1nL Ak8I1kA1ICN LAW CI INDIA: A CkI1ICAL ANALSIS

by SumeeL kachwaha*
[1hls arLlcle was flrsL publlshed ln Asla lnLernaLlonal ArblLraLlonal !ournal, volume 1, number 2, ages
103-126]
lndla opened a fresh chapLer ln lLs arblLraLlon laws ln 1996 when lL enacLed Lhe ArblLraLlon and
ConclllaLlon AcL ('Lhe AcL' or 'new AcL'). 1hls arLlcle presenLs sallenL feaLures of Lhe AcL and analyses lLs
worklngs ln lLs near one decade of exlsLence.
A. 1he re-1996 os|t|on
rlor Lo 1996, Lhe arblLraLlon law of Lhe counLry was governed by a 1940 AcL. 1hls AcL was largely
premlsed on mlsLrusL of Lhe arblLral process and afforded mulLlple opporLunlLles Lo llLlganLs Lo approach
Lhe courL for lnLervenLlon. Coupled wlLh a slugglsh [udlclal sysLem, Lhls led Lo delays renderlng
arblLraLlons lnefflclenL and unaLLracLlve. A Lelllng commenL on Lhe worklng of Lhe old AcL can be found
ln a 1981 [udgmenL of Lhe Supreme CourL where Lhe [udge (!usLlce uA uesal) ln angulsh remarked 'Lhe
way ln whlch Lhe proceedlngs under Lhe (1940) AcL are conducLed and wlLhouL an excepLlon challenged
ln CourLs, has made lawyers laugh and legal phllosophers weep .'.

8. A New Act, A New 8eg|nn|ng
lndla (ln Lhe good company of several oLher naLlons) enacLed lLs new ArblLraLlon AcL based on Lhe
unlLed naLlons Commlsslon on lnLernaLlonal 1rade Law Model Law on lnLernaLlonal Commerclal
ArblLraLlon2 and Lhe ArblLraLlon 8ules of Lhe unlLed naLlons Commlsslon on lnLernaLlonal 1rade Law
1976.3 1hls was ln !anuary 1996. 1he SLaLemenL of Cb[ecLs and 8easons Lo Lhe AcL made no bones of
Lhe lnefflclency of Lhe old leglslaLlon. lL sald LhaL Lhe same had 'become ouLdaLed' and Lhere was need
Lo have an AcL 'more responslve Lo conLemporary requlremenLs'. lL added: 'Cur economlc reforms may
noL become fully effecLlve lf Lhe law deallng wlLh seLLlemenL of boLh domesLlc and lnLernaLlonal
commerclal dlspuLes remalns ouL of Lune.'
AmongsL Lhe maln ob[ecLlves of Lhe new AcL (seL ouL ln Lhe SLaLemenL of Cb[ecLs and 8easons) are 'Lo
mlnlmlze Lhe supervlsory role of courLs ln Lhe arblLral process' and 'Lo provlde LhaL every flnal arblLral
award ls enforced ln Lhe same manner as lf lL were a decree of Lhe CourL'.

1hls ls how Lhe Supreme CourL dwelled on Lhe new AcL:

1o aLLracL Lhe confldence of lnLernaLlonal MercanLlle communlLy and Lhe growlng volume of lndla's
Lrade and commerclal relaLlonshlp wlLh Lhe resL of Lhe world afLer Lhe new llberallzaLlon pollcy of Lhe
CovernmenL, lndlan arllamenL was persuaded Lo enacL Lhe ArblLraLlon & ConclllaLlon AcL of 1996 ln
unCl18AL model and Lherefore ln lnLerpreLlng any provlslons of Lhe 1996 AcL CourLs musL noL lgnore
Lhe ob[ecLs and purpose of Lhe enacLmenL of 1996. A bare comparlson of dlfferenL provlslons of Lhe
ArblLraLlon AcL of 1940 wlLh Lhe provlslons of ArblLraLlon & ConclllaLlon AcL, 1996 would unequlvocally
lndlcaLe LhaL 1996 AcL llmlLs lnLervenLlon of CourL wlLh an arblLral process Lo Lhe mlnlmum.4

C. 1he Scheme of the Act
1he AcL ls a composlLe plece of leglslaLlon. lL provldes for domesLlc arblLraLlon, lnLernaLlonal commerclal
arblLraLlon, enforcemenL of forelgn award and conclllaLlon (Lhe laLLer belng based on Lhe unCl18AL
ConclllaLlon 8ules of 1980).

1he more slgnlflcanL provlslons of Lhe AcL are Lo be found ln arLs l and ll Lhereof. arL l conLalns Lhe
provlslons for domesLlc and lnLernaLlonal commerclal arblLraLlon. Any arblLraLlon Lo be conducLed ln
lndla would be governed by arL l, lrrespecLlve of Lhe naLlonallLles of Lhe parLles. arL ll provldes for
enforcemenL of forelgn awards.

arL l ls more comprehenslve and conLalns exLenslve provlslons based on Lhe Model Law. lL provldes,
lnLer alla, for arblLrablllLy of dlspuLes, nonlnLervenLlon by courLs, composlLlon of Lhe arblLral Lrlbunal,
[urlsdlcLlon of Lhe arblLral Lrlbunal, conducL of Lhe arblLraLlon proceedlngs, recourse agalnsL arblLral
awards and enforcemenL. arL ll, on Lhe oLher hand, ls largely resLrlcLed Lo enforcemenL of forelgn
awards governed by Lhe ConvenLlon on Lhe 8ecognlLlon and LnforcemenL of lorelgn ArblLral Awards3 or
Lhe ConvenLlon on Lhe LxecuLlon of lorelgn ArblLral Awards.6 arL ll ls Lhus, (by lLs very naLure) noL a
compleLe code. 1hls led Lo [udlclal lnnovaLlon by Lhe Supreme CourL ln Lhe case of 8haLla lnLernaLlonal v
8ulk 1radlng.7 Pere Lhe lndlan courL's [urlsdlcLlon was lnvoked by a parLy seeklng lnLerlm measures of
proLecLlon ln relaLlon Lo an arblLraLlon under Lhe 8ules of ArblLraLlon of Lhe lnLernaLlonal Chamber of
Commerce lnLernaLlonal CourL of ArblLraLlon8 Lo be conducLed ln arls. 1he provlslon for lnLerlm
measure (s 9) was Lo be found ln arL l alone (whlch applles only Lo domesLlc arblLraLlon). Pence, Lhe
courL was faced wlLh a slLuaLlon where Lhere was no proprlo vlgore legal provlslon under whlch lL could
granL lnLerlm measures of proLecLlon. CreaLlvely lnLerpreLlng Lhe AcL, Lhe Supreme CourL held LhaL Lhe
'general provlslons' of arL l would apply also Lo offshore arblLraLlons, unless Lhe parLles expressly or
lmplledly exclude appllcablllLy of Lhe same. Pence, by [udlclal lnnovaLlon, Lhe Supreme CourL exLended
Lhe general provlslons of arL l Lo forelgn arblLraLlons as well.

lL may be sLaLed LhaL Lhls was premlsed on Lhe assumpLlon LhaL Lhe lndlan courLs would oLherwlse have
[urlsdlcLlon ln relaLlon Lo Lhe maLLer (ln Lhe lnLernaLlonal sense). 1hls became clear ln a subsequenL
declslon of Lhe Supreme CourL ln Shree[ee 1raco (l) vL LLd v aperllne lnLernaLlonal lnc.9 Pere Lhe
courL's asslsLance was soughL for appolnLlng an arblLraLor ln a forelgn arblLraLlon. 1he power of
appolnLmenL by Lhe courL exlsLs under s 11 of arL l of Lhe AcL (whlch applles Lo domesLlc arblLraLlon
alone). 1he courL decllned Lo exerclse [urlsdlcLlon. lL found LhaL Lhe arblLraLlon was Lo be conducLed ln
new ?ork and LhaL Lhe law governlng Lhe arblLraLlon proceedlngs would be Lhe law of seaL of Lhe
arblLraLlon. Pence, Lhe exLenslon of arL l provlslons Lo forelgn arblLraLlons sancLlfled by8haLla10 would
noL be resorLed Lo ln every case. 1he lndlan courLs would have Lo flrsL deLermlne lf lL has [urlsdlcLlon, ln
Lhe lnLernaLlonal sense.

D. Sa||ent Ieatures of the Act
1he AcL applles Lo all Lypes of arblLraLlons, vlz sLaLuLory or non-sLaLuLory, lnsLlLuLlonally admlnlsLered or
ad hoc, Lhe only quallflcaLlon belng LhaL Lhe dlspuLe musL be arblLrable.11 1he sallenL feaLures of Lhe AcL
are dlscussed below.

1. Arb|trat|on Agreement Def|ned
An arblLraLlon agreemenL has Lo be ln wrlLlng, and may be even conLalned ln an exchange of leLLers or
any oLher means of LelecommunlcaLlon whlch provlde a record of Lhe agreemenL. 1he agreemenL need
noL be slgned and Lhe unslgned agreemenL afflrmed by Lhe parLles' conducL would be valld as an
arblLraLlon agreemenL.12 An arblLraLlon agreemenL would also be consldered Lo be ln wrlLlng lf Lhere ls
an exchange of a sLaLemenL of clalm and defence ln whlch Lhe exlsLence of Lhe agreemenL ls alleged by
one parLy and noL denled by Lhe oLher.13

2. Arb|trab|||ty of D|sputes
1he AcL sLaLes LhaL Lhe relaLlonshlp beLween Lhe parLles need noL be conLracLual. Pence, a dlspuLe ln
LorL can also be referred. 1he Supreme CourL ln Lhe case of 8enu Sagar ower Co v Ceneral LlecLrlc Co14
sLaLed Lhls as follows:

1he quesLlon ls noL wheLher Lhe clalm lles ln LorL buL Lhe quesLlon ls wheLher even Lhough lL has laln ln
LorL lL 'arlses ouL of' or ls 'relaLed Lo' Lhe conLracL, LhaL ls Lo say, wheLher lL arlses ouL of Lhe Lerms of Lhe
conLracL or ls consequenLlal upon any breach Lhereof.

1he courL ln 8enu Sagar l also approved an Lngllsh declslon ln Lhe case of Woolf v Collls 8emoval
Servlce13 where Lhe CourL of Appeal held LhaL Lhough Lhe clalm ln negllgence was a clalm ln LorL and noL
under conLracL, yeL Lhere was a sufflclenLly close connecLlon beLween LhaL clalm and Lhe LransacLlon Lo
brlng Lhe clalm wlLhln Lhe arblLraLlon clause. ClLlng Lhls, Lhe courL ln 8enu Sagar l conLlnued:

Lhls auLhorlLy clearly shows LhaL even Lhough a clalm may noL dlrecLly arlse under Lhe conLracL whlch
conLalns an arblLraLlon clause, lf Lhere was sufflclenL close connecLlon beLween LhaL clalm and Lhe
LransacLlon under Lhe conLracL, lL wlll be covered by Lhe arblLraLlon clause.

Pence, wheLher an acLlon lles ln LorL or conLracL, lL would lle before an arblLral forum, unless lL can be
demonsLraLed LhaL Lhe cause of acLlon ls de hors Lhe conLracL whlch conLalns Lhe arblLraLlon clause.

A conLroversy arose as Lo wheLher arblLraLors would have [urlsdlcLlon Lo order speclflc performance of a
conLracL. 1he Plgh CourL of uelhl held16 LhaL Lhe power Lo granL speclflc performance ls dlscreLlonary
and sLaLuLorlly conferred on clvll courLs under Lhe Speclflc 8ellef AcL 1963. Pence, an arblLral Lrlbunal
would have no such power. Cn Lhe oLher hand, Lhe Plgh CourLs of un[ab, 8ombay and CalcuLLa17 Look
Lhe vlew LhaL arblLraLors could granL speclflc performance. 1he Supreme CourL puL Lo resL Lhe
conLroversy ln Clympus SupersLrucLures vL LLd v Meena vj ay kheLan18 and held LhaL arblLraLors do
have Lhe power Lo order speclflc performance of a conLracL. 1he courL relled on Palsbury's Laws of
Lngland19 whlch sLaLes LhaL Lhe dlfferences or dlspuLes whlch may be referred musL conslsL of 'a
[usLlflable lssue Lrlable clvllly. A falr LesL of Lhls ls wheLher Lhe dlfference can be compromlsed lawfully
by way of accord and saLlsfacLlon.'

ln Lhe case of PlndusLan eLroleum CorporaLlon v lnk ClLy,20 Lhe respondenL reslsLed arblLraLlon on Lhe
ground LhaL Lhe cause of acLlon made ouL by Lhe clalmanL (le shorL dellvery and Lamperlng wlLh welghLs
and measures and seals) was essenLlally a crlmlnal offence under speclal sLaLuLes. lL was conLended LhaL
Lhe respondenL's conducL could be lnvesLlgaLed only by offlcers so auLhorlsed under sLaLuLe and LhaL Lhe
offence, lf any, can be Lrled only by a courL of compeLenL [urlsdlcLlon and noL by an arblLraLor. 1he
Supreme CourL negaLlved Lhls conLenLlon, holdlng LhaL Lhe clalmanL had rlghLs under Lhe conLracL whlch
are lndependenL of Lhe sLaLuLory provlslons and hence Lhe conLracLual rlghLs could be enforced Lhrough
Lhe arblLraLlon process: '1he exlsLence of dual procedure, one under Lhe crlmlnal law and Lhe oLher
under Lhe conLracLual law ls a well-accepLed legal phenomenon ln lndlan [urlsprudence.'21


1he Supreme CourL has, however, held LhaL a clalm for wlndlng up22 ls noL arblLrable and hence a courL
acLlon for wlndlng up cannoL be dlsmlssed on a conLenLlon LhaL Lhe parLles had enLered lnLo an
arblLraLlon agreemenL.
1he case of Man 8oland v MulLlcolour CffseL23 made a slgnlflcanL lnroad lnLo Lhe sancLlLy of an
arblLraLlon agreemenL. Pere Lhe Supreme CourL held LhaL Lhe Monopolles and 8esLrlcLlve 1rade
racLlces Commlsslon of lndla ('Commlsslon') would have [urlsdlcLlon Lo enLerLaln a clalm for damages
arlslng ouL of an alleged 'unfalr Lrade pracLlce' (ln Lhls case, sale of alleged defecLlve goods and
deflclency ln servlces). 1he conLracL beLween Lhe parLles conLalned an arblLraLlon agreemenL provldlng
for arblLraLlon ln arls, under lCC 8ules wlLh Cerman law applylng. 1he Supreme CourL held LhaL Lhe
MonopollsLlc and 8esLrlcLlve 1rade racLlces AcL 1969 ('M81 AcL') provldes for sLaLuLory remedles ln
respecL of sLaLuLorlly deflned offences and Lhese remedles are ln addlLlon Lo Lhe usual remedles
avallable Lo Lhe parLles under Lhe ConLracL AcL. Pence, Lhe complalnL for damages under Lhe M81 AcL
would be malnLalnable desplLe an arblLraLlon agreemenL beLween Lhe parLles. 1hls case assumes
slgnlflcance, for an 'unfalr Lrade pracLlce' ls deflned raLher wldely under Lhe M81 AcL. lL lncludes any
'unfalr or decepLlve pracLlce' for sale of goods or servlces. 1he lndlan clalmanL here was Lhus able Lo
bypass Lhe arblLraLlon agreemenL and sue for damages ln lndla (wlLh lndlan law applylng) by adapLlng
Lhe M81 rouLe.

3. Lxpert Determ|nat|on D|st|ngu|shed from Arb|trat|on
1he Supreme CourL had occaslon Lo conslder Lhls exLenslvely ln Lhe case of kk Modl v kn Modl24 where,
afLer clLlng MusLlll & 8oyd's Commerclal ArblLraLlon23 and 8ussell on ArblLraLlon,26 lL concluded LhaL,
by and large, Lhere were no concluslve LesLs one could follow Lo deLermlne wheLher Lhe agreemenL was
Lo refer an lssue Lo an experL or wheLher Lhe parLles had ln facL agreed Lo resolve dlspuLes Lhrough
arblLraLlon. lL held:
Lherefore our courLs have lald emphasls on (1) exlsLence of dlspuLes as agalnsL lnLenLlon Lo avold fuLure
dlspuLes, (2) Lhe Lrlbunal or forum so chosen ls lnLended Lo acL [udlclally afLer Laklng lnLo accounL
relevanL evldence before lL and Lhe submlsslons made by Lhe parLles before lL, and (3) Lhe declslon ls
lnLended Lo blnd Lhe parLles. nomenclaLure used by Lhe parLles may noL be concluslve. Cne musL
examlne Lhe Lrue lnLenL and purporL of Lhe agreemenL.27

4. lnLernaLlonal Commerclal ArblLraLlon
As menLloned earller, Lhe AcL governs boLh domesLlc and lnLernaLlonal commerclal arblLraLlons Lhrough
arL l. 1here are only Lwo slLuaLlons where arL l LreaLs domesLlc arblLraLlon dlfferenLly from
lnLernaLlonal commerclal arblLraLlon. Cne ls ln relaLlon Lo an appolnLmenL of an arblLraLor by Lhe courL
and Lhe oLher ls ln relaLlon Lo Lhe deLermlnaLlon of governlng law (and Lhese are dlscussed below).

'lnLernaLlonal commerclal arblLraLlon' ls deflned as an arblLraLlon where aL leasL one of Lhe parLles ls a
naLlonal or hablLual resldenL ln any counLry oLher Lhan lndla or a body corporaLe whlch ls lncorporaLed
ln any counLry oLher Lhan lndla or a company or assoclaLlon or a body of lndlvlduals whose 'cenLral
managemenL and conLrol'28 ls exerclsed ln any counLry oLher Lhan lndla.29

S. 1he r|nc|p|e of Non-|ntervent|on by the Courts
1he prlnclple LhaL Lhe courLs shall noL lnLerfere ln arblLral proceedlngs ls a fundamenLal Lheme
underlylng Lhe AcL. lndeed Lhe AcL conLemplaLes of only Lhree slLuaLlons where [udlclal auLhorlLy may
lnLervene ln arblLral proceedlngs. 1hese are:

l. appolnLmenL of arblLraLors, where Lhe parLles' envlsaged meLhod for Lhe same falls (s 11),
ll. ll. rullng on wheLher Lhe mandaLe of Lhe arblLraLor sLands LermlnaLed due Lo lnablllLy Lo
perform hls funcLlons or fallure Lo proceed wlLhouL undue delay (s 14(2)), and
lll. lll. provlde asslsLance ln Laklng evldence (s 27).
lv. As would be noLlced, lndlan law ls far more resLrlcLlve ln allowlng courL lnLervenLlon
(compared Lo Lhe Model Law).
v.
SecLlon 3 of Lhe AcL provldes, Lhrough a non-obsLanLe clause, LhaL ln ma ers governed by arL l, no
[udlclal auLhorlLy shall lnLerfere excepL where so provlded for.

SecLlon 8 ls a companlon secLlon. lL sLaLes LhaL a [udlclal auLhorlLy before whlch an acLlon ls broughL ln a
maLLer whlch ls Lhe sub[ecL maLLer of an arblLraLlon agreemenL shall refer Lhe parLles Lo arblLraLlon. 1he
only condlLlon belng LhaL Lhe parLy ob[ecLlng Lo Lhe courL proceedlngs musL do so no laLer Lhan hls flrsL
sLaLemenL on Lhe subsLance of Lhe dlspuLe. ln Lhe meanwhlle, Lhe arblLraLlon proceedlngs may be
commenced and conLlnued wlLh and an award rendered.

1wo polnLs are noLeworLhy. 1he flrsL ls LhaL s 3 (deparLlng from Lhe Model Law) conLalns a non-obsLanLe
clause. SecLlon 8 also deparLs from Lhe Model Law. 1he correspondlng provlslon (ArL 8 of Lhe Model
Law) permlLs Lhe courL Lo enLerLaln an ob[ecLlon Lo Lhe effecL LhaL Lhe arblLraLlon agreemenL ls 'null and
vold lnoperaLlve or lncapable of belng performed'. 1he deparLures made by Lhe lndlan law demonsLraLe
Lhe leglslaLlve lnLenL Lo keep Lhe courLs ouL and leL Lhe arblLral sLream flow unobsLrucLed.

8y and large Lhe lndlan courLs have well undersLood Lhe splrlL and lnLenL behlnd Lhe prlnclple of non-
lnLervenLlon. 1hus, ln CuC llnanclal Servlces (MaurlLlus) LLd v 8L CommunlcaLlons30 Lhe respondenL
obLalned an anLlarblLraLlon ln[uncLlon from Lhe Plgh CourL on Lhe ground LhaL Lhe pledge of shares
whlch was soughL Lo be enforced Lhrough arblLraLlon would enable Lhe clalmanLs Lo Lake conLrol of a
Lelecom company whlch (as lL was a forelgn company) would be conLrary Lo lndlan law. Cn appeal, Lhe
Supreme CourL re[ecLed Lhls conLenLlon, sLaLlng LhaL Lhls was a plea on merlLs and Lhus wlLhln Lhe sole
[urlsdlcLlon of Lhe arblLraLors. lnLeresLlngly, Lhe courL noL only vacaLed Lhe ln[uncLlon, lL also resLralned
Lhe respondenL from movlng any furLher appllcaLlons 'whlch would have Lhe effecL of lnLerferlng wlLh
Lhe conLlnuance and concluslon of Lhe arblLraLlon proceedlngs'.31 ln Sukanaya Poldlngs v !ayesh
andya,32 however, Lhe Supreme CourL refused Lo sLay Lhe courL acLlon on Lhe ground LhaL Lhe sub[ecL
maLLer of Lhe arblLraLlon agreemenL was noL Lhe same as Lhe sub[ecL maLLer of Lhe clvll sulL. 8esldes, Lhe
parLles ln Lhe Lwo acLlons were noL ldenLlcal. 1he courL held LhaL Lhe enLlre sub[ecL maLLer of Lhe sulL
should be Lhe sub[ecL maLLer of Lhe arblLraLlon agreemenL ln order for Lhe mandaLory provlslons of s 8
Lo apply.

6. Inter|m Measures of rotect|on
A parLy whlch seeks lnLerlm measures has essenLlally Lwo avenues open Lo lL. lL can approach Lhe courL
or lL can approach Lhe arblLral Lrlbunal. SecLlon 9 enables a parLy Lo approach a compeLenL courL33
before or durlng Lhe arblLral proceedlngs or even afLer Lhe award ls pronounced, buL before lL ls
enforced. 1he Model Law ln facL has a more resLrlcLlve provlslon: lL does noL conLemplaLe recourse Lo a
courL for an lnLerlm measure afLer Lhe award ls pronounced (ArL 9).

1he Supreme CourL ln Lhe case of Sundaram llnance v nLC34 held LhaL lf a courL ls approached before
Lhe arblLral proceedlngs are commenced, Lhe appllcanL musL lssue a noLlce Lo Lhe opposlng parLy
lnvoklng Lhe arblLraLlon clause or, alLernaLlvely, Lhe courL would have Lo be flrsL saLlsfled LhaL Lhe
appllcanL wlll lndeed Lake effecLlve sLeps Lo commence Lhe arblLral proceedlngs wlLhouL delay. lurLher,
Lhe courL would have Lo be saLlsfled LhaL Lhere exlsLs a valld arblLraLlon agreemenL beLween Lhe
parLles.33

1he arblLral Lrlbunal also has powers Lo make an order for any lnLerlm measure of proLecLlon or Lo
provlde approprlaLe securlLy ln connecLlon wlLh Lhe measures ordered (s 17). Powever, Lhls provlslon ls
percelved Lo be lneffecLlve and usually noL resorLed Lo. 1hls ls for several reasons. llrsLly, Lhe appllcanL
has Lo walL for Lhe arblLral Lrlbunal Lo be consLlLuLed (Lhus rullng ouL Lhls rouLe ln Lhe case of urgency).
lurLher, Lhere are no sancLlons lf Lhe order ls dlsobeyed. lrom a pracLlcal vlewpolnL also, Lhlrd parLles
cannoL be affecLed. lurLher, any lnLerlm measure would come Lo an end wlLh Lhe maklng of an award
(unllke a courL obLalned order whlch can conLlnue Llll enforcemenL).

CommenLlng upon Lhe lnherenL llmlLaLlons of Lhe provlslon, Lhe Supreme CourL ln Mu Army Welfare
Pouslng CrganlsaLlon v Sumangal Servlces36 sLaLed:
Lhe power of Lhe arblLraLor ls a llmlLed one. Pe cannoL lssue any dlrecLlon whlch would go beyond Lhe
reference or Lhe arblLraLlon agreemenL. An lnLerlm order musL relaLe Lo Lhe proLecLlon of Lhe sub[ecL-
maLLer of dlspuLe and Lhe order may be addressed only Lo a parLy Lo Lhe arblLraLlon. lL cannoL be
addressed Lo oLher parLles . no power ls conferred upon Lhe ArblLral 1rlbunal Lo enforce lLs order nor
does lL provlde for [udlclal enforcemenL Lhereof.

lL may be menLloned LhaL orders passed under ss 9 and 17 are appealable.37

7. Arb|trators
a. Appo|ntment of Arb|trators
1he AcL allows full freedom Lo Lhe parLles ln Lhe maLLer of appolnLmenL of arblLraLors. Powever, lf Lhere
ls a fallure of Lhe parLles' agreed mechanlsm for appolnLmenL, Lhe Chlef !usLlce of a Plgh CourL (ln Lhe
case of a domesLlc arblLraLlon) or Lhe Chlef !usLlce of Lhe Supreme CourL of lndla (ln Lhe case of an
lnLernaLlonal commerclal arblLraLlon) may be approached for Lhls purpose. 1hls ls Lhe flrsL lnsLance ln
whlch Lhe AcL envlsages recourse Lo a courL ln relaLlon Lo arblLraLlon proceedlngs.

1he AcL demonsLraLes lLs senslLlvlLy Lowards a forelgn llLlganL embrolled ln an arblLraLlon ln lndla. 1hus,
whlle parLles Lo a domesLlc dlspuLe have Lo approach Lhe Chlef !usLlce of Lhe Plgh CourL of Lhe sLaLe, Lhe
parLles ln an lnLernaLlonal commerclal arblLraLlon would be able Lo approach Lhe hlghesL [udlclal offlcer
of Lhe counLry, vlz, Lhe Chlef !usLlce of lndla. (ln conLrasL, Lhe Model Law envlsages Lhe appolnLmenL Lo
be made by a courL.38) CommenLlng on Lhe mandaLe resLlng on Lhe hlghesL [udlclal offlcer of Lhe land,
Lhe Supreme CourL ln konkan 8allway CorporaLlon v 8anl ConsLrucLlon vL LLd39 commenLed:
1he funcLlon has been le Lo Lhe Chlef !usLlce or hls deslgnaLe advlsedly, wlLh a vlew Lo ensure LhaL Lhe
nomlnaLlon of Lhe arblLraLor ls made by a person occupylng hlgh [udlclal offlce or hls deslgnaLe, who
would Lake due care Lo see LhaL a compeLenL, lndependenL and lmparLlal arblLraLor ls nomlnaLed.

A quesLlon arose as Lo wheLher Lhe Chlef !usLlce ls requlred Lo carry ouL hls duLy (of appolnLmenL) ln an
admlnlsLraLlve or ln a [udlclal capaclLy. lf Lhe Chlef !usLlce ls requlred Lo acL ln a [udlclal capaclLy, a
cerLaln procedure would have Lo be followed whlch would necessarlly enLall delays and Lhe declslon
may Lend Lo embarrass Lhe arblLraLor's [urlsdlcLlon Lo declde lssues of merlL or [urlsdlcLlon
lndependenLly. 1here may also be a posslblllLy of confllcLlng declslons. AfLer some dlfference of oplnlon,
Lhe conLroversy was flnally se led by a ConsLlLuLlon 8ench of Lhe Supreme CourL (le a bench comprlslng
of flve [udges) ln Lhe konkan case.40 Pere Lhe courL unanlmously held LhaL Lhe funcLlon of appolnLmenL
ls admlnlsLraLlve ln naLure and noL [udlclal. lL held LhaL one of Lhe ob[ecLs of Lhe law ls Lo have Lhe
arblLral Lrlbunal consLlLuLed as expedlLlously as posslble. Lven formal pleadlngs for Lhls purpose would
noL be requlred and Lhe opposlng parLy would need Lo be only noLlfled 'so LhaL lL may know of lL and
may lf lL so choose, asslsL Lhe Chlef !usLlce or hls deslgnaLe ln Lhe nomlnaLlon of an arblLraLor'.41

1hls slgnlflcanL [udgmenL ensures LhaL Lhe arblLral process does noL geL sLulLlfled ln Lhe process of
seeklng courL asslsLance for consLlLuLlon of Lhe arblLral Lrlbunal. 1hus, ln a glven case, lf Lhere ls any
conLroversy as Lo Lhe exlsLence or valldlLy of Lhe arblLraLlon agreemenL, lL has Lo be le Lo Lhe arblLral
Lrlbunal alone and Lhe Chlef !usLlce would noL geL dlverLed lnLo deLermlnlng Lhls lssue. ln Lhe
subsequenL case of nlmeL 8esources v Lssar SLeels42 Lhe Supreme CourL clarlfled LhaL even lf Lhere ls
any 'doubL' ln Lhe mlnd of Lhe Chlef !usLlce or hls deslgnaLe as Lo Lhe exlsLence or valldlLy of an
arblLraLlon agreemenL, Lhe same musL be referred Lo Lhe arblLral Lrlbunal Lo be resolved. lL ls only lf Lhe
Chlef !usLlce 'can be absoluLely sure'43 LhaL Lhere ls no arblLraLlon agreemenL ln exlsLence beLween Lhe
parLles LhaL Lhe power of appolnLmenL under s 11 can be decllned.

b. Cha||enge to an Arb|trator
Llke ArL 12 of Lhe Model Law and ArL 10 of Lhe unCl18AL ArblLraLlon 8ules, Lhe AcL also requlres Lhe
arblLraLors (lncludlng parLy appolnLed arblLraLors) Lo be lndependenL and lmparLlal and make full
dlsclosure ln wrlLlng of any clrcumsLance llkely Lo glve rlse Lo [usLlflable doubLs on Lhe same.44
AL Lhls sLage, one may polnL ouL a pecullar pracLlce ln lndla (essenLlally ln governmenL and publlc secLor
bulldlng conLracLs) provldlng for arblLraLlon by an owner's employee or nomlnee (eg arblLraLlon by Lhe
managlng dlrecLor or englneer of Lhe corporaLlon). 1hls pracLlce has been sancLlfled wlLh usage and
conLlnues under Lhe new reglme as well. 1hough Lhe maLLer has noL been LesLed under Lhe 1996 AcL, lL
ls qulLe posslble LhaL Lhls pracLlce of appolnLmenL would conLlnue Lo be upheld.
An arblLraLor may be challenged only ln Lwo slLuaLlons. llrsL, lf clrcumsLances exlsL LhaL glve rlse Lo
[usLlflable grounds as Lo hls lndependence or lmparLlallLy, second, lf he does noL possess Lhe
quallflcaLlons agreed Lo by Lhe parLles. A challenge ls requlred Lo be made wlLhln 13 days of Lhe
peLlLloner becomlng aware of Lhe consLlLuLlon of Lhe arblLral Lrlbunal or of Lhe clrcumsLances furnlshlng
grounds for challenge. lurLher, sub[ecL Lo Lhe parLles' agreemenL, lL ls Lhe arblLral Lrlbunal (and noL Lhe
courL - unllke under Lhe old reglme) whlch shall declde on Lhe challenge. lf Lhe challenge ls noL
successful Lhe Lrlbunal shall conLlnue wlLh Lhe arblLral proceedlngs and render Lhe award, whlch can
Lhen be challenged by an aggrleved parLy aL LhaL sLage. 1hls ls anoLher slgnlflcanL deparLure from Lhe
Model Law, whlch envlsages recourse Lo a courL of law ln Lhe evenL Lhe arblLral Lrlbunal re[ecLs Lhe
challenge.43


1he lndlan courLs have held LhaL 'Lhe apprehenslon of blas musL be [udged from a healLhy, reasonable
and average polnL of vlew and noL on mere apprehenslon of any whlmslcal person. vague susplclons of
whlmslcal, caprlclous and unreasonable people are noL our sLandard Lo regulaLe our vlslon.'46

c. 1erm|nat|on of Mandate of an Arb|trator
1he AcL provldes LhaL Lhe mandaLe of an arblLraLor shall LermlnaLe ln Lwo clrcumsLances: (1) lf he
becomes de [ure or de facLo unable Lo perform hls funcLlons, or (2) lf he falls Lo acL wlLhouL undue delay.
lf Lhere ls any conLroversy as Lo Lhe above, a parLy may, unless oLherwlse agreed, apply Lo Lhe courL for
a declslon (Lhe second lnsLance of courL lnLervenLlon envlsaged by Lhe AcL).

8. Iur|sd|ct|on of the Arb|tra| 1r|buna|
SecLlon 16 of Lhe AcL (correspondlng Lo ArL 16 of Lhe Model Law) ls a key provlslon of Lhe AcL. 1he
secLlon provldes LhaL Lhe arblLral Lrlbunal may rule on lLs own [urlsdlcLlon, lncludlng wlLh respecL Lo Lhe
exlsLence or valldlLy of Lhe arblLraLlon agreemenL. lurLher, Lhe arblLraLlon clause shall be LreaLed as
lndependenL of Lhe underlylng conLracL and a declslon LhaL Lhe conLracL ls null and vold shall noL enLall
lpso [ure Lhe lnvalldlLy of Lhe arblLraLlon clause. Where Lhe arblLral Lrlbunal re[ecLs an ob[ecLlon Lo lLs
[urlsdlcLlon, lL shall conLlnue wlLh Lhe arblLral proceedlngs and make Lhe award. Any challenge Lo Lhe
award would be avallable aL LhaL sLage. lf, on Lhe oLher hand, Lhe arblLral Lrlbunal accepLs Lhe plea as Lo
lLs lack of [urlsdlcLlon, an appeal shall lle Lo a courL of law.47
1hls agaln marks a slgnlflcanL deparLure from Lhe Model Law whlch conLemplaLes recourse Lo a courL
from a declslon of Lhe arblLral Lrlbunal re[ecLlng a challenge Lo lLs [urlsdlcLlon. 1he lndlan leglslaLure's
keenness Lo keep Lhe courLs ouL of Lhe arblLral process Lhus becomes evldenL wlLh every sLep of Lhe
leglslaLlon.


9. Arb|tra| proceed|ngs
a. Conduct of Arb|tra| roceed|ngs
1he arblLraLors are masLers of Lhelr own procedure and sub[ecL Lo parLles' agreemenL, may conducL Lhe
proceedlngs 'ln Lhe manner Lhey conslder approprlaLe'. 1hls power lncludes Lhe power Lo deLermlne Lhe
admlsslblllLy, relevance, maLerlallLy and welghL of any evldence.48 1he only resLralnL on Lhem ls LhaL
Lhey shall LreaL Lhe parLles wlLh equallLy and each parLy shall be glven a full opporLunlLy Lo presenL hls
case,49 whlch lncludes sufflclenL advance noLlce of any hearlng or meeLlng.30 nelLher Lhe Code of Clvll
rocedure 1908 ('CC') nor Lhe lndlan Lvldence AcL 1872 apply Lo arblLraLlons.31 unless Lhe parLles
agree oLherwlse, Lhe Lrlbunal shall declde wheLher Lo hold oral hearlngs for Lhe presenLaLlon of evldence
or for argumenLs or wheLher Lhe proceedlngs shall be conducLed on Lhe basls of documenLs or oLher
maLerlal alone. Powever, Lhe arblLral Lrlbunal shall hold oral hearlngs lf a parLy so requesLs (unless Lhe
parLles have agreed LhaL no oral hearlng shall be held).32

1he arblLraLors have power Lo proceed ex parLe where Lhe respondenL, wlLhouL sufflclenL cause, falls Lo
communlcaLe hls sLaLemenL of defence or appear for an oral hearlng or produce evldence. Powever, ln
such a slLuaLlon Lhe Lrlbunal shall noL LreaL Lhe fallure as an admlsslon of Lhe allegaLlons by Lhe
respondenL and shall declde Lhe maLLer on Lhe evldence, lf any, before lL. lf Lhe clalmanL falls Lo
communlcaLe hls sLaLemenL of clalm, Lhe arblLral Lrlbunal shall be enLlLled Lo LermlnaLe Lhe
proceedlngs.33


b. 1ak|ng of Lv|dence |n Arb|tra| roceed|ngs
1he lndlan CaLhs AcL 1969 exLends Lo persons who may be auLhorlsed by consenL of parLles Lo recelve
evldence. 1hls AcL, Lhus, encompasses arblLral proceedlngs as well.34 SecLlon 8 of Lhe sald AcL sLaLes
LhaL every person glvlng evldence before any person auLhorlsed Lo admlnlsLer oaLhs 'shall be bound Lo
sLaLe Lhe LruLh on such sub[ecL'. 1hus, wlLnesses appearlng before an arblLral Lrlbunal can be duly sworn
by Lhe Lrlbunal and be requlred Lo sLaLe Lhe LruLh on oaLh and upon fallure Lo do so, commlL offences
punlshable under Lhe lndlan enal Code.33 Powever, Lhe arblLraLors cannoL force unwllllng wlLnesses Lo
appear before Lhem and for Lhls Lhe courL's asslsLance ls provlded vlde s 27 of Lhe AcL. under Lhls
provlslon Lhe arblLral Lrlbunal or a parLy wlLh Lhe approval of Lhe Lrlbunal may apply Lo Lhe courL seeklng
lLs asslsLance ln Laklng evldence (Lhls ls also provlded for ln Lhe Model Law). Powever, s 27 of Lhe AcL
goes beyond Lhe Model Law as lL sLaLes LhaL any person falllng Lo aLLend ln accordance wlLh any order of
Lhe courL or maklng any oLher defaulL or refuslng Lo glve evldence or gullLy of any conLempL of Lhe
arblLral Lrlbunal, shall be sub[ecL Lo llke penalLles and punlshmenL as he may lncur for llke offences ln
sulLs Lrled before Lhe courL. lurLher, Lhe courL may elLher appolnL a commlssloner for Laklng evldence or
order LhaL Lhe evldence be provlded dlrecLly Lo Lhe arblLral Lrlbunal. 1hese provlslons exLend Lo any
documenLs Lo be produced or properLy Lo be lnspecLed. SecLlon 26 provldes for appolnLmenL of experLs
by Lhe arblLral Lrlbunal for any speclflc lssue. ln such a slLuaLlon, a parLy may be requlred Lo glve Lhe
experL any relevanL lnformaLlon or produce any relevanL documenL, goods or properLy for lnspecLlon as
may be requlred. lL wlll be open Lo a parLy (or Lo Lhe arblLral Lrlbunal) Lo requlre Lhe experL, afLer
dellvery of hls reporL, Lo parLlclpaLe ln an oral hearlng where Lhe parLles would have an opporLunlLy Lo
puL quesLlons Lo hlm.


10. Govern|ng Law
lor deLermlnlng Lhe rules of law appllcable Lo Lhe subsLance of Lhe dlspuLe, Lhe law makes a dlsLlncLlon
beLween lnLernaLlonal commerclal arblLraLlon and arblLraLlon beLween lndlan parLles.36
ln lnLernaLlonal commerclal arblLraLlon Lhe arblLral Lrlbunal shall declde Lhe dlspuLe ln accordance wlLh
Lhe rules of law deslgnaLed by Lhe parLles as appllcable Lo Lhe subsLance of Lhe dlspuLe and, falllng any
such deslgnaLlon, Lhe rules of law Lhe Lrlbunal conslders approprlaLe glven all Lhe clrcumsLances. lndlan
courLs have long slnce accepLed LhaL ln Lhe absence of express or lmplled cholce, Lhe arblLraLors would
apply Lhe law whlch has 'Lhe closesL and mosL real connecLlon wlLh Lhe conLracL'.37
ln arblLraLlon beLween lndlan parLles, however, Lhe Lrlbunal ls obllged Lo apply Lhe subsLanLlve law for
Lhe Llme belng ln force ln lndla.

1he AcL provldes LhaL where Lhe award ls for paymenL of money, Lhe Lrlbunal may lnclude lnLeresL aL
such raLe as lL deems reasonable for Lhe whole or parL of Lhe perlod beLween Lhe daLe of accrual of Lhe
cause of acLlon and Lhe daLe of Lhe award.38 lurLher, a sum dlrecLed Lo be pald by Lhe arblLral Lrlbunal
shall (unless Lhe award oLherwlse dlrecLs) carry lnLeresL aL 18 per annum from Lhe daLe of Lhe award
Lo Lhe daLe of paymenL.39 1he raLher healLhy raLe of 18 lnLeresL from Lhe daLe of Lhe award Llll
paymenL (noL Lo be found ln Lhe Model Law) seems Lo be deslgned Lo deLer any unwarranLed challenge
Lo Lhe award. 1hls raLe of lnLeresL may, however, noL apply Lo any forelgn award belng enforced ln lndla,
as Lhe provlslon ls Lo be found ln arL l alone. lor forelgn awards, Lhe raLe of lnLeresL would be governed
by Lhe CC whlch empowers Lhe courL Lo order pendenLe llLe lnLeresL as well as lnLeresL from Lhe daLe of
decree Lo Lhe daLe of paymenL. lor commerclal LransacLlons, Lhe raLe of lnLeresL shall noL exceed Lhe
conLracLual raLe or where no conLracLual raLe ls speclfled, Lhe raLe aL whlch moneys are lenL or
advanced by banks ln relaLlon Lo commerclal LransacLlons.60


11. Genera| owers of the Arb|tra| 1r|buna|
1here ls a long llne of case law whlch sLaLes LhaL Lhe arblLraLor ls Lhe sole [udge of Lhe evldence before
lL. 1hls ls how a Supreme CourL declslon puLs lL:

AppralsemenL of evldence by Lhe arblLraLor ls ordlnarlly never a maLLer whlch Lhe CourL quesLlons and
conslders. 1he arblLraLor ln our oplnlon ls Lhe sole [udge of Lhe quallLy as well as Lhe quanLlLy of
evldence and lL wlll noL be for Lhe CourL Lo Lake upon lLself Lhe Lask of belng a [udge of Lhe evldence
before Lhe arblLraLor.61


lnLerpreLaLlon of a conLracL ls an lssue of law and also wlLhln Lhe sole prerogaLlve of an arblLraLor:

When Lhe arblLraLor ls requlred Lo consLrue a conLracL Lhen merely because anoLher vlew may be
posslble Lhe courL would noL be [usLlfled ln consLrulng Lhe conLracL ln a dlfferenL manner and Lhen Lo seL
aslde Lhe award by observlng LhaL Lhe arblLraLor has exceeded hls [urlsdlcLlon ln maklng Lhe award.62
1he courL by purporLlng Lo consLrue Lhe conLracL cannoL Lake upon lLself Lhe burden of saylng LhaL Lhe
consLrucLlon was conLrary Lo Lhe conLracL and as such beyond [urlsdlcLlon.63 Powever, ln consLrucLlon
conLracLs lf Lhere ls no provlslon for escalaLlon or for addlLlonal quanLlLy of work, Lhe arblLraLor cannoL
allow Lhe same.64
1he arblLraLor ls bound Lo sLaLe Lhe reasons for Lhe award unless Lhe parLles have agreed oLherwlse or
Lhe award ls on agreed Lerms (as a resulL of a seLLlemenL). An award, however, cannoL be challenged for
lack of adequaLe reasons63 (or lndeed Lhe reasonableness of Lhe reasons66).
1he arblLral Lrlbunal ls empowered Lo make Lypographlcal or clerlcal correcLlons Lo Lhe award elLher on
lLs own lnlLlaLlve or on an appllcaLlon of Lhe parLles.
1he Lrlbunal may aL any Llme durlng Lhe arblLral proceedlngs make an lnLerlm award on any maLLer wlLh
respecL Lo whlch lL may make a flnal award.67

12. Arb|tra| Awards
a. kecourse aga|nst Awards
A domesLlc award can be challenged and seL aslde only by way of an appllcaLlon under s 34 of Lhe AcL
and only on Lhe grounds conLalned Lhereunder. SecLlon 34 ls based on ArL 34 of Lhe Model Law. 1o
paraphrase Lhe provlslon, an award can be seL aslde lf:
(1) Lhe parLy maklng Lhe appllcaLlon was under some lncapaclLy, or (2) Lhe arblLraLlon agreemenL was
noL valld under Lhe law agreed Lo by Lhe parLles (or appllcable law), or (3) Lhe parLy maklng Lhe
appllcaLlon was noL glven proper noLlce of Lhe appolnLmenL of Lhe arblLraLor or of Lhe arblLral
proceedlngs or was oLherwlse unable Lo presenL hls case, or (4) Lhe award deals wlLh a dlspuLe noL
conLemplaLed by or falllng wlLhln Lhe Lerms of submlsslons Lo arblLraLlon or lL conLalns declslons beyond
Lhe scope of Lhe submlsslons Lo arblLraLlon, or (3) Lhe composlLlon of Lhe arblLral Lrlbunal or Lhe arblLral
procedure was noL ln accordance wlLh Lhe agreemenL of Lhe parLles, or (6) Lhe sub[ecL maLLer of Lhe
dlspuLe was noL capable of seLLlemenL by arblLraLlon, or (7) Lhe arblLral award ls ln confllcL wlLh Lhe
publlc pollcy of lndla.

SecLlon 34 (devlaLlng somewhaL from Lhe Model Law) goes on Lo add an 'LxplanaLlon' ln relaLlon Lo Lhe
ground of publlc pollcy Lo clarlfy LhaL an award would be ln confllcL wlLh Lhe publlc pollcy of lndla lf Lhe
same was affecLed by fraud or corrupLlon or was ln vlolaLlon of Lhe confldenLlal requlremenLs a ached Lo
Lhe conclllaLlon proceedlngs provlslons prescrlbed under Lhe AcL.68

An appllcaLlon for seLLlng aslde an award musL be made wlLhln Lhree monLhs of recelpL of Lhe award by
Lhe appllcanL sub[ecL Lo a furLher exLenslon of 30 days on sufflclenL cause belng shown. An appllcaLlon
beyond Lhls perlod ls Llme barred and furLher delay cannoL be condoned.69


b. 1he Saw |pes Iudgment
1he llmlLed grounds of challenge provlded for under s 34 reflecL Lhe very [urlsprudence on whlch Lhe
Model Law ls formulaLed, vlz of LrusL ln Lhe arblLral process. lL ls abundanLly clear LhaL Lhe courLs have
no power Lo geL lnLo Lhe merlLs of Lhe maLLer. Powever, Lhls baslc proposlLlon was puL Lo Lhe LesL and
suffered a seLback ln Lhe case of CnCC v Saw lpes LLd.70 1here Lhe courL succumbed Lo Lhe LempLaLlon
Lo 'correcL' percelved errors of [udgmenL. 1he courL was concerned wlLh an arblLral award whlch
dlsallowed llquldaLed damages. 1he lndlan law of llquldaLed damages ls conLalned ln s 74 of Lhe lndlan
ConLracL AcL 1872.71 1he poslLlon ls dlfferenL from common law ln as much as 'reasonableness of Lhe
compensaLlon' becomes an lssue even where llquldaLed damages are sLlpulaLed. 1he Supreme CourL ln
Saw lpes came Lo Lhe concluslon LhaL Lhe lmpugned award, ln so far as lL dlsallowed llquldaLed
damages on Lhe premlse LhaL Lhey have Lo be proved, was legally fl awed. ln Lhe process lL held as a
maLLer of law, LhaL an award can also be challenged on Lhe ground LhaL lL conLravenes 'Lhe provlslons of
Lhe AcL or any oLher subsLanLlve law governlng Lhe parLles or ls agalnsL Lhe Lerms of Lhe conLracL'.72
lurLher, Lhe [udgmenL expanded Lhe concepL of publlc pollcy Lo add LhaL Lhe award would be conLrary Lo
publlc pollcy lf lL ls 'paLenLly lllegal'. An earller Supreme CourL declslon, by a larger bench, ln Lhe case of
8enu Sagar ower Co v Ceneral LlecLrlc CorporaLlon73 had consLrued Lhe ground of 'publlc pollcy'
narrowly as conflned Lo Lhe 'fundamenLal pollcy of lndlan law or Lhe lnLeresL of lndla or [usLlce or
morallLy'. 1he Supreme CourL ln Saw lpes dlsLlngulshed 8enu Sagar ll on Lhe ground LhaL Lhe sald
[udgmenL was ln Lhe conLexL of a forelgn award. 1he reasonlng of Lhe courL ls LhaL ln forelgn arblLraLlon,
Lhe award would be sub[ecL Lo belng seL aslde or suspended by Lhe compeLenL auLhorlLy under Lhe
relevanL law of LhaL counLry, whereas ln domesLlc arblLraLlon Lhere ls no such recourse and Lhe award
aLLalns flnallLy74 (Lhus, Lhe greaLer need for [udlclal scruLlny).

Pence, Lhe raLlo of Saw lpes ln so far as Lhe expanslon of publlc pollcy ls concerned, would be conflned
only Lo domesLlc awards. 1he expanslon of s 34 Lo lnclude 'paLenL lllegallLy' may also noL apply Lo
forelgn awards slnce Lhls expanslon was premlsed by Lhe courL on Lhe provlslons of arL l of Lhe AcL
(whlch would noL apply Lo forelgn awards). 1hus, forelgn awards would be saved from Lhe appllcaLlon of
Lhe sald [udgmenL.

1he case of Saw lpes makes a slgnlflcanL denL ln Lhe [urlsprudence of arblLraLlon ln lndla. 1he [udgmenL
has come ln for some sharp crlLlclsm. LmlnenL [urlsL and lawyer Mr lS narlman mlnced no words when
he sald LhaL Lhe [udgmenL has:
vlrLually seL aL naughL Lhe enLlre ArblLraLlon and ConclllaLlon AcL of 1996 .

1o have lnLroduced - by [udlclal lnnovaLlon - a fresh ground of challenge and placed lL under Lhe head
of 'ubllc ollcy', was flrsL conLrary Lo Lhe esLabllshed docLrlne of precedenL - Lhe declslon of a 8ench
of Lhree !udges belng blndlng on a 8ench of Lwo !udges. lL was also conLrary Lo Lhe plaln lnLenL of Lhe
new 1996 Law - vlz., Lhe need for flnallLy ln alLernaLe meLhods of dlspuLe resoluLlon wlLhouL CourL
lnLerference.
lf CourLs conLlnue Lo hold LhaL Lhey have Lhe lasL word on facLs and on law - noLwlLhsLandlng
consensual agreemenLs Lo refer maLLers necessarlly lnvolvlng facLs and law Lo ad[udlcaLlon by
arblLraLlon - Lhe 1996 AcL mlghL as well be scrapped.
1he ulvlslon 8ench declslon of Lhe Lwo !udges of Lhe CourL has alLered Lhe enLlre road-map of
ArblLraLlon Law and puL Lhe clock back Lo where we sLarLed under Lhe old 1940 AcL.73
1he Saw lpes [udgmenL skews Lhe dellcaLe balance, carefully crafLed by Lhe Model Law (and enshrlned
ln s 34), beLween flnallLy of arblLral awards on one hand and permlsslble [udlclal revlew on Lhe oLher.
1he [udgmenL ls qulLe conLrary Lo boLh Lhe leLLer and splrlL of arblLraLlon law ln lndla. 1he [udgmenL ls
especlally unsulLable for lndla, where courLs are bogged down wlLh enormous workload. ln such a
slLuaLlon, Lo open Lhe door Lo challenge on merlLs - howsoever guardedly - ls Lo undermlne Lhe
efflcacy of Lhls dlspuLe resoluLlon mechanlsm.

13. Lnforcement of Iore|gn Awards
1hls brlngs us Lo arL ll of Lhe AcL. 1he AcL provldes for enforcemenL of boLh Lhe new ?ork ConvenLlon
awards and Lhe Ceneva ConvenLlon awards vlde arL ll Lhereof. lndla ls noL a parLy Lo Lhe ConvenLlon on
Lhe SeLLlemenL of lnvesLmenL ulspuLes beLween SLaLes and naLlonals of CLher SLaLes 1963 ('WashlngLon
ConvenLlon') or lndeed any oLher convenLlon or LreaLy perLalnlng Lo enforcemenL of forelgn arblLral
awards.

lor Lhe purposes of Lhls arLlcle, we deal wlLh Lhe provlslons relaLlng Lo Lhe new ?ork ConvenLlon alone
(slnce Lhe provlslons perLalnlng Lo Lhe Ceneva ConvenLlon are now oLlose).


a. Def|n|t|on of Iore|gn Award
1hls ls conLalned ln s 44 of Lhe AcL. A pecullar feaLure of lndlan law ls LhaL a forelgn award by deflnlLlon
means an award passed ln such LerrlLory as Lhe CenLral CovernmenL by noLlflcaLlon may declare Lo be a
LerrlLory Lo whlch Lhe new ?ork ConvenLlon applles. Pence, even lf a counLry ls a slgnaLory Lo Lhe new
?ork ConvenLlon, lL does noL lpso facLo mean LhaL an award passed ln such counLry would be
enforceable ln lndla. 1here has Lo be furLher noLlflcaLlon by Lhe CenLral CovernmenL declarlng LhaL
counLry Lo be a LerrlLory Lo whlch Lhe new ?ork ConvenLlon applles.

1he reservaLlon carved ouL by Lhe lndlan leglslaLlon (Lhough ln Lerms of and permlLLed by Lhe new ?ork
ConvenLlon) may well prove Lo be a legal Lrap for Lhe unwary. Cnly 43 counLrles have been noLlfled so
far by Lhe lndlan governmenL. 1hus, whlle lrance, Cermany, unlLed klngdom, unlLed SLaLes of Amerlca,
!apan and Slngapore have been noLlfled, Pong kong and AusLralla (amongsL many oLhers) have noL yeL
been noLlfled.76


14. keference of art|es to Arb|trat|on
SecLlon 43 of Lhe AcL provldes LhaL noLwlLhsLandlng anyLhlng conLalned ln Lhe CC, a [udlclal auLhorlLy
when selzed of an acLlon ln respecL of a maLLer where Lhe parLles have enLered lnLo an arblLraLlon
agreemenL shall, aL Lhe requesL of any parLy, refer Lhe parLles Lo arblLraLlon. 1he only excepLlon ls lf Lhe
courL flnds Lhe agreemenL Lo be null and vold, lnoperaLlve or lncapable of belng performed. lL would be
noLlced LhaL Lhls secLlon (Lhough ln Lune wlLh ArL 8 of Lhe Model Law) ls a llLLle dlfferenL from lLs
correspondlng provlslon ln Lhe AcL for domesLlc arblLraLlons (s 8) ln as much as lL permlLs a courL Lo
reLaln [urlsdlcLlon on Lhe ground LhaL Lhe arblLraLlon agreemenL ls null and vold, lnoperaLlve or
lncapable of belng performed. So whlle Lhese conLenLlons would noL furnlsh grounds for avoldlng Lhe
arblLral process ln a domesLlc arblLraLlon, Lhe poslLlon ln relaLlon Lo forelgn arblLraLlons would be
dlfferenL. 1hls dlfference ln Lhe AcL beLween lndlan and forelgn arblLraLlons ls posslbly premlsed on Lhe
facL LhaL lL may be Loo harsh Lo compel an lndlan parLy Lo undergo arblLraLlon ln a forelgn counLry lf lL
could demonsLraLe LhaL Lhe arblLraLlon agreemenL ls null and vold, lnoperaLlve or lncapable of belng
performed (and ln any case Lhe Model Law also envlsages courL lnLervenLlon Lo Lhls exLenL).

An lnLeresLlng lssue arose ln Shln-LLsu Chemlcal Co LLd v Aksh CpLlflbre LLd77 as Lo wheLher a rullng by
Lhe courL on Lhe valldlLy or oLherwlse of an arblLraLlon agreemenL ls Lo be on a prlma facle basls or a
flnal declslon. lf lL were Lo be a flnal declslon, lL would lnvolve a full Lrlal and consequenLly years and
years of [udlclal proceedlngs whlch would frusLraLe Lhe arblLraLlon agreemenL. keeplng Lhls and Lhe
ob[ecL of Lhe AcL ln mlnd, Lhe Supreme CourL, by a 2:1 declslon, held LhaL a challenge Lo Lhe arblLraLlon
agreemenL under s 43 on Lhe ground LhaL lL ls 'null and vold, lnoperaLlve or lncapable of belng
performed' ls Lo be deLermlned on a prlma facle basls. lL sald:

lf lL were Lo be held LhaL Lhe flndlng of Lhe courL under SecLlon 43 should be a flnal, deLermlnaLlve
concluslon, Lhen lL ls obvlous LhaL, unLll such a pronouncemenL ls made, Lhe arblLral proceedlngs would
have Lo be ln llmbo. 1hls evldenLly defeaLs Lhe credo and eLhos of Lhe AcL, whlch ls Lo enable expedlLlous
arblLraLlon wlLhouL avoldable lnLervenLlon by [udlclal auLhorlLles.

1hls would mean LhaL a courL declslon under s 43 would noL operaLe as res [udlcaLa and Lhe aggrleved
parLy would be able Lo challenge Lhe same ln subsequenL proceedlngs. 1hus, ln effecL, a person
challenglng an arblLraLlon agreemenL on Lhe ground LhaL lL ls null and vold, lnoperaLlve or lncapable of
belng performed would have Lhree rounds Lo venL hls grlevances: Lhe flrsL, under s 43 before an lndlan
courL, Lhe second Llme around before Lhe arblLral Lrlbunal lLself, and, flnally, aL Lhe sLage of enforcemenL
of Lhe arblLral award. 1he [udgmenL of Lhe Supreme CourL ls no doubL welcome. Any oLher
lnLerpreLaLlon would have broughL abouL a slLuaLlon where lL would Lake very llLLle for a dlshonesL
llLlganL Lo derall a forelgn arblLraLlon. AL Lhe same Llme an lssue would remaln as Lo whaL ls Lo be done
ln cases where Lhe courL does ln facL come Lo a concluslon LhaL Lhe arblLral agreemenL ls null and vold,
lnoperaLlve or lncapable of belng performed. A declslon Lo Lhls effecL ls appealable under s 30 of Lhe AcL.
1hus, a rullng on a prlma facle vlew alone would noL be saLlsfacLory. Cne of Lhe [udges addressed Lhls
and held LhaL lf Lhe courL were Lo arrlve aL a prlma facle concluslon LhaL Lhe agreemenL ls ln facL null and
vold, lL would go ahead and hold a full Lrlal and enLer a flnal verdlcL. ln such a slLuaLlon, Lherefore, a
forelgn arblLraLlon may well come Lo a halL pendlng flnal declslon from an lndlan courL, buL oLherwlse
proceedlngs under s 43 would noL have any slgnlflcanL effecL lmpedlng progress of a forelgn arblLraLlon.

1S. Cond|t|ons for Lnforcement of Iore|gn Award
Where Lhe courL78 ls saLlsfled LhaL a forelgn award ls enforceable, lL shall be deemed Lo be a decree of
LhaL courL.79 Crounds for refusal of enforcemenL are provlded for under s 48 of Lhe AcL and Lhese are
vlrLually Lhe same as Lhe new ?ork ConvenLlon grounds (and, Lherefore, noL markedly dlfferenL from Lhe
Model Law). 1here are Lwo noLeworLhy dlfferences beLween ss 48 and 34. SecLlon 34 (ln relaLlon Lo
domesLlc awards) permlLs Lhe courL Lo seL aslde an award, whereas s 48 provldes only for refusal Lo
enforce a forelgn award. (8efusal Lo enforce an award would noL Lherefore by lLself prevenL an appllcanL
from seeklng Lo enforce lL ln some oLher [urlsdlcLlon.) 1here ls no provlslon ln lndlan law for seLLlng aslde
a forelgn award. 1hus, lf a forelgn award ls Lo be seL aslde ln lndla, Lhe only remedy would be by way of
a clvll sulL under Lhe Speclflc 8ellef AcL 1963.80 1he second dlfference beLween ss 34 and 48 ls LhaL Lhe
laLLer (ln relaLlon Lo forelgn awards) conLalns an addlLlonal ground under whlch Lhe courL could decllne
Lo enforce a forelgn award and LhaL ls lf Lhe award has noL yeL become blndlng on Lhe parLles, or has
been seL aslde or superseded by a compeLenL auLhorlLy of Lhe counLry ln whlch, or under Lhe laws of
whlch, Lhe award was made. (1he second dlfference flows from Lhe provlslons of Lhe new ?ork
ConvenLlon.)

Larller, ln relaLlon Lo s 34, lL was polnLed ouL how Lhe ground of 'publlc pollcy' has been narrowly
consLrued by Lhe Supreme CourL ln8enu Sagar ll.81 ln LhaL case, a Lhree-[udge bench of Lhe Supreme
CourL afLer an ln-depLh conslderaLlon of Lhe case law opLed for Lhe narrow lnLerpreLaLlon of Lhe 'publlc
pollcy' ground as affordlng a challenge Lo enforcemenL of an award. 1he courL held LhaL Lhe award may
be refused Lo be enforced lf lL 'ls conLrary Lo (l) fundamenLal pollcy of lndlan law, or (ll) Lhe lnLeresLs of
lndla, or (lll) [usLlce or morallLy'.82

lf Lhe courL ls saLlsfled LhaL Lhe forelgn award ls enforceable, Lhe same shall be deemed Lo be a decree of
Lhe courL. 1he Supreme CourL has held83 LhaL no separaLe appllcaLlon need be flled for execuLlon of Lhe
award. A slngle appllcaLlon for enforcemenL of award would undergo a Lwo-sLage process. ln Lhe flrsL
sLage, Lhe enforceablllLy of Lhe award, havlng regard Lo Lhe requlremenLs of Lhe AcL (new ?ork
ConvenLlon grounds) would be deLermlned. Cnce Lhe courL decldes LhaL Lhe forelgn award ls
enforceable, lL shall proceed Lo Lake furLher sLeps for execuLlon of Lhe same.84

An appeal shall lle from an order of Lhe courL refuslng Lo enforce a forelgn award. Powever, lnLeresLlngly
(unllke for domesLlc awards), Lhere ls no appeal provlded for agalnsL an order of Lhe courL re[ecLlng
ob[ecLlons Lo enforce Lhe award.83 Pence, an order upholdlng Lhe forelgn award ls noL appealable.
Powever, Lhe consLlLuLlonal remedy by way of a (dlscreLlonary) Speclal Leave eLlLlon Lo Lhe Supreme
CourL of lndla would sLlll be malnLalnable.86

L. Conc|us|on
1hus Lo conclude, lndla has puL ln place a progresslve plece of leglslaLlon whlch ls essenLlally based on
Lhe Model Law and Lhe unCl18AL ArblLraLlon 8ules. Any deparLure Lherefrom ls essenLlally almed aL
keeplng courL lnLervenLlon aL bay. 1he courLs of Lhe land (by and large) are ln Lune wlLh Lhe splrlL of Lhe
law: wlLness, for lnsLance, a consLlLuLlon bench of Lhe Supreme CourL holdlng LhaL Lhe Chlef !usLlce of
lndla or Lhe Chlef !usLlce of Lhe Plgh CourL (as Lhe case may be) would exerclse admlnlsLraLlve and noL
[udlclal funcLlons ln Lhe maLLer of appolnLmenL of arblLraLors. 1he Saw lpes declslon87 ls no doubL a
reLrogresslve sLep. Powever, lL ls hoped LhaL when Lhe opporLune momenL arrlves, Lhe declslon wlll be
revlewed.

lndla has an effecLlve law ln place. WhaL lL now needs ls lnculcaLlon of Lhe culLure of arblLraLlon wlLhln
Lhe bar, Lhe bench and Lhe arblLral communlLy. 1he baggage of Lhe pasL needs Lo be dropped so LhaL
lndla, lndeed, has an aLLracLlve arblLraLlon mechanlsm on offer.
* 8A (Pons) (Lngllsh LlLeraLure), LL8 (unlverslLy of uelhl), arLner, kachwaha & arLners, lndla.
1 Curu nanak loundaLlon v 8a an Slngh & Sons 1981 (4) SCC 634.
2 Ceneral Assembly 8esoluLlon 40/72, adopLed on 11 uecember 1983 ('Model Law').
3 Ceneral Assembly 8esoluLlon 31/98, adopLed on 13 uecember 1976 ('unCl18AL ArblLraLlon 8ules').
4 konkan 8allway CorporaLlon v Mehul ConsLrucLlon Co 2000 (7) SCC 201.
3 new ?ork, 10 !une 1938 ('new ?ork ConvenLlon').
6 Ceneva, 26 SepLember 1927 ('Ceneva ConvenLlon').
7 2002 (4) SCC 103 ('8haLla').
8 LffecLlve 1 !anuary 1998 ('lCC 8ules').
9 2003 (9) SCC 79.
10 Supra, n 7.
11 '1hls arL shall noL affecL any oLher law for Lhe Llme belng ln force by vlrLue of whlch cerLaln dlspuLes
may noL be submlLLed Lo arblLraLlon': Lhe AcL s 2(3).
12 SmlLa ConducLors LLd v Luro Alloys LLd 2001 (7) SCC 728.
13 SecLlon 7.
14 1984 (4) SCC 679 ('8enu Sagar l').
13 [1947] 2 All L8 260.
16 Sulochana uppal v Surlnder Sheel 8hakrl Al8 1991 uel 138.
17 Lakshml naraln v 8aghblr Slngh Al8 1936 un[ 249, lerLlllser Corp of lndla v Chemlcal ConsLrucLlon
Corp lL8 1974 8om 836 (u8), kevenLer Agro LLd v Seegram Comp LLd, Apo 498 of 1997 daLed 27 !anuary
1998 (Cal).
18 1999 (3) SCC 631.
19 lourLh LdlLlon, 8u erworLhs (ArblLraLlon, vol 2, para 303).
20 2003 (6) SCC 303.
21 lbld aL 313.
22 Paryana 1elecom v SLerllLe lndusLrles 1999 (3) SCC 688.
23 2004 (7) SCC 447.
24 1998 (3) SCC 373.
23 Second LdlLlon, 1989, 8uLLerworLhs.
26 1wenLy-flrsL LdlLlon, 1997, SweeL & Maxwell.
27 Supra, n 24 aL 383.
28 A somewhaL confuslng expresslon borrowed from Laxlng sLaLuLes.
29 SecLlon 2(f).
30 2003 (12) SCC 140.
31 ld aL 144.
32 2003 (3) SCC 331.
33 'CourL' ls deflned vlde s 2(e) Lo mean Lhe prlnclpal clvll courL of orlglnal [urlsdlcLlon, havlng
[urlsdlcLlon Lo declde Lhe quesLlon formlng Lhe sub[ecL maLLer of Lhe arblLraLlon (lf Lhe same had been
Lhe sub[ecL maLLer of a sulL). 1hls would Lhus mean elLher Lhe ulsLrlcL CourL or Lhe Plgh CourL of a sLaLe
(as ln some sLaLes, Plgh CourLs have orlglnal clvll [urlsdlcLlon beyond a cerLaln pecunlary llmlL).
34 1999 (2) SCC 479.
33 ld aL 488.
36 2004 (9) SCC 619.
37 SecLlon 37.
38 Model Law, ArLs 6 and 11.
39 2002 (2) SCC 388 aL 403.
40 le konkan 8allway CorporaLlon v 8anl ConsLrucLlon vL LLd 2002 (2) SCC 388.
41 ld aL 406.
42 2000 (7) SCC 497.
43 ld aL 300.
44 SecLlon 12.
43 Model Law, ArL 13.
46 lnLernaLlonal AlrporLs AuLhorlLy of lndla v ku 8all & Anor 1988 (2) SCC 360.
47 SecLlon 37.
48 SecLlon 19(3) and (4).
49 SecLlon 18.
30 SecLlon 24(2).
31 1he AcL, s 19, Lvldence AcL, s 1.
32 SecLlon 24.
33 SecLlon 23.
34 8alpur uevelopmenL AuLhorlLy v Chokhamal ConLracLors 1989 (2) SCC 721.
33 enal Code, ss 191 and 193.
36 SecLlon 28(1)(a).
37 8rlLlsh lndla SLeam navlgaLlon Co v S Cashew lndusLrles 1990 (3) SCC 481 aL 496.
38 SecLlon 31(7)(a).
39 SecLlon 31(7)(b).
60 CC, s 34.
61 Munlclpal CorporaLlon of uelhl v !agan naLh Ashok kumar 1987 (4) SCC 497.
62 P SLaLe LlecLrlclLy 8oard v 8! Shah & Co 1999 (4) SCC 214 aL 223, para 23.
63 v Subba naldu v CovernmenL of A 1998 (9) SCC 407 aL 409, para 6.
64 8amachandra 8eddy v SLaLe of Andhra radesh 2001 (4) SCC 241.
63 Sudarsan 1radlng Co v CovernmenL of kerala 1989 (2) SCC 38.
66 lbld.
67 SecLlon 31(6).
68 SecLlons 73 and 81: s 73 sLaLes LhaL Lhe parLles shall keep confldenLlal all maLLers relaLlng Lo Lhe
conclllaLlon proceedlngs and s 81 provldes LhaL Lhe parLles shall noL rely on or lnLroduce as evldence ln
any arblLral or [udlclal proceedlngs any proposal, vlew or suggesLlon made or exchanged by a parLy Lo
Lhe conclllaLor.
69 unlon of lndla v opular ConsLrucLlon Co 2001 (8) SCC 470.
70 2003 (3) SCC 703 ('Saw lpes').
71 SecLlon 74 of Lhe ConLracL AcL, ln so far as relevanL, provldes as follows:

CompensaLlon of breach of conLracL where penalLy sLlpulaLed for When a conLracL has been broken, lf a
sum ls named ln Lhe conLracL as Lhe amounL Lo be pald ln case of such breach, or lf Lhe conLracL conLalns
any oLher sLlpulaLlon by way of penalLy, Lhe parLy complalnlng of Lhe breach ls enLlLled, wheLher or noL
acLual damage or loss ls proved Lo have been caused Lhereby Lo recelve from Lhe parLy who has broken
Lhe conLracL reasonable compensaLlon noL exceedlng Lhe amounL so named or, as Lhe case may be, Lhe
penalLy sLlpulaLed for.

72 Saw lpes, supra, n 70 aL 744-743.
73 1994 Supp (1) SCC 644 ('8enu Sagar ll').
74 Supra, n 70 aL 723.
73 lrom Lhe LranscrlpL of a speech dellvered by Mr lS narlman aL Lhe lnaugural sesslon of 'Legal
8eforms ln lnfrasLrucLure', new uelhl, 2 May 2003.
76 lor a compleLe llsL of Lhe counLrles noLlfled, see Ck kwaLra, 1he ArblLraLlon and ConclllaLlon Law of
lndla (2003) publlshed by Lhe lndlan Councll of ArblLraLlon.
77 2003 (6) SCALL 361.
78 1he enforcemenL proceedlngs musL be broughL before a courL wlLhln whose [urlsdlcLlon Lhe
aggrleved parLy has aL leasL some properLy slLuaLed: 1993 Supp (2) SCC 280.
79 SecLlon 49.
80 raLabmull 8ameshwar v kC SeLhla Al8 1960 Calcu a 702.
81 Supra, n 73.
82 ld aL 682.
83 luersL uay Lawson v !lndal LxporLs LLd 2001 (6) SCC 336.
84 ld aL 371.
83 SecLlon 37.
86 ConsLlLuLlon of lndla, ArL 136.
87 Supra, n 70.