Arbitration dispute resolution has been prevalent in India

Arbitration has indeed to an
extent, created the widespread need for a clean and sophisticated dispute
settlement mechanism. The law and practice of private and transactional
commercial disputes without court intervention, is firmly proclaimed in the
ancient history. Arbitration as an alternative to dispute resolution has been
prevalent in India from the Vedic times in different ways. Arbitration of
commercial disputes is a necessity in the contemporary world governed by the
principle of laissez-faire. Some jurisdictions, at both the national and
international level, have endorsed initiatives to amend their arbitration laws
to minimise the scope of judicial review and judicial intervention to
facilitate the arbitral process and smooth settlement of disputes. There has
been a upward trend in favour of the arbitration. Arbitration facilities and
institutions have increased. The pendency in litigating process all over the
world coupled with the exorbitant expenses has led to efforts in creating an
alternative dispute resolution mechanism. The favourable trend towards
arbitration has been reflected also in legislative enactments, international
treaties, and other measures by which arbitration has gradually acquired a more
solid legal standing. The
larger difficulty felt in the International Commercial Transactions was that of
the recognition and enforcement of an arbitral award made in one country by the
Courts of other countries. Various International Conventions had tried and
sought to remove such obstacles in the arena of enforcement of foreign awards.
Also relying upon the practical
modalities adopted by respective countries in various spheres depending upon
the commercial or civil transaction, laws governing the country, the
Arbitration Legislation has been enacted accommodative to their nations. India
was a party to the New York Convention, and first gave effect to the same by
enacting the Foreign Awards (Recognition and Enforcement) Act of 1961. It was
only later that India adopted the Model Law when India’s Parliament by repealing
the provisions of the Arbitration Act of 1940) enacted the Arbitration and
Conciliation Act of 1996. The rationale or the objective  behind formulating The Arbitration and
Conciliation Act, 1996 was to consolidate and amend the law relating to
domestic arbitration, international commercial arbitration, and the enforcement
of foreign arbitral awards, as well as to define the law relating to
conciliation and matters connected and matters connected therewith or
incidental thereto. The act was formulated in the lines of The UNCITRAL Model
Law on International Commercial Arbitration. The Arbitration and Conciliation
Act, 1996 contains some additional and modified rules to satisfy the
requirements of domestic and international arbitration. It also contains
certain useful provisions of the Arbitration Act, 1940. An arbitral award can
be set aside by a competent court by an order under section 34, on grounds
similar to the grounds for refusing enforcement of a foreign award under the
New York Convention. Also part II of the act specifically talks about foreign
awards with its enforcement enshrined in section 48. The Arbitration and
Conciliation Act, 1996 Act was created to ensure that there is minimal judicial
intervention on the enforcement of foreign awards which was the very same
object of the UNCITRAL model law, but the analysis of judgements regarding
enforcement of foreign awards show the indifferent attitude of the Indian
courts in the enforcement proceedings. The general approach of the courts
should be to uphold arbitration awards. They should not approach them with a
meticulous legal eye endeavouring to pick holes, inconsistencies and faults in
foreign awards and with the object of upsetting or frustrating the process of
arbitration1 The
Model Law set the standards where it was stated that in matters governed by it,
no court shall intervene except in very limited circumstances. Courts while
interpreting the grounds for enforcement, try to give the widest interpretation
thereby leading to greater judicial intervention than what was perceived in the
Model Law. The whole purpose of why the model law was created is vitiated by
the varied interpretations of the court relating to enforcement of foreign
arbitral awards. If in the name of interpretation and wider public interest,
the scope of judicial review of arbitral awards is widened by the courts, the
entire effort of the parliament to bring the arbitration law in India in
harmony with the arbitral mechanism available to resolve the disputes in most
of the countries in the world and responsive to contemporary requirements shall
be nullified. The discretionary power of the courts to interpret in the widest
possible manner proves to be hindrance in enforcement of arbitral awards passed
in another state. Intervention by the national courts, if excessive or too
intrusive, can defeat the whole arbitration process, destroying its sanctity
and benefits; and in the long term may lead to crumbling of the institution of
arbitration in that country. This problem assumes more serious dimensions in
case of International Commercial Arbitration which is at focus here when there
are dealings with parties who are indulging either in international trade or
foreign investment.

 

While going for enforcement of a
foreign arbitral award, the possibility of different courts arriving at
different findings on questions of fact and different conclusions on questions
of law cannot also be ruled out. The result will be that an award annulled in a
convention country will have to travel around the world, begging for
enforcement in other convention countries. The courts of various countries may
also have divergent and inconsistent opinions on the application and
interpretation of the Model Law as applied in India. This divergence and
inconsistency will defeat the basic object of the New York Convention and the
uniformity of the arbitration law among all Convention Countries. During the
prevalent economic scenario when the Indian government is seeking more Foreign
Direct Investment and greater exports, it should efficaciously tackle problems
pertaining to the International Commercial Arbitration, including the systemic
issues involved, to make it a viable and attractive dispute resolution option.
The series of judgements pronounced by the Indian courts in the last ten years
show gradual progress towards creating a conducive atmosphere for
enforceability of foreign arbitral awards in the country. The remarkable shift
was made through the law commission in its 246th report specifically
stated that, in The Arbitration and Conciliation Act,1996 the grounds for
setting aside (under section 34) and conditions for refusal of enforcement of
foreign arbitral awards (section 48) are in pari materia. All the three types
of awards – purely domestic award (i.e. domestic award not resulting from an
international commercial arbitration), domestic award in an international
commercial arbitration and a foreign award considered as same has led to much chaos
according to the law commission report.2
The report clearly states the need for separate enactments in place for both
domestic and foreign awards. The objective behind this rationale of the law
commission was to ensure India’s arbitration law is in tune with the postmodern
developments in the international scenario. The recent amendment Arbitration
and Conciliation Act, 2015 provides much needed solution to this problem but
the question whether it reduces or increases the judicial intervention is to be
determined. Not only the question regarding the excessive judicial interference
is to be answered, but also the extent to which India fulfilling its
obligations in relation to the Model law is to be analysed with the need of the
hour. Equating the domestic arbitral awards to that of international arbitral
awards has indeed been the standstill point of Indian judiciary which cannot be
seen as blindfolded in these days where international trade and commerce in the
country is at its epitome.

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The concept of arbitration has been
recognized from the time immemorial straight from the medieval, British, post
and pre Independence period by trial and error method to suitably meet the
demands of the litigants both related to economic and commercial transactions
ultimately to secure ends of justice. The position of judicial intervention in
India with regard to enforcement of foreign has undergone transformation to a
great extent. The current position prohibits judicial intervention unless a
specific provision is present in that regard brings back all the arguments in
favour of more judicial intervention. The concept of public policy also comes
into focus as it is only Indian courts that can decide upon the public policy
prevalent in the scenario and whether the foreign award is in compatibility
with it. The requirement of an agreement reduces greatly; due to extent of
interference Indian courts will have in enforcing foreign arbitral awards. A
decent balance needs to be struck between intervention of domestic courts and
finality of the award made in outside India. Proper and precise legislative
provisions, instead of only the mere opinions of judiciary in this regard will provide
more authority and give finality with regard to judicial intervention relating
to enforcement of foreign awards.

1
Zermalt Holdings SA v Nu-Life Upholstery, 1985 2 E.G.L.R. 14 at 14.

 

2
Law Commission of India, Report No.246, August, 2014 – Amendments to the
Arbitration and Conciliation Act 1996

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