• 

Arbitrability Challenges And Public Policy Considerations

🔷 1. Meaning of Arbitrability

Arbitrability refers to whether a particular subject matter is capable of being resolved through arbitration instead of courts.

Types of Arbitrability (as evolved in jurisprudence):

1. Subject-matter arbitrability – Whether the dispute itself can be arbitrated
2. Party arbitrability – Whether parties are capable of entering arbitration
3. Dispute arbitrability – Whether the specific dispute falls within the arbitration agreement

🔷 2. Non-Arbitrable Disputes (General Categories)

Courts have held certain matters to be non-arbitrable, such as:

• Criminal offences
• Matrimonial disputes (divorce, custody)
• Insolvency and bankruptcy
• Testamentary matters (wills, succession)
• Matters involving rights in rem (rights against the world)

🔷 3. Landmark Case Laws on Arbitrability

1. Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd.

• Laid down the classic test distinguishing:
  • Rights in rem (non-arbitrable)
  • Rights in personam (arbitrable)
• Held that disputes relating to mortgage enforcement are non-arbitrable.

2. A. Ayyasamy v. A. Paramasivam

• Clarified that:
  • Serious allegations of fraud may render disputes non-arbitrable
  • However, simple fraud can still be arbitrated

3. Vidya Drolia v. Durga Trading Corporation

• Landmark ruling refining arbitrability:
• Introduced the 4-fold test:
  A dispute is non-arbitrable when:
  1. It relates to actions in rem
  2. It affects third-party rights
  3. It involves sovereign/public interest functions
  4. It is expressly or impliedly non-arbitrable by statute

4. Himangni Enterprises v. Kamaljeet Singh Ahluwalia

• Held that certain tenancy disputes governed by special statutes are non-arbitrable.

5. Emaar MGF Land Ltd. v. Aftab Singh

• Consumer disputes are non-arbitrable despite arbitration clauses.
• Consumer protection law overrides arbitration agreements.

6. Deccan Paper Mills Co. Ltd. v. Regency Mahavir Properties

• Clarified that fraud affecting third-party rights can make disputes non-arbitrable.

7. N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd.

• Addressed enforceability of arbitration agreements and stamp duty issues, impacting arbitrability at the threshold stage.

🔷 4. Public Policy in Arbitration

Meaning

Public policy acts as a ground to refuse enforcement or set aside arbitral awards under:

• Section 34 (domestic awards)
• Section 48 (foreign awards)

🔷 5. Evolution of Public Policy Doctrine

1. Narrow Approach (Initial Phase)

Renusagar Power Co. Ltd. v. General Electric Co.

• Defined public policy narrowly:
  • Fundamental policy of Indian law
  • Interests of India
  • Justice or morality

2. Expansion Phase

ONGC Ltd. v. Saw Pipes Ltd.

• Expanded public policy to include:
  • Patent illegality
• Allowed courts to interfere more broadly with arbitral awards.

ONGC Ltd. v. Western Geco International Ltd.

• Further expanded scope:
  • Introduced judicial review of reasonableness
  • Included Wednesbury unreasonableness

3. Restrictive Approach (Modern Position)

Associate Builders v. Delhi Development Authority

• Structured public policy into:
  • Fundamental policy of Indian law
  • Interest of India
  • Justice or morality
  • Patent illegality

Ssangyong Engineering & Construction Co. Ltd. v. NHAI

• Narrowed scope again:
  • Courts cannot re-appreciate evidence
  • Patent illegality applies only to domestic awards
  • Reinforced minimal judicial interference

🔷 6. Key Principles Emerging

✔️ Arbitrability

• Focus on nature of rights (in rem vs in personam)
• Certain statutory and public interest matters are excluded
• Courts adopt a pro-arbitration approach today

✔️ Public Policy

• Now interpreted narrowly
• Courts intervene only when:
  • Award shocks conscience
  • Violates fundamental legal principles
  • Is patently illegal (limited scope)

🔷 7. Interplay Between Arbitrability and Public Policy

• Arbitrability → determines whether dispute can go to arbitration
• Public policy → determines whether award can survive judicial scrutiny

👉 Example:

• A dispute involving insolvency:
  • Not arbitrable (threshold issue)
• An award violating statutory provisions:
  • Set aside on public policy grounds

🔷 8. Conclusion

Indian arbitration law reflects a clear shift toward minimal judicial interference and a pro-enforcement bias. The Supreme Court of India has:

• Narrowed public policy exceptions
• Clarified arbitrability tests
• Strengthened arbitration as an effective dispute resolution mechanism

At the same time, safeguards remain to ensure that:

• Matters of public importance stay within courts
• Awards violating core legal principles do not stand

RELATED Blog

Maritime Arbitration in India

Legal recognition of ADR in India

Arbitration law in Afghanistan

Arbitration Law in Albania

Arbitration Law in Algeria

Arbitration Law in American Samoa (US)

Arbitration Law in Andorra

Arbitration Law in Angola

Arbitration Law in Anguilla

Arbitration Law in Antigua and Barbuda