Judicial interpretation in arbitration
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This article has been written by Adv Priscilla Rodrigues, pursuing the Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho. This article has been edited by Prashant Baviskar (Associate, Lawsikho), and Ruchika Mohapatra (Associate, Lawsikho).  

Introduction

With this viewpoint in mind, “justice delayed is justice denied, and justice hurried is justice buried” the idea of alternative dispute settlement developed in India. Alternative dispute resolution (ADR) is the most successful and efficient method of settling conflicts between parties by allowing for a low-cost and quick trial. However, as the use of alternative conflict resolution grows, so do the challenges that come with it. With the implementation of the recent amendments to the arbitration laws in India, the Arbitrability system has taken a sharp turn and made the prospects for arbitration in India look bright. It is a bid to make India a favoured arbitration venue for both Indians and international parties and in order to contend with global arbitration seat attractions such as Singapore and London, Courts have started taking a staunch pro-arbitration stance these days. The MNCs preparing to invest in India have been looking at this shift with a lot of hope.

India was not the only country in the arbitration system to implement several steep changes to assist the “facility to do business.” To maintain its top position as the most favoured arbitration venue, Singapore has also revised its Rules of Arbitration (SIAC Rules) to such magnitudes so as to bring about some sheer improvements in its rules. 

Arbitration in India

The Government of India has sought to make the country’s arbitration system more robust. It has taken a lot of measures to make it possible but it has not been able to realize a desirable business environment to its satisfaction. The Government attempted in 2001 to change the country’s arbitration laws but failed. Then it attempted again in 2010, but that attempt was even aborted. Eventually, on October 23, 2015, the President released an ordinance integrating the substance of major decisions taken over the two decades, including the recommendations of the 246th Report of the Law Commission.

The Arbitration and Conciliation Bill 2015 was subsequently passed on 17 December 2015 in the Lok Sabha and Rajya Sabha with minor changes to the amendments adopted by the Order. It was eventually signed by the president on 31 December and the act came into force on 23 October 2015.

Also, it was subsequently amended just recently when, “The Arbitration and Conciliation (Amendment) Bill, 2019” was introduced in Rajya Sabha by the Minister for Law and Justice, Mr. Ravi Shankar Prasad, on July 15, 2019.

Even with these recent amendments that brought a dramatic reform to India’s arbitration rules, much remains unanswered. The matters where Indian parties with foreign seats and arbitration in the event of oppression and mismanagement within a corporation are problems that are still suffering due to differences of opinions between different high courts.

It is clear that this new amendment in 2015 to the Arbitration Act has streamlined a relatively easier route for International Commercial Arbitration to take place with headquarters in India and shows promising prospects of India becoming an arbitration centre for future arbitration, but there are still some concerns that have been left out of the amendment and that would affect future applicability and efficiency.

Section 44(b) of the Arbitration and Conciliation Act 1996 now, after the amendment,  specifies that the international award is made not only in a reciprocating territory but that the reciprocating territory is notified in the Official Gazette by the Central Government. With only about 50 (fifty) countries notified as reciprocating territories, the room for implementing international arbitral awards is considerably reduced. The government should either notify most countries in the Official Gazette or delete the obligation of Section 44(b) to notify reciprocating territories in the Official Gazette.

Another effect we can see is that the Law Commission Report had recommended the addition of “emergency arbitrator” to the definition of “arbitral tribunal” under Section 2(d) of the Arbitration Act in order to provide constitutional recognition to the “emergency arbitrator” as given under some institutional rules. Many international arbitration laws recognized the idea of “emergency arbitrator” and gained popularity for its effectiveness. The recommendations made in this regard by the Law Commission Report were not adopted, and this is a significant omission that is likely to impact arbitration in India.

arbitration

Issues in arbitration

Issue no 1.  applicability of the Amendment Act 

New Tripur Area Development Corporation Limited v. M/s. Hindustan Construction Co. Ltd. & Ors

The Madras High Court has dealt with the interpretation and applicability of Section 26 of the Amendment Act. The Madras High Court concluded that Section 26 of the Amendment Act does not apply to post-arbitral proceedings and that a fresh application under Section 36(2) is required under the modified regulations, enforcement proceedings must have stayed while an arbitral award is being challenged. Due to the absence of the phrase “in relation to,” the court concluded that the terminology used in Section 26 of the Amendment Act only pertains to arbitral procedures and not court proceedings. The post-arbitral procedures stage is not covered by Section 26 of the Amendment Act.

Electrosteel Castings Limited v. Reacon Engineers (India) Private Ltd 

However, in Electrosteel Castings Limited v. Reacon Engineers (India) Private Ltd., the Calcutta High Court, however, took the opposite view and held that the amended law would not apply and that, in the case of arbitration proceedings initiated before 23 October 2015, Section 34 would serve as an automatic stay.

Issue no 2. arbitrability in cases of oppression and mismanagement

Oppression and mismanagement disputes in India are regulated by Sections 241 and 242 of the 2013 Companies Act. Section 242 of the 2013 Act (or Section 402 of the 1956 Act) provides for reliefs provided in such cases by the National Companies Law Tribunal(‘ NCLT’)[ formerly known as the Company Law Board(‘ CLB’)]. Very often, the company’s arrangement with its members allows provision for arbitration as a dispute resolution process. The 2013 Act posits no limit on the settlement of Oppression and mismanagement related matters. But are those controversies arbitrable?

The question of whether a disagreement can be settled by arbitration is referred to as the arbitrability of a case. While Section 8 and Section 45 of the Arbitration and Conciliation Act 1996 (“Law 1996”) need not clearly state that “arbitrability of the dispute” is a requirement for sending arbitration proceedings, the courts have ruled them as such. The subject of the referral should be one over which the tribunal has jurisdiction.

Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532

The Supreme Court was deciding the scope of Section 8 of the 1996 Act in an appeal and ruled that the judicial authority seized of the matter must examine if the reliefs requested in the lawsuit can be determined and awarded in the arbitration.” The Court relied on the decision in Haryana Telecom, where dispute for winding up of a company was held to be a matter where the arbitrator was unqualified to rule since only the court has the authority to provide that remedy under the law. Therefore, instances involving proceedings in rem had to be resolved by public fora, whereas situations involving proceedings in personam might be sent to arbitration. The Court did remark, though, that this was not a hard and fast rule, and that conflicts over subordinate rights in personam arising from a right in rem might be arbitrated. Following the ruling in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, 2003 (5) SCC 531, the Court remarked that a cause of action could not be divided under section 8 of the 1996 Act.

Issue no 3. cross-cultural difficulties in arbitral practice 

The reality would be that the present, well-established arbitral system arose from a litigation-based environment. In pursuit of a single standard, the international arbitration community works to discover answers to simple challenges and integrate the many ways to solve global disputes as it develops. Examining witnesses, the utilisation of written petitions and proceedings; witness statements; and demonstration and application of international and global commercial laws are all instances of cross-cultural disparities that may influence arbitral proceedings.

Conclusion

To conclude, we can see how the improvements in arbitration systems in well-known arbitration centres and India provide a beam of hope for involved parties in lengthy arbitral proceedings and a better possibility of conducting accelerated arbitral hearings all over the world with low procedural expenses. Each institutional arbitration centre, whether it is the Singapore International Arbitration Centre or the LCIA, is trying to be the first choice of parties entering into arbitration agreements. It is indisputable that the prevailing amendment to the Arbitration Act has made it extremely easy for International Commercial Arbitration to take effect with a seat in India, and it indicates that India has a promising future as an arbitration centre, but there are still some concerns that have been left out of the amendment and will have an effect on its prospective applicability and efficacy. Given that the drive behind the 2015 and proposed 2018 reforms are for India to take its place on the world stage of arbitration it is unlikely that India will adopt rules that are out-of-sync with leading arbitration jurisdictions.

References  

  • https://indiacorplaw.in/2018/05/arbitrabilityoppressionmismanagement-rakesh-malhotra.html

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