by control_zenuser | Mar 26, 2024 | Blog
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:
- 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.
- 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.
- 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
by control_zenuser | Mar 14, 2024 | Blog
Article by Ankita Sinha
The question of law and concept of ‘Group-Company Doctrine’ which was referred to the constitution bench of Hon’ble Supreme Court in the matter of Cox & Kings Ltd. v. SAP India (P) Ltd.[1], has now been crystallized and made enforceable under the Arbitration & Conciliation Act, 1996 (‘Arbitration Act’). The Hon’ble Supreme Court has recognized the Doctrine’s application to bind non-signatories to an ‘Arbitration Agreement’ upon satisfaction of certain parameters. The controversy over binding nature of Arbitration Agreement on non-signatories – in absence of their express consent inter-alia the concepts of ‘Autonomy’ and ‘Privity of Contracts’ has been laid to rest to the extent that Court’s seized of the question have to determine if there exists a defined legal relationship between the non-signatory and the parties to the arbitration agreement. Depending on the facts and circumstances of each case, the courts where the question of applicability of doctrine arises will have to see whether the non-signatory has consented to be bound by the arbitration agreement, either expressly or impliedly.
Analysis of “Group of Company Doctrines”
In recognizing the Group Company Doctrine as an applicable concept under the Indian Arbitration regime – and making the joinder of parties who are non-signatory to the Arbitration Agreement – a question of contractual interpretation, the Hon’ble Courts have given way to a more diverse and expansive view of what constitutes an ‘Arbitrable Dispute’. By way of the present Article, the author is trying to analyze the broader impact of the Constitution Bench judgment on the Indian Arbitration regime, with a focus on the meaning of ‘Arbitrable Disputes’ in the subsequent judgments of Indian Court.
However, before delving into what the Hon’ble Courts have held subsequent to the judgment of the Constitution Bench, the present Article is briefly dealing with the findings on the ‘Group Company Doctrine’ as the same forms the backbone of the subsequent rulings on ‘Arbitrable Dispute’. Vide the judgment upholding the ‘Group Company Doctrine’ the Hon’ble Supreme Court has cautioned that a pragmatic approach ought to be adopted to ascertain consent of the non-signatory from the facts of each case. The Hon’ble Court examined the questions of ‘Single Economic Reality’ ‘Implied Consent to arbitrate’ ‘Piercing of Corporate Veil’ etc. to find that the conduct of the non-signatory is the most important factor to be considered by the courts and tribunals as the same is an indicator of the intention of the non-signatory to be bound by the Arbitration Agreement. In its conclusions, it was held that the definition of “parties” under Section 2(1)(h) read with Section 7 of the Arbitration Act includes both the signatory as well as non-signatory parties and that principle of alter ego or piercing the corporate veil cannot be the basis for the application of the group of companies’ doctrine. Indeed, it has been clarified that group of companies’ doctrine has an independent existence as a principle of law which stems from a harmonious reading of Section 2(1)(h) along with Section 7 of the Arbitration Act. It has also been cautioned that the at the referral stage, the referral court should leave it for the arbitral tribunal to decide whether the non-signatory is bound by the arbitration agreement.
Following the Judgment of Cox & Kings, recently the Hon’ble Delhi HC in the matter of Opuskart Enterprises v. Kaushal Kishore Tyagi[2] dated 10.01.2014 in an application under S.11(6) of the Arbitration Act examined the Arbitration Agreement arising out of a partnership deed between certain individuals. In the said case, the partnership deed clearly narrated that the referred parties intended to carry on the business of trading, import and export of books and any other businesses which the partners intended to deal with under the name of M/s Opuskart Enterprises. Under Clause 12 of the Deed, the parties were required be just and faithful and render true accounts and full information relating to the firm to the other partners and also pay their separate private debts on their own.
It was the case of the Petitioners is that the Respondent – Mr. Tyagi had indulged in misappropriation of funds of the firm. Accordingly, notice was issued initially raising a claim of certain amounts. In the reply to said notice, Respondent stated that apart from being a partner in the partnership firm, the said partners are also Directors in M/s Opuskart India Pvt. Ltd and made allegations that the that the Petitioners intended to hijack, usurp and run away with the business of both the firm as also the company. Whereafter, the Petitioners invoked the Arbitration Clause and since there was no response from the Respondent, the S.11 petition was filed before the Hon’ble High Court of Delhi. The Hon’ble High Court was therefore seized of the question as to whether the disputes raised by the Petitioner, since the business was common between the firm and the company, whether the claim is an arbitrable dispute.
Without going into the factual analysis of the above case, attention is drawn to the Hon’ble High Court’s interpretation of the Cox & Kings judgment (Supra). Rejecting the Respondent’s arguments that the accounts relating to the firm, or the Company would not be ‘Arbitrable Disputes, the Hon’ble Judge took the view that since the business by the Partners is being conducted both through the firm and by the company, the disputes raised would in fact be arbitrable disputes. Therefore, in the Opuskart Judgment (supra) the Hon’ble Judge reiterated the view taken in Cox & Kings and stated that a non-signatory affiliate or sister or parent company can be a party to an arbitration agreement if there is mutual intention of the signatories and non-signatories to this effect.
However, in the subsequent judgment of the Hon’ble Delhi High Court in the matter of Vingro Developers (P) Ltd. v. Nitya Shree Developers (P) Ltd[3] dated 24.01.20214, where once again the main challenge raised by the respondent was that Respondent No. 2 and 3 were not parties to the Arbitration Agreements and thus, the matter could not be referred to arbitration against them, as the Respondent No.2 and 3 had only acted in their capacity as directors of the Respondent No.1. It was argued that they cannot be held personally liable, and the referred disputes were not ‘Arbitrable Disputes’.
The Hon’ble Delhi High Court, interpreted the judgment in Cox & Kings and found that to bind a non-signatory to an arbitration agreement, there must exist a common intention between the parties to do so, and held that there was a principal agent relationship between the Respondent No.1 and Respondents Nos. 2 and 3, and merely because they were signatories to the Builder Buyer Agreement in question, Arbitration could not be invoked against them.
Conclusion
By way of the illustration of the above referred two judgments of the Hon’ble Delhi High Court, in the aftermath of the Constitution Bench Judgment in Cox & Kings, the author is trying to convey that the diverse views being taken by the Hon’ble Court’s is a curiouser subject and begs the present analysis insofar as the contrary views & interpretations only make it fascinating to see how the definition of ‘Arbitrable Disputes’ especially in cases of Partnership Firms and Companies will unfold going forward. The present Article is a mere commentary on the diverse understanding of the evolving Group Company Doctrine, and as stated above, it will be fascinating to follow and analyze. However, it goes without saying, that the Constitution Bench Judgment and recognition of the ‘Group Companies doctrine” has left the Indian Arbitration Jurisprudence much richer.
[1] 2023 SCC OnLine SC 1634
[2] 2024 SCC OnLine Del 266
[3] 2024 SCC OnLine Del 486
by control_zenuser | Feb 2, 2024 | Blog
Article by Saima Mahmood
The equilibrium in party autonomy and judicial intervention
The Arbitration and Conciliation Act, 1996 (referred as ‘Arbitration Act’) has predicated on the principle of “party autonomy”, “settlement of disputes” with “minimal judicial intervention” during an arbitration proceeding. The Courts have time again made multiple attempts to dilate the judicial intervention in arbitration matters and the classic example of the same is Section 11 of the Arbitration Act i.e., Appointment of Arbitrators. Section 11 of the Arbitration Act clearly demarcates the scope of judicial intervention only when there is a deadlock or a failure of the parties to follow the appointment procedure. In a sense it can be said that Section 11 of Arbitration Act intents to give effect to the mutual intention of the parties to settle their dispute by arbitration in situations where the partes fail to appoint an arbitrator.
The elasticity of Judicial intervention:
The intent of the legislature is even more clear from Section 5 of the Arbitration Act which envisages minimum supervisory role of courts in the arbitral process, and only to the extent “so provided” under the Part I of Arbitration Act[1]. Thus, it can be said that Section 5 is the general rule of judicial non-interference, and all provisions of the Arbitration Act shall be construed in consonance with Section 5.
Striking the right balance between the interposition and intercession of judicial scope is the key to the successful execution of the intent of Arbitration Act. The elasticity of judicial intervention is so immense that it is capable of enlarging its ambit in every statute and legislation with the attempt to ‘iron out the crease’ to the ambiguity to such extent that the intent and the interpretation both go haywire. Hence it becomes vital that the true intent of any statute is safeguarded by striking the right balance in elasticity of judicial intervention.
Selective Judicial Intervention.
In the latest 7 judge bench judgment i.e In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899[2], the Court yet again has dealt with the ever-shifting paradigm of the scope of judicial intervention and further examined Section 11 of the Arbitration Act in terms of judicial scope. This article attempts to deal with the scope of judicial intervention in Section 11 of Arbitration act.
Position prior to In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899[3]
Before, the 7 judge bench[4] has dealt in detail the judicial precedence of Section 11 in order to examine its scope and effect. Starting from SPB & Co. v. Patel Engineering Ltd.[5] , a seven-Judge Bench of Apex Court which observed that Sections 8 and 11 are complementary in nature. Consequently, it was held that the judicial authority at the referral stage under Section 11(6) had the right to determine all preliminary issues.
Subsequently, the extent of judicial interference at the referral stage was scrutinised by Apex Court in National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd.[6] which further enhanced the ambit of judicial interference at pre-arbitral stage leading to courts conducting mini-trials instead of summarily dealing with the preliminary issues.
Significantly, the Law Commission observed this and accordingly, Section 11(6) was inserted and the nature of preliminary examination at the referral stage under Section 11 was confined to the existence of an arbitration agreement.
The effect and impact of the 2015 Amendment Act[7] was subsequently clarified in Duro Felguera, S.A. v. Gangavaram Port Ltd.[8]. and further held that Section 11(6A) incorporates the principle of minimal judicial intervention.
In Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman[9], a three-Judge Bench of this Court affirmed the reasoning in Duro Felguera, S.A. v. Gangavaram Port Ltd.[10] by observing that the examination under Section 11(6A) is “confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense.” Moreover, it was held that the position of law prior to the 2015 Amendment Act, as set forth by the decisions of this Court in Patel Engineering (supra) and Boghara Polyfab (supra), has been legislatively overruled.
Subsequently, a three-bench judge in Vidya Drolia v. Durga Trading Corpn.[11], held that an arbitration agreement would not exist if does not satisfy the mandatory legal requirements for it to be enforceable which includes a stamp duty. Later a three-judge Bench of the Supreme Court, in N.N. Global Mercantile Private Limited v. Indo Unique Flame Limited[12] doubted this position and observed that since arbitration agreement is an independent agreement, it cannot be invalidated merely on insufficiently stamped main contract.
This issue was referred to a larger bench to render the verdict of this issue. A five Judge decided in N.N. Global Mercantile Private Limited v M/s Indo Unique Flame Ltd. & Ors.[13] by a 3:2 majority that Court acting under Section 11 of the Arbitration Act cannot disregard the mandate of Section 33 & 35 of Stamp Act[14]. and further the “existence” of an arbitration agreement contemplated under Section 11(6A) of the Arbitration Act is not merely a facial existence or existence in fact, but also “existence in law. Finally, a Seven Judge Bench was called upon to resolve the question.
Scope of Section 11(6A) and Section 16 of Arbitration Act – the Tussle of Referral Court vs Arbitral Tribunal:
The Seven Judge Bench[15] observed that Section 11(6A) uses the expression “examination of the existence of an arbitration agreement.” The selective use of the word “examination” clarifies the legislative intent is to restrict the judicial intervention at the stage of appointment of arbitrator of the legislature to merely inspect or scrutinize the dealings between the parties for the existence of an arbitration agreement. It makes it clear that the expression “examination” does not connote or imply a laborious or contested inquiry, hence the scope of determination of preliminary issues by referral court under Section 11(6A) goes away.
On the other hand, the Seven Judge Bench[16] analyzed Section 16 of the Arbitration Act which provides that the arbitral tribunal can “rule” on its jurisdiction, including the existence and validity of an arbitration agreement. A “ruling” connotes adjudication of disputes after admitting evidence from the parties. Therefore, it is evident that the referral court is only required to examine the existence of arbitration agreements, whereas the arbitral tribunal ought to rule on its jurisdiction, including the issues pertaining to the existence and validity of an arbitration agreement.
The Seven Judge Bench[17] validated that it is the arbitral tribunal and not the court which may test whether the requirements of a valid contract and a valid arbitration agreement are met. If the tribunal finds that these conditions are not met, it will decline to hear the dispute any further. If it finds that a valid arbitration agreement exists, it may assess whether the underlying agreement is a valid contract.
Intent behind restrictive judicial intervention
The next question that comes to mind is why such strict constrains to judicial intervention. The purpose of the Arbitration Act is not just avoiding court but also to deliver relief within reasonable time. If the ambit of judicial intervention is widened, it will give leeway to unnecessary delay.
It was held by the Seven Judge Bench[18] that the purpose of vesting courts with certain powers under Sections 8 and 11 of the Arbitration Act is to facilitate and enable arbitration as well as to ensure that parties comply with arbitration agreements. However, the disputes which have arisen between the parties remain the domain of the arbitral tribunal only subject to the scope of its jurisdiction as defined by the arbitration clause). The exercise of the jurisdiction of the courts of the country over the substantive dispute between the parties is only possible at two stages:
- If an application for interim measures is filed under Section 9 of the Arbitration Act; or
- If the award is challenged under Section 34.
Once the arbitral tribunal has been appointed, it will act in accordance with law and proceed to impound the agreement under Section 33 of the Stamp Act if it sees fit to do so. It has the authority to receive evidence by consent of the parties, in terms of Section 35[19]. The procedure under Section 35 of the Stamp Act[20] may be followed thereafter. In this manner, the competence-competence doctrine is given life and arbitration proceedings can continue to remain a faster alternative to suits before the trial courts or other, similar actions.
Intent of Arbitration & Conciliation Act, 1996
The Court[21] interpreted that the Statement of Objects and Reasons of the 2015 Amendment Act to observe that it indicates that the Supreme Court or High Court at the stage of the appointment of an arbitrator shall “examine the existence of a prima facie arbitration agreement and no other issues”.
These other issues not only pertain to the validity of the arbitration agreement, but also include any other issues which are a consequence of unnecessary judicial interference in the arbitration proceedings. Accordingly, the “other issues” also include examination and impounding of an unstamped instrument by the referral court at the Section 8 or Section 11 stage. The process of examination, impounding, and dealing with an unstamped instrument under the Stamp Act is not a time-bound process, and therefore does not align with the stated goal of the Arbitration Act to ensure expeditious and time-bound appointment of arbitrators.
Conclusion
Lastly the Court concluded by stating that an objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement prima facie exists; accordingly, any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal; and the decision in N.N. Global Mercantile Private Limited v M/s Indo Unique Flame Ltd. & Ors.[22] and SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd[23] are overruled. Paragraphs 22 and 29 of Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.[24] are overruled to that extent.[25]
The 7-judge bench judgment has given ample clarity to the harmonious intent of Arbitration and Conciliation Act and Stamp Act. The inclination of the 7-Bench judgment is towards the importance of selective judicial intervention. The selection of when & where and, including the magnitude of judicial intervention is required in an arbitration proceeding while keep the essence of Arbitration Act intact. The legislator and the Courts have attempted to keep it as “business-friendly arbitration regime” with party’s autonomy as priority.
[1] Food Corporation of India v. Indian Council of Arbitration, (2003) 6 SCC 564
[2] 2023 SCC Online SC 1666
[3] 2023 SCC Online SC 1666
[4] 2023 SCC Online SC 1666
[5] (2005) 8 SCC 618
[6] (2009) 1 SCC 267
[7] 2015 Amendment Act
[8] (2017) 9 SCC 729
[9] (2019) 8 SCC 714
[10] (2017) 9 SCC 729
[11](2021) 2 SCC 1
[12] (2021) 4 SCC 379
[13] (2023) 7 SCC 1
[14] Indian Stamp Act, 1899
[15] 2023 SCC Online SC 1666
[16] 2023 SCC Online SC 1666
[17] 2023 SCC Online SC 1666
[18] 2023 SCC Online SC 1666
[19] Indian Stamp Act, 1899
[20] Indian Stamp Act, 1899
[21] 2023 SCC Online SC 1666
[22] (2023) 7 SCC 1
[23] (2011) 14 SCC 66
[24] (2019) 9 SCC 209
[25] Para 234, 2023 SCC Online SC 1666
by control_zenuser | Oct 10, 2023 | Blog
Article by Divya Kashyap
Institutional Arbitration in India: Brief Overview
The growth of arbitration as a dispute resolution mechanism has been exponential in the recent times. It is one of the most preferred choice of dispute resolution, especially when parties are in a long and continuing relationship such as in infrastructure contracts, supply contracts, shareholder agreements, investment contracts etc. However, the growth of institutional arbitration has been far from equal in the Indian regime. Ad-hoc arbitrations are still the preferable mode of arbitration, despite its shortcomings such as delayed proceedings, unprofessional arbitrators, poor quality of awards etc. On the other hand, institutional arbitration, which enables parties to submit their disputes to an institution has various advantages such as pre-established rules, efficient administration, qualified arbitrators and established format.
Taking note of the lack of good institutions to administer arbitration in India and looking at the institutionalized framework at the global level, the legislature brought some important amendments to the Arbitration and Conciliation Act, 1996 in the year 2015 and 2019.
The aim was to improve the institutionalization of administration of arbitrations and to improve the existing infrastructure for such institutionalization so as to make India a center for international arbitration. The global institutions like Singapore International Arbitration Centre (“SIAC”), London Court of International Arbitration Centre (“LCIA”), Hong Kong International Arbitration Centre (“HKIAC”) and International Chamber of Commerce (“ICC”) are some of the most successful institutions which have paved the way for India to develop its institutional arbitration and become an arbitration friendly nation and further impose confidence in the foreign investors.
Enactment of the New Delhi International Arbitration Centre Act, 2019
The promulgation of the New Delhi International Arbitration Centre Act, 2019 (“NDIAC Act”) sought to provide a further impetus towards the aforementioned intention. The Act was notified on September 26, 2019 with the objective of providing for the establishment of an institution namely, The New Delhi International Arbitration Centre (“The NDIAC”), for the purpose of creating an independent autonomous regime for institutionalized arbitration.
It further sought for better management of arbitration so as to make it a hub for institutional arbitration and to declare the NDIAC as an institution of national importance. The aim of enacting this legislation was to incorporate a robust institution for domestic and international arbitration which inspires confidence and credibility among the litigants of the commercial disputes, to expedite the settlement of disputes and basically to overcome the shortcomings of the International Centre for Alternative Dispute Resolution set up in 1995.[1]
The NDIAC consists of seven-member body headed by a former judge of Supreme Court or High Court or any other eminent person. The NDIAC was created to provide cost effective and timely services for the conduct of arbitration and conciliation at national and international level, facilitate conduct of international and domestic arbitration and conciliation and impart training in alternative dispute resolution and related matters in the field of arbitration, conciliation and mediation.[2]
Its purpose is to bring reforms in the field of arbitration and conciliation and to develop it as a flagship institution for both domestic and international arbitration. It will facilitate and provide administrative assistance for conduct of arbitration and conciliation proceedings in a professional and a time-bound manner and in the most cost-effective way. It will also set up an arbitration chamber to empanel professional arbitrators at national and international level and set up an Arbitration Academy to train arbitrators in India, so as to empower them to compete on par with reputed arbitral institutions in the world.[3]
Subsequently, the name of the institution has been changed to The India International Arbitration Centre (“The IIAC”) by way of the New Delhi International Arbitration Centre (Amendment) Act, 2022 (No. 23 of 2022). [4]
The IIAC comprises of a chairperson, who is designated by the Central Government in conjunction with the Chief Justice of India and is a retired Supreme Court or High Court judge. There would be two full-time members possessed with substantial knowledge and experience in the regime of arbitration. These members will be appointed by the Central Government. A part-time member to be appointed as Secretary and Financial Advisor. A Chief Executive Officer is also to be appointed to keep a check on the Centre’s administrative activities. A Registrar would also to be appointed to supervise the activities of the Centre.[5]
As per Section 14 of the Act, the objects of the Centre are (a) to bring targeted reforms to develop itself as a flagship institution for conducting international and domestic arbitration; (b) to promote research and study, providing teaching and training, and organising conferences and seminars in arbitration, conciliation, mediation and other alternative dispute resolution matters; (c) to provide facilities and administrative assistance for conciliation, mediation and arbitral proceedings; (d) to maintain panels of accredited arbitrators, conciliators and mediators both at national and international level or specialists such as surveyors and investigators; (e) to collaborate with other national and international institutions and organisations for ensuring credibility of the Centre as a specialised institution in arbitration and conciliation; (f) to set up facilities in India and abroad to promote the activities of the Centre; (g) to lay down parameters for different modes of alternative dispute resolution mechanisms being adopted by the Centre; and (h) such other objectives as it may deem fit with the approval of the Central Government.[6]
The Act provides for the establishment of chamber of arbitration under Section 28, who would appoint arbitrator and also review the application for admission to the panel of arbitrators. Section 29 of the Act deals with establishing an arbitration academy for providing training to the arbitrator(s).[7] Further, one of the objectives of the Act is to also promote facilities and administrative assistance for mediation and conciliation.
IIAC (Conduct of Arbitration) Regulations, 2023
Recently, in exercise of the powers conferred by clause (f) of sub-section (2) of section 31 of the Act, the IIAC has notified the India International Arbitration Centre (Conduct of Arbitration Proceedings) Regulations, 2023 (“Regulations”). These Regulations have provided for the procedure and conduct of arbitral proceedings, appointment of arbitrators and passing of Award. Some of the key highlights of the Regulations are as under:
- Regulation 4 provides for the procedure for request for arbitration by a party and necessary documents required in the process, followed by Regulation 5 which provides for response by the other party within fourteen days of request.
- Regulation 6 provides that any notice or communication shall be in writing, and delivery of such written communications may be made personally or by registered post or by a courier service, or transmitted by any form of electronic means or delivered by any other means that provides a record of its transmission.
- Regulation 7 provides for joinder of additional parties in the arbitration proceedings after constitution of the arbitral tribunal; whereas Regulation 8 provides for consolidation of arbitrations, subject to inter-alia agreement of the parties.
- Regulation 11 talks about appointment and confirmation of arbitrators, where Regulation 12 deals with appointment of sole arbitrator and Regulation 13 talks about appointment of arbitral tribunal comprising of three arbitrators. Regulation 14 provides for multi-party appointment of arbitrator.
- Regulation 17 provides for fast track procedure for resolving disputes. In such a case, the disputes have to be resolved within six months from the date of intimation by the Registrar to the parties, of the constitution of the arbitral tribunal.
- Regulation 18 provides for appointment of emergency arbitrator within three days of the receipt of the application by the Registrar. It also provides for the time limit of fifteen days for completion of the entire arbitration proceedings from his date of appointment, which can be extended by the Registrar in exceptional circumstances.
- Regulation 28 provides for place/seat of arbitration and allows the arbitral tribunal to hold proceedings either physically, virtually or in a hybrid manner.
Conclusion
A perusal of these Regulations unveil that they are in line with the intention of the government to boost the arbitration regime in India. They also aim to bring the IIAC at par with the globally popular arbitral institutions like SIAC, LCIA etc. by adopting the best practices followed therein and to resolve commercial disputes smoothly. It however, will be a matter of time for IIAC to provide the same level of effectiveness and efficiency as offered by the global institutions like SIAC, LCIA etc. and provide state of the art procedural framework for resolution of international disputes. Be that as it may, these steps will certainly augment the intention behind the 2015 and 2019 amendments to the Arbitration and Conciliation Act, 1996 to push model arbitration proceedings in India.
[1]https://legalaffairs.gov.in/sites/default/files/The%20New%20Delhi%20International%20Arbitration%20Centre%20Act%2C%202019.pdf
[2]https://legalaffairs.gov.in/new-delhi-international-arbitration-centre
[3] Id.
[4]https://legalaffairs.gov.in/sites/default/files/NDIAC_Amendment_Act_2022.pdf
[5]https://legalaffairs.gov.in/sites/default/files/The%20New%20Delhi%20International%20Arbitration%20Centre%20Act%2C%202019.pdf
[6] Section 14 of the New Delhi International Arbitration Centre Act, 2019
[7] https://timesofindia.indiatimes.com/blogs/voices/road-to-institutionalised-arbitration-indian-approach/
