Dispute Resolution Quarterly Milestones (July-September 2025)

The Delhi High Court recently affirmed that civil courts may intervene in foreign-seated arbitrations in exceptional circumstances, particularly when the proceedings are vexatious, oppressive, and unconscionable.¹ The Court held that while the principle of minimal judicial interference in arbitral proceedings is central to arbitration, it does not oust the court’s inherent power to prevent an abuse of the arbitral process.

The case arose from a challenge to the impartiality of an arbitrator based on the non-disclosure of a previous professional engagement with the promoter of one of the parties. The arbitrator admitted to the non-disclosure. The Court found that this deliberate non-disclosure undermined the arbitral process, as impartiality is central to any adjudicatory mechanism. The Court held that compelling a party to participate in proceedings where there is a legitimate doubt as to the arbitrator’s neutrality would be oppressive and unfair.

The Court distinguished between anti-suit injunctions and anti-arbitration injunctions, noting that the latter are granted more sparingly. However, it held that where the very foundation of the arbitration is compromised due to an arbitrator’s failure to comply with mandatory disclosure norms, the party’s consent to the composition of the arbitral tribunal stands vitiated. In such circumstances, the courts are duty-bound to intervene to uphold the fairness and legitimacy of the arbitral proceedings. Considering the prima facie vexatious and oppressive nature of the proceedings in this case, the Court granted an interim injunction restraining the continuation of the arbitral proceedings seated in Singapore.

This ruling provides further clarity on the evolving jurisprudence concerning the scope of judicial interference by Indian courts in foreign-seated arbitrations.

The Supreme Court recently reinforced the distinction between genuine homebuyers and speculative investors, holding that the latter cannot initiate a Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC).² The Court clarified that the IBC is a framework for revival and resolution, not a coercive debt recovery tool for investors seeking profitable exits.

While deciding an appeal against the acquittal of an accused in a cheque-bouncing case, the Supreme Court clarified several significant aspects of cheque dishonour jurisprudence under the Negotiable Instruments Act, 1881 (NI Act).³

The Court reaffirmed that the statutory presumption under Sections 118 and 139 of the NI Act – specifically, that a cheque was drawn for consideration and issued for the discharge, in whole or in part, of any debt or other liability – arises automatically in favour of the complainant once the execution of a cheque is admitted by the accused. It further held that the accused person’s failure to respond to the statutory notice under Section 138 of the NI Act supports an inference in favour of the complainant’s version.

Significantly, the Court also addressed a common defence raised in Section 138 proceedings: that a cash loan, if it exceeds the monetary threshold stipulated under Section 269SS of the Income Tax Act, 1961 (which prohibits acceptance of loans or deposits of INR 20,000 or more in cash), would render the underlying debt legally unenforceable. The Court clarified that while Section 269SS imposes a penalty for accepting a loan or deposit in cash above a certain limit, non-compliance with this provision does not automatically invalidate the underlying transaction or render the debt legally unenforceable for the purpose of a proceeding under Section 138 of the NI Act. This distinction underscores that the penalty imposed by the Income Tax Act for such a cash transaction does not, by itself, extinguish the civil liability or the existence of a ‘legally enforceable debt‘ required under the NI Act.

Recognising the tremendous backlog of cheque-bouncing cases across trial courts, the Court issued comprehensive procedural guidelines to facilitate expeditious disposal of cases. These include:

This decision reinforces the Supreme Court’s consistent emphasis on procedural efficiency and timely resolution in cheque dishonour matters, while also providing much-needed clarity on key interpretative issues under the NI Act.

The Supreme Court recently upheld a judgment of the Orissa High Court, which had set aside an arbitral award on grounds of patent illegality and violation of the fundamental policy of Indian law.⁴ The decision reaffirms that while the scope of judicial interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 (1996 Act) is narrow, courts are obligated to intervene when an award shocks the conscience of the court.

One of the central issues in this case was the arbitral tribunal’s finding that the requirement of issuing contractual notices had been waived by one party, despite a ‘No Oral Modification’ clause in the contract. The Supreme Court held that a waiver or estoppel of contractual terms cannot be inferred from the mere silence or inaction of one party when the contract expressly prohibits any modification, unless made in writing.

The Court also found that the arbitral tribunal had applied this waiver unequally – it had allowed the claims of the party that had failed to issue the required notices, while rejecting the counterclaims of the other party on the same ground. The Supreme Court agreed with the High Court that this constituted a violation of the principle of equal treatment of parties under Section 18 of the 1996 Act and was contrary to the basic notions of justice. The Court also held that the tribunal had effectively rewritten the terms of the contract by deciding that a crucial performance test had been successfully completed, despite acknowledging that its mandatory pre-conditions had not been met.

The Supreme Court’s judgment clarifies that an arbitral tribunal, being a creature of the contract, cannot travel beyond its terms. A deliberate departure from the contract amounts to a jurisdictional error and renders the award liable to be set aside. This decision also underscores the judiciary’s limited yet crucial role in safeguarding the integrity of arbitral proceedings by ensuring that awards are consistent with contractual terms, statutory mandates and the principles of natural justice.