Below is a guest post from Sanskriti Rastogi, final year student at GNLU. The article looks at certain important angles of the arbitration scene in India , which, though known and were neglected.
Although
Indian law favours dispute resolution by arbitration, Indian sentiment has
always abhorred the finality attaching to arbitral awards. A substantial volume
of Indian case law bears testimony to the long and arduous struggle to be freed
from the binding arbitral decisions. Aided and abetted by the legal fraternity,
the aim of every party to an arbitration is: “try to win if you can; if you
cannot, do your best to see that the other side cannot enforce the award for as
long as possible”
Over
the years our judges have despaired. Under the 1940 law of arbitration an award
was subject to the scrutiny of courts at three stages: in the court where the
award was filed, in an appeal to a higher court against an order refusing to
set aside the award; and the supreme court of India if that court decided to
entertain another appeal ( by special leave) under its supervisory jurisdiction
under article 136 of the constitution of India.
Nowadays
things are quite different. In so many large international arbitrations the
defendant will do everything to postpone the moment of the award; at and before
the hearing the parties will deploy all conceivable, and some inconceivable
procedural devices to gain advantage; the element of mutual respect is lacking
and the loser, rather than paying up with fortitude, will try either to have
the award upset, or at least to have its enforcement long postponed.
It
is in this background that the new Indian Law (of arbitration and conciliation)
was conceived and enacted- as from January 25, 1996 based on UNCITRAL Model Law
and Rules.
Commercial
arbitration in India and in many countries in Asia- has been for too long,
filled with lawyers- in the Mexican sense. And for a while they nearly
succeeded in making a mess of it. We can profit by their experience. We should
use different tools. With them, we could do better.
In
India after the enactment into the parliamentary law of the existing provisions
of the arbitration and conciliation in ordinance 1996- we will need active
encouragement from our courts and our lawyers in the different avenues of ADR-
most of all in encouraging negotiation and conciliation as a first filter before recourse is to be taken to
arbitration. ADR offers a variety of interesting innovations- ADR to be
successful must be implemented in an indigenous “home-grown” manner.
UNCERTAIN
COURT INTERVENTION:
“Ideally, the handling of arbitral disputes
should resemble a relay race. In the initial stages, before the arbitrators are
seized of the dispute, the baton is in the grasp of the court; for at that
stage there is no other organization which could take steps to prevent the
arbitration agreement from being ineffectual. When the arbitrators take charge
they take over the baton and retain it until they have made an award. At this
point, having no longer a function to fulfill, the arbitrators hand back the
baton so that the court can in case of need lend its coercive powers to the
enforcement of the award.”
-Lord Mustill
The
problems have been exacerbated by judicial intervention. Unnecessary judicial
legislation has created uncertainty about the position of the law. The single
most remarkable aspect of the experience over the last decade has been the propensity
for judicial intervention — while the Act bolted the front door and limited
judicial intervention to a few strictly defined instances, courts have found
means to break down the back door. Their readiness to become involved in
contentious disputes is exemplified by the decisions of the Supreme Court in Saw
Pipes[1] and
SBP[2],
which threaten key goals of arbitration — speed and efficiency.
Court observed in M/S Guru Nanak Foundation
v. M/S Rattan Singh and sons, (1981):[3]
“Interminable,
time consuming, complex and expensive court procedures impelled jurists to
search for an alternative forum , less formal, more effective and speedy for
resolution of disputes avoiding procedural claptrap and this led them to the
arbitration act, 1940. However, the way in which the proceedings under that act
are conducted and without exception challenged in courts, has made lawyers
laugh and legal philosophers weep. Experience shows and law reports bear ample
testimony that the proceedings under the act have become highly technical,
accompanied by unending prolixity , at every stage providing a legal trap to
the unwary. Informal forum chosen by the parties for expeditious disposal of
their disputes has by the decisions of the courts, been clothed with “legalese”
of unforeseeable complexity. This case amply demonstrates the same.[4]
- Great expense, delays and
uncertainty and almost extinguishes the advantages of arbitration over
court litigation.
- Erodes the principle of respecting
the disputing parties’ decision to resolve their disputes by arbitration
rather than in a national court.
- It also inevitably leads to a loss
of confidentiality which is another key attraction of arbitration.
GROUND REALITIES:
“If longevity of
litigation is made an item in Olympics, no doubt the Gold will come to India” -Nani Palkhivala
Besides
the above mentioned court intervention, the process of Alternative Dispute
Mechanism suffers from inherent infirmities. In India, the most common form of
arbitration is ad hoc arbitration. There is already a dearth of
institutionalized arbitration and the members of the arbitration panel are
mostly retired judges who have already become used to of the tardy court
proceedings.
From
the above discussion the problems which prevail in the Indian system as to the
implementation of the ADR mechanism are listed below coupled with their
remedial solutions:
- Tardy
and expensive: The much envisaged twin objectives of the arbitration being
a time and money saving mechanism have come to a naught. In case of ad hoc
arbitration , the time taken for setting the terms of reference , time for
hearing the reference and time up for making of the award, all put
together , usually consume a lot of time. In certain cases arbitration is
as expensive as the court litigation.
There
is a need to provide with fast track arbitration which ensures speed and
economy. To popularize the concept of fast track arbitration, a serious effort is
required from all concerned for giving wide publicity to its efficacy in
resolving disputes especially commercial disputes rapidly and economically.
- Abuse
of arbitration and inflated claim: Many a times parties resort to dilatory
or other unfair tactics such as making inflated claims which robs of its
preference over litigation.In order to curb this menace the heavy cost
should be awarded to the other party but the party making such inflated
claims could be deprived of the cost.
- Contestants
avoid finality: As has been already discussed that Indian sentiments avoid
finality attaching to the arbitral awards. This again adds on the burden
of already existing cases in the courts. A change is required in order to
truly achieve the much discussed purpose of the Arbitration and
Conciliation, Act 1996.
- Lawyers
responsible for loss: This phrase
connotes the problem of too many lawyers engaged in the arbitral
proceedings and their habit of delaying the process by showcasing their
pedantic attitude. A lawyer –orchestrated dispute resolution system is not
frequently resorted to, nor is it recommended.
A
lot of professional training is required for implementation of ADR systems.
Arbitration is not always conciliation. And mediation is not always
negotiation; nor it is always conciliation. Counseling is different skill
altogether. As of today, practically none is professionally trained in these
skills. Lawyers who are ready in the profession and are desirous of learning
the ADR techniques should be provided with necessary training to acquire
necessary skills in order to avoid lawyering. The development of arbitration
along non- litigious, non- adversarial lines; in other words . Less lawyer-
techniques less “court- craft”; lawyers are certainly useful but not in their
confrontational capacity, but in their more meaningful role as negotiators and
mediators.
- Lack
of institutional framework and infrastructural facilities: There is dearth
of institutional framework which again militates against the purpose of
the arbitration and conciliation act, 1996. As a result there are
absolutely no support facilities such as assistance of suitable arbitral
institutions in appointing qualified arbitrators, in providing supporting
staff like court clerks, stenographers etc.
As
a remedial action each arbitral institution should have a list of arbitrators
consisting of retired judges, eminent lawyers, bureaucrats, qualified civil
engineers, chartered accountants, social workers, academics, industrialists and
other experts who would be willing to act as arbitrators. These arbitrators
should exhibit qualities like –impartiality, integrity, rectitude, uprightness
and courteous behavior and the preparedness and the patience to learn and
listen.
- No
prescribed court fees: An arbitrators’ fee may vary between a few
thousands to a few lakhs. While ad hoc arbitration charge varying fee for
their services, even the institutionalized ones have readymade list of
fees which do not appear to be uniform.
There
should be standardization of fees: The fees payable to arbitrators need to be
standardized and a uniform rate needs to be fixed for arbitration of various
types of disputes. In this regard, the present arbitration law may be suitably
amended so as to have clear provisions for scales of fees payable to
arbitrators according to the nature of and the amounts involved in the
disputes. The amendment in the Court Fees Act with regard to getting back the
court fee paid in a arbitration plaint is a welcome change however it has still
not been enforced.
F.S.
Nariman in one of his articles has strongly opined that the arbitration process has
become more and more assimilated to a proceeding in a court. The legal jargons
such as “jurisdiction” and “legal misconduct” are not properly defined and
moreover the lawyers and judges haven’t been too reluctant to find them.
CHANGE ON ANVIL:
Part of NLP (National Law Policy)
One more new facet which has given importance to the concept of
Alternative Dispute Resolution is the coming up of the National Litigation Policy
(NCP) as proposed by Verappa Moiley in order to curtail the litigation time
from 15 years to 3 years.
1. It has been realized that
nowadays all the government and Public sector units are resorting to
arbitration in matters of drilling contracts, hire of ships, construction of
highways, etc. Therefore the arbitrators should be trained well for
the careful drafting of such contracts. The Ministry of Law and Justice
has re iterated the importance of the same.
2. The party which deliberately
tries to drag on the arbitration award in order to get time for fabricating the
same should not be encouraged. In this way the whole process becomes tardy.
Such a practice should be put to an end and expedite disposal should be
encouraged or else it will lose its true essence.
4. The Head of Department
(HOD) should call for the daily records of the arbitration proceedings. They
should obtain a copy of roznama for the same and in case of repetitive
adjournments should enquire about the reasons for the same. Inefficient and
unethical practitioners should be debarred from becoming the part of
arbitration proceedings anytime in future and must also be penalized. It
shall be the responsibility of the Head of Department to call for regular
review meetings to assess the status of pending arbitration cases.
5. It is very important to note
that lack of precision in drafting arbitration agreements is a major cause of
delay in arbitration proceedings. This leads to disputes about
appointment of arbitrators and arbitrability which results in
prolonged litigation even before the start of arbitration It must
correctly and clearly reflect the intention of the parties particularly if
certain items are required to be left to the decision of named persons such as
engineers are not meant to be referred to arbitration. Also, sole arbitrators
may be preferred over a panel of 3 arbitrators. The panel must contain an
expert as regards to the subject matter of arbitration.
7. The concept of preferred
arbitrators in various departments should not be encouraged. The arbitrator
must be chosen on grounds of his expertise, knowledge and experience in that
particular field. Care should be taken in order to ensure if the arbitrators
can devote sufficient time for the same.
Arbitration
as a method of dispute resolution had been practiced from time immemorial. But
of late, it has been considered as no better than court-litigation.
Other legislative
changes
The above suggested remedies would
bolster support and give impetus to mitigate all the drawbacks in the
implementation of the ADR mechanism in India. Besides the above the legislature
should also make amendment in the arbitration and conciliation act, 1996 so as
to segregate the arbitration and conciliation matters. Also, the government is
thinking to amend the advocates act, 1961 [by Advocates (Amendment) Bill 2003]
to the effect that the functions of the Bar Council of India shall be to
promote legal education and law down standards of such education in accordance
with the recommendations of the Bar Council Legal Education Committee arrived
at in the manner specified in section 10AA, including in the matter promoting
alternative dispute resolution as a subject of academic study in the law
schools for students and promoting continuing education on alternative dispute
resolution for legal practitioners .
It’s important that the all key stakeholders
such as bar, the bench, the arbitral tribunal and other people associated with
it should strive for the successful implementation of the same. Since we in
India appear to have lost the art of conciliation, and have not yet acquired
the necessary modern expertise , we must learn from other countries , then
evolve our own standards for strengthening the mechanism of conciliation.
Amendment in Court Fees Act, 1870: However
the amendment hasn’t been enforced up till now in India.
S.16: where the court refers the
parties to the suit to any one of the mode of settlement of dispute referred to
in section 89 of the code of civil procedure, 1908 the plaintiff shall be
entitled to a certificate from the court authorizing him to receive back from
the collector, the full amount of fee paid in respect of such a plaint.”
Proposal of Nyaya Panchayat Bill,
2006
The
objective of the proposed Nyaya Panchayat Bill is to provide a sound institutionalized
forum at the grassroots level for alternative dispute resolution through
mediation and conciliation with community involvement. Sources stated that it
was felt that delegation of judicial powers to local elected representatives
could promote “khap panchayat”-like establishments Also it would violate
article 50 of our Indian constitution which provodes for separation of
judiciary form the executive, thereby it was rejected by the cabinet[6].
CONCLUSION
The
necessity of Alternative Dispute Resolution is owing to the burden of cases at
all the three levels. The Alternative Dispute Mechanism broadly comprises of 4 ways of
dispute settlement:
- Arbitration
2. Mediation 3. Negotiation 4. Conciliation
The
above process aims at speedy remedy in a cost effective manner. However the
whole system is infirmed with many difficulties at the grass root level. At
some places they have done excellent job e.g. mediation centers in Tamil Nadu.
However, at most parts it has proved out to be a mirror of the court
litigation. This defeats the whole purpose of the Arbitration and Conciliation
Act, 1996. However, in order to work in collaboration with the government, an
entire revamping of the whole system is required where institutionalized
arbitrations should be encouraged; lawyers should be trained for effective
drafting of the plaint, the above discussed amendment in the court fees act(
where the plaintiff’s money is refunded) should be enforced. More over the
unethical lawyers who are diluting the whole arbitration system should be
debarred from becoming a part of the Alternative Dispute System and must be
heavily penalized.
It’s
important to bring about a change or it will always remain on its probation
forever.
[1] (2003 5 SCC 705)
[2] (2005 8 SCC 618)
[3] AIR 1981 SC 2075, at 2076
[4] Trustees of the Port of
Madras v. Engineering Constructions Corporations Ltd, 1995 (4) SCALE 742
[6] http://www.deccanchronicle.com/chennai/nyaya-panchayat-bill-rejected-054
