Adr in an Era of Globalisation: an Indian Perspective

In a country with a population in otiose of a billion, and plagued by an piling the stairsfunded address structure plenteous of corrupt and ineffecient officers, we argon looking at decades of stagnation, a backlog of efforts in excess of 29 million, across the extract- lead aim chat ups, the twenty- unitary last fronts and the supreme court. According to Global depravation Report 2007 Corruption in juridical Systems, Indians shelled out an estimated $600 billion as bribes to the judiciary, which is high than the bribes paid out in both other sector in the court.This enormous gestation period of discriminatory professional personceeding has resulted in a tumid scale andton of confidence in the judiciary, with a development number of people opting to stay out-of-door from court. Enter alter dispute re fortitude. It is this superfluity of people who atomic number 18 prime tar develops of an alternate dispute mechanism. The prime eon solution to the snails pa ce discharge of show windows. The main sell point of arbitrament is the speedy and bodacious proclamation of disputes outside of a courtroom. magic spell arbitrement is a product of a private agreement, once an arbitrament stage is rendered, the prevailing party can anticipate to deport that apportion confirmed by the courts, and, having d wizard so, can invoke the dogmatic power of the state to enforce it in the same manner as it could a court fancy. Initially received with unbelief by the courts in various countries, arbitrement is now organism embraced as an powerful form of alternate dispute closure.As a result of the burgeoning international change over and an explosion in the involutioning come up to investment numbers in the country, arbitrament and other forms of alternate dispute resolution atomic number 18 becoming much than(prenominal) and to a greater extent indispensable. cardinal of the major problems with opposed litigation is that foreign ju dgments are survey to several(prenominal) layers of appellate survey, whereas, foreign break ins are practi appointy easier to enforce in different self-directed states. Arbitration is particularly successful in sketchs like construction, where a reliable amount of expertise is required time resolving disputes, of which there is paucity in the courts.Arbitrators are chosen from the same industry, and are generally required to resolve disputes make on fact kind of than profound issues. Most companies prefer much(prenominal) a business approach to resolution of disputes, rather than a profound approach. Arbitration in India was first governed by the Arbitration and expiation stage, 1940, which was later replace by the 1996 wreak. The 1996 Act was designed primarily to implement the UNCITRAL poseur Law on International moneymaking(prenominal) Arbitration and create a pro-arbitration lawful regime in India.This Act was more often than non aimed at subduing the lo opholes which entrusted for excessive legal intervention in the 1940 Act. Some of the features of juridical look backward The words in component 30 of the 1940 Act read shall non be stripe deviation took away the legal power of the courts to fall past an booty unless on one or more of the grounds specified in the section. amend in 1996, however, the section re-numbered section 34 reads An dirty money may be stigmatize diversion only if Hence, the court has no jurisdiction to set aside an demo on every other grounds.This amendment was brought with an role to reduce the orbit of judicial critical study to allow for a minimum level of court intervention. In R. S. Avtar Singh & Co. v. N. P. C. C. Ltd. , the court commented on the nature and extent of the courts jurisdiction It is a well settled pattern of law of nature that the assign of the judge who is a chosen judge of facts and of law between the parties can non be set aside unless an error is patent on t he mettle of the award or it can be inferred from the award that the arbitrator has misconducted himself or the legal proceeding or that he has non apply his mind to the material facts.Hence, the court is not sitting in appeal on the award, nor can it re-examine the material which was adduced onwards the ump. The court cannot examine the correctness of the award on merits nor it is obligatory for the justice to fall flat detailed reasons. Unless the court comes to the conclusion that the award is preposterous, it cannot set aside nor replace its bear last in place of the arbitrator. In short, the arbitrator is the final judge of facts and law, and the arbitrational award is not open to take exception on the ground that the arbitrator has reached a wrong conclusion or failed to revalue the facts. scratch 31 (3) of the new Act of 1996 states that an arbitrational award shall state the reasons upon which it is based, unless the parties have concur otherwise, or the aw ard is agreed on the terms enumerated under air division 30. This was reiterated by the court in the case of Tamil Nadu Electricity jury v. bridge deck Tunnel Construction Co.. The rationale croupe this tell apart of the court is to ensure that the arbitrator acts capriciously, and to give the parties assurance that the grounds for the get over of accomplishment chosen by him and likely and just.At the same time, however, to ensure the decisiveness of the award, reasonable of reasons given by an arbitrator cannot be challenged on merits. Why judicial freshen? The main purpose of arbitrators is to try to decide disputes properly on the basis of the applicable law, and subsequently, formulate the rationale for their decision. The need for a cooking for judicial re come across in the field of arbitration is born out of the states concern to maintain the virtue of the arbitrational mathematical operation, and maintain a proportionateness between party autonomy and the l aws of the belt down. juridical refreshen is primarily intended to base hit against arbitrariness of awards, and to ensure that the law of the land is followed within the states jurisdiction. No doubt judicial intervention is a requisite in the field of arbitration which lacks a accepted decisional law in the matter. However, the issue to be addressed is to what extent, and an test is to be made to define the stretch of this judicial intervention. To what extent can courts come forward and substitute their judgment for the arbitral award?Parties who are dissatisfied with arbitration awards often call upon the courts for review. Procedurally, review is sought in an execution to modify the award or set it aside by way of defense, in a proceeding brought to enforce the arbitrators decision or, by way of replication, in an action where the dissatisfied party has sued on his headmaster claim and the satisfied party has pleaded the award. One of the major problems with the 1996 Ac t, is that a person aggrieved by an arbitral award has to start proper(a) from the District court in baseball club to hallenge an award. Additionally, in dickens recent absolute hail decisions, Oil & vivid burn out Corporation v. SAW Pipes and SBP v. Patel Engineering, the scope of judicial review has been widened by interpreting eachthing remote to universal constitution as being ostensibly mislabeled, and since any(prenominal) award which contravenes Indian statutory supply is patently illegal, it is also contrary to semipublic constitution, and hence, number to the judicial review of courts. Generally speaking, arbitral awards are not subject to appeal.However, in most countries, including India, there are provisions to set aside an award in extreme cases. Judicial review of foreign arbitral awards generally falls into two categories. First, the reviewing court inquires whether requirements of natural justice were find in the arbitration proceeding and whether the arbitration agreement is well-grounded under the applicable law. Failing so, the arbitral award leave be denied recognition or enforcement on the grounds that the fundamental requirements of natural justice or legality have not been met.Subsequently, the court inquires into the merits of the award, that is, whether the arbitral body has affiliated an error in rendering the award. The challenge of judicial review, however, is a two-headed coin. On the one hand, limiting the scope of judicial review reaffirms the roots of arbitration, that is efficient and speedy resolution of disputes. Conversely, however, widening the scope of judicial review defeats the very concept of decisiveness of an arbitral award, and hence, moving back to square one of the legal court system.Why not? The way in which the legal proceeding under the Act are conducted and without an exception challenged in courts has made lawyers laugh and legal philosophers weep. get shows and law reports bear testi mony that the proceedings under the Act have plow highly technical accompanied by unterminus prolixity at any stage providing a legal hole to the unwary. An informal forum chosen by the parties for expeditious disposal of their disputes has by the decisions of the courts been change state with Legalese of unforeseen omplexity. To the critics of judicial review of arbitral proceedings, the likelihood and to an extent, inevitability of judicial review serves as a serious preventive to individuals and companies seeking arbitration as a solution to commercial disputes. A certain school of thought views arbitration as a mere dress re take insal for subsequent litigation, and disregards judicial review as a mere interference to the finality of the arbitral award. India is a country ontogenesis in leaps and bounds, with the coming of globalization.Being a country looking to attract more foreign investment, developing a fool-proof, cost-efficient and speedy legal system is vital. Wh en a foreign company explores the prospects of investing in India, they factor in the possible legal costs, and the opportunity to settle disputes through arbitration quickly and cheaply is an attractive change point. However, with increasing judicial intervention, and the inevitability of ending up in court, hassle-free dispute resolution is no longer a pro on their list of pros and cons.Hence, the 1996 Act was passed with the objective to diminish the supervisory role of the courts in the arbitral process. The very epitome of minimal judicial intervention is contained in dent 5 of the Arbitration and placation Act, 1996, which reads Notwithstanding anything contained in any other law for the time being in force, no judicial authority is to intervene except as provided in the Act Section 34 of the Act imposes certain restrictions on the correctly of the court to set aside an arbitral award, and the limited grounds on which the award can be challenged have been enumerated.The f ive dollar bill grounds upon which an award can be set aside as per Section 34 (2) (a) are -Incapacity of parties -Non-existence or invalidity of arbitration agreement -Exceeding jurisdiction -Non-compliance of collect process -Composition of arbitral tribunal As per Section 34 (2) (b), an arbitral award may also be set aside by the court on its own initiative if the subject matter of the dispute is not arbitrable or the impugned award is in conflict with the public policy of India. Public policy, however, has not been defined anywhere in the Act. acceptation the definition of public policy from Section 23 of the Indian Contract Act, 1872 The friendship or object of an agreement is lawful, unless it is veto by law or is of such(prenominal) nature that, if permitted, it would defeat the provisions of any law or is fraudulent or involves or implies injury to the person or property of another or the court regards it as immoral, or opposed to public policy. The court, over the yea rs, has tender to varying conceptions of public policy, swinging between the narrow view and the broader view. In Gherulal Parakh v.Mahadeodas Maiya, the court favoured the narrower view, and commented that though the heads are not unairedd and though theoretically it may be permissible to prepare a new head under exceptional circumstances of a changing world, it is admissible in the interest of perceptual constancy of society not to make any attempt to discover new heads in these days. With respect to public policy in the field of arbitration, the court held in Renusagar violence Co. Ltd. v. General Electric Co. , that in order to attract the bar of public policy the enforcement of the award must invoke something more than the violation of the law of India.It was held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to -Fundamental policy of Indian law -The interest of India -Jus tice or holiness The court in recent times, however, has subscribed to the broader view of public policy, choosing to widen the scope of judicial review. A landmark judgment in this respect is Oil & Natural Gas Corporation Ltd. v. SAW Pipes Ltd.. The crux of the matter of the case was that the arbitral tribunal had failed to take into account Section 73 and 74 of the Indian Contract Act, 1872.The major issue, however, that it dealt with was whether the Court would have jurisdiction under Section 34 of the 1996 Act to set aside an award passed by the Arbitral administration which is patently illegal or in contravention of the provisions of the Act, or any substantive law governing the parties, or is against the terms of the contract. The judgment of the court in this case, not only negated the purpose of the 1996 Act, and also widened the scope of judicial review beyond the realms provided for in the 1940 Act as well.It was held that an award is opposed to public policy under the same heads primed(p) down in Renusagar Power, but also if it is -Patently illegal -So unfair and unreasonable that it shocks the conscience of the court Another important judgment of the commanding Court in 2005 was SBP & Co. v. Patel Engineering, which sanctioned go on intervention in the judicial process. The case dealt with the appointment of an arbitrator by the motion Justice, and the contention was that the Chief Justice could try out on contentious preliminary issues such as the existence of a valid arbitration agreement.The court agreed, while property that the Chief Justices findings would be final and binding on the arbitration tribunal. This judgment makes a mockery of the principle of Kompetenz Kompetenz, which is the power of an arbitral tribunal to escort its own jurisdiction, enshrined in Section 16 of the 1996 Act. This opens up a Pandoras shock of opportunity for parties to sabotage the appointment process of arbitrators and make spurious arguments simply to see to it the arbitration proceedings. Looking AheadIt is calorie-free to forget the purpose of arbitration and get carried away with the nuances of the law. Therefore, in an attempt to move forward, it is important to incorporate the very picture of finality and amicable resolution in the contract itself. Of course the most apparent solution at the face of it is to close all doors to review of the award by incorporating a clause for the same in the contract. However, this can only be through at the risk of receiving an award not in line with the principles of natural justice.On the legislatures part, the Arbitration and Conciliation (Amendment) Bill, 2003, currently pending before the Parliament, proposes to introduce a new section 34A, which would allow an award to be set aside where there is an error apparent on the face of the arbitration award well-favoured rise to a substantial question of law. This narrows the scope for review laid down by the SAW Pipes ruling, but it st ill affords losing parties an opportunity to approach courts in an attempt to second guess arbitral tribunals, very similar to the position during the pertinency of the 1940 Act.An interesting avenue to be explored in the future, particularly in the case of contracts involving large sums of money, is a system of contemporary and synchronous dispute resolution, involving the establishment of Dispute palingenesis Boards (DRBs). This system has been adopted by the subject field Highway Authority of India (NHAI), Maharashtra Sewerage Board and Delhi Metro in recent times. A Dispute Review Board essentially consists of three experienced, respected and impartial reviewers.It is established before the commencement of the contract, and regular inspections are carried out to ensure smooth carrying into action of the contract and ensure good working(a) conditions. This serves to familiarize the reviewers with the job process and the prefatorial environment as well, so that in case a dispute arises, a well-informed decision can be made. In such a case, a hearing is convened where the reviewers hear arguments of both sides and after deliberation submit a non-binding recommendation to the contractors.