“Doesn’t Conduce To Certainty”: Justice RF Nariman Flags Uncertainty In Arbitration Law

Speaking at GHAC Arbitration Week 2026 – Day 1, organised by the Gujarat High Court Arbitration Centre (Domestic & International) in collaboration with the High Court of Gujarat on the theme “Building Gujarat’s Institutional Arbitration Ecosystem,” Justice Nariman discussed the evolution of Indian arbitration law, the working of the Arbitration and Conciliation Act, 1996, and the challenges that have emerged through judicial interpretation.

Justice Nariman noted that the 1996 Arbitration Act has now completed 30 years, but several shortcomings remain both in its drafting and implementation.

He pointed out that while the 1996 Act improved upon the earlier Arbitration Act, 1940, including by making reasoned awards the norm and eliminating the requirement of converting awards into court decrees before enforcement, the legislation did not impose comprehensive timelines covering challenges and appeals.

According to Justice Nariman, although the 1996 Act and subsequent amendments introduced timelines at various stages, the absence of a corresponding time limit for appeals continued to create delays.

“The important thing to focus upon is how we have worked it in these last 30 years,” Justice Nariman said, while discussing recent Supreme Court decisions concerning the appointment of arbitrators and challenges to arbitral awards.

Justice Nariman on Cox & Kings and Groups of companies doctrine 

Justice Nariman discussed the Supreme Court’s 2023 Constitution Bench judgment in Cox and Kings Ltd. v. SAP India Pvt. Ltd., which examined the “group of companies” doctrine in arbitration.

He explained that the judgment moved away from treating the doctrine itself as sufficient to bind a non-signatory to an arbitration agreement. Instead, the Court emphasised the need to determine whether the concerned entity actually intended to be bound by the arbitration agreement.

Justice Nariman highlighted the importance placed by the Constitution Bench on the Contract Act alongside the Arbitration Act, particularly the concept of consent and the manner in which an arbitration agreement may arise from documents and conduct.

According to him, the judgment recognised that the Arbitration Act “does not stand by itself” and must be read with other laws governing the formation of an agreement, particularly the Contract Act.

"No Certainty" over Stamp Act-Arbitration interplay

Justice Nariman then turned to the Supreme Court’s seven-judge Constitution Bench decision concerning the interplay between the Stamp Act and the Arbitration Act, which overruled the earlier majority view in N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd.

He observed that the issue had undergone repeated judicial reconsideration, beginning with the SMS Tea Estates decision and later rulings including Garware Wall Ropes and N.N. Global.

Under the earlier position, an unstamped or insufficiently stamped instrument containing an arbitration agreement had to be impounded before the court proceeded with the appointment of an arbitrator under Section 11.

However, the seven-judge Bench subsequently held that an arbitration agreement contained in an unstamped instrument could not be treated as non-existent merely because the underlying instrument was inadequately stamped.

Justice Nariman questioned this approach and argued that the reasoning was difficult to reconcile with the Contract Act.

He also criticised the characterisation of the Arbitration Act as a “self-contained code”, pointing to Sections 2(3) to 2(5) of the Arbitration Act, which recognise the operation of other statutory regimes and procedures in specified circumstances.

Justice Nariman further questioned the reliance on Section 5 of the Arbitration Act, which restricts judicial intervention, arguing that the provision concerns “intervention” in matters governed by Part I of the Arbitration Act and does not necessarily prevent the operation of the Stamp Act at the relevant stage.

Justice Nariman Questions 'Existence' versus 'Validity'

Justice Nariman also took issue with the distinction drawn between the existence and validity of an arbitration agreement.

He referred to Sections 8 and 11 of the Arbitration Act and argued that the statutory scheme requires courts to consider more than the mere factual existence of a document containing an arbitration clause.

Referring to the Contract Act, he explained that an agreement must satisfy the legal requirements necessary for it to become an enforceable contract.

He also drew an analogy with a wagering agreement, which is void under Section 30 of the Contract Act, to question whether the mere existence of a signed document should be sufficient to trigger arbitration when the underlying agreement is legally void.

Justice Nariman further referred to the Supreme Court’s earlier seven-judge decision in SBP & Co. v. Patel Engineering Ltd., which held that proceedings under Section 11 involve the exercise of judicial power.

He observed that if the court is required to apply its judicial mind to the existence of an arbitration agreement, the inquiry cannot, in his view, be confined merely to whether a document physically exists.

"Made certain by Five Judges, unravelled almost immediately"

Justice Nariman’s broader concern was the lack of stability in arbitration jurisprudence. Referring to the successive Constitution Bench decisions, he observed that a legal position settled by one Bench could be reopened and reversed shortly thereafter.

He said that the development “doesn't conduce to certainty”, particularly when a position settled by five judges is subsequently unravelled by a seven-judge Bench within months.

Justice Nariman also pointed out a practical consequence of the seven-judge ruling: the time limit contemplated by the earlier Garware Wall Ropes approach, under which stamp adjudication was expected to be completed within 45 days to facilitate appointment of an arbitrator within the statutory 60-day period, would no longer operate in the same manner.

The former Supreme Court judge said that the experience of the last three decades shows that simply introducing statutory timelines is not enough if subsequent court proceedings and appeals remain capable of substantially delaying the arbitral process.

His address ultimately underscored the need for greater certainty, consistency and efficiency in Indian arbitration law, particularly as India seeks to strengthen institutional arbitration and establish itself as a more effective arbitration-friendly jurisdiction.