Booz, Allen and Hamilton Inc.  (Appellants)

vs

SBI Home Finance Ltd. & Ors.  (Respondents)

FACTS:

                   Capstone Investment Co. Pvt. Ltd (R2) and Real Value Appliances Pvt. Ltd (R3) are the owners of the suit property. Capstone and RV Appliances had borrowed loans from SBI Home Finance Ltd. under two loan agreements by securing the said property in favour of SBI. The Appellants and Capstone & RV appliances signed two leave and license agreements and the Respondents confirmed the same. Following which they entered a tripartite deposit agreement and paid refundable deposit as consideration. The transactions were made as indicated by the Respondents. By virtue of which said loan amount of Capstone was paid but the RV appliances debt remained outstanding as result of which the property was secured by SBI. Eventually the official liquidator retained the asset. The deposit agreement contained clause for arbitration. SBI filed mortgage suit in the High Court of Bombay on 28.10.1999 against Appellant, Capstone and RV Appliances in regard to the mortgaged property and also prayed for eviction of Appellant from the premises. Court issued an order allowing the Appellants to continue its occupation and ceased the other respondents from a third party interest.  The Appellant filed a detailed reply to the said notice of motion and contended that SBI had a contractual obligation towards the Appellant as it had agreed for the continuance of Appellant occupation till refund of the deposit. The High Court dismissed the plea for arbitration as the dispute which is the subject matter cannot be adjudicated by a private forum. The application under section 8 of the Act was filed on 10.10.2001 nearly 20 months thereafter, during which period the Appellant had subjected itself to the jurisdiction of the High Court and due to excessive delay they were refused to grant relief. The Appellants contended that the parties to the agreement were aware of the arbitration clause hence the dispute is arbitrable, to which Respondents also agreed.

The case mentioned above gave rise to the following questions:

Whether the subject matter of the suit fell within the scope of the arbitration agreement contained in clause 16 of the deposit agreement?

           
                 The parties to the suit agreement affirmed themselves to resolve disputes which are mentioned below to be adjudicated by arbitration.
        

(a)              Disputes with respect to creation of charge over the shares and flats;

(b)              Disputes with respect to enforcement of the charge over the shares and flats and  realization of sale proceeds there from;

(c)               Application of the sale proceeds towards discharge of liability of Capstone and RV Appliances to the Appellant; and

(d)              Disputes relating to exercise of right of the Appellant to continue to occupy the   flats until the entire dues as stated in clauses 9 and 10 of the deposit agreement are realized by the Appellant.

The subject matter of the dispute falls within the scope of arbitration clause. So the suit can be mandated under sec 8 of the act.

Whether the Appellant had submitted his first statement on the substance of the dispute before filing the application under section 8 of the Act?

According to the act, filling any statement by defendants prior to the filing the application under section 8 of the Act will be construed as ‘submission of a statement on the substance of the dispute’, if by filing such statement/application/affidavit, the defendant shows his intention to submit himself to the jurisdiction of the court and waive his right to seek reference to arbitration. But filing of a reply by a defendant, to an application for temporary injunction/attachment before Judgment/appointment of Receiver, cannot be considered as submission of statement on the substance of the dispute, as that is done to avoid an interim order being made against him. Obviously in the present suit the Appellants filled counter affidavit against an interim injunction which is to be awarded by the court. By virtue of which the Appellant has not waived their right to seek reference through arbitration.

Whether the application under section 8 was liable to be rejected as it was filed nearly 20 months after entering appearance in the suit?

Since the sec 8 of the act does not mentions the time limit for filling an application under the same but it affirms that a party right to seek through arbitration can only be determined by its conduct. The party waives its right to seek arbitration only when it submits a written statement to the court or submits itself to the jurisdiction of the court as mentioned earlier. As per the current suit the plaintiff were seeking for an interim order by the court for which the defendants have to submit a counter statement to avoid ex parte order. As mentioned earlier filling an counter statement does not implies that the parties have waived their right to seek through arbitration and as for the excess time lapse concerned, the parties tried to settle the dispute outside the court on failing which the Appellants filled the said application. The unamended Rule 1 of Order VIII of the Code did not prescribe any time limit for filing written statement. Henceforth the High Court has faulted rejecting the application on the ground of delay.

Whether the subject matter of the suit is ‘arbitrable’, that is capable of being adjudicated by a private forum (arbitral tribunal); and whether the High Court ought to have referred the parties to the suit to arbitration under section 8 of the Act?

            Basically a suit seeking to refer arbitration can only be adjudicated by the court if the there was an arbitration agreement among the parties.  Though there is such a stipulation in the agreement it is up to the court to decide the dispute is arbitrable or not. However the court confers authority to arbitration on certain civil disputes which is mentioned in the act.

Russell on Arbitration [22nd Edition] observed thus: “Not all matters are capable of being referred to arbitration. As a matter of English law certain matters are reserved for the court alone and if a tribunal purports to deal with them the resulting award will be unenforceable. These include matters where the type of remedy required is not one which an arbitral tribunal is empowered to give.

Courts grants authority to arbitration only to disputes which is of interests protected solely against specific individuals so called in personum and forfeits to affirm cases which is a right exercisable against the world at large so called in rem. Sections 34(2)(b) and 48(2) of the 1996 Act makes it clear that an arbitral award will be set aside if the court finds that “the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force”. In the aforementioned case, an agreement to sell or an agreement to mortgage does not involve any transfer of right in rem but create only a personal obligation. Therefore if specific performance is sought either in regard to an agreement to sell or an agreement to mortgage, the claim for specific performance will be arbitrable. On the other side the agreement to mortgage is a right in rem a suit for enforcement of a mortgage being the enforcement of a right in rem, will have to be decided by courts of law and not by arbitral tribunals. The scheme relating to adjudication of mortgage suits contained in Order 34 of the Code of Civil Procedure, replaces some of the repealed provisions of Transfer of Property Act, 1882 relating to suits on mortgages (section 85 to 90, 97 and 99) and also provides for implementation of some25 of the other provisions of that Act (section 92 to 94 and 96). Order 34 of the Code does not relate to execution of decrees, but provides for preliminary and final decrees to satisfy the substantive rights of mortgagees with reference to their mortgage security. The provisions of Transfer of Property Act read with Order 34 of the Code, relating to the procedure prescribed for adjudication of the mortgage suits, the rights of mortgagees and mortgagors, the parties to a mortgage suit, and the powers of a court adjudicating a mortgage suit, make it clear that such suits are intended to be decided by public forum (Courts) and therefore, impliedly barred from being referred to or decided by private forum (Arbitral Tribunals). Consequently, it opines that the court where the mortgage suit is pending should not refer the parties to arbitration.

Conclusion

Having regard to our finding on questions as to be held that the suit being one for enforcement of a mortgage by sale, it should be tried by the court and not by an arbitral tribunal. Therefore the court upheld the dismissal of the application under section 8 of the Act.

Consultation paper on the proposed amendments to the Arbitration and conciliation act 1996 - A Brief Note

Introduction:

The Act is based on the Model Law adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 1985. The object and basis of the said Act is to speedy disposal with least court intervention.

The objects, as mentioned in the Statement of Objects and Reasons for the Arbitration and Conciliation Bill, 1995 were (a) to comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation;(b) to minimize the supervisory role of courts in the arbitral process;(c) to provide that every final arbitral award is enforced in the same manner as if it were a decree of court.

Arbitration and Conciliation (Amendment) Bill 2003

Accordingly the Arbitration and Conciliation (Amendment) Bill 2003 was introduced in Rajya Sabha on 22^nd December, 2003.

In July 2004, Government constituted a Committee under the Chairmanship of Justice Dr. B. P. Saraf to make in-depth study of the implications of the recommendations of the Law Commission made in its 176^th Report and all aspects relating to the Arbitration and Conciliation (Amendment) Bill, 2003.

The Committee (Departmental Related Standing Committee) was of the view that the provisions of the Bill gave room for excessive intervention by the Courts in the arbitration proceedings and emphasized upon the need for establishing an institution in India which would measure up to international standards and for popularizing institutionalized arbitration.  The Committee further expressed the view that since many provisions of the Bill was contentious, the Bill may be withdrawn and a fresh legislation may be brought after considering the recommendations of the Committee. The said Bill was withdrawn from the Rajya Sabha.

Main purpose of the 1996 Act is to encourage an ADR method for resolving disputes speedy and without much interference of the Courts which Section 5 of the Act provides for.

 In the (Dominant Offset Pvt. Ltd. Vs. Adamouske Strojirny AS,(1997) 68 DLT 157 the parties having developed a dispute, a petition was filed in the High Court of Delhi with a prayer for reference to arbitration in terms of the Arbitration Clause for enforcement of the agreement.  The Court held that Part I of the Act applies to International Commercial arbitration conducted outside India. Court added that courts should be extremely cautious in granting interim relief in cases where the venue of arbitration is outside India and both parties are foreigners.

Recommendation regarding the applicability of Part I

The Supreme Court observed that if the part I of the Act is not made applicable to arbitration held outside India it would have serious consequences. It made certain observations in respect of International commercial arbitration which take place in a non-convention country. The Court further observed that international commercial arbitration may be held in a non-convention country. Part II only applies to arbitrations which take place in a convention country.

An international commercial arbitration may be held in a country which is a signatory to either the New York Convention or the Geneva Convention (hereinafter called “the convention country”). An international commercial arbitration may be held in a non-convention country.

The Supreme Court also observed that Sections 44 and 53 define foreign award as being award covered by arbitrations under the New York Convention and the Geneva Convention respectively. The provision in Part I dealing with these aspects will not apply to such foreign awards.

The court concluded that the provisions of Part I would apply to all arbitrations and proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules, will not apply.

The reason, which persuaded the court that a challenge to foreign award can lay in India, was the fact that an award, which is otherwise opposed to Public Policy of India and thus not enforceable even under the New York Convention, can be enforced, by a party by seeking its enforcement of such an award in another country.

The Supreme Court in Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd.,(2008) 10 SCC 308, while referring Bhatia International observed – As per Bhatia International (Supra) and Satyam Computers, in cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement exclude all or any of its provisions.

The result is that all the provisions of Part I including provisions relating to appointment of arbitrator (Section11), challenge of arbitration award (Section 34) would also be applicable to International Commercial Arbitration where seat of arbitration is not in India.

However, in view of the observations made by the Supreme Court in Shreejee Traco(I) Pvt. Ltd. Vs. Paper Line International Inc (2003) 9 SCC 79, no provisions of Part I would apply to cases where the place of arbitration is not in India.

Foreign awards:

We may point out that an award to be a ‘foreign award’ has to be made in the territory of a foreign State notified by the Central Government as having made a reciprocal provision for enforcement of New York Convention or Geneva Convention.

The provisions of the aforesaid statute, foreign awards and foreign judgments based upon awards are enforceable in India on the same grounds and in the same circumstances in which they are enforceable in England under the common law on grounds of justice, equity and good conscience.

It is well established that the awards rendered in countries with which India does not have reciprocal arrangements cannot be enforced in India as if it were a decree.

Clause (3) of Article 1 of New York convention on the Recognition and Enforcement of Arbitral Awards permits the signing, ratifying or acceding State to declare on the basis of reciprocity that it will apply the convention made only in the territory of another contracting State.  India has made reservation and declared that convention will apply only on the basis of reciprocity.

Therefore, when an International arbitral award is made in a country or territory in respect of which there is no reciprocal arrangement between Central Government and Government of that country, it cannot be enforced under the Arbitration and Conciliation Act, 1996. For the purpose of enforcement of such an arbitral award party has to file a civil suit in India.

Provisions of Sections 9 and 27 shall also apply to international commercial arbitration where the place of arbitration is not in India if an award made in such place is enforceable and recognized under Part II of this Act.

 A proposal for amendment in Section 11

A Bench of two learned Judges (Adur Samia (P) Ltd Vs Peekay Holdings Ltd.) of the Supreme Court held that the Chief Justice or any person or institution designated by him acts in administrative capacity under section 11 of the Act and hence an order passed in exercise of such power, does not attract the provisions of the Article 136 of the Constitution. The same was reaffirmed by a three judges (Konkan Railway corp. Ltd. Vs Mehul Construction Co) bench which held that the order passed by the Chief Justice or his designate under section 11 of the Act was an administrative order not amenable to the jurisdiction of the court under Article 136.

Thereafter, a Constitution Bench consisting of five learned Judges affirmed the decision of the three Judge Bench.  Subsequently, the decision of the Constitution Bench has been reconsidered by the larger Bench consisting of seven-Judges.

The Court overruled the decision in Konkan Railway Corp. Ltd. Vs Rani Construction (P) Ltd. rendered by five learned Judges and held that the power exercised by the Chief Justice of the High Courts or the Chief Justice of India under Section 11(6) of the Act is judicial power and not an administrative power and that such power, in its entirety, could be delegated only to another Judge of that Court.

The Supreme Court held that the Chief Justice or the designated Judge will have the right to decide preliminary aspects as regards his own jurisdiction to entertain the request, existence of a valid arbitral agreement, the existence or otherwise of a live claim, the existence of the conditions for the exercise of the power and on the qualifications of the Arbitrator.

The decision of the Supreme Court has rendered the provisions contained in sub-section (4), (5), (7), (8) and (9) of Section 11 with regard to appointment of Arbitrators by any person or institution designated by the Chief Justice of India and totally ineffective. 

This is clearly contrary to the objective of the Act that is, to encourage litigants to take recourse to the alternative dispute resolution mechanism by Arbitration. The parties may stipulate in the arbitration agreement to refer an arbitral dispute between them for resolution to a particular institution.

The Chief Justice instead of choosing an arbitrator may choose an Institute and the said institute shall refer the matter to one or more arbitrator from their panel.

Various proposals to amend to the limited extent of the Section 11 of the Arbitration and Conciliation Act, 1996 have been made. Almost all the sections from 4 to 12 and 28 have been prescribed for an amendment.

The Law Commission in 176th Report

The Law Commission in 176th Report considered the question whether it was desirable to provide for an appeal under section 37 to court against decision of the arbitral tribunal rejecting the plea of bias or disqualification under section 13. After due deliberation, the Law Commission was of the view that there should not be an immediate right of appeal under section 37 against the decision of the tribunal rejecting the plea of bias or disqualification under section 13.

Section 34 does not enable the parties to question the decision of the arbitral tribunal made under Section 13 (2) rejecting a plea of bias or to question the decision of the said tribunal made under Section 16 (2) or (3) rejecting a plea of want of jurisdiction on the part of the arbitral tribunal.

Though the existence of these remedies was referred to in Sections 13 (5) and 16 (6), these remedies were not included in Section 34 and further the use of the word ‘only’ in section 34 (1) contradicted what was stated in sections 13 and 16.

Therefore, the Law Commission, recommended insertion of a clarification in section 34 by way of an explanation that an applicant, while seeking to set aside the award, can attack the interlocutory order of the arbitral tribunal rejecting a plea of want of jurisdiction, as permitted by section 16(6).

Law Commission while suggesting amendment in Section 34 also recommended that in case of domestic arbitration, new ground for challenges viz. mistake appearing on face of award may be made available. Accordingly it recommended for inserting a new Section 34A.

The Law Commission in their Report had observed that parties are filing applications to set aside the award even though there is no substance whatsoever in such applications and, to put a stop to this practice, proposed the amendment of section 36 by deleting the words which say that the award will not be enforced once an application is filed under sub-section (1) of section 34.

To give effect to the above recommendation of the Law Commission, the Amendment Bill of 2003 sought to substitute the existing section 36.That was is a very good provision. It will have a salutary effect on the expeditious execution of the awards. Standing Committee of the Parliament in its report on the Arbitration and Conciliation (Amendment) Bill, 2003 has recommended promoting institutional arbitration.

Proposed Amendment of Section 89 of Civil Procedure Code, 1908


 

Backdrop to section 89

The objective of the 129^th report of the law commission is to make Alternative Dispute Resolution effective and obligatory in courts.  When the parties fail to settle their disputes by means of an alternate dispute resolution settlement then they may proceed with the section under which the suit was originally filed.

Clause 7 seeks to insert a new section 89 in the Code in order to provide for alternate dispute resolution which facilitates for the settlement of disputes outside the court. The provisions of clause 7 are based on the recommendations made by Law Commission of India and Malimath Committee. It was recommended by the Law Commission of India that the court may require attendance of any party to the suit or proceedings to appear in person with a view to arriving at a feasible settlement of dispute between the parties. It was further suggested by the Malimath Committee to make it obligatory for the court to refer the dispute, for settlement after issues are framed, either by way of arbitration, conciliation, mediation, judicial settlement or through Lok Adalat. When the parties fail to get their disputes settled through any of the alternative dispute resolution methods then the suit could proceed further.   

129^th report of the law commission of India referred to Order XXVII of the CPC rule 5B which provides that in a suit to which it applies, it should be the duty of the court to make every endeavour where it is possible to do so with the nature and circumstances of the case to assist the parties in arriving at a settlement of the dispute. Where the court is of the opinion that there is a reasonable possibility of a settlement between the parties to the suit, the proceedings may be adjourned for such period as it thinks fit to enable attempts to be made to effect such settlement. In fact the rule 5B turns out to be a limitation which expects the court before which the suit is pending to itself attempt to conciliate the dispute.

 

Section 89 in Afcons case

Section 89 enacted with a lofty objective, has revealed manifest drafting errors, which in turn gave rise to complexities in understanding its true scope and purpose. The Supreme Court observed in Afcons Infrastructure Case that the correct interpretation and understanding of the provision has become difficult for the judges to interpret.

The court observed that the sub-section requires formulating the terms of settlement and placing them before the parties and then reformulating the terms after observation by the parties of a possible settlement. It further shows that on such reformulation, the court shall have to refer the dispute for one of the five ADR methods, which is absurd.

This report briefly explains the errors in Section 89 of Civil Procedure Code which was also observed by the Supreme Court in Afcons Infrastructure case that there are many drafting errors in Section 89 and suggested amendments to the Section which may be considered by Law Commission of India. To facilitate the removal of the deficiencies in Section 89 which is a significant provision for facilitating dispute resolution in civil matters and to make it more simple and straightforward, the Law Commission has earlier proposed amendments to Section 89 CPC as well as Order X Rules 1-A to 1-C. 

 

Refund of the court fee

With regard to the amendment of Section 21 of the Legal service Authorities act, wherein the court fee shall be considered for refund to the plaintiff, only when the ADR has derived at an award for the dispute, otherwise the plaintiff’s case will be adjudged for cost by the court when the ADR does not grant an award or the parties to the dispute. 

 

Conclusion

The foremost reason for the misinterpretation of the Section 89 of the CPC is primarily due to the drafting errors in that section which is abstractly understood by its readers. Secondly, the incorporation of the two sub-sections (i.e. Section 89 (c) (d)) has been erroneous which has in fact made it difficult even for the layman to interpret. Since sub-sections a and b of section 89 are governed by the Arbitration and conciliation Act of 1996, its understanding has become rather effortless, but the other two sub-sections do not have any specific acts which govern them, not to forget that there are general laws and acts which aid them, so the court should persuade parties to resolve their disputes by ADR where the proceedings in the courts have not been commenced and the issues have been framed.  

The complete proposal is available for reading from this webpage.

http://www.scribd.com/fullscreen/79323880?access_key=key-jaih12ykexptx9zefnf

ICADR International Conference on Mediation and Conciliation, Chennai 2012

This post shall be updated shortly

Applicability of National laws in Arbitral Proceedings

Settlement of disputes through reference to third party is a part of the volkgiest of India since time immemorial. The Indian epics and folklore are replete with examples of consensual procedures for the settlement of disputes at the grassroots level. Making such a procedure legal, was the solution to end the increasing number of cases in the courts of the nation, vexatious litigation and delayed justice. Thus, the Arbitration and Conciliation Act, 1996 was enacted with a view to relieve the technical difficulties faced by the parties in the court proceedings and to ensure speedy disposal of cases. This is to help parties solve their disputes amicably through mutual understanding and reduced cost and by way of a trusted arbitration procedure. This revolutionary enactment meant cutting down on the stringent legal procedures and bureaucratic red tapes. One of the important sections that is an exemplification of this desideratum is section 19 of the Act.

 Section 19 of the Arbitration and Conciliation Act, 1996 states as under:

Determination of rules of procedure.-

(1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872.

(2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.

(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.

(4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence.

This essay would take its focal point to be Clause (1) of section 19, Arbitration and Conciliation act, 1996. Clause (1) of Section 19 states very clearly that any arbitration procedure is not bound by the Civil Procedure code, 1908 or The Indian Evidence Act, 1872.

Before making a headway into the merits of the clause, I would like to highlight the difference between two situations one wherein the parties are not "bound" and in the other where they are "prohibited by law". When it is said that the parties are not bound, it translates to the parties not being under legal or moral obligation to do or abstain from doing a particular act. That is, they are not constrained or fettered by the provisions/clauses of the act.

Whereas, “prohibited" from doing an act, means to be barred from doing it. Performance of such an act would be treated unlawful, illegal or will render any agreement based on it void. There is an element of inherent restraint.

In my humble view, while Section 19 of the Arbitration and Conciliation Act, 1996 (henceforth referred to as the act) does not bind the parties to follow The Civil Procedure code, 1908, it doesn't prohibit them from doing so. Meaning, the parties, by their own will may decide whether or not to follow the act. It is true that when the parties choose to take recourse to the usual proceedings despite having the leeway not to do so, the benefits and attractiveness of arbitration mechanism gets significantly diminished. But, in any suit, and nonetheless in an arbitration, the point of concentration should be skewed towards delivery of speedy equitable justice than on procedures. Failure to do this may militate against the requirements of fair trial and vitiate the resulting award. This view has been upheld by the recent judgement in the case of:

Gammon India Ltd vs. Sankaranarayana Construction (Bangalore)

Wherein, the bench declared that an arbitral tribunal, in its discretion, may adopt principles of Civil Procedure Code.  The learned judges have declared that while the arbitration panel as permitted by Sec. 19 (1)  is not bound by the CPC or evidence act,  in the absence of an agreed specific procedure by the opposing parties, there are no fetters placed on the panel to adopt the principles and procedures of CPC or Evidence Act.  The panel is free to conduct the proceedings in a manner which it considers appropriate.  However, the principle of 'res-judicata' would apply.

I would like to reiterate here that this judgement complements my view that the referred section provides the freedom to arbitration bodies to follow the 'National Laws, albeit under certain conditions'. In my opinion, here it has been expressly declared that 'Shall not be' bound doesn't mean 'it is prohibited from. Of course, the arbitration option is given to the parties to unshackle themselves from the procedural fetters of the existing laws. At the same time, it doesn't prohibit or take away from the parties the freedom to adopt or invoke the same laws if they are comfortable with the same. That is, if the parties refer to a given law on Civil Procedure or Evidence, such law would be applicable by virtue of their choice and not by virtue of being a national law.

Also, it follows, that, in the absence of a specific agreement between the parties on the laws, rules and procedures to be applied during arbitration, the tribunal may formulate its own procedure or adopt the national laws, namely, CPC, Evidence Act etc.

Once the issue of whether the arbitration panel has the powers to adopt and pass orders under CPC or Evidence Act is settled, the power of the panel to pass an interim award exercising those powers would also logically derive. 

In the above case questioning the decision of the learned single judge, the learned counsel for the Appellant/Petitioner had also tried to establish that the power to pass an interim award can be invoked only if there is an admission and it should be a clear, unambiguous and unequivocal admission

Towards this the learned counsel for the Petitioner/appellant relied on Numero Uno International Ltd. vs. Prasad Bharati.  The learned counsel for the petitioner had tried to interpret the judgement as one which vested with the counsel the right to contest the powers of the arbitrator to grant an interim award, even if not contested earlier, and such a contest later would also render the interim award unenforceable.  Inherent in this argument is the reasoning that the contest would take the trait of an objection which would negate the condition of 'clear, unambiguous and unequivocal admission' for grant of interim award.  However, the learned single judge has rejected argument quoting from the same citation that an interim reward cannot be interfered with, simply because the other party has made a counter claim or because it had raised a point which is outside, or is independent of the areas covered by the interim award.

 The judgement of the Madras division bench in Gammon India Ltd vs. Sankaranarayana Construction (Bangalore) has thus provided interpretative clarity to article 19 of the Arbitration and Conciliation Act, 1996 by which elements of flexibility have been fused with procedural discipline.

This is article was written by Ms. Varsha Raghavan, while interning at CNICA. She is studying B.A.LLB., at School of Law, SASTRA University.

 

International Commercial Arbitration and Foreign Arbitral Awards in India – an overview

International commercial arbitration is the process of resolving disputes between parties that arise out of international commercial transactions, whether contractual or not, through the use of one or more arbitrators. Agreement of the parties is a necessary prerequisite. An arbitration clause is usually part of the contract between parties that decide to be adjudicated before a sole arbitrator or a panel of arbitrators. The decision of the arbitrator(s) is usually binding on the parties.

In India The Arbitration and Conciliation Act, 1996 section 2(1)(f) of the Act defines "International Commercial Arbitration" as arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India where at least one of the parties is: 

a.    an individual who is a national of, or habitually resident in any country other than India; or 

b.   a body corporate which is incorporated in any country other than India; or 

c.  a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or 

d.   the Government of a foreign country.

One of the advantages of International Commercial Arbitration is that parties appoint arbitrators of their choice. This reduces the distrust. If the same matter would have been taken before a foreign Court of Law, there would be cultural differences, differences in interpretation of law or facts, leading to an impasse and loss of faith in the system. International Commercial Arbitration alleviates such problems and provides faster results, as awards are usually binding  on the parties.

All this said and done the question of enforceability arises. One of the advantages of International Commercial Arbitration is its enforceability. More than 140 countries have signed the Convention on the Recognition and Enforcement of Foreign Arbitral Awards or the New York convention of 1958. This ensures that foreign arbitral awards are enforceable in one’s own jurisdiction.  

In India foreign arbitral awards can be enforced under both the New York convention of 1958 or under the Geneva convention of 1927. Sections 44 to 60 of the Arbitration and Conciliation Act, 1996 provides for the various conditions for enforcement of foreign arbitral awards.

One of the conditions states that the Central Government, by notification in the Official Gazette, declare these to be territories to which the said Convention applies. Any party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court----

(a) the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made;

(b) the original agreement for arbitration or a duly certified copy thereof; and

(c) such evidence as may be necessary to prove that the aware is a foreign award.

The act also provides the conditions for non-enforcement of foreign awards. These are

 (a) incapacity of the parties to the agreement

 (b) the party against whom the award is invoked was not given proper notice

(c) the award deals with matters beyond the scope of the submission to arbitration.

 (d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place.

(e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

 (f) the subject -matter of the difference is not capable of settlement by arbitration under the law of India; or

(g) the enforcement of the award would be contrary to the public policy of India.

Sections 49 and 58 of the Arbitration and Conciliation, 1996 provide that   Where the Court is satisfied that the foreign award is enforceable, the award shall be deemed to be a decree of that Court.

Thus a basic picture of International Commercial Arbitration and enforceability of Foreign Arbitral Awards in India has been portrayed.