Arbitration in India plagued by rampant corruption: Justice Sanjib Banerjee

The arbitration landscape in India is plagued by rampant corruption. former Madras and Meghalaya High Court Chief Justice Sanjib Banerjee said on Friday.

He said that he has witnessed gross misuse of arbitration laws when he was a judge at the Calcutta High court.

Finance companies would often pitch arbitrators of their choice with the connivance of contractors and government employees, he said. These arbitrators would dance to their tunes, taking reference after reference and fixing awards that were much bigger than the original claim, the retired judge alleged.

He was speaking at the launch of the book, ‘A treatise on Arbitration Law and Practice’ authored by Senior Advocate M Sricharan Rangarajan.

Specifically on arbitration law in India, Justice Banerjee said that it was still work in progress and many reforms have to be brought about.

There is an imminent need for the Supreme Court to correct several of its judgements on arbitration, he emphasised.

Correcting some of the law laid down by the apex court is necessary since the law laid down by the Supreme Court has to be followed by all, he said.

“Some of the law laid down by the Supreme Court in Arbitration also requires correction.  In particular, paragraph 95 or 96 in Kaisar Aluminum and Balco, which was absolutely out of context in that judgement,” Justice Banerjee said.

Justice Banerjee was referring to the full court judgment of the Supreme Court in the Bharat Aluminum Company Limited vs Kaisar Aluminum where, the Court held that if an arbitration agreement designated a foreign country as the ‘seat’ of the arbitration, then the same translated into an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to the proceedings.

"This case deals with the enforcement of foreign arbitral awards in India. And as you would know, there is a basic difference between municipal law and international law. In international law if you do not specify the governing law and you specify the venue then it implies that the law of the venue becomes the governing law under which arbitration may be held. But in municipal law it makes no difference because, the law is the same in Delhi and Mumbai and Calcutta and Chennai. And so the analogy that is drawn in kaisar and Balco is absolutely in opposite and following that several judgements have been delivered holding that if A in Chennai enters into an agreement with b in Mumbai and the two decide that the arbitral reference will be held in Delhi then the courts in Delhi will have jurisdiction over the matter. In fact if you look at section 2(1)(e) it has nothing to do with the seat of arbitration but only with the cause of action," Justice Banerjee said.

The law laid down by the Supreme Court has to be followed under 141 but if such laws were always academic and correct, then it would be even better, he added.

The former judge went to say that Advocate Rangarajan's book dealt with several such issues concerning arbitration proceedings in India and was a must read for every stakeholder.

"I always found Sricharan to be precocious for his age. His knowledge and erudition struck me. And just as every father of an Indian girl is on the constant lookout for prospective grooms, every Chief justice is always looking for those fit to be elevated to the Bench. So when I was the Chief Justice of the Madras High Court, I immediately proposed Sricharan's name, only to be told that he was just 39 years old," justice Banerjee said.

Advocate Rangarajan, was designated as a Senior Advocate by the Madras High Court in January this year. He was also the Additional Advocate General for the State during the AIADMK regime in Tamil Nadu.

“The thought of such book had been lingering in my mind since college days. Also, because post the 2015 amendments to the Arbitration Act, the scope for challenging an award became very limited and so I thought there was a need for a book, especially for the practitioners on the other side of the table. The thought really fructified when I was a law officer and I was dealing with seven to eight cases of arbitration every day on behalf of the State," Rangarajan said.

Also present at the event were Supreme Court judges Justices MM Sundaresh and KV Viswanathan, Chief Justice of the Madras High Court Justice SV Gangapurwala and judges Justices Anitha Sumanth, Bharatha Chakravarthy, R Mahadevan, Senthil Kumar Ramamoorthy, S Vaidyanathan, Mohammed Shaffiq, retired judge Justice V Parthiban and Senior Advocates Vijay Narayana and Aravindh Pandian.