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Arbitration & ADR
The patent illegality ground was formally introduced to the Arbitration and Conciliation Act 1996 by way of the Arbitration and Conciliation (Amendment) Act 2015. Prior to 2015, the scope of this ground of challenge was set out in various Supreme Court decisions stemming from Oil & Natural Gas Corporation Ltd v Saw Pipes Ltd. This article examines the genesis of patent illegality and tracks its trajectory from Oil & Natural Gas Corporation.
The freedom to contract principle forms the basis of the Contract Act, and a similar principle is also provided for in the Arbitration and Conciliation Act. However, the question often arises as to what happens when one party – despite a contractual agreement setting out the scope and ambit of arbitration – seeks recourse to remedies provided for under a special statute. This article examines this issue in view of the Micro, Small and Medium Enterprises Development Act.
The enforcement of a foreign arbitral award in India is founded on the fundamental principle of minimal judicial intervention in order to further India's pro-arbitration and consequently pro-foreign investment climate. However, the Delhi High Court recently refused to enforce a foreign arbitral award under the Arbitration and Conciliation Act. This article analyses the court's decision, its reasons for refusing the enforcement of the award and whether this judgment is a step back for Indian arbitration law.
The Bombay High Court recently passed an order in favour of the enforcement of a foreign arbitral award which had been rendered by an arbitral tribunal constituted under the Singapore International Arbitration Centre Arbitration Rules. The award upheld the validity and performance of a put option created pursuant to a share subscription agreement and a put option deed, which provided a foreign investor with an exit from its investment in an Indian company on agreed terms and conditions.
While anti-suit injunctions are typical court-ordered injunction orders which restrain the parties from initiating or continuing legal action in foreign courts, anti-arbitration injunctions are specific orders which prohibit parties from initiating or continuing arbitration proceedings. As the Indian courts may assume jurisdiction and grant anti-arbitration injunctions even though they seem to weaken the competence-competence principle, these injunctions are highly controversial.
The Supreme Court recently refused enforcement of a foreign award on the basis that it was contrary to the fundamental public policy of India. Although a recent decision, the dispute arose almost 40 years ago and thus pertains to an era which preceded the amendment of the Arbitration and Conciliation Act. In its decision, the court analysed the concept of public policy and the difference between contingent contracts and frustration as a principle for voidability of contracts under the Contract Act.
If the parties to a contract fail to choose the applicable law, the task trickles down to the arbitral tribunal. This will be one of the first tasks required of an arbitral tribunal, as adjudication of a dispute is not possible until the applicable law has been determined. Further, the application of an incorrect law is a ground for setting aside an arbitral award. This article examines the role of an arbitral tribunal in determining the applicable law in arbitration proceedings.
The concepts of 'seat' and 'venue' in the context of arbitration law have been the subject of numerous landmark rulings in India. However, the test for distinguishing between these two concepts has yet to be settled under Indian law. In order to avoid confusion, inconvenience or conflicting decisions in the future, this issue must be referred to a larger bench of the Supreme Court as soon as possible for its final word on the matter.
The division bench of the Bombay High Court recently confirmed the legal position and the tests for determining whether a partial final award may be interpreted as an arbitral award under the Arbitration and Conciliation Act. In so doing, it also clarified the position on the limitation period for challenging such an award.
Following the passing of amendments in 2015, the Arbitration and Conciliation Act specifically provides that arbitral tribunal orders which are passed under Section 17 of the act will be enforceable under the Code of Civil Procedure as if they were a court order. However, a party can take advantage of Section 17 only when the arbitration is seated in India, which raises questions as to the enforceability of interim measures granted by arbitral tribunals which are situated outside India.
Insufficiently stamped agreements: can parties still seek interim relief in support of India-seated arbitrations?India | 20 February 2020
The Supreme Court recently held that the courts cannot appoint an arbitrator on the basis of an arbitration clause if the agreement containing such clause is insufficiently stamped. The court concluded that such an arbitration clause does not exist in law. In so doing, the court expressly overruled a prior decision of the Bombay High Court to the extent that it dealt with the powers of the courts under Section 11 of the Arbitration and Conciliation Act.
The Supreme Court recently decided key issues relating to the interpretation of arbitration clauses and the scope of appealable orders under the Arbitration and Conciliation Act. This judgment does an admirable job of resolving residual ambiguities regarding the issue of exclusive jurisdiction where the seat of an arbitration is situated. Notably, through its decision, the Supreme Court has specifically declared that its earlier judgment in Hardy Exploration and the Delhi High Court's decision in Antrix are incorrect.
The Supreme Court recently considered whether an unconditional stay can be granted under Section 36 of the Arbitration and Conciliation Act 1996 when the applicant is the government. The court rightly held that the safeguards which were incorporated for the Crown by Order 27, Rule 8A of the Code of Civil Procedure are now inapplicable and outdated, especially as the purpose and intent of alternate dispute resolution is to treat parties equally.
Supreme Court rules that arbitrators' fee schedule fixed by parties overrides Fourth Schedule of Arbitration ActIndia | 08 August 2019
The division bench of the Supreme Court recently held that if the parties to an arbitration have agreed an arbitrators' fee schedule, the arbitrators must charge their fees in accordance with this agreed schedule and not in accordance with the Fourth Schedule of the amended Arbitration Act. While this decision gives credence to party autonomy and may thus be hailed as pro-arbitration, it specifies no limits and provides no other directions for parties to bear in mind when fixing a fee schedule.
It is common knowledge that arbitration provides greater flexibility and party autonomy compared with traditional litigation before the courts. Corollary to this, the agreed terms for the appointment of an arbitrator or arbitral tribunal must be strictly followed while making such appointments if a dispute arises between the parties to an agreement. However, what happens when an arbitrator fails to or is prevented from acting specifically at the penultimate stage?
The question of whether a contract can be amended retroactively was raised in the arbitration proceedings between Ssangyong and the National Highways Authority of India. The Supreme Court's ruling on the case is a welcome exposition on the contours of Section 34 of the Arbitration and Conciliation Act, especially in relation to challenges on grounds of violations of principles of natural justice.
Enforcement of foreign awards: does violation of legal provision equate to contravention of fundamental policy?India | 18 April 2019
In 2013 the Supreme Court held that the enforcement of a foreign arbitral award can be refused only if it is contrary to, among other things, the 'fundamental policy of Indian law'. This article focuses on the Indian courts' interpretation of this term and looks at a common question that arises in relation to this area of law – namely, whether a foreign arbitral award which is a mere violation of an Indian legal provision qualifies as a contravention of the fundamental policy of Indian law.
The Supreme Court recently ruled that consumer disputes are incapable of being submitted to arbitration, placing them in the infamous category of 'non-arbitrable' subjects in India. However, the court also stated that where an elected consumer fails to file a consumer complaint, the parties are not barred from submitting the dispute to arbitration. This article analyses whether such a statement could have far-reaching implications for arbitrability as a ground for challenging an award.
The focus of India's rapidly evolving arbitration regime appears to be concentrated on factors such as ensuring that arbitrations are completed in a timely manner and appointed arbitrators are impartial. While these factors are significant, the importance of substantive and procedural clarity in terms of what happens after an award is passed is also crucial.
Two-tier arbitration clauses or appellate arbitration mechanisms were upheld by a three-judge bench of the Supreme Court in Centrotrade Minerals and Metal Inc v Hindustan Copper Limited. This article discusses the evolution of the jurisprudence surrounding two-tier arbitration in India and analyses both the utility of such a mechanism for the parties and its usefulness in certain situations.
The Supreme Court recently held that the only prerequisite for an arbitration agreement is that it be in writing. Through this decision, the court has adopted a pro-arbitration approach and, as such, may contribute positively to the existing jurisprudence on the Indian arbitration regime. By relying on the unsigned bill of lading, the court focused on the parties' conduct and intent, both of which indicated that there was an arbitration agreement between them.
The Bombay High Court recently issued a landmark ruling regarding third parties' right to challenge interim measures granted by an arbitral tribunal under the Arbitration and Conciliation Act. The ruling is a welcome reprieve for non-signatories to arbitration proceedings in situations where disputes between arbitrating parties have a bearing on their rights and interests, as well as a step towards balancing innocent parties' interests.
Before its amendment in 2015, the Arbitration and Conciliation Act 1996 neither promoted institutional arbitration nor discouraged parties from considering it. The 2015 amendment was an attempt to reduce judiciary intervention in arbitration proceedings and promote a culture of institutional arbitration. One of the proposed changes was the amendment to Section 11 of the 1996 act, which provides for the appointment of arbitrators by the competent court.
Following the enforcement of the Arbitration and Conciliation (Amendment) Act 2015, the Arbitration and Conciliation (Amendment) Bill 2018 proposes to further amend the Arbitration and Conciliation Act 1996. The bill is another step by policymakers towards making India "a robust centre for international and domestic arbitration" and attempts to make it an investor-friendly jurisdiction and a preferred seat of arbitration for dispute resolution.
The Bombay High Court recently held that in accordance with the 2015 amendment of Section 11 of the Arbitration and Conciliation Act 1996, the courts' responsibility to refer a dispute to arbitration is narrow and limited to examining the existence of an arbitration agreement. Further, the high court held that an unstamped document does not bar a dispute from arbitration.
The Bombay High Court recently ruled that an application under Section 9 of the Arbitration and Conciliation Act 1996 which had been filed following an award passed by a foreign-seated arbitral tribunal had to be brought before a 'court' as defined in the explanation to Section 47 rather than Section 2(1)(e)(ii) of the act. The judgment has clarified, and to a large extent simplified, the procedure for a foreign award holder.
Section 34 of the Arbitration and Conciliation Act 1996 sets out the conditions for setting aside an arbitral award. In this context, the term 'arbitral award' has always been understood as an award rendered by the majority members of an arbitral tribunal. However, recent decisions of the Bombay High Court and the Delhi High Court, while setting aside the award of the arbitral tribunal, have upheld the so-called 'minority award', in variance with the act and established precedent.
Multi-tiered dispute resolution clauses prescribing pre-arbitral steps are common in commercial contracts in order to allow parties to resolve their disputes in a non-adversarial set up, preserve commercial relationships and save costs. Almost all contracts require performance of such pre-arbitral steps as a condition precedent to arbitration, but are they specifically enforceable? In other words, are pre-arbitral steps mandatory or directory in nature?
The Supreme Court recently set out the legal position regarding challenges to a person's possible appointment as an arbitrator. It held that since ineligibility goes to the root of the appointment, the Arbitration and Conciliation Act 1996 clarifies that if the arbitrator falls under any of the categories specified in the Seventh Schedule, he or she becomes ineligible to act as an arbitrator. However, if the circumstances fall under the Fifth Schedule, the person would not be de jure ineligible.
By way of the Arbitration and Conciliation (Amendment) Act 2015, the government sought to reform the law in relation to international commercial arbitrations conducted in India and foreign-seated international commercial arbitrations. Following recent judgments from the Delhi High Court and the Bombay High Court, it is timely to analyse the amendment act with reference to the United Nations Commission on International Trade Law Model Law on international commercial arbitration.
The Supreme Court recently reaffirmed that Indian arbitration law does not specifically prohibit two-tier arbitration clauses which provide for appellate review of an arbitral award by a subsequent arbitration. This judgment is an important win for party autonomy in India and sends a pro-arbitration message.
The Delhi High Court recently clarified the scope and interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act 2015. The Delhi High Court held that if arbitration was commenced before October 23 2015, the amendment act does not apply to the court proceedings for setting aside an arbitral award rendered in relation to such proceedings.
Significance of independence and impartiality in constitution of arbitral tribunals – critical analysisIndia | 22 December 2016
The independence and impartiality of arbitral tribunals is significant in order to encourage faith and trust in litigants and ensure that disputes are independently, impartially and fairly adjudicated. Against this backdrop, the enforceability of contracts between private parties and government entities must be considered, as such entities often appoint arbitrators who act with such inflexibility as essentially to render arbitration agreements redundant and the required consent of the parties meaningless.
India's arbitration law was transformed in several key respects when the Arbitration and Conciliation (Amendment) Act 2015 came into force. However, despite the visionary changes introduced by the act, it is vague in both applicability and scope, which has led various courts to reach different conclusions about its applicability. Until these issues are resolved, the act cannot be hailed as a game changer for the Indian arbitral regime.
The Delhi High Court recently addressed a unique jurisdictional issue regarding the applicability of an incorrect provision of the Commercial Courts Ordinance which was retrospectively corrected by the Commercial Courts Act. However, the retrospective application of the Commercial Courts Act has raised concerns which must be clarified to ensure a smooth transition from the Commercial Courts Ordinance to the Commercial Courts Act.
In order to rectify the issues associated with arbitration in India, Parliament recently passed the Arbitration and Conciliation (Amendment) Act. The amendment seeks to make arbitration in India a quicker and more streamlined process, reduce interference by the courts, make India a more attractive destination for foreign investors and improve the ease of doing business.
India recently released its new Model Bilateral Investment Treaty (BIT). Compared to the previous Model BIT, the new BIT incorporates substantial and critical changes and considers international precedents and trends in investment treaty law. The new Model BIT attempts to safeguard the host state's interests and is intended to form the basis of India's negotiations with other countries in relation to the redrafting of existing BITs.
The Arbitration and Conciliation (Amendment) Ordinance, 2015 – which provides for less cumbersome, more cost-effective, efficient and expeditious dispute resolution – has been welcomed by litigants. However, more clarity is needed with regard to the ambiguities in the new Section 11 – in particular, in relation to the scope and applicability of the Fourth Schedule and the model fee structure payable to arbitrators.
The courts have issued a series of judgments which have strengthened the pro-arbitration stance of the Indian judiciary with regard to international commercial arbitration. However, the jurisprudence is more nuanced with respect to arbitrating disputes between two Indian parties and uncertainty still persists with regard to whether two Indian parties can choose a foreign seat and a foreign law to govern their arbitration agreements.
The courts continue to retain jurisdiction over pre-BALCO arbitration agreements under the Bhatia International regime. However, theories of expressed and implied exclusions have been carved out to bar the application of Part I of the Arbitration and Conciliation Act 1996. That said, unless the courts provide further clarity, implied exclusion of Part I does not apply to two Indian parties which have agreed to foreign-seated arbitration.
While the jurisdiction of the Indian courts in relation to international commercial arbitration remains a complex issue, the Supreme Court has attempted to strike a balance between the courts, arbitrators and parties through a series of judicial pronouncements. A recent Supreme Court decision significantly altered the settled position on the application of the Arbitration and Conciliation Act in relation to international commercial arbitration.
A transaction culminating in arbitral proceedings often creates questions regarding the scope and power of an arbitral tribunal to grant relief to a successful party. A question that often arises when arbitral awards are made is whether further interest can be imposed on an awarded sum. In other words, can interest be awarded on interest? The Supreme Court recently ruled that such claims for compound interest are sustainable.
A recent Supreme Court judgment confirms that Part I of the (Indian) Arbitration and Conciliation Act 1996, which governs domestic arbitration, does not apply where the arbitration clause has expressly specified foreign law as the law applicable to the arbitration agreement. The court further held that the issue of arbitrability of the disputes themselves would be determined in accordance with the law governing the arbitration agreement.
A recent Supreme Court decision has significantly altered the country's position on the arbitrability of fraud. However, while the decision could speed up domestic arbitration proceedings, it has raised many questions, as the single judge held that he was not bound by a two-judge bench decision because it had been made without reference to relevant decisions and statutory provisions.
Allegations of fraud by a party have proved to be a vexatious issue for arbitration in India. Judicial pronouncements have led to a situation where even a hint of any fraudulent activity could take disputes out of an arbitrator's jurisdiction. Although recent decisions on international arbitrations linked to India appear to have steered the legal position towards international practice, allegations of fraud in domestic arbitrations remain a minefield.
The Supreme Court recently held that the doctrine of 'double exequatur' is inapplicable in India, in light of the change in law introduced by the Arbitration and Conciliation Act. The court rejected the argument that a foreign arbitral award could not be enforced in India unless confirmation thereof was first sought from the relevant foreign court.
A series of recent Indian court judgments have given a much-needed impetus to arbitration and its practice in India. These judgments are clearly a conscious attempt on the part of the Indian judiciary to restrict intervention in arbitration and related processes in order to make the arbitration process a credible, speedy and effective mode of dispute resolution.
The Supreme Court recently held that that when interpreting the expression 'public policy in India', patent illegality cannot be included as one of the grounds on which the enforcement of foreign awards may be refused. The court has endeavoured to make a distinction between awards made in India and foreign awards, with a view to limiting the scope of grounds by which to challenge the latter.
The Delhi High Court recently examined the question of when an arbitration clause can be deemed binding on a party that is not a signatory to the agreement containing the clause. The court held that the question should be determined based on the terms of the agreement, along with the intention and conduct of the parties. However, a cautious eye should be kept on applications in order to discourage frivolous petitions.
The Delhi High Court recently affirmed that where parties to an agreement make reference to an arbitrator for the purposes of determining a question of law, the decision taken by the arbitrator cannot be interfered with by the courts, even if the court itself may have a different view on the question of law from that taken by the arbitrator. The court may interfere only where the view arrived at by the arbitrator is implausible or contrary to law.
In a recent appeal of an International Chamber of Commerce arbitration in Malaysia, the Delhi High Court had to consider whether the Indian law of limitation was a procedural law or a substantive law. The lead arbitrator had noted that since the statute of limitations in both India and Malaysia was procedural, an action could be brought in Malaysia even if the period of limitation in the claim had expired under the Indian Limitation Act.
A recent case before the Delhi High Court demonstrates that the courts continue to frown on parties' efforts to avoid arbitration by filing suits that implead unnecessary parties. Efforts on the part of the courts to weed out frivolous civil suits filed by parties to scuttle the arbitral process is a necessary step and will go a long way towards building the confidence of commercial parties when considering engaging in arbitration.
A constitutional bench of the Supreme Court recently issued a judgment in which it restricted the scope of interference by Indian courts in arbitrations conducted outside the territorial boundaries of India by excluding the applicability of Part I of the Arbitration and Conciliation Act 1996 to such arbitrations. This judgment was much anticipated in international commercial arbitration circles and is very welcome.
Bilateral investment treaties have recently become the chosen pathway for dispute resolution by foreign investors in India. However, historically foreign companies that invest in India have rarely invoked the dispute resolution clauses of such treaties. A view has been canvassed that India should therefore consider amending its investment treaties so as to reduce the protections accorded to foreign investors.
A recent case before the Supreme Court has confirmed the grounds under which arbitration awards may be challenged. As detailed under Section 34 of the Arbitration and Conciliation Act, the court has the power to allow an amendment where an application has been made within the prescribed limits, if the peculiar circumstances of the case so warrant and it is so required in the interest of justice.
In a recent case the Supreme Court held that there is an implied exclusion of Part I of the Arbitration and Conciliation Act 1996 if the parties have expressly chosen foreign law as the curial law to govern the arbitration procedure. Therefore, as a cautionary approach, where parties intend not to be governed by the act's provisions, it is best specifically to exclude the applicability of Part I of the act.
Two recent Supreme Court judgments deal with a situation where, due to the peculiar facts of the case, non-parties to the arbitration agreement were joined in the arbitration proceedings. The court therefore considered whether the arbitration agreement should be allowed to have effect in relation to all parties before the court, or only with respect to the parties to the arbitration agreement.
The Supreme Court recently issued its judgment in Videocon Industries Limited v Union of India. The court clarified that on a correct interpretation of the Arbitration and Conciliation Act 1996 and relevant judgments, application of Part I of the act would be held to have been excluded by the parties to an arbitration agreement who had agreed that the arbitration agreement will be governed by foreign law.
The Supreme Court recently considered the extent to which the high courts in India are entitled to exercise their powers under Article 226 of the Constitution (writ jurisdiction), notwithstanding the presence of an arbitration clause in the agreement entered into between the parties. The court held that the presence of an alternate remedy did not constitute a bar on the high court from entertaining the dispute in its writ jurisdiction.
The courts try to give a restrictive interpretation of the nature and scope of enquiry and the jurisdiction of the chief justice or his or her designate when dealing with petitions under Section 11 of the Arbitration and Conciliation Act. The Supreme Court recently held that the chief justice or his or her designate cannot decide on the issues of whether the claims are barred by principles of res judicata and by limitation.
A recent Delhi High Court decision raised important questions about the enforcement of foreign awards in India. The judgment confirmed that the expression 'public policy' under Section 48(2)(b) of the 1996 Arbitration and Conciliation Act (pertaining to enforcement of a foreign award) carries a narrower meaning than that assigned to the same expression in Section 34(2)(b)(ii) (pertaining to enforcement of a domestic award).
A recent decision by the Supreme Court of India confirmed that an arbitration agreement that is not in writing is invalid. Such agreements should be signed by both parties as mutual consent is a fundamental part of all contracts. Additionally, faxed copies are now considered acceptable.
Contracts to which large corporations or government agencies are a party often provide for arbitration as the method of dispute resolution, with a nominee of such corporation or government agency acting as the sole arbitrator. In most cases the arbitrator is named either in person or by designation. Presumption of such arbitrator's bias or lack of independence has always been a bone of contention between parties.
The Bombay High Court recently upheld the constitutionality of the Maharashtra Tax on Lotteries Act 2006. The legality and taxation of lottery schemes in Maharashtra has been at the centre of a catena of judgments, including State of Bombay v RMD Chamarbaugwala and Writ Petition 854/2007. The latest judgment clarifies that the taxation of lotteries falls within the ambit of the term 'betting and gambling' under Entry 62 of the State List of the Constitution.