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Among the advantages which we have contended that nations would reap from
entering into treaties of arbitration are, that when difference arose, the
disputants would have time for reflection, because, while the arbitrators are
deliberating, the passions of the contending parties would cool, and the chances
of war be greatly diminished.
The Preamble to the Constitution of India promises to secure socio-economic and political
justice and equality of status and of opportunity to all citizens. Artice 39-A 1 contains a directive
principle which holds that the state will ensure that the legal system operates in a manner so as to
promote justice to all and to ensure that no citizen is denied the opportunities of securing justice
by reason of economic or any other disabilities. The Malimath Committee Report (1989-90)
underlined the need for the alternative disputes resolution mechanism such as mediation,
conciliation, arbitration, lok adalats etc. Considering the needs for these methods of resolution
legislature enacted Arbitration and conciliation Act, 1996 and this the present law governing
arbitration in India.
Arbitration is a process of settling disputes in the commercial sphere and is well known to the
Indian system of justice. It is an old practice through which the panchayats in villages would
settle disputes between the parties2. The main objective of the Arbitration Act is to minimize the
supervisory role of courts in the arbitral process and to provide that every final arbitral award is
enforced in the same manner as if it were a decree of the Court. Undoubtedly, judiciary is the
important institution which has withstood many challenges to retain its integrity. But with the
mounting pressure of cases, the workload of judiciary increased leaps and bounds and it has now
reached a stage of unmanageable magnitude and the cases remain undecided for years together
for one reason or for the other.
1 Constitution of India
2 D.S.Chopra, Supreme Courts Role Vis A Vis Indian Arbitration And Conciliation Act, 1996
http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context=dev_chopra as assessed on 22/9/
2016 at 8:50pm.
Arbitration is one among the most popular and significant methods of alternative dispute
resolution. Arbitration and Conciliation Act 1996 is to make provision for an arbitral procedure
which is, efficient and capable of meeting the needs of the specific arbitration and to minimise
the supervisory role of courts in the arbitral process and to permit an arbitral tribunal to use
mediation, conciliation or other procedures during the arbitral proceedings in settlement of
disputes.
The most important step of all in the development of the supportive modern approach to resolve
disputes without intervention of court was the promulgation of UNCITRAL Model Law. Article
5 of the Model Law significantly limits the occasions for Court intervention in arbitral matters.
Another object of the Act is highlighted by Section 5 is that of encouraging resolution of disputes
expediously and less expensively and when there is an arbitration agreement, the Courts
intervention should be minimal. Notwithstanding the fact that the act aims at finding speedy
disposal of cases in economic and commercial transactions, such speedy disposal shall not be at
the cost of Justice. Justice ought not to be placed at the altar for the purpose of speedy disposal of
cases. Intervention of the Judiciary may appear to be delaying the case, but judicial consideration
of commercial disputes implies justice is done in the proper sense.
Section 5 of the Act defines the extent of judicial intervention in following words:
"Notwithstanding anything contained in any other law for the time being in force, in matters
governed by this Part, no judicial authority shall intervene except where so provided in this
Part".
Essential ingredients of this section are discussed as follows:
This provides overriding effect to the provisions of Part I of the Act. There is a
prohibition on intervention by any Judicial Authority in arbitration matters or proceedings
contemplated under Part I of the Act, except where it is specifically provided for in Part I.
No judicial authority:
These words are wide enough to apply to and cover not only the Court which has
jurisdiction in to intervene in arbitration matters or proceedings but to any and all other
judicial authority in so far as the matter in question is governed by Part I of this Act.
Interpreting the words shall intervene connotes that the use of the word shall takes
away the discretion normally available to a judicial authority.
XV. Section 43(3) Power of the court to extend time with respect a dispute which may
become time barred
the tarnished image of the Indian arbitration scenario. BALCO judgment, one of the important
judgments of the Supreme Court of India, is bound to attract attention from those interested in
commercial and legal dealings with India. BALCO judgement rests the doubts operating in the
minds of foreign investing partners and traders regarding the enforceability of the foreign arbitral
awards in India. Since the BALCO overrules Bhatia International with surprisingly prospective
effect, the fate of the matters pending in the concerned area is still at the mercy of Indian
judiciary. The latter will continue to haunt many a foreign traders and investors and control many
a pending disputes for years to come.
the Courts would wish to intervene when they are faced with injustice and the people would
definitely knock the door of the court for Justice.
notwithstanding that an application has been made to the judicial authority and that issue is
pending before it, arbitration may be commenced or continued and concluded by making an
arbitral award during the pendency of the application. This section has been described as one
of the pillars of this Act. Under section 8, Power is conferred upon the Judicial Authority to
refer the parties to the dispute to arbitration, in the circumstances, namely, where:
(a) an action is brought, before such judicial authority:
(b) the matter brought is subject matter of an Arbitration Agreement;
(c) a party applies while submitting his first statement on the substance for reference
(d) the application so filed by a party is accompanied by original arbitration agreement or its
certified copy.
If however, the party who wants the matter to be referred to arbitration applies to the court
after submission of his statement and the other party who has brought the action does not
object, there is no bar on the judicial authority referring the parties to arbitration. By the
consent of the parties, the matter may be referred to arbitration even after the submission of
the first statement of the party before the judicial authority and conversely by implication, if
a party objects to the application, such a reference cannot be made. In, Renusager Power
General Co. Ltd., V Electric Company 9 Supreme Court observed that Supreme Court
observed that On the plain reading of the section as it now stands two things become very
clear. In the first place the section opens with a non obstante clause giving overriding effect
to the provision contained therein and making it prevail over anything to the contrary
contained in the Arbitration Act 1940 or the Code of Civil Procedure, 1908. Secondly, unlike
Section 34 of the Arbitration Act 1940 which confers discretion upon the Court, the section
uses the mandatory expression shall and makes it obligatory upon the Court to pass the
order staying the legal proceedings commenced by a party to the agreement if the conditions
specified therein are fulfilled.
Honble Supreme court in the case of Morgan Securities and Credit Pvt. Ltd., V. Modi
Rubber Ltd10 observed that The Board exercises statutory functions. It is a quasi judicial
authority. It exercises various powers under the Code of Civil Procedure. The expression
Judicial Authority must be interpreted having regard to the purpose and object for which the
1996 Act was enacted. The Board is a judicial authority within the meaning of Section 5 of
9 AIR 1994 SC 860
10 AIR 2007 SC 683
the 1996 Act. A power to pass an interim order, however, and that too directing disposal of
the assets must be found out in the scheme of the statue itself. Although the Courts of limited
jurisdiction may also possess by necessary implication incidental power so as to enable it to
direct preservation of property during the pendency of a proceeding before it, it is doubtful
whether such incidental power can be exercised for sale of the assets of the company Section
19A does not empower the Board to direct sale of the assets at the stage of Enquiry.
e. Such other interim measure of protection as may appear to the court to be just and
convenient
The court is having power to issue interim orders as it issues orders in the ordinary civil suits.
The court is not having power to issue orders for staying or suspending the arbitration
proceedings during the period when the application for interim reliefs is pending. The court
will not interfere if the parties commence the arbitration proceedings and the arbitrators give
the arbitral award. It may be noted that the application can be made before the court even
before commencement of arbitration proceedings in accordance with the provisions of
Section 21 of the Arbitration and Conciliation Act, 1996. However, the court has to be
satisfied that there is a valid arbitration agreement in existence and applicant intends to take
the dispute to arbitration. The court can also order for interim reliefs and measures under the
Section 9 in the case of international commercial arbitration also in spite of having the place
of arbitration outside India and in spite of having a provision under Section 2 (2) stating that
this Part (Part 1)apply where the place of arbitration in India.
Supreme Court in, BHATIA INTERNATIONAL VS BULK TRADING S. A. & ANR, 11
held that it must be borne in mind that the very object of the Arbitration and Conciliation Act
of 1996, was to establish a uniform legal framework for the fair and efficient settlement of
disputes arising in international commercial arbitration. The conventional way of interpreting
a statute is to seek the intention of its makers. If a statutory provision is open to more than
one interpretation then the Court has to choose that interpretation which represents the true
intention of the legislature. This task often is not an easy one and several difficulties arise on
account of variety of reasons, but at the same, it must be borne in mind that it is impossible
even for the most imaginative legislature to forestall exhaustively situations and
circumstances that may emerge after enacting a statute where its application may be called
for. It is in such a situation the Courts duty to expound arises with a caution that the Court
should not try to legislate. While examining a particular provision of a statute to find out
whether the jurisdiction of a Court is ousted or not, the principle of universal application is
that ordinarily the jurisdiction may not be ousted unless the very statutory provision
explicitly indicates or even by inferential conclusion the Court arrives at the same when such
a conclusion is the only conclusion. Notwithstanding the conventional principle that the duty
of judges is to expound and not to legislate.
The issues which fell under second category wherein the Chief Justice or his
Designate can also choose to decide (or leave them to the decision of the Arbitral
Tribunal) are:
a. Whether the claim is a dead (long barred) claim or a live claim,
b. Whether the parties have concluded the contract/transaction by recording
satisfaction of their mutual rights and obligation or by receiving the final payment
without objection.
Third category wherein the issues which fell for consideration to be decided
exclusively by the Tribunal are:
a. Whether a claim made falls within the arbitration clause (as for example, a matter
which is reserved for final decision of a department authority and excepted or
excluded from arbitration).
b. Merits or any claim involved in the arbitration.
2.2 FAILURE OR IMPOSSIBILITY TO ACT.
Section 14 of the Act provides for the termination of the mandate of the Arbitrator
under certain circumstances.
2.3 COURT ASSISTANCE IN TAKING EVIDENCE.
Section 27 of the Act provides for court assistance in taking evidence during the
Arbitration proceedings on the application of the arbitral tribunal or any party to the
arbitration proceedings.
A party who is discontent with an arbitral award shall proceed to challenge the award
by preferring an application for its setting aside arbitral award. Section 34 of the Act
1996 carves out the permissible grounds only upon which the award can be subject to
challenge. Section 34 of the 1996 Act encompass four sub sections. To put it
comprisingly, there are very limited grounds for setting aside the arbitral award,
which are as follows:
a) A party to the arbitration agreement was under some incapacity.
b) The arbitration agreement is not valid under the law.
c) The applicant that is the party making the application was not given proper
notice of appointment of the arbitrator or of the arbitral proceedings or was
otherwise unable to present his case.
d) The arbitral award deals with matters outside the scope of submission or
reference to arbitration.
e) The constitution of the arbitral tribunal or the procedure of arbitration was not
as per agreement of the parties.
f) The subject matter of dispute is not capable of settlement by arbitration.
g) The arbitral award is in conflict with the public policy of India.
h) The award is founded on matters relating to conciliation proceedings between
the parties, which are confidential in law or is based on admissions,
suggestions or proposals made in conciliation for an attempted settlement of
dispute.
3.2 ENFORCEMENT.
Section 36 of the Act provides that upon the expiry of the time prescribed
under the Act for making an application to set aside the arbitral award under
Section 34, the Award shall be treated as a decree of a court and the provisions
of the Code of Civil Procedure, 1908 will have to be followed in getting the
decree executed under the due process of law.
In Leela Hotels Limited vs Housing and Urban Development Corporation
Limited,13 it was held by the Supreme Court that the language used in Section
36 left no scope for any doubt as to the manner in which the award of the
arbitrator was to be accepted, which establishes the credibility of an award by
the judiciary.
3.2 APPELLABLE ORDERS.
Section 37 of the Act categorically stipulates that only orders passed under
Sections 9, 16 (2) and 16 (3), 17 and 34 will be appealable and no other
orders. It further stipulates that no second appeal shall be available against an
order passed in appeal but nothing in the said Section 37 shall affect or take
away any right to appeal to the Supreme Court. The intention of Section 37
therefore appears to limit the intervention of the courts unless it involves a
substantial question of law.
3.3 LIEN ON ARBITRAL AWARD AND DEPOSITS AS TO COSTS.
Section 39 of the Act provides for a lien on the Award for any unpaid costs of
arbitration by the parties to the dispute. In the instant case, the arbitrator
reserved the right to his fees by prescribing a condition in the arbitral award
that the parties to the award can file their objections to the award under
Section 34 of the Act only on payment of their respective shares of the costs
of arbitration. The courts upheld that the arbitrator will have a lien on the
award till the fees and costs are paid by the parties. Accordingly the party
aggrieved by the Award filed its objections and deposited its share of the costs
of arbitration in the court of appeal.
3.4 PROVISIONS IN CASE OF INSOLVENCY.
During the subsistence of insolvency proceedings against a party to a contract,
the receiver may apply to the court to subject any dispute under the said
contract for arbitration against the other party.
CONCLUSION.
In reality, Judicial intervention is justified if current Indian situation in taken into consideration.
Where the arbitrators appointed by the center are the government employees who are likely to be
biased for one or the other reason & where often, retired judges are appointed as arbitrators who,
by virtue of long tenures behind the Bench, have got accustomed to tedious rules pertaining to
Prof. O.P. Malhotra identifies four basic features of arbitration as firstly an alternative to court
litigation, secondly a confidential dispute resolution mechanism, thirdly agreed and controlled by
parties and lastly as a final and binding determination of the rights and obligations of the parties.
[44]
higher level of judicial control violate the idea behind each of these basic features of
arbitration.