National University of Advanced Legal Studies, Kochi (Batch of 2020)

That, one of the legislative goals of the Arbitration and Conciliation Act, 1996, is to curtail the excessive judicial interference that seriously undermined the older Arbitration Act, 1940. The 1996 Act was initially endorsed by the Court in the case of Konkan Railway Corporation v. Mehul Construction Co., ¹ which made it abundantly plain that the Act's provisions limit the Court's ability to interfere with an arbitral process to the absolute minimum. But the reality that followed was far from perfect. 

Governmental efforts to promote arbitration in India have been starkly exposed in cases like ONGC v. SAW Pipes ² and SBP & Co. vs. Patel Engineering. 3 In the ONGC case, an arbitral award was challenged on the ground that it was "in conflict with the public policy of India." The Court adopted a very broad interpretation of the term "public policy" rather than adopting a narrow one that defined it as something that went beyond the scope of Indian law. The Court continued by equating "patent illegality" with "error of law" and holding that any violation of Indian law would automatically render the judgement against public policy.

Thus, the avenues for the judicial review that the Act was designed to prevent were now available. When the Hon'ble Supreme Court ruled in the case of SBP & Co. that the Chief Justice of India had the authority to decide on matters like whether arbitration agreements were valid and went on to say that the Chief Justice could even call for evidence to resolve jurisdictional issues while performing the function of appointing an arbitrator when the parties failed to reach an agreement, the scope of judicial intervention was further expanded. The Supreme Court continued by stating that such judgements would be conclusive and bind the parties. This effectively flouted the principle of competence and thus amounted to a situation where the arbitration tribunal's power to determine its jurisdiction was undermined. 

Therefore, Courts effectively granted themselves the ability to materially prolong arbitral proceedings (either by raising fictitious objections to preliminary issues or by obstructing the appointment process), which is contrary to the primary intent of Section 13 of the Act's enactment.

This brings us to the debate between lofty ideals and low principles, which emphasises the necessity for fairness (an equally insistent to end litigation). Serious problems have been raised by the Court's enlargement of its judicial intervention; the ONGC case's expansive interpretation of the term "public policy" has been applied in several Judgements, all of which affirm the judiciary's ability to examine the arbitral award. 

Further, in case of Hindustan Zinc Ltd. vs. Friends Coal Carbonisation, 4 according to the Honorable Supreme Court, awards may be set aside if they are in violation of a contract. As previously mentioned, the support of ADR was premised on the necessity to avoid the drawn- out court process, therefore this does certainly set a perilous precedent. When the arbitrators or the references engage in wrongdoing, the Court is authorised by statute to void the award. It does, however, also have the absolute option to remit the award to the selected tribunal. 

The government or its agencies are parties in the great majority of arbitrations that are entirely domestic in nature and do not involve any foreign parties. The arbitrators chosen by the centre are frequently public servants who are prone to bias for one reason or another. 5 There are no trained arbitrators who can assist quick and summary disposition while upholding the confidence of both parties, and the majority of arbitration tribunals are not institutional but rather ad hoc. Few institutions are able to offer arbitration services in accordance with their rules. 

Frequently, former judges who spent a lot of time on the Bench are nominated as arbitrators because they are familiar with the onerous requirements of process and evidence. As a result, arbitrations turn into a fight of pleadings and formalities, with each party attempting to drag things out if it suits them. ⁶ 

Additionally, arbitrators could be tempted to drag out the arbitration in order to receive higher "sitting fees." There are rumours that arbitrators are susceptible to "procurement" and that wealthy people can buy justice. Many arbitrators lack knowledge of arbitration procedures and how to carry out the arbitral process efficiently. ⁷ 

They have all lost sight of the Act's purpose, goal, and goal-setting mission. That, lack of standards in the conduct of arbitration in India is largely due to the fact that lawyers are frequently untrained in the law and practice of arbitration and have a propensity to drag out proceedings, request pointless adjournments, sandwich proceedings between routine court appearances, etc. ⁸ As a result, a lot of arbitrations end up being run like mini-trials, complete with pleadings, issues, admissions and denials, oral and written evidence, cross-examination, etc. Therefore, where there is a disconnect between arbitration theory and practice, it makes sense that when there is injustice, the Courts would want to step in, and the public would undoubtedly knock on the door of the Court in search of justice. 

In truth, if the situation in India today is taken into account, judicial action is appropriate. Where retired judges are frequently chosen as arbitrators because they have spent a significant amount of time behind the Bench and have become accustomed to the onerous rules governing procedure and evidence. Further, the arbitrators chosen by the Centre are government employees who are likely to be biassed for one reason or another. 

On the other hand, if we consider the Act's goals and objectives, we conclude that the judiciary's involvement weakens them. The obvious solution to this conundrum is to take a medium road. With sufficient access to competent, educated, and trustworthy arbitrators as well as a well-equipped arbitration institution, the Act's goals and objectives could be achieved. Such arbitrators are desperately needed. Because it would undoubtedly cast doubt on the future of arbitration if it were to become widely believed that by opting for arbitration over litigation, parties have significantly decreased their prospects of receiving high-quality justice. Therefore, what is required is the ingraining of an arbitration culture among the important parties, including the Bar, the Bench, the Arbitrators, and the Parties to the Arbitration. As Sir LJ Earl Warren once stated, “It is the spirit of the law, not its structure, that sustains justice.” 

N.B.: The author certifies that the work is original. Views expressed are personal.