It is true that both the courts and the administration in India have recently embraced a pro-arbitration approach. “The Government of India is actively supporting International Arbitration as a fair and lawful mechanism of settling International Business Disputes,” according to the agreement. A review of recent Supreme Court of India cases reveals that courts now rarely intervene in the arbitration process, allowing tribunals to deal with the problems raised in the case.
The “basic principle that must guide judicial decision making is that Arbitration is essentially a voluntary assumption of an obligation by contracting parties to resolve their disputes through a private tribunal” and that “the duty of the court is to impart to that commercial understanding a sense of business efficacy,” according to the new interpretation. The Hon’ble Supreme Court, in upholding the courts’ minimal participation in arbitral procedures, also stated that “the courts need to remind themselves that the trend is to limit interference with arbitration process as that is the forum of choice.” That is also the policy that the 1996 Act reveals. Courts must use extraordinary caution and even reluctance in interfering with arbitration processes. While Indian courts may have the jurisdiction to halt arbitration procedures, they must do so sparingly and only on the basis of considerations similar to those stated in sections 8 and 45 of the 1996 Act, as the case may be. “The Hon’ble Supreme Court of India’s arbitration approach was further reflected in a recent judgement, which held that “the Court should not decide on the merits of whether the dispute relates to excepted matters under the agreement in question or not while dealing with an application under Section 11(6) of the Act.”
In Indus Mobile Distribution Private Ltd versus Datawind Innovations Private Limited and Ors, the Hon’ble Supreme Court upheld the exclusivity of arbitration, noting that “the moment the seat is chosen, it is equivalent to an exclusive jurisdiction provision.” In a recent decision, the Hon’ble Supreme Court declared that the execution of an award can be filed anywhere in the country if such an order from the court, which would have jurisdiction over the arbitral proceedings, is available. Furthermore, the Hon’ble Supreme Court of India recently held that “since a foreign award is not contained within the expression “award” in item 12 of the Schedule I, it is not taxable under the Indian Stamp Act 1899,” further promoting arbitration by allowing execution of foreign awards in India without payment of stamp duty. International Commercial Arbitration is divided into two categories in India:
1) India-based International Commercial Arbitration (Part 1 of the Act)
2) International Commercial Arbitration has a seat in a country other than India (Part 2 of the Act)
In a series of judgements, the Hon’ble Supreme Court of India clarified and streamlined the law of arbitration, holding that India courts have no involvement at all in matters of foreign seated arbitrations, and that only Part 2 will apply in such cases. The Hon’ble Supreme Court of India’s decision in BALCO, which overruled the earlier Bhatia International versus Bulk Trading judgement, has thereby moved Indian arbitration law in the proper path. The Bombay High Court and the Calcutta High Court have confirmed that Part 1 of the Act will not apply in foreign seated arbitrations, following in the footsteps of the Hon’ble Supreme Court of India. It is worth noting that the Hon’ble Supreme Court and the Hon’ble High Court have repeatedly emphasised the value of arbitration. The following are some key decisions:
“The arbitrator having been made the final arbiter of resolution of disagreements between the parties, the award is not susceptible to challenge on the ground that the arbitrator has reached the wrong conclusion,” the Supreme Court said in the SAIL decision. In Sarvesh Chopra vs Ircon International Ltd, the Hon’ble Delhi High Court declared that the court should not have looked into a finding of a fact that is not perverse. It was also decided that when adjudicating under Section 34 of the ACT, courts should avoid entering the factual arena to challenge the impugned award.
It’s also worth noting the Hon’ble Supreme Court’s decision in Shree Ram Mills Ltd vs Utility Premises Pvt Ltd, which found that “if the contract dispute is under negotiation or consideration, then the limitation for arbitration would be regarded to have not begun.” It was thus emphasised that the cause of action for resorting to arbitration cannot be regarded to have begun when the parties are actively attempting to resolve the disagreement. In clarifying the meaning of Section 34 of the Act, the Hon’ble Supreme Court of India held that the section’s scope is restricted to the stipulation provided in Section 34(2) of the Act of 1996. The words “An arbitral award may be set aside by the court only if” in Section 34(2) are mandatory and remove the court’s ability to set aside the award on any of the grounds listed in the section. It was clarified that the court will not sit in appeal over the arbitral tribunal’s decisions or reappraise evidence as an appellate court.
In Union of India versus Ambika Construction, the Hon’ble Supreme Court held that the rate of interest should be given and computed from the date the arbitration was called until the final realisation of the sum. In a recent decision, the Hon’ble High Court concluded that an agreement prohibiting interest awards merely prohibits the claim for interest, not the arbitrator’s jurisdiction to award interest. In the case of Oil and Natural Gas Corporation Vs Saw Pipes Ltd, the Hon’ble Supreme Court of India defined the court’s authority under Section 34 of the Act, holding that the courts must act where there is patent illegality deriving from statutory provisions.
In recent years, there has been an exponential increase in foreign dealings and contracts, resulting in a surge in international arbitration disputes. India is no longer a closed economy; it is adapting to the changing times, and decisions like BALCO are demonstrating to the rest of the world that parties can enter into arbitration without fear of being subjected to inconvenient traditional procedures.
As a result, the Indian judiciary is currently going to great lengths to simplify procedures in situations of international commercial arbitration. Furthermore, the amendment to Section 36 has given the Act more teeth, as now, in order to challenge an Award under Section 34 of the Act, a stay is not automatically imposed, as it was in the pre-amended Arbitration and Conciliation Act 1996 prior to its amendment in 2015, and conditions similar to Order 41 Rule 5 of the Code of Civil Procedure must be imposed by the Court adjudicating the correctness of the Award. In line with the purpose of the Act and authoritative court dicta in this regard, this criterion would likewise eliminate superfluous challenges to an Arbitration Award.
Author’s Name: Akshansh Negi (Indore Institute of Law)