Supreme Court’s recent arbitration rulings have created grave uncertainty: Retired Justice Rohinton Nariman

Former Supreme Court Justice Rohinton F Nariman recently said that some of the Supreme Court’s recent arbitration judgments were incorrect and had created “grave uncertainty” by reopening settled questions.

Justice Nariman was delivering the keynote address at the Gujarat High Court Arbitration Centre’s Arbitration Week 2026. He examined 5 recent Constitution Bench decisions concerning the appointment of arbitrators and challenges to arbitral awards.

“Here we have five recent judgments of the Supreme Court. How has the Act fared? According to me, not particularly well, because, firstly, the judgments don’t conduce to certainty.

Secondly, constantly reopening closed questions again leads to grave uncertainty. Some of the judgments, unfortunately, are on the face of them not correct, in my humble submission.”

Justice Nariman first referred to the five-judge ruling in Cox and Kings. The judgment held that the Arbitration and Conciliation Act, 1996 had to be read with the Contract Act while deciding whether a non-signatory intended to be bound by an arbitration agreement.

He contrasted this with the subsequent 7-judge ruling on unstamped arbitration agreements. That judgment described the Arbitration Act as a self-contained code and special enactment. Justice Nariman said that this reasoning contradicted Cox and Kings, where the Contract Act had been treated as fundamental to determining the existence of an arbitration agreement.

He also criticised the speed with which the earlier 5-judge ruling in NN Global was reopened by a seven-judge bench. He said,

“Unfortunately, what was made certain by 5 judges was made uncertain. God alone knows now whether a 9-judge bench will overrule this view, or whether whatever happens, happens.”

Justice Nariman then criticised the Supreme Court’s curative judgment in the Delhi Metro dispute. The Court had set aside an arbitral award in favour of Delhi Airport Metro Express Private Limited (DAMEPL) after finding that the judgment upholding it had resulted in a miscarriage of justice.

According to Justice Nariman, the Court interfered with the award on a pure question of fact after the proceedings had attained finality. He said that the arbitral tribunal had considered whether Delhi Metro Rail Corporation had cured the defects and whether it had taken effective steps to do so. Whether a safety certificate established that effective steps had been taken was a matter for the arbitrators to decide, he added.

“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 said that the ruling had introduced a broad ground of “miscarriage of justice” at the curative stage.

“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 curative petition if, finally, the court’s conscience, so to speak, is shocked.”

Justice Nariman further criticised the Supreme Court’s ruling in Gayatri Balasamy v ISG Novasoft Technologies Limited. The majority recognised a limited power to modify arbitral awards under Section 34 of the Arbitration and Conciliation Act.

He said that the ruling did not overrule NHAI v M Hakeem, which held that courts could set aside awards but not modify them. Instead, it “tweaked” that precedent. He argued that Section 33 gave the power to correct an award to the arbitrator. Section 34 only permitted courts 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 said that Justice KV Viswanathan, who dissented from the majority, was “clearly right”.

He then discussed the Constitution Bench ruling in Central Organisation for Railway Electrification. The majority held that allowing one party, particularly the government, to control the appointment of arbitrators violated the principle of equal treatment.

Justice Nariman agreed with the conclusion that such clauses were invalid. However, he questioned the majority’s reliance on Section 18 of the Arbitration Act. Section 18 required parties to be treated equally after the arbitral process had begun. It did not govern the appointment stage, he said.

“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.”

Against this background, Justice Nariman proposed significant changes to the law governing domestic arbitration. He called for a full appeal against domestic awards on facts and law.

“My suggestion now is that the time has come, after 30 years of working of this Act, to have a full-blown appeal on both facts and law at one stage.”

The appeal should go directly to a division bench of a High Court, he said. The existing single-judge stage should be eliminated. The division bench should decide the appeal within one year.

Justice Nariman said that the present system allowed domestic awards containing errors of fact or law to survive judicial scrutiny. Modern commercial disputes required accuracy as well as speed and cost-effectiveness, he added.

“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 said arbitral awards should be “as accurate as a trial court judgment”. Only then would faith in the arbitration process be restored.

Justice Nariman separately proposed fixing arbitrators’ fees as a lump sum at the beginning of proceedings. The amount should be deposited in an escrow account and released only after the award was pronounced, he suggested.