Arbitration In India: Role Of Judiciary And Challenges In The Light Of Recent Amendments

Arbitration In India: Role Of Judiciary And Challenges In The Light Of Recent Amendments- Prolawctor

The most recent in the sequence of efforts and attempts by the Indian Government to push forward India as an arbitration-friendly destination under the New Delhi International Arbitration Center Act, 2019 is the Arbitration and Conciliation (Amendment) Act, 2019 (Amendment Act/2019 Amendments) which received the Presidential Assent on 9 August 2019. Two prevailing characteristics underlying most of the reforms adopted by the Amendment Act are – (i) an effort to further limit the reach of judicial interference in arbitration and other cases; and (ii) an attempt to speed up arbitration proceedings; both of these are essential features of arbitration as they are an effective alternative to litigation proceedings.


Dispute Resolution is one of the important mechanisms of Indian Judiciary. Through means of the State, laws and structure are set up to ensure social order and to achieve the goals of justice. Government of India operates by various organs and Judiciary is one that is directly responsible for justice. Arbitration, the ADR process is accepted as a dispute settlement mechanism by the Indian Judiciary. Section 82 of the Arbitration Act, 1996 authorizes the court to lay down rules for the arbitration process. The guidelines can determine how the application should be submitted; all records should be approved. It is hoped that the high courts will interpret rules in such a way that they can help to resolve the case quickly. Section 5 of the Arbitration Act provides that notwithstanding anything contained in any other law in the force, in matters governed by this part, no judicial authority shall intervene except where so provided in this part-

  1. Power to refer parties to arbitration
  2. Interim Measures by Court
  3. Appointment of Arbitrators
  4. Termination of mandate of an Arbitrator
  5. Court assistant in taking evidence
  6. Setting aside the arbitral award

“Purushottam V. Anil & Ors”[1]
In this case, the Bench of Justice Arun Mishra and Justice UU Lalit observed that if the settlement between the parties had been signed after the end of the Arbitration Act, 1996 and referred to the relevant provisions of the Indian Arbitration Act, 1940 that reference would not be considered by the court and the case must be governed by the Arbitration Act, 1996. The court also ruled that such misrepresentations would not invalidate the entire agreement.


Arbitration and Conciliation (Amendment) Act, 2019, Major Changes and Challenges.

Appointment procedure for Arbitrator. (Section 11)[2]


The most significant change implemented by the Amendment Act is to eliminate the scope of judicial intervention at the level of the selection of arbitrators by allowing for the appointment of arbitrators by arbitral bodies appointed by the Supreme Court and the High Court. The Amendment Act provides for the establishment of an Indian Arbitration Council tasked with establishing arbitral bodies and various other tasks for the purpose of promoting arbitration in India. For the purpose of naming arbitrators under Section 11 of the Arbitration and Conciliation Act, 1996 (the Act), the Supreme Court or the High Court shall nominate such arbitral institutions from among these graded arbitral institutions. A request for the appointment of arbitrators originally moved before the High Court or the Supreme Court[3] must now be placed before such arbitral bodies.

This amendment could be seen as an attempt to bring the arbitrator appointment clause into line with those in foreign jurisdictions such as Singapore and Hong Kong. Although the Supreme Court initially held that the power under Section 11 of the Act was a judiciary, its entrustment to an agency appointed by the Supreme Court / High Court [4] dilutes its essence and tilts its weight to the administrative side. The Amendment Act does not provide instructions on the structure or procedure to be followed for the selection of arbitrators to arbitral bodies. The Arbitration Council of India set up under Part 1A is entrusted with the task of framing regulations for the same. The exact nature of the power bestowed on the appointed bodies and its practical implications would only be apparent when such regulations were formulated. For the time being, the minimal conclusion remains the abrogation of the courts ‘ power to appoint arbitrators pursuant to Section 11 of the Act in order to reduce the scope of arbitration judicial interference.

Limitation on challenge to arbitral award (Section 34)[5]

In the post-arbitral award stage, a significant change to Section 34 of the Act seeks to further limit the scope of judicial interference. Prior to the 2019 amendment, any party attempting to appeal the arbitral award pursuant to Section 34(2) was required to “prove” the basis on which the arbitral award was to be set aside. The revised section 34 now limits the parties ‘ right to provide fresh evidence before the appeal court and restricts the court’s review to “the arbitral tribunal’s record.” That is, no fresh evidence can be put before a court at the stage of a Section 34 appeal petition. In practice, it means that any question which is sought to be presented before the court prospectively at the post award level is raised first before the arbitral tribunal or at least the report which is sought to be relied upon before the court is subject to the arbitral tribunal’s review during the arbitration proceedings. This move can be instrumental in speeding up the dispute resolution process as there will not only be limited scope of challenge, but also less judicial time will be spent in scrutinizing the complaint and the veracity of the facts on which the challenge is based.

Interim measures of protection post the final award (Section 9) [6]
A positive change because of the Amendment Act is the abolition of the clause ‘ or at
any time after an arbitral award, but before it is implemented pursuant to Section 36′ [7] in
Section 17 of the Act, which ensures that all transitional steps post award but prior to
implementation will be dealt with by the court concerned pursuant to Section 9 or Section 36 (read the Civil Procedure provisions).


According to the 2019 amendments, a disparity in jurisdiction existed between the court and the arbitral tribunal pursuant to Section 9 and Section 17, respectively, as both could be pursued for transitional protection measures once the final award was rendered and awaited compliance. The amendment clarifies the problem by limiting the venue to be reached pursuant to Section 9 of the Act for the post-grant interim protection mechanism for courts. This arrangement also fits well with the current arbitration system envisaged by the Act in which the arbitral tribunal is functus officio when the final arbitral award is pronounced. [8]

Timely conduct of proceedings (Section 23) [9]\
According to the newly introduced Section 23(4), the statement of claim and response shall be completed within a period of six months from the date of the appointment of the arbitrator(s) and, in accordance with the provisions of the amended Section 29(1), the international commercial arbitration award may be rendered as soon as possible with an attempt to deliver it within 12 months of the date of the arbitration.

Qualifications to be an Arbitrator in India (Schedule VII) [10]
While the current trend in arbitration in India has been to nominate a retired High Court / Supreme Court judge as an arbitrator, the Amendment Act subtly extends the choice available to arbitrators by making any lawyer, chartered accountant, cost accountant, company secretary or those engaged in the technical / scientific field with a minimum. Such principles include neutrality honesty, dignity and impartiality, lack of conflict of interest, and basic law and contract information. This is a reaffirmation of the fact that arbitration requires settling disputes not only with respect to the strictures of law, but also with due regard to industry and business practices.

To establish Arbitration Council in India [11]
This move is motivated by the goal of promoting arbitration in India as a viable alternative dispute resolution forum along with putting India on the global map as an arbitration-friendly jurisdiction. In an attempt to develop arbitration in a business-friendly manner, the central body envisaged under the Amendment Act consists of members not only from the legal field but also from the industrial and commercial sectors. Wide- ranging duties were delegated to the corporate body structure of India’s Arbitration Council envisaged under the Amendment Act.

Conclusion
While this is not clearly stated in the Amendment Act, the essence of the proposed amendments indicates that it is of a prospective nature except where otherwise stated (for example, it is clearly stated in Section 13 of the Amendment Act to be retrospective). The Amendment Act has also introduced a number of other changes that are appropriate and in the interests of an active arbitration system. India has a new, successful Arbitration Act in place. Many decisions have been made that are not in line with the letter or intent of the Act. Hopefully, these would be resolved in the near future by the judiciary and a truly efficient ADR system would support the growing popularity of arbitration. We have also observed that why arbitration in India is Important. It is really necessary for our judiciary to find quick redressal to people otherwise this problem will lead to many other problems in Future. The concept of Arbitration in India is not new for us, it has been following by since ancient civilization but now we need proper mechanism. Although we noticed that the arbitration act tried best to achieve its objectives, it also tried to minimize the interference of judiciary in arbitration process. Through the Arbitration and Conciliation (Amendment) Act, 2019 legislature has tried to establish an arbitration council so it can maintain the uniformity in all arbitral matters. The same act also ensured that the High Court’s where are arbitration center is not available, can constitute the panel of judges so it can help to reduce the burden of courts.

Reference

  1. Purshottam v. Anil & others. 2018 (8) scc 95
  2. The Arbitration and Conciliation (Amendment) Act, 2019. http://legalaffairs.gov.in/actsrulespolicies/arbitration-and-conciliation-amendment-act-2019
  3. Section 11 of the Arbitration and Conciliation Act, 1996.
  4. Konkan Railways v Rani Construction (2002) 2 SCC 388; SBP & Co. v Patel Engineering (2005) 8 SCC 618
  5. The Arbitration and Conciliation (Amendment) Act, 2019. http://legalaffairs.gov.in/actsrulespolicies/arbitration-and-conciliation-amendment-act-2019
  6. The Arbitration and Conciliation (Amendment) Act, 2019. http://legalaffairs.gov.in/actsrulespolicies/arbitration-and-conciliation-amendment-act-2019
  7. This was introduced in Section 17 vide the Arbitration and Conciliation (Amendment) Act, 2015.
  8. Section 32(3) of the Arbitration and Conciliation Act, 1996.
  9. The Arbitration and Conciliation (Amendment) Act, 2019. http://legalaffairs.gov.in/actsrulespolicies/arbitration-and-conciliation-amendment-act-2019
  10. The Arbitration and Conciliation (Amendment) Act, 2019. http://legalaffairs.gov.in/actsrulespolicies/arbitration-and-conciliation-amendment-act-2019
  11. The Arbitration and Conciliation (Amendment) Act, 2019. http://legalaffairs.gov.in/actsrulespolicies/arbitration-and-conciliation-amendment-act-2019

Author: Hritik Shekhar Srivastava

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