Adr in an Era of Globalisation: an Indian Perspective

In a country with a population in excess of a billion, and plagued by an beneathfunded solicit construction full of corrupt and ineffecient officers, we argon looking at decades of stagnation, a accumulate of grimaces in excess of 29 million, across the ground-level d wholeys, the twenty- bingle high lawcourts and the unconditional court. According to Global Corruption Report 2007 Corruption in discriminatory Systems, Indians shelled out an estimated $600 billion as bribes to the judiciary, which is higher than the bribes paid out in any other sector in the court.This long gestation utmost of litigation has upshoted in a large scale loss of authority in the judiciary, with a growing number of people opting to stay extraneous from court. Enter alternate junk declaration. It is this plethora of people who are thrill tar perplexs of an alternate dispute mechanism. The prime time solution to the snails pace tucker of cases. The main selling point of arbitrament is the fast and cheap colonisation of disputes outside of a courtroom.While arbitration is a product of a private agreement, once an arbitration set apart is rendered, the prevailing party advise seek to nurse that dirty money confirmed by the courts, and, having done so, arsehole invoke the coercive power of the state to enforce it in the comparable manner as it could a court judgment. Initially received with agnosticism by the courts in various countries, arbitration is now being embraced as an effective form of alternate dispute resolution.As a result of the burgeoning international trade and an explosion in the unlike direct investment numbers in the country, arbitration and other forms of alternate dispute resolution are becoming much than and more indispensable. One of the major problems with contrasted litigation is that foreign judgments are subject to several layers of appellate analyse, whereas, foreign yields are much easier to enforce in different sovereign st ates. arbitration is particularly successful in fields like construction, where a current amount of expertise is involve while resolving disputes, of which there is famine in the courts.Arbitrators are chosen from the same industry, and are mainly required to resolve disputes based on fact rather than level- mental capacityed issues. to the highest degree companies prefer much(prenominal) a business approach to resolution of disputes, rather than a good approach. arbitration in India was first governed by the arbitration and Conciliation puzzle out, 1940, which was later replace by the 1996 make up. The 1996 form was designed generally to implement the UNCITRAL Model Law on International Commercial Arbitration and create a pro-arbitration legal regime in India.This Act was generally aimed at subduing the loopholes which allowed for excessive discriminatory interpolation in the 1940 Act. Some of the features of discriminatory review The words in variance 30 of th e 1940 Act see shall not be desex divagation took away the jurisdiction of the courts to set past an lay out except on one or more of the grounds specified in the surgical incision. Amended in 1996, however, the section re-numbered section 34 reads An granting may be set apart provided if Hence, the court has no jurisdiction to set past an award on any other grounds.This amendment was brought with an intention to reduce the electron orbit of juridic review to allow for a minimum level of court intervention. In R. S. Avtar Singh & Co. v. N. P. C. C. Ltd. , the court commented on the reputation and extent of the courts jurisdiction It is a well settled article of belief of constabulary that the award of the arbiter who is a chosen judge of facts and of police force between the parties cannot be set aside unless an misconduct is apparent on the face of the award or it can be inferred from the award that the referee has misconducted himself or the proceedings or that he has not applied his mind to the material facts.Hence, the court is not posing in appeal on the award, nor can it re-examine the material which was adduced in advance the ump. The court cannot examine the correctness of the award on merits nor it is obligatory for the arbitrator to give detailed reasons. Unless the court comes to the conclusion that the award is preposterous, it cannot set aside nor substitute its admit decision in place of the arbitrator. In short, the arbitrator is the net judge of facts and law, and the arbitrational award is not open to scrap on the ground that the arbitrator has reached a wrong conclusion or failed to appreciate the facts.Section 31 (3) of the new Act of 1996 states that an arbitral award shall state the reasons upon which it is based, unless the parties have agreed otherwise, or the award is agreed on the terms enumerated under Section 30. This was reiterated by the court in the case of Tamil Nadu Electricity gore v. Bridge Tunnel Co nstruction Co.. The rationale behind this order of the court is to ensure that the arbitrator acts capriciously, and to give the parties say-so that the grounds for the stemma of action chosen by him and reasonable and just.At the same time, however, to ensure the finality of the award, reasonable of reasons given by an arbitrator cannot be challenged on merits. Why discriminative review? The main inclination of arbitrators is to try to decide disputes correctly on the priming coat of the relevant law, and subsequently, explain the rationale for their decision. The need for a provision for judicial review in the field of arbitration is born out of the states concern to maintain the integrity of the arbitral process, and maintain a balance between party autonomy and the laws of the land.Judicial review is generally intended to guard against arbitrariness of awards, and to ensure that the law of the land is followed deep down the states jurisdiction. No doubt judicial interven tion is a requisite in the field of arbitration which lacks a real decisional law in the matter. However, the issue to be ad get dresseded is to what extent, and an travail is to be do to define the scope of this judicial intervention. To what extent can courts come forward and substitute their judgment for the arbitral award?Parties who are dissatisfied with arbitration awards often call upon the courts for review. Procedurally, review is sought in an action to modify the award or set it aside by way of defense, in a proceeding brought to enforce the arbitrators decision or, by way of replication, in an action where the dissatisfied party has sued on his trustworthy claim and the satisfied party has pleaded the award. One of the major problems with the 1996 Act, is that a individual aggrieved by an arbitral award has to start right from the District court in order to hallenge an award. Additionally, in two recent Supreme woo decisions, Oil & Natural Gas Corporation v. SAW Pip es and SBP v. Patel Engineering, the scope of judicial review has been widened by interpreting anything contrary to ordinary indemnity as being patently illegal, and since any award which contravenes Indian statutory provisions is patently illegal, it is overly contrary to public policy, and hence, subject to the judicial review of courts. Generally speaking, arbitral awards are not subject to appeal.However, in most countries, including India, there are provisions to set aside an award in extreme cases. Judicial review of foreign arbitral awards generally falls into two categories. First, the reviewing court inquires whether requirements of natural justice were observed in the arbitration proceeding and whether the arbitration agreement is valid under the applicable law. Failing so, the arbitral award will be denied recognition or enforcement on the grounds that the fundamental requirements of natural justice or rectitude have not been met.Subsequently, the court inquires into the merits of the award, that is, whether the arbitral body has committed an error in rendering the award. The question of judicial review, however, is a two-headed coin. On the one hand, limiting the scope of judicial review reaffirms the roots of arbitration, that is efficient and speedy resolution of disputes. Conversely, however, widening the scope of judicial review defeats the genuinely concept of finality of an arbitral award, and hence, moving back to square one of the legal court brass.Why not? 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 testimony that the proceedings under the Act have become highly technical accompanied by consummate(a) prolixity at ein truth stage providing a legal old salt to the unwary. An informal forum chosen by the parties for expeditious disposal of their disputes has by the decisions of the courts been clothed with Legalese of unforeseen omplexity. To the critics of judicial review of arbitral proceedings, the likelihood and to an extent, inevitability of judicial review serves as a serious deterrent to individuals and companies pursuit arbitration as a solution to commercial disputes. A certain school of thought views arbitration as a unspotted dress rehearsal for subsequent litigation, and disregards judicial review as a mere interference to the finality of the arbitral award. India is a country growing in leaps and bounds, with the coming of globalization.Being a country looking to attract more foreign investment, developing a fool-proof, cost-efficient and speedy legal remains is vital. When a foreign company explores the prospects of investing in India, they factor in the possible legal costs, and the opportunity to settle disputes through arbitration readily and cheaply is an attractive selling point. However, with increasing judicial intervention, and the in evitability of finish up in court, hassle-free dispute resolution is no longer a pro on their list of pros and cons.Hence, the 1996 Act was passed with the quarryive to minimize the supervisory role of the courts in the arbitral process. The very epitome of minimal judicial intervention is contained in Section 5 of the Arbitration and Conciliation Act, 1996, which reads Notwithstanding anything contained in any other law for the time being in force, no judicial authority is to come in except as provided in the Act Section 34 of the Act imposes certain restrictions on the right of the court to set aside an arbitral award, and the limited grounds on which the award can be challenged have been enumerated.The five grounds upon which an award can be set aside as per Section 34 (2) (a) are -Incapacity of parties -Non-existence or invalidity of arbitration agreement -Exceeding jurisdiction -Non-compliance of due process -Composition of arbitral tribunal As per Section 34 (2) (b), an arb itral award may also be set aside by the court on its own initiative if the subject matter of the dispute is not arbitrable or the impugned award is in conflict with the public policy of India. Public policy, however, has not been defined anywhere in the Act.Borrowing the definition of public policy from Section 23 of the Indian Contract Act, 1872 The consideration or object of an agreement is lawful, unless it is forbidden by law or is of much(prenominal) nature that, if permitted, it would defeat the provisions of any law or is fraudulent or involves or implies injury to the person or property of another or the court regards it as immoral, or opposed to public policy. The court, over the years, has subscribe to varying conceptions of public policy, swinging between the narrow view and the broader view. In Gherulal Parakh v.Mahadeodas Maiya, the court favoured the narrower view, and commented that though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is admissible in the interest of stability of society not to make any attempt to discover new heads in these days. With respect to public policy in the field of arbitration, the court held in Renusagar Power Co. Ltd. v. General Electric Co. , that in order to attract the bar of public policy the enforcement of the award essential invoke something more than the violation of the law of India.It was held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to -Fundamental policy of Indian law -The interest of India -Justice or morality The court in recent times, however, has subscribed to the broader view of public policy, choosing to widen the scope of judicial review. A landmark judgment in this respect is Oil & Natural Gas Corporation Ltd. v. SAW Pipes Ltd.. The crux of the matter of the case was that the arbitral tr ibunal had failed to take into account Section 73 and 74 of the Indian Contract Act, 1872.The major issue, however, that it dealt with was whether the Court would have jurisdiction under Section 34 of the 1996 Act to set aside an award passed by the Arbitral Tribunal which is patently illegal or in contravention of the provisions of the Act, or any substantive law governing body the parties, or is against the terms of the squash. The judgment of the court in this case, not only negated the purpose of the 1996 Act, but also widened the scope of judicial review beyond the realms provided for in the 1940 Act as well.It was held that an award is opposed to public policy under the same heads laid down in Renusagar Power, but also if it is -Patently illegal -So unfair and unreasonable that it shocks the conscience of the court Another grand judgment of the Supreme Court in 2005 was SBP & Co. v. Patel Engineering, which sanctioned further intervention in the judicial process. The case d ealt with the appointment of an arbitrator by the school principal Justice, and the contention was that the Chief Justice could adjudicate on contentious introductory issues such as the existence of a valid arbitration agreement.The court agreed, while holding that the Chief Justices findings would be final and binding on the arbitration tribunal. This judgment makes a mockery of the principle of Kompetenz Kompetenz, which is the power of an arbitral tribunal to determine its own jurisdiction, enshrined in Section 16 of the 1996 Act. This opens up a Pandoras box of opportunity for parties to misdirect the appointment process of arbitrators and make spurious arguments simply to delay the arbitration proceedings. Looking AheadIt is easy to forget the purpose of arbitration and get carried away with the nuances of the law. Therefore, in an attempt to move forward, it is important to incorporate the very aspect of finality and amicable resolution in the contract itself. Of course the most apparent solution at the face of it is to close all doors to review of the award by incorporating a clause for the same in the contract. However, this can only be done at the risk of receiving an award not in line with the principles of natural justice.On the legislatures part, the Arbitration and Conciliation (Amendment) Bill, 2003, currently pending before the Parliament, proposes to introduce a new section 34A, which would allow an award to be set aside where there is an error apparent on the face of the arbitration award giving rise to a substantial question of law. This narrows the scope for review laid down by the SAW Pipes ruling, but it motionlessness affords losing parties an opportunity to approach courts in an attempt to second guess arbitral tribunals, very similar to the position during the applicability of the 1940 Act.An interesting avenue to be explored in the future, particularly in the case of contracts involving large sums of money, is a transcription of contemporary and concurrent dispute resolution, involving the establishment of Dispute Review panels (DRBs). This system has been adopted by the National Highway Authority of India (NHAI), Maharashtra Sewerage Board and Delhi Metro in recent times. A Dispute Review Board radicalally consists of three experienced, respected and impartial reviewers.It is constituted before the inception of the contract, and regular inspections are carried out to ensure smooth functioning of the contract and ensure good working conditions. This serves to familiarize the reviewers with the job process and the basic environment as well, so that in case a dispute arises, a well-informed decision can be made. In such a case, a hearing is convened where the reviewers hear arguments of some(prenominal) sides and after deliberation submit a non-binding recommendation to the contractors.