Supreme Court Criticizes Lengthy And Costly Arbitral Proceedings In India

Supreme Court Criticizes Lengthy And Costly Arbitral Proceedings In India

The Supreme Court on Monday expressed its concern over the increasingly burdensome nature of arbitral proceedings in India, noting that they have become synonymous with bulky pleadings, extensive evidence, and time-consuming submissions. This observation came during the case of Bombay Slum Redevelopment Corporation Private Limited v. Samir Narain Bhojwani.

A bench of Justices Abhay S. Oka and Pankaj Mithal remarked that in appropriate proceedings, the Court might need to examine whether arbitration remains a cost-effective method of dispute resolution in India. The Bench voiced its "serious concerns," stating:

"Case after case, we find that the arbitral proceedings have become synonymous with very bulky pleadings and evidence and very long, time-consuming submissions, leading to very lengthy awards. Moreover, there is a tendency to rely on a large number of precedents, relevant or irrelevant. The result of all this is that we have very long hearings before the courts in Sections 34 and 37 of the Arbitration and Conciliation Act."

The Court criticized the manner in which appeals against arbitral awards are contested, likening them to appeals under Section 96 of the Code of Civil Procedure, which cite innumerable grounds and waste judicial time.

"The time of our courts is precious, considering the huge pendency. This is happening in a large number of cases. All this makes the arbitral procedure inefficient and unfair. It is high time that the members of the bar show restraint by incorporating only legally permissible grounds... Everyone associated with the arbitral proceedings must remember that brevity will make the arbitral proceedings and the proceedings under Sections 34 and 37 more effective," the Bench underlined.

The Supreme Court urged all stakeholders to consider and work towards making arbitration a tool for expeditious, effective, and cost-effective dispute resolution.

"Arbitration must become a tool for expeditious, effective, and cost-effective dispute resolution," the Court emphasized.

These observations were made while disposing of appeals against a July 2023 order of a Division Bench of the Bombay High Court. The Division Bench had remanded the case, which involved appeals against an arbitral tribunal decision, who initially set aside the award on grounds of illegality and perversity.

The Supreme Court highlighted that the arbitral award itself ran into 139 pages, while the petition under Section 34 of the Arbitration Act ran into 93 pages and incorporated 151 grounds. Additionally, the judgment was 101 pages long and relied on 35 precedents, and the appeal against it ran into 46 pages with 164 grounds cited.

"As per the practice in the High Court of Judicature at Bombay, a memorandum of appeal under Section 37 of the Arbitration Act does not contain the facts but only the grounds of challenge... Considering the narrow scope of interference under Sections 34 and 37 of the Arbitration Act, we cannot comprehend how there could be 151 grounds in a petition under Section 34 and 164 grounds in an appeal under Section 37. It is not surprising that this appeal has a synopsis running into 45 pages, and it contains as many as 54 grounds of challenge," the Supreme Court said.

Consequently, the appeals were partly allowed, and the matter was remanded to the Division Bench of the High Court for a decision on merits in line with the Arbitration Act.