In this blog post, Tanisha Agarwal, a student of Institute of Law, Nirma Universtiy, Ahmedabad, who is currently pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the powers of an arbitrator to punish for contempt.

Introduction

The more widespread legal thought is that the orders of an arbitrator are powerless because the arbitrator has no authority to implement them. Therefore, involvement of a Court to achieve enforceable orders, even in an on-going arbitration, becomes unavoidable. This article is intended at refuting this proposition by explaining that an arbitrator is assigned with the power of contempt (at par with the Court), under the [Indian] Arbitration and Conciliation Act, 1996 (hereinafter, the “Arbitration and Conciliation Act”), and has complete command over implementing its own orders sans interference of any Court.

Arbitrator differs from a “Court”

An arbitrator under the Arbitration and Conciliation Act possesses several powers comparable to that of the Court, for example, the power to grant interim relief under Section 17. Although an arbitrator is an adjudicating authority under the Arbitration and Conciliation Act and has to act judicially, an arbitrator differs from a Court. On the same basis, under Section 17 of the Arbitration and Conciliation Act, an arbitrator is not bound by the principles of the Code of Civil Procedure, 1908 and the Indian Evidence Act, 1872. Even the definition of “Court” under Section 2 of the Indian Evidence Act, 1872 specifically eliminates an arbitrator. Hence, it is apparent that an arbitrator is not a “Court”.

As an arbitral tribunal is not a “Court” and is a result of an agreement between the parties, it has no authority to punish a defiant party for contempt of its orders, not only under the Constitution of India, but also under the Contempt of Courts Act, 1971.

Supreme Court’s View on Arbitrator’s Power to Enforce its Orders

The Supreme Court of India, in MD, Army Welfare Housing Organisation v, Sumangal Services (P) Ltd. while looking into the sections of the old Arbitration Act, 1940, made some remarks (which could only possibly serve as obiter dicta), vis-à-vis the power of an arbitrator to implement its orders under Section 17 of the Arbitration and Conciliation Act, which gives authority to the arbitral tribunal to grant interim relief to the parties during the pendency of the arbitration proceedings. The Court remarked that even under Section 17, no authority is conferred upon the arbitral tribunal to implement its order nor does it arrange for any judicial implementation.

Further, in the case of Sundaram Finance Ltd. v. NEPC India Ltd.[1], the Supreme Court has categorically stated that even though Section 17 gives the arbitral tribunal the power to grant interim relief, such orders cannot be obligatory as orders of a Court are. Therefore, Section 9 gives a concurrent power to the Court to pass interim orders even during the arbitration proceedings. It is for this reason only that Section 9 gives the court power to pass interim orders during the arbitration proceedings.

Consequently, in M.D. Army Welfare Housing Organisation v. Sumangal Services Pvt. Ltd.[2], the Apex Court had held at para 56 thereof that under section 17 of the Act no power is conferred on the arbitral tribunal to enforce its order nor does it provide the judicial enforcement thereof.

Section 27 (5) of the Arbitration and Conciliation Act, 1996

Somehow, these decisions of the Apex Court fail to take notice of Section 27 (5) of the Arbitration and Conciliation Act, 1996 which expressly confers the power on the arbitral tribunal to punish for its contempt.

Section 27 (5) stipulates that “Persons failing to attend in accordance with such process, or making any other fault, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences is suits tried before the Court”.[3]

High Court of Delhi on Section 27 (5) of Arbitration and Conciliation Act

In the case of Sri Krishan v. Anand[4], the Delhi High Court was apprehended of the issue whether a petition under Section 9 of the Arbitration and Conciliation Act, 1996 would stand for an identical interim measure which has already been passed by the arbitral tribunal under Section 17 earlier. The petitioner had tried to validate the petition under Section 9 of the Act on the stand that orders passed by an arbitral tribunal are powerless and not enforceable.

Justice Endlaw of the High court of Delhi while rejecting the argument of the petitioner said that the legislative intent of passing Section 17 of the Arbitration and Conciliation Act is to make the arbitral tribunal a comprehensive platform not only for completely resolving disputes between parties but to also order interim measures. The Court additionally held that absolutely no purpose would be aided in coming to the arbitral tribunal under Section 17, if for implementing orders under Section 17 a distinct petition under Section 9 has to be filed consequently.

The Court said that under Section 27 (5) of the Arbitration and Conciliation Act, 1996 any individual failing to conform to the order of the arbitral tribunal would be considered to be “making any other default” or “guilty of any contempt to the arbitral tribunal during the conduct of the proceedings”. The Delhi High Court also elucidated that Section 27(5) was not observed in Sundaram Finance Ltd. or in Sumangal Services Pvt. Ltd. probably, since it was dodged in the heading/title of Section 27. Nonetheless, as the said heading/title cannot confine or contract the otherwise extensive ambit of Sub-section (5) of Section 27. The default, contempt specified within that cannot be narrowed to that only in appearance of witnesses in front of the arbitral tribunal. Doing so, would be to reduce the words “any other default” and “guilty of any contempt” therein futile.

Therefore, the option before the aggrieved party in a case of non-compliance of the order of the arbitrator is to apply to the tribunal for putting across a representation to the Court to give out such a punishment to the disobedient party, as would have been necessary in a case of contempt of Court. The arbitral tribunal should create such a representation to the Court only if it is pleased that the defaulter is in default or in contempt. When such a representation by the arbitral tribunal is before the Court, the Court is at the discretion to deal with such disobedient party as if in contempt of order of the Court. This may well be either under the sections of the Contempt of Courts Act or under the sections of Order 39 Rule 2A of the Code of Civil Procedure, which arranges for penalties of disobedience or breach of injunction.

This particular point of law has been endorsed by a following decision of the Delhi High Court in the case of India Bulls Financial Services Limited v. Jubilee Plots and Housing Private Limited,[5] depending upon the already mentioned decisions of the Apex court, all the courts in India have observed that the arbitral tribunals have no authority to implement their own orders. Further, there have only been a couple of dissenting decisions by the same judge.

In T. Sudhakar Prasad v. Govt. Of AP & Ors (2000), the Apex Court went on to understand the pertinent sections of Chandrakumar’s case. Court remarked that in Chandrakumar, the Supreme Court had inferred Articles 323A and 323B of the Constitution of India as ultra vires insofar as they impinged on the basic structure of the Constitution, of which the power of judicial review of the High Courts and Supreme Court was essential.

To explain further, those powers of administrative tribunals which were precisely given under Article 323A and thereafter the Administrative Tribunals Act, which did not run different to the Constitution’s basic structure, would be intact and not be impacted by the ruling in Chandrakumar’s case. Thus, the power to punish for contempt under Section 17 of the Administrative Tribunals Act, which flowed by Article 323A(b), was not impacted by the judgment.

Conclusion

When parties are required to take recourse to Courts for assistance despite having agreed to arbitration, the benefits and attractiveness of arbitration gets significantly diminished. Giving due meaning to Section 27 (5) of the Arbitration and Conciliation Act by the Courts would act as a deterrent to litigants for filing separate proceedings for the same relief under Section 9 and Section 17 of the Arbitration and Conciliation Act, and would also be consistent with the objectives of the Arbitration and Conciliation Act, in reducing interference of Courts in arbitration proceedings.

According to Article 141 of the Constitution of India, the pronouncements of the Supreme Court of India, carry on to be the “law of the land” and are compulsory to be observed by all other Courts in India. Nevertheless, keeping in mind Section 27 (5) of the Arbitration and Conciliation Act and the judgements of the Delhi High Court, the law on this issue needs to be reconsidered.

 

[1] (1999) 2 SCC 479

[2] ( 2004 ) 9 SCC 619

[3] Section 27(5), Arbitration and Conciliation Act, 1996

[4] (2009) 3 ArbLR 447 (Del

[5] MANU/DE/1829/2009

 

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