CERTIFICATE

This is to certify that the present dissertation titled “ALTERNATIVE DISPUTE RESOLUTION
SYSTEM IN INDIA- RECENT JUDICIAL TRENDS embodies the research work carried out
by Mr.MANISH NANDAL, a L.L.M final year student of Faculty of Law, Maharshi Dayanand
University, Rohtak under my supervision and guidance. I recommend that this dissertation may be
accepted by the University for evaluation since it meets the requirements laid down by Maharshi
Dayanand University, Rohtak for awarding the degree of Master in Law.

Place:
Date:

SIGNED BY SUPERVISOR:
DR. YOGENDER SINGH
Assistant Professor
Faculty of Law
M.D. University
Rohtak Haryana

COUNTERSIGNED BY:
DR. A.S.DALAL
Head and Dean
Faculty of Law
M.D.University
Rohtak Haryana

1
 DECLARATION

I hereby declare that the entire work embodied in the present work titled ALTERNATIVE
DISPUTE RESOLUTION SYSTEM IN INDIA- RECENT JUDICIAL TRENDS is written by
me and submitted to MAHARSHI DAYANAND UNIVERSITY ,ROHTAK, HARYANA. The
present work is of original nature and the conclusions are based on the data collected by me. To the
best of my knowledge this work has not been submitted previously, for the award of any degree or
diploma, to this or any other university.

Date:
Place:

(Signature of the candidate)

MANISH NANDAL
ROLLNO -7011558

2
 ACNOWLEDGEMENT

I take this opportunity to express my gratitude to all those who encouraged and guided me in
completing my present research work.First and foremost, I would like to thank my supervisor
DR.YOGENDER SINGH, ASSISTANT PROFESSOR, FACULTY OF LAW , M. D. University,
Rohtak, who is my supervisor, for his valuable guidance, constructive help and whole-hearted
support given to me from time to time during my research work.I am also thankful to
DR.A.S.DALAL, HEAD and DEAN, FACULTY of LAW, MAHARSHI DAYANAND University,
Rohtak, for his valuable advice and support in completing my research work.
I have no words to express my gratitude for the my father Late. Shri SEHDEV SINGH
NANDAL and my mother SHRIMATI SHOBHA WATI, who helped me a lot in choosing and
guiding me in completing this research work. It would never have been possible to complete this
study without an untiring support from them.

Apart from the above, I would like to thank all my seniors, colleagues and Library staff at
MDU, Rohtak who helped me a lot and cooperated me in providing relevant books and material
from time to time during the research work. I am greatly indebted to the various writers, jurists and
all others from whose writings and work I have taken help to complete this dissertation.

It would be unjust if I fail to express my gratefulness to my elder brother FLT. LIEUTENANT

SAMEER NANDAL and my younger sister MONIKA who inspired and assisted me in writing
this dissertation without whose cooperation, I would not be able to complete my work.

DATE :
PLACE: ROHTAK
MANISH NANDAL
LL.M FINAL YEAR
ROLLNO :7011558

3
 ABBREVIATIONS
ADR : ALTERNATIVE DISPUTE RESOLTION
UNCITRAL : UNITED NATIONS COMMISSIONS ON INTERNATIONAL TRADE LAW
UN : UNITED NATIONS
SCC : SUPREME COURT CASES
ONGC: OIL AND NATURAL GAS CORPORATION
SIAC : SINGAPORE INTERNATIONAL ARBITRATION CENTRE
NAI: NETHERLANDS ARBITRATION INSTITUTE
LCIA: LONDON COURT OF INTERNATIONAL ARBITRATION
ICDR: INTERNATIONAL COURT OF DISPUTE RESOLUTION
AAA: AMERICAN ARBITRATION ASSOCIATION
ICC: INTERNATIONAL CHAMBER OF COMMERCE
MHCAC: MADRAS HIGH COURT ARBITRATION CENTRE
IP: INTELLECTUAL PROPERTY
ICA: INTERNATIONAL COMMERCIAL ARBITRATION
BIT: BILATERAL INVESTMENT TREATY
ISDS: INTERNATIONAL STATE DISPUTE SETTLEMENT
OECD: ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
UNCTAD: UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT
FTA: FREE TRADE AGREEMENT
CEPA: COMPREHENSIVE ECONOMIC PARTNERSHIPS AGREEMENTS
CECE: COMPREHENSIVE ECONOMIC COOPERATION AGREEMENTS
WTO: WORLD TRADE ORGANISATION
GATS: GENERAL AGREEMENT ON TRADE IN SERVICES
TRIMS: TRADE RELATED INVESTMENT MEASURES
APEC: ASIA PACIFIC ECONOMIC COOPERATION
TPP : TRANS-PACIFIC PARTNERSHIP
MFN : MOST FAVOURED NATION

4
 TABLE OF CASES
1. M/s Gurunanak Foundation v. M/S Ratan Singh & Sons 1981 SCC 842
2. Jagraj Singh v. Birpal Kaur 2007 2SCC 564
3. Collins v. Collins,48 Cal.2d325
4. Baba Ali ,Petitioner v. Union of India and Ors.1999 Arb. LR 433 SC
5. Sundaram Finance limited v. NEPC Ltd. AIR 1999 SC 563
6. Grid Corp of Orissa Ltd. v. Charge Chrome Limited 1998 Are LR 128
7. Ashalata S. Lahoti v.. Hiralal Liladhar 1993 Arb LR 462
8. ITC Classic Finance Ltd. vs.. Grapen Finance Ltd.AIR 1997
9. Hasmukhlal Joshi v.. Justice M.L.Pendse 2001 Arb LR 87 BOM.
10. Sri Venkateshwara Construction Co..Ltd. v.. Union of India 2001
11. Indowind Energy Ltd..VS Subuthi Finance Ltd. 200 Arb LR 401
12. Dolphin Drilling Ltd. v. ONGC AIR 1991 SC 2075
13. Orient Paper Mills v. Civil Judge 2003 4 RAJ
14. ONGC VS. Saw Pipes Ltd. 2003 2 CLT 242
15. Venture Global Eng . v. Satyam Computers Ltd.AIR 2008 SC 1061
16. Bhatia International Trading v.. Bulk Trading SA 2001 NWLR
17. Yograj Singh v. SSANGYONG Engineering AIR 1999 SC 2102
18. Videocon v. Union of India 2007
19. Dosco v. Dozon2008 ARB/87/3
20. FCI v. Joginderlal Mohinderpal 1989 2 SCC 347
21. Sundaram Finance Ltd. v. Abdul Samad Civil Appeal No. 1650 OF 2018 SC
22. Union of India v. Kishanlal Gupta and Sons AIR 1953 CAL.
23. Union of India v. Reliance Ltd. AIR 2002 4 SCC 105
24. SAIL v. Gupta Brothers Steel Tubes Ltd. AIR 2009 10 SCC 63
25. Hussain Kadam Dada v.State of MP 1953 SCR 987
26. BALCO v. Kaiser Alumnium Technical Services Ltd. 2012 9 SCC 552
27. Indus Mobile v. Datawind Innovations Ltd. 2017 SC 2105
28. White Industries Australia v. Republic of India 30 NOV 2011

5
 TABLE OF CONTENTS

TITLE PAGES

CERTIFICATE ....................................................................................................................... 1

DECLARATION..................................................................................................................... 2

ACKNOWLEDGEMENT ..................................................................................................... 3

ABBREVIATIONS ................................................................................................................. 4

TABLE OF CASES................................................................................................................. 5

TABLE OF CONTENTS .................................................................................................. 6-10

CHAPTER -I ....................................................................................................................11-17

ADR : AN INTRODUCTION

CHAPTER-II ................................................................................................................... 18-20

THE ARBITRATION AND CONCILIATION,ACT 1996 :THE SHADOW OF THE ACT

2.1 EVOLUTION OF THE ACT

2.2 FORM AND CONTENT

CHAPTER-III ................................................................................................................. 21-27

JUDICIAL EFFORTS TOWARDS ALTERNATIVE DISPUTE RESOLUTION SYSTEM

IN INDIA

3.1 JUDICIAL CONTRIBUTION OF ADR IN INDIA

CHAPTER-IV.................................................................................................................. 28-33

THE DOCTRINE OF KOMPETENZ-KOMPETENZ :AN INDIAN PERSPECTIVE

4.1 THE ARBITRATION ACT,1940

6
4.2 UNCITRAL MODEL LAW

4.3 THE ARBITRATION AND CONCILIATION ACT,1996

4.4 AMENDMENT ACT 3 OF 2016

4.5 THE ROAD AHEAD

CHAPTER-V ................................................................................................................... 34-46

GROUNDS FOR CHALLENGING AN ARBITRAL AWARD IN INDIA

5.1 INTRODUCTION

5.2 JUDICIAL APPROACH

5.3 COMPLIANCE OF PRINCIPLES OF NATURAL JUSTICE AND NON-APPLICATION OF

MIND BY THE ARBITRAL TRIBUNAL

5.4 PERVERSITY OR IRRATIONALITY IN THE ARBITRAL AWARD TESTED ON THE

TOUCHSTONE OF WEDNESBURY PRINCIPLES

5.5 THE ROAD AHEAD

CHAPTER -VI................................................................................................................. 47-55

RECTIFICATION OF JURISDICTION TO ENTERTAIN ARBITRATION APPLICATION

IN THE COMMERCIAL COURTS ACT,2015

6.1 THE PROBLEM

6.2 THE STATUTORY RIGHT TO APPEAL UNDER THE ARBITRATION ACT: IS IT

RESTORED FOR SOME OR ALL?

6.3 THE SOLUTION: REVIEW APPLICATION

6.4 THE GROUND FOR REVIEW: NO JURISDICTION

6.5 DISCRIMINATION DUE TO DRAFTING ERROR

6.6 BAR TO REVIEW SAVING CLAUSE

6.7 CONCLUSION

CHAPTER-VII ................................................................................................................ 56-66

INSTITUTIONAL ARBITRATION IN INDIA

7
7.1 INTRODUCTION

7.2 THE PROBLEM WITH AD HOC ARBITRATION

7.3 ADVANTAGES OF INSTITUTIONAL ARBITRATION

7.4 LAW COMMISSION’S RECOMMENDATION ON INSTITUTIONAL ARBITRATION

7.5 THE 2015 AMENDMENTS TO THE ARBITRATION ACT

7.6 THE CONCLUSION

CHAPTER-VIII............................................................................................................... 67-75

EMERGENCY ARBITRATOR IN THE INDIAN CONTEXT

8.1 ROLE OF DOMESTIC COURTS

8.2 EARLIER ATTEMPT AT PROVIDING URGENT INTERIM RELIEF

8.3 EMERGENCY ARBITRATOR

8.4 HISTORICAL BACKGROUND OF THE EMERGENCY ARBITRATOR

8.5 LEGAL FRAMEWORK GOVERNING EMERGENCY ARBITRATION

8.6 LEGAL HURDLES IN RELATION TO EMERGENCY ARBITRATOR PROCEDURE

8.7 LEGALASPECTS IN INDIA

8.8 CONCLUSION

CHAPTER- IX................................................................................................................. 76-84

RISE OF EXPERT WITNESS IN ALTERNATIVE DISPUTE RESOLUTION

9.1 PLAYING THEIR PART: ROLE AND FUNCTIONS OF AN EXPERT WITNESS

9.2 APPOINTING EXPERT WITNESS

9.3 THE EVOLVING ROLE OF EXPERT WITNESSES IN ARBITRATIONS

9.4 THE RIGHT TIME TO INTRODUCE YOUR EXPERT WITNESS

9.5 ENTRY OF THE TECHNICAL EXPERT: ROLES AND FUNCTIONS

9.6 HOW TECHNICAL SUBJECT MATTER; AND QUANTUM EXPERTS NEED TO

COLLABORATE TO GIVE A COHESIVE AND CONCLUSIVE VIEW TO THE ARBITRATION
TRIBUNALS?

8
9.7 COMMON FORM OF EVIDENCE WHICH EXPERTS RELY UPON

9.8 TECHNICAL EXPERTS

9.9 ROLE OF EXPERTS IN CONSTRUCTION DISPUTES AND CLAIMS

9.10 THE INCREASING DEMAND FOR EXPERT TESTIMONY SERVICES

9.11 INTELLECTUAL PROPERTY LIFE CYCLE

9.12 IP NOW INVOLVES ‘ SIGNIFICANT RETURNS’

9.13 ROLE OF EXPERTS IN IP DISPUTES

9.14 ROLE OF EXPERTS IN JOINT VENTURE AND SHAREHOLDER DISPUTES

9.15 ROLE OF EXPERTS

CHAPTER-X ................................................................................................................. 85-90

MED-ARB

10.1 NEW APPROACH TO ADR DISPUTES

10.2 CONCLUSION

CHAPTER-XI................................................................................................................ 91-102

THE CONCEPT OF SEAT IN INTERNATIONAL ARBITRATION : DEVELOPMENTS IN

INDIA

11.1 DEVELOPMENTS IN INDIA

11.2 CASE LAW ANALYSIS

11.3 JUDICIAL TREND AWAY FROM BHATIA RATIO

11.4 LAW COMMISSION RECOMMENDATIONS AND AMENDMENT ACT 2015

11.5 CONCLUSION

CHAPTER-XII ............................................................................................................103-114

INTRODUCTION TO INVESTMENT ARBITRATION IN INDIA

12.1 ISDS REGIMES

12.2 OTHER ARBITRAL INSTITUTIONS

12.3 RIGHTS UNDER A BILATERAL INVESTMENT TREATY

9
12.4 DIRECT AND INDIRECT EXPROPRIATION

12.5 NATIONAL TREATMENT AND MOST FAVOURED NATION

12.6 INDIA AND BITS

12.7 WATERSHED EVENTS IN INDIA’S HISTORY OF INVESTMENT TREATY

ARBITRATION

12.8 MODEL BITs IN INDIA

12.9 CONCLUSION

CHAPTER-XIII ........................................................................................................... 115-117

COMMERCIAL MEDIATION

13.1 THE DRIVING FORCE OF COMMERCIAL PARTIES TO ADOPT MEDIATION

13.2 CONCLUSION

CHAPTER-XIV ...........................................................................................................118-122

CONCLUSIONS AND SUGGESTIONS

BIBLIOGRAPHY........................................................................................................ 123-125

10
CHAPTER-I

ADR: AN INTRODUCTION

“I had learnt the practice of law. I had learnt to find out the better side of human nature, and to
enter men’s hearts. I realized that the true function of a lawyer was to unite parties driven a sunder.
The lesson was so indelibly burnt into me that the large part of my time during the twenty years of
my practice as a lawyer was occupied in bringing about private compromises of hundreds of cases.
I lost nothing thereby- not even money, certainly not my soul.”

- Mahatma Gandhi1

Any dispute is just like a Cancer. If it is resolved sooner, it is better for all the parties concerned to
it. If it is not resolved at the beginning, it grows at the very fast rate and with time, it becomes very
difficult to resolve it1 .As new issues emerges and conflicting situation flourish. In this way one
dispute leads to another and new complexities arises thereby leading to multiplicity of proceedings.
Therefore, it is always better to resolve it at the moment it rears its head. Therefore, it is necessary
that the procedure of resolving it must be agreeable by both the parties.2
The preamble of the Constitution of India declares to “...... to secure all its citizen justice, liberty,
equality and fraternity”. The justice granted to citizen is of social, economical and political.
However, the mode of delivering the justice to the citizen of India poses so many questions. It is in
this regard necessary to put the question that whether the present system of access to justice is
satisfactorily fulfilling the constitutional goal?3
Desire for quick and affordable justice is universal. Right to speedy trial is a right to life and
personal liberty of every citizen guaranteed under Article 21 of the Constitution, which ensures just,
fair and reasonable procedure. The goal of the constitution is to render justice social economical
and political .Access to fast , inexpensive justice and expeditious justice is a basic human right . Art

1 Mahatma Gandhi, ‘The Story of My Experiments With Truth’,Navjivan Publishing House 1st Edition 1948
2 Dr. Avatar Singh, Law of Arbitration and Conciliation ,Eastern Book Company,Lucknow;7th Edition (2006)
3 S.K Chawla , ‘Law of Arbitration and Conciliation-Practice and Procedure, Eastern Law House Pvt.Ltd. 2nd Edition

1998, Reprint 2000

11
39a of the constitution of the India prescribed free legal aid. Disposal of cases in time is the
necessity to maintain the rule of law and providing access to justice, which is a fundamental right of
every citizen guaranteed by the Constitution. “Behind almost every human conflict someone feels
dismissed, discounted, disenfranchised or disrespected. Unresolved tensions that may have
immersed below the surface can resurface and make situations difficult.”4
In 1996, the Indian Legislature accepted the fact that in order to lessen the burden on the courts,
there should be a more efficient justice delivery system in the form of arbitration, mediation and
conciliation as an Alternative Dispute Resolution (ADR) options in appropriate civil and
commercial matters. Thus, Parliament enacted Arbitration and Conciliation Act, 1996, with a view
to provide quick redressal to commercial dispute by private Arbitration.
ADR is completely different to normal judicial method and is nowadays considered an alternative
to it. It is one of the methods of alternative dispute resolution (ADR). ADR is an alternative way to
settle disputes through means other than approaching the regular courts, instituted by the state
machinery, through less expensive means, on the one hand, and reducing the burden of the court on
the other.Thus its a supplant rather than a replacements to the regular courts. Of all the forms of
ADR arbitration is the most dominant of all. ADR was established by the the State to cut down the
time of formalities of court procedure.. ADR can be defined as the alternative process established
by the state where parties can save their disputes amicably and vocally rather than going through
cumbersome court process.5
The law relating to arbitration is contained in the Arbitration and Conciliation Act, 1996, based on
UNCITRAL model and it came into force on the 25th of January, 1996. It provides for domestic
arbitration as well as international commercial arbitration and also provides for enforcement of
foreign arbitral awards. It also contains the chapters on conciliation. Like arbitration, conciliation is
also getting recognised as an popular mode of dispute resolution system.
Before the enactment of Arbitration and Conciliation Act, 1996 the practice of amicable resolution
of disputes can be traced back to historic times, when the villages’ disputes were resolved between
members of particular relations or occupations or between members of a particular locality. “Of all
mankind’s adventures in search of peace and justice, arbitration is amongst the earliest. Long
before law was established or courts were organised, or judges has formulated principles of law,
man had resorted to arbitration for resolving disputes.” With the advent of the British rule and the

4 G.K Kwatra; Arbitration and Conciliation Law of India; The Indian Council of Arbitration, Edition 2004
5 G.K. Kwatra ; Arbitration and ADR with International Dispute Resolution,Universal Law Publishing House ,2nd

Edition ,2008
12
introduction of their legal system in India starting from the Bengal Regulation of 1772, the
traditional system of dispute resolution methods in India gradually declined. The successive Civil
Procedure Codes enacted in 1859, 1877 and 1882, which codified the procedure of civil courts,
dealt with both arbitration between parties to a suit and arbitration without the intervention of a
court. The first Indian Arbitration Act was enacted in 1899.6
The year 1940 is an important year in the history of law of arbitration in British India, as in that
year the Arbitration Act, 1940 was enacted. It replaced the 1899 act and CPC provisions related to
arbitration.Later on this act was repealed and thus The Act of 1996 was enacted due to some
misconstruction of the before Act of 1940.
The Arbitration Act, 1940 dealt with only domestic arbitration. International arbitration was not
governed by any law till now. however, enforcement of overseas awards in this country became
governed by using enactments, the Arbitration (Protocol and conference) Act, 1937 and the foreign
Awards (reputation and Enforcement) Act, 1961. these two statutes, of their entity, except for phase
three (in both of them) did no longer deal with international arbitration as such however simply laid
down the situations for ‘enforcement of awards’ in India.7
Though the Act of 1940 was a good piece of legislation but it was considered to be ineffective. In
M/S Guru Nanak Foundation v. M/S Ratan Singh & Sons,8 the Hon’ble Supreme Court observed
that the Act was totally ineffective and bogus. The lawyers used to laugh and legal philosophers
usually weep when proceedings were conducted according to it in the Courts.
In India, ADR has occupied an important platform for resolving disputes realising that solving of
cases in court was more expensive. Various methods were adopted to solve the disputes, arbitration,
Lok adults, mediation and emerging med-arb are some of them.Alternative Dispute Resolution in
modern times is being increasingly acknowledged in the field of law as well as in the commercial
sector. The very reasons for origin of Alternative Dispute Resolution are the costs , tiresome
process of litigation and inability of the court system. It broke through the resistance of the vested
interests because of its ability to provide cheap and quick relief. In the last quarter of the 20th
century, there was phenomenal growth in science and technology field. It made a great impact on
commercial life by increasing competition throughout the world.Consumer were also now readily
worried about their rights in tech century.ADR’s objective is to provide the parties with cheap,
speedy and less formalistic rigid remedy to the aggrieved party .ADR represents only aa change in

6 Anupam Kurlwal, ‘An Introduction to Alternative Dispute Resolution’,Central Law Publications 3rd Edition,2017
7 ibid
8 M/s Guru Nanak Foundation v. M/S Ratan Singh & Sons AIR 1981 4 SCC 634
13
forum , not in the substantive rights of the parties. The primary object of ADR system is avoidance
of vexation , expenses and delay and promotion of the idea of access to justice to them who were
harassed due to formal structure of judicial system. It aims at providing appropriate remedy
according to arbitration systems or mini trials that look and feel very much like a court room
process to solve their problems in less rigid structure and more economically.The search for a
simple, quick, flexible and accessible dispute resolution system has resulted in the adoption of
‘Alternative Dispute Resolution’ mechanisms. The primary object of ADR system is avoidance of
vexation, expense and delay and promotion of the ideal of “access to justice” as mentioned in the
ideals of preamble of Constitution of India. ADR consists of conciliation, arbitration, mediation and
other evolving procedures.9

ADR has many advantages and disadvantages. Few of the advantages are- it can be used at anytime,
reduces the number of contentious issues, it costs less than regular litigation, it is flexible, ADR can
be used with or without a lawyer, it helps in reduction of work load of courts, etc. Besides
advantages there are various drawbacks of ADR, some of them are follows- ADR may not be
appropriate, and may even carry a degree of risk for one of the parties, imbalance of power between
the parties which could make face-to-face mediation unfair, legal rights and Human rights cannot be
relied on in ADR processes, Ombudsmen investigations can be very slow, etc.“It is settled law that
free legal aid to the indigent persons who cannot defend themselves in a Court of law is a
Constitutional mandate under Article 39-A and 21 of the Indian Constitution. The right to life is
guaranteed by Article 21.” The law has to help the poor who do not have means i.e. economic
means, to fight their causes.10

Many international treaties and conventions have been enacted for establishing ADR worldwide.
Some of the important international conventions on arbitration are:

1.The Geneva Protocol on Arbitration clauses of 1923.

2.The Geneva Convention on the execution of foreign award, 1927.

3.The New York Convention of 1958 on the recognition and enforcement of foreign arbitral award.

9 Anupam Kurlwal, ‘An Introduction to Alternative Dispute Resolution’,Central Law Publications 3rd Edition,2017
10 ibid
14
In India, International Commercial Arbitration is contained in part III of the Arbitration and
Conciliation Act, 1996. Another step in strengthening the international commercial arbitration is the
established of various institutions and organizations such as:
• International Court of Arbitration of the International Chamber of Commerce (ICC).
• Arbitration and Mediation Centre of World Intellectual Property Organization.
• American Arbitration Association (AAA).
• Tehran Regional Arbitration Centre (TRAC).
• International Centre for Dispute Resolution (ICDR).
• Organization of American States (OAS), etc.
The alternative modes of disputes resolution include- Arbitration, Negotiation, Mediation,
Conciliation, Lok Adalat, National and State Legal Authority. ADR strategies which facilitate the
development of consensual solution by the disputing parties are therefore considered a viable
alternative. ADR methods such as mediation, negotiation and arbitration along with many sub-
strategies are increasingly being employed world over in a wide range of conflict situations, ranging
from family and marital disputes, business and commercial conflicts, personal injury suits,
employment matters, medical care disputes, construction disputes to more complex disputes of a
public dimension such as environmental disputes, criminal prosecutions, professional disciplinary
proceedings, inter-state or international boundary and water disputes.11
The Arbitration and Conciliation Act, 1996 contains 85 Sections, the Preamble and three
Schedules. The Act is divided into four Parts. Part-I contains general provisions on arbitration. Part-
II deals with enforcement of certain foreign awards. Part-III deals with conciliation. Part-IV
contains certain supplementary provisions. The Preamble to the Act explains the object of the
proposed legislation. The three Schedules reproduce the texts of the Geneva Convention on the
Execution of Foreign Awards, 1927; The Geneva Protocol on Arbitration Clauses, 1923; and the
New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958
respectively.12
The establishment of the International Centre for Alternative Dispute Resolution (ICADR), an
independent non-profit making body, in New Delhi on May 1995 is a significant event in the matter
of promotion of ADR movement in India. Lastly, to make arbitration and conciliation a success
story in India, three things are needed:

11Prof.Nomita Aggarwal; “Alternative Dispute Resolution: Concept and Concerns”; NYAYA DEEP; Vol. VII, Issue: 01,
Jan. 2006
12S.N.P Sinha and Mishra, Dr. P.N Mishra ; “A Dire Need Of Alternative Dispute Resolution System In A Developing

Country Like India”; INDIAN BAR REVIEW; Vol. XXXI (3&4) 2004
15
 1) A good law that is responsive to both domestic and international requirements.
2) Honest and competent arbitrators and conciliators without whom any law or arbitration or
conciliation can succeed.
3) Availability of modern facilities and services such as meeting rooms, communication
facilities, administrative and secretariat services.
Chapter VII reflects the role of judiciary in the field of dispute settlement. With the increasing
population, complications and disputes are increasing day by day between the parties regarding
various matters and as the courts are having a huge number of cases pending in there, this method is
put into practice for reducing the burden of cases and to solve the matters quickly in parallel with
the fast running of the life in the society. For a stable society there must be resolution of disputes.
States function through different organs and for the administration of justice judicial organ is

directly responsible. Resolving disputes is basic building pillar to the peaceful existence of society.
The only field where the Courts in India have recognized ADR is in the field of arbitration.
Preamble to our Constitution reflects such aspiration as “justice-social, economic and political”.
Part IV Directive principles contains Article 39A of the Constitution provides for legal aid on the
expense of the state .
The Supreme Court realized the scope of ADRM in procedural as well in family law in Jag Raj
Singh v. Bripal Kaur,13 where it application was also applied to matrimonial disputes.the
Court affirmed and observed that the approach of a court of law in matrimonial matters is ideal as it
is much more constructive, affirmative and productive rather than abstract, theoretical or
doctrinaire. The Court also said that in matrimonial matters must be considered by the courts with
human angle and sensitivity and to make every endeavour to bring about reconciliation between the
parties.Since law is changing with the changing demand of time, to meet with the needs of the
peoples. ADR mechanisms would certainly supplement the existing adjudicatory machinery so as to
develop the confidence of common man in the justice delivery system.
The growth of ODR is very recent. With the fast and quick lifestyle and with the increase of various
e-commerce problems, this method is adopted as it can solve the disputes very fast and is easily
accessible at a low cost. The whole procedure is carried over online, no matter wherever the parties
are. Distance does not cause any barrier in solving such disputes whether it is business related or
consumer related, whether related to marital separation or interstate conflicts. The concept of
Online Dispute Resolution (ODR) has been accepted in many countries worldwide.

13 Jagraj Singh v. Bripal Kaur AIR 2007 2 SC 564

16
In court system, time zones and physical locations are obstacles to justice. It is very expensive as
well as time consuming. Whereas, in Online Dispute Resolution Mechanisms (ODRM) all the
procedures is carried over through online and so the matter is solved or rather settled within a few
days or which may take a week or so, but shall not extend to months or year after years. With the
help of ODR a wide range of disputes are solved in a very short time, where disputes includes inter-
personal disputes i.e. consumer to consumer, business to business, business to consumer; marital
separation; court disputes and inter-state disputes.
WHY USE ADR ?
ADR has become popular in recent years because it is timely, more efficient, and more cost -
effective than the traditional, formal redressal mechanisms. The use of conflict prevention also
tends to mend or improve the overall relationship between the parties, because the focus is largely
on the community or disputants’ interests, while litigation focuses on positions, In additions , the
parties can draft the agreement or solution themselves and they are generally more committed to
agreement compared to judge or hearing officer imposing a solution. ADR process also can allow
the parties to develop a more flexible or creative solution that is generally impossible in courts or
formal hearings and appeals.The Supreme Court of India has also encouraged the ADR process by
directing the parties in the literation or the lawyers representing the parties to settle the disputes
amicably out of the court especially in matrimonial disputes, so that the courts can concentrate on
other important legal matters, where the attention or intervention of court is mandatory.
Globalisation and a rapidly changing landscape of business and commerce have led to the growth in
ADR.14

14Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.5-7, OXFORD University Press,First
Edition ,2018
17
CHAPTER - II

THE ARBITRATION AND CONCILIATION

ACT, 1996: THE SHADOW OF LAW

1. EVOLUTION OF THE ACT:

Arbitration as a foundation for settlement of question has been known and rehearsed in every single
acculturated society from time immemorial. "Of every one of humankind's undertakings looking for
peace and equity, mediation is among the most punctual. Well before law was built up or courts
were sorted out, or judges has planned standards of law, man had turned to intervention for settling
question." Traces of the act of settling debate through the strategy for discretion was found in the
organizations of Panchas and Panchayat which were drilled in numerous town groups and inborn
territories in India. Be that as it may, with the approach of the British control and the presentation of
their lawful framework in India beginning from the Bengal Regulation of 1772, the customary
arrangement of debate determination techniques in India steadily declined. The progressive Civil
Procedure Codes ordered in 1859, 1877 and 1882, which systematized the strategy of common
courts, managed both mediation between gatherings to a suit and assertion without the intercession
of a court.15
The main Indian Arbitration Act was ordered in 1899. This Act was generally in light of the English
Arbitration Act of 1889 and connected just to situations where, if the topic of a suit, the suit could,
regardless of whether with leave or something else, be founded in what was then known as a
Presidency town. The extent of this Act was restricted to mediation by understanding without the
intercession of a court16The Code of Civil Procedure, 1908 initially discarded the intervention
procedures with the expectation that they would be exchanged to the complete Arbitration Act.

15Rao P.C & Sheffield William “Alternative Dispute Resolution -What it is and how it works?”, p.68-69 Universal Law
Publishing Co. Pvt. Ltd. New Delhi-India,1997 Edition,Reprint 2011
16 Ibid

18
The year 1940 is a vital year in the historical backdrop of law of intervention in British India, as in
that year the Arbitration Act, 1940 was instituted. It united and altered the law identifying with
intervention as contained in the Indian Arbitration Act, 1899 and the Second Schedule to the Code
of Civil Procedure, 1908. It was to a great extent in light of the English Arbitration Act, 1934.
However, it was seen or rather watched that specific cases were all the while pending and there
were a few downsides on the establishment of this Act. In this way at that point prompted the
authorization of the Arbitration and Conciliation Act, 1996.17

2. THE FORM AND CONTENT:

This Act contains 85 Sections, other than the Preamble and three Schedules. The Act is partitioned
into four Parts. Part-I contains general arrangements on discretion. Part-II manages implementation
of certain outside honors. Part-III manages appeasement. Part-IV contains certain supplementary
arrangements. The Preamble to the Act clarifies the predispositions of the proposed enactment. The
three Schedules replicate the writings of the Geneva Convention on the Execution of Foreign
Awards, 1927; The Geneva Protocol on Arbitration Clauses, 1923; and the New York Convention
on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 separately.18
Part-I nearly manages the arrangements of the UNCITRAL Model Law yet some of them contrasts

from that of the Model Law. A portion of the Sections are said underneath:
Section 10(1) manages the quantity of authorities in an arbitral council and gives that that the
quantity of judges should not be of considerably number. Segment 10(2) gives that the arbitral
council might comprise of a sole judge. Section 11(10) engages the Chief Justice of India or the
Chief Justice of the High Court, by and large, to make such plan as he consider proper for managing
the arrangement of referees. Section 13 does not allow the testing gathering to approach the Court
when the test made to the arbitral council isn't fruitful. However after the award is made, the
gathering could challenge the award on the ground that the mediator has wrongly dismissed the test.
Section 16 expresses that if the arbitral council turns down the request that it has no locale then the
Act does not make the arrangement for moving toward the Court at that stage. Section 31(7)
contains definite arrangements on award of enthusiasm by the arbitral court. It manages the
expenses of intervention. Section 36 gives that under two circumstances, to be specific a) where a
award isn't tested inside the recommended period, or b) where a award has been tested yet the test is

17 Rao P.C & Sheffield William “Alternative Dispute Resolution -What it is and how it works?”, p.33-44 Universal Law
Publishing Co. Pvt. Ltd. New Delhi-India,1997 Edition,Reprint 2011
18 The Arbitration and Conciliation Act,1996 (26 of 1996)

19
turned down, the award should be upheld in an indistinguishable way from on the off chance that it
were a pronouncement of the court. Section 37 makes arrangement for claims in regard of specific
issues.Section 38 empowers the arbitral court to settle the measure of store or supplementary store,
all things considered, as a progress for the cost of assertion. Sections 39 to 43 are to a great extent
in view of the relating arrangement in 1940 Act.
Part-II contains sections 44-60. It incorporates provisions of the Arbitration (Protocol and
Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. It states
that any award given outside India, whether or not made in an arbitration agreement covered by the
law of India, will henceforth be treated as a foreign award.19
Part-III deals with conciliation. It does not define what conciliation is. Conciliation is one of the
non-litigative dispute resolution processes. Conciliation process aims at securing a compromise
solution rather than solution according to the law. It is a voluntary, non-judicial, speedy and
confidential process. The cost of conciliation is much less than the costs of litigation. Above all,
conciliation process allows the parties to be more directly involved in the resolution of the dispute;
consequently in this process, the parties retain freedom of action with regard to initiating,
conciliation, adapting the proceedings to their particular case, and discontinuing it if there is any
such violation.20
Thus to make arbitration and conciliation a success story in India, three things are needed:Honest
and competent arbitrators and conciliators without whom any law or arbitration or conciliation can
succeed.Availability of modern facilities and services such as meeting rooms, communication
facilities, administrative and secretariat services.
Lastly, the establishment of the International Centre for Alternative Dispute Resolution (ICADR),
an independent non-profit making body, in New Delhi on May 1995 is a significant event in the
matter of promotion of ADR movement in India. 21

19 The Arbitration and Conciliation Act,1996 [26 of 1996}

20 Rao P.C & Sheffield William “Alternative Dispute Resolution -What it is and how it works?”, p.45-56, Universal
Law Publishing Co. Pvt. Ltd. New Delhi-India,1997 Edition,Reprint 2011
21 Rao P.C & Sheffield William “Alternative Dispute Resolution -What it is and how it works?”, p.45-56 Universal Law

Publishing Co. Pvt. Ltd. New Delhi-India,1997 Edition,Reprint 2011

20
CHAPTER -III
Judicial Efforts Towards Alternative Dispute
Redressal System in India

“There is no better test of the excellence of a government than the efficiency of its judicial system”
…….Lord Bryce.

Resolving disputes is fundamental to the peaceful existence of society. The only field where the
Courts in India have recognized ADR is in the field of arbitration mediation and conciliation.ADR
was initially introduced by the Indian arbitration act,1940 which was later on amended by the new
act of 1996 and most recently in 2016.
Late Mr. M.C. Setalvad, the first Attorney General of India, address the bar Association of India and
said: “No doubt, the British system of administration was very good and led to excellent results, but
it had its defects which have been accentuated in two ways. We are now a democratic and a very
populous country. In these days, therefore, what is required is a radical change in the method of
administration of justice. We want court to which people can go with ease and with as little cost as
possible. It is not merely the quickness of justice but it is the easy approach and quick disposal both
of which are needed and that only can be achieved if the system is completely overhauled.”Justice
R.C. Lahoti also observed that “Working under considerable handicaps such as inadequate funds,
budgetary allocations for law and justice not being part of plan expenditure, lack of resources,
shortage of staff and infrastructure, and the Indian judiciary can still claim a better standing with the
other wings of governance in performance.”

Contribution of ADR in India : In Baba Ali, Petitioner v. Union of India and Others,22 the
validity of the Act was challenged on the ground that under the Act of 1996 the question of
jurisdiction of the arbitrator can only be considered by the appropriate court after the award is
passed and not any penultimate stage. The Delhi High Court rejected the plea. Against this decision

22 Baba Ali v. Union of India and Ors. 1999 Arb. LR 433(SC)

21
a Special Leave Petition was filed in the Supreme Court. The Supreme Court of India dismissed the
Special Leave Petition and held that there is no question of the Arbitration and Conciliation Act,
1996 being unconstitutional or in any way offending the basic structure of the Constitution of India,
as the High Court has rightly observed that judicial review is available for challenging the award in
accordance with the procedure laid down therein. The time and manner of judicial scrutiny can
legitimately be laid down by the Act passed by the Parliament.

In Grid Corp. of Orissa Ltd. v. Indian Charge Chrome Ltd.,23 Section-37(1) of the Indian
Electricity Act, 1910 provides for arbitration by the Commission or its nominee any dispute arising
between the licensees or in respect of matters provided under Section-33. The Orissa High Court
held that Section-7 of the Arbitration Act, 1996 would apply to the present case in view of the fact
that the scope of the Arbitration Act, is very wide and it not only contains arbitration agreement in
writing but also other agreements as mentioned in sub-section (4). It also held that if there is any
arbitration agreement in any other enactment for the time being in force i.e., statutory agreement,
provisions of Arbitration Act, 1996 shall apply except sub-section (1) of Section-40 and Sections 41
and 43.

In Ashalata S. Lahoti v. Hirala Lilladhar,24 the Bombay High Court has taken a stand in a few
matters, wherein the number of arbitrators was even. It was held that under Section 14 of the Act 0f
1996 the mandate of Arbitrator should terminate, if he becomes de facto or de jure to perform his
functions. It was held that if the Tribunal is constituted contrary to Section-10 of the Act of 1996,
the Arbitrators de jure will not be able to perform those functions. In that case, the parties can move
the Court for decision to decide whether the mandate has been terminated or not. And thus this
matter is to be dealt by the Court having a jurisdiction under Section-14(2). So, once it is so treated
it will be so held that the Arbitrators de jure cannot proceed with the Arbitration.

In ITC Classic Finance Ltd. v. Grapeo Mining and Co. Ltd.25, the arbitration clause in a contract
provided for “…..sole arbitration of a person appointed by…….. (left blank)……”. It was held by
the Calcutta High Court that neither Section- 11(5) nor 11(6) are relevant. The arbitration clause
was held to be vague and uncertain.

23 Grid Corp of Orissa Ltd. Indian Charge Chrome Ltd. 1998 Arb LR 128 (Orissa)
24 AshalataS. Lahoti v. Hiralal Liladhar 1993 Arb. LR 462 (Bombay)
25 ITC Classic Finance Ltd. v. Grapeo Mining Co.Ltd. AIR 1997 Calcutta 397

22
In Hasmukhlal H. Doshi v. Justice M.L. Pendse26, it was urged that Section 12 only deals with
pre-referential challenges and not challenges arising in course of tribunal proceedings. Rejecting the
contention the Bombay High Court observed that Section 12 (2) incorporates the words ‘throughout
the arbitral proceedings’ and therefore Section 12 cannot be restricted to pre- reference challenges
alone.
In Sri Venkateshwara Construction Co. v. Union of India27, Andhra Pradesh High Court, in an
application filed under Section 11, referred to the provisions of Section 10, sub-section (1) and (2)
and held that after a close reading of the aforesaid provision it clearly shows that the parties are free
to determine the number of Arbitrators, but such number shall not be an even number. Sub-section
(2) further provides that if the parties fail to provide for an odd number of arbitrators, the arbitral
tribunal shall be constituted by a sole arbitrator.
In Indowind Energy Ltd. v. Wescare (I) Ltd. & Subuthi Finance Ltd., the Supreme Court of
India held that the ‘third party’ to an arbitration agreement is not bound by an arbitration .clause in
an agreement to which it is not a party. In addition the Supreme Court categorically stated that once
a High Court renders a decision under the Act holding that there is an arbitration agreement
between the parties, arbitrators are not permitted to re-consider or re-examine the same issue. It is
clear that only the parties who have signed or accepted the agreement can be considered as the
parties to the arbitration agreement. In this context, it may be quite pertinent to state that the Sec. 82
(2) of the U.K Arbitration Act, 1996 has a broader scope by increasing the definition of ‘parties’ to
include any person claiming under or through a party to the agreement.
In Mahesh Kumar Agarwal v. Raj Kumar Agarwal,28 the Madhya Pradesh High Court held:
“…….once the parties have appointed an Arbitrator or Arbitrators right or wrong, there is procedure
provided in the Act to challenge his authority. The applicant cannot bypass that procedure and
directly file an application under Section 11 of the Act before the Chief Justice or the person or
institution designated by him. This is clear from Section 12 of the Act read with Section 13 thereof.
That apart, the jurisdiction of the Arbitration Tribunal can be challenged under Section 16(1) of the
Act. Therefore, once the Arbitrator has already been appointed then there is no occasion for the
Chief Justice or his designate to exercise his powers under Section 11 of the Act. The Arbitrator is
already seized of the matter and it is for him to decide whether he was validly or invalidly
appointed.”

26 Hasmukhlal H.Doshi v. Justice M.L. Pendse 2001(1) Arb LR 87 (Bombay)

27 Sri Venkateshwara Construction Co. v.Union of India 2001 Arb LR 619 (AP)
28 Mahesh Kumar Aggarwal v. Raj Kumar Aggarwal 2000 Arb LR 401 (MP)

23
In Guru Nanak Foundation v. M/s Rattan Singh & Sons,29 the Supreme Court held
“Interminable, time- consuming, complex and expensive Court procedures impelled jurists to search
for an alternative forum, less formal, more effective and speedy for resolution of disputes avoiding
procedural claptrap and this led them to Arbitration Act, 1940. However, the way in which the
proceedings under the Act are conducted and without an exception challenged in Courts, has made
lawyers laugh and legal philosophers weep. Experience shows and law reports bear ample
testimony that the proceedings under the Act have become highly technical accompanied by
unending prolixity, at every stage providing a legal trap to the unwary. Informal forum chosen by
chosen by the parties for expeditious disposal of their disputes has, by the decisions of the Courts
been clothed with ‘legalese’ of unforeseeable complexity.”
In Godrej Properties & Investments Ltd. v. Tripura Construction,30 the Bombay High Court it
was held that Section- 18 itself is not a ground of challenge; a challenge to an award can only be
under Section 34(2). Section 18 could at the highest be invoked to point out denial of opportunity.
In Orient Paper Mills v. Civil Judge,31 the Orissa High Court did not permit the summoning of the
Chairman of Arbitral Tribunal as a witness. The application was made under Articles 226 and 227
of the Constitution for a direction to the Civil Judge for issuing summons. The award was submitted
by the Tribunal. It rejected the claim with a full statement of reasons. The ground on which the
Chairman was sought to be summoned was that the Tribunal considered certain document behind
the back of the party. The Court said that this ground, if established, would have enabled the party
to get the remedy of setting aside. In the presence of such a clear remedy, there was hardly any need
for summoning the arbitrator as a witness.
Now highly controversial judgment given in case of Oil and Natural Gas Corporation Ltd. v.
SAW Pipes Ltd.,32 their Lordships of the Supreme Court interpreted the provisions of Section 34(2)
(b) and observed: “Therefore, in our view, the phrase public policy of India used in Section 34 in
text is required to be given a wider meaning. It can be stated that the concept of public policy
denotes some matter, which concerns public and the public interest. What is for public or in public
interest or what would be injurious or harmful to the public good or public interest has varied from
time to time. However, the Award, which is, on the fact of it, patently in violation of statutory
provisions cannot be said to be in public interest. Such Award/judgment decision is likely to

29 Guru Nanak Foundation v. M/s Rattan Singh &Sons AIR 1991 SC 2075
30 Godrej Propertis &Investment Ltd. v. Tripura 2003 Arb LR (Bombay)

31 Orient Paper Mills v. Civil Judge AIR 2003 4 RAJ (Orissa)

32 ONGC v. Saw Pipes Ltd. 2003 2 CLT 242

24
adversely affect the administration of justice. Hence, in our view in addition to narrower meaning
given to the term ‘Public Policy’ in Renusagar’s case, it is required to be held that the Award could
set aside, if it is patently illegal. Result would be Award could be set aside if it is contrary to :
(a) Fundamental policy of Indian Law; or
(b) The interest of India; or
(c) Justice or morality; or
(d) In addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held
that Award is against the public policy. Award could also be set aside if it is so unfair and
unreasonable that it shocks the conscience of the Court. Such Award is opposed to public policy and
is required to be adjudged void.”
In Venture Global Engg. v. Satyam Computer Services Ltd.,33 the decision given by the Hon’ble
Supreme Court in Bhatia International v. Bulk Trading SA,34 in relation to the applicability of
Part I to international commercial arbitrations. Here, in this case the Court said that the provisions
of Part I are equally applicable to international commercial arbitrations held outside India, unless
any or all such provisions have been excluded by agreement between the parties, expressly or by
implication. Thus following the above decision in Bhatia International case, it was observed that
unless the applicability of Section 34 has been excluded, the parties may challenge the award before
a court in India. The judgement- debtor cannot be deprived of his right under Section 34 to invoke
the public policy of India, nor can the decree-holder seek to evade compliance with the legal and
regulatory scrutiny that might be necessary in India in case of enforcement of the award in India.
The court clarified that Sections 45, 48, 52 or any other provision of Part II do not exclude the
application of Part I to foreign awards.
An arbitral award is at par with a judgement of the court as recognized by the Supreme Court in the
case of Ras Pal Gazi Construction Company Ltd. v. FCDA, where Hon’ble Justice Katsina- Alu
pronounced that “arbitration proceedings are not the same thing as negotiations for settlement out of
court. An award made, pursuant to arbitration proceedings constitute the final judgement on all
matters referred to the arbitrator. It has a binding effect and it shall upon application in writing to
the court be enforceable by the court.”
In Yograj v. Ssang Yong Engineering case the matter concerned an appeal before the court under
section 37 for setting aside of arbitral award granted in Singapore. The supreme court particularly

33 Venture Global Engineering v. Satyam Computers Ltd. AIR 2008 SC 1061

34 Bhatia International v. Bulk Copy SA 2001 4 SCC 361
25
held that the agreement specifically discusses and agrees that it will be bound by SIAC Rules which
includes Rule 32, thus decision in Bhatia international and other cases would not apply here.
In the case of Videocon v. Union of India, was the case where the supreme court chose the implied
exclusion route and held that the Bhatia international ratio would not apply. In this case, the
arbitration agreement contained the obstinate clause that the agreement shall be governed by the
laws of England. The court held that this amount to exclusion of Part I and it did not have
jurisdiction to entertain the case.
The Supreme Court’s strange judgments related to arbitration cases continued in its verdict
on Dosco v. Doozan35 is one such case where the supreme court deviated from the ratio laid down
in Bhatia case and observed that the correct law has been discussed in Mustill and Boyd.
The scope of Interference of the award passed by arbitration was dealt with by the Apex Court in
the decision reported in Food Corporation of India v. Jogindarial Mohindarpal as
follows: “Arbitration as a mode for settlement of disputes between the parties has a tradition in
India. It has a social purpose to fulfil today. It has a great urgency today when there has been an
explosion of litigation in the Courts of law established by the sovereign power. However in
proceedings of arbitration, there must be adherence to justice, equality of law and fair play in
action. The proceedings of arbitration must adhere to the principles of natural justice and must be
in consonance with such practice and procedure, which will lead to a proper resolution of the
dispute and create confidence of the people, for whose benefit these procedures are resorted to. It is
therefore, the function of the Court of law to oversee that the arbitrator acts within the norms of
justice. Once they do so and the award is clear, just and fair, compel to adhere and obey the
decision of their chosen adjudicator. It is in this perspective that one should view the scope and
limit of corrections by the Court on an award made by the arbitrator. The law of arbitration must be
made simple, less technical and more responsible to the actual realities of the situation but must be
responsible to the canon of justice and fair play. The arbitrator should be made to adhere to such
process and norms which will create confidence not only doing justice between parties but by
creating a sense that justice appears to have been done”.

In SUNDARAM FINANCE LIMITED ver.us ABDUL SAMAD &ANR CIVIL APPEALNO

1650 of 201836, The Supreme Court ruled that an arbitral award can straightaway be filed and

35 Dozco India Pvt.Ltd.v.Doosan Infracore Co.Ltd. AIR 2011 6 SCC 179

36 Sundaram Finance Ltd. v. Abdul Samad & Anr. Civil Appeal No.1650 of 2018 SC
26
executed in the Court where the assets are located, without first obtaining a transfer of decree from
the Court which would have jurisdiction over the arbitral proceedings.
Though some good has come out of the ADR mechanism, Lok adults have make the judicial
officers busy in handling the cases and resolving them easily and through fast and efficient manner.
For the success of ADR procedure it is important that the judicial vacancies should be filled at the
earliest. All over the country. So that the judiciary can function in transparent way.The judiciary
could spare some of its judicial officers for ADR process.The Government has established the
national mission for justice delivery and legal reforms programme to fast track the court cases
pending in the courts.The Government has accepted the recommendations of the Thirteenth Finance
Commission to provide a grant of Rs. 5000 crore to the States for fast tracking judicial process.The
‘National Litigation Policy’ (NLP) was announced in 2009 to reduce formalities and long time in
court to reduce the average time of pending cases in India. Veraapa Moily announced this in the law
conference in New Delhi.Thus, unless we can do something about the problem of delay and huge
arrears, the whole system would get crushed under its weight. We must guard against the system
getting discredited and people losing faith in it and taking recourse to extra legal remedies.

27
CHAPTER - IV
The Doctrine of Kompetenz-Kompetenz- An
Indian Perspective
The doctrine of Kompetenz-Kompetenz alongside its united standard of distinctness of the
mediation agreement is among the most noteworthy tenets in cutting edge discretion. The idea
suggests, basically, the arbitral court's energy to thoroughly lead without anyone else ward. One
may inquire as to why, in any case, is it critical to present such power particularly on the mediator.
All things considered, each settling expert, before leaving on the activity of arbitration, is relied
upon to first ask into its own particular locale and govern on it. At that point, is it not characteristic
and a matter of rudimentary rule that the arbitral court ought to have such power? The appropriate
response lies in the mediator's exceptional position and qualification, as an adjudicator, from other
arbitrating specialists, all of which infer their energy to settle from the state's sovereign energy to
manage equity or statutes assigning them as adjudicators for choosing questions emerging
thereunder. The referee, then again, is a secretly picked gathering, owing its energy and expert to an
agreement went into by the gatherings, which is generally a piece of a basic contract, to choose
debate under which the gatherings try to depend on such discussion. Imagine a scenario in which
the agreement containing the intervention agreement is itself invalid or stops to exist. What happens
then to the assertion agreement ? Is it not rendered invalid or non-existent? In what manner can a
discussion, which owes its extremely presence to such understanding, at that point keep on
operating? All through the historical backdrop of intervention law, the courts have attempted to
ponder these adroitly dubious issues, till the landing of the present-day principles of Kompetenz-
Kompetenz and distinguishableness. The reason for this article is to follow the improvement of
these principles and locate their correct place in Indian law to find out their span and substance
under Indian assertion law, the issue regions that keep on dogging us even today, lastly, the street
ahead.37
Under the rule of Kompetenz-Kompetenz, the arbitral court, while practicing the ability to lead

without anyone else ward, chooses any protests as for the presence or legitimacy of the mediation
jurisdiction.. Aside from giving the hypothetical premise to the referee's ward and expert,
unaffected by the presence or legitimacy of the understanding from which such locale also,

37Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.38-39, OXFORD University
Press,First Edition ,2018
28
specialist are sourced, it deals with a useful level too. Each time an issue emerges concerning the
presence or legitimacy of the intervention jurisdiction, it enables the authority to choose such issue,
in any event in the main occasion, without the gatherings going to the national courts for such
choice. The accentuation, all things considered, of the cutting edge discretion law is to hold party
self-governance without bounds measure conceivable and keep the obstruction of the conventional
courts, correspondingly, to the base. Nearly as a sensible culmination to the tenet of Kompetenz-
Kompetenz, the law needed to develop the rule of distinctness of the mediation assertion from the
'fundamental' or 'basic' contract. The teaching runs as an inseparable unit with the energy of the
arbitral council to decide its own ward, in that it requires regarding the mediation proviso as an
discretion free of the other terms of the contract.'The teaching of distinctness builds up that the
mediation understanding has a different life from the agreement for which it gives the methods for
settling debate. empowers the discretion consent to survive break of the agreement of which it is a
proviso" .Even if the 'principle' or 'hidden' contract is viewed as invalid, non-existent, or inadequate,
the mediation statement, which however a piece of such contract, gets by as an unmistakable and
separate understanding in order to empower the authority delegated under it to decide the very
shortcoming, non-presence, and inefficacy. Each choice of the mediator all alone purview is,
obviously, subject to the last controlling of an able court, if and when the issue is brought before it,
yet that still does not keep the judge from accepting such locale and upon a finding for such ward,
even finishing the intervention procedures and rendering a award. matter goes to the national courts
simply after the award is rendered, in a test to the award.38
The two standards, in this way, together shape the bedrock of the authority's locale. The guideline of
detachability, by confirming the different presence of the discretion understanding, permits the
referee to choose the question under the primary contract regardless of whether the last is invalid
and void. Be that as it may, this is on the balance that such shortcoming does not influence the
mediation agreement itself. On the off chance that and to the degree, how-ever, such weakness
influences the understanding itself, it is the standard of Kompetenz-Kompetenz, instead of the
distinguishable ness guideline, which enables the judge to manage on his ward. The separability
standard, basic as it is to give the hypothetical premise of the referee's ward, is as yet inadequate in
a crucial sense to empower the discretion consent to survive any shortcoming which goes to the
very base of the agreement or to its making. It is incomprehensible that when marking of the
primary contract is itself under a cloud, say when the mark is guaranteed as a phony, the resultant

38Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.39-40, OXFORD University
Press,First Edition ,2018
29
weakness would not influence the intervention proviso which is a piece of that very contract,
regardless of whether it is to be dealt with as particular from it. The trouble is then gotten over
through the statutory prohibit of the standard of Kompetenz-Kompetenz, enabling the mediator to
govern in any case on his purview.

The Arbitration Act, 1940

The Arbitration Act, 1940, did not per se recognize the separability of the arbitration clause
contained in a contract from the substantive stipulations of the contract. In all cases, where the
contract (which inter alia contained the arbitration agreement) was either void or being voidable
was avoided by a party or discharged or substituted, the arbitration agreement contained in it was
also said not to survive. 'The arbitration clause, which is contained in the original contract, perishes
with it', was the original dictum. Indian Courts, however, started recognizing the principle of law
laid down in Heyman v. Darwins Limited. In Union of India v. Kishanlal Gupta & Bros.,39 one
of the early cases under the Arbitration Act of 1940, Calcutta High Court (per Justice R.S.
Bachawat), relying on the observations in Heyman's case, held that total breach of the substantive
stipulations, even when it is accepted by the other party, does not abrogate the arbitration clause,
and even the party in default may invoke that clause. The learned judge, however, proceeded to
observe that the parties are not bound to have recourse to arbitration; that they may settle their
disputes directly and agree not to invoke the arbitration clause for that purpose, and that in reference
to the disputes which are thus settled the arbitration clause ceases to exist. They may also enter into
a substituted contract in complete supersession of the original contract and thereby abrogate the
original contract and with it the arbitration clause contained in it. In another important judgment of
the time, Tolaram Nathmull v. Birla Jute Manufacturing Company Ltd.,40 after taking a review of all
English cases on the point right up to Homan's case, Das J (as he then was) laid down the principles
deducible from the authorities reviewed. Finally, the Supreme Court in Union of India v. Kishorilal
Gupta and Bros.41 affirmed, after an extensive analysis of all English and Indian cases on the point.
UNCITRAL Model Law
This model law is probably the single-most important contribution by the United Nations to
international arbitrations. It is this law which has greatly influenced the making of the new Act of
1996 in India, namely, the Arbitration and Conciliation Act, 1996. The Model Law took the

39 Union of India vs. KishanLal Gupta & sons AIR 1953 Cal.642
40 Tolaram Nathumall vs. Birla Jute Manufacturing Compay AIR 1948 ILR 2.Cal. 171
41 Union of India v. Kishanlal Gupta &Sons AIR 1959 SC 1362

30
separability principle one notch above and combined with it the principle of Kompetenz-
Kompetenz.

The Arbitration and Conciliation Act, 1996

“The Arbitration and Conciliation Act, 1996, which notes in its prelude the critical commitment
made by the Model Law and Rules of UNCITRAL to the 'foundation of a brought together lawful
structure for the reasonable and productive settlement of debate emerging in global business
relations' and recognizes the practicality of making a law 'regarding intervention and placation,
considering the aforementioned Model Law and Rules', completely embraces the standards of
detachability and Kompetenz-Kompetenz UNCITRAL Model Law and Rules. These are contained
in Section 16 of the demonstration, Competence of Arbitral Tribunal to Rule on its Jurisdiction.The
pivotal provision, sub-section (1) of that section, is in the following terms:
(I) The arbitral court may lead alone purview, including administering on any complaints
concerning the presence or legitimacy of the mediation assention, and for that reason,
(a) a discretion statement which frames some portion of an agreement should be dealt with as an
assention autonomous of alternate terms of the agreement; and
(b) a choice by the arbitral council that the agreement is invalid and void should not involve ipso
jure the weakness of the discretion statement.The arrangement is thrown in the very same terms as
Article 16(1) of the Model Law.
Supplementing the power and specialist of the referee to govern without anyone else locale is the
absence of energy in any legal specialist to run on such purview whenever before the authority
administering on it. This is accomplished by Section 16(5) and (6) read with Section 34 and Section
5. Under Section 16(5) and (6), the referee needs to choose the request that he either does not have
the locale or is surpassing it and where he takes a choice dismissing the supplication, proceed with
the arbitral procedures and make a award. Such award can be tested just under Section 34.
(Acknowledgment of the request calls for. an interest under Section 37) Section 5 forbids any
mediation by a legal specialist in an issue administered by Part I with the exception of where so
gave in the Part. [Sections 16(1), (5), and (6), 34, and .37 go in close vicinity to Part I.]

Amendment Act 3 of 2016

Some of these issues have now been tended to by the Arbitration and Conciliation (Amendment)
Act, 2015 (that is, Amendment Act 3 of 2016), which influences broad corrections to the Arbitration
To act, 1996. In any case, it makes an extensive modification in Section 8 of the 1996 Act in so far
31
as the energy of any legal specialist to allude the gatherings to intervention, when an activity is
brought before it in an issue which is the topic of a mediation understanding, is concerned. Despite
the fact that Section 8, as it initially remained preceding that change, did not in wording endorse
any such prerequisites for the legal expert, by legal understanding, as we have seen over, the
specialists were required to consider if the intervention agreement is invalid and void or out of
commission or unequipped for being performed. As we have noted over, this presented a specific
weakening of the rule of Kompetenz-Kompetenz and distinguishable ness and enabled the court to
basically govern on the judge's purview before the referee himself could do it. Presently under the
corrected arrangements of Section 8, legal specialists, while thinking about an application under
Section 8, are just required to consider if at first sight a legitimate understanding exists. Tie segment
now orders legal experts to allude the gatherings to intervention, if the issue before them is the
subject of a discretion and a gathering thereto applies to them inside time as gave in Section 8,
'unless it finds that at first sight no substantial intervention understanding exists'.It is now for the
arbitral tribunal to consider finally, in the first place, the question of its jurisdiction, including any
objections with respect to the existence or validity of the arbitration agreement, even when the
parties are referred to it under a court order passed under Section 8. With that the principle of
Kompetenz-Kompetenz is taken one step ahead to reach its fullest potential. 42
Seeing that the arrangements of the Arbitration Act, 1996 are concerned, to be specific, Section 11
of the Act, the Amendment Act, 2015 now confines the request of the Supreme Court or, all things
considered, the High Court, while thinking about an application for arrangement of an authority, to
'the examination of the presence of an assertion understanding'. The inquiries of legitimacy, it
would show up are currently past the pale of the court while thinking about the mediator's
arrangement. The issue, be that as it may, is in no way, shape or form clear, since by legal
understanding, it is as yet conceivable to grow
The importance of the word 'presence' to take into its overlap the 'lawful' presence of an
jurisdiction. It would have been much better, as we might by and by observe, if the assurance of the
presence of the mediation understanding and subsequently, the ward of the arbitral council
thereunder, would have been left to be dictated by the court on an at first sight thought, as on
account of corrected Section 8. The net impact of the corrected Section 11, as it is by and by
worded, is that not at all like on account of a mediation without reference to court, in case of
arrangement of an arbitral council is being looked for from the court under Section 11 of the Act, it

42Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.57, OXFORD University Press,First
Edition ,2018
32
is the court which leads on the 'presence' of the mediation and in this manner, on the purview of the
arbitral court, such assurance being then authoritative on the arbitral council. Concerning Section 45
of the Act, which draws near Part Il identifying with the authorization of certain remote awards, the
position continues as before as on account of the unamended Act of 1996. As prior, under Section
45 of the Act, a legal specialist, when seized of an activity in an issue in regard of which parties
have made an assertion consent to which the New York Convention applies, might at the demand of
any of the parties allude them to intervention unless it finds that the said jurisdiction. is 'invalid and
void or out of commission or unequipped for being performed'. Such assurance would, on the rule
of the Chloro Controls' case, be official on the arbitral court. On account of a global business
discretion, along these lines, in an issue brought before a legal specialist in India, on the off chance
that it is secured by a mediation understanding inside the significance of Section 44, the parties are
required to be alluded to intervention subject to the thought of the inquiries of presence, legitimacy,
and enforceability of the discretion jurisdiction.43

The Road Ahead

Albeit a portion of the inconsistencies under the unamended Act of 1996, as translated by courts,
are evacuated by the Amending Act 3 Of 2016, the law still does not proliferate the guideline of
Kompetenz-Kompetenz in its fullest expression.Introduction of a by all appearances thought in
every one of the three arrangements, Sections 8, 11, and 45, loans not just a particular sanity to the
way to deal with the rule of Kompetenz-Kompetenz yet in addition plain effortlessness and
consistency to it. While it keeps away from response to mediation through courts in situations
where the assertion plainly does not exist, it enables the intervention procedures to finish up
quickly in all cases, giving gathering self-governance its fullest substance but then jelly all post-
grant solutions for abused gatherings, un-affected by the mediator s possess appraisal of his
locale.44

43 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.59 , OXFORD University Press,First
Edition ,2018
44 Refer Fouchard Goldman on International Commercial Arbitration (2013) 1 SCC 129

33
CHAPTER-V
Grounds for Challenging an Arbitral Award in
India
INTRODUCTION
Finality of an arbitral award, scope of its scrutiny by a supervisory court, and the grounds on which
such a supervisory court can interfere with an arbitral award are decisions which have consistently
raised many perplexed questions among all jurisdictions in the world.
Essentially, the alternate dispute resolution (ADR) mechanism has evolved so as to ensure that the
businessmen who enter into a commercial transaction with open eyes and diligence are given a
redressal forum for their disputes, in which party autonomy would prevail over other technical
rules, procedure, and evidence, thereby giving flexibility to adjudicating parties. Wherein, unlike a
court where dispute would be adjudicated as per the procedural rules of statutes and by an
adjudicator appointed as per the roaster of the said court, the parties would have the option to
choose specialists or technical experts as adjudicators, who in all circumstances were considered by
these businessmen as better placed persons than a judge to appreciate and understand the technical
issues involved in the dispute and to provide a practical decision for its resolution. It also sought to
conferfinality to the resolution arrived through the process of arbitration by envisaging a very
limited scope of interference by the municipal courts, who were conferred with a consolatory,
supervisory jurisdiction to scrutinize an arbitral award, on limited grounds, just to ensure that no
grave injustice is done to a party resorting to remedy under arbitration.
However, despite myriad advantages envisaged in the concept of arbitration, there have always
been constant whisperings of dissatisfaction when it comes to implementation of this scheme of
arbitration; more particularly, in the arena of implementation of the arbitral award and its finality in
the eyes of the supervisory courts which have been conferred with limited jurisdiction, in every
municipal law, to scrutinize the same. 45
As witnessed globally, the Indian arbitration law also saw, rather is still seeing, its share of
ambiguity as to what would be the correct form and content of an arbitral award which would
confer finality to it, without any interference by the supervisory municipal court. The problem has

45Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.63-64, OXFORD University
Press,First Edition ,2018
34
aggravated because in arbitration, parties chose their own procedure without taking guidance from
any statute which, if followed, can insulate it from any fatal infirmities of law. The precedents show
that the law related to the 'grounds permissible under law for challenging arbitration award' did not
evolve on the touchstone of statutory prescription or on literal interpretation of statutory mandate,
but the same evolved through the course of successive judicial interpretation of statute-fitting and
supplementing diverse fact situations in pursuit of achieving that not only is justice done but is also
seen to be done. In reality, as experienced world over, in India also 'grounds permissible under law
for challenging arbitration award' evolved on judge-centric approaches, adopted from time to time
by various benches. These judge-centric approaches also included adoption of principles evolved by
the courts of other jurisdiction which fitted into the factual situations mushrooming before Indian
courts in its liberalized economy. 46
The literature and jurisprudence of arbitration laws shows that the parties to the proceedings have
always considered the statute, that is, the Arbitration Act, to be a mandate in abstract and sought to
give it a life by asserting divergent interpretations of the statute. Classic example of this approach
can be found in judicial dissection between the meaning of venue and of seat of arbitration.This
branch of law evolved so as to ascertain jurisdiction of the court that would have supervisory
control over an arbitration and would be competent to an appeal challenging the finality of the
arbitral award in the arbitral proceedings or to interfere with an arbitration proceeding at an interim
stage. 47
Although the world over, the said distinction was not contemplated in the statutes and it is difficult
to understand that businessmen, who consciously drafted and incorporated the arbitration agreement
in their contract after a series of negotiations, chose to stipulate only the venue (which can be
anywhere in the world as per the agreement of the parties) but remained silent on the most cardinal
point, that is, seat of said arbitration.
However, the parties as per their convenience, who either wanted to invoke the jurisdiction of their
preferred country or wanted to block the courts of an un preferred country from exercising their
supervisory jurisdiction—on grounds of the so-called 'statutory appellate jurisdiction' over an award
—advanced their arguments through astute practitioners having a zealous allegiance to uphold
their client's interest. This was in turn accepted by the superior courts and resulted in an arbitration
clause being dissected into: (a) proper law of contract; (b) proper law of arbitration agreement; (c)

46Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.64-65, OXFORD University Press,First
Edition ,2018
47 ibid

35
proper law of reference; (d) the Curial law or procedural law or the Lex Fori, so as to reach and
render a final statement of law that Indian courts would not have any jurisdiction over a foreign
award if it is found that on the facts of a case either the juridical seat of the arbitration is outside
India or the law governing the arbitration agreement is a law other than Indian law.48To ascertain as
to whether on facts juridical seat of the arbitration is outside India, the Indian Supreme Court
propounded the theory of 'Closest and Intimate connection test’.49
Through the aforesaid decision rendered in Reliance Industries case, the Supreme Court of India
impliedly overruled a 15-year-old judgment rendered by it in Bhatia International.50
In the year 1996, the Indian legislature by a consolidating and amending Act, that is the Arbitration
and Conciliation Act, 1996 (the 1996 Act), consolidated all the earlier three acts relating to
domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral
awards, with slight modifications, while repealing the 1940 Act and also the Acts of 1937 and 1961.
The said 1996 Act was based on the United Nations Commission on International Trade Law
(UNCITRAL) Model and to comply with its obligation to provide a uniform law governing the
arbitration, both domestic and foreign, as well as the law relating to enforcement of foreign awards
in the new borderless areas of commercial agreements. Indian legislature mutatis mutandis adopted
the grounds mentioned in the UNCITRAL Model Law, which became Section 34 of the 1996 Act.
The grounds for challenging an arbitral award as mentioned under the said section inter alia
provided that a court could interfere with an arbitral award if:
1. a party was under some incapacity;
2. the arbitration agreement was not valid under the law to which the parties had subjected it or,
failing any indication thereon, under the law for the time being in force;
3. the party making the application was not given proper notice of the appointment of an arbitrator
or of the arbitral proceedings or was otherwise unable to present his case;
4. the arbitral award dealt with a dispute not contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on matter beyond the scope of the submission
to arbitration; or
5. the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the
agreement of the parties, unless such agreement was in conflict with a provision of this Part from
which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part.

48 Union of India vs Reliance Industries ltd.(2015) 10 SCC 213

49 Enercon ltd. and ors. v. EnerconGmbh And Anr. (2014) 5SCC 1
50 Bhatia International v. Union Of India AIR 2002 4 SCC 105

36
The said Section 34 also inter alia contemplated the principles of severability as it provided that if
the decisions on matters submitted to arbitration were capable of being separated from those not
so submitted, the court exercising supervisory jurisdiction would be empowered to set aside only
that part of the arbitral award which contains decisions on matters not submitted to arbitration. 51
As can be seen, the aforesaid portion of Section 34 of the 1996 Act empowered the supervisory
courts to interfere with an arbitral award only on the ground of procedural irregularity; these
procedural grounds did not require much judicial interpretation or literature to be developed.
However, the entire jurisprudence in this regard boiled down to the portion of Section 34 which
provided that an arbitral award would also be set aside if the same was in conflict with the 'public
policy of India'. Though the said portion of Section 34 of 1996 Act came with an explanation that an
award would be treated to be in conflict with the public policy of India only if the passing of the
award was induced or affected by fraud or corruption, the expression 'public policy of India' 52later
came under strict judicial scrutiny and was given an expansive definition from time to time. It is
this expression 'public policy' which gave maximum latitude to parties to challenge an arbitral
award before the courts in India.
The expression 'public policy of India' first came to be interpreted by the Indian Supreme Court in
the case of Renusagar Power Co. Ltd. v. General Electric Co.53 In the said case, the Supreme Court
of India for the first time held that an arbitral award can be set aside if it was contrary to (a)
fundamental policy of Indian law, (b) the interests of India, or (c) justice or morality.

The Indian Supreme Court in Renusagar case gave a narrower meaning to the expression 'public

policy' thereby confining judicial review of the arbitral award only to the aforementioned three
grounds. It is worth noting that though Renusagar was decided under the Foreign Awards
(Recognition and Enforcement Act), 1961, and before the enactment of the Arbitration Act of 1996,
there was no material difference between the two corresponding provisions; hence, it continued to
remain a relevant point of reference.
Almost ten years later, the Indian Supreme Court in ONGC (1) case54 made an apparent shift from
the principles laid down in its previous judgment in Renusagar case and held that apart from the

51 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.66-67, OXFORD University
Press,First Edition ,2018
52 Howard M.Holtzman and Joseph Neuhas ,A Guide to UNCITRAL: Legislative History and Commentary, p.977

Taxation Publishers 1989 2nd Edition

53 Renusagar Co. Ltd. v. General Electric Co. AIR 1994 SUPP SCC 644

54 ONGC Ltd. v. Saw Pipes Ltd. AIR 2003 5 SCC 705

37
three grounds stated in Renusagar case, the court would also be empowered to to set aside an
arbitral award on the ground of it being violative of public policy if it is patently arbitrary.
To test arbitral award on the touchstone of ‘patent illegality, the court of India in ONG'C case cited
a caution holding that, Such patent illegality, however, must go to the root of the matter.The public
policy violation, indisputably, should be so unfair and on unreasonable as to shock the conscience
of the court, Where the arbitrator, however, has gone contrary to or beyond the expressed law of
the contract or granted relief in the matter not in dispute would come within the purview of' Section
34 of the Act.
Vide the said judgment, the Indian Supreme Court permitted the local supervisory courts to go into
the merits of the case, since in the opinion of the Indian Supreme Court, what would constitute
public policy was a matter dependent upon the nature of transaction and the nature of statute which
can only be ascertained from the pleadings of the parties and the materials brought on record, a
scrutiny of which would only enable the court to judge what is in public good or public interest and
what would otherwise be injurious to the public good at the relevant point.
Resultantly, the Indian Supreme Court in ONGC (1) case laid down the following grounds on which
an arbitral award could be challenged before a supervisory court in India:
1. 'The court can set aside the arbitral award under Section 34(2) of the Act if the party making the
application furnishes proof that:
i. party was under some incapacity;
ii. the arbitration agreement is not valid under the law to which the parties have subjected it or,
failing any indication thereon, under the law for the time being in force;
iii. the party making the application was not given proper notice of the appointment of an arbitrator
or of the arbitral proceedings or was otherwise unable to present his case; or
iv. the arbitral award deals with a dispute not contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on matters beyond the scope of the submission to
arbitration.
2. The court may set aside the award:
i. if the composition of the Arbitral Tribunal was not in accordance with the agreement of the
parties, or if failing such agreement, the composition of the Arbitral Tribunal was not in accordance
with Part I of the Act.
ii. if the arbitral procedure was not in accordance with: (a) the agreement of the parties, or (b)
failing such agreement, the arbitral procedure was not in accordance with Part I of the Act.
However, exception for setting aside the Award on the ground of composition of Arbitral Tribunal
38
or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions
of Part I of the Act from which parties cannot derogate. (c) If the award passed by the Arbitral
Tribunal is in contravention of the provisions of the Act or any other substantive law governing the
parties or is against the terms of the contract.
3. The Award could be set aside if it is against the public policy of India, that is to say, if it is
contrary to: (a) fundamental policy of Indian law; (b) the interest of India; (c) justice or morality; or
(d) if it is patently illegal.55
Since the Indian Supreme Court in ONGC (1) case now permitted scrutiny of an arbitral award on
merits in order to ascertain whether the arbitral award was contrary to public policy of India or
contrary to any substantive law in force, this new window gave rise to various findings being
rendered by the supervisory courts on the true meaning and purport of the expression 'public
policy'—on which ground, an arbitral award could be challenged before a supervisory court. This
expansive scope of judicial review of arbitral award by the supervisory court led the Hon’ble
Supreme Court to once again reiterate the principles on which a supervisory court could interfere
with an arbitral award in the case of SAIL v. Gupta Brother Steel Tubes Ltd., (2009) 10 SCC 63,
wherein the Supreme Court held:
1. For a situation where a mediator goes past the agreement, the award would be without locale and
would add up to legitimate unfortunate behavior and in light of which the award would wind up
amiable for being put aside by a court.

2. A blunder relatable to elucidation of the agreement by a judge is a mistake inside his ward and
such blunder isn't managable to rectification by courts accordingly mistake isn't a blunder on the
substance of the award.
3. If a specific question of law is submitted to the arbitrator and he answers it, the fact that the
answer involves an erroneous decision in point of law does not make the award bad on its face.
4.An award contrary to substantive provision of law or against the terms of contract would be
patently illegal.
5.Where the parties have intentionally indicated the measure of remuneration in express terms, the
gathering who has endured by such break can just claim the total determined in the agreement and
not in overabundance thereof. At the end of the day, no award to be paid if there should arise an
occurrence of rupture of agreement, if named or determined in the agreement, could be granted in
abundance thereof.

55Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.69-70, OXFORD University
Press,First Edition ,2018
39
6. In the event that the finish of the referee depends on a conceivable perspective of the issue, the
court ought not meddle with the honor. It isn't passable to a court to look at the accuracy of the
discoveries of the mediator, as though it were sitting in bid over his discoveries.
The Supreme Court in 2011 in Phulchand,56 interpreting 'public policy' under Part Il of the Act, now
went on to expand the test laid down in ONGC (1) to apply in case of foreign awards. This allowed
the Indian courts to reject enforcement of a foreign award on the additional ground of ‘patent
illegality' devised in ONGC (1). The Supreme Court did not provide clear analysis of its reasons for
its keen expansion of Saw Pipes and as to why the broad interpretation given in Saw Pipes is
principally sounder than Renusagar, which though under the old Act, had the identical text to
Section 48.
Phulchand came to be expressly overruled in 2013 in Shri Lal Mahal.57 The wider meaning given to
the expression 'public policy of India' under Section 34(2) (b) (Part I) of the Act' was held by the
Supreme Court as not applicable to objections raised against the enforcement of the foreign awards
under Section 48(2)(b) of the Act. The expression and concept of the phrase, though identical in
Section 34(2)(b) and Section 48(2)(b), was interpreted to be narrower in cases of enforcement of
foreign awards than in case of enforcement of domestic arbitral awards; contravention of law alone
will not be sufficient to attract the bar of public policy, and something more than contravention of
law is required for refusal of enforcement of a foreign award on the ground that it is contrary to
public policy of India. Renusagar was thus reinstated, and the wide import of the term ONGC (1)
ceased to apply, once again limiting the possibility of a successful challenge to enforcement of a
foreign award in India. That an award must not be refused enforcement merely on the ground of
erroneous application of law or on the basis of re-appreciation of evidence, and that the broad
interpretations of the term 'public policy' must stay restricted to domestic awards, came to be
recommended with substantial emphasis in the Law Commission of India in its 246th Report, which
recommended reversion to the Renusagar position.58
The aforesaid interpretations given by the Indian Supreme Court in ONGC (1) and the SAIL case
occupied the field till recently when the Indian Supreme Court in the ONGC (2) case 59 added three
other distinct and fundamental juristic principles which were held to be part and parcel of the

56 Phulchand Exports Ltd. vs OOO Patriot (2011) 10 SCC 300

57 SriLal Mahal Ltd. v.Progetto Grano Spa AIR 2014 2 SCC 433
58 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.71-72, OXFORD University

Press,First Edition ,2018

59 ONGC Ltd. vs Western Geco Int. Ltd. AIR 2014 9 SCC 263

40
'fundamental policy of Indian law' which constituted as a sub-head of challenge under the head
'public policy of India'.
In ONGC (2) case, while interpreting the term 'fundamental policy of Indian law' as propounded in
ONGC (1) case, the Indian Supreme Court held that the 'fundamental policy of Indian law', which
was not succinctly interpreted in ONGC (1) case, would mean and include all such fundamental
principles which form the basis for administration of justice and enforcement of law in India.
The Indian Supreme Court in ONGC (2) case referred to the following three distinct and
fundamental juristic principles, which it held to be necessarily embodied as part and parcel of the
fundamental policy of Indian law. The said principles enunciated by the Indian Supreme Court in
ONGC (2) case is as under:

Judicial Approach : Indian Supreme Court held that in each assurance whether by a court or other
expert that influences the privileges of a resident or prompts any respectful results, the court or
specialist concerned is bound to embrace what is in legitimate speech called a 'legal approach' in the
issue. The obligation to embrace a legal approach emerges from the very idea of the power
practiced by the court or the specialist and does not need to be independently or furthermore urged
upon the for a concerned.The Indian Supreme Court held that insofar as the court, council, or the
expert practicing powers that influence the rights or commitments of the gatherings previously them
indicates loyalty to legal approach, they can't act in a self-assertive, eccentric, or unconventional
way. Legal approach guarantees that the expert demonstrations true blue and manages the subject in
a reasonable, sensible, and target way and that its choice isn't incited by any unessential thought.
Legal approach in that sense goes about as a check against imperfections and flaws that can render
the choice of a court, council, or specialist defenceless against challenge.60

Compliance of Principles of Natural Justice and Non-Application of Mind by the

Arbitral Tribunal
The Indian Supreme Court in ONGC (2) case held that the crucial to the strategy of Indian law is
the rule that a court thus additionally a semi legal expert must, while deciding the rights
what's more, commitments of gatherings before it, do as such as per the standards of regular equity.
It held that non-use of psyche is a deformity that is lethal to any settling. Utilization of brain is ideal

60Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.72-73, OXFORD University
Press,First Edition ,2018
41
exhibited by revelation of the psyche and divulgence of brain is best done by recording reasons in
help of the choice which the court or specialist is taking. prerequisite that an adjudicatory
specialist must apply its psyche is, in that view, so profoundly installed in our law that it can be
portrayed as a principal arrangement of Indian law.61

Perversity or Irrationality in the Arbitral Award Tested on the Touchstone of

Wednesbury Principles
The third ground which Indian Supreme Court embodied as a part and parcel of the 'fundamental
policy of is the principle of reasonableness; commonly known as Wednesbury principle .The Indian
Supreme Court in ONGC' (2) case held that a decision or an arbitral award which is perverse or so
irrational that no reasonable person would have arrived at the same will not be sustained in a court
of law.
Notwithstanding the over, the Indian Supreme Court held that what is essential with regards to the
current case is that if on realities demonstrated before them, the judges neglect to draw a surmising
which should have been drawn or in the event that they have drawn a deduction which is on its
substance, untenable bringing about unsuccessful labor of equity, the settling notwithstanding when
made by an arbitral council that appreciates significant scope and play at the joints in influencing
honors to will be available to challenge and might be thrown away or changed relying on whether
the culpable part is or isn't severable from the rest.Although from the reading of the dicta laid down
by the Indian Supreme Court in ONGC (2) case, it appears that virtually all the grounds of
challenge as applicable in administrative law jurisdiction are available, while challenging an arbitral
award under Section 34 of the 1996 Act, however the same is not the case, as the Indian Supreme
Court in subsequent case of Associate Builders62 explained the meaning of perversity and
irrationality in the context of scheme and purport of arbitration act to hold that an award of an
arbitral tribunal would be perverse only if:
1. A finding is based on no evidence; or
2. An arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or

3. Ignores vital evidence in arriving at its decision.

61 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.72-73, OXFORD University
Press,First Edition ,2018
62 Associate builders vs. DDA (2013) 3 SCC 49: 2014 SCC on line SC 937

42
In Associate Builders case, the Indian Supreme Court while relying on its previous decisions63 held
that the test of perversity/irrationality so as to attract the application of Wednesbury principle would
be limited to cases where findings of facts are arrived at by ignoring or excluding relevant material
or by taking into consideration irrelevant material and such findings so outrageously defies logic so
as to make the arbitral award suffer from the vice of irrationality incurring the blame of being
perverse. In such cases, the finding rendered would be infirm in law. "The Indian Supreme Court
further held that if a decision is arrived at on no evidence or evidence which is thoroughly
unreliable and no reasonable person would act upon it, the order court in the said case however held
that if in would be perverse. The Court in the said case however held that if in some case there is
some evidence on record which is acceptable and which could be relied upon, howsoever
compendious it may be, the conclusions would not be treated as perverse and the findings would not
be interfered with. On the strength of the aforesaid test laid down by it, the Indian Supreme Court
held that:
“It should plainly be comprehended that when a court is applying 'general society strategy' test to a
discretion Award, it doesn't go about as a court of advance and therefore blunders of certainty can't
be redressed. A conceivable view by the judge on realities has fundamentally to pass marshal as the
mediator is a definitive ace of the amount and nature of proof to be depended upon when he
conveys his arbitral Award. Hence, an Award in light of little proof or on prove which does not
measure up in quality to a prepared legitimate personality would not be held to be invalid on this
score. When it is discovered that the judge's approach isn't subjective or fanciful, at that point he is
the keep going word on realities.”64
In the judgment of Associate Builders, the Indian Supreme Court also gave a restricted meaning to
the term justice, morality, and patent illegality to hold that an award would be against 'justice' only
when it shocks the conscience of the court. Same would be the case in testing an arbitral award on
the ground of 'morality'. It held that 'morality' would, if it is to go beyond sexual morality,
necessarily cover such agreements which are not illegal but which would not be enforced in the
given prevailing mores of the day. However, interference on this ground would also be only if
something shocks the conscience of the court.
In so far as the phrase 'patent illegality' was concerned, the Indian Supreme Court again imparted a
restricted and narrower meaning to the same to hold that only those arbitration awards which are

63 Kuldip Singh v. Commr. Of Police AIR 1999 (2) SCC 10

64 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.75, OXFORD University Press,First

Edition ,2018
43
rendered in complete and blatant contravention of the substantive law of India would result in its
death knell. The Indian Supreme Court in the said case held that patent illegality in an arbitral
award should and must go to the root of the matter and cannot be of trivial nature.
On the issue of a award being 'obviously illicit and contradicted to open approach 'by virtue of it
being rendered against the terms of agreement, the Indian Supreme Court in Associate Builders held
that if a judge understands a term of the agreement in a sensible way, it won't imply that the honor
can be put aside on this ground. Development of the terms of an agreement is essentially for a
referee to choose. Unless the authority understands the agreement such that it could be said to be
something that no impartial or sensible individual could do, it can't be addressed before a
supervisory court.65
Vide the said articulation of law, the Indian Supreme Court restored the before position of law that
development of the terms of an agreement is fundamentally for a judge to choose. He is qualified
for take the view which he holds to be the right one in the wake of thinking about the material
before him and subsequent to translating the arrangements of the agreement. The court while
considering test to an arbitral award would not sit in request over the discoveries and choices unless
the judge understands the agreement such that no impartial or sensible individual could do.
Thus, from the position of law stated by the Indian Supreme Court in a series of judgments referred
here in above, it is clear that a domestic award rendered under the 1996 Act, can be challenged
under the broad heads of 'public policy of India', including 'fundamental policy of Indian law' and
'decisions on matters not submitted or beyond matters submitted for adjudication' inter alia on the
following grounds:
1. Failing to adopt 'judicial approach';
2. Deciding matters beyond the arbitrator's jurisdiction or terms of reference;
3. Deciding contrary to the terms of the contract;
4. Reflecting non-application of mind;
5. Failing to draw an inference from the facts that ought to be drawn from them or drawing an
inference, which is on the face of it untenable resulting in miscarriage of justice;
6. Rendering findings that are so unreasonable, perverse, or irrational that the court would conclude
that no reasonable person would have arrived at the conclusion that the arbitrator did. In other

65Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.77-78, OXFORD University
Press,First Edition ,2018
44
words, rendering an award that is so unfair and unreasonable that it shocks the conscience of the
court; 66
7. Rendering an award that is vitiated by patent illegality, such illegality going to the 'root of the
matter' and not being of a 'trivial nature';
8.Rendering an award that is contrary to substantive provisions of law and the provisions of the
Arbitration and Conciliation Act; and
9.Acting in a capricious, arbitrary, or whimsical manner, rather than acting bona fide and dealing
with the subject in a fair, reasonable, and objective manner.
The 1996 Act has now been amended vide the Arbitration and Conciliation Amendment Act, 2015
(the 'Amendment Act'). The said amendment act has though in principle retained all the grounds as
judicially evolved by the Supreme Court of India in the afore-referred cases; however, in an attempt
to restrict the scope of interference, it has provided that 'the test as to whether there is a
contravention with the fundamental policy of Indian law shall not entail review on the merits of the
dispute', and 'patent illegality' would not mean an illegality merely accruing on the ground of
erroneous application of law or re-appreciation of evidence. In effect, by forbidding scrutiny on the
merits of the arbitral award to ascertain violation public policy of India or patent illegality in the
award, the Indian legislature has sought to take away the said portion of ONGC (l) case which
permitted the supervisory courts to scrutinize the merits of the arbitral award so as to ascertain
whether there was any violation in public policy of India or not.
However, as per scholars and academicians in India, it has always been the law that in deciding
challenges to arbitration awards, courts should not enter into the merits of the dispute, 67 re-
appreciate evidence, or substitute their own interpretation in place of another plausible, but
contrary, interpretation of terms of contract adopted by arbitrators. According to them, it has been
the law for the last 116 years. Yet, this has not dissuaded courts from finding a way, by rendering an
expansive interpretation of phrases such as 'otherwise invalid', 'public policy of India', and
'fundamental policy of Indian law , and so on, to embark on a detailed examination of the validity of
awards. Furthermore, the proposed amendment only tells us what examination of fundamental
policy of Indian law' does not entail. It is silent on what it does. This may lead to uncertainty as to
when, and in what circumstances, if not on a review of the merits, could an award be said to be in

66 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.77-78, OXFORD University
Press,First Edition ,2018
67 Union Of India vs. Bungo steel Furniture AIR 1967 SC 1032

45
violation of fundamental policy of Indian law'. In these circumstances, whether the amendment
would really add something new to the law, or rein the courts in, is debatable.68
THE ROAD AHEAD
This takes us to the last question, whether the concepts of 'public of India', fundamental policy of
Indian law', and so on as applicable in scrutinizing domestic awards by local municipal courts in
India are also applicable to foreign awards. Tie answer to the said question lies in the statutory
scheme envisaged in Part Il of the 1996 Act. Under the said part, a foreign award (New York
Convention Awards and Geneva Convention Awards) is binding on an Indian party only if it is
enforceable. Tie test for enforceability provided under the said part mutatis mutandis incorporates
all the grounds as are available to challenge a domestic award. This also includes grounds of 'public
policy of India', 'fundamental policy of Indian law', and so on. Thus, the principles or grounds for
interfering with an arbitral award, as enunciated by the Indian Supreme Court in the afore-referred
cases, are also applicable to foreign awards before the same can be made binding on an Indian party
and enforced in India. This position is regardless of a situation where the said foreign award may
have been upheld by the supervisory courts of the country where the scat of arbitration lies and may
have attained finality as per the law governing the arbitration agreement. 69

68 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.78, OXFORD University Press,First
Edition ,2018
69 ibid.

46
CHAPTER -VI

Rectification of Jurisdiction to Entertain

Arbitration Applications in the Commercial
Courts Act 2015

Pending Practical Re-alignment to Restore the Statutory Right to Appeal?

The Problem
The Commercial Courts, Commercial Division, and Commercial Appellate Division of the High
Courts Act, 2015 (2015 Act) was passed by Parliament on 31 December 2015, and Section1(3) of
the 2015 Act creates a deeming fiction by virtue of which the said Act was given retrospective
effect from 23 October 2015, that is, the date on which the Commercial Courts, Commercial
Division, and Commercial Appellate Division of the High Courts Ordinance 2015 (2015 Ordinance)
came into force. As per Section 10(2) of the 2015 Act, all applications under the Arbitration and
Conciliation Act, 1996 (Arbitration Act), in the cases of domestic arbitration, shall be heard and
disposed of by the Commercial division that is the single bench of the High Court.Hence, the
legislature rectified the poor drafting error by providing that a Single bench would have the
jurisdiction to entertain arbitration applications, and not the Division Bench, as it is the appropriate
bench to the appeal against an order passed on an arbitration application and cannot wear two hats
of first hearing in its original jurisdiction and thereafter hearing in its appellate jurisdiction.70
In this background, the retrospective effect of such rectification would mean that all applications
under the Arbitration Act, in the cases of domestic arbitration, which were heard and disposed of by
the Commercial Appellate Division, that is Division Bench, between the period from 23 October
2015 to 31 December 2015 were heard and disposed without jurisdiction as the correct forum was
the Commercial Division, that is Single Bench of the High Court (View One). However, another
view could be that the 2015 Act could not have intended upsetting the disposed litigation during the

70Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.80-81, OXFORD University
Press,First Edition ,2018
47
period from 23 October 2015 to 31 December 2015 and preserved the same by its savings clause
under Section 23 (View Two). 71
The rectification of the error in the 2015 Ordinance was positively welcomed on the ground that the
Single Bench has jurisdiction to hear arbitration applications as it restored the statutory right to
appeal under Section 37 of the Arbitration Act, in the real sense as the Single Bench would be the
First Court and the Division Bench would be the Appellate Court. However, the ambiguity and
complexity on the issue of restoration of the statutory right to appeal under the Arbitration Act
existed in: (a) whether the statutory right to appeal has been restored prospectively for the period
beginning 31 December 2015 or even retrospectively for the period from 23 October 2015 to 31
December 2015 as the 2015 Act was to take retrospective effect from 23 October 2015, (b) whether
the savings clause under the 2015 Act could be interpreted to save the acts of the Courts (Division
Bench), which during the 2015 Ordinance regime, were vested with jurisdiction to entertain and
dispose arbitration applications, and (c) what remedy lies or is available to the aggrieved litigants
whose arbitration applications were disposed of by a Division Bench in the capacity of the First
Court during the 2015 Ordinance regime, in case after the enactment of the 2015 Act, they choose
to exercise the statutory right to appeal under Section 37 of the Arbitration Act which will be posted
for hearing before the same or Coordinate Division Bench, now wearing the hat of the Appellate
Court. 72

Statutory Right to Appeal under the Arbitration Act: Is It Restored for Some or All?
Section 37 of the Arbitration Act provides to an aggrieved person the statutory right to appeal
against an order passed under the various provisions of the Arbitration Act as stipulated therein.
Such right of appeal, in view of the settled legal position, is not merely a matter of procedure but a
substantive right. The right of appeal from the decision of an inferior court becomes vested in a
party, when proceedings were first initiated before an inferior court. In this context, reliance may be
placed upon the judgment of the Hon'ble Supreme Court in the case of Hoosein Kasam Dada (India)
limited v. State of Madhya Pradesh.73 Such a vested right, it was held, not be taken away except by
an express enactment or by necessary intendment.

71 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p. 80-81, OXFORD University
Press,First Edition ,2018
72 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.81-82, OXFORD University

Press,First Edition ,2018

73 Hoosein Kadam Dada (India) Ltd. v. State of Madhya Pradesh AIR 1953 SC 221

48
This proposition of law was crystallised in the Constitutional Bench judgment of the Hon'ble
Supreme Court in the case of Garikapati vs. N. Subbiah Choudhary74 wherein the Hon'ble Court
recorded its conclusions in paragraph 23, which is extracted here:
23. From the decisions cited above, the following principles emerge:
1.That the legitimate quest for a cure, suit, bid and second interest are truly yet ventures in a
progression of procedures all associated by an inborn solidarity and are to be viewed as one
lawful proceeding
2. right of appeal is not a mere matter of procedure but is a substantive right.
3. The institution of the suit conveys with it the suggestion that all privileges of advance at that
point in drive are safeguarded to the gatherings there to till whatever remains of the career of the
suit.
4. The privilege of appeal is a vested right and such a privilege to enter the better court accumulates
than the defendant and exists as on and from the date the lis starts and in spite of the fact that it
might be really practiced when the unfavorable judgment is articulated such right is to be
administered by the law winning at the date of the foundation of the suit or continuing and not by
the law that wins at the date of its choice or at the date of the documenting of the interest.
5. This vested right of appeal can be taken away only by a subsequent enactment, if it so provides
expressly or by necessary intendment and not otherwise. 75
In view of the aforesaid judgments as reiterated from time to time, it is well settled that the right of
appeal is not a mere matter of procedure but a substantive right. Therefore, this substantive right
vested in a litigant could not have been abridged or taken away. In particular context of the 2015
Ordinance, the Division Bench of the Delhi High Court in Roger Shashoua & Ors. v. Mukesh
Sharma & Ors.,76 observed that there is an inherent inconsistency in the reading of Section of the
2015 Ordinance, to the extent that it takes away the statutory right to file appeal under Section 37 of
Arbitration Act.
Eventually, in consonance with the aforesaid settled principles of law, the Division Bench of the
Delhi High Court (even during the 2015 Ordinance regime) in Ascot Estates Pvt. Ltd. v. Bon Vivant
Life Style Ltd. (Ascot case)77 when faced with the issue whether the right of appeal conferred by
Section 37 of the Arbitration Act which has been specifically preserved by Section 13 of the 2015

74 Garikapati v. N.Subbiah Choudhary AIR 1957 SC 540

75 Garikapati v. N.Subbiah Choudhary AIR 1957 SC 540

76 Roger Shashoua & Ors. v. Mukesh Sharma & Ors.OMP (COMM) NO.1 of 2015

77 Ascot Estates Pvt. Ltd. v. Bon Vivant Lifestyle Ltd. OMP(I) COMM NO 16 of 2015

49
Ordinance can be taken away by Section 10 of the 2015 Ordinance inter alia: (a) interpreted
Section 10(1) and Section 10(2) of the 2015 Ordinance harmoniously with Section 13 of the 2015
Ordinance to preserve the substantive right to appeal conferred by Section 37 of the Arbitration Act
and (b) read down Section 10(2) of the 2015 Ordinance holding that all applications under the
Arbitration Act relating to commercial dispute of a specified value has to be adjudicated only by the
Commercial Division, that is, a Single Bench of the High Court.978 Moreover, any interpretation to
the contrary would be absurd and the aforesaid reading down was finally rectified while passing the
2015 Act.
However, despite rectification of jurisdiction while passing the 2015 Act, it remains unsettled,
whether the statutory right to appeal was restored prospectively, that is, only for litigants filing
arbitration applications after passing of the 2015 Act on 31 December 2015 or retrospectively, that
is, for all the litigants regardless of the time of filing of the arbitration applications during the 2015
Ordinance regime as it could not have been abridged in the first place by the 2015 Ordinance. The
concern is that the statutory right of appeal will be of no meaning in practicality for the set of
litigants whose arbitration applications were disposed of by the Division Bench during the
2015 Ordinance regime (23 October 2015 to 31 December 2015) as if they now (post 31 December
2015, that is, passing of the 2015 Act) file an appeal then the same will be listed before the same or
Coordinate Division Bench (Appellate Bench as per the 2015 Act) for disposal. Thus, the need
arises for a real practical realignment to actually restore the statutory right to appeal for such
aggrieved litigants.79

The Solution: Review Application

The Commercial Courts Act was notified on 31 December 2015 with retrospective effect from 23
October 2015 by repealing the Commercial Court Ordinance. As per Section 10 (2) of the
Commercial Courts Act, only the Commercial Division (and not Appellate Division) has the
jurisdiction to entertain arbitration applications under the provisions contained in the Arbitration
Act. This provision as it existed in the Commercial Ordinance wrongly provided that such
applications under the Arbitration Act were to be heard and disposed of by the Commercial

78 International law office , ‘Transition from Commercial Courts Ordinance to Commercial Courts Act: Ambiguities and
Implications’ ,http://www.internationallawofice.com/Newsletters/Arbitration-ADR/Indian/Khaitan-Co/Transitions-
from-Commercial-Courts-ordinance-to-Commercial-Courts-Act-ambiguities-and-implications last accessed on
21-01-2017
79 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.84-85, OXFORD University

Press,First Edition ,2018

50
appellate Division. The legislature realised such apparent mistake in Section 10 (2) of the
Commercial Courts Ordinance rectified the provision while enacting the Commercial Courts Act
and changed the term 'Commercial Appellate Division' to'Commercial Division .
Interestingly, the said rectification of the error/mistake by Section 10 (2) of the Commercial Courts
Act has resulted in more ambiguities and complications rather than simplifying and solving the
inconsistencies and adverse implications arising therefrom. This is particularly applicable in the
wrongful exercise of jurisdiction by Commercial Appellate Division (instead of the Commercial
Division) during the intervening period, that is, from 23 October 2015 till 31 December 2015.
Litigants who have suffered or have been aggrieved by the orders passed by the Commercial
Appellate Division during such intervening period, when there was lack of clarity in the legal
position, have been rendered remediless in as much as their substantive right to file an appeal
against an adverse order passed by the Commercial Appellate Division has been virtually taken
away. In other words, Section 37 of the Arbitration Act, which provides for a statutory right to an
appeal to a party aggrieved by an order passed in an Arbitration Application, inter alia, under
Section 9 of the Arbitration Act was made redundant in view of the fact that an Appeal under
Section 37 of the Arbitration Act could not be heard before a Coordinate Bench (Division Bench),
when the original application itself has been heard and disposed of by a Division Bench
(Commercial Appellate Division).80

Ground for Review: No Jurisdiction

Subsequently, in perspective of the discoveries in the Ascots case (pre-2015 Act and cash of the
2015 Ordinance) and the death of the 2015 Act giving that the Commercial Division, that is, Single
Bench might hear all applications under Arbitration Act in household mediations, all gatherings
who confronted an ominous request on being heard by the Commercial Appellate Bench, that is,
Division Bench between the interceding time frame, that is, from 23 October 2015 to 31 December
2015, ought to fall back on documenting an audit application on the ground of 'patent mistake'
expressing that the Commercial Appellate Bench acted without purview as the fitting discussion
was the Commercial Division, that is, Single Bench of the High Court in wording with View One.
Moreover, absence of locale is a 'patent mistake' perceived as a fit ground for survey by courts, and
the Hon'ble Supreme Court in Raja Shatrunji v. Mohammad Azmat Azim Khan and Ors.81 (Raja

80Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.85, OXFORD University Press,First
Edition ,2018
81 Raja Shatrunji v. Mohammad Azmat Azim Khan and Ors.1971 2 SCC 200,PARA 13

51
Shatrunji case) held that one of the grounds for review is an error apparent on the face of record
which would encompass a judgment applying the unamended law where a statute has been
amended retrospectively.
The Raja Shatrunji case was recently reiterated by the Bombay High Court in VIP Industries Ltd. v.
Commissioner of Central Excise, Nashik, Maharashtra.82 Furthermore, the Hon'ble Supreme Court
in Union of India v. Sube Ram 83 held as follows:
It is now settled legal position that the claimants would be entitled to the enhanced solatium and
interest only if the proceedings were pending either before the Land Acquisition Officer or the
court. The word 'Court' defined under Section 2(d) of the Act as on the date of Amendment Bill was
introduced and Act made by Parliament, was civil court. Therefore, the question that arises is
whether the High court has jurisdiction to entertain the application for enhancement after the
Amendment Act 68 of 1984 came into force. It is true that if it were a case of a superior court
having interpreted the law and the law having become final, by Order 47 Rule 1 CPC it could not
constitute a ground for review of the judgment. But here is the case of entertaining the application
itself; in other words, the question of jurisdiction of the court, Since the appellate court has no
power to amend the decree and grant the enhanced compensation by way of solatium and interest
under Section 23(2) and proviso to Section 28 of the Act, as amended by Act 68 of 1984, it is a
question of jurisdiction of the court. Since courts have no jurisdiction, it is the settled legal position
that it is a nullity and it can be raised at any stage.
Moreover, the Hon'ble Supreme Court in Zuari Cement Ltd. v. Regional Director, ESIC, Hyderabad
& Ors. 84 has reiterated the well-settled principle that the issue of lack of jurisdiction even if
acquiesced can be raised at any stage as it makes the order without jurisdiction non est in the eyes
of law and void. Thus, all the orders passed by the Division Bench during the 2015 Ordinance
regime, that is 23 October 2015 to 31 December 2015, are non est in the eyes of law for being
passed without jurisdiction and may be subjected to review.

Discrimination Due to a Drafting Error

One may take the view that if courts entertain such review applications, it may lead to unsettling
settled litigation as that could not have ever been the intention of the 2015 Act, and during the 2015
Ordinance regime, the Division Benches of the High Courts were well vested with the jurisdiction

82 VIP Industries Ltd. v. Commissioner of Central Excise,Nashik,Maharashtra AIR 2010 SCC Online BOM.1908
83 Union of India v. Sube Ram AIR 1997 9 SC 69 para 5
84 Zuari Cement Ltd. v. Regional Director ESIC ,Hyderabad Civil Appeal no. 5138-40/2007

52
to hear arbitration applications at the first instance itself. However, it is pertinent to note that if the
review applications are not entertained, then injustice and discrimination will be caused as: a. one
category of parties (who suffered an unfavourable order between 23 October 2015 and 31
December 2015) would have lost their statutory right to appeal and are left only with discretion of
the Hon'ble Supreme Court to be exercised under Article 136 of the Constitution, which also may
lead to opening of floodgates and b. another category of parties (who suffered an unfavourable
order post 31 December 2015) would have their statutory right to appeal as an available remedy.14
Hence, the balance tilts in favour of filing of review applications as opposed to non-filing of review
applications as it is the only way to negate 'discrimination due to drafting error', between parties
approaching the court by filing arbitration applications when the error existed and when the error
had been rectified. Moreover, filing of review applications is the only way how the statutory and
substantive right to appeal available to an aggrieved party under Section 37 of the Arbitration Act
can be protected for all (2015 Ordinance regime) and not some (post-2015 Act). 85

Bar to Review: Savings Clause?

The repeal and savings clause contained in Section 23 (2) of the Commercial Courts Act which
provides that 'anything done or any action taken under the said ordinance, shall be deemed to have
been done or taken under the corresponding provision of this Act', only adds to the confusion.
Applying the aforesaid repeal and savings clause to a situation where a Commercial Appellate
Division (Division bench) has heard, adjudicated, and disposed of an application under the
Arbitration Act in terms of Section 10 (2) of the Commercial Courts Ordinance would be deemed to
have been passed by the Commercial Division (Single Bench). Such an interpretation would also
lead to an absurdity, as in that case also the substantive right to file an appeal under Section 37 of
the Arbitration Act cannot still be restored back, as in fact a Division Bench has disposed of the
original application and a Coordinate Bench (Division Bench) cannot sit in appeal against the same
order.
Thus, even though on a standalone prima facie interpretation of the Savings and Repeal Clause
under Section 23 may be that what was done during the period from 23 October 2015 to 31
December 2015 stands preserved and will not be undone, a harmonious interpretation of Section
23(2) of the 2015 Act with Section 1 (3) of the 2015 Act expressly providing for retrospective effect
from 23 October 2015 may unsettle what is done. Moreover, the Hon'ble Supreme Court in M.S.

85Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.87-89, OXFORD University
Press,First Edition ,2018
53
Shivananda v. Karnataka State Road Transport Corporation and Ors. 86 has held that when an Act
replaces an Ordinance with express legislative intention of having retrospective effect from the date
when the Ordinance was notified then the acts done under the Ordinance stand 'wholly effaced’.

Conclusion
In light of the factual context and settled principles of law, the ambiguities arising out of the
positive rectification in jurisdiction (Single Bench to entertain arbitration applications and not
Division Bench), while passing the 2015 Act, and the corresponding responses are summarized as
follows:
1. Whether the statutory right to appeal has been restored prospectively for the period beginning 31
December 2015 or even retrospectively for the period from 23 October 2015 to 31 December
2015 as the 2015 Act was to take retrospective effect from 23 October 2015. First Response: the
question of 'restoring' the statutory right to appeal does not arise at all because the same could not
have ever been taken away in the manner done by the 2015 Ordinance. Second Response: the
statutory right to appeal has been restored retrospectively for the period from 23 October 2015 to 31
December 2015 as the 2015 Act was to take retrospective effect from 23 October 2015.
2. Whether the savings clause under the 2015 Act could be interpreted to save the acts of the courts
(Division Bench) as during the 2015 Ordinance Regime, the courts (Division Bench) were vested
with jurisdiction to entertain and dispose arbitration applications. The savings clause under the 2015
Act cannot be interpreted to save the acts of the courts (Division Bench) as during the 2015
Ordinance regime, the courts (Division Bench) even if it is argued that then the Division Bench was
vested with jurisdiction to entertain and dispose arbitration applications. Moreover, when an Act
replaces an Ordinance with express legislative intention of having retrospective effect from the date
when the Ordinance was notified (Section 1(3) of the 2015 Act) then the acts done under the
Ordinance stand 'wholly effaced'.
3. What remedy lies/is available to the aggrieved litigants whose arbitration applications were
disposed of by a Division Bench in the capacity of the First Court during the 2015 Ordinance
regime, in case after the enactment of the 2015 Act they choose to exercise the statutory right to
appeal under Section 37 of the Arbitration Act which will be posted for hearing before the same or
Coordinate Division Bench, now wearing the hat of the Appellate Court.

86 MS ShivaNanda v. Karnataka State Road Transport Corporation and Ors. AIR1980 1 SCC 149
54
All parties who faced an unfavourable order on being heard by the Commercial Appellate Bench,
that is, Division Bench,. between the intervening period, that is, from 23 October 2015 to 31
December 2015, should resort to filing a review application on the ground of 'patent error' stating
that the Commercial Appellate Bench acted without jurisdiction as the appropriate forum was the
Commercial Division, that is, the Single Bench of the High Court. As on date, the aforesaid
ambiguities have not been settled by the courts of law, however, it may not be long before the High
Courts of the country are approached to resolve the aforesaid ambiguities
followed by the Hon'ble Supreme Court. 87

87Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.89-90, OXFORD University
Press,First Edition ,2018
55
CHAPTER -VII
Institutional Arbitration in India

It is commonly accepted today that alternative dispute resolution (ADR) has not been successful as
contemplated in resolving commercial disputes in India.l Considering the fact that India is on its
way to become a key player in the world economy, this unacceptable state of affairs prompted the
Government of India and the Parliament to initiate far-ranging amendments to the Indian
Arbitration and Conciliation Act, 1996 (Arbitration Act) in 2015.88
Among the various causes that contributed to the present state of arbitration in India, perhaps the
most significant one has been the lack of penetration of institutional arbitration in the Indian
context• Ad hoc arbitration is based on the arbitration clause in the agreement without reference to a
specific arbitral institution or a specific body of rules. Institutional arbitration, on the other hand,
mandates arbitration administered by a specialised institution, where the arbitral process is managed
by the rules under the supervision of the said institution. In its purest form, ad hoc arbitration
represents a significant degree of party autonomy, and the parties can decide not just the manner of
dispute settlement but also the details of procedure which will govern such dispute resolution.
Institutional arbitration, to a large extent, curbs party autonomy, certainly in terms of procedure, but
compensates for it with procedural certainty, guaranteeing availability Of high-quality arbitrators, as
well as infrastructural and administrative support.
The aim of arbitration is to resolve commercial disputes in a manner which is cost and time
efficient, particularly when compared to traditional court-driven dispute resolution. This has not
been the case with ad hoc arbitration in the Indian context, where it as often proved to be more
expensive than litigation. An examination reveals that ad hoc arbitration, in practice, suffers the
same maladies as court litigations: incessant delays and adjournments, uncontrollable and
unpredictable costs, and overemphasis on procedure. Added to this is the lack of accountability of
the arbitrators and the absence of rules of conduct and standards of professional ethics applicable to
arbitrators.5 These fallacies negate the fundamental reasons why parties choose arbitration.89

88 Justin D’Agostino, ‘Arbitration in Asia at Full Gallop’, Kluwer Arbitration blog available http://
kluwerarbitrationblog.com/2014/02/10/arbitration-in-asia-at-full-gallop accessed on 21-02-2018
89 Namrata Shah and Niyati Gandhi, ‘Arbitration: One Size Does Not Fit All: Necessity of Developing Countries,’

Journal of International Commercial Law and Technology p.235, (4,2011)

56
The experience of most participants with arbitration in India has contributed to a widespread
erosion of faith in the arbitral process. Accordingly most parties, including Indian parties, prefer to
opt for arbitration governed by institutions outside India. In fact, today, India appears before the
Singapore International Arbitration Centre (SIAC) with most number of arbitration cases.
In most developed countries, institutional arbitration is the preferred form of arbitration since it is
more predictable and usually more efficient than ad hoc arbitrations. By contrast, more than 95
per cent of all arbitrations that happen in India are ad hoc in nature.90
Given the concerns with ad hoc arbitration, in particular the elements of delays and costs, the way
forward for ADR in India is to increase the penetration and popularity of institutional arbitration12
This is a view that found support from the Ministry of Law and Justice of the Government of India,
which has noted with urgency the need to develop arbitral institutions in India: 'As a result of the
structured Procedure and administrative support provided by institutional arbitration, it provides
distinct advantages which are unavailable to parties opting for ad-hoc arbitration.
The Supreme Court of India has acknowledged that institutional arbitration can be a cost effective
solution to the increasing costs of arbitration. Also opined the same in this case of Union of India
v/s Singh Builder Syndicate.91

The Problems with Ad Hoc Arbitration

As previously stated, ad hoc arbitration is the ultimate manifestation of party autonomy. Parties
have the freedom to determine all aspects of the arbitration including the manner of appointment of
the arbitral tribunal, manner of obtaining evidence, frequency of hearing, arbitrator fees, location,
and so on. While theoretically it gives parties greater flexibility and may possibly make the
arbitration more flexible, cheaper and faster than its institutional counterpart, in practice it suffers
from significant shortcomings, which are briefly outlined as follows.

Lack of Certainty of Procedure

Ad hoc arbitration requires the parties to decide the applicable procedures. This remains an ideal
method of dispute resolution if parties approach the arbitration. However, once a dispute has
occurred, the presumption of cooperation vanishes and the question of procedure leads to protracted

90 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.92-93, OXFORD University
Press,First Edition ,2018
91 Union of India v. Singh Builder Syndicate AIR 2004 SC 491

57
conflicts and delays. Procedural issues affecting the fundamentals of arbitration, setting the terms of
reference, time for hearings, time limit for making of the award, and so on, usually consume a lot of
time.The chances that one of the parties will use these uncertainties to delay proceedings or cause a
stalemate also increases. For example, with respect to the appointment of arbitrators, if one of the
parties refuses or delays doing so, while institutional rules would provide for how such a situation
can be addressed, in ad hoc arbitration the parties would have no recourse but to approach a court of
law. This increases involvement of a court particularly in the 'pre-arbitration' phase. Further, since
the arbitral tribunal has significant powers in terms of determining
procedural matters, it may make the process unpredictable.92

Retired Judges as Arbitrators

An overwhelming majority of arbitrators in ad hoc arbitrations have been retired judges of the
Supreme Court of India or the High Courts. Given that the judges are familiar with adversarial
litigation, they tend to approach arbitrations in the same manner in most cases. This results in the
loss of one of the fundamental features of arbitration—the spirit of settlement. Judges turned
arbitrators are also much likely to permit delays and adjournments and in fact do tend to get bogged
down by procedures.93

Costs
Ad hoc arbitration tends to be, in final count, higher than institutional arbitrations and often turn out
to be higher than court proceedings. More importantly, these costs are difficult to assess when the
arbitration is initiated. Expenses include administrative expenses and costs of counsel as well,
which keep adding up and can end up making ad hoc arbitration prohibitively expensive.
Particularly, in case, one of the parties takes advantage of procedural loopholes and there is frequent
recourse to court proceedings, costs can spiral out of control.94

Quality and Availability of Arbitrators

The quality of arbitrators has been generally poor, and in the absence of a reference point for
determining their value, parties are forced to choose the best among the available ones, In fact,

92 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.94-95, OXFORD University
Press,First Edition ,2018
93 Justice Ajit Prakash Shah,’Need to Bring Reforms in Indian Arbitration Law ‘,Indian Council of Arbitration Quarterly

,p.2.,(Oct-Dec 2005 )
94 Price Waterhouse Cooper, ‘Corporate Attitudes’, 2nd Edition ,p.11,Oxford Press ,2015

58
within the circles a small group of effective arbitrators have been identified whom all parties wish
to use. Lack of dates from such arbitrators stretches the the arbitral process.Added to this is the fact
that there are few arbitrators with specialised or technical backgrounds, which reduces the ability of
arbitral tribunals to deal with complex technical and domain-specific disputes.Finally, in many uses,
arbitrators are found to be not proactive enough to identify preliminary issues, are not prepared for
hearings. Are biased in favour of the appointing party and ultimately produce poor quality arbitral
awards.95

Logistics and Infrastructure

Parties spend precious organizational time and expenses to deal with the logistics of arbitration well
coordination and clerical work. Parties arc often compelled to hiring facilities at expensive hotels
or similar venues which increases the cost of arbitration.
There is therefore very little doubt that in the Indian context ad-hoc arbitration is an inefficient and
costly method of redressal and furthermore, imposes a disproportionate onus on the disputing
parties appearing before it.

Advantages of Institutional Arbitration

Availability of Pre-Established Rules and Procedures

Compared to ad hoc arbitration, institutional arbitration is more transparent and accountable, and
the arbitral institution contributes significant procedural know hows. Tried and tested arbitral rules,
which are primarily designed to maximize the efficiency of the arbitration process, are mechanically
incorporated in the arbitration agreement. This ensures that even if a situation arises wherein the
parties have not contemplated or wherein one of the parties decide to be non-cooperative, the rules
usually have fall backs, allowing resolution of issues with the intervention of the institution and
permitting the arbitral process to move. For example, appointment and removal of arbitrators who
are biased are usually matters explicitly dealt with by the rules, which fails to serve the purpose of
the parties who approach the courts. This repeatedly creates uniformity, certainty, and more
stability. Most institutions also regularly update their rules, drawing on the expertise of experienced
arbitrators as well as the practical learning from precedent arbitrations.

95International Bar Association,’The Current State and Future of International Arbitration:Regional

Perspectives,’(September 2015) available http://www.ibanet.org/Document/Default.aspx?
DocumentUid=2102ca46-3d4a-48e5 ,accessed 6-2-2018
59
Reputation
Another inherent advantage of institutional arbitration is the reputation of the institution. This
impacts any future challenges to an award of the institution. Awards issued by a well-known
institution are easier to enforce. Challenges from a procedural perspective are limited, if the
procedures of the institution have been followed.96

Monitoring and Supervision

The establishment plays out various parts including deciding if there is a by all appearances
assertion understanding, the quantity of authorities, arrangement of mediators, dismissal of the
judges, guarantee that the interventions are directed in consistence with the guidelines and supplant
them if fundamental, decide the place of discretion, settle and expand time limits, decide the
charges and costs of referees and investigate grants. This dispenses with any procedural discretion
and furthermore decreases any view of inclination. Foundations guarantee that the thinking and
substance of the honor are suitable and exhaustively managed while screening grants before they
are given to parties every single applicable issue, claims, and counterclaims.97

Administrative and Infrastructural Assistance from the Institution :

Most arbitral institutions have trained staff and case management teams to administer the
arbitration.40 Parties do not have to worry about the logistics of administering the arbitration,
collection of fees, recovery of expenses, arbitration venue, and so on. Most institutions also have
physical facilities and support services, which allow the parties and the arbitrators to focus on
resolving the dispute rather than be concerned with logistical aspects. The institution is ready to
assist, especially in the selection of the arbitrators. Some institutions are also tech savvy to use
modern technological tools for example, e-filing of documents and petitions and video-
conferencing to resolve disputes. 98

Quality of Arbitrators
In institutional arbitrations, arbitrators are typically appointed by the institution based on pre-
specified criteria. This ensures a first level of scrutiny because only arbitrators who meet the

96 Kaur. ‘The 1996 Arbitration and Conciliation Act’,p.278,CLA Publications,3rd edition,2002

97 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.97, OXFORD University Press,First
Edition ,2018
98 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.97, OXFORD University Press,First

Edition ,2018
60
qualification criteria of the institution would qualify for a panel. Institutions maintain extensive
database of arbitrators in order to assist parties in appointment stage. 99

Transparent Fee Structure

Institutions ensure certainty of costs through the use of expedited timelines and specified cost
guidelines. The remuneration of arbitrators is also set out by the institution. Since arbitrator fee is
one of the largest contributors to the costs of arbitration," this (along with clear timelines) is a key
advantage for disputing parties.

Code of Conduct and Conflicts of Interest

The institution will have a prescribed code of conduct or rules of professional ethics, which all the
arbitrators have to comply with, under the supervision of the secretariat of the institution.100
Institutions also set behavioural norms in terms of consistency of procedure and conduct of
proceedings, reducing the chances of any procedural capriciousness originating from the tribunal.
Institutions ensure that the appointment of arbitrators is confirmed only if their independence

and impartiality is established.101

Law Commission's Recommendations on Institutional Arbitration

The Arbitration Act was ordered in 1996 with a view to align Indian assertion law with global
practices. The arrangements of the Arbitration Act depended on the UNCITRAL Model Law.On
International Commercial Arbitration, and the Arbitration Act supplanted an assortment of out-dated
laws including the Indian Arbitration Act, 1940 and the Foreign Awards (Recognition and
Enforcement) Act, 1961. The expressed target of the Arbitration Act was to empower discretion as a
savvy and fast component for question settlement. As abridged under the watchful eye of, the law
can't be said to have prevailing for an assortment of reasons.

The 20th Law Commission of India102 was cognizant of and extremely concerned with the state of
arbitration in the country, critiquing sharply the 'culture of frequent adjournment when arbitration is
treated as secondary by lawyers'. Accordingly, the Law Commission advocated sweeping changes

99 Yves Derains,’The Future of ICC Arbitrations’,George WashingtonUniversity Journal ofInternational Law and
Economics, p.437 (1979-80)
100 Justice RC Lahoti ,”International Commercial Arbitrations:Challenges and Possibilities in Asian Countries’,p.3

101 Rajoo ‘Institutional and Adhoc arbitration’ p.555 CLA Publications 2nd edition 2002

102 20th Law Commission of India,Report No.246,’Amendments to the Arbitration Act,1996’(August 2014)

61
to the existing Arbitration Act, with the express aim of streamlining the process and encouraging
institutional arbitration. Some of the key recommendations of the Law Commission in its report
were encouragement of institutional arbitration as a culture; all references by a Court to arbitration,
where required under the law or under the arbitration agreement to be arbitral institutions; legal
sanction of an ‘emergency' arbitrator; requirement that an application for appointment as arbitrator
to a court to be disposed of within 60 days of filing; requirement that arbitration be commenced
within 60 days of filing of any application for interim order from a court of law; and the stipulation
that once the arbitral tribunal has been constituted, the court shall not entertain an application under
Section 9 of the Arbitration Act (which provides for interim measures from a court of law).Instead
the parties should approach the arbitral tribunal which would have wide powers of granting interim
measures, which could be enforced on par with court orders. The Law Commission further
recommended that challenges to arbitral proceedings will be dealt with expeditiously, and in any
event, within 12 months of notice to the respondent and the development
of a model fee structure for domestic ad hoc arbitration.

The 2015 Amendments to the Arbitration Act : The Government of India made wide-ranging
amendments to the Arbitration Act through the Arbitration and Conciliation (Amendment) Act,
2015 (No. 3 of 2016) (2015 Amendment) in order to facilitate timely and more cost-effective
arbitration.103 Some of the key amendments are:

Time-bound Arbitration
In terms of the newly introduced Section 29A to the Arbitration Act, the arbitral tribunal is required
to make an award within 12 months from the date of initiation of arbitration, extendable to 18
months with the consent of the parties. After 18 months, it can only be extended by a court for
sufficient cause. court also has the right to order that the fees by the arbitral tribunal is reduced (by
not more than 5 per cent of the fees for every week of delay) if the delay can be attributed to the
actions of the tribunal. This is expected to serve as a deterrent to the arbitral tribunal and avoid
unnecessary adjournments and delay. There is also provision for additional fees for the arbitral

103Pillai and Shan in Kluwer Arbitration Blog,10 March 2016 available http://kluwerarbitrationblog.com/2016/03/10/
persisting-problems-amendments-to-the-indian-arbitration-and-conciliaton-act accessed on 8-07-2016
62
tribunal if parties agree. India is one of the first jurisdictions in the world which has specified a
statutory time limit for arbitration.104

Fast-Track Arbitrations
The Arbitration Act now permits, in Section 29B, a fast-track arbitration process for certain disputes
where the arbitration has to be concluded within 6 months.

Appointment of Arbitrator
Section 11 of the Arbitration Act initially gave that if the parties couldn't select an authority then the
Chief Justice of the High Court or the Supreme Court of India can do as such. Another sub-segment
has now been added to Section 11 such that an application for arrangement of a referee will be
discarded by the High Court or Supreme Court by and large, as speedily as could be expected under
the circumstances. Attempts ought to be made to close such arrangement inside 60 days. Moreover,
the arrangement of the judge might be by the High Court or the Supreme Court (as a foundation) as
opposed to the Chief Justice of a High Court or the Chief Justice of India by and large. The
arrangement of a judge has been moved from a legal capacity to an authoritative one.

Power of Interim Relief : Section 17 of the Arbitration Act was amended to give the arbitral tribunal
the same powers as a civil court, including the power to grant interim relief as specified in Section 9
of the Arbitration Act (which means that the interim injunctions are now enforceable) for both
domestic and overseas arbitrations.105 Section 17 was also amended to state that in case an arbitral
tribunal has been constituted, no court would pass interim orders related to that arbitration.106

Initiation of Arbitration Proceedings

Arbitration proceedings are required to be commended within 90 days of any application for interim
relief by one of the parties to the arbitration. Any interim relief provided elapses at the end of this

104 Sanjeevi Sheshaddri ,’Section 29A of the new Arbitration act:An Attempt at Playing Hydra( 2 February
2016) ,available http://kluwerarbitrationblog.com/2016/02/02/s-29a-of-the-new-arbitration-act-an-attempt-at-slaying-
hydra/ accessed on 8 July 2016
105 International Chambers of Commerce Rules of Arbitration,2012 available http://www.iccbwo.org/products-and-

services/Arbitration-and-ADR/Arbitration/Rules-of-arbitration/ICC-rules-of-arbitration/ accessed on 21-01-2018

106 Gunjan Chhabra, ‘Foreign Seated Arbitration: Section 9 Reliefs Post Amendment,2015’,in Indian Corporate Law

Blog (9 May 2017) available http://www.indiacorplaw.blogspot.in/2016/05/foreign-seated-arbitration-section-9.html

accessed on 21-01-2018
63
90-day period. would avoid a situation where parties would obtain an interim relief and then delay
initiating arbitration since their interests were protected.

Guidelines on Conflict of Interest

The 2015 Amendment, in Section 12, incorporates by reference the International Bar Association
(IBA) Guidelines on Conflict of Interest in International Arbitration which reflects the international
best practices with respect to impartiality and independence of arbitrators. This includes the Red
List (waivable and non-waivable) and Orange List (requiring disclosure) formulation of conflicts
and disqualifications.107

Reducing the Scope of the 'Public Policy Challenge'

Under the Arbitration Act, an order of an arbitrator could be challenged on the ground that it is
against the 'public policy' of India. Courts were likely to interpret this clause widely increasing the
scope of challenging an arbitration award. The 2015 Amendment seeks to address this by providing
a fairly restrictive definition of public policy, which is restricted to the following situations: (a) the
award was induced or affected by fraud or corruption, (b) the award was in contravention of a
fundamental policy of Indian law or, (c) the award in conflict with the most basic norms of morality
and law.

Comprehensive Provision for Costs

Section 3 IA has been added to the Arbitration Act as a comprehensive provision for costs. It applies
not only to the arbitration proceedings but also to the related costs of any court proceedings. The
section is intended to discourage frivolous litigation.108

Fees Chargeable by Arbitrators

The 2015 Amendment introduces a fourth schedule which specifies the model fees chargeable by
arbitrators. However, this schedule is not legally binding and needs to be incorporated into rules by
individual high courts for it to be effective.

107 Assigna-VIL JV v. Rail Vikas Nigam Ltd. Arb 677/2015 Delhi HC Judgement dated 29 April 2016
108 AdityaKurien, ‘Arbitration Reform in India: A Look at the Hong Kong Model’, International Arbitration Asia(21
July 2015), available http://www.internationalarbitrationasia.com/articles/arbitration-reform-in-india-a-look-at-the-
hong-kong-model/ accessed 21 July 2015
64
Challenge to an Award
The 2015 Amendment amends Section 36 of the Arbitration Act to the effect that the filing of an
application challenging the award would not automatically stay the operation of the award. A court
must grant a specific order for stay. Further, Section 34(6) has been introduced to state that any
challenge to an arbitral award shall be disposed of within 12 months.

Conclusion
It is evident that the Parliament and the Government of India recognizes that if India intends to
grow as a commercial superpower, it needs to develop a robust commercial dispute settlement
infrastructure and inculcate confidence in its legal system. Given the lack of success of the Indian
arbitral regime, the government has chosen a'top—down' approach to initiate reform and increase
the effectiveness of arbitration."109 In this context, the changes made by the 2015 Amendment can
be broadly classified under three major bundles: (a) ensuring that the arbitral process can be
concluded within a strict timeline and reasonable cost; (b) reducing the scope of judicial
intervention either before, during or after the arbitration to a minimum' and (c) ensuring the
integrity and neutrality of arbitrators.
Along with the arbitration law, the Indian Government also came out with a law related to creation
of commercial courts, Commercial Division, and Commercial Appellate Division of High Courts
Act, 2015 (No.40f 2016) 110 which provides that arbitration above a particular value determined by
the Central Government time to time (but not less than Rs. 10 million) shall be heard by specially
qualified commercial courts. “This again will positively influence parties in choosing
arbitration.”111

Prior to the amendment, the Arbitration Act, with its emphasis on party autonomy, inadvertently
favoured ad hoc arbitration.112 The 2015 Amendment reduces this party autonomy to a significant
degree by introducing procedural strictures in the arbitral process.This ensures an encouragement of

109 Rohit Singhal ,Shishir Kant,and Mayank Rajput, ‘Dispute Resolution in The Light Of New Arbitration Act of
2015’,Long International , available http://www.long-intl.com/articles/
Long_Intl_Dispute_Resolution_in_India_in_the_light_of_new_arbitration_act_of_2015.pdf , last accessed on 8 July
2016
110 Available http://www.indiacode.nic.in/acts-in-pdf/2016/201604

111 Sulabh Rewai ‘Are Commercial Courts The Answer To India’s Arbitration Woes?’Kluwer Arbitration Blog( 25

December 2016)
112 Patkar ‘Indian Arbitration ‘ p.63 Oxford University Press,2nd Edition,2008

65
institutional arbitration since it best suited to ensure that individual and all arbitrations take place in
accordance with the provisions of the revised Arbitration Act.
The key reasons for a jurisdiction to succeed as a well-recognized venue for international arbitration
include the presence of an institution of repute; volume, variety, and quality of specialist advice;
a minimum intervention policy from the judiciary; and a strong rule of law. A jurisdiction that
wishes to promote arbitration must therefore adopt a pro-arbitration policy, which needs to
permeate across the lawmakers, the administrators and the Courts. In addition to these key factors, a
number of 'soft' factors also play a part, for example, the quality of general level of infrastructure,
ease of travel, geographical location and the levels of commerce. With the amendments to the
Arbitration Act, the government seeks to address some of these issues, but all of it cannot of course
be achieved through legislation. There has been no strong arbitral institution which could operate
within the intricacies and complications of the Indian system. Parties will always be more willing to
arbitrate in India if they know that there is an established institution that ensures efficiency and
predictability.Obviously the government has a significant role in the promotion of arbitral
institutions, but it cannot be the only source of impetus. (In fact, one of the key features of the
internationally reputable institutions is that they enjoy a great degree of independence from state
interference.) While the 2015 amendments to the Arbitration Act are far-reaching and extensive, the
amendments themselves will not automatically result in the achievement of the goal for expeditious
and effective arbitration. What is necessary is the development of strong, well-managed,
independent institutions, which adopt international best practices and has access to internationally
renowned arbitration experts.113 The more robust the arbitral institutions are India, it is more likely
for becoming a preferred arbitral destination.

113Meenakshi Natesan and Gerald Manoharan, ‘Making arbitration work’,The Financial Express (12 May 2016),
available http://www.financialexpress.com/fe-columnist/column-making-arbitration-work/253308/ accessed on
21-01-2018
66
CHAPTER - VIII
Emergency Arbitrator in The Indian Context

Arbitration has been hailed as a viable alternate dispute resolution by virtue of its speed,
confidentiality, and the degree to which parties may exercise control over the process.
Developments in the undoubtedly dynamic field of arbitration enhance these traditional benefits.
Without a doubt, the interim measures before, during, or after the arbitration play a vital role in
protecting the subject matter of arbitration. For this reason, parties heavily rely upon national courts
in various jurisdictions. Emergence and development of the concept of emergency arbitrator makes
the arbitral process extremely responsive and addresses one of the most important aspects of a party
seeking urgent interim relief with recourse to national courts. 114
It is common knowledge that parties to a dispute may suffer irreparable harm before they are in a
position to seek interim relief from an arbitral tribunal once constituted, given the time usually
consumed in the formation of such tribunal. Such lack of access to interim relief was significant,
especially in cases of institutional arbitration. As an alternative, emergency arbitrator provisions and
the scope of their power have put in place an efficient procedure by which a party can obtain
interim relief even prior to the constitution of the arbitral tribunal. This is especially significant in
jurisdictions like India, wherein the reliance and interference of the domestic
courts can thus be minimized.115
These provisions have particular relevance insofar as the certain interim protections typically
sought before the emergency arbitrator as they are extremely time-sensitive. The existing
emergency arbitration provisions of institutional rules enable a party to make an application to seek
emergency interim relief even prior to the constitution of the tribunal. The institutions administering
the arbitrations either accept or reject an application for seeking emergency relief. Upon acceptance,
an emergency arbitrator is appointed who is empowered to hear parties and grant or reject

emergency interim relief in the absence of a fully constituted tribunal.116

Role of Domestic Courts

114 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.120-121, OXFORD University
Press,First Edition ,2018
115 Ibid

116 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.120-121, OXFORD University

Press,First Edition ,2018

67
Until recently, in case a party needs an urgent interim relief prior to the constitution of a tribunal,
only one option is available, that is, to seek interim relief from the relevant national courts. While
this is a viable option employed by most parties to an arbitration agreement, it has certain inherent

disadvantages.

Often, when arbitration is chosen as the agreed method of dispute resolution, the common intent of

the parties is to reduce their exposure to the formalities, constraints, and requirements of national

courts. Parties may also want to stay away from national courts due to confidentiality concerns.
Often parties tend to forge facts relating to the dispute in order to seek favourable interim reliefs
from a national court. This is particularly relevant in cases of non-existence of procedure for the
protection of identity of the litigating parties. Moreover, in some jurisdictions, certain types of
interim relief may not be available from state courts, which are bound by their municipal law.117

Earlier Attempt at Providing Urgent Interim Relief

To reduce such procedural gaps and to ensure timely delivery of awards and resolution of disputes
as a whole, various arbitral institutions have time and again introduced provisions, such as
“summary arbitral proceedings for interim relief” by Netherlands Arbitration Institute118 or
‘expedited formation of the arbitral tribunal “ by London Court of International Arbitration119 or
Pre-Arbitral Referee procedure’ by ICDR120.While these forums achieved limited success, a
platform for a newer, more uniform development was initiated in the form of emergency arbitrator.

EMERGENCY ARBITRATOR
The latest attempt is the introduction of emergency arbitrator procedures which, in effect, tries to
address parties' emergency needs to obtain effective relief without compromising on the benefits of
arbitration. Emergency arbitrator procedures provide a temporal solution to parties by bestowing a
choice of forum in which they can seek interim relief while awaiting the constitution of a tribunal.
This mode allows for to obtain interim relief, before the constitution of the tribunal and allows the
arbitral procedure for a time-responsive mechanism.

Historical Background of the Emergency Arbitrator

117 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.120-121, OXFORD University
Press,First Edition ,2018
118 Netherland Arbitration Rules (NAI), 2015 Article 9 and Article 36

119 London Court of International Arbitration Rules,2014,Article 9A

120 International Chamber of Commerce Rules ,1990

68
The idea of crisis mediation was first embraced by International Center for Dispute Resolution, the
worldwide division of the American Arbitration Association (AAA) as a feature of its altered
standards in 2006. From that point, Stockholm Chamber of Commerce (SCC) presented a
comparable arrangement in 2010 took after by International Chamber of Commerce (ICC) which
presented crisis mediator arrangements in 2012. This was trailed by the Hong Kong International
Arbitration Center and Singapore International Arbitration Center (SIAC) in 2013.Surprisingly,
LCIA presented the crisis judge arrangements just in 2014.Followed by the Swiss Chambers'
Arbitration Institution, the Australian Center for International Commercial Arbitration, the Mexico
City National Chamber of Commerce, the Netherlands Arbitration Institute, the Madrid Court of
Arbitration, and the Arbitration Center of the Portuguese Chamber of Commerce and Industry.121

Legal Framework Governing Emergency Arbitration

The legal framework governing the emergency arbitration is comprised of the institutional rules
providing for emergency arbitration, the municipal laws which form part of the curial law, and the
law of the state where the emergency arbitrator order or awards are enforced.

Institutional Rules Providing for Emergency Arbitration

Various institutional rules provide only basic framework for emergency arbitrator. One of the
methods in which the emergency arbitrator framework obtains legitimacy is when parties choose a
certain set of rules to govern the procedure of the arbitration: they implicitly choose the emergency
arbitration provisions in them. Some of them are detailed as follows:

INTERNATIONAL CHAMBERS OF COMMERCE (ICC)

The ICC Rules in Article 29 provides for an application for emergency measures and clarifies that
such an application by a party would lie regardless of whether the party making the application has
submitted its request for arbitration. This presents a unique legal background insofar as at the time
of assessment of the application, no underlying request for arbitration and, the decision on the
measures will be made solely on the basis of the application.Furthermore, the ICC Rules, at least
theoretically, differ from the SIAC Rules insofar as the decision of the emergency arbitrator,
because it is an order and is not referred to as an award. In terms of enforceability, Article 29(2)
simply specifies that the 'parties undertake to comply with any order made by the emergency

121Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.122-123, OXFORD University
Press,First Edition ,2018
69
arbitrator.The temporality of the emergency arbitrator provisions as reflected in Article 29 (6) of the
Rules make it clear that the emergency arbitrator provisions would not apply to arbitration
agreement concluded before the new Rules come into force. While this provision is precise, it is
anticipated that problems of interpretation may arise where the arbitration agreement itself specifies
that the rules applicable to the arbitration would be the ICC Rules, prevalent at the time of
invocation of the Notice of Arbitration.Article 29(6) also establishes an opt-out mechanism, that is,
unless parties who are subject to the new rules specifically exclude the application of the emergency

arbitrator provisions.122

LONDON COURT OF INTERNATIONAL ARBITRATION (LCIA)

In addition to the general provisions relating to emergency arbitrators which largely resemble the
ICC and SIAC Rules, Article 9.6 of the LCIA Rules, 2014, provides for a two-step process for the
hearing before the emergency arbitrator. In terms of the provisions, the LCIA Court shall determine
the application for relief. On the application being granted, the emergency arbitrator shall be
appointed within three days by the LCIA Court. Specifically, Article 9.7 of the LCIA Rules
specifically states that while the emergency arbitrator is required to, if possible, consult each party
in relation to the emergency arbitrator claim, the arbitrator is not required to hold any hearings
(whether oral, telephonic, or otherwise). Further Article 9.8 requires that a reasoned order be passed
within 14 days of the appointment of the emergency arbitrator. The provisions contained in Article
9.14 are similar to that of the ICC Rules; however, the LCIA rules requires parties to opt-in of the
emergency arbitrator provisions where the arbitration agreement has been entered into prior to 1
October 2014. 123

SINGAPORE INTERNATIONAL ARBITRATION COURT (SIAC)

Article1.5 of the SIAC Rules defines an award to also include awards of an emergency arbitrator.
Article 26.2 read with Schedule I of the SIAC Rules sets forth the scheme for emergency arbitrator
and allows a party to obtain interim relief before the constitution of the tribunal.124
Law Governing Enforcement of the Decision of the Emergency Arbitrator

122 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.124-125, OXFORD University
Press,First Edition ,2018
123 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.126-127, OXFORD University

Press,First Edition ,2018

124 ibid

70
Regardless of the two sets of rules stated above, the law governing the enforcement of the decision
of the emergency arbitrator will be pivotal in ensuring enforceability of an order of the emergency
arbitrator. Most states have adopted the New York Convention verbatim. Given that the New York
Convention was drafted and agreed upon before the emergence of the concept of emergency
arbitrator procedures, there remains no definitive view on whether such decisions are enforceable
under the New York Convention. Further, the New York Convention abstains from clearly defining
an arbitral tribunal as anything apart from a tribunal appointed by the parties. By definition, the
emergency arbitrator does not meet this criterion. Further, the definition of an award under the New
York Convention also does not lend any support to define the emergency arbitrator decisions as
award. Hence a definitive legislative gap exists in ensuring the enforceability of the emergency
arbitrator decisions. Singapore and Hong Kong are the leading jurisdictions to have addressed the
legislative need. 125

Legal Hurdles in Relation to Emergency Arbitrator Procedures

While the emergency arbitrator mechanism is hailed as a positive development, it suffers from, in
our view, four conceptual hurdles.
The first such hurdle relates to the status of the emergency arbitrator emergency arbitrator is by
definition, not appointed by the parties. This would, therefore, mean that the arbitrator cannot be
referred to as a tribunal appointed by the parties. Therefore, concerns relating to party autonomy
come to the fore since the tribunal is appointed by a third-party institution, without any substantive
input from the parties. The second such hurdle relates to the status of the decisions of the
emergency arbitrator. Under most municipal laws, Hong Kong and Singapore being notable
exceptions, the decisions are neither considered as orders nor awards. A direct consequence of such
non-recognition is the absence of strict enforceability of such decisions. However, an argument may
be made that in terms of the rules agreed by the parties, the parties agree to be bound by such an
order. In absence of these contractual rights, there remains little, if any, legislative support. To a
large extent, evidence has appeared to the contrary, where at least in the experience of the SIAC,
parties have remained in compliance with the decisions of the emergency arbitrator. It may be
pointed out that such compliance is only slightly affected by Singapore's recognition of emergency

125Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.126-127, OXFORD University
Press,First Edition ,2018
71
arbitrator decisions. Enforcement proceedings are typically carried on in the state where the
respondent's assets are located. 126
While the above concerns are based on lack of legislative recognition, there exists some supportive
jurisprudence. There are some case laws to the effect that the decisions arising out of emergency
arbitration provisions are final in terms of the issues they intend to address.
In Yahoo! Inc. v. Microsoft Corporation, 127 the US District Court held that the relief awarded by the
emergency arbitrators was 'in essence final' and capable of being enforced. It held that simply
because a final award may be passed in respect of the subject matter of the arbitration, the
emergency arbitrator was not prevented from awarding final relief for the purpose of preserving the
status quo of the subject of the dispute. In an earlier case, the US District Court had itself ruled
against the finality of a decision of the emergency arbitrator.128
The third hurdle, which strikes at the legitimacy of the arbitral Process is the alleged due process
concerns. There is, quite often, very limited time for the respondent to present its case. Further,
failure of the respondent to appear will quite likely lead to an ex parte order. There are further
concerns relating to the material on record for the emergency arbitrator to review before arriving at
his decisions.Specially under the ICC Rules, where a party may seek such an order even before it
files its request for arbitration implies that the arbitrator would be granting the order only on the
basis of the application before it. This narrows the scope of inquiry and may not even extend to a
full assessment of the validity of the arbitration agreement.

Legal Aspects in India

The concept of emergency arbitrator has been a subject of much discussion and debate in the Indian
context. The Law Commission in its 246th Report had suggested an amendment be made to Section
2(1)(d) which defines 'arbitral tribunal' read as, '2(1) (d) emergency arbitrator to be included in
arbitrator tribunal definition.The Law Commission specially noted that ‘this amendment is to ensure
that institutional rules such as the SIAC Arbitration Rules which provide for an emergency
arbitrator are given statutory recognition in India'. However, this amendment was not made part of
the Arbitration Ordinance promulgated on 23 October 2015 or a part of the subsequently passed

126 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.128-129, OXFORD University
Press,First Edition ,2018
127 Yahoo Inc. v. Microsoft Corporation, United States District Court, Southern District of New York,13 CV 7237,21

October 2013
128 Chinmax Medical Systems Inc. v. Alere San Diego, Southern District of California, Case No.10cv2467 WQH (NLS),

27 MAY 2011 Inc. (2011)

72
Amendment Act. Had the amendment' been passed, the proposed change along with the
enforcement powers under Section 17 would have made enforcement of emergency arbitrator orders
straightforward. With no confirmation of the enforceability of the emergency arbitrator decisions or
provisions relating thereto, Madras High Court Arbitration Centre (MHCAC) (Internal
Management) Rules, 2014 in Rule 20 provides for interim relief by an emergency arbitrator and sets
out the procedure for the same. At best, this sets out evidence of the positive attitude of the
administrative side of the Madras High Court in accepting the concept of emergency
arbitration.Similar provisions are evident in the Delhi International Arbitration Centre(Arbitration
Proceedings) Rules, Part Ill-A.129
The newly launched Mumbai Centre for International Arbitration in Rule 14 provides for
emergency arbitrator provisions. The chairman is entitled to accept requests for seeking emergency
interim relief and appoint emergency arbitrator within one business day of completion of pre-
appointment formalities. These rules are largely reflective of the international practice in relation to
appointment of emergency arbitrator procedures.The standards for granting emergency interim
relief in the emergency arbitrator context may differ to the standard applicable under Indian law for
obtaining interim relief from courts. "Therefore, success before an emergency arbitrator does not
necessarily mean success before the Indian courts.
1. Even where the Indian courts are inclined to order interim relief, there is no guarantee that they
will order a relief that is identical to, or even substantially similar to, the order issued by the
emergency arbitrator.
2. The applicability of Section 9 of the Arbitration and Conciliation Act, 1996 as amended is a pre-
condition for this approach. This would mean that where the parties have excluded Part I entirely,
this avenue would not be available. Where Section 9 is available, it may be better for parties to
approach the court directly. That is because interim relief can be obtained from an Indian court
within a few days on an ex-parte basis. On the other hand, emergency arbitrator procedures take
longer (usually a few weeks) and require that the other party be given an opportunity to present its
case. 130

129 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.131-132, OXFORD University
Press,First Edition ,2018
130 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.132, OXFORD University Press,First

Edition ,2018
73
CONCLUSION
The evolution of the emergency arbitrator provisions indicate the requirement of an arbitral
procedure to fill the gap that existed between the arising of a dispute and the ability of a party to
seek interim measures from the tribunal. The ability of a party to seek interim relief often sets the
background in which the disputes are adjudicated or settled.
Prior to the emergence of the emergency arbitrator provisions, a party could approach only the
courts for interim relief. In many circumstances, this would be a less than optimal approach for
primarily three reasons:
first, that the local courts are bound by the mandatory local laws which may restrict their ability to
grant relief,
second, most courts would require disclosure of the relevant facts in order to entertain a claim for
grant of relief which may go against the parties intent to maintain confidentiality and
third, parties would be forced to litigate before a national court—the exact situation that the parties
sought to avoid by subjecting their dispute to arbitration. The need for an emergency arbitral relief
procedure is real and imminent.
As discussed earlier, the emergency arbitrator provisions are fairly uniform with a few differences
across the institutional rules. These rules are in fact the cornerstone of the development of the
concept of emergency arbitration. The real issue exists in the law governing the arbitration, which is
perhaps, the most important legal source defining the nature of the decision of the emergency
arbitrator and of the emergency arbitrator himself.
This approach which gives effect to the primary intent of arbitration, which is to give force to the

parties' agreement to arbitrate their disputes, may be advanced as a strong argument to claim the
enforceability of emergency arbitrator orders. Under this paradigm, decisions of the emergency
arbitrator must be enforceable. In fact, where the arbitration legislations provide mandate to a pro-
arbitration attitude, this may indeed be the case.. Alternatively, parties benefit from the sort of
judicial creativity displayed in HSBC v. Avitel and count on courts to purposively enforce the

emergency arbitrator decisions within the current legal framework.

While the above are strong arguments, on a strict legal construction, it is difficult to see how an
emergency arbitrator decision by itself would vest in a party the right to enforce it as it is. Unless,
other jurisdictions follow Singapore and Hong Kong model and introduce the legislative
amendments to support the emergency arbitrator provisions, uncertainty will surround the question
of the nature and enforceability of decisions rendered by the emergency arbitrators except the hope
of self-compliance for fear of antagonizing the arbitral tribunal once constituted. It is clear that
74
emergency arbitrator procedures do not claim to be an exclusive remedy in a situation where a
tribunal has not been constituted. Institutional rules provide the emergency arbitrator
decisions will not bind the subsequently constituted arbitral tribunal. Even for pure utility basis,
where one party seeks to rely on the element of surprise such as in ex-parte situations, recourse to
emergency arbitrator procedures is sub-optimal since all of them provide for emergency arbitrator
decisions only after both parties have been given a reasonable opportunity to present its case.
Tempered by the views expressed above, while judicial interpretation in favour of various
emergency arbitrator provisions is a great step forward, legislative support in India would
immensely help in reinforcing the benefit of this concept. 131

131Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.132-134, OXFORD University
Press,First Edition ,2018
75
CHAPTER - IX

Rise of The Expert Witness in Alternative

Dispute Resolution

According to estimates, the last few years have seen a steady rise in disputes arising out of
increased business activities. Besides tarnishing reputation, disputes can disrupt the business
foundation, resulting in project delays, funds shortage, blocking of monies, and loss of business
opportunities.

Playing Their Part: Role and Functions of an Expert Witness

According to estimates, the last few years have seen a steady rise in disputes arising out of
increased business activity. Besides tarnishing reputation, disputes can disrupt the business
foundation, resulting in project delays, funds shortage, blocking of monies, and loss of business
opportunities. Expert witnesses are 'experts' for a reason. When court cases drag on for years of
painful testimony, counterclaims, and appeals, it is the knowledge of an expert witness alone that
helps you settle the case without further agonizing proceedings. Expert witnesses are independent
third parties from various relevant professional backgrounds, who objectively assess facts and
matters under dispute and then act in the most reasonable 'and neutral interest of each party
involved, rather than judging or acting as arbitrators.Expert witnesses help conduct independent and
impartial fact finding exercises in order to arrive at a decision applying right professional diligence
that serves all parties involved in their best interest. 132
An expert can overcome shortcomings such as using an internal person, inexperience, lack of

industry knowledge and independence, or lack of requisite skills.133

Appointing an Expert Witness

132 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.135-136, OXFORD University
Press,First Edition ,2018
133 ibid.

76
Expert witnesses can be proactively introduced into the arbitration proceedings either by the
claimants or by respondents, in order to objectively counter the damages filed by the claimants. In
many cases, experts can also be appointed in unique situations where disputes are complex and
arbitration tribunals choose to rely on expert evidence only to arrive at a judgment taking various
aspects of the matter under dispute. 134
In commercial disputes involving business and financial issues, accounting, technical or economic
damages, a critical success factor is the decision of the counsel regarding the selection of the
testifying expert.

Following are the common forms of disputes where expert witnesses can be crucial:
1. Disputes arising out of inappropriate contract terminations.
2. Disputes amongst joint venture partners or shareholders.
3. Disputes arising out of delays in project execution.
4. Dispute between private sector players and stakeholders such or regulatory bodies or public
sector undertake (in case of public-private partnership projects).
5.Disputes in case of bilateral agreements.
6.Disputes arising between insurance companies and corporates for large-scale insurance claims
filed by the latter.135

Five best practices that expert witnesses need to follow arc:

1.Maintain independence: Expert witnesses should maintain independence, impartiality, and
transparency at all times. It is critical for expert witnesses to be completely unbiased in her or his
testimony in the court.
2. Rely on only robust and forensically obtained evidence: It is vital for experts to scientifically
collect, test, and evaluate evidence, before forming an opinion and communicating it to the judge
and jury.
3. Get their facts right: Conduct a thorough research, collect information, and understand all
important aspects of matters under dispute and assess their impact on the expert report.

134Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.135-136, OXFORD University
Press,First Edition ,2018
135 ibid.

77
4. Adopt a fact-based yet solution-oriented approach: It is critical for expert witnesses to clear the
air and strengthen inferences that might otherwise be confusing for the jury.
5. Consider a neutral view on position on both parties to dispute: Staying objective, neutral, and
impartial while giving their opinions before the court is one of the cornerstones of becoming an
expert witness.136

The Evolving Role of Expert Witnesses in Arbitrations

Mostly companies opt for arbitration proceedings either with much established international
arbitration forums or local arbitrations, depending on the requirement and depth of the issue at
hand.
In the last few years, there has been a globalization of arbitration forums, with London Court of
International Arbitration (LCIA), Singapore International Arbitration Centre (SIAC), and
International Chamber of Commerce (ICC) increasing their global footprints. In certain local
jurisdictions, it has been found that as compared to their international counterparts, they still have to
go a long way when it comes to the way arbitrations are conducted. They need to get the degree of
maturity and efficiency on par with their international counterparts.
Today, most of the arbitrations locally derive their tradition from age-old litigations framework and
are yet to imbibe the wholesome spirit of the way international arbitrations are run. It is for this
that in certain countries, many corporates (especially those which are dealing with overseas

strategic or financial investors) still prefer international arbitrations.

While many arbitrators have increasingly started relying on independent expert evidences, the
extent of use of experts in local jurisdictions is still considered low in comparison with international
standards. In many cases, expert reports are relied upon, however, the experts are neither cross
examined nor a conferencing process is performed between experts of both sides to reach at the
maximum common ground as possible.137

Where are expert services required in disputes?

1. Commenting on technical, business, and commercial aspects of the contractual terms under
dispute.

136 Shashank Garg ,Alternative Dispute Resolution: The Indian Perspective, p.137-138, OXFORD University Press,First
Edition ,2018
137 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.137-138, OXFORD University

Press,First Edition ,2018

78
2. Providing objective opinions on technical, financial, and legal matters requiring specialized
knowledge or expertise.
3. Quantifying damages arising in a dispute and demonstrating an objective and scientific approach
for arriving at the damages.
4. Performing relevant issue analysis, document assessment, schedule and cost analysis, cause and
effect determination, resultant damage analysis, delay and impact evaluation, and cost-recovery
assessment.
5. Validating delays caused in disputed projects leading to root cause for culmination into disputes.
6. Assessment of cost overruns and review of critical costs related to equipment, materials, labour,
and project overheads.
7. Review of revenue sharing modules (in case of revenue sharing models with government bodies).
8. Probing into the counter party's documents and facilitating a critique of his position.
9. Issuing expert report in arbitration.
10. Providing a professional testimony before the arbitral tribunal. 138

Common forms of Damages, Claims, and Quantum Computation Filed in Arbitrations

l. Quantum of damages arising and potential losses caused due to loss of future business
opportunity, especially in case of untimely contract terminations.
2. Quantum of damages arising and potential losses caused due to loss of future business
opportunity, especially in case of untimely contract terminations.
3. Differences of opinions on value of businesses arising from disagreement between joint venture
partners or shareholders.
4.Quantum of damages arising from nonfulfillment of obligations of one party to reimburse the
other (contractor relationships), in case of cost overruns.
5. Differences in opinion of both parties (employer—contractor relationship), in case of costs

overruns arising from project delays in significantly large and complex contracts.

6. Computing claims, in case of large insurance claims disputes.

The Right Time to Introduce Your Expert Witness

138Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.137-138, OXFORD University
Press,First Edition ,2018
79
1. At the time of filing of claims/damages or at the time of countering or rebuttal of claims/damages
during the arbitration tribunal.
2. At the time of ascertaining the heads of claims/damages much early in a hostile dispute or
situation.
3. At the time of pre-dispute assessment of project delay and its commercial impact and cost
overruns of projects.139

Entry of the Technical Expert: Roles and Functions

In modern times in arbitration the entry of experts in technical areas is more specifically needed. And their

roles and functions have vastly increased.140

How Technical, Subject Matter, and Quantum Experts Need to Collaborate to

Give a Cohesive and Conclusive View to the Arbitration Tribunals?
Most of the complex disputes require a manifold analysis to arrive at damages or claims—from a
technical, specific sector business, financial and commercial perspective. Since expertise may sit
with different kinds of experts it is imperative that there is consolidation of thought, views, and
opinions amongst various experts so that seamless experts view (techno-commercial assessment) on
the matter under dispute can be formed and presented to the arbitration tribunal. The critical point is
for different experts to simplify the puzzle, translate professional views and opinions in a manner
where the inputs of one expert into that of another and at the same time, the arbitration tribunal can
get a holistic expert view on the matter. 141

Common Form of Evidence Which Experts Rely Upon

Business and Financial Experts
1.Books of account and underlying records related to the project.
2.Business plans and financial models of the target entity.
3.Relevant contracts, including back-to-back contracts signed with subcontractors.
4.Documentation supporting costs related to equipment, materials, labour, overheads, and finance
costs.

139 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.139-140, OXFORD University
Press,First Edition ,2018
140 ibid.

141Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.140, OXFORD University Press,First

Edition ,2018
80
5.Internal management reports on budgeted costs.
6.Management business plans and project revenue and costs models.
7.Market studies and industry trends, and performance benchmarks.
8.Critical written correspondences shared between parties prior to during culmination of dispute
circumstances, and consequentially.
9. Correspondence with bankers for project financing. 142

Technical Experts
1.Baseline programmes of the relevant projects under dispute.
2.Revised schedules and engineering designs.
3.Reports submitted by site engineers, contractors, and subcontractors.
4. Resource planning schedules (detailing requirement and actual utilization of material, labour, and
equipment).
5. Reports submitted by geologists, civil engineers, and other third party consultants143.

Role of Experts in Construction Disputes and Claims

As the pace of business intensifies, the possibility of disputes and other complications arises
proportionally involving dealing the Governments and other commercial organisations.
This where the role of experts comes in. They help to provide concise and proportional expert
testimony on delay, disruption, loss and, expense as well as other quantum issues for organizations
involved in complex capital project disputes that are prone to financial and reputational loss. This
enables you to concentrate on mitigating effects of the dispute rather than dwelling on what the
outcome might be. 144

Expert Testimony Services Help in

1. Reducing the time taken to resolve disputes and save money.
2. Enabling successful negotiations.
3. Providing a robust set of results and opinions to be used in the case. 145

142Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.140, OXFORD University Press,First
Edition ,2018
143 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.141, OXFORD University Press,First

Edition ,2018
144 ibid

145 ibid

81
The Increasing Demand for Expert Testimony Services
Intellectual Property Disputes
World Intellectual Property Organisation defines Intellectual Property (IP) as creations of the mind
—inventions: literary and artistic works and symbols: names and images—used in Commerce. The
IP rights are the rights that accelerate the owner of the IP asset to derive economic benefits from its
use in future.146

Intellectual Property Life Cycle

The IP life cycle commencing from creation, protection, enforcement, commercialization, and its
awareness, has become increasingly crucial to business success. Quantitative economic analysis of
the IP rights during each phase of the life cycle plays an essential role, especially at a time when
these rights have been subject to greater scrutiny and higher standards of proof in a dispute or
litigation. 147

IP Now Involves 'Significant Returns'

The present global economy is driven by the power of IP, which is the gateway to growth. The
value of intangible IP assets can significantly enhance the market value of the company as is
evident from studies which show that the brand value of top 10 global brands individually exceeds
$25 billion. As IP plays an increasingly important role in making the business unique, both business
owners and courts are recognising the true value of IP and the loss caused to right holders due to
IP infringement.

Role of Experts in IP Disputes

1.Carry out an independent validation of the damages to strengthen the legal position of the patent
holder in this matter.
2. Make the court or arbitrator understand the methodology of computing IP damages.
3. Understand the negotiations of the parties from the time the infringement began.
4. Consolidated look at the complete set of various events and facts that occurred thereafter and that
could not have been known to or predicted by the hypothesized negotiators.

146 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.143, OXFORD University Press,First
Edition ,2018
147 ibid

82
Role of Experts in Joint Venture and Shareholder Disputes
Any prudent strategic investor spends expecting long-term growth and financial success. However,
this association also brings with it a new set of challenges and risks resulting from different realms.
Lapse in corporate governance is one of the primary sources of conflict between the strategic
investor and other shareholders of the investee company resulting in stress, disagreement, and
eventually legal disputes. While the strategic investor expects best practices in areas of corporate
governance and execution of fiduciary responsibility, some shareholders struggle with poor
governance practices and are plagued with the inability to appreciate these expectations in areas of
transparency, quality, timelines, and customer service.

Some of the reasons why some of these joint ventures or alliances could not sustain in the long run
are:
l. Weak corporate governance standards adopted by some shareholders.
2. Disagreement, either strategic or operational in nature.
3. Technology sharing and IPR-related issues: legal versus economic ownership, fair royalty rate.
4. Dilution in shareholding and management control issues.
5. Lack of parity in size, ownership, control, and contribution.
6. Inability to appreciate best practices in areas of quality, timelines, and customer service.
7. Breach of terms of the joint venture or shareholder agreement.
8. Dominance of family members in business decision-making.
9. Lack of transparency in use of funds of the strategic investor by other partners or shareholders.
10. Difficult exit for the investors from the business.
11. Resultant litigations or arbitrations between shareholders.

Any material breach of the terms of the shareholder agreement, arising from the factors mentioned
above, forces strategic investors to take a legal action against the investee company and/or other
shareholders.148

Role of Experts
1. Critically examine factors for failure of association with joint venture partners or shareholders.

148Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.143-145, OXFORD University
Press,First Edition ,2018
83
2. Assist in firming up position on your exit strategy.
3. Assist in exercising right of inspection of books.
4. Evaluate underperformance of business plan.
5. Investigate into appropriateness of utilization of funds.
6. Providing valuation and negotiation support:
i. Carry out pricing analysis to determine fair value of the business or the stakes held.
ii. Carryout valuation as per the shareholder agreement and/or the local laws, as applicable.
iii.Assess the business, financial, and commercial impact Of clauses in joint venture/shareholder
agreements.
iv.Assist you in retaining critical written correspondence and other information in electronic form.
v.Assist in protecting your brand, technology, and other IP given without ownership transfer. 149

149Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.143-145, OXFORD University
Press,First Edition ,2018
84
CHAPTER - X
Med-Arb

The fact that arbitration as an alternative dispute resolution (ADR) mechanism has failed to produce
the desired result, though it has been in existence in India since 1899, is best exemplified by the
following observations of the Supreme Court, made as far back as in 1997 in Guru Nanak
Foundation v. Rattan Singh & Sons.150 that the way proceeding were carried out in it made the legal
advisors and practitioners weep.
With the enactment of the Arbitration Conciliation Acc, 1996 (1996 Act),it was hoped that a course
correction would occur—sadly, though much of the expectations raised stand belied.The
observations made by the Law Commission in its 246th Report are felt by the jurists, lawyers, and
litigants alike.
Resultantly , steps were taken to amend the 1996 Act. Substantive Amendments were brought about
in the 1996 Act with the passing of the Arbitration Conciliation (Amendment) Act of 2015 (in short,
Act of 2015'). The Amendment Act was preceded by series of ordinances, the last in line being the
Arbitration and conciliation (Third) Ordinance, 1996. This ordinance however repealed by virtue of
Section 86 of the Amendment Act, 2015.
To reinforce the cause of arbitration, several amendments have been brought about in the 1996 Act.
However, the amendments suggested by the Law Commission neither touched upon Part Ill of the
1996 Act, which deals with provisions relatable to conciliation, nor did it suggest incorporation of
specific provisions pertaining to mediation. This was a missed opportunity, with regard to the fact
that mediation movement has otherwise gained momentum. Undoubtedly, it is the perceived failure
of the arbitration mechanism which has fuelled the movement for other ADR mechanisms, such as
judicial settlements (including Lok Adalats), mediation, and conciliation. 'The legislature, on its
part, took some robust steps in this behalf by amending the Code of Civil Procedure, 1908 (in short,
'the Code'), with the insertion of Section 89. The insertion of Section 89 was brought about with the
enactment of the Code of Civil Procedure (Amendment) Act of 1999. This amendment was brought
into force from 1 July 2002. Section 89, in sum, takes forward the goal set forth in Article 39A of
the Constitution, which, inter alia, calls upon the State to put in place legislation or schemes or even

150 Guru Nanak Foundation v. Rattan Singh &Sons AIR 1981 SC 2075
85
other mechanisms which ensure that opportunities for securing justice are not denied to any citizen
by reason of economic or other disabilities.
Thus, Section 89 of the Code obliges a court, before whom a dispute is brought, to refer parties to
any of the ADR mechanisms adverted to therein, in cases where there exist elements of settlement.
The four ADR mechanisms alluded to in sub-section (1) of Section 89 are: arbitration, conciliation,
judicial settlement (which includes settlement through Lok Adalats) and mediation.
That Section 89 has been poorly drafted is explicitly, articulated by the Supreme Court in its
judgment in Afcons Infrastructure Ltd & Anr v. Cherian Varkey Construction co. (P) Ltd & Ors.
2151Resultantly, the Supreme Court ended up issuing several directions in respect of the procedure
to be adopted by courts, while taking recourse to the provisions of Section 89 of the code.
Interestingly, each of the ADR mechanisms referred to above except mediation has received
substantial legislative support. Save and except, for a passing reference to mediation, in Section 30
of the 1996 Act, which empowers an arbitrator to bring about a settlement between disputants, inter
alia, via mediation, there are no specific provisions, in the said Act, which deal with mediation per
se. However, in contrast, both Lok Adalat and conciliation are fully supported by legislative
enactments.
For instance, Lok Adalats received legislative recognition after the enactment of the Legal Services
Act, 1987 (in short, the 1987 Act). Similarly, as indicated above, conciliation has received
legislative backing in the form of provisions contained in Part III of the 1996 Act.
Consequently, the settlements drawn up with the intercession of Lok Adalats and/or conciliators
have the force of a decree. The decree, thus obtained via either of the two mechanisms referred to
above, can be enforced against a recalcitrant and/or a diffident disputant with the help and
assistance of courts.
It is for this reason, that, in recent times, non-adjudicatory ADR mechanisms, such as mediation and
conciliation have received a major fillip. Though in comparative terms, conciliation in India does
not appear to have the kind of traction that mediation has. Having said so, success in mediation in
India is presently confined to court-appended mediation centres. Amongst the court-appended
mediation centres, which appear to have attained a high percentage of success are The Bangalore
Mediation Centre and the Mediation Centres appended to various District Courts in Delhi. The
Bangalore Mediation Centre,4 between 1 January 2007 and 31 January 2016, referred 38,594 cases
for mediation, out of which 30,573 were settled; which included 5,595 cases that were connected.

151 Afcons Infrastructure Ltd. &Anr. Cherian Varkey Construction Ltd. AIR 2010(8) SCC 24
86
The success rate achieved by the Bangalore Mediation Centre was thus, in the given period, in
effect 78 per cent if one were to include connected cases as well. In so far as in the various district
courts in Delhi were concerned, shows the number of cases settled through non-adjudicatory

mechanisms. 152

As would be evident, there are no institutions solely involved with conciliation. The only exception
is, perhaps, the recognition of the status of a conciliator under the Industrial Disputes Act, 1947.
Therefore, in our country, most mediation centres double-up as conciliation forums.153
It must, therefore, be said that while the purist seek to draw a distinction between conciliation and
mediation, there is a 'broad synonymy' between the two. While a conciliator who is a neutral third
party attempts to bring about a settlement between the disputants, a mediator encourages the
disputants to suggest their own solutions to the disputes at hand. Quite clearly, to a layman, the
distinction drawn between the two processes is not one of substance but more to do with process
involved in reaching the conclusion.
What is clear though is that spiralling costs, delays in pronouncement of awards, and the prolixity in
court proceedings which is experienced by litigants, post the pronouncement of an award, has
propelled disputants to look for an amalgam—in other words, a process which includes the
attributes of both adjudicatory and a non-adjudicatory mechanism.
Consequently, lately, litigants have sought to take recourse to a Mediation-Arbitration (Med-Arb) or
even Arbitration-Mediation mechanism (Arb-Med). Med-Arb 154 is a process in which a mediator
changes his/her role from that of a mediator to one of an arbitrator in case mediation does not
produce the desired result. Parties often enter into such contracts and/or arrangements prior to
disputes arising between them. The process has its own pros and cons. The pros being that the
person who adjudicates upon disputes is the same person who attempted mediation between parties
in the first place. The adjudication would therefore optimize time and, logically, costs as well.
The negatives, on the other hand, are that the person entrusted with the task of working the
mediation mechanism is not able to fulfil either the role of the mediator or that of an arbitrator. The
skill sets required for the two tasks are different. The mediator's role requires the person concerned
to encourage disputants to arrive at a self-determined solution, whereas in an arbitration, solutions
are imposed by a neutral third party.

152The Legal Services Act,1987, Section 21

153Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.150, OXFORD University Press,First
Edition ,2018
154 Henry J.Brown and Arthur Marriott Q.C. “ADR- Principles and Practice” Sweet &Maxwell 3rd.ed,2012

87
Besides this, the biggest drawback appears to be the fear that the information supplied by the
disputants during separate caucus meetings with the mediator may be used unfairly in case parties
were to eventually end up in a litigation.
These drawbacks, evidently, have been successfully overcome in some countries with the help of
requisite legislative intervention. A prime example of one such intervention is found in the
Commercial Arbitration Act of 2010, Number 61 enacted by the New South Wales.The act in
particular, Section 27D(4), enacted by New South Wales, to the parties to step out of the Med-Arb
process. In Other words, once the mediation process is over, and for some reason it not result in a
resolution, any one of the parties is entitled to opt-out of the Med-Arb process. Consequently, upon
failure of the Med-Arb process, any one of the parties have the option of proceeding with the agreed
arbitral mechanism, albeit, with the involvement of a person other than the one who acted as the
mediator. 155
In so far as the other drawback is concerned, which is, that the information supplied in confidence
during mediation may probably be unfairly used in litigation, can, in my opinion be overcome by
incorporating the necessary provision in the statute/contract which would prohibit the use of such
information during trial. A provision similar to Section 81 of 1996 Act which pertains to

conciliation proceedings should suffice to my mind.156

The question which remains is would such statutory/contractual precautions do away with the risks
of parties superficially engaging in mediation proceedings only to assess the strength and weakness
of the opponent's case? The answer to that will perhaps be in the negative. Parties and their counsels
are known to engage, ostensibly, in a mediation process only to either delay or gauge the strength
and weaknesses of the opponent's case. This is distinctly a downside of the mediation process,
which cannot be avoided. It is for this reason, that parties often exhibit an inclination to move away
from a Med- Arb process to a converse mechanism, that is, arbitration followed by mediation, that
is, Arb-Med.
Arb-Med 157 mechanism is a process where once arbitration proceedings are over and an award is
drawn up, it is kept in a sealed cover till the time the parties conclude the mediation process. In case
mediation is successful, the award is destroyed. Here again the same person who acted as the

155 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.150, OXFORD University Press,First
Edition ,2018
156 The Arbitration and Conciliation Act,1996 ,See Section 81 of the said act.

157 Brown and Marriot Q.C.

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arbitrator engages in mediation. Critics decry the process as it not only involves costs but also
results in vitiating the atmosphere and hardening of stands between litigating parties, which is

undoubtedly the necessary fallout of an adjudicatory mechanism preceding a mediation process.

That Arb-Med process has resonance with a large section of disputants can be gauged from the fact
that even when mediation is concerned, parties have increasingly looked for evaluative
mediation.158One of the negatives of the mediation movement has been that it has over the years
come to be dominated by litigators and it is, therefore, veering more and more towards arbitration.
Since litigators are involved in the mediation process, and more often than not represent disputants
before the mediator, the attempt is to stress on the rights of parties rather than what is in their
interest.159 The legal rights of parties and what is in their interest is not necessarily the same thing
when looked at from the point of view of conflict resolution. It is because of this reason that
mediators often evaluate for parties their chances of success in full-blown court proceedings to
bring about a settlement. While an evaluative mediation process has its merits, it dilutes to a large
extent the very purpose of mediation which is pivoted on the premise and belief that the disputants
find their own solutions to the problem at hand. Evaluative mediation thus takes away party
autonomy as the mediator and the litigators representing parties partake a domineering role which
involves setting forth a predictive outcome of what would follow in the event disputants were to go
to trial. Evaluative mediation, thus, in a sense has become a 'surrogate' 160 for an arbitration
mechanism.

Having said so, if one were to move away from the aggressive form of mediation, which
emphasizes more on rights than on what is in the interest of parties, a Med-Arb process would,
expectedly, go a long way in resolution of disputes inter se parties. Much of its success would
depend upon the approach of parties and their lawyers (assuming they are involved in the mediation
process). If the approach is one which centres around truth, re-conciliation, and peaceful resolution
of disputes, the success rate of mediation process is bound to be high. In the event mediation fails,
parties could immediately thereafter proceed to arbitration, knowing fully well where they stand
vis-a-vis the opposing side. To avoid unfair use of information, voluntarily supplied during the
mediation process, parties could in the Med-Arb arrangement itself incorporate provisions which

158 Robert A.Baruch Bush ,”Substituting Mediation for Arbitration” Pepperdine Dispute Resolution Law Journal,3
(1,2012)
159 Bush ‘Substituting Meditation for Arbitration.’ Article in Arbitration Journal 2015

160 Jacqueline Nolan-Haley, “Mediation: The New Arbitration” (Harvard Negotiation Law Review, 2012 )

89
would prevent use of information supplied (during mediation process) in the event of a litigation
erupting between them. Such provisions if incorporated would firewall to parties against unfair use
of information till such time the legislature steps-in and fills this very crucial gap in the 1996 Act. In
judicial opinion, this gap can be filled in quite easily if the legislature were to amend Part Ill of the
1996 Act in a manner would indicate that the provisions contained otherwise apply to conciliation
proceedings, would therein, apply mutatis mutandis to mediation as well.

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CHAPTER- XI

The Concept of Seat in International Arbitration

:Developments in India

A central issue in any international arbitration is the location of the seat of arbitration. It is well-
accepted that the location of the seat of arbitration can have profound legal and practical
consequences and materially alter the course of dispute resolution.161While jurists such as Born
have classified the impact of the seat on costs and convenience of parties as 'mundane', the authors
believe that these issues may very well influence parties at the time of entering into
the arbitration agreement. Needless to say, the choice of seat can also impact the arbitration per se.

Developments in India
The Arbitration and Conciliation Amendment Act, 2015 (the Amendment Act)162 enacted recently
by the Parliament, has once again opened the vexed question of applicability of Part I of The
Arbitration and Conciliation Act 1996.163 The Amendment Act makes certain sections of Part 1,
specifically Sections 9, 27, 37(3) of the Act, applicable to international commercial arbitration ,even
if the place of arbitration is outside India unless the said sections are expressly not applied.
In the Constitution Bench judgment in the matter of Aluminium Co. v. Kaiser Aluminium Technical
Services,164 the Supreme Court of India had put to rest all the issues concerning applicability of Part
I to foreign-seated international commercial arbitrations (ICA). The court conclusively held that
Part I of the Act applies only when the seat or place of arbitration is in India. In holding so, the apex
court also expressly overruled its two previous decisions in Bhatia International 165 and Venture
Global.166 The Supreme Court in Bhatia International had held that Part I of the Act would also
apply to international commercial arbitrations held outside of India unless the parties by agreement,

161 Gary Born ,International Arbitration:Cases and Materials( Wolters Kluwer 2011),535
162 The Arbitration and Conciliation (Amendment) Act,2015
163 The Arbitration and Conciliation Act,1996

164 Bharat Aluminium Co. v. Kaiser Aluminium Technical Services (2012) 9 SCC 552

165 Bhatia International v. Union of India AIR 2002 9 SCC 105

166 Venture Global Engineering v. Satyam Computers, AIR 2008 4 SCC 190

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express or implied, excluded all or any of its provisions. The Apex Court in Venture Global
followed the position taken by Bhatia International and held that foreign awards could also be
challenged under Section 34, Part I of the Act.
These are in a long line of conflicting decisions given by Indian courts on the subject of seat of
arbitration and its relevance in deciding the curial law. The jurisprudence on this point in other com-
mon law countries is fairly clear that in the absence of an express agreement, there is a strong prima
facie presumption that 'the parties intend the curial law to be the law of the seat of arbitration. Since
the Indian Arbitration Act does not make express mention of the word seat' and uses the term 'place
of arbitration' instead, it has warranted examination into the real intention of the parties as to which
curial law will be applicable to the arbitration proceedings. Indian courts have not been as forthright
in taking a similar stand when it comes to the question of deciding the curial law. Courts in India
have given differing opinions on the issue of relevance of seat of arbitration in deciding the curial
law.
We will consider these judgments in order to outline the development of case laws on this point.
But before that, we must gain a general understanding of the scope and ambit of relevant systems of
laws applicable to or during an arbitration proceeding. The Supreme Court discusses the area of
operation of curial law in its decision in Sumitoma Heavy Industries Ltd. v. ONGC Ltd.

Case Law Analysis

Having underlined the scope and ambit of curial laws in the arbitration process, we must now go

back to discussing the original matter at hand, that is, relationship between seat of arbitration and

applicable curial law, especially in the light of decisions on this point by courts in India. In India,'
matters pertaining to arbitration are governed by the Act. It is important here to consider the scheme
of the Act. The Act is divided into two parts± simplistically, Part I applies to arbitrations that take
place in India, Part Il applies to foreign awards. In the context of the Act, Indian curial law is
mainly contained in part I.As a natural corollary, any decision regarding the choice of curial law in
an international arbitration would turn on the question of applicability of Part I.

Bhatia International (SC)

We begin our analysis with the Bhatia International case. This was a case where the applicability of
interim measures under Section 9 of the Act to international commercial arbitration held outside
India came before the courts. The Supreme Court, placing reliance upon the absence of word 'only'

92
in section 2(2) of the Act, held that Part 1 would also apply to international commercial arbitrations
held outside India. Apex Court compared the Act with the UNCITRAL model law and observed,

Article 1(2) of UNCITRAL Model Laws utilizes the word 'just' to underscore that the arrangements
of that Law are to apply if the place of discretion is in the domain of that State. Altogether in
Section 2(2) the word 'just' has been precluded. The exclusion of this word changes the entire
composition of the sentence. The exclusion of the word 'just' demonstrates it is a classificatory
arrangement. in Section 2(2) shows that this sub-area is just a comprehensive and clarificatory
arrangement.167

The Supreme Court in holding so, overruled several decisions given by (he, High Courts of Orissa,
Bombay, Madras, Delhi, and Calcutta, wherein the respective courts had held that Part I of the Act
would apply only to arbitrations held in India. "The Supreme Court reasoned its position in the
following words, :
It will therefore have to be held that the contrary view taken by these High Courts is not good law.
168

Whatever the intention of the Supreme Court might have been, the Bhatia International decision
revealed an alarmingly interventionist stand on the part of the Indian judiciary.169 The ratio of the
case railed against the very objectives of the Act, which was to provide fast, efficient, and
predictable remedy to the business community in case of disputes. The Supreme Court's decision to
exercise jurisdiction in matters of ICAs held out of India also defeated the underlying principles of
arbitration per se. Arbitration being an alternate remedy, interference by the courts should be kept at
a minimal. The Bhatia judgment derogated from this principle and caused much angst to the
business community.

Venture Global (SC)

The Bhatia International ratio regarding the applicability of Part I to ICAs held out of India was
followed by the Supreme Court in the Venture Global case. In this case, applicability of Section 34
of the Act to foreign awards came under dispute before the court. The Apex Court relying on its

167 UNCITRAL Arbitration Law ,1978

168 Bhatia International v. Union Of India AIR 2002 4 SCC 105
169 ibid.

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judgment in Bhatia case held that all provisions of Part I including Section 34 would apply to ICAs
held out of India unless the parties agree, either expressly or impliedly, to the contrary. The Apex
Court underlined the reasoning behind its decision in venture global case law.170

Inventa Fischer (Bombay HC)

The issue of applicability of Section 34 to foreign awards also came up for consideration before the
Bombay High Court in the matter of Inventa Fischer GmbH and Co. v. Polygenta Technologies Ltd.
171.The court extensively discussed the ratio laid down in Bhatia International and held that the
challenge procedure provided under Section 34 of the Act would not be available against foreign
awards. The court quoted Bhatia International to arrive at its ratio, 'To the extent that Part Il
provides a separate definition for enforcement of foreign awards, the provisions in Part I dealing
with these aspects will not apply to such foreign awards'.172
The court, after considering the scheme of the Act and submissions put before it, held the
contention that Section 34 would be attracted to a challenge against foreign award is not acceptable.
The court observed that the scheme of the Act does not make remedy available under Section 34 to
foreign awards. In the words of the court, 'The scheme of Arbitration Act appears to be to make the
remedy for challenging an Arbitral Award provided by Section 34 available only against a domestic
award made under the provisions of Part I of the Arbitration Act. 173 However, this decision was
overruled by the Supreme Court in Venture Global case discussed earlier.

INDTEL Technical Services (SC)

The ratio laid down in Bhatia International case was further entrenched by Supreme Court in its
decision in INDTEL Technical Services Pvt. Ltd. v. W.S. Atkins PLC.174 The appellant applied for
the appointment of sole arbitrator under Section 11 of the Act. As per the facts Of the case' the
agreement provided that proper law of contract was to be the English law. relevant arbitration
clauses, however, were silent on proper law of arbitration agreement, seat and venue of the
arbitration' and the curial law applicable to arbitral proceedings.
The respondents put dependence upon the choice of this court in National Thermal Power
Corporation v. Vocalist Company and Anr. wherein it was held that when an intervention assention

170 Venture Global vs Satyam Computers AIR 2008 4 SCC 190

171 Inventa Fischer Gmbh and Co. v. Polygenta Technologies Ltd.2005 (2) BOM. C.R. 364
172 ibid.

173 Inventa Fischer and o. v. PloyGenta Technologies Ltd. 2005 (2)Bom. CR.364

174 Inditel Technical Services ltd v. W.S Atkins PLC AIR 2008 (10) SCC 308

94
is noiseless with regards to the law and methodology to be followed in executing the discretion
understanding, the law overseeing the said understanding would usually be the same as the law
representing the agreement itself. The court, be that as it may, recognized the NTPC judgment and
connected the proportion set down in Bhatia International. The court connected the Bhatia
proportion to the certainties of the case and held that appropriateness of Part I of the Act hosted not
been rejected by the gatherings, either explicitly or impliedly. Since there was no prohibition of Part
I, the Supreme Court had the specialist to choose the sole mediator under Section 11(9) of the Act.

Sara International (Delhi HC)

There have also been decisions where the courts in India have given effect to the common law
position that in the absence of an agreement to the contrary, curial law would be the law of the seat
of arbitration .The Delhi High Court decision in Sara International Ltd. v. Arab Shipping175 is a case
in point. As per the facts of this case, the parties had agreed that the arbitration will be held in
Mumbai and English law would be applicable. The court considered the jurisprudence surrounding
the seat of arbitration, proper law of contract, proper law of arbitration agreement, and the curial
law. It also discussed English case laws and academic literature on this matter and held that, ;

In view of the above discussion, the Court is of the opinion that the claimant's contention about
applicability of English law as the proper or governing law for the arbitration agreement cannot be
accepted. The discussion in Bhatia International and subsequent judgments and Mustill & Boyd
clearly show that if the seat of the arbitration is in a different country than the laws of one, which
govern the contract, the proper law of the arbitration agreement and the curial law would be
that of the former.176

Impact of Bhatia Ratio

The Bhatia ratio had vested an overarching power of interference in the Indian judiciary. This came
to be exercised often, leading to a corpus of conflicting case laws. Ihere was widespread ambiguity
and confusion about the status of law currently applicable. Needless to say, affected the business
culture of the country. Soon enough, the courts in India began to realize the perilous impact of the
Bhatia decision on the sacrosanct principle underlying the arbitration process, that is, providing

175 Sara International Ltd. v. Arab Shipping Co. Ltd. AIR 2009 3 Arb. LR 81
176 Sara International Ltd. vs Arab Shipping Co.Ltd 2009 3 Arb. LR 81
95
swift and predictable resolution of disputes thereby improving the ease of doing business in India.
This came to be amply reflected in subsequent decisions of our Supreme Court and high courts.
The ratio laid down in Bhatia International was not overruled until the SC decision in BALCO case
which came much later in 2012. Even so, the high courts and the Supreme Court chose not to apply
the Bhatia ratio by taking the implied exclusion route propounded by Bhatia International.

Judicial Trend Away from Bhatia Ratio

Dozco India (SC)

The Supreme Court ruling in the Dozco India 2 Ltd. v. Doosan Infracore Co. Ltd177 is one such case
where the Apex Court chose the implied exclusion route to deviate from the ratio laid down in
Bhatia International. The question that came before this court was regarding the appointment of
arbitrators under Section 1 1 (6) of the Act. The main issue was whether or not the Supreme Court
had the jurisdiction to decide this matter. The court quoted the relevant arbitration clauses from the
agreement and observed that the correct law in this regard has been discussed in Mustill and Boyd.
The relevant paragraph from Mustill and Boyd that according to the court was extremely
important for this particular case, is quoted as follows:
Without express assention, indicates assumption of the gatherings the planned to apply th law of
seat of mediation. there is a solid at first sight assumption that the gatherings mean the curial law
to be the law of the 'seat' of the intervention, to referee. 178
It was therefore important for the court to decide the seat of arbitration.The court interpreted the
relevant arbitration clauses and arrived at a conclusion that the parties meant the seat of arbitration
to be in Seoul, South Korea. The court then went into the difference between seat and venue of
arbitration. It observed that the distinction between the seat and the venue of arbitration is a
common feature of international arbitrations. There could only be one seat of arbitration. However,
whatever may be the seat of the arbitration, the parties are free to hold meetings and arbitral
hearings at a place(s) other than the designated seat. These other places are called venue(s) and
decided as per the convenience of the The arbitral proceedings may be held at these venues but
parties. the seat of arbitration remains the same.

177 Dozco India P. Ltd. v. Doosan Infracore Ltd. Arb 2011 6 SCC 179
178 Dozco India P.Ltd v. Doosan Infracore Co. Ltd. AIR 2011 6 SCC 179
96
The Apex Court held that from the language of the arbitration clause, it was clear that the parties
intended to exclude the applicability of Part I of the Act. Hence, the ratio laid down by Bhatia
International would not be applicable to the present case. The court therefore didn't have the
requisite jurisdiction to appoint arbitrators under Section 1 1 (6) of the Act.

Videocon Industries (SC)

The Videocon Industries Limited v. Union of India (UOI)179 case was another matter where the
Supreme Court chose the implied exclusion route and held that Bhatia International ratio would not
apply. Again, the Court's jurisdiction to grant a (under Section 9 of the Act) interim relief was under
dispute. In this particular case, the arbitration agreement contained a non-obstante clause which said
that the arbitration agreement shall be governed by the laws of England. The Court held that this
amounted to implied exclusion of Part I and hence, it did not have the jurisdiction to grant a relief
under Section 9 of the Act.

Yograj Infrastructure (SC)

In Yograj Infrastructure Ltd, v. SSANGYONG Engineering and Construction Company Ltd.,180 the
matter concerned an appeal before the Court, under Section 37, for setting aside of a foreign award
by an arbitral tribunal in Singapore. The Supreme Court, upholding the rulings by Courts below,
held that since 'the parties had specifically agreed that the arbitration proceedings would be
conducted in accordance with the SIAC Rules, which includes Rule 32, the decision in Bhatia
International, and the subsequent decisions on the same lines would no longer apply in the instant
case'. 181

BALCO (SC)
Perhaps the most widely discussed verdict on this issue was delivered by the Supreme Court in
Bharat Aluminium Company u Kaiser Aluminium Technical Services Inc.182 It was also the most
welcome.The Apex Court extensively discussed the contentious issue of applicability of Part I to
ICAs held out of India. It traced the development of the Act and noted that it was based on the
UNCITRAL model law. It observed that, like UNCITRAL model law, the Act too has given effect

179 Videocon Industries Limited v. Union of India AIR 2011 6 SCC 161
180 Yograj Infrastructure Ltd v. SSANGYONG Engineering and Construction Co.Ltd. AIR 2012 12 SCC 359

181 ibid

182 BALCO v. Kaiser Aluminium Technical Services Ltd. AIR 2012 9 SCC 552

97
to the territoriality principle. The Act, by adopting the territorial principle of UNCITRAL law, has
limited the applicability of Part I to arbitrations that take place in India.
On the issue of nonattendance of the word 'just' from Section 2(2) of the Act, the Court watched that
the Indian Legislature received the model law with a few changes. In light of those progressions,
the incorporation of the word 'just' in the Act would have been unnecessary. Subsequently, the
Bhatia contention that oversight of the word 'just' would demonstrate that the territoriality guideline
was not embraced by the Act and was denied by the Court. In the expressions of the Court, 'The
nonappearance of the word 'just' which is found in Article 1(2) of the Model Law, from Section 2(2)
of the Arbitration Act, 1996 does not change the sub'183
The Court further elaborated upon its argument that the strict territoriality principle had been firmly
embedded in the Act by placing reliance upon the scheme of the Act and ruled that 'Section 2(2) is
an express parliamentary declaration/recognition that Part I of the Arbitration Act, 1996 applies to
arbitration having their place/seat in India and does not apply to arbitrations seated in foreign
territories' .184
The Court also highlights the distinction between seat and venue in the context of Section 20(3) of
the Act. said section allows parties to hold arbitral meetings, proceedings, and hearings at any
place. The Apex Court observes that in an ICA seated in India, parties may, by mutual agreement,
hold arbitral proceedings outside India. This, however, would not have the effect of changing the
seat of arbitration, which would continue to remain in India.
The Court then envisages a scenario where the arbitration agreement designates a foreign seat and
also selects the Act as the curial law governing the conduct of arbitral proceedings.The Court,
having couched the complex issue in the above words, goes on to answer it:
if the agreement of the events is construed to provide for the 'seat'/'region' of Arbitration being in
India, would component I of the Arbitration Act, 1996 be applicable. If the settlement is held to
provide for a 'seat'/'place' outside India, element i'd be inapplicable to the extent inconsistent with
the arbitration law of the seat, although the settlement purports to provide that the Arbitration Act,
1996 shall govern the arbitration lawsuits.
Further elaborating on this point, the Court observes that even where the arbitration agreement
contains a provision that the Arbitration Act, 1996 would govern the arbitral proceedings, if upon
construction. the seat of arbitration is held to be outside India, Part 1 would remain inapplicable,
and Indian Courts wouldn't have supervisory jurisdiction over arbitration or award. However, the

183 BALCO v. Kaiser Aluminium Technical Services Ltd. AIR 2012 9 SCC 552
184 ibid
98
Court also observed that, in the above situation,it would just imply that 'the gatherings have
authoritatively imported from the Arbitration Act, 1996 those arrangements which are worried about
the inward lead of their discretion and which are not conflicting with the required arrangements of
the English Procedural Law/Curial Law. This fundamentally takes after from the way that Part I
applies just to assertions having their seat/put in India'185
The Court, while considering the matter of applicability of Part Il, reiterates its position that Part I
and Part Il of the Act are segregated and there is no overlap whatsoever between the two parts. It is
for this reason that provisions of Part I would not be applicable to foreign awards defined under
Section 44 of Part Il. The Court reasoned that if provisions of two parts were allowed to overlap, it
would lead to distortion of the scheme of the Act.
On the question of availability of interim awards/reliefs under Section 9 of the Act, the Court ruled
that since Section 9 is schematically placed in Part I of the Act, it cannot be granted a special status.
Quoting the words of the Court, 'On a logical and schematic construction of the Arbitration Act,
1996, the Indian Courts do not have the power to grant interim measures when the seat of
arbitration is outside India'.186
The Court further reasoned that by extending the applicability of Section 9 to arbitrations seated
outside India, it would be dilapidating/sabotaging the territoriality principle adopted and declared
by Section 2(2) of the Act. The Apex Court finally concludes saying that Part I of the Act would
apply only to arbitrations which take place within the territory of India. In its concluding remarks,
the Court rules that the law so declared by it 'shall apply prospectively, to all the arbitration
agreements executed hereafter' .187

Harmony Innovation (SC)

In Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. and Ors, the Supreme Court once
again considered a matter concerning its jurisdiction to decide matters under Sections 9, 11, and 34
of the Act. The Apex Court following the ratio laid down in Videocon and Reliance cases held that
the parties had excluded the applicability of Part I of the Act.188

Prico/ v. Johnson Controls (SC)

185 BALCO vs Kaiser Aluminium Technical Services Ltd. AIR 2012 9 SCC 552
186 ibid

187 ibid

188 Harmony Innovation Shipping Ltd. v. Gupta Call India Ltd. AIR 2015 9 SCC 172

99
In the case of Pricol v. Johnson Controls, 189 the Supreme Court of India declined to intervene in an
international arbitration with the SIAC (Singapore International Arbitration Centre) as appointing
authority, upholding the parties chosen mechanism in a decision which was marked by a degree of
judicial deference towards the arbitral process.

Indus Mobile (SC)

The most recent pronouncement by the apex Court regarding the interplay between seat and place
of arbitration came in the case of Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt.
Ltd. and Ors., 190wherein the Court discussed the BALCO, Enercon, and Reliance judgments and
read them together with the amendments to the Act pursuant to the Law Commission Report.
primary issue before the Court was the effect of an exclusive jurisdiction clause on
the seat of arbitration. The Court observed that
A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin
to an exclusive jurisdiction clause. Under the Law of Arbitration, unlike the Code of Civil
Procedure which applies to suits filed in courts, a reference to 'seat' is a concept by which
a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in
the classical sense have jurisdiction— that is, no part of the cause of action may have arisen at the
neutral venue and neither would any of the provisions of Section 16 to 21 of the CPC be attracted.
In arbitration law however, as has been held above, the moment 'seat' is determined, the fact that
the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of
regulating arbitral proceedings arising out of the agreement between the Parties. It is well settled
that where more than one court has jurisdiction, it is open parties to exclude all other courts.

Law Commission Recommendations and Amendment Act

The Law Commission of India by its 246th report 191 focused on the amendments required to the
Act. One of the issues it noted with the ‘gaps' which were left with the Supreme Court's decision in
BALCO. As many noted when the decision came out, the effect of BALCO is that where the assets
of a party are in India and the arbitration is seated outside India, the court's refusal to exercise
jurisdiction under Section 9 may leave the party with no adequate avenue for interim relief. The

189 Pricol.vs Johnson Controls Ltd. SC Arbitration case civil no 30 of 2014

190 Indus Mobile Distribution Pvt Ltd. v. Datawind Innovations Pvt. Ltd. and Ors. AIR 2017 SC 1372
191 The Law Commission of India Report 246” Amendment to Arbitration and Conciliation Act,1996” available at

http://lawcommissionofindia.nic.in/reports/Report246.pdf accessed 21-01-2018

100
Law Commission recommended that the courts should have power to issue interim relief in cases
where the award is likely to be enforced in India.
The court's power in India to issue interim relief has been slightly controversial in the past. The
Law Commission suggested limit on the court's power to issue interim relief and recommended that
once the arbitral tribunal is constituted, courts should not ordinarily entertain an application for
interim relief. In such cases, the parties should approach the arbitral tribunal to seek interim relief.

The Law
Commission strengthened the tribunal's authority to issue interim relief by providing for effective
enforcement of the tribunal's interim orders as if they were orders of the court, providing 'teeth to
the interim order of the arbitral tribunal'.
The Amendment Act specifically recognizes that parties to a foreign-seated arbitration can seek the
assistance of Indian courts for interim protection and for obtaining evidence, unless they
specifically exclude the jurisdiction of the Indian courts to provide such assistance. Amendment Act
however limits the Indian Courts ability to provide such assistance to cases where the seat of
arbitration is in a country which India recognizes in its official gazette as being a reciprocating
territory for the purposes of the Act.

Conclusion

The judicial trend post Bhatia, as far as international arbitrations held out of India are concerned,
showed a preference for interference on the part of Indian courts. This is amply evident from the
judgment of Indian courts in Venture Global, Inventa Fischer, Indtel, and Sara International. This
clearly had an adverse impact on the business environment prevailing in the country. It also railed
against the underlying principles of arbitration as a method of speedy resolution of disputes.
However, the courts soon realized their folly and made a course correction starting with their
judgment in Dozco case. The Supreme Court instead of overruling the Bhatia case used its ratio to
devise an implied exclusion route. The Apex Court also widened the ambit of this implied exclusion
route sufficiently enough to cover all fact scenarios where an ICA was held out of India. However,
the position soon changed with the Supreme Court judgment in the BALCO case, where the court
expressly overruled its Bhatia decision. The BALCO decision, however, had only prospective
applicability. "The Bhatia ratio continued to operate for cases where the arbitration agreement had

101
been executed before 6 September 2012. However, the judicial trend of following the implied
exclusion route continued. Even in the post BALCO era, the Apex Court, while conceding that
Bhatia ratio was applicable, followed the judicial trend of taking the implied exclusion route to
exclude the applicability of Part I.
The recent Amendment Act changes everything, as it makes Sections 9, 27, 37(1)(a), and 37(3)
applicable to international commercial arbitrations held out of India. The Amendment Act, however,
allows the parties to exclude the applicability of Part I, in general, and these provisions, in
particular, by mutual agreement. There is still some uncertainty over the applicability of the
Amendment Act. The judicial response to agreements entered in the post-Amendment era remains
to be seen.

As a suggestion, the authors would like to leave the reader with a model arbitration clause:
1. Any dispute arising out of or in connection with this [agreement/ contract], including any
question regarding its existence, validity or termination, shall be referred to and finally resolved by
arbitration seated in in accordance with the Arbitration Rules of the [e] for the time being in force,
which rules are deemed to be incorporated by reference in this clause.
2. Arbitral tribunal shall consist of [an odd number, either one or three] arbitrator(s) to be appointed
by parties
3. The language of the arbitration shall be as decided by parties.
4. For the avoidance of doubt, the arbitral tribunal may decide to convene its meetings at any other
location either for convenience or for taking evidence, and so on, without affecting the agreed
scat of arbitration as set out in sub-clause (1) above.
5. The provisions of Part I of the [Indian] Arbitration and Conciliation Act 1996, including Sections
9, 27, 37(1)(a), and 37(3) shall [apply/ not apply] to the arbitration/s under this clause .

102
CHAPTER - XII

INTRODUCTION TO INVESTMENT
ARBITRATION IN INDIA

The first Bilateral Investment Treaty (BIT) was signed between Germany and Pakistan in 1959
192and contained dispute resolution provisions only between states.193 This epoch witnessed
decolonization and the advent of the World War, represented by the coming together of two major
geopolitical formations in the Western world.194 The first BIT that incorporated Investor State
Dispute Settlement (ISDS) mechanism was the Netherlands—Indonesia BIT (1968) 195 and the first
BIT that included ISDS with unqualified consent to ISDS was the Chad—Italy BIT in 1969. 196
ISDS is an international law mechanism through which foreign investors seek redressal of
investment treaty rights violation by the host state. BITS, with ISDS, are perceived to be important
tools in encouraging the influx of foreign investment.197 They have gained significant support and
encouragement from global economic institutions such as the Organisation for Economic
Cooperation and Development (OECD) and the United Nations Conference on Trade and
Development (UNCTAD) as it is believed that BITS spur an increase in FDI by providing investor
security, in particular, for developing countries. However, there have also been critics who have
queried the link between BITS and increased investment.198
By the end of 2016, the International Investment Agreement (IIA) network consisted of 3,324
treaties, including 2,957 BITS and 367 treaties199 with investment protection clauses like Free Trade
Agreements (FTA), Comprehensive Economic Partnership Agreements (CEPA), Comprehensive

192 Treaty between the FDR Germany and Pakistan,Signed at Bonn available http://www.iisd.org/pdf/2006/
investment_pakistan_germany.pdf accessed 21-01-2018
193 Germany-Pakistan BIT 1959, art 11

194 International Institute for Sustainable Development, http://www.iisd.org/pdf/2011 visted 21-01-2018

195 Burhard Ilge “Rethinking Bilateral Investment Treaties- Critical Issues and Policy Choices” 1st edition 2016

196 Harvard International Law Journal ,55 2016 p. 55 ,2016

197 http://www.iisd.org/investment/law/treaties.aspx visited 21-01-2018

198 BITs,DDTs, and FDI Flows- An overview , Oxford University press,2009

199 UNCTAD, World Investment Report,2017 p.11

103
Economic and Trade Agreement (CETA) and Comprehensive Economic Cooperation Agreements
(CECA) .

There have been innumerable endeavours to deal with investment at the multilateral level. Tie 1994
World Trade Organization (WTO) agreements that resulted from the 1986—94 Uruguay Round
negotiations, in particular, the General Agreement on Trade in Services (GATS) and the Agreement
on Trade Related Investment Measures (TRIMs), cover important aspects of investment. It was
expansively discussed by the OECD at the multilateral agreement on investment (MAI)
negotiations in May 1995. However, the negotiations broke down in 1997 and have not been
resumed since. In 1996, at the Singapore Ministerial Conference, where member-countries decided
to set up three new working groups, including one on investment. This was included in the Doha
Development Agenda in 2001 and later dropped due to opposition from developing countries in the
2003 Ministerial Conference in Cancan, Mexico. 200 Presently, the major multilateral treaties in
Asia protecting investments201 are the Asia Pacific Economic Cooperation (APEC), Trans-Pacific
Partnership (TPP), the 1987 ASEAN Agreement for the Promotion and Protection of Investments,
(1987 ASEAN Agreement), and the ASEAN Comprehensive Investment Agreement, 2009 (2009
ASEAN Framework Agreement).

The global IIA regime, according to the UNCTAD Investment Report 2015,11 has moved from an

era of infancy (1950—64) to an era of dichotomy (1965—89), to an era of proliferation(1990-2007)

and is now in the era of reorientation.202 Asian countries tries did not actively participate in the IIA
regime till the era of dichotomy. However, India and China stayed away from BITS till much later.
In fact, India signed its first BIT (also known as Bilateral Investment Protection Agreement, or
BIPA) only in 1994 with the United Kingdom, and China in 1982 with Sweden.

ISDS Regimes

Investment arbitrations are conducted either on an ad hoc (non administered) basis or through
established arbitral institutions (like the International Centre for Settlement of Investment Disputes

200 IISD, Investment Treaties, 2015 ,p.5

201 UNCTAD ,World Investment Reports 2016 .p.121
202 UNCTAD,World Investment Reports, 2015.p.121

104
(ICSID). Appointment of the Permanent Court of Arbitration as the arbitral institution while
adopting the UNCITRAL rules to govern the arbitral process has been a recurring trend. 203

ICSID Regime
ICSID, established by the Convention on the Settlement of Investment Disputes between States and
Nationals of Other States (ICSID Convention), provides facilities for arbitration and conciliation of
investment disputes between contracting states and nationals of other contracting states.
The executive directors of the International Bank for Reconstruction and Development (World
Bank) formulated the convention and submitted it to the World Bank members for their
consideration, signature, and ratification.204 With 20 countries ratifying it, the convention came into
force on 14 October 1966. Currently, 161 states have signed the convention and 153 states have
ratified it. Presently, India is not a signatory to the ICSID convention.
The ICSID Convention is accompanied by rules and regulations adopted by the Administrative
Council of the Centre pursuant to Article 6(1)(a)—(c) of the Convention (the ICSID Regulations
and Rules). The ICSID Regulations and Rules (last amended in April 2006) comprise
Administrative and Financial Regulations, Rules of Procedure for the Institution of Conciliation and
Arbitration Proceedings (Institution Rules), Rules of Procedure for Conciliation proceedings
(Conciliation Rules), and Rules of Procedure for Arbitration Proceedings (Arbitration Rules).

UNCITRAL Regime
United Nations Commission on International Trade Law (UNCITRAL) was established by the
United Nations General Assembly by Resolution 2205 (XXI) on 17 December 1966 to promote
areas of commercial law inter alia dispute resolution, insolvency, and sale of goods. It prepares
legislative and non-legislative guidance documents in these areas of law.205
In the area of international arbitration, the UNCITRAL has prepared a set of rules that guide
arbitration procedure which is used in both ad hoc and institutional arbitrations. The UNCITRAL
arbitration rules have turned out to be the second-most popular choice of arbitration rules for
investment arbitrations, with the ICSID rules being the most popular. 206 The rules provide
guidelines with respect to appointment of arbitrators, conduct of arbitral proceedings and

203 Latham and Watkins , ‘Investment Treaty Arbitration: A Primer’,p.4 (1563,29 July 2013)
204 ICSID Convention ,Regulations and Rules,2016

205 UNCITRAL ,Guide to UNCITRAL

206 UNCTAD, Investment Policy Hub http://investmentpolicyhub.unctad.org/ISDS accessed 30 June 2017

105
effect, and interpretation of awards.207

The UNCITRAL has three versions of the arbitration rules. They are (a) UNCITRAL Arbitration
Rules, 1976; (b) the UNCITRAL Arbitration Rules, 2010; and (c) UNCITRAL Arbitration Rules
2010 (modified slightly in 2013) incorporating the UNCITRAL rules on Transparency for Treaty
Based Investor-State Arbitration.208
The UNCITRAL Transparency Rules aim to bring about a transparent regime in international
investment arbitration process and can be adopted along with either the UNCITRAL Arbitration
Rules or any other arbitration rules.

Other Arbitral Institutions

The other arbitral institutions that administer investment treaty arbitrations are Arbitral Institute of
the Stockholm Chamber of Commerce (SCC), International Chamber of Commerce (ICC), London
Court of International Arbitration (LCIA), Moscow Chamber of Commerce and Industry (MCCI),
Permanent Court of Arbitration (PCA), and the Cairo Regional Centre for International Commercial
Arbitration (CRCICA). All these institutions have their own arbitration rules. LCIA adopted a
revised set of arbitration Proceedings rules in 2014.Having released the draft SIAC
InvestmentArbitration Rules in early 2016 for public consultation, they came into effect on 1st
January 2017.209

Rights under a Bilateral Investment Treaty

Protection against Expropriation

An important protection granted under a BIT is protection of foreign investment against
expropriation. Expropriation is a bundle of rights which balances the interest of both the host state
and the investor. The sovereign right of the host government under international law to take
property of a domestic and foreign investor for social, economic, political, and other reasons is
recognized. Following are important considerations in determining the legality of expropriation:

1. Whether the property has been taken for a public purpose

207 UNCITRAL Arbitration rules http://www.uncitral.org/arbitrationrules.html accessed 30 June 2017

208 UNCITRAL Arbitration Rules
209 SIAC December 2016 Press release , ‘SIAC announces official release of new SIAC investment rules,2017

106
2. Whether the acquisition was non-discriminatory
3. Whether the acquisition was in accordance with due process
The availability of compensation and duties of mitigation may also be pertinent. Expropriation is
divided into multiple kinds based on the nature of the taking direct, indirect, creeping, de facto, or a
measure tantamount to expropriation.210 Broadly, expropriation can be grouped into indirect and
direct expropriation.

Direct and Indirect Expropriation

Direct expropriation is the physical seizure of property. It is also said to occur where 'the use or
enjoyment of benefits related thereto is exacted or interfered with to a similar extent even where
legal ownership over the assets in question is not affected, and so long as the deprivation is not
temporary'.211
On the other hand, indirect expropriation is a result of 'the measures taken by governments which
interfere with the right to the property or diminish the value of the property'. The Iran—US Claims
Tribunal in the Starrett Housing case defined indirect expropriation as follows: 'measures taken by a
State can interfere with property rights to such an extent that these rights are rendered
so useless that they must be deemed to have been expropriated, even though the State does not
purport to have expropriated them and the legal title to the property formally remains with the origi-
nal owner'.212

National Treatment and Most-Favoured Nation

National Treatment Clause

National treatment is a concept in international law which ensures that foreigners are given the
same treatment as nationals. It is not a concept specific to investment treaties as it is used in all
kinds of agreements from trade, to intellectual property, to investment.
The standard of national treatment is set on a comparative basis, which means that the standard of
treatment to a foreigner is decided based on the standard of treatment meted out to nationals. This
came to be known as the Calvo Doctrine and was accepted by many Latin American states.
However, developed countries did not recognize this doctrine and asserted that in cases where the

210 Working Papers on International Investment ,2004/04 ,OECD Publishing,p.4

211 Technicas Medioambientales Tecmed ,S.A. vs.The United Mexican States (2003) Arb(AF/00/2)
212 Startet Housing v. Iran 1983 ITL 32-34-1

107
standard of treatment given to nationals is below customary international law, as recognized by the
International Law Commission (ILC) Articles on State Responsibility, then the standard of
treatment to be given to the foreigners must be the higher customary international law standard of
treatment.
The wording of national treatment clauses has remained fairly consistent for many decades.213 "
Some national treatment clauses include the phrase 'in like circumstances'. Tie objective of this
insertion would be to ensure that the foreigner and national are on the same footing or 'in a like
situation' before the State is obliged to accord them treatment which is equally favourable. 214
An important question in national treatment that tribunals often face is the relevance of
discriminatory intent on the part of the host state." Ruling on this, the tribunal in Siemens v.
Argentina held that intent was not a decisive or essential factor for a finding of discrimination, but
what was essential was the impact of the measure on the investment.67 However, several tribunals
like those in SD Myers vs. Methanex, 215and Genin held that intent was a 'necessary prerequisite
for a finding of discrimination’.216 In any case, the burden of proving discrimination is on the
claimants.

Most Favoured Nation Clause

The most favoured nation clause is 's treaty provision whereby obligation towards another state to
accord most favoured nation ( MEN ) treatment in an agreed sphere of relations " .MFN treatment is
guaranteed to the investor by the host state It guarantees that an investor from one count would be
treated the same way as it would treat an investor in another country .Thus If a host state grants a
level of protection to an investor from country X, which is higher than granted to Country Y then
the investor from Country Y can invoke the MFN Clause in his BIT and avail the standards of
treatment granted to investors from Country X. However MEN may be invoked only if the
underlying BIT grants the MFN protection.
As defined by the ILC draft articles on NEW loans “MFN favoured nation treatment is a treatment
accorded by the granting State to the beneficiary State or to persons or thing in a determined
relationship with that State not less favourable than treatment extended by the granting State or to a
third State or to persons or things in the same relationship with that third State .217

213 Rudolph Dolzer ,’Principles of International Investment laws’,p1.78,. 2nd edition Oxford Press,2012
214 UPS vs.Canada,Award,24 May 2007
215 Methanex vs.USA 2005 44 ILM 395

216 Eastern Credit Limited- vs the Republic of Estonia ICSID CASE NO.ARB/99/2

217 Yearbook of International Law Commission ,1978 VOL II PART Two

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India and BITS
India liberalized its economy in 1991, opening up most industries to foreign investment. Automatic
approval of FDI up to 51 per cent in high priority industries, 100 per cent foreign equity in the
energy sector and setting up of the Foreign Investment Promotion Board in order to act as an single
window of clearance for foreign investments were just some of the measures taken by the
government in pursuance of its liberalisation policy.218 Further India has signed bilateral investment
protection and promotion agreements, with Singapore, Korea, Malaysia, and Japan and Trade in
Services and Trade in Investment Agreement with the Association of the South East Asian
Nations.219. As an initiative to encourage foreign investment, the Government of India adopted the
Make in India programme on 25 September 2014. The programme involves guiding the investors
through the whole process including helping them identify areas of investment and expediting
regulatory approvals, among others.220
The FDI inflows into India has over the years increased from $36 billion in FY 2013—14 to $45.1
billion in FY 2014—15 to $55.4 billion in FY 2015—16. On the flip side, India also plays a
significant role as a capital exporting country. In the year 2015—16, Indian investors made foreign
investments to the tune of S 7 billion'221 India has signed BITS with 84 countries out of which 74
have come into force. It was only in the mid-1990s that BITS were initiated by the Government of
India.222 A look at various BITS to which India is a party will make it clear that each BIT is quite
different from the other in its own way although there are many common features present.

Watershed Events in India's History of Investment Treaty Arbitration

White Industries Australia Ltd. v. Republic of India223
In this landmark case, White Industries, an Australian investor, filed this investment treaty
arbitration against the Government of India in order to enforce an ICC award passed in the
investor’s favour back in 2002. The investor had been trying to enforce the award for around ten
years and was unable to do so. investor claimed that long judicial delays in India were the cause of

218 India’s bilateral Investment treaty programme ,Prabhash Ranjan p.104

219 ibid
220 available at http://www.investIndia.gov.in accessed 30 Jan 2018

221 Investment report 2016

222 Investment policy hub, UNCTAD http://www.investmentpolicyhub.unctad.org/IIA visited 21-01-2017

223 UNCITRAL Final Award 2011 , 30 NOV. 2011

109
this enforcement delay. Therefore ,they used the MFN clause224 under the India—Australia BIT to
get the effective means' protection granted under the India-- Kuwait BIT225 . The tribunal found for
the investor on the issue of long judicial delays stating that these delays amounted to a denial
of effective means and thereby a denial of justice under the India— Australia BIT, This case is
important because it is the first case in which a BIT was effectively used against India.226

The Dabhol Case

Enron, through its subsidiary, entered into a power purchase agreement (PPA) with the Maharashtra
State Electricity Board (MSEB) in India for the construction and operation of an electrical power
plant, the Dabhol Power Project. The contract provided for dispute resolution through arbitration.
Enron was majority shareholder with GE and Bechtel owning 10 percent. The project was cancelled
by the state Government on grounds of lack of transparency and high tariff among others.
Later on out of court settlement was reached.

Devas vs India227
Recently,Devas filed an investment treaty arbitration against ISRO under the India Mauritius BIT
against the Government’s decision to cancel telecommunications contract.They had entered into
agreement with Devas granting it the license to a specific frequency of satellite spectrum for the
purpose of providing high-speed internet services. The Agreement was terminated by Antrix,
allegedly based on a decision of the Cabinet Committee on Security citing grounds of national and
strategic purposes and India's essential security interests .Devas alleged that the termination was
coloured with corruption at the hands of the Union government, based on a draft audit report
of the Comptroller and Auditor General (CAG) which pointed out several serious financial
irregularities and corruptive practices on part of the Indian government. The PCA tribunal seated in
Hague has recently issued an award against India finding material breaches of the substantive
provisions of the BIT. the award has not yet been made available in the public domain, it would be
interesting to see how issues of alleged corruption have been analysed by an international
investment tribunal.

224 India-australia BIT, Art.4(2)

225 India -Kuwait BIT ,Art 4(5)

226 Indian Journal of International Law ,2015

227 Devas Limited vs India ,UNCITRAL

110
IMFA v. Indonesia 228

Aside from being a receiver of foreign investment, India's role as a capital exporting country has
also grown. Indian investors are now turning to BITS signed by India, to explore claims against the
host state. IMFA v. Indonesia is an illustration. 100 In this case, Indian investor Indian Metals and
Ferro Alloys Ltd. has initiated an investment treaty arbitration against Indonesia in 2015 under the

India—Indonesia BIT. The arbitration is conducted by PCA under the UNCITRAL Rules and is

currently in progress.

Model BITS in India

India adopted its first model BIT in 1993. was revised in 2003 and was called the 2003 Model BIT
and further revised recently in 2015 and called the New Model BIT.

India's New Model BIT

The Government of India, with an aim to bolster the inflow of investment into the country, re-
examined the existing Model BIT (2003 Model BIT) and adopted the New Model BIT in December
2015. The objective was to ensure that the country had a model BIT instilled faith and reposed
confidence in Indian and foreign while maintaining a balance between rights of the investor
and government obligations.229 If the growing global criticism of the ISDS regime.102 While some
countries took measures such as denouncing ISDS, India aimed to find a middle ground which
would protect both its investors and the State. In light of this, the government, in April 2015, invited
comments on the then-existing model BIT. The Law Commission of India in its 246th Report, dated
August 2014, recognized risks to the international investment treaties due to gaps in the growing
body of international investment law. Concurrently, the monetary penalty award in White
Industries230and the receipt of numerous notices of arbitration under various BITS triggered a
renewed focus on the country's BIT regime. There was also pressure from the civil society
organizations, to review the regime. 231 All these events cumulatively led to the formation of a study
committee to analyse and study the 2003 Model BIT.

228 Antrix-Dewas, A bit of Protectionism, The WIRE 9 August ,2016

229Available at https://www.mygov.in acessed 21-01-2018
230 White Industries Australia Ltd.v. The Republic of India , UNCITRAL November 30 2011

231 Prabhas Ranjan “ Most Favoured Nation Provision in Indian Bilateral Investment Treaties : A Case for Reforms”,

2015,Indian journal Of International Law

111
India adopted the New Model BIT on 28 December 2015, which replaced the 2003 Model BIT and
declared that all future BIT negotiations would be led by the Department of Economic Affairs so as
to ensure the convergence of investment and trade issues.232 The Government of India has,
presently, notified 47 countries that it does not wish to renew its existing BITS as it intends to
implement the text of the new model investment treaty and sign new BITS .The background for
this decision was, as the external affairs minister put it, the shocking number of cases (or disputes)
that arose out of the earlier investment treaties drafted along the lines of the previous Model BITs
(1993, 2003).
The New Model BIT is radically different from the 2003 Model BIT, making substantial changes to
the clauses relating to scope, MFN and investment treaty protections inter alia fair and equitable
treatment (FET) and expropriation. The 2003 Model BIT had envisaged only 'promotion' as an
objective. The absence of 'protection' was one of the reasons for the criticism of the Draft BIT. The

preamble of the Model BIT now includes 'protection' of the investment as an objective. This step

will be viewed positively not only by the investors who want to invest in India but also by the
Indian investors now actively investing outside India.Thus ‘promotion’ and ‘protection’,considered
to be the two cornerstones Of a BIT , are now reflected in the Model BIT.
The Scope Clause: the 2003 Model BIT encompassed all disputes relating to any investment made
by an investor of a Contracting party as long as the investment was made in accordance with the
law of the State. 'The Model BIT has significantly narrowed down the ambit of the BIT to exclude.
inter-alia, disputes pertaining to pre-investment expenditure, law or measure of taxation, measures
taken by a local government, services tendered by a governmental authority in governmental
capacity, IP-related subject matters subsidies/grants given by the government and disputes relating
to governmental procurement.233

Fair and Equitable 'treatment Clause: 'The 2003 Model BIT incorporated the usual fair and

equitable treatment protection found in many investment treaties. The law Commission of India

noted that this ever-growing umbrella of protections along with an inconsistent interpretation of

legitimate expectations under the clause, limited the legislative, regulatory, and administrative

actions of the host state. 234 'Thus, in the New Model BIT, the FET provision was deleted and a

232 Availableat http://finmin.nic.in/sites/default/files/ModelBIT accessed 21-01-2018

233 Model BIT 2016. Art 2.4
234 Law Commission of India Report No.260 ‘Analysis of the 2015 Draft Model Indian Bilateral Investment

Treaty’,Para 3.1.1
112
more general customary law protection was inserted to ensure a base level of protection for the
investors. 235

Full Protection and Security: "The 2016 Model BIT also grants Full Protection and Security that
extends only to the physical protection of its investor and investment and not any other
obligation.236 Moreover, any breach of any article of the treaty or of an international agreement
would not amount to a violation of this clause. 237

Exhaustion of Local Remedies: The 2016 Model BIT expressly provides for an exhaustion of local
remedies clause, which ensures that arbitral tribunals are not burdened with premature claims and
more importantly that the domestic courts are given the power to decide on issues of domestic law.
238

National Treatment and MFN: Tie National Treatment clause which grants the investors and their
investments the same protection as that provided to the investors and investments of the nationals
of the host state, has been narrowed down in 2016 Model BIT to the extent that the National
Treatment would be granted only if the foreign investment or the investor is in like ‘circumstances’
as the national investment or investor. 239
Till dates all the BITS signed by India contain the MFN provision. The only ones that do not have it
are India's FTAs with Singapore, Koreas and Malaysia.240 The New Model BIT provides that there
must be a minimum of five years between the date on which the investor first acquired knowledge
and the date of filing of a 'Notice of Dispute', to refer the matter to investment treaty arbitration.
This time period is intended to be used for exhausting available local judicial and administrative
remedies. The cooling off period, that is, the time period between the notice of dispute and the
notice of arbitration, is prescribed at six months.

Expropriation Clause: The New Model BIT has excluded from its purview non-discriminatory
regulatory measures and measures/ awards by judicial bodies of the host state aiming to protect

235 New Indian Model BIT , available https://finmin.nic.in acessed 21-1-2018

236 Model BIT 2015, art3.2
237 Model BIT 2015 art 3.3

238 Encana vs Ecuador,Article 2(2)c UN Charter on Economic Rights

239 Model BIT 2015 art 4.1

240 Prabhas Ranjan, “ Most favoured Nation Provision in Indian Bilateral Investment Treaties : A Case For Reform”,

2015, Indian Journal of International law

113
public interest. India had contemplated the inclusion of a clause which took away the power of the
tribunal to review a host state's determination of whether the measure was made genuinely in public
interest. On the recommendation of the Law Commission of India, this clause was dropped in order
to ensure a fair balance of interests of the investor and State.241
Other Notable changes: The term 'company' has been replaced by the term ‘enterprise’.242 Thus
moving from an open-ended asset. based' definition to a more limited definition that protects Only
those investors who have a substantial and real business presence in India. 243 The New Model BIT
also reiterates that foreign investors must be in strict compliance with the host state's taxation
laws.Umbrella and Stabilization Clauses have also been excluded. The New Model BIT has
incorporated Dispute Settlement within states mechanism.

Conclusion
The debate on fine-tuning the ISDS process is now enriched by the proposal for a World Investment
Court. India is yet to take a formal position in this debate but has to bear in mind interests of
foreign investors in India and Indian investors overseas. There is a new found confidence in the
resilience of the Indian Investment environment as evidenced by the proposed re-negotiation of
significant DTAAs and BIPAs. It is critical that India remains engaged in international
debates on both incremental and radical reform proposals to ensure a healthy balance of investor
and host state's sovereign concerns not only in India but across the world.

241 AshutoshRay ,Unveiled :Indian Model BIT ,2016, The Wire

242 Model BIT 2015 , art 1.3
243 Law commission of India Report,260 p.8-9’An Analysis of India Model Investment Treaty “

114
Chapter-XIII

Commercial Mediation
An Evolving Frontier of Alternative Dispute Resolution in India

The principles and practice of mediation are not new or even contemporary concepts, with
consensual forms of dispute resolution observed in traditional societies dating back centuries. Even
before litigation or trial advocacy, informal means of resolving disputes through the use of third
party interventions were familiar to nearly every society. Exploring the concepts inherent within
commercial mediation and its scope in India exposes itself to several key concerns raised by
commercial and business entities. How are alternative dispute resolution (ADR) mechanisms being
utilized to address disputes currently and how are these various mechanisms understood within the
legal and business community? More specifically, how can mediation be utilized as an instrument
for boosting commercial growth and business in India to achieve its fullest potential? India is a
powerful emerging economy with fertile and appealing markets. Increasingly, rapid globalization is
demanding commercial integration on multiple levels. The rapid expansion of technology, including
e-commerce, and more frequent international business partnerships, has brought the need for
collaborative dispute resolution processes to the fore. It is, therefore, both relevant and necessary to
locate and cultivate commercial mediation in India within a broaderglobal context, identifying
domestic Indian statutes and frameworks impacting mediation in the commercial sphere.244
Mediation is progressing to the top as the first choice for dispute settlement because it has to.
Corporate entities are expected to secure positive settlement outcomes at lower costs, minimizing
risks with shareholder assets. It is becoming increasingly necessary that businesses draw a line
under conflict budgets and opt for progressive, more effective outcomes. In addition, legal
practitioners are becoming convinced that extemporaneous early conflict resolution is more
efficient, especially in terms of client satisfaction. Therefore, mediation merits further exploration
and potential utilization in India, given the sea of existing commercial disputes245 and those
impending.

244 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.319-320, OXFORD University
Press,First Edition ,2018
245 UNCITRAL Model Law on International Commercial Arbitration with Guide to Enactment and User 2002 (Model
Law on International Commercial Arbitration)
115
Fundamental to this investigation of commercial mediation in India is the development of an
understanding of the roles of various stakeholders; in-house counsel, mediation advocates, the
commercial parties themselves and significantly, the key qualities and designations of the mediator.
These stakeholders operate in a variety of environments and as such, the scope of the application of
commercial mediation is both broad and inclusive. For many years, mediation has suffered
misperceptions. Bringing clarity, therefore, to the concept and its application in the legal and
commercial context is indispensable. This chapter deals with these concerns providing a firm base
for users and practitioners to make threshold decisions about choosing mediation. 246

The Driving Force of Commercial Parties to Adopt Mediation

The outlook towards mediation has much improved in the recent years.Numerous factors such as
these may drive parties to consider mediation and work towards a settlement are noted here,
1.Mediation doesn't merely conclude matters. Whilst securing the parties' future relations,
mediation resolves matters.
2. The costs and flaws of the legal system in the main suit and connected matters (such as interim
applications, parallel legal actions, and so on.
3. Delays having pernicious effects on the business and exchequer. Commercial parties may,
therefore, tend to strongly prefer avoiding losses rather than acquiring gains.
4. The ability of a party to wear down the other with heavy litigation affecting business and
financial status. The 'winner takes it all' aspect of judicial decisions can be quite counterproductive,
creating a peculiar incentive to adopt mediation.
5. Exposure from a court decision in the public record as to who was 'right' and who was 'wrong'
can have repercussions on future business, reputation, and otherwise.
6. Court findings against a party may trigger further litigation in collateral matters, inviting
additional court actions from several other parties who see an advantage in the findings of the
court.247
7. The implications that the Arbitration and Conciliation (Amendment) Act, 2015 (Arbitration
Amendment Act) has on mediations/conciliations will be more psychological and strategic impact
as the Arbitration Amendment Act made no amendment to the conciliation part of the 1996 Act.
Before the amendment, stakeholders lamented over several issues and called for greater efficiency,

246 Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.320, OXFORD University Press,First
Edition ,2018
247 Lon Fuller, ‘The Forms and limits of Adjudication’,Harvard Law Review ,92 (353,1978)

116
transparency, and accountability in arbitration. Now that it is actually here, many will also wish
otherwise: strict timelines, checks and balances over the appointment of arbitrators, no automatic
stay on the award on filing of an application to set aside an award under Section 34 of the Act,
narrower grounds of challenge, enforceability of interim orders of an arbitral tribunal, and so on.
With the amendments in place, mediations will be taken much more seriously. It would no longer be
seen as a mere step to just get over with before one can institute a lawsuit or a notice of arbitration.

The uptake of commercial mediation as a valued and viable alternative to litigious processes has
been met with initial resistance within the business community in countries around the world. With
increased education around the potential benefits of mediation, and conscious effort made to adjust
the attitudes and behaviour promulgating litigation as 'best' practice, commercial mediation stands
to win over the hearts and minds of ADR users, lawyers, and the justice system more broadly.
Adopting mediation has become much more pressing in a country like India in its present state of
affairs, as also lamented by the Supreme Court of India in Satem Advocates Bar Association v.
Union of India.248 According to Dr Justice Dhananjaya Y. Chandrachud, “Above all, there has to be
a realisation that the service that is rendered by the legal profession is in the cause of justice to the
common man. The needs of litigants must occupy a position of pre-eminence. Any method of ADR
which ensures expeditious and inexpensive justice to the ordinary litigants must, therefore, be
supported.”

Conclusion
With the foundation being laid, and the subsequent support and promotion for the advancement of
commercial mediation garnered by India's judiciary and legislative body, the moment to embrace
this evolving flagship of ADR is now. In this day and age, national and international communities
interact with increased frequency and overlap, exposing the need for high level cooperation and
efficiency as the level of domestic commerce and overlap the domain of international trade and
investment. India's role as an increasingly relevant player on the global stage highlights this need
for efficacy even more so. Conflict is, however, inevitable in commercial dealings as in life more
broadly. That mediation offers itself as a robust, efficient, and effective alternative litigation in
matters of commercial dispute is evident. It is unique in its flexible and voluntary nature, and in the
way in which it may be utilized by parties at various points on a dispute trajectory. This chapter has,
thus, explored the processes and considerations required in deciding how, if and when to mediate.

248 Salem advocates Bar Association v. Union of India AIR 2005 6 SCC 344
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Equally, the selection of the team of professionals serving as advocates and mediators offering their
guidance and support to disputing parties has been attended adequately to encourage the use of
mediation as a fitting method to resolve disputes. Given India's litigious culture and the paralysis of
the judicial system, mediation is the need of the hour. It is proposed and accepted that mediation is
not appropriate for all disputes nor does it guarantee a settlement. However, in the context of
lengthy and expensive adjudicatory processes, the possibility for saving time, preserving
relationships and commercial reputation ,and generating progressive, creative settlement options,
far outweighs any alternative observed in the adversarial arena. Having said that, mediation is not a
technique to manage the inability of courts but a defined and structured mechanism of CDR and an
independent means of providing access to justice. There are a myriad possible rewards a party may
receive from a successful mediation, with a very important precept of parties having the opportunity
to articulate their case and being heard.In light of the recent developments in ADR, it has been a
view in India that a number of principles pertaining to mediation should now be accepted as
forming part of a separate mediation In India, the emphasis placed upon mediation has been sharply
articulated time and again. It, therefore, remains to be seen how far and wide will the message be
received and accepted in the commercial sphere.249

249Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.377-378, OXFORD University
Press,First Edition ,2018
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CHAPTER-XIV

CONCLUSION AND SUGGESTIONS

Alternative Dispute Resolution mechanisms are in addition to courts and complement them. The
traditional system of dispute resolution is afflicted with inordinate delays. However the backlog and
delay appear to be more accentuated than in modern-day India. ADR mechanisms play an important
role in doing away with delays and congestion in courts. The Indian civil justice system serves the
interests of a diverse and exploding population, the largest democracy and the seventh largest
national market in the world. This formidable responsibility, combined with the recent drive toward
greater political accountability in the public administration and post-1991 market reforms, places
ever-greater pressure on the civil justice system. An estimated backlog of 25 million cases and
reported delays in some urban areas in excess of twenty years, currently undermine the effective
enforcement of the substantive civil and commercial rights. Backlog and delay have broad political
and economic implications for Indian society. If India fails to face and meet these challenges, it will
not be able to realise fully its legal commitment to democratic and liberal economic policies. In
cases such as motor accident claims, the victims may require the compensation to be paid without
delay in order to meet medical and other expenses. In matters such as these, Alternative Dispute
Resolution mechanisms like Lok Adalat can help victims obtain speedy relief.250

In the ultimate analysis it may be concluded that the widening gap between the common people and
the judiciary is indeed a serious cause of concern for all those who deal with the judiciary is indeed
a serious cause of concern for all those who deal with the administration of justice. The effective
utilization of ADR systems would go a long way in plugging the loophole which is obstructing the
path of justice. The concepts of alternative modes of dispute resolution should be deeply ingrained
in the minds of the litigants, lawyers and the judges so as to ensure that ADR methods in
dispensation of justice are frequently adopted. Awareness needs to be created amongst the people
about the utility of ADR and simultaneous steps need to be taken for developing personnel who
would be able to use ADR methods effectively with integrity.

250Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.6-10, OXFORD University
Press,First Edition ,2018
119
In the Preamble, the words ‘justice, liberty, equality and fraternity these four pillars form the
infrastructure, supporting the whole Indian system to be built. Breaking or damaging or weakening
any one of these pillars will damage the entire structure since everyone is a fundamental pillar and
each is tightly interlinked to each other and these four forms a single interdependent reality.

The justice dispensing system in the the country have undercome serious stress in the last century.In
India, the backlog of cases have become so much that there is no other alternative to look to other
than ADR.With the arrival of the air procedures, there is new statutory place for the people to solve
their disputes.Lok adults introduced the The Legal services act ,1987 have contributed strongly in
reducing the overload of cases by dispensing agreed justice to the parties. The scope of alternate
dispute resolution system (ADR) has been highlighted by the Hon’ble Chief Justice of India in his
speech in the joint conference of the Chief Ministers of the State and Chief Justice of High Courts,
held at Vigyan Bhavan, New Delhi on September 18, 2004 and insisted the Courts to try settlement
of cases more effectively by using alternate dispute resolution system so as to bring down the large
pendency of cases in law Courts.

Alternate Dispute Resolution is developing at a fast pace in all arena domestically as well as
internationally.“Arbitration clause” in majority of contracts have become the new normal in modern
times. Now various laws school courses ,seminars etc. are regularly done all around the country to
encourage people and to communicate with them the benefits of ADR procedures.

Lastly,Abraham Lincoln have aptly describe the ADR in simple quotes:

“Discourage litigation persuade your neighbours to compromise whenever you can point out to
them how the nominal winner is often a real loser, in fees, expenses, waste of time…”

Arbitration is considered to be an essential part of dispute resolution among commercial parties

these days. Even in non-commercial cases, arbitration and other alternative dispute resolution
mechanisms are used these days. However, gradually even ADR mechanisms have become time
consuming and expensive nowadays. Therefore, commercial world is looking towards information
and communication technology (ICT) for a better opinion than ADR.251

Online dispute resolution (ODR) has emerged as an alternative to ADR that is primarily technology
driven. Perry4 Law and Perry4 Law Techno Legal Base (PTLB) have been working in the direction

251Shashank Garg (ed),Alternative Dispute Resolution: The Indian Perspective, p.6-10, OXFORD University
Press,First Edition ,2018
120
of legal enablement of ICT systems in India and worldwide and legal enablement of e-governance
in India and abroad. To strengthen the initiatives and projects of of Perry4 Law and PTLB, they
have thought of taking some crucial and immediate steps for the development of E-Courts, E-
Judiciary, ODR India, and Online Arbitration and so on. It has many advantages over traditional
litigation methods and even over ADR methods. However, online dispute resolution (ODR) in
India is still evolving. Perry4Law and PTLB suggest that India must speed up the process of
adoption of ODR for resolving e-commerce and international commercial disputes. E-commerce
disputes resolutions in India may be resolved using ODR in the near future. Electronic delivery of
justice in India has failed. There is no second opinion that e-delivery of justice in India is needed.
Further, e-courts and ODR in India are also required to be strengthened.

Suggestions:

There may be some restrictions in the existing arbitration laws on the development of online
arbitration, but these restrictions are not substantial obstacles. With the development of laws about
the Internet, e-commerce and arbitration, there is spacious room for the development of e-
commerce and online arbitration all over. By taking appropriate precautions, arbitration agreements
can be concluded by electronic means and arbitration proceedings can be conducted by electronic
means, within the framework of existing national laws and international treaties. Though it is
contended above that the online arbitration and its utility is a possibility without any law reform and
people do not feel secure unless it is placed in proper legal frame work. Hence law reform in this
regard is the urgent need. Jurisdictional issues in cyberspace have always been the matter of great
concern. There is a close connection of this issue with the success of online arbitration. As online
arbitration is more suitable and often resorted to in resolution of cross border disputes, no amount of
law reform at national level would be the answer to the menace. At international level the suitable
law reform is recommended.

Online dispute resolution system presents a realistic and practical solution to the growing needs of
the Internet community. Furthermore, it provides speedy resolution, is convenient, eliminates
complex jurisdictional and choice of law problems and has the potential to be economically viable.
As the number of people using the World Wide Web grows, so will the disputes. The existing
services are trying to come up with the demand but there are certain problems that must be
addressed first like jurisdiction, confidentiality, enforcement of decisions, etc. there is an urgent
need to address these issues to maximize the benefits and to provide a better system of resolution

121
for new breed of technology led disputes. The various possible steps that can be taken for the
bringing in the concept and practice of Online Dispute Resolution worldwide.

Lastly, it can be concluded by saying that as the importance and necessity of ADR along with ODR
is increasing in the society both in national and international, initiatives should be taken in every
way for the development in these fields so that society can be benefited and the pendency of the
cases in the courts may be reduced to zero. If India wants to be a hub for international commercial
dispute resolution and online commercial arbitration, then it must start investing in ODR and e-
courts as soon as possible. ODR system in essence not only offers a promising mechanism of
dispute resolution worldwide, but serves as a facilitator of global harmony and a wholesome e-
commerce interaction and growth.

122
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