A Brief History of Arbitration Law in IndiaArbitration has a long history in India. In ancient times, people often voluntarily submitted their disputes to a group of wise men of a community—called the panchayat—for a binding resolution. Modern arbitration law in India was created by the Bengal Regulations in 1772, during the British rule. The Bengal Regulations provided for reference by a court to arbitration, with the consent of the parties, in lawsuits for accounts, partnership deeds, and breach of contract, amongst others. Until 1996, the law governing arbitration in India consisted mainly of three statutes: (i) the 1937 Arbitration (Protocol and Convention) Act, (ii) the 1940 Indian Arbitration Act, and (iii) the 1961 Foreign Awards (Recognition and Enforcement) Act. The 1940 Act was the general law governing arbitration in India along the lines of the English Arbitration Act of 1934, and both the 1937 and the 1961 Acts were designed to enforce foreign arbitral awards (the 1961 Act implemented the New York Convention of 1958). The government enacted the Arbitration and Conciliation Act, 1996 (the 1996 Act) in an effort to modernize the outdated 1940 Act. The 1996 Act is a comprehensive piece of legislation modeled on the lines of the UNCITRAL Model Law. This Act repealed all the three previous statutes (the 1937 Act, the 1961 Act and the 1940 Act). Its primary purpose was to encourage arbitration as a cost-effective and quick mechanism for the settlement of commercial disputes. The 1996 Act covers both domestic arbitration and international commercial arbitration. The Arbitration Act, 1940 The Arbitration Act, 1940, dealt with only domestic arbitration. Under the 1940 Act, intervention of the court was required in all the three stages of arbitration, i.e. prior to the reference of the dispute to the arbitral tribunal, in the duration of the proceedings before the arbitral tribunal, and after the award was passed by the arbitral tribunal. Before an arbitral tribunal took cognizance of a dispute, court intervention was required to set the arbitration proceedings in motion. The existence of an agreement and of a dispute was required to be proved. During the course of the proceedings, the intervention of the court was necessary for the extension of time for making an award. Finally, before the award could be enforced, it was required to be made the rule of the court. While the 1940 Act was perceived to be a good piece of legislation in its actual operation and implementation by all concerned - the parties, arbitrators, lawyers and the courts, it proved to be ineffective and was widely felt to have become outdated. 1 the 1996 Act applies both to international and domestic arbitrations. there was no widespread debate and understanding of the changes before such an important legislative change was enacted. The Law Commission of India prepared a report on the experience of the 1996 Act and suggested a number of amendments. The Government of India enacted the 1996 Act by an ordinance. attract foreign investments and reassure international investors in the reliability of the Indian legal system to provide an expeditious dispute resolution mechanism. The 1996 Act contains two unusual features that differed from the UNCITRAL Model Law. the 1996 Act goes beyond the UNICITRAL Model Law in the area of minimizing judicial intervention. The 1996 Act has two significant parts – Part I provides for any arbitration conducted in India and enforcement of awards there under. and then extended its life by another ordinance. Any arbitration conducted in India or enforcement of award there under (whether domestic or international) is governed by Part I. In the meantime. is governed by Part II of the 1996 Act. Part II provides for enforcement of foreign awards. while enforcement of any foreign award to which the New York Convention or the Geneva Convention applies. The Committee submitted its report in January 2005. Unfortunately. Government of India. several provisions of the 1996 Act were brought before the courts. It has not been taken up for consideration. before Parliament eventually passed it without reference to a Parliamentary Committee—a standard practice for important enactments. First. In the absence of case laws and general understanding of the Act in the context of international commercial arbitration. the Government of India introduced the Arbitration and Conciliation (Amendment) Bill. which interpreted the provisions in the usual manner. in Parliament for amending the 1996 Act. 1996 The 1996 Act. which repealed the 1940 Act. while the UNICITRAL Model Law was designed to apply only to international commercial arbitrations. 2003. was enacted to provide an effective and expeditious dispute resolution framework. the Ministry of Law and Justice. 2 . to study in depth the implications of the recommendations of the Law Commission of India contained in its 176th Report and the Arbitration and Conciliation (Amendment) Bill. 2003. Based on the recommendations of the Commission. The changes brought about by the 1996 Act were so drastic that the entire case law built up over the previous fifty-six years on arbitration was rendered superfluous. constituted a Committee popularly known as the ‗Justice Saraf Committee on Arbitration‘. Second.The Arbitration and Conciliation Act. which would inspire confidence in the Indian dispute resolution system. though gradually creeping in the arbitration system in India. These advantages are not available to the parties in ad hoc arbitration. Other problems include getting trained staff and library facilities for ready reference. has yet to make an impact. on the other hand. the procedural rules are already established by the institution. in institutional arbitration. some of which are discussed below: • In ad hoc arbitration. There are a number of advantages of institutional arbitration over ad hoc arbitration in India. As a result. The ground realities can be ascertained from the study and analysis of the various aspects in conducting arbitration.Institutional Arbitration and Ad Hoc Arbitration Arbitrations conducted in India are mostly ad hoc. which are discussed in the following paragraphs. • In institutional arbitration. Before the award is finalized and given to the parties. When a dispute is in existence. The concept of institutional arbitration. the institution will have ready facilities to conduct arbitration. trained secretarial/administrative staff. • In ad hoc arbitration. the arbitral institutions maintain a panel of arbitrators along with their profile. as well as library facilities. infrastructure facilities for conducting arbitration pose a problem and parties are often compelled to resort to hiring facilities of expensive hotels. • In institutional arbitration. Types of Arbitration Practice . the experienced panel scrutinizes it. One of the objectives of the 1996 Act was to achieve the twin goals of cheap and quick resolution of disputes. but current ground realities indicate that these goals are yet to be achieved. This facility is not available in ad hoc 3 . which increase the cost of arbitration. The advantages of institutional arbitration over ad hoc arbitration in India need no emphasis and the wide prevalence of ad hoc arbitration has its ramifications in affecting speedy and costeffectiveness of the arbitration process. This requires co-operation between the parties and involves a lot of time. the possibilities of the court setting aside the award is minimal. many arbitral institutions such as the International Chamber of Commerce (ICC) have an experienced committee to scrutinize the arbitral awards. because the scrutiny removes possible legal/technical flaws and defects in the award. the procedures have to be agreed upon by the parties and the arbitrator. Such arbitral institutions also provide for specialized arbitrators. it is difficult to expect cooperation among the parties. The parties can choose the arbitrators from the panel. The fees are also fixed and regulated under rules of the institution.WORKING OF ARBITRATION IN INDIA Arbitration in India is still evolving. There will be professionalism in conducting arbitration. In institutional arbitration. In contrast. Formulating rules is therefore no cause for concern. however. Inspite of the numerous advantages of institutional arbitration over ad hoc arbitration.arbitration. Arbitration Practice Across Industries Generally speaking. it is easy to maintain confidentiality of the proceedings. the Federation of Indian Chamber of Commerce and Industry (FICCI). there is no marked difference in arbitration practice from one industry to another in India. substitutes can be easily located and the procedure for arbitration remains the same. • In the event the arbitrator becomes incapable of continuing as arbitrator in an institutional arbitration. since there is considerable scope for parties to be aggrieved by the functioning of ad hoc tribunals. An empirical survey will reveal that a considerable extent of litigation in the lower courts deals with challenges to awards given by ad hoc arbitration tribunals. • In institutional arbitration. In ad hoc arbitration. and the International Centre for Alternate Dispute Resolution (ICADR). This tendency is counter productive. In ad hoc arbitration. where one party (whose nominee arbitrator is incapacitated) has to re-appoint the new arbitrator. as the secretarial and administrative staffs are subject to the discipline of the institution. and they may be removed from the panel for not conducting the arbitration properly. where the manner of settling disputes has substantially evolved separately across various industry sectors. there is currently an overwhelming tendency in India to resort to ad hoc arbitration mechanisms. the arbitrators are governed by the rules of the institution. and a result of the globalization of the Indian economy. where the likelihood of court interference is higher. it is difficult to expect professionalism from the secretarial staff. Some of the arbitral institutions in India are the Chambers of Commerce (organized by either region or trade). The exceptions to this rule. are the construction industry and the IT industry. 4 . This advantage is not available in an ad hoc arbitration. the arbitrators are not subject to such institutional removal sanctions. unlike in Europe. • In institutional arbitration. This requires co-operation of the parties and can be time consuming. the Indian Council of Arbitration (ICA). An important secondary effect of this development is that arbitration has also streamlined a sector-specific approach to cater to the technicalities and specific requirements of such specific sectors. arbitration in construction and IT industry disputes are characterized by certain peculiarities quite distinct from other industries. Due to the technical complexities and long term nature of relationships between parties in these industries. The growth in the infrastructure and the IT industry in India is a recent development. These clauses are included. The rights and obligations. these contracts provide for remedial measures to meet various contingencies. privies and privileges of the respective parties are formally written.18 Ad hoc arbitration is still very popular in the construction industry. railways and public enterprises. Central and state governments. According to a survey conducted in 2001 by the Construction Industry Development Council. 1.000 million. Arbitration in the construction industry Construction/infrastructure is one of the fastest growing sectors of the Indian economy. there are exemption clauses or exclusion clauses that make the decision of an authority named in the agreement. To meet these situations. the ‗excepted matters‘ or ‗exclusion clauses. 1. there has been a great deal of construction activity both in the public and private sectors. Arbitration in the construction industry has a unique feature.1 Standard Contracts of Central and State Governments and Industry Giants Over the last four decades in India. have their own standard terms of contract. as well as private corporations. Despite these extensive and time-tested contracts. catering to their individual needs. situations arise for which immediate decisions on a point of difference or dispute is required to avoid costly delays.1. although an arbitration clause may include within its purview all the possible disputes relating to the transaction. and not subject to arbitration. state instrumentalities. final and binding on the parties. Military Engineer Services (MES). Often. 5 . which is quite distinct from the general arbitration practice seen in other industries. because in construction contracts. generally covering either all disputes arising from the contract or all disputes save a few ‗excepted matters. disputes and differences often arise between the parties. The central and state governments and instrumentalities of the states. arbitration clauses are provided in the contract themselves. and millions of dollars are spent in construction related disputes. In these situations.2 Unique Features of Arbitration in the Construction Industry In the standard forms adopted by the government departments like the Central Public Works Department (CPWD).‘ make the decision of a particular authority final and binding on both the parties. the amount of capital blocked in construction sector disputes was over INR 540. and public and private companies have all been entering into contracts with builders as part of their commercial activities. In Food Corporation of India vs. accepted by both the parties at the start of the work as neutral persons and having thorough knowledge of the project will not normally be changed by any such tribunal. the Supreme Court held that ‗excepted matters‘ do not require any further adjudication. The DRB members are kept abreast of the developments and progress in the job. the decision last rendered shall be treated as final and binding upon both the parties. The proceedings of the DRB can be brought as evidence before an arbitral tribunal or other judicial forum. The DRB process helps the parties to solve problems before they escalate into major disputes. The DRB meets with the employer and the contractor representatives during regular site visits. It would 1 1999 AIR 488 6 . in case one of the parties is not satisfied with such decision. The DRB is a panel of three experienced. The DRB is organized before construction begins and meets periodically at the job site.3 Dispute Review Board in the Construction Industry The concept of a Dispute Review Board (DRB) is quite common in the construction industry. and made familiar with the project procedures and the participants. and encourages the resolution of disputes at the job level. Such clauses also provide a right of appeal to a superior officer within a particular time. and impose a liability on the officer to give a decision within a stipulated time. and are provided with the contract plans and specifications. The clause further provides reference of the matter to arbitration. the same shall not be re-agitated in arbitration. However.There has been a series of judicial decisions. ‗Exception‘ can also operate differently. Recommendations made by the three experts known for their reputation. The board members could also be presented as witnesses. respected and impartial reviewers. which have held that if a particular matter has been excluded from the purview of arbitration incorporating excepted matter clause/exclusion clause. the provision expressly provides that if none of the parties opt for the choice to refer the matter to arbitration within the time limit thus prescribed. Sreekanth1 Transport. 1. and concurrence by the parties to the decision of the named adjudicator is obviously presumed by reason of unequivocal acceptance of the terms of the contract of the parties. There may be certain clauses in the contract which empower either the engineer-in-charge or the consultant to take an on-the-spot decision regarding points of difference between the builder and the employer. since the agreement itself provides a named adjudicator. or if the officer does not render a decision. 1221 disputes were settled by the DRBs. This is particularly true in ad hoc arbitration.4 Specialized Arbitral Institutions in the Construction Industry In India. India (CIDC). This type of institution-administered arbitration has clear advantages over ad hoc arbitrations for construction companies. and almost no case goes up to arbitration. In relation to this aspect. due acceptance is given to the system world wide. but decided by the arbitral tribunal with the consent of the 7 . Arbitration in the Information Technology (IT) Industry IT disputes differ from disputes in other industries mostly in their substance. Therefore. 2. speedy and cost-efficient manner. in cooperation with the Singapore International Arbitration Centre (SIAC). public sector undertakings and government departments that have construction contracts. IT projects tend to be complex and characterized by a network of responsibilities shared between parties that are dedicated to carry through a technology-related. 3. On this consideration. long term relationship. Thus. which is a departure from the intent of the 1996 Act. the ICA conducted an in-depth seminar on Alternate Dispute Redressal methods for the IT sector in India‘s major cyber cities like Bangalore and Hyderabad for the purpose of creating an expert pool of arbitrators specialized in cyber laws. only 31 were taken by the parties to the arbitral tribunal. 1. which is now considered to be an apex arbitral institution in the country. and that during that year. the Construction Industry Development Council. has started the process of identifying and training specialized arbitrators for disputes connected with the IT industry. the construction industry felt the need to introduce new measures to resolve disputes in a fair. The Indian Council of Arbitration (ICA). There is a growing recognition that arbitration is becoming a costly affair. set up an arbitration centre in India called the Construction Industry Arbitration Council (CIAC). and out of 1038 recommendations made. Arbitration Practice by Industry Size There is no marked difference in the arbitration practice based upon the size of the industry. where the fees of the arbitrators are not regulated.therefore become difficult to go against the tribunal. Due to such requirements. IT disputes typically center on contractual or intellectual property (IP) law issues. substantial sums amounting to several crores of Indian rupees (INR) are locked up in contractual disputes in the construction sector alone. The statistics up to the year 2001 indicate that there were 818 projects with DRBs valued at US $ 41 billion. and constituting a valid arbitral tribunal. under Section 11(6) of the 1996 Act. and the reduced span of time makes it more cost-effective. if they so desire. construction disputes in time-bound projects. if the agreement provides for a mechanism to deal with the failure of the other party to appoint the arbitrator. A large company is assumed to have better funds for incurring these expenses. Section 24(1) also permits the parties to do away with the requirement of an oral hearing. Further. 2003. wherein filing of pleadings and evidence will be on fast track basis. charge high arbitration fees. As a premier Indian organization for institutionalized arbitration. the larger the parties. Fast Track Arbitrations Establishment of fast track arbitrations is a recent trend aimed at achieving timely results. Although this cannot be a conclusion that applies to all large corporations. destruction of evidence. The 1996 Act has built-in provisions for fast track arbitration. a party does not have to approach a court for appointment of an arbitrator. the venues and court fees are decided by arbitrators with the consent of the parties. Thus. and franchises where urgent decisions are required. parties may request the arbitral tribunal to settle disputes within a fixed timeframe of three to six months or any other time agreed upon by the parties. Theoretically. Thus. Some of the arbitral tribunals. the parties are given complete autonomy in choosing the fastest possible method of appointing an arbitrator. Fast track arbitration is a time-bound arbitration. The Arbitration and Conciliation (Amendment) Act. Section 11(2) of the 1996 Act provides that the parties are free to agree on a procedure for appointing an arbitrator. The reason could be that in ad hoc arbitration. Section 13(1) confers the freedom on parties to choose the fastest way to challenge an arbitral award. More importantly. Fast track arbitration is required in a number of disputes such as infringement of patents/trademarks. Under the rules of the ICA. the arbitral tribunal shall continue proceedings and pass an award. marketing of products in violation of patent/trademark laws. replies and counter claims. Section 13(4) expedites arbitral proceedings by providing that if a challenge to an arbitral proceeding is not successful. licensing contracts. so as to pronounce an award within six months. before commencement of the arbitration proceedings. it can reasonably be argued that only such corporations can afford costly arbitration. consisting of high profile arbitrators such as retired Supreme Court and High Court judges. the costlier will be the arbitration. which do not allow any laxity or scope for extensions of time and the resultant delays. proposes to introduce a single-member fast track arbitral tribunal.parties. 4. Section 23(3) of the 1996 Act enables parties to fix time limits for filing of claims. thereby lowering the costs and difficulties associated with traditional arbitration. with stricter rules of procedure. 8 . in some cases at least. it is an emerging trend amongst large corporations involved in high-stake commercial disputes—including government undertakings—to hold ad hoc arbitrations in five-star hotels and other costly venues. and will also specify the procedures to be followed by such fast track arbitral tribunals. the Indian Council of Arbitration (ICA) has pioneered the concept of fast track arbitration in India. which fixed the time period for completion of arbitration proceedings. the parties usually approach arbitration with a similar mindset as for litigation. who are mostly retired judges. reveals that it failed to achieve its desired objectives. as and when sought by the parties. A. Moreover. usually treat the arbitration proceedings in the same manner as traditional litigations. So. did not live up to the aspirations of the people of India in general. Although the scope of judicial intervention under the 1996 Act has been curtailed to a great extent. the ground realities show that arbitration in India.A CRITICAL ANALYSIS OF THE SUCCESS OF ARBITRATION UNDER THE 1996 ACT The 1996 Act was brought on the statute book as the earlier law. Cost-Effectiveness Arbitration is generally considered cheaper over traditional litigation. have widened the scope of judicial review. the 1940 Act. on the presumption that the root cause of delays in arbitration is judicial interference. particularly 9 . increasing the timeframe for resolution of the disputes. with the result that awards invariably end up in courts. However. and are willing to give long and frequent adjournments. and is one of the reasons for parties to resort to it. The time frame for completion of the arbitration proceedings was done away with. The main purpose of the Act was to provide a speedy and efficacious dispute resolution mechanism to the existing judicial system. Parties also abuse the existing provision that allows ‗automatic stay‘ of the execution of the awards on mere filing of an application for challenge of the awards. as practiced under the 1996 Act. This is a departure from the 1940 Act. the arbitral system that evolved under it led to its failure. resulting in the admission of large number of cases that ought to be dismissed at the first instance. and the business community in particular. B. But an analysis of the arbitration system. Even though the 1996 Act was enacted to plug the loopholes of 1940 Act. and that granting greater autonomy to the arbitrators would solve the problem. However. Though the 1996 Act confers greater autonomy on arbitrators and insulates them from judicial interference. marred with inordinate delays and backlog of cases. the reality is quite different. it does not fix any time period for completion of proceedings. Speedy Justice Arbitration in India is rampant with delays that hamper the efficient dispensation of dispute resolution. Arbitrators. courts through judicial interpretation. the objective of arbitration as a mechanism for speedy resolution of disputes gets obstructed due to obtrusive delays. the arbitrators‘ fees varies from INR 5. 2. For example. separate fees may be charged for drafting of the suits. plaints/petitions. This is a crucial factor which weighs against developing a cost-effective quality arbitration practice in India. They also charge a nominal non-refundable registration fee on the basis of the claim amount. The arbitrator‘s fees are decided by the arbitrator with the consent of the parties.000. depending upon the professional standing of the arbitrator and the size of the claim. court fees are fixed and are very nominal. court fees do not generally exceed ten per cent of the claim amount of the suit. the hierarchy of the competent court deciding the case and the location of the concerned court. The number of hearings required and the cost of the arbitral venue vary widely. The Cost of Litigation The cost involved in court proceedings is limited to lawyers‘ fees and court fees.000. most institutional arbitration bodies in India.00 per arbitrator for claim amounts upto INR 100.000.000. It may vary from a meager INR 500. and professional fees for the representatives of the parties (which may include lawyers and expert witnesses). The fee varies approximately from INR 1000. The Cost of Arbitration Arbitration costs incurred by the parties may include the arbitrator‘s fees. administrative/clerical expenses.000. 10 . In contrast. the stakes involved.000. There is no regulated fee structure for arbitrators in an ad hoc arbitration.00 for claim amounts upto INR 10.00 to INR 160. The only recurring expenditure involved is the professional fees paid to the lawyers.00 for claim amounts upto INR 100.00.000.000.ad hoc arbitration.00.000. In case of writ petitions or first appeals.00 to INR 315. High Courts across India have their own schedule. A cost analysis on arbitration vis-à-vis litigation will throw light on the higher cost of arbitration over litigation.750. Lawyers are generally paid on a per appearance basis. based on claim amounts. have their own schedules for arbitrators‘ fees and administrative fees.000.000.00.00 to INR 62. For the CIAC.00 for claim amounts upto INR 10.00 per hearing for an arbitrator. counter affidavits/written statements and interim applications.00 to INR 260. In case of suits. while administrative fees vary from INR 15.00 per appearance before a district court in a small town to INR 200000.000. The following paragraphs analyze the cost of arbitration and litigation.000.00 per appearance by senior advocates in the Supreme Court of India.00 to INR 50. which are calculated ad valorem on the claim amount or the value of the suit. such as the Indian Council of Arbitration (ICA) or the Construction Industry Arbitration Council (CIAC). The sum of these fees may differ significantly between ad hoc and institutional arbitrations.000.00. and administrative fees varies from INR 2.000. 1. is becoming quite expensive vis-à-vis traditional litigation. the ICA‘s arbitrators‘ fees vary from INR 30. There is a great variation in the professional fees of the lawyers depending upon the seniority and reputation of the lawyer. which fixes the rates for court fees. rent for arbitration venues. In addition.000. The old Arbitration Act of 1940 did not give any express authority to the arbitral tribunal. if not more. If the respondent is the State or a public sector undertaking. the claimant files his rejoinder. Parties pay a fee to the arbitrators for each hearing and thus spend a substantial amount of money. However. and the grounds on which an award can be challenged are very limited. Under the 1940 Act. This is because lawyers‘ fees are the only major expenditure in litigation. In contrast. The prevalent procedure before the arbitrators is as follows . the grounds for challenging an award before the courts were broad and quite liberal. the number of adjournments is higher as it takes more time for these parties in internally finalizing pleadings and documents that are to be filed before the arbitral tribunal. Second. Similarity in the trend of Arbitration Practice under the 1996 Act with that of the 1940 Act The 1940 and the 1996 Acts differ in some important ways in terms of the Arbitration system they establish and the processes that they require. and lawyers usually charge the same.3. even though they take substantial amounts of time to resolve. as per litigation hearing. This is particularly true for ad hoc arbitrations. First. the 1940 Act required that an arbitral award be filed in a court before it could become binding upon the parties. Perhaps more importantly. the authority of the arbitral tribunal varies. and such power is traditionally enjoyed by the courts. at the third hearing. Under the 1996 Act. however. Sometimes. the arbitral tribunal does not have any power to grant any interim relief in arbitration proceedings under the 1940 Act. an arbitral 11 . the opposing parties are directed to file their reply and documents. if admitted. However. Cost of Arbitration vis-à-vis Cost of Litigation Although arbitration is considered to be a cheaper mechanism for the settlement of disputes. which increases the number of arbitration sittings for deciding such interim applications. Furthermore. under the 1996 Act. the arbitral tribunal has the power to decide its own jurisdiction. there is limited scope for interference by courts. This is in addition to the other costs involved. at the second hearing. The award is no longer required to be filed before the court to make it a rule of law. The first occasion for considering any question of jurisdiction does not normally arise until the arbitral tribunal has issued at least six adjournments. C. In addition. there are usually at least two or three adjournments. law suits. which was initially determined by the courts under the 1940 Act. In the 1996 Act. the situation has changed with the 1996 Act. there is a growing concern in India that arbitration has become a costly affair due to the high fee of the arbitrators and liberal adjournments. are certainly cheaper. courts played a substantial role in the arbitration process. applications for interim directions are also filed by either party. Arbitration is more cost-effective than litigation only if the number of arbitration proceedings is limited. the role of judges is more limited in the 1996 Act. At each of these stages. the claimant is directed to file his claim statement and documents in support thereof.at the first hearing. under the 1940 Act. though statutorily restricted. 2003. and the courts have been very liberal in entertaining petitions. 1908. Moreover.tribunal has powers to give interim relief. These include the following: • The tendency for parties to ask for—and for arbitral tribunals to grant—frequent adjournments. continues unabated. However. There is an amendment proposed by the Law Ministry in the Arbitration and Conciliation (Amendment) Bill. While some large corporations and bodies welcomed the decision. and appeals at an interlocutory stage. there are still some notable arbitration practices of the 1940 Act. the intervention of the courts. D. Despite these differences. the scope of appeal against an award under the 1996 Act has become broader particularly after the decision of the ONGC case. in 12 . which are incorporated in Chapter II. Enforcement of Awards One of the factors for determining arbitration as an effective legal institution is the efficiency and efficacy of its award enforcement regime. invited substantial criticism from the legal circles and fraternity. However. which has widened the ambit of ‗public policy. although technically constrained by the 1996 Act. Enforcement of foreign awards in India is governed by the 1958 New York Convention and the 1927 Geneva Convention. which stipulate the recognition and enforcement of arbitral awards. has not subsided.‘ Violation of public policy of India is one of the grounds for challenge of an award under the 1996 Act. with gradual judicial interpretation. The ONGC case. which has not been taken up for consideration by the Parliament. respectively. An award resulting from an international commercial arbitration is enforced according to the international treaties and conventions. and could be executed like a decree in a suit under the provisions of the Civil Procedure Code. • Section 34 of the 1996 Act makes a mere challenge to an award operate as an automatic stay even without an order of the court. revisions. thereby encouraging many parties to file petitions under that provision to delay the execution proceedings. because of which the fruits of an existing Alternate Dispute Resolution (ADR) mechanism is neither timely nor effective. undoubtedly. because under the 1940 Act. • The 1996 Act narrows down the scope of grounds available for challenging awards as compared to the earlier 1940 Act. which continue even under the new 1996 Act. most of the members of the legal profession disagreed and stated that the 1996 Act will in effect become ‗old wine in new bottle‘. it was easy to set aside awards only on the basis of public policy. there was no such automatic stay. While elaborating on this problem. one cannot help but notice the manner in which appeals and revisions are filed at interlocutory stages against every decision or order taken or made by the arbitral tribunal. which is not even contemplated under the Act. an arbitral award is enforceable as a decree of the court. Under Section 36 of the 1996 Act. Part I and Part II. The rate of enforcement of arbitral awards is high. Both cases involved Indian parties and Indian law. The provisions of enforcement are the same under the 1940 Act and the 1996 Act. Under the 1996 Act. The decree holder must file the award. Any party interested in foreign awards must apply in writing to a court having jurisdiction over the subject matter of the award.the 1996 Act. the Supreme Court of India declined to enforce or recognize awards in only two out of twenty four cases relating to enforcement of arbitral awards (Section 36 of the 1996 Act) that came before it. the agreement on which it is based and evidence to establish that the award comes under the category of foreign award under the 1996 Act. 13 . the applicant‘s ability to make out a prima facie case and most importantly the irreparable harm that would be caused in the event the measure is not granted. (A)Types of interim measures: Provisional remedies and interim relief come in many forms.. and (c) Reliefs which are interim or conservatory in nature and are required to preserve the subject matter of the dispute or the rights of a party thereto or to maintain the status quo and to prevent one party from doing a particular act or from bringing about a change in circumstance pending final determination of the dispute by the arbitrators. The principle governing the grant of interim measures is the use of judicial discretion by a Court while taking into consideration questions pertaining to balance of convenience. depending on the parties involved and context of the dispute. custody or sale of the property in dispute.g. During the pendency of a proceeding in a court. a party may make an application for grant of an interim measure(s) and the court may grant such measure(s) as permitted under the procedural rules governing the powers of the court or those that it may derive through its inherent powers. making of an attachment order or any other interim order for securing the amount in dispute or for the preservation. pre-award attachments etc. (b) Reliefs which are evidentiary in nature and are required to protect any document or property as evidence for the arbitration. By definition. Under Indian Law. 14 .INTERIM MEASURES: CONCEPT Interim Measures are granted during the pendency of adjudication of a dispute and are usually in the form of injunctions. These reliefs can be provided by granting an interim injunction. appointing a receiver. inspection of property in possession with third parties or compelling the attendance of a witness. Interim reliefs may be broadly classified into the following categories: (a) Reliefs which are procedural in nature e. specific performance. Rule 1 and 2. court‘s have both the express power of granting interim measures under Order 39 Rule 1 and Rule 2 of the Civil Procedure Code as well as their inherent power under section 151 to grant an interim measure other than that specified under Order 39. ‗interim reliefs‘ are temporary or interim in nature and are granted in advance of the final adjudication of the dispute by the arbitral tribunal. courts not only have the power to grant interim measures but this power.a party could commence e proceedings in a Court by moving an application under Section 20 for appointment of an arbitrator and simultaneously it could move an application for interim relief under the Second Schedule read with Section 41(b) of the old Act .4 However. under arbitration procedural statutes and rules. Comparison of Interim relief provisions in the Old Act and New act: Under the Arbitration Ac t . 1940. Prayers for interim measures of protection may include: . keeping in mind the new changes in legislative thinking. if goods are of perishable nature . courts have. Under the New Ac t 1996. However it is not possible to completely do away with the role of the court as the nature of interim injunctions make it necessary to go to a court of law and it is possible that the very purpose of seeking an interim measure may be defeated. in most cases. Section 9 empowers the court to order a party to take interim measure e or protection when an application is made. to the court for interim measure of protection. (C) Interim measures under Court: A plain reading of the section 9 indicates that a party may before or during the arbitral proceedings or at any time after making of the arbitral award but before it is enforced in accordance with Section 36.(B) Interim measures under Arbitral Proceedings: Arbitration is a forum for adjudication that is a departure away from courts and in fact. court interference has been considered a bane to its development.Appointment of a guardian for a minor or per son of unsound mind .Securing the amount of claims . 15 . Besides this Section 17 gives power to the Arbitral Tribunal to order interim measure unless the agreement prohibits such power . it has been realised that a total curtailment of the court‘s power to grant interim measures during the pendency of arbitration cannot be envisaged and it is necessary to allow the court to grant interim measures. Though. reduced their interference in arbitration proceedings.Allowing inspection or interim injunction or appointment of receiver - Any other relief‘s as the court may in its discretion may deem proper considering the circumstances of the case. is wider than that of a Tribunal. m ay apply.Preservation or interim custody or sale of goods. The Bombay High Court. but any such exclusion of jurisdiction is only in matters. Ordinarily if the arbitrator is seized of the matter the interim relief should not be entertained and the parties should be advised to approach the arbitrator for interim relief unless and until the nature of relief intended to be sought falls outside the jurisdiction of the arbitrator or beyond terms of the agreement or reference of disputes. vs. therefore.(A) Sec. which are not otherwise specifically provided for. which has no intention to appoint the Arbitral Tribunal. it is debarred from invoking the jurisdiction of the court under Section 9 of the Act. in Arun Kapur v.2. The provision cannot be availed by a party for restraining the other party from approaching the Arbitral Tribunal. Vidharbha Irrigation Dev. Corpn3. Continental Glass Ltd. 5: Section 5 of the Act no doubt forbids any intervention by any judicial authority. There is. vs. however. (B) Circumstances preventing court from granting interim relief: The Bombay High Court in Nimbus Television & Sports Vs D G Doordarshan opined that if the interim relief prayed for u/s 9 would amount to granting final relief frustrating the arbitration proceedings such a relief cannot be granted by the court. the very object of adjudication of 2 1998 (45) DRJ 368 (2006) 200 CTR Bom 555 4 AIR 2002 Delhi 420 3 16 . no merit in the contention that Section 5 would exclude the jurisdiction of the Civil Court otherwise competent to entertain applications and pass orders in regard to the stipulated matters under Section 9 of the Act. In Navbharat Ferro Alloys Ltd. held that the benefit of section 9 cannot be availed of by a party. Vikram Kapoor and others4. the sale of materials cannot be ordered as an interim relief. the Delhi High Court held that when the claim is for money. However. after considering the decision of an English court in Channel Tunnel group Ltd. The Delhi High Court. it is submitted that an order of interim measure of protection can be passed by a competent court for sale of property where such property forming the subject matter of the dispute is perishable in nature. in Anil Construction vs. Section 9 of the Act is. an exception to the general rule contained in Section 5 in as much as the former specifically empowers the Civil Court concerned to pass suitable orders on the subject and in relation to matters stipulated therein. 9 as an exception to Sec. Otherwise. Balfour Beatty construction Limited observed as follows: ―It is cardinal rule that if the party invokes preliminary alternative remedy before the Arbitral Tribunal. (3) When application under Section 9 is filed before the commencement of arbitral proceedings. (2) Only a party to an arbitration agreement is qualified to make an application under Section 9. Remedy available to a party under section 17 is an additional remedy and is not in substitution of section 9. an interim order must relate to the protection of subject .disputes by arbitration would stand frustrated. Judicial Precedents: Let us now refer to some important judgments for understanding the effectiveness or limited effectiveness of Section 17. G. 1932 is not attracted to an application under Section 9 of the Act. Recently.‖ (C) Is parallel application u/s 9 as well as u/s 17 possible? The Court can exercise power under section 9 to grant interim measures even during the pendency of application under section 17 before the Arbitral Tribunal. 17 of 1996 Ac t . A party should always be discouraged to knock the door of the Court particularly when the arbitrator is seized of all the relevant or even ancillary disputes. no power is conferred upon the Arbitral Tribunal to enforce its order nor does it provide for judicial enforcement thereof .matter of dispute and the order may be addressed only to a party to the arbitration. Even under S. 17 of the 1996 Act the power of the Arbitrator is a limited one. 17 of the 1996 Act . in the case of Firm Ashok Traders vs. No power to Arbitral tribunal to enforce its orders u/s17 Supreme court of Indi a in the case of M D Arm y WHO Vs Sumangal services (P) Lt d6 observed that even under S. 5 6 AIR 2004 SC 1433 AIR 2004 SC 1344 17 . a two-member bench of the Supreme Court. the applicant must be able to satisfy the Court that arbitral proceedings are positively going to commence within a reasonable time.D Saluja5 held that (1) An application under Section 9 is neither a suit nor an application for enforcing a right arising from a contract – Prima facie the bar enacted by Section 69 of the Partnership Act. Even under S. A person not a party to an arbitration agreement cannot make an application under Section 9. There should be proximity between the application and the arbitral proceedings. It cannot be addressed to other parties. It cannot issue any direction which would go beyond the reference or t he arbitration agreement . In arbitration. it is typically difficult to obtain such relief expeditiously. Non-enforceable nature of interim measures granted by an arbitral tribunal is an accepted disadvantage that an Arbitral Tribunal faces when granting interim relief and without any coercive enforcement powers 2. Provisions contained in section 9 regarding the availability of interim relief even before the arbitration proceedings commence had been misused by parties. 18 . because the Arbitral Tribunal has not yet been constituted. Parties had used underhand means to destroy evidence which they felt could go against them during the Arbitral Proceedings or had attempted to concoct witnesses and tamper with evidence. The Tribunal‘s jurisdiction to grant interim measures may be limited by the governing law of the arbitration. The Law Commission in its 176th report. 4. 3. parties did not take initiative to have an arbitral tribunal constituted.28 If a party seeks to delay the opposing party‘s request for an injunction or attachment. 5. so that the Tribunal could get more powers to deal with such situations. there is an immediate need to change the provisions of the existing section. in the past.DRAWBACKS EXPERIENCED IN THE PROVISIONS FOR INTERIM RELIEF The Law Commission of India in its 176th report published in 2001 noted a number of loopholes in the provisions for interim relief in the 1996 Act which were exploited by the parties after the Act came into force. When interim measures of protection are needed against one of the parties to the arbitration. It so happened that after obtaining an interim order from the court. issues arise as to the availability of such remedies when they are sought at early stages in an arbitral proceeding. observed that very often. As a result. This allowed them to reap the benefits of the interim order without any time limit. Thus. (A) Difficulties in granting interim measures in Arbitration: 1. in the possession of a third party. most parties in need of this immediate assistance seek the aid of national courts for this emergency relief. that party can slow the process considerably by taking a long time to select an arbitrator. A common difficulty in arbitration occurs when resolution of the dispute involves a third party against whom no order of the Tribunal shall be valid for the reason of lack of jurisdiction. Parties to arbitration also face difficulties when one party seeks interim relief at an early stage of the proceeding. the next question they would be required to answer is whether the said relief can be granted quickly and effectively as the situation demands and herein unless the applicant is able to demonstrate that the delay will cause irreparable hardship or injury.9 & 17. if it is not complied with by the party. in which case the court may intervene in order to meet the ends of justice.CONCLUSION It is submitted that lacunas in the provisions of interim measures should be set right by legislative initiation. Thus. But there exists a doubt about its enforceability. one should keep in mind whether the arbitral tribunal should be given the power to grant interim relief or not . it should be allowed to knock the doors of the Court. the court should. then one need not approach the court for such relief . Courts can be approached only if interim relief as prayed is refused u/s 37(2)b) but not for enforcing the interim relief granted by the arbitrator . While drafting arbitration clause. in all other circumstances. Only when a party is not able to get relief from the Arbitral Tribunal. refrain from interfering and direct the parties to seek relief from the Arbitrators. If arbitration clause provides for such power to arbitral Tribunal . One aspect in all the statutes /rules is common: they follow the policy of minimal role to be played by Courts. thereby ascertaining whether in a given case the interim relief claimed by the applicant can be granted by the Arbitral Tribunal. If held in the affirmative. This will be in line with the objectives of the Act to minimise the intervention of the Court in arbitral proceedings. 2003 has not been made into law because the Legislature feels that there are many other important issues like enforcement of interim orders and Costs of proceedings which need to be taken care of before making these Amendments to Ss. Six years have passed but the Amendment Bill. It is high time that Law makers should amend the Act to make interim award enforceable like that of Final award. The system of dual agency for providing relief needs to be abolished or otherwise some enforcement mechanism be provided for enforcement of the interim measures of protections ordered by the Arbitral Tribunal. one of the ways by which courts may determine whether they are required to interfere in granting an interim measure is by keeping in mind the powers exercisable by the Tribunal. It would be better that application of interim measures is put to the Arbitral Tribunals as they are seized of the subject matter under dispute. 19 .
Report "A Brief History of Arbitration Law in India"