Ans1.

The Arbitration and Conciliation Act, 1996 (hereinafter the "1996 Act") supplants the
Arbitration Act, 1940. In the 1996 Act, intervention by Courts was limited so that the object
behind speedy justice could be well achieved. To further the aforesaid objective, the 1996
Act harbours many provisions. Section 8 of the 1996 Act denotes one such provision which
provides for limited judicial intervention and furthers the objective by directing the parties to
get involved in arbitration on the basis of the arbitration agreement. In domestic arbitrations ,
the uses of Section 8 applications in the Courts have spiraled over the years. This piece
provides an indepth analysis of Section 8 of the 1996 Act by focusing on the judicial
precedents.
Section 8: The Golden Eagle:
A. Condition Precedent Stipulated under Section 8
Section 8 of the Arbitration and Conciliation Act, 1996 is peremptory in nature. It provides
that a judicial authority shall, on the basis of the arbitration agreement between the parties,
direct the parties to go for arbitration. It also enlists conditions precedent, which need
fulfillment before a reference can be made as per the terms of the 1996 Act.1 In P. Anand
Gajapathi Raju & Ors. v. P.V.G. Raju (Died) & Ors2., while iterating the periphery of Section
8 of the 1996 Act, the Supreme Court said that "The conditions which are required to be
satisfied under Sub-sections (1) and (2) of Section 8 before the Court can exercise its
powers are (1) there is an arbitration agreement; (2) a party to the agreement brings an
action in the Court against the other party; (3) subject matter of the action is the same as the
subject matter of the arbitration agreement; (4) the other party moves the Court for referring
the parties to arbitration before it submits his first statement on the substance of the dispute.
.... The language of Section 8 is per-emptory."
The following factors are to be considered before entertaining an application under Section 8
of the 1996 Act:
First question to be analyzed is whether it can be made applicable to a civil dispute. The
Supreme Court while answering the aforesaid question in H. Srinivas Pai and Anr. v. H.V. Pai
(D) thr. L.Rs. and Ors.3, said that "The Act applies to domestic arbitrations, international
commercial arbitrations and conciliations. The applicability of the Act does not depend upon
the dispute being a commercial dispute. Reference to arbitration and arbitability depends
upon the existence of an arbitration agreement, and not upon the question whether it is a
civil dispute or commercial dispute. There can be arbitration agreements in non-commercial
civil disputes also."
The presence of arbitration agreement is another pre-requisite for seeking a reference under
Section 8.4 Section 7 of the 1996 Act provides the diameter of the term "arbitration
agreement". The importance of arbitration agreement, for seeking a reference under Section
8, was emphasized by the Supreme Court in Smt. Kalpana Kothari v. Smt. Sudha Yadav and
ors.5 wherein the Court said that "As long as the Arbitration clause exists, having recourse to
Civil Court for adjudication of disputes envisaged to be resolved through arbitral process or
getting any orders of the nature from Civil Court for appointment of Receiver or prohibitory
orders without evincing any intention to have recourse to arbitration in terms of the
agreement may not arise."
Next question which might arise in the step wise analysis of Section 8 is whether the validity
of the arbitration clause can be disputed before the Court, in front of which an application for
reference is made. The answer to the question was laid in the negative by the Supreme
Court in Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums6. The Court in this
case held that if the existence of the arbitration clause is admitted, in view of the mandatory
language of Section 8 of the Act, the courts ought to refer the dispute to arbitration. The
Supreme Court, while raising a presumption for the validity of an arbitration clause in an
agreement, in India Household and Healthcare Ltd. v. LG Household and Healthcare Ltd.7,
said that the Courts would construe the agreement in such a manner so as to uphold the
arbitration agreement.
Section 8 further mandates that the subject matter of the dispute is the same as the subject
matter of the arbitration agreement. While articulating on this pre-requisite, the Supreme
Court in Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya and Anr.8, said that "The relevant
language used in Section 8 is-"in a matter which is the subject matter of an arbitration
agreement". Court is required to refer the parties to arbitration. Therefore, the suit should be
in respect of 'a matter' which the parties have agreed to refer and which comes within the
ambit of arbitration agreement."
An application under Section 8(1) cannot be entertained unless accompanied by original
arbitration agreement or a certified copy thereof. Laying emphasis on section 8(2) for the
grant of reference, the Supreme Court in The Branch Manager, Magma Leasing and Finance
Limited and Anr. v. Potluri Madhavilata and Anr.9 said that "An analysis of Section 8 would
show that for its applicability, the following conditions must be satisfied: (e) that along with
the application the other party tenders the original arbitration agreement or duly certified
copy thereof."
B. Implied Inclusion under Section 8
Though not implicit in the reading of Section 8 of the Act, the Court in the case of Haryana
Telecom Ltd. v. Sterlite Industries (India) Ltd.10 brought in the competence of the arbitral
tribunal as one of the grounds for the grant of reference. The proposition that Section 8,
despite providing the explicit grounds on which reference can be made, also lays down the
implicit ground of competence of the Arbitral Tribunal, was also read in the affirmative by the
Court in the case of Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd.11 wherein it was
held that where the cause/dispute is inarbitrable, the court where a suit is pending, will
refuse to refer the parties to arbitration, under Section 8 of the Act.
Effect of the Arbitration and Conciliation (Amendment) Ordinance, 2015:
On 23rd October, 2015, the President promulgated the Arbitration and Conciliation
(Amendment) Ordinance, 2015. The said Ordinance amended Section 8 by stipulating that
joinder of non-signatories to an arbitration agreement was not permissible. Further
amendment to Section 8 requires that the judicial authority compulsorily refer parties to
arbitration irrespective of any decision by the Supreme Court or any other court, if the judicial
authority finds that a valid arbitration clause prima-facie exists. The amendment essentially
nullifies the judgment of the Supreme Court in Booz Allen Hamilton v. SBI Home finance12,
where it had ruled that serious allegations of fraud are not arbitrable.
Conclusion:
Section 8 of the 1996 Act denotes a provision which limits judicial intervention in the process
of arbitration. However, the judiciary has drawn exception to the extent of intervention on the
basis of the arbitrability of the subject matter and the competence of the arbitral tribunal to
deal with it. Though, the Amendment to Section 8 under the Arbitration and Conciliation
(Amendment) Ordinance, 2015 nullify the exceptions drawn by the Judiciary, however, the
effect of amendments are still to be seen. This said, Section 8 of the 1996 Act still acts as a
saving beacon for arbitration and forms the basis for forcing the parties in cases of domestic
arbitrations to adopt the model of arbitration where there exists an arbitration agreement.
Ans2. Arbitration is a procedure in which a dispute is submitted, by agreement of the parties,
to one or more arbitrators who make a binding decision on the dispute. In choosing
arbitration, the parties opt for a private dispute resolution procedure instead of going to court.
Its principal characteristics are:
Arbitration is consensual
Arbitration can only take place if both parties have agreed to it. In the case of future disputes
arising under a contract, the parties insert an arbitration clause in the relevant contract. An
existing dispute can be referred to arbitration by means of a submission agreement between
the parties. In contrast to mediation, a party cannot unilaterally withdraw from arbitration.
The parties choose the arbitrator(s)
Under the WIPO Arbitration Rules, the parties can select a sole arbitrator together. If they
choose to have a three-member arbitral tribunal, each party appoints one of the arbitrators;
those two persons then agree on the presiding arbitrator. Alternatively, the Center can
suggest potential arbitrators with relevant expertise or directly appoint members of the
arbitral tribunal. The Center maintains an extensive roster of arbitrators ranging from
seasoned dispute-resolution generalists to highly specialized practitioners and experts
covering the entire legal and technical spectrum of intellectual property.
Arbitration is neutral
In addition to their selection of neutrals of appropriate nationality, parties are able to choose
such important elements as the applicable law, language, and venue of the arbitration. This
allows them to ensure that no party enjoys a home court advantage.
Arbitration is a confidential procedure
The WIPO Rules specifically protect the confidentiality of the existence of the arbitration, any
disclosures made during that procedure, and the award. In certain circumstances, the WIPO
Rules allow a party to restrict access to trade secrets or other confidential information that is
submitted to the arbitral tribunal or to a confidentiality advisor to the tribunal.
The decision of the arbitral tribunal is final and easy to enforce
Under the WIPO Rules, the parties agree to carry out the decision of the arbitral tribunal
without delay. International awards are enforced by national courts under the New York
Convention, which permits them to be set aside only in very limited circumstances. More
than 165 States are party to this Convention.
M/S NN Global Mercantile Pvt Ltd v. M/S Indo Unique Flame Ltd & Others, January 2021
Issue
The main legal question in the Global Mercantile decision was whether an arbitration
agreement or an arbitration clause included in a contract might be declared void due to
non–stamping and non–fulfillment of technical compliances.
Judgment
The Supreme Court ruled that non-stamping/inadequate stamping is treatable. In addition,
because the arbitration agreement is,
An independent agreement.
The non-payment of duty on the contract was not actionable under the stamping legislation,
but it did not preclude the parties from relying on the contract’s arbitration clause.
The Supreme Court reversed its prior decision in M/S Sms Tea Estates P.Ltd vs M/S
Chandmari Tea Co. P.Ltd, (2011) and found the conclusions in Garware Wall Ropers Ltd. vs
Coastal Marine Constructions, (2019) to be incorrect. However, because this ruling had just
been confirmed by a Supreme Court coordination bench. The Supreme Court referred the
case to a bigger court for decision. The Supreme Court has issued instructions for how
courts and tribunals should handle non-stamping or inadequate stamping objections.
An arbitral tribunal will seize the document and order the parties to pay the stamp duty and
any penalties to the collector’s satisfaction.
The court will send the case to arbitration rather than impounding the document under
Section 8. However, before the tribunal decides on the issue, the court will order the parties
to stamp the document.
The court can provide remedies to protect the arbitration’s subject matter under Section 9,
but it will then seize the document and order the parties to pay the stamp duty.
The court will appoint a tribunal under Section 11, but the parties must stamp the document
before the tribunal may rule on the issue.
Analysis of the judgment
The Global Mercantile decision was a welcome one, preserving the core of Section 16 of the
Arbitration Act and honouring the draftsmen’s purpose. The primary purpose of this Act is to
protect the parties’ “Equitable Rights,” not to compel them to go to court or to use litigation
as an alternative remedial mechanism, which will in no way fulfill the actual objective of the
Arbitration Act and would cause the parties to suffer. The Indian courts, through its
precedents, must set an example and encourage parties to use arbitration as an alternative
dispute resolution process, rather than focusing on technical compliances. Instead, the focus
should be on the bigger picture, which will benefit the parties.
The Global Mercantile decision has not only set a precedent on a national level, but it has
also had international ramifications. In conformity with the arbitration process created in
India, this precedent will undoubtedly favor a foreign firm. This judgment has also assumed
the onus of clearing the air with regard to the debates over the arbitrability of fraud in India
and has used a holistic approach in reaching its conclusion on the topic. This decision has
unquestionably raised the bar and provided a glimmer of hope to the parties by preserving
the substance of the two interlinked historic concepts of “Doctrine of Severability” and
“Kompetenz Kompetenz.”
Haryana Space Application Centre (HARSAC) and Anr. v. Pan India Consultants Pvt. Ltd.
and Anr., January 2021
Issue
Pan India filed an application with the Additional District Judge, Chandigarh (District Judge)
under Section 29A(4) of the Arbitration and Conciliation Act, 1996 stating that the arbitral
judgment was ready to be pronounced and that the whole cost had been paid to the tribunal.
HARSAC objected to the application, claiming that it should be denied due to a lack of
adequate grounds for granting an extension under Section 29A(4). The panel was given a
three-month extension by the District Judge to complete the procedures. HARSAC then filed
a revision appeal with the High Court, asking the court to overturn the District Judge’s ruling
and granting an extension of time to pass the arbitral award. Due to the epidemic, the High
Court granted a four-month extension to let the parties finish their arguments within three
months, with one month set aside for the tribunal to issue the arbitral decision. HARSAC
filed a special leave petition with the Hon’ble Supreme Court, expressing its dissatisfaction
with the aforementioned High Court judgment.
Judgment
The Hon’ble Supreme Court was of the opinion that, under Section 12(5) of the Arbitration
Act, 1996 read with the Seventh Schedule, the nomination of the Principal Secretary,
Government of Haryana as the nominee arbitrator of the appellant, which was a nodal
agency of the Government of Haryana, was unlawful. It was pointed out that under Section
12(5) of the Arbitration Act, any individual whose connection with the parties falls into any of
the categories listed in the Seventh Schedule is ineligible to be chosen as an arbitrator,
regardless of any prior agreement to the contrary. The Hon’ble Supreme Court ruled that
Section 12(5) of the Arbitration Act, coupled with the Seventh Schedule, was an obligatory
and non-derogable clause.
In the instance at hand, it was determined that the Principal Secretary of the Government
would be unqualified to serve as an arbitrator because he would have a controlling influence
on the HARSAC, which is a state-run nodal agency. During the hearing, the counsel for both
parties agreed to the replacement of the present panel by selecting a single arbitrator to
finish the arbitral procedures. The Hon’ble Supreme Court then appointed a substitute
arbitrator, who would continue the proceedings from where they were at the time of the
order’s receipt and issue an arbitral decision within six months.
Analysis of the judgment
The Supreme Court’s current decision is extremely important. As previously stated, neither
party has ever objected to any of the arbitrators being appointed because they were
unqualified under Section 12(5) of the Act. Despite the fact that the arbitral proceedings had
been ongoing for nearly four years and were nearing completion, the Supreme Court, in an
SLP arising from a petition filed under Section 29 A, took suo motu cognizance of the
invalidity of appointing the Principal Secretary of the Haryana Government as an arbitrator.
The Supreme Court has often ruled in favour of “arbitrator neutrality” since the addition of
Section 12(5) to the Act by the Arbitration and Conciliation (Amendment) Act 2015. The
current judgment appears to serve the same goal, in that the SC looked at the issue of
ineligibility for the appointment of an arbitrator, regardless of whether such objections were
submitted by any of the parties or the stage of the arbitral proceedings at the time.