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Limited Scope for Judicial Intervention in Arbitral Awards: Time for a Change?
Arbitration is a method of Alternate Dispute Resolution (ADR) that was introduced in India first through the Arbitration Act, 1940 during the colonial reign and later it was standardized and institutionalized, after taking into account international models like the UNCITRAL Model Law on International Commercial Arbitration[1], through the Arbitration and Conciliation Act, 1996[2] and the amendments made to it in 2015 and 2019. The Arbitration and Conciliation Act, 1996 was enacted at a time when courts in India were starting to be overburdened by the never-ending pile of cases and arbitration practice in India was picking up speed as an alternative to litigation. Since the Act aimed at attracting parties to arbitration instead of the traditional route of litigation, it made sure to incorporate provisions limiting judicial interference which would be a time-consuming process that would inhibit the speedy resolution that Alternate Dispute Resolution offers.
Section 34 of the Arbitration and Conciliation Act, 1996 specifies that judicial intervention by a court is prohibited except under certain special circumstances where an arbitral award can be set aside by a court and these circumstances are enumerated below[3]:
- Either party to arbitration is under some incapacity
- The arbitration agreement in not valid under the Law
- Party making the application for arbitration was given improper notice of appointment of arbitrator
- The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration
- The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties
- 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 or Award is in conflict with the Public Policy of India
These provisions are not only stated clearly in an inclusive list under Article 34, but the Supreme Court of India has also upheld them in the case of McDermott International Inc v. Burn Standards Co. Ltd.[4] where the Court held that the Arbitration and Conciliation Act, 1996 allows for judicial intervention in arbitration proceedings only when the arbitral award seems prejudiced, so as to maintain fairness. The Supreme Court also observed that the Court is not empowered to correct the decision made by an arbitrator through an arbitral award but can only set aside the award and leave parties to restart the arbitration process afresh if they wish to do so. This view was also upheld in the case of Ssangyong Engineering & Construction v. National Highways Authority of India[5] where the Court opined that if a contract can be interpreted in two ways and an arbitrator interprets it one way, the court cannot interfere with the arbitral award simple because it prefers the other view of interpretation. Therefore, the view of the court cannot prevail over the view of the arbitrator once the dispute has been resolved by arbitration and an arbitral award has been pronounced.
Furthermore, Section 8 of the Arbitration and Conciliation Act, 1996 eliminates the scope of judicial intervention in matters regarding disputes on the interpretation of the arbitration agreement. Section 8 states that if parties to a dispute face a conflict regarding the arbitration agreement itself and approach the court for interpretation, the court must refer the parties to arbitration immediately and have them sort the dispute out through the arbitration proceeding[6]. Hence, the Act itself provides for minimal court intervention which allows parties that have an arbitration agreement or an arbitration clause in their contract to settle their disputes, especially commercial disputes, through arbitration.
This idea of limiting powers of the Courts to intervene in arbitral proceedings and arbitral awards is justified according to the Highest Court in the country, the Supreme Court, because when parties opt for mechanisms of Alternate Dispute Resolution like arbitration, they choose to exclude the jurisdiction of the courts because they prefer the convenience and finality it provides[7]. The Act also bears in mind the reason for its enactment, i.e. to reduce the workload of judges in courts, and allows for the finality of arbitral awards to prevent parties from returning to the courts and appealing the awards unless the reason for doing so is grave and provided for under Section 34 of the Arbitration and Conciliation Act, 1996. So, limiting judicial intervention in arbitration was the right move and it doesn’t look like it’s about to change any time soon.
[1] Editor, The Arbitration and Conciliation Act, 1996 – An Analytical Outlook, Shodhganga, (Apr. 10, 2020, 2:56 PM), https://shodhganga.inflibnet.ac.in/bitstream/10603/201576/10/10_chapter%204.pdf.
[2] The Arbitration and Conciliation Act, 1996, No. 26 Acts of Parliament, 1996 (India).
[3] The Arbitration and Conciliation Act, 1996, No. 26 Acts of Parliament, 1996 (India).
[4] McDermott International Inc v. Burn Standards Co. Ltd. (2006), 11 SCC 181.
[5] Ssangyong Engineering & Construction v. National Highways Authority of India, (2019), Civil Appeal no. 4779 of 2019.
[6] Abhishek Bhargava, Salient Features of Arbitration and Conciliation Act, 1966, India Institute of Legal Science, (Apr. 11, 2020, 3:09 PM), https://www.iilsindia.com/blogs/salient-features-of-arbitration-and-conciliation-act-1996/.
[7] Editor, Law of Arbitration in India – In a Nutshell, Vakilno1, (May 11, 2018, 6:21 PM), https://www.vakilno1.com/legal-news/law-of-arbitration-in-india-in-a-nutshell.html.
- Alternate Dispute Resolution
- Arbitration
- Judicial Intervention
