Objectives of the Arbitration is to end the disputes in an expeditious, inexpensive and amicable manner. This is an old age and well recognized dispute redressal mechanism in India, wherein the people used to settle their disputes by submitting to independent and neutral person. In the present time as well, it is quite true in the rural side that democratically elected panchayats adjudicate and conciliate upon the common issues of the villagers. Consequently, with the passage of time, legal system emerged, and as result the arbitration and conciliation grown legal sanction by virtue of “The Arbitration and Conciliation Act 1940”, which was an exhaustive legislation and served the litigants for fifty years, but the advent of globalization in trade and commerce diminished its importance, as it observed that the provision of the act did not allow adequate autonomy to the parties for settling domestic and international commercial disputes. To meet the objectives of the legislation, and to stride the speed of globalization, the legislature re-looked into the existing provision and aligned the ACA 1996 with UNICITRAL 1985.
Notwithstanding the facts that legislature had travelled miles and put in the best endeavour to grant autonomy to the parties under The Arbitration & Conciliation Act 1996, but could not manage to secure the unnecessary and excessive judicial intervention to the desired level. It will not be out of place to mention that Act of 1996 has narrowed down the grounds of challenge to a very minimum, yet left many pigeonholes for the parties to approach regular courts at every stage of the proceeding including starting from appointment to interim relief and challenge of awards etc. one cannot question the intention of judicial intervention, but impact is not very plausible. In globalization tug of war and to keep one’s stake high, neutrality, certainty and fairness are essential element and entrepreneurs don’t want to waste time and efforts to settle the commercial dispute through lengthy judicial action, rather wants legislative, executive and judicial assurance that India is safe and go to destination for trade and commerce.
To see the “MAKE IN INDIA” as a success story of India, legislature, executive and judiciary has to align with India vision and need to assure swift and fair resolution of commercial disputes with minimal judicial intervention. Notwithstanding the facts that it is equally pertinent that Indian legislature endeavored to allow maximum freedom to the parties in settlement of their disputes through arbitration, but approach of the judiciary remained unfocused. It is also true that legislation promises neutrality and non-intervention, and Courts announced landmark welcome judgement intermittently and discouraged the judicial intervention to certain extent. Despite the fact it is desperate need for development of trade and commerce that courts keep consistency in its decisions to snuff out the judicial intervention except on very limited grounds. The undefined and ambiguous terms like “public policy” “Patent illegality” are so easy way available to delay the enforcement of awards, should be liberally interpreted, so law do not serve the undeserved party.
A welcome move by the Supreme Court in “Renusagar Power Co Ltd v General Electric” therein it is endeavored to minimize the judicial intervention by restricting the scope of public policy. The Court refused to get into the merit of case and held that issue of unjust enrichment has nothing to do with enforcement of the award, so as result court can look into the foreign award on the three ground i.e. 1) fundamental policy of Indian law; 2) the interest of India; or 3) justice or morality, but it was unfortunate that “public policy” in Renusagar was interpreted under the Foreign Awards (Recognition and Enforcement) Act 1961 (repealed Act) and did not receive much Judicial attention after implementation ACA 1996.
Supreme Court in ONGC v/s Saw Pipes adopted all three grounds from Renusagar, but went a step ahead, which expanded the scope of judicial intervention, by giving a narrow meaning to public policy and added another ground “patent illegality”, and apparent on the face of the records. The Supreme Court thereby held that any arbitral award in violation of statutory provisions of Indian law is “patently illegal” and contrary to the cannon of “Public Policy”
Since this cannot be treated as stray statement, so was opening of new arena to approach the regular courts. Subsequently Supreme Court approved the “Patently illegal” in McDemott International Inca as well and further Bombay High Court in “Western Maharashtra Development Corporation Ltd. v Bombay Pune Road” relying on Saw pipes and set aside the arbitral award on the ground of “substantive provisions of law” and held that any award contrary to the substantive provisions of law is patently illegal.
On the other hand TPI Ltd versus UOI was a very welcome decision in the interest of finality of award, wherein constitutionality of Section 34 was challenged on the ground that court should not deny to entertain the award on merit, but the High Court dismissed the plea and held that an award can be set aside if it is in conflict with "the public policy in India", therefore the court have no power to travel beyond the boundaries set by the legislature under Section 34.
In a recent case the Supreme Court in Oil & Natural Gas Corporation Ltd. v Western Geco International ltd.( 2014) further laid down the scope of fundamental policy of India and held at sl. No. 30 of the judgement, which expanded the unlimited scope of judicial intervention and held that “It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that “if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice”, the adjudication even when made by an arbitral tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest.”
In view of the above, it was expected that the Supreme Court will rectify the unlimited scope of judicial intervention of as provided under “Saw pipes”, while adjudicating the “Western Geco International”, but contrary to the popular demand Supreme Court went to expand further the limits of judicial scope and thereafter making the amendment 2015 in ACA 1996, legislature itself approved the most controversial ground of challenge i.e. public policy & “patent illegality”. It is slight better that amendment kept the foreign award beyond the purview of “patent illegality” clause thereby tried to narrow down the scope of challenging the International awards, which looked as disparity with the domestic award. Therefore, law commission need to relook upon that Indian Arbitration regime is not immature, so should be equated with International awards especially in term of “public policy & patent illegality”, else anything and everything is subject to judicial scrutiny for domestic awards, which makes Indian arbitration regime unfriendly.
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Tags :Corporate Law
