NPAC’s Arbitration Review: Invocation of writ jurisdiction against decisions of designated Arbitral Institutions: Prospects and consequences

NPAC’s Arbitration Review: Invocation of writ jurisdiction against decisions of designated Arbitral Institutions: Prospects and consequences

Amit George and Rishabh Dheer

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The Arbitration and Conciliation (Amendment) Act, 2019 (2019 Act) effects a significant amendment in Section 11 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) and establishes a regime whereby applications for appointment of arbitrators shall be heard by ‘designated’ arbitral institutions chosen by the Supreme Court and the respective High Courts. This amendment, which is yet to be notified, would entail disposal of applications for appointment of arbitrators under Section 11 of the Arbitration Act (‘application for appointment’) by the designated arbitral institutions within a period of 30 days from the date of service of notice on the opposite party.

The aforesaid regime raises various interesting issues for future adjudication. One such critical issue would be of the prospective forums for recourse, or the lack thereof, against any such decision of an arbitral institution in allowing or rejecting an application for appointment. In this context, the present article seeks to examine the possibility of the invocation of writ jurisdiction before the concerned High Court.

As per the position prevailing under the un-amended Arbitration Act, whenever an application for appointment was disposed of by the High Court concerned in the case of domestic arbitration, no appeal against the said order is permissible in law and only a special leave petition under Article 136 of the Constitution of India would lie there-against. The Constitution Bench of the Supreme Court in SBP & Co. v. Patel Engineering Ltd.[1] settled the position in this regard. The reason that prevailed with the majority in the aforesaid case to so hold was the ultimate finding arrived at by the majority that deciding an application for appointment represents an exercise of ‘judicial’ power as opposed to an ‘administrative’ power. The dissenting opinion authored by Justice C. K. Thakker, however, held to the contrary, and noted that inasmuch as the said power was ‘administrative’ in nature, a writ petition would lie there-against. It is also relevant to make reference to another finding of the majority wherein, on an ancillary note, it was held that the writ remedy could not be invoked to assail an order or an award passed by an arbitral tribunal inasmuch as the Arbitration Act provided a specific alternative mechanism for challenge thereto in the form inter-alia of Section 37 and Section 34.[2]

Further, under the un-amended Arbitration Act, with arbitral institutions not having any statutory foundation, it has been the consistent view that a writ petition would not lie against a decision taken by an arbitral institution inasmuch as the said institution was not performing a public/statutory function but a purely contractual one[3].

At this juncture, it is relevant to note that by the enactment of the Arbitration and Conciliation (Amendment) Act, 2015 (‘2015 Act’), it was specified under the amended Section 11(6B) that designation of an arbitral institution by the Supreme Court or the concerned High Court would not mean delegation of judicial power.[4] Therefore, on a co-joint reading of the amendments introduced by the 2015 Act and the 2019 Act, an arbitral institution seemingly exercises an independent function directly attributable to the Arbitration Act which empowers it to dispose of an application for appointment, divorced from the power of the designating Court.

This newly established statutory regime, therefore, opens up the very real possibility of the writ remedy being invoked against an arbitral institution’s decision. The reasons for this are not far to seek.

Firstly, an arbitral institutions now performs an independent statutory function; and not being a mirror-image of the designating Court, it could therefore be argued that the decision of an arbitral institution in deciding an application for appointment would be amenable to writ jurisdiction.[5] On a related note, the Supreme Court in SREI Infrastructure Finance Limited v. Tuff Drilling Private Ltd.[6], in the context of the nature of power exercised by arbitral tribunals under the Arbitration Act, held that even though arbitral tribunals are essentially private in nature, it could not be lost sight of that they exercise powers which are granted to them under a statute i.e., Arbitration Act, and thus, the following would be the position in law:

12. …The power and functions of arbitral tribunal are statutorily regulated. The tribunals are special arbitration with institutional mechanism brought into existence by or under statute to decide dispute arising with reference to that particular statute or to determine controversy referred to it. The tribunal may be a statutory tribunal or tribunal constituted under the provisions of the Constitution of India. Section 9 of the Civil Procedure Code vests into the Civil Court jurisdiction to entertain and determine any civil dispute. The constitution of tribunals has been with intent and purpose to take out different categories of litigation into the special tribunal for speedy and effective determination of disputes in the interest of the society. Whenever, by a legislative enactment jurisdiction exercised by ordinary civil court is transferred or entrusted to tribunals such tribunals are entrusted with statutory power. The arbitral tribunals in the statute of 1996 are no different, they decide the lis between the parties, follows Rules and procedure conforming to the principle of natural justice, the adjudication has finality subject to remedy provided under the 1996 Act.”

Secondly, as already noted hereinabove, in SBP & Co. (supra) the majority view held writ proceedings to be non-maintainable against orders of arbitral tribunals inasmuch as there were alternative provisions for recourse there-against under the Arbitration Act. There exists no such recourse against decisions of arbitral institutions under the Arbitration Act, as amended, and therefore this would further strengthen the argument for recourse to writ proceedings.

Thirdly, there is a surprising deletion, by the 2019 Act[7], of Section 11(7)[8] of the Arbitration Act. The erstwhile Section 11(7), as further amended by the 2015 Act, specifically provided for the finality of an order passed inter-alia by an arbitral institution, and a corresponding bar to any appeal against such an order. Therefore, under the changed regime which will come into operation once the amendment is notified, there exists no textual indication of a normative precept that grants finality to the decision of an arbitral institution and ring-fences it from further challenges.

The availability of a writ remedy against an order of an arbitral institution deciding an application for appointment would open up the possibility of judicial interference at an initial stage of the proceedings and the consequent likely delays which can result therefrom, thus subverting the very essence of speedy adjudication which is the fundamental motivating factor of the 2015 Act and 2019 Act. To make matters worse, the 2019 Act further seeks to delete[9] Section 11(6)(A)[10] of the Arbitration Act, which had been introduced by the 2015 Act, and which provided for a very limited scope of examination of the existence of an arbitration agreement while deciding an application for appointment. There will be a deafening silence in this regard in the Arbitration Act, once the amendment in question is notified, potentially opening up avenues to challenge decisions of arbitral institutions on various aspects such as accord and satisfaction, limitation etc.

Though there are valid arguments to be made on either side of the debate as to the availability of the writ remedy, or the lack thereof, against decisions of arbitral institutions, it is quite evident that the said issue is likely to witness significant contestation in the future. The 2019 Act, as it stands today, offers little by way of clarity, and it would be advisable to effect the requisite changes to provide some legislative guidance in this regard before the amendment in question is formally notified.

The authors are Advocates practicing before the High Court of Delhi

[1] (2005) 8 SCC 618

[2] In the subsequent judgment in Lalitkumar V. Sanghavi v. Dharamdas V. Sanghavi (2014) 7 SCC 255, the Supreme Court disapproved of the view taken by certain High Courts that any order passed by an arbitral tribunal was amenable for interference by the High Court under Article 226 or 227 of the Constitution of India.

[3] Reference in this regard may be made to the decision of the High Court of Delhi in Steel Authority of India Ltd. & Ors. v. Indian Council of Arbitration & Ors. 2013 (4) Arb. LR 526 (Delhi).

[4] 11(6B): The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.

[5] It is otherwise well settled that statutory tribunals are amenable to judicial review under Article 226 or Article 227 of the Constitution of India. Reference in this regard may be made to Bharat Bank Ltd. v. Employees of the Bharat Bank Ltd. (1950) SCR 459 and Gujarat Steel Tubes Ltd. & Ors. v. Gujarat Steel Tubes Mazdoor Sabha & Ors. (1980) 2 SCC 593.

[6] (2018) 11 SCC 470

[7] Through Section 3 (v) of the 2019 Act, which states that “sub-sections (6A) and (7) shall be omitted”.

[8] 11 (7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision.

[9] Supra note 7.

[10] 11 [(6A): The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.

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