Trends And Practices In Commercial Arbitration by Manoj K Singh and Nilava Bandyopadhyay
The Indian Economy is witnessing a boom in the Infrastructure sector. It is but natural that increases in the large and complex contracts have also led the increase in the number of disputes between the parties. Most infrastructure contracts now have a multi-tier dispute resolution clause. The first step of dispute resolution is an amicable resolution by the parties. Sometimes, this process involves the Independent Engineer, who tries to facilitate dialogue between the parties and helps them to reach an amicable settlement. If this fails, then the next step is Conciliation, where a neutral third party tries to facilitate the resolution of the dispute between the parties. Conciliation is different from mediation as it is more formal and in conciliation, the conciliator plays a much more active role by suggesting solutions to the parties. In certain Government Contract, in the second step, the highest level officer of the department hold meeting with the main promoter of the Company to facilitate the amicable resolution.
If both mediation and conciliation fail, the parties turn to arbitration. What makes the process of arbitration so attractive is that swift and time-bound resolution of the dispute coupled with the fact that the parties have a certain degree of control over the process. Not only are the parties free to decide the composition of the Arbitral Tribunal and appoint highly qualified expert arbitrators, equipped to deal with complicated issues and large claims, but parties can also select the procedure to be followed by the Arbitration Tribunal. Further, arbitration results in the final adjudication of the dispute, and the arbitral Award passed by an Arbitral Tribunal is final and binding on the parties and the Award can be enforced in the same manner as if it were a decree of the Court.
The above mentioned reasons have made arbitration the preferred method of dispute resolution in the infrastructure industry. Arbitration matters in the infrastructure industry often see financial claims, running into thousands of crores. This is the testament to the growing confidence in the system of arbitration. Because of the high stakes, parties often choose retired Supreme Court or High Court judges who then examine the merits of the matter meticulously and deliver well-reasoned Awards. Recent trends also show that the Tribunals tend to take a less conservative approach and are not shying away from awarding huge sums to aggrieved parties.
In India, the legislative and judicial approach has also been pro-arbitration. Arbitration in India is governed by the Arbitration and Conciliation Act, 1996. The pro-arbitration stance of the legislature is evident from the fact the Act provides for limited instances of intervention by the Courts of law, thereby preserving the autonomy of the Tribunal and the Parties. Further, major changes were also brought through the Arbitration and Conciliation (Amendment) Act, 2015 to make the process of arbitration more streamlined and shorter. Most notably, the amendment added section 29A which prescribed a time period for completion of the arbitration proceedings and made changes to section 28 to give the tribunal greater power to decide the dispute while taking into account the contract agreement and trade usages. The amendment to section 28(3) has been introduced solely in order to remove the basis for the decision of the Hon’ble Supreme Court in ONGC vs. Saw Pipes Ltd, (2003) 5 SCC 705 – and in order that any contravention of a term of the contract by the tribunal should not ipso jure result in rendering the award becoming capable of being set aside. Pro-arbitration changes have also been suggested in the Arbitration and Conciliation (Amendment) Bill, 2018 to further improve the system of arbitration in India and among other things provides for the formation of the Arbitration Council of India.
Recent judicial trends also show that the Courts are adopting a pro-arbitration approach wherein they refuse to intervene under the arbitration and conciliation act, unless absolutely necessary. Thus, in Jindal ITF Limited v. NTPC Limited the Hon’ble Delhi High Court took a very pro-arbitration step by enforcing an interim order and accordingly the Court directed the Respondent to pay the amount, i.e., INR 197.81 Crores passed by the Hon’ble Tribunal as interim relief.
The Courts have similarly refused to interfere with awards of the tribunal when the same is challenged under S. 34 for setting aside of the same and in turn, have discouraged the practice taken up by Public Sector Undertaking of challenging awards without any basis. This is summed by the approach of the Hon’ble High Court of Delhi in NHAI vs. SC-RBM-PATI , where the Court noted that needless challenges to arbitral awards by public sector undertakings had contributed to menace of “docket explosion” and deprecated the practice, The Court was of the view that these appeals, filed simply because a party had the financial wherewithal to do so, were resulting in wastage of the court’s valuable time. These developments show that the outlook for arbitration in the construction industry is positive and the same will further help in the growth of the infrastructure industry.
Authored by Mr Manoj K Singh, Founding Partner, Singh & Associates, and Mr. Nilava Bandyopadhyay, Senior Partner, Singh & Associates
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