Introduction:
The notion of an Alternative Dispute Resolution[1] mechanism has the potential to replace traditional dispute resolution techniques. ADR can be used to resolve a wide range of disputes, including civil, commercial, industrial, and familial concerns, in which participants are unable to begin or complete any sort of dialogue. ADR often employs a neutral third party to assist the parties in communicating, discussing their differences, and resolving their disputes. It is a technique that allows people and groups to retain cohesion, social order, and the ability to lessen antagonism. ADR plays a vital role in India by using a variety of approaches to deal with the condition of cases pending in Indian courts. The Indian judiciary receives scientifically established approaches through the ADR process, which serves to reduce the strain on the courts. Arbitration, conciliation, mediation, negotiation, and Lok Adalat are all forms of alternative dispute resolution. Negotiation is defined as self-counseling between parties to resolve a conflict, although it is not recognized by law in India. Articles 14 and 21[2], which deal with equality before the law and the right to life and personal liberty, respectively, are also foundations of ADR. The goal of ADR is to promote social, economic, and political justice while maintaining the society’s integrity, as stated in the preamble. ADR also aims to promote equal justice and free legal assistance under Article 39-A[3] of the State Policy Directive Principles (DPSP).
Development of arbitration law in India
Act IX 1850 was the first effort by the British East India Company to implement arbitration law in India. Multiple legislation followed, but they were deemed ineffective, thus the Arbitration Act[4], based on the English Arbitration Act[5], was enacted. The Act of 1940 was wide in scope, but it only addressed domestic honors, leaving overseas awards unaffected. Thus, the Act of 1940 was ineffective in achieving its goal, as evidenced by the case Guru Nanak Foundation vs. Rattan Singh & Sons[6], in which justice D.A. Desai stated that complex court proceedings compelled jurists to seek a less expensive, more informal, more effective, and less time-consuming alternative to resolve disputes without the procedural nonsense, which led them to the Act of 1940.
However, the manner this Act’s processes are performed and disputed in court has made both the lawyer and the philosopher laugh and cry. Due to legal snags, the processes have become very technical and time-consuming at every point. As a result of the court’s ruling, alternative conflict resolution has been enshrouded in ‘legalese’ of unfathomable complexity. India approved the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, 1985, and passed the Arbitration and Conciliation Act, 1996, nearly half a century after finally responding to the criticism. This Act addressed both domestic and foreign arbitration verdicts. As a result, to guarantee a comfortable business climate and encourage foreign investment following post-economic liberalization, this act was enacted to reduce delays and judicial intervention in arbitration processes.
The Principle of Minimal Interference
The Arbitration and Conciliation Act[7]
The broadening of the phrase “public policy” by the judiciary was the subject of the 246th Law Commission Report. The study recommended changes to many sections of the 1996 Act, notably Section 34. This suggestion was later incorporated into the 2015 amendment. The commission recommended that the Renusagar decision be upheld and that it be applied to all international arbitration verdicts. It limited the scope of the word “public policy” by eliminating the phrase “interest of India,” which may be interpreted in a variety of ways, particularly in the case of an international arbitration ruling. The idea of “patent illegality” should be preserved, but it should be interpreted more narrowly than in the Saw Pipes case. The Arbitration and Conciliation Act, 2015, was enacted in India in response to the advice (Amendment). As a result, this regulation limited the extent of court intervention by permitting an international award to be set aside based on public policy, if the award is not in conformity with the core policy of Indian law, or if it goes against the basic principle of morality and justice, it is tainted by fraud or corruption. Only domestic awards can be set aside based on patent infringement, according to Section 34(2A).
The president granted his approval to the revised modification to the Arbitration and Conciliation Act[8], on August 9, 2019. According to the Shrikrishna committee report, it resolved the issue of applicability of the Arbitration and Conciliation Act[9], by introducing Section 87, which stated that the 2015 Act applies to court proceedings relating to arbitration that began after the introduction of the 2015 Act and not arbitration proceedings that began before the introduction of the 2015 Act, thus eliminating the retrospective applicability of the 2015 Act. This Section, however, was thrown down in Hindustan Construction Company Limited vs. Union of India[10], which found that the Arbitration and Conciliation Act, 2015 shall apply to all court actions, whether new or continuing, before or after the 2015 Act’s start. The insertion of Section 87, it was said, would delay arbitration processes and increase court intrusion, therefore contradicting the goal of the 2015 amendment. The case NAFED vs. Alimenta[11], in which the Supreme Court finally reached conclusions in 2020 after over three decades of deliberation, exemplifies the length of time it takes to enforce arbitral judgments.
The Arbitration and Conciliation Act[12]
The court should not interfere unless there is a clear provision in Part I of the Act 1996, according to Section 5 of the Act. The court’s involvement in arbitration is so limited and defined. The court has the responsibility to examine the procedures if there are any anomalies in the process, but not to assess the award’s merits. It highlights the significance of the party’s autonomy while limiting the role of the judiciary by ensuring that the court’s function is restricted to aiding the arbitral procedure rather than interfering with it. The application to set aside the arbitral award is governed by Section 34. This is based on the New York Convention’s Article V (2)[13]. If the party contesting the award can substantiate the grounds listed in Section 34, the judgment can be set aside. As a result, after passing off the award, the court may intervene in the arbitration procedure. Except for the words public policy of India used in Section 34(2), all of the requirements under Section 34 are narrow, unambiguous, and allow no room for interpretation (b). As a result, the discussion over the scope of judicial action has traditionally been referred to as public policy.
Public Policy
In the Act of 1996 or any other law, there is no precise definition of public policy. Because the phrase is ambiguous and difficult to define, it is subject to judicial review at all times. In one of his decisions, Justice Burrough compares public policy to an untamed horse. You’ll never know where it’ll take you until you’re astride it. The Supreme Court has issued many major decisions in which it has attempted to clarify the definition of public policy:
- The Supreme Court concluded in Renusagar Power Co. Ltd vs. General Electric Co.[14] that a breach of Indian laws is insufficient to withdraw the award’s execution. The word “public policy” should be used in the way that it is used in international private law. The Supreme Court narrowed the definition of public policy, ruling that enforcement of the judgment would be against public policy if it violated I Indian law’s essential principle; (ii) India’s interests; or (iii) justice or morality. Thus, the award was in breach of public policy since it was made in violation of the law Foreign Exchange Regulation Act[15], which was made for the benefit of national economic interests.
- The Supreme Court broadened the definition of public policy in Oil & Natural Gas Corporation Ltd vs. Saw Pipes Ltd[16]. The court determined that the award is against the public interest if it violates Indian legislative provisions. An award made in violation of the law would obstruct the administration of justice and would be contrary to public policy. As a result, the award’s enforceability might be reversed due to “patent illegality.” As a result, each legal error will raise the bar of public policy, allowing the court to evaluate the legal foundation and increase its intervention.
- In Oil & Natural Gas Corp. Ltd vs. Western Geco International Ltd[17], the Court, citing the Saw Pipes decision, determined that if the arbitrator made a prima facie incorrect inference or failed to make an inference that should have been made, the award is subject to judicial review. Any perverse or unreasonable award would be annulled if the arbitrator’s finding was such that “no reasonable person would have reached the same conclusion.”
- The Supreme Court concluded in Associate Builders vs. Delhi Development Authority[18] that “the basic public policy of India” includes: 1) not taking orders from the superior court, 2) judicial method and 3) natural justice concept. The Supreme Court ruled that if the award is deemed to be perverse, it would be reversed. As a result, the perverse principle applies if the results are based on no evidence, if crucial evidence is ignored, or if the tribunal takes anything irrelevant into account while making a judgment.
- The Supreme Court concluded in Bharat Aluminium and Co. vs. Kaiser Aluminium and Co.[19], often known as BALCO, that Part I of the Act does not apply to Part II of the Act. Part I does not extend to international commercial arbitration, hence the court could not hear an application for interim relief under Section 9 in international arbitration, which is covered by Part II.
Conclusion
India must build confidence in the arbitration process. “Let’s arbitrate rather than litigate,” as the saying goes. In certain situations, it is necessary to keep a check on the implementation of an arbitration ruling, but this should be restricted, and arbitration processes should be as autonomous as possible to support an arbitration-friendly country. The court must decide where to draw a line and strike a balance such that there is less involvement while ensuring that justice is done.
References:
[1] Hereinafter referred to as ADR.
[2] The Constitution of India.
[3] Supra 2.
[4] 1940; and Hereinafter referred to as The Act of 1940.
[5] 1934.
[6] 1981 AIR 2075, 1982 SCR (1) 842.
[7] 2015
[8] 2019
[9] 2015
[10] WRIT PETITION (CIVIL) NO. 1074 OF 2019
[11] CIVIL APPEAL NO.667 OF 2012
[12] 1996
[13] Article V (2) (b), (Nov 13, 2021, 10:00 AM), https://newyorkconvention1958.org/index.php?lvl=cmspage&pageid=10&menu=626&opac_view=-1.
[14] 1994 AIR 860, 1994 SCC Supl. (1) 644.
[15] 1973.
[16] (2003) 234 SC.
[17] (2014) 9 SCC 263.
[18] CIVIL APPEAL NO. 10531 OF 2014.
[19] CIVIL APPEAL NO.7019 OF 2005.
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