Failures in Law Making: The Case of Arbitration Law in India

A recently published paper of this blawgger deals with failures in law making with focus on arbitration law in India. The abstract is provided below:

The Statement of Objects and Reasons to the Arbitration & Conciliation (Amendment) Bill, 2015 placed substantial blame on the judiciary for the delay in disposal of arbitration matters and the increasing court interference in arbitration, both of which, according to the said Statement, had, the effect of undermining the object of the Arbitration & Conciliation Act, 1996. It is true that although the decisions in some cases could have been delivered taking into consideration the framework of arbitration, this paper argues that a substantial amount of blame falls on the law makers as well on two major aspects: If the judiciary has wrongly interpreted a particular provision, it is for the legislature to be proactive and immediately take action to correct the erroneous interpretation. However, it took about fifteen years for the government and the legislature to bring about the statutory reforms in the 1996 Act. This constitutes the first failure of the government and the legislature vis-à-vis the 1996 Act. Secondly, the courts cannot be entirely faulted since it was difficult to trace the legislative intent in enacting a particular provision of the 1996 Act. Therefore, an authoritative source such as parliamentary debates or reports of the Government on the 1996 Act would have aided the courts in finding out the legislative intent. This paper argues that failure by the lawmakers on both these counts contributed immensely to the failure of Arbitration & Conciliation Act, 1996 in achieving its objects.

The conclusive portion of the paper notes that whenever courts misconstrue a statute or render judgements contrary to, or which undermine, legislative intent, the government and the legislature should be more dynamic and correct such errors. Failure to do so will make law uncertain and justice costlier, and at times, elusive; It, secondly, argues, that authoritative sources from which legislative intent can be gathered should be made available especially in statutes that address a new area or which is drafted in a manner different from the previous law on the subject; Lastly, the paper reminds readers that legislative ambiguities impose immense costs on the parties and great burden on the judicial system and that therefore, the government and the legislature should act proactively to address these ambiguities.

The paper can be accessed from here.

[The paper was written for a conference in Kolkata which was held on 09.12.2016. ]

Two-Tiered Tribunal with the first Tier Indian & Second Tier Foreign Valid Says SC: Another Pro-Arbitration Decision?

Readers would be aware of the two-Judge Bench of the Supreme Court in Centrotrade (2006) 11 SCC 245:2006(3) Arb LR 201 (SC).) where SB Sinha, J. held a two-tiered tribunal invalid when the first tier was Indian and the second tier was foreign while Tarun Chatterjee, J. disagreed with him. Due to the difference of opinion between the judges, the matter was referred to a larger Bench. . 

Readers may note that while SB Sinha, J. tried to distinguish two tier tribunals of arbitral institutions from the two-tiers in the case, there are observations in his judgement to the effect that two tiered tribunals of the nature discussed in the case (one Indian and the other foreign) is not contemplated in the 1996 Act. A three judge-Bench heard the matter and held such a clause to be valid.

Two questions were before the three-Judge Bench:

"(1) Whether a settlement of disputes or differences through a two-tier arbitration procedure as provided for in Clause 14 of the contract between the parties is permissible under the laws of India? 

(2) Assuming a two-tier arbitration procedure is permissible under the laws of India, whether the award rendered in the appellate arbitration being a ‘foreign award’ is liable to be enforced under the provisions of Section 48 of the Arbitration and Conciliation Act, 1996 at the instance of Centrotrade? If so, what is the relief that Centrotrade is entitled to?"

The judgement of the three judge-Bench primarily rests on party autonomy and non-applicability of public policy  to set aside the award. Holding that such a clause was valid, the Supreme Court, the Supreme Court held that the appeal should be listed again for consideration of the second question quoted above. 

The decision of the three-judge Bench can be accessed from here. 

Arbitration in India: New Developments

We've not been blogging for some time but the period of lull is over. In this post, we intend to bring to the readers a few developments in Indian arbitration law and provide link comments on those developments.

Raffles Design Intl. India Pvt. Ltd v. Educomp Professional Education (Del HC: Oct. 2016): Non-applicability of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 to arbitration related court proceedings; whether Part I has been excluded?; Non-availability of relief under Section 9 to enforce orders of the arbitral tribunal; power of the court to award interim relief under S. 9 independent of the tribunal's orders; non-availability of relief under S. 27(5) (purportedly contempt) for disobedience of interim relief awarded by a Singapore seated arbitral tribunal.  

Comments: here and here

Ayyasami v. Paramasivam (SC: Oct. 2016): Disputes involving fraud are non-arbitrable; But allegations of such fraud should not only be serious and in normal course constitute a criminal offence but also that they "are also complex in nature and the decision on these issues demand extensive evidence for which civil court should appear to be more appropriate forum than the Arbitral Tribunal." The court later held: "It is only in those cases where the Court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by civil court on the appreciation of the voluminous evidence that needs to be produced, the Court can sidetrack the agreement by dismissing application under Section 8 and proceed with the suit on merits."

The blogger still thinks N Radhakrishnan is based on shaky foundations and is liable to be overruled. If at all disputes of the nature mentioned in Ayyasami have to be made non-arbitrable, it could be only for the purposes of bringing such disputes tainted by serious allegations of fraud to the public domain rather than deciding it in arbitration, which is private and confidential. Unfortunately, N. Radhakrishnan and Ayyasami are based on the misconceived basis that "the principle of common law that certain disputes which are of public nature, etc. are not capable of adjudication and settlement by arbitration and for resolution of such disputes, Courts, i.e. public for a, are better suited than a private forum of arbitration." This is totally misconceived considering that English law abandoned the legal position, as has been argued in this paper.

Comments: here and here

[Note: The links are just one of many comments on the topic and there is no particular reason for providing only those links and not others. Readers may please provide links to more comprehensive analyses in the comment section of this blog post.]