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THE EFFECTIVENESS OF THE INDIAN JUDICIARY IN SUPPORTING ARBITRATION: COMPREHENSIVE STUDY By: Beeda Rashmitha Rani Yadav
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THE EFFECTIVENESS OF THE INDIAN JUDICIARY IN SUPPORTING
ARBITRATION: COMPREHENSIVE STUDY
Authored By:
Beeda Rashmitha Rani Yadav
Contact Details:
Address: 1-60,
Iskapalli main road, Iskapalli (v)
Allur(M), Nellore (Dist.), Andhra
Pradesh.
PIN: 524315
Phone no.:
9492109222
Academic Qualifications: 4th year BA-LLB student at VIT-AP School of Law,
Amaravati.
ABSTRACT
Arbitration
has become a popular alternative dispute resolution procedure in India that
offers parties have the freedom and autonomy to resolve their issues outside of
traditional court proceedings. In-depth analysis of the Indian judiciary's
support for arbitration is provided in this research study, with a special
emphasis on crucial elements including interim relief, jurisdictional issues,
and public policy concerns. The article begins by highlighting the growing
dependence on India arbitration as a method of dispute resolution spurred by
legislative changes and legal position. It examines the importance of interim
relief, a crucial component of arbitration procedures, and assesses the extent
to which Indian courts have accepted their responsibility for awarding prompt
and efficient interim measures to protect the arbitral process. Arbitration
jurisdictional issues are frequently brought up by complicated multi-party and
international disputes. In order to evaluate the judiciary's commitment to
respecting the concept of party autonomy while providing due process, this
study examines how Indian courts approach jurisdictional concerns. Case law and
legislative measures are analyzed.
The
study also explores how Indian courts must strike a careful balance when
dealing with public policy issues in arbitration. It discusses the evolution of
the Indian judiciary's position on protecting the integrity of the arbitration
process while defending public interests and looks at cases when the courts
have been asked to interfere based on public policy. Incorporating a thorough
review of relevant legal provisions, landmark judgments, and international best
practices, this study report gives a complete review of the Indian judiciary's
efficacy in promoting arbitration. It finishes with insights into India's
changing arbitration landscape and recommendations for future changes,
promoting an atmosphere favorable to efficient and impartial conflict
resolution through arbitration.
Keywords:
Arbitration, Indian judiciary, alternate dispute resolution, jurisdiction,
interim relief, public policy.
INTRODUCTION:
India's
increased reliance on arbitration as a form of conflict resolution is due to a
mix of legislative changes and a supportive judicial culture. During the last
few decades, India has made significant efforts to promote arbitration as a
preferred method of conflict settlement. In India, a number of legislative
amendments have been implemented in order to modernize the arbitration
environment. One of the most significant is the Arbitration and Conciliation
Act of 1996 (the "1996 Act"), which was modified in 2015 to reflect
worldwide best practices and fix weaknesses in previous legislation. These
changes shortened the arbitration procedure, minimized the need for judicial
involvement, and increased the effectiveness and cost-effectiveness of
arbitration. The 1996
Act emphasizes party autonomy by allowing parties to pick the arbitrators, the
site for the arbitration, and the language of the proceedings. This method gives parties the
ability to customize arbitration to meet their unique demands, which increases
its appeal as a conflict settlement method. To maintain the concept of party
autonomy and enable the prompt resolution of conflicts, courts are becoming
less willing to become involved in cases meant for arbitration. In accordance
with the New York Convention, Indian courts have showed a willingness to
enforce arbitral decisions rendered both locally and internationally[1].
Due to the likelihood that their decisions will be sustained and enforced, this
has given parties engaged in arbitration in India more confidence. India has
established specialized commercial courts in major cities to deal with
commercial disputes, including those arising out of arbitration agreements. These
courts have the expertise to handle complicated arbitration cases
expeditiously. India has taken attempts to establish international arbitration
centers, such as the Mumbai Centre for International Arbitration (MCIA) and the
Delhi International Arbitration Centre (DIAC), in order to provide world-class
arbitration facilities and promote India as an international arbitration hub.
Businesses and legal professionals are becoming more aware of the benefits of
arbitration. Educational programs, seminars, and conferences have contributed
to disseminating knowledge about arbitration procedures and best
practices.
APPROACH OF INDIAN COURTS TO INTERIM RELIEF
Interim
remedies must preserve the interests of arbitration parties. It might stop one
of the parties from doing something that would make the arbitration procedure
pointless or ineffective. Since the goal of arbitration could be thwarted in
the absence of interim remedy, Indian courts have come to appreciate the
importance of this feature. Interim relief plays a crucial role in minimizing prejudice that parties
may suffer during the course of arbitration. This includes preventing parties
from dissipating assets, continuing harmful conduct, or causing irreparable
harm. Indian courts have been responsive to such concerns and have granted
injunctions, stay orders, and other interim measures to address them promptly.
Ensuring the effectiveness of the arbitral process itself is a key
responsibility of Indian courts. They understand that without adequate interim
relief, parties might resort to court litigation, defeating the purpose of
arbitration. As a result, Indian courts have been increasingly proactive in protecting
the arbitral process by granting interim measures. Indian courts comprehend the
significance of establishing a balance in arbitral procedures between offering
interim relief along with preventing undue intrusion. They are generally
inclined to uphold party autonomy and the arbitrator's authority but also
acknowledge that there are circumstances where court intervention is necessary
to maintain fairness and prevent injustice. The courts should not adopt a
hyper-technical approach in deciding whether interim relief should be granted
and should ensure that parties are not unfairly prejudiced.[2]
When providing interim relief, Indian courts now take public policy issues into
account. They have acknowledged the necessity to protect legitimate arbitration
agreements and not for public policy to be utilized as a weapon for delaying or
blocking arbitration procedures while recognizing the public policy exclusion
under the Arbitration and Conciliation Act, 1996.
The issue of whether Section 2(2)[3]
abolished the courts of India's ability to award interim remedies in
international commercial arbitrations held outside of India was decided in the
renowned case of Bhatia International v. Bulk Trading S.A[4].
In Bhatia, the Supreme Court attempted to clarify the vague nature of 2(2) by
taking the bold stance that, despite its wording to the contrary, the entirety
of Part I of the Act also applied to international commercial arbitrations held
outside of India, blatantly contradicting the conceptual and structural distinctions
made by the 1996 Act. The court may have meant to encourage arbitration by
addressing the conflict between the Model Law[5]
and the 1996 Act, but by making Part I applicable to arbitration held outside
of India, it may have gone too far in widening the scope of Part II. Given that
the Model Law itself does not anticipate delegating such extensive powers to
national courts, the Court's ruling stands in stark contrast to the Model Law.
The need of adhering to international
norms while granting interim relief has also been acknowledged by Indian
courts. The ruling in Ssangyong Engineering and Construction Co. Ltd. v. NHAI[6]underlined
India's adherence to the principles articulated in the Model Law developed by
the UNCITRAL, which emphasizes the issuance of interim remedies by both
arbitral tribunals and courts to protect the arbitral process.
When granting interim relief, Indian
courts have worked to strike a balance between party sovereignty and
effectiveness. The Supreme Court affirmed the temporary injunction to safeguard
the arbitral procedure in the case of Amazon.com NV Investment Holdings LLC v.
Future Retail Ltd. (2021)[7],
while acknowledging the independence of the parties in choosing the arbitrator.
The court's dedication to upholding arbitration's integrity while avoiding
excessive interference in party decisions is demonstrated by this ruling.
Efficiency is essential while
providing temporary relief. In its decision in M/s. Mayavti Trading Pvt. Ltd.
v. Pradyuat Deb Burman[8],
the Supreme Court emphasized the value of promptness in the granting of
temporary remedies. According to the Court, giving interim relief slowly might
defeat the goal of arbitration. This underscores the responsibility of Indian
courts to ensure that interim relief is awarded promptly and efficiently to
protect the arbitration procedure.
JURISDICTIONAL CHALLENGES
The ability of the parties to choose
the arbitral location is an essential component of party autonomy in
arbitration. The courts' ability to monitor and aid the arbitration is based on
the location of the arbitration, which also establishes the legal framework
that will apply to the arbitration proceedings. Indian courts have
traditionally adopted a pro-arbitration stance in this respect and have
demonstrated a strong commitment to maintaining party autonomy. The supreme
court of India has traditionally held that the site of the arbitration
confers jurisdiction on its courts. The Balco[9]
case is a significant ruling demonstrating the Indian judiciary's view on
arbitration jurisdiction. In Balco v. Kaiser Aluminium[10],
the Supreme Court of India held that Indian courts should exercise minimal
intervention in arbitration matters. The court affirmed the kompetenz-kompetenz
principle[11],
emphasizing the tribunal's authority to decide its own jurisdiction. This
landmark judgment underscored India's pro-arbitration stance and its commitment
to party autonomy. Building upon the Balco precedent,
the Supreme Court, in Bharat Aluminium Co. v. Kaiser Aluminium Technical
Service (2012), reiterated its pro-arbitration approach. The court emphasized
that Indian courts should only intervene if the arbitration agreement is
"null and void" or "inoperative," as per the Act. This
ruling outlined the boundaries of judicial review's limited power to address
jurisdictional questions, thereby safeguarding the rights of parties. Indian
courts make a distinction between domestic and foreign arbitration, taking a
more pro-arbitration stance in certain situations. The Supreme Court stressed
in its most recent ruling in Vijay Karia v. Prysmian Cavi E Sistemi Srl[12]
that courts should limit their involvement in international commercial
arbitration in order to support party autonomy and speed up conflict
settlement. While upholding the independence of the parties, Indian courts
retain the power to step in if arbitration agreements or decisions are in
conflict with basic principles of Indian public policy. This approach was
clarified by the historic decision in ONGC v. Western Geco[13],
which placed an emphasis on a constrained understanding of public policy. In
keeping with their dedication to due process and international arbitration
norms, courts are careful not to abuse this provision. The significance of the
arbitration venue in resolving jurisdictional questions is acknowledged by
Indian courts. The ruling in BGS SGS Soma JV v. NHPC Ltd.[14],
which placed emphasis on the independence of the parties in determining
jurisdiction, reaffirmed that the parties' choice of the seat indicates their
objective regarding the arbitral procedure. The Indian courts have, however,
occasionally displayed considerable uncertainty in how they handle
jurisdictional disputes. One such issue is when both parties to an
international arbitration consent on having their arbitration conducted outside
of India yet decide to have Indian law apply to the dispute as its substantive
law. In such circumstances, there is a possibility that inconsistent judgements
from Indian courts and courts at the arbitration site would arise, creating
uncertainty and perhaps complicating issues. This situation shows how important
it is for Indian courts to have a more defined and consistent stance on
jurisdictional issues in foreign arbitrations. In addition, Indian courts have
been critiqued for meddling extensively with arbitration proceedings, notably
when it comes to the nomination and the removal of arbitrators. It is crucial
for courts to find a careful balance between their function as gatekeepers and
the independence of the arbitral procedure. Although it is clear that the
courts must uphold justice and due process, they should take care to avoid
excessively interfering with the jurisdictional choices made by the parties
since doing so would violate the idea of party autonomy. Finally, it should be
noted that Indian courts have a strong history of upholding parties' autonomy
in arbitration. They use a methodical approach to dispute resolution by
granting authority to the courts of the designated arbitration venue. Clearer
rules are still required, especially in international arbitration proceedings
where conflicts of jurisdiction may occur. To foster trust in the judiciary's
dedication to upholding due process, Indian courts should work to find a
balance between supervisory authorities and the autonomy of the arbitral
proceedings.
PUBLIC
POLICY CONSIDREATIONS
Public policy is a fundamental tenet
of legal systems worldwide, serving as a safeguard against injustice and
illegality. Indian courts in the context of arbitration have the challenging
task of ensuring that the arbitral awards do not violate public policy while
preserving party sovereignty and the finality of arbitral rulings, public
policy is pursued. In Indian arbitration, the notion of public policy is a key
legal principle that plays a critical role in ensuring the integrity and
justice of arbitral rulings. It establishes a constrained frame of reference
for court engagement with proceedings involving arbitration and the enactment
of arbitral recommendations. Sections 34[15]
and 48[16]
of the Arbitration and Conciliation Act, 1996, which supervise domestic and
foreign arbitration, respectively, consolidate public policy in Indian law.
Although the Arbitration and Conciliation Act expressly define public policy,
Indian courts have interpreted it broadly to encompass principles of justice,
morality, and the basic framework of Indian law. It acts as a protection
against the implementation of awards that are contradictory to India's core
principles and legal system. Indian courts have established a high bar for using
public policy as a justification to relinquish or reject the execution of an
arbitral reasoning. Even grave mistakes of law or fact are insufficient to
invoke the public policy exemption. The breach must be so severe that it shocks
the conscience or is clearly prohibited. Public policy includes principles of
natural justice and fairness. An award that contravenes due process established
standards or is unjust in its fundamental nature may be acknowledged against
public policy. The idea of separability is followed by the Indian legal system,
which implies that an arbitration agreement is viewed as a separate agreement.
Even if the underlying contract is deemed to be illegal, the arbitration
agreement may still be enforced. Domestic and foreign arbitration are both
subject to the idea of public policy. However, in conformity with India's
international commitments under the New York Convention, the bar for refusing
to implement an international arbitral award on public policy grounds is
considerably higher. Indian courts have consistently emphasized that public
policy should be used cautiously and in rare circumstances. The courts are
generally deferential to arbitral awards and aim to minimize interference in
the arbitration process. In
international arbitration, Indian courts are mindful of the need to uphold
India's international commitments, particularly under the New York Convention.
This means that they should be cautious about national policy reasons,
declining to enforce foreign arbitral judgements. Renusagar Power Company Ltd.
v. General Electric Company[17]
established the idea of public policy in Indian arbitration. The Supreme Court
ruled that in order for an award to be overturned on public policy grounds, it
must either "shock the conscience" or be "patently illegal.[18]"
This high bar guarantees that public policy is not exploited as a pretext to
re-argue a dispute's merits.
Respecting the autonomy of both
parties is the foundational principle in arbitration that is vital to both the
efficiency and acceptability of this dispute-resolution approach. It
refers to the parties' ability to modify the terms and processes of their
binding arbitration contract according to their individual needs and
inclinations. Party autonomy in arbitration incorporates several
basic concerns that require being precisely balanced. While party autonomy is
crucial, it is not absolute. Arbitral awards or agreements that conflict with
indispensable public policy principles may not be perpetuated. The view of
public policy acts as a hedge against ethically or legally invalid agreements
or judgments. The primary virtue of arbitration is that every stakeholder has a
fair chance of claims for relief. Excessive party autonomy that restricts
a party's right to be heard or manipulate the process unfairly may be
challenged. Balancing party autonomy with the principles of finality and
efficiency is vital. Overpowering procedural discretion or interruptions might
jeopardize arbitration's overall efficiency. In ONGC v. Saw Pipes[19],
Indian courts stressed their belief that they should refrain from participating
in the arbitration process unless there is a "patent illegality[20]"
in the award or a breach of the "most basic notions of morality or
justice." The Court recognized the essence of contacting an intricate
equilibrium between advocating for public policy and guaranteeing party
autonomy.
Indian courts have gradually refined
their approach to public policy in arbitration. The definition of public policy
has evolved to encompass a broader understanding of what constitutes a
violation, ensuring that only the most egregious cases are subject to
intervention. In the context of arbitration, the notion of public policy has
evolved over time to adapt to changing legal and societal norms. The
development is particularly obvious in India, where landmark judgments have
drastically changed the scope of public policy in arbitration. The courts
adopted a rather restrictive reading of public policy in the early years of
Indian arbitration. This approach focused on fundamental illegality, such as
agreements to commit crimes or violate Indian law. It was highlighted in
judgments like "Oriental Insurance Co. Ltd. v. Narbheram Power and Steel
P. Ltd"[21].
Subsequent judgments, such as "Phulchand Exports Ltd. v. O.OO.
Patriot"[22],
emphasized that public policy should also encompass principles of natural
justice and fairness. This evolution recognized that public policy concerns go
beyond mere statutory violations and extend to ensuring that the arbitral
process itself is just and equitable. The decision in Shri Lal Mahal Ltd. v.
Progetto Grano Spa[23]
stressed the restricted scope of public policy participation in arbitration. It
warned against using public policy to re-evaluate the merits of a dispute. The
Court emphasized the significance of party sovereignty and the finality of
arbitral rulings.
In international arbitration, Indian
courts are mindful of aligning with international standards. They realize that
the New York Convention imposes a higher threshold for refusing to implement
international arbitral judgements based on public policy considerations. Cases
such as "Venture Global Engineering v. Satyam Computer Services"[24]
show this international viewpoint, underlining the importance of India adhering
to its international obligations. The decision in "ONGC v. Saw Pipes"
reaffirmed that courts should not intervene in the arbitration process unless
there is a "patent illegality" in the award or a violation of the
"most basic notions of morality or justice. “This high bar guarantees that
public policy is not utilized to re-argue the merits of a case.
The perspective of public policy in
Indian arbitration has evolved from a relatively narrow focus on statutory
violations to a broader interpretation that encompasses moral, legal, and
procedural considerations. Attention has broadened to assuring a fair and
equitable arbitral method while maintaining an exceptionally high standard for
setting aside or refusing to execute arbitral guidelines on public policy
grounds. This evolution reflects India's building arbitration environment, is
identical to international norms, and advances the concepts of party autonomy
and the finality of arbitral rulings.
CONCLUSION:
Beneficial alterations and dedication
to be consistent with international norms characterize India's developing
arbitration system. India may solidify its dominance as an internationally
renowned arbitration powerhouse by complying with the recommendations provided
above and propagating a situation that promotes efficiency, openness, and
impartiality. This will not only benefit domestic and international parties
seeking to resolve disputes in India but also contribute to the overall
expansion and advancement of the country's legal and business landscape. India
should continue to update and refine its arbitration laws to keep pace with
international best practices. This includes addressing any remaining
ambiguities, enhancing confidentiality provisions, and encouraging the use of
technology in arbitration proceedings. Fostering a pool of well-trained
arbitrators and legal professionals is essential. Initiatives to train arbitrators
and practitioners in international arbitration best practices should be
encouraged. India should actively promote institutional arbitration by
supporting and recognizing more arbitration institutions. This will help
streamline and standardize arbitration processes and build trust in
institutional arbitration. Encouraging parties to explore alternative dispute
resolution (ADR) methods, including mediation, can help reduce the burden on
the judicial system and promote faster resolution of disputes. Maintaining
transparency in arbitration proceedings and ensuring accountability of
arbitrators is vital. Establishing clear ethical guidelines and codes of
conduct for arbitrators can help maintain impartiality. While India has made
progress in enforcing foreign arbitral awards, further improvements in the
enforcement process, including streamlining procedures and reducing delays, can
enhance the esteemed status of India as an arbitration-friendly jurisdiction.
Public awareness campaigns can educate businesses and individuals about the
benefits of arbitration and ADR, promoting their use as a primary means of
dispute resolution.
[1] Kumar A and others, ‘Interpretation and Application
of the New York Convention in India’ [2017] Recognition and Enforcement of
Foreign Arbitral Awards 445
[2] National Aluminium Co. Ltd. v.
Pressteel & Fabrications (P) Ltd (2004) 1 SCC 540
[3] See BALCO, (2012) 9 SCC 552, ¶¶
194–197 (India) (this is manifest in the discussion in BALCO wherein the Court
overruled Bhatia International?s position that the provisions of Part I of the
Arbitration Act can be used in foreign seated arbitrations).
[4] See Bhatia Int?l v. Bulk Trading
S.A., (2002) 4 SCC 105, ¶¶ 21, 32 (India) [hereinafter “Bhatia International”]
(the Bhatia International principle was that the Indian Courts will exercise
jurisdiction over interim applications and challenges resulting from
arbitrations, unless the intention of the parties was to expressly or impliedly
oust the jurisdiction of Indian courts. This means that the Indian Courts would
exercise concurrent jurisdiction, along with the courts of the seat of the
arbitration).
[5] Hardy Exploration, (2019) 13 SCC
472, ¶¶ 26–27 (India); See United Nations Commission on International Trade Law
(UNCITRAL), Model Law on International Commercial Arbitration, G.A. Res. 40/72,
U.N. Doc. A/RES/40/72 (Dec. 11, 1985), as amended by G.A. Res. 61/33, U.N. Doc.
A/RES/61/33 (Dec. 18, 2006) [hereinafter “Model Law”] (the Model Law is similar
to the ICC Rules as it also gives the arbitral tribunal the right to decide the
seat if the parties have not already specified it).
[6] See Ssangyong Engineering & Construction Co.
Ltd. v. National Highways Authority of India (NHAI) 2019 SCC OnLine SC 677, the
Supreme Court elucidated and interpreted the grounds for setting aside an award
when the party was unable to present its case under Section 34(2)(a)(iii) of
the Arbitration & Conciliation Act, 1996 (‘Act’), when arbitral award deals
with a dispute not contemplated or falling within the terms of submission under
Section 34(2)(a)(iv) of the Act, when the award is in conflict with the public
policy of India as provided under Explanation 1 & 2 of Section 34(2)(b)(ii)
of the Act and what constitutes patent illegality appearing on the face of the
award under Section 34(2A) of the Act.
[7] 1.3 In these Rules: “Award”
includes a partial, interim or final award and an award of an Emergency
Arbitrator”
[8] See 2019 (8) SCC 714 “appointment of an
arbitrator is a judicial power and is not a mere administrative function
leaving some degree of judicial intervention; when it comes to the question to
examine the existence of a prima facie arbitration agreement, it is always
necessary to ensure that the dispute resolution process does not become
unnecessarily protracted.”
[9] See Bharat Aluminium Co. v. Kaiser
Aluminium Tech. Servs., Inc. (2012) 9 SCC 552, ¶¶ 95 (India); the
term “subject matter of the arbitration” cannot be confused with “subject
matter of the suit”. The term “subject matter” in Section 2(1)(e) is
confined to Part I. It has a reference and connection with the process of
dispute resolution. Its purpose is to identify the courts having supervisory
control over the arbitration proceedings. Hence, it refers to a court which
would essentially be a court of the seat of the arbitration process. In our
opinion, the provision in Section 2(1)(e) has to be construed keeping
in view the provisions in Section 20 which give recognition to party
autonomy.
[10] See Bharat Aluminium Co. v. Kaiser
Aluminium Tech. Servs., Inc. (2012) 9 SCC 552, ¶¶ 71–76, 95–117 (India)
[hereinafter “BALCO”].
[11] Enercon (India) Ltd & Ors v
Enercon GmBH & Anr (2014) 5 SCC 1, ¶¶20 (India); “In the present case, even
though the venue of arbitration proceedings has been fixed in London, it cannot
be presumed that the parties have intended the seat to be also in London. In an
International Commercial Arbitration, venue can often be different from the
seat of arbitration. In such circumstances, the hearing of the arbitration will
be conducted at the venue fixed by the parties, but this would not bring
about a change in the seat of the arbitration”.
[12] See Vijay Karia & Ors. v. Prysmian Cavi E Sistemi
SRL & Ors. 2020 SCC OnLine SC 177, ¶¶ 85 (India); “if a foreign award fails to determine a material issue which goes
to the root of the matter or fails to decide a claim or counter-claim in its
entirety, the award may shock the conscience of the Court [and its enforcement may be refused] on the ground of violation of the public policy of India, in that
it would then offend a most basic notion of justice”.
[13] See 2014 (9) SCC 263, ¶¶ 31-34
[14] See BGS SGS Soma JV vs. NHPC
Ltd. [2019 SCC Online SC 1585], ¶¶ 25-30 (India)
[15] 34 Application
for setting aside arbitral award. —
(2) An arbitral award may be set aside by
the Court only if—
(b) the Court finds that—
(ii) the arbitral award is in conflict with
the public policy of India.
Explanation. —Without prejudice to the
generality of sub-clause (ii) it is hereby declared, for the avoidance of any
doubt, that an award is in conflict with the public policy of India if the
making of the award was induced or affected by fraud or corruption or was in
violation of section 75 or section 81.
[16] 48. Conditions for enforcement of
foreign awards.—
(2) Enforcement of an arbitral award may also be refused if
the Court finds that—
(b) the enforcement of the award would be contrary to the
public policy of India. Explanation.—Without prejudice to the generality of
clause (b) of this section, it is hereby declared, for the avoidance of any
doubt, that an award is in conflict with the public policy of India if the
making of the award was induced or affected by fraud or corruption.
[17] See Renusagar Power Company Ltd.
v. General Electric Company 1994
Supp (1) SCC 644, ¶¶ 27, (India).
[18] See Renusagar Power Company Ltd.
v. General Electric Company 1994
Supp (1) SCC 644, ¶¶ 66, (India); Article
V(2)(b) of the New York Convention of 1958 and Section 7(1)(b)(ii) of
the Foreign Awards Act do not postulate refusal of recognition and enforcement
of a foreign award on the ground that it is contrary to the law of the country
of enforcement and the ground of challenge is confined to the recognition and
enforcement being contrary to the public policy of the country in which the
award is set to be enforced. There is nothing to indicate that the expression
"public policy" in Article V(2)(b) of the New York Convention
and Section 7(1)(b)(ii) of the Foreign Awards Act is not used in the
same sense in which it was used in Article I(c) of the Geneva Convention of
1927 and Section
7(1) of the Protocol and Convention Act of 1937. This
would mean that "public policy" in Section 7(1)(b)(ii) has
been used in a narrower sense and in order to attract to bar of public policy
the enforcement of the award must invoke something more than the violation of
the law of India. Since the Foreign Awards Act is concerned with recognition
and enforcement of foreign awards which are governed by the principles of
private international law, the expression "public policy"
in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be
construed in the sense the doctrine of public policy is applied in the field of
private international law. Applying the said criteria it must be 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 (i)
fundamental policy of Indian law; or (ii) the interests of India; or (iii)
justice or morality."
[19] See ONGC v. Saw Pipes 2003 (5) SCC 705, ¶¶ 31,
(India); "In our view, the phrase "public policy of India"...is
required to be given a wider meaning. It can be stated that the concept of
public policy connotes some matter which concerns public good and the public
interest. What is for public good 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 face of it, patently in violation
of statutory provisions cannot be said to be in public interest. Such
award/judgment/decision is likely to adversely affect the administration of
justice. Hence, in our view in addition to narrower meaning given to the term
"public policy" in Renusagar case it is required to be held that the
award could be set aside if it is patently illegal. The 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."
[20] Section 28(2) specifically
provides that arbitrator shall decide ex aequo et bono [according to what is
just and good] only if the parties have expressly authorised him to do so.
Similarly, if the award is patently against the statutory provisions of law
which is in force in India or is passed without giving an opportunity of
hearing to the parties as provided under Section 24 or without giving any
reason in a case where parties have not agreed that no reasons are to be
recorded, it would be against the statutory provisions. In all such cases, the award
is required to be set aside on the ground of ’patent illegality’
[21] Clause 13
which provides for the dispute redressal clause can be broadly classified into
the following three parts:
1.
Disputes with regards to quantum of claim shall be
referred to an arbitrator, to be appointed by the procedure prescribed therein.
2.
No reference to arbitration if the insurer denies
its liability.
3.
Obtaining of arbitral award to be condition
precedent to initiating any right of action or suit against the policy.
[23] See Shri Lal Mahal Ltd. v. Progetto Grano Spa, (2014) 2 SCC
433,¶¶29, that expression “public policy of India” under Section 48(2)(b) is
narrow and limited to the extent of[11]: (i) Fundamental policy of Indian law.
(ii) Interests of India. (iii) Justice and morality. However, the Arbitration
and Conciliation (Amendment) Act, 2015 with regard to enforcement of foreign
awards added Explanation to Section 48(2)(b) and thereby clarifying when an award
shall be considered to be in conflict with “public policy of India”.
[24]See Venture Global Engineering v.
Satyam Computer Services, (2008) 4 SCC 190.
Article Information
THE EFFECTIVENESS OF THE INDIAN JUDICIARY IN SUPPORTING ARBITRATION: COMPREHENSIVE STUDY By: Beeda Rashmitha Rani Yadav
Authors: Beeda Rashmitha Rani Yadav
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/10/17
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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