Sec 34 Arbitration Act requires no further tweaking, arbitration is as good as the arbitrator: Justice Indu Malhotra

Speaking on the “way forward” after the amendment to Section 34 of the Arbitration and Conciliation Act, 1996, Supreme Court Judge, Justice Indu Malhotra has opined that the Section did not need any more tweaking..“I don’t think it requires any further tweaking. Believe me, the bottom line is, arbitration is as good as the arbitrator who conducts (the arbitration proceedings) and that is the bottom line. To my mind, it is necessary to appoint trained arbitrators with domain knowledge of the subject they are dealing with and a person of integrity rather than widen the scope of judicial review.”Justice Indu Malhotra.Justice Indu Malhotra was speaking as a keynote speaker at the 12th Annual International Conference on Arbitration organized by the Nani Palkhivala Arbitration Centre. .Justice Malhotra stated that further widening the scope of judicial review under Section 34 would be contrary to the entire spirit of the Act..“There are sufficient grounds which are available in the Act to cover almost every kind of objection which a person may raise for setting aside the award. If Section 34 were to be enlarged it will certainly have an impact on Section 37, which is the statutory appeal provided if objections are dismissed.”Justice Indu Malhotra.Justice Malhotra acknowledged that with the growing complexities of issues raised in arbitration, greater protection was required to avoid errors..The recourse, Justice Malhotra said, must be found within the arbitral process itself and not outside by harking back to the courts..“This would be by way of providing a right of an internal appeal within the process and not widening the contours of judicial review..”.She added,.“.. A second look at the award, I think, would be preferable by an internal review process rather than moving towards the courts and a right to appeal would be preferable to preserve jurisprudential value in the development of commercial law..”Justice Indu Malhotra.Justice Malhotra also spoke on the existence of multi-tier arbitration and remarked,.“..Even though two tier, multi-tier arbitration has not been provided by our Act but our Act recognizes procedural autonomy with respect to the arbitral process. With respect to two tier arbitration, the Supreme Court has accepted it and recognized it in the judgement of Centro Trade. It was an interesting case which had a hybrid clause. In the first instance it was a domestic arbitration and in the second tier it was an appeal to the ICC with its seat in London which made an international award. But despite that and the objections raised that it was an incongruous contract..the Supreme Court upheld it. Party autonomy has been respected..”.She added that to effectuate a two –tier arbitration process, the way forward was to bring about institutionalization of arbitration..“we have to move away from the era of ad-hoc arbitrations so that that one internal review can take place within the arbitral process and the award which is passed in the second tier is the final award.”Justice Indu Malhotra.Justice Malhotra stated that during the past decade and particularly in the last five years, there had been a “tremendous growth” in the arbitration jurisprudence of India and the Amendment Acts of 2015 and 2019 brought the Indian law in consonance with contemporary international norms and principles..Justice Malhotra spoke at length on the precursor to the 1996 Act i.e. the Arbitration Act, 1940 Act. .She informed that pre-1996, while the domestic arbitration was governed by the 1940 Act, the enforcement of international awards was governed by a separate legislation called the Foreign Awards (Recognition and Enforcement) Act, 1961..This regime, Justice Malhota opined, was time consuming and completely inefficacious..She said,“We had section 15 which empowered the court to modify and correct and award. We had section 30 .. for setting aside an award and it was only the 1990s, with the liberalization of the economy, when the UN General Assembly had adopted the UNCITRAL model law that the Indian legislature brought it the 1996 Act which is a close replica, with of course minor contextual variations which are required for the local environment in which we exist. “.Justice Malhotra stated that the distinctive point in the post-1996 regime was that the newly enacted law “a comprehensive, self-contained Code” which governed both domestic arbitration as well as foreign awards..Justice Malhotra remarked that in her opinion, there should have been two separate legislations for domestic arbitrations as well as foreign awards, such as in Singapore..“.. it is my belief ..that I think there should have been two acts, one for domestic arbitrations and one for enforcement of foreign awards because the regimes are entirely different and sometimes in the interpretation of one part, one tends to look at the other part which may create confusion. That is what had happened in the Bhatia and Venture Global cases, when they kept referring to the part II which is an entirely different regime.”Justice Indu Malhotra.Justice Malhotra further noted that the 1996 Act brought in "minimum judicial intervention" as the court’s power to modify, amend or rectify the award in the 1940 Act had been completely done away with..Justice Malhotra thus discussed at length the conditions under Section 34, Section 13(5) and Section 16 of the 1996 Act under which an award could be interfered with..Stating that recourse to court under the Indian law is only provided at the post-award stage and not at the intermediate stage, Justice Malhotra opined that there should be recourse to court at the intermediate stage..“Probably the law makers felt that they wanted to cut short the number of appeals or provisions where the court could be approached and they wanted the entire process to the expedited. Although, in my view, if an objection is raised at an intermediate stage regarding the conflict of interest or lack of impartiality and the independence of the arbitrator, I think that issue needs to be resolved first rather than go through the gamut because it is time consuming. it is expensive to go through arbitration and eventually (if) the award, at the post 34 stage, is set aside on any of these grounds, it is a complete waste of money and time..I feel one should have the recourse at the intermediate stage.”Justice Indu Malhotra.Justice Malhotra also discussed the nature of power and scope of judicial review under Section 34..Referring to the judgements passed by the Supreme Court, Justice Malhotra stated that Section 34 was not an appellate power but in the nature of a supervisory jurisdiction..“The scope of inquiry is restricted to a consideration whether any of the grounds contained in 34(2), 13(5) or 16(6) are made out for setting aside an award..”.She also spoke on the principles for deciding when an award could be set aside and said,.“..re-appreciation of evidence is not permissible by the court under section 34. The court cannot probe into the mental process of the arbitrator or speculate as to what impelled the arbitrator to arrive at a particular decision..The arbitrator is the master of evidence and the court cannot scrutinize an award as if it was sitting in appeal.”.She added,.“..if the arbitrator has taken a plausible view , you don’t interfere with it, you accept it. If two interpretations are possible and the view taken by the arbitrator is plausible, the court will not interfere.”.However, the arbitrator cannot decide contrary to the terms of the contract or re-write the contract under the guise of interpretation, Justice Malhotra said. .Justice Malhotra also reflected on the Courts' approach in arbitration matters and said, ."I think in the last five years, the Indian Courts..have revealed a pro-arbitration approach . It is in very few cases where awards have been set aside and those are cases where there has been a gross violation of natural justice or some kind of unfairness."Justice Indu Malhotra.[Watch Video]