Alternative Dispute Resolution

Basic Concepts
Harm under ADR
Harm is conceptualised as something affecting that particular person and also the society at large. The conception
of harm is contextual and there cannot be a one-size-fits-all remedy. Instead, the remedy must be tailor-made. The
impact of the harm on the victim as well as the reintegration of the wrongdoer must be considered. At this stage
of resolution, community-involvement is important for the reintegration process, as it concerns them. This is why
ADR is called “participative process of resolution”. The State is however not concerned about things beyond
punishment, ADR is different because it is a creative process and take the reintegration into consideration.

Conception of justice
Justice is contextual, it is geared towards India’s Rule of Law. Fairness and equality without consideration for social
standing. The ADR processes incorporate social equality and are not just considered with formal equality. Justice
shouldn’t be just responsive/reactive, but must be geared towards equal well-being. This is why out-of-the-box
and creative solutions are allowed and encouraged.

Flexibility in ADR
It looks at the actual impact of the problems on the needs of the people. People might require different remedies
and not just what is given by the law. Example: Western countries encourage face-to-face interaction between the
victim and the criminal because this might help reintegration, and also allow assistance by local officials. ADR
processes provide a participatory platform and act as a liberating process for the victim. Because in the normal
court system there is no participation in the healing process. Allowing people to speak in the ADR process can be
an empowering experience.

Objectives of the ADR

(a) Classification of wrong and appraisal of its impact
Courts: The information is only used to support your version of the facts. Not all facts are presented equally, only
those that fit into the cause of action are emphasised.
ADR: There is a free flow of information and everything that the participants want to discuss can be discussed.
There is no relevant, irrelevant or inadmissible information. Information is gathered for understanding and
discovering actual harm and impact caused. There can be better bargaining when there is great information for
creating value.

(b) Allocation of presumption of responsibility

The emphasis in the court system is on the allocation of responsibility. Same goes for the ADR system but here it is
viewed as distributive responsibility. Here, parties assume responsibility voluntarily. The liability can be distributed
between the people.
However, in the court system, there is no incentive for the defendant to assume responsibility. He/she flatly denies
liability, otherwise the court can even assume that he/she is liable.(express denial required).
Courts: The benefit goes to the defendant and all proof is to be generally given by the plaintiff.
ADR: Different conception of responsibility. It can be distributed through the sharing of information. There is no
ideal of duty and liability. There must be confrontation with the actual impact of the act and one cannot hide behind
the procedures and rules of the court. In court, lots of cases are rejected on technical grounds. In ADR, however,
the person has to face the actual impact and consequences of his act and must feel guilty and responsible so that
he can be effectively integrated back into the society.

(c) Relationship transformation

The relationship of the parties with each other and with the society is transformed. They are empowered and can
take their lives into their own hands. Negativity is contained and minimised. However, in the court, the model of
dispute resolution is that the animosity between the parties is aggravated. This is because sudden facts and
situations are exaggerated. Cause of action. The result is always going to be a loss for one party. It dehumanises
the other person and damages their relationship. The idea of them being on opposite sides makes them enemies
and aggravates the dispute.

ADR aims to achieve results in cordial manner and reduces or at least maintain the level of animosity as it is and
not increase it.

(d) Moving forward

The court system entirely focuses on the facts of a past incident. They do not focus on the future. They assume that
by making an example of one person, they would prevent wrongs from happening in the future (deterrence). ADR,
however, believes that humans always have existing relationships with each other. They look into the past to learn
from mistakes and attribute liability but the focus is on the future of the relationship between the parties.

Even in cases of one-time short relationships, a person will work towards resolving his or her issues within that
short period relationship. Parties must explain their perspectives and needs in detail. The individual’s future and
growth must also be considered the ADR process.

Core Values of the ADR process:

(a) Participation
Unless the parties participate in the dispute resolution, there is no purpose of the process of resolution. In the court
system, the parties are present but participate at an arm’s length. Imports, impartiality and illegality of justice that
is a depersonalisation of the dispute. Rational and learned people like lawyers take over the process and are
considered rational because of their impersonal relationship with the case. The judge is also a neutral party and the
concerned party has no say in the presentation of facts or resolution of dispute.

In ADR, the parties are the primary focus as their participation is key to justice.

Benefits of actual participation

(a) parties have a voice in how the dispute is presented. This is entirely for the parties.
(b) feeling of being heard. They get the feeling of validation and acknowledgement for their experiences.
(c) Having control over the process – it is an underlying need in all dispute resolution processes, people want
to have control over everything around them. In the court system there is no control over the processes
and the parties usually are not able to decide on any action to be taken. In ADR, the parties can decide the
place, time and procedure of dispute resolution. They are empowered and given the capacity to take
control and big rational decisions. It is a very party-dependent process. Participation gives them control and
reduces negativity.
(b) Fairness
ADR ensures fairness. Fair treatment in court - the impartial procedure ensures fair treatment. In ADR, the degree
of involvement and participation gives the parties feeling that they have been fairly treated. If there is this sense of
fair treatment, the parties are more likely to follow the ultimate decision that was a result of the ADR process.
Respect, etc.

(c) Flexibility
Of process and of the outcome. ADR lacks the rigidity and tyranny of the law. The court system is very lengthy.
ADR allows you greater confidentiality. The laws can also be decided by the parties. This allows greater freedom in
deciding what laws govern them.

(D) High Litigation Costs

Costs are sometimes invisible also in Court, as parties sometimes collect the cost of setting precedents. The party
might not want such long-term effects and may want to use ADR process.

(E) Early Intervention

[most important according to ma’am]

Criticisms of ADR
(a) Resources:
lack of ADR professionals, lack of training funds.

(b) Regulatory body:

there is a gap as to supervisors of ADR processes, training, qualifications, evaluation, etc,

(c) Systemic inequality:

ADR works outside the state control and is sorted by secrecy. Even criminal cases are now being resolved using ADR
process.

(d) Delegation of power to the people:

the power is being delegated to the society. It is assumed that they conform to laws and exercise balanced
judgement. This is highly optimistic. These powers can be misused by the society. (Vigilantism)
Can ADR be used in its pure form or should it be in formalised or institutionalised?
No, flexibility of process and flexibility of outcome will be compromised. However, institutionalising it will lead to
legitimising the process of ADR. If it happens independent of state processes, they will be no state control. Some
say ADR can only be supplementary with the court system and not in place of it.
Rate of disposal is considered a criteria for the promotion of judges. If you considered this as a criteria for judging
the effectiveness of ADR, then there will be a conflict between the purpose of ADR and people-settlement. The ADR
professionals might even cause the parties to settle in case this is a criteria for judging the efficacy of the ADR
process. Settlement is not a criteria. Criteria can involve factors like party satisfaction.
Early intervention is in consonance with the dispute resolution. You have societal mechanisms allowing you to
intervene for the legal process kicking in. Problems of the judiciary can be helped by intervening at an early stage
before it gets to a full-blown dispute.
Stages of Conflict Building
Picked up from here.

(1) Disagreement
We give permission only to some to comment on us/personal life/professional life. We set boundaries, which are
either drawn explicitly or declared. If someone crosses it, it causes disagreement. Boundaries also keep shifting on
an almost daily basis depending on our frame of mind. Intervention of third-party/prudence on one’s part
necessary for an amicable resolution at this stage.

(2) Personification of the problem

Attaching blame. Focus shifts to the person you disagree with. The issues at hand: (I) the disagreement (II) the
person you disagree with.

(3) Expansion of the problem

You bring in past experiences. We focus on things other than the present problem. (shit gets real)

(4) Stopping of dialogue

Cutting off communication between parties. Even if composition was not positive, engagement is important in
itself. If communication is out, things can get very ugly. Dialogue can be direct/indirect (face-to-face or
phone/agent). Parties, if they don’t talk to each other will talk to third parties, only add fuel to the fire. You will
likely engage in confirmation bias and hear only those supporting opinion. Treating as an enemy: all actions of the
person are judged as being against you.

(5) Open hostility

Either physical or violence inflicted by parties on one another. We dehumanise the other party.

(6) Polarisation
last stage at which intervention is possible. You
are entrenched in your position
(legal/otherwise) and court process is the only
way out. Parties are virtually unable to coexist
with one another.

Five Dimensions of Conflict->

Responses-
Thomas Kilmann: conflict resolution instrument.
Identified by responses to conflict:
1. Avoidance
2. Competition
3. Accommodating
4. Compromise
5. Collaborative
Responses
(a) Avoidance (Flight)
Ignore the existence of a dispute because we do not want to get tangled in disputes and trivial issues.
(b) Competition (Fight)
Physical or psychological fight response, like going to court. We even go to court when we know we will lose, just
because it gives the satisfaction of retribution.

Conflict Management
Two approaches
a. Co-operative
b. Assertive

Variables
Depending on these you can decide how which or to what extent will you choose (a) or (b) from the aforementioned
list.
1. Importance of the relationship
2. Importance of the issue
3. Leverage over each other
4. Time available

Models
Collaborative Model/Corroborative Bargains
Harvard Project; Maximum interest of the people will be achieved. The distributive process makes it a win-win
situation. However, the main problem is that it requires sincere effort and maximum concern from all people
involved.

Competing Model
Can be used when the issue is more important than the relationship. Maximum assertiveness, not recommended
for interpersonal disputes. If you need to take an unpopular decision for the greater good or in case you have more
power and time is also a constraint. (??)

Accommodating Model
You are not taking care of your personal interests, maybe when you have less bargaining power. High on
compromise and very low on assertiveness. The issue is not as important as the relationship. Maybe the dispute is
at a time when building goodwill is very important. This is not a good response because in the long run it may lead
to frustration and you may be taken for granted.
(a) Separating the persons from the issue- As representative is not personally concerned with the dispute, they
can handle it objectively.

Problems
(a) Emotional Aspect: We have to confront the emotions as they are. We must not react to the emotional
outburst.
(b) Perception: We need to understand the process of perception of the other person.
(c) Communication: Parties quibble to other parties, leading to confirmation bias, instead of talking to each
other. You should talk to each other instead.
 (d) Over-blaming: For allocation and attribution of responsibility, blaming is required but you should not over
blame the person by attacking him. Blame game clouds your rationality.
(e) Empathy and Sympathy: if you have a fear that the other person will leave you, it will colour your
interpretation of his/her acts. You need to understand the perception of the other person so that you do
not misunderstand their words and actions.
(f) Secrecy: Negotiators never reveal their underlying intent. So you have to figure them out yourself. A lot of
brainstorming is spent out figuring out intentions.

Other Concepts
Best Alternative to Negotiated Agreement (BATNA) must be refined and used in the other situation.

Negotiation Jujitsu
They do not use their force in attacking an opponent, they simply direct and flip the opponent’s attack on them.
The principled party may use "negotiation jujitsu" to bring the other party in line. The key is to refuse to respond in
kind to their positional bargaining. When the other side attacks, the principles party should not counter attack, but
should deflect the attack back onto the problem. Positional bargainers usually attack either by asserting their
position, or by attacking the other side's ideas or people. When they assert their position, respond by asking for the
reasons behind that position. When they attack the other side's ideas, the principle party should take it as
constructive criticism and invite further feedback and advice. Personal attacks should be recast as attacks on the
problem. Generally the principled party should use questions and strategic silences to draw the other party out.

Integrative Bargaining
If the opponent is trying positional bargaining, you must question and focus on the underlying intent and press for
soft positional or integrative bargaining. Even then, if the opponent refuses to focus on interests, then you can use
negotiation jujitsu and flip the attack on the issue.
Then the party gets locked into the position they are taking and try to defend it. They try to save face. If you do the
same thing (i.e. play hard and do positional bargaining, I guess), then it simply becomes a clash of ego and
personality. They then become positional bargainers and do not reach a
solution. It is better to use negotiation jujitsu and try to explore their interests
and help them move form their position by pointing out their underlying Argumen
Defense
t
interests.
Hard positioners usually rejects all proposals to discourage the negotiators, you
must psychologically deflect this and ask them for the reasons for not accepting
things, that way you can disarm them. Even when they personally attack you,
Counter
you must not react and you must remain poised. That way you can use the Attack
attack
pressure against the problem.

Problem of Bluffing
A main issue in negotiation is the lack of trust. There is a problem of communication. You can ask them questions
and make sure that you are actively listening. Non-verbal cues must be observed. The body language of the parties
+ the skill of asking the right questions at the right time can really change the direction of the negotiations.

Venue
Usually people say that you must just pick a neutral zone, but some negotiators pick the home turf of the other
party to ensure that they are relaxed and ready to make concessions. Sometimes they make the temperature
extreme so that people can finish the negotiations fast. The seating arrangement also really impacts the quality of
the negotiations. It should not be confrontational but must be collaborative.
Personal Psychological Attacks
This is often made to discourage the other negotiator and can either lead to quick completion or hostility.

Good cop/Bad cop

Classic strategy to gain information.

Threats
No successful negotiator will use threats. Instead they should warnings which are not very negative. In case there
is a deadlock, compare, even after using the problem solving model of negotiations.

Failed Negotiation
A negotiation is said to have failed when either of these are the outcomes: -
(1) Where you can’t enter into any agreement.
(2) Where the agreement entered into is not the best possible agreement.

Barriers to Settlement
(a) Strategic Barrier
Maximum information must be given to enlarge the size of the pie. Then the pie must be distributed where one
must maximise his/her own interest. There is often a conflict between these two. Negotiators have the dilemma
about how much information they should reveal. If a negotiator tries to act strategically and guard information, and
the outcome will not be the best possible outcome.

(b) Divergence of Interest (Principle/Agent)

In a civil suit, is it is advocate in principle as the client. Is there a conflict of interest? Yes. Claimants may want to
continue litigation because of personal reasons (revenge on opposite party), when advocates tend to also settle
out of court. Trial exposes loopholes in their case. The seeming alignment of interest does not exist in negotiations
if you are being represented by your own agent, your interest may differ in any agreement reached in not be in the
best interest of the client. Advocate could also possibly suggest litigation even when negotiation is a better strategy.

(c) Cognitive barriers

Positivists say that during negotiation, negotiators take decisions without rationality for two reasons:

Loss Aversion
Between a sure loss and one fifth chance of winning, what do you choose? The gambling is that there is a chance
to lose the entire amount. We reacting makes it likely that we will choose the one fifth option.

Risk aversion
Between a sure win and the gamble letting you gain more, people go for the sure win.
Together, these cause cognitive barriers during negotiation.

(d) Reactive devaluation

If offer comes from a mediator, as opposed to the opposite party, we think the offer is unbiased. Due to distrust
between negotiating parties, they suspect any further offer the opposite side makes. So we devalue the offer and
feel like we should rejected before we even analyse the offer made to us.
The mediator can help foster trust between parties and integrates parties to reveal any information only to her, if
not one another. Mediator can ask questions to ascertain of information revealed. Mediator cannot reveal the
information of the other side, by can help build the case. Mediator does not suggest an outcome but discourages
strategic behaviour by parties and fosters trust.
How can a mediator help?
Principal – Agent divergence of interest
Mediator can invite more people to align the conflict of interest. In case advocate is messing up, mediator can
encourage party to take lead (not the advocate).

Cognitive Barrier
Mediator can help parties overcome the problems of risk and loss aversion, and help parties appreciate the trade-
off, help them arrive at a rational settlement.

Good Faith
Litigation usually breaches the confidentiality agreement between the parties. Civil law has confidentiality clauses,
however they aren’t present in common law. Cultural sensitivity really helps in understanding the other party and
adds to your negotiation style.

Client Counselling
The client believes that the advocate is an expert and expects an immediate answer to their problems.

Preventive Law
Aims at preventing disputes and focuses on legal opportunities. It aims to avoid litigation by delineating the rights
and duties in advance.

Therapeutic Jurisprudence
Look at the emotional ramification of any action, not just the legal ones. Ultimate thing is satisfaction and happiness.

Importance of Emotional Quotient (EQ)

Has become an important requirement that client look for in their lawyers. You must involve the client and treat it
as a problem-solving method. Always keep the client in the know-how of whatever is happening and consult before
you make any decision, and have his/her consensus about things.
All rules and procedures should have a therapeutic effect on the client. Reduce negativity and the chance of future
disputes between the client and the opposite parties. Avoiding litigation doesn’t mean lawyers don’t make money.
ADR helps the client and also helps the lawyer make more money. You must be able to look for what the client
really wants and what their capacity to get it is. The advocate must explore all the personal questions and ensure
that the resolution process doesn’t harass the client. [Whether the client wants a distant or close relationship with
the process of resolving the dispute.]

Choosing the Right ADR Method

(i) Client wants to talk face to face, negotiation.
(ii) Client wants to stay away from the dispute resolution and not talk face-to-face, Advocate represents
and talks instead of the client.
(iii) Client is okay with talking to third parties, mediation or co-negotiators
(iv) Clients don’t care about confidentiality and are ready to be cross-examined, litigation.
(v) High value placed on confidentiality, arbitration.

Bargaining in the shadow of the law

Judging the possible result/outcome of litigation, in the light of the facts and strength of both parties’ cases. Leads
to most settlements, but if the person perceives their case as the sharpest, it might even prevent reaching a
settlement. In order to ensure no future disputes, arise out of the settlement reached now, the agreement reached
must be drafted clearly and sensibility. Advocates must have a futuristic vision of how things must be done. There
must be an interpretation clause also. This will prevent more litigation.

Follow up with the client

You must act as a counsellor at law and keep in touch and build better relations with your client.

Mediation
Mediators are trained third-parties, with no decision making power, they help the clients solve issues amicably.
Earlier the notion was that if the person was close to both parties and not neutral, then he could help them better.
[Eg: most respected or oldest person in the society].
Eg, Panchayat was a med-Arb situation. The Panchayat had decision making power if mediation failed.
Neutrality: You do not bring your own values to the table. You are not concerned with the outcome of the DR or
with the parties. It is essential in the present system of mediation.

Evaluative Mediation (rights-based)

The focus is on the rights of the parties and focus is on the law. Mediator is supposed to evaluate the facts and the
evidence of the case (he can then suggest an outcome). The parties can then make a decision in light of this. Not
adversarial but amicable settlement in light of the law.
The mediator is expected to give his views on the strength and weaknesses of the parties. He has to do fact-finding
research, and his opinion would not be binding on the parties. The mediator will weigh the evidence put forth in
the mediation and give his decision thereafter.
Evaluation of the model - It helps in the administration of justice more amicably as parties are free to devise their
own solution and the same is merely guided by the system of law.
The parties may be tempted to suspect the neutrality of the mediator, specially when the decision is against a party.
It also restricts the scope of mediation as only certain people with legal knowledge can become mediators.

Conventional Mediation (interest-based)

The parties focus on the underlying interest in order to achieve a holistic outcome which is far-fetched. The
mediator helps in all four stages (barriers to settlement). The pie will be enlarged and the agreement would cover,
not only the legal issues, but also the broader issues of the dispute.
Here, the mediators would just help the parties to come back on track and facilitate trade. He will also help the
parties to devise creative solutions if they are not able to do so by themselves. There is no proactive role (decision
making) as such. Here, any person can act as a mediator. This is deemed to be the best form of mediation as it is
free from the problems mentioned in Evaluative mediation.
- Mediators don’t play a big role, no suggestions or advice
- They help identify interests, needs, and effectively communicate
- Parties often choose mediators they both know
- AC Act gives the option of waving off the conflicts of interest
Can the mediator be made liable for the quality of evaluation?
It shall be seen that in courts it is very hard to extract documents from the parties and coercive methods have to
be used. Therefore, a mediator who does not have any coercive power, cannot be expected to extract such
documents and render an apt decision from the very beginning.
 Voluntary Mediation Mandatory Mediation

Private mediation (like arbitration). Not chosen by own volition

In light of mediation clause Sent by court or pre-litigation requirement

The voluntary nature of mediation is one of the mediation is one of its biggest attractions. However, the
requirement of mandatory mediation is criticized for being against such feature of mediation.

Models of Mediation
1. Transformative Model (facilitative)
Unlike problem-solving mediation, transformative mediation does not seek a solution for the immediate problem.
Instead transformative mediation uses empowerment and mutual recognition of the parties involved in order to
understand the problem on many levels.
Through empowerment, parties are encouraged to examine their issues and develop their own solutions. Through
recognition, the involved parties are encouraged to understand the other party’s point of view, and why they seek
the solution they do. In transformative mediation, the mediator plays the role of a neutral third party and the
involved parties are responsible for all the outcomes.

2. Problem Solving Model (goal-oriented)

Settlement is the ultimate goal. So they always look at resources as something that must be divided between the
people. They give half-hearted recognition to the emotional aspect of the dispute.

If in the PSM, the mediator’s goal is only to reach a settlement then it is not any different from a Judicial Settlement
Conference. The judge in a JSC can predetermine the stand of the court and is well versed with the law. If JSC exists,
then why do you need PSM. Evaluative mediation can be compared to expert opinion in early neutral evaluation.
Mediation must aim to transform people, relationships and society. This is met by TM.

Imbalance of Power in ADR

Since the processes are private and confidential, TM says in order to do something about the operational process
of mediation, the mediator often behaves in a paternalistic way and tries to avoid an imbalance of power, this is
not right under the TM of mediation and the parties should go to court to get justice.
However, since there is no discussion of rights and liabilities in the TM, there is no question of imbalance of power.
They only discuss how to empower the parties and create an understanding.
PSM said imbalance of power exists in society and you cannot do away with it in one mediation session. The
mediator must maintain his/her mentality in the situation. It is an absolute concept and can’t exist. (?)

Responses
1. Mediator can refuse to sign the agreement if he feels that it is one sided.
2. BATNA is a tool against powerful parties, the mediator can help the parties work on their own and each
other’s BATNA
3. The mediator can give hints and help the parties during the caucus.

Confidentiality
Most important in PSM, because they need a free flow of information. It must be present at all stages. In the
Transformative mode, again confidentiality is very important. But it is said that they don’t need any confidentiality
because they discuss only emotional aspects of the dispute and n disclosure is made as such that it might prejudice
them in the trials.

Legal Expertise
Must in evaluative model; PSM requires legal advice only at the 4th stage of mediation- using objective criteria-Ruhi
feels they need legal knowledge at all stages because they need to understand their rights and liabilities and not
just at the distribution stage. In TM there is no discussion of the law, and therefore anyone can be a mediator. It is
a pure facilitative model of mediation. There is no need of any legal expertise.

3. Narrative Model of mediation1

This emerges out of postmodern thinking. They criticize both the models and say that the focus should be on the
narrative in which the party lives. Each person has their own rights, ideology and sense of entitlement. Conflict is
simply a collision of the different story lines. They have to explore the alternative discourse.
The mediator must understand the story and deconstruct the story of conflict and creating a story of relationship.
The mediation must ask questions and explore the sense of entitlement, sense of self and dehumanisation of the
other party. The mediator must spend a lot of time talking about the part of the parties.
The purpose is to create a shift in their narratives. This is a highly theoretical model and the mediator must be well
versed with dealing with people and must be familiar with the deconstruction theory. Can be a psychologist or
anthropologist. Their response to imbalance of power is that they believe in Foucault’s model of power. Power is
in a flux in the society and can be negotiated in society. It is not a commodity. Confidentiality is important in this
model also because a lot of past details are revealed in the course of discussion. Main focus is on the past. The
fundamental belief in the PSM is looking forward. They focus more on the future of the dispute. The past must be
looked into only for the imputation of liability.
How does the narrative model deconstruct the story?
- Suitable only for interpersonal disputes
- Uncover the past relational dimension b/w parties
- Deconstruct conflict-saturated stories between the parties- expose the biases underpinning them-
Mediator can do that through questioning
- Create a new story between the parties.
- This is similar to the transformative model because it is focused on transformations and emotions. It allows
the parties to resolve the dispute in a creative manner.

Alternative Dispute Resolution in India Today

In cases where the Court is the opinion that Settlement is possible, the Court can formulate terms of settlement
and give it to the parties for observation. Post-observation, the court can reformulate/amend the terms as well,
and then refer it for any of the methods of ADR. These methods are as follows: -
1. Arbitration
2. Conciliation
3. Mediation
4. Judicial Settlement
5. Lok Adalat2

1 By Gerald Monk and Vin Slade

2Section 89 was repealed with the commencement of the Arbitration Act 1940, and added again with modifications by way of
the 1999 Amendment.
For Judicial Settlement and settlements in the Lok Adalat, the Legal Services Authority Act, 1987 will apply, for
Arbitration and Conciliation Proceedings the AC Act, 1996 will apply. For mediation, prescribed procedure of the
specific High Court is to be followed.
Order X of the Civil Procedure Code

Rule 1A: After hearing admissions and denials, court to ask parties to pick from any settlement method given in
Section 89 (1).
Rule 1B: Parties to appear before appropriate forum on decided date as per Rule 1A.
Rule 1C: If presiding officer of the forum referred to is of the opinion that it would not be just to move on with
settlement, then matter would be sent back to the Court.

Referring of Disputes
Stage of Referral
The Law Commission suggested that reference as per Section 89 must be made after the framing of issues.
(a) Early reference: Early mitigation lowers cost and time taken. Prevents the parties’ stance from hardening
(especially in adversarial). Ideal stage is once pleadings are done.
(b) Late reference - Not ideal point of time, they might not be ready to settle.
Everyone wants a day in Court. They have high expectations from the court system and aren’t ready for ADR, they
might not be willing to experiment. At a later stage, they will realise the inefficiency of the court and will probably
opt for ADR. Thus, the ideal stage is after settlement of issues between the parties, especially because after the
stage of interrogation, the parties might actually be willing to settle.
Arbitration is a form of alternative adjudication, and the award is usually binding on the parties. All the other
methods are those of conciliation and the parties can approach the court again.

Salem Advocate Bar Association v Union of India - I (2005)

Report I: The first report provided for guidelines on how to operationalize Section 80 and 89. Said that the purpose
of notice was to exercise settlements and prevent litigation. Court will check the reply made by the nodal officer to
the private person. Otherwise, the Court will impose cost on the government, even though S. 35 isn’t applicable to
the government. It isn’t recovered from the taxpayers’ money, but from the designated officer of the government. 3
Report II and III: There is a contradiction in S. 89 and Order 10 (Rules 1A, 1B, 1C C) as the words used in both are
shall and may respectively. The confusion is whether it is the duty or discretion of the court to refer the party to
ADR. The Supreme Court said that the word ‘may’ is used in the later part of S. 89 because it is about reformulation
of the terms of settlement, which might not be necessary in all cases.
It is the duty of the Court to refer the parties to ADR.
Para 59: Reference to arbitration and conciliation isn’t in sync. Since one law cannot be in contradiction to the
other, only provisions of the law post-reference of the cases will apply. If any provisions contradict it, then it will
simply not be applicable.

Anant Raju vs. Raju

Can arbitration be done at the SC level, even if there is no agreement? SC said yes, the parties can accept the idea
of arbitration at even such a stage.

3Sidenote about Judicial Impact Assessment, when a Bill is introduced, the cost of establishing a new court should be decided
by the government.
Under S. 89, the Court should look at whether settlement under S. 89 will be possible or not. They said different
judges sit in the court and bias can’t be assumed.

Salem Advocate Bar Association v Union of India - II

What is the correct term for a court decided settlement? If the settlement doesn’t go through, can the same court
adjudicate the case?
There is a process internationally followed, a hybrid of mediation and arbitration, i.e., med-arb. The mediator
knows the dispute in and out and is a neutral person, so he can be the arbitrator of the issues in case at a later
point. However, it would hinder free exchange of information and may lead to ineffective mediation processes
(accepted by India in 2002).
Para 16 - S. 89(1)(a)-(c) - The matter should be referred to some conciliatory forum, and the court should give effect
to that settlement that the parties have decided on. The Court itself doesn’t undertake the task of reaching a
settlement.
Should there be any fee charged for ADR processes by the Court?
SC said that if fee is charged then parties won’t have any incentive to opt for these services. They must be free of
cost so that the objective of reducing litigation is reached.
S. 89 and Order 10(1)(a)-(c)
Once parties have reached a settlement, they can ask for a consent decree or withdraw the suit in consultation. As
they have have the option to withdraw the case, they can ensure confidentiality, the court has no coercive powers
to demand any information or terms of settlement. If parties settle in the Lok adalat, their costs (court fees) are
refunded. In 2005, Section 16 of the Court Fees Act allows for reimbursement of court fees in case of settlement
under Section 89 CPC,

Conciliation vs. Mediation

Conciliation requires a greater proactive role of the conciliator. He/she can give suggestions on how disputes can
be resolved.

ADR and Conciliation Rules

1. Duty of the judge to check for possibility of settlement (Section 89),
2. Duty of the judge to explain the five options before them,
3. Inform parties that mediation is free of cost and that court fees will be reimbursed upon settlement,
4. Parties must then decide which method to use and inform the court of the same,
5. Similarly, the Supreme Court and all High Courts have their mediation rules and manuals. 4

Rule of thumb from Jagannath Committee Report

- Mediation, if parties want to protect their relationship
- Arbitration, if no relationship to protect
- Lok Adalat/Judicial Settlement, if parties want to meet halfway and settle

Referral to Lok Adalat [LSA Act, S. 20]

1. Either all the pending cases are transferred
2. Pre-litigation referral
3. If one party wants to go to Lok Adalat (here, no consent needed from other party, referral may be made
after hearing reasons)
4. If court refers the dispute suo moto

4 MPCP Committee of retired judges who oversee

Consent in Referral
- Judicial settlement not done in India because of already overburdened judges and courts
- Court must hear all parties, but doesn’t need consent for referral to mediation or conciliation.
- Consent of all parties needed for referral to Arbitration as it is binding, as well as expensive. Parties can
jointly opt out as well.

Case Flow Management

Timetable for cases through tracking of case is made by taking into consideration
1. Subject of the case
2. Quantum of evidence
3. Expected time taken

Indo-US study Report

Bottleneck 1: Listing and Calling of Cases
1. Too many cases listed before a judge, leads to adjournment and increases backlog.
2. Calling of cases: Lots of time wasted in procedural and administrative cases. There must be a screening to
check whether any actual application of judicial mind is required at that stage or not.
Eg: judicial Registrars in the Delhi HC hear the procedural matters, but they are absent in the Trial Court.

Four Tracks
1. Maintenance, divorce, child custody [family matters]: 9 months
2. Money suits: 12 months
3. Trademarks and copyrights: 24 months
4. All other cases: 24 months
Some officer must be given the task of tracking each case and must inform the judge of the time schedule. The
nature of dispute and quantum of court resources must be also factored in. Judge has the discretion to change the
case to different tracks.
Bottleneck 2: Serving of Summons
(a) The notice of when written statement must be given should also be given along with summons
(b) The timeline must be followed at every stage
(c) The calling of cases - cases should go to court only if judicial application of mind is necessary
(d) File for injunction or interim injunction. Tactics used by parties to get adjournments delay the case. Court
should make a strict timetable and follow it so that this is avoided.
Bottleneck 3: Interim orders/injunctions
Parties often seek a stay order as a strategy to suspend litigation for a long time.
Eg., whenever an Order 39 application is filed, on the hearing of the admission, the Court first listens to interim
applications. The rule says that if the court passes an ad-interim injunction, if it is passed in the absence of the
party, notice should be given to the opposite party. Defendant can then immediately come to contest the grant of
ad-interim injunction and Court can vacate it at the earliest if needed.
Eg., When defendant objects, plaintiff can file a rejoinder, but to keep injunction going plaintiffs file for
adjournments. The court must take strict notice of this

Amendment to Order XVIII - Taking of Evidence by Commissioners

Commissioners have no judicial powers. They can only record evidence. There is no examination-in-chief in person,
because this is now done via affidavits, but they can, and do conduct cross-examination because commissioners
don’t have judicial powers and parties don’t respect them.5 When a Commissioner is appointed by a court, they
have to keep a check on them, and provide them with a timeline.
Sometimes, files got destroyed and damaged, and Commissioners frequently allow access to files of opposite
parties. Now Commissioners must give an undertaking.

Costs
LCI said that the rule as to Costs in Section 35 of the CPC is not followed in most cases. Encourages frivolous litigation
without punishment. Court management rules require strict application of Sections 35, 35A and 35B of CPC.

Proceedings for perjury

Court shouldn’t shy away from starting proceedings against witnesses and parties
SC observed that India has a difference between mediation and conciliation, as shown by the Arbitration and
Conciliation Act. Under S. 62 of this Act, parties are free to choose any procedure. Conciliation is non-adjudicatory,
wherein parties choose 1-3 neutral parties who will help resolve the dispute.

Commencement of Conciliation
Parties may have a prior agreement providing for conciliation in case of dispute, or parties may first try to resolve
it using Arbitration and Conciliation Act, and if it fails, use the institutional rules. Conciliation is voluntary and in
even in case of an existing agreement, a party can refuse conciliation.6 The procedure for starting conciliation is as
follows: -
1. Sending of Notice
2. Deemed refusal in case of failure to respond within reasonable time

Appointment of Conciliator (depends on number of conciliators)

The appointing of a conciliator depends on the number of conciliations members as decided by the parties,
- If 1, both parties choose together
- If 2, both parties choose one each
- If 3, both choose one, and appoint a neutral 3rd member.7

Relevant Sections

Section 62, 65(2)-(3), 29, 70, 71, 73, 74, 75. 8

Court-annexed Mediation
Started when Roscoe Pound gave a lecture in 1906 in which he criticised the legal system of America. He said that
the quest for justice is lost and the court is more concerned with whether the rules of procedure are followed or
not. He called the legal system a game and said that one can win by following the rules. He said that judges are not
doing anything and advocates behave like ‘hired guns’ and not like the officers of the court. They are manipulating
the law to the maximum extent possible. In 1976, in Minnesota, USA, in the Pound conference.
Before this, ADR was only in the private realm. This attitude was changed after this conference. They tried to
understand the alternative systems available, to combat the disaffection that people have with courts. The courts
are not ideal for taxation and family matters. This way they realised that type of dispute must be matched with the

5
Lack of judicial/coercive powers of the commissions, led to the frequent non-appearance of Parties.
6
Similar refusal cannot be made w.r.t Arbitration Agreement. See Section 8, Arbitration and Conciliation Act.
7 The presiding conciliators view is only to be taken into consideration in case of a difference of opinion amongst the other two

members, other than that she has no other powers.

8 If possible, read from the Act, can be found here.
appropriate system of ADR. Professor Frank Sender laid down the system of multi-door court home. (Refer to earlier
notes for details of process).
In 1996, Lord Woolf suggested reforms for the civil justice system, which he presented in a report in 1999, this
included the following: -
1. New concept of court and case management.
2. ADR used help courts work efficiency and techniques of case management
The civil reforms act in England wanted to allocate the appropriate amount of court resources for court
management. One tool is tiering of the cases, so the court have to follow that time period as per the nature of the
dispute. It helps everyone cut down on their waste (time + money).
The Court has to encourage the party to identify issues amongst themselves, so that the court doesn’t have to.
There should be a pre-trial conference by the judge, between the parties. This helps identify the issues. Prior to the
actual trial, they have to prepare everything and decide their issues.
Lord Woolf was not in favour of court annexed ADR processes but said courts must encourage ADR processes. The
court should look at whether they are acting in good faith or not. There should not be any force or compulsion to
do mediation or ADR. The judge must have the power to check the ADR process after its conclusion. Cost does not
follow the litigation.

India
We have not followed case management, despite opting for court annexed ADR and other recommendations made
by Woolf. Court annexed mediation is followed in Delhi, mediation centres in courts provide mediation services to
parties. MCPC overlooks the functioning of such centres all over India. They mostly come in after the initiation of
litigation. Other bodies like women’s commission and samadhan provide pre-litigation services.9

General practice of Section 89

The referral judge transfers the case to the mediation centre. He gives 90 days for settling the dispute amicably and
gives a returnable date for the case to come back to court. The judge coordinator of the mediation centre allots
cases to the mediators and keeps track of the cases referred to the centre. Earlier judges were given mediation
trainings as there would be no cost of lack of faith in his/her competence. However, this would increase the problem
of delay. It would also lead to them predicting the result and giving opinion on the issues.
When judges arbitrated, they brought the court into the arbitration centres. The advocates were enraged at the
new mediation system and the court then started including them and started conducting workshops to inform them
about how mediation increases their work and is a viable option for dispute resolutions. The judges/advocates sit
in the mediation centres on a weekly basis/timetable. Initially it was to be pro bono, but now they are paid according
to the payment schedule.

Mediation Rules
Important Mediation Rules, have been discussed below.10 Mediators are paid in honorariums, only paid for cases
successfully settled. Ideally, however, it should be pro bono. In Delhi Dispute Resolution Society, any person can
become a mediator.

Rule 2 - Appointment of Mediator

The judge-coordinator allots the cases. Parties have no choice. There should be no ulterior motive when selecting
a mediator.

9 Salem Advocates Bar Association - II case deals with post-litigation stage of the cases.
10 Part II of the The Delhi High Court’s Mediation and Conciliation Rules, 2004, they can be found here.
Rule 4 - Mediator Training (40 hours)

Requirements for becoming mediators is as follows: -

- 3 lakhs income per year

- 10 years working experience
- Must co-mediate 10 cases

Rule 10 - Procedure of Mediation and Conciliation

Original Court files are not sent to the mediation centre as the files can be manhandled there.

Rule 12 - Representation
One school of thought says that mediation doesn’t require advocates. Second school of thought says that
settlement arrived at will be better because advocates can clarify positions and provide a reality check to the clients.
Now parties can choose to come with advocates or not.

Rule 13 - Non-attendance
The mediator has no coercive power and he/she must refer the case back to the court, and it shall be deemed to
be ‘no settlement’. Parties often take mediation for granted, as there is no serious consequence for non-
attendance.
The mediator can be changed in case of any conflict of interest. Even though mediation is said to be flexible, in
court-annexed mediation, the court and the judge coordinator will decide the dates according to the mediation
centre schedule. The parties may choose the timings sometimes.

Styles of Mediation Procedure

1. Mediation in joint sessions are better as caucus can often cause doubts in the minds of other parties,
2. Private meetings are also good because in the separate sessions the mediator can help the parties deviate
interests and create options. The presence of the other party might inhibit this conversation. There is
greater reception of a proposal from neutral mediators.
3. Only caucus/private sessions: this school of thought believes that joint sessions are of no use, and aren’t
constructive. In this method, the mediator carries the messages and proposal of one party of the other.
There is less deviation/anger in this form of mediation.
Styles (1) and (3) are extreme, (2) is midway.

Rule 13 - Non-attendance
The party or mediator can inform the court of any non-attendance or disrespect. The court has the power to make
appropriate directions, which include (1) Summons, (2) Costs, (3) Sending of files to court before lapse of 90-day
period.
However, (1) and (3) are punitive in nature and are against the voluntary nature of mediation processes (unlike the
negative obligation in arbitration). However, Rule 13 is not followed properly.
Rule 13 allows the courts to encroach on the voluntary nature and confidentiality of any mediation. Refusal of
mediation also becomes questionable in court. Purpose was to reduce litigation, not to increase the grounds for
litigation. Professor Frank says that mandatory mediation is mandatory only at the beginning stage. Whether the
party participates or not should still remain voluntary. It should only be mandatory to opt for mediation,
participation should be voluntary.

Rule 15 - Offer of Settlement

Offer of settlement by parties is completely confidential. It doesn’t prejudice their right in any court proceedings or
at a later point of time.
Slight contradiction in clause (2) because it gives parties the right to send with-prejudice documents. Parties can
opt for their own documents and notices to be public and usable later in court. This is with respect to their own
statements and not with respect to the statements of other parties.

Rule 16 - Role of mediator/conciliator

Conciliator can formulate terms of settlement/reformulate, as further given in Part III of the Act.

Rule 17
Mediator only facilitates in arriving at a decision
(neither can impose any settlement on the parties, or any term of settlement on the party)
- But there is a conflict of interest as mediators get paid only on settled cases. So the mediator might dictate
terms to them. Rule 17 tries to prevent this
- S. 73 of Arbitration and Conciliation Act says that concilators can draft the terms of settlement for the
parties and they may accept or reject them.
- Family disputes are tougher and their settlement means that the mediator will get higher honorarium.
- The new model is to pay for unsettled cases but pay lesser than if the case were settled. The model in the
Delhi Dispute Resolution Society - the mediators get paid for the duration they sit in the mediation centre,
whether cases are settled or not is immaterial. This is called payment of sitting fees.

Rule 18 - Time Limit

Such ADR must be settled within 90 days (option to extend for a further 30 days)

Rule 19 - Bona Fides

Ethical duty to act in good faith - this is not sanctionable.

R 20: About confidentiality.

Part (a) of R 20-- gen abt role of mediator in the mediation process. No requirement of court like formality.
Confidentiality at all stages of the process. No audio/video rec of the mediation/conc process.

Sometimes, there’s a zeal to achieve something. Eg: family litigation, no of forums provided: (matrimonial home,
where the parties last resided together: lots of options). No of transfer petitions filed thanks to this (even at the SC
level).

Krishna Veni Nigam v Harish Nigam (2017)

SC said most courts should use ICT (video conferencing) instead of flooding courts with transfer petitions.

Santhini v Vijaya Venkatesh (2017)

Should video conferencing be resorted to? Reviewing Krishna Veni. (obv SC case). Overruled Krishna Veni-- said that
this violates confidentiality of proceedings u/R 20. Idea is good (video conferencing) but we need to see the
situation holistically.

R 21: Privacy
Students also can shadow mediation only w consent of parties + mediator. Privacy is important.

R 22: Immunity
Mediator given immunity for bona fide acts/omissions. Done so she can perform her job properly, done only when
mediation is done free of cost for the parties. Does not necessarily apply for pvt mediation (bet 2 or more pvt
parties) where the contract can create some liability for the mediator.
Rules provide for deletion of the mediator’s name from the panel of mediators. There are no sub-rules for detailed
procedure of de-empanelment. In mediation centres, there is a feedback mechanism for clients and parties can also
file anonymous complaints against mediators on the basis of which it’s possible this is done.

R 23: Communication b/w mediator, conciliator, or the court

ID Act: Conciliating Officer has to tell appropriate gov about what happened in conc proceedings.

There is a requirement for no communication b/w court and mediator: if at all needed, must be in writing and this
communication ka copy must be sent to both parties.

Rule (c) : what kind of communication can happen. (In actual practice, no real punishment.)

Karnataka, Mumbai HC Mediation Rules: provide for imposition of cost if the parties fail to attend. Mediator will
inform court u/R 23 of the parties’ failure to attend. Chandigarh HC said recently that if parties don’t attend
mediation proceedings, contempt proceedings can be initiated. Stricter measure. Parties are referred to mediation
centre by order of the court.

Should such compulsion be used? Matter of debate.

What if parties have settled some/all issues amongst themselves? In such cases, court will give a date and O 23 R 3
will apply (consent decree). Any settlement arrived at during mediation needs court approval to become a decree
-- does not become a decree on its own. (R 24 and 25)

R 26: Fees
SC: K Srinivas v Deepa: lot of pre-lit mediation for family disputes -- in such cases, parties must pay fees for mediator
+ fee for using mediation centre facilities. Gen free of cost.

R 27: Ethics (read)

S. 27: Help of court in taking evidence

Procedure in s 27 can be used for parties not following orders of Tribunal by Contempt of Court Act/ initiating
proceedings u/O 39 R 2-A.

Difference between mediation and conciliation rules.

1. Status of settlement agreement: u/ Arb + Conc Act, no need for court approval: as good as a decree. If
u/mediation: needs to be upheld by court to be a decree.
2. Role of third neutral party: conciliator more proactive. Mediator ( R 16 and 17) facilitatory.
3. Case referred for mediation by the court (u/s 89): mediation and conc rules apply. Pre-lit mediation: Part
III of Arb + Conc Act applies.

Problems w s 89: Definitions jumbled up. In (c), says any institution. But (b) says court will effect settlement. These
defs are not in line w terms of mediation and jud settlement used abroad. Interchange (b) and c.

Order 1 Rule 8 - Settlement of Representative suits

Cases of fraud, impersonation or coercion, such cases shouldn’t be sent for ADR processes (ADR jurisprudence). In
cases of Arbitration, they don’t refer the cases for arbitration if there is fraud as it involves complicated questions
of fact and law, and should not be referred to arbitration even if there is a clause for the same.
Afcons infrastructure and Ors. v. Cherian Varkey Construction
Facts: Dispute b/w 2 parties. Approached court. No arb agreement b/w them. Court referred matter to arb cause
one of the parties requested it. Other party opposed it. HC said Section 89 allows the court to frame an opinion as
to which framework of dispute resolution should be adopted.
How should courts implement section 89 be implemented?
Section 89 of the CPC has been copied from the Section 73(1) of the AC Act, and hence it is very tough for courts to
apply the same. Generally terms of settlement in conciliation proceedings are proposed only towards the end of
the pleadings; but here it is before the pleadings. The Court does not till then have enough time to apply its mind
and thorough discussion on the same has not happened, but is expected to frame terms of settlement. If court
frames terms of settlement, what will other processes do? Court said deviate from literal application of this section.
Courts must appraise themselves only of the nature of the dispute and frame a summary which it will refer to any
of the ADR processes.

Is consent necessary?

Is ADR under Section 89 mandatory?

Court has to form its opinion regarding possibility of settlement, which shows that there are cases which don’t need
to go to ADR, and hence is not mandatory. Reference is not mandatory, however application of judicial mind
regarding reference is mandatory.
Can all civil cases be settled?
Representatives suits and those civil cases which affects society at large, must be decided by the public body.
Further, as per Order XXXIII, rights of legally disabled people should be protected by courts only and should not be
referred for settlement.

What about criminal cases?

No criminal case, except those falling within the exceptions should be referred to ADR. If there is some relationship
that needs to be preserved, go for non-adjudicatory processes.

Jagdish Chander v Ramesh Chander, 2007

The parties can be referred for arbitration under S. 89 - this must be mutual and should be of all the parties. The
consent is simply to the process of arbitration and not the particulars of the process especially because they don’t
have an arbitration agreement. A Submission agreement has to be made after the dispute has arisen - it has all the
details of the arbitration. It can be done under Section 89 also.

P. Anand Gajapathi Raju vs P.V.G. Raju

At the SC stage, they asked jointly for referral to arbitration and the SC held the joint application was valid
arbitration agreement even at the SC stage. S. 62 and S. 64 of the Arb & Con Act - one party has to send a proposal
for conciliation to the other and the other must reply. Even for referral to conciliation, under S. 89, the parties must
give consent. If the parties don’t consent to conciliation, they have to explore other 4 ADR processes. Even
conciliation has costs, so written consent of all parties is required. Court said that for ADR other than arb and
conciliation, no consent of parties is required before referrals (from the Lok Adalat Act maybe). The court can refer
even if the person doesn’t really want to (Lok Adalat)

K. Sreenivas Rao v Deepa

Matrimonial disputes mediation (pre-litigation services must be provided), consent is also needed.
Status of Settlement through ADR
Arbitration
If a case is referred to Arbitration, then court loses control over the cae, and the Arbitrator/Tribunal will pass an
award, which is at par with the a decree passed by a civil court. then Arb. Tribunal has to pass award, and it is at
par with the decree of the civil court as per S. 30 of the Arbitration Act. 11

Conciliation
If it is authenticated by the conciliator, then it is also at par with the decree of the civil court. The parties have to
come to the court, to inform that they settled, only after which the case will be disposed of.

Lok Adalat
At par with the civil court decree, however they will have to come back and inform the Court of their settlement.

Mediation and Judicial Settlement

The agreement of settlement is not binding as the court has to pass a decree on the basis of the settlement reached,
the court has to give a hearing to the parties and see if there is any fraud or coercion. Only then can it pass a consent
decree under Order 23, Rule 3 if it is satisfied.
Para 28 - the SC also talks about pre-litigation cases and says that, in mediation and Lok Adalat, the procedure under
part III of the Arb Act will apply.
Can referral be made twice?
Yes, the court can give another opportunity to settle the dispute.
- In matrimonial disputes, the case should be referred to ADR processes. Only after hearing of admissibility
because if the parties start adversarial process, they become more hostile. There is no need to follow S. 89,
you can refer right in the beginning to prevent further hostility.
- Vanishing Trial - judicial resources are scarce and must be kept for important cases. His study said that there
is a crisis in the civil justice system.

Criticism of ADR Processes12

1. Excessive delegation: Judicial function can’t be delegated. If judges start promoting ADR processes, then
there will be lack of precedent creation and badly affect lawyering. The other school of thought opposes
this saying it is okay if the adjudication is happening outside the CJS.
2. Lack of accountability in the public system: When the dispute is pushed to the private realm, there will be
loss of accountability of public institution. In order to protect the public policy, some category of cases are
exempt from being referred to ADR.
3. Loss of day in court: ADR proponents say that people don’t even go to court. Court people said that the
fact that court exists is satisfying and gives a sense of peace.
We should be upset about vanishing trials in the light of ADR.

Reasons for Growth in Mediation

1. Litigation is too expensive, ADR is cheaper.
2. ADR is faster than the Civil Justice System
3. CJS is also more unpredictable so it makes sense to avoid it
4. Private disputes don’t always need State interference

“Sensible people do not litigate”.

11 As per Section 30 of the AC Act.

12 See, Vanishing Trials by Mark Gallanter.
Article by Hazel Genn
She focuses on mediation centres set up on Lord Woolf’s recommendation. 13 She believes that the Civil justice
system is a public good. And that it is important for law and order in a society, and security, that courts will protect
people’s rights. But everyone is saying there is a crisis, but she said there is no crisis. Regarding the Woolf reforms,
she says that the discussion of scarce judicial resources allowed judges to refer to mediation and to impose costs
on the people if they behaved badly in the ADR processes.

External Threat
Because of burden of the criminal justice system, the government wants to divert funds from the civil justice system
to the criminal justice system. The state has only created the hype of crisis in the civil justice system so that people
bear the cost of their own trials.
(a) Lack of access to justice: in spite of so many laws, Woolfe Committee said there should not be too many
laws governing the people.

Internal Threat
(a) Judges themselves are promoting ADR processes because they are looking for a market for their newly
acquired skills
(b) ADR processes must be voluntary in nature, and it is then a problem when the court mandates it,
(c) Mediation can’t supplant/go over the court system,
(d) System must be promoted on its own qualities and not as a last resort after the lack of efficiency of court.

Four Stories about Mediation

1. Satisfaction story: Mediation a win-win situation because of creative/non-legal solutions,
2. Social justice story: Mediation entails a shift from individualism to communalism, which develops
community interests. Centuries ago, ADR had the entire community involved. ADR systems in the West
have sentencing circles and neighbourhood justice training that encourages civilians to participate in solving
disputes.
3. Transformation Story: It transforms society by enabling people to take responsibility for their activities.
4. Oppression story: Mediation widens the imbalance of power, because of confidentiality and the role of
mediator, and leads to oppression of those already oppressed.
According to Mark Gallanter, Lok Adalats are second hand justice for the poor. People were not ready to explore
ADR even after this. Then the court started pushing ADR in cases like: -

(1) Dunnett vs. Railtrack, 2002 -

The court denied costs to the winning party as there was an unreasonable refusal to mediate or explore ADR. [Note:
UK has mandatory pre-litigation, with a 3hr mediation program.]
Q: What is unreasonable?
A: If the party gets less than what they could get in mediation, then refusal is unreasonable

(2) Royal Bank of Canada case

If the dispute involves and important question of law, does it make sense to still refer it to ADR? Yes, the Court said
this doesn’t mean you can’t mediate

(3) Heming vs. Lent

House of Lords decided that the judge can decide whether refusal is unjustified or not.

13 Written in light of Marc Galanter's article.

 (4) Halsey vs. Milton, 2004
There is no mandatory mediation and the judge cannot refer them mandatorily.

(5) Civil Mediation Council’s National Conference, Birmingham, 200814

The Master of Rolls, UK, gave a speech said that the Halsey decision was not appropriate - Right to approach the
court is not a fundamental right. He also said that the courts have the power to regularise mediation and make it
an integral part of the litigation process. While mediation might not be suitable for every case, or work in every
case, the courts must help litigants settle disputes this way, by encouraging mediation.

(6) Rolph vs. De Guerin 201115

Defendant was denied cost on the basis of him refusing mediation as he wanted his ‘day in court’. The court said it
is unreasonable refusal to mediation.
Hence, in UK it isn’t settled, there is no final position.

Permanent Lok Adalat

History
Abdul Hasan & National Legal Services Authority v Delhi Vidyut Board (1999, Delhi HC)
Facts: AH filed a petition for restoration of electricity cut by DVB cause he didn’t pay the bill. Court observed that
such complaints are raised by scores of litigants and not just ag the board but also ag other bodies like MTNL, LIC,
DDA etc. Lots of cases were coming up and clogging the legal system. To combat this, idea of PLA mooted.
Problem: There is some new authority created. LAs are not functioning. They are unable to conclusively decide
disputes. Possibility of dispute coming to court. The institution of LAs are very temporary, there can only be 1
hearing.
Delhi Vidyut Board: There are already many authorities under the law.
Delhi HC: All the authorities created under the Act are adjudicatory in nature, while there should be some new
authority that is permanent in nature.
In this case, Permanent Lok Adalats were discussed for the first time.
There is a lot of burden on the court because of these kinds of cases. The establishment of Lok Adalats is not enough
as such cases are still pending. The need for a mechanism that would prevent such such cases from coming up was
felt.
When one of the parties voluntarily approaches a Lok Adalat, the LSA sends a notice to the respondent and they
have to attend the Lok Adalat on a prescribed date. At that point, Section 89 was just re-introduced in CPC. Before
the LA, parties can choose to settle or not, it was a completely voluntary process.
If they don’t settle, the case would come back to court. Hence, in that way it was not completely checking the
clogging of the court. Parties will often not reach a settlement in one hearing. The institution of LA suffers from the
defect of temporariness. So two things are needed to be done:
1. Prevent cases from arising in the first place,
2. Remedy the effect of temporariness.
Para 11: Sikri (then counsel for MTNL) raised an objection saying that wrt MTNL, there are 5 fora under which
remedy can be attained (see para for authorities). DDA was also saying there is no need to create another
institution. [Link to judicial impact of Salem] Before creating an institution, analyse the impact it might have and

14 https://www.cedr.com/news/?item=Master-of-the-Rolls-urges-the-legal-profession-to-use-mediation
15 http://www.bailii.org/ew/cases/EWCA/Civ/2011/78.html
see if already existing mechanisms can solve the problem. MTNL and DDA were saying to legislate and pass one
more law is problematic when other fora exist.
Delhi HC rejected their contentions (without reasons). They say that the mandate under Article 39A is bigger and
that’s why it stands rejected. The real reason is that when you create an authority, PNJs have to be followed and
some provision for appeal/review has to exist for adjudicatory processes. They said that regular disputes happen
with public sector authorities and therefore need for permanent Lok Adalat.
1999: Justice AK Anand also reiterated need for PLA cause if one of the parties is adamant without reasons,
settlement will never be possible. LAs cannot do anything because they have no power. (Sections 19 and 20: Lok
Adalats only help parties reach a settlement. Conciliatory role. Part III of Arb and Conc Act applies but no powers
beyond that). In certain cases, some power should be given to Lok Adalats to settle the dispute. (Anand’s
suggestion) Similar to mandatory ADR, or rather the Med-Arb hybrid that has been discussed earlier.

Jurisdiction
LAs have unlimited civil jurisdiction. If Lok Adalats are given power to decide cases, only one appeal from the LA
should be allowed. Appeal will be to court to whom the original application could have been filed (if Lok Adalats
function at a pre-lit stage). If it is a post-lit stage, possible to work out appropriate court to appeal to.
Chapter VI-A (establishment of PLA) added subsequent to all of this. It was the first initiative in pre-litigation
settlement of disputes. Once the case starts, Chapter VI will apply. Chapter VI-A provides for the establishment of
PLAs, which were different from normal LAs due to its permanent.
Subject-matter
Only compoundable disputes involving Public Utility Services. It parties do not the reach to a settlement, it can
only pass an adjudicatory award if the dispute does not involve an offense.
Pecuniary
According to Section 22, the pecuniary jurisdiction is upto Rs. 25 lakhs.

Composition
One judicial and two non-judicial officers (tend to be members of PSUs which are a part of the case. Nomination
can be made by Central Government and must be approved by the state, or central LSA). Reason for introducing
two people from there is to make the idea of PLA accessible.
People should not have to pay for services of PLA. Government servants are appointed so the government can pay
them. Further, these individuals have experience within PSUs. Their inclusion will prevent proceedings from being
mired in legal technicalities.

Procedure
When a dispute is filed before Lok Adalat, there is a hearing done before submission. Questions will be whether it
is a case in relation to PSU, compoundable or non compoundable, etc. It is similar to Part III of the AC Act.
Documents have to be filed regarding issues and facts, it is then the duty of the LA to help them reach a conciliation.
Mediation is used only in Section 89, and even Family and ID uses the word ‘conciliation’. Part III of Arb and C Act
applies.
The last clause of Section 22C is important. If parties can still not reach a settlement, then the PLA can decide the
case if the parties reject drafted agreement of PLA. They are not bound by law or CPC, and they can simply decide
on PNJ. All decisions are final and binding. They shall not be questioned in any original suit, as per Section 22-E(4).
And can only challenged by way of Writ Petition. The words ‘original suit’ are used instead of ‘non-appealable in
nature’ because the entire thing is pre-litigation, and hence it hasn’t yet entered the civil-court sphere.
Bar Council of India Case
All provisions of Chapter VI A were challenged as unconstitutional.
Objections:
1. Composition of PLA: said that it was suited to creating bias towards PSU. They are all non-judicial members,
and they are from PSUs. So they will be biased towards PSU because of composition/
2. Requirement of decision of majority. There are members of PSUs present on PLA, which might tilt favour
towards the PSU in the case.
3. Its pecuniary jurisdiction is upto Rs. 25 lakhs, however the government has the power to increase it.

Differences Permanent Lok Adalats (“PLA”) and Lok Adalat (“LA”)

- Nature: PLA is not purely conciliatory in nature, it can decide cases where the parties do not arrive at
settlement.16
- Temporal: PLA is a body which is relatively permanent, while LAs are more sporadic
- Subject-Matter Jurisdiction: LA has unlimited civil jurisdiction: PLAs have jurisdiction over matters
pertaining to PSUs.
- Pecuniary Jurisdiction: PLAs have limited, LAs unlimited
- Stage: PLA available only at a pre-litigation stage, LA post-litigations also: but LAs are also available at post-
lit stage. (See heading of Chapter VI and VI-A).17 PLAs are available at a pre-lit stage to prevent the
categories of cases it hears from going to court. The award of the PLA cannot be questioned in courts. It is
a conclusive determination of the dispute.
S.N. Pandey v Union of India
Case before establishment of PLA, challenged Constitutional validity of Chapter VI-A. Writ petition dismissed.

Objections to Chapter VI-A:

1. Composition of Tribunal: Majority decision in PLAs, but most members are from PSUs. Bias trickles in and
it becomes more and more an agency of the state, it’ll pass awards in favour of PSUs, hampering citizens’
rights. Unless you prove that the PLA is acting like an agent of the govt., there exists no basis for such
assumption. The appointment must be finalised by state/Central LSA as per Chapter VI A. This is normally
headed either by CJI/CJ of that state. So the objection that this is only the Executive appointing members
without judicial oversight is untrue. The hybrid composition is to ensure proceedings aren’t stuck due to
legal formalities, and to allow non-judicial members to bring in their expertise.

2. Better remedies under other laws such as COPRA: According to the BCI, there are che wider too. The
approach of the COPRA is pro-consumer and the fora have wide powers of granting compensation.

3. Chapter VI-A violates Art. 14 and 21: It was alleged that services under VI-A are part of the right to life
under Article 21, and that people cannot be prevented from approaching better fora for their remedies.
PSUs may preempt the private parties from approaching these better fora by first approaching the PLA, and
Chapter VI A says that once an application is filed, the other party cannot go to court/any other forum. This
will also violate the right of the person under Article 14 and 21 (Court decided this is in National Seeds
Corporation case). If the party has approached the consumer forum, there is no need to refer parties to
arbitration because remedies under COPRA are in addition to other remedies, but not in derogation of any
other remedy.

16 LA Cases go to Court upon non-settlement, orders in PLA cases will be passed by them regardless.
17 See Chapter IV and IVA
Counter-arguments
1. No right to have the case heard in court: Parliament can create a tribunal. Statistics do not show that cases
filed with the PLA are by PSUs, but rather that it is done by private parties. Chapter VI A merely proposes
another forum, and does not bar the jurisdiction of any other for enacted under Tribunal laws. The usage
of the word may shows that it is not a mandatory pre-litigation procedure.
2. This is not the first tribunal exempt from CPC and Evidence laws, as long as principles of natural justice are
followed, there is no problem. The rights granted under these services all come from Article 21 and are
such that they require speedy remedy (eg electricity cut). This was not happening under normal LA, which
is why PLA was created. PLA is only applicable to such disputes, so the creation of the tribunal under PLA is
not a problem.
3. With respect to the efficacy of an Article 226 remedy, the court said that parties are always free to approach
the HC.
United India Insurance Company vs Permanent Lok Adalat
The petitioners made various objects regarding the PLAs, which were as follows: -
1. Inefficient as failure of settlement leads to adjudication, hence parties might not reveal factly openly during
settlement proceedings. Settlement requires openness, admissions, confessions, offers and proposals, with
the promise that they will not be used against them at a later stage [rejected],
2. Parties may enter into sub-optimal settlement in the fear of the PLA deciding the matter against them
[rejected],
3. Not knowing how PLAs work might disincentivize parties from approaching PLAs in the first place [rejected].
The Supreme Court, rejecting the petitioners arguments, said the following: -
1. MedALOA is followed all over the world, bodies have to appoint one 3rd party rather than two, save costs,
time and effort. Lesser chances of breaches of confidentiality. Positive effects outweigh the negative.
2. Non-availability of Appeal from PLA is fine as grievances fall within writ jurisdiction. After the BCI
judgement, there was lot of opposition on this issue. Some people have creatively interpreted Chapter VI
A. The award of the PLA is a deemed decree, even that of a normal LA is a deemed decree. The difference
is that, LA’s decree is my mutual consent and so it is treated like a consent decree (Section 96 of the CPC).
But PLA has adjudicatory powers, and can pass non-mutual decrees as well. Law also says all decrees are
appealable unless they are made non-appealable. Chap VI-A says it cannot be challenged in execution/at
the stage of filing a suit, but not at the stage of appeal. [what]
Arbitration
For clarity on ICA- read this [disclaimer, these are many a times wrong]
As seen for Order XXXVII (Summary Suits) even the CPC recognizes that the procedure laid down is not apt and fast
enough a system to work for commercial disputes. Arbitration is the most appropriate for commercial and other
disputes where speedy justice is required. The 1996 ACA is a modified version of the 1940 Act, with inputs from the
UNCITRAL Model Law on Arbitration.
UNCITRAL adopted a model law in an attempt to unify the laws of arbitration around the world, which becomes
necessary due to the transnational character of commercial disputes. Aim was that the signatories will adopt the
same as their model law. India modified it a little and passed the new Act in 1996.
What is Arbitration? No specific definition in the Act. Section 2(a) only says it includes both domestic and ICA.
What is institutional arbitration? Arbitration proceedings are submitted to a permanent arbitration institution,
which has its own arbitrators, own structure, etc, and might even have its own appellate process. It is a complete
package. Cost is a problem in institutional arbitration, since you let the institution manage the entire thing. And
when you institutionalise anything, it becomes rigid. So the institution now offsets the original advantage of speed.
In ad-hoc, you may be able to negotiate cost to a certain extent, but then you’ll have to manage everything.
What is Ad-hoc arbitration? It gives complete party autonomy. Parties can tailor make any of the proceedings. In
institutional arbitration, everything is taken care of by the institution. Institution takes care of everything after
reference has been made to it. Arbitrators will expect parties to have to come together and agree on several details
like venue, arbitrators, etc., which might be difficult due to strained relations between parties because of the
dispute. This might delay the conduct of arbitration. So parties should detail everything in the agreement itself.
Other types of Arbitration? Statutory arbitration, as provided for by lots of Central and State Acts. This can be
viewed in context of the Pound conference.
What is an Arbitration Agreement? Mentioned in Section 7, but not specifically defined. It has to be in writing,
other than that there are no other requirements regarding form. 18 It can be through any of the forms mentioned
there. Disputes already arisen can be submitted to Arbitration by way of a Submission Agreement. Other way is
when there is Arbitral Clause in the main contract in the agreement between parties. This clause will give power to
parties to submit dispute to arbitration. Can also be done via incorporating through previous agreement which had
arbitral clause.
Why is there a requirement of writing and sign? Due to the importance of Section 28 of the Contract Act, any
exclusion of jurisdiction of civil court has to be put in writing.
Are there requirements for capacities of parties? The AC Act does not specifically talk about capacity of parties,
but since the Contract Act will apply, all its capacity requirements will be applicable too.

Presumptions & Fiction(s) of Arbitration

1. Arbitration Agreement: It govern the entire procedure, its validity is presumed.
2. Arbitration Tribunal: Has the jurisdiction to decide the dispute, note the Kompetenz-kompetenz doctrine.
UNCITRAL Article 16, became part of 1996 Act.
3. Arbitration Award: Its bindingness is presumed.

Desired Qualities of Arbitration

1. Party autonomy: Many court systems do not accept the tenets on which arbitration is based. Party
autonomy means that parties are the main trigger for initiating or ending arbitration, who the arbitrator

18 Refer to Section 7 (4)

 should be, the procedure, etc. Party autonomy is exercised through the arbitration agreement. Valid
arbitration agreements need an intention to arbitrate, and put on the party the duty to be bound by the
arbitral award.
2. Duty of the Arbitration Tribunal: The chosen arbitrators must act independently and impartially, and
cannot act as agents of the parties. The tribunal must decide the case in a judicial manner. The tribunal is
not governed by rules of procedure and evidence, but the decision must not be whimsical. The tribunal also
has a continuous duty to disclose if there is a conflict of interest vis-a-vis them and the subject matter
and/or parties to the dispute. Under the 1940 Act of India, arbitrators were not required to give reasons
for the award, while the 1996 Act says this must be done subject to party autonomy. By such waiver, parties
restrict their ability to challenge the award later.
3. Obligation of parties: Parties should honour their obligation to arbitrate the dispute (+ve obligation), and
not go to court over the dispute (-ve obligation).19 Parties should also abide by the arbitration award. By
and large, the award is deemed to be final and binding. It is at par with a civil court decree and can be
enforced under Order XXI of the CPC. The primary duty, however, is to draft the arbitration agreement very
responsibly.
4. Judicial minimalism: The 1940 Act gave unlimited power to Courts over arbitration proceedings, and almost
acted as appellate courts for awards as they had very wide powers to set them aside.20 They had a
paternalistic attitude to arbitration tribunals. Further, all awards needed the confirmation from a Court to
be a deemed-decree. This too was done away with.

Advantages
1. Confidentiality
2. Choice of Venue
3. Free-er representation
4. Easier enforcement, lesser appeals after award passed.

Disadvantages
1. At times, the Cost of arbitration proceedings is much more than the civil proceedings as some arbitrators
take a share of the award.
2. Procedural uncertainty
3. Harder to join parties to the proceedings
4. Supremacy of courts still present, dependence on them for a lot of things
5. Injustice under the garb for confidentiality

International Conventions
- Conventions to facilitate international trade law: New York (“NY Con”) and Geneva (“GC”)
- Laid down ground rules to give validity to institution of arbitration.
- NY convention widespread, although some still prescribe to Geneva convention as well
- NY Con lays down certain principles mostly applicable to ICA, but has further wider implications
Validity of Arbitration Agreement
The Indian Contract Act has Section 28 which says that agreements in restraint of legal proceedings are void. An
arbitration exceptions was later added, which makes it relevant during each arbitration agreement. In the Specific
Relief Act, Section 14 talks about agreements not specifically enforceable, wherein the Section 14 (2) deals with

19 Refer to Section 8, of the 1996 Act.

20 Section 30/60 of the 1940 Act.
arbitration agreements. They are not specifically enforceable, i.e. the clause to refer a dispute to arbitration cannot
be enforced, but any civil suit taken up will be barred.
Two main policies implemented in the New York Convention:
1. Respect for the contractual nature of arbitration proceedings.
2. Non-interference of the Sovereign Courts with arbitration proceedings.

New York Convention

Article 2
Both conventions have this, it gives presumption of validity to arbitration agreements. This reciprocal nature of
arbitration agreements is well recognised for current as well as future disputes. This is the first objective of all
arbitration agreements that signatory states have to ensure that a domestic legislation is enacted wherein
international arbitration agreements are recognized and the jurisdiction of civil courts is barred.
Article 5
There should be limited grounds for setting aside an arbitral award. The convention gives these grounds in Article
5, and it is in Indian law as part of Section 34 of the 1996 Act. There are limited grounds, which means there is
presumption of validity given, and sign of respect of validity of institution of arbitration.
- Courts must help functioning of arbitration proceedings, which can be done by sticking to grounds found in
Sections 8, 9, 11, 27. Primary way is to restrict their own jurisdiction.
- If parties cannot appoint arbitrators, they must appointed for them ASAP.
KK Modi v K N Modi (1990)
Memorandum of Association between parties, wherein Clause 9 required referral of disputes and clarifications with
regard to the agreement to the Chairman of IFCI. Some decision was passed by IFCI w.r.t dispute submitted to the
court to become proper award (under the old act). Whether clause 9 constitutes an arbitration agreement and do
the proceedings constitute arbitration proceedings?
Court differentiated arbitration from expert determination. Core foundation of this differentiation being
composition, function and source of derivation of power. Court said though arbitration is used in agreement,
chairperson of IFCI is an expert in this case. Talked about duty of tribunal to act judicially, and how evidence of
parties has to be fairly presented, on basis of which tribunal would decide. In this case, chairperson was free to not
act judicially. He could apply own mind, and decide as he pleased. He could even nominate another member in his
place. So court said that just because word arbitration is there in agreement, does not mean that this is one. They
said it was more along the lines of expert determination.
Important to draw distinction because arbitral award is equivalent to court decree. Also, opinion of expert
determination is final, while there is some recourse available in arbitration. Arbitrator has some immunity in course
of their role, not so for expert determination.
Case under the Old Act, laid down the essential requirements of the arbitration agreements.
1. Clear Intention to Arbitrate
2. Intention to be bound by decision of arbitration tribunal
3. Tribunal has to act judicially
4. Other requirement w.r.t 1940 act reference can be by statute, consent or court orders.
5. Arbitration decision must be enforceable (the dispute must arbitable)
Bihar State Mineral Development Corp. v Encon Builders (2003)
Case of bias of arbitrator. Laid down further essential requirement. Added that parties must be ad idem. There must
be certainty of intention of parties.
Jagdish Chandra v Ramesh Chandra
Parties were partners in business. Agreement said they will resolve dispute amicably, and if not they will go for
arbitration if all parties agree to it. So court said there is alternative to arbitration, not very clear, so not a specific
arbitration clause. Court said the usage of word ‘arbitration’ is not as important, as the fulfilment of the intention
to be bound, and the other requirements.
So, there are tiers of dispute resolution. Negotiation, then meditation, then maybe arbitration. That is a tiered
dispute resolution clause. That’s fine, and will be valid, as long as intention to go into arbitration is clear.
Neutral evaluation is a process similar to arbitration, but different. Where parties are asked to present case, issues
and evidence. Based on these presentations, the neutral evaluator will give an opinion, but this opinion is non
binding in nature. So everything is similar to arbitral tribunal, but it is non binding. Usually after this, parties decide
upon what course to take.
Apart from the previous requirements, what else is there in an ideal arbitration agreement. One of this is the
number of arbitrators being mentioned. Seat of arbitration (S. 20) should be mentioned. More relevant in context
international commercial arbitration. S. 20 says parties are free to choose the seat, and if they don’t, the tribunal
will pick it. If tribunal picks Delhi, will Delhi courts have jurisdiction? The court which will have jurisdiction will be
decided as per the CPC (refer to S. 2 (e)).

International Commercial Arbitration

In an ICA, parties have the freedom to choose the laws which can apply to the arbitration. Parties can choose the
substantive law, rules of procedural, and the law which would apply to the arbitration agreement in case of an
interpretative issue. At times, parties also choose the law which would govern their capacity. When the ICA takes
place in a neutral country, the civil courts of such country will have limited control over the award and agreement,
mostly regarding public policy. Hence, they annul the award on such limited grounds. Such annulment has to take
place within the stipulated time period, failing which the award is effectively binding.
Once the award is passed, the parties have to start the proceedings to get the award enforced, in the civil court of
the country where the opposite party is based, or has assets. One principle is that any award is as good as the
decree of a civil court.
Accordingly, any ICA award against a party which has property in India, can be enforced via the civil courts of India.
Under the New York and Geneva Convention, ratifying countries have entered into reciprocal countries recognizing
the validity of foreign awards. It just has to be formally recognized by a court of the enforcing country. Therefore,
in India, there is a presumption as to the validity of the foreign judgments, as per Section 14 of the Civil Procedure
Code. These decrees can be executed under Order XXI of the CPC, just like domestic decrees.

Seat Theory of Arbitration

Lex Arbitri is the law governing the procedure of Arbitration. As per principles of International Law, the law of the
land governs the procedure of the forum. Hence, when parties to an ICA choose a seat of arbitration, they are said
to choose the lex arbitri by default. For example, if an ICA is taking place in India, the AC Act of 1996 will apply w.r.t.
Procedure.

Delocalized Theory of Arbitration

It is not recognized by the UNCITRAL Model law which is followed by India. Therein, parties can choose the lex
arbitri just like the substantive law, by way of contract. Priority here is laid on autonomy and flexibility of the parties,
and believe that the parties should therefore not be bound by anything other than their agreement. In the landmark
case of BALCO, the supreme court reiterated that India follows the Seat Theory. And that Lex Arbitri and law of
procedure can be different(?). The Indian AC Act has a lot of non-mandatory provisions, the parties have the right
to choose the procedures at their will. When an ICA occurs in India, only the mandatory provisions of the Act apply
by law, rest can be opted into.
In delocalised arb, can parties choose not to follow mandatory provisions?
Some countries recognize annulled arbitral awards i.e. recognize and enforce them even though they have been
set aside by the courts in the country in which it was made. At times this is due to it not recognizing the ground on
which it was set aside.
Annulment: it is still not final and binding. There still has to be judicial scrutiny of the award.
Recognition and enforcement: award has become final and binding. If country A is moved for enforcement of
award, and court of country A refuses to recognise and enforce it, it does not mean the award is not final and
binding per se: the award itself can still be enforced in another country. Rejection basically does not affect validity.
Section 8: (and Article 8 UNCITRAL) We’ve used “judicial authority” to show that even if proceedings are by
tribunals, etc., they are covered by the AC Act. Same time requirement (first statement of facts, check Article). We
have deviated from prima facie validity of the arbitration agreement.
According to the Section, if a party approaches a court in derogation of an arbitration agreement, the courts have
a duty to refer the party to arbitration after checking the validity of the agreement. The usage of the word shall
does not indicate a mechanical and automatic reference by the court.
Implications
1. Other party can challenge the reference
2. Other party can choose not to challenge the action (waives it right to arbitration, and deemed to have
accepted the jurisdiction of court if not challenged in time)

Arbitration Agreement
Objections to an Arbitration Agreement
There are problems when it comes to the enforcement of arbitration clauses which are defective (or pathological).
One of the type of pathological clause is when it is indefinite or unclear. An intention to arbitrate has to be made
out from the agreement. Eg, the language “want to arbitrate in London” does not express any specific intention of
the parties to the contract. Enforcement of such clauses depends on the jurisdiction wherein it is sought to be
enforced. Countries which has a pro-arbitration civil justice system will generally enforce it, while the other might
interpret it conservatively.
Indefinite Clause
Often, the question of the validity of clauses comes up between courts/tribunals. 21 If the arbitration agreement is
indefinite, courts will try to give effect to the arbitration by falling back on default procedure, as long as a clear
intention to arbitrate can be made out. Clauses’ validity will usually depend on the extent of the pathology of the
clause.
Outdation
Sometimes, parties may refer to institutions that no longer exist/have merged with other institutions/that have
changed their name, etc and sometimes refers to arbitrators who subsequently are found to be dead, or having a
conflict of interest. For institution: courts try to enforce the agreement by substituting the new name for the old,
and for arbitrators try to get parties to decide on a new arbitrator.

21 Refer to Section 8, 11 of the Ac

Contradictory
Internally contradictory arbitration clauses, like where there are two seats specified in the agreement, ex “The
agreement will be enforced in India, the seat shall be in London”. To figure out what the actual seat should be, the
tribunal attempts to see the true intention of the parties; or, at many instances also treats the second seat as
surplus. In cases where any reference to arbitration is not mandatory, such agreements are not enforced due to
the lack of clarity and sign on intention. However, a few French decisions have given effect to such clauses, wherein
even if one of the parties has requested Arbitration, it becomes a mandatory reference. Sometimes, courts give
one party an option to explore arbitration.
Null and Void
According to Article 8 of the UNCITRAL rules, courts are to refer the matter to arbitration when requested, unless
it finds the agreement to be “null and void, inoperative or incapable of being performed”. These have also been
included in the Section 8 of the 1996 Act.
- Formation of Contract bad in law: In case of lack of capacity, lack of free consent and voluntariness, the
court will declare the agreement null and void. The formation of contract should be free from fraud and
coercion etc. (And impossibility, lack of consensus ad idem)
- Unconscionable Agreement: Often called asymmetrical arbitration agreements. Parties end up with these
due to one party’s abuse of dominant position and/or unequal bargaining power. Such terms include giving
only one party too much power in the arbitration (like power to decide seat/bench). Most jurisdictions treat
such agreements as null and void.
- Government contracts: There is tendency of appointing the head of the Department or another such
official as the arbitrator. Pre-amendment, this was allowed; however post-amendment we follow the ABA
list, and such appointment as arbitrator is not permitted as it is asymmetric. 22
- Hardship: Is undue hardship a part of “incapable”? In arbitration context, what is undue hardship? Eg,
forum non conveniens. There is no general trend that this makes it incapable of being performed.

Questions as to Validity
When such question regarding the validity of the Arbitration Agreement comes up before the Tribunal, they are
allowed to decide the same under Section 16 of the Act and Article 16 of the UNCITRAL model law. There are two
main approaches regarding the Court’s determination of such questions, (1) prima facie determination, and (2)
final/conclusive determination.
France
Being a pro-arbitration regime, the KK principle is highly respected and so is the jurisdiction of tribunal to decide. It
follows the prima facie determination approach. Courts will only see if the agreement is valid prima facie, following
which the rest of the dispute will be decided by the Tribunal. Any orders then passed by the Tribunal, however, will
be subject to the judicial review of Courts.
United States
Not a signatory to UNCITRAL model law. Their Federal Arbitration Act allows interlocutory jurisdiction of civil courts
on issues of jurisdiction. Courts can conclusively decide issue of jurisdiction before referring the matter to
Arbitration. One major advantage of this is that there is a lower probability of these subsequent awards being set
aside. Furthermore, if they do not adjudicate on issues of jurisdiction, parties will go to the tribunal, which may
accept/reject the jurisdiction and in both cases it’s just a waste of time. However, there riders to this. The objections
have to pertain to the validity of the arbitration agreement only, and no to the entire agreement. Questions of the

22 Is this the ABA List??

latter’s validity are to be dealt with by the Tribunals. However, if the question is regarding the existence of the
entire agreement, such question is to be decided by the Courts.23

First Options of Chicago v Kaplan (2005)

An exception was laid down in the case, if the parties have autonomy to arbitrate jurisdictional issues. In US law,
parties can also grant certain powers to the tribunal/exclude intervention of the court in jurisdictional issues. But
courts have said intention in such a case to arbitration the issues has to be very clear.

Recognition of Awards
Judicial Scrutiny
Any award passed in an ICA happening in India, will be treated as a domestic award. Civil courts will have the power
of judicial review over them under Part I of the 1996 Act. Only after judicial scrutiny, does it becomes final and
binding. (see from Prashasthi 19th april)
Recognition of Foreign ICA Awards
The Part II of the AC Act, which deals with the recognition and enforcement of foreign awards, comes into play
when a party seeks to execute a foreign ICA order against the Indian properties of a company, or against any
Company based in India. By default, only awards passed by tribunals in India are at part with the decree of a civil
court, and not foreign awards, and hence, such foreign awards will have to be recognized by the courts of India
(under Part II of the AC Act), by way of an application for recognition of the award, following which it will have legal
effect. It can then be executed under Order XXI of the CPC. If courts in India do not recognize the award, it still
remains a valid award between the parties, but just has to be enforced in another country. While if a domestic
award is not recognized by Indian courts, the award does not exist any longer at all and will be void ab initio.

Pre-Arbitration Litigation
As under Section 8, 9 and 11, the parties may have to approach the court prior to arbitration proceedings. The court
can either conclusively decide the issues, or just get prima facie satisfaction as to validity of the agreement. If the
issue is that of the agreement being null and void, the court will not look into it if the tribunal has already been
constituted.

UNCITRAL
Pre-arbitration court proceedings are provided for in Article 8 of the Model law. It is not clear on the point of it
being conclusive or prima facie adjudication.

India
The same has been provided for in Section 8 of the 1996 Act. However, the words ‘prima facie’ have been explicitly
used, and so the power and duty of courts is very clearly mentioned. In the new act the words “unless it is null and
void” were removed, and the words “judicial authority” have been used to fully recognize the KK principle, and to
give broader power to the tribunals. Original copy of the agreement has to be submitted to the Court as under
Section 8(2).

Section 8
If one party to the agreement (which has an arbitration clause) moves the civil court, the other party can, under
Section 8 move the court to refer the dispute to arbitration. It is common for the former party to claim that there
is no arbitration agreement, or they aren’t a party to it, or that the dispute falls outside the scope of the agreement.
The court will then see if there is a prima facie valid agreement, if the both the parties are parties to the agreement,
and whether the subject matter is included within the arbitration clause; and whether the application filed has been
filed not later than the first statement of the dispute, under Section 8(1).

23 Buckeye Check Cashing, Inc. v. Cardegna- US SC 2006

Section 8(3)
Subsection 3 says that a pending application before any court under Section 8 will not be a bar or stay on any
arbitration proceedings which have commenced, or might commence in the future. If however, when the
arbitration proceedings are going on, the civil courts parallely decides that there is not valid agreement, it will
render the arbitration pointless. Hence, for practical purposes tribunals themselves stay their proceedings in light
of any litigation.
An arbitration agreement is presumed to be valid, hence a court order referring a dispute under the agreement
to arbitration is not appealable, but an order refusing to do so is.
(Take initial notes from Prashasthi for 19 April)
P. Anand Raju v. PVG Raju (2002 SC)
Held that as long as the procedural aspect is satisfied, due to the usage of the word ‘shall’ in Section 8, reference
to arbitration is mandatory.
Hindustan Petroleum Corp. v Pink City (2003 SC)
Rejected as application under Section 8 as the subject matter of the suit was different from that included under the
arbitration clause of the agreement.
SBP Co. v Patel Engineering (2005 SC) for further, read this)
The court in this case talked about the scope of intervention by judicial authority with respect to pre-arbitration
proceedings and the intertwined interpretation of Section 8, 11 and 16. The question raised herein being whether
the power to appoint an arbitrator under Section 11(6) (exercised by the SC or HC), was it judicial or administrative.
A previous decision had ruled that the function was merely filling a gap and was thus administrative. The Court in
Patel Engineering by holding the function to be judicial, reasoned that an arbitrator could be appointed only if all
the conditions precedent to an arbitration were fulfilled. The judicial authority in such cases cannot be expected in
a mechanical manner. Firstly, the court must assume jurisdiction by satisfying itself regarding the matter by
interpreting the agreement and seeing if the agreement is binding on the parties of the dispute. Once the tribunal
is brought into existence by the Courts (CJ of State or CJI) as under Section 11 (4), (5) or (6); the tribunal then cannot
rule on its jurisdiction and say that the Court (which brought it into existence) had no jurisdiction to do so. The
judge’s order as to jurisdiction is binding on the tribunal and cannot be gone against under Section 16. This makes
the decision of the Judge at a Section 11 stage conclusive and binding, which shows that the trend in India is moving
in the same direction as USA. If the issue of jurisdiction, however, comes to the court before any court proceedings,
it can conclusively decide the same. The case was important as it reconciled Sections 11 and 16.
National Insurance v Boghara Polyfab pvt. Ltd. (2009 SC) (For context of Section 11)
Clarified the decision in Patel Engineering and created three categories of questions, while deciding the scope of
intervention.
1. Issues which the CJ or their designate have to decide: -
a. Whether the applying party has approached the correct court,
b. Whether the parties are party to the arbitration agreement.
2. Issues which the CJ may decide, or leave to the tribunal: -
a. Whether the issue is barred by limitation or is a live claim,
b. Whether the parties have concluded the contract.
3. Issues which only the Tribunal can decide:
a. Whether the claim falls within the arbitration clause of the agreement (i.e. scope),
b. Merits of the dispute.
Shin-Etsu Chemicals v Aksh Optifibre (SC 2005)
Section 45 is similar to Section 8, but in the International context. The court in this case held that the jurisdictional
issues under Section 45 must be decided by the court only prima facie. Main conclusive determination (in line with
the French approach) is to be done by the Tribunals only.
246th Law Commission Report (read here)
Conflicting judgements makes it difficult to understand what is the actual situation. The courts do have a lot of
scope for intervention in arbitration, which is contrary to the principles of Arbitration. The approach of mechanically
deciding things is not followed anymore. Made the following recommendations: -
1. Suggested that (read for understanding the amendment) there should be something clear in the act for
understanding the scope and nature of the court’s intervention.
2. The words prima facie should be added to Section 8 (and they later were)
3. Section 11 gives finality to the order of the Courts, while Section 8 orders are appealable under Section 37.
And hence the ratio of Section 11 must not be applied without checking the same, as it can really affect
business in India (due to excessive interference).
4. The court should conclusively decide that the arbitration agreement exists and is not null and void (?)
5. Party has to approach the court before filing the first statement of substance of the dispute. The term
written submission is not used as it is a technical term and would not cover all proceedings. (Urgent
applications for interim relief would not be counted as first statements)
6. Fraud should be explicitly included as Arbitrable
Rashtriya Ispat Nigam Ltd & Ors. v Verma Transport Company (SC 2006)
Case talks about what the First Statement is. The intention of the statute is to see if the party has submitted itself
to the jurisdiction of a civil, by way of a waiver of their right to arbitration. In the following case, an interim relief
was sought in civil court to which the other party replied. The former party later claimed that it was a First statement
and that they submitted themselves to the jurisdiction of the civil court. The court, correcting this in appeal, said
that that first statement is different from written submission; and reply to interlocutory application cannot be
counted as the first statement and invoke Section 8(1). Only when the submission is a full substantive reply to the
submission of the opposite party, which goes beyond the incidental proceedings can it be counted as a first
statement.

Arbitrability
Disputes of all subject matters cannot be arbitrated, only those as provided by the State, due to public policy, etc.
Article 2 of the New York Convention says that there is a presumption of arbitrability of an agreement unless the
dispute is such that it cannot be arbitrated. However, the similar Section 8 of the Indian Act does not talk about
arbitrability, but the lack of it is a valid ground for its setting aside under Section 34(2)(b).
National Insurance corporation vs, Boghara Polyfab (SC 2009)
SC held that the court should not go into the issue of arbitrability as it requires the court to go into the merits of
the case.
Booz-Allen & Hamilton vs SBI Home Finance Ltd. (SC 2011) (Also, here)
It was laid down that Courts at Section 11 stage should not look at the issue of arbitrability, as the scope of the
same is smaller than that under Section 8 (in case of an application under which arbitrability is to be checked too).
Many rules regarding arbitrability are not finely defined and hence, even at a later stage lack it can checked under
Section 34 as a ground for setting it aside. Saying so, the court laid down a three-facets of arbitrability in paragraph
21: -
1. Whether the dispute is such that is capable of adjudication by way of arbitration, i.e. is it private in nature
or is it public in nature and hence falls within the domain of the public for?
 2. Whether such disputes are covered by the arbitration agreement, i.e. whether the agreement enumerates
or describes or explicitly excludes its arbitrability?
3. Whether parties have jointly referred to the tribunal, such matter for adjudication?
Rights in rem cannot be arbitrated, only rights in personam. Hence, sale, redemption and foreclosure of mortgages
cannot be arbitrated. Same test is used to see if settlement in private for is allowed or not.
Sukanya Holding v Jayesh H (2002 SC)
Held that in case the disputes includes parties which are not party to the arbitration agreement, the dispute should
then not be referred to arbitration, as it would be bad for non-joinder of the necessary parties. Bifurcation of parties
is not allowed, and instead of reference, the case should be decided by the Court itself. Also lays down that subject
matter cannot be bifurcated. [This case was problematic because the CPC has allowed for the bifurcation of subject
matter.]

Fraud
Ruhi thinks that the public connotations of the allegations of fraud should be considered before deciding whether
the case is arbitrable or not. In case the allegations only affect the private parties, then the case should be allowed
for arbitration.
Abdul Khader v Madhav Prabhakar (1962 SC)
Held that if there is a serious allegation of fraud involved, the court should not refer the case to arbitration and
itself decide it, as opposed to any allegations of misconduct/dishonesty amounting to fraud. The ratio of the case
of Russell v Russell was followed, holding that a serious allegation of fraud is something that one should defend
before a public fora only.
N Radhakrishnan v Maestro Engg (2009 SC)
Ratio of Abdul Khader case was upheld as under the 1996 Act as well.
Bharat Rasiklal v Gautam Rasiklal (2012 SC)
Not all issues of fraud vitiate the jurisdiction of the Tribunal. Only if the allegation of fraud is specific to the
arbitration agreement, should the court decide the issue. If, on the other hand, the allegation of fraud is regarding
the main agreement, then the case should be referred to the tribunal as the the KK principle allows them to decide
such dispute.
Swiss Timing Ltd v Organizing Committee (2014 SC)
Held that the law laid down in case of N Radhakrishnan was bad in law. Allegations of fraud which might render the
main contract null and void, do not preclude the dispute to be referred as the arbitration clause of contracts is
severable and has a life of its own. Hence, as long as there is a prima facie arbitration agreement between the
parties, the dispute should be referred. Further the court also said that arbitration and criminal proceedings can
run parallely.
World Sports Group v MSM Satellite (2014)
Regarding Part II of the Act, i.e. International Commercial Arbitrations. Court here held that fraud is arbitrable, and
will not preclude reference to foreign-seated arbitration, as long as valid under Section 45 of Part II of the 1996 Act.
A. Ayyasamy v A. Paramasivam (2016 SC)
Cases of fraud simpliciter can be arbitrated, however cases of serious fraudulent activities which has public
connotations (including forgery and fabrication), where voluminous evidence has to be taken and examined, virtual
criminal case is made out, and fraud permeates the arbitration-related provision as well the case should be
adjudicated upon by the court. Further stated that IP matters, competition law matters, insolvency, bribery, trusts,
matrimonial/conjugal/guardianship, fraud and criminal matters should be handled only in the public fora.
Fiona Trust and Holding Co v Yuri Privalov
Only express provisions can give quasi-judicial bodies the power to take evidence, etc. Tribunals are not even
statutory in nature, but are completely private. There is a provision in the Act (Section 27) regarding them being
able to ask the assistance of the court for taking evidence, but for practical reasons they don’t do that.

Consumer Disputes
Each country does deals with the arbitrability of consumer disputes differently, eg, USA allows arbitration of
consumer disputes as long as it is not unconscionable. Contracts with unfair terms are not referred to arbitration.
In India, consumer courts are not obliged to refer the cases to arbitration under Section 8, before hearing them.
Section 12(1) of the CP Act specifies the manner in which consumer complaints are to be made, it makes no mention
of Arbitration. Claims under Section 12 (1) (c) and (d) might be non-arbitrable in light of it being in public interest,
however those under 12(1)(a) can be arbitrated upon. There could have been better judgment which discussed
arbitrability of rights in rem in detail.
The CP Act allows for simultaneous court proceedings (civil court and NCDRC), can arbitration not be allowed in the
same way? This judgment is not so good. Right now arb’s main problem is secrecy and the court is only looking at
this. Current position is that the Consumer disputes are all non arbitrable.
Trans Mediterranean Airways v Universal Exports Case
Dispute covered by two laws. Court held that consumer remedy under COPRA is separate and can be undertaken
notwithstanding the arbitration agreement. Followed in National Seeds Corporation Case.
Rosedale Developers Private Limited v. Aghore Bhattacharya (SC)
It upheld the NCF decision wherein it was held that it is not the duty of the consumer to refer matters to arbitration,
and they can directly go to the Consumer Court. Upheld again later by the case of National Seeds Corporation v
Madhusudhan Reddy.
Aftab Singh and Ors v Emaar MGF land Ltd. & Ors
There was a complex which was to be constructed by a particular date. The builders could not deliver possession
by the previously stipulated date and the owners filed for a refund. The builders applied under Section 8 of the
1996 Act. All courts decided in favour of the buyers. The national consumer tribunal then said that such consumer
dispute is not arbitrable. The case then went to the Supreme Court in 2018, which while hearing it said that apart
from the Booz-Allen Test we should also look at the purpose of creation of the law (w.r.t the CP Act), which was to
protect consumer rights. Such social legislations aim to protect the people and must be decided only in a public for,
as the claims involve rights in rem and have social ramifications. The adjudicatory right of other bodies is recognized
in Section 2(3) of the Act, and such consumer fora need not refer the disputes to arbitration.

Company Law Matters

Rakesh Kumar Malhotra v Rajinder Kumar Malhotra (2014)
Shareholders brought an Oppression and Mismanagement action against the directors, which the company wanted
to refer to arbitration under section 8. Prima facie it would be arbitrable, applying the Booz-Allen test as rights here
are those in personam. However, upon a perusal of the Companies Act, it can be seen that the remedy is one which
only the CLB can pass, not courts and certainly not tribunals; and hence it will not be arbitrable. Bifurcation of the
subject matter is allowed, and the Sukanya Holdings ratio is not fully followed now.

Intellectual Property Disputes

Initially the stand throughout the world was that the states should control this rights and they are non-arbitrable.
Now, however, WIPO exists which has is own ADR forums exclusively for IP disputes.
In India, certain IP disputes, which involve contractual rights in personam are arbitrable. Some countries have made
copyright disputes arbitrable as there is no compulsory registration, but for trademarks and patents you need to
register and it is non-arbitrable. A notice of the award has to be sent to the State IP-regulator after it is passed, so
that they can enforce the same. This practice is followed by the Swiss, this is sort of like delegating the power of
the state.
Eros Int’l Media Ltd. v Telemax Links India Pvt ltd. (2016 Bom HC)
In the first departure from the Booz-Allen Test, decided the issue of arbitrability based on nature of remedy. Said
that if only the civil court can grant such remedy, then it is non-arbitrable, and if it can be remedied by a private
forum, it is arbitrable.
Indian Performing Rights Society Ltd v Bombay Network (Bombay HC)
Held that IP disputes are non-arbitrable, as in case of infringement the only remedy is injunction, which can only be
granted by the court. So it ended up with a ratio opposite of that of the Eros case.

Competition Law
Competition law is all about protecting the rights of customers against anti-competitive behaviour of businesses.
The earlier global trend was that competition law was a social welfare legislation, and dealt with rights in rem,
making it non-arbitrable. However, USA has allowed arbitration for antitrust claims after 1980.
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.
Federal antitrust claims are arbitrable if they accrue from an international transaction. Laid down the second look
doctrine, according to which the Courts can fully look at and examine the merits and validity of the award during
its enforcement.
Eco Swiss China Time Ltd v Benetton International NV (1999, EU)
Same ratio as case of Mitsubishi.
Union of India v Competition Commission of India (2012 Del HC)
The Competition Act (2002) created the CCI which prevents anti-competitive behaviour and promotes the interest
of consumers in the Market. In this case, there was application filed under Section 8, which was rejected, and
appealed to the High Court. The HC said that the CCI functions differently from tribunals and the commission does
not have to mandatorily refer parties to arbitration. CCI can investigate a complaint, and pass a cease and desist
order, which an arbitration tribunal cannot do. Thus, the nature of work was held to be different from tribunals.
Earlier, the idea was that judicial authority should mandatorily refer parties to arbitration. However, it was a
common fear that arbitrators are usually pro-business and will give verdicts in favour of corporations.
Possible change: Disputes under Section 53N of the Competition Act are actually disputes in personam. Remedies
to these disputes are compensation and damages which can be given by arbitration tribunals as well. On the other
hand, disputes under Section 19 are regarding rights in rem, any order given by CCI in such cases will impact
everyone. Such cases can be made non-arbitrable. This is also the global trend.
Parties in ICAs often choose their own substantive law which will govern their rights and liabilities. However, such
right of parties is not unrestricted. They cannot opt out of the mandatory laws of the country.
(Eg, even if ICA is happening in India and parties have chosen substantive law of UK, competition law dispute will
be decided by applying Competition Act of India).
Further, whenever arbitration tribunals decide antitrust claims, the competition commission often act as amicus
curiae in those cases. In this way, indirectly there’s a balance between arbitrability and public interest.
Labour Disputes
Under Section 10A of the Industrial Disputes Act, parties can voluntarily refere their dispute to arbitration. Common
legal issue is if the Labour Court upon Section 8 application is obligated to refer to arbitration.
Kingfisher Airlines v Capt Prithvi Malhotra and Ors (2012, Bom HC)
Pilots moved the labour court for arrears of salaries. Employer (petitioner) filed a Section 8 application before
Labour Court, relying on Section 10A of the ID Act. The Booz-Allen test was applied. The HC said that even if rights
are in personam, they have to see if there is a special law or forum having exclusive jurisdiction over the dispute in
light of public policy. Court said ID Act allows arbitration, but under its own provisions. And, even if arbitration is
allowed under the ID Act, only provisions of the ID Act will apply and not that of the 1996 AC Act.
Rajesh Korat v Inovati (2017, Karnataka HC)
On the same logic as Kingfisher Airline, Court said that such industrial disputes are non-arbitrable under the AC Act.
Even under the ID Act, there are disputes which cannot be referred to arbitration. Those which can be arbitrated,
are to be done by the procedure laid down in Section 10A(3).
Mohan v Co-op Society of Ambala (SC) [Ruhi unsure of name]
Workman should not be put under onerous procedures, just because there is an alternate forum. Once it is known
that party is a workman and the dispute is Industrial under the ID Act, the labour court cannot absolve itself of its
responsibility to adjudicate the same. Similar to the status under CP Act, existence of alternative forum is irrelevant
to the question of reference.

The Agreement and Third Parties

There are four requirements for an application under Section 8 (as per Sukanya Holdings). (For requirements, see
the paras with firstly, secondly, thirdly, etc.) Sections 45 and 8 of the Act are very similar, and section 8 has been
amended to include parties and parties claiming for or under him. The definition of party is very narrow under the
Act, and upon seeing the reality of how the world of business operates, it seems inadequate. There are situations
where the interests of people, not being signatories to the arbitration agreement are at stake.
1. Agency: Agents sign on behalf of the principal and bind the principal as well.
2. Mergers: New entity may not have signed the agreement, but is bound by it.
3. Assignment of interests in contracts. You can assign interests, but not your obligations (duties) as per
Contract Law. Now, allowed in arbitration.
(For Doe, Peterson and Group of Companies doctrine, read this.)

Doe Chemicals v Isover Saint-Gobain (ICC)

The Group of Companies doctrine was used, and upheld by an appellate court in France. In casu, the parent
company was a non-signatory to the arbitration agreement and moved for arbitration. Using the doctrine, ICC
allowed the parent company to take part in the arbitration, because they were closely related to the working of the
entire group & had a lot of power over what happened in the arbitration agreement (even though they had separate
legal existence).
United States: ‘Party’ means party to the agreement, but they use the principles of Alter ego or of lifting the veil to
make non-signatory entities party to the agreement. They even use the principle of equitable estoppel (if they
choose to abide by few terms of the contract or if they pretended to be part of the contract then you give implied
consent to be a part of the arbitration agreement) and agency.
Peterson Farms v CF Farming Ltd. (2004 UK Commercial HC)
They held that the doctrine of group of companies is not applicable in England. Similar to our Section 45, they have
the Section 82(2) of the English Arbitration Act, which allows such other parties to claim. They also have a law called
Contract (Rights of Third Parties) Act, which precludes the need for using the doctrine.
Nisshin Shipping Co Ltd v Cleaves & Co Ltd (2003 UK Commercial HC)
Case of Charter Party Agreement, where the broker wanted to claim commission from the Charter parties and so
moved for arbitration. The arguments from the other side included the fact that he was not a party and hence could
not be allowed to move arbitration [rejected]. It was contended that neither parties at the time of the signing into
the agreement intended for him to be a party [rejected]. The broker said that if a third party is to receive substantial
benefit in a contract or from the arbitration, then he is deemed to be a party to the agreement [accepted].
UK also uses the principles of agency, estoppel but not that of group of companies, but for all practical purposes
they are the same, as they have the same results.
Chloro Controls (I) P. Ltd. v. Severn Trent Water Purification Inc. & Ors (2013 SC)
Discusses the relationship of arbitration over those third-parties which have legitimate claims over the issue but
are not party to the arbitration agreement. Often, when parties enter the proceedings in front of arbitration
tribunals, they forgo the right to go to court and parties often use this to exclude third parties and ignore their duty
towards them. The court said that in any case under Article 2 of the New York Convention, and Section 45 of the
Arbitration Act, the usage of the phrase any person and persons claiming, gives the court a very wide power to
include people who may not be signatories to the agreement. Upon a joint reading into the phrases, the court
discusses and applies the doctrine of group of companies, which would also bind non-parties to the arbitration. The
doctrine is a controversial one owing to the pre-existing concepts of separate legal entity, privity of contract and
the fact that the arbitration tribunal has jurisdiction only over the parties to the arbitration agreement. The
requirements which such non-parties have to satisfy are as follows:
1. Tight group structure & a Composite transaction,
2. Signatories and non-signatories should share trademarks, board of directors, etc.
3. Common intention to be part of the arbitration agreement (examine if the non-signatories have taken
enough interest and played a role in negotiating the initial agreement).

Amit Lal Chand v Rishabh Enterprises (SC, pending)

HC said that simply because the language of section 8 and section 45 is similar, doesn’t mean that the doctrine of
group of companies applies because the nature of arbitration in India is very different from ICAs. The questions
raised is whether the law laid down in Chloro Control applies to domestic arbitration and whether that laid down in
Sukanya Holdings is valid law. The LCI said in light of the Chloro Control case that Section 8 should be amended.

Present Situation
Non-signatories can be forced to arbitrate using the conventional principles of Contract Law like Lifting of corporate
veil, agency, estoppel etc. But the doctrine of group of companies is still being debated and is not applicable to
domestic arbitrations. In case of companies which could not produce the original agreement then they can produce
the copy of the agreement. Parties which are non signatories have the burden to prove how they are claiming that
they are person through or under the party.

Interim Relief
Section 9 provides for Interim measures which parties can seek from the courts during ongoing proceedings. There
have been changes made to the Section 9 by way of the 2015 Amendment Act.
An important recent question is if the Court is to be bound by the rules and principles of the Code of Civil Procedure.
It is important as it raises the issue of judicial minimalism.

Two Approaches
The Tribunal has already been given equal powers regarding interim measure in Section 17. The Court will only
grant interim measure before the Tribunal is constituted or if after being constituted it feels that the remedy of
Tribunal will not be efficacious, as per Section 9(3). This section recognizes the principle of Judicial Minimalism from
Section 5 of the AC Act. There are two main approaches regarding how much the procedure laid down in the CPC
should be followed.24
1. Inclusive Approach: Principles, and standards are contained in the Code under Order XXXVIII Rule 5 and
Order XXXIX Rules 1 & 2 as specified above in Point 4.1 would apply to the grant of interim measures under
Section 9 of the Act.
2. Exclusive Approach: Not all technical rules verbatim, but only well known principles and spirit of the Code
has to apply so as to expedite the process and not render the ADR infructuous.
And for review by higher courts, certain procedure needs to be followed by the lower courts, or it risks the possibility
of being struck down when it comes up for review or appeal in the higher court.
ITI v Siemens Public Communication (2002 SC)
SC held that there was no evidence in the Act which binds the Tribunal to it, but the Courts were to follow it in their
proceedings.
Arvind Construction v Kalinga Mining Corporation (2007 SC)
Standards and well recognized principles of the Code are to be followed.

Adhunik Steel v Orissa Manganese and Mineral Corporation (2007 SC)

Principles such as (i) prima facie case, (ii) balance of convenience, and (iii) irreparable injury would have to be kept
in mind while granting an injunction. The Apex Court stopped short of stating that specific standards under Order
XXXVIII Rule 5 and Order XXXIX Rule 1 and 2 would apply.

Most HCs follow inclusive approach. But if we see later two judgements, it's more along the amendment of the
UNCITRAL model law. Amended version is very detailed. Approach of SC is now in line with amended UNCITRAL
model law (though it is for tribunals there). Courts and tribunals should be on the same page. There is only a hairline
difference when we say CPC applies or spirit of CPC will apply. Order 39 specifically doesn't mention the three
requirements, but it is just a judicial requirement.

Court should be guided by principle that they do not need to decide rights and liabilities. They should expedite &
support proceedings, and not hold it up. Court can exercise discretion, and doesn't need to be held up by
technicalities. Even under Order 39, there is discretion because the requirements themselves there are not clear
cut (prima facie, irreversible damage, etc). It is more dependent on the other side saying it should not be granted,
and these interim measure are usually granted. There is a mentality of judiciary feeling that they should protect
rights of parties, and not let arbitration interfere with it. So Section 9 amendment was introduced to combat it.
Even if court rejected it, it would waste a lot of time.

Non-signatories in Interim Relief

Recently, after third parties have been included by way of Section 8, a question has been raised if they can also
move court for interim relief under Section 9. And if interim relief can be granted against such third parties. The
answer is in the language of the Section 9 itself. The definition of party in itself has not changed, only the entire
wording of the clause of Section 8 has changed. Section 9 only uses the word ‘party’ and hence they are excluded.

Cox and Kings Limited v Indian Railways (2012)

SC laid down that third party cannot move application under Section 9. But it is still an open question, since a lot of
cases have said the opposite.

24 http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Interim_Reliefs_in_Arbitral_Proceedings.pdf
Value Advisory Services v ZTE Corporation (2009 Delhi)
It said that interim measures can be passed by third parties. Tribunal may not have power over third parties, but
courts do. So it logically follows that such third parties can approach the court for such measures.

By way of the recent 2015 Amendment, Section 2(2) was added which provides for Section 9 (Interim measures),
27 (Assistance of court in taking evidence), and 37 (Appeals) being applicable to ICAs even if they are seated outside
India, as the subject matter of the suit might be located in India and the protection of the same or some other
assets during the pendency of the suit might be necessary.

Seat Theory of Arbitration

It is not unique to law of arbitration, but it is a principle existing in International Law, that any forum or tribunal has
to follow the law of the land wherein it is situated, and hence the law of procedure of that country will apply. It was
laid down for the first time in the context of Arbitration in the Geneva Protocol in 1923. It is followed by jurisdictions.
The Seat Theory has a few implications: -

1. Lex loci arbitri: the procedure of arbitration will be governed by law of arbitration of that country,
2. Court-Tribunal Relationship: Regulates the relationship of the forum with the Country and its civil courts
(Section 8, 9, 11, 27, 34; enforcement and recognition of awards),
3. Tribunal-Public Policy Relationship: It will relate arbitral tribunal with public policy of country (arbitrability
of dispute - fraud, corruption, etc).
As for the internal procedure of arbitration, there are some mandatory and some non-mandatory provisions.
Parties can deviate away only from the non-mandatory provisions of lex arbitri, by way of their own tailor-made
procedure, or by arbitrating under an arbitral institution (which have their own rules of procedure). They cannot
however deviate from the mandatory provisions of the lex arbitri. In case there is a gap in their new or custom
rules, they are to fall back on the default non-mandatory provisions given under the code of the Country.

Note: Very few countries, like England, have demarcated the mandatory and non-mandatory provisions, In India, it
is only the interpretation of the Court which will decide whether a provision is a mandatory or non-mandatory
provision.

Delocalised Theory of Arbitration

Also known as the Transnational Theory of Arbitration, this theory arises out of the school of thought which believes
that there is no need to follow the laws of country, and to subject themselves to the jurisdiction of the civil courts
of the state, only because it is the venue of the arbitration. The primary reason a country is chosen as the venue
is that it is a neutral forum, out of which no logic for such submission to jurisdiction arises. Just the fact that the
arbitration is physically taking place in that country does not affect the law and enforcement of the country, giving
them no right to rule over it. They also believe that if at all the country in which such award is to be enforced can
have jurisdiction over the same; which they can annul in exceptional cases when party do not want to be bound by
the award. The norm, however, is that parties do not approach the courts.

Implication: Too many laws will apply and parties will cherry pick provisions from the laws of different countries
and try to enforce them based on their case and convenience, it can also give multiple states jurisdictions
jurisdiction over the same case, creating a mess.

Lex Arbitri

There are three aspects of the lex arbitri: -

1. Internal arbitral proceedings (Autonomy given to parties)
2. External arbitral proceedings (Bound by the law of the seat)
 3. Public policy (Bound by the law of the seat)

Most countries follow the Seat Theory of Arbitration (which is also recognized by the UNCITRAL Model Law), and
only a few aspects of the Delocalized theory are followed, i.e. giving parties the autonomy of choosing internal
procedure and custom rules regarding the non-mandatory provisions of the laws. As for the internal arbitral
proceedings, there are only basic principles and guidelines given, detailed procedure can be created by the parties
for themselves.

Marriott International (Del HC 2000) [need better case summary]

Arguments for the Applicants:

(1) If a country is not a signatory to either the Geneva or NY Conventions, then there is no way the India AC
Act will apply (as Part II only applies to signatories)
(2) Section 2 says Part I will not apply to any ICA held outside India
(3) If the law is interpreted to allow for jurisdiction of India, then there is a clash between 2(2) and 2(4) & (5).
(4) Court cannot change the law, it is the duty of the legislature. 2(2) is very clear and part I will not apply to
ICA happening outside India.

Arguments for the Respondents

(1) The court must provide remedy to the party and cannot wash its hands off the matters
(2) The word ‘only’ of the UNCITRAL model law Article 1 (2) was omitted in the Indian Act in Section 1 (2), which
implies that Part I will apply for arbitration not held in India
(3) India follows the seat theory of arbitration according to the arbitration act. But some HC’s have held that
even in case of domestic arbs, some partial application of the delocalised theory is allowed.
The Supreme Court held that Section 2(2) is not exhaustive but inclusive in nature, and therefore Part I will apply
to arbitrations which are happening outside India because it does explicitly not bar such application.

Bhatia International v. Bulk Trading S.A (SC 2002)

For a summary of Bhatia and arguments for BalCo, read this.
Two parties who entered into an arbitration agreement where they said that they will follow the law of ICC rules
and the arbitration will be in Paris, France (will be Lex Arbitri). One of the parties started alienating the subject
matter property, and hence the other party filed for interim injunction under Section 9. The responding party
claimed that as it is an ICA, Part I will not apply, their reasons are substantiated as follows: -

a) Art 1 (2) of the UNCITRAL Model Law provides for the exceptions, i.e. the provisions which would apply to
arbitrations not taking place in the State. India at the time did not have such exception clause, which Sen
argued was a conscious decision and India completely followed the Seat Theory.

b) To interpret Section 2 (4) and(5) (which say that each and every arbitration will be bound by part I) to mean
that Part I is applicable to even ICA would cause section 2 (2) to become redundant.
The Supreme Court reasoned that the if the exceptions are applied, the country where the property is located will
have the jurisdiction to grant interim measures. If country of origin is barred from granting the same, they will have
to get a decree from the seat-country, get it recognized as a foreign decree in India and then get it enforced, which
is too long a process. Some countries will not even recognize it as it is not a final order. And hence, Part I will apply
to arbitrations happening outside India also.

Para 40: Application of Sen’s interpretation of Law, that party cannot come to India. However, it’ll be a problem if
the award is passed in a non-signatory country and lead to an anomaly between Section 1 and 2 of the AC Act. SC:
Something has to be done about Section 1 and 2, its a hasty piece of legislation, and hence have to read into the
Act.
Para 16: Arguments seen in favour of the Delocalized Theory of Arbitration; (1) Section 2(f) which defines ICA makes
no difference based on it being inside or outside India. (2) There will be a presumption in favour of the award if the
passing country is a signatory to the Conventions, if not then there’s a gap in the law because neither Part I or Part
II will apply.

Para 17: If it followed that Part 1 applies to ICA which occur only in India, there will be a contradiction between
Sections 1 and 2(2), and will lead to differential application of law to different parts of the country, which could not
have been the intent of the legislature.

Para 20: In the Acts definition of ‘Court’ (Section 2 (e)), it can not be made out that the Indian Courts will have no
jurisdiction when the arbitration takes place outside India.

Para 22: The Court analyzes Section 2, 3, 4 and 5

- In section 2(4) and (5), the use of ‘every arbitration’ and ‘all arbitration’, shows that it includes all
arbitrations even if it it is seated outside India.
- Section 2(5) is subject to sub-section 4, because the latter says ‘every arb’, and Section 5 is not made subject
to Section 2. Part I mandatorily applies to ICAs in India unless the parties have explicitly or by necessary
implication excluded such application of Indian law for ICA, it will apply.
Para 23: Section 2(7) is important, as there is no point having it as otherwise it is implied from the scheme of the
legislation. But there has to be a reason for its existence. If ICA award passed in India, it is implied that it is a
domestic award. This needs to have a more nuanced interpretation. Section 2(7) tells us that if the ICA happens in
a non-signatory country, it is deemed to be a domestic award, to maintain checks, as Part II is only applicable with
respect to Signatories.

Para 24: In the Section (and Articles) 5 and 8, UNCITRAL uses the word court, while the Indian Act uses judicial
authority. The Court says that we have deviated from the same as to include the jurisdiction of the foreign courts
(foreign courts are not courts under Indian law). This is another proof that we use the delocalized theory.

Para 25: Section 2(7) and 28, use the words ‘where the place of arbitration is situated in India’ which would not be
needed if Part I only exclusively applied to ICA in India only; this is evidence in Part I which shows that it was to
apply to ICA held outside India:

According to Mr. Sen, there is an equivalent for Section 8 in Part II but none for Section 9 and 17, which shows that
such relief cannot be claimed for ICAs which are happening outside India. The drafters consciously omitted such
provision and this proves his contention. Act has to be read as a whole and not feel that there are general provisions
that will be repeated in all parts of the Act. Section 9 and 17’s omission from Part II makes no difference. Even
Sections 8 and 45 are different from each other too.

Court on why Section 2(2) drops the word “only”: Such omission is made so as to make Section 2(2) inclusive, it
would’ve been closed if used. According to the UNCITRAL rules, it applies only when the seat is in a particular
country and not otherwise. By such omission, we leave the room open for expanding and applying the exception to
not only Section 8, 9, 35 and 36, but to all other Sections of Part I. For arbitration (and ICA) in India, all provisions
of Part I will apply, and if outside, any provision from it can apply. If the Indian party is arbitration outside India,
they can ignore even mandatory provisions under the AC Act. [what?]

Para 28, 29: According to Sen, Section 9 subscribes to the seat theory of arbitration as it says that the award should
be enforced as per Section 36. Foreign award cannot be enforced that way, and hence Part I excludes its applicability
to ICAs outside India. [rejected] Court say that ‘award enforced in accordance with Section 36’, is only for the 3rd
relief under Section 9, after passing the award. The legislature has excluded the application of Section 9 only wrt
the 3rd stage. Parties can use Section 9 before the constitution of the tribunal, when it is functioning and has not
yet passed the award.

Both, the Seat Theory and Delocalized theory allow the parties to deviate from the lex loci arbitri.

Para 33: Nothing in Article 22 of the ICC Rules prevents parties from approaching Courts in India, “Parties may apply
to any competent authority” which does not exclude, and would include Indian courts. Hence, we follow the
Delocalized Theory of Arbitration.

The only problem with the law laid down in Bhatia was that it was applied to different circumstances, i.e. under
Section 11 and 34. Other than that, it was good law.

Renusagar Power Co. Ltd vs General Electric Co. (SC 1994) [before the 1996 Act]
In the context of Private International Law, the narrow view of defining public policy was opted for, thereunder
public policy included: -
1. Fundamental policy of Indian law
2. Interest of India
3. Justice and morality

ONGC v. Saw Pipes (SC 2003)

Did not modify any of the three heads as laid down by Renusagar, but added a fourth head called patent illegality
(applicable only to domestic arbitrations). Widening the scope of the Section 34 (based on Article 5 of the
Convention). This gave courts a broader power to set aside awards.

This is a v imp case. 2 lines are not enough. Read this.

Venture Global Engineering v. Satyam Computer Services (SC 2008)

(Extended Bhatia and said that foreign awards can be set aside under Section 34.)
ICA Tribunal seated in the States, American court upheld the award as well. The Court used one of the ratios of
Bhatia (regarding the omission of the word only) to say that an award given by a foreign court can be examined and
set aside by an Indian court under Section 34 as its application is not explicitly excluded. So by the Saw pipes ratio,
courts go into merits on grounds of public policy, and in that process, a foreign award is also a domestic award,
insofar as it has to be checked by Section 34 as well.

Phulchand Exports Ltd v. OOO Patriot (SC 2011)

Used the Saw pipes ratio to say that what is good for a domestic award should also be good for a foreign award.
And made foreign awards also subject to the four saw pipes. [Overruled in Shri Lal Mahal]

Indel Technical Services Pvt. Ltd. v WS Atkins (2008)

Used the ratio of Bhatia that Part I will apply to ICAs not held in India unless its jurisdiction is expressly or by
necessary implication excluded, to say that the Supreme Court’s power to appoint an arbitrator in ICA’s extends to
those not held in India.

Citation infowares v Equinox (2009)

on section 11- Facts of both this case and Indel were that the party approached the SC to appoint an arbitrator
under section 11 for an ICA. dispute was whether they should approach the court in the seat of arb. They wanted
to cash in on the SPB case. SPB v Patel Engg.- in this case the SC held that the HC as well as the CJI will have power
to decide the jurisdictional issues prior to referring the cases to the tribunal. It broadened the ability of the court
to interfere with arbs.
Because of the backlash of bhatia and the power of the SC to set aside a foreign arbitral award, the court started
developing the principles of implied exclusion as bhatia case made it

See this source. Seems legit.

Videocon Industries v Union of India (SC 2011)

The agreement said that the arbitration agreement will be governed by the Law of England, the seat will be Kuala
Lumpur, and the substantive law will be that of India. Following the Bhatia regime, it was held that as the application
of Indian arbitration law is explicitly excluded, and therefore it will not apply.

Dosco India v Doosan (SC 2011)

Just like the Videocon ratio, they said that Indian AC Act will not apply (due to the exclusion), and they will need to
go to the Courts of the seat to get a new arbitrator appointed.

Kaiser Aluminum v. Balco (SC 2012)

It was held in this case that Part I will not apply to any ICA happening outside the territory of India, and set aside
Bhatia (following the UNCITRAL Model Law and the NY Convention). Signalling that India follows the Seat Theory,
they said that the interpretation of Bhatia implied and let something happen which was not written in the Bare Act,
making new law. The court said that the seat is chosen by parties keeping in mind all contingencies, and hence they
do not need a remedy under Section 9.

In case of non-conventional countries, the court said that there are set procedures and you have to file a civil suit
to enforce these awards. There is no need to interpret the arbitration act to include non-conventional country. They
said that Seat Theory is the most accepted and logical theory of arbitration. The parties will have to approach the
court of the seat for any remedy.

Read this:

http://arbitrationblog.kluwerarbitration.com/2012/09/26/the-bharat-aluminium-case-the-indian-supreme-court-
ushers-in-a-new-era/

Problems with the BALCO Judgment

A. It is a prospective overruling, and therefore previous arbitrations will still be governed by law in Bhatia.
B. Did not take into account the inefficiency of now accessing a remedy under Section 9
C. Amendment made to the Section 2(2) proviso, even when arbitrating in another country certain sections
(like 9, 37) can be included w.r.t. Assets in India
D. No confusion in Section 1 regarding application of law of ICA to outside J&K (?)
E. Section 2 (4) & (5)- in clause 4 the phrase every arbitration is wrt only statutory arbitration. Clause 5 talks
only about bilateral int. treaties, this does not cover ICA because these are specific.
F. Section 28- “Where the arbitration is situated outside India” it talks about the choice of law. Two situations.
The court in bhatia gave reasoning based on only one phrase and did not make sense, in context it did not
make any sense.
G. Section 45- Bhatia said that ‘notwithstanding anything contained in part I’ is because Part I applies. But this
applied only to section 45 because it corresponds to section 8 and the leg did not want section 8 cases to
be applied to section 45 situations.
Courts could have simply used the UNCITRAL model law to understand that Bhatia is good law and Indian law was
interpreted to make it in line with the model law. They didn’t need to do so much crap in Balco, she says this is not
a good judgment but applies. The seat theory is not abandoned, if it was so good, why would the delocalisation
theory emerge from?
NY Conv. Art 5(e)- “in which or under the law of which” people have interpreted this to mean that the law of either
the seat or the place which law governs the arbitration is to be applied. Hence, all arbitrations are delocalised in
some sense.

Composition of the Arbitral Tribunal

The composition of Tribunals has been discussed in Section 10 of the AC Act, and Article 10 of the UNCITRAL. India
deviates from the latter in changing the number of arbitrators in case of non-decision from three to one, and the
condition of it being an odd number in case of a custom number.

Section 10

Narayan Kumar Lohiya v Nikunj Kumar Lohiya (SC 2002)

Damn good article summarising contentions + judgement here:
https://www.financialexpress.com/archive/number-of-arbitrators-can-be-even/59009/
Family dispute where they agreed to get one arbitrator, then they amended the agreement to appoint another
arbitrator. The two arbitrators then passed an award. Were they arbitrators or mediators? (as this would decide
the bindingness of the award). And if Section 10 was a mandatory provision of the Act? The parties separately
moved an application for setting aside the award as the act provides for an odd number of arbitrators, under Section
34 (2)(v).

Petitioners

1. Section 4 and 10 are very clear, and the latter is mandatory as it codifies the public policy of India (as we
deviated from Article 10, reason being the arbitrators should not be deviated in their opinions so as to
waste money, time and effort)
2. Case does not fall into either Section 4 (a) or (b)
3. Section 34(2)(v) simply means that the parties can have any procedure and composition but it must be in
composition with the mandatory provisions of the Part I.

Respondents

1. Unless the objection is raised before the tribunal, you cannot approach the court under Section 34. Inherent
lack of jurisdiction (as composition against policy of India), hence no need to raise it there first [this is a bad
argument].
2. Upon a conjoint reading Sections 4, 10, 16 and 32; even though the number of arbitrators is not odd, if the
party refrains from objecting to the same, arbitration can continue regularly, showing that Section 10 is a
derogable provision of the Act (Paras 12 - 17).
3. Section 11, which talks about appointment of arbitrators, talks about three arbitrators, but doesn't talk
about other odd numbers, all eventualities are not covered by the Act, and if the arbitrators could have
appointed a third arbitrators if they felt that it was required (as per section 11) but as they were in
consensus, a third arbitrator was of no use.

Held, that Section 10 is a derogable provision of the Act, if the composition and the tribunal is in consonance with
the agreement, then it is allowed. Section 10 is not mandatory. It would render almost everything as non-
mandatory. Furthermore, their interpretation does not take into consideration Section 10 (2).

As of now, parties are free to choose an even number of arbitrators as Section 10 is not a mandatory provision. This
decision is in line with the UNCITRAL Model Law.
Section 29 talks about how all decisions by panels of arbitrators are to be made by a majority among them, however
with this decision that too is now interpreted loosely. The way in which the SC arrived at this decision, is wrong as
they have effectively re-written the provisions.

Problems with/comments on the Judgment.

1. SC erred the conjoint reading, implied waiver does not render a provision non-mandatory. The timeline is
Section 16 was to provide speedy resolution, it doesn’t imply that because they can waive the right it is a
non mandatory provision,
2. Section 34(2)(v) comes into picture on when the parties depart from the agreement, only then will the court
look at whether the agreement is not in line with Part I.
3. Parties’ knowledge, ignorance and participation should not be used to read a decision,
4. Petitioner saying that they could approach Court as Tribunal lacked jurisdiction. This is faulty because of
the KK principle and their right to decide width of jurisdiction.
5. Precluding a party from approaching the court unless it was raised with the Tribunal is not right as it does
not account for cases where the tribunal is corrupt or biased (like Venture Globals).

Section 10 (2) deviates from the model law by providing for a sole arbitrators appointment, the logic behind this is
that the decision should be fast and cost effective, which would be much harder for a three-member tribunal.
UNCITRAL allows for a sole arbitrator from a neutral country, but usually the two parties appoint an arbitrator each
and they then appoint another arbitrator, this is because of the International Nature of the Arbitration [the
arbitrator shouldn’t be acting on behalf of the person who appoints him].

Section 11 (here till SPB ) [read the Section]

The 1996 act used the words CJI and CJ of HC instead of Court as given in UNCITRAL model. When the application
was filed before the CJ, should he decide the jurisdictional issues or just look at the procedural formalities. This
changed and the SC said that the judicial mind must be applied and jurisdictional issues must be decided before
referring the case under section 8.

Konkan Railway vs. Rani Construction (SC 2002) (admin duty under section 11)
A. We have departed from the UNCITRAL Model law because the word court has a specific meaning in our Act.
Due to the importance given to Arbitration in India, the legislative intent was to only give higher judicial
officers the power to appoint arbitrators.
B. The words used are Chief Justice of India/High Court, instead of Supreme Court and High Court as the
legislature wanted to differentiate it from other normal court proceedings, to preclude it from being subject
to appeals and unnecessary rules. This language makes it part of the CJ’s administrative duties, and is not
a judicial proceeding but an administrative one. There are fewer remedies [Art. 226], which do not include
SLPs, etc.
C. It is an administrative duty as it does not do any adjudicatory task, just helps the parties in the
administration of their adjudication.
Principles used to arrive at the decision: -

1. Judicial Minimalism
2. Kompetenz-Kompetenz doctrine

The work of the CJ is to simply decide the appointment of the arbitrator, the tribunal will decide everything else.
There is no need to send a notice [where a right of hearing is given to the opposite side] but an intimation can be
given to the opposite side to say that the CJ has been approached for appointing the arbitrator. The only remedy
available is under Art. 226.
The CJI and CJ of HC were just delegating this power the district court, and the district courts were not looking at
the jurisdictional issues but were simply appointing the arbitrators. But they do look into the qualifications of the
arbitrators. It is unlikely that the DJ will not go into these aspects, especially when the agreement specifies some
qualifications and the other party challenges the appointment.

SPB & Co v. Patel Engineering (SC 2006) [overruling Konkan Railways]

Held that the CJIs power in appointment of arbitrators is a judicial power and not an administrative power.

Para 8: When a tribunal is created, it has the power to decide jurisdictional issues. The appointing authority of such
tribunal is the office of the CJ. There is finality attached to their decision, and hence it is a judicial power.

Para 9: Hence, it cannot be delegated to a non-judicial body.

Para 10: Section 11 (6) and (7) use the words decision, which shows some level of application of judicial mind and
adjudicatory characteristic of the decision, furthering the decision that it is a judicial power. Furthermore, the CJ
should look into the jurisdictional issues of the case also before appointing the Tribunal. Otherwise it’ll be a waste
of time as the tribunal might decide very similarly to the CJ.

Para 12: The reason for departure from UNCITRAL is not the definition of court, it also unlikely that the CJ is
supposed to act in a solely administrative manner.

Para 13 & 14: It should not be expected that the CJ is to be a persona designata in section 11, because persona
designata will continue in his employment even after leaving that particular post. Once he exits the office of CJ, he
can no longer appoint arbitrators. The persona designata can also not delegate the power given to him because it
is given particularly to him, section 11 however does allow the CJ to delegate the power to someone else. The CJ
therefor cannot act as a persona designata.

Para 15: It is assumed that when a case comes up before the Court under Section 8, it will have to go into the
preliminary aspects of the Agreement. [Anand raju and pinkcity midway petroleum case]. In this light it is weird to
say that the judicial authority can decide jurisdictional issues but the CJ and CJI cannot look into the jurisdictional
issues. Since it is allowed in section 8, it should be allowed in section 11.

Section 8 requires both parties to be on record, while Section 11 says only that the party who is aggrieved can
approach the CJ to appoint an arbitrator.

Delegation can be only to the brother judges of the same court, and the power exercised will be said to be that of
the CJ.

Para 18: The concept of kompetenz kompetenz was not accepted by the court. The SC said that it does not mean
that the tribunal has sole jurisdiction to decide jurisdictional issues. If the parties have directly approached the
tribunal then it has the power to conclusively decide the issues. The reason is that if we accept the ratio of Konkan
Railways which subscribes completely to the KK doctrine, it would be unacceptable that if the CJ decides the
jurisdictional issues, and only the tribunal would be able to (like the USA). The decision of the CJ is conclusive and
binding, the tribunal can then look only into the substantive issues.

They said it is good because-

a. Minimal judicial interference as these issues will have been finally decided by the court
b. Remedy only under Art. 136 if it a CJ, and none if it is the CJI.
c. Art. 226 might lead to peculiar situation where lower officer will review the decision of a higher judicial
officer
 d. Infructuous reasoning in Konkan as right to hearing must be given to both parties even in non-judicial
administrative actions.
Why was the phrase ‘notwithstanding any judgment, decree...agreement’ added in Section 11? This has been
introduced because the SC and HC is supposed to look at the existence of the arbitration agreement, but under
Section 8 they simply have to prima facie check whether there is a valid arbitration agreement. The SC and HC under
section 11 need not check the validity of the agreement. [Patel Engg wrongly held that the same scheme must be
applied to section 8 & 11. Which Boghara Polyfab then corrected]

As there is no recourse by way of SLP, as in Section 11 Clause 7, the issues should go directly to the tribunals and
the decision of the SC and HC should not final.

Section 11(6B)

Why was there a need to use ‘Supreme Court’ in S 11(6B)?

Read this.

National Insurance Corp v Boghara Polyfab (SC 2009)

Refined the view in Patel Engineering, and said that there are three categories of questions which can come before
the CJ when an application under Section 11 is made. [Click here for previous summary] Further held that once
the CJ has decided a Category I or II issue, the decision is final and the tribunal cannot reopen those issues.

- There is a limitation within many questions of Category II, most questions are mixed issues of laws and fact.
They cannot be decided at a preliminary stage,
- In a question under Category II where there is an allegation of fraud, the CJ should decide that question
and then refer the matter to arbitration,
- The Category I issues revolve around ascertaining the existence of a valid arbitration agreement which will
decide how everything in the future will pan out.

Shriram Mills Ltd v Utility Premises (SC 2007)

CJ should only do a prima facie inquiry into the issues under a Section 11 hearing, and should leave conclusive
determination to the tribunal. (Most later cases did not support this case as it goes against the Patel Engineering
ratio) However, this judgment is more in the spirit of arbitration. At a prelim stage, ideal is prima facie inquiry. Even
in the Amended Section 8 (2015), it is now said that there should be prima facie inquiry by the court.

This decision was criticised in Chloro Control (2013). SC said that the decision in Shriram is contrary to the Consti
Bench decision of Patel Engg. In Chloro Control, they said even the court deciding under s 45 is a conclusive
determination by application of the ratio of Patel Engg.

Patel was confined to Section 8, 9 and 11. In Chloro Control, the SC applied it to Section 45 which is a Part II provision
because it is similar to Section 8. Section 8,9, 11 focus on jurisdiction, and such analogizing should not have been
done.

Indowind Energy Limited v Wescare India (2010 SC)

The CJ in a Section 11 case should only confine himself to see if an arbitration agreement exists, and not go into the
details as that can be done by the tribunal at a later point of time.

Bharat Rasiklal v Gautam Rasiklal (2012 SC)

The Court under Section 11, other than seeing if an arbitration agreement exists, should also see if it is valid and
enforceable. This decision shows the way in which this provision can be interpreted.
Arasmeta Captive Power v Lafarge India (2013 SC)
Applied the ratio of Patel Engg and the Booz-Allen test. SC held that Arbitrability should not be decided by CJ in a
Section 11 proceeding. This should be done by the tribunal. We can see that even SC is not clear on whether it
should be a conclusive determination or prima facie determination and whether the CJ should go into arbitrability.
However, we more or less know that ‘existence’ sometimes can mean the validity of the arb agreement.

Review under Section 11(6)

Can the CJ’s decision under Section 11(6) be reviewed? Code of Civil Procedure does not apply, Higher Courts are
bound by their own rules of procedure.

Rode Madan India v Int’l Expo (SC 2005) [overruled by Jain Studio]
Power under Section 11(6) is a statutory power and cannot be said to be a Constitutional power exercised by the
CJ.

Jain Studio Ltd v Shin Satellite Public Co Ltd (SC 2006)

Patel Engg said that power under Section 11 is judicial in nature, therefore it has to be open to review. Such order
can be compared to the SC’s order under Article 137, and hence can be reviewed similarly.

Art. 137 says it is subject to any law made by Parliament, this is an important. This is then subject to the AC Act, and
the power to the CJ becomes a statutory power. SC Rules also say that for something to be called a supreme court
decision there should be a minimum of two judges and then only then Article 137 can apply. The equating of CJI as
SC is messed up, but in the lack of any overruling, this is the law at the moment.

Named Arbitrators
There are certain contracts in which the arbitrators, or the officers who will appoint them are named (?). This is
very common in Government contracts. The Govt. will many a times appoint its own people as officers. Hence, a
sole arbitrator appointed like this cannot be said to be deciding fairly and impartially. Reasons for these contracts,
is that the private parties don’t pay for arbitration because the agents will be paid by the government. Intention
was good, but led to problems.

Indian Oil Corp v Raja Transport (SC 2009)

One of the parties opposed the appointing of a serving government officer as an arbitrator as he cannot be
impartial, and hence in a Section 11 proceeding, requested the CJ of the HC to appoint another arbitrator [rejected].
The SC, refusingy, said that the CJ cannot do anything about it as the party entered into the contract with open
eyes, and any objection should have been raised at the stage of entering into the agreement. Also, not all
arbitrators will be biased; only when the arbitrator is a direct junior or senior of the government officer (which is
the opposite party) will there be apparent bias and that shall not be allowed.

Amendment to Section 11 (2015)

The terms ‘Chief Justice of India’, and ‘Chief Justice of the High Court’ (as seen in the judgment of the cases Konkan
railways and Patel Engineering) were replaced by way of the Amendment Act by the term ‘Supreme Court’ and
‘High Court’. The main reason was to clarify the position on which there was till date no consensus amongst courts.
The change of terms makes it clear that they both are judicial bodies and there is no doubt about the nature of
their power.

Section 11(6B) also clarifies that the delegation will not be considered to be judicial in nature, and will not be open
to any appeal. Further, this also allows them to delegate it to ex-judges. The guidelines laid down in Patel
Engineering have been followed.
Implications of Section 11 power being judicial: -

1. Cannot be delegated
2. Multiple avenues of Remedy available
3. Application of Judicial Mind

246th Law Commission Report

a. The Scheme should be used to interpret Section 8, 9 and 11, because they are all similar (Patel Engg),
b. Same kind of procedure should be followed for these sections, the court should decide whether the
arbitration agreement exists or not, and whether is null and void,
c. For all other purpose, the court will do a prima facie inquiry only (and then send it to the Tribunal),
d. If they think it is null and ,void, they can conclusively decide it, and the matter will then not be referred to
arbitration (same as USA)
The legislature did not accept the reasoning of Patel Engg, said that there are different requirements under Sections
6 and 11. The former requires a prima facie inquiry, while the latter is confined to the existence of the arbitration
agreement.

If the court decides that there is no arb agreement and the HC and SC refuse to appoint an arbitrator, the parties
can still come to a mutual agreement and form an arbitration tribunal and arbitrate the dispute.

Section 11(4)
The party must appoint an arbitrator within 30 days, however the Supreme Court has said that Section 11 does not
prescribe a time limit within which an application must be made to the CJ. Even if the parties appoint an arbitrator
after 30 days of the notice being given but before the application is made to the CJ, it is a valid appointment. The
residuary clause of the limitation act will apply to applications under section 11, 6 etc.

Section 12, Grounds of Challenge

- No conflicts of interest
- Can devote time to the arbitration.
A person is duty bound to disclose any conflicts or grounds hereunder before being appointed by the parties or the
court. The grounds given in the 5th schedule will be followed for determining whether a conflict of interest exists
(IBA lists). The parties have the right to challenge the mandate of the arbitrator under section 13 & 14 if the discover
that he is not independent and impartial after the appointment has been made. If the party has knowingly
appointed the arbitrator he cannot question his eligibility.

In the new act there is a strict timeline that must be followed. Section 29A, lays down a 12-month period from the
date of the appointment of the arbitrator to pass an award.

Denel (Pty) Ltd. v. Ministry of Defence

Applied the ratio of Indian Oil v. Raja Transport, to say that the named arbitrator’s appointment was not upheld
and they appointed a Retd. Judge instead. Court said that the act of appointing a named arbitrator in a Govt.
contract must be the exception and not the norm.

The LCI report said that the parties have no bargaining power in govt. contracts and the principles of contract will
not apply. The IBA guidelines on the conflicts of interest [red, orange and green lists] should be followed by the
Indian Government to see what is waivable and what is not. The Indian Govt. has included schedules 5, 6 and 7
which list out some of the categories under the IBA guidelines and give a proforma that must be filled by the
arbitrator.
Independence and Impartiality
LCI suggested that in the old times, there was a tendency to appoint the third party who was a person known to
both disputants due to the importance given to familiarity and integrity. Neutrality is defined in a different manner
now, they must not have any relationship with the people. The parties however are free to waive the requirement
that the arbitrator should not be known to the parties.

Independence is an objective test, it is a matter of fact and is based on the relationship between people, while
Impartiality is a subjective test and is harder to prove.25

Section 12, 13, 14 & 15 must be read together. Para 3 of article 13 is a mandatory provision, all other are not. If a
challenge under section 13 is not successful, the parties have a right to go to the court within 30 days.

Section 11
Talks about appointment of arbitrators. If the court does it on its own, it should not just confine itself to jurisdiction
issues but should look at qualifications also.

Named Arbitrator in PSU

Sec 12(1) amended in 2015—before a person can be appointed, has a duty to disclose. Was also u/1996 Act but
was not clearly written. There were many cases on bias, many opinions of HCs and the SC. Arb also has to give an
undertaking that she has the time to decide w/in specified time (12 months).

Duty to disclose is before appointment but what about cases where he has already been appointed? The grounds
given in the fifth schedule will be used to determine if a conflict of interest exists. (Read (a) along w lists in the
schedule)
Test of bias was laid down by SC in several cases.

Gov contracts: named arb situation. They may say that the other party waived the right to raise the objection. They
may have an arb known to them. However, the duty is on the arbitrator even during the proceedings.

View that there should be an exception for gov contracts cause arb can be a high ranking official from the dept.
Certain people think there should be an exception for pub sector contracts. LCI said creating this exception
undermines party autonomy and the party’s right to a fair trial. S 12 gives grounds for challenging mandate of
arbitrators. (Read 12 w 13, 14 and 15)

Section 13
According to Article 13, UNCITRAL, parties can have their own procedure for challenging the mandate (subject to
Para 3 of the Article). If a challenge is not successful, parties can approach the court or any other authority (if it’s
institutional arbitration).

Section 13 of the AC Act talks about the same. Only Section 13 (3) however is mandatory. Either the arbitral tribunal
withdraws or other party accepts the challenge. If it’s a sole arbitral tribunal, it can be tricky. If the tribunal doesn’t
withdraw, the act of not withdrawing is in effect rejecting the objection. Having a hearing on the objection is then
a time waste.

Departure from UNCITRAL: if challenge not successful, arb tribunal may continue arb proceedings and pass an
award. UNCITRAL gives an immediate relief, but our law is pro-arb and wished to prevent hampering of arb
proceedings.

25 Read 246th LCI Report for more doubts on ADR

Rationale: Grounds are mostly that of bias. Possible that after award is passed, the party may not feel that the party
was actually biased. May not feel the need to file an app to set aside arb award under Section 34. However, it is an
important departure from the Model Law.

Disqualification [Time]
What will happen if a time limit is given in the agreement for the tribunal to decide the case? If the arbitration is
time bound, the parties can extend the time of the arbitration . The court can also extend the time in exceptional
circumstances. Section 29 A remedies this problem and fixes a standard time under the act, it also says that the
time may be extended by the parties mutually and gives the tribunal the ability to expedite the matter as they
can get some additional fees.

In some cases, the tribunal was taking too much time and the court extended the time, otherwise the parties would
have to initiate the proceedings all over again. The previous decision of the HC does not stand after the new
amendment, Now the court can extend the time after imposing some nominal penalties on the parties under
section 29A. The penalty is imposed on the tribunal if the tribunal caused the delay or if the parties caused the
delay then a hearing is conducted to see who is responsible and penalties are imposed on that person.

The new proposed amendment of 2018 says that the time limit should start after the parties complete the pleading
because it is only after that the work of the tribunals starts.

Failure to act- Section 14- substitute arbitrator should be adopted. It can be decided whether he starts de novo or
continues. Withdrawal by the arbitrator does not mean he is accepting the allegations against him.

There should just be one section with all the disqualifications.

How will time ka ground come u/13? Cause 13 is more about prelim objection.
Sec 14(1): Before amendment, this provision was already there. There was however no corresponding penalty to
this provision. (Section 29-A handles this now)

Other Grounds
De facto inability
Unable to get outta bed/physical inability, etc.

De jure inability
Legal incapacity by way of insanity, insolvency, moral turpitude, conviction, etc.

State of AP v Subhash Projects 2007 Gauhati HC:

Issue: if a time is fixed in the agreement (pre amendment) and the arb couldn’t complete the decision in time, can
he be terminated? Court can do nothing. Only parties can extend the time with mutual consent. If parties don’t do
it, court can’t do it. Case of de jure inability. After termination of time, arbitrator is de jure unable to perform her
function, and comes under Section 14 (1) (a).

Obj of s 13 differs from s 14: see 14(2). S 13 stops any recourse to courts—gives only tribunals right to decide. 14
says unless otherwise agreed, parties can go to court. No party autonomy in s 13. Obj was grounds of independence,
impartiality can be raised only in s 13—if it could be raised in s 13, what was the need for s 14?

Some HCs said inability to raise it u/s 13 does not bar party from raising it u/s 14 under the head of de jure inability.
13, 14 and 15 are a scheme.

Shyam Telecom v Arms Ltd, Delhi HC

Said the same as above.
Imaging Solutions Pvt Ltd v Hughes Communications India Ltd 2013, P&H HC
Arbitrator failed to disclose that he was the director of the respondent’s company. HC said this is a de jure inability.
If parties cannot raise an objection under Section 13, they can raise it under Section 14 as a de jure inability.

New Act: Time comes u/s 12. (?) This comes u/s 13. Technically, correct thing to do is to raise it u/s 13. The broad
interpretation of de jure given to s 14 is legally correct, but remember that u/s 13 there can be no recourse to court.
Section 13 speaks only of preliminary issues, while 14 speaks of the entire proceedings (eg, if the arb died after
proceedings). She thinks s 14 and 13 speak of different situations.

What if the tribunal does not follow the Terms of agreement? Then it is a disqualification, even though it is not a
ground under section 12, 13 & 14. It is a violation of Section 28(3), previously it used to say “all cases”, it was
amended after ONGC vs Saw Pipes [wanted to include patent illegality as a ground under section 34, if the tribunal
does not follow any provisions, then there should be some remedy to set aside the award] to say that the tribunal
has to take into account the terms of the agreement only at the stage of making of the award. If the arbitral tribunal
does not follow the terms of the agreement, it loses its mandate.

Conduct and Jurisdiction

Section 16
Principle of competence competence and severability of the arbitral clause. The tribunal can decide issues of
jurisdiction completely. In this section, the parties cannot go to court until the tribunal passes the award if the
tribunal rejects the objection to its jurisdiction. This is the French interpretation and deviates from the UNCITRAL
model. [Read Section]

The SC decided in the Lohiya case that it is not provided in section 16 and 34 that objection should be raised
before the tribunal and they cannot raise it before the court for the first time. In exceptional circumstances when
the circumstances are know after the award has been passed, the parties can go to court directly.

Section 18
Speaks of equal treatment of parties. Mandatory provisions, almost everywhere. PNJ has to be included, and cannot
be subject to party autonomy.

Section 19
Tribunal not bound by CPC or Evidence Act. Incorporates something from seat theory. Parties are free agree to
procedure to be followed, and if they don't choose, the tribunal can. But they cannot deviate from Part I (i.e the
mandatory provisions of Part I). See clause 4 as well.

Section 20
Has no qualification attached to clause, just says that parties can choose the place of arbitration. If they don't
decide, the tribunal will. Clause 3 says there can be various venues of arbitration.

Section 21
Has to be read with Section 3, 29A of the Act. Different dates wrt the latter. Read Section 22-26 on your own.
Amendment to Section 2 (f)

Omission of the Company from the Section 2(f)(iii). Place of incorporation can be different from the place of central
management and control (as raised by the Court in TDM), Legislature accepted this and incorporated it into the Act.
[Relevant for subsidiaries]

Proviso to Section 24 (1)

Tribunal can now impost cost for asking delay without cause, underlying theme is to make it similar to a civil court.
To make speedy arbitration a reality.

Section 25
Default ex parte award in of the absence of the respondent, if the claimant is absent then the mandate of the
tribunal comes to an end.

Section 27
Parties can opt for Section 9 and 27 to apply to them. [Read Order XVI CPC] Similar power Tribunals do not have,
they can apply to the court to get the same done. Taking evidence, coercive power to mandate attendance, etc.
Summons and Punishment too. There is extraterritorial application wrt assets or evidence which is located in India.

Can two Indian parties arbitrate outside India?

Read this.

Why would two Indian parties arb outside india?

1. They might want to avoid mandatory provisions. And circumvent Section 28.
2. They might not want to be bound by Indian substantive law.
3. They may want to avoid setting aside of award under Section 34. This gives wider power to court to set
aside award, which has restrictions under Section 48. This is also becoming prominent because some parent
companies based abroad would prefer their subsidiary company’s disputes to be decided outside of India.

Why is place an issue at all?

1. It will be a domestic arbitration, AC Act defines ICA, and it needs one foreign party,
2. Section 28 circumvented
3. Allows them to derogate from mandatory provisions, as the act will not apply

Atlas exports v. Kotak & co (SC 1999)

Section 28 of the Contract Act, public policy. Seat outside India and hence they cannot approach Indian court, will
such an agreement struck by Section 28? Held, that upon a reading with the arbitration exception, it will not be hit
by the Section 28. If two indian cos have willingly entered into agreement to arbitrate outside India, it will not be
violative of the public policy of india.

TDM Infrastructure (SC 2008)

By reading Section 28(1) of the AC Act, legislative intent to be that indian parties should not derogate from the
substantive laws of india. Section 11 case.

Sasan Power Ltd., v. North American Coal Corporation India Private Limited
MP High Court: ICA classification depending on nationality only for the purposes of Section 11, relevant criteria is
the chosen seat of arbitration. Once seat is foreign, Part II will come into effect. Intention is to be respected. Hence,
possible for parties to choose a seat outside india.
Addhar Mercantile Pvt Ltd v Shri Jagdamba Agrico (Bom HC)
Arb Agreement says that it will happen in India or Singapore, substantive law will be England. To interpret solving
the pathology, seat will be India, Indian party will be governed by the laws of the India.

GMR Energy v Doosan Power Systems (Del HC 2017)

Said that parties can choose a foreign seat. Applying the ratio of Sasan.

Section 28
Five laws which can be chosen by the parties to the Arbitration are as follows: -
1. Substantive law
2. Procedure to be applied
3. Law which will apply to the arbitration agreement
4. Law regarding capacity
5. Law regarding enforcement

Section 28(b)(iii)
Section 28 talks about the substantive law which is applicable to the dispute. (b)(iii) talks about the procedure to
follow in the lack of a designation of one in the agreement.
Few approaches: -
1. Many a times the tribunals apply the conflict of law rules of the seat, so as to arrive to a convenient
substantive law to apply. [Ancient]
2. Follow the law of the Seat (as there is an implicit choice within the choice of seat as well).
3. Specialized laws of the Seat: Sometimes national laws say that the conflict of law rules of country which
has the highest connection and relevance (Swiss).26
4. Based on the conflict of law rules of the most appropriate state as chosen by the Tribunal (USA and India).
5. Mandatory law rules of the Arbitration statute of the Seat.

TDM Infrastructure v UE Development Pvt Ltd (SC 2008)

Company who had registered entity in India, claimed that it would be an ICA as the company’s central management
and control was outside India [rejected]. Court said that as long as the company is registered in India, it is Indian
for the purposes of the Act and it’ll be a domestic arbitration. There was a conflict regarding Sections 2(1)(f) ii and
iii. The Act was then amended to remove company from the clause dealing with control and management, and such
criteria was left for groups and associations only.

Tribunals have power to impose exemplary cost (Like civil court, to make the arb a speedy process in reality)

They can choose any law to apply to the substantive law in India.

If an ICA is happening in India, the parties can choose any substantive law. If two Indian companies are arbitrating
in India, the law must be the substantive law of India.

Principles: -
- Parties can choose any law to govern the substance of the dispute.

26 It can be either the place of performance, assets, headquarters, etc.

 - Clause 2 means that the substantive law of a country is to be applied and not the conflict of law rules [Rules
that come into the picture when there are multiple parties governed by different jurisdictions, the
principles which determine how to decide which laws will apply]
- Clause 3 talks about what will happen if there is no choice of substantive law in the arbitration agreement.
In such a situation the arb tribunal can decide which laws will be applied to the substantive rights and
liabilities of the parties, taking into account all the circumstances of the dispute.

Amit George Lecture, 19th May 2018

View PDF file of PPT here.
The tribunal now has the power to enforce its own orders and give orders under section 9. Now only the tribunal
can be referred to for interim measures under section 9.

ONGC case- criticised because it expanded the scope for interference when the award is being challenged. It has
basically converted a section 34 proceeding to an appellate proceeding.

Public policy- Amendment to Section 34. People say that court can’t go into merits because of the amendment,
but according to 34(2A) brings the doctrine of patent illegality back which was a part of the 1940 act. Now lawyers
can use the pre 2015 cases to interpret patent illegality, and the court takes jurisdiction which was not
contemplated and they can go into the merits of the award. Even though the proviso says that you can’t re-
appreciate the evidence, looking at the evidence and finding evidence lacking is not considered re-appreciation.
This is the dichotomy because things aren’t really clear.

Independence of arbitrators-

Section 11, before the amendment, Bogara polyfab divided a category of disputes which the court could go into at
the stage of appointing an arbitrator, the court could then go into the question of appointing an arbitrator and this
would lead to years of lit.

Now the section says that the court will only go into the existence of the arbitration agreement. This ensures that
an arbitrator is appointed and things are sped up.

Section 29A- Provides time limit. The issue is that cultural changes take time in India and in some arbitration in India
involving the govt takes 15 years for pleadings. Despite 29, in the Srikrishna committee report, they have given
more suggestions which will work in the litigation culture.

Section 36- before the amendment, if you file a petition before 120 days after the award, there would be an
automatic stay on the award no matter what is that merit of the petition. Application under Section 36 will now
have to show prima facie case to be made.

Captive arbitrators- story time. I like this guy.

Raja Transport- departmental arbitrators, spoils the purpose of arbitrators.

The amendment act under section 12 says that if you have any disqualifications under schedule 5 & 7, you are
disqualified and if there is institutional bias (?). It imposes on the arbitrator the duty to disclose for all the elements
that exist under schedule 5 & 7. There must be no doubt about his independence and impartiality. But in case of
arbitration agreements which give one of the parties the power to appoint an arbitrator, this power is not taken
away by section 12 because the power to appoint is distinct from the actual person appointed. As long as someone
qualified is appointed, there is no issue.

Section 17 can be enforced as if it is an order under the CPC.

Section 29A: Time limit.

W/in 12/18 months, he has to pronounce an award (can be shifted by 6 months w consent and beyond that if the
court permits).

S 34 2A: Patent illegality. Problem: Patent illegality is subjective.

Eg: There are judgements dealing with prolongation of costs. Contracts may contain provisions saying even if the
contract is prolonged, no compensation will be provided. Some judgements say that if arbitrators award
compensation despite this provision in the contract, it is patently illegal, while other judgements say the existence
of such a provision violates contract and constitutional law.

Problem of subjectivity inherent in law.

S 34: Now provides for mandatory service of a notice to the other side. Imp practically. Advance notice must be
sent to other party before filing a petition u/s 34. And court has 1 year to decide the case from the time the advance
notice is served.

S 36: Stay on enforcement: now amended to say that you will not get a stay on arb award at your whim and fancy.
A party should be able to get fruits of the award at the initial stage. Lacunae: BALCO is universally praised cause it
whittled down scope of interference by Indian courts in ICA. But in its blanket exclusion of Indian courts, it left a
gap.

Eg: Imagine a case where there’s an ICA where 1 Indian party’s assets are in India. Pending this arbitration if you’re
worried something will happen to your property, why will you go to a British court, for eg?

Arb amendment act says even in ICA if the assets are in India, for this limited purpose S 9 is still available to the
party.

Amendment Act has seen debate judicially.

DMRC Case 2017-- AIR 2017 SC 939

DMRC would send the name of 3 retired people but v curated list (similar profiles) for appointing arbitrators. So
effectively no choice among these people because they’re all the same. SC said even though textually s 12 doesn’t
prevent this, v imp to follow the spirit of the amendment.

SC said that just because people in the list are ex-perm employees, that in itself doesn’t mean they can’t be
arbitrators. But the people on the panel of DMRC must represent a wide set of professions and backgrounds.
Issued a writ of mandamus to DMRC saying that there must be people from eco background, accounting
background, ex jud and pvt sector in the panel considered. Act must be complied with in spirit.

This case gives you the power to ask a PSU to give you a panel that is all-encompassing.

TRF Ltd v Energo Engineering Projects Ltd (AIR 2017 SC 3889)

Here, SC said that in the clause you are getting the power to yourself become an arbitrator. But under amendment,
you are ineligible to become arbitrator. One who cannot be arbitrator is not eligible to appoint arbitrator.
Subsequently, when arbitrators tried to use this in HC, the Delhi HC recently said these deal with hybrid clauses,
but if it only says the person can appoint, power to appoint will not be affected. Reason for this is party autonomy.

In some contractors, it is mentioned in the arb clause that either party or party’s employer will be arbitrator. So in
12 (5), this is remedied. But there is an provision which says this can be waived, after the dispute has started.
Section 26 said that the amending act will not apply to pending arbitral proceedings, invoked under section 21
before 23 October 2015. But the term used is very loose, so in an argument made before Cal HC, they said this
would apply to litigation proceedings ? (clarify?)

BCCI v Kochi Cricket PVT LTD

Read this
Said to give greater efficacy, said it would apply to all court proceedings. This has great ramifications, party who
has challenged award, will have to go and apply stay application (the automatic stay will fade). Government
recommended it will not be retrospective in nature. SC takes notice and says this should not happen. But there is
an ordinance in the pipeline which is standing to counter

Can the tribunals apply non national laws? Uniform laws adopted by several countries (eg CISG) these are
principles of general application across nations.

A. Difference between the terms “law or legal system” and “rules of law” in Sub clause 1-3 in section 28, some
say that the rules of law is used in clause 1 to indicate non-national laws, therefore parties are free to
choose non national laws but the tribunal under clause 2 can only choose national laws;

B. Another school of thought said that the purpose of international principles is so that they can be applied
when the parties do not decide what to apply, this does away with the enquiry regarding conflict of law
rules etc.

C. General principles of law aren’t really applied yet.

Section 28 Clause 2- Also known as equity clauses, says that the tribunal can only decide in equity when the parties
have expressly authorised it to do so. Unlike CPC section 151, no tribunal automatically has the discretion that
courts have. This discretion has to be given by the parties to them. These equity clause originated in france, earlier
the substantive law was applied and principles of equity were applied to the result of the substantive law in order
to soften the decision and not make a rigid award. This clause again shows that the tribunal is a creation of the
agreement.

In India, even if equitable jurisdiction is given to the tribunal they have to follow section 18 and must abide the
public policy of India (Section 34). They must also take into account the terms of contract and the trade usages
applicable to the dispute (Clause 3 of section 28). Clause 3 has been amended because of the ONGC judgment, the
SC held that section 28(3) is mandating following all terms of the agreement.

The amendment diluted this to makes it ‘take into account’ and not mandatorily follow the terms of the agreement.
They must give reason for deviation but its not like the earlier situation where the award could be set aside for non
compliance with the terms of the agreement.

Practice in India
SC held that if there is no choice regarding the arbitration agreement, it should be the law governing the main
agreement. The principle of implied intention is to be applied because the arb agreement is usually a part of the
main agreement and if no clear choice is made, then it must be looked at as one bigger agreement and the same
law should be applied.

The SC said that the separability clause is only for section 16 for the jurisdiction of the tribunal and should not be
applied to say that both agreements should have different laws.
Another school says that the separability clause and party autonomy should be paramount and the parties should
be choosing the law governing the arbitration agreement, this law should be found by using the different principles
that were discussed under section 28.

In India, section 28 only embodies the principle of appropriateness, the other principles have been read into it by
the court.

The third school of thought is that law of the seat should be applied if the parties have not made a choice regarding
the law. This is for countries which don’t believe in delocalised theory of arb.

Another school of thought says that the law of the Country with which the arb agreement has real and closest
connection should be applied.

Another school of thought is that the Rome I rules should be applied, which excludes arbitration agreement from
the scope and this means substantive law cannot be assumed to be the same as the main agreement and
substantive rights and liabilities of the parties . This is only an reinforcement of the first point.

Issues under an arb agreement- [different laws that can applied to a single agreement] [it is upto the parties to

1. Formal (law of contract)

2. Substantive Validity of the Arbitration Agreement (AC Act of 1996)
3. LOOK FOR THE THIRD ISSUE.
4. Law of Reference
5. Law defining capacity of parties
6. Curial law
7. Law of the recognition and enforcement of the award.

What if no seat is mentioned? The tribunal can decide the seat of arbitration. In some rules a default seat is given.
But this might violate the principle of party autonomy because then they have no choice in such a situation. Find
the default seat in India and hong kong (not sure is important)

Section 29A
Subject to penalties, the parties can approach the court for an extension in time.

Section 29B
Fast tract procedures are only through documents and there is no opportunity for the parties to plead or have an
oral hearing. The section just details how the procedure is done.

Section 30
[Similar to Order 23 Rule 3] First time mediation was used in an act. Irrespective of choosing arbitration, the tribunal
may refer the parties to mediation or conciliation. Ruhi says that the reading can also mean that the tribunal itself
can try for settlement by using mediation, conciliation to encourage the parties to settle.

Whether the same adjudicator can be used for settlement and if that fails, then adjudicate the dispute? (use
previous discussion around PLA Chapter 6A and med arb) In case they settle, the can terminate the proceedings or
get the tribunal to pass an award in the same vein as their settlement. It must follow the substantive and formal
(section 31) of an award.
If this is like a consent decree because they both consented to it, can it be appellable or set aside? Section 96 in
the CPC excludes consent decree. No such exclusion of consented award under section 34 of the arb act. Ruhi says
that since no provision is excluding it, it is possible but the practice should be discouraged.

Section 31
Before the 1940 act, the award wasn’t clearly said to be in writing but was to be signed. This was pretty confusing
because if even one arbitrator is not signing the award, it was still valid. The legislature has cleared this by clause 1
of section 31 in the new act and said that all members should sign the award, if someone doesn’t sign, the reason
should be mentioned.

Confidentiality of the award: They don’t want the court to go into the reasoning of the award. This is a departure
from principles of fair trial because it prevent appeals.

The reason this is a good option-

1. No avenue for Appeal,

2. Maintains confidentiality,
3. Speedy award because doesn’t take time to write the award

Now the rule is that they should give reasoning, not giving reasons is an exception.

Sufficiency of reasoning
Courts should not go into the merits of the dispute. In ONGC vs. Saw pipes, section 31(3) seems to be a mandatory
clause but there is nothing under section 34 which allows for this reason and this is why patent illegality should be
added under section 34 because insufficiency of reasoning can be read into that into order to set aside the award.

Another thought is that the arbitrator cannot be expected to write a judicial reasoned award and the standard must
be the expertise of the arbitrator and the reasoning from his side must be looked keeping his qualification in mind
and the facts and the circumstances of the case.

The tribunal must give reasoning now because it is essential when approaching the court under 34 to point out
grounds for challenging the award. A refusal to sign the agreement (reasoned) is taken to mean that the arbitrator
disagrees with the majority.

Section 31
Talks about form and content of the arbitral award. Date and place of arbitration must be mentioned in the award,
this is because it must be clear what is the seat of arbitration and when exactly it was passed because sections like
29 A give a timeline for when things should be concluded.

(Section 34 gives a limitation of 3 months for an application. Mentioning the date is important even for this section)

Place: Has to be mentioned to figure out whether something is a domestic or international award.

Recitals of the award: all facts, issues raised and the award must be mentioned in the award.

Publication of the arbitral award is important and it must be delivered to each party, it should be handed over to
the party (delivery is not when you just send it and its in transit).

Any order which does not affect the rights and liabilities of the parties (the disputes which are referred to the court
by party) is not challenged under section 34, no appeal available (procedural decisions like language etc other than
decisions under section 16 and 17 which are appellable under section 37.)
Section 31A- Interests like pendente lite interest and pre-litigation interest can be awarded by the civil court and
the tribunal can award such interest under section 31A, but this is subject to party autonomy. If the parties do not
specify anything then the tribunal has the power to award interest from any point of time. However the parties can
take this power away and can specify if the tribunal can grant simple/compound interest and from what time to
what time.

Section 31 Clause 2 (b) mentions that the interest granted will be 2% more than the current rate of interest
according the interest act? From the date of cause of action to date of payment. This is an incentive not to elongate
the arb proceeding.

State of Haryana vs. SL Arora (SC 2010)

They can’t award compound interest unless the party may specifically allow the tribunal to award it. Only on the
principle amount. This judgment created a distinction b/w the remedies available to court and those available to
the tribunal.

Haider Consulting, UK vs. Governor of Odisha (SC 2013)

The 246th report of the law commission. The arbitrator can award compound interest also. Clause 7 says for the
sum the award is made includes the principle and the interest, or just the interest, or just the principal amount.
This discretion vests with the tribunal. This is pre award interest.

In the post award period, the tribunal has the power to award 2% more than the interest. The tribunal may give
lesser rate of interest and post the award the party cannot by agreement change this. Post award rate of interest
is not subject to party autonomy, it is statutory in nature.

Section 31 A
Allows the tribunal to grant costs to the parties. Tribunal has limited jurisdiction unlike the civil courts which have
extraordinary powers. The general rule is the the loser pays the costs, but the tribunal can refuse to award the
costs.

Factors which the tribunal has to take into account: -

(a) Conduct of all the parties;

(b) Whether a party has succeeded partly in the case;
(c) Whether the party had made a frivolous counterclaim leading to delay in the disposal of the arbitral
proceedings,
(d) Whether any reasonable offer to settle the dispute is made by a party and refused by the other party.

This embodies the good faith participation that is valued in ADR processes. Section 31 A is not subject to any party
autonomy, the parties by agreement cannot take the right of the tribunal to impose cost on the parties. They can
only take away the power to impose interest on the pre award amount.

Additional Award- this is subject to party autonomy. It may elongate the process, this may be undesirable.

The tribunal can correct any errors that it may have committed in the award. Ambiguous parts of the award can be
interpreted by the tribunal at the request of the parties.

Setting Aside of Orders (Section 34)

These are highly procedural in order to prevent the court from going into the merits of the award. The basic
principle of the 1940 award (Section 30 & 16- remission when the court can give the award back to the tribunal for
correcting the award) was that the court can look into the merits and said that any error of law could allow the
court to set aside the award. The previous act was hence very vaguely worded. If the tribunal doesn’t correct the
award within a particular time in case of remission, the award was deemed to be set aside.

The Court can look into the award under Sections 34 (2)(b), 2A and 4. Clause 3 says that the application for setting
it aside must be made within three months of the award. The Limitation Act will not apply at it is a special
provision.27 Due to the usage of the words not thereafter the court can condone delay only upto 30 days from the
end of 3 months, and any application for condonation of further delay, regardless of grounds has to be rejected.

Cases
Fiza Developers & Inter-Trade v AMCI(I) Pvt. Ltd.
Section 34 proceeding is a summary proceeding so evidence will be only on documents and affidavits. The SC later
says that parties can be cross examined. It was criticized because it gave two positions in the same judgment. But
this is the valid law now. Now the court just treats it as a summary proceedings.

State Of Maharashtra vs Hindustan Construction Company (SC 2010)

The court held that there can be no blanket rule that all amendment application including new grounds should be
accepted. The discretion to accept or reject will lie with the court.

Corresponds with UNCITRAL Art 34. The difference is that 34 (a) (ii) of our act says under the law for the time being
in force

It it not explicitly mentioned that only an Indian Court can set the award aside. However, the same can be inferred
from a joint reading of Section 2 and 34, as only Indian Courts are recognized under the definition of courts.

Article 5 (1)(e) of the New York Convention recognizes as a ground of the refusing recognition, the fact that the
award has been set aside by competent authority of the state in which the award was made. [The usage of of
country of which furthering the Seat Theory] The same article also mentions order from the competent authority
of the country under the law of which the award was passed, signalling a delocalized approach. The latter came in
relevance after the Bhatia. Post-Bhatia Indian parties are clear that Part I shall not apply by way of express
exclusions.

However, Implied exclusions began to develop as a response to the same. After BAlCo the confusion regarding the
setting aside of the award was sorted. Country whose lex arbitri was chosen will also get the power to set aside
the award. The number of proceedings will go up as well, as `multiple States may have jurisdictions in the such
cases.

Practice in India

In India, upon a joint reading of Section 2 (Court) and Section 34, it can be seen that the Seat Theory is followed.
Ideally, the approach of the court with respect to Domestic Arbitration and ICAs should be different. However, due
to the UNCITRAL Model Law subscribing strictly to exhaustive and exclusive reasons for setting awards aside, and
India not doing so, the level of discretion is much higher here.

As per Section 34(2), the burden of furnishing proof lies on the party applying for such setting aside. Furthermore,
as per the new Amendment, notice of the same has to be given to the other party as well.

Incapacity
Setting aside awards on the ground of incapacity of the parties is provided for in Section 34(2)(a)(i), and corresponds
to Section 7 of the Act. Should this ground be raised before the tribunal at the stage of setting it aside? In Narayan

27 Which by explicitly providing for a limitation period, overrides the application of the Law of Limitation.
Prasad, it was held that such grounds should be raised before the Tribunal at an earlier stage. In most cases, this
will be the ground taken up by the party, since it is a root problem, and will invalidate proceedings. But unlikely that
this will only come up at such a late stage.

Invalidity of Agreement
Second ground mentioned under the same first clause. Pretty straightforward. If no law has been specified, it will
be the law of India (as per Section 28). Because we apply 34 to ICAs as well, cuz it is not necessary that the law
being applied is just the law of the state.

Notice
UNCITRAL, Clause ii:
the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present his case;
Purely procedural ground, similar to those of the AC Act.
Composition Bad
Fourth clause as given in the Model Law. Similar to Section 16 of the Act, should usually be taken up before the
Tribunal. Can go to court as under Section 13 as well.

In Narayan Prasad, court interpretation differed w.r.t clause (v). The composition of arb tribunal was not in
accordance with agreement of parties. If it is in agreement with parties, they said you need not go further. They do
not look at Part I, say that only comes into play when there is no law. This is a flawed reasoning in (v), considering
that SC has already said Section 10 is non- mandatory in nature. (cross check).

Arbitrability

It is a ground under Section 34 (2A) Grounds under 34- In 2A the party who is alleging the existence has the burden
to prove the grounds. Arbitrability of the dispute is a jurisdictional dispute and can be brought under section 16
also. Under the new amended section 8, the court should only do prima facie satisfaction with the agreement. The
court should not hold a very detailed procedure to check the validity of the arb agreement.

After the SPB case, they go into the arbitrability of a dispute now. The ground of arbitrability is not enough for it to
be made invalid. In boghara polyfab, they held that arbitrability is something that the tribunal should decide.
However, under section 8 the SC does sometimes decide the arbitrability of the agreement. Section 37 says only
one appeal is allowed, so sometimes applications under section 34 goes straight to the SC. The amended section
11 doesn’t allow court to decide on arbitration.

If the objection to jurisdiction is rejected by the tribunal under section 16, then AFTER the award is passed, the
court can be approached for setting aside the award on the same ground under section 34.

Chloro Control and the amendment of section 8 allow non signatories to be made parties to the arb proceeding and
this makes the reasoning of sukanya holdings case invalid. In case of fraud its the ayyaswamy case ratio and not the
severability doctrine reasoning that is followed.

Grounds of Public Policy

[Listen to R. F. Nariman, J. talk about Public Policy in Arbitration here.]
Under section 34 (2) & (3), the ground of public policy is an open ended ground and public policy has not been
defined under any law in India (Saw Pipes) Section 24-30 in the Indian Contract Act mentions the various void
contracts, and any award breaching the same are liable to be set aside.
These laws are very country specific and can change with time as they deal with the policy of the specific country
where such setting aside is applied for. There are two main views regarding the scope of the public policy.

A. Narrow View: Judicial minimalism is the guiding principle and the duty of the court is limited to expounding
and not expanding the law. The legislature is the appropriate body to decides the heads of public policy,
the courts should only attempt to see if the cases fall within the same. It is similar to the system of writs in
India. This view was first propounded by Subba Rao in the case of Gherulal Parakh v Mahadeodas Maiya
(SC 1959).

B. Broad View: Public policy is and should be a dynamic concept and no legislature can forsee everything. If
the court doesn’t step in, then there will be a gap in the law. Therefore, the court should be creating new
heads of public policy in line with the time and the changing needs of society, the legislature can then
incorporate it into the law later as well. This view was propounded by the SC in the case of Central Inland
Water Transport Corporation v Brojo Nath (SC 1986).

Cases

Renusagar Power Limited vs. General Electric (SC 1994)

Case regarding recognition of a foreign award in India. The award was contended to include a potential violation of
FERA, unjust enrichment, compound interest and it was also contended that it was against the interests of India. In
the SC judgment, the narrow view was adopted, which said that the award can be set aside only on the public policy
ground only if it falls within one of these categories: -

1. Fundamental Policy of Indian Law (should be something more than a mere error or misapplication of the
substantive law of India, rather a violation of fundamental policy)
2. Against the Interest of India (Violation of FERA, against economic interests, etc.)
3. Contrary to Justice and Morality
Three grounds not needed, (b) and (c) can be subsumed within the first category.

ONGC v Saw Pipes

ONGC had ordered pipes, and as a result of raw material strike in europe, saw pipes had to face delays. They sought
an extension, which ONGC granted under the terms of the contract. The relevant clause stated that in case of an
extension, the payment would be liable to a deduction. Saw Pipes later claimed that ONGC could not prove any
losses caused due to the delay and hence there should not be any deduction in the price to be paid. The domestic
arbitral tribunal accepted such contention and ruled in favor of Saw Pipes. ONGC then tried to get the award set
aside at the Supreme Court.
The Court discusses Section 73 and 74 of the Indian Contract Act, which talks about stipulations in the contract. The
Act says that as long as it is previously stipulated in the contract, such claim for deduction can be made without the
party having to prove any such losses. In light of this, the award passed was in violation of the Substantive law of
the State. The award however did not strictly fit into any of the three categories. The court then goes on to create
a fourth head under public policy, which is it being patently illegal. They reasoned that such action had to be taken
as being against law of the country, it would be blocked at the enforcement level anyway as the sections derogated
from (Sections 24, 28, 31).
There are three broad views regarding the judgement, which were as follows.
First Thought: An award is only final and binding after the rejection of the application to set it aside under Section
34. It is the duty and the right of the state to prevent such unlawful and unjust awards from being passed. Hence,
it was a good judgment.
Second Thought: Patent illegality was a ground for remission in the 1940 Act, which was then removed to solve
problem of the judiciary’s then over-involvement into arbitration proceedings, by way of going into a deep
examination of the facts. Hence, the grounds were limited by the legislature. The court in this judgment, took a
contrary broad view, and also ignored the decision of the larger bench in Renusagar. This criticism does not take
into account the part of the judgment, where the court discusses how they agree with Renusagar, but do not think
it will apply in the first place as precedent. The main reason for such thought was that Renusagar was a case for
recognition and enforcement of an award already confirmed by the court at the Seat, while here it was yet to be
final as it it was a Section 34 proceeding.

Third view: There was no need to create third head, as violation of law could be read into violation of the
fundamental policy of Indian law; or even justice & morality.

Any errors made by the court in the case of Saw Pipes, were further aggravated by the court in the following
case of Venture Global.

Venture Global Engineering v. Satyam Computer Services

In the SHA, there was a clause which gave the other party to buy shares at face value in case of a default. Arbitration
happened in the States, which Satyam got confirmed from the American court in Michigan. Applying the logic of
Bhatia (that Part I will apply to ICAs unless explicitly excluded), Venture Globals filed in India for the setting aside
of the award. Further applying the logic of Saw Pipes, they claimed that there was a potential FEMA and Indian
Corporate Law violation in the award, and hence it should be set aside under Section 34 of the AC Act for being
patently illegal. The Court, following the Saw Pipes regime, further expanded it by accepting such contention and
going into a deep examination on merits.
Phulchand v OOO Patriot
The current petitioner is a seller of rice who agreed to sell to Patriot some polished rice. According to the contract,
there was advance payment to be made. The ship, after being dispatched, never reached the buyer, and caused
some damage to the buyer, who then filed a GAFTA complaint which resulted in arbitration. The tribunal held that
any loss caused was not due to any fault of the seller, but ordered them to return have the payment, which the
agreement said that the full amount was to be returned. Another appeal to GAFTA was rejected. In the proceeding
to get the award recognized in India, the SC said that drill for passing the public policy muster should be the same
for domestic as well as foreign awards, within Sections 34 and 48.
Shri Lal Mahal Ltd vs Progetto Grano Spa (SC 2013)
Contract between an Indian seller and Italian buyer for the sale of what. The process according to the agreement
was that the ship was to be loaded at a port in India, an authority would then check the quality & issue a certificate.
The buyer then upon receiving substandard goods, said that they were relying on a certificate from the original
supplier, to which the seller said that the certificate was issued according to the contract. The case came to courts
in India for recognition. The case was of one of fact and evidence. The court upheld both Saw Pipes and Renusagar,
said that they were both in sync, saying that in proceedings of ICA enforcement & recognition, the court should not
go into the same broader view, and should not re-do such detailed examination.
Public policy will include patent illegality, but not for ICA already confirmed at Seat.
Associate Builders v DDA (2014)
It further elucidated the three grounds as laid down in Renusagar,
1. Fundamental Policy of Indian Law: against foreign exchange legislations, against orders of superior
courts, against COI inter alia,
2. Interest of India Foreign exchange should be here
3. Justice & morality: Something so grave, shakes the conscience of the court, error apparent also included
here.
 4. Patent illegality: Something more than just a small error of law.

“The tribunal is the best judge.”