Monday, October 26, 2015

Quick Overview: Arbitration (Amendment) Ordinance, 2015

Below is Guest Post from Paavni Anand. Paavni is a fourth year student at the West Bengal National University of Juridical Sciences, Kolkata.

President Pranab Mukherjee has promulgated the Arbitration and Conciliation Amendment Ordinance, 2015 to amend the Arbitration and Conciliation Act 1996. The Ordinance is largely aimed at encouraging ease of doing business in India in a bid to promote foreign investment in India. The following major amendments have been proposed: 

1. A distinction has been made as regards to jurisdiction for international commercial arbitration, and for all other matters. For the former, the appropriate High Court shall have jurisdiction, whereas for the latter, the principal Civil Court of original jurisdiction or the High Court shall have jurisdiction. 

2. The following sections shall apply to international commercial arbitration even when the place of arbitration is not in India: 

  • Section 9 which deals with interim measures by the Court, 
  • Section 27 that deals with Court assistance in taking evidence, 
  • Section 37(1)(a) which states than an appeal shall lie on orders granting or refusing to grant measures under Section 9, and 
  • Section 37(3) which states that no second appeal shall apply in such cases 
3. In a case the arbitration agreement or certified copy thereof is not available to the party applying for reference for arbitration, such party can file an application praying the Court to call upon the other party to produce the same. 

4. If the court passes any interim measure under Section 9, the arbitral proceedings must commence within 90 days of the court doing so. 

5. No application for interim measure under Section 9 shall be entertained after the arbitral tribunal has been constituted unless the remedies under Section 17 have been rendered inefficacious. 

6. The High Court may frame rules for the purpose of determination of fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal. However, such rules shall not apply to international commercial arbitration and in arbitrations where parties have agreed for determination of fees as per the rules of an arbitral institution. 

7. The provisions to ensure independence of arbitrators have been elaborated upon under Section 12. The Fifth Schedule has also been inserted enumerating certain grounds for the same. A potential arbitrator must disclose in writing circumstances such as the existence of direct or indirect, past or present relationship with any of the parties or in relation to the subject matter of the dispute which is likely to give doubts as to independence shall be disclosed. Further disclosures in writing with respect to circumstances which are likely to affect their ability to devote time towards the arbitration shall be made. The applicability of this sub-section can be waived by the parties in writing, subsequent to the dispute having arisen. 

8. Interim measures ordered by the arbitral tribunal have been delineated as follows: 

  • Appointment of a guardian for a minor or person of unsound mind 
  • Measures protecting goods, or amount of money, or property which is subject matter of the dispute 
  • Interim injunction or appointment of receiver 
  • Such other measures for protection 
9. A time limit of twelve months from the date of entry of the tribunal upon reference has been provided under Section 29A before which the award shall be made by the tribunal. Additional fees shall be provided to the tribunal if an award is made between six months. If the parties give consent to an extension, it shall be made for a further period up to six months. 

10. Fast track procedure has been instituted under Section 29B wherein parties may agree in writing to have their dispute resolved by a fast track procedure. The award shall be made within six months.There shall be no oral hearing, and decisions shall be made on the basis of written pleadings, documents, and submissions filed by the parties, along with any further information called for from the tribunal. Oral hearings shall be made if all the parties agree and the tribunal finds it necessary. A new Section 31A has been added giving specific provisions for costs regime. 

11. The ambit of setting aside an award for being in conflict with public policy under Section 34 has been broadened to include not only contravention with Section 75 or Section 81, but also if it is in contravention with the “fundamental policy of Indian law” or if it in conflict with the “most basic notions of morality or justice”. 

The ordinance is largely in line with the recommendations put forth in the 246th Report of the Law Commission of India. The amendments would be a step forward in making arbitration an easier, faster and more cost effective method of dispute resolution, especially to attract foreign investors to invest in India. 

The full text of the ordinance can be accessed below.

Saturday, October 24, 2015


Two ordinances, one on  Constitution of Commercial Courts and another to amend the Arbitration and Conciliation Act 1996, have been promulgated by the President of India. Press Information Bureau of Government of India reports it here.

The ordinance on amendments to the Arbitration and Conciliation Act is expected to carry most of the changes recommended by the 246th Report of the Law Commission of India. See here for more information on the suggestions by the 246th  Report of the Law Commission of India.

Wednesday, May 13, 2015

Symposium on Arbitration Law at NLU, Delhi

Below is an announcement from NLU Delhi about their symposium on Arbitration law.

The National Law University, Delhi is organizing a Symposium on Arbitration Laws on the 16th of May, 2015. The Symposium promises to be an exciting event and will comprise of 2 sessions. 

1st Session: 10.45 – 1.30 pm (Interpretation of Pre-BALCO agreements) 
Lunch: 1.30 – 2.30 pm 
2nd Session: 2.30-4 pm (Reference of non-signatory parties to arbitration) 
High Tea: 4 – 5 pm 

The First Session deals with Interpretation of Pre-BALCO agreements. Considering the string of cases from Bhatia till Reliance Industries, the panellists will provide a ring side view of the development of arbitration jurisprudence. We have 4 speakers as a part of the first panel: Mr. Gourab Banerji, Senior Advocate, Supreme Court of India & Former ASG, Mr. Ajay Thomas, Director & Registrar, LCIA (India), Mr. Daniel Mathew (Assistant Professor, NLU Delhi) and Dr. Ruhi Paul (Associate Professor, NLU Delhi). 

The Second session deals with the issue surrounding reference of Non-Signatory Parties to Arbitration. Chloro Controls applied the ‘group of companies’ doctrine’ to provide jurisdiction of the arbitral tribunal over a non-signatory. The recent 246th Law Commission Report has suggested expanding the definition of ‘party’ to include ‘persons claiming through or under such party’. The session seeks to engage a discussion about the role of prominent theories dictating jurisdiction of arbitral tribunals over a non-signatory (viz. group of companies, estoppels etc.) and their grounding in the Indian Law. The second session will have 2 speakers: Mr. Debesh Panda is a practicing lawyer who focuses on arbitration related matters before the Delhi High Court and the Supreme Court & Mr. Ashutosh Ray who serves as the Law Assistant to a Former CJI. 

Amrutanshu Dash 
+91 78389 90366 
National Law University, Delhi, Sector – 14, Dwarka, New Delhi -110078

Shanghai: A Venue for International Arbitrations.

Below is a report from CIArb about assisting Shanghai in becoming an attractive arbitration destination. It is quite interesting to note that increasing number of nations are taking keen interest in developing their cities into attractive arbitration destination and are therefore seeking help from expert organisations such as CIArb.

The Chartered Institute of Arbitrators (CIArb) held a meeting early this week organised by Ruby Zhang, Economic Officer with the British Consulate-General Shanghai, to assist the Shanghai Municipal Commission in identifying what is required to make the Free Trade Zone a more attractive venue for international arbitrations. 

CIArb Member Simon Maynard (Allen & Overy), Paul Brumpton (White & Case) and Bing Yan (Skadden) provided insight into three key issues: the success of the English arbitration model, competition between key institutions and the perspective of foreign parties on arbitration in China. 

The success of the English arbitration model 

Simon Maynard initiated the discussion by considering the success factors associated with the English arbitration system. The Arbitration Act 1996 and its relationship with the UNCITRAL Model Law, autonomy of the parties, supportive courts, competitive institutions, adherence to the principles of separability and competence-competence, as well as the assurance of confidentiality throughout the arbitral process were all mentioned as key aspects which attracted users both at home and abroad. 

Competition between key institutions 

Paul Brumpton examined the role of competition between both institutions and seats (including the UK, France, Switzerland, the US and Singapore). Using interim measures as an example, healthy rivalry was put forward as a key component in developing the responsiveness of arbitration services to the needs of users. 

Perspective of foreign parties on arbitration in China 

Bing Yan considered the lack of confidence on behalf of non-Chinese parties in light of the limits on party autonomy under the Arbitration Law of the PRC, and possible amendments that could be made to the PRC Arbitration Law in order to meet the accepted international practices. Subsequently, the main conclusions touched on the need for a straightforward, liberal, confidential and transparent arbitration process to attract international arbitrations. Successful arbitration practices in Singapore and Hong Kong were listed as potential prototypes for reform. 

Members of the Delegation included: Ms. Lu Zheng, Deputy Director, Fair Trade Division, Shanghai Municipal Commission of Commerce; Ms. Yan Bei, Deputy Director, Service Trade Division, Shanghai Municipal Commission of Commerce; Mr. Xia Yongzheng, Officer, Shanghai Municipal Commission of Commerce; Ms. Zhou Jiepu, Professor, Law School, Shanghai University of Finance and Economics; Ms. Shang Shu, Executive Director, Free Trade and ADR Development Center, Shanghai University of Finance and Economics and Ms. Ruby Zhang, Economic Officer, British Consulate-General Shanghai. 

The group will be visiting other arbitral institutions in London, including the London Court of International Arbitration (LCIA) during its trip.

Friday, May 8, 2015

Obituary: Rt Hon Lord Mustill

Below is a tribute from CIArb on the sad demise of Rt Hon Lord Mustill. It is indeed a great loss to the international arbitration fraternity. His legacy will continue.

It is with great sadness that the Chartered Institute of Arbitrators (CIArb) has learned of the passing of Lord Mustill. Formerly President of CIArb, Michael Mustill has been Vice President of the Court of Arbitration of the International Chamber of Commerce and Chairman of the Departmental Committee on Law of Arbitration. As both a distinguished author and practitioner, his contributions to the development of arbitration will always be remembered by the dispute resolution community. A tribute will be paid to his memory at CIArb’s London Centenary Conference this summer.

Thursday, May 7, 2015

Announcement: CIArb Appoints Head of Dispute Appointment Service.

Below is an announcement from CIArb on naming of its new Head of Dispute Appointment Service. 

The Chartered Institute of Arbitrators (CIArb) is pleased to announce the appointment of Keisha Williams as Head of the Institute’s Dispute Appointment Service.

Previously, Keisha Williams acted as Deputy Registrar at the London Court of International Arbitration (LCIA), entrusted with administering and/or acting as appointing authority in commercial arbitrations and ADR.  

Commenting on this recent appointment, Anthony Abrahams, CIArb Director General said “We are absolutely delighted Keisha Williams is joining us. I cannot think of a better person to drive the CIArb Dispute Appointment Service forward in 2015 and look forward to her starting with us on the 1st June 2015.”

Waj Khan, who previously led the Dispute Appointment Service departed at the end of April 2015.  He developed the service from 15 to 142 cases during 2014.

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 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]


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.

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.
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