ROLE AND POWER OF THE COURTS TO REVIEW ARBITRAL AWARD

 

AUTHORED BY- ASHOK KUMAR TIWARI[1]

 

ABSTRACT

The fast globalization and expanding additional regional exchange the present world is leading to unavoidable questions and clashes between the parties associated with the trades. As time is money, consequently the parties like to resolve their debates by substitute question goal strategies as opposed to going to customary courts. Additionally, courts are very overburdened with a large number of cases anticipating their turn. Plan of action to courts are additionally kept away from to keep up with discretionary exchange relations and even to keep up with protection. Among the wide range of various ADR modes, discretion as a method of resolving debates is most famous and created mode. Intervention has turned into a pervasive strategy for settling debates outside customary court frameworks because of its productivity, adaptability, and privacy. In any case, the adequacy and believability of discretion depend vigorously on the oversight of courts in reviewing arbitral awards. This exploration paper looks at the job and force of courts in reviewing arbitral awards, investigating the harmony between legal arbitration and regard for party independence. It digs into the lawful structures, worldwide shows, and legal practices that guide the audit cycle, underlining the significance of keeping up with decency, fairness, and consistency in arbitral procedures.

Keywords: Arbitration, Arbitral awards, Judicial Review, Courts.

 

Introduction

Arbitration is a cycle by which parties resolve their debates through the intercession of third individual, known as Judge. Halsbury defines Arbitration as the reference of question or contrast between at least two parties, for assurance, subsequent to hearing the two sides in a legal way, by an individual or people other than a Court if equipped ward. The parties should expect to make an accommodation to Arbitration, i.e., there should animus arbitrandi[2].

 

The fast globalization and expanding additional regional trade the present world is leading to unavoidable debates and clashes between the parties engaged with these trades. As time is cash, consequently the parties like to resolve their debates by substitute question goal strategies as opposed to going to customary courts. Additionally, courts are very overburdened with a large number of cases anticipating their turn. Plan of action to courts are additionally kept away from to keep up with trade relations and even to keep up with protection. Among the wide range of various ADR modes, Arbitration as a method of resolving debates is most famous and created mode. A center group of Joined Countries for example United Nations Commission on International Trade Law (UNICTRAL) in 1985, presented the Model Law on International Commercial Arbitration (Model Law). The Model law was embraced by nations across the world who were looking to foster their arbitral systems. India being one such country, on the lines of the Model Regulation, India sanctioned the Arbitration and Conciliation Act, 1996 (hereinafter alluded to as "the Act") to combine and revise the law connecting with homegrown as well as global business Arbitration.

 

In India, Arbitration is an ideal strategy for business banter objective since it is quick, compelling and offers a degree of sureness. Section 35 of the Arbitration and Conciliation Act 1996 (1996 Act) articulates an arbitral award as keep going and limiting on the parties and individuals ensuring under them separately. According to the 1996 Act, Section 36 treats an arbitral award at standard with the statement of a court. It licenses parties to execute an award according to the plans of the Code of Civil Procdure 1908, likewise like it were a statement of the court. The parties can't propose against an arbitral award on its advantages; nor are the courts allowed to block an award. Regardless, this doesn't actually expect that there is no be careful with a middle person's lead. A arbitration by the court is imagined in several circumstances, as in case of blackmail or inclination by the adjudicators, encroachment of customary value, etc. To ensure suitable direct of the systems, the law licenses explicit fixes against an award. Under Section 34 of the Arbitration and Pacification Act, 1996, two fixes are open against an award to a party under the careful focus of the court: saving and reduction. Nevertheless, saving an award totally commits parties to another round of Intervention or urges them to challenge under the watchful eye of courts. This leaves the most basic objective of the 1996 Act, explicitly, speedy objective of discussions by the arbitral cycle and conveys the fast inquiry objective communication of declaration more cumbersome than the conventional case process.

 

Decoding the legislative intent of Section 34

Before the extent of judicial intervention in arbitration is investigated, it should be viewed as that the Act, 1996 as well as changes done to same in 2015 and 2019, pointed toward bringing down the weight of courts alongside speedier goal of the debate since it is in wellbeing of a creating economy to have fast answer for business questions and bars. Accordingly, with this two layered point of bringing down weight of courts and arranged way of speedy goal of business debates the Act of 1996 was ordered. In this manner, officials tried to incorporate arrangements that could restrict legal impedance which would be a tedious cycle that would repress the quick disposal that Alternate Dispute Resolution offers.[3]

 

The previous conversation on clashing choices by the High Courts and the Supreme Court has exhibited that there is an absence of legal clearness upon the force of courts to change an arbitral honor. Indeed, even the dependence on McDermott appears to be lawfully illogical and accordingly doesn't lead us to presume that courts don't have the ability to address the blunders of an authority. In such conditions, navigating the expectation behind the order of Section 34 may assist with clearing the sloppy waters and unwind the genuine reason for utilizing the expression "setting aside" in Section 34. While pondering upon Section 34, one might pivot upon the administrative undertakings prior the institution of Section 34 to contend that it doesn't consider the ability to alter an arbitral honor. This is on the grounds that the 1996 resolution, which is an imitation of the UNCITRAL Model Law talks just about saving the honor. It should be reviewed that Part 34 gives two cures: saving and abatement. The ramifications of a confined translation of "setting aside" under Section 34 would mean the refusal of the use of the teaching of severability to it. Notwithstanding, such a translation appears to be unreasonable thinking about that both the Model Law and the 1996 Act.

 

Section 34(2)(a) sets out specific grounds which must be laid out on premise of record of arbitral tribunal for the courts to save an arbitral honor. They are as per the following:-

1. “The party was under some incapacity;
2. The arbitration agreement is not valid in accordance with the law to which it was subjected by the parties to the agreement;
3. Proper notice of the arbitrator's appointment or the proceedings was not given to the party applying for setting aside award;
4. The arbitral award deals with a dispute not contemplated by or not falling within the terms of submission to arbitration or if the decision is on matters beyond the scope of submission to arbitration.; or
5. The tribunal was not composed in accordance with the agreement between the parties.”

Moreover, assuming we inflexibly decipher "setting aside", it basically means to deliver an honor void. A fundamental edge to fulfill for considering something as void is that it is past fix, which suggests that each arbitral honor which is completely saved should be difficult to fix by change. The Supreme Court in Karnail Singh v State of Haryana[4] explained that void method ineffective, useless; it has no lawful impact at all, and no freedoms anything that can be acquired under it or outgrow it. In regulation it is like the void thing had never existed.

 

In Videocon Industries ltd. v Union of India[5] Hon'ble Apex court observed that intervention of courts is explicitly banished, besides in circumstances explicitly accommodated in the actual Act. Obviously point of lawmaking body was to give restricted degree to courts to meddle in arbitral procedures. Justification for the equivalent can be surely known. Common debates in ordinary courts are administered by procedural code in India. Said code comprise of various arrangements for a prosecutor to record requests and updates to defer the procedures. Just to stay away from a corrupt prosecutor to practice the escape clauses in ordinary courts and pointlessly postpone an honor, with much thought little degree was left in the Act, 1996 for arbitration of the courts. Indeed, even at the same time, independence was given to gatherings to question to make arrangements in agreement for arbitration of courts.

The degree and job to be played by the courts in arbitral procedures is appropriately made sense of by Hon'ble Supreme Court in Surya Dev Rai V. Ram Chander Rai[6]. Observation by Hon'ble Apex court in said case is as herein below;-

"If it intervenes in pending proceedings there is bound to be a delay in termination of proceedings. If it does not intervene, the error of the moment may earn immunity from correction........Thus, the power is there but the exercise is discretionary which will be governed solely by the dictates of judicial conscience enriched by the judicial experience and practical wisdom of the Judge".

 

Supreme Court’s View

In Parsam Homes v Mr. Anil Sahai[7] it was held that the use of the term "judicial authority" in section 5 in no manner has any reference to arbitrations not held in India. It was observed that "such use of the term judicial authority , in section 5 and section 8 of the arbitration Act, 1996 is not a recognition by parliament that Part I will apply to international commercial arbitrations held outside India." Section 8 of the Act of 1996 is mandatory in nature. In Hindustan Petroleum Corpn. Ltd. v Pink City Midway Petroleum[8] Hon'ble Apex court observed that assuming that in an understanding between the gatherings under the watchful eye of the civil court there is a provision for mediator, it is obligatory for the civil court to allude the debate to a referee.

 

While the Supreme Court has not explicitly governed on the issue of alteration of arbitral awards post-McDermott, it is influential for dissect the act of the Court to comprehend this legitimate problem better. Before the Court's decision in McDermott, the Apex Court in Tata Hydro-Electric Power Supply Co Ltd v Union of India[9] didn't adjudicate upon the issue of adjustment of arbitral awards, however changed the arbitral award. In the previously mentioned matter, a question emerging out of an understanding between the litigant company and the Union of India, for the stockpile of electric power on rail route tracks, was alluded to arbitration. The judge granted an amount of INR 4.00 Crores to the petitioner, payable with interest at 12% per annum from the date of accommodation of bills. However in this choice, the inquiry connecting with the force of the Court to alter the award was not explicitly tended to, the award was as a matter of fact changed by the High Court by limiting interest granted to be determined from the date of the award rather than the date of accommodation of bills. Likewise, in Hindustan Zinc Ltd v Friends Coal Carbonisation[10], the Supreme Court did explicitly resolve the issue with regards to whether the Court has the power under Section 34 to adjust the award. In any case, the Supreme Court fastened a certified endorsement on the preliminary court's choice to changing the award.

 

Similarly, the Apex Court in Numaligarh Refinery Ltd v Daelim Industrial Company Ltd[11] didn't oppose the change of the award by the Region Court and the High Court in request all things considered and itself additionally altered the award with regards to its discoveries. All the same, the High Court additionally altered the financing cost granted by the arbitrator in Krishna Bhagya Jala Nigam Ltd v G. Harischandra Reddy.[12]

 

Parties to intervention have a response to a court against an arbitral award by making an application under Section 34 of the Act of 1996 for setting aside an award. Said arrangement set out a few passable grounds whereupon an arbitral award can be tested. It may be viewed as that said Section isn't an allure against the award passed by the authority. Rather, it is really an action for guaranteeing that Courts don't surpass their restricted job under the rule.[13]

 

Sections 34 specifies a few reasonable justification for setting aside an arbitral award. Utilizing said grounds, an insightful attorney will generally thump entryways of courts by attempting to draw out his case under at least one grounds laid under Section 34 of the Act of 1996. Said grounds are in soul of Section 5 of the Act of 1996 such that while lawmaking body didn't mean for much arbitration by courts, still it perceived that even in his outrageous insight, a mediator is afterall a human and is defenseless to commit errors. Subsequently, cautiously grounds were made on premise of which an individual could thump entryways of court to have an award saved. In McDermott International Inc. v. Burn Standards Co. Ltd.[14] Hon'ble Supreme Court held that the court can't right the blunders made in the award. Courts can save the arbitral award. Accordingly, powers of courts are a greater amount of administrative in nature that can be practiced in unambiguous conditions referenced in Section 34 of the Act, 1996.

 

Aside from above laid out grounds which must be demonstrated by the party applying for setting aside an arbitral award, same could likewise be saved Under Section 34(2)(b) of the Act assuming the court finds out:

1. The subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force; or
2. The arbitral award is in conflict with the public policy of India.[15]

 

International Regime

The laws of worldwide arbitration center point, for example, the UK, US, Hong Kong and Singapore, which are likewise founded on the Model Law, have given express legal abilities to alter an arbitral honor on their courts.[16] This has been done maybe to make up for the secretive exclusion of the expression "put away just a piece of the award" from the language of art.34. Article 34 of the UNCITRAL Model Law sets out the system for setting aside as "set aside only a part of the award " against an arbitral award. Despite the fact that, the Model Law no place expressly ponders "change of an award", the administrative assemblages of these nations have gathered "setting aside" to be comprehensive of the "ability to adjust" and authorized arrangements that permit gatherings to look for an elective cure of altering an award or putting it to the side somewhat, rather than setting aside in whole.

 

The United Kingdom, Section 67[17] and Section 69[18] of the English Arbitration Act 1996, permit the courts to change an award when the test is on the subject of considerable ward or when it is an allure on an issue of Law. In any case, Section 69 being non-compulsory, parties predominantly contract out of its application and the arrangement is exposed to various procedural limitations. It very well might be counter-contended that in the UK, the courts sit over grants as a re-appraising body, making it conceivable to have the ability to adjust an award, while in India, courts practice simple administrative purview over arbitral awards. However, as explained in Surya Dev Rai v Ram Chandra Rai[19], this supervisory jurisdiction is similar to revisional jurisdiction, which incorporates inside its domain the ability to address patent lawless acts.

In Singapore, Section 48[20] of the Singapore Arbitration Act is almost identically worded as Section 34 of the Indian Act and speaks only about “setting aside” of an award. In this way, one might will generally imagine that in a unique application to save an award under Section 48, the court doesn't have the ability to alter the award. Be that as it may, this end arrived at on the strict perusing of the arrangements is scattered by Section 47, which talks about setting aside, shifting, dispatching, and so on.  Additionally, Section 51[21] which is made relevant to the two Sections 48 and 49, talks about fluctuating an award, under Section 51(2). Hence, Sections 47 and 51(2) of the Singapore Intervention Act make obviously the ability to save incorporates an ability to change the award.

 

The USA, Section 11[22] of the Federal Arbitration Act permits the Court to adjust and address the award to impact the plan and advance equity between the parties. The US Supreme Court in Hall Street Associates LLC v Mattel Inc[23], while depicting on the extent of legal audit of arbitral awards by courts, reaffirmed the force of the Courts to adjust or address an arbitral award.

 

Judicial Interpretation in Appealable Orders

Section 37(1) of the Act lay down that appeal shall lie from following orders to court authorised by law to hear appeals from original decrees of court passing the order;-

1. 1. Refusing to refer parties to arbitration under section 8;
   2. Grant or refusing to grant any interim measure under section 9;
   3. Setting aside or refusing to set aside an award under section 34

Section 37(1) of the Act lay down that appeal shall lie from following orders passed by the arbitral Tribunal:-

1. 1. Accepting plea referred to in section 16(2) and (3); or
   2. Grant or refusing to grant any interim measure under section 17.

Further, as per clause (3) of section 37, there shall be no second appeal to an order passed in appeal in this section. But at the same time right of a party to approach Hon'ble Supreme Court is intact.

To keep away from simple test to the jurisdiction of arbitral tribunal on the ground that agreement which contained an intervention statement itself was not substantial, regulation of detachability was advanced which says that assertion provision is viewed as discrete and free from the parent contract containing such mediation proviso. In this manner, the mediation condition must be considered at a different balance than the parent agreement of which said discretion proviso was a section. In like manner a sickness in the agreement wouldn't ipso jure assertion understanding/statement invalid.

 

enforcement of arbitral award

An award holder would need to hang tight for a time of 90 days after the receipt of the award preceding applying for requirement and execution. During the mediating time frame, the award might be tested as per Section 34 of the Act. After expiry of the previously mentioned period, in the event that a court views the award as enforceable, at the phase of execution, there can be no further test with regards to the legitimacy of the arbitral award. Before the new Arbitration and Conciliation (Amendment) Act, 2015 ("Amendment Act"), an application for saving an award would equivalent to a stay on procedures for execution of the award. In any case, by prudence of the Amendment Act, a party testing an award would need to move a different application to look for a stay on the execution of an award.

In the event that, as frequently occurs in global trade, resources are situated in various regions of the planet, the party looking for implementation of the award has a decision of country where to continue an opportunity to go 'discussion shopping', as it is at times communicated. The Supreme Court in its recent ruling in, Sundaram Finance Ltd. v. Abdul Samad and Anr.[24] explained that an award holder can start execution procedures under the watchful eye of any court in India where resources are found. On the off chance that the topic of the discretion is of a predetermined worth. Commercial courts laid out under the Commercial Courts Act 2015 ("Commercial Courts Act") would have jurisdiction.

 

Conclusion

Considering the confined degree for impedance by the Courts in a Section 34 application to change or address the award, which brings about the object of the Act not being accomplished, the creators are of the assessment that the Supreme Court should return to the ability to adjust or address the award in the illumination of the suggestion contained in the 76th Regulation Commission Report. Despite the fact that it means a lot to restrict the legal impedance by courts to assign India as a favorable to intervention system and advance the consistency and enforceability of grants, the Indian Courts should permit change of grants so the discretion cycle is sufficiently adaptable to consider veritable mistakes and keep away from its maltreatment. The creators recommend that Indian Courts draw motivation from the expectation of the UNCITRAL to universally blend the translation of Section 34 as per its comprehension. The point of the Act of 1996 was to guarantee fast and quick redressal to question via discretion with least court intercession. Notwithstanding, with entry of time a few hardships have been seen in the pertinence of the Act. Same justified Arbitration of courts by giving reasonable translation on case to case reason for guaranteeing that extreme goal of the Act is achieved. Consequently, there can be no refusal that legal activism in the field of discretion is additionally required. And yet, legal Arbitration in arbitral procedures ought to be made mindfully. There may be a few regions leaving some lacunae requiring intercession of the courts. Amendment Act of 2015 and that of 2019 reasonably demonstrates that with quick changing economy of India, existing Act of 1996 was not fit for adapting. Reasonable unique changes were required. Same was likewise made for giving a solid extent of legal Arbitration. The job which is expected to be played by the courts is that of a manager to direct arbitral council easily. However, lately it has been seen that courts will more often than not violate it's obligation in that frame of mind to fill in lacuna in the resolution. This, could end up being against the soul of the Act. Indeed, even while performing its legal responsibility, courts should remember it that it's job is to really work with and empower elective debate goal system so that questions are chosen a more easy to use, financially savvy and speedy removal of cases. This would help in working on legitimate structure of the nation and would go far in making India a Arbitration hub.

 

 

 

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[1]  Research scholar (Law), Deen Dayal Upadhyaya Gorakhpur University,Gorakhpur(U.P)

[2] Hormusji&Daruwala v. Distt. Local Board, MANU/SN/0048/1934

[3] SnehaMahawar, Scope of Judicial Interpretation in Arbitration, Ipleaders blog(Dec 1,2021,11:00 AM), https://blog.ipleaders.in/scope-judicial-interpretation-arbitration/

[4] 1995 Supp (3) SCC 376

[5] MANU/SC/0598/2011

[6] MANU/SC/0559/2003

[7] MANU/AP/1248/2014

[8] MANU/SC/0482/2003

[9] 2003 (4) SCC 172

[10] 2006 (4) SCC 445

[11] 2007 (8) SCC 466           

[12] 2007 (2) SCC 720

[13] MANU/SC/1248/2011

[14] MANU/SC/8177/2006

[15] Section 34(2) of the Arbitration and Conciliation Act, 1996

[16] Nigel Blackaby, Redfern and Hunter on International Arbitration, 6th edn (Oxford: Oxford University Press, 2015), pp.569–604

[17] Arbitration Act 1996 (UK) S. 67

[18] Arbitration Act 1996 (UK) S. 69

[19] 2003 (6) SCC 675

[20] Arbitration Act 2002 (Singapore) 48

[21] Arbitration Act 2002 (Singapore) 51

[22] Federal Arbitration Act 1925 (USA) Section 11

[23] [2008] AMC 1058

[24] 2018 (3) SCC 622