‘Regressive’: Justice Ujjal Bhuyan flags judicial intervention, finance ministry policy as setback to arbitration

IN an unco heart-to-heart critique of both juridical interference and authorities policy, Supreme Court judge Justice Ujjal Bhuyan on Saturday warned that “erratic court verdicts” and “regressive” decisions of 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 developments, including a 2024 Supreme Court judgment in the Delhi Metro arbitration dispute and subsequent policy changes by the finance ministry, have substantially 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 were present at the event, which was moderated by senior advocate Amit Gupta.Also Read | Om Birla gives nod to merger of Uddhav rebels with Shinde Sena, TMC rebels with NCPIJustice 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.”The judge 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 effectively reopened the dispute for a fifth round of scrutiny.Also Read | SC to look into affordable access to life-saving cancer medicines“In curative jurisdiction, Supreme Court undertook a detailed review of the merits... Effectively the fifth round of challenge to the award,” said Justice Bhuyan, adding that while the judgment cautioned against creating additional stages of judicial intervention in arbitral awards, “the Bench did just the opposite.”According to him, the ruling raised “serious questions” regarding 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 ₹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, however, said the consequences of that judgment extended far beyond the dispute itself. He pointed 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 ₹10 crore, while encouraging mediation instead.Describing the memorandum as marking “a sharp, sudden and controversial policy shift against arbitration”, Justice Bhuyan said the change was inconsistent with the government’s own declared policy. The judge recalled Prime Minister Narendra Modi’s address at the National Initiative Towards Strengthening Arbitration and Enforcement in India conference in 2016, where the PM described the creation of “a vibrant eco-system for institutional arbitration” as one of the government’s foremost priorities and emphasised that India should emerge as a global arbitration hub.“In complete negation of the Prime Minister’s vision and notwithstanding the declaration of the External Affairs Minister, the Finance Ministry issued the above guidelines,” Justice Bhuyan remarked.Justice Bhuyan concluded with a broader warning that recent developments risk undoing years of legislative reform 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,” said the judge.