Judicial intervention in Arbitration

March 21, 2023

This article has been written by Ms. Suhani Singh, a student studying B.A.LL.B[HONS.] from Teerthanker Mahaveer College Of Law And Legal Studies, Moradabad. The author is 3^rd year law student.

Introduction

In India, arbitration law has a lengthy history of development. The Bengal Rules, eventually, introduced modern arbitration for the first time in British India in 1772. Yet eventually, the 1996 Arbitration and Conciliation Act was created. When a disagreement emerges over the selection of an arbitrator at the outset, the court will unavoidably need to get involved. The court’s involvement is necessary to support the proceedings throughout. The court may offer temporary protection or other forms of help. Last but not least, after the arbitral award is announced, judicial action is necessary for either the award’s enforcement or its defence.

The Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) was created to adopt the arbitration method for resolving disputes between the parties, taking into consideration the UNCITRAL Model Law on International Commercial Arbitration (1985) (hereinafter referred to as “UNCITRAL Model Law”). The Arbitration Act of 1940 governed the procedures prior to the UNCITRAL Model Law. One kind of ADR is arbitration, in which the parties settle their conflict outside of the courts by choosing a neutral third party, known as an arbitrator.

Scope Of Judicial Intervention

Conundrums surround the question of court intervention in arbitration, which makes it simple to become mired in definitional technicalities and restrictions. The complexity of this subject is a result of how frequently and rapidly Arbitration is changing and evolving in India. The main issue in this context revolves around the judiciary’s involvement in arbitration procedures and the appropriate level of that involvement. The 1996 Act was passed, together with revisions in 2015 and 2019, to alleviate the burden on the judicial system and promote the use of arbitration as a method of resolving disputes. The legislators made sure to include that could limit judicial provisions interference, which would be a time-consuming process that would inhibit the swift resolution that Alternative Dispute Resolution offers. The Act aimed to divert the traffic of cases from the traditional route of litigation to arbitration. As previously stated, the Courts’ or Judicial Intervention’s role in the processes is quite limited

Legislative intend behind the 1996 Act

Only after two ordinances were passed and the New Economic Policy of 1991 was in operation did the 1996 legislation come into being. The 1996 act was designed in a way that would lessen the courts’ oversight of the arbitration proceedings and arbitral rulings. The UNCITRAL Model Law, upon which this Act is based, is noted in the preamble. Not all of the protections offered by the UNCITRAL Model Law, nonetheless, were included in this Act. Under Article 16 of the Model law provided that Arbitration Tribunals may rule in its own Jurisdiction and jurisdictional issues were to be decided as preliminary issues by the arbitral tribunal, before appealing to the Court. This was eliminated from the Act. According to the Model Law, the location of the arbitration and whether it will take place there will determine whether the court has the authority to grant an interim measure of protection. However, a specific section was added to the 1996 Act in order to limit the court. In order to limit this judicial power, Section 2(2) was added as an alternative to Article 1(2) of the Model Law.

Judicial intervention in Arbitration Law

Three ways in which judicial intervention in arbitrator takes place: –

Before proceedings- Section 5 of the 1996 act
During proceedings- Section 9 of the 1996 Act
After proceedings- with regard to arbitral awards
Judicial Intervention Before Arbitration Proceedings:

The Arbitration and Conciliation Act of 1996’s Section 5 specifies the limits of court intervention that are statutorily permissible. It’s interesting that this portion is comparable to UNCITRAL Model Law’s Article 5. Also, the English Arbitration Act of 1996 served as inspiration. However, a significant amount of unnecessary judicial intervention is practiced in reality while applying the Arbitration Law. But, in practice, the Arbitration Law is applied with a large amount of needless judicial intervention. It is very obvious from the way Section 5 of the Act was written that the legislature intended to restrict the role of the Court in arbitration. In order to accomplish the dual goals of accelerating justice and achieving an economical resolution of disputes, parties are allowed discretion regarding the court’s intervention. Commercial arbitration can be used to settle disputes on a domestic or international level. A non-obstante clause opens Section 5. This renders judicial involvement impossible

The phrase “no judicial authority” is broad enough, and the Act further assures that there is no judicial discretion present by inserting the verb “must intervene.” Judicial involvement is permitted to a certain extent, but only to initiate the arbitral process. The job of the judiciary is purely administrative and not judicial. Words like “except where so stipulated in this part” are used in the Act to provide exceptions to the non-obstante clause. In Secure Industries Ltd V. Godrej and Boyce Mfg. Co. Ltd., the SC provided a similar explanation. Arbitration does not, however, preclude the possibility of bringing criminal charges against an accused if it appears from the evidence that a crime has been committed.

Judicial Intervention under/during Arbitration

Arbitration offers a speedy and effective alternate dispute resolution method. It is a crucial component of the alternative dispute resolution process. Because it combines mediation and conciliation processes and encourages parties to resolve their problems outside of court and quickly, it is currently one of the most popular conflict resolution processes. Arbitration” is a process for settling disputes between two or more parties in which the parties’ intentions are expressed through a contract or other agreement and they agree to use mediation or conciliation to address their differences.

Section 2 of the Arbitration and Conciliation Act, 1996: defined Arbitration” AS ” Unless the context otherwise requires (a) Arbitration means not or whether arbitration any Arbitral by permanent administered (b) ” Arbitration and Institution Agreement”, means and Agreement referred to in Section 7.”

A contract in and of itself is a “ARBITRATION AGREEMENT.” As a result, it must have all the fundamental elements of a legal contract

The following are the primary features of an arbitration agreement;

The contract must be in writing;
Any document that is agreed to be an arbitration agreement and is signed by the parties may also be proven to be in writing;
An exchange of letters, telegrams, telexes, or other communications that may be proved as a record of agreement and are authentic shall be deemed to constitute an agreement,
A full agreement on arbitration is not required because it can be agreed upon in the form of an arbitration clause incorporated into the agreement;
The parties’ intention should be crystal apparent in the Arbitration Clause that disputes should be subject to arbitration;
An agreement to arbitrate may be deemed to have been reached upon the exchange of a statement of claim and defence in which the existence of the agreement to arbitrate is asserted by one party and is not denied by the other
Whether the agreement or communication is a contractual one or not, the parties may communicate that all or specific disputes that have arisen or may in the future arise between them about any defined legal relationship will be submitted to arbitration;
If a contract is written and contains a reference to a document with an arbitration clause, the reference constitutes an arbitration agreement and the arbitration clause becomes a part of the contract.

We are aware that unless there is a prior express agreement to arbitrate the case, the jurisdiction of arbitration cannot be invoked in the absence of any mutual parties to the dispute. A separate Arbitration Agreement is not necessary if an agreement contains a clause that referees any disputes brought about by the violation of any agreement terms and conditions to arbitration. However, it should be emphasised that if the agreement contains an arbitration clause, two agreements will be in force due to the concept of separability. The main agreement between the parties will come first, and if any of its terms and conditions are violated, a second agreement to arbitrate any issues will come into effect.

IF THERE IS AN AGREEMENT ARBITRATION, COURT INTERVENTION;

In most cases, a court or other judicial authority won’t interfere with an arbitration proceeding or an arbitration award. The doctrine of non-intervention is founded on the idea that the judiciary would not have any justification to intervene in an arbitration proceeding where the parties to any commercial contract have freely chosen to resolve their issues through mediation and negotiation.

SECTION 8; stipulates that if an arbitration agreement is reached between the parties, any action brought before the courts must be referred at once. to be taken into account during arbitration.

Yet, the courts have the authority to review any case in which they believe there is a lack of a legitimate arbitration agreement between the parties on the surface. Any of the parties in this situation may submit an application to the court along with the original arbitration agreement or a properly certified copy of the agreement. When one party does not have an arbitration copy of the agreement, the court may intervene. The act gives the court the authority to entertain any application for intervention in arbitration cases where the court is satisfied that the applying party does not have a copy of the arbitration agreement and will not obtain one in the normal course of the arbitration. In these cases, the court has the authority to intervene and give the other party the necessary instructions to produce the original arbitration agreement. The parties are still free to refer the dispute to arbitration despite this little court intervention ordering the opposing party to present the original arbitration agreement or a certified true copy before the court

Judicial Intervention After Arbitration Proceedings:

The Act’s Section 34 specifies who must file an application to vacate an arbitral award. It specifically states that judicial interference is not permitted, but it also outlines the exceptional situations in which an arbitral judgement may be overturned by a court, or the exceptions to this rule. The following conditions must be met in order for a court to overturn an arbitration ruling under Section 34(2)(a):

1. The party was under some incapacity;

2. The arbitration agreement is not valid in accordance with the law to which it was subjected by the parties to the agreement; arbitrator’s of the

3. Proper notice appointment or the proceedings was not given;

4. The dispute did not fall within the terms of those which could be submitted to arbitration or the award contains a decision beyond the scope of the arbitration; of

5. The tribunal was not composed in accordance with the parties’ agreement.

In Dyna Technologies Pvt Ltd. v. Crompton Greaves Ltd., the Apex Court said that the courts shouldn’t overturn an award simply because another interpretation of the facts and the contract is available. Even if the judgment’s reasoning is implied, the courts should exercise caution and defer to it unless the award exhibits perversity that is so extreme that it violates Section 34 of the Act, 1996.

The Apex Court has also ruled that the Court’s involvement in Arbitration proceedings should be limited because when parties choose an alternative dispute resolution method, such as Dispute Arbitration, they choose to waive court jurisdiction because they prefer the convenience and, in the end, it offers.

The Apex Court ruled in McDermott International Inc. v. Burn Standards Co. Ltd. that certain circumstances outlined in section 34 of the Act, 1996 give courts the authority to set aside an arbitral award. The arbitral award may only be set aside by the court since it cannot be corrected if errors were committed in it.

In accordance with Section 34(2)(b) of the Act, a court may also nullify an award.

1. The subject matter of the dispute cannot be settled by means of arbitration; or

2. The arbitral award conflicts with the public policy of India.

The grounds listed in section 34(2)(a) are sufficiently specific that the courts are prohibited from expanding their authority to interfere with arbitral verdicts.

“Public policy of India” is the only term in this paragraph that is unclear. It leaves its meaning open to interpretation, which has led to judicial intervention Jurists now have more challenges in determining what violates public policy and what justifies reversing a judgement. The lack of a definition for the term in the Act or any other statute leaves it open to multiple interpretations and judicial review. Public policy is a very unruly horse, and once you get on it and ride it, you never know where it will take you, Judge Burrough stated in 1824.Some judges have attempted to bring some order to this idea with regard to overturning an award. The Indian judiciary has also referred to it as a “unruly horse,” which implies that it can never be defined completely. The Supreme Court’s and mark rulings in Renusagar Power Co Ltd. v. General Electric Co and ONGC Ltd. v. Saw Pipes Ltd. are crucial to understand in light of this.

Conclusion

It is a well-known fact that Indian courts play a significant role in conflict resolution; nevertheless, their involvement in arbitration procedures appears to be a breach of both their own ongoing obligations and the arbitration statutes. Despite the changes made by the 2015 Amendment Act, ambiguities and loopholes continue to exist, diminishing the benefits and value of arbitral procedures

The primary goal of arbitration, or alternative dispute resolution, or ADR, was to resolve conflicts with the least amount of judicial intervention while yet being effective in preserving diplomatic links between international parties and reliable in terms of time management. Instead, the judiciary’s intervention causes the situation to become more chaotic.

If the right changes are made to make the court a support system for the Indian Arbitration system, such as prompt delegation of tasks to Arbitration institutes, limited involvement, and case-by-case examination, the intervention that is being considered might be of a beneficial kind.

Last but not least, closing the remaining gaps and loopholes could result in arbitration assuming paramount importance in a nation like India, one of the key actors in the modern global market that values its diplomatic trade connections.

Sources Uses for Research: –

Aishwarya Says:

Law students often face problems, which they cannot share with their friends and families. We have started a column on our website Student’s Corner. In this column we are talking to several law students about the challenges that they face. Students who are interested in participating in the same, can fill this Google Form.

IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems to aishwarya@aishwaryasandeep.com

Join our Whatsapp Group for latest Job Opening

March 21, 2023