Saturday, March 7, 2015

Vacancy: LCIA-India

Below is a vacancy announcement for the position of Deputy Registrar at LCIA-India.


Deputy Registrar of LCIA India 
LCIA India are looking for an enthusiastic and motivated candidate for the demanding, challenging and rewarding role of Deputy Registrar, who will assist, and deputise for, the Registrar in the administration of disputes referred to LCIA India, and in the day-to-day management and promotion of LCIA India, as instructed by the Registrar.

About LCIA India 
LCIA India was established in 2009 as the first independent overseas office of the London Court of International Arbitration (LCIA), and has already become recognised as one of India’s foremost arbitral institutions. 
Based in New Delhi, LCIA India offers all the services offered by the LCIA, and with the same care to ensure the expeditious, cost effective and neutral administration of arbitration, mediation and other forms of ADR conducted under its auspices, for contracting parties of all nationalities.

How to Apply 
For further information and to apply for this position, please visit the LCIA India website:

Closing Date for Applications 
20 March 2015

Tuesday, February 3, 2015

Academy on International Trade Law and Policy

Below is the announcement of the Joint Academy on International Trade Law and Policy. The course which otherwise is very expensive, is being offered to Indians interested in this area at a very reasonable cost. 

The Centre for WTO Studies, in partnership with the World Trade Institute, Berne is launching the 2nd WTI-CWS Joint Academy on International Trade Law and Policy in New Delhi, from May 25- June 19, 2015. Taught by distinguished academics and practitioners from India and abroad, the course will equip participants with theoretical and practical insights into various issues relating to international trade. The course is open to law students and legal professionals in India. 

Financial benefits include refund of the course fees to student participants successfully completing the course. 

The Call for Application and the Application Form for the can be downloaded from HERE.  Last date to apply is March 15, 2015

Period of Limitation for Enforcement of Foreign Awards in India.

Below is a guest from Vaisakh Shaji. Vaisakh, in this post discusses the unsettled position on application of limitation in enforcing foreign awards in India. 

The question of limitation for enforcement of foreign award is still an unsettled one. The High Courts of Bombay, Delhi & Madras in separate instances have dealt this issue but a different interpretation by each of the courts has added uncertainty.

The Bombay High Court in Noy Vallesina vs Jindal Drugs Limited[1] held that the provision for limitation as provided under article 136 and 137 of the Limitation Act would apply for enforcement of foreign award under Part II Chapter 1 of the Act.

The Court dealt with various contentions regarding the scope of limitation for enforcement of Foreign Award. The parties relied on section 43(1) of the Act which provides that Limitation Act will apply to proceedings made in arbitration as it applies to proceedings in a court. Further the definition of Court in various parts of the Act contemplates the Principal Civil Court of original jurisdiction in a district or the High Court exercising ordinary original civil jurisdiction. By referring to various Supreme Court cases, it was argued that when an application is contemplated by any law to a Civil Court then the provisions of the Limitation Act are applicable.

The Court drew attention to section 46 of the Act, which reads as, “Any foreign award which would be enforceable under this Chapter..[..]” And held that when a foreign award is yet to be found enforceable by a competent court, it cannot be relied on for any purpose in India. The award is not binding on the parties, until it is found to be enforceable in India for the purpose of executing it as a decree or for any other purpose such as using it as defence, set off etc.

The Court further held that, looking at the scheme of sections 47, 48 and 49 of the Act, the principal civil court as defined under explanation to section 47 records a finding that the award is enforceable, that award is deemed to be a decree of that court i.e it is at that point of time that the award becomes a decree of the civil court.

Further, in order to attract application of Article 136 of the Limitation Act, the decree or order of which execution is sought must be a decree or order of any civil court. And necessarily, section 136 would become applicable only after the foreign award is deemed to be a decree of the principal civil court which records finding that the award is enforceable in India. Therefore, once enforceability of foreign award is satisfied by the court under section 49, such decree can be enforced within twelve years.

Secondly, on the issue of making an application for execution of a foreign award, there is no provision given under the Limitation Act. Hence the Court held that, such application will be governed by the residuary Article 137 of the Limitation Act and therefore such application has to be made within a period of three years from the time the right to apply accrues to the party.

Therefore, as per the Court, first a party get a time period of three years to make an application under Article 137 of the Limitation Act, and in the second stage, once the application is determined by the civil court to be enforceable in India, such decree can be executed within a period of twelve years as provided under Article 136 of the Limitation Act.
On the other hand, the Madras High Court in Compania Naviera vs Bharat Refineries Ltd[2], held that a foreign award is already stamped as a decree and the party having a foreign award can straight away apply for enforcement and in such circumstances, the party having a foreign award has twelve years like that of a decree-holder. The Court did not address the issue of limitation for making an application to a civil court under Article 137 of the Limitation Act as decided in Noy Vallesina. Further, it did not clearly determine from what stage the period of limitation would commence.

The Delhi High Court in Hindustan Petroleum vs M/s Videocon Industries Ltd[3] took a different view. The Court held that no limitation period is provided under section 48 of the Act. It stated that the period of limitation provided under Section 34 of the Act in Part I come under the chapter Recourse against Arbitral Award. A similar provision is not provided for under Part II.

Secondly, section 34 provides for a mandatory period of limitation to challenge a domestic award and no such period of limitation is provided for an application under section 48 of the Act. Hence a proceeding is to be launched under section 34 to assail the limitation period, whereas under section 48 it can only be initiated once its enforcement is sought. The Court therefore held that, section 34 is proactive whereas section 48 is reactionary in nature. Further the Court held that the language of section 48 shows that it provides for initiation of independent proceedings for assailing a foreign award before a competent authority/ court and as such proceedings under section 48 cannot be one to assail the foreign award, i.e. to seek the setting aside of the award.

In each of the cases discussed above, the courts have taken different interpretations. The Supreme Court has not specifically dealt with this issue yet. It would be interesting to see if this issue is settled in the near future. Or else, will remain unsettled; similar to the issue regarding multi-tier arbitration as decided by the Supreme Court in Centrotrade Minerals vs Hindustan Cooper Ltd[4] in which a reference to a larger bench is still pending due to difference of opinion by the two-judge bench.

In Conclusion, it can be stated that, as the issue stands today, it will be open to parties to adopt a reasoning which they find suitable based on facts and circumstances.





[1] 2006 (3) ARBLR 510 (Bom)
[2] AIR 2007 Mad 251.
[3] 2012 (3) ARBLR 194 (Delhi)
[4] 2006 (4) ALT 18 (SC) 

Friday, January 9, 2015

What the New Indian Model BIT Might Look Like?

I have written a post for Kluwer Arbitration Blog on the prospects of the new Indian model Bilateral Investment Treaty (BIT).  It can be accessed here.

The post evaluates the possible modifications that are being considered in the new model BIT. While some stipulated modifications are well thought, others may be dwelled into with fresh view. While only the final BIT will clear the clouds, I hope the drafters, after reading the post are able to consider the views as well as the implications of the stipulated modifications. Have a look.

Wednesday, January 7, 2015

Arbitration Amendments: Through Ordinance or Parliament Debate?

Many newspapers, here, here, here, here  and here have reported that the ordinance for change in arbitration law has been passed. The reports also mention that most of the recommendations of the Law Commission of India submitted in its 246th Report have been incorporated. The ordinance however, is not yet publicly available.

I have learnt that the ordinance has not yet been passed as the President has not yet signed it. There is a new report stating that the amendment Bill might now be tabled in the Parliament.

Thursday, January 1, 2015

Happy New Year!!

Wishing all our readers a great year. Thank you for your support and trust. May the year be eventful for all of you! Let 2015 begin! 
Image from here.

Thursday, December 18, 2014

Call for Papers: Indian Journal of Arbitration Law

Below is the Call for papers for the Indian Journal of Arbitration Law:
The Indian Journal of Arbitration Law is a biannual, student reviewed Journal by the Centre for Advanced Research and Training in Arbitration Law of National Law University, Jodhpur.
National Law University, Jodhpur, one of the premier law schools in India, is taking successful initiatives for the promotion of areas related to the specialized fields of law. To strengthen the promotion of knowledge, research and legal interaction in the subject of arbitration law, it has established the Centre for Advanced Research and Training in Arbitration Law. The Indian Journal of Arbitration Law is one such initiative of this centre towards the development of this expert legal arena.
The Journal strives to inculcate the prevalent theories in the field of arbitration with their practical relevance. The editorial board seeks to achieve this feat by including contributions from individuals with varied expertise of practicing arbitration and by focusing on developing trends. In this regard, the board would give due emphasis to the rich thought processes of students of law, who bring to the forefront the innovative academic research currently underway in most law schools all over the world. Inclusion of changing regional trends will play a vital part in understanding the scope and extant of this discipline and would therefore find due importance in the Journal.
The Indian Journal of Arbitration Law is pleased to announce its upcoming issue (Volume 4: Issue 1), which is to be published in April, next year.
Theme: UNCITRAL Model Law’s 30th Anniversary. We also welcome notes on the 246th Law Commission Report.
The Board of Editors cordially invites original, unpublished submissions for publication in the following categories:
- Articles
- Notes
- Comments
- Book Reviews
Manuscripts may be submitted via email to editor.cartal@gmail.com latest by 5th February, 2015.
For further details regarding Editorial policy and submission guidelines please visit the website here.

Wednesday, December 17, 2014

Substitution of Arbitrator(s) by Indian Courts: Aiding, not Intervening

Below is a guest post from Bharatendu Agarwal. Bharatendu did his Bachelors from NLU, Jodhpur and Masters in International Arbitration from Stockholm University. He is currently interning at SIAC.


An earlier post on this blog discussed the Bombay High Court’s decision dealing with the issue of delay in rendering an arbitral award. Here, the Delhi High Court’s decision of terminating a tribunal’s mandate on account of delay in the arbitral proceedings had been highlighted.

In the recent decision of Union of India (UOI) v. U.P. State Bridge Corporation Ltd.[1] the Supreme Court addressed a similar issues with primary focus on the issue of appointing substitute arbitrator(s)/tribunal. This post aims to briefly map out the relevant issues, arguments and legal nuances involved, followed by a short analysis on the case.

Brief Facts and Procedural History

The case revolves around an agreement entered into between the Railway Authority of India (the ‘Railway Authority’) and a Contractor (collectively referred to as the ‘Parties’) for the construction of a railway bridge across river Ganges. This agreement was subject to certain terms and conditions, which provided for an arbitration agreement. The relevant portion of the arbitration agreement reads as follows:-
64.(1)(i) Demand for Arbitration - In the event of any dispute or difference between the parties as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the expected matters referred to in Clause 63 of these conditions, the contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters, shall demand in writing the dispute or difference be referred to arbitration.
...
64.(3)(a)(ii) In cases not covered by Clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below JA grade, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway Officers of one or more departments of the Railway to the contractor who will be asked to suggest to General Manager upto 2 names out of the panel for appointment as contractor's nominee. The General Manager shall appoint at least one out of them as the contractor's nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the presiding arbitrator from amongst the 3 arbitrators so appointed. While nominating the arbitrators it will be necessary to ensure that one of them is from the Accounts department.
...
64.(3)(a)(iii) If one or more of the arbitrators appointed as above refuses to act as arbitrator, withdraws from his office as arbitrator, or vacates his/their office/offices or is/are unable or unwilling to perform his functions as arbitrator for any reason whatsoever or dies or in the opinion of the General Manager fails to act without undue delay, the General Manager shall appoint new arbitrator/arbitrators to act in his/their place in the same manner in which the earlier arbitrator/arbitrators had been appointed. Such re-constituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator(s).
After a while some dispute arose between the Parties and pursuant to the arbitration agreement an arbitral tribunal (the ‘Tribunal’) was constituted in 2007. After the Tribunal’s constitution, four years passed, however the arbitral proceedings were still pending on account of transfers, retirements and adjournments. Frustrated by the delay the Contractor, in accordance with Section 14(2) of the Arbitration and Conciliation Act, 1996 (the ‘Act’), approached the Patna High Court (the ‘High Court’) so as to seek fulfilment of a vacancy in the Tribunal. By the time the Contractor’s application was taken up by the High Court the said vacancy was filled up by the Railway Authority. In light of the developments, the High Court issued an order by which it gave the Tribunal a lifeline and ordered for the arbitral proceedings to be completed within three months from the date of receipt of the order. The High Court, however, also stated that in case the proceedings were not completed within the stipulated duration, the Contractor would be at liberty to approach the High Court again which would then be forced to pass appropriate orders in accordance with the Act.

Despite the High Court’s direction, the proceedings were not completed within the stipulated three month duration and the Contractor again approached the High Court alleging non-cooperative attitude of the Tribunal members. The Railway Authority disputed this contention by stating that the proceedings could not be completed within time due the extreme urgency of the members of the Tribunal. After considering the Parties respective arguments and materials on record the High Court concluded that the delay in the proceeding was intentional and the Tribunal members continued their dilatory tactics regardless of the Court’s order. Most of the times one or the other member of the Tribunal were not available and they saw to it that the three month time expired. The Court went on to state that:-
“these facts also disclose a very sorry state of affairs that the members of the arbitral tribunal are inept and ineffectual by any standard, completely negligent towards their duties and having no sanctity for any law or for the orders of the High Court, which are binding upon them.”[2]
Based on these findings the High Court terminated the mandate of Tribunal and appointed a sole arbitrator to conduct the arbitration expeditiously.

Proceedings before the Supreme Court

The Railway Authority appealed against the High Court’s decision in the Supreme Court arguing that the High Court could not appoint the sole arbitrator as it was not empowered to constitute a tribunal of its own, that too, contrary to the arbitration agreement. Even if the tribunal’s mandate was to be terminated, a fresh tribunal could only be constituted in accordance with the arbitration agreement, i.e. in accordance with Clause 64(3)(a)(iii).

On the other hand, the Contractor defended the High Court’s decision arguing that in circumstances where the very purpose of arbitration was frustrated by the Tribunal members, who were dragging the proceedings, the Court was not powerless to travel beyond the framework of the arbitration agreement and appoint an arbitrator. The Contractor supported its argument by reliance on North Eastern Railway v. Tripple Engineering Works, (the ‘Tripple Engineering’ case) another recent Supreme Court decision.

The Issue

Based on the Parties’ arguments the Supreme Court categorized the issue as follows:-
“[w]hether .. a course of action has to be necessarily adopted by the High Court in all cases, while dealing with an application [u]nder Section 11 of the Act or there is a room for play in the joints and the High Court is not divested of exercising discretion under some circumstances?”[3]
Deliberations by the Supreme Court

At the outset, the Supreme Court highlighted that to decipher the answer to the issue Sections 11(6) & (8) (appointment of arbitrators), 14 (failure or impossibility to act), 15 (termination of mandate and substitution of arbitrator) & 32 (termination of proceedings) of the Act were the relevant sections.

The Supreme Court mentioned that Section 14(2) allowed a party to approach the Court to seek termination of mandate ‘when there is a failure on the part of the Arbitral Tribunal to act and it is unable to perform its function either de jure or de fact’.[4] Accordingly, the decision of the High Court to terminate the Tribunal’s mandate, on account of its ‘cavalier manner’, was flawless.[5]

Moving on to Section 15, the Supreme Court acknowledged that ordinarily, pursuant to Section 15(2), substitute arbitrators have to be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.[6] At this point, however, the Court raised the question as to whether there could arise circumstances in which there would be deviation from this approach. This led the Court to the case of the Tripple Engineering case, which it discussed in length.

The Tripple Engineering case had facts very similar to the case at hand and the Supreme Court in that case had made reference to a series of judgements before stating that:-
“[t]he power of the Court under the Act has to be exercised to effectuate the remedy provided thereunder and to facilitate the mechanism contemplated therein. In a situation where the procedure and process under the Act has been rendered futile, the power of the Court to depart from the agreed terms of appointment of arbitrators must be acknowledged in the light of the several decisions noticed by us.”

A few of the decisions so noted in the case were:-

The Supreme Court particularly quoted some paragraphs from Union of India v. Singh Builders Syndicate, the relevant parts for our discussion are:-
“The object of the alternative dispute resolution process of arbitration is to have expeditious and effective disposal of the disputes through a private forum of the parties' choice. If the Arbitral Tribunal ... is made non-functional on account of the action or inaction or delay ... the Chief Justice or his designate, required to exercise power Under Section 11 of the Act, can step in and pass appropriate orders ... [T]he matter has now been pending for nearly ten years from the date when the demand for arbitration was first made with virtually no progress ... The delays and frequent changes in the Arbitral Tribunal make a mockery of the process of arbitration.”

Findings of the Supreme Court

Taking a note of the case laws mentioned above the Court pointed out that the classical notion that the respective authority while exercising its power under Section 11 of the Act must appoint the arbitrator as per the agreement between the parties has seen a significant erosion in recent past. The provisions of the Act have to be applied purposively and hence the appointment of arbitrator by the court, of its own choice, departing from the arbitration clause, has become an acceptable proposition of law which can be termed as a legal principle established by a series of judgments.[8]

Concluding it findings the Supreme Court stated that courts were not powerless under Section 11 and could spring into action to constitute an arbitral tribunal so as to ensure that interest of parties were equally protected.[9]

Analysis

This decision of the Supreme Court is a welcoming decision in the context of the arbitral regime in India. Indian courts of late have been very particular not to repeat their mistakes by poorly interpreting the provisions of the Act and interfering in the arbitral proceedings. This decision, in fact, is a very informed one because the Supreme Court realized that the issue of delay in arbitral proceedings on account of the tribunal itself was often encountered in arbitration in India, particularly where the arbitration clause provided for appointment of serving officers. Although the same issue had been dealt with in bits and pieces before, with this decision the Supreme Court has set the record straight once and for all.

With its decision the Supreme Court in fact brings the position of the Act akin to the position taken by leading arbitral institutions of the world, for example, the International Chamber of Commerce (the ‘ICC’) and the London Court of International Arbitration (the ‘LCIA’). Article 15(4) ICC Rules 2012 and Article 11(1) LCIA Rules 2014 both state that in situations where replacements have to be made, discretion vests with the institution as to decide whether or not to follow the original nominating process. Similar provisions can be found in the Stockholm Chamber of Commerce Rules[10] and the UNCITRAL Rules.[11]

The most direct implication of this decision will be that arbitration proceedings will no longer suffer because of an irresponsible or lackadaisical tribunal. In general, proceedings will be completed within a reasonable time frame. Besides, the decision will also push those who are not full time arbitrators or arbitration practitioner to adopt a professional approach. Additionally, it would discourage counsels to indulge in dilatory tactics by seeking outrageous extensions under the patronage of the tribunal. All in all the Supreme Court has sought to ensure that one of the fundamental features of arbitration, i.e. expeditiousness, remains intact.

The decision indicates a continuing trend on the part of Indian courts to develop and project India as an arbitration friendly jurisdiction. Despite being modelled on the UNCITRAL Model Law on International Commercial Arbitration (the ‘Model Law’), in the past there had been instances where interpretation of the Act’s provisions were far from what was envisioned by its drafters (there is, however, an interesting post by Advocate Sujoy Chatterjee on the extent of making reference the Model Law to interpret the provision of the Act).  Therefore, in conclusion, it can be said that unlike several earlier instances, this time when the court took the matter in its own hands it was too aid, and not intervene in the arbitration.


[1] Civil Appeal No. 8860 of 2014 (Arising out of Special Leave Petition (Civil) No. 20183 of 2012) decided on 16.09.2014
[2] U.P. State Bridge Corporation Ltd.v. The Union of India, 2012(1)ARBLR390(Patna) at paragraph 11
[3] Supra note 1, paragraph 15
[4] Ibid, paragraph 13
[5] Ibid
[6] Ibid, paragraphs 14, 15
[7] In this case the Supreme Court also recommended to the government that they should consider phasing out arbitration clauses providing for appointment of serving officers and encourage professionalism in arbitration.
[8] Supra note 1, paragraph 21
[9] Ibid, paragraph 22
[10] Article 17(1) SCC 2010 Rules
[11] Article 14(2) UNCITRAL Rules 2010

Sunday, November 2, 2014

A Wake Up Call to Speed up Arbitral Proceedings.

Below is a guest post from Vaisakh Shaji. In the post below Vaisakh discusses a judgment on the importance of giving a reasoned award as well as result of delaying rendition of an award. 

The Bombay High Court’s (‘The Court’) recent decision in Dirk India Private Ltd[1] (“Petitioner”) vs Maharashtra State Electricity Generation Company Ltd (“Respondent”) AND Maharashtra State Electricity Generation Company Ltd (as ‘Petitioner’) vs Dirk India Private Ltd (as ‘Respondent’) brings into focus certain important issues regarding the consequence of delay in rendering arbitral award and also the importance of stating reasons for the award.   

Note: The Court decided two different claims arising from the same arbitral award. In the second claim, Dirk India is the respondent and the issue therein is with respect to damages sought by the original Respondent. This part of the judgment will be discussed as second part of this note.

Part one

Brief Facts:
The dispute between the parties relate to Nashik Thermal Power Station (‘the plant’), which uses coal as fuel for generation of electricity. The parties entered into an agreement dated October 4th, 2000, according to which the Petitioner would use its technology to dispose of waste product that is generated at the plant. The Petitioner, a company based in United Kingdom specializes in recycling by-products generated by thermal power stations. Pulverised Fly Ash (‘PFA’) which is a waste product generated in coal fired thermal power stations, is used by the Petitioner to manufacture cement replacement material.

As per the agreement, there were two stages involved in disposing off PFA. In the first stage, the Respondent was to provide PFA from the plant and deliver the PFA to the Plaintiff by depositing the same in the Hoppers constructed by the Plaintiff and for this purpose a Dense Phase Conveying System was to be built by the Respondent.

In the second stage, the Plaintiff was to transport the PFA from the Hoppers to the PFA plant situated at the site at the Plaintiff’s own cost and is its sole responsibility. Accordingly there were two stages of transportation of PFA i.e. (a) ESP to Hoppers and (b) from Hoppers to the PFA Plant.


Plaintiff’s case:
A Dense Phase Conveying System was to be built by the Respondent at their cost to enable them to provide PFA to the Petitioner. Further, the Respondent was required to deposit the PFA in the Hoppers constructed by the Petitioner. However, as the Respondent did not construct the Dense Phase Conveying System, the Plaintiff had to resort to manual removal of PFA.  The Respondent terminated the agreement illegally by alleging that it was the duty of the Plaintiff to construct the Dense Phase Conveying System.

Respondent’s case:
The respondents alleged that as per the agreement, the Plaintiff was supposed to construct the hoppers and as they did not do so, the question of Respondents releasing PFA through the hoppers did not arise. Further they alleged that the Plaintiff was implementing the agreement at their own will by constructing only one hopper and the rest manually, resulting in spillage and causing pollution.

Arbitral Tribunal
To adjudicate the dispute between the parties, an Arbitral Tribunal of three Arbitrators, constituting senior retired Judges was formed in 2007. The Arbitrators initially framed twenty two issues, however modified them subsequently and narrowed it down to four issues and a final award was passed in 2011.
The decision of the Tribunal was challenged under section 34 of the Arbitration and Conciliation Act, 1996 (‘the act’) by the Plaintiff on the grounds that:
  •  the Tribunal did not adjudicate on the real issues between the parties;
  • Secondly, the award is without reason and did not consider the submissions made by the parties;
  • Further there was gross delay in making the award which resulted in abandoning the issues that were framed and the arbitrators consequently missing key issues to be decided.
On examining the reasoning by the Tribunal, the Court ascertained that during the process of adjudicating, the Tribunal intermixed the issues and kept referring to Phase two of the agreement which was never in dispute. The arbitrators brought onto themselves to decide an issue which was never in dispute.

For deciding the dispute in the first stage of the agreement, the arbitrators adjudicated by deciding the second stage and mixed up the issues such that it was not possible to divest the two from the Tribunals reasoning. The Court observed that the failure to distinguish between two stages is a fundamental flaw.

Arbitral award:
The Plaintiffs contended that, firstly there was inordinate delay in rendering the award, as a consequence of which the Tribunal lost its focus from the core issues of the dispute and secondly, that the award is not without reasons.

The Court observed that, even though an arbitral award need not be very detailed, unless the parties agree to the contrary, the reasons have to be given in the award. If the parties go to the Arbitrators with specific issues to be decided, not only they must be decided, but the parties must be informed why the dispute was decided in a particular manner.

Further, the Court held that, “they may choose an arbitrator with a judicial background if judicial expertise is what they want. Their choice reflects how they want the arbitration to be conducted. Once the parties choose an arbitrator with a judicial background, they expect that the arbitrator would apply judicial and legal expertise and resolve the dispute evaluating the veracity of assertions of both the sides. Parties expect the judicial mind will understand and appreciate the real dispute between the parties better and bring it into focus and give a just and reasoned decision”.[2]

On the issue of delay in rendering the award, the Court noted that the Tribunal took more than a year in rendering its final award and observed that had it been a lone consideration, it would not have been sufficient to set aside the award, however the perverse reasoning by the Tribunal coupled with the delay in its final decision would go in the direction of attributing the delay as one of the factors due to which the Tribunal side tracked from the real issues.

Applicability of Section 34:
The Court stated that it may not be possible to test the merits of the award, however if it is found that there exists a fundamental flaw and it is intermixed, the entire award will be vitiated.

The second aspect with the award is with respect to the issues that were framed. The Tribunal framed 22 issues initially and at the time of passing the award, it narrowed it down to 4 issues. The serious fall out of this was that the Tribunal lost its focus on identifying issues which are vital to the claims by the parties and ended up overlooking or divesting certain issues which had to be addressed together such as determining the Plaintiff’s liability for not collecting the PFA by overlooking the issue of installing Dense Phase Conveying System.

The Court did not lay down any further grounds on which a challenge can be brought under section 34 and relied on the decision in ONGC vs Saw Pipes on the applicability of section 34 of the Arbitration and Conciliation Act, 1996 for setting aside an award for error apparent on the face of it.

It relied on ONGC vs Garware Shipping Corporation to state that courts can interfere if the award by an Arbitral Tribunal contains perverse conclusions and finding on wrong basis.

Analysis:
This case once again brings into focus the conduct of arbitration proceedings in India. The facts of the case shows that, inordinate delays would lead to intermixing issues especially and a speedy remedy as contemplated by parties cannot be achieved through an alternate process. This will further, discourage foreign parties who make huge investments in India to shy away from going for an alternate dispute resolution process and comes in the way of making India a dispute resolution friendly nation.

As stated in the 246th Report of the Law Commission of India for reforms in the Arbitration and Conciliation Act, 1996 the arbitration proceedings are becoming a replica of court proceedings and frequent adjournments would lead to setting aside of arbitral awards.

In Ircon International vs Arvind Constructions, the Court the question of sufficiency is left with the arbitrator. And the duty of the court is to look into the nexus between the reasons and the material before the arbitrator. As long as the reasons lead to the conclusion made, it is sufficient. However in Ircon the arbitrator was an expert, being a retired Financial Commissioner of the Railway Board.

While appointing arbitrators from technical background sufficiency of the arbitrators reasoning might be not over-emphasised. However, in the present dispute, the three arbitrators were retired judges and though there is no onus to pronounce a judgment as that of a Court, the necessary nexus between the issue and the final adjudication is lacking.

Part two:

The second appeal decided by the Court is regarding the counter-claim  by Maharashtra State Electricity Generation Co. (‘Mahgenco’) against Dirk India which was dismissed in its entirely by the Tribunal.

The tribunal stated that Mahgenco did not provide enough documentary evidence and on the additional ground that Mahgenco did not challenge various orders passed by the High Court from time to time.

It was contended for Mahgenco that, it being a statutory body decided to comply with the orders of the High Court, and that cannot be a reason to deprive it form claiming damages.

The court held that the mere fact that interim order under section 9 of the act has not been challenged by Mahgenco were not challenged by it, is not sufficient reason to dismiss its claims.

Further it stated that the entire claim of Mahgenco was dismissed in two paragraphs and the Tribunal refused to look into the counter-claims. The Court agreed with the contention that such approach by the Tribunal is perverse. Additionally, even though Dirk India contested that Mahgenco is entitled to damages, they agreed with Mahgenco that the awards passed are perverse and hence the Court found it an additional ground to set aside the award.




[1] MANU/MH/1071/2014
[2] Para 45.

Saturday, August 23, 2014

Briefing on the Law Commission of India's Report on Changes to the Arbitration Law

I recently wrote a post for Kluwer Arbitration Blog on the 246th Report of the Law Commission of India on the "Amendments to the Arbitration and Conciliation Act, 1996". The post covers the suggestions and amendments proposed by the commission and can be viewed on this link

Friday, August 22, 2014

To Rein if Not Tame the 'Unruly Horse' of Public Policy

Below is a guest post from Garv Malhotra who is a final year student at GNLU, Gandhinagar.

A substantial amount of literature has been dedicated to the topic of the Scope of Public Policy as a ground for 'set-aside' of Domestic arbitral awards under Section 34 (2)(b)(ii) of the Arbitration and Conciliation Act, 1996, especially in the past decade since the infamous expansive interpretation of the term 'public policy' by the Apex court. The decision in the case of ONGC v. Saw Pipes[1] has attracted much flak from all quarters[2]. However, recent decisions of the Supreme Court in the McDermott[3], Sumitomo[4], Rashtriya Ispat[5] among other[6] cases among others that have attempted to water down the ONGC Doctrine without overruling the same. 



The Law relating set-aside of Domestic arbitral awards in India is laid down under Section 34 of the Arbitration and Conciliation Act, 1996. It is based on Article 34 of the Model Law and states that the grounds contained therein are the "only" grounds on which an award may be set aside. However in the Indian context the word "only" prefixing the grounds is a bit of a misnomer as two additional grounds have been created by the Act itself under Section 13(5) and 16(6). Besides another ground of fraud and corruption is found in an Explanation to the public policy ground in Section 34.[7]


The scope of challenge and set-aside of a final award of a tribunal is very restricted as there is a legal presumption in favour of the validity of an award.[8] The arbitrator's interpretation of the contract and his decision on the merits of the case cannot be re-examined by the court and it cannot substitute its own decision in place of the final and binding award.[9] Additionally, the reasonableness of the reasons given by the arbitrator cannot are not subject to challenge in a court of law.[10] The court cannot simply term the award on fact and/or law erroneous and substitute the award with their own judicial decision[11] and where the opinion of the arbitrator is plausible[12], the courts will not interfere. In effect, if the tribunal passes an award (as per Section 31) or an order under Section 16(2) or 16(3) after considering rival submissions on both fact and law, its decision cannot be interfered with unless the conclusion shocks the consciousness with a blatant error apparent from a prima facie perusal of the award. 

Though most other grounds of set-aside mentioned in Section 34 can be literally constructed, the most malleable among all grounds is the residuary ground under S. 34 i.e. the award can be set aside if found violative of the 'public policy' of India, leaving room for immense 'judicial legislation' on the point. It is known that the term 'public policy' is incapable of any precise definition, however, some light may be drawn from the Ministry of Law, Justice and Company Affairs, Government of India's attempt[13]- "A set of principles in accordance with which communities need to be regulated to achieve the good of the entire community or public" 

The reason why Public Policy is incapable of any precise definition is because it is a concept premised on the socio-cultural needs of every society as distinguished from the socio-political Policies. e.g. the consumption of alcohol, though ubiquitous in most countries may be against the Public Policy in some Gulf Countries. 

The term 'public policy' has been called an 'unruly horse'[14] as it is a dynamic concept, not being static at anytime, in any jurisdiction . It is a residuary ground that vests with the judges a powers analogues to a 'Henry VIIIth Clause' i.e. 'power to remove difficulties' in Administration Law. This power can also be compared to the common law canon of Justice, Equity and Good Conscience. Clearly, the term public policy is very open ended and is impossible to straitjacket[15]. However, unlike the two analogies hereinbefore mentioned, the interpretation of 'public policy' has to be done in the backdrop of the intervention-restrictive scheme of the Act as seen from the Statement of Objects and Reasons and Section 5.

The term public policy is capable of both a narrow and a broad interpretation depending upon the socio-cultural needs of the society[16] and the pendulum of the Apex Court's interpretation has oscillated between both these stands for decades without conclusive settlement[17]. However, in the ONGC case, the court disturbed the delicate balance between party autonomy and judicial supervision sought to be achieved by Section 34 and tilted the scales strongly in favour of the latter thereby setting the clock back to the old position where an award could be challenged on merits and indeed renders the court (testing enforceability of an award) as a court of appeal. It opened the floodgates to many previously barred challenges on vague assertions of statutory violations or interpretation of documents or the law. Invariably today, almost every dispute being arbitrated is further being litigated under the garb of challenge.

Recent Developments 

It has been over a decade since the highly criticised ONGC Judgement but no bench faced with a similar question has recommended the Chief Justice to constitute a review bench. ONGC still stands as the Locus Classicus on the interpretation of Public policy. However, a few recent decision benches of the Supreme Court of equivalent strength as ONGC have attempted to dilute its overtly expansive interpretation without sitting in review of the ratio.

In the McDermott Industries v. Burn Standard[18] the Supreme Court held-

"The 1996 Act makes provision for the supervisory role of courts for review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct the errors of the arbitrators...this can be justified as the parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."

In Sumitomo Heavy Industries Ltd. v. ONGC Ltd.[19] the Hon'ble Supreme Court, relying on another recent decision in SAIL v. Gupta Brothers Steel Tubes Ltd.[20] held that the umpire is legitimately entitled to take the view which he holds to be correct...hence if the conclusion of the arbitrator is based on a possible view of the matter, the court is not expected to intervene. The Court further reiterated the position that a 'perverse view' is not a finding against the weight of the evidence but against the evidence itself of the grounds of inadmissibility or irrelevance.

Further in the Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran[21], the Supreme Court upheld the interpretation of the court in Sumitomo Case and SAIL Case and opined that even if the decision of the arbitrator is possible if not plausible, the court would not be justified in interfering.

The author submits that the overtly expansive stance on Public Policy as laid down in the ONGC Case is defeating the main objectives of the Act. It renders the Arbitral Tribunal a mere forum at the bottom of the Court hierarchy subject to just as many actions as a traditionally litigated dispute. Invariably today, most of the arbitral awards are challenged on grounds of violation of public policy and patent illegality premised on vague assertions of statutory violations imploring the court to 're-adjudicate' issues of fact and law under the pretext of a challenge. The recent decisions of the Supreme Court and a few High Court decisions mark a welcome trend in watering down the ONGC Doctrine and upholding the restrictive sanctity of the Act. However, it is only up to the next bench faced with a similar question to request the Chief Justice of India to constitute a larger bench to review this position and salvage the Domestic Arbitration scenario in India. 



[1] (2003) 5 SCC 705. 
[2] Sumeet Kachwaha, Arbitration Law of India: A Critical Analysis, Asia International Arbitrational Journal, Volume 1, Number 2, P. 105 http://www.kaplegal.com/upload/pdf/arbitration-law-india-critical-analysis.pdf ; Speech delivered by Mr. F.S. Nariman at the inaugural session of “Legal reforms in Infrastructure”. 
[3] (2006) 11 SCC 181. 
[4] (2010) 11 SCC 296. 
[5] (2012) 5 SCC 306. 
[6] SAIL v. Gupta Brothers Steel Tubes Ltd (2009) 10 SCC 63, Kwality Mfg. Corpn. v. Central Warehousing Corporation (2009) 5 SCC 142; Arulvelu v. State (2009) 10 SCC 206. 
[7] Sumeet Kachwaha, Enforcement of Arbitration Awards in India, Asian International Arbitration Journal, Volume 4, Number 1, PAGES 64-82. 
[8] Union of India v. Jai Narayan Misra AIR 1970 SC 753; Food Corporation of India v. Joginder Mahinderpal AIR 1989 SC 1263. 
[9] Union of India v. Jai Narayan Misra AIR 1970 SC 753; Francis Klein Pvt. Ltd. v. Union of India 1995 2 Arb LR 298. 
[10] Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar AIR 1987 SC 2316; Id. 
[11] Lakshmi Mathur v. CGM, MTNL 2000 (2) ArbLR 684 Bom. 
[12] Supra Note 4, 5, 6. 
[13] P Anklesaria, "Scope of the expression Public Policy in Domestic and Foreign Awards". 9 AIR (2005) at 310. 
[14] Burrough, J., Richardson v. Mellish (1824), 2 Bing. 252; (1824) 130 Eng. Rep. 294, 303. 
[15] O.P. Malhotra, The Law and Practice of Arbitration and Conciliation (New Delhi: Lexis Nexis Butterworths, 2002) at 768. 
[16] Supra Note 19. 
[17] For a narrow view refer- Gherulal Parekh v. Mahadeodas Maiya AIR1959 SC 781 and Renusagar Power Co. Ltd. v. General Electric Co. AIR 1986 SC 1571; For a Broad view refer- Central Inland Water Transport Corp. Ltd. v. Brojo Nath Ganguly1986 SCR (2) 278 and ONGC v. Saw Pipes AIR 2003 SC 2629. 
[18] (2006) 11 SCC 181 para 52. 
[19] (2010) 11 SCC 296 para 41-43. 
[20] (2010) 11 SCC 296. 
[21] (2012) 5 SCC 306 para 43-45.

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