only as a jurisdictional question to determine whether the dispute falls within the scope of arbitration. Senior Advocate Ranjit Kumar appeared for the Appellants, while Senior Advocate Amit Sibal represented the Respondents. The Court clarified that it had left all jurisdictional objections, including limitation and non-arbitrability, to be decided by the Arbitral Tribunal as preliminary issues. "The issues that we have not taken up and left to the arbitral tribunal are jurisdictional issues, involving barring of the arbitral proceedings due to limitation or for the reason that they are non-arbitrable. These issues shall be taken up as preliminary issues and the arbitral tribunal will consider them after giving opportunity to all the parties," the bench concluded. Accordingly, the Supreme Court dismissed the appeals, effectively allowing the arbitration proceedings to continue in accordance with the Patna High Court's earlier directions. The Court observed that disputes involving allegations of serious fraud need more clarity so that there is a certainty about the available remedy. UNI SNG RN
Time of India
29-07-2025
- Business
- Time of India
MMRDA deposits Rs 560 crore with Bombay high court registry in arbitration dispute with Mumbai Metro One Pvt Ltd
Mumbai: The Mumbai Metropolitan Region Development Authority (MMRDA) deposited Rs 560.2 crore with the registry of Bombay high court in an arbitration matter involving Mumbai Metro One Pvt Ltd, in accordance with a directive recently issued by Supreme Court. MMOPL, a joint venture between Reliance Infrastructure and MMRDA, is a special purpose vehicle set up to run the Versova-Andheri-Ghatkopar Metro 1 corridor. In Aug 2023, a three-member arbitral tribunal awarded Rs 992 crore to MMOPL as compensation for cost escalations and contractual disagreements. With interest accrued till May 2025, the total award rose to Rs 1,169 crore. You Can Also Check: Mumbai AQI | Weather in Mumbai | Bank Holidays in Mumbai | Public Holidays in Mumbai On July 10, 2025, HC directed MMRDA to deposit the entire amount, rejecting its plea for an unconditional stay. The court observed that MMOPL's arbitration win could not be rendered meaningless during the pendency of MMRDA's challenge to the award. It noted that MMRDA failed to make a prima facie case to justify a stay without deposit. HC also pointed out that MMRDA, as a 26% equity holder in MMOPL, was involved in key financial decisions and project execution. The audit committee of MMOPL, chaired by an MMRDA nominee, endorsed the financial statements on which the tribunal partly relied. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like New Container Houses In Bolon Container House | Search ads Search Now It concluded that the award — passed by a 2:1 majority — could not be dismissed as perverse or arbitrary. MMRDA filed a challenge under Section 34 of the Arbitration and Conciliation Act, calling the award illegal and based on flawed assumptions regarding project delays, rent recovery, and cost escalations. MMOPL, in turn, accused the authority of attempting to backtrack from previously approved decisions. After the HC ruling, MMRDA approached Supreme Court, which granted partial relief by allowing it to deposit only 50% of the award amount pending final adjudication. In a stock exchange filing, Reliance Infrastructure confirmed that MMRDA complied with the SC order and deposited Rs 560.2 crore with the HC registry. The final outcome of this arbitration matter is likely to set a precedent for public-private partnership infrastructure disputes in India. S
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Business Standard
29-07-2025
- Business
- Business Standard
Supreme Court junks Zostel's plea against Oyo in arbitration dispute
The Supreme Court on Tuesday refused to accept Zostel Hospitality's plea seeking to set aside a Delhi High Court order in favour of Oravel Stays, the parent company of Oyo. A bench of Justices Sanjay Kumar and Satish Chandra Sharma observed that Zostel should have filed an appeal instead of approaching the top court by way of a Special Leave Petition. Zostel subsequently withdrew its petition. In May this year, the Delhi High Court had set aside an arbitral award entitling Zostel to up to a 7 per cent stake in Oravel Stays. Zostel had appealed against this order before the Supreme Court. A single-judge bench of Justice Sachin Datta of the Delhi High Court had passed the May order on a plea filed by Oyo under Section 34 of the Arbitration and Conciliation Act, 1996. Section 34 outlines the procedure for a party to challenge an arbitral award in court. In an award dated 6 March 2021, the arbitral tribunal ruled that Zostel was entitled to specific performance of Oyo's obligations under the term sheet but did not order allotment of shares. It, however, allowed Zostel to pursue proceedings for the execution of the definitive agreements. The tribunal held that Oyo had acted in breach of a binding agreement after acquiring Zostel Hospitality, which owned ZO Rooms. According to the agreement, Oyo had agreed to transfer a 7 per cent stake to ZO Rooms' shareholders, the tribunal had noted. Oravel Stays and Zostel Hospitality—then rivals in the hospitality sector—were embroiled in a legal dispute over a proposed buyout deal. Zostel initially accused Oyo of failing to transfer the agreed 7 per cent stake. It later raised concerns over Oyo's draft red herring prospectus related to its proposed initial public offering (IPO). Oyo refuted all allegations and claimed the deal had been terminated by mutual agreement. Zostel then approached the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking to restrain Oyo from altering its shareholding—including via the proposed IPO—on the grounds that it would frustrate enforcement of the arbitral award.
