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Is Uniformity in the Indian Arbitration System an Illusion?
Since the inception of the Arbitration Act 1940, India has been struggling to find a comprehensive legislation that meets the guidelines set out in international conventions like the Geneva Protocol on Arbitration Clauses and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as well as Model Laws such as the UN Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration[1]. Initially, during colonial rule, the problem was the lack of uniformity between the English system of arbitration and the one followed in India but after independence the question of meeting international standards arose. The Arbitration and Conciliation Act, 1996 was enacted as a response to this question and since its introduction in the legal system it has been amended twice, once in 2015 and once in 2019. The amendment in 2015 sought to bring about impartiality among arbitrators, independence in the arbitral process and speedy resolution of disputes[2] while the 2019 amendment focused on provisions that would make India a recognized Centre for International Commercial Arbitration[3]. Even though the arbitration system in India has undergone so many changes in the past, the system still seems flawed in more ways than one.
First, the 2019 Amendment seeks to institutionalize international commercial arbitration in India with the establishment of the Arbitration Council of India (ACI) which will frame policies and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration in India[4]. While the constitution of a Council is a well-intentioned idea, its execution, especially with respect to its composition and duties, have been widely criticised. The ACI is composed mainly of government appointees and this begs the question of the presence bureaucracy even in a system that is meant to be independent. The Amendment has also been under fire for its provision enabling courts in India to designate Arbitral Institutions accredited by the ACI but failing to limit the number of Arbitral Institutions that can be designated and laying down a comprehensive list of factors to be considered by the ACI in the process of accreditation and grading.
Second, in the battle to make India a hub for international arbitration, the country has failed in clarifying the enforceability of international arbitral awards granted by international arbitration institutions to Indian parties[5]. Many high Courts have attempted to address this issue but there still exists no clarity on the matter. In the case of Addhar Mercantile Private Limited v. Shree Jagamba Agrico Exports Pvt. Ltd.[6], the Bombay High Court ruled that two Indian parties opting for the application of foreign law in an international seat of arbitration would be against public policy. However, in the case of GMR Energy Limited v. Doosan Power Systems India Private Limited & Ors[7], the Delhi High Court ruled that there is no prohibition on two Indian parties having a foreign seat of arbitration. In a strict contrast to this, the court in TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd.[8] , held that two Indian parties could not deviate from the application of Indian law by agreeing to have a foreign seat of arbitration.
One of the principle rules of arbitration is freedom from judicial interference but this has not bene the rule of thumb in India as parties have been denied the enforcement of arbitral awards while others have been allowed to execute their awards.
Third, there is a confusion regarding the arbitrability of disputes relating to oppression and mismanagement where in Rakesh Malhotra v. Rajinder Kumar Malhotra[9], the Bombay High Court ruled that disputes regarding these matters must be settled by a judicial authority – the courts, but the judgement also mentioned that in cases where the petition in mala fide and filed to avoid an arbitration clause, the matter must be sent for arbitration. This is a clear path to disagreement and misunderstandings which once again make uniformity a hard concept to grasp in the field on Indian Arbitration Law.
Fourth, a country like India taking a pro-arbitration stance does not allow consumer disputes to be settled by arbitration even if there is an arbitration clause in the agreement signed by both parties[10] as there are existing forums, like the Consumer Redressal Agencies, constituted specially to resolve such disputes.
With these conundrums yet to be resolved, the latest amendments are bound to be reformed again and hopefully, that will help clear the system and rid it of these questions.
[1] 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/.
[2] Vikas Goel, Highlights of Amendment to the Arbitration and Conciliation Act, 1996 via the Arbitration Ordinance 2015, Mondaq, (Dec. 2, 2015, 3:15 PM), https://www.mondaq.com/india/arbitration-dispute-resolution/448666/highlights-of-amendment-to-the-arbitration-and-conciliation-act-1996-via-arbitration-ordinance-2015.
[3] Ahlawat&Associates, Arbitration and Conciliation (Amendment) Act, 2019 notified, InsightSuccess, (Aug. 10, 2019, 3:53 PM), https://www.insightssuccess.in/arbitration-conciliation-amendment-act-2019-notified/.
[4] Law Senate, The Impact of the Arbitration and Conciliation (Amendment) Act, 2019, Lexology, (Oct. 30, 2019, 8:09 PM), https://www.lexology.com/library/detail.aspx?g=05fa48c5-8d05-40af-a1a4-8f5bba2eaecf.
[5] Bhavana Sunder, International Commercial Arbitration Law and Recent Developments in India, NishithDesai Associates, (Feb. 19, 2020, 6:45 PM), http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/International_Commercial_Arbitration.pdf.
[6] Addhar Mercantile Private Limited v. Shree Jagamba Agrico Exports Pvt. Ltd., (2015) SCC OnLine Bom 7752.
[7] GMR Energy Limited v. Doosan Power Systems India Private Limited & Ors, (2017) SCC OnLine Del 11625.
[8] TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd., (2008) 14 SCC 271.
[9] Rakesh Malhotra v. Rajinder Kumar Malhotra, (2015) 2 Comp LJ 288 (Bom).
[10] Aftab Singh v. Emaar MGF Land Limited, Consumer Case No. 701/2015.
- Arbitration
- Arbitration and Conciliation Act, 1996
- Uniformity
