By Parth Rishik (PH, CSDR) & Utkarshika Srivastava ~ Law College Dehradun, faculty of Uttaranchal University

Introduction

Time and again, on the one hand, the various arbitral tribunal has faced the scrutiny of various judicial intervention, while on the other hand, the periodic amendments done to the Arbitration and Conciliation Act 1966 is done to make the tribunals more competent in the matter they oversee. In this article, the authors will probe into case laws of 2019, to demonstrate the extent of judicial intervention in arbitration cases.

The extent of Judicial Intervention: Art. 5 of Model Law and Sec. 5 of ACA

“In matters governed by this law, no court shall intervene except where so provided in this law”, the following is stated in Article 5 of the Model Law. It formulates a simple but very important principle, which ensures that when such model law is adopted by a state, it should clarify instances in which court control is envisioned, which will further result in an increase in certainty for parties and arbitrators, and further the cause of uniformity. S/5 of ACA further provides that no judicial body shall intervene except where so provided in this part. Which formulates on the above stated Art. 5.

Judicial Review cannot be taken away

S/8 of ACA is non-obstante in nature; however, it does not affect the power of judicial review of the High Court under Art. 226 & 227, or of the Supreme Court under Art. 32. To simplify the same, no act of legislature can limit or fetter this structure of judicial intervention, as they form a part of the basic structure of the constitution.[1]

It is important to note that a state’s contract with a private party is also under the preview of judicial review as per constitutional and administrative law principles. A purely contractual dispute is usually outside the self-imposed limitations of court’s discretionary jurisdiction because the extraordinary remedy under these provisions is not envisioned to be used for the statement of private rights, but, for illustration, if the state discriminates, or acts unreasonably, or unfairly or arbitrarily the public law remedy can be prayed.

Article 14 of the Indian Constitution is one of the foremost bases for challenging either the formation of a contract or a state action during a contract, the same was held in Shrilekha Vidyarthi (Kumari) v. State of U.P.[2], in which the Hon’ble court held the view that “The State cannot be attributed the split personality of Dr Jekyll and Mr Hyde in the contractual field to impress on it all the characteristics of the State at the threshold while making a contract requiring it to fulfil the obligation of Article 14 of the Constitution and thereafter permitting it to cast off its garb of State to adorn the new robe of a private body during the subsistence of the contract enabling it to act arbitrarily subject only to the contractual obligations and remedies flowing from it. It is the nature of its personality as State which is significant and must characterize all its actions, in whatever field, and not the nature of the function, contractual or otherwise, which is decisive of the nature of scrutiny permitted for examining the validity of its act. The requirement of Article 14 being the duty to act fairly, justly and reasonably, there is nothing which militates against the concept of requiring the State always to so act, even in contractual matters. In other words, “When an instrumentality of the State acts contrary to the public good and public interest, unfairly, unjustly and unreasonably, in its contractual, constitutional or statutory obligations, it acts contrary to the constitutional guarantee found in Article 14 of the Constitution”.[3]

Judicial Intervention using constitutional grounds in arbitrational matters: A Case Analysis

Icomm Tele Limited v. Punjab State Water Supply and Sewerage Board and others[4], is an example of the involvement of constitutional rights in arbitration (with a State instrumentality). Here, the question of the validity of the arbitration agreement arose outside of the ACA in a petition under Article 226 of the Constitution of India before the High Court. The matter involved a pre-deposit requirement before the non-state party could invoke arbitration. In the decision, the Supreme Court of India struck down part of an arbitration clause which required a claimant to deposit 10 per cent of the amount claimed with the arbitrator before the arbitration went ahead. The contract was between a government entity and a private party and the Court relied on principles of Indian constitutional and administrative law to hold that the clause was arbitrary and therefore liable to be struck down. The Court also emphasised the need for arbitration to be speedy, effective and inexpensive so that it can “de-clog” the overburdened court system in India[5]. It will be useful to note here that unconscionability claims to an arbitration agreement have been recognized in many jurisdictions across the world, as noted by Mr Born.[6]

The case of Deep Industries Limited v. Oil and Natural Gas Corporation and another[7] was also on a similar page. Under Article 227, the High Courts have judicial and administrative powers of superintendence over all courts and tribunals throughout its territory. “Can or should a High Court exercise its jurisdiction under Article 227 in matters decided under the ACA?” The arbitral tribunal made an interim order under Section 17 of the ACA (which provides for interim measures by the tribunal). An appeal was filed before the City Civil Court but rejected. Since no appeal lies from such an order under the ACA, a petition under Article 227 of the Constitution was filed challenging the City Court’s order. The court held that though High Courts can exercise jurisdiction under Article 227 against judgments allowing or dismissing first appeals under Section 37 of the ACA, this must be with extreme circumspection, considering the statutory policy of the ACA so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction.

Concluding Thoughts

These cases show the necessity of judicial intervention, as to whenever such agreement of arbitration is arbitrary. Thus, the obligation to protect the ideology of equality and to ensure that the instrumentality of the state is kept in check, the judicial intervention comes out as an essence. Yet, the periodic amendments to ACA, as stated earlier, is done to make arbitral tribunals more competent. In the cases stated above, the tribunal could have come upon the fact that the very arbitration clause that supports arbitration of the disputed matter is arbitrary, and such delegation of power should be granted to the tribunal. If India aims to become an arbitration hub, it requires various changes and developments which must ensure independence and competence of the arbitral tribunals.

Citations


Indian Judicial Intervention in Arbitration Cases: Analysis of 2019 cases

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