This is not the first occasion that the government has proposed to amend the existing law on arbitration. Based on the UNICITRAL model and aimed at minimising judicial intervention as also the conduct of the proceedings, the poor drafting of the statute has lent itself to a myriad of interpretations, conveying the impression that arbitration in India is far from a quick and efficient dispute resolution process that it should be.
Possibly the first issue that has to be addressed is the blurring of the distinctions between Part I and Part II of the Arbitration and Conciliation Act, 1996 (Act). Part I is applicable to arbitrations in India. The exact language “the place of arbitration" creates confusion as to whether it implies seat or venue of arbitration. Parties can agree provide for any place in India to be a venue, but not necessarily the seat. In construing this with the definition of "international commercial arbitration", Section 2 (f) of the Act is indicative that this applies to arbitrations between two Indian parties, unless they agree that the seat should be located overseas. International commercial arbitration, is broadly interpreted bringing in its scope any organisation effectively managed or controlled by a person or entity located in another country. Yet the courts have through repeated judgements starting with Bhatia International vs. Bulk Trading S A, in 2002, made inroads into Part I, initially under Section 9, on the basis of the language that, since the qualification that did not exclude specifically the applicability of Part I to international commercial arbitrations, this has to be inferred, unless excluded expressly or by implication. The inroads travelled beyond interim orders to the most sacrosanct protection, that of the sanctity of the award ensured by incorporating the applicable principles of the New York Conventions in the Act. Courts have effectively now empowered themselves with the jurisdiction to set aside foreign awards, when the Act only provides for enforcement and refusal thereof in Sections 48 and 57. The implications for any foreign party are discouraging.
Even in domestic arbitrations there have been battles — as on the powers of the court on appointment of the Arbitral Tribunal by Courts under Section 11. The five judge Constitution bench in the Konkan Railways case had determined the power to be supervisory and not adjudicatory.
A seven Judge Bench reversed the judgment to extend the scope of determination to validity and even issue of jurisdiction, when Section 16 vests this power on the Tribunal.
Again the provisions of Section 45 in referring parties to arbitration became an interpretational issue before the Supreme Court whether to take a prima facie view or full-fledged trial. Fortunately, the majority overruled the minority decision of the then Chief Justice of the Indian Supreme Court, upholding that prima facie view could be taken based on affidavits. On Section 9 again, Courts have been freely entertaining applications of parties even when arbitration proceedings are ongoing. Recent judgements of the Delhi High Court on judicious interpretation of Section 27(5) of the Act have held that there are adequate recourses available to the Tribunal for enforcement of judgments and that Section 9 Petitions would not be entertained during pendency of arbitral proceedings.
Finally there is a strong need for institutionalising arbitration proceedings. There is a perception, however misplaced, that senior lawyers and Judges seemed to dominate the process. Most Section 11 petitions result in appointment of former judges, and in case of three-member tribunals, all of them. There can be no questioning of the probity and integrity of such persons. What is not fair to either the Tribunal or the parties is that , such Tribunals have to operate without the benefit of a secretariat and a case management system, with rules for timelines, mechanisms for determination and disbursement of fees and costs of arbitrator commensurate with the value of the dispute. That, coupled with delays has created a sense of disillusionment that needs to be addressed and confidence restored in the system. Whether this is reflected in the proposed bill, expected to be in the public domain shortly inviting responses is not clear. But these issues are as critical as that of redefining “public policy”.
Kumkum Sen is a Partner at Rajinder Narain & Co. and can be reached at kumkumsen@rnclegal.com