Introduction
By allowing foreign investments and promoting international trade, the economic changes of 1991 altered the trade environment nationwide. The likelihood of disagreements increased with the growth of business relations. Since then, the backlog of cases and pendency have put tremendous strain on Indian courts; any additional cases would overwhelm the system. Under India’s notoriously backlogged legal system, foreign investors seeking to settle their conflicts through litigation or other means could not afford to wait decades for a resolution. India needed an Alternative Dispute Resolution Mechanism that could be quick, affordable, and operated independently of traditional litigation in order to get over these obstacles.
The legislation’s goal of using arbitration as a rapid and affordable means of resolving business disputes is hampered by needless “Judicial Intervention,” which makes the process extremely laborious and lengthy. In India, arbitration is everything but “non litigious,” and it suffers from the same issues of pendency and delayed justice. Another hurdle to consider is whether arbitral awards may be enforced. Since “public policy” is a flexible notion, there will always be a range of judicial interpretations.
Appointment of arbitral tribunal: administrative or judicial?
The limited judicial interference promised by the Act of 1996 was one of the main reasons it replaced the Act of 1940. Since the 1996 act went into effect, it has been noted that the law is not living up to expectations. Prior to the 2015 revisions, Section 11 of the 1996 Act conferred authority for the appointment of an arbitral tribunal upon the Chief Justice of the jurisdictional High Court, his nominee, or the Chief Justice of India, as applicable. S11 orders have traditionally been viewed as administrative rather than judicial. Sundaram Finance Ltd v. N.E.P.C India ltd brought the issue of whether orders under S11 of the statute are administrative or judicial before the Supreme Court. and the court issued instructions stating that the orders under S11 will be considered administrative in nature and cannot be challenged under Article 136 of the Indian Constitution. The decision in the Ador Samia case was upheld by the supreme court in Konkan Railway Corporation Ltd v. Mehul Construction. Later, in Konkan Railway Company V. Rani Construction Pt. Ltd , it was noted that the Chief Justice or his designee is not required to perform any adjudicatory function, indicating that the appointment orders made under section 11 of the act are purely administrative and not judicial, thus invoking Article 141of the Indian constitution.
In contrast to earlier court orders, the Agio Counter Trade v. Punjab Iron and Steel Company Ltd. and Wellington Associates decision established that the Chief Justice’s duties are of a judicial nature and are subject to appeal under Article 136 of the Indian Constitution. It came about as a result of the seven-judge bench decision in SBP and Co. v. Patel Engineering Co, which determined that the Chief Justice’s duties or his designation are of a judicial nature, expanding the reach of judicial intervention and undermining the values of prompt resolution and minimal court involvement. Furthermore, the ruling seemed to downplay the significance of the arbitral tribunals.
Nonetheless, the 2015 revision to the statute saw some significant adjustments in response to the 246th Law Commission Report’s recommendations. The Supreme Court, the High Court, or any other institution designated by said court now has the authority to appoint arbitral tribunals in the event that parties cannot be persuaded to do so through the procedures outlined in S11(2) and 11(3) of the acts. There are several options for the parties to reach a consensus and select the arbitral tribunal of their choosing. If such an arrangement fails, the courts become involved, which causes delays.
The deadlines for the appointment of the arbitral tribunal, as indicated in S11(4)(b) and 11(5), have been determined by the court in the best interests of the parties to arbitration and to ensure the principles of the act. The party has been given a total of thirty days from the date the court received the request from the other party to name an arbitrator. The court is in charge of appointing the arbitral panel when the allotted time has passed. Such aggressive timeframes could discourage people from choosing arbitration, which would be counterproductive to the original intent behind the amendments’ introduction.
Enforceability of Arbitral awards: When procedure supersedes scope.
The true litigation begins when the award is to be enforced post-announcement, contrary to popular notion that an arbitral suit ends when the award is proclaimed. The legislators decide to allow arbitral verdicts to be contested in trial courts for reasons that are only known to themselves. A trial judge reviews the decisions made by the three retired chief justices of the Supreme Court. The image of prompt and efficient justice is handily refuted by the arbitration process, which can instead prove to be painful, drawn out, and lopsided, especially for the winning claimant. The situation of a winning claimant who is unable to take advantage of the arbitral ruling until such procedural issues are resolved is merely imagined.
Due to differing court interpretations in several seminal rulings such as Bhatia International v. Bulk Trading, Venture Global Engineering v. Satyam Computer ltd, and Bharat Aluminium Co v. Kaiser Aluminium Technical Service, a fine line separating a foreign and domestic arbitral award has been drawn. In the Bharat Aluminium case, the court noted that while Part II of the act applies to arbitrations with foreign seats in accordance with the UNCITRAL Model Law, the New York Convention, and the Geneva Convention, Part I of the act solely establishes the protocols and rules for domestic arbitrations. It should be mentioned that arbitrations falling under Part I encompass both international commercial arbitration conducted in India and arbitration conducted in India between two Indian parties. Arbitrations for international commerce conducted outside of India would be governed under procedures mentioned under Part II of the act.
The excessive court intervention in the form of judicial review has retarded the dispute resolution mechanism and frustrated the purpose of the act. The act under S34 lays down a list of reasons on which an application can be moved to the court challenging the arbitral award. The S34 of the act is brain child of Article 34 of the UNCITRAL Model Law 1985 and its ambit in the 1996 act is much wider than the repealed act of 1940. S34(2)(A) mentions five sub provisions under which a party is required to furnish concrete proof in support of its petition to the court to set aside the arbitral award. The point of concern here is S34(2)(B) which refers to two grounds of examining the arbitral award. Firstly, if the subject matter of the dispute is not capable of settlement by arbitration in India and secondly if the award is in conflict with the ‘Public Policy of India’. In O.N.G.C v. Saw Pipes ltd, the Supreme Court interpreted ‘public policy’ in light of principles underlying 1996 act, Indian Contract Act, 1872 and Constitutional provisions. Saw Pipes broadened the scope of public policy by enhancing the possibility of a near limitless judicial review, defeating the Act’s objective of minimal court interference. Therefore, the Saw Pipes decision is a significant blemish on India’s arbitration jurisprudence.
Justice delayed is justice denied
It is equivalent to keeping the grounds for challenge that were previously granted by 1940 Act S 30[17]. Furthermore, a thorough examination of the 1996 Act reveals that the two requirements for annulling the award—which are in conflict with the specific terms of the agreement or the relevant legal framework—are already debatably accessible under subclauses 34(2)(a)(iv) and 34(2)(a)(v), respectively.
Under S34(3), a three-month time period has been specified within which an application for setting aside an arbitral award has to be made. Such time period begins with the day when the applicant received the order. A further extension of thirty days can be given to the applicant incise he can furnish substantial proof that he was hindered by a sufficient cause for making the application within three months. The above procedure needs to be reconsidered. The act was framed for quick and effective redressal to the litigants but while doing so one should not lose the sight of possibilities that may prevent an honest litigant from seeking his right to be heard. The provision of S34(3) shuts down such persons from seeking justice. Procedural law should not overlap the rights provided by substantive law. Undoubtedly the objective of the act should receive paramount importance but while doing so, the aim of providing justice should not be ignored. Hence the provisions of the act require interpretation in a manner that retains the goals and values of our legal system.
Cost & time: the directly proportional relationship
“The costs are awarded to the successful party to partially compensate him for the legal expenses he has incurred in prosecuting his suit or in his defence, rather than as a punishment to the defeated party or a bonus to the party receiving them”. The scope of arbitration expenses has expanded during the last few years. The fee paid to the arbitrators for “reading charges,” “sitting fees,” “award writing fee,” and other expenses is now included in the cost of arbitration. In addition, there are other expenses including travel costs for the parties, witnesses, lawyers, and arbiter, as well as the cost of setting up sittings, which are frequently held in opulent hotels. At times, the total cost can reach crores, which is significant for a developing nation like India.
It is thought that the procedure is convenient and reasonably priced because there are no ad-valorem court costs associated with an arbitral claim. Although the parties believe that the court fee is avoided, they ultimately wind up paying roughly the same amount due to the costs of the arbitrator, counsel, administrative charges, and stamp duty on the arbitral ruling. The fact that the arbitral proceedings are expensive and by no means cheap does not change, even though the expenses might and should be taken into account when making an award. The Supreme Court stated in a fairly recent ruling in Union of India v. Singh Builders Syndicate that “it is regrettable that delays, exorbitant costs, frequent and often unnecessary judicial interruptions at different stages are occasionally
It must be noted that the process of arbitration proves to be cost efficient only when the number of the arbitration proceedings is limited. However, the delays caused by the judicial intervention drains the finances of the parties because arbitration becomes litigation in disguise. Ironically the speed and cost efficiency are hallmarks of the procedure and the reasons why arbitration is preferred over litigation as a viable option for dispute resolution especially in commercial disputes. To make India arbitration friendly destination cost effectiveness is a hurdle yet to be crossed. As per the recommendations of the 246th Law Commission Report the legislature has added S31(A) to the Act. It empowers the Court or Arbitral Tribunal to have discretion to determine (A) Whether costs are payable by one party to another (B) Amount of such costs and (C) When such costs are to be paid. An explanation next to S31(A) interprets ‘cost’ in reference to the section. The Fourth Schedule has also been added to the Act that lays down a fixed model fee depending upon the sum in dispute along with the percentage share based on the claim amount. It also furnishes that an additional amount of twenty five percent on the fee payable (as per the provisions of the ‘Fourth Schedule’) will be added where arbitral tribunal is only a sole arbitrator. The model fee mention arbitration as well as arbitrations where parties have agreed for the determination of fee as per the rules of arbitral institution under which arbitral proceedings are to be conducted. Such shortcomings are capable of hindering the progress of international trade and commercial arbitration. Strengthening international arbitration and providing for a more stable process that is cost-effective and time saving can help India attract foreign investors and commercial entities which is the goal of the government.
Remedies: Scope of Improvement
The judiciary needs to recheck its amount of intervention and understand that arbitration has to be treated as another dispute resolution procedure which works independently. Moreover, it should play an assisting role in the arbitration process. With adequate assistance, judiciary can play a very impactful role but by unnecessary intervention, it defeats the whole purpose of the procedure.
Although the nation now allows for both institutional and ad hoc arbitration, choosing institutional arbitration would expedite the procedure. Reforms in institutional arbitration are therefore recommended. India is beset by a dearth of institutions that are impartial. Even though organisations like the Indian Council for Arbitration, Nani Palkhiwala Arbitration Centre, International Centre for Alternate Dispute Resolution, and The Delhi High Court International Arbitration Centre are making a significant contribution, arbitration institutes must emerge in order to improve overall efficiency given the volume of backlogs and pending cases. Additionally, the judiciary and arbitration institutions should have a mutually beneficial connection that can be developed by the courts directing specific instances to arbitration and the institutes making sure those cases don’t have to go to court.
Conclusion
In India, the idea of alternative dispute resolution is still developing. It is now extremely difficult to keep up with the speed and meet the constantly evolving needs of the modern world due to the effects of globalisation and the ongoing expansion of the world economy. The conventional adversarial approach of dispute resolution has been broken up by arbitration, mediation, and other mechanisms; yet, the larger goal has not been accomplished. Despite all of these myths, arbitration has continued to demonstrate its strength by meeting people’s requirements and bolstering their confidence to engage in business dealings.
