Arbitration is now the principal method of resolving international disputes involving states, individuals, and corporations. This is one of the consequences of the increased globalisation of world trade and investment. It has resulted in increasingly harmonised arbitration practices by specialised international arbitration practitioners who speak a common procedural language. (Redfern and Hunter on International Arbitration, USA 2015).
The Arbitration and Conciliation Act, 1996, has brought a watershed to streamline the Indian Arbitration Law and to permeate it with unrivalled global modus operandi. For the last ten years, a chain of judicial pronouncements and a number of amendments, have given a whirl to metamorphose our country into a robust hub for international as well as domestic arbitration. Our country has observed some productive legal reforms in the landscape of arbitration in recent years. The amendments have tried to orient the arbitration regime of India with the significant arbitration regimes of other realms.
The Supreme Court and legislature of our country have put their best foot forward to make India an arbitration hub. With the propounding of reasoned judgments and the introduction of amendments to the arbitration legislation in India, the arbitration jurisprudence in India is blooming perfectly and profitably.
In this write-up, takeaways from the 10 recent important judgments of the Hon'ble Supreme Court on Arbitration and Conciliation Act, 1996, are briefly discussed.
Mere expression "place of arbitration" cannot be the basis to determine the intention of the parties that they have intended that place as the "seat" of arbitration.
The Supreme Court held that the seat of arbitration is a vital aspect of any arbitration proceedings and its location will determine the courts that will have exclusive jurisdiction to oversee the arbitration proceedings. It was further held that the Seat normally carries with it the choice of that country's arbitration/curial law and it is well-settled that "seat of arbitration" and "venue of arbitration" cannot be used inter-changeably. Mere expression "place of arbitration" cannot be the basis to determine the intention of the parties that they have intended that place as the "seat" of arbitration. The intention of the parties as to the "seat" should be determined from other clauses in the agreement and the conduct of the parties.
The court cannot act upon a document or the arbitration clause which is not properly stamped.
The Supreme Court held that when a lease deed or any other instrument is relied upon as containing the arbitration agreement, the Court is required to consider at the outset, whether the document is properly stamped or not. If the instrument is not properly stamped, it should be impounded and dealt with, in the manner specified in Section 38 of the Stamp Act, 1899. It has also been held, that the Court cannot act upon such a document or the arbitration clause therein.
The Gujarat Public Works Contract Disputes Arbitration Tribunal has the power to grant interim relief in cases of statutory arbitrations under the Gujarat Act, 1992.
The Supreme Court held that on a conjoint reading and a careful analysis of the Arbitration Act and the Gujarat Act, the powers vested in the Arbitral Tribunal in terms of Section 17 of the Arbitration and Conciliation Act, can be exercised by the Tribunal constituted under the Gujarat Act because there is no inconsistency in these two Acts as far as the grant of interim relief is concerned. This power is already vested in the Tribunal under the Gujarat Act and Section 17 of the Arbitration and Conciliation Act complements these powers and therefore it cannot be said that the provisions of Section 17 of the Arbitration and Conciliation Act are inconsistent with the Gujarat Act.
The reasoning utility of an award, when absent, can be cured by Section 34(4) of the Arbitration Act and when complete perversity exists in the reasoning then it can be challenged under Section 34 of the Arbitration Act.
The Supreme Court held that in case of absence of reasoning the utility has been provided under of Section 34(4) of the Arbitration Act to cure such defects. When there is complete perversity in the reasoning then only it can be challenged under the provisions of Section 34 of the Arbitration Act. The power vested under Section 34(4) of the Arbitration Act to cure defects can be utilized in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured so as to avoid a challenge based on the aforesaid curable defects under Section 34 of the Arbitration Act.
Whenever there is the designation of a place of arbitration in an arbitration clause as being the "venue" of the arbitration proceedings, the expression "arbitration proceedings" would make it clear that the "venue" is really the "seat" of the arbitral proceedings.
The Supreme Court held that whenever there is the designation of a place of arbitration in an arbitration clause as being the "venue" of the arbitration proceedings, the expression "arbitration proceedings" would make it clear that the "venue" is really the "seat" of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. This language has to be contrasted with language such as "tribunals are to meet or have witnesses, experts or the parties" where only hearings are to take place in the "venue", which may lead to the conclusion, other things being equal, that the venue so stated is not the "seat" of arbitral proceedings, but only a convenient place of meeting.
Any delay beyond 120 days in the filing of an appeal under Section 37 from an application being either dismissed or allowed under Section 34 of the Arbitration and Conciliation Act, 1996 should not be allowed.
The Supreme Court held that the period of 90 days, which is provided by statute for filing of appeals under Section 37 of the Arbitration Act has a grace period of 30 days under Section 5 of the Limitation Act by following Lachmeshwar Prasad Shukul [Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri, 1940 SCC OnLine FC 10 : AIR 1941 FC 5] , as also having regard to the object of speedy resolution of all arbitral disputes which was uppermost in the minds of the framers of the 1996 Act, and which has been strengthened from time to time by amendments made thereto.
The issue of limitation is a jurisdictional issue, which would be required to be decided by the arbitrator under Section 16.
The Supreme Court held that the doctrine of "kompetenz-kompetenz", also referred to as "compétence-compétence", or "compétence de la recognized", implies that the Arbitral Tribunal is empowered and has the competence to rule on its own jurisdiction, including determining all jurisdictional issues, and the existence or validity of the arbitration agreement. In view of the provisions of Section 16, and the legislative policy to restrict judicial intervention at the pre-reference stage, the issue of limitation would require to be decided by the arbitrator. Sub-section (1) of Section 16 provides that the Arbitral Tribunal may rule on its own jurisdiction, "including any objections" with respect to the existence or validity of the arbitration agreement. Section 16 is as an inclusive provision, which would comprehend all preliminary issues touching upon the jurisdiction of the Arbitral Tribunal.
Section 87 of the Act struck down; No automatic stay available against the enforcement of any award.
The Supreme Court held that Section 87 must be struck down as it is manifestly arbitrary under Article 14. The retrospective resurrection of an automatic-stay not only turns the clock backwards contrary to the object of the Arbitration Act, 1996 and the 2015 Amendment Act, but also results in payments already made under the amended Section 36 to award-holders in a situation of no-stay or conditional-stay now being reversed.
A person who has an interest in the outcome or decision of the disputes must not have the power to appoint a sole arbitrator.
The Supreme Court held that where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator.
When the agreement specifically provides for appointment of named arbitrators, the appointment should be in terms of the agreement.
The Supreme Court held:-
"17. Considering the various matters of railway contracts and setting aside the appointment of independent arbitrators, after referring to M.P. Gupta [Union of India v. M.P. Gupta, (2004) 10 SCC 504] and V.S. Engg. case [Union of India v. V.S. Engg. (P) Ltd., (2006) 13 SCC 240] and other judgments, in Parmar Construction Co. [Union of India v. Parmar Construction Co., (2019) 15 SCC 682] , this Court set aside the appointment of the independent arbitrator and directed the General Manager of the Railways to appoint arbitrator in terms of Clause 64(3) of the agreement. In para 47, this Court held as under: (Parmar Construction Co. case [Union of India v. Parmar Construction Co., (2019) 15 SCC 682] , SCC p. 715)
"47. To conclude, in our considered view, the High Court [Parmar Construction Co. v. Union of India, 2017 SCC OnLine Raj 4202] was not justified in appointing an independent arbitrator without resorting to the procedure for appointment of an arbitrator which has been prescribed under Clause 64(3) of the contract under the inbuilt mechanism as agreed by the parties."
Our economy needs a dependable process for resolving disputes so that foreign investment is wooed. There is now a strong desire of parties to resolve their disputes with the aid of arbitration as there is a heap of cases pending before the courts of our country. In the last ten years, the arbitration regime in our country has come of age and the exigency for arbitration has increased rapidly, with the efflux of time. India is a party to the New York Convention as well the Geneva Convention, hence, our arbitration law has been able to keep up with the worthwhile international practices of Arbitration. The Supreme Court and the legislature of our country have put their best foot forward to make India an arbitration hub. With the propounding of reasoned judgments and the introduction of amendments to the arbitration legislation in India, the arbitration jurisprudence in India is blooming perfectly and profitably. Institutional arbitration has not been able to spread its wings in our country because the parties still prefer adhoc arbitration. The report by the High-Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, constituted on 13th January 2017, headed by Justice B.N. Srikrishna, Retired Judge, Supreme Court of India, had identified a number of factors for the limited success of institutional arbitration in India which are - lack of credible arbitral institutions, misconceptions relating to institutional arbitration, lack of governmental support for institutional arbitration, lack of legislative support for institutional arbitration, and judicial attitudes towards arbitration in general. Therefore, concerted steps need to be taken by all stakeholders for ballooning the institutional arbitration mechanism in our country. We need an arbitration bar having detailed knowledge and training of the arbitration jurisprudence who can work in perfect coordination with proficient institutions of arbitration for the burgeoning of institutional arbitration in our country. Another important factor that will prove to be beneficial for the arbitration regime in our country is the utilization of block chain, artificial intelligence for the selection of arbitrators and to boost document collection system, which will prove to be trailblazing for arbitration mechanism in our country. The arbitration jurisprudence of our country will surely make a complete headway internationally provided all stakeholders take united steps and rise to the occasion for the evolution and growth of arbitration in India.
The author is a Fourth Year law student at Lloyd Law College, Greater Noida. The author's views are Personal.