In spirit, the purpose of alternatives to the court process is speedy, efficient and cost-effective dispute resolution. A consequence of arbitration in India defeating this purpose is the “well intended” Section 29A of the Arbitration and Conciliation (Amendment) Act, 2015 (AC 2015).
Section 29A imposes a 12 month time frame on completion of an arbitration proceeding, from the date of reference of case to arbitration (i.e., from the date on which the arbitration notice is issued). The question here is whether Section 29A can pursue a role larger than imposing deterrence to improve the quality of the arbitration process.
While Section 29A takes adequate care of the time bound element, to ensure that arbitrations are not unending, it also provides for a cost incentive, which requires arbitrators to hasten case disposal. Here, taking cue from the efficacy of institutional arbitration in other jurisdictions, Section 29A seems to be an attempt to introduce procedure into an ad hoc process which deviates from the purpose of the Indian arbitration legislation that provides flexibility to parties through contract and the arbitral tribunal to determine its own process of arbitration.
On a literal reading, the provision seeks to increase judicial intervention by imposing an obligation on the court to assess and scrutinize the validity and requirement to extend the time for arbitration with “sufficient cause” under Section 29A (5). It also does not deal with the deadlock created during pendency of the case before the appropriate court. Further, the language contained in Section 29A(4) which states that the “mandate of the arbitrator(s) will terminate” opens a pandora’s box waiting for a future constitutional challenge. A holistic reading of Section 29(A) therefore proves it to be a provision of ideology as opposed to a provision of strategy.
One of the purposes of arbitrations is to provide a focused dispute resolution avenue to parties with complex and multi-faceted cases. Parties to contract negotiate, discuss and thereafter agree upon a provision of arbitration. Here, time imposition for completion of a case becomes self-defeating. Section 29A allows for a petition to the appropriate court for time extension for arbitration. This again threatens to become a likely norm. Assuming for a second that the court refuses to provide time extension, what if the arbitration without fault of parties, counsel and the arbitral panel cannot be completed within the remaining time? Is penalty justified in such a circumstance? As a concept, Section 29A is borne out of institutional frameworks (i.e., organisations such as LCIA, SIAC and HKIAC) who have procedure and rules that have to be followed in an arbitration that mandate timely resolution of a case at arbitration. The inability of Section 29A to address the absence of a quality arbitration service provider and yet provision for timely “execution” is myopic and from a practice standpoint may not serve the larger purpose of bettering the practice of arbitration in India.
The purpose of arbitration is not only to cater to only a particular population but to make it available to the bourgeois, including smaller claim cases where the suitability of arbitration can be determined by legal advisors. Ad hoc arbitration plays a fundamental role in catering to this audience by not providing for fee fixations. In this background, Section 29A could be viewed as a bold move though without an implementation action.
At present Section 29A is prospective in application (as clarified through intervention of the Madras High Court) and its efficacy as a process stimulator of effective and efficient arbitration is yet to be tested in detail. Expectations to meet quality, cost and time in parallel have been placed on the system of arbitration which may be too soon to envisage without weeding out the issues and roadblocks in existing arbitration regime in India. For advisors on commercial and contractual matters, options of established institutions such as SIAC and LCIA or usage of their rules of arbitrations are suggested, given the procedural clarity as well the fee quotes that are set out therein and also the case / client type which allows monetary flexibility to make such decisions. Section 29A to this extent may not be able to increase popularity in usage of the arbitration process under AC 2015.
As it stands the provision requires framework guidelines to ensure that the provision is not in vain and the merits of it are not subjected to perennial scrutiny. It is worthwhile to bear in mind that good law and effective institutions / service providers are not interchangeable, and today while India battles delocalisation of arbitration to gear towards an international arbitration hub, the need to improve the domestic arbitration system cannot be overlooked.
Ishana Tripathi is an Associate at J.Sagar Associates.
[The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of LiveLaw and LiveLaw does not assume any responsibility or liability for the same].