Rethinking legislative framework for settling disputes

The Arbitration & Conciliation (Amendment) Act, 2015, did not address certain key issues such as importance of institutional arbitrations at a time when internationally, institutions such as ICC, LCIA, SIAC and HKIAC were playing key roles in resolution of disputes through arbitration. A ghost of uncertainty has always revolved around the arbitration regime of the country. The 2015 Amendment also brought uncertainty with regard to its applicability (retrospective or prospective). However, the Indian government has recently approved the Draft of Arbitration and Conciliation (Amendment) Bill, 2018 assenting to bring further amendments to the Arbitration and Conciliation (Amendment) Act, 2015 by removing some practical difficulties from the Act. Moreover, New Delhi International Arbitration Centre Bill, 2018 has been introduced in Lok Sabha to establish an autonomous and independent arbitral institution for better management of arbitration in India. These moves by the Indian government are in consonance with its commitment to improve India’s ranking in the area of ease of doing business by promoting arbitration and alternative dispute resolutions as a mean for resolving disputes.

Key amendments to the Arbitration and Conciliation (Amendment) Bill, 2018.

The High Level Committee under the Chairmanship of Justice B. H. Srikrishna submitted its Report on 30th July, 2017 and has recommended for amendments in the Arbitration and Conciliation Act, 1996. The proposed amendments are as per the recommendations of the High Level Committee.

1. Establishment of the Arbitration Council of India

The Bill proposes to insert a new Part IA to the Act for establishment and incorporation of an independent body named the Arbitration Council of India chaired by a former judge of the Supreme Court or Chief Justice or Judge of any High Court or any eminent person, with government nominees, as well as, practitioners and academics. The Council will grade arbitral institution and accredit arbitrators by laying down norms and take all such steps as may be necessary to promote and encourage arbitration, conciliation, mediation and other ADR Mechanism and for that purpose evolve policy and guidelines for the establishment., operation and maintenance of uniform professional standards in respect of all matters relating to arbitration and ADR mechanism. The Council shall also maintain an electronic depository of all arbitral awards.

2. Appointment of Arbitrators

The Bill has proposed for provisions for facilitating speedy appointment of arbitrators through designated arbitral institutions by the Supreme Court or the High Court, without having any requirement to approach the court in this regard. It is envisaged that parties may directly approach arbitral institutions designated by the Supreme Court for International Commercial Arbitration and in other cases the concerned High Courts.

3. Confidentiality Provisions

The Bill has proposed for statutory recognition to confidentiality in the arbitral proceedings by inserting Section 42A to the Act. Section 42A avers that the arbitrator and the arbitral institutions shall keep confidentiality of all arbitral proceedings except award. It also adds a new section 42B to protect an Arbitrator from any suit or other legal proceedings, for any action or omission done in good faith in the course of the arbitration proceedings.

4. Timeline of the proceedings under Section 29A

The Bill has relaxed the previous provision under sub-section (1) of Section 29A, which provided for completion of the arbitration proceeding within 12 months from the initiation of the proceeding with further extension of six months by excluding International Arbitration from the ambit of this provision. This amendment will enable more complex International Commercial Arbitrations being governed by institutional rules to be seated in India by removing the impediment of timeline that was unrealistic to achieve in certain cases.

5. Applicability of 2015 Amendment

A new section 87 is proposed to be inserted to clarify that unless parties agree otherwise the Amendment Act 2015 shall not apply to (a) Arbitral proceedings which have commenced before the commencement of the Amendment Act of 2015 (b) Court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Amendment Act of 2015 and shall apply only to Arbitral proceedings commenced on or after the commencement of the Amendment Act of 2015 and to court proceedings arising out of or in relation to such Arbitral proceedings.

Overview of the New Delhi International Arbitration Centre Bill, 2018

Based upon the recommendations submitted by the High Level Committee chaired by Justice Srikrishna, the New Delhi International Arbitration Centre Bill, 2018, was introduced in Lok Sabha on January 5, 2018, to establish an autonomous and independent institution for better management of arbitration in India. Objective: To provide for the establishment and incorporation of the New Delhi International Arbitration Centre (NDIAC), for the purpose of creating an independent and autonomous regime for institutionalized arbitration and for acquisition and transfer of undertakings of the International Centre for Alternative Dispute Resolution, and to vest such undertakings in the NDIAC for the better management of arbitration so as to make it a hub for institutional arbitration, and to declare the NDIAC to be an institution of national importance and for matters connected therewith or incidental thereto.
Composition: Under the Bill, the NDIAC will consist of seven members including: (i) a Chairperson who may be a Judge of the Supreme Court or a High Court, or an eminent person with special knowledge and experience in the conduct or administration of arbitration; (ii) two eminent persons having substantial knowledge and experience in institutional arbitration; (iii) three ex-officio members, including a nominee from the Ministry of Finance and a Chief Executive Officer (responsible for the day-to-day administration of the NDIAC); and (iv) a representative from a recognised body of commerce and industry, appointed as a part-time member, on a rotational basis.
Term and superannuation: The members of NDIAC will hold office for three years and will be eligible for re-appointment. The retirement age for the Chairperson is 70 years and for others is 67 years.
Functions: The key objectives of the NDIAC include (i) promoting research, providing training and organising conferences and seminars in alternative dispute resolution matters; (ii) providing facilities and administrative assistance for the conduct of arbitration, mediation and conciliation proceedings; (iii) maintaining a panel of accredited professionals to conduct arbitration, mediation and conciliation proceedings. Key functions of the NDIAC will include: (i) facilitating conduct of arbitration and conciliation in a professional, timely and cost-effective manner; and (ii) promoting studies in the field of alternative dispute resolution. Institutional Support: The Bill specifies that the NDIAC will establish a Chamber of Arbitration which will maintain a permanent panel of arbitrators. Further, the NDIAC may also establish an Arbitration Academy for training arbitrators and conducting research in the area of alternative dispute resolution. The NDIAC may also constitute other committees to administer its functions.

No Appointment of Arbitrator if there is a violation of pre requisite to initiate Arbitration as per the clause: Supreme Court

The Supreme Court of India in the case of United India Insurance Co. Ltd. & Anr. v. Hyundai Engineering & Construction Co. Ltd. & Ors. while setting aside the Madras High Court Judgment stated that the conditionality clause in the arbitration agreement should be respected. In an agreement between a Joint Venture and insurance company, there was reference to arbitration. The arbitration clause provided that no difference or dispute shall be referred to arbitration if the company has disputed or not accepted liability under or in respect of this policy. The High Court appointed the Arbitrator on request from one of the parties. The Court relied on judgments to conclude that the arbitration clause has to be interpreted strictly. The bench said, “The present clause is a conditional expression of intent. Such an arbitration clause will get activated or kindled only if the dispute between the parties is limited to the quantum to be paid under the policy. The liability should be unequivocally admitted by the insurer. That is the precondition and sine qua non for triggering the arbitration clause. To put it differently, an arbitration clause would enliven or invigorate only if the insurer admits or accepts its liability under or in respect of the concerned policy.”

Referring parties to arbitration without their written consent has serious civil consequences: SC

The Supreme Court in the matter of Kerala State Electricity Board and Anr. v. Kurien E. Kathilal, the appellant had entered in an agreement with the Respondent contractor for construction of a composite dam. The respondent contractor in view of the revised minimum wages of labour claimed from the petitioner escalated labour charges. The State government referred the matter to the industrial tribunal for adjudication of the dispute with regard to the said claim of workmen. While the adjudication was pending, the Appellant terminated the contract with the contractor. When the case came before the High Court with reference to the amount payable for additional work done by the Respondent contractor with the consent of the counsel for the parties, to refer the matter for arbitration to resolve the dispute relating to items which they could not amicably resolve. The issue which arose before the SC was whether the High Court was right in referring the parties to arbitration on the oral consent given by the counsel without written instruction from the party. While adjudicating the matter, the court held that, if there is no arbitration agreement between the parties, the High Court cannot refer the parties to arbitration without a joint memo or a joint application of the parties. It stated that in the absence of arbitration agreement, the court can refer parties to arbitration only with written consent of parties, either by way of a joint memo or joint application, not on oral consent given by their counsel. Under such circumstances, the procedural mechanism as enumerated under Section 89 Code of Civil Procedure is to be duly adhered to.

DC Federal Judge Refuses to Confirm Arbitral Award to Hardy Oil & Gas

The United State District Court for the District of Columbia in the matter of Hardy Exploration & Production (India) Inc. v. Government of India, Ministry of Petroleum & Gas, refused to confirm the arbitration award which would have resulted in Hardy Exploration & Production (India) Inc. (HEPI) returning to work in India’s natural gas reserves. U.S. District Judge, Rudolph Contreras asserted that U.S. policy respects rights of other nations to manage resources within their own territories. The Judge in fact went on to add that the case presented a unique opportunity to balance two “important” American public policy values: respect for the sovereignty of other nations and respect for foreign arbitration agreements. The victory is a major one as considering the traditional pro Arbitration attitude of the US Courts which normally supports enforcement of New York Convention Awards. Most importantly, the new dimension given to the sovereignty principle in the realm of natural resources contract by the US Court is a contribution to the international arbitral jurisprudence.

An Appeal against the execution of Foreign Award is not maintainable under the Commercial Court: SC

In the recent case of Kandla Export Corporation & Anr. v. M/s OCI Corporation & Anr, the issue before the Apex Court was that whether an appeal which was not maintainable under Section 50 of the Arbitration & Conciliation Act can be maintainable under Section 13(1) of the Commercial Courts Act. In the present case, the appellant filed an application for execution of foreign award in the High court which was transferred to the Commercial Division of the court, considering the value of the award and the same was allowed. The order for execution was challenged before the Commercial Appellate Division which did not entertain it stating that such an order was not appealable under the Arbitration Act. The Supreme Court while delivering its judgment relied on the case of Fuerst Day Lawson Limited v. Jindal Exports Limited, wherein it was observed that that the Arbitration Act is a self-contained Code on all matters pertaining to arbitration, which would exclude the applicability of the general law contained in Section 13 of the Commercial Courts Act. It also stated that, Section 13(1) of the Commercial Courts Act, being a general provision vis-à-vis arbitration relating to appeals arising out of commercial disputes, would not apply to cases covered by Section 50 of the Arbitration Act.

Consumer cases are not arbitrable: SC

The Supreme Court in Emaar MGF v. Aftab Singh dismissed the appeals filed by builders and upheld the decision of National Consumer Dispute Redressal Commission (NCDRC) that held arbitration clause in the agreements cannot circumscribe the jurisdiction of a consumer fora, notwithstanding the amendments made to Section 8 of the Arbitration and Conciliation Act. The Appellants preferred appeal stating that the matter shall be referred to arbitration as per the buyer’s agreement. It relied on the amendment made to Section 8 of the Arbitration & Conciliation Act, 1996. The Court stated that the amendment was meant for a completely different purpose. Also, the disputes which are to be adjudicated and governed by statutory enactments (Consumer Protection Act in this present case), established for specific public purpose to sub-serve a particular public policy are not arbitrable.

Arbitral Award directing transmission of shares can be ‘Enforced’ through National Company Law Tribunal (NCLT): SC

The Apex Court in Cheran Properties Limited v. Kasturi & Sons Ltd. has upheld proceedings for rectification of records before the National Company Law Tribunal (NCLT) by a Claimant company whose claim was upheld by the arbitral tribunal directing transmission of shares. The Appellant made the contention that an arbitral award has to be enforced as a decree of civil court considering Section 36 of the Arbitration & Conciliation Act and could not be enforced before the NCLT. The arbitral award contained a direction to Respondents to return the documents of title and share certificates to the Claimant. The Court held that the transfer of the share certificates by the appellant will be effectual only by the rectification of the register of the company which requires an enforcement application before the NCLT.

An arbitral award of Rs 2,950 crore plus interest to Reliance Infrastructure’s Subsidiary from Delhi Metro: Delhi HC

The Delhi High Court upheld the Rs. 2,950 crore arbitral award along with interest to Delhi Airport Metro Express Private Limited (DAMEPL), a subsidiary of Reliance Infrastructure Limited (RInfra) against Delhi Metro Rail Corporation Ltd. Two petitions were filed in the present case. One had been filed under Section 34 of the Arbitration and Conciliation Act, 1996 by Delhi Metro, challenging the award passed against it in May, 2017. Another Petition had been filed under Section 9 of the Act by DAMEPL, seeking a direction to Delhi Metro to deposit with the Court 75% of the award, i.e. Rs. 3502.62 Crores. The High Court upheld this award and ruled in favour of DAMEPL, opining, “The Arbitral Tribunal has in great detail examined and assessed the material and evidence placed before it and has analyzed the relevant clauses of the contract and taken a view, which is plausible.”