Guwahati: Supreme Court judge Justice Ujjal Bhuyan on Saturday said “erratic court verdicts” and “regressive” policy decisions by the Union Finance Ministry have undermined India’s ambition of becoming a global arbitration hub, questioning how the Centre’s recent approach can be reconciled with Prime Minister Narendra Modi’s vision of promoting institutional arbitration.
Delivering the keynote address on “Arbitration in India: Reform, Relevance and the Road Ahead”, organised by The Law Forum, Justice Bhuyan said a series of recent judicial and policy developments had weakened investor confidence in India’s arbitration regime.
Delhi High Court judge Justice C. Hari Shankar and former Himachal Pradesh High Court Chief Justice Rajiv Shakdher attended the event, which was moderated by senior advocate Amit Gupta.
Justice Bhuyan described the Supreme Court’s April 2024 curative judgment in the Delhi Metro Rail Corporation (DMRC) vs Delhi Airport Metro Express Pvt Ltd (DAMEPL) dispute as one that had caused “the most extensive damage to arbitration in India”.
He said that by invoking its extraordinary curative jurisdiction to set aside a high-value arbitral award after it had survived challenges before the arbitral tribunal, the High Court, the Supreme Court under Article 136 and even review proceedings, the court had effectively reopened the dispute for a fifth round of scrutiny.
According to Justice Bhuyan, the court, in its curative jurisdiction, had undertaken a detailed review of the merits, effectively creating a fifth round of challenge to the award. He added that while the judgment cautioned against creating additional stages of judicial intervention in arbitral awards, “the Bench did just the opposite.”
He said the ruling had raised “serious questions” about the extent of judicial intervention in arbitration and India’s suitability as a preferred destination for commercial dispute resolution.
The April 2024 judgment had overturned an earlier Supreme Court ruling upholding an arbitral award directing DMRC to pay nearly Rs 8,000 crore, including interest, to DAMEPL over the Airport Express Metro Line concession agreement. The curative Bench held that the arbitral tribunal had ignored vital evidence and that allowing the award to stand would result in a grave miscarriage of justice.
Justice Bhuyan said the consequences of the judgment extended beyond the dispute itself. He referred to a June 3, 2024 office memorandum issued by the Union Finance Ministry, which cited the government’s “unsatisfactory experience” with arbitration and advised government departments and public sector undertakings against incorporating arbitration clauses in contracts involving disputes exceeding Rs 10 crore, while encouraging mediation instead.
Describing the memorandum as “a sharp, sudden and controversial policy shift against arbitration”, Justice Bhuyan said it was inconsistent with the government’s stated policy of promoting institutional arbitration.
Recalling Prime Minister Narendra Modi’s address at the National Initiative Towards Strengthening Arbitration and Enforcement in India conference in 2016, Justice Bhuyan said the Prime Minister had described the creation of “a vibrant eco-system for institutional arbitration” as one of the government’s foremost priorities and stressed that India should emerge as a global arbitration hub.
Justice Bhuyan said the Finance Ministry had issued the guidelines “in complete negation of the Prime Minister’s vision” and “notwithstanding the declaration of the External Affairs Minister”.
He warned that recent judicial decisions and policy changes risk undoing years of legislative reforms aimed at making India an arbitration-friendly jurisdiction.
“Erratic court verdicts and regressive policies like the above act as barriers to India’s efforts to position itself as a global arbitration hub,” Justice Bhuyan said.