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An Overview of the Recent Developments in Arbitration (India)

INTRODUCTION

Arbitration is the method of dispute resolution wherein a neutral third party, called the arbitrator renders a decision after giving both sides an equal opportunity to be heard[1]. The practice of arbitration in India can be traced back to as far as ancient and medieval times when subjects approached their kings to settle disputes amicably. Before the enactment of the 1996 Act, arbitration in India was governed by three different acts namely, the Arbitration Act of 1940 for domestic arbitration, the Arbitration Act of 1937 concerning Protocol and Convention, and the Foreign Awards Act of 1961. The three preceding arbitration laws proved extremely inefficient[2] in resolving disputes which led to the enactment of the Arbitration and Conciliation Act of 1996 to regulate the system of Alternative Dispute Resolution (ADR) in India. The act was based on the lines of the United Nations Commission on International Trade Law (UNCITRAL) Model Law, 1985 and applies to domestic disputes, international commercial disputes, ad-hoc and institutional arbitration.

THE 2019 AMENDMENT

The 2019 amendment to the Arbitration and Conciliation Act, 1996 was the result of the report issued by the High Commission Committee in 2017 headed by BN Srikrishna. Prominent changes introduced by the amendment include:

(I) the establishment of the Arbitration Council of India (ACI) through the introduction of Section 11(3A) whereby the Supreme Court and the High Courts of India, based on the gradings provided by ACI will designate ‘arbitral institutions’. The Council is primarily entrusted with grading the arbitral institutions (in line with Section 43-I, introduced by the 2019 Amendment) and to also maintain professional standards to further the quality of institutional arbitration in India. Besides, the Council is also entrusted with the reviewing the grading given by arbitrators according to Section 43(D)(2)(c). This is seen as a step towards the institutionalization of arbitration in India. 

(II) In order to avert the delays in arbitral proceedings, the amendment empowers the Supreme Court and the High Courts to assign accredited arbitral institutions for the appointment of arbitrators in case of disagreement between parties to appoint one. 

(III) As per the newly introduced Section 42(A), the arbitrator has an obligation to maintain the confidentiality of the arbitral proceedings. However, this does not apply to cases where the disclosure is imperative for the execution of the award.

(IV)  While the 1996 Act stipulated 12 months for all arbitration proceedings within which tribunals must make their awards, the amendment reiterated this ultimatum for international commercial arbitration and emphasized that it may be discharged as expeditiously as possible. Besides, the amendment imposes new limits through Section 23(4) concerning statements of claim and defence for domestic proceedings which shall now be completed by 6 months.

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(V) The amendment also highlights that to set aside an award, the courts must rely only on proof furnished before the relevant arbitral tribunal, thereby largely reducing the scope of interference by courts.

(VI) According to the 2019 amendment, no suit can lie against an arbitrator for things done in good faith.

This amendment therefore, clearly tries to forge an attempt to tear down the notorious ‘unfriendly’ tag that is used to describe India’s arbitral mechanisms especially in the context of international commercial arbitration. With this amendment in place, India now looks to attract more foreign parties for trade and thereby to facilitate ease of doing business.

GLIMPSES OF CERTAIN RECENT JUDGMENTS

A closer look into recent judgments shows that India’s hopes of becoming a ‘friendly’ jurisdiction in terms of arbitration especially to attract foreign parties and become a global arbitral hub has increased exponentially[3].

Quippo Construction Equipment Limited v. Janardan Nirman Private Limited [Civil Appeal No. 2378 of 2020]

The Supreme Court, in this case, held that should a party decide to not take part in the arbitral proceedings, he is deemed to have waived his right to raise any objections concerning the jurisdictions of the tribunal at a later stage in any other forum. The parties to the case had initially entered into four separate agreements, each with an arbitration clause. While one of the agreements stipulated Kolkata as the venue for arbitration, the other three stipulated Delhi as the venue. When disputes arose and the appellant invoked the arbitration clause, the respondent denied the existence of an agreement and refused to take part in the arbitration proceedings held in New Delhi. Subsequently, an award in favour of the appellant was passed by the New Delhi Tribunal. The respondent objected to the jurisdiction of the Tribunal in the Supreme Court. The court after considering the relevant provisions of Section 4 (Waiver of Party’s right to object) and Section 16 (Competence of the Arbitral Tribunal to rule on its jurisdiction) and Section 20 (Place of arbitration), relied on the case of Narayan Prasad Lohia v. Nikunj Kumar Lohia and others[4] and articulated that a waived right cannot be reclaimed at a later stage and that the place of arbitration has no relevance in the context of domestic arbitration. This judgment is reflective of India’s attempt to reduce the interference of courts and increase the autonomy of arbitral institutions. [5]

Gammon India Ltd. and Anr. v. National Highways Authority of India [Judgment dated June 23, 2020 in OMP 680/2011] [New No. O.M.P (COMM.) 392/2020) & I.A 11671/2018]

In this case, the dispute was referred to three different arbitral tribunals which passed three different awards, contradicting each other. The court noted that, although the Act allows for multiple arbitral proceedings arising from the same contract, it is certainly against public policy and the spirit of the Act to permit claims to be referred to multiple arbitral tribunals. The court also pointed out that it not only defeats the purpose of arbitration which is a speedy resolution but is also counter-productive especially when the disputes have overlapping issues. The court further emphasized on the importance of discipline in arbitral proceeding to be cost-effective and efficient and stated that the parties must not be allowed to misuse and abuse the relief of arbitration in this fashion. [6]

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Glencore International AG v Indian Potash Limited [Ex. P. 99/2015 dated 9 August 2019]

The Arbitration Agreement in the present case stipulated that the disputes between the parties are to be referred to the non-existent “Singapore International Arbitration of the Chambers of Commerce in Singapore”. However, the intent as inferred by the Tribunal was to refer the disputes to a Singapore International Arbitration Centre. Thus the arbitral proceeding was conducted based on the SIAC (Singapore International Arbitration Centre) Rules, 2010. The respondent, Indian Potash Limited challenged the applicability of the SIAC Rules and argued that since the applicable law was Singaporean law, the relevant arbitrator should have been appointed in line with the International Arbitration Act (IAA) and not in accordance with the 2010 Rules. The court, however, opined that once the registrar rightly assumed jurisdiction according to the SIAC Rules, it had the right to act as the appointing authority. Further, since the administration of the arbitration by SIAC was not of the nature to alter the award itself, the court noted that the threshold for refusing enforcement wasn’t met. The respondents (Indian Potash Limited) further contended that the award should be set aside on the ground that it was against public policy as the Tribunal did not decide on the jurisdiction as a preliminary matter thereby depriving their ability to challenge that decision under the Singaporean International Arbitration Act. The court however, rejected this claim and noted that the Tribunal was in fact vested with the discretion to decide whether to treat jurisdiction as a preliminary matter or not and that no public policy in India mandated that the arbitral authority must deal with jurisdiction as a preliminary issue.[7]

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The court also observed that according to Rule 17.5 of the SIAC Rules, the Tribunal is permitted to allow either party (unless considered inappropriate because of delay or prejudice to the other party) and thus the decision to allow the petitioner for alteration of its pleadings was intra-vires the power of the Arbitral Tribunal. Thus the court highlighted that this does not amount to a breach of natural justice. This judgment therefore proves that the courts of our country rely with utmost trust on the tribunals and institutions while respecting their judgements in matters over which they have discretion.

CONCLUSION

India is notorious for being cost-ineffective and in-efficient when it comes to disposing of arbitral proceedings. However, the 2019 Amendment and the recent judgements are standing proof that India is on the road to recovery, especially now with the reduction in interference of courts and institutionalization of arbitration. With cost effective mechanisms and speedy disposal of cases India hopes to instil faith in its arbitral institutions sooner than later.


[1] Black’s Law Dictionary, 6th edition, West Publishing Co. 1990, p.105.

[2] Guru Nanak Foundation v. Rattan Singh, A.I.R. 1981 S.C. 2075 (India).

[3]Subhiksh Vasudev, The 2019 Amendment to the Indian Arbitration Act: A classic case of one step forward, two steps backward?, KLUWER ARBITRATION BLOG (Aug 25, 2019), http://arbitrationblog.kluwerarbitration.com/2019/08/25/the-2019-amendment-to-the-indian-arbitration-act-a-classic-case-of-one-step-forward-two-steps-backward/?doing_wp_cron=1595576863.9528141021728515625000.

[4] Narayan Prasad Lohia v. Nikunj Kumar Lohia and others, (2002) 3 S.C.C. 572 (India).

[5] Ankoosh Mehta, Siddharth Ratho & King Dungerwal, Domestic Arbitration receives booster shot from Supreme Court, CYRIL AMARCHAND MANGALDAS BLOG (May 18, 2020), https://corporate.cyrilamarchandblogs.com/2020/05/domestic-arbitration-receives-booster-shot-from-supreme-court/#more-3661.

[6]Ankoosh Mehta, Siddharth Ratho & Ria Lulla, Multiplicity of proceedings defeats the purpose of Alternate Dispute Resolution: Delhi High Court, CYRIL AMARCHAND MANGALDAS BLOG (July 17, 2020), https://corporate.cyrilamarchandblogs.com/2020/07/multiplicity-of-proceedings-defeats-the-purpose-of-alternate-dispute-resolution-delhi-high-court/#_ftn1.

[7]Recent Developments In India-Related Arbitration, HERBERT SMITH FREEHILLS (May 5, 2020), https://hsfnotes.com/arbitration/2020/05/05/recent-developments-in-india-related-arbitration-2/.


Cite this article (The Bluebook 20th ed.)-

Aarthi V., An Overview of the Recent Developments in Arbitration (India), Ex Gratia Law Journal, (October 1, 2020), https://exgratialawjournal.in/journal/volume-1-issue-2/an-overview-of-the-recent-developments-in-arbitration-india-by-aarthi-v/.

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Author

Aarthi V.
Student - SASTRA Deemed to be University