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Still Far Away From Effective and Expeditious Arbitration Culture Dr. P. C. Markanda Naresh Markanda Rajesh Markanda Sr. Advocate Sr. Advocate Advocate

Something is always better than nothing. This proverb holds good when it comes

to comparing The Arbitration and Conciliation Act, 1996 with The Arbitration and

Conciliation (Amendment) Act, 2015 which came into effect from 23rd October

2015. Some more effective steps, if taken, will bring us closer to better efficiency

which is absolutely essential, looked at from the angle of foreign investors as also

in the interest of domestic field.

The intention behind the framing of the Amending Act, 2015 is really

commendable. It is imperative that implementation of the changes made in the

Amending Act, 2015 are made affective in its letter and spirit which would

incidentally help in ensuring the most important facets of arbitration, i.e.

expediency and economy.

Some of the important features of the Amending Act, 2015 (read with the

Commercial Courts Act) which would go a long way in helping the litigants are:

- Commercial Courts would be set up in each District Court (or in High Courts

which have original civil jurisdiction);

- Commercial Courts would be set up in Districts Courts by the State

Governments, for purposes of domestic arbitrations (in consultation with the

Chief Justice of the respective High Court) or by the High Court itself where

the High Court has original civil jurisdiction;

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- Commercial Courts would be set up in the High Court only, for the purpose

of international arbitration to the exclusion of District Court; and

- The insertion of proviso to S. 2(2) of the Act has extended the applicability

of Ss. 9, 27, 37(1)(a) and 37(3) even in cases of international commercial

arbitration even where the seat of arbitration is not in India.

Changes made in S. 9

- Under the 1996 Act, interim measures could be ordered by the Courts

without any rider as to the period within which arbitration process shall be

set in motion. This delayed the arbitration matter for months together.

Under the Amending Act, 2015, an interim measure can be obtained from

the Court and is effective only if the arbitration commences within 90 days

from the date of such order;

- Once an arbitral tribunal is constituted, Courts will not normally interfere for

grant of interim measures. It will only be within the jurisdiction of the arbitral

tribunal to grant interim measure;

- Interim measures ordered by the arbitral tribunal shall be deemed to be the

orders of the Civil Court and can be implemented in the same manner; and

- Arbitral tribunals can grant interim measures till such time the award is

enforced.

Appointment of Arbitrators in a Time-Bound Manner

- In the event of the failure of the parties to the contract to appoint

arbitrator(s), it would be for the Court to appoint the same. Under the 1996

Act, there was no obligation on the part of the Court to make the

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appointment within any defined period of time. Under the Amending Act,

2015, an endeavour shall be made by the Court to make the appointment of

the arbitrator within a period of 60 days from the date of service of notice on

the opposite party. It is submitted that the period of 60 days may or may not

be adhered to by the Court since it is only the endeavour which has to be

made. This is a loose end which needs to be plugged. It is suggested that a

period of 90 days for finally disposing of the matter be fixed, rather than

making “endeavour”, which is not binding;

- A decision appointing arbitrator(s) is final and no appeal, including Letters

Patent Appeal, shall lie against such an order;

- Before appointment is made effective, arbitrator(s) has to declare, in writing,

that he possesses the requisite qualification as provided in the agreement

and that he shall continue to remain independent and impartial; and

- A person shall not be eligible for appointment as arbitrator if he comes

within the purview of Seventh Schedule, e.g. where the person concerned

is an employee or consultant of or has a controlling interest in or personal

relation with any party or its affiliate or advocate.

It is submitted that neither in the 1996 Act nor in the Amending Act, 2015, any time

limit has been provided within which a party entrusted with the task of appointing

arbitrator is required to make the appointment. This is another loose end which

needs to be plugged. Under the 1996 Act, by virtue of decision in Datar

Switchgear Ltd. vs. Tata Finance Ltd., (2000) 8 SCC 151, if a party failed to make

the appointment within 30 days and the opposite party approached the Chief

Justice or his designate, then the appointment of arbitrator was made by the Chief

Justice or his designate. It is suggested that an outer limit for appointing an

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arbitrator by the party be fixed as 30 days as provided for situation covered by S.

11(4) and 11(5).

Fixation of Fee of Arbitral Tribunal

Under the Amending Act, 2015, there is no provision for fixing fee of arbitral

tribunal in case of ad hoc arbitrations. Obviously, therefore, the old menace of

charging exorbitant fee shall continue. This is another loose end which needs to

be plugged.

Under the Amending Act, 2015, a new sub-sec. (14) to S. 11 has been added,

according to which the High Court has been vested with the authority to frame

such rules as may be necessary, after taking into consideration the rates specified

in the Fourth Schedule. However, it needs to be noted that the scale of fee set out

in the Fourth Schedule is only a „model‟ fee structure, which may be binding when

the Court constitutes the arbitral tribunal. It also needs to be noted that a

maximum fee of Rs. 30 lacs has been fixed even if the claims run into hundreds of

crores of rupees. This is another loophole which needs to be plugged. It is

suggested that fee of arbitral tribunal, whether appointed by the Court or by the

parties, needs to be determined on a sliding scale, with a cap of Rs. 50 Lacs.

Procedure in Arbitrations

- While deciding claims, arbitral tribunal shall have to adjudicate upon

counter-claims as well;

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- The arbitral tribunal shall, as far as possible, hold oral hearing for

presentation of evidence or for oral argument on day to day basis and shall

not grant adjournments unless sufficient cause is shown. The tribunal has

been vested with the power to impose exemplary costs on the party seeking

adjournment without sufficient cause;

- Arbitration proceedings have to be disposed of within a period of 12 months

from the date of appointment of the arbitral tribunal;

- In case, despite best efforts, an arbitral tribunal can be granted extension of

time by the parties subject to an outer limit of 6 months;

- Even after a lapse of 18 months if the arbitral proceedings cannot finally be

disposed of, the Court has been vested with the power to extend time. No

time limit has been provided within which the arbitral tribunal has to finally

dispose of the matter nor any time limit has been provided upto which the

Court can grant extension of time. This is yet another loophole which needs

to be plugged. It is suggested that a cap needs to be put on the period upto

which Court can grant extension of time. It would meet the ends of justice if

outer-most limit of one year is fixed for making the award over and above

the original period of 12 months allowed under the Amending Act, 2015

together with a period of 6 months extended by the parties. Thus, all in all, a

period of 2½ years should, under all circumstances, be sufficient to finally

dispose of the arbitral matter. If the arbitral tribunal fails to complete the job

within the said period of 2½ years, then it should not be entitled to any fee.

Fee already realized by the arbitral tribunal should be ordered for being

refunded to the parties;

- In the event of the failure of an arbitral tribunal to finally dispose of the

matter within the extended time of 6 months by the parties, the Court has

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been vested with the power of ordering reduction of the fee by 5% at the

most for every month on account of laches on the part of the arbitral

tribunal. In case the Court comes to the conclusion that the period does not

deserve to be extended, it shall terminate the mandate of the arbitral

tribunal. In the event of one or more arbitrator or the entire tribunal being

substituted by the Court, the substituted tribunal shall continue from the

stage at which the case was at the time of substitution;

- Application seeking extension of time shall be moved by the parties (and

not the arbitral tribunal) and the application shall be disposed of by the

Court within 60 days from the date of service of notice on the opposite

party. This is yet another loophole which needs to be plugged. A cap of 45

days from the date of service of notice on the opposite party would be

sufficient to meet the ends of justice, more so when there is not much to be

debated in the Court;

- Provision for summary proceedings has been made under which the arbitral

matter finally comes to a close within a period of 6 months. Under this

provision, no oral hearing would be called unless so requested by the

tribunal or by all the parties to the contract; and

- Arbitral tribunal shall be entitled to extra fee if they dispose off the case in a

period of 6 months from the date of entering upon the reference. The extra

fee shall be such which may be agreed upon between the tribunal and the

parties.

The aforesaid provisions introduced in S. 29(A) and (B) in the Amending Act,

2015, were a long-felt need of the trading community because nobody seemed to

be in a hurry to dispose the arbitral matter expeditiously. When the legislature

passed The Arbitration Act, 1940, it was hoped that henceforth arbitration matters

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would be quickly disposed off. But in reality, it was not so. This prompted the

Supreme Court in Ramji Dayawals & Sons (P) Ltd. vs. Invest Import, (1981) 1

SCC 80, to make the following observations:

“Protected, time-consuming exasperating and atrociously expensive Court trials impelled an alternative mode of resolution of disputes between the parties: arbitrate - don‟t litigate. Arbitration being a mode of resolution of disputes by a judge of the choice of the parties was considered preferable to adjudication of disputes by Court. If expeditious, less expensive resolution of disputes by a judge of the choice of the parties was the consummation devoutly to be wished through arbitration, experience shows and this case illustrates that the hope is wholly belied because in the words of Edmond Davis, J. in Price v Milner [1966] 1 WLR 1235] these may be disastrous proceedings.”

In India, it is commonly seen that the parties and/or the arbitrators and/or the

lawyers do not take the arbitral matter seriously. Unfortunately, we have not

developed professional arbitration culture in India. For example, lawyers more

often than not treat arbitration matters as an extra source of income and are

agreeable for dates only on weekends/ holidays or late evenings. Nobody is

prepared to hold a session of more than 2 hours.

In international arbitration held outside India, arbitration meetings are held for 10-

15 days at a stretch and these meetings are held from 10 am to 4.30 pm, with one

hour break for lunch. Needless to say that each minute is profitably utilized. There

is no gup-shup nor idle talk. This is the type of arbitration culture that is required in

India. This is probably why the legislature in section 24(1) of the Amending Act,

2015, has provided for day-to-day hearing, if so warranted by the situation.

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True that a person likely to be appointed as arbitrator would give undertaking that

he would be in a position to make and publish the award within 12 months, but this

is possible only if such a person has a limited number of arbitration matters in

hand. It can thus, be said very safely that to achieve this objective, a cap of 6

cases has to be put for any arbitrator to handle at one time, which obviously would

include such matters in respect of which award has not been published. This is yet

another loophole which needs to be plugged.

The practice of charging fee on per day basis on the part of the members of the

arbitral tribunal must be stopped forthwith. This step, if taken, would automatically

result in long number of hours for each arbitration meeting. Even adjournments,

which are frequently experienced, would be drastically reduced. This is a very big

loophole which needs to be plugged. It is suggested that the members of the

arbitral tribunal may be paid at the time of publication of award or on culmination of

proceedings.

Award of interest

Under the 1996 Act, a provision was made in section 31(7)(b) that “unless the

award otherwise directs, carry interest at the rate of eighteen per centum per

annum from the date of the award to the date of payment.” In view of the fast

changing economic conditions in our country, the Courts, as a matter of rule,

allowed interest @ 12% p.a. or even less. This situation has been overcome by

the legislature in the Amending Act, 2015 when it provided in section 31(7)(b) that

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“unless the award otherwise directs carry interest at the rate of two per cent higher

than the current rate of interest prevalent on the date of the award, from the date

of the award to the date of payment.”

Award of costs

In earlier days, the arbitral award would usually carry the dictum that both the

parties shall bear their own cost. Under the Amending Act, 2015, the legislature

has explained as to what „costs‟ would include. Still, it has been left to the

discretion of the Court or arbitral tribunal to award costs. This is a loophole which

needs to be plugged. The question is: why a successful party should be deprived

of the costs actually and genuinely incurred by it? The Supreme Court in Salem

Advocate Bar Association vs. Union of India, (2005) 6 SCC 344, observed:

“Judicial notice can be taken of the fact that many unscrupulous parties take advantage of the fact that either the costs are not awarded or nominal costs are awarded against the unsuccessful party. Unfortunately, it has become a practice to direct parties to bear their own costs……costs have to be those which are reasonably incurred by a successful party except in those cases where the Court in its discretion may direct otherwise by recording reasons therefor. The costs have to be actual reasonable costs including the cost of the time spent by the successful party, the transportation and lodging, if any, or any other incidental costs besides the payment of the Court-fee, typing and other costs in relation to the litigation.”

It is submitted that in case actual and reasonable costs are allowed by the Court

and/or arbitral tribunal, it will go a long way in discouraging frivolous proceedings

and inequitable conduct.

Challenge to award

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Section 34(2)(b) has been made more specific and is in consonance with the

Associate Builder’s judgment.

- Before filing objections to the award in the Court a notice has to be given to

the opposite party;

- An arbitration award shall only be stayed by a specific order of the Court.

The Court can grant stay of award on such terms which may be decided by

it including deposit of amount awarded or part thereof;

- The Court shall dispose of the objections to the award within a period of

one year from the date of service of notice on the opposite party; and

- The party filing application for setting aside award shall file an affidavit

endorsing compliance with the stipulation that a notice of filing of objections

has been served on the opposite party.

The explanation to sub-section (2)(b) of the 1996 Act has been substituted

inasmuch as an attempt has been made in the Amending Act, 2015 to narrow

down the definition of the expression “Public Policy of India” to mean that the

award is in contravention with the fundamental policy of the laws of the land, or the

award is in conflict with the most basic notion of morality or justice. Explanation (2)

has been added to the Amending Act, 2015 to provide that while deciding the

objections to the award, the Court will not review the merits of the dispute.

The newly introduced sub-section 2A to section 34 provides that „An arbitral award

arising out of arbitrations other than international commercial arbitrations, may

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also be set aside by the Court, if the Court finds that the award is vitiated by patent

illegally on the face of the award.” A proviso has been added to this newly

introduced sub-section which puts restriction on the Court in setting aside an

award on the ground of “erroneous application of law or re-appreciation of

evidence.”

There are innumerable judgments from various High Courts and the Supreme

Court that the Court shall not set aside the award by re-appreciating and re-

appraising the evidence led before the arbitral tribunal, but in actual practice the

Courts go into these aspects of the matter under section 34 and, in some cases,

under section 37 as well. Now the legislature has categorically provided in section

34(2A) that an award shall not be set aside merely on the ground of re-

appreciation of evidence. It is submitted that the objections touching the merits of

the award or re-appreciation of evidence being beyond the purview of the Courts,

a considerable period of time of the Courts shall be saved in the process.

The Amending Act, 2015, has sought to narrow down the interpretation of the

expression “Public Policy of India” to bring it more in tune with the judgment of the

Supreme Court in Renusagar Power Co. vs. General Electric Co., 1994 Supp (1)

SCC 644. This was necessitated because of Supreme Court having broadened

the scope of the definition of „Public Policy of India‟ in its judgment cited as ONGC

Ltd. vs Saw Pipes Ltd., (2003) 5 SCC 705.

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Reported judgments clearly indicate that after the Supreme Court had given

broader meaning to the “Public Policy of India”, the Courts had started setting

aside awards citing “Public Policy of India”, which was not the avowed object of

the Act. Another loophole in setting aside the awards on one pretext or the other

has now been done away with. Now the Courts have no power to set aside the

award which is based on erroneous application of law or on the ground of re-

appreciation of evidence.

A perusal of various judgments of the High Courts as well as of the Supreme Court

will clearly reveal that it used to take number of years for the Courts to dispose

objections against the award. Hopefully, it may not happen in times to come

because of introduction of section 34(b) in the Amending Act, 2015 which inter alia

stated that objections to the award “shall be disposed of expeditiously and in any

event, within a period of one year from the date on which the notice referred to in

sub-section (5) is served upon the other party.” Thus, the outer limit for disposal of

objections to the award has been pegged at one year from the date of service of

notice on the opposite party.

Enforcement of Award

Section 36 of the 1996 Act has been deleted and instead a comprehensive

provision has been made in the Amending Act, 2015.

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Under the 1996 Act where the time for making an application to set aside the

arbitral award under section 34 had expired, or such application having been

made, it has been refused; the award could be enforced as if it were a decree of

the Court. Full use of the provision was made by the party against whom the

arbitral award had been made. There are innumerable cases where the

unsuccessful party in arbitration filed flimsy objections against the award and

enjoyed automatic stay for years together. This was a gross abuse of the process

of law.

The aforesaid loophole in section 36 of the 1996 Act has been sought to be

plugged in the Amending Act, 2015. Now S. 36(2) provides that where an

application for setting aside the award has been filed, the filing of such an

application shall not, by itself, render the award unenforceable, unless the Court

grants an order of stay. In case the Court decides to stay the operation of the

award, it can do so only for reasons to be recorded in writing. Therefore, now the

unsuccessful party shall have to show sufficient cause as to why stay should be

granted. The Supreme Court in National Aluminum Co. Ltd. vs. Pressteel &

Fabrication Pvt. Ltd., (2004) 1 SCC 544, recommended such a course of action.

Even while granting stay, the Court can impose conditions as it deems fit on the

party objecting to the award. The Court has also to consider the provisions with

regard to the grant of stay of a money decree under the provisions of CPC. This

obviously leads to the conclusion that even while granting stay, the Court can

direct the deposit of the decreetal amount in the Court or it can order disbursement

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of the amount to the beneficiary of the award on furnishing of adequate security to

the satisfaction of the Court.

In British India, it was a common saying that it is easy to get a decree in India but

very difficult to execute it. Hopefully, such a situation will not arise under the

Amending Act, 2015.

Appeal Against Judgment of Court of First Instance

Section 37 deals with appeals. Provisions contained in section 37(1) (a) and (b) of

1996 Act have been substituted by the Amending Act, 2015. Now an appeal would

lie against orders passed by the judicial authority under S. 8. No such appeal was

provided under the 1996 Act. In Part II of the 1996 Act, an appeal had been

provided for orders passed under S. 45. However, no such corresponding

provision existed with regard to S. 8. Parity has now been brought about in Parts I

and II by adding clause (a) to sub-section by the Amendment. A notable omission

is that no time limit has been fixed within which the Appellate Court should dispose

off the appeal.

PROVISIONS WHICH CALL FOR INCORPORATION

A. Time Limit for Disposing of Applications:

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In earlier days, Courts did not favour provisions which limited their jurisdiction to

extend time. In Salem Advocate Bar Association vs. Union of India, (2005) 6 SCC

344, it was stated:

“The amendment made in Section 148 affects the power of the Court to enlarge time that may have been fixed or granted by the Court for the doing of any act prescribed or allowed by the code. The amendment provides that the period shall not exceed 30 days in total. Before amendment, there was no such restriction of time. Whether the Court has no inherent power to extend the time beyond 30 days in the question. We have no doubt that the upper limit fixed in Section 148 cannot take away the inherent power of the Court to pass orders as may be necessary for the ends of justice or to prevent abuse of process of the Court. The rigid operation of the section would lead to absurdity. Section 151 has, therefore, to be allowed to operate fully. Extension beyond maximum of 30 days, thus, can be permitted if the act could not be performed within 30 days for reasons beyond the control of the party.”

It is highly doubtful whether the time limit of 60 days provided in S. 11(13), S. 29-

A(9) or 1 year provided in S. 34(6) would be implemented without the active

cooperation of the Courts. The enforcement of time limits, as stated hereinbefore,

is all the more doubtful in view of the language employed in Ss. 11(13) and 29-A

(9) which state:

S.11(13) “An application … shall be disposed of ….. as expeditiously as

possible, and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.”

S.29-A(9) “An application …… shall be disposed of … as expeditiously

as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.”

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The stipulation now is about „endeavour‟ which the Courts are required to make.

„Endeavour‟ may or may not succeed. There is no restriction on Courts to observe

any time limit. But newly introduced sub-section (6) of S. 34 does cast a restriction

on the Courts to strictly observe the time limit. S. 34(6) states:

“An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date of which the notice referred to in sub-section (5) is served upon the other party.”

While the newly introduced provisions under Ss. 11(13) and 29-A(9) are not even

directory let alone mandatory, the new provision contained in S. 34 (6) is couched

in an emphatic language meant for being strictly observed. A word of caution is

necessary. Whether the emphatic language stipulated in section 34(6) would be

„mandatory‟ would be dependent upon the interpretation which the Courts shall

place on this stipulation.

It is suggested that the language contained in S. 11(13) and S. 29-A(9) be made

more stringent so as to make it mandatory on the Courts to stick to the time limit

within which the applications have to be disposed of. Similarly, it is suggested that

a fixed time limit be imposed for disposal of appeals by the Appellate Court

hearing appeals against orders passed on applications under Sections 8, 9, 16, 17

and 34.

B. Fee of Arbitral Tribunal

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A bare reading of S. 11(14) and of the Fourth Schedule would reveal that it is only

a „Model Fee‟ structure applicable in such cases where the appointment of the

arbitral tribunal is made by the Court. In any case, in case of ad hoc arbitrations,

where the parties are involved in fixing the fee, the „Model Fee‟ structure has no

applicability.

The „Model fee‟ is a fixed amount of fee depending upon the amount of claims and

counter claims. In ad hoc arbitrations, the arbitrators have devised unique way of

deriving pecuniary financial benefit by charging “Reading fee” and “Award fee”, in

addition to daily fee. It is most respectfully submitted that hardly any arbitrator

even opens the brief what to talk of reading it. It is only the lawyers of the parties

who make the members of arbitral tribunal go through the documents. Even

otherwise, it is impossible to go through a large number of voluminous documents

and then to comprehend the same in the absence of assistance from the counsel

of the parties.

While fixing daily fee, the arbitrators invariably ask the parties as to how much is

the amount of claims and counter claims. Why should anybody be interested in the

total amount of claims of both the parties? Daily fee of arbitrators has absolutely

nothing to do with the total amount of claims and counter claims. Another aspect

which deserves mention is that the arbitrators charge daily fee for each hearing

both for the claims and counter claims, whether or not both are discussed in the

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said hearing. Consequently, for one hearing, the parties have to bear charges for

two hearings. How far is this justified?

Lately, a practice to charge administrative fee @ 10% of the daily fee by the

Presiding Arbitrator, has been introduced. This is extremely exorbitant and

unpalatable. For instance, if the daily fee of the Presiding Arbitrator is Rs. 2 Lacs,

the administrative fee would be Rs. 20,000/-. If such a Presiding Arbitrator keeps

himself busy for 15 days in a month, he would be charging Rs. 3 lacs by way of

administrative charges. There is no justification for such a charge.

It is suggested that fleecing of exorbitant fee by arbitrators need to be stopped

forthwith by legislative enactment forthwith before it is too late. There seems to be

a conspicuous omission on the part of the legislature in putting a cap on fee of

arbitrators. The fee stipulated in Fourth Schedule also does not speak of any

payment over and above what is payable as per the said Schedule.

C. Time-limit for arbitral award

A long-felt need to bind the arbitrators to make the award within a reasonable

period of time has, after all, seen the light of the day. It is a known fact that in

many cases arbitrators took years together for making the award – the chief

reason being that a number of favored arbitrators had their hands full and had no

dates to give to the parties. Ultimate loser was the unsuccessful party who had to

bear the burden of interest for the pendentelite period.

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S. 29-A (1) has been introduced in the Amending Act, 2015 which states that:

“The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference.”

Date of entering upon reference shall be the date when the appointment of the

arbitrators had been made.

It is a matter of common knowledge that parties seek a minimum of 2 months each

to submit their respective pleadings. Submission of rejoinder takes another 3-4

weeks. All in all, a period of 5 months is gone. Thereafter, 2-3 weeks notice is

given to the parties to make appearance. Taking into consideration that it would

take the arbitrators a period of about two months to write the award, the arbitrators

are left with just 5 months to record evidence and hear arguments of the parties.

This seems to be too inadequate.

It is suggested that a period of 18 months be substituted for the 12 months period

now provided under S. 29-A(1). It is also suggested that the provision regarding 6

months extension of time by the parties be dispensed with in view of experience

gained under S. 28 of the Arbitration Act, 1940.

No cap has been put in the amending Act on the number of extensions and total

period of time upto which Courts can grant the same. This is a big loophole and is

likely to delay arbitration proceedings. It is suggested that in addition to proposed

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period of 18 months for arbitrators to make award, another period of 12 months,

which should be the outer-most limit, may be allowed to be granted by the Courts.

D. Section 29-A (1) and Section 18 – Time limit of Arbitration

Section 29-A (1) stipulates that award shall be made within a period of twelve

months from the date of entering upon reference. This provision could run foul with

the provision of S.18 which inter alia states that: “Parties shall be treated with

equality and each party shall be given full opportunity to present his case.” The

word “full” means 100%, i.e. no party can be prevented from stating his case in the

manner he likes. As against this S. 33 (1)(a) of the English Arbitration Act, 1996,

states that the Arbitral Tribunal “act fairly and impartially as between the parties,

giving each party a reasonable opportunity of putting his case and dealing with

that of his opponent”. As against “full opportunity” in the Amending Act, it is

“reasonable opportunity” in the English Arbitration Act, 1996. To overcome this

lacuna, it is suggested that the word “full” in S. 18 be substituted by the word

“reasonable” or “adequate”.

E. Fixing time limit for disposal of appeals (Section 37)

The Legislature should also have fixed a time limit for disposal of the appeal under

Section 37 of the Act, akin to the time limit for disposal of application under

Section 34 of the Act. It is a matter of common knowledge that normally the appeal

is admitted for final hearing in the High Court and the parties are consigned to the

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never-ending queue of pending cases. Thus, keeping in view the practical

difficulties, it is imperative that the Legislature has to step in and lay down the

procedure right from the inception of the proceedings till the final disposal of the

matter at the level of the highest Court. This would eradicate many unhealthy,

unethical and time-wasting tactics adopted by the parties and, unfortunately, in

some cases by the arbitral tribunals as well.

F. Section 12 Read with Section 29 – Busy Arbitrators

Under the Amending Act, 2015, a new provision, i.e. section 12(1)(b), has been

introduced which calls upon the person who is tipped for being appointed as an

arbitrator to declare that he can “devote sufficient time to the arbitration and in

particular his ability to complete the entire arbitration within a period of twelve

months.” Despite this stipulation, it is doubtful if anybody would decline the offer.

He would certainly have in mind that he can avail of 6 months extension by

consent of the parties followed by extension by the Court. Thus, the very purpose

of S. 12(1)(b) would be defeated. To overcome this lacuna, a provision needs to

be inserted that no arbitrator shall have more than 6 arbitrations at any given point

of time.

G. Age Limit for Arbitrator

As person advances in age, his faculties start fading. This is a fact proven by

medical science. Certainly a person at the age of 80 years cannot be as alert and

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agile as a man of 60 years. Persons above 80 years of age being slow in action

and fading memory would take much more time to digest the facts and law as

compared to persons of lower age. Obviously, with super senior citizens acting as

arbitrators, there are good chances of injustice being done in arbitral matters. It is

suggested that all persons above 80 years of age as on the date of appointment

should not be eligible for being appointed as arbitrators.

H. Section 29-A (4) and (b) – Reduction of Fee/ Removal of Arbitrators

After the elapse of 18 months (which includes a period of 6 months granted by the

parties), the Court has been vested with the power to reduce fee of arbitrators.

Section 29-A(6) empowers the Court to remove an arbitrator and substitute one

while granting extension of time. It seems that these provisions are unfair for the

following reasons:

(i) Time-limit of 60 days provided for Court to decide an application under

S. 29-A is certainly insufficient to determine whether the arbitrator is

responsible for the delay and thus, liable for punishment by way of

reduction of fee or removal;

(ii) The Amendment does not provide that the Court has to hear the

arbitrator before punishing him – it could thus, lead to situations where

the arbitrators would be impelled to challenge the order under Art. 227

of the Constitution;

(iii) The provision is most likely to be used by an unethical party to rid itself

of an inconvenient arbitrator;

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(iv) It is demeaning and humiliating.

It is suggested that S. 29-A(4) needs to be substituted by the provision that the

mandate of the arbitral tribunal shall stand terminated 1½ years after the tribunal

enters upon reference. However, if an unethical party does not consent to extend

the period of extension by 6 months, the Court needs to be vested with the power

to extend time and in no other case.

Unfortunately, no importance is given towards expeditious disposal of cases and

to the true spirit of arbitration. In case the arbitrators, parties and their counsel

show utmost seriousness, there is no reason why arbitration cannot be completed

within a period of one year.

To cut short on time, it is suggested that the claimant, while invoking arbitration

clause, should start preparing the statement of claims and must submit the same

in the very first hearing of the arbitral tribunal. A maximum period of one month

should be allowed to the opposite party to file Statement of Defence. Rejoinder

should not be a matter of course. It should be rarely allowed. Thus, a period of

over 10 months would be available to the tribunal to make the award. It is

respectfully submitted that though the suggestion may look to be harsh but it is

practicable.

I. Enforcement of Awards

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Under the 1996 Act, the moment objections are filed against the award, the

execution of the award stands automatically stayed. However, in the Amending

Act, 2015, section 36(2) provides that filing of objections against the award “shall

not by itself render that award unenforceable, unless the Court grants an order of

stay of the operation of the said arbitral award…”. This provision has finally given

effect to the observations of the Supreme Court in National Aluminium Co. Ltd. vs.

Pressteel and Fabrications (P) Ltd., (2004) 1 SCC 540, wherein it was stated:

“…The automatic suspension of the execution of the award the moment an application challenging the said award is filed under section 34 of the Act leaving no discretion in the Court to put the parties on terms, in our opinion, defeats the very objective of the alternative dispute resolution system to which arbitration belongs. We do not find that there is a recommendation made by the Ministry concerned to Parliament to amend section 34 with a power to empower Civil Court to pass suitable interim orders in such cases.”

Despite plethora of case law mandating enforcement of money decrees, Courts

are very often lenient in granting stay, especially where the affected party is the

Government or a Government undertaking. Law should be applied equally to

Government and non-Government parties. It is, therefore, suggested that it should

be made mandatory for a party to deposit at least 50% of the decreetal amount in

Court while challenging the award.

J. Need for Imposition of Exemplary Costs

The costs awarded in litigation in India are rarely actual costs. If actual costs are

granted, unnecessary challenges to awards can be disclosed to a very large

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extent. The Supreme Court in Salem Advocate Bar Association T. N. vs. Union of

India, (2005) 6 SCC 344 had opined that imposition of exemplary costs would

deter frivolous litigation.

It is suggested that a provision similar to S. 31-A of the Amending Act, 2015

(which empowers arbitrators to impose actual costs) should be added to Ss. 34

and 37 empowering Courts to impose actual costs against the unsuccessful party

challenging the arbitral awards.

K. Institutional Arbitrations and Fast Track Arbitrations

Ad hoc arbitrations are no longer favoured in Western countries. There is no

reason why institutional arbitrations cannot be the norm in India. The biggest

advantages of institutional arbitration are: (i) Appointment of arbitrators is from

panel of experts who have no inclination towards either party to the dispute, and

(ii) arbitration is governed by a set of rules, whereas ad hoc arbitrations are

governed by the whims and fancies of the arbitrators. The Ministry of Law and

Justice, Government of India has also favoured institutional arbitrations and has

stated:

“Institutional arbitration, throughout the world, is required as the primary mode of resolution of international commercial disputes. Institutional arbitration is an arbitration administered by an arbitral institution. The parties may stipulate in the arbitration agreement to refer an arbitral dispute between them for resolution to a particular institution. When parties have not named any institution or when they fail to reach an agreement on the name of any institution, the Chief Justice instead of choosing an arbitrator

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may choose an institute and the said institute shall refer the matter to one or more arbitrators from their panel.”

[Proposed Amendment to the Arbitration and Conciliation Act, 1996 – A

Consultation Paper]

A Standing Committee of Parliament had also favoured institutional arbitrations in

India and recommended the following:

“Since the Committee feels that the accountability of arbitrators has to be ensured, the Committee recommends that persons who would like to render their services as arbitrators should be registered as a member of the professional institution or an association such as the Bar Council of India, the Institute of Chartered Accountants, The Engineer‟s Association etc. The arbitrators shall be governed by the rules of the institution. This will ensure accountability of the arbitrators.”

[Recommendation of the Department Related Parliamentary Standing Committee

on Personnel, Public Grievances, Law and Justice, 9th Report on Arbitration and

Conciliation (Amendment) Bill, 2003 (presented to the Rajya Sabha on 4th August,

2005)

It is high time that our Legislature makes it mandatory that institutional arbitration

in India shall be the norm and not an exception for achieving the objective of fair

and inexpensive adjudication of disputes. This will encourage foreign investors to

come to India for trade. Earlier the suggestions mooted are implemented, better it

would be.