by- Shruti Bist
Arbitration in India until the Arbitration and Conciliation Act, 1996 (“Act”), the law governing arbitration in India consisted mainly of three statutes:
i. The Arbitration (Protocol and Convention) Act, 1937 (“1937 Act”)
ii. The Indian Arbitration Act, 1940 (“1940 Act”) and
iii. The Foreign Awards (Recognition and Enforcement) Act, 1961 (“1961 Act”) The 1940 Act was the general law governing arbitration in India and resembled the English Arbitration Act of 1934.
India, in 1996, adopted a new legislation on the “Model Law” in the form of the Arbitration and Conciliation Act, 1996 (“Act”). The Act also aimed to provide a speedy and efficacious dispute resolution mechanism in the existing judicial system which was marred by inordinate delays and a backlog of cases.
International Commercial Arbitration – Meaning Section 2(1)(f) of the Act defines an ICA as a legal relationship which must be considered commercial, where either of the parties is a foreign national or resident, or is a foreign body corporate or is a company, association or body of individuals whose central management or control is in foreign hands.. The Amendment Act has deleted the words ‘a company’ from the purview of the definition thereby restricting the definition of ICA only to the body of individuals or association. Therefore, by inference, it has been made clear that if a company has its place of incorporation as India then central management and control would be irrelevant as far as its determination of being an “international commercial arbitration” is concerned.”
INTERNATIONAL COMMERCIAL ARBITRATION WITH SEAT IN INDIA
The laws applicable to ICA when seat of arbitration is in India have been discussed below. Arbitration is said to have commenced when the notice of arbitration requires the other party to take steps in connection with the arbitration or do something on his part in the matter of arbitration.
I. Notice Of Arbitration– Under Section 21 of the Act, a notice of arbitration has to be served to the other party, requesting that the dispute be referred to arbitration. The day on which the respondent receives the notice, arbitral proceedings commence under the Act.
II. Referral To Arbitration -Under Part I, the courts can refer the parties to arbitration if the subject matter of the dispute is governed by the arbitration agreement. Section 8 of the Act provides that if an action is brought before a judicial authority, which is the subject matter of an arbitration agreement, upon an application by a party, the judicial authority is bound to refer the dispute to arbitration.
III. Interim Reliefs- Under the Act, the parties can seek interim relief from courts and arbitral tribunals under Sections 9 and 17 respectively. A party may, before, or during arbitral proceedings or at any time after the making.
IV. Appointment Of Arbitrators- The parties are free to agree on a procedure for appointing the arbitrator(s). The agreement can provide for a tribunal consisting of three arbitrators and each party will appoint one arbitrator and the two appointed arbitrators will appoint the third arbitrator who will act as a presiding arbitrator. If one of the parties does not appoint an arbitrator within 30 days, or if the two appointed arbitrators do not appoint the third arbitrator within 30 days, the party can request Chief Justice of India (“CJI”) to appoint an Arbitrator in case of international commercial arbitrations.34 The CJI can authorize any person or institution to appoint an Arbitrator. In case of domestic arbitrations, application has to be made to Chief Justice of respective High Court within whose jurisdiction the parties are situated.
International commercial arbitration, according to the Arbitration and Conciliation Act 1996, comes into being by virtue of a legal relationship considered commercial under the law in force in India. Such relation, however, may be contractual or otherwise wherein at least one of the parties is “(i) an individual who is national of, or habitually resident in any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iii) an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country.”
The Supreme Court in ONGC v SAW Pipes ruled that even patent illegality could amount to a breach of public policy and held that “a foreign award which was on its face patently in violation of statutory provisions could not be said to be in public interest”. Such award or judgment or decision, according to Supreme Court “was likely to adversely affect the administration of justice and as such could be set aside if it was contrary to (a) fundamental policy of Indian law (b) the interest of India or (c) justice or morality or
Venture Global Engineering v Satyam Computers Services is yet another prominent example which shows the intervention of the Supreme Court even in a case where the award was already made by a competent tribunal outside India. The Supreme Court reaffirmed the decision of ‘Bhatia International’ and maintained that the Court in India had jurisdiction both under section 9 and 34 of the Arbitration and Conciliation Act 1996 and as such an award passed in England through an arbitral process conducted by London Court of Arbitration could be set aside. The Supreme Court concluded that the provisions of part I would apply as the parties did not choose to exclude the provisions of part I.
In ‘Bhatia International’ the Supreme Court ought to have dismissed the application under section 9 saying that part I had no application in matters of international commercial arbitration but rather chose to interpret the law that “(1) in the absence of expression ‘only’ in section 2(2) of part I of the Act would make that section to apply to arbitration held outside India so long as the law of India was the governing law (2) in cases of international commercial arbitration held outside India, provisions of part I would apply unless parties by agreement express or implied excluded of all or any of its provisions (3) the definition of ‘Court’ did not make any distinction between international commercial arbitration held in India or outside India, commercial arbitration held in signatory or non-signatory country to New York Convention or Geneva Convention”.
The Future Holds For International Arbitration In India
It is obvious from the foregoing that a change is taking place gradually on all fronts. Indian Courts have refrained themselves from interfering with the arbitral process in the cases where the parties chose to settle their disputes amicably through arbitration to give effect to the preferred choice of the parties; besides the Arbitration and Conciliation (Amendment) Act 2015 .These efforts of all the three wings of the Government testify that India is taking all possible measures to make India investor friendly which may lead India one of the prominent hubs of arbitration on par with other leading centres.
The Union Cabinet chaired by Prime Minister Shri Narendra Modi approved today the Bill New Delhi International Arbitration Centre (NDIAC) Bill, 2019 for introduction in the ensuing session of Parliament.
NDIAC – The Future International Hub Of Arbitration.
The New Delhi International Arbitration Centre (NDIAC) will be headed by a Chairperson, who has been a Judge of the Supreme Court or a Judge of a High Court or an eminent person, having special knowledge and experience in the conduct or administration of arbitration, law or management, to be appointed by the Central Government in consultation with the Chief Justice of India. Besides, it will also have two Full-time or Part-time Members from amongst eminent persons having substantial knowledge and experience in institutional arbitration in both domestic and international. In addition, one representative of a recognized body of commerce and industry shall be nominated on rotational basis as a Part-time Member. The Secretary, Department of Legal Affairs, Ministry of Law & Justice, Financial Adviser nominated by Department of Expenditure, Ministry of Finance and Chief Executive Officer, NDIAC will be ex-officio Members.
Aims And Objectives Of NDIAC :-
(a) Bring targeted reforms to develop itself as a flagship institution for conducting international and domestic arbitration
(b) Provide facilities and administrative assistance for conciliation, mediation and arbitral proceedings;
(c) Maintain panels of accredited arbitrators, conciliators and mediators both at national and international level or specialists such as surveyors and investigators;
(d) Facilitate conducting of international and domestic arbitrations and conciliation in the most professional manner;
(e) Provide cost effective and timely services for the conduct of arbitrations and conciliations at Domestic and International level;
(f) Promote studies in the field of alternative dispute resolution and related matters, and to promote reforms in the system of settlement of disputes; and
(g) Co-operate with other societies, institutions and organisations, national or international for promoting alternative dispute resolution.
Thus with efforts of Legislature and Parliament it is expected to see India A hub of International Arbitration in future.