ARBITRATION: LEGISLATIVE ACTION IN INDIA

Introduction

Alternate Dispute Resolutions can be adopted in two ways either by filing a lawsuit or by way of free-standing. ADR procedures are mostly divided into two segments: Adjudicatory and Non-Adjudicatory. In adjudicatory process the case reaches a stage where the decision gets a binding effect, for example in case of arbitration. And the other is non-adjudicatory; it contributes to resolution without adjudication, such as the process of Negotiation, Mediation etc. There have been several laws in India which approve to settle the dispute outside courts. Section 89 which was introduced to CPC, 1908 in 2003 formulates the four methods to settle disputes outside the court namely - Arbitration, Conciliation, Mediation and Lok Adalat.

Status of Enforceability of Domestic Award and International Award.

Enforcement of domestic awards

Section 36 of the Arbitration and Conciliation Act deals with the enforcement. It shall be executed and enforced just like that of execution of Decree under CPC, as awards are at par as Decree as has been defined u/s 2(2) of CPC

An award holder after receiving the award before applying for enforcement and execution would need to wait for three months. During the intervening period, the award could be challenged under Section 34 of the Act. After the expiry of the aforesaid period, if a court finds the award to be enforceable, at the stage of execution, there are often no further challenges on the validity of the arbitral award.

However, by the Amendment Act, a celebration challenging a gift would need to

move a separate application to hunt a stay the execution of a gift

Enforcement of Foreign Award

Under Section 13 and 14 of CPC foreign awards are often executed with some conditions mentioned therein India signed a treaty to the Convention on the popularity and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”). The enforcement of a foreign award in India may be a two-stage process which is initiated by filing an execution petition. Initially, a court would determine whether the award adhered to the wants of the Act. Once an award is found to be enforceable it's going to be enforced like a decree of that court.

Conditions for enforcement of arbitral awards – domestic and foreign

Enforcement of a foreign award could also be refused and a domestic award could also be set aside if it's proven that:

• The parties to the agreement were under some incapacity.
• The agreement in question isn't in accordance with the law to which the parties have subjected it or under the law of the country where the award was made (especially in case of foreign awards).
• There’s a failure to supply proper notice of appointment of the arbitrator or arbitral proceedings or the party against whom the award was rendered was otherwise unable to present his case.
• Award is ultra vires the agreement or submission to arbitration.
• Award contains decisions on matters beyond the scope of the submission to arbitration.
• Composition of the arbitral authority or the arbitral procedure is ultra vires.
• Composition of the arbitral authority or the arbitral procedure isn't in accordance with the law of the country where the arbitration happened.
• The award (specifically a foreign award) has not yet become binding on the parties, or has been put aside or suspended by a competent authority of the country during which, or under the law of which that award was made.
• Material of the dispute isn't capable of settlement by arbitration under Indian law.
• Enforcement of the award would be contrary to the overall public policy of India.

Legislative Steps toward Arbitration

The legislature amended the Arbitration and Conciliation Act in 2019 The major updates were:

• Arbitral Institution
• Establishment of an Arbitration Council of India
• Qualification and Knowledge of Arbitrator
• Confidentiality of date
• Time Limits

The court can take cognizance and refer the parties for arbitration, conciliation, mediation, Lok Adalat, or judicial settlement in terms of section 89 of the Code of Civil Procedure, 1908 for resolution of their disputes at the post-litigation stage.

Arbitral institutions

The Supreme Court and the High Court have the facility to designate arbitral institutions who are going to be liable for the appointment of arbitrators. These arbitral institutions are going to be graded by a newly established Arbitration Council of India (“Council”). When no graded arbitral institution is out there, the judge of the relevant Supreme Court may maintain a panel of arbitrators for discharging the functions and duties of an arbitral institution. The judge can also review the panel of arbitrators from time to time. The appointment of an arbitrator or arbitrators is going to be disposed of by the arbitral institution within 30 days from the date of service of notice to the other party. The arbitral institution will also determine the fees and manner of payment to the arbitral tribunal.

Establishment of an Arbitration Council of India

The Amendment Act also establishes the above-mentioned Council with its head office at Delhi. The Council will consist of:

• A Chairperson, to be appointed by the Central Government in consultation with a Supreme Court Judge or a retired Judge of the Supreme Court or an eminent person with special qualification and knowledge in arbitration.
• A Member nominated by the Central Government who is an eminent arbitration practitioner with substantial knowledge in both Domestic and International Institutional Arbitration.
• A Member appointed by the Central Government in consultation with the Chairperson who is an eminent academician with experience in research and teaching within the field of arbitration and alternative dispute resolution laws.
• An ex officio Member who is a Secretary to the Government of India within the Department of Legal Affairs, Ministry of Law and Justice.
• An ex officio Member who is a Secretary to the Government of India within the Department of Expenditure, Ministry of Finance.
• A Part-time Member who may be a representative of a recognized body of Commerce and Industry chosen on a rotational basis by the Central Government.

The Chairperson and Members of the Council, aside from ex officio Members, will hold office for a term of three years. The Council features a number of duties focused on promoting and inspiring arbitration and other alternative dispute resolution mechanisms also as framing policies and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of arbitration. The Council is required to form grading of arbitral institutions on the idea of criteria concerning infrastructure, quality and calibre of arbitrators, performance, and compliance of time limits for disposal of domestic or International Commercial Arbitrations.

Qualifications and knowledge of an Arbitrator

The Council is additionally empowered to review the grading of arbitrators whereby the qualifications, experience and norms for accreditation of arbitrators are laid out in the Eighth Schedule to the Indian Arbitration and Conciliation Act 1996. The Eighth Schedule specifies nine categories of qualifications as an arbitrator, including, inter alia, being an Indian advocate, accountant or company secretary with certain levels of experience. The Eighth Schedule also sets out the overall norms applicable to an arbitrator, including, inter alia, being an individual with a reputation of fairness and integrity, impartial and neutral, and with no conflict of interest. Notably, the standards within the Eighth Schedule do not qualify foreign registered lawyers or retired foreign officers as arbitrators.

Confidentiality of data

A new provision imposes an obligation on the arbitral institution and therefore the parties to the arbitration agreement to take care of confidentiality of all arbitral proceedings except of a gift where its disclosure is important for implementation and enforcement of the award.

Time limits

The Amendment Act imposes deadlines on the filing of pleadings, issuing of arbitral awards and therefore, the granting of extensions of time.

• A press release of claim and defence will have to be completed within six months from the date the arbitrator receives notice, in writing, of his appointment.
• Further, arbitral awards, apart from international commercial arbitration, will have to be made within a period of 12 months from the date of completion of pleadings. In International Commercial Arbitration matters, awards need to be made as expeditiously as possible and endeavours need to be made to eliminate the matter within a period of 12 months from the date of completion of pleadings.
• Where an application for an extension of time is pending, the mandate of the arbitrator will continue until the disposal of the application. 

The legislative changes under the Amendment Act are largely a positive step towards making arbitration in India according to current international best practices. However, it remains unclear whether India will become a beautiful destination for international arbitration as long as foreign-registered lawyers and academicians aren't qualified to be appointed as arbitrators under the Amendment Act. 

Moreover, while the deadline for issuance of a gift will likely cause efficiency in arbitration proceedings, there are concerns with enforceability if the deadlines aren't complied with. Therefore, it's prudent for all parties to aim to manage arbitration proceedings accordingly.

Does the law prohibit any sort of dispute from being resolved through arbitration?

There are various matters which still cannot be solved by arbitration:

• Criminal offences.
• Matrimonial disputes.
• Guardianship matters.
• Insolvency petitions.
• Testamentary suits.
• Trust disputes.
• Labour and industrial disputes.
• Tenancy and eviction matters.

While there is no authoritative decision on the difficulty, existing jurisprudence suggests that disputes involving problems with competition law also are not arbitrable. Generally, disputes in rem (regarding a thing/property) cannot be resolved through arbitration, while disputes in personam (regarding a selected person) are often. 

There are two areas of uncertainty about the arbitrability of disputes:

• Disputes where allegations of fraud are made. This area of law continues to evolve but at the present, for India-seated arbitrations, where there are "very serious allegations of fraud" which allegedly affects the very validity of the article or have implications on the general public domain instead of only impacting the interior affairs of the parties, the dispute isn't arbitrable. Similarly, there are some inconsistent decisions on the arbitrability of disputes involving oppression and mismanagement claims in shareholder disputes, with some courts having taken a view that such disputes aren't arbitrable.
• Intellectual property (IP) law disputes. The prevailing view, supported by the choices of a couple of High Courts, is that while disputes concerning IP rights are in themselves not arbitrable, commercial arrangements concerning the utilization of IP rights are arbitral.

Conclusion

Arbitration in India is a tough process because of a large number of reasons, one of which is the inordinate delay in the final conclusion of the arbitration proceedings and arbitrators’ fees. Legislature tries to make them easier with new amendments but it looks like it will take time. Arbitration is still not available in many laws. Arbitration is an appreciable step if taken, with serious concern and proper management.