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Limitations of Arbitration in Indian Context

Jasman Dhanoa 11A058 Semester V

LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT

TABLE OF CONTENTS

1. 2. 3. 4. 5.

Introduction 3 Development of the Law..3 Shortcomings of the 1996 Act4 Conclusion..18 Bibliography...20

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT

LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT

1. INTRODUCTION
Arbitration, when properly carried out, is an efficacious and alternative method of dispute resolution. The method of arbitration has evolved over a period of time to help the parties to speedily resolve their disputes. The Indian Arbitration and Conciliation Act 1996 (the '1996 Act') was enacted with elaborate provisions to cater to the needs of speedy disposal of disputes. The proceedings under the 1996 Act have become highly technical and involve considerable prolixity at every stage, providing a variety of legal traps to the unwary.

In the light of the 1996 Act's main objectives, the courts have had to constantly interpret the legislative intention for minimizing their supervisory role in the arbitral process. Tribunals all over the world generally bend over backwards to ensure that the parties' intention to arbitrate is upheld, as adding unnecessary technicalities disturb the parties' autonomy of the will. Despite the disquiet expressed about this lack of supervision by the highest court of the country, namely, the Supreme Court of India, the basic scenario has not changed.

This paper, while touching upon the development of the arbitration law in India in Part 1, seeks mainly to highlight the shortcomings in the 1996 Act in Part 2, with the aid of various important decisions handed down by the Supreme Court of India. The article concludes that the arbitration regime needs a lot of strengthening if it is really to serve as a mode of fast track dispute resolution.

2. DEVELOPMENT OF THE LAW

A codified form of arbitration regulations was introduced in India in 1859, as part of the Code of Procedure of Civil Courts. This Code not only permitted a reference to

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT arbitration in pending suits but also provided for reference to arbitration without the intervention of the court. These provisions, by a trial and error method, reached a gradual metamorphosis, especially with regard to procedure and the role of courts, culminating first into the Arbitration Act 1899, the operation of which was confined to the Presidency Towns (Bombay, Calcutta and Madras) and later extended to several important commercial towns, then into the Code of Civil Procedure 1908 and thereafter the Arbitration Act 1940 (the '1940 Act').

The 1940 Act was susceptible to numerous anomalies, fallacies, inequities and shortcomings. Several of its provisions had to be interpreted in the light of case laws which were not necessarily consistent, which made the 1940 Act itself only a starting point in trying to understand the correct and complete law relating to arbitration. One of the main shortcomings of the 1940 Act was that instead of serving as a speedy and economical remedy, arbitration tended to be a time consuming and costly avenue and consequently came to be treated only as a one more inning in the match of litigation. To address these shortcomings in the 1940 Act, in 1995 a new Bill was introduced in the Indian Parliament, namely the Arbitration and Conciliation Bill 1995. After being replaced by three Ordinances, the Bill resulted in the 1996 Act on 16 August 1996. In spite of being passed after three earlier failures, within two years of its enactment, certain amendments to the 1996 Act were felt necessary by the Law Commission in 1998. However, it was also felt that it may not be appropriate to take up amendments of the 1996 Act in haste and would perhaps be desirable to wait and see how the courts grapple with the situations that arise. More than 17 years after the enactment of the 1996 Act, it has failed to achieve its objectives, as discussed below.

3. SHORTCOMINGS OF THE 1996 ACT

Since the passing of the 1996 Act, requests have been voiced for amendments to the provisions of the 1996 Act, in so far as they related to arbitration. Though the 1996 Act provides for a challenge in case doubts arise about an arbitrator's independence or
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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT impartiality, it does not provide for approaching a judicial authority in case the challenge is not successful. No time limits have been prescribed for the arbitral tribunal to conduct proceedings and pass the award and further, subsequent to passing of the award, there is no time limit provided for challenging the award. The 1996 Act does not provide for the parties to refer to arbitration a dispute which is at any stage of judicial proceeding. The 1996 Act also lacks a mechanism for enforcement of interim measures ordered by the arbitral tribunal.

3.1 Judicial Pronouncements

In view of the shortcomings in the 1996 Act, the onus fell on the court to interpret the 1996 Act and draw conclusions, on the intention of the legislature behind certain provisions, which were either ambiguous or unclear. In conducting this exercise the Supreme Court has in some cases clarified the law but some of its judgments have come under severe criticism, as they have deviated from the paramount objectives of the 1996 Act, thereby derailing the arbitration regime. Some of the key Supreme Court judgments are analysed below.

3.1.1 Applicability of General Provisions Contained in Part I of the 1996 Act to International Arbitrations In the case of Bhatia International v Bulk Trading SA1 ('Bhatia International), the question before the Supreme Court was whether the General Provisions as contained in Part I of the 1996 Act would apply to an arbitration which does not take place in India. Whilst keeping in mind the age old adage, that a Court's duty to expound arises with caution and that the Court should not try to legislate, the Supreme Court in this matter held that the provisions of Part I would apply to all arbitrations, including international commercial arbitrations which take place outside India, unless the parties have expressly excluded by agreement the provisions of Part I.

4 SCC 105: AIR 2002 SC 1432.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT In the aforesaid judgment, the Supreme Court has acted, though reluctantly, in a legislative capacity rather than judicial capacity. The application of the whole of Part I to arbitrations held outside India would have, inter alia, the following ramifications.

Firstly, if Part I is made applicable to international commercial arbitrations which take place outside India, it may be possible for a party to approach the Chief Justice of the Supreme Court for appointment of an arbitrator or a presiding arbitrator even where the seat of arbitration is outside India. Secondly, a party can challenge a foreign award as a domestic award and subsequently resist the enforcement thereof under the provisions of the 1996 Act.

It is widely observed that the issue in controversy in the aforesaid matter was the powers of courts in India to grant interim measures of protection in international arbitration held outside India. The judgment, however, failed to comprehend the true nature of international arbitration, which is that parties having chosen their venue by nominating a particular place as the seat of their arbitration implicitly submit to the curial and procedural law of that venue. Allowing a party to seek judicial intervention from another Court is inconsistent with the idea of neutrality sought to be achieved by the parties by having the arbitral tribunal located at a place other than their home jurisdiction.

In view of the ultimate conclusion in Bhatia International, that Part I would apply to foreign awards, recently the Supreme Court in Venture Global Engineering v Satyam Computer Services Ltd2 went a step further and held that a foreign award rendered in London was amenable to challenge in Indian courts under the provisions of the 1996 Act. Also on similar lines is another recent judgment rendered by the Supreme Court in Citation Infowares Ltd v Equinox Corporation3 , where it was held that in the absence of any express or implied exclusion of provisions of Part I of the 1996 Act by agreement

2 3

(2008) 4 SCC 190. (2009) 7 SCC 220.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT between the parties concerned, the Supreme Court had jurisdiction to appoint an arbitrator.

The 1996 Act provides a unique unified legal regime for domestic as well as international arbitration based on the premise that what is good for international arbitration is also good for domestic arbitration. However, this approach adopted under the 1996 Act, while attempting unity between the two types of arbitrations, has lost out on the nuanced approach that is required in regulating these two very different types of dispute resolution mechanisms. This has created a legal quandary. While an interventionist philosophy may be justifiable for purely domestic arbitrations, this is antithetical to the ethos of international commercial arbitration. The Courts feel helpless in this situation. Judicial authorities deciding in light of particular fact situations, whether domestic or international, find their decision to be perceived as either too broad or too narrow on whether it is seen from the prism of domestic or international arbitration. This fundamental defect resonates through all the perceived anomalies of the 1996 Act and the seemingly erroneous judicial decisions by the Supreme Court.

3.1.2 Judicial Authorities' Power to Refer Parties to Arbitration Where There is an Arbitration Agreement In P Anand Gajapathy Raju v P V G Raju4, in view of the ambiguity in s. 8, dealing with the powers of judicial authorities to refer parties to arbitration where there is an arbitration agreement, the Supreme Court held that the provision would be applicable not only to arbitration agreements entered into before the commencement of the suit or other proceedings but also to those entered into pending a suit or other proceedings.

Additionally, s 42 of the 1996 Act confers exclusive jurisdiction on the court where any application has been made under Part I. The objective of this provision is to prevent forum shopping and minimize hardship to parties by restricting them to only one court
4

(2000) 4 SCC 539.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT for all proceedings relating to the arbitration. In view of the broad language of the section, the Supreme Court in the aforesaid judgment made an observation that applications under s 8 would not attract the exclusivity rule as provided in s 42. Despite the aforesaid judgment there is still some uncertainty on this issue also since cause of action may arise in jurisdiction of various courts and a party may file an application for interim measures in an inconvenient court and create delays and needless trouble. Given such a possibility, the current broad drafting of s 42 is felt unsuitable to tackle modem commercial realities.

It would not be out of context to add here that the 1996 Act does not define 'judicial authority' and the Supreme Court in a recent decision, Morgan Securities and Credit Pvt Ltd v Modi Rubber Ltd5, held that the expression would have to be interpreted having regard to the purport and object for which the 1996 Act was enacted.

3.1.3 Parties May Apply to Court for Interim Measures The Supreme Court in Sundaram Finance v NEPC India Ltd6 held that a party may invoke s 9 of the 1996 Act, which provides for interim measures, even before the arbitral proceedings have been formally instituted. Under this section, a claimant may apply to the Court for a wide range of interim or provisional measures without prejudicing her or his right to prosecute her or his substantive claims by means of arbitral proceedings. This is a serious lacuna under the scheme of the 1996 Act, as the aforesaid provision may be misused by the parties. A party may not take any initiative to have the arbitral tribunal constituted prior to obtaining an interim measure and may unnecessarily delay the dispute resolution process. Therefore it is submitted that suitable amendments should be made in the 1996 Act to make it mandatory for a party who has obtained interim relief from a court to constitute the arbitral tribunal in an expeditious manner.

5 6

(2007) 2 Company Law Journal 401. (1999) 2 SCC 479.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT 3.1.4 Recourse to Court against an Arbitral Award In Narayan Prasad Lohia v Nikhunj Kumar Lohia7, the parties had agreed upon two arbitrators in the arbitration agreement and objection to composition of the arbitral tribunal was not taken up before the arbitral tribunal within the prescribed time. The Supreme Court held that, arbitration being a creature of the agreement between the parties, so long as the composition of the arbitral tribunal was in accordance with the agreement, s 34 (which provides for recourse to a Court against an arbitral award) does not permit challenge to an award merely on the ground of composition of an arbitral tribunal and that a challenge can be maintained only if the agreement was in conflict with the provisions of the Part I of the 1996 Act.

It was further held that if the agreement permits the parties to appoint an even number of arbitrators contrary to the provisions of the 1996 Act, such arbitral tribunal would be validly constituted and the validity of an arbitration agreement is not dependent on the number of arbitrators specified therein.

It can be observed that the aforesaid decision of the Supreme Court is not in consonance with the scheme and language of s 10 of the 1996 Act, which mandates that the number of arbitrators shall not be an even number. It has in effect brought back the institution of umpire, which was deliberately given up by the legislature in favor of an arbitral tribunal comprising of sole or an odd number of arbitrators.

3.1.5 Appointment of Arbitrators Section 11 of the 1996 Act empowers the Chief Justice of the High Courts in domestic arbitrations and the Chief Justice of India in international arbitrations to appoint an arbitrator or presiding arbitrator, in the circumstances set out in the section, if and when the parties are unable to agree on a procedure for the appointment or the two nominated arbitrators fail to agree on the appointment of a presiding arbitrator.
7

(2002) 3 SCC 572.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT Though this section was intended to set the arbitral process in motion expeditiously, it has been the subject matter of considerable litigation right from inception of the 1996 Act, resulting in long delays in the constitution of the arbitral tribunals and the commencement of the arbitral proceedings. In Ador Samia Pvt Ltd v Peekay Holdings Ltd8 and Konkan Railway Corporation Ltd v Mehul Construction Co9, the Supreme Court held that orders passed by the Chief Justice under s 11 was administrative in nature. It was also held that since the Chief Justice and her or his designate acted in an administrative capacity, the order could not be said to have been passed by a court or a tribunal and hence a special leave petition against such an order was not maintainable before the Supreme Court under Article 136 of the Constitution of India.

The controversy with respect to the nature of the powers of the Chief Justice under s.11 did not come to an end with the aforesaid decisions and it was referred to a constitutional bench (comprising of five judges) for reconsideration in Konkan Railway Corporation Ltd v Rani Construction Pvt Ltd.'10 The constitutional bench affirmed the aforesaid three judge bench decision.

However, this decision was short lived. The controversy was again revived and referred, only this time to a seven judge bench of the Supreme Court in SBP & Co v Patel Engineering Ltd.11 ('Patel Engineering') and by a majority of six to one this bench overruled the decision of the five judge bench.

The Supreme Court in Patel Engineering held that the power exercised by the Chief Justice under s 11(6) is a judicial order and the Chief Justice has to decide whether (a) the party making the application has approached the right High Court; (b) the applicant has satisfied the conditions provided in the section for appointing an arbitrator; (c) there
8 9

(1999) 8 SCC 572. (2000) 7 SCC 201. 10 (2002) 2 SCC 388. 11 (2005) 8 SCC 618.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT is an arbitration agreement as defined in the 1996 Act; (d) the person making the application is a party to such agreement; and (e) the claim was dead or live. To ascertain all these factors, the Chief Justice can proceed on the basis of sworn affidavits, documents or even take evidence.

It was widely observed that the decision in Patel Engineering is contrary to the scheme of the 1996 Act. The Supreme Court has virtually rewritten ss. 11 and 16 of the 1996 Act, when it held that the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by s 16 - the only exception being those cases where the arbitral tribunal has been constituted by the parties without having recourse to s 11 - and on the validity of the arbitration agreement and other jurisdictional issues it would be conclusive (except when a remedy is available by special leave to appeal to the Supreme Court in case of a decision of the Chief Justice of the High Court). This is widely seen as a significant setback to the concept of one stop adjudication contemplated by the scheme of the 1996 Act.

The other serious ramification under the scheme of the 1996 Act is that all contentious jurisdictional issues, including objections with respect to the existence and validity of the arbitration agreement, can be raised before the arbitral tribunal and if any party wants to challenge such decisions it could do so. This remedy would not be available if the appointment of an arbitrator is made by the Chief Justice under s. 2 and such decision becomes final and conclusive and cannot be challenged even in an application to set aside the award. As a consequence of the aforesaid decision, s. 34 dealing with application for challenge of an award has effectively been amended to the extent that certain grounds of challenge are no longer available in awards made by arbitral tribunals constituted with the aid of s 11.

The consequences flowing from the aforesaid decision in Patel Engineering can be seen from two recent judgments of the Supreme Court, in Union of India v V.S Engineering Pvt Ltd,12 where the Supreme Court distinguished Patel Engineering on the
12

(2007) Company Law Journal 126.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT issue of appointment of arbitrators by administrative authorities such as railways, and in National Thermal Power Corporation Ltd v Siemens Atkeingesellschaft,13 where the Supreme Court held that Patel Engineering effectively confined the operation of s 16 to cases where the arbitral tribunal was convened without reference to the Chief Justice under s 11(6) of the 1996 Act. In other words, in a case where the parties have constituted the arbitral tribunal without recourse to section 11(6) of the 1996 Act, they still have the right to question the jurisdiction of the arbitral tribunal, including the right to invite a ruling on any objection with respect to the existence or validity of the arbitration agreement.

As a result of the decision in Patel Engineering, the decision of the Chief Justice on vital issues like the existence of a valid arbitration agreement and other jurisdictional issues will become final and conclusive without a regular trial by the arbitral tribunal or a court. If the legislature intended to give finality to the decision on such vital issues as those examined above, it would have conferred the power under s ll on the courts as it has done in other sections and not on the Chief Justice or any person or institution designated by him or her. The legislature must have been aware that the Chief Justice or any other person or institution cannot decide on such issues finally and conclusively. Thus, there has been a widespread campaign for the majority decision in Patel Engineering to be the subject of immediate legislative intervention or reconsideration by a still larger bench of the Supreme Court.

3.1.6 Power of Judicial Authorities to Refer Parties to Arbitration under Part II of the 1996 Act In Shin-Etsu Chemical Co Ltd v Aksh Optlfibre Ltd14, the Supreme Court had to consider whether the finding of the judicial authority under s 45 of the 1996 Act, as to whether the arbitration agreement, falling within the definition of s 44 of the 1996 Act, is or is not 'null and void, inoperative or incapable of being performed', should be a final expression of

13 14

(2007) 5 Company Law Journal 83. (2005) 7 SCC 234.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT the view of the judicial authority or should rather be a prima facie view formed without full-fledged trial.

By a majority, the Supreme Court answered the aforesaid question by holding that subsection (3) of s 8 in Part I of the 1996 Act envisages that even in a situation where an application to the court has been made under sub-section (1), the arbitration may commence, continue and even an arbitral award be made. This was obviously meant to cut down delay in the conclusion of the arbitral proceedings. There is conspicuous absence of a corresponding provision either in s 45 or in the rest of the provisions in Part II. This legitimately gives rise to an inference that once the arbitral agreement has been subjected to scrutiny before the court under s 45 of the 1996 Act, conceivably, the arbitral proceedings could be stayed till the outcome of the decision of a court on the nature of the arbitral agreement.

If it were to be held that the finding of the court under s 45 should be a final and determinative conclusion, then it is obvious that, until such a pronouncement is made, the arbitral proceedings would have to be in limbo. This evidently defeats the credo and ethos of the 1996 Act, which is to enable expeditious arbitration without avoidable intervention by judicial authorities.

3.1.7 The 1996 Act as Special Legislation In Gujarat Uraja Vikash Nigam Ltd v Essar Power Ltd15, the issue adjudicated before the Supreme Court was whether the provisions for dispute resolutions contained in the Indian Electricity Act 2003 would prevail over s 11 of the 1996 Act. In complete disregard of the dispute resolution clauses in the executed Power Purchase Agreement between a State Electricity Board and an Independent Power Producer and applying the principle of generalia specialibus non derogant (specific prevails over general) the Supreme Court held that any dispute between these two parties will have to be adjudicated by the State Electricity Regulatory Commission as per the provisions of the
15

(2008) 4 SCC 755.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT Electricity Act, since the Electricity Act is a specialised statute and will override the general provisions contained in the 1996 Act.

The immediate implication of the aforesaid judgment is to render the dispute resolution mechanism contractually agreed between the parties in all the existing Power Purchase Agreements inoperable, despite the parties voluntarily choosing arbitration as their preferred mode of dispute resolution.

In handing down the aforesaid judgment, the Supreme Court had not taken into consideration s 5 of the 1996 Act, which provides that all other laws for the time being in force have been excluded from operation in so far as they relate to intervention by any judicial authority. Additionally, any judicial authority faced with a matter that is the subject of an arbitration agreement is statutorily mandated by s 8 to refer the parties to arbitration. Both these provisions apply to any judicial authority performing an adjudicatory function, including the State Electricity Regulatory Commission under the Electricity Act.

It is even more ironic that in another decision of the Supreme Court applying the very same principle of generalia specialibus non derogant - namely, Consolidated Engineering Enterprises v Principal Secretary, Irrigation Department 16 - the Court

decided the 1996 Act is in fact a specialised act. It is submitted that conflicting decisions like these are only adding to the already existing uncertainty and ambiguity in the current form of the 1996 Act.

16

(2008) 7 SCC 169.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT 3.1.8 Scope for a Court to Entertain an Application for Setting Aside an Arbitral Award One of the main objectives of the 1996 Act was to minimize the supervisory role of the courts in the arbitral process. In that light, s 34 of the 1996 Act was modeled on Article 34 of the UNCITRAL Model Law. It permitted challenge to an award only on very limited grounds, such as invalidity of the arbitration agreement, excess of jurisdiction as to the scope of the arbitration and conflict with the public policy of India. The Supreme Court in Oil & Natural Gas Commission v SAW Pipes Ltd17, ('SAW Pipes') examined the jurisdiction of the courts under s 34 of the 1996 Act. It was held that if the award is (a) contrary to the substantive provision of law; (b) against the provisions of the 1996 Act; or (c) against the terms of the contract, it would be 'patently illegal', which could be interfered with under s 34, meaning thereby that such a patently illegal award will be liable to be set aside on the grounds of 'public policy' under s 34. While doing so the Supreme Court made it abundantly clear that in order to fall within the ambit of public policy of India, the illegality must go to the root of the matter and if the illegality is of a trivial nature it cannot be held that the award is against public policy. The nature of patent illegality has been clarified further, in that the award should be so unfair or unreasonable that it shocks the conscience of the court and such an award is opposed to public policy and is required to be adjudged void.

The aforesaid decision was extensively criticised as bringing back by the interpretative process, the much abused ground of 'error of law' for setting aside an award, which had been done away with by the 1996 Act. While the SAW Pipes decision discusses the grounds for appeal against a domestic arbitral award, the concern also is that the reasoning could just as well apply to foreign arbitral awards. This could therefore mean that the Courts could give the same wide interpretation to the grounds available for the setting aside of a foreign arbitral award as they have given and are prone to giving in respect of domestic arbitral awards.
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(2003) 5 SCC 705.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT

There is a danger that the concept of illegality introduced by the Supreme Court as a ground of challenge will convert the proceedings under s 34 of the 1996 Act into a full fledged appeal and frustrate the very purpose of the 1996 Act. According to critics, the aforesaid judgment showed the inability of the courts to reconcile with the limited role assigned to them in arbitrations.

Another criticism of s. 34 of the 1996 Act is its suspensory effect on the execution of the arbitral award. In National Aluminium Co Ltd v Pressteel & Fabrications Pvt Ltd18, the Supreme Court held that there is an automatic suspension of the execution of the award the moment an application challenging the said award is filed under s 34. In such an event, if any interim orders or measures are to be taken, the parties have no recourse but to wait till the application under s 34 is decided.

It has been widely argued that the legislature should amend s 34 to bring more clarity on the various instances which could confer a right on a party to challenge an award. It would avoid wasting the valuable time of the courts and will prevent trivial issues being challenged under the aforesaid provision. For instance, in Sanshin Chemicals Industry v Orient Carbons & Chemicals Ltd19, a simple issue of venue for the arbitration was challenged and the same had to be decided ultimately by the Supreme Court. Though the Supreme Court expressed its hope that necessary steps would be taken by the authorities concerned at the earliest to bring about the required change in the law to empower courts to pass suitable interim orders in s 34 cases, the suggested change in law is yet to occur.

18 19

(2004) 1 SCC 540. (2001) 3 SCC 341.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT 3.1.9 Relief from Appellate Orders

In Shin-Etsu Chemical v Vindhya Telelinks20, the Supreme Court had to decide, whether a person aggrieved by an appellate order passed by a District or Civil Court under s 37 of the 1996 Act could challenge it by filing a special leave petition before the Supreme Court. It was held that the aggrieved party could not approach the Supreme Court directly against such an order and would have to first approach the High Court either by way of a revision under the Code of Civil Procedure 1908 or under Article 227 of the Constitution of India, which grants supervisory powers to the High Court.

While the 1996 Act clearly excludes the applicability of Civil Procedure Code 1908, the Supreme Court in the aforesaid judgment has observed that the jurisdiction of the High Court shall not stand superseded under the 1996 Act, since the 1996 Act does not contain any express bar against exercise of revisional power by the High Court. Section 37 of the 1996 Act prevents a party from filing a second appeal, but allows the aggrieved party to appeal to the Supreme Court. The aforesaid provisions in the 1996 Act are specifically provided to avoid multiple rounds of litigations. However, this decision does not further the objective of this legislation, which is minimal judicial intervention and maximum judicial support.

Apart from the anomaly in the 1996 Act in its current form, one of the reasons for the aforesaid approach by the Supreme Court is that, normally, the majority of the arbitral tribunals which pass an award or any interim orders comprise of retired Supreme Court Judges and or retired High Court Judges. Normally the judge presiding in a District Court would either avoid overruling decisions which have been challenged before it or not state any reasons for dismissal of an appeal. Given this situation, the Supreme Court, in order to avoid becoming a court of first appeal and getting into the entire details of the matter, has directed the aggrieved parties to approach the High Court for one more round of litigation.

20

AIR (2009) SC 3284.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT The 1996 Act does not provide any clear provision on whether an aggrieved party can approach a High Court under the supervisory jurisdiction or the Supreme Court by a special leave petition against an order of a district judge. It also does not lay down what kind of orders would be appealable before the Supreme Court. Though the Supreme Court in Rashtriya Ispat Nigam Ltd v Verma Transport Co.21 observed that the 1996 Act was enacted by the Indian Parliament in the light of the UNCITRAL Model Rules, in certain respects, the Parliament of India while enacting the 1996 Act had gone beyond the scope of the said rules. As a consequence of this, the Courts have taken upon themselves the role of the legislature in interpreting the 1996 Act. In some cases it has resolved and in others it has added to the ambiguity.

4. CONCLUSION
In view of the various shortcomings in the provisions of the 1996 Act, as discussed above, the Law Commission in 2001 recommended amendments to Part I of the 1996 Act. It was widely felt that these recommendations, which sought to provide all pervasive court supervision and control over the conduct of the arbitral proceedings, would take us back to the era of court structured and court controlled arbitration something that was supposed to have effectively ended with the coming into force of the 1996 Act.

In 2004 the Government of India constituted a Committee headed by Justice Saraf to make an in-depth study of the implications of the recommendations of the aforesaid Law Commission and also all the aspects of the Arbitration and Conciliation (Amendment) Bill 2003 and make suggestions to the government. In its report, submitted in 2005, the committee made recommendations which largely attempted to protect the basic features like party autonomy, maximum judicial support and minimum judicial intervention contained in the 1996 Act.

21

(2007) 6 Company Law Journal 240

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT The key highlights of this committee's recommendations included constitution of separate courts to specifically deal with arbitration matters, deeming of international commercial arbitration held in India as domestic arbitration, provision for maintainability of revision, enabling reference to arbitration in pending legal proceedings, providing mechanisms for the enforcement of interim measures, additional grounds for challenging a domestic award and providing for constitution of fast track arbitral tribunal for fast track arbitration. These recommendations have not yet taken the shape of a law.

The greatest single virtue of a strong legislature is not what it can do, but what it can prevent. The paramount objectives of enacting the 1996 Act were party autonomy, maximum judicial support and minimum judicial intervention. The courts should undoubtedly be reluctant to extend the scope of a statute beyond the contemplation of the legislature on difficult matters of law or policy. However, this is what has happened with judicial attitudes to the 1996 Act. An analysis of the aforesaid decisions handed down by the Supreme Court makes it evident that the 1996 Act needs a serious rethink in order to achieve the objectives for which it was enacted.

The first Chancellor of the German Empire, Otto von Bismarck, is said to have quipped, 'Laws are like sausages - it is better not to see them being made'. With due respect, our law makers should pay more attention while enacting statutes, which would further the objective of fast track dispute resolution and reduce the time taken in litigation. If some fine tuning of the 1996 Act is undertaken, it could remove the pitfalls and go a long way towards strengthening the arbitration regime in India.

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5. BIBLIOGRAPHY
LIST OF CASES

1. Bhatia International v Bulk Trading S.A., 4 SCC 105: AIR 2002 SC 1432 2. Venture Global Engineering v Satyam Computer Services Ltd, (2008) 4 SCC 190. 3. Citation Infowares Ltd v Equinox Corporation, (2009) 7 SCC 220 4. P Anand Gajapathy Raju v P V G Raju, (2000) 4 SCC 539. 5. Morgan Securities and Credit Pvt Ltd v Modi Rubber Ltd, (2007) 2 Company Law Journal 401. 6. Sundaram Finance v NEPC India Ltd, (1999) 2 SCC 479. 7. Narayan Prasad Lohia v Nikhunj Kumar Lohia, (2002) 3 SCC 572. 8. Ador Samia Pvt Ltd v Peekay Holdings Ltd, (1999) 8 SCC 572. 9. Konkan Railway Corporation Ltd v Mehul Construction Co., (2000) 7 SCC 201 10. SBP & Co. v Patel Engineering Ltd., (2005) 8 SCC 618 11. Union of India v V.S Engineering Pvt Ltd, 2007)] Company Law Journal 126. 12. National Thermal Power Corporation Ltd v Siemens Atkeingesellschaft, (2007) 5 Company Law Journal 83. 13. Shin-Etsu Chemical Co Ltd v Aksh Optlfibre Ltd., (2005) 7 SCC 234. 14. Gujarat Uraja Vikash Nigam Ltd v Essar Power Ltd, (2008) 4 SCC 755. 15. Consolidated Engineering Enterprises v Principal Secretary, Irrigation Department, (2008) 7 SCC 169. 16. Oil & Natural Gas Commission v SAW Pipes Ltd (2003) 5 SCC 705. 17. National Aluminium Co Ltd v Pressteel & Fabrications Pvt Ltd (2004) 1 SCC 540. 18. Sanshin Chemicals Industry v Orient Carbons & Chemicals Ltd., (2001) 3 SCC 341. 19. Rashtriya Ispat Nigam Ltd v Verma Transport Co., (2007) 6 Company Law Journal 240.

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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT ARTICLES

1. RISHI KUMAR DUGAR, Derailment in Fast Track Dispute Resolution, Law Asia Journal, 2010 Lawasia J. 129 2010. 2. SUMEET KACHWAHA AND DHARMENDRA RAUTRAY, Kachwaha & Partners, Arbitration in India: An Overview, available at

http://www.kaplegal.com/index.php?option=com_members&view=members&id=3 3. GEOFFREY S. STEWART & KARTHIK KUMAR, Dispute Resolution Issues in Indian Cross-Border Transactions, available at http: //www. jonesday.com/dispute_resolution_issues/. 4. MARTIN DOMKE, Recent Developments in International Commercial Arbitration, N.Y.U. Journal of International Law and Politics, 2 N.Y.U. J. Int'l L. & Pol. 267 (1969). 5. TOM CANNING, The Supreme Court of India upholds the sanctity of international arbitration, Milbank, Tweed, Hadley & McCloy LLP Publications, available at www.milbank.com/.../Indian-Supreme-Court-Upholds-The-Sanctity-of/. 6. BADRINATH SRINIVASAN, Arbitration and the Supreme Court: a tale of discordance between the text and judicial determination, 4 NUJS L. Rev. 639 2011. 7. SUMEET KACHWAHA, The Indian Arbitration Law: Towards a New Jurisprudence, 10 INT. A.L.R. 13, 17 (2007). 8. PRABHASH RANJAN & DEEPAK RAJU, The Enigma of Enforceability of Investment Treaty Arbitration Awards in India, 6 ASIAN J. OF Comp. LAW ART. 5 (2011). 9. REPORT OF JUSTICE SARAF COMMITTEE ON ARBITRATION (January 29, 2005), available at lawmin.nic.in/la/consultationpaper.pdf.

BOOKS

1. DAVID ST. JOHN SUTTON, Russell on Arbitration, 21st ed, 1996, Sweet & Maxwell, London 2. SAHARAY H.K., Law of Arbitration and Conciliation, Eastern Law House, New Delhi, 2001
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LIMITATIONS OF ARBITRATION IN INDIAN CONTEXT 3. JUSTICE DR. B.P. SARAF AND JUSTICE S.M. JHUNJHUNWALA, Law of Arbitration and Conciliation, 4th ed., 2006, Snow White Publishing Ltd. 4. MALHOTRA O.P., Law and Practice of Arbitration and Conciliation 1st ed., 2002, Lexis Nexis Butterworths Wadhwa, Nagpur (India).

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