Arbitration has become a well-known alternative in India’s dispute resolution system, providing a quick and effective way to resolve disputes. The enforcement of arbitral awards is essential to this mechanism’s effectiveness since it serves as a cornerstone for the legitimacy and smooth operation of the arbitration procedure as a whole. An important legislation, the Arbitration and Conciliation Act, 1996, carefully lays out the procedural rules and guiding concepts that determine whether arbitral rulings can be enforced in India. The Supreme Court of India, whose judicial philosophy and interpretations have a significant impact on the development and application of legislation pertaining to arbitration, plays a crucial role in this framework. 

There is no denying the significance of enforcing arbitral awards. It acts as the link between the final outcome of arbitration processes and their material realization. India’s ratification of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, sometimes referred to as the New York Convention, emphasizes the issue’s global relevance. This international agreement emphasizes how critical it is to acknowledge and uphold arbitral rulings as soon as possible, promoting an atmosphere compliant with international norms. 

“The difficulties of a litigant in India begin when he has obtained a decree” is a saying that perfectly captures the necessity of arbitral rulings being enforced effectively. The Supreme Court has voiced concerns throughout the years, highlighting the complex network of procedural obstacles and structural bottlenecks that might impede the execution process. The legal environment throughout the world emphasizes the need for efficient execution even more. 

Arbitral Awards

Arbitral awards are similar to court rulings in that they represent the outcome of arbitration processes. These awards, which establish legally enforceable obligations and rights, are the decisions of a tribunal that settles significant disagreements between parties. When the arbitration procedure is carried out properly, the losing party, referred to as the award-debtor, usually voluntarily abides by the tribunal’s ruling, which includes giving the award-creditor, the opposing party, payment for damages. Nonetheless, legal recourse may exist if the award-debtor feels the tribunal decided inappropriately or committed errors.

According to section 34 of the Arbitration and Conciliation Act, 1996, the award-debtor may choose to file a suit in order to have the arbitral award set aside. The aforementioned clause outlines the exact reasons upon which the court will intervene. The arbitral award does not immediately become unenforceable, even if a section 34 application is made to set it aside. On a separate application, the court may issue a stay of the award’s operation, meaning that the award-creditor’s recovery is subject to the court’s judgment. The award is enforceable as a court decree as soon as it reaches finality.

Part 1 of the Arbitration and Conciliation Act of 1996 governs domestic awards. Differentiating between domestic and foreign awards, the former are subject to dispute under section 34. A foreign award, on the other hand, is one rendered in an arbitration held outside of India. The Act’s Section 48 complies with New York Convention Article V, which deals with the execution of foreign awards. The Act prohibits the filing of challenge processes in India against foreign awards, in contrast to domestic awards.

Legislative Framework for Enforcement of Arbitral Award

One important factor ensuring the effectiveness of dispute resolution processes, particularly in the context of international commerce, is the legal framework in India for the enforcement of arbitral awards. In the Indian context, difficulties frequently occur when the other side refuses to take part in the arbitral procedure or gives up on it in the middle. In situations like these, the execution of awards or judgments may be more complicated than in situations when both parties actively participate in the procedures.

The Code of Civil Procedure, 1908 (CPC) and the Arbitration & Conciliation Act, 1996 (Act) both regulate the execution of arbitral rulings concurrently. Remarkably, awards, both foreign and domestic, including those arising from settlements (consent awards), are executed similar to an Indian court’s verdict. Nonetheless, there is a difference in the enforcement procedure according to the seat of arbitration. Part I of the Act applies to domestic awards, or those seated in India, whereas Part II of the Act governs awards sat abroad.

Part II of the Arbitration Act applies to foreign awards. India acknowledges international awards issued in areas designated as convention nations by the official gazette, having ratified both the New York and Geneva Conventions. According to Section 47, an application for enforcement must be filed with the appropriate high court and be supported by certain documents. The Act’s Section 48 lists a few specific reasons why enforcement may be refused. The statute of limitations for enforcement is three years from the day the right to apply accrues.

Judicial Interpretations and Enforcement of Arbitral Awards

The adage that “the difficulties of a litigant in India begin when he has obtained a decree” is echoed by the fact that litigants attempting to execute arbitral awards face an enormous challenge in the Indian judicial system. Although receiving a favourable order is celebrated as a win, the real struggle begins when the decree enters the executing court’s domain. The Supreme Court, aware of this hardship, has continuously expressed its worries.

In a 2016 ruling, the Supreme Court expressed dissatisfaction, saying, “It is really agonizing to learn that the Appellant-Decree Holder is unable to enjoy the fruits of her success even today i.e., in 2013 though the Appellant – Plaintiff had finally succeeded in January 1996.” In another landmark case, the Supreme Court ordered that Executing Courts conclude the proceedings within six months of the date of filing, with the option for an extension upon recording written justifications for the delay.

Turning our attention to the Arbitration Act, the award-holder is subject to a three-month waiting time (which can be extended by 30 days) before an arbitral award is enforceable and executed. The Act’s Section 34 permits a challenge to the award within this time. Following finality, in the event that Section 36(3) of the Arbitration Act does not provide a stay of execution, the award-holder petitions the executing court to have the decision enforced. The lack of a set process for enforcing arbitral awards forces the party seeking the award to interact with the exact courts they attempted to avoid by using alternative dispute resolution.

Challenges in Seeking Enforcement of Arbitral Awards

Arbitration has become a popular method of resolving disputes because it is seen to be effective in providing parties with prompt decisions and relief. Nonetheless, questions have been raised in India about the prompt implementation and enforcement of arbitral awards. Hon’ble Justice Kaul, a judge in the Apex Court of India, has expressed worry over this and has advised parties, especially government bodies, to accept arbitration rulings rather than continuing litigation as a formality of the appeals process. Furthermore, the government’s failure to carry out a significant arbitral award of INR 7,200 crores was chastised by the Apex Court in a recent case against the Delhi Metro Rail Corporation (DMRC), underscoring the possible obstacle to India’s ambitions to become a global centre for arbitration.

Executing arbitral awards is a drawn-out procedure with several levels of difficulty, particularly when dealing with domestic awards. The challenge procedure outlined in Section 34 of the Arbitration and Conciliation Act, 1996, is the first obstacle for a winning party. The time limit for submitting this challenge is three months from the date of the award, with a potential 30-day extension. Although there are rigorous deadlines for further appeals under Section 37(1)(c) of the Arbitration Act, the entire appeal process sometimes takes several years.

One major obstacle is the relationship between the court system and arbitral award enforcement. Reforms are desperately needed, as seen by the staggering number of execution petitions that are still pending in both lower and higher courts. The 2022 Supreme Court comment connected India’s goals to become a centre for international arbitration with the enforcement of arbitration awards. The committee appointed by the Indian government to propose changes to the Arbitration Act ought to give special attention to the problem of implementation delays.

Analysis and Conclusion

The joint efforts of the legislature and judiciary have resulted in notable advances in the enforcement of arbitral awards in India. To meet the demands of businesses and society at large, the government has put in place creative and practical policies. Even with these amendments, there are still certain aspects of the arbitration process that need improvement.

Several decisions of the Supreme Court have been crucial in shedding light on the processes involved in carrying out and enforcing arbitral awards. By placing significant financial penalties on individuals who violate prescribed processes, these rulings deter litigating parties from impeding the execution of international judgments. The Supreme Court’s support for upholding foreign arbitral awards, even when grounds for rejection exist, has improved India’s standing as an arbitration-friendly nation. However, obstacles persist, necessitating ongoing efforts to create a more favorable environment for arbitration.

Reforming arbitration institutions and enhancing judicial support are essential steps to ensuring swift and efficient enforcement of arbitral awards, thereby bolstering India’s reputation as a pro-arbitration jurisdiction.

References 

• https://www.thehindubusinessline.com/business-laws/gavel-pagethe-emerging-jurisprudence-for-quicker-execution-of-decrees/article65321133.ece

1. Anirban Chakraborty, Law And Practice Of Alternative Dispute Resolution In India – A Detailed Analysis, Lexis Nexis, 2015.
2. Indu Malhotra, O.P. Malhotra on the Law & Practice of Arbitration and Conciliation, Thomson Reuters, Third Edition, 2014.
3. Delhi Airport Metro Express Private Limited vs. Delhi Metro Rail Corporation Ltd. 2022 LiveLaw (SC) 452.
4. Govt. of India v. Vedanta Ltd. 2020 SCC OnLine SC 749. 
5. National Agricultural Coop. Mktg. Federation of India v. Alimenta SA 1989 AIR 818.
6. Venture Global Engg. LLC v. Tech Mahindra Ltd. (2018) 1 SCC 656.
7. NTT Docomo Inc. v. Tata Sons Ltd. 2017 S.C.C. OnLine (Del) 8078.
8. BALCO Employees’ Union v. Union of India 90 (2001) DLT 789.
9. Vijay Karia v. Prysmian Cavi E Sistemi SRL (2020) 11 SCC 1.

Author: Vaidehi Sharma

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In arbitrations, there are many stages before a “final” award is rendered by the Tribunal. This may include a likelihood of “interim awards” (akin to interim relief granted to parties in a litigation), “partial awards” (decision on a particular issue by the Tribunal at an earlier stage) and many more. While these types of awards are often differentiated in terms of the process of arbitration, awards can also be categorized as being an international award or a domestic award.

Final Awards

The term “final award”, while it might seem to connote a straightforward meaning, has been often interpreted across the globe in different manners. One understanding is that the term “Final” connotes that the Award puts an end to the arbitration proceedings. This understanding stems from Article 32(1) of the UNICITRAL Model Law, which provides:

The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal…[1] 

In other words, a Final award, as per this understanding, would mean that the mandate of the Tribunal stands expired and the Tribunal would become functus officio.[2]

The other understanding of the term “Final” connotes that it is the final (or last) in a series of awards, which would decide the last remaining aspect of the dispute or “it might put an end to at least one aspect of the dispute”.  However, this interpretation does not seem to find favour with some jurisdictions given the possibility of partial awards deciding an aspect of the dispute finally. Hence, the former understanding seems more apt in light of the term finding mention in the UNCITRAL Model Law.

Partial Awards

Partial Awards and “interim awards” are terms which are, at times, used interchangeably in certain jurisdictions. Certain other jurisdictions interpret these to mean two different types of awards – partial awards being ones where a substantive claim might be decided at an earlier stage before the other claims; whereas interim awards being awards on an aspect of the dispute such as jurisdiction, limitation, or law applicable or generally speaking, awards which decide an issue in the form of an interim relief and not absolutely and finally.

Keeping in mind the 1996 Act’s inclusion of “interim awards” in the definition of “awards” to render them the same enforceability as that of a final award, it would not be out of place to state that as far as India is concerned, interim awards and partial awards seem to be used interchangeably as every partial award would be deemed to be an interim award under the 1996 Act, as was held in McDermott International Inc. v Burn Standard Co Ltd[3]

70. …. Some arbitrators instead and in place of using the expression “interim award” use the expression “partial award”. By reason thereof the nature and character of an award is not changed.

With regards to the enforceability of the partial awards or interim awards, in the international context, institutional rules would be the foremost source to ascertain the power of the Tribunals to issue such awards. In this regard, it must be mentioned that most of the international arbitration rules do provide for the power of the Tribunal to issue “partial awards” or “interim awards” during the proceedings, with the only variance being in the terminology being used.

Enforceability and subsequent challenge to these “partial awards” or “interim awards” in India have never been in doubt. This has recently been clarified by the Supreme Court of India in IFFCO Ltd v Bhadra Products[4] with the Court holding that “interim awards” are wide enough to cover a determination on any point of dispute between the parties and that the same can be challenged separately and independently as per section 34 of the 1996 Act.

Default Awards

The concept of a default award is rather straightforward. These are awards issued by the Tribunal in instances where one of the parties fails to appear in the arbitration. However, even in instances where a Tribunal is issuing a default award, it has to be mindful of all due-process considerations, especially ensuring that an opportunity to be heard is accorded to the other party at every stage of the arbitration. It is pertinent to mention here that in cases where a defaulting party fails to appear before the Tribunal in the arbitration, a higher onus is cast upon the Tribunal for determination of the claims in as much as the same are deemed to have been denied in the same manner as if a denial was received from the other party. Thus, a default award would have a full determination on the claims of the Claimant.

Additional Awards

Additional awards are generally issued by the Tribunal to either fill gaps or to rectify the final award (only minor apparent errors) which has already been rendered by the Tribunal. Hence, they are more in the nature of awards for correction of the final awards than being substantive on their own self. Most leading institutional arbitration rules provide for the possibility of issuing additional awards to rectify the errors or at the very least, provide the scope for the Tribunal to correct apparent errors.[5] UNCITRAL Model Law and some jurisdictions even provide for an additional award on an issue which had not been adjudicated upon by the Tribunal in the final award.[6]

Consent Awards

As the name suggests, consent awards are drawn by the Tribunal in cases where the parties decide to mutually settle their disputes. While there is no apparent need to have a settlement converted into an award, it is advisable for the parties to do so in order to have a better opportunity of having it enforced in case of a potential breach.

Performance Award

It is most common to see awards made in monetary terms, however, a party can be ordered to perform specific works, hand over goods or rights. For example, a contractor may be required to carry out remedial works in a building to ensure work is finished to the quality required. The difficulty is that these types of award create grounds for further dispute. An arbitrator should award a monetary award where possible in these instances to avoid escalation of conflict.

References:

[1] UNICITRAL Model Law; Article 32

[2] See, Gary B. Born, International Commercial Arbitration, 3^rd Edition, Kluwer Law International, 2021, pg.3148.

[3] (2006) 11 SCC 181

[4] (2018) 2 SCC 534

[5] UNCITRAL Arbitration Rules 2013, Article 39; ICC Rules 2021, Article 36; SIAC Rules 2016, rule 33; LCIA Rules 2014, Article 27

[6] UNCITRAL Model Law, Article 33(3); 1996 Act, section 33(4)

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It is settled under the case Afcons Infrastructure Ltd v. M/s Cherian Varkey Construction, 2010

(7) SCALE 293 that ‘mediation’ and ‘conciliation’ are used synonymously wherein a neutral third party is appointed to facilitate the amicable resolution of the dispute.

Though the Arbitration and Conciliation Act, 1996 does not provide for the qualifications of a Conciliator; it requires the Conciliator to be independent, impartial, fair, objective and give consideration to the rights and obligations of the parties. Hence, a lawyer can also be appointed as a Conciliator, provided he/she undertakes to be guided by the said principles.

One of the major questions unturned is whether a lawyer who has acted as a mediator or conciliator can legally represent one of the parties in the later stages of the same matter?

Though it has been recognised under Section 80 of the Arbitration and Conciliation Act, 1996 that where a lawyer is appointed as the Conciliator, he/she is restrained from representing any of the parties to the dispute (in Court) in any arbitral or judicial proceeding in respect of the dispute that was the subject of the said conciliation proceeding. 

Hence, it has been restricted under Section 80; however, if both the parties to the dispute agree, then the lawyer appointed as the Conciliator may represent any one of the parties concerning the same matter. The waiver is a mandatory requirement in such a situation as there is a conflict of interest as regards the lawyer who has been a conciliator and represents one of the parties in the Court of law thereafter. In any case, a lawyer is bound under Section 2 Rule 4 of the Bar Council of India Rules to disclose to his/her client the connection with the parties or any interest in the matter which is likely to affect the client’s decision to engage the lawyer.

It is settled that a mediator/ conciliator shall avoid a conflict of interest or the appearance of a conflict of interest during and after a dispute resolution. A conflict of interest can arise from involvement by a mediator/ conciliator with the subject matter of the dispute or from any relationship between a mediator/ conciliator and any dispute resolution participant, whether past or present, personal or professional, that reasonably raises a question of impartiality by the mediator/ conciliator.

In Western jurisdictions like the United States, it is a mandatory rule that unless there is a waiver by the parties, that could amount to a conflict of interest in the dispute resolution proceedings. But there is no such explicit guidance which states the Indian scenario related to the situation of waiver of amounting to conflict of interest.

With respect to the international perspective, IBA Guidelines on Conflicts of Interest in International Arbitration adopted by resolution of the IBA Council on 23rd October 2014 states about the position as to the validity and effect of waivers under General Standard 3(a), though the validity and effect of any waiver must be assessed in view of the specific text of the advance declaration or waiver, the particular circumstances at hand and the applicable law.

With respect to India, the situation of waiver has been defined by the Supreme Court in the case Manak Lal v. Dr. Prem Chand 1957 AIR 425. It was observed in this case that “the waiver can be inferred from the failure of the party to take the objection only if and after it is shown that the party knew about the relevant facts and was aware of his right to take the objection. And since the fact of appearance of mediator/ conciliator as legal representative of one of the parties to others and also that it must be deemed to have been conscious of his legal rights, his failure to take the objection before the tribunal creates an effective bar of waiver against him.”

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Mr. Khan opens up about his journey from a Law Student of Jamia Millia Islamia to becoming an Arbitrator. 

Before we start can you please introduce yourself to the viewers?

I am basically from Shahjahanpur (Uttar Pradesh), I completed my schooling from Shahjahanpur and later moved to Delhi. I wanted to be an Engineer, but was not able to crack a good rank. In entrance exams like AIEEE and others, I scored a rank in 4-5 digits. So, I did not have any option left, then one fine day my father told me to consider law as an option. And that’s how I ended up doing law. Specifically, I say “I did not choose law, law chose me”. And then I graduated from faculty of law Jamia Millia Islamia Delhi, and then I started working with a company. And now I am in the Arbitration field for more than 6 years.

So how was your experience with traditional universities which did not offer any placements?

So, that was pretty interesting and honestly, it’s more of a challenge. So it was that time we did not have placements in college, so each and every student was on its own. That time we had to do a lot of internships. We had to ensure we secure a good internship and I was unable to secure it. Neither did I applied to firms where I did my internships and nor was I  knowing much about law, and was not so focused about my future too. So, I started trying in every legal aspect, once I will go for criminal law, other times I was an intern in a corporate law firm.  So, in the last days of my law program we made a placement cell, and I was chosen as the coordinator of placement cell but it’s still difficult. Some of the colleges are privileged to have a proper placement cell and have a tie up with big firms and companies and our placement cell was not that organized so, it was a tough task.

So, do you think is it necessary for a law graduate to explore the law field and to do internships in every arena of law, whether it be Criminal, Civil, Corporate or any other?

There are people who are focused since the beginning, they have had that exposure to law, maybe his/her father is in this field or any other family member and that has been a motivation for him/her to pursue law and perhaps they are clear about this field. So, there is a very small fraction of people who are confident about what they want to pursue, and maybe with the experience of moot courts they have identified their area it could be criminal, corporate or arbitration, so I suggest Moot Courts are really crucial in your law program, they give you every idea about researching, drafting, how to argue, a new level of confidence is developed and it keeps on boosting up with every new moot court. And for the students who have still not identified their arena of interest, I suggest them to do a lot of internships in different field. For me in my college days I was not a focused person and I did a lot of internships be it in Amarchand Mangaldas or others and that’s how I realized I have no interest in corporate law, then I switched to Criminal but later I was able to discover my truly interested area that is Arbitration. So, the idea over here is not to look for more and more options but to seek out the area of your interest, the ultimate career option. And by the end of 5th year in law course you will land up into something concrete but if not than let destiny decide.

So, my question is how do you see the landscape of Arbitration in India?

So, the Arbitration landscape in India has changed drastically. It’s not the case that Arbitration has been in India since 1996, some people say it’s from 1940, some say it’s the 1889 Act but I believe it was since the Bengal Regulation Act. The New Act may be introduced in 1996 but till 2000 or even 2012 very few people exercised this option, but in the last 6-7 years we have seen a tremendous increase in arbitration cases because now have understood that if we want more Investments from Foreign Entities in India than arbitration is the only key because nobody wants to go to the court of law. Justice Fali.S. Nariman said that the Future of Arbitration is bright but the future of Litigation is not. And after the amendment introduced in   2015, introducing the time span for resolution of disputes, now a person has an idea about the time when he could get justice unlike regular courts, and this has made arbitration gain momentum.

You have a liking towards teaching, so have you ever considered that as your profession?

So, I do have a strong liking to it and I have been teaching for 6 years now. After I finished my graduation, I started teaching in Indian Law Institute (ILI) as a guest faculty. The students I taught were either lawyers or were of the PG-Diploma course. I even took lectures in most of the law schools in Delhi. And I like teaching only because as a teacher you can shape up the lives of many people, but I would like to discuss a major drawback in the Educational Sector in India is that Justice Krishna Iyer once said Education in India is priced not imparted. In today’s scenario, law schools have become money-sucking machines. And some of these institutions instead of teaching what law is should focus on what it should be.  Law schools should adopt unconventional methods and should focus more on practical aspects of the law.

What is the most intriguing part of Arbitration?

Flexibility is the most interesting part of the arbitration. There are no formalities or complexities in arbitration. And the fact it is international in nature. You are not limited to one court; there is no bar to the area of practice. And for me that you don’t have to stick to procedural law in arbitration and of course the lifestyle that comes with it is what fascinates me the most.

So, do you think India has really started to prefer Arbitration over Litigation since India is trying to become an arbitration hub in Asian-Pacific Region?

Yes, the landscape of India is changing with Arbitration being in Frame. In my opinion the Government of India is doing a great job, the judiciary is trying really hard, passing different judgements some of be it BASL, URBAN PARK, MEDANTA VS UOI, ANANT GLOBAL. By these judgements’ judiciary has given a good message to investor’s community at large. Judiciary has taken an investor friendly approach but we also have judgements where a regressive approach is taken. It is like one regressive approach can take us 10 years back and will take years to correct this error. We also face issues like the sloppy drafting of law, or the improper laws in arbitration, or the amendments not addressed. The amendments in 2015 were so badly drafted that it took the Supreme Court three years to interpret them whether it has retrospective applicability or prospective applicability. In my opinion more clarity is required while drafting any law and we should adopt institutional arbitration. As compared with Singapore India was ahead in arbitration laws yet Singapore is a new busy hub of arbitration and all the credit goes to the Supreme Court of Singapore. They have upheld arbitration agreements, enforced award, they have interpreted public policy that too on a narrow basis and there were judgements interpreted so broadly in India that they made all this process expensive. India needs a new Act and strong center. You don’t need infrastructure or high-class facilities; only leadership is required. 

How is arbitrability of fraud, interpreted by the Judiciary in India?

Any dispute which involves or has an impact on the public at large is not arbitrable. So, fraud falls into this category and it was discussed that it is a crime in society. Justice Fali.S.Nariman clarified this and moved to a more arbitrable approach, that fraud is arbitrable.

What advice will you give to students, who want to go in Arbitration?

I would firstly advise students not to get carried away by what they see.  Don’t get carried away by the achievements of people on social media, because nobody exposes their failures, believe in the concept of bad days too. Any area involves a lot of hard work, you will have to face a lot of sleepless nights. If you are passionate about arbitration, you should be ready to deal with voluminous documents. Do it when you are confident about it, and be clear about what are you getting into. And the most important thing is to follow your heart. 

How does it feel to be enlisted in Forbes Legal Power List 2021?

Frankly, it’s just nice. It’s a good feeling that finally your efforts are being acknowledged and appreciated. Recognized by a reputed magazine in the world is a great feeling. I want to say that there are so many people better than me, I just think I got lucky or fortunate. I am proud of myself to be considered in these great magazines and it makes me feel that yes, I have done some decent work and I am capable of giving my best in future. It honestly acts like a fuel because when you are recognized or acknowledged you want to work more to achieve other milestones. The idea of all this is to perform better each day, to see ourselves as our only competitor and outshine ourselves each day. I will conclude that it’s a very long journey and it’s just a beginning for me.

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Presently, mediation in India comprises of two modes, inter alia, court referred mediation and private mediation.   Firstly, inclusion of mediation in the Code of Civil Procedure, Industrial Disputes Act, Companies Act 2013, the Hindu Marriage Act and the Family Courts Act, requires the courts to make every endeavour to refer a case pending before it for mediation.  Secondly, in private mediation a qualified personnel is appointed as a mediator on a fixed fee basis by the disputants themselves.   

Mediation enables access of justice in its own way; as it is conducted by a third party having no interest in the matter, in a manner as agreed by the parties, hence it makes the process simpler. Further, it involves conversation and compromise whilst resolving issues, thereby, provides for a fair solution, which is impossible in litigation as a court may not be able to provide a judgement which is acceptable by both parties. Furthermore, the only cost incurred in mediation is the fees of the mediator, administrative cost and the sum as agreed between the parties to settle the dispute, thereupon protects the disputants from burning a hole in their pocket. Also, absence of procedure naturally shortens the time required to resolve any dispute.   Subsequently, it overcomes all the barriers of access to justice by saving time, cost and providing confidentiality. Therefore, mediation is without an iota of doubt the click to the problems of congested court rooms, lack of manpower, delay, cost and complex procedures.  Nevertheless, despite the high probability of settlement that pre-litigation mediation provides, the number of cases referred remain abysmally low and that affects the development of mediation in the country.   Also, justice still remains inaccessible due to existence of barriers such as poverty, social and economic backwardness, unawareness, illiteracy, etc.

Despite being an integral part of the system and gaining exponential faith of the citizens,   judiciary has been subjected to several hinderances which disrupt justice.   Courts in India are largely affected due to poor infrastructure, magnified number of backlogged cases, inefficient training and shortage of judges.  The contenders are compelled to go through complex and costly procedures for enforcement of their rights, which they fail at due to illiteracy, abject poverty, unawareness, which in effect causes inequality.  Mediation is reckoned to be the best way of imparting justice.  Notably, mediation can fix the holes of the formal system, if executed properly, therefore, mediation is proposed as need of the hour which efficiently and expeditiously disposes off cases and enforces legal and contractual rights of all the sections of the society.  Thereby it can complement the overburdened formal justice system and make it more efficient and accessible to justice.  Nevertheless, mediation in India is not a ripened fruit yet and efforts need to be taken to strengthen the same.  The loose ends of mediation are visible when  not all cases actually proceed despite the efforts by the courts.  Moreover, even the cases that proceed for mediation may arrive at instances when the other party fails to abide by the terms of settlement   and ultimately approaches the judiciary for its enforcement,    which again raises a whole lot of concerns that litigation brings along with it.   

it is concluded that the existing dispute resolution system is incapable of dealing with the overflowing concerns of access to justice and by virtue of  the capacity to quickly dispose of cases, initiate dialogue, conduct proceedings orally, provide subject-specific expertise and make justice approachable, mediation is indeed the need of the hour to wide access to justice for all sections of the people. But, at this point, it fails to cement the existing gaps of access to justice as there remains a dearth of trainers and mediators, lack of regulation, distrust amongst citizens and inefficient funds. However, considering the fact that mediation is still in its development phase in India, it is demonstrated that if executed properly, it can fix the holes of the formal system, thereby making the whole dispute resolution system more efficient and accessible to justice.

Author: Sonam Chandwani, Managing Partner at KS Legal & Associates

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For starters, a commercial agreement is a document that legally binds the involved parties. If you and another party were to get in a dispute, it could get out of hand really quickly. When that happens, there will be consequences for your business. For instance, it can damage your reputation, disrupt your business operations, and, worse, it can force you to defend yourself in court.

For that reason, it’s essential to resolve commercial agreement disputes as soon as possible, hence this guide. Listed below are six tips for resolving commercial agreement disputes:

• Identify The Root Of The Dispute 

When resolving a dispute, the first thing you should do is determine what caused the dispute in the first place. Below are a few examples of what these causes may be: 

• Not paying the provided goods and services in the scheduled period. 
• The quality of goods doesn’t meet the standards specified in the agreement. 
• A clause in the contract was misinterpreted 
• The other party makes a false claim that they know isn’t true 

Performing any of these acts can disrupt the operations of the other parties. Take delayed payment, for example. By delaying your payment to the other party, you’re also causing disarray to their budget plan, which may push them to retaliate in the form of legal action. Your goal is to understand what caused the dispute so you can analyze the best possible approach to take. 

For instance, if the cause of the dispute is a breach of contract, you need to prepare a solid defense against the other party. If that’s what you’re looking for, you might want to consider looking into this Florida breach of contract guide for some valuable tips. 

• Review The Agreement Terms 

As stated earlier, one of the many causes of a commercial agreement dispute is when you or the other party misinterprets a clause included in the contract. 

For instance, you may have come to an agreement with another party that you’ll pay for the repairs of a particular building in the event that it collapses. The other party might assume that you’ll also pay for the hospital bills of the injured individuals, which is an incorrect assumption. 

If that’s the case, you can resolve the commercial agreement dispute by simply reviewing the agreement terms since both parties most likely have a copy of the contract. Once you confirmed the contents of the contract, the other party would eventually give up on the dispute, especially if it’s a mistake on their part. But that’s not always the case. 

If the other party is persistent, they may continue pursuing the matter until they’re given what they want. In such cases, your best bet would be to look for other clauses that may prove to be quite helpful in resolving the dispute. These may include: 

• A clause that enumerates the obligations of both you and the other party 
• A clause that details the procedures you can take during disputes 
• A clause that explains how you can terminate your relationship with the other party 

During a commercial agreement dispute, the contract is your most powerful weapon. But that doesn’t necessarily mean you have to use it all the time. Sometimes, a one-on-one talk with their representative is all it takes to resolve a commercial dispute. 

• Look For A Reliable Mediator 

Although many commercial agreements dispute often end up with the termination of the contract, there are cases where both parties involved remain in a mutual relationship even after the dispute. This usually occurs between companies with a relatively long history of working together. If this is your situation, the best course of action is to ask for mediation where the authoritative figures of both companies meet personally to talk about the matter. 

Mediation works best if both sides aren’t inclined to take legal action. During this meeting, you and the other party will discuss the matter at hand while a mediator makes sure the process goes as smoothly as possible. Moreover, the mediator must have no connections to both sides whatsoever to avoid bias. 

If you’re planning on taking this approach, the best way to look for a reliable mediator is to search for an agency geared towards specializing in these services. You can also opt for a more modern solution by scheduling an online mediation.

• Accept Reasonable Compromises 

Generally, in a commercial agreement dispute, the longer it goes on, the worse it gets for both sides. Business operations are temporarily disrupted, and there may be some expenses during the whole process, especially if you decide to hire legal counsel or a representative. 

For that reason, as soon as the other party offers a compromise, you must take the opportunity immediately. That way, you can resolve the dispute soon, and you and the other party can get back to managing your own enterprises. 

Of course, their compromise must be reasonable. Otherwise, all the effort you’ve put into standing your ground would be all for naught. 

• Collect Evidence In Advance 

While the chances may be slim, there’s a possibility that the opposing party would take the dispute to court. When that happens, resolving the conflict would become a lot harder, and both sides will inevitably incur considerable losses. You can, however, minimize the potential loss by taking control over the dispute in court. You can do so by collecting evidence in advance. These may include written contracts, witness statements, and copies of conversation. 

With enough evidence, you can enforce the appropriate judgment upon the opposing party. This also allows you to earn back a portion of what you’ve lost throughout the entire process. 

Conclusion

Commercial agreement disputes are in no way rare. As you continue establishing connections with other enterprises, you’ll get into a dispute at some point. When that happens, you’ll inevitably incur some losses and your relationship with the opposing party, regardless of the severity of the issue. As such, it’s essential to resolve the dispute as soon as possible. These tips should be more than enough to get you going.

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The United Nations Commission on International Trade Law, which is known as the, “UNCITRAL”[1]  can be deemed to be regarded as a primary organ of the United Nations when it comes to the United Nations dealing with matters pertaining to international trade and laws mandating the trade between countries. The UNCITRAL is mandated by the United Nations General Assembly which aims to foster growth and development in international trade law and at the same time aims to harmonize the relations that persist between nations that are involved in trade. Under the scope of the framework which is established by the UNCITRAL, there are innumerable instruments which deal with aspects pertaining to Alternative Dispute Resolution methods. UNCITRAL primarily deals with rules pertaining to arbitration and there are rules which have been enumerated within the UNCITRAL model which are specifically applicable to ad hoc arbitrations, which come handy to various arbitration institutions. At the same time, it also enumerates upon the model laws of international commercial arbitration which have been incorporated and are adhered to by many States within their domestic legislations.

Indian Arbitration Act, 1996

The Arbitration and Conciliation Act, which was enacted by Parliament in the year 1996[2] is primarily drafted in consonance to the UNCITRAL Model Laws which enumerate upon the rules that an organization or a State may adapt or adhere to. This Act was passed since India signed the UNCITRAL treaty pertaining to Arbitration.

The primary focus here is to understand as to how the UNCITRAL model laws help countries in understanding the way in which they need to formulate their laws and at the same time how crucial it is to adopt the UNCITRAL rules dealing with Arbitration. It is imperative to understand that India partially adopted the UNCITRAL Model Laws as it specifically adopted its provisions pertaining to International Commercial Arbitration from the UNCITRAL model.

UNCITRAL and International Arbitration

With support from its working groups and an Arbitration and Conciliation/Dispute Settlement Working Group, UNCITRAL aimed to draft several instruments which could in turn help individuals and organizations in facilitating the settlement of their disputes while relying to Alternative Methods, instead of approaching a matter in the traditional way, i.e. by approaching a Court and filing for litigation. The UNCITRAL came up with the UNCITRAL Arbitration Rules, the UNCITRAL Model Law and the UNCITRAL transparency provisions.

1)      UNCITRAL Arbitration Rules: The UNCITRAL Arbitration Rules were primarily adopted by the UNCITRAL in the year 1976.[3]  The rules enumerated under the UNCITRAL Arbitration Rules majorly focus upon procedural rules which may aid the parties while dealing with their disputes. These rules basically enumerate the procedural aspects which the parties may agree when it comes to conducting an arbitral proceeding. These rules can be adhered to by the parties during the commencement of their arbitral proceedings as the same is a proceeding which arises as a result of their prevalent commercial relationship and these rules could be adhered to while carrying out ad hoc as well as institutional arbitration. These rules deal with all the stages in an arbitration proceeding right from the making of the arbitration agreement, to the composition and at the same time it also takes under its ambit the jurisdictional powers which have been conferred upon the arbitral tribunals. Lastly, it also takes under its scope the various aspects revolving around the arbitral proceedings and the form and the effect in which the award is to be passed by the arbitrator presiding over the arbitral tribunal.[4]

2)      UNCITRAL Model Law: In the year 1985, the UNCITRAL assumed the Model Law pertaining to International Commercial Arbitration, which was revised later on in the year 2006.[5] The Model law is not a piece which can be deemed to be regarded as binding, however, individual states are open to incorporate the various provisions of these model laws in their domestic legislations. It is imperative to note that Australia incorporated certain provisions from the UNCITRAL Model law in their domestic piece of legislation which is the, “International Arbitration Act, 1974”, this was after it was amended.

3)      UNCITRAL Transparency Provisions: Apart from establishing a model piece of legislation known as the UNCITRAL Model Laws, UNCITRAL also aimed to adopt a Convention on Transparency in Treaty-based Investor-State Arbitration in the year 2014.[6] The Convention particularly, can be deemed to be regarded as a piece of instrument which enables the Parties to an investment treaty, which is concluded before the 1^st Day of April, 2014, to show their consent with regards to the application of the UNCITRAL Rules pertaining to Transparency in Treaty-based Investor-State Arbitration.[7]

Advantages and Disadvantages of adhering to the UNCITRAL Arbitration Rules

The way in which the UNCITRAL Rules have been drafted, make it easier for the designating authorities to appoint arbitrators, however, these rules have been made much more comprehensive which has thereby strengthened the roles conferred upon the designating authorities, and these rules no longer are limited solely with the appointment of an arbitrator or the challenges that an organization may face when it comes to appointing an arbitrator. However, these rules also take under its ambit the relevant procedures which an arbitral institution may be required to follow when it comes to the proper supervision over arbitration proceedings in general. Therefore, if the arbitral institution or the arbitrators fail to adhere to the rules enumerated, or fail to perform any of the tasks enumerated under the rules, then under such circumstances, it could be replaced at the request of one of the parties to the proceedings.[8]

The Arbitration Rules could be deemed to be regarded as a set of rules which majorly focuses its aim towards strengthening the framework when it comes to dealing with ad hoc arbitration.[9], wherein limitations arise with regards to the deadlock that the parties may face when they find it difficult to come to a mutual ground in terms of settling the dispute during the pendency of the arbitration proceedings.

It is imperative to understand that the rules pertaining to arbitration as enumerated under the UNCITRAL have been drafted in such a way which aims to modernize the arbitration regime and in particular aims to taken into consideration the many issues surrounding the voids that have been left open either for interpretation or have not been adequately dealt with. Therefore, with the making of specific set of rules, which thereby deal with the process of transparency, the UNCITRAL seeks to change the arbitration regime or the arbitration practice.[10]

Conclusion

In a nutshell, it is imperative to understand that unlike the ICSID or the rules made by the ICC pertaining to arbitration, the UNCITRAL Rules on Arbitration, do not take into consideration the issues pertaining to enforcement per se. However, the award which is passed in favour of one of the parties to the dispute, which is made under the provisions of the UNCITRAL Rules, can be deemed to be regarded as something which will be enforced in consonance to the latter, which can be deemed to be regarded in accordance to the provisions on international rules of recognition and enforcement of arbitral awards, which may also include the New York Convention or the domestic laws of a nation if they are more in consonance when it comes to the aspects dealing with enforcement.[11]

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The the world is witnessing an unprecedented pandemic situation and even in the near future, the conditions are far from being normal. The state of affairs is appalling since the only steps to curb COVID19’s expansion so far are social distancing and lockout. In India, the administration of justice is already burdened with pending cases and has a background of delaying its procedure and the coronavirus has made the situation even worse. To ease the pressure on the courts, an improvised and efficient solution is needed and the answer can only be Online Dispute Resolution.

Online Dispute Resolution (ODR) is an umbrella term that describes dispute resolution processes that are assisted by the use of Information Technology.[1] Online dispute resolution (ODR) is in its infancy stage in India and is gaining popularity every day. E-commerce and E-governance gained formal and legal recognition with the enactment of the Information Technology Act, 2000.

This article covers the meaning of ODR, the outlook of various nations towards it, why there is need of this new phenomenon and its use in Consumer Redressal.

MEANING OF ONLINE DISPUTE RESOLUTION

Online dispute resolution or ODR is a method of resolving conflicts outside the judiciary, incorporating technology with Alternate dispute resolution methods. Many of us have participated in some form of ODR, whether through e-mail contact with a tribunal or through the use of online disclosure channels to manage disclosure. The resolution of disputes may be done with the help of Information and Communication Technology (ICT). It is the new counterpart of ADR and ICT. When the process is conducted entirely online, it is referred to as ODR, which means performing most of the dispute resolution procedure online, including initial filing, evidence-based processes, and oral hearings where necessary, online discussions, and even binding settlement rendering. ODR is the first step towards virtual dispute resolution. Online dispute resolution in India is a mechanism that strengthens the simplicity and advantages of alternative dispute resolution in India by requiring the parties to resolve the dispute by just sitting at home.

OUTLOOK OF VARIOUS NATIONS

Various courts have established or are looking forward to establish the online court system. On 18 August 2017, China established its first cyber court specializing and dealing with internet-related lawsuits in Hangzhou’s e-commerce hub, following an increase in the number of online disputes. Later, on 9 August and 28 September 2018, two new Cyberspace Courts in Beijing and Guangzhou were opened, raising the total number of Cyberspace Courts to 3. It’s high time now that India should also draw inspiration from China and establish cyber courts for rapid and cost-efficient adjudication of matters.

UNCTAD set up a conference on Online Dispute Resolution to address transnational consumer issues. The paper on possible future work on online dispute resolution in cross-border e-commerce transactions was presented at April 2010.[2]

The European Commission offers the European Online Dispute Resolution (ODR) forum to render online shopping easier and fairer by accessing the standard dispute resolution resources.[3]

India has seen significant growth in the volume of online transactions over the past half-decade, therefore, it has now become convenient to accept ODR as an efficient dispute resolution mechanism and thus implement a rapid and reasonable dispute resolution system. NITI Aayog, in collaboration with Agami and Omidyar Network India, brought key stakeholders together to facilitate electronic dispute resolution (ODR) in India.[4] A seminar meeting was conducted by NITI Ayog where several eminent senior judges of the Supreme Court, sectaries of government, legal experts, etc. took part and also presented their views.

Justice DY Chandrachud, Judge, Supreme Court of India spoke on Technology and access to Justice–[5]

We need a fundamental change of mindset, a resolution of disputes that should not be seen as a court where justice is administered but as a service that is being used. ODR has various functions to perform:

ü  Dispute settlement: Settlement of disputes that approach the courts via a free, effective and effective procedure.

ü  Containment of disputes: Those matters that do not require judicial resolution should not at all reach the courts.

ü  Dispute avoidance: Facilitate and ensure a problem does not reach the stage of a dispute through ODR. This will ensure that an issue will not become a dispute.

The ‘Digital India’ Programme, approved by the Hon’ble Prime Minister Narendra Modi in August 2014 aims to transform the country into a digitally empowered society and knowledge economy. The program aims to provide high-speed internet access to all up to Grama Panchayat levels. It also aims to empower citizens digitally.[6]

The First International Forum on Online Courts was also held in London on 3 and 4 December, 2018, where various countries participated like England, Singapore, United States, Japan, India, etc. Dr. Sadanand Date, Joint Secretary, eCourts, Justice Department, Government of India, talked about the ongoing Indian judiciary and ICT initiatives to allow judicial systems to be technically effective. He found out that the pendency of cases in India is one of the key issues that need to be tackled.[7] India started the eCourts Integrated Mission Mode Project in 2016 as one of the National e-Governance projects being carried out in the country’s District and Subordinate Courts. The effort aims at delivering approved facilities to litigants, lawyers and the judiciary by uniform district and appellate court technology, as well as improving the Supreme Court’s ICT infrastructure.[8]

Recently, the Supreme Court of India in Meters and Instruments Private Limited and Ors. v. Kanchan Mehta, a suo moto petition titled ‘Expeditious case trial under Section 138 of N. I. Act, 1881’, observed that “it is necessary to consider the use of modern technology not only for paperless courts but also to reduce the overcrowding of courts. Categories of lawsuits that may be conducted ‘online’ partly or fully, without the actual involvement of the parties, where strongly disputed issues are not needed to be adjudicated.”[9] (Para 17)

NEED OF ONLINE DISPUTE RESOLUTION

1.      Our judiciary is already over-burdened with a number of cases. Right now, India has a total of 33,189,635 cases pending at the District level[10] and 4,142,236 cases pending in the High Courts.[11] Delay in the administration of justice and high litigation costs are also the stumbling blocks.

2.      Arbitration was originally created as an alternative to going to court for various types of disputes but over time this method has become complex and expensive. ODR offers many companies a faster, more transparent and more accessible option for resolving disputes online, especially those with high volume and low-value cases.[12]

3.      Data storage problem has been solved by an ODR system which is one of the most common concerns faced in Indian courts, whereas in ODR data storage is secured and enables transferring information as and when necessary without any difficulties.

4.      ODR which was at an infancy phase has now acquired more prominence because of COVID’19.

5.      ODR eliminates the need for traveling and reduces costs considerably. It provides for improved time and cost management, greater procedural efficiency and more innovative approaches.

6.      ODR can be accessed wherever the internet is available, according to the convenience and necessity of the parties.

7.      Other factors that make online mediation an effective tool to protect consumers include confidentiality, flexibility, economization and the removal of legal problems.

CHALLENGES FACED BY ODR

1.      There is no sufficient recognition provided to it by Legislature or Judiciary.

2.      There is lack of awareness of ODR amongst the public.

3.      There is no sufficient technology system to support ODR.

CONSUMER REDRESSAL MECHANISM

Consumers play a vital role in supporting India’s economy. Everyone is a consumer because each and every one of us is engaged in some form of exchange of goods or services through money as a medium. Gradually, there has been an increase in all kinds of disputes between distributors, distributors and sellers, buyers and sellers, etc. Therefore, legislation governing the friction between buyers and sellers was required. The Consumer Protection Act identifies the right to Redressal as a key consumer right based on the establishment of the three-tier redress system.[13]

ü  District Forum established by the State Government in each district of the state by notification.

ü  State Commission established by the State Government in each district of the state by notification.

ü  National Commission established by the Central Government in each district of the state by notification.

The Preamble to the Consumer Protection Act, 1986 notes that the act was passed in order to safeguard the customer’s interest against exploitation and to put the customer grievances to the proper consumer court in order to meet the purpose of the Act and to do justice to the customers.

The Supreme Court in M/s Afcons Infra Ltd. v. M/s Cherian Varkey Construction Company Ltd. and Ors. it was observed that “when identifying matters appropriate for Alternative Dispute Resolution (ADR), it was maintained that all customer conflicts, including conflicts where a trader/ supplier/ service provider is keen on protecting its business/ professional image and reputation or product popularity, should be directed to ADR.”[14] (Para 19)

From its founding, eBay has been at the forefront of designing and providing tools to help ODR systems. Its Dispute Resolution Center is one of the world’s largest ODR programs, and has been called the most popular example of ODR.[15]

Thus, in the territorial-based grievance redress mechanisms, the non-territorial nature of electronic commerce throws up new challenges to consumer protection.

ONLINE PLATFORMS

1.      In 2018, the Indian Parliament enacted the ‘Pre-Institution Mediation and Settlement Rules’ where under section 21A(2) of the Commercial Courts Act, made it necessary for commercial disputes above INR 3,00,000 rupees to mediate until proceedings are brought until the judge.

2.      His Excellency President of India Shri Ram Nath Kovind and Honorable Chief Justice of India Shri S.A. Bobde recently stressed the adoption of mediation as an instrument for the resolution of disputes and the integration of artificial intelligence in judicial proceedings.[16]

3.      In consumer disputes also mediation is proposed as an alternative dispute resolution. Chapter V of the Consumer Protection Act, 2019 provides for the establishment, at district, state and national level, of consumer mediation cells for the aim of enabling court-annexed mediation.[17]

4.      The Centre of Excellence on Alternative dispute resolution, called “CADR,” is a website based entity facilitating ODR services. The Center is founded to undertake and facilitate research and to produce and disseminate expertise in the field of alternative dispute resolution methods.

5.      SAMA is a completely new way of resolving disputes between businesses and customers, employers and employees, landlords and tenants, professionals and customers or anyone else, all online, quickly and cost-effectively. Using sophisticated technology and a network of skilled professionals, SAMA ensures that your dispute will end with the end of the week.[18]

6.      AGAMI is bringing forward ideas that serve justice. AGAMI does so by identifying ideas, reframing problems, and catalyzing collaborative action. They do that with an abundance and transparency mentality.

CONCLUSION

Considering the current state of the judicial system in India, it can be concluded that there exists an utmost necessity to find alternatives to traditional litigation. As “justice delayed is justice denied” as propounded by William Ewart Gladstone. A radical shift in mentality has to be undertaken by people to distinguish the notion of justice from the place named, court.  The future will be a hybrid style, incorporating the best of the real world with the electronic world. People should reimagine the whole process of delivering justice to operate within the hybrid system. Promoting a dispute settlement mechanism that is allowed by technology would not only benefit the litigants but will ease the pressure and increase the performance of the Indian legal system. Therefore, the sooner ODR is adopted, the better it will be for the nation in general, and the justice seeker in particular.[19]

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Novation of a Contract

Section 62 of the Indian Contract Act, 1872 (“ICA”) governs the effect of novation of a contract. A contract is said to be novated if the parties to such contract agree to substitute a new contract for it, or to rescind or alter it. As per section 62 of ICA, in the event a contract is novated then the original contract need not be performed.

Anti Arbitration Suit

An anti arbitration suit is a proceeding filed by a party to a contract, before a Civil Court, seeking an injunction on either the initiation or continuation of arbitration proceedings in case of a dispute between parties to such contact. These suits seem to have been trending in the present decade before the Indian judiciary and the Courts have to been proactive in deciding them in rapidity. Grounds for such suits have been various including non-arbitrability of dispute, existence and validity of the arbitration agreement in view of: discharge, accord and satisfaction of the contract, settlement between the parties, rescission, novation and the like. We shall, for the purposes of this article, focus upon the ground of novation.

Postulation & theory

Over the years there have been various propositions presented before the Courts of India that an anti arbitration suit could be entertained on the ground that the contract containing the arbitration clause has been novated. As per these propositions, when a contract containing the arbitration clause is novated and substituted by another contract, the original contract need not be performed as per section 62 of the ICA. By that theory, the arbitration clause contained in the original contract also need not be performed and as such, the arbitration agreement under the original contract becomes inoperative. The Hon’ble Courts of India, in their cumulative wisdom, have predominantly taken a pro-arbitration stand on this subject. However, the ambiguity that remained was in the question as to who would decide whether or not novation has rendered the arbitration agreement inoperative.

Evaluations, tests and decisions

The foundation for decisions on this subject has been laid down by Subba Rao, J. in the decision of the SCI in Union of India v. Kishorilal Gupta and Brothers[1] (“Kishorilal Judgement”). Kishorilal Judgement has been followed by the SCI in Damodar Valley Corporation v. K.K Kar[2] (“Damodar Valley Judgement”). In these two decisions, the SCI held that if it is established that a contract containing an arbitration clause is replaced by way of novation, by another contract which did not contain an arbitration clause, the arbitration clause in the first contract would not apply. If there is no such novation, the earlier contract together with the arbitration clause will hold good. In Kishorilal Judgement it was laid down that, if the original contract was substituted by a new contract, the arbitration clause in the earlier contract would perish with that contract and could not be relied upon. Otherwise, it could be relied upon. Therefore, the test would be whether the contract containing the arbitration clause is substituted by way of novation, by another contract not containing an arbitration clause. These decisions were under the Arbitration and Conciliation Act, 1940 (“1940 Act”).

As we just saw, these decisions settled the issues regarding the tests to be conducted in such matters. However, there arose a question as to which judicial forum would have the jurisdiction to apply these tests. The Kompetenz Kompetenz principle of law states that the arbitral tribunal is competent to rule in its own jurisdiction. Does this mean that the arbitral tribunal will apply the test to the reference before it?  The above two decisions seemed to indicate that the Civil Courts do possess the jurisdiction to apply these tests thereby bestowing the Civil Courts with the jurisdiction to entertain anti arbitration suits on the ground of non arbitrability of the dispute in view of novation of the original contract.

Post enactment of the Arbitration and Conciliation Act 1996 (“1996 Act”), and its multiple amendments, excessive interference of the Civil Courts seem to be frowned upon by the legislation as well as the judiciary. The SCI obsequious to its earlier decisions mentioned above, in SBP & Co. v. Patel Engineering Ltd.[3],  Uttarakhand Purv Sainik Kalyan Nigam Limited v. Northern Coal Field Ltd.[4] Union of India & Ors. v. Master Construction Co.[5], Duro Felguera S.A. v. Gangavaram Port Limited[6] and National Insurance Co. v. Boghara Polyfab (P) Ltd.[7] reiterated that the Civil Court is required only to examine the existence of the arbitration agreement as the 1996 Act reinforces the Kompetenz Kompetenz principle which states that the arbitral tribunal. However, all these decisions did leave scope for an anti arbitration suit to be entertained as regards the existence or validity of the arbitration agreement in the event of novation of the contract containing the arbitration agreement.

Then came the 2019 amendment of the 1996 Act which proceeded to amend the 1996 Act to the extent of minimising the Civil Courts interference even as regards appointment of the arbitral tribunal.

The Final Reprieve

The SCI, finally after reviewing the decisions, statutes and amendments, has now decided in Sanjiv Prakash Judgement that the arbitral tribunal possess the jurisdiction to decide on the non arbitrability of the dispute even in cases of novation of the original contract. The crisp and clear approach of the SCI in this regard is reasoned with its following observations in the Sanjiv Prakash Judgement:

• Whether the original contract (containing the arbitration agreement) has been novated has to be determined after a detailed consideration of the clauses in both original and novated contracts;
• Detailed arguments on whether the original contract has or has not been novated cannot be possibly decided (by the Civil Court) in exercise of jurisdiction under a limited prima facie view as to whether an arbitration agreement exists between the parties;
• The Court cannot enter into a mini trial or elaborate review of the facts and the law which would usurp the jurisdiction of the arbitral tribunal;
• Kishorilal Judgement and Damodar Valley Judgement deals with novation in context of the 1940 Act which had a scheme completely different from the scheme set out in the 1996 Act.

This judgement has come as a welcome reprieve to the judiciary congested with such suits which cause hinderance in smooth functioning of a separate and distinct dispute resolution mechanism. However, a downside to this judgement is that it may shut the doors of Civil Courts for parties who are subjected to onerous arbitrations in cases where the arbitration agreements are no longer in existence due to novation of the original contract. In any case, no matter what you do, it is indeed difficult to be able to please everyone.

[1] AIR 1959 SC 1362

[2] AIR 1974 SC 158

[3] (2005) 8 SCC 618

[4] (2020) 2 SCC 455

[5] (2011) 12 SCC 349

[6] (2017) 9 SCC 729

[7] (2009) 1 SCC 267

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What is Emergency Arbitration? It is a procedure where an emergency arbitrator is assigned to grant temporary remedies that are so urgent that they cannot wait for the final tribunal to be established so as to save either of the parties from counterplay. “To ensure the effectiveness of arbitration, a side must have ample means to deter the counterparty’s threatening behavior. The counterparty could, for example, destroy evidence in his possession or transfer property offshore in order to frustrate the successful enforcement of an award.”[1] Nonetheless, it is important to consider the counterparty’s interests and to address the need for due process. If these conditions are not fulfilled, the award will be contested and set aside. Since arbitrators seek only enforceable and conclusive awards, they are cautious of awarding interim measures. Many international arbitration organizations, including the “Singapore International Arbitration Centre”, the “London Court of International Arbitration”, and the “International Chamber of Commerce”, have included clauses in their regulations for the selection of an emergency arbitrator. The emergency arbitrator becomes functus officio after passing the interim award, according to the majority of the rules. It is founded on two legal maxims: first, the fair probability that the claimant will prevail on the merits (fumus boni iriuris), and second, the claimant will be caused irreparable harm if the remedy is not granted urgently (periculum in mora). These may be regarded as special-purpose arbitral tribunals whose authority ends after their work is completed.

Furthermore, although the UNCITRAL Model Law does not explicitly have provisions for emergency arbitration, the ability to use this path is implicitly included in the scope of ‘Arbitration’ thereunder. “Article 2(a) of the UNCITRAL Model” Law defines arbitration as “any arbitration whether or not administered by a permanent arbitral institution.”[2] Since many of the laws of the arbitral agencies allow for emergency arbitration, the Model Law implicitly covers emergency arbitration within its framework.

HISTORY OF EMERGENCY ARBITRATION IN INDIA

The 246th Law Commission Report[3] proposed a change to the concept of an “arbitral tribunal” under “Section 2(1)(d) of the Arbitration and Conciliation Act, 1996”[4]. To add “in case of an arbitration conducted under the rules of an institution providing for appointment of an emergency arbitration, includes such emergency arbitrator”. The aim of the recommendation was to promote the culture of institutional arbitration in India and to ensure that institutional rules like the SIAC Arbitration Rules, which allow for an emergency arbitrator, are granted legislative recognition in India. However, after the Arbitration and Conciliation (Amendment) Act, 2015 went into effect, this recommendation was not implemented.

However, it is necessary to note that the rules of several arbitral institutions developed in India prior to the 246th Law Commission Report provide provisions for emergency arbitration. Rule 14 of the Delhi International Arbitration Centre (Arbitration Proceeding) Regulations, for example, establishes procedural rules for the operation of Emergency Arbitrations. Similarly, the Rules of the Mumbai Centre for International Arbitration and the Rules of the Madras High Court Arbitration Centre provide for Emergency Arbitrations and interim awards. The law report also suggested that Section 2(1)(c) should include the words “emergency award” under the definition of arbitral award which only comprises the term “interim award” in it.

LEGAL STANDING OF EMERGENCY ARBITRATOR IN INDIA

Legal complexities –

The meaning of arbitral tribunal excludes “emergency arbitration,” and there is no clear clause in the Arbitration and Conciliation act for direct application of international emergency awards. As a result, the parties typically seek protection from international emergency awards in court under “Section 9 of the Arbitration and Conciliation Act”. Though, the Delhi High Court in the case of “HSBC PI Holdings (Mauritius) Limited v. Avitel Post Studioz Ltd.”[5]has stated that the emergency arbitrator proceedings will be used to provide an impartial opinion on the appeal for interim relief before the court.

ORDERS AGAINST THIRD PARTIES

Third-party relief cannot be granted by emergency arbitrators. This is a significant drawback resulting from the fact that the authority of emergency arbitrators and the (eventual) arbitral tribunal is restricted to parties who have agreed to refer their dispute to arbitration. “Article 29(5) of the ICC Rules”[6], for example, specifically states that the ICC’s Emergency Arbitrator Provisions extend only of the signatories to the arbitration arrangement or their heirs.

Indian courts, as courts in other countries, may, however, provide temporary relief against third parties in some cases. The most common scenario is where a freezing order is issued against a bank that retains assets on behalf of one of the respondents. An emergency arbitrator will be unable to compel the bank to comply with the freezing order.

EX-PARTE ORDERS

In situations where an element of surprise is needed, a party’s ability to receive ex parte interim orders may be critical (For example, where prior warning to the respondent will cause him to withdraw his properties from the court’s jurisdiction). In extraordinary cases, Indian courts, like other jurisdictions, may issue ex parte orders. Emergency arbitrators, on the other hand, are not allowed to award relief ex parte. This is due to the fact that one of the fundamental tenets of arbitration is that both sides are given an equal chance to discuss their case.

AMAZON- RETAIL DISPUTE

In this ongoing case[7], where it was before the Delhi High Court, the court had to examined the status of the emergency arbitration applicable in India.

Brief Facts of the case:

The dispute is related to deal between the future retail and Reliance Retail Ventures ltd. Prior to this deal, Amazon had already bought the 49% of the Future Group’s unlisted firms in the year 2020 and in the agreement there was the clause that the Amazon will also have the right to buy the listed firms of the Future Group in the upcoming years. The dispute arose when Future Group going through cash crunch due to lockdown in the month of March due to the coronavirus outbreak.

Due to that Reliance Retail Ventures and Future Retail made a deal, where Reliance Retail to acquire the supermarket chain Big Bazaar, which is a supermarket in India, clothes supermarket ‘Brand Factory’ and Food supply chain unit ‘Foodhall’. This is done to decrease the debt of the Future Retail Group.

When Amazon came to know about the agreement, they claimed that contract with the unlisted firms of the Future Retail Group has been breached by the Future Group and to which in the Singapore International Arbitration Centre they invoked the emergency arbitration relief against the Future Retail Group. To this the Singapore International Arbitration Centre obtained the injunction against the transaction of acquisition by the Reliance Retail Ventures Ltd. Then Amazon approached the Delhi High Court for enforcing the SIAC emergency arbitral award which was to refrain the Future Retail from going ahead with the deal with Reliance Retail Ventures Ltd. The Delhi High Court had maintained the status quo till reserved order is pronounced by the court.

Analysis of the case:

Now the important thing to be considered is that to put an permanent injunction against Amazon their contentions in the Delhi High Court were that the Emergency arbitration relied that was invoked by Amazon is not within the scope of Arbitration and Conciliation Act, 1996 and therefore the emergency arbitral award passed by SIAC would not stand valid in India. Another Contention was the Emergency arbitration award is not defined and included under the Section 2(1)(d) of the Arbitration act amendment of 2019.

This case is a prime example of why there are ambiguities with respect to applicability of the emergency arbitration in India as the Delhi High Court single-judge bench had passed the interim injunction in the favor of Amazon, which had barred the Future Retail from going ahead with the deal with Reliance Retail Ventures ltd whereas when Future Retail Group had appealed in front of two-panel judge, the Court ruled that the emergency arbitral award would not have its impact in India as the Future Retail was not the party and it is not enforceable in India. This shows that there is still uncertainty over the applicability of emergency arbitration in India. Despite being recommended by the Law Commission Report 246^th, The 2015 amendment of the arbitration and conciliation act,1996 had not included provisions for emergency arbitration in the act but the arbitral institution that are existing in India like Delhi International Arbitration Centre of the Delhi High Court of its arbitration rules has provided the provision of ‘Emergency Arbitration’, even Mumbai Centre for International Arbitration also provided the list of provisions of emergency arbitration and also emergency arbitrator.

Conclusion

The growth of emergency arbitration in India has been minor as there is lack of clarity regarding the applicability and also interim measures that are issued by the emergency arbitrators have made the parties to approach the courts for seeking the relief. In the Part II of  Act, there is also need of a section have same characteristics like the section 17 in the Part I of the Act. If the provision was included in the Amendment 2015 of the Arbitration act, then it would have boost the Indian Arbitration law. If the provision are included in the upcoming years in the act, then there will be also a need to clear some of the ambiguities that would arise with the inclusion of the provision like when the parties have preferred the ad-hoc arbitration over the institutional arbitration in the agreement, then would they be invoke a provision regarding the emergency arbitration and also to clarity as to whether the courts can be asked to appoint the emergency arbitrators.

Thus, with the introduction of the emergency arbitration through the legislative enactment, it will encourage the foreign investors as it will secure their commercial transactions in India, otherwise  as in Amazon- Future Retail case is unfolding, the investors has to wait for the judgement with respect to emergency arbitration and makes the reputation nascent of India.

CITATIONS

[1]See e.g. Lew – Mistelis – Kröll 2003, p. 585.

[2] UNCITRAL Model Law on International Commercial Arbitration, Article 2(a), pp 25-37.

[3]246th Report of The Law Commission of India, Amendments to the Arbitration and Conciliation Act, 1996, 37 (2014), available at: http://lawcommissionofindia.nic.in/reports/Report246.pdf

[4] Arbitration and Conciliation Act, 1996, Section 2(1)(d).

[5]HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd & Ors., Arbitration Petition No. 1062/2012 dated January 22nd, 2014.

[6]ICC Rules (2021), Article 29(5).

[7] Future Retail Ltd. v. Amazon.com Investment Holdings LLC & Ors, CS(COMM) 493/2020

Author – Aarsh Brahmbhatt 

Co-author – Deep  Hirani

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