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Revisiting Arbitral Immunity under Indian Laws

Article by Sarthak Tripathi

Introduction

In an unusual turn of events, a Spanish criminal court found a Spanish arbitrator guilty of contempt of court in an international contract dispute and sentenced him to six months in jail[1]. The ruling was tied to the arbitrator’s role in an ongoing case alleging breach of contract against Malaysia filed by the descendants of a sultan who ruled part of the region in the late 1800s. The descendants of the sultan filed a claim for breach of agreement in Spain after the UK Foreign and Commonwealth Office rejected the request. The arbitrator awarded claimants $ 14.9 billion and filed enforcement actions for payment in various jurisdictions across Europe. The court banned him from practicing as an arbitrator for one year for knowingly disobeying rulings and orders from the Madrid High Court of Justice. This ruling raised a conversation around the immunity exercised by arbitrators across jurisdictions which is necessary for them to perform their duties without being intimidated or interfered with by any party[2].

The source of arbitral immunity can be traced back to the English common law doctrine of immunity under Floyd & Barker[3] which held that Judges of English common law courts cannot be sued for their actions performed in their judicial capacity in competing courts.

Indian Law on Arbitral Immunity

The Indian legislature incorporated a provision for arbitrator’s immunity from Civil Liabilities by incorporating Section 42B to the Arbitration and Conciliation Act of 1996 [hereafter the Act]. This was a positive step towards structuring the Indian arbitration principles in consistency with international practices. The Chartered Institute of Arbitrators in 2015 had laid down a framework for evaluating the best arbitral seats[4] which included “immunity for arbitrators from civil liability for anything done or omitted to be done in good faith as an arbitrator.”

The high-level committee to review the institutionalization of Arbitration mechanism in India accordingly recommended the incorporation of a provision for arbitral immunity in the Act, which resulted in the incorporation of Section 42B in 2019 which read that:

“No suit or other legal proceedings shall lie against the arbitrator for anything which is in good faith done or intended to be done under this Act or the rules or regulations made thereunder.”

However, the wordings of the provision provide that such suits or other legal proceeding would not be initiated for anything “which is in good faith done or intended to be done under this Act”, which leaves a grey area for such acts of the Arbitrator which can be construed against his or her duties or portray plain lousy faith on their behalf.

Recommendations of the Srikrishna Committee

The B.N. Srikrishna Committee was formed to review the instutionalization of arbitration mechanism in India[5]. They were tasked with identifying the roadblocks to the development of institutional arbitration, examining specific issues affecting the Indian landscape, and preparing a roadmap for making India “a robust centre for international and domestic arbitration.”

Based on the recommendation of the Committee[6], Section 42B was inserted in the A&C Act, however the exception of cases of bad faith has not been expressly incorporated in the provision.

The Committee had explained that the immunity was granted based on the well-accepted principle that any individual who is performing a judicial or quasi-judicial act should be granted immunity for the same.

The committee had opined that in the absence of any provision for immunity, the arbitrators rely on the institutional arbitral rules for seeking immunity. The Rules of Domestic Commercial Arbitration of the Indian Council of Arbitration[7], the Rules of International Commercial Arbitration of the Indian Council of Arbitration[8], Delhi International Arbitration Centre (Arbitration Proceeding) Rules[9] and the Mumbai Centre for International Arbitration[10] all contain provision for immunity.

However, in cases of ad hoc arbitration, the arbitrators do not enjoy immunity, unless decided upon by the parties.

Before incorporation of Section 42B of the Act

The Hon’ble Delhi High Court in Rajesh Batra vs Ranbir Singh Ahlawat[11] while adjudicating on a petition under Section 34 of the Act, was posed with a scenario where the Respondents had unilaterally appointed the arbitrator without the consent of the Petitioner and the Arbitrator assumed jurisdiction on such unilateral nomination. The Hon’ble DHC not only held the impugned award to be patently illegal but also imposed costs on the arbitrator for brazenly conducting the proceedings and passing the impugned award.

After the incorporation of Section 42B of the Act

The Madras High Court in Kothari Industrial Corporation Ltd. v. M/S Southern Petrochemicals Industries and Anr.[12] while adjudicating on a petition under Section 34 of A&C Act 1996 wherein the arbitrator was impleaded in the appeal, held that arbitrators should not be unnecessarily impleaded unless any personal or specific allegations have been made against the arbitrator. The court noted that:

“It is a pernicious practice in this court to implead arbitrators or arbitral tribunals when there is no need to do so. Often, arbitrators are embarrassed upon receipt of notice. It is only in a rare case when a personal allegation is made against an arbitrator may such arbitrator be impleaded”.

Recourse to arbitral immunity

It is pertinent to note that the Section 42B does not provide any exception to the underlying arbitral immunity. However, in cases where there is such act or omission on behalf of the arbitrator, the Act provides for the following recourses:

  1. Failure or impossibility to act under Section 14 of the Act: The Section 14 of the Act provides for the de jure or de facto inability of the arbitrator to perform his duties. In such a scenario the arbitrator shall be removed or substituted. Section 14 r/w Section 12(5) would result in the removal of the arbitrator on the counts of bias.
  2. Inability to pass the arbitral award within stipulated time limit under Section 29A of the Act: If the court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, it may order reduction of fees of arbitrators by not exceeding 5% for each month of the delay.
  3. Setting aside of the award under Section 34 r/w Section 36 of the Act: An arbitral award can be inter alia set aside on the ground of fraud and corruption in the making of the award.

Conclusion

The provision of immunity is imperative for the arbitrators to carry out their duties, however, it is pertinent that such immunity is accompanied by certain safeguards to prevent its abuse. The interpretation of the term “good faith” is crucial for achieving the desired result from the inclusion of the section. Incidentally, there exists a grey area resulting from the interpretation of “good faith”. The safeguard or misuse of the immunity under the act will depend on how the courts will interpret “good faith”.

[1] Emily R. Siegel, Arbitrator’s Guilty Verdict Puts UK Funder’s Investment at Risk, Bloomberg Law, https://news.bloomberglaw.com/business-and-practice/arbitrators-guilty-verdict-puts-uk-funders-investment-at-risk, Jan 9, 2024
[2] Bianca Castro, Arbitrator jail sentence and ban raises questions in ‘highly unusual’ case, The Law Scoiety Gazette, https://www.lawgazette.co.uk/news/arbitrator-in-149bn-case-jailed-following-intervention-by malaysia/5118364.article#:~:text=Arbitrator%20jail%20sentence%20and%20ban%20raises%20questions%20in%20’highly%20unusual’%20case&text=The%20jailing%20of%20an%20arbitrator,of%20process%2C%20experts%20have%20warned, Jan 19, 2024
[3] Barker v. Town of Floyd, 61 A.D. 92 (N.Y. App. Div. 1901)
[4] A framework for evaluating the best arbitral seats, Chartered Institute of Arbitrators (Nov 20, 2018) https://ciarb.org/resources/features/a-framework-for-evaluating-the-best-arbitral-seats/
[5] Press Information Bureau, Constitution of high-level committee to review Institutionalization of Arbitration Mechanism in India, (Issued on December 29, 2016)
[6] Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, July 30, 2017, chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf
[7] Rule 79, Indemnity of Secretariat and Arbitrator, Rules of Domestic Commercial Arbitration of the Indian Council of Arbitration,
[8] Rule 28. Indemnity of the Council, the Committee, the Governing Body, the Chairman, the President, the Registrar and the Arbitrators; Rules of International Commercial arbitration of the ICA
[9] Rule 34. Exclusion and Waiver of Liability; Delhi International Arbitration Centre (Arbitration Proceeding) Rules 2023
[10] Rule 34. Rule 34. Exclusion and Waiver of Liability; Mumbai Centre for International Arbitration Rules 2016
[11] Rajesh Batra v. Ranbir Singh Ahlawat; 2011 SCC OnLine Del 3308
[12] Kothari Industrial Corporation Limited v. Southern Petrochemicals Industries Corporation Limited; 2021 SCC OnLine Mad 5325

Closing the Gap: A Case for Confidentiality Reforms in Indian Arbitration

Article by Kabir Chaturvedi & Kopal Chaturvedi

Confidentiality in arbitration serves as both a shield to protect sensitive information and a sword to promote candour among disputing parties. Further, as the Federal Court of Australia recently noted, “confidential arbitration can be attractive to parties wishing not to have their dirty laundry aired in public, or wishing to maintain an ongoing commercial relationship with each other by excluding interference or pressure that might come from their dispute being aired publicly”. Thus, for India to become ‘the next hub for international arbitrations’, it is imperative to have a robust mechanism to protect and enforce confidentiality. However, despite the recent amendment in the Arbitration and Conciliation Act of 1996 (‘Arbitration Act’) to protect the confidentiality obligation, the gaping holes in the new provisions do little to address the issues around ensuring enforcement of confidentiality in the country. This article identifies the shortcomings of the existing statutory regime regarding confidentiality and provides possible remedies to address them.

The Pitfalls in the Existing Regime

After the recommendation of the B.N. Srikrishna Committee to include a new provision in Part I of the Arbitration Act designed to safeguard the sanctity of confidentiality in arbitral proceedings, Section 42-A of the Arbitration Act was introduced through the 2019 Amendment. This section stipulates that arbitrators, arbitral institutions, and parties to the arbitration agreement must maintain confidentiality throughout arbitral proceedings, except for the disclosure of the award when necessary for its implementation and enforcement. However, this provision falls short of fully implementing a mechanism to protect confidentiality for the reasons elucidated below:

Firstly, Section 42-A only imposes the obligation to maintain confidentiality in arbitral proceedings upon “the arbitrator, the arbitral institution and the parties to the arbitration agreement”.  However, parties often refer disputes to arbitration due to their complex nature. This requires involvement of non-signatories like expert witnesses for comprehensive adjudication of disputes. While such parties may not be actively involved in arbitrations, they are nonetheless part of the proceedings. Further, as per the Supreme Court’s recent landmark decision in Cox and Kings, parent companies which are non-signatories to arbitration agreement can also be made parties to arbitration proceedings by applying the Group of Companies (‘GOC’) doctrine if their consent to be bound by the agreement is implicit through their conduct. Therefore, while the involvement of non-signatories is now practically a certainty in arbitration proceedings, Section 42-A does not extend the obligation of confidentiality to such parties to the proceeding.

Secondly, Section 42-A only exempts the parties from the obligation of confidentiality in cases where “disclosure is necessary for the purpose of implementation and enforcement of award”. However, parties often seek judicial intervention for interim relief under Section 9 of the Arbitration Act when the relief which could be granted by the arbitral tribunal under Section 17 of the Arbitration Act is deemed to be inefficacious. The provision does not address such situations or provide exception for the same.

Further, while confidentiality is essential for fostering candid discussions and protecting sensitive commercial information, there are instances where the public interest demands transparency. Therefore, confidentiality in arbitral proceedings cannot be absolute, and exceptions need to be codified to discard the obligation in cases where there arises a conflict between transparency and confidentiality. The exception of transparency to maintaining confidentiality has also been duly recognized by Foreign Courts in a catena of decisions[1].

Thirdly, the absence of a mechanism to enforce confidentiality obligations and the recourse available to the arbitral tribunal in cases of non-conformity with this provision is perhaps what renders this provision toothless. In theory, it could be argued that an award passed in a proceeding where the obligation to maintain confidentiality has been breached would be against the public policy of India due to a violation of Section 42-A, and hence the award would be liable to set aside. However, this would not only undermine the efficiency of arbitral proceedings but also give the party breaching the obligation of confidentiality to escape unscathed.

Lastly, while the Arbitration Act 1996 recognizes the importance of confidentiality in arbitration, it lacks detailed provisions on privacy. The absence of explicit statutory guidelines leaves room for interpretation, leading to uncertainty and potential disputes over the scope of confidential information.

Suggested Remedies

Binding Non-Signatories

With regards to the extension of the confidentiality obligations to non-signatories, the authors believe that the Supreme Court’s decision in Cox and Kings has provided a firm foundation for the legislature to amend Section 42-A and extend the confidentiality obligation to non-signatories. The Court in Sunkist, Thixomat v. Takata Physics International Co.[2] was faced with a similar problem, where the non-signatory subsidiary alleged that the confidentiality provision of the contract had been breached and requested for arbitration of disputes. The court ruled that because of the close relationship between the subsidiary and the parent company, the fact that both entities sought an identical remedy and because the claims arose “from one common nucleus of operative facts,” they were “intimately founded in and intertwined with the underlying contract obligations” and had to be referred to arbitration. Therefore, courts can use the GOC doctrine to enforce confidentiality obligations upon a non-signatory which is part of the same corporate group as a signatory and/or is closely connected to the dispute.

Necessary Exceptions

From the issues outlined above, it is evident that Section 42-A of the Arbitration Act does not account for the many situations where confidentiality obligations may need to be discarded. Hence, the authors propose the following exceptions:

Firstly, to address situations where parties seek judicial relief at an interim stage, the authors believe that the exceptions of disclosure necessary for protecting or pursuing a legal right or interest of the party can be borrowed from Section 18 of the Arbitration Act of Hong Kong to avoid any unnecessary litigation arising out of a conflict between Section 9 applications under the Arbitration Act and confidentiality obligations.

Secondly, where parties still want to maintain confidentiality while seeking interim relief, Section 22 and Section 23 of the Singapore International Arbitration Act (“SIAA”) provides an appropriate solution. Section 22 of SIAA provides that the proceedings under the act before the courts shall be heard otherwise than in open courts, on the application of any party to the proceedings. Further, Section 23 of SIAA gives the courts power to issue necessary directions regarding what information relating to the proceedings may be published, provided the parties mandatorily consent to such publication.

Thirdly, to further make the provision more robust with regard to exceptions to the confidentiality obligations, the authors also suggest that the exception of the ‘disclosure being made with the consent of the parties, to the parties’ advisor, for the protection of the legitimate interest of the third party, and by order of the court’ be borrowed from Section 14B of the New Zealand Arbitration Act of 1996 to ensure party autonomy is protected and there is no conflict between the two cornerstones of arbitration.

Lastly, the exception of necessary disclosure in the interest of public or justice is necessary to align the statute and the jurisprudence on the issue.

Consequences of Breach

For the provision of confidentiality to be effective, it is necessary that it provides for consequences in case a party is found to be in breach of obligation. The consequences must depend on the degree of the breach and may range from grant of damages to invalidating the respective order/proceedings during which such breach takes place.

Conclusion

In conclusion, addressing the shortcomings in India’s confidentiality provisions demands immediate attention. Drawing insights from foreign jurisdictions, urgent amendments are imperative. It is crucial to emphasize that the proposed remedies do not advocate a sweeping extension of confidentiality across all arbitral documents. Instead, they advocate a tailored approach—confidentiality granted solely to documents mutually agreed upon by the involved parties. Striking a balance between transparency and protection, this nuanced adjustment is pivotal for fostering a robust legal framework that aligns with global standards, ensuring the efficacy and fairness of arbitral proceedings in the Indian context.

[1] AAY v. AZV [2012] SGHC 116; The Chartered Institute of Arbitrators v. B [2019] EWHC 460 (Comm); Esso Australia Resources Ltd. v. Plowman (1995) 183 CLR 10.
[2] No. 01 Civ. 5449(RO), 2001 WL 863566 (S.D.N.Y. July 30, 2001).

Consequence of No Consent in Extension of Mandate of Arbitral Tribunal under Section 29 of The Arbitration and Conciliation Act, 1996

Article by Ankur Mishra & Akash Singh

Introduction

Under Section 29A of the Arbitration and Conciliation Act, 1996 (“Act”), awards in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings. These stipulations as to timelines for completion of arbitral proceedings are intended to sensitize the parties and the Arbitral Tribunal to aim for culmination of the arbitration proceedings expeditiously.[1] In cases where award is not made within the stipulated period of twelve months, Section 29A of the Act prescribes two modes for extension of the mandate of the arbitral tribunal. Firstly, the parties under Section 29A(3) of the Act may with consent extend the period for making of award by a further period not exceeding six months.  Secondly, the Court may under Section 29(4) read with Section 29(5) of the Act either prior to or after the expiry of the stipulated time period extend the time period within which award is required to be made by the arbitral tribunal. The word ‘extend’ means to enlarge, expand, lengthen, prolong, to carry out further than its original limit.[2] Such extension of mandate of the arbitral tribunal by the Court is on application by any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.

In a recent judgment titled “Larsen and Toubro Limited v. IIC Limited, (“L&T v. IIC”) Hon’ble Delhi High Court was called upon to decide the requirement of consent by the parties in exercise of power by the Court to extend the time period for making arbitral award under Section 29A(4) of the Act. In L&T v. IIC, party to the arbitration i.e. IIC had undergone insolvency proceedings and liquidator had been appointed towards the same. L&T had sought the consent of the IICL’s Liquidator for a six-month extension of the Arbitral Tribunal’s mandate under Section 29A(3) of the Act. However, no such consent was granted by IICL’s Liquidators. Being aggrieved, L&T had approached the Hon’ble Delhi High Court seeking extension of the mandate of the Tribunal in terms of Section 29A(4) of the Act. The Hon’ble Delhi High Court has ruled that the Court is empowered under Section 29A(4) of the Act to extend the mandate of the arbitral tribunal even in absence of consent by the parties to the arbitration. Accordingly, the Hon’ble Delhi High Court extended the mandate of the Arbitral Tribunal.

Difference between extension of mandate under Section 29A(3) and Section 29(4) of the Act

From a contextual reading of the sections, it is evident that the remedies under Section 29A of the Act for extension of time period, namely Section 29A(3) and Section 29A(4) of the Act, have their own sphere and does not control the meaning and the exercise of the other. At the outset, Section 29A(3) of the Act allows the parties to extend the mandate of arbitral tribunal “for a further period not exceeding six months” meaning that said act of extension under Sub-section (3) is required to be executed during the subsistence of the twelve months. Whereas, the Court may extend the time period under Section 29A(4) either prior to or after the expiry of the time period stipulated in Section 29A(1) or extended period under Section 29A(3) of the Act. Thus, the sole remedy for extension of mandate after expiry of the period specified in Section 29A(1) of the Act is by way of an application before the Court under Section 29A(4) of the Act. As for extension of time before expiry of the period of twelve months stipulated in Section 29A(1), Section 29A provides that extension of time period by parties under Section 29A(3) can only be taken before application is made under Section 29A(4) of the Act seeking extension of period by the Court. This is borne from the difference in the wordings of Section 29A(3) and Section 29A(4) wherein Section 29A(3) provides for extension of period specified in Section 29A(1) i.e. twelve months while Section 29A(4) provides for extension of period specified in sub-section (1) or the extended period specified under sub-section (3). In Hiran Valiiyakkil Lal v. Vineeth M.V.[3], Hon’ble Kerala High Court negatived the contention that the mandate of the arbitrator can be extended by the Court under sub-section (4) only in cases where the period for passing the award by the arbitral tribunal is extended for a period not exceeding six month by the parties, by consent, as provided under subsection (3) of Section 29A of the Act.

Scope of Power of Court to extend the mandate under Section 29A(4) of the Act

In L&T vs. IIC, the Hon’ble Delhi High Court reiterated that Section 29A(4) of the Act contemplates two situations: where the mandate is not extended and the time of 12 months has expired as per sub-section (1) or where the mandate has been extended for a further six months by consent of parties under Section 29A(3) of the Act. The Hon’ble Delhi High Court ruled that in either of the two situations, the Court has the power to extend the mandate of the Arbitral Tribunal. The Hon’ble Delhi High Court also ruled that there is no limitation on the power of the Court to extend the mandate of the Arbitral Tribunal on the basis that consent for extension of mandate has not been given by one of the parties to the arbitration. However, the exercise of power to extend the mandate is subject the arbitral proceedings being pending at the time of the application.[4]

The Hon’ble Delhi High Court has observed that there can be many instances where a party may not be able to give its consent for extension of the mandate of the arbitral tribunal. The Court under Section 29A(4) of the Act is not powerless to extend the mandate of the arbitral tribunal on mere non-giving of the consent by the parties.  In Satnam Global Infrasprojects Ltd v. BHEL,[5] it was held by the Hon’ble Calcutta High Court that the timelines under Section 29A of the Act cast a responsibility on the parties not only to obtain consent from the other; but also on the other party to communicate the refusal (to give consent) during the subsistence of the mandate. Thus, one party cannot be held responsible for slipping of the timelines particularly where the other party does not communicate a clear and unequivocal “no consent”.

Sufficient Cause and not Consent: Ingredient for Extension of Mandate under Section 29A(4) of the Act

Under Section 29A(4) read with Section 29A(5) of the Act, the mandate of the arbitral tribunal may be extended by the Court ‘only’ for sufficient cause and on terms and conditions imposed by the Court. In Wadia Techno-Engineering Services Limited,[6] (“Wadia”) the Hon’ble Delhi High Court has observed that to read the requirement of consent in Section 29A(4) of the Act would make the requirement of sufficient cause irrelevant and the adjudication by the Court unnecessary. In H.P. Singh[7], the Hon’ble Jammu & Kashmir High Court observed that the power conferred to the Court for extension of time, obviously, it would require application of judicial mind which is an attribute of a Court and not required nor contemplated when the extension of time is made by the parties by consent. Thus, before directing any extension of the period under Sub-section (4), the Court has to be satisfied with the genuineness and sufficiency of the cause for extension of period put forth by the applicant and the Court may allow extension by imposing such terms and conditions as the Court may deem fit. Thus, it was held in H.P. Singh that, extension of time by the Court under Section 29(A)(4) of the Act can be done by application of judicial mind, which invariably would require that the Court has to be satisfied with the sufficiency of cause for extension of the mandate of the arbitral tribunal. The Court under Section 29A(4) of the Act is not bound to grant extension of mandate of the arbitral tribunal, if the cause projected is frivolous, vexatious, belated and hopelessly time barred or merely to prolong the arbitral process unnecessarily. The Courts under Section 29A of the Act are required to determine the attributability of delay[8] and whether parties have diligently proceed with their claims. In most cases, the need for extension of mandate arises after applications for amendment[9], challenge to jurisdiction and extension of time for filing of Statement of Claim or Statement of Defense due to voluminous documentation[10].

Given that sufficient cause is a common phrase used under different statutes, its interpretation has to be guided by the import and scope of enquiry under Section 29A of the Act. The scope of proceedings under Section 29A of the Act is limited to what is sufficient cause for extension of mandate of the arbitral tribunal vis-à-vis expeditious culmination of arbitral proceedings. Correspondingly, the only ground for removal of the Arbitrator under Section 29A of the Act can be the failure of the Arbitrator to proceed expeditiously in the adjudication process.[11] Sufficient Cause has been defined as the presence of legal and adequate reasons as may be necessary to answer the purpose intended. The sufficient cause should be such as it would persuade the court, in exercise of its judicial discretion, to treat the delay as an excusable one.[12] It means a cause for which a party could not be blamed for his absence. A party should not have acted with negligence or lack of bona fides.[13] The expression “sufficient cause” necessarily implies an element of sincerity, bona fide and reasonableness.[14]

Conclusion

A recourse to Court under Section 29A for the purpose of extension of mandate is a common occurrence for arbitration proceedings in India. The judgment of Hon’ble Delhi High Court in L&T vs. IIC has clarified the difference between extension of mandate under Section 29A(3) and Section 29A(4) of the Act and that the consent of the parties or lack thereof would not impede the power of the Court to extend the mandate of the arbitral tribunal in case the Court is satisfied that sufficient cause exists for the same. The judgment offers clarity in circumstances where consent for extension of mandate of arbitral tribunal is withheld or denied by one party. Parties are thus advised to apprise themselves in advance as to whether the other party is capable of giving consent owing to reasons such as insolvency proceedings etc and make arrangements for approaching the Court for extension of mandate under Section 29A(4) of the Act.

[1] NCC Ltd v. Union of India, 2018 SCC OnLine Del 12699
[2] Mitra’s Legal and Commercial Dictionary, 6th Edition
[3] Hiran Valiiyakkil Lal v. Vineeth M.V. and Others, 2023 SCC OnLine Ker 5151
[4] Powergrid Corporation of India Limited v. SPML Infra Limited, 2023 SCC OnLine Del 8324. Also See Suryadev Alloys and Power Pvt Ltd v. Govindraja Textiles Pvt Ltd, 2020 SCC OnLine Mad 7858.
[5] Satnam Global Infraprojects Limited v. Bharat Heavy Electricals Limited, 2023 SCC OnLine Cal 4668
[6] Wadia Techno-Engineering Services Limited (2023 SCC OnLine Del 2990)
[7] H.P. Singh v. G. M. Northern Railways and Others, 2023 SCC OnLine J&K 1255.
[8] Puneet solanki and another v. Sapsi electronics pvt ltd, 2018 SCC OnLine Del 10619
[9] ASF insignia Sez P. ltd v. Punj Lloyd Ltd, 2017 SCConline Del 10124
[10] International Trenching Pvt. Ltd v. Power Grid Corporation of India Ltd 2017 SCC OnLine Del 10801
[11] NCC Ltd v. Union of India, 2018 SCC OnLine Del 12699
[12] Balwant Singh v. Jagdish Singh, (2010) 8 SCC 685
[13] Basawaraj v. Land Acquisition Officer, (2013) 14 SCC 81
[14] Sankaran Pillai v. V.P. Venuguduswami, (1999) 6 SCC 396

Power of an Arbitral Tribunal to Review and Recall its own Order

Article by Pranav Nayar and Nikhat Jamal

Introduction

The Arbitration and Conciliation Act, 1996 provides parties with limited solutions for an appeal from an arbitral tribunal’s interim orders. In the absence of an established standard and procedure of review, the question arises whether an arbitral tribunal has the jurisdiction to review its own orders. In this article, we discuss the issues that arise owing to the lacunae in the statute and the consequential judicial interpretations. We further analyze the power of the arbitral tribunal to recall its orders and how the judiciary has addressed the same through various judgements.

The Power to Review

The Supreme Court in the landmark case of Kapra Mazdoor Ekta Union v. Management of Birla Cotton Spinning and Weaving Mills Ltd. carved out the difference between a review on merits and a procedural review.[1] In a procedural review, the Court or quasi-judicial authority having jurisdiction proceeds to do so and commits procedural illegality which goes to the root of the dispute. In turn, the authority invalidates the proceeding and the subsequent order passed thereof.[2] For example, cases where a decision is rendered by the Court or a quasi-judicial authority without notice to the opposite party or under a mistaken impression that notice had been served upon the opposite party were held to be falling in the category where the power of procedural review may be invoked. Such a review aims at setting aside a palpably erroneous order passed by the authority under a misapprehension. On the contrary, if a Court or a quasi-judicial authority having jurisdiction to adjudicate on merit proceeds to do so, its order can be reviewed on merit only if such an authority is vested with such power by express provision or by necessary implication. The Supreme Court has held that an arbitral tribunal has no inherent power to review on merit.[3]

The Power to Recall

The power to recall is different from the power of review. The power to review as elucidated above refers to a situation where there was an error apparent in the order of the Tribunal. The power to recall on the other hand relates to the order being reverted to the authority where the party was deprived of making its submission due to a sufficient cause. While the courts have the power to recall their own orders[4], the same is not available to arbitral tribunals. The High Courts have provided contrasting positions while dealing with the issue. While the Patna High Court reasoned that a recall power cannot be interpreted from the provisions of the Act either specifically or by necessary implication. However, the Delhi High Court in the matter of Awasthi Construction Co v. Govt of NCT of Delhi and Anr,[5] differed from the abovementioned judgements and held that the arbitrator does not become functus officio after passing an order under Section 25(a) of the Act and can recall the order after sufficient cause is shown.

Addressing the dichotomy

The aforesaid issues were addressed and settled by the Supreme Court in the case of Srei Infrastructure Finance Ltd v. Tuff Drilling Private Ltd[6]. The Hon’ble Court also upheld the view that every tribunal has inherent powers to review its order on the grounds of a procedural defect. It was held that arbitral tribunal, being a quasi- judicial authority, is vested with the power to invoke procedural review. The Apex Court also affirmed that there is no distinction between a statutory tribunal established under statutory provisions or the constitution when it comes to the authority for procedural review. Additionally, the court pointed out that Section 19 of the Act, which specifies that the arbitral tribunal is not bound by the procedural rules outlined in the Code of Civil Procedure, 1908 (“CPC”), should not be interpreted to mean that the arbitral tribunal is restricted from drawing guidance from any provisions within the CPC. Consequently, the underlying principles of Order IX Rule 9 can be utilized by an arbitrator. Furthermore, by drawing a clear distinction between terminations under Section 25(a) and Section 32, the Court emphasized that the option for recall is only applicable under the former. This distinction arises because Section 25(a) deals with terminations resulting from the ‘default of the claimant,’ while Section 32 pertains to situations where it is ‘impossible’ to continue with the arbitral proceedings.

Analysis

Arbitration proceedings are typically guided by the procedure agreed upon between the parties that are involved in the dispute and the provisions of the Act become applicable in cases where the procedure is not agreed upon. While the Act under Section 29 stipulates that the tribunal shall not be bound by the rules of CPC, the provisions of the Act do not prohibit the Arbitral Tribunal from drawing sustenance from the fundamental principles underlying the CPC or Evidence Act, but free the Tribunal from being bound, as would a Civil Court, by the requirement of observing the provisions of the CPC and the law relating to evidence with all its rigor.[7] Therefore, in the current scenario, the use of the CPC by the arbitral tribunal aligns with established court precedents in India. Additionally, applying the CPC to address procedural formalities not explicitly outlined in the Act ensures that the parties have suitable recourse.

Conclusion

The legal position regarding review was further clarified by the Delhi High Court in the case of Delhi Development Authority v. Naveen Kumar[8], which reaffirmed the Supreme Court judgement that the tribunal has no power to review on merit and is not available unless expressly conferred by law[9]. Moreover, the Delhi High Court last year categorically held that though the arbitral tribunal does not have the power of substantive review of its previous order, it does have the power to vacate or modify the conditions of its previous order if the change in circumstances so warrant or causes undue hardships to the party seeking such modification.[10]

While the Act provides for correction and interpretation of an arbitral award[11], the same is not expressly available for an order passed by the tribunal. Thus, the need for a proper legal framework is essential to avoid any arbitrariness in the process, further complicating the resolution process between the parties and requiring the involvement of the courts.

[1] Kapra Mazdoor Ekta Union v. Management of Birla Cotton Spinning and Weaving Mills Ltd, C.A No. 3475 of 2003.
[2] ATV Projects v. Indian Oil Corporation Ltd, 200 (2013) DLT 553.
[3] State of Arunachal Pradesh v. Damani Construction, (2007) 10 SCC 742.
[4] Order IX Rule 13, Code of Civil Procedure, 1908.
[5] Awasthi Construction Co v. Govt of NCT of Delhi, 2013 (1) ARBLR 70 (Delhi).
[6] Srei Infrastructure Finance Ltd v. Tuff Drilling Private Ltd, (2018) 11 SCC 470.
[7] Maharashtra State Electricity Board v. Datar Switchgear Ltd, (2010) 10 SCC 479.
[8] Delhi Development Authority v. Naveen Kumar, 2017/DHC/4058.
[9] Supra Note 3.
[10] Airports Authority of India v. TDI International Limited, ARB. A. (COMM.) 17/2022 & I.As. 6774-75/2022.
[11] Section 33, Arbitration and Conciliation Act, 1996.
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