Ever Evolving Arbitration Laws In India

The legislature has promoted institutional arbitrations and even established the India International Arbitration Centre by an act of Parliament and given it the status of an institute of national importance

In a country like India where dockets of the courts are always flooded and Justice is often delayed, if not denied, Alternate Dispute Resolution is the necessity of time. We all know that in order to achieve this objective, India had adopted the UNCITRAL model law and enacted the Arbitration and Conciliation Act, 1996. However, comparative data available in the public domain suggests that India is not being considered as a favorable destination by the parties for conducting Arbitrations. No doubt this aspect has been getting attention from the Legislature as well Judiciary and steps are being taken to promote Arbitration in India. As a first step, all stakeholders have come together and have promoted the institutional Arbitration which is more organized and result-oriented.

There have been amendments brought in the legislative scheme as well and the Arbitration and Conciliation Act, 1996 has seen many amendments. It is trite to say that law is ever evolving and it is commendable that the Indian legislature and Judiciary has been alive to the ground situation and day to day practical problems faced.

Recently, the Supreme Court was tasked to resolve a legal conundrum relating to interplay between the Arbitration agreement and Indian Stamp Act. The task was not simple inasmuch as the Apex court was faced with a Judgment of a constitutional Bench of five Hon’ble judges in the matter of N N Globalⁱ. However, in a landmark Judgment by the seven Judges bench, this issue was set at rest by holding that Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable and that non-stamping or inadequate stamping is a curable defect. This indeed would resolve many pending objections in the Courts of law.

Similarly, the concept of public policy of India has traveled a long distance from Renusagarⁱⁱ to Saw Pipesⁱⁱⁱ to now Government of India v. Vedanta Ltd.^iv There are many more fundamental questions of law and procedure like power of courts exercising jurisdiction under section 34 or Section 37 of the Act to modify the Award or to review their own orders are also being considered by the larger benches of the Supreme Court of India.

The question of power of courts appointing arbitrator under section 11 has seen a paradigm shift in approach from SBP Patel Engineering^v to Vidya Drolia^vi and now SPML^vii judgment. This was required to expedite the process of initiation of Arbitration without going into the technical objections and holding the process for years even at the stage of appointment of arbitrator. It is interesting to see that the Supreme Court at one stage has interpreted the law so as to expedite the process of appointment of arbitrator, on the other hand in the judgment Perkins^viii the unilateral appointment by one party was deprecated. This has allowed more transparency and a judicious approach.

At the same time, when judicial intervention has kept the soul of arbitration alive in the country, the legislature has also kept pace with the time. Prior to the amendments brought in the Act in the year 2015, an arbitral award would be automatically stayed upon the courts entertaining objections under section 34 of the Act. However, in order to discourage the delays in prosecuting cases, the amendment provided that for getting a stay of the arbitral award, award debtor is required to file a specific application to this effect. This indeed was a welcome step. This, again triggered some controversy on the applicability of the amended provision on the pre 2015 proceedings. Ultimately, the legislature brought in the 2021 Amendments introducing the grounds for unconditional stay and also providing that these provisions would also apply to the Court proceedings emanating from the pre-2015 arbitrations.

The legislature has promoted institutional Arbitrations and has even established India International Arbitration Centre by Act of Parliament and given it the status of an Institute of National Importance. This demonstrates that the country is now adapting to the changing environment of alternate dispute resolution. In the end, I would like to emphasise that all the changes brought in the recent past bring the Arbitration Act in conformity with the International status should be compiled together and introduced in the Arbitration Act on a consolidated basis.

These changes if brought in by way of legislative initiative instead of judicial verdicts would provide poise and pave the way to a more certain and clearer path for the International Community to consider India as a more Arbitration friendly country.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.