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ARBITRATION IN INDIA: AN OVERVIEW

By Sumeet Kachwaha and Dharmendra Rautray, Kachwaha & Partners

Background to arbitration legislation: The Indian law of arbitration is contained in the Arbitration and Conciliation Act 1996 (Act ! The Act is based on the "#$% &'(I TRA) *odel )aw on International (ommercial Arbitration and the &'(ITRA) Arbitration Rules "#+,! The Statement of -b.ects and Reasons of the Act reco/nises that India0s economic reforms will become effecti1e only if the nation0s dis2ute resolution 2ro1isions are in tune with international re/ime! The Statement of -b.ects and Reasons set f orth the main ob.ecti1es of the Act as follows3 4i to com2rehensi1ely co1er international and commercial arbitration and conciliation as also domestic arbitration and conciliation5 ii to ma6e 2r o1ision for an ar bitral 2rocedure which is fair , efficient and ca2able of meetin/ the needs of the s2ecific arbitration5 iii to 2ro1ide that the arbitral tribunal /i1es reasons for its arbitral award5 i1 to ensur e that the arbitral tribunal remains within the limits of its .urisdiction5 1 to minimise the su2er1isory role of courts in the arbitral 2rocess5 1i to 2ermit an arbitral tribunal to use mediation, conciliation or other 2rocedures durin/ the arbitral 2roceedin/s to encoura/e settlement of dis2utes5
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1ii to 2ro1ide that e1ery final arbitral award is enforced in the same manner as if it were a decree of the court5
The authors are 2artners of th e law firm, Kachwaha & Partners! 7ull te8t of the Act can be 1iewed at3 htt2399www!6a2le/al!com9statutes9inde8!h tml !

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1iii to 2ro1ide that a settlement a/reement reached by the 2arties as a result of conciliation 2roceedin/s will ha1e the same status and effect as an arbitral award on a/reed terms on the substance of the dis2ute rendered by an arbitral tribunal5 and i8 to 2ro1ide that, for 2ur2oses of enfor cement of forei/n awards, e1er y arbitral award made in a country to which one of the two Inter national (on1entions relatin/ to forei/n arbitral awards to which India is a 2ar ty a22lies, will be treated as a forei/n award!: Scheme of the Act: The Act is a com2osite 2iece of le/islation! It 2ro1ides for domestic arbitration5 international commercial arbitration5 enforcement of forei/n award and conciliation ( the latter bein/ based on the &'(ITRA) (onciliation Rules of "#$; ! The more si/nif icant 2ro1isions of the Act are to be found in Part I and Part II thereof! Part I contains the 2ro1isions for domestic and international commercial arbitration in India! All arbitration conducted in India would be /o1erned by Part I, irres2ecti1e of the nationalities of the 2arties! Part II 2ro1ides for enforcement of forei/n awards! Part I is more com2rehensi1e and contains e8tensi1e 2ro1isions based on the *odel )aw! It 2ro1ides inter alia for arbitrability of dis2utes5 non<inter1ention by courts5 com2osition of the arbitral tribunal5 .urisdiction of arbitral tribunal5 conduct of the arbitration 2roceedin/s5 recourse a/ainst ar bitral awards and enforcement! Part II on the other hand, is lar/ely restricted to enfor cement of forei/n awards /o1er ned by the 'ew =or6 (on1ention or the >ene1a (on1ention! Part II is thus, (by its 1er y nature not a com2lete code! This led to .udicial ?

inno1ation by the Su2reme (ourt in the case of Bhatia I nternational v. Bulk Trading . @ere the Indian courts .urisdiction was in1o6ed by a 2arty see6in/ interim measures of 2rotection in relation to an arbitr ation under the I(( Rules to be conducted in Paris! The 2ro1ision for interim measure (section # was to be found in Part I alone (which a22lies only to domestic arbitration !

@ence the (ourt was faced with a situation that there was no proprio vigore le/al 2ro1ision under which it could /rant interim measur e of 2rotection! (reati1ely inter2retin/ the Act, the Su2reme (ourt held that the 4/eneral 2ro1isions: of Part I would a22ly also to of fshore arbitrations, unless the 2arties e82ressly or im2liedly e8clude a22licability of the same! @ence by .udicial inno1ation, the Su2reme (ourt e8tended a22licability of the /eneral 2r o1isions of Par t I to off< shore arbitr ations as well! It may be stated that this was 2r emised on the assum2tion that the Indian (ourt would otherwise ha1e .urisdiction in relation to the matter (in the international sense ! This became clear in a subseAuent decision of the Su2r eme (ourt in Shreejee Traco ( I !vt. "td. v. !aperline

International Inc. @ere the (ourt0 s assistance was sou/ht for a22ointin/ an arbitrator in an off< # shore ar bitration! The 2ower of a22ointment by court e8ists under Section "" of Part I of the Act! The (ourt declined to e8ercise .urisdiction! It found that the arbitration was to be conducted in 'ew =or6 and that the law /o1ernin/ the arbitration 2roceedin/s would be the law of seat of the arbitration! @ence, the e8tension of Part I 2ro1isions to forei/n arbitrations sanctified by Bhatia could not be resorted to in e1ery case! The Indian (our ts would ha1e to first determine if it has .ur isdiction, in the international sense!
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Subject matter of arbitration: Any commercial matter includin/ an action in tort if it ar ises out of or relates to a contract can be ref erred to arbitr ation! @owe1er, 2ublic 2olicy would not 2ermit matrimonial matters, criminal 2roceedin/s, insol1ency matters anti<com2etition matters or commercial court matter s to be ref erred to ar bitration! Dm2loyment contracts also cannot be referred to ar bitration but director < com2any dis2utes are arbitrable (as there is no master ser1ant relationshi2 here matters co1ered by statutory reliefs throu/h statutory tribunals would be non<arbitrable! Role of the court: -ne of the fundamental features of the Act is that the role of the court has been minimised! Accordin/ly, it is 2ro1ided that any matter before a .udicial authority containin/ an arbitration a/reement shall be referred to arbitration (Section $ 2ro1ided the non < a22licant ob.ects no later than submittin/ its statement of defense on merits ! 7urther, no .udicial authority shall interfere, e8ce2t as 2r o1ided for under the Act (Section % ! In relation to arbitration 2roceedin/s, 2arties can a22roach the (ourt only for two 2ur2oses3 (a for any interim measure of 2r otection or in.unction or for any a22ointment of recei1er etc! 5 or
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(b for the a22ointment of an arbitrator in the e1ent a 2ar ty fails to a22oint an arbitrator or if two a22ointed arbitrator s f ail to a/ree u2on the third arbitrator! In such an e1ent, in the case of domestic arbitration, the (hief Eustice of a @i/h (our t may a22oint an arbitrator, and in the case of international commercial arbitration, the (hief Eustice of the Su2reme (ourt of India may

(omed (hemicals )td! 1! (!'! Ramchand ?;;$ ("C S(A)D "+! This can be e1en 2 rior to the institution of arbitration 2roceed in/s, 2ro1ided that it is clear that the a22licant intends to ta6e the dis2ute to arbitration!
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carry out the a22ointment ! A court of law can also be a22roached if there is any contro1er sy as

to whether an arbitr ator has been unable to 2erform his functions or has failed to act without undue delay or there is a dis2ute on the same! I n such an e1ent, the court may decide to terminate the mandate of the arbitrator and a22oint a substitute arbitrator! Jurisdiction of the arbitrator: The Act 2ro1ides that the arbitral tribunal may rule on its own .urisdiction, includin/ any ob.ections with res2ect to the e8istence or 1alidity of the arbitration a/reement! The arbitration a/reement shall be deemed to be inde2endent of the contract containin/ the arbitration clause, and in1alidity of the contract shall not render the arbitration a/reement 1oid! @ence, the arbitrators shall ha1e .urisdiction e1en if the contract in which the arbitration a/reement is contained is 1itiated by f raud and9or any other le/al infirmity! 7urther , any ob.ection as to .ur isdiction of the arbitrator s should be raised by as 2arty at the first instance, i!e!, either 2r ior to or alon/ with the filin/ of the statement of defence! I f the 2lea of .urisdiction is re.ected, the arbitrators can 2roceed with the arbitration and ma6e the arbitral award! Any 2arty a//rie1ed by such an award may a22ly for ha1in/ it set aside under Section CB of the Act! @ence, the scheme is that, in the first instance, the ob.ections are to be ta6en u2 by the ar bitral tribunal and in the e1ent of an ad1erse order, it is o2en to the a//rie1ed 2arty to challen/e the award! In SB! ' Co. v. !atel (ngg "td. the Su2reme (ourt of India (in a decision rendered by a Bench of Se1en Eud/es held that the natur e of 2ower conferred on the (ourt under Section "" of the Act is .udicial (and not administrati1e in nature! Accordin/ly, if 2arties a22roach the (our t f or a22ointment of arbitral tribunal (under Section "" and the (hief Eustice 2ronounces that he has
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.ur isdiction to a22oint an ar bitrator or that there is an arbitration a/reement between the 2arties or that there is a li1e and subsistin/ dis2ute to be r eferred to arbitration and the (ourt constitutes the Tribunal as en1isa/ed, this would be bindin/ and cannot be re<a/itated by the 2arties before the arbitral tribunal! In S.B.! ' Co. case the Su2reme (ourt has defined what e8actly the (hief Eustice, a22roached with an a22lication under Section "" of the Act, is to decide at that sta/e! The (hief Eustice has the 2ower to decide his own .urisdiction in the sense whether the 2arty ma6in/ the motion has a22roached the ri/ht cour t! @e has to decide whether there is an ar bitration a/reement, as defined in the Act and whether the 2er son who has made the reAuest before him, is a 2arty to such an a/reement! @e can also decide the Auestion whether the claim was a dead one5 or a lon/<barred claim that was sou/ht to be resurrected and whether the 2arties ha1e concluded the transaction by recordin/ satisfaction of their mutual ri/hts and obli/ations or by recei1in/ the final 2ayment without ob.ection! The (ourt in SB! ' Co case, inter alia, concluded as follows3 (i (ii The 2ower e8ercised by the (hief Eustice of the @i/h (ourt or the (hief Eustice of I ndia under Section ""( , of the Act is not an administrati1e 2ower! It is a .udicial 2ower! The 2ower under Section ""( , of the Act, in its entirety, could be dele/ated, by the (hief Eustice of the @i/h (ourt only to another Eud/e of that (ourt and by the (hief Eustice of India to another Eud/e of the Su2reme (ourt!

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In case of desi/nation of a Eud/e of the @i/h (ourt or of the Su2reme (ourt, the 2ower that is e8ercised by the desi/nated Eud/e would be that of the (hief Eustice as conferred by the statute!

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The (hief Eustice or the desi/nated Eud/e will ha1e the ri/ht to decide the 2r eliminary as2ects as indicated in the .ud/ment! These will be, his own .urisdiction to entertain the reAuest, the e8istence of a 1alid arbitration a/r eement, the e8istence or otherwise of a li1e claim, the e8istence of the condition for the e8ercise of his 2ower and on the Aualifications of the arbitr ator or arbitrators! The (hief Eustice or the desi/nated Eud/e would be entitled to see6 the o2inion of an institution in the matter of nominatin/ an arbitrator Aualified in terms of Section ""($ of the Act if the need arises but the order a22ointin/ the arbitrator could only be that of the (hief Eustice or the desi/nated Eud/e!

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The District Eud/e does not ha1e the authority under Section ""( , of the Act to ma6e a22ointment of an arbitrator!

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The @i/h (ourt cannot interfere with the orders 2assed by the arbitrator or the Arbitral Tribunal dur in/ the course of the arbitration 2roceedin/s and the 2arties could a22roach the (ourt only in terms of Section C+ of the Act (a22ealable orders or in terms of Section CB of the Act (settin/ aside or arbitral award !

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Since it is a .udicial order, an a22eal will lie a/ainst the order 2assed by the (hief Eustice of the @i/h (ourt or by the desi/nated Eud/e of that (ourt only under Article "C, of the (onstitution to the Su2reme (ourt!

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'o a22eal shall lie a/ainst an order of the (hief Eustice of India or a Eud/e of the Su2reme (ourt desi/nated by him while entertainin/ an a22lication under Section ""(, of the Act!

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Fhere an Arbitral Tribunal has been constituted by the 2arties without ha1in/ recourse to Section ""(, of the Act, the Arbitral Tribunal will ha1e the .urisdiction to decide all matters as contem2lated by Section ", of the Act!

Challenge to arbitrator: An arbitrator may be challen/ed only in two situations! 7irst, if circumstances e8ists that /i1e rise to .ustifiable /rounds as to his inde2endence or im2ar tiality5 second, if he does not 2osses the Aualifications a/reed to by the 2arties! A challen/e is reAuired to be made within "% days of the 2etitioner becomin/ awar e of the constitution of the arbitral tribunal or of the circumstances furnishin/ /rounds for challen/e! 7urther, sub.ect to the 2arties a/reement, it is the arbitral tr ibunal (and not the court < unli6e under the old Act of "#B; which shall decide on the challen/e! If the challen/e is not successful the tribunal shall continue with the arbitral 2roceedin/s and render the award, which can be challen/ed by an a//rie1ed 2arty at that sta/e! This is another si/nificant de2arture fr om the *odel )aw, which en1isa/es recourse to a court of law in the e1ent the arbitral tribunal re.ects the challen/e! # The Indian courts ha1e held that 4the a22rehension of bias must be .ud/ed from a healthy, reasonable and a1era/e 2oint of 1iew and not on mere a22rehension of any whimsical 2erson!

Article "C of *odel )aw

Ga/ue sus2icions of whimsical, ca2ricious and unreasonable 2eo2le are not our standard to re/ulate our 1ision!:
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Conduct of arbitration proceedings: The ar bitrators are masters of their own 2rocedure and sub.ect to 2arties a/reement, may conduct the 2roceedin/s 4in the manner they consider a22r o2riate!: This 2ower includes< 4the 2ower to determine the admissibility, rele1ance, mater iality and wei/ht of any e1idence:! The only
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restrain on them is that they shall treat the 2arties with eAuality and each 2arty shall be /i1en a full o22or tunity to 2resent his case, which includes sufficient ad1ance notice of any hearin/ or meetin/! 'either the (ode of (i1il Procedure nor the Indian D1idence Act a22lies to
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arbitrations! &nless the 2arties a/ree otherwise, the tribunal shall decide whether to hold oral hearin/s for the 2resentation of e1idence or for ar/uments or whether the 2roceedin/s shall be conducted on the basis of documents or other material alone! @owe1er the arbitral tribunal shall hold oral hearin/s if a 2arty so reAuests (unless the 2arties ha1e a/reed that no or al hearin/ shall be held !
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Arbitrators ha1e 2ower to 2roceed e82arte where the res2ondent, without suf ficient cause, fails to communicate his statement of def ence or a22ear for an oral hearin/ or 2roduce e1idence! @owe1er, in such situation the tribunal shall not treat the failure as an admission of the alle/ations by the res2ondent and shall decide the matter on the e1idence, if any, before it! If the

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claimant fails to communicate his statement of the claim, the arbitral tr ibunal shall be entitled to terminate the 2roceedin/s!
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Taking of evidence in arbitral proceedings: The Indian -ath0s Act "#,# e8tends to 2ersons who may be authoriHed by consent of 2arties to recei1e e1idence! This Act thus, encom2asses arbitral 2roceedin/s as well! Section $ of the said

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Act states that e1ery 2erson /i1in/ e1idence befor e any 2erson authoriHed to administer oath 4shall be bound to state the truth on such sub.ect!: Thus, witnesses a22earin/ before an arbitral tr ibunal can be duly sworn by the tribunal and be reAuired to state the truth on oath and u2on failure to do so, commit off ences 2unishable under the Indian Penal (ode! @owe1er, the
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arbitrators cannot f orce unwillin/ witnesses to a22ear before them and for this court0s assistance is 2ro1ided for 1ide Section ?+ of the Act! &nder this 2ro1ision the arbitral tribunal or a 2arty with the a22ro1al of the tribunal may a22ly to the court see6in/ its assistance in ta6in/ e1idence (this is also 2r o1ided for in the *odel )aw ! @owe1er, Section ?+ of the Indian Act /oes beyond the *odel )aw as it states that any 2erson failin/ to attend in accordance with any order of the court or ma6in/ any other def ault or ref usin/ to /i1e e1idence or /uilty of any contem2t of the arbitral tribunal, shall be sub.ect to li6e 2enalties and 2unishment as he may incur for li6e offences in suits tried before the court! 7urther, the court may either a22oint a commissioner for ta6in/ e1idence or order that the e1idence be 2ro1ided directly to the arbitral tribunal! These 2ro1isions e8tend to any documents to be 2roduced or 2ro2er ty to be ins2ected! Section ?, 2ro1ides for a22ointment of e82erts by the arbitral tribunal for any s2ecific issue! In such situation a 2arty may be reAuired to /i1e the e82ert any rele1ant information or 2roduce any
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rele1ant document, /oods or 2ro2erty for ins2ection as may be reAuired! I t will be o2en to a 2arty (or to the arbitral tribunal to reAuir e the e82ert after deli1ery of his re2ort, to 2artici2ate in an oral hearin/ where the 2arties would ha1e an o22ortunity to 2ut Auestions to him! Governing a!: In an inter national commercial arbitr ation, 2arties ar e free to desi/nate the /o1ernin/ law for the substance of the dis2ute! If the /o1ernin/ law is not s2ecified, the arbitral tribunal shall a22ly the rules of law it considers a22ro2riate in 1iew of the surroundin/ circumstances! 7or domestic arbitration, howe1er, (i!e!, between I ndian 2arties , the tribunal is reAuired to decide the dis2ute in accor dance with the substanti1e laws of India! The Su2reme (our t in T*+ In,ra-tructure (! "td. v. .( *evelop/ent India (! "td. held that ir res2ecti1e of where the Icentr al mana/ement and control is e8ercised0 by a com2any, com2anies incor2orated in India, cannot choose forei/n law as the /o1er nin/ law of their arbitration! The nationality of com2anies incor2orated in India bein/ Indian, the intention of the le/islature is that Indian nationals should not be 2ermitted to der o/ate from Indian law as it would be a/ainst 2ublic 2olicy! The (ourt was of the 1iew that Jinternational commercial arbitrationJ meant an arbitration between 2arties wher e at least one of it is a body cor2orate incor2orated in a countr y other than India! Fhere both com2anies are incor2orated in India (and thereby had Indian nationalities , then the arbitration between them cannot be said to be an international commer cial arbitration (e1en thou/h the central mana/ement and control of the com2any may be e8ercised from a country other than India !

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"orm and content of a!ards: The arbitrators are reAuired to set out the reasons on which their award is based, unless the 2arties a/ree that no r easons are to be /i1en or if it arises out of a/reed terms of settlement! The tr ibunal may ma6e an interim awar d on matter s on which it can also ma6e a final award! Indian law 2ro1ides for a 1ery healthy "$K interest rate on sums due under an award! Thus, unless the arbitral tribunal directs otherwise, the awar d will carry interest at "$K 2er annum from the date of the awar d till the date of 2ayment! The tribunal is free to award costs, includin/ the cost of any institution su2er1isin/ the arbitration or any other e82ense incurred in connection with the arbitration 2roceedin/s! Setting aside of a!ards: The /rounds for settin/ aside an award rendered in India (in a domestic or international arbitration are 2r o1ided for under Section CB of the Act! These are materially the same as in Article CB of the *odel )aw for challen/in/ an enforcement a22lication! An award can be set aside if3 a a 2arty was under some inca2acity5 or b the arbitration a/reement was not 1alid under the /o1ernin/ law5 or c a 2arty was not /i1en 2ro2er notice of the a22ointment of the arbitrator or on the arbitral 2roceedin/s5 or d the award deals with a dis2ute not contem2lated by or not fallin/ within the terms of submissions to arbitration or it contains decisions beyond the sco2e of the submissions5 or e the com2osition of the arbitral tribunal or the arbitral 2rocedure was not in accordance with the a/reement of the 2arties5 or f the sub.ect matter of the dis2ute is not ca2able of settlement by arbitration5 or "?

/ the arbitral award is in conflict with the 2ublic 2olicy of India! A challen/e to an award is to be made within three months from the date of recei2t of the same! The cour ts may, howe1er, condone a delay of ma8imum C; days on e1idence of sufficient cause! Sub.ect to any challen/e to an award, the same is final and bindin/ on the 2arties and enforceable as a decree of the (ourt! (onsiderable contro1ersy has been /enerated as to whether an award is liable to be challen/ed under Section CB on merits! The earlier 1iew, as e82ounded by the Su2reme (ourt in 0enu Sagar !o1er Co. "td. v. 2eneral (lectric Co. was that an award could be set side if it is contrary to the 2ublic 2olicy of India or the interests of India or to .ustice or morality L but not on the /rounds that it is based on an error of law or fact! The Su2reme (ourt in that case was faced with the issue to determine the sco2e of 2ublic 2olicy in relation to 2roceedin/s for enforcement of a forei/n award under the 7orei/n Awards (Reco/nition and Dnforcement Act, "#,"! The (ourt also held that in 2r oceedin/s for enfor cement of a f orei/n award the sco2e of enAuiry befor e the court in which the award is sou/ht to be enforced would not entitle a 2arty to the said 2roceedin/s to im2each the award on merits! @owe1er, in a later Su2reme (ourt of India decision in 4il and 5atural 2a- Corporation v-. Sa1 !ipe- the (ourt added an additional /round of 42atent ille/ality:, thereby considerably
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widenin/ the sco2e of .udicial re1iew on the merits of the decision! In Sa1 !ipe- case the court acce2ted that the scheme of Section CB which dealt with settin/ aside the domestic arbitral award and Section B$ which dealt with enforcement of forei/n award were not identical! The court also
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acce2ted that in forei/n arbitration, the award would be sub.ect to bein/ set aside or sus2ended by the com2etent authority under the rele1ant law of that country whereas in domestic ar bitration the only recourse is to Section CB! The Su2reme (ourt obser1ed3 4 But in a ca-e 1here the judg/ent and decree i- challenged be,ore the Appellate Court or the Court e6erci-ing revi-ional juri-diction7 the juri-diction o, -uch Court 1ould be 1ider. There,ore7 in a ca-e 1here the validit8 o, a1ard i- challenged there i- no nece--it8 o, giving a narro1er /eaning to the ter/ 9public polic8 o, India9. 4n the contrar87 1ider /eaning i- re:uired to be given -o that the 9patentl8 illegal a1ard9 pa--ed b8 the arbitral tribunal could be -et a-ide. ;;;.. Si/ilarl87 i, the a1ard i- patentl8 again-t the -tatutor8 provi-ion- o, -ub-tantive la1 1hich i- in ,orce in India or i- pa--ed 1ithout giving an opportunit8 o, hearing to the partie- a- provided under Section 2$ or 1ithout giving an8 rea-on in a ca-e 1here partie- have not agreed that no rea-on- are to be recorded7 it 1ould be again-t the -tatutor8 provi-ion-. In all -uch ca-e-7 the a1ard i- re:uired to be -et a-ide on the ground o, 9patent illegalit8 M!: The court in Sa1 !ipe- case althou/h ado2ted the wider meanin/ to the term I2ublic 2olicy0 but limited its a22lication to domestic awards alone! The Sa1 !ipe- case has /enerated some

contro1ersy, and it remains to be seen if it will stand the test of time! The 2osition of a forei/n award has also under/one some recent contro1ersy! A f orei/n award is enfor ceable under Part II of the Act if it is rendered in a country that is a si/natory to the 'ew =or6 (on1ention or >ene1a (on1ention and that territor y is notified by the (entr al >o1ernment of India! -nce an award is held to be enforceable it is deemed to be a decree of the court and can

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be e8ecuted as such! &nder the Act there is no 2rocedure f or settin/ aside a forei/n award! A forei/n award can only be enforced or refused to be enforced but it cannot be set aside! This fundamental distinction between a forei/n and a domestic award has been altered by the Su2reme (ourt in the r ecent case of <enture 2lobal (ngineering v. Sat8a/ Co/puter Service"td. (<enture 2lobal ! @ere the Su2reme (ourt was concerned with a situation where a forei/n 22 award rendered in )ondon under the Rules of the )(IA was sou/ht to be enforced by the successful 2arty (an Indian com2any in the District (ourt, *ichi/an, &SA! The dis2ute arose out of a .oint 1enture a/reement between the 2arties! The res2ondent alle/ed that the a22ellant had committed an 4e1ent of default: under the shareholders a/reement and as 2er the said a/reement e8ercised its o2tion to 2urchase the a22ellant0s shares in the .oint 1enture com2any at boo6 1alue! The sole arbitrator a22ointed by the )(IA 2assed an award directin/ the a22ellant to tr ansfer its shares to the res2ondent! The res2ondent sou/ht to enforce this award in the &SA! The a22ellant filed a ci1il suit in an Indian District (ourt see6in/ to set aside the award! The District (ourt, followed by the @i/h (ourt, in a22eal, dismissed the suit holdin/ that there was no such 2rocedure en1isa/ed under Indian law! @owe1er, the Su2reme (ourt in a22eal, followin/ its earlier decision in the case of Bhatia International v. Bulk Trading held that e1en thou/h there was no 2ro1ision in Part II of the Act 2ro1idin/ for challen/e to a forei/n award, a 2etition to set aside the same would lie under Section CB Part I of the Act (i!e! it a22lied the domestic award 2ro1isions to forei/n awards ! The (ourt held that the 2ro2erty in Auestion
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(shares in an I ndian com2any are situated in I ndia and necessarily Indian law would need to be followed to e8ecute the award! In such a situation the award must be 1alidated on the touchstone of 2ublic 2olicy of India and the Indian 2ublic 2olicy cannot be /i1en a /o by throu/h the de1ice of the award bein/ enforced on forei/n shores! >oin/ further the (ourt held that a challen/e to a forei/n award in India would ha1e to meet the e82anded sco2e of 2ublic 2olicy as laid down in Sa1 !ipe- (su2ra (i!e! meet a challen/e on merits contendin/ that the awar d is 42atently ille/al: ! The <enture 2lobal case is far reachin/ for it creates a new 2rocedure and a new /round for challen/e to a forei/n award (not en1isa/ed under the Act ! The new 2rocedure is that a 2erson see6in/ to enforce a forei/n award has not only to file an a22lication f or enforcement under Section B$ of the Act, it has to meet an a22lication under Section CB of the Act see6in/ to set aside the award! The new /round is that not only must the awar d 2ass the 'ew =or6 (on1ention /rounds incor2orated in Section B$, it must 2ass the e82anded 42ublic 2olicy: /round created under Section CB of the Act! I n 2ractice, the statutorily enacted 2r ocedure for enfor cement of a forei/n award would be rendered su2erfluous till the a22lication for settin/ aside the same (under Section CB is decided! The statutorily en1isa/ed /r ounds for challen/e to the award would also be rendered su2erfluous as notwithstandin/ the success of the a22licant on the 'ew =or6 (on1ention /rounds, the award would still ha1e to meet the e82anded 42ublic 2olicy: /round (and 1irtually ha1e to meet a challen/e to the award on merits ! The <enture 2lobal case thus lar/ely r enders su2erfluous the statutorily en1isa/ed mechanism for enforcement of forei/n awards and substitutes it with a .ud/e made law! The Eud/ement thus is erroneous! *oreo1er, in so far as the Eud/ment 2er mits a challen/e to a forei/n awar d on the e82anded inter2retation of 2ublic 2olicy it is per incuria/ as a lar/er, three Bench decision in the case of 0enu Sagar ",

(su2ra holds to the contrary! 7urther Sa1 !ipe- (on which <enture 2lobal r elies for this 2ro2osition had clearly confined its e82anded inter2retation of 2ublic 2olicy to domestic awards alone (lest it fall foul of the 0enu Sagar case which had inter2reted the e82ression narrowly ! The Su2reme (ourt in <enture 2lobal did not notice this self<created limitation in Sa1 !ipe- nor did it notice the narr ower inter2retation of 2ublic 2olicy in 0enu Sagar and therefore a22lication of the e82anded inter2retation of 2ublic 2olicy to forei/n awards is clearly per incuria/. The decision thus needs to be re1iewed! Conclusion: India has in 2lace a modern, an efficient Arbitration Act! There ha1e been some decisions which are not in tune with the letter or s2irit of the Act! @o2ef ully, these would be addressed by the .udiciary in the near future and continuin/ 2o2ularity of arbitr ations would be ser1ed by a truly eff icient ADR mechanism! NThe law as stated herein is as on A2ril ?;;#O

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