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Arbitration in British India pt.2
In the 18th century, courts of justice that had been previously set up for the three presidency towns of Calcutta, Madras, and Bombay, conferred on them the requisite jurisdiction to administer within the presidency towns - English Common Law as well as English statutes. Ultimately in each of the three presidency towns, high courts were established by the year 1862, with the issue of Letter Patents by Royal Command.
Subsequently ten years later, the Indian contract act,1872 was enacted by the Indian legislature which was in consonance with the prevailing English law at the time, contracts that had effectively undermined the jurisdiction of courts in India were declared null and void, with an exceptional clause which was in turn enacted only as an exception with respect to contracts by referring to arbitration any potential dispute that might arise between the respective parties to the agreement.
Section 28 which were the agreements in the restraint of legal proceedings void had affirmed that the common law rule that was initially applicable in lieu of being recognized by English courts prohibited all agreements ousting the jurisdiction of courts. In the prevailing predilection prevalent all over the world with various range of alternative dispute methods of dispute- resolution with a specific emphasis on conciliation and mediated settlements which included India joining the revised Singapore Convention(UN Convention on International Settlement Agreements which emanated from mediation) this opened for signature and ratification by all states on and from the 1st of August 2019- the resumption in the operation of Section 28 of the 1872 Act remains an inexplicable anachronism.
Since there was no such provision made for a reference to arbitration of future disputes, the initial substantive law(enacted primarily for that very purpose) was the Indian Arbitration Act(|X of 1899) which in turn was itself based on the provisions of England’s Arbitration Act of 1899. This made provisions for reference of the present as well as future disputes, to arbitration without the prior intervention of the court. However at the time the provisions of the Indian arbitration act, 1899 applied only to Presidency towns such as Bombay, Madras, and Calcutta, which implied that it didn't apply to the rest of British India.
Starting from 1899 onwards, arbitration became in some sense, only a mechanism to resolve disputes which included disputes emanating from commercial issues which were resolved outside the courts, however, the enforcement and the exclusion of an arbitral award remained strictly within the powers and purview of the Courts. When arbitrators did not follow the law, their various awards were rescinded by respective courts. Keeping in mind the provision which was contained in Section 28 of the Contract Act, the Privy Council held in Champsey Bhara vs Jivraj Ballo Spinning and Weaving Co. ltd(1923)- that a particular award could be set aside if the court’s opinion was there was prevalent an error of law on the very face of the award, which went to the very fundamentals of the matter and ended up vitiating and showing the award in extremely poor light eventually.
Source: Harmony Amidst Disharmony: The Indian Framework- Fali S Nariman
- English Common Law
- Singapore Convention
- Indian Arbitration Act
