TeaHe has requested the Ministry of Law and Justice notes On Arbitration and Conciliation Act 1996. These comments will serve as inputs for the committee constituted to examine the working of arbitration law in India and recommend reforms in the Act. An important element of the arbitration framework is how it engages with litigation by the government. The committee should consider ways in which the text of the Act can be amended to bar the government from litigation if it loses in arbitration.
arbitration framework
When there is a dispute between two parties, they can either go to court, or opt for arbitration. The option is often embedded in the contract itself. The parties appoint a neutral arbitrator who hears both and passes an award which is binding. The idea behind opting for arbitration is faster resolution. This also reduces the burden on the courts.
When the Government of India signs a contract with a private contractor to provide a service (for example, building a road), it also agrees to subject itself to arbitration. Under the Indian Act, a party can appeal against an arbitral award only on certain specific grounds – these are enumerated in section 34 of the Act. This was done to ensure that the arbitration award is final, and does not give rise to appeals and cross-appeals to the High Court and then to the Supreme Court.
However, the Act allows one to appeal against the decision under section 37, under section 34 of the Act, to avoid the enforcement of the award.
Read also: ‘Centre judge and prosecutor in his case’ – why Kunal Kamra has challenged…
Government Litigation and Arbitration
Does the government use arbitration to resolve contractual disputes? A Study A look at the cases in the Delhi High Court for the period between January 1, 2007 and September 30, 2020 revealed that nearly 70 per cent of cases filed under Section 34 of the Arbitration Act were Original Miscellaneous Petitions (OMPs) – Challenges to Arbitration for Enforcement of awards.
According to the authors, these petitions are generally filed for three reasons: seeking direction from the court to appoint an arbitrator where either party to the dispute fails to appoint one; Seeking interim relief during arbitration proceedings and seeking extension of time limit for conduct of arbitration. Arbitration is clearly important in dealing with issues relating to contract execution between business and government.
However, it is not clear whether the arbitration route has reduced the propensity of the government (or private entity, for that matter) to sue after losing a case. The same study also found that a large number of cases filed by the government against businesses fall into one category: challenges to arbitration awards passed in disputes arising out of procurement contracts.
one more Study Focusing only on NHAI orders in the Delhi High Court over the period 2007-2020, it was found that arbitration-related matters constituted about 70 per cent of the sample of case orders they studied. Our own analysis of NHAI orders in the Delhi High Court in 2018 and 2019 shows that most appeals were not limited to procedural or public policy grounds, but were reviewed on merits, misapplication of law, or re-appreciation of evidence. Used to demand And while the court, in general, is unwilling to interfere with the arbitral award, these petitions do use up the adjudicatory resources of the court.
Read also: ‘Negligent act by irresponsible appellant’- Meghalaya HC orders fine of Rs 10 lakh…
suggestions for improvement
Private parties also often litigate, but the direct costs are borne by them, not the taxpayer. Therefore, it is important for the government to pay attention to litigation. The extent to which government litigation in court can be reduced by changes to the arbitration law is limited.
The major policy change has to come from the government itself. However, when one has lost in arbitration, he can use the opportunity to raise the limit of appeal. For example, the law requires the court to hear every petition under section 34 or section 37(1)(c) of the Act and decide the same on merits. the committee may consider Prima facie satisfaction test where the court can dismiss the petition unless the petitioner proves Prima facie case on merit.
The Committee may also consider levying pre-deposit fee compulsorily before initiation of proceedings by the petitioner. Another possibility is to leave at least Section 37(1)(c) So that the award can be implemented without any appeal. This will reduce the cost of dispute resolution as the matter will have already gone through two forums – arbitration and section 34 appeal. These will not solve the problem completely, as suggested earlier, but will at least reduce the number of appeals after arbitration.
When making these changes, it is important to remember that the law applies to entities other than the government. Arbitrage is being used extensively today, involving things like loans between banks and individual borrowers. In trying to find a solution to the government’s litigation burden, we should not make it more difficult for private parties to appeal. Also, if appeals are to be made more difficult, the quality of the arbitration process must be stronger to be acceptable to both parties. To the extent that the text of the law may be another tool by the government to reduce litigation, it should be deployed. This can bring significant benefits to the economy.
Renuka Sane is Director of Research at TrustBridge, which works on improving the rule of law for better economic outcomes for India. Thoughts are personal. she tweets @resanring
(Editing by Anurag Choubey)