Limitation of Arbitration in Indian Context (1)

7/30/2019 Limitation of Arbitration in Indian Context (1)

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Limitations of Arbitration inIndian Context

Jasman Dhanoa

11A058

Semester V


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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT

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TABLE OF CONTENTS

1. Introduction 3

2. Development of the Law..33. Shortcomings of the 1996 Act4

4. Conclusion..18

5. Bibliography...20


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1. INTRODUCTION

Arbitration, when properly carried out, is an efficacious and alternative method of

dispute resolution. The method of arbitration has evolved over a period of time to help

the parties to speedily resolve their disputes. The Indian Arbitration and Conciliation Act

1996 (the '1996 Act') was enacted with elaborate provisions to cater to the needs of

speedy disposal of disputes. The proceedings under the 1996 Act have become highly

technical and involve considerable prolixity at every stage, providing a variety of legal

traps to the unwary.

In the light of the 1996 Act's main objectives, the courts have had to constantly interpret

the legislative intention for minimizing their supervisory role in the arbitral process.

Tribunals all over the world generally bend over backwards to ensure that the parties'

intention to arbitrate is upheld, as adding unnecessary technicalities disturb the parties'

autonomy of the will. Despite the disquiet expressed about this lack of supervision by

the highest court of the country, namely, the Supreme Court of India, the basic scenario

has not changed.

This paper, while touching upon the development of the arbitration law in India in

Part 1, seeks mainly to highlight the shortcomings in the 1996 Act in Part 2, with the aid

of various important decisions handed down by the Supreme Court of India. The article

concludes that the arbitration regime needs a lot of strengthening if it is really to serve

as a mode of fast track dispute resolution.

2. DEVELOPMENT OF THE LAW

A codified form of arbitration regulations was introduced in India in 1859, as part of the

Code of Procedure of Civil Courts. This Code not only permitted a reference to


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arbitration in pending suits but also provided for reference to arbitration without the

intervention of the court. These provisions, by a trial and error method, reached a

gradual metamorphosis, especially with regard to procedure and the role of courts,

culminating first into theArbitration Act 1899, the operation of which was confined to the

Presidency Towns (Bombay, Calcutta and Madras) and later extended to several

important commercial towns, then into the Code of Civil Procedure 1908and thereafter

theArbitration Act 1940(the '1940 Act').

The 1940 Act was susceptible to numerous anomalies, fallacies, inequities and

shortcomings. Several of its provisions had to be interpreted in the light of case laws

which were not necessarily consistent, which made the 1940 Act itself only a starting

point in trying to understand the correct and complete law relating to arbitration. One of

the main shortcomings of the 1940 Act was that instead of serving as a speedy and

economical remedy, arbitration tended to be a time consuming and costly avenue and

consequently came to be treated only as a one more inning in the match of litigation.

To address these shortcomings in the 1940 Act, in 1995 a new Bill was introduced in

the Indian Parliament, namely the Arbitration and Conciliation Bill 1995. After being

replaced by three Ordinances, the Bill resulted in the 1996 Act on 16 August 1996. In

spite of being passed after three earlier failures, within two years of its enactment,

certain amendments to the 1996 Act were felt necessary by the Law Commission in

1998. However, it was also felt that it may not be appropriate to take up amendments of

the 1996 Act in haste and would perhaps be desirable to wait and see how the courts

grapple with the situations that arise. More than 17 years after the enactment of the

1996 Act, it has failed to achieve its objectives, as discussed below.

3. SHORTCOMINGS OF THE 1996 ACT

Since the passing of the 1996 Act, requests have been voiced for amendments to the

provisions of the 1996 Act, in so far as they related to arbitration. Though the 1996 Act

provides for a challenge in case doubts arise about an arbitrator's independence or


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impartiality, it does not provide for approaching a judicial authority in case the challenge

is not successful. No time limits have been prescribed for the arbitral tribunal to conduct

proceedings and pass the award and further, subsequent to passing of the award, there

is no time limit provided for challenging the award. The 1996 Act does not provide for

the parties to refer to arbitration a dispute which is at any stage of judicial proceeding.

The 1996 Act also lacks a mechanism for enforcement of interim measures ordered by

the arbitral tribunal.

3.1 Judicial Pronouncements

In view of the shortcomings in the 1996 Act, the onus fell on the court to interpret the

1996 Act and draw conclusions, on the intention of the legislature behind certain

provisions, which were either ambiguous or unclear. In conducting this exercise the

Supreme Court has in some cases clarified the law but some of its judgments have

come under severe criticism, as they have deviated from the paramount objectives of

the 1996 Act, thereby derailing the arbitration regime. Some of the key Supreme Court

judgments are analysed below.

3.1.1 App licabi l i ty o f General Provis ions Contained in Part I of th e 1996 Act to

Internat ional Arbi t rat ions

In the case of Bhatia International v Bulk Trading SA1 ('Bhatia International), the

question before the Supreme Court was whether the General Provisions as contained in

Part I of the 1996 Act would apply to an arbitration which does not take place in India.

Whilst keeping in mind the age old adage, that a Court's duty to expound arises with

caution and that the Court should not try to legislate, the Supreme Court in this matter

held that the provisions of Part I would apply to all arbitrations, including international

commercial arbitrations which take place outside India, unless the parties have

expressly excluded by agreement the provisions of Part I.

14 SCC 105: AIR 2002 SC 1432.


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In the aforesaid judgment, the Supreme Court has acted, though reluctantly, in a

legislative capacity rather than judicial capacity. The application of the whole of Part I to

arbitrations held outside India would have, inter alia, the following ramifications.

Firstly, if Part I is made applicable to international commercial arbitrations which take

place outside India, it may be possible for a party to approach the Chief Justice of the

Supreme Court for appointment of an arbitrator or a presiding arbitrator even where the

seat of arbitration is outside India. Secondly, a party can challenge a foreign award as a

domestic award and subsequently resist the enforcement thereof under the provisions

of the 1996 Act.

It is widely observed that the issue in controversy in the aforesaid matter was the

powers of courts in India to grant interim measures of protection in international

arbitration held outside India. The judgment, however, failed to comprehend the true

nature of international arbitration, which is that parties having chosen their venue by

nominating a particular place as the seat of their arbitration implicitly submit to the curial

and procedural law of that venue. Allowing a party to seek judicial intervention from

another Court is inconsistent with the idea of neutrality sought to be achieved by the

parties by having the arbitral tribunal located at a place other than their home

jurisdiction.

In view of the ultimate conclusion in Bhatia International, that Part I would apply to

foreign awards, recently the Supreme Court in Venture Global Engineering v Satyam

Computer Services Ltd2went a step further and held that a foreign award rendered in

London was amenable to challenge in Indian courts under the provisions of the 1996

Act. Also on similar lines is another recent judgment rendered by the Supreme Court in

Citation Infowares Ltd v Equinox Corporation3 , where it was held that in the absence of

any express or implied exclusion of provisions of Part I of the 1996 Act by agreement

2(2008) 4 SCC 190.

3(2009) 7 SCC 220.


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between the parties concerned, the Supreme Court had jurisdiction to appoint an

arbitrator.

The 1996 Act provides a unique unified legal regime for domestic as well as

international arbitration based on the premise that what is good for international

arbitration is also good for domestic arbitration. However, this approach adopted under

the 1996 Act, while attempting unity between the two types of arbitrations, has lost out

on the nuanced approach that is required in regulating these two very different types of

dispute resolution mechanisms. This has created a legal quandary. While an

interventionist philosophy may be justifiable for purely domestic arbitrations, this is

antithetical to the ethos of international commercial arbitration. The Courts feel helpless

in this situation. Judicial authorities deciding in light of particular fact situations, whether

domestic or international, find their decision to be perceived as either too broad or too

narrow on whether it is seen from the prism of domestic or international arbitration. This

fundamental defect resonates through all the perceived anomalies of the 1996 Act and

the seemingly erroneous judicial decisions by the Supreme Court.

3.1.2 Judic ial Autho ri t ies' Power to Refer Parties to Arb itration Where There is an

Arbi t rat ion Agreement

In P Anand Gajapathy Raju v P V G Raju4, in view of the ambiguity in s. 8, dealing with

the powers of judicial authorities to refer parties to arbitration where there is an

arbitration agreement, the Supreme Court held that the provision would be applicable

not only to arbitration agreements entered into before the commencement of the suit or

other proceedings but also to those entered into pending a suit or other proceedings.

Additionally, s 42 of the 1996 Act confers exclusive jurisdiction on the court where any

application has been made under Part I. The objective of this provision is to prevent

forum shopping and minimize hardship to parties by restricting them to only one court

4(2000) 4 SCC 539.


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for all proceedings relating to the arbitration. In view of the broad language of the

section, the Supreme Court in the aforesaid judgment made an observation that

applications under s 8 would not attract the exclusivity rule as provided in s 42. Despite

the aforesaid judgment there is still some uncertainty on this issue also since cause of

action may arise in jurisdiction of various courts and a party may file an application for

interim measures in an inconvenient court and create delays and needless trouble.

Given such a possibility, the current broad drafting of s 42 is felt unsuitable to tackle

modem commercial realities.

It would not be out of context to add here that the 1996 Act does not define 'judicial

authority' and the Supreme Court in a recent decision, Morgan Securities and Credit

Pvt Ltd v Modi Rubber Ltd5, held that the expression would have to be interpreted

having regard to the purport and object for which the 1996 Act was enacted.

3.1.3 Parties May Ap ply to Court fo r Interim Measures

The Supreme Court in Sundaram Finance v NEPC India Ltd6 held that a party may

invoke s 9 of the 1996 Act, which provides for interim measures, even before the arbitral

proceedings have been formally instituted. Under this section, a claimant may apply to

the Court for a wide range of interim or provisional measures without prejudicing her or

his right to prosecute her or his substantive claims by means of arbitral proceedings.

This is a serious lacuna under the scheme of the 1996 Act, as the aforesaid provision

may be misused by the parties. A party may not take any initiative to have the arbitral

tribunal constituted prior to obtaining an interim measure and may unnecessarily delay

the dispute resolution process. Therefore it is submitted that suitable amendments

should be made in the 1996 Act to make it mandatory for a party who has obtained

interim relief from a court to constitute the arbitral tribunal in an expeditious manner.

5(2007) 2 Company Law Journal 401.

6(1999) 2 SCC 479.


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3.1.4 Recourse to Cour t against an Arb itral Award

In Narayan Prasad Lohia v Nikhunj Kumar Lohia7, the parties had agreed upon two

arbitrators in the arbitration agreement and objection to composition of the arbitral

tribunal was not taken up before the arbitral tribunal within the prescribed time. The

Supreme Court held that, arbitration being a creature of the agreement between the

parties, so long as the composition of the arbitral tribunal was in accordance with the

agreement, s 34 (which provides for recourse to a Court against an arbitral award) does

not permit challenge to an award merely on the ground of composition of an arbitral

tribunal and that a challenge can be maintained only if the agreement was in conflict

with the provisions of the Part I of the 1996 Act.

It was further held that if the agreement permits the parties to appoint an even number

of arbitrators contrary to the provisions of the 1996 Act, such arbitral tribunal would be

validly constituted and the validity of an arbitration agreement is not dependent on the

number of arbitrators specified therein.

It can be observed that the aforesaid decision of the Supreme Court is not in

consonance with the scheme and language of s 10 of the 1996 Act, which mandates

that the number of arbitrators shall not be an even number. It has in effect brought back

the institution of umpire, which was deliberately given up by the legislature in favor of an

arbitral tribunal comprising of sole or an odd number of arbitrators.

3.1.5 App ointment of A rbi t rators

Section 11 of the 1996 Act empowers the Chief Justice of the High Courts in domestic

arbitrations and the Chief Justice of India in international arbitrations to appoint an

arbitrator or presiding arbitrator, in the circumstances set out in the section, if and when

the parties are unable to agree on a procedure for the appointment or the two

nominated arbitrators fail to agree on the appointment of a presiding arbitrator.

7(2002) 3 SCC 572.


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Though this section was intended to set the arbitral process in motion expeditiously, it

has been the subject matter of considerable litigation right from inception of the 1996

Act, resulting in long delays in the constitution of the arbitral tribunals and the

commencement of the arbitral proceedings.

In Ador Samia Pvt Ltd v Peekay Holdings Ltd8and Konkan Railway Corporation Ltd

v Mehul Construction Co9, the Supreme Court held that orders passed by the Chief

Justice under s 11 was administrative in nature. It was also held that since the Chief

Justice and her or his designate acted in an administrative capacity, the order could not

be said to have been passed by a court or a tribunal and hence a special leave petition

against such an order was not maintainable before the Supreme Court under Article 136

of the Constitution of India.

The controversy with respect to the nature of the powers of the Chief Justice under s.11

did not come to an end with the aforesaid decisions and it was referred to a

constitutional bench (comprising of five judges) for reconsideration in Konkan Railway

Corporation Ltd v Rani Construction Pvt Ltd.'10 The constitutional bench affirmed the

aforesaid three judge bench decision.

However, this decision was short lived. The controversy was again revived and referred,

only this time to a seven judge bench of the Supreme Court in SBP & Co v Patel

Engineering Ltd.11 ('Patel Engineering') and by a majority of six to one this bench

overruled the decision of the five judge bench.

The Supreme Court in Patel Engineeringheld that the power exercised by the Chief

Justice under s 11(6) is a judicial order and the Chief Justice has to decide whether (a)

the party making the application has approached the right High Court; (b) the applicant

has satisfied the conditions provided in the section for appointing an arbitrator; (c) there

8(1999) 8 SCC 572.

9(2000) 7 SCC 201.

10(2002) 2 SCC 388.

11(2005) 8 SCC 618.


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is an arbitration agreement as defined in the 1996 Act; (d) the person making the

application is a party to such agreement; and (e) the claim was dead or live. To

ascertain all these factors, the Chief Justice can proceed on the basis of sworn

affidavits, documents or even take evidence.

It was widely observed that the decision in Patel Engineering is contrary to the scheme

of the 1996 Act. The Supreme Court has virtually rewritten ss. 11 and 16 of the 1996

Act, when it held that the arbitral tribunal will have the jurisdiction to decide all matters

as contemplated by s 16 - the only exception being those cases where the arbitral

tribunal has been constituted by the parties without having recourse to s 11 - and on the

validity of the arbitration agreement and other jurisdictional issues it would be

conclusive (except when a remedy is available by special leave to appeal to the

Supreme Court in case of a decision of the Chief Justice of the High Court). This is

widely seen as a significant setback to the concept of one stop adjudication

contemplated by the scheme of the 1996 Act.

The other serious ramification under the scheme of the 1996 Act is that all contentious

jurisdictional issues, including objections with respect to the existence and validity of the

arbitration agreement, can be raised before the arbitral tribunal and if any party wants to

challenge such decisions it could do so. This remedy would not be available if the

appointment of an arbitrator is made by the Chief Justice under s. 2 and such decision

becomes final and conclusive and cannot be challenged even in an application to set

aside the award. As a consequence of the aforesaid decision, s. 34 dealing with

application for challenge of an award has effectively been amended to the extent that

certain grounds of challenge are no longer available in awards made by arbitral

tribunals constituted with the aid of s 11.

The consequences flowing from the aforesaid decision in Patel Engineering can be

seen from two recent judgments of the Supreme Court, in Union of India v V.S

Engineering Pvt Ltd,12where the Supreme Court distinguished Patel Engineering on the

12(2007) Company Law Journal126.


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issue of appointment of arbitrators by administrative authorities such as railways, and in

National Thermal Power Corporation Ltd v Siemens Atkeingesellschaft,13 where the

Supreme Court held that Patel Engineeringeffectively confined the operation of s 16 to

cases where the arbitral tribunal was convened without reference to the Chief Justice

under s 11(6) of the 1996 Act. In other words, in a case where the parties have

constituted the arbitral tribunal without recourse to section 11(6) of the 1996 Act, they

still have the right to question the jurisdiction of the arbitral tribunal, including the right to

invite a ruling on any objection with respect to the existence or validity of the arbitration

agreement.

As a result of the decision in Patel Engineering, the decision of the Chief Justice on vital

issues like the existence of a valid arbitration agreement and other jurisdictional issues

will become final and conclusive without a regular trial by the arbitral tribunal or a court.

If the legislature intended to give finality to the decision on such vital issues as those

examined above, it would have conferred the power under s ll on the courts as it has

done in other sections and not on the Chief Justice or any person or institution

designated by him or her. The legislature must have been aware that the Chief Justice

or any other person or institution cannot decide on such issues finally and conclusively.

Thus, there has been a widespread campaign for the majority decision in Patel

Engineeringto be the subject of immediate legislative intervention or reconsideration by

a still larger bench of the Supreme Court.

3.1.6 Power of Jud icial Auth ori t ies to Refer Parties to Arb itration un der Part II of

the 1996 Ac t

In Shin-Etsu Chemical Co Ltd v Aksh Optlfibre Ltd14, the Supreme Court had to consider

whether the finding of the judicial authority under s 45 of the 1996 Act, as to whether the

arbitration agreement, falling within the definition of s 44 of the 1996 Act, is or is not 'null

and void, inoperative or incapable of being performed', should be a final expression of

13(2007) 5 Company Law Journal 83.

14(2005) 7 SCC 234.


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the view of the judicial authority or should rather be a prima facie view formed without

full-fledged trial.

By a majority, the Supreme Court answered the aforesaid question by holding that sub-

section (3) of s 8 in Part I of the 1996 Act envisages that even in a situation where an

application to the court has been made under sub-section (1), the arbitration may

commence, continue and even an arbitral award be made. This was obviously meant to

cut down delay in the conclusion of the arbitral proceedings. There is conspicuous

absence of a corresponding provision either in s 45 or in the rest of the provisions in

Part II. This legitimately gives rise to an inference that once the arbitral agreement has

been subjected to scrutiny before the court under s 45of the 1996 Act, conceivably, the

arbitral proceedings could be stayed till the outcome of the decision of a court on the

nature of the arbitral agreement.

If it were to be held that the finding of the court under s 45 should be a final and

determinative conclusion, then it is obvious that, until such a pronouncement is made,

the arbitral proceedings would have to be in limbo. This evidently defeats the credo and

ethos of the 1996 Act, which is to enable expeditious arbitration without avoidable

intervention by judicial authorities.

3.1.7 The 1996 Act as Sp ecial Legislatio n

In Gujarat Uraja Vikash Nigam Ltd v Essar Power Ltd15, the issue adjudicated before

the Supreme Court was whether the provisions for dispute resolutions contained in the

Indian Electricity Act 2003 would prevail over s 11 of the 1996 Act. In complete

disregard of the dispute resolution clauses in the executed Power Purchase Agreement

between a State Electricity Board and an Independent Power Producer and applying the

principle of generalia specialibus non derogant (specific prevails over general) the

Supreme Court held that any dispute between these two parties will have to be

adjudicated by the State Electricity Regulatory Commission as per the provisions of the

15(2008) 4 SCC 755.


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Electricity Act, since the Electricity Act is a specialised statute and will override the

general provisions contained in the 1996 Act.

The immediate implication of the aforesaid judgment is to render the dispute resolution

mechanism contractually agreed between the parties in all the existing Power Purchase

Agreements inoperable, despite the parties voluntarily choosing arbitration as their

preferred mode of dispute resolution.

In handing down the aforesaid judgment, the Supreme Court had not taken into

consideration s 5of the 1996 Act, which provides that all other laws for the time being in

force have been excluded from operation in so far as they relate to intervention by any

judicial authority. Additionally, any judicial authority faced with a matter that is the

subject of an arbitration agreement is statutorily mandated by s 8 to refer the parties to

arbitration. Both these provisions apply to any judicial authority performing an

adjudicatory function, including the State Electricity Regulatory Commission under the

Electricity Act.

It is even more ironic that in another decision of the Supreme Court applying the very

same principle of generalia specialibus non derogant - namely, Consolidated

Engineering Enterprises v Principal Secretary, Irrigation Department16 - the Court

decided the 1996 Act is in fact a specialised act. It is submitted that conflicting decisions

like these are only adding to the already existing uncertainty and ambiguity in the

current form of the 1996 Act.

16(2008) 7 SCC 169.


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3.1.8 Scope for a Court to Enter tain an App l icat ion for Sett ing Asid e an Arbi t ral

Award

One of the main objectives of the 1996 Act was to minimize the supervisory role of the

courts in the arbitral process. In that light, s 34 of the 1996 Act was modeled on Article

34 of the UNCITRAL Model Law. It permitted challenge to an award only on very limited

grounds, such as invalidity of the arbitration agreement, excess of jurisdiction as to the

scope of the arbitration and conflict with the public policy of India.

The Supreme Court in Oil & Natural Gas Commission v SAW Pipes Ltd17, ('SAW Pipes')

examined the jurisdiction of the courts under s 34 of the 1996 Act. It was held that if the

award is (a) contrary to the substantive provision of law; (b) against the provisions of the1996 Act; or (c) against the terms of the contract, it would be 'patently illegal', which

could be interfered with under s 34, meaning thereby that such a patently illegal award

will be liable to be set aside on the grounds of 'public policy' under s 34. While doing so

the Supreme Court made it abundantly clear that in order to fall within the ambit of

public policy of India, the illegality must go to the root of the matter and if the illegality is

of a trivial nature it cannot be held that the award is against public policy. The nature of

patent illegality has been clarified further, in that the award should be so unfair or

unreasonable that it shocks the conscience of the court and such an award is opposed

to public policy and is required to be adjudged void.

The aforesaid decision was extensively criticised as bringing back by the interpretative

process, the much abused ground of 'error of law' for setting aside an award, which had

been done away with by the 1996 Act. While the SAW Pipes decision discusses the

grounds for appeal against a domestic arbitral award, the concern also is that the

reasoning could just as well apply to foreign arbitral awards. This could therefore mean

that the Courts could give the same wide interpretation to the grounds available for the

setting aside of a foreign arbitral award as they have given and are prone to giving in

respect of domestic arbitral awards.

17(2003) 5 SCC 705.


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There is a danger that the concept of illegality introduced by the Supreme Court as a

ground of challenge will convert the proceedings under s 34 of the 1996 Act into a full

fledged appeal and frustrate the very purpose of the 1996 Act. According to critics, the

aforesaid judgment showed the inability of the courts to reconcile with the limited role

assigned to them in arbitrations.

Another criticism of s. 34 of the 1996 Act is its suspensory effect on the execution of the

arbitral award. In National Aluminium Co Ltd v Pressteel & Fabrications Pvt Ltd18, the

Supreme Court held that there is an automatic suspension of the execution of the award

the moment an application challenging the said award is filed under s 34. In such an

event, if any interim orders or measures are to be taken, the parties have no recourse

but to wait till the application under s 34 is decided.

It has been widely argued that the legislature should amend s 34 to bring more clarity

on the various instances which could confer a right on a party to challenge an award.

It would avoid wasting the valuable time of the courts and will prevent trivial issues

being challenged under the aforesaid provision. For instance, in Sanshin Chemicals

Industry v Orient Carbons & Chemicals Ltd19, a simple issue of venue for the arbitration

was challenged and the same had to be decided ultimately by the Supreme Court.

Though the Supreme Court expressed its hope that necessary steps would be taken by

the authorities concerned at the earliest to bring about the required change in the law to

empower courts to pass suitable interim orders in s 34 cases, the suggested change in

law is yet to occur.

18(2004) 1 SCC 540.

19(2001) 3 SCC 341.


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3.1.9 Relief from Appellate Orders

In Shin-Etsu Chemical v Vindhya Telelinks20, the Supreme Court had to decide, whether

a person aggrieved by an appellate order passed by a District or Civil Court under s 37

of the 1996 Act could challenge it by filing a special leave petition before the Supreme

Court. It was held that the aggrieved party could not approach the Supreme Court

directly against such an order and would have to first approach the High Court either by

way of a revision under the Code of Civil Procedure 1908 or under Article 227 of the

Constitution of India, which grants supervisory powers to the High Court.

While the 1996 Act clearly excludes the applicability of Civil Procedure Code 1908, the

Supreme Court in the aforesaid judgment has observed that the jurisdiction of the High

Court shall not stand superseded under the 1996 Act, since the 1996 Act does not

contain any express bar against exercise of revisional power by the High Court. Section

37 of the 1996 Act prevents a party from filing a second appeal, but allows the

aggrieved party to appeal to the Supreme Court. The aforesaid provisions in the 1996

Act are specifically provided to avoid multiple rounds of litigations. However, this

decision does not further the objective of this legislation, which is minimal judicial

intervention and maximum judicial support.

Apart from the anomaly in the 1996 Act in its current form, one of the reasons for the

aforesaid approach by the Supreme Court is that, normally, the majority of the arbitral

tribunals which pass an award or any interim orders comprise of retired Supreme Court

Judges and or retired High Court Judges. Normally the judge presiding in a District

Court would either avoid overruling decisions which have been challenged before it or

not state any reasons for dismissal of an appeal. Given this situation, the Supreme

Court, in order to avoid becoming a court of first appeal and getting into the entire

details of the matter, has directed the aggrieved parties to approach the High Court for

one more round of litigation.

20AIR (2009) SC 3284.


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The 1996 Act does not provide any clear provision on whether an aggrieved party can

approach a High Court under the supervisory jurisdiction or the Supreme Court by a

special leave petition against an order of a district judge. It also does not lay down what

kind of orders would be appealable before the Supreme Court.

Though the Supreme Court in Rashtriya Ispat Nigam Ltd v Verma Transport Co.21

observed that the 1996 Act was enacted by the Indian Parliament in the light of the

UNCITRAL Model Rules, in certain respects, the Parliament of India while enacting the

1996 Act had gone beyond the scope of the said rules. As a consequence of this, the

Courts have taken upon themselves the role of the legislature in interpreting the 1996

Act. In some cases it has resolved and in others it has added to the ambiguity.

4. CONCLUSION

In view of the various shortcomings in the provisions of the 1996 Act, as discussed

above, the Law Commission in 2001 recommended amendments to Part I of the 1996

Act. It was widely felt that these recommendations, which sought to provide all

pervasive court supervision and control over the conduct of the arbitral proceedings,

would take us back to the era of court structured and court controlled arbitration -

something that was supposed to have effectively ended with the coming into force of the

1996 Act.

In 2004 the Government of India constituted a Committee headed by Justice Saraf to

make an in-depth study of the implications of the recommendations of the aforesaid Law

Commission and also all the aspects of the Arbitration and Conciliation (Amendment)

Bill 2003 and make suggestions to the government. In its report, submitted in 2005, the

committee made recommendations which largely attempted to protect the basic

features like party autonomy, maximum judicial support and minimum judicial

intervention contained in the 1996 Act.

21(2007) 6 Company Law Journal 240


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The key highlights of this committee's recommendations included constitution of

separate courts to specifically deal with arbitration matters, deeming of international

commercial arbitration held in India as domestic arbitration, provision for maintainability

of revision, enabling reference to arbitration in pending legal proceedings, providing

mechanisms for the enforcement of interim measures, additional grounds for

challenging a domestic award and providing for constitution of fast track arbitral tribunal

for fast track arbitration. These recommendations have not yet taken the shape of a law.

The greatest single virtue of a strong legislature is not what it can do, but what it can

prevent. The paramount objectives of enacting the 1996 Act were party autonomy,

maximum judicial support and minimum judicial intervention. The courts should

undoubtedly be reluctant to extend the scope of a statute beyond the contemplation of

the legislature on difficult matters of law or policy. However, this is what has happened

with judicial attitudes to the 1996 Act. An analysis of the aforesaid decisions handed

down by the Supreme Court makes it evident that the 1996 Act needs a serious rethink

in order to achieve the objectives for which it was enacted.

The first Chancellor of the German Empire, Otto von Bismarck, is said to have quipped,

'Laws are like sausages - it is better not to see them being made'. With due respect, our

law makers should pay more attention while enacting statutes, which would further the

objective of fast track dispute resolution and reduce the time taken in litigation. If some

fine tuning of the 1996 Act is undertaken, it could remove the pitfalls and go a long way

towards strengthening the arbitration regime in India.


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5. BIBLIOGRAPHY

LIST OF CASES

1. Bhatia International v Bulk Trading S.A., 4 SCC 105: AIR 2002 SC 1432

2. Venture Global Engineering v SatyamComputer Services Ltd, (2008) 4 SCC 190.

3. Citation Infowares Ltd v Equinox Corporation, (2009) 7 SCC 220

4. P Anand Gajapathy Raju v P V G Raju, (2000) 4 SCC 539.

5. Morgan Securities and Credit Pvt Ltd v Modi Rubber Ltd, (2007) 2 Company Law

Journal 401.

6. Sundaram Finance v NEPC India Ltd, (1999) 2 SCC 479.

7. Narayan Prasad Lohia v Nikhunj Kumar Lohia, (2002) 3 SCC 572.

8. Ador Samia Pvt Ltd v Peekay Holdings Ltd, (1999) 8 SCC 572.

9. Konkan Railway Corporation Ltd v Mehul Construction Co., (2000) 7 SCC 201

10.SBP & Co. v Patel Engineering Ltd., (2005) 8 SCC 618

11.Union of India v V.S Engineering Pvt Ltd, 2007)] Company Law Journal126.

12. National Thermal Power Corporation Ltd v Siemens Atkeingesellschaft, (2007) 5

Company Law Journal 83.

13.Shin-Etsu Chemical Co Ltd v Aksh Optlfibre Ltd., (2005) 7 SCC 234.

14.Gujarat Uraja Vikash Nigam Ltd v Essar Power Ltd, (2008) 4 SCC 755.

15.Consolidated Engineering Enterprises v Principal Secretary, Irrigation Department,

(2008) 7 SCC 169.

16. Oil & Natural Gas Commission v SAW Pipes Ltd(2003) 5 SCC 705.

17.National Aluminium Co Ltd v Pressteel & Fabrications Pvt Ltd(2004) 1 SCC 540.

18.Sanshin Chemicals Industry v Orient Carbons & Chemicals Ltd., (2001) 3 SCC 341.

19.Rashtriya Ispat Nigam Ltd v Verma Transport Co., (2007) 6 Company Law Journal

240.


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ARTICLES

1. RISHI KUMAR DUGAR, Derailment in Fast Track Dispute Resolution, Law Asia

Journal, 2010 Lawasia J. 129 2010.

2. SUMEET KACHWAHA AND DHARMENDRA RAUTRAY, Kachwaha & Partners,

Arbitration in India: An Overview, available at

http://www.kaplegal.com/index.php?option=com_members&view=members&id=3

3. GEOFFREY S. STEWART & KARTHIK KUMAR,Dispute Resolution Issues in IndianCross-Border Transactions, available at http: //www.

jonesday.com/dispute_resolution_issues/.

4. MARTIN DOMKE, Recent Developments in International Commercial Arbitration,

N.Y.U.Journal of International Law and Politics, 2 N.Y.U. J. Int'l L. & Pol. 267 (1969).

5. TOM CANNING, The Supreme Court of India upholds the sanctity of internationalarbitration, Milbank, Tweed, Hadley & McCloy LLP Publications, available atwww.milbank.com/.../Indian-Supreme-Court-Upholds-The-Sanctity-of/.

6. BADRINATH SRINIVASAN, Arbitration and the Supreme Court: a tale ofdiscordance between the text and judicial determination, 4 NUJS L. Rev. 639 2011.

7. SUMEET KACHWAHA, The Indian Arbitration Law: Towards a New Jurisprudence,

10INT. A.L.R. 13, 17 (2007).

8. PRABHASH RANJAN & DEEPAK RAJU, The Enigma of Enforceability ofInvestment Treaty Arbitration Awards in India, 6ASIAN J. OF Comp. LAW ART. 5(2011).

9. REPORT OF JUSTICE SARAF COMMITTEE ON ARBITRATION (January 29,2005), available at lawmin.nic.in/la/consultationpaper.pdf.

BOOKS

1. DAVID ST. JOHN SUTTON, Russell on Arbitration, 21st ed, 1996, Sweet & Maxwell,

London

2. SAHARAY H.K., Law of Arbitration and Conciliation, Eastern Law House, New Delhi,

2001
http://www.kaplegal.com/index.php?option=com_members&view=members&id=3http://www.kaplegal.com/index.php?option=com_members&view=members&id=3


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3. JUSTICE DR. B.P. SARAF AND JUSTICE S.M. JHUNJHUNWALA, Law of

Arbitration and Conciliation, 4th ed., 2006, Snow White Publishing Ltd.

4. MALHOTRA O.P., Law and Practice of Arbitration and Conciliation 1st ed., 2002,

Lexis Nexis Butterworths Wadhwa, Nagpur (India).

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Limitation of Arbitration in Indian Context (1)

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