Though alternative dispute-resolution mechanisms are promoted by the government and commercial organisations, the record of arbitration cases has not been inspiring. They are supposed to be informal, fast-track alternatives to the cumbersome and expensive road to civil courts. However, they have fallen into ruts of their own, and have become as expensive and tedious as any other civil litigation. In the Dolphin Drilling Ltd vs ONGC case, the Supreme Court last week lamented that “it is unfortunate that arbitration in this country has proved to be a highly expensive and time-consuming means for resolution of disputes”.
A survey of judgments delivered by the Supreme Court last year showed that most arbitration cases were seven years old when they landed in the court. There were at least 45 major judgments. Moreover, the Supreme Court’s decisions were not the end of the disputes for the parties; rather they have only been the start. This is because legal objections raised by the parties, either genuinely aggrieved or trying to delay payment, have to be addressed. The decision of the trial court is inevitably appealed against in the high court and then in the Supreme Court. The apex court sorts out the legal issues and then sends back the matter to the high court or the original court or the arbitrator. This is the beginning of arbitration, after years of legal wrangling.
Observing these realities, the Supreme Court stated some time ago in the Guru Nanak Foundation vs Rattan Singh case that “the way in which the proceedings are conducted, and without exception challenged in the courts, has made lawyers laugh and philosophers weep. Experience shows that the proceedings have become highly technical accompanied by unending prolixity, at every stage providing a legal trap to the unwary. An informal forum chosen by the parties for expeditious disposal of their disputes has, by the decisions of the courts, been clothed with legalese of unforeseeable complexity.”
Some cases decided recently by the Supreme Court exemplify this comment. It was a long trek for the parties in the appeals in the SBP & Co vs Patel Engineering Ltd case. The contract for the Koyna hydroelectric project was signed in 1992 and the disputes started in 1996. The Supreme Court cleared the legal clutter only last year and allowed the arbitrator to proceed with his work afresh.
The Shin-Etsu Chemicals Co vs Vindhya Telelinks Ltd case made several trips from the district court in Madhya Pradesh to the high court and the Supreme Court in the past seven years, and the arbitration is still not over. The Supreme Court itself noted this delay in its judgment when it said that “we are conscious of the fact that the matter has been pending before this court for more than two years and relegation to an alternative remedy will further delay the consideration of the issue. But it is inevitable in the circumstances.”
Arbitration in the Vijay Constructions vs State of Kerala case of 2002, is still halfway. The Supreme Court has just set aside the order of the high court, holding that there indeed was an arbitration agreement between the parties. After this finding, the Supreme Court has reverted the matter to the high court to decide other remaining objections raised by the state government which has to pay the awarded amount to the contractors. The actual arbitration will start only after this exercise and probably after some more trips to the Supreme Court.
The legal muddle invariably sets in from the start. If the parties are rich and resourceful, they raise questions of interpretation of the terms of the agreement and the provisions of the Arbitration and Conciliation Act 1996. That is the first journey to the court. The next common stratagem is to doubt whether there was an arbitration clause in the contract at all. Though the voluminous agreements are drafted by resourceful law firms, they do leave gaps. In any case, there are equally ingenious lawyers who can invent a lacuna.
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Once the court finds that there is indeed an arbitration clause, the wrangle starts over who the arbitrator should be. The party who has to pay will then raise objections to the conduct of the arbitrator, like bias and mala fide.
The arbitrators themselves are not very keen to complete their job as the assignment comes with several seven-star perks, a la Liberhan and Eradi commissions. These are only some of the hurdles in implementing the law.
There was a proposal to amend the 1996 law to make it more effective, but the proposed Bill has been in cold storage for many years now. It is said that international corporations are willing to choose India as a venue for arbitration, but lack of clarity in law and procedure coupled with poor infrastructure deters them. Unless these hurdles are removed, arbitration cases will continue to troop to the Supreme Court — and it has not yet disposed of appeals under the old Arbitration Act 1940.