Arbitration Law in India has long-running history of evolution. The legislative intent behind the Act is to facilitate efficient and alternative mechanism for quick dispute resolution. It is one of the important aspects of Alternate Dispute Resolution Process. But in India the intent with which the Act was enacted, it seems that the objective has not yet been achieved. Arbitration in India is not effective way of solving the dispute. It is said that where there is an effective arbitration there are chances that the country’s economy boosts up owing to the increase in investment by the foreign investors. Arbitration Act was enacted to settle the disputes between the party effectively without taking the recourse of court litigation and without any judicial intervention in the award passed by the Arbitrators.
Section 34 of the Act lays down the grounds for setting aside the arbitral award. Most of the arbitral awards are set aside commonly on the ground of being against the public policy. Section 34(4) of The Act states that the Court if deems fit on receipt of the application filed under section 34(1) of the Act, can adjourn the arbitration proceedings and can eliminate those grounds on basis of which the arbitral award can be set aside. Now, there is a difference between setting aside an award and modifying an award. Under the provisions of Arbitration Act, the courts have limited power and cannot interfere with the arbitral award and modify it. The objective behind the enforcement of such provision was to reduce the judicial interference in the Arbitration Proceedings.
Recently, the issue has been highlighted by the Supreme Court in the matter of Mutha Construction vs. Strategic Brand Solutions (I) Pvt. Ltd. where the matter was remanded u/s 34 of the Arbitration Act. Now, the decision of the Supreme Court raises the issue of judicial intervention in Arbitration Proceedings. There are numerous judicial pronouncements where the same issue was dealt.
In 2021 the Supreme Court laid down a significant judgment in The Project Director, National Highways Authority of India vs. M. Hakeem & Anr. on the extent of power of court while hearing any challenge to the arbitral award under section 34 of the Arbitration and Conciliation Act, 1996. The Supreme Court in this case held that the courts are not empowered to modify or vary an arbitral award, the court further stated “Quite obviously if one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha and doing what, according to the justice of a case, ought to be done. In interpreting a statutory provision, a judge must put himself in the shoes of the parliament and then ask whether Parliament intended this result. Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996. It is only for parliament to amend the aforesaid provision in the light of the experience of the courts in the working of the Arbitration Act, 1996, and bring it in line with other legislations the world over”. The Supreme Court also considered and compared section 15 and 16 of the 1940 Act, which vested the courts with the power to modify, correct or remit an award to the arbitral tribunal in the circumstances laid down in the provisions. The court said that, on a perusal of the provisions of the 1996 Act it is evident that there is no legislative intent to include powers to modify or remit the arbitral award. The legislative intent on the basis of which the Act of 1996 was enforced was to avoid the judicial interference in the arbitration proceedings. The court also considered section 34 of the UNCITRAL Model Law and stated that the courts have no power to modify an arbitral award and prohibits interference with the award.
The Supreme Court in Enercon v. Enercon GMBH devised the overarching principle of least intervention in the arbitration act. The Supreme Court in Mcdermott International Inc. v. Burn Standard Co. Ltd. & National Highway Authority of India v. M. Hakeem. stated that the courts in the Arbitration Act have only supervisory role and they should only interfere in the cases if the cases pertain to fraud or biasness. In furtherance, the court in this case stated that the courts have no power to modify an award while exercising jurisdiction under Section 34.
Now, in some cases the arbitration proceedings takes several years to complete and if the matter is remanded back for fresh arbitration then it defeats the legislative intent of the Act. Welspun Speciality Solutions Ltd V. Oil and Natural Gas Corporation Ltd- The Apex Court held that merely explicit clause would not make the time as the essence of the contract. It should be determined from the reading of the complete contract as well as the immediate circumstances. An extension of time clause, dilutes the clause making the time the essence of the contract. Moreover granting various extension without imposition of any damages would render such clause entirely ineffective. The arbitration act was enacted with the purpose to settle the disputes between the parties effectively and efficaciously but we have seen that time to time courts have somehow, interfered in the arbitral proceedings one such case where the court modified the order is Oriental Structural Engineers Pvt. Ltd. v. State of Kerala. In this the Supreme Court modified the Arbitral Award by stating that “We, however, are of the opinion that the rate at which interest has been directed to be paid as contained in paragraphs 1.6 and 1.8 of the award, which we have reproduced above, are rather excessive. We, accordingly, set aside the judgment of the Division Bench of the High Court of Kerala impugned in this Appeal.”
Concluding Remarks:-
The authors are of the opinion that to become the Arbitration Hub India has to work a lot in that direction. In the light of the discussion on the issue done above it is clearly evident that the Arbitration proceedings in India suffers from the vice of judicial intervention. The recent judgment laid down by the Apex Court in Mutha Construction vs. Strategic Brand Solutions (I) Pvt. Ltd. is the clear example of judicial intervention in arbitration proceedings. The purpose of the Act is to dispose of the cases in speedy manner but remanding back the case for fresh arbitration means that the entire proceedings will commence again and will last long meaning thereby, the parties in arbitration will be heard again and will go through the whole process once again which clearly is not what the legislative intent behind the enactment of the Act. A judge before addressing the matter and before deciding any point of law under any special legislation should first apply its judicial mind and consider the legislative intent behind any legislation. Therefore, there are already many obstacles which come in the effective implementation of the Act so, rather than interfering in the arbitration proceedings the judiciary should work in the direction of proper implementation of the Act.