Council for National and International Commercial Arbitration (CNICA)

2012-02-22T11:52:00.003+05:30

CNICA welcomes you to the Inauguration of its

Study Circle meet

Inaugural Address by

Hon'ble Mr. Justice V. Ramasubramanian

For more information see the invitation below

Event Time and Location

Saturday - 03.03.2012

Andhra Mahila Sabha (Near Nageshwar Rao Park)

Luz Church Road

Mylapore

Chennai - 600 004

2012-02-20T10:49:00.003+05:30

Take-it-or-leave-itarbitration clause is fine if the underlying agreement is fair
by THE HR SPECIALIST: CALIFORNIA EMPLOYMENT LAW on FEBRUARY 19, 2012 1:00AM
in EMPLOYMENT LAW, HUMAN RESOURCES

The Court of Appeal of California has handed a significant victory to employersthat use arbitration agreements as a condition of employment.

As long as the underlying terms of the agreement are fair and the arbitrationprocess impartial, the court will send a case to arbitration even if theemployee had no choice but to sign the agreement.

Recent case: When Jennifer Hicks was offered a job at a Hilton spa in SanDiego, she quit her job in Minnesota, sold her possessions and moved west. Whenshe arrived in California, her new employer presented her with atake-it-or-leave-it arbitration agreement buried in an employment application.She was told she had to accept all the terms to start work.

Years later, Hicks sued over alleged pregnancy discrimination. She claimed shewas told she would lose her job if she took time off for post-partumdepression.

Hilton asked the court to send the case to arbitration. Hicks argued that theway she had to sign the arbitration agreement was unconscionable.The Court ofAppeal of California has handed a significant victory to employers that usearbitration agreements as a condition of employment.

As long as the underlying terms of the agreement are fair and the arbitrationprocess impartial, the court will send a case to arbitration even if theemployee had no choice but to sign the agreement.

Recent case: When Jennifer Hicks was offered a job at a Hilton spa in SanDiego, she quit her job in Minnesota, sold her possessions and moved west. Whenshe arrived in California, her new employer presented her with atake-it-or-leave-it arbitration agreement buried in an employment application.She was told she had to accept all the terms to start work.

Years later, Hicks sued over alleged pregnancy discrimination. She claimed shewas told she would lose her job if she took time off for post-partumdepression.

Hilton asked the court to send the case to arbitration. Hicks argued that theway she had to sign the arbitration agreement was unconscionable.

The court disagreed, concluding that as long as the actual arbitration would befair and impartial, it didn’t matter if Hicks signed under duress. (Hicks v.Mission Bay Management, No. D058683, Court of Appeal of California, 4thAppellate District, 2011)

2012-02-14T16:46:00.001+05:30

R.GEORGE PEREIRA

ST.JOSEPH'SINTERNATIONAL ACADEMY

on 8 May, 2009

The following was in pursuance of anapplication under section 11(6) of the Arbitration and Conciliation Act, 1996and the Scheme for Appointment of an Arbitrator by the Chief Justice of theKerala High Court. The application seeks appointment of an independent andimpartial arbitrator for adjudicating upon the various claims of the applicantagainst the respondent.

Facts of the case:

The applicant was a contractor of therespondent for the construction of a school building at Kumbalam in Kollamunder the name and style "St. Joseph International Academy". It wasalleged that disputes and differences arose between the parties on account ofwhat is described as the obstinate attitude of the respondent to allow theapplicant to complete the work, which had neared completion. It was claimedthat the applicant had carried out works in seven part bills whereas therespondent had paid only two third. The balance amount was due under the bill.Since the balance amount remained unpaid, the windows, which had been suppliedby the applicant to the respondent, had to be taken back and deducting thevalue of those windows, the balance amount was due to the applicant. Accordingto the applicant, in order to avoid payment of the due amount the respondentsought to terminate the contract. The disputes and differences, which were thusarisen, are to be settled by resorting to arbitration proceedings.

If there are any dispute relating to anymatter regarding the construction of the building or any matter related to thiscontract, the Manager, St.Joseph's International Academy, Kollam will be thesole Arbitrator for such purpose and his decision shall be final, and thesecond party will have no right to challenge this decision in the court oflaw". It was submitted that as per clause 17, the Manager of therespondent is to be the sole arbitrator. However, since disputes have arisen onaccount of the actions and inactions of the Manager himself, he is not entitledto function as arbitrator since the same will be against the fundamentalprinciple of natural justice, nemo debet esse judex in propria causa (no oneshall be a judge in his own cause).

It was under such circumstances that theapplicant sent a letter indicating a panel of three names for selection of oneamong them as arbitrator by the respondent. The respondent's Advocate sent areply without selecting any of the nominee arbitrators but suggesting forappointment of two Civil Engineers, one to be appointed by each party who couldjointly verify the records and files and assess the quantity and quality of thework done in order to avoid litigation and to come to a fair settlement.

The applicant obliged and appointed hisnominee. The respondent also appointed its Engineer. The applicant requestedboth the Engineers to take up the assignment and pave way for a settlement.However, the applicant called for nominee Engineer of the respondent, furnishedall measurement books, and connected records and made necessary follow up,nothing materialized. Meanwhile, the applicant's nominee Engineer met with anaccident and passed away. Hence, no useful purpose will be served by waitingfurther and that is the circumstances under which the applicant has filed thisapplication under section 11(6) of the Arbitration and Conciliation Act, 1996invoking the statutory appointment procedure of arbitrators.

The contentions of the respondent are asfollows:

The arbitrator who was appointed by the courtunder the order (Sri. E.K. Muraleedharan, Retired District and Sessions Judge)was incapable of acting as arbitrator between the parties in the light of thelegal bar under the provisions of the Arbitration and Conciliation Act, 1996.It was submitted that contrary to what has been projected the Manager envisagedunder the arbitration clause who was to act, as the sole arbitrator in theevent of disputes and the signatory to the agreement are the same person. Inorder to convince the court that the Manager of St.Joseph’s InternationalAcademy and the executants to the agreement are the same, the applicant hasproduced an agreement, but that does not contain the last page of theagreement. The last page will disclose that the Manager was not the executantof the agreement. On the contrary, the executant of the agreement was theGeneral Manager. It was pointed out that it will be seen that there was atyping mistake where the first party was indicated and instead of General Manager,the word Manager was mistakenly used. Since the party noticed the mistake atthe time of execution of the agreement, the first party to the agreement, theGeneral Manager, St.Joseph's International Academy did not sign and instead hesigned as the General Manager only where the first party was indicated. Thiswas deliberately and intentionally done in order to avoid confusion as the Manager;St.Joseph's International Academy was appointed as the arbitrator under agreement.It was submitted that there was absolute consensus with regard to thearbitrator by both parties to the agreement. It was then contended that theGeneral Manager and the Manager of St.Joseph's International Academy are twodifferent persons. A certificate issued by Mr.Joseph J. who was the Manager ofSt.Joseph Academy during the period of five years was produced. The presentManager of St.Joseph Academy was one S.Sundaresan and a certificate issued byhim was produced.

During which, the respondent was claiming asum from the applicant on various counts and requested that if the claim wasdisputed the matter be referred to the Manager, St, Joseph's InternationalAcademy who was the sole arbitrator. In the reply affidavit filed by the respondentto the counter filed by the applicant, it was submitted that the respondent hasnever acted in a capacity as the Manager of St. Joseph's International Academyat any stage. This was because of the fact that at the time of construction ofthe school, the organization was at a very nascent stage and therefore therespondent was styled as General Manager and later as Managing Director/Director.Similarly the then Manager Joseph John was styled as Manager and subsequentlyhe continued as Manager who was also styled as Administrator. He continued tobe the Manager as well as Administrator. It was submitted that the respondent(applicant) was trying to take advantage of a typing mistake made in theagreement wherein the word Manager was used in the last page instead of GeneralManager.

The contentions of the applicants are asfollows:

However, it was submitted that there is noscope for such confusion as in the last page; it was the General Manager whohad signed at the portion where the first party is indicated. In the agreement,the first party is described as General Manager. Hence, there is no scope forconfusion. Referring to the correspondence produced by the respondent it issubmitted that the Manager Mr.Joseph John had signed on behalf of the GeneralManager and not in his capacity as the Manager of the school. It was reportedthat Joseph John has functioned only as Manager and that the respondent hasnever styled or functioned as Manager. It was further pointed out that thepresent Manager was not Joseph John but Mr. S. Sundareswaran and thereforethere was no question of any prejudice being caused to the respondent.

The applicant counsel submitted that thenon-production of the last page of Annexure was not fatal. The ArbitrationScheme and the Kerala Arbitration Rules required production of the arbitrationagreement only along with the arbitration request and not the whole contractagreement. Reference was made to Section 7(2) of the Arbitration andConciliation Act in this context. According to the applicant counsel, this waswhy the applicant produced only clause 17, which is the arbitration clause. Itwas submitted that on behalf of the applicant it has been made clear that itwas Sri. George Fernandez who signed the agreement in the capacity of the Manager,first party and disputes have arisen on account of actions and inactions on thepart of Sri. George Fernandez, the signatory which were denied.

Respondent maintained that the agreement wassigned by the Managing Director and that the arbitrator was Manager. Mr. Varghese(applicant counsel) submitted that the witness Joseph.J. was only theAdministrator and his full name Joseph John is indicated and highlighted thatin the reply affidavit it is admitted that Joseph. J. alias Joseph John turnedto be the administrator. The letter pad shows that he was only"administrator" and not "Manager". If so, his successor,the signatory also can be only an administrator and not the Manager, whichmeans that there was no Manager to function as arbitrator. This according toMr. Varghese is precisely the reason why the respondent said that the matter /all relevant papers would be placed before the arbitrator and the matter willbe decided by him. He submitted that those documents are fabricated and cookedup. He pointed out that the title "to whom it may concern" (sic) isconspicuous. He submitted that the same mistake is repeated, though created andsigned on different dates.

By issuing such certificates both thesignatories to prove their allegiance to respondent, making themselvesdisqualified to be independent and impartial arbitrator which is required undersection 11(8)(b) of the Act even assuming that any one of them can beconsidered as arbitrator. Mr. Varghese argued that actual bias is not necessaryto be proved and that the knowledge at the time of appointment does not debarfrom applying on the ground that the arbitrator to be appointed in terms of theagreement may not be impartial. For this proposition, he relied on the Law ofPractice of Commercial Arbitration by Mustill and Byod. He further relied oncommentaries contained in Comparative International Commercial Arbitration byJulian D M Lew QC and others. He relied on the judgments of the Supreme Courtin ACE Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corp. Ltd. (2007), BiharState Mineral Development Corp. and others. v. Encon Builders (I) (P) Ltd. (2003)and in Tata Cellular v. UOI (1994) in support of various propositions canvassedby him.

Sri. Madhu Radhakrishnan, learned counsel forthe respondent relied on the judgment of the Calcutta High Court in PragatiEngineering (P) Ltd. v. T.N. Water Supply & Drainage Board, AIR 1992Calcutta 139 to argue that where the parties entered into a contract with theireyes open and knew that the nominated arbitrator is an employee of one of theparties, none of the parties to the agreement should be allowed to allege thatsuch nominated arbitrator being an officer of one of the parties to thecontract, would be biased or is likely to be biased. Mr. Madhu Radhakrishnanrelied on the judgment of the Supreme Court in International Airport Authorityof India v. K.D. Bali, (1988) to argue that the apprehension of bias must bejudged from a healthy, reasonable and average point of view and the request forremoval of the appointed arbitrator is not to be granted lightly. Mr. MadhuRadhakrishnan placed reliance on the judgment of the Supreme Court in JainStudios Ltd. v. Shin Satellite Public Co. Ltd., (2006) also. The provisionscontained in sections 12 and 13 of the Arbitration and Conciliation Actincorporate grounds for challenge and the challenge procedure against and in respectof arbitrators will reveal that partiality and bias or circumstances givingrise to justifiable doubts regarding the impartiality and independence can be validgrounds for challenging the appointment given to a certain persons asarbitrator. At the same time, a party should not be allowed to wriggle easilyout of agreements entered into by them with open eyes.

Judge Held:

The submissions from both sides were heard. Inthe instant case, it was seen that the applicant had agreed to the appointmentof a person in the service of the opposite party as an arbitrator in the eventof disputes. That being the position the Judge would have been ordinarilyreluctant to accept the opposition of the applicant to the appointment of thenominated arbitrator on ground of bias and partiality. After all, it was aquasi-judicial function, which was being discharged by the arbitrator whoseproceedings will be regulated by the provisions of the Arbitration andConciliation Act. His award will be subjected to judicial scrutiny though onlimited grounds and to a limited extent.

However, in the instant case the Judge wasnot inclined to dismiss the arbitration request and to appoint the nominatedarbitrator as the arbitrator for resolving the disputes, which have admittedlyarisen between the parties because it is seen that the respondent also becameagreeable to the idea of the disputes between the parties being resolved bypersons other than the arbitrator nominated under the agreement. The partieshad nominated an Engineer each and were willing to have the disputes betweenthem resolved by a joint perusal of the relevant records by these twoEngineers. To that extent, the Judge opined the respondent has waived his rightto insist that the arbitrator to be appointed has to be the arbitratornominated under the agreement. Moreover, in his opinion no prejudice whatsoeverwill be occasioned to the respondent by appointing a Retired Judicial Officerknown for his learning and integrity as the arbitrator for resolving the disputes,which admittedly subsist. Therefore, without deciding the issue whetherappointment of the nominated arbitrator will be vitiated due to reasons of biasand partiality he allowed the arbitration request and appointed Sri.E.K.Muraleedharan,Retired District and Sessions Judge, presently at Ernakulum as arbitrator forsettling all the claims and counter claims raised by the applicant and therespondent in the arbitration request. The arbitrator will enter on arbitration,make, and publish his award without undue delay.

2012-02-07T11:24:00.004+05:30

Afcons InfrastructureLtd. & Anr.

Vs.

Cherian Varkey ConstructionCo. (P)

Facts:

The second respondent entrusted thework of construction of certain bridges and roads to the appellants under anagreement. The appellants sub-contracted a part of the said work to the firstrespondent under an agreement. It is not in dispute that the agreement betweenthe appellants and the first respondent did not contain any provision forreference of the disputes to arbitration. The first respondent filed a suitagainst the appellants for recovery of dues from the appellants and theirassets. In the said suit an order of attachment for recovery of dues was awarded.There after in March 2005, the first respondent filed an application undersection 89 of the Code before the trial court praying that the court mayformulate the terms of settlement and refer the matter to arbitration. Theappellants filed a counter to the application submitting that they were notagreeable for referring the matter to arbitration or any of the other ADRprocesses under section 89 of the Code. In the meanwhile, the High Court ofKerala by order allowed the appeal filed by the appellants against the order ofattachment and raised the attachment granted by the trial court subject tocertain conditions. While doing so, the High Court also directed the trialcourt to consider and dispose of the application filed by the first respondentunder section 89 of the Code. The High Court held that the concept of preexisting arbitration agreement which was necessary for reference to arbitrationunder the provisions of the Arbitration and Conciliation Act, 1996 was inapplicableto references under section 89 of the Code.

From the predicamentsstated above the appellants moved to Supreme Court seeking inapplicability ofsec 89 of civil procedure code due to non existence of arbitration agreement.

What is wrong with section 89 ofthe Code?

Primarily the definitions of‘mediation’ and ‘judicial settlement’ are interchanged in sec 89 of civilprocedure code. When words are universally understood in a particular sense,and have been assigned a particular meaning in common Parlance, the definitionsof those words in section 89 with interchanged meanings has led to confusion,complications and difficulties in implementation.

Thesecond anomaly is that sub-section (1) of section 89 imports the final stage ofconciliation referred to in section 73(1) of the AC Act into the pre-ADRreference stage under section 89 of the Code. If sub-section (1) of Section 89is to be literally followed, every Trial Judge before framing issues, isrequired to ascertain whether there exists any elements of settlement which maybe acceptable to the parties, formulate the terms of settlement, give them toparties for observations and then reformulate the terms of a possible settlementbefore referring it to arbitration, conciliation, judicial settlement, LokAdalat or mediation. There is nothing that is left to be done by thealternative dispute resolution forum. If all these have to be done by the trialcourt before referring the parties to alternative dispute resolution processes,the court itself may as well proceed to record the settlement as nothing moreis required to be done by ADR process.

Section 89 has to beread with Rule 1-A of Order 10 which requires the court to direct the partiesto opt for any of the five modes of alternative dispute resolution processesand on their option refer the matter. The said rule does not require the court toeither formulate the terms of settlement or make available such terms ofsettlement to the parties or to reformulate the terms of possible settlementafter receiving the observations of the parties. Therefore the only practicalway of reading Section 89 and Order 10, Rule 1-A is that after the pleadingsare complete and after seeking admission/denials wherever required, and beforeframing issues, the court will have recourse to section 89 of the Code. Suchrecourse requires the court to consider and record the nature of the dispute,inform the parties about the five options available and take note of theirpreferences and then refer them to one of the alternative dispute resolutionprocesses. It is sufficient ifthe court merely describes the nature of dispute and makes reference to ADR. Itwould be unnecessary to discuss the issue of the case.

Whether the arbitration can beenforced on an unwilling party?

Rule 1A of Order 10requires the court to give the option to the parties, to choose any of the ADR processes.This does not mean an individual option, but a joint option or consensus aboutthe choice of the ADR process. On the other hand, section 89 vests the choiceof reference to the court. This is course of no inconsistency. Section 89 ofthe Code gives the jurisdiction to refer to ADR process and Rules 1A to IC ofOrder 10 lay down the manner in which the said jurisdiction is to be exercised.The scheme is that the court explains the choices available regarding ADRprocess to the parties, permits them to opt for a process by consensus, and if thereis no consensus, proceeds to choose the process.

A court has no power,authority or jurisdiction to refer unwilling parties to arbitration, if thereis no arbitration agreement. This Court has consistently held that thoughsection 89 of the Code mandates reference to ADR processes, reference toarbitration under section 89 of the Code could only be with the consent of bothsides or not otherwise.

Conclusion

From the abovementioned views of the honorable judge a civil court exercising power underSection 89 of the Code cannot refer a suit to arbitration unless all the partiesto the suit agree for such reference, and also this appeal is allowed as theorder of the trial court referring the matter to arbitration and the order ofthe High Court affirming the said reference are set aside. The Trial Court willnow consider and decide upon a non-adjudicatory ADR process.

2012-02-01T15:19:00.003+05:30

Bhatia International vs.Bulk Trading S. A.

Facts:

The Appellant entered into acontract with the 1st Respondent which contained an arbitration clause whichprovided that arbitration was to be as per the rules of the InternationalChamber of Commerce. Parties agreed that the arbitration be held in Paris,France. 1st Respondent filed an application under Section 9 of the Arbitrationand Conciliation Act, 1996 (hereinafter called the said Act) before the IIIrdAdditional District Judge, Indore,M.P. against the Appellant and the 2nd Respondent. One of the interim relief’ssought was an order of injunction restraining these parties from alienating,transferring and/or creating third party right, disposing of, dealing withand/or selling their business assets and properties. The Appellant raised theplea of maintainability of such an application. The Appellant contended that PartI of the said Act would not apply to arbitrations where the place ofarbitration is not in India.This application was dismissed by the IIIrd Additional District Judge. TheAppellant filed a Writ Petition before the High Court of Madhya Pradesh, IndoreBench. The said Writ Petition has been dismissed by the impugned Judgment. Appellantsrelied on sub-section (2) Section 2 of the said Act which provides that Part Ishall apply where the place of arbitration is in India. He submits thatsub-section (2) of Section 2 makes it clear that the provisions of Part I donot apply where the place of arbitration is not in

India

. The said Act is based on UNCITRALModel Law on International Commercial Arbitration. He points out that Article1(2) of UNCITRAL Model Law provides that the law would apply only if theArbitration takes place in the territory of the State. It was also submited that while framing the said Act theLegislature has purposely not adopted Article 1(2) of the UNCITRAL Model Law. Appellant further submits that sub-sections(3), (4) and (5) of Section 2 would necessarily only apply to arbitration whichtake place in India.He submits that, therefore, even though the sub-section (4) of Section 2 usesthe words "every arbitration" and sub-section (5) of Section 2 usesthe words "all arbitrations and to all proceedings relating thereto",they must necessarily refer only to arbitrations which take place in India. Arbitrationswhose place of arbitration is not in

India

, then Sub section (2) ofSection 2 will not fit. Sections 9 and 17 would not apply and cannot be used incases where the place of arbitration is not in India it’s from part I.

By the said facts, appellantsmoved to Supreme Court as it was submitted by appellants following issues wereraised :

Whether PartI of the Arbitration and Conciliation Act, 1996 will apply to arbitrationswhich take place outside India?

Appellants affirmed that provisions for enforcement of foreign awardsare contained in Sections 48, 49, 57 and 58. He submits that it is verysignificant that Section 9 does not talk of enforcement of the award in accordancewith Sections 48, 49, 57 and 58and it is also clear that the provisions of Part I of the said Act do not apply toarbitrations which do not take place in India. Court in Indore and the High Court were wrong inrejecting the application of the Appellant and in holding that the Court hadjurisdiction. Actually, Madhya Pradesh High Court, is the only one which states that Part I applies toarbitrations which take place outside India, which has so held by theimpugned Judgment.

Whether undoubtedlysub-section (2) of Section 2 states that Part I is to apply where the place ofarbitration is in India and Part II applies to foreign arbitration?

Appellantsaffirms that it would lead to ananomalous situation, inasmuch Part I would apply to Jammu and Kashmir in allinternational commercial arbitrations but Part I would not apply to the rest ofIndia if the arbitration takes place out of India, and it will also instigatesa conflict between sub-section (2) of Section 2 on one hand and sub-sections(4) and (5) of Section 2. Further sub- section (2) of Section 2 would also bein conflict with Section 1 which provides that the Act extends to the whole of India. It leavesa party remediless inasmuch as in international commercial arbitrations and it wouldnot be able to apply for interim relief in Indiaeven though the properties and assets are in

India

. Thus a party may not be ableto get any interim relief at all.

On the other hand, the act is notproviding that Part I shall not apply where the place of arbitration is not in

India

.It is also not providing that Part I will "only" apply where theplace of arbitration is in India . Thus Article 1(2) of UNCITRAL ModelLaws uses the word "only" to emphasize that the provisions of thatLaw are to apply if the place of arbitration is in the territory of that State.Significantly in Section 2(2) the word "only" has been omitted. Theomission of this word changes the whole complexion of the sentence. Theomission of the word "only" in Section 2(2) indicates that thissub-section is only an inclusive and wider provision. As stated above it is notproviding that provisions of Part I do not apply to arbitration which takeplace outside India.Thus there was no necessity of separately providing that Section 9 would apply.

Whether foreignawards from arbitration settlement can be enforced by Indian courts?

Under Section 9 a party could apply tothe court before, during arbitral proceedings or after the making of thearbitral award but before it is enforced in accordance with Section 36. Thewords "in accordance with Section 36" can only go with the words"after the making of the arbitral award". It is clear that the words"in accordance with Section 36" can have no reference to anapplication made "before" or "during the arbitralproceedings". Thus it is clear that an application for interim measure canbe made to Courts in India,whether or not the arbitration takes place in India, before or during arbitralproceedings. Once an Award is passed, then that award itself can be executed.Sections 49 and 58 provide that awards covered by Part II are deemed to be adecree of the Court. Thus "foreign awards" which are enforceable in India aredeemed to be decrees. A domestic award has to be enforced under the provisionsof Civil Procedure Code. All that Section 36 provides is that an enforcement ofa domestic award is to take place after the time to make an application to setaside the award has expired or such an application has been refused. Section 9does suggest that once an award is made an application for interim measure canonly be made if the award is a "domestic award" as defined in Section2(7) of the said Act. Thus there cannotbe applications under Section 9 for stay of arbitral proceedings or tochallenge the existence or validity of arbitration agreements or thejurisdiction of the arbitral tribunal. All such challenges would have to bemade before the arbitral tribunal under the said Act. In any event, an award passed in arbitralproceedings held in a non-convention country could not be enforced. Thus such aparty would be left completely remediless. Appellants hold that the provisionsof Part I would apply to all arbitrations and to all proceedings relatingthereto. Where such arbitration is held in India the provisions of Part Iwould compulsory apply and parties are free to deviate only to the extent permittedby the derogable provisions of Part I. In cases of international commercialarbitrations held out of

India

provisions of Part I It would apply unless the parties by agreement express orimplied, exclude all or any of its provisions

Conclusion

However, inour view a proper and conjoint reading of all the provisions indicates thatPart I is to apply also to international commercial arbitrations which takeplace out of India,unless the parties by agreement, express or implied exclude it or any of itsprovisions. Such an interpretation does not lead to any conflict between any ofthe provisions of the said Act. On this interpretation there are no lacunae inthe said Act. This interpretation also does not leave a party remediless.

2012-01-30T12:56:00.001+05:30

Booz, Allen and Hamilton Inc. (Appellants)

SBI Home Finance Ltd. & Ors. (Respondents)

FACTS:

Capstone Investment Co. Pvt.Ltd (R2) and Real Value Appliances Pvt. Ltd (R3) are the owners of the suitproperty. Capstone and RV Appliances had borrowed loans from SBI Home FinanceLtd. under two loan agreements by securing the said property in favour of SBI.The Appellants and Capstone & RV appliances signed two leave and licenseagreements and the Respondents confirmed the same. Following which they entereda tripartite deposit agreement and paid refundable deposit as consideration.The transactions were made as indicated by the Respondents. By virtue of whichsaid loan amount of Capstone was paid but the RV appliances debt remainedoutstanding as result of which the property was secured by SBI. Eventually theofficial liquidator retained the asset. The deposit agreement contained clausefor arbitration. SBI filed mortgage suit in the High Court of Bombay on 28.10.1999against Appellant, Capstone and RV Appliances in regard to the mortgagedproperty and also prayed for eviction of Appellant from the premises. Courtissued an order allowing the Appellants to continue its occupation and ceasedthe other respondents from a third party interest. The Appellant filed a detailed reply to thesaid notice of motion and contended that SBI had a contractual obligationtowards the Appellant as it had agreed for the continuance of Appellantoccupation till refund of the deposit. The High Court dismissed the plea forarbitration as the dispute which is the subject matter cannot be adjudicated bya private forum. The application under section 8 of the Act was filed on10.10.2001 nearly 20 months thereafter, during which period the Appellant hadsubjected itself to the jurisdiction of the High Court and due to excessivedelay they were refused to grant relief. The Appellants contended that theparties to the agreement were aware of the arbitration clause hence the disputeis arbitrable, to which Respondents also agreed.

The casementioned above gave rise to the following questions:

Whether thesubject matter of the suit fell within the scope of the arbitration agreementcontained in clause 16 of the deposit agreement?

                 The parties tothe suit agreement affirmed themselves to resolve disputes which are mentionedbelow to be adjudicated by arbitration.

(a) Disputes with respect to creationof charge over the shares and flats;

(b) Disputes with respect toenforcement of the charge over the shares and flats and realization of sale proceeds there from;

(d) Disputes relating to exercise ofright of the Appellant to continue to occupy the flats until the entire dues as stated inclauses 9 and 10 of the deposit agreement are realized by the Appellant.

The subject matter of the dispute falls within thescope of arbitration clause. So the suit can be mandated under sec 8 of theact.

Whether the Appellanthad submitted his first statement on the substance of the dispute before filingthe application under section 8 of the Act?

According to the act, filling any statement by defendants prior to thefiling the application under section 8 of the Act will be construed as‘submission of a statement on the substance of the dispute’, if by filing suchstatement/application/affidavit, the defendant shows his intention to submithimself to the jurisdiction of the court and waive his right to seek referenceto arbitration. But filing of a reply by a defendant, to an application fortemporary injunction/attachment before Judgment/appointment of Receiver, cannotbe considered as submission of statement on the substance of the dispute, asthat is done to avoid an interim order being made against him. Obviously inthe present suit the Appellants filled counter affidavit against an interiminjunction which is to be awarded by the court. By virtue of which the Appellanthas not waived their right to seek reference through arbitration.

Whether theapplication under section 8 was liable to be rejected as it was filed nearly 20months after entering appearance in the suit?

Since the sec 8 of the act does not mentions the time limit for filling anapplication under the same but it affirms that a party right to seek througharbitration can only be determined by its conduct. The party waives its rightto seek arbitration only when it submits a written statement to the court orsubmits itself to the jurisdiction of the court as mentioned earlier. As perthe current suit the plaintiff were seeking for an interim order by the courtfor which the defendants have to submit a counter statement to avoid ex parteorder. As mentioned earlier filling an counter statement does not implies thatthe parties have waived their right to seek through arbitration and as for theexcess time lapse concerned, the parties tried to settle the dispute outsidethe court on failing which the Appellants filled the said application. The unamendedRule 1 of Order VIII of the Code did not prescribe any time limit for filingwritten statement. Henceforth the High Court has faulted rejecting theapplication on the ground of delay.

Whether thesubject matter of the suit is ‘arbitrable’, that is capable of beingadjudicated by a private forum (arbitral tribunal); and whether the High Courtought to have referred the parties to the suit to arbitration under section 8of the Act?

Basically a suit seeking to refer arbitration can only be adjudicated bythe court if the there was an arbitration agreement among the parties. Though there is such a stipulation in theagreement it is up to the court to decide the dispute is arbitrable or not.However the court confers authority to arbitration on certain civil disputes whichis mentioned in the act.

Russell onArbitration [22nd Edition] observed thus: “Not allmatters are capable of being referred to arbitration. As a matter of Englishlaw certain matters are reserved for the court alone and if a tribunal purportsto deal with them the resulting award will be unenforceable. These includematters where the type of remedy required is not one which an arbitral tribunalis empowered to give.

Courts grants authority to arbitration only to disputes which is ofinterests protected solely against specific individuals so called inpersonum and forfeits to affirm cases which is a rightexercisable against the world at large so called in rem. Sections 34(2)(b)and 48(2) of the 1996 Act makes it clear that an arbitral award will be setaside if the court finds that “the subject-matter of the dispute is not capableof settlement by arbitration under the law for the time being in force”. In theaforementioned case, an agreement to sell or an agreement to mortgage does notinvolve any transfer of right in rem but create onlya personal obligation. Therefore if specific performance is sought either inregard to an agreement to sell or an agreement to mortgage, the claim forspecific performance will be arbitrable. On the other side the agreement tomortgage is a right in rem asuit for enforcement of a mortgage being the enforcement of a right in rem, will have to bedecided by courts of law and not by arbitral tribunals. The scheme relating toadjudication of mortgage suits contained in Order 34 of the Code of CivilProcedure, replaces some of the repealed provisions of Transfer of PropertyAct, 1882 relating to suits on mortgages (section 85 to 90, 97 and 99) and alsoprovides for implementation of some25 of the other provisions of that Act(section 92 to 94 and 96). Order 34 of the Code does not relate to execution ofdecrees, but provides for preliminary and final decrees to satisfy thesubstantive rights of mortgagees with reference to their mortgage security. Theprovisions of Transfer of Property Act read with Order 34 of the Code, relatingto the procedure prescribed for adjudication of the mortgage suits, the rightsof mortgagees and mortgagors, the parties to a mortgage suit, and the powers ofa court adjudicating a mortgage suit, make it clear that such suits areintended to be decided by public forum (Courts) and therefore, impliedly barredfrom being referred to or decided by private forum (Arbitral Tribunals).Consequently, it opines that the court where the mortgage suit is pendingshould not refer the parties to arbitration.

Conclusion

Having regardto our finding on questions as to be held that the suit being one forenforcement of a mortgage by sale, it should be tried by the court and not byan arbitral tribunal. Therefore the court upheld the dismissal of theapplication under section 8 of the Act.

2012-01-29T21:45:00.000+05:30

Consultation paper on the proposed amendments to the Arbitrationand conciliation act 1996 - A Brief Note

Introduction:

The Act is based on theModel Law adopted by the United Nations Commission on International Trade Law(UNCITRAL) in 1985. The object and basis of the said Act is to speedy disposalwith least court intervention.

The objects, asmentioned in the Statement of Objects and Reasons for the Arbitration andConciliation Bill, 1995 were (a) to comprehensively cover internationalcommercial arbitration and conciliation as also domestic arbitration andconciliation;(b) to minimize the supervisory role of courts in the arbitralprocess;(c) to provide that every final arbitral award is enforced in the samemanner as if it were a decree of court.

Arbitration andConciliation (Amendment) Bill 2003

Accordingly theArbitration and Conciliation (Amendment) Bill 2003 was introduced in RajyaSabha on 22^nd December, 2003.

In July 2004, Governmentconstituted a Committee under the Chairmanship of Justice Dr. B. P. Saraf tomake in-depth study of the implications of the recommendations of the LawCommission made in its 176^th Report and all aspects relating to theArbitration and Conciliation (Amendment) Bill, 2003.

The Committee(Departmental Related Standing Committee) was of the view that the provisionsof the Bill gave room for excessive intervention by the Courts in the arbitrationproceedings and emphasized upon the need for establishing an institution inIndia which would measure up to international standards and for popularizinginstitutionalized arbitration. TheCommittee further expressed the view that since many provisions of the Bill wascontentious, the Bill may be withdrawn and a fresh legislation may be broughtafter considering the recommendations of the Committee. The said Bill waswithdrawn from the Rajya Sabha.

Main purpose of the 1996Act is to encourage an ADR method for resolving disputes speedy and withoutmuch interference of the Courts which Section 5 of the Act provides for.

In the (Dominant Offset Pvt. Ltd. Vs.Adamouske Strojirny AS,(1997) 68 DLT 157 the parties having developed adispute, a petition was filed in the High Court of Delhi with a prayer forreference to arbitration in terms of the Arbitration Clause for enforcement ofthe agreement. The Court held that PartI of the Act applies to International Commercial arbitration conducted outsideIndia. Court added that courts should be extremely cautious in granting interimrelief in cases where the venue of arbitration is outside India and bothparties are foreigners.

Recommendation regardingthe applicability of Part I

The Supreme Courtobserved that if the part I of the Act is not made applicable to arbitrationheld outside India it would have serious consequences. It made certainobservations in respect of International commercial arbitration which takeplace in a non-convention country. The Court further observed thatinternational commercial arbitration may be held in a non-convention country.Part II only applies to arbitrations which take place in a convention country.

An internationalcommercial arbitration may be held in a country which is a signatory to eitherthe New York Convention or the Geneva Convention (hereinafter called “theconvention country”). An international commercial arbitration may be held in anon-convention country.

The Supreme Court alsoobserved that Sections 44 and 53 define foreign award as being award covered byarbitrations under the New York Convention and the Geneva Conventionrespectively. The provision in Part I dealing with these aspects will not applyto such foreign awards.

The court concluded thatthe provisions of Part I would apply to all arbitrations and proceedingsrelating thereto. Where such arbitration is held in India the provisions ofPart I would compulsorily apply. In cases of international commercialarbitrations held out of India provisions of Part I would apply unless the partiesby agreement express or implied, exclude all or any of its provisions. In thatcase the laws or rules chosen by the parties would prevail. Any provision, inPart I, which is contrary to or excluded by that law or rules, will not apply.

The reason, whichpersuaded the court that a challenge to foreign award can lay in India, was thefact that an award, which is otherwise opposed to Public Policy of India andthus not enforceable even under the New York Convention, can be enforced, by aparty by seeking its enforcement of such an award in another country.

The Supreme Court inIndtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd.,(2008) 10 SCC 308,while referring Bhatia International observed – As per Bhatia International(Supra) and Satyam Computers, in cases of international commercial arbitrationsheld out of India provisions of Part I would apply unless the parties byagreement exclude all or any of its provisions.

The result is that allthe provisions of Part I including provisions relating to appointment ofarbitrator (Section11), challenge of arbitration award (Section 34) would alsobe applicable to International Commercial Arbitration where seat of arbitrationis not in India.

However, in view of theobservations made by the Supreme Court in Shreejee Traco(I) Pvt. Ltd. Vs. PaperLine International Inc (2003) 9 SCC 79, no provisions of Part I would apply tocases where the place of arbitration is not in India.

Foreign awards:

We may point out that anaward to be a ‘foreign award’ has to be made in the territory of a foreignState notified by the Central Government as having made a reciprocal provisionfor enforcement of New York Convention or Geneva Convention.

The provisions of theaforesaid statute, foreign awards and foreign judgments based upon awards areenforceable in India on the same grounds and in the same circumstances in whichthey are enforceable in England under the common law on grounds of justice,equity and good conscience.

It is well establishedthat the awards rendered in countries with which India does not have reciprocalarrangements cannot be enforced in India as if it were a decree.

Clause (3) of Article 1of New York convention on the Recognition and Enforcement of Arbitral Awardspermits the signing, ratifying or acceding State to declare on the basis ofreciprocity that it will apply the convention made only in the territory ofanother contracting State. India has madereservation and declared that convention will apply only on the basis ofreciprocity.

Therefore, when anInternational arbitral award is made in a country or territory in respect ofwhich there is no reciprocal arrangement between Central Government andGovernment of that country, it cannot be enforced under the Arbitration andConciliation Act, 1996. For the purpose of enforcement of such an arbitralaward party has to file a civil suit in India.

Provisions of Sections 9and 27 shall also apply to international commercial arbitration where the placeof arbitration is not in India if an award made in such place is enforceableand recognized under Part II of this Act.

A proposal for amendment in Section 11

A Bench of two learnedJudges (Adur Samia (P) Ltd Vs PeekayHoldings Ltd.) ofthe Supreme Court held that the Chief Justice or any person or institutiondesignated by him acts in administrative capacity under section 11 of the Actand hence an order passed in exercise of such power, does not attract theprovisions of the Article 136 of the Constitution. The same was reaffirmed by athree judges (Konkan Railway corp. Ltd. VsMehul Construction Co)bench which held that the order passed by the Chief Justice or his designateunder section 11 of the Act was an administrative order not amenable to thejurisdiction of the court under Article 136.

Thereafter, aConstitution Bench consisting of five learned Judges affirmed the decision ofthe three Judge Bench. Subsequently, the decision of the ConstitutionBench has been reconsidered by the larger Bench consisting of seven-Judges.

The Court overruled the decision in Konkan Railway Corp.Ltd. Vs Rani Construction (P) Ltd. rendered by five learned Judges and heldthat the power exercised by the Chief Justice of the High Courts or the ChiefJustice of India under Section 11(6) of the Act is judicial power and not anadministrative power and that such power, in its entirety, could be delegatedonly to another Judge of that Court.

The Supreme Court held that the Chief Justice orthe designated Judge will have the right to decide preliminary aspects asregards his own jurisdiction to entertain the request, existence of a validarbitral agreement, the existence or otherwise of a live claim, the existenceof the conditions for the exercise of the power and on the qualifications ofthe Arbitrator.

The decision of the Supreme Court has rendered theprovisions contained in sub-section (4), (5), (7), (8) and (9) of Section 11with regard to appointment of Arbitrators by any person or institution designatedby the Chief Justice of India and totally ineffective.

This is clearly contrary to the objective of theAct that is, to encourage litigants to take recourse to the alternative disputeresolution mechanism by Arbitration. The parties may stipulate in thearbitration agreement to refer an arbitral dispute between them for resolutionto a particular institution.

The Chief Justice instead of choosing an arbitratormay choose an Institute and the said institute shall refer the matter to one ormore arbitrator from their panel.

Various proposals to amend to the limited extent of the Section 11 of the Arbitration andConciliation Act, 1996 have been made. Almost all the sections from 4 to 12 and28 have been prescribed for an amendment.

The Law Commission in 176th Report

The Law Commission in 176th Report considered thequestion whether it was desirable to provide for an appeal under section 37 tocourt against decision of the arbitral tribunal rejecting the plea of bias ordisqualification under section 13. After due deliberation, the Law Commission wasof the view that there should not be an immediate right of appeal under section37 against the decision of the tribunal rejecting the plea of bias ordisqualification under section 13.

Section 34 does not enable the parties to questionthe decision of the arbitral tribunal made under Section 13 (2) rejecting aplea of bias or to question the decision of the said tribunal made underSection 16 (2) or (3) rejecting a plea of want of jurisdiction on the part ofthe arbitral tribunal.

Though the existence of these remedies was referredto in Sections 13 (5) and 16 (6), these remedies were not included in Section34 and further the use of the word ‘only’ in section 34 (1) contradicted whatwas stated in sections 13 and 16.

Therefore, the Law Commission, recommendedinsertion of a clarification in section 34 by way of an explanation that an applicant,while seeking to set aside the award, can attack the interlocutory order of thearbitral tribunal rejecting a plea of want of jurisdiction, as permitted bysection 16(6).

Law Commission while suggesting amendment inSection 34 also recommended that in case of domestic arbitration, new groundfor challenges viz. mistake appearing on face of award may be made available.Accordingly it recommended for inserting a new Section 34A.

The Law Commission in their Report had observedthat parties are filing applications to set aside the award even though thereis no substance whatsoever in such applications and, to put a stop to thispractice, proposed the amendment of section 36 by deleting the words which saythat the award will not be enforced once an application is filed undersub-section (1) of section 34.

To give effect to the above recommendation of theLaw Commission, the Amendment Bill of 2003 sought to substitute the existingsection 36.That was is a very good provision. It will have a salutary effect onthe expeditious execution of the awards. Standing Committee of the Parliamentin its report on the Arbitration and Conciliation (Amendment) Bill, 2003 hasrecommended promoting institutional arbitration.

2012-01-25T15:54:00.001+05:30

Proposed Amendment of Section 89 of Civil Procedure Code, 1908

Backdrop to section 89

Theobjective of the 129^th report of the law commission is to makeAlternative Dispute Resolution effective and obligatory in courts. When the parties fail to settle theirdisputes by means of an alternate dispute resolution settlement then they mayproceed with the section under which the suit was originally filed.

Clause 7 seeks to insert a new section 89in the Code in order to provide for alternate dispute resolution whichfacilitates for the settlement of disputes outside the court. The provisionsof clause 7 are based on the recommendations made by Law Commission ofIndia and Malimath Committee. It was recommended by the Law Commission ofIndia that the court may require attendance of any party to the suit orproceedings to appear in person with a view to arriving at a feasible settlementof dispute between the parties. Itwas further suggested by the Malimath Committee to make it obligatory for thecourt to refer the dispute, for settlement after issues are framed, eitherby way of arbitration, conciliation, mediation, judicial settlement or throughLok Adalat. When the parties fail to get their disputes settled through any ofthe alternative dispute resolution methods then the suit could proceedfurther.

129^th report of thelaw commission of India referred to Order XXVII of the CPC rule5B which provides that in asuit to which itapplies, it should be the duty of the court to make every endeavour where it is possible to do so withthe nature and circumstances of the case to assist the parties in arriving at asettlement ofthe dispute. Wherethe court is ofthe opinion that there is a reasonable possibility ofa settlement between the parties to the suit, the proceedings may be adjournedfor such period as it thinks fit to enable attempts to be made to effect such settlement. Infact the rule 5B turns out to be a limitation which expects the court before which the suit is pending to itself attempt to conciliate the dispute.

Section89 in Afcons case

Section 89 enacted with a lofty objective,has revealed manifest drafting errors, which in turngave rise to complexities in understanding its true scope and purpose. TheSupreme Court observed in Afcons Infrastructure Case that the correct interpretation andunderstanding of the provision has become difficult for the judges tointerpret.

The court observed that the sub-section requiresformulating the terms of settlement and placing them before the parties andthen reformulating the terms after observation by the parties of a possiblesettlement. It further shows that on such reformulation, the court shall haveto refer the dispute for one of the five ADR methods, which is absurd.

This report brieflyexplains the errors in Section 89 of Civil Procedure Code which was alsoobserved by the Supreme Court in Afcons Infrastructure case that there are manydrafting errors in Section 89 and suggested amendments to the Section which may be considered by Law Commission of India. To facilitate the removal of the deficiencies in Section 89 which is a significant provision for facilitating disputeresolution in civil matters and to make it more simple and straightforward, theLaw Commission has earlier proposed amendments to Section 89 CPC as well as Order X Rules 1-A to 1-C.

Refundof the court fee

Withregard to the amendment of Section 21 of the Legal service Authorities act,wherein the court fee shall be considered for refund to the plaintiff, onlywhen the ADR has derived at an award for the dispute, otherwise the plaintiff’scase will be adjudged for cost by the court when the ADR does not grant anaward or the parties to the dispute.

Conclusion

Theforemost reason for the misinterpretation of the Section 89 of the CPC is primarilydue to the drafting errors in that section which is abstractly understood byits readers. Secondly, the incorporation of the two sub-sections (i.e. Section89 (c) (d)) has been erroneous which has in fact made it difficult even for thelayman to interpret. Since sub-sections a and b of section 89 are governed bythe Arbitration and conciliation Act of 1996, its understanding has becomerather effortless, but the other two sub-sections do not have any specific actswhich govern them, not to forget that there are general laws and acts which aidthem, so the court should persuade parties to resolve their disputes by ADRwhere the proceedings in the courts have not been commenced and the issues havebeen framed.

The complete proposal is available for reading from this webpage.

http://www.scribd.com/fullscreen/79323880?access_key=key-jaih12ykexptx9zefnf

2012-01-23T17:03:00.000+05:30

ICADRInternational Conference on Mediation and Conciliation, Chennai 2012

This post shall be updated shortly

2012-01-20T18:13:00.000+05:30

Applicability of National laws in ArbitralProceedings

Settlement of disputes through reference to thirdparty is a part of the volkgiest of India since time immemorial. The Indianepics and folklore are replete with examples of consensual procedures for thesettlement of disputes at the grassroots level. Making such a procedure legal,was the solution to end the increasing number of cases in the courts of thenation, vexatious litigation and delayed justice. Thus, the Arbitration andConciliation Act, 1996 was enacted with a view to relieve the technicaldifficulties faced by the parties in the court proceedings and to ensure speedydisposal of cases. This is to help parties solve their disputes amicablythrough mutual understanding and reduced cost and by way of a trustedarbitration procedure. This revolutionary enactment meant cutting down on thestringent legal procedures and bureaucratic red tapes. One of the importantsections that is an exemplification of this desideratum is section 19 of theAct.

Section 19 ofthe Arbitration and Conciliation Act, 1996 states as under:

Determination of rules of procedure.-

(1) The arbitral tribunal shall not be boundby the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872.

(2) Subject to this Part, the parties are freeto agree on the procedure to be followed by the arbitral tribunal in conductingits proceedings.

(3) Failing any agreement referred to insub-section (2), the arbitral tribunal may, subject to this Part, conduct theproceedings in the manner it considers appropriate.

(4) The power of the arbitral tribunal undersub-section (3) includes the power to determine the admissibility, relevance,materiality and weight of any evidence.

This essay would take its focal point to be Clause(1) of section 19, Arbitration and Conciliation act, 1996. Clause (1) ofSection 19 states very clearly that any arbitration procedure is not bound bythe Civil Procedure code, 1908 or The Indian Evidence Act, 1872.

Before making a headway into the merits of theclause, I would like to highlight the difference between two situations onewherein the parties are not "bound" and in the other where they are"prohibited by law". When it is said that the parties are not bound,it translates to the parties not being under legal or moral obligation to do orabstain from doing a particular act. That is, they are not constrained orfettered by the provisions/clauses of the act.

Whereas, “prohibited" from doing an act,means to be barred from doing it. Performance of such an act would be treated unlawful,illegal or will render any agreement based on it void. There is an element ofinherent restraint.

In my humble view, while Section 19 of theArbitration and Conciliation Act, 1996 (henceforth referred to as the act) doesnot bind the parties to follow The Civil Procedure code, 1908, it doesn'tprohibit them from doing so. Meaning, the parties, by their own will may decidewhether or not to follow the act. It is true that when the parties choose totake recourse to the usual proceedings despite having the leeway not to do so,the benefits and attractiveness of arbitration mechanism gets significantlydiminished. But, in any suit, and nonetheless in an arbitration, the point ofconcentration should be skewed towards delivery of speedy equitable justicethan on procedures. Failure to do this may militate against the requirements offair trial and vitiate the resulting award. This view has been upheld by therecent judgement in the case of:

Gammon India Ltd vs. SankaranarayanaConstruction (Bangalore)

Wherein, the bench declared that an arbitraltribunal, in its discretion, may adopt principles of Civil Procedure Code. The learned judgeshave declared that while the arbitration panel as permitted by Sec. 19 (1) is not bound by the CPC or evidence act, in the absence of an agreed specificprocedure by the opposing parties, there are no fetters placed on the panel toadopt the principles and procedures of CPC or Evidence Act. The panel is free to conduct the proceedingsin a manner which it considers appropriate. However, the principle of 'res-judicata' would apply.

I would like to reiterate herethat this judgement complements my view that the referred section provides thefreedom to arbitration bodies to follow the 'National Laws, albeit undercertain conditions'. In my opinion, here it has been expressly declared that'Shall not be' bound doesn't mean 'it is prohibited from. Of course, thearbitration option is given to the parties to unshackle themselves from theprocedural fetters of the existing laws. At the same time, it doesn't prohibitor take away from the parties the freedom to adopt or invoke the same laws ifthey are comfortable with the same. That is, if the parties refer to a givenlaw on Civil Procedure or Evidence, such law would be applicable by virtue oftheir choice and not by virtue of being a national law.

Also, it follows, that, in theabsence of a specific agreement between the parties on the laws, rules andprocedures to be applied during arbitration, the tribunal may formulate its ownprocedure or adopt the national laws, namely, CPC, Evidence Act etc.

Once the issue of whether thearbitration panel has the powers to adopt and pass orders under CPC or EvidenceAct is settled, the power of the panel to pass an interim award exercisingthose powers would also logically derive.

In the above case questioning thedecision of the learned single judge, the learned counsel for theAppellant/Petitioner had also tried to establish that the power to pass aninterim award can be invoked only if there is an admission and it should be aclear, unambiguous and unequivocal admission

Towards this the learned counselfor the Petitioner/appellant relied on Numero Uno International Ltd. vs.Prasad Bharati. The learned counselfor the petitioner had tried to interpret the judgement as one which vestedwith the counsel the right to contest the powers of the arbitrator to grant aninterim award, even if not contested earlier, and such a contest later wouldalso render the interim award unenforceable. Inherent in this argument is the reasoning that the contest would takethe trait of an objection which would negate the condition of 'clear, unambiguousand unequivocal admission' for grant of interim award. However, the learned single judge hasrejected argument quoting from the same citation that an interim reward cannotbe interfered with, simply because the other party has made a counter claim orbecause it had raised a point which is outside, or is independent of the areascovered by the interim award.

The judgement of theMadras division bench in Gammon India Ltd vs.Sankaranarayana Construction (Bangalore) has thus provided interpretativeclarity to article 19 of the Arbitration and Conciliation Act, 1996 by whichelements of flexibility have been fused with procedural discipline.

This is article was written by Ms. Varsha Raghavan, while interning at CNICA. She is studying B.A.LLB., at School of Law, SASTRAUniversity.

2012-01-20T16:25:00.000+05:30

InternationalCommercial Arbitration and Foreign Arbitral Awards in India – an overview

Internationalcommercial arbitration is the process of resolving disputes between partiesthat arise out of international commercial transactions, whether contractual ornot, through the use of one or more arbitrators. Agreement of the partiesis a necessary prerequisite. An arbitration clause is usually part of thecontract between parties that decide to be adjudicated before a sole arbitratoror a panel of arbitrators. The decision of the arbitrator(s) is usually bindingon the parties.

In India The Arbitrationand Conciliation Act, 1996 section 2(1)(f) of the Act defines"International Commercial Arbitration" as arbitration relating todisputes arising out of legal relationships, whether contractual or not,considered as commercial under the law in force in India where at least one ofthe parties is:

a. an individual who is a national of, orhabitually resident in any country other than India; or

b. a body corporate which is incorporatedin any country other than India; or

c. a company or an association or a bodyof individuals whose central management and control is exercised in any countryother than India; or

d. the Government of a foreign country.

One of the advantagesof International Commercial Arbitration is that parties appoint arbitrators oftheir choice. This reduces the distrust. If the same matter would have beentaken before a foreign Court of Law, there would be cultural differences,differences in interpretation of law or facts, leading to an impasse and lossof faith in the system. International Commercial Arbitration alleviates suchproblems and provides faster results, as awards are usually binding on the parties.

All this said anddone the question of enforceability arises. One of the advantages ofInternational Commercial Arbitration is its enforceability. More than 140countries have signed the Convention on the Recognition and Enforcementof Foreign Arbitral Awards or theNew York convention of 1958. This ensures that foreign arbitral awards areenforceable in one’s own jurisdiction.

In India foreign arbitralawards can be enforced under both the New York convention of 1958 or under theGeneva convention of 1927. Sections 44 to 60 of the Arbitration andConciliation Act, 1996 provides for the various conditions for enforcement offoreign arbitral awards.

One of the conditions states that the Central Government, bynotification in the Official Gazette, declare these to be territories to which the saidConvention applies.Any partyapplying for the enforcement of a foreign award shall, at the time of theapplication, produce before the court----

(a) the original award or a copythereof, duly authenticated in the manner required by the law of the country inwhich it was made;

(b) the original agreement forarbitration or a duly certified copy thereof; and

The act also provides the conditions for non-enforcementof foreign awards.These are

(a) incapacity of the partiesto the agreement

(b) theparty against whom the award is invoked was not given proper notice

(d) thecomposition of the arbitral authority or the arbitral procedure was not inaccordance with the agreement of the parties, or, failing such agreement, wasnot in accordance with the law of the country where the arbitration took place.

(e) the award has not yet becomebinding on the parties, or has been set aside or suspended by a competentauthority of the country in which, or under the law of which, that award wasmade.

(f) thesubject -matter of the difference is not capable of settlement by arbitrationunder the law of India; or

(g) the enforcement of the award would becontrary to the public policy of India.

Sections 49 and 58 of the Arbitration and Conciliation, 1996provide that Where the Court is satisfied that the foreignaward is enforceable, the award shall be deemed to be a decree of that Court.

Thus a basic picture of InternationalCommercial Arbitration and enforceability of Foreign Arbitral Awards in Indiahas been portrayed.