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Global Outlook sponsored briefing: Reformation and evolution of the arbitration laws in India

The Indian courts are proposing new amendments to legislation surrounding arbitration in India to encourage a positive pro-arbitration approach

The arbitration regime in India has undergone evolutionary change in the last few years. The arbitration laws in India have been made more flexible with time, to attract international parties to choose India as their preferred seat for international arbitration.

Nevertheless, the Indian legal system has often appeared non-conducive to cross-border arbitration and has been criticised for interfering with international awards and the extra-terrestrial application of domestic laws, even in foreign seat arbitrations. However, recently with the Daiichi Sankyo judgment of the Hon’ble Delhi High Court, among certain other judgments, India has made its mark in the race to be a preferred seat for high-end arbitration.

Following the 2015 amendment (the Amendment Act) to the Arbitration and Conciliation Act 1996 (the Act), many heartening changes have been brought about. The new purposive interpretation by the judiciary has been the most important improvement in the post-amendment era of arbitration in India. For instance, s17(2) of the Act has been amended to enable order of the arbitral tribunal to be enforced as an order of the court. Now, s36 of the Civil Procedure Code 1908 of India states that any order of the court will be enforced as a decree of the court in terms of Order XXI; thus, bringing the order of the Arbitral Tribunal at parity with a decree of a court, to be enforced with the same effect.

Recently, for the first time, in the Hon’ble Delhi High Court, a petition was filed by Singh & Associates (the firm) that the Hon’ble Court was in agreement to list as an enforcement petition and accordingly the court directed the other party to pay the amount, ie INR 197.81 crores passed by the Hon’ble Tribunal as interim relief. In NTPC v Jindal ITF, the firm also succeeded in securing an award of Rs.158.5 crores for the client under the provision of s17 of the Act. The judiciary’s approach in interpreting s17 of the Act has been appreciative and supportive of parties and alternative dispute resolution (ADR) mechanisms.

Furthermore, in KMB-ERA (JV) v Airport Authority of India, Indore, argued by the author hereof, the Hon’ble Court was pleased to hold that the limitation aspect of claims cannot be barred in terms of a limitation provision as provided in a contract, as such a clause of a limiting nature comes under the scope of s28 of the Indian Contracts Act 1872. The Hon’ble Supreme Court of India also upheld the same view.

The Hon’ble Delhi High Court in another recent judgment, Daiichi Sankyo v Malvinder Mohan Singh, passed on 31 January 2018, refused to intervene in the foreign arbitral award passed in the favour of Daiichi Sankyo. The court upheld the international arbitral award of Rs.3,500 crores against the respondents for concealing information about erstwhile Ranbaxy Laboratories. The High Court also held that the award was enforceable in India however, it concluded that the award was not enforceable against five minors, including the respondent’s children, as article 15, 39(e), 39(f) and 45 of the Constitution of India empowers the state to make special provisions for the protection of children.

In another matter of National Highways Authority of India v Gwalior Bypass Project, a petition under s14 of the Act was filed before the Hon’ble Delhi High Court praying for termination of a mandate of the Arbitral Tribunal questioning the authenticity and form of the declaration filed by the Ld. Arbitrators under s12 of the Act. The Hon’ble Court appreciated the arguments advanced by the team of Singh & Associates led by the author, and held that the declaration of the Ld. Arbitrators was in the form specified in the sixth schedule of the Act. It was further held that a reading of explanation-1 and explanation-2 to s12 of the Act shows that while giving a disclosure in the form specified in the sixth schedule, the arbitrator would keep in mind the grounds stated in the fifth schedule as a guide. This, however, does not mean that while giving a disclosure in the form specified in the sixth schedule, the arbitrator must also separately refer to each and every ground that has been stated in the fifth schedule.

Often, new amendments are introduced with the intention to address old issues; but sometimes end up bringing fresh ones to the table. After the 2015 amendment to the Act, the most hotly debated issue was whether the new amendments were to apply retrospectively or prospectively. The said issue came up before a lot of high courts and the view was widely divided. While most high courts took a view that the amendments would apply to arbitrations which commenced after 23 October 2015 and court proceedings such as s9 and s34 proceedings etc. that commenced after 23 October 2015 (even if the arbitration proceeding itself would have been initiated pre-23 October 2015), there were high courts with a dissenting view that the amendments would not apply to any proceedings (including court proceedings) where the arbitral proceedings had been initiated before 23 October 2015.

However, the controversy was finally put to rest recently by the Hon’ble Supreme Court of India with the judgment of Board of Control for Cricket in India v Kochi Cricket Pvt on 15 March 2018, wherein the Hon’ble Court held that laws affected by the Amendment Act would apply to those arbitral proceedings which commenced on or after 23 October 2015 and would apply to those court proceedings (which relate to arbitration) which commenced on or after 23 October 2015. The Hon’ble Supreme Court also opined that the amended s36 of the Act would apply even in cases where application for setting aside the award was filed prior to and was pending on 23 October 2015.

Apart from the above, Indian courts, with the Hon’ble Supreme Court and the Hon’ble Delhi High Court leading the way, were seen to continue with their pro-arbitration stance in various other matters, including:

  • The Hon’ble Supreme Court in the judgment of Centrotrade Minerals and Metal Inc v Hindustan Copper held that a two-tier appellate arbitration mechanism (parties providing for an appeal from the first-tier arbitration to another arbitral tribunal thereby giving two opportunities of arbitration to resolve their disputes) did not violate fundamental policy or the public policy of India.
  • In another matter of Union of India v City Promoter & Buildwell Pvt successfully argued by the firm before the Hon’ble Delhi High Court, a petition under s34 of the Act had been filed challenging part of the claims as awarded by the Ld. Arbitral Tribunal vide the impugned Arbitral Award. The Hon’ble Court however, refused to set aside the award stating that if an arbitrator construes a term of the contract in a reasonable manner, the award cannot be set aside on this ground. The Hon’ble Court further observed that a possible view by the arbitrator on facts has necessarily to pass muster, as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Hence, once it is found that the arbitrator’s approach was not arbitrary or capricious, then he is the last word on facts.

Thereby, as evident from the above examples, the arbitral regime has undergone several pertinent changes in the last couple of years. Furthermore, the Union Cabinet has recently approved a bill, Arbitration and Conciliation (Amendment) Bill 2018, wherein more amendments have been proposed to be made to the arbitration laws in India to make it more conducive to arbitration, both international and national. The key changes proposed are as follows:

(i) Forming an independent corporate body, the Arbitration Council of India (the ACI), for the grading and accreditation of arbitral institutions and to promote and encourage arbitration and other ADR mechanisms.

(ii) Arbitration institutions (designated by the Supreme Court or High Court) would be required to be recognised by the ACI and would be responsible for appointing arbitrators.

(iii) Certain changes have been proposed with regard to the timeline for conducting arbitrations.

(iv) The exclusion of international arbitrations from the timeline of 12 months provided in the Act for completing the arbitral proceeding.

(v) Extension of the timeline for conducting arbitral proceedings from the date of completion of pleadings instead of the date of constitution of the tribunal.

(vi) Changes have been proposed with respect to the confidentiality of arbitral proceedings and immunity of the arbitrators.

In a nutshell, it can be stated that despite India being one of the original signatories to the New York Convention, arbitration in India has not always kept up with the standards of international best practices. However, the last few years have witnessed a momentous positive change in the processes of arbitration in India. With the positive approach of the courts and the Amendment Act in place, there is cause to look forward to best practices being adopted in Indian law in the near future. Exciting times are ahead for Indian jurisprudence and its courts are ready to take on several matters dealing with the interpretation of the new Amendment Act.

Manoj K Singh, founding partner, Singh & Associates Advocates & Solicitors

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