Experts CornerTariq Khan

For many years, alternative dispute resolution (ADR) has been used to describe arbitration, conciliation and mediation as alternatives to litigation. The idea behind calling these methods of dispute resolution “alternate”, is that litigation has been, and will always be the primary mode of dispute resolution. However, in the last one decade, we have seen a paradigm shift in this approach. Young lawyers, general counsel, micro, small and medium enterprises (MSMEs) as well as companies are moving away from protracted litigation and accepting ADR as primary modes of dispute resolution. Litigation is a time-consuming and costly affair. Pursuing a case in court may result in loss of time, efforts and money whereas resolving a dispute by ADR can be quicker and cheaper. Another reason why ADR gained popularity is perhaps the dissatisfaction created by the litigation process. However, it cannot be denied that formal adjudication system will always be there as there will always be certain disputes that can only be resolved through it. Barring such disputes, all other disputes that one can resolve without burdening the court system, can be efficaciously resolved through ADR.

 

Over the last decade, ADR has gained traction in India. Both legislative framework as well as judicial precedents have aimed at promoting ADR as a preferred mode of dispute resolution rather than a mere substitute or alternative to the formal judicial system. In particular, the Arbitration and Conciliation Act, 1996 (Arbitration Act) has been amended[1] time and again with the view of keeping at par with other legal regimes and making India an arbitration-friendly jurisdiction. This has been buttressed by the Indian judiciary which has also actively adopted and recommended a minimal intervention approach, such that confidence is instilled in the arbitral process, amongst parties.

 

Particularly, with the current arbitration regime in place in India, the arbitral process is party friendly, time bound and confidential. The courts are slow in granting anti-arbitration injunctions, interfering with foreign awards, and a challenge to an arbitral award is now available to a party on limited grounds. This has allowed parties to attain a final and binding decision in a shorter timeline as against long-drawn battles before judicial fora.

 

The global business community has reaped benefits of ADR, both for containment of disputes as well as quick resolution. Across various sectors, the growing trend now, particularly in relation to commercial contracts, is to opt for an arbitration clause or med-arb clause for dispute resolution to ensure access to justice in reduced time and cost and in an efficient and satisfactory manner.

 

While the course of arbitration in India has been flourishing, mediation in India has been slowly gaining recognition. Mr Justice N.V. Ramana, the Chief Justice of India, recently said that prescribing mediation as a mandatory first step for resolution of every allowable dispute will go a long way in promoting mediation[2].

 

The primary reason for slow growth of mediation in India was the lack of awareness and its acceptance as a mode of dispute resolution. Other reasons why mediation could not gain popularity include lack of domain experts and suitable infrastructure. Recently, the Mediation Bill, 2021 (Mediation Bill) has been introduced with the aim of promoting domestic and international mediation in India, including online mediation, and is currently pending before the Rajya Sabha.

 

In April 2022, the Ministry of Law and Justice, India, indicated that the cases pending before the Supreme Court of India are 70,154, before various High Courts are 58,90,726 and 4,09,85,490 before District and Subordinate Courts, as of March 2022[3]. Further, on 15-4-2022, the Chief Justice of India while addressing the inaugural session of Telangana State Judicial Officers Conference, 2022 said that the judiciary is overburdened.[4]

 

In view of this surmounting pendency, adopting ADR as a primary mode of dispute resolution, as opposed to a mere alternative, is now the need of the hour. This will also result in decongesting the court system and bring about much-needed relief to the judiciary, which is overburdened.

 


Legislative Framework and Other Initiatives


Section 89 of the Code of Civil Procedure 1908 (CPC) was introduced in 2002 with the objective of promoting non-judicial dispute resolution. Section 89 contemplates reference of a dispute to arbitration, conciliation, judicial settlement through Lok Adalat or mediation, where there exists an element of settlement in the opinion of the court.

 

In 2018, Section 12-A was introduced in the Commercial Courts Act, 2015, mandating mediation before a party can approach a commercial court with a suit. The exception to pre-litigation mediation is cases where urgent interim relief is being sought. Thereafter, the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 were notified, which enumerate the manner in which the mediation proceedings would be conducted for reconciling and settling commercial disputes between the parties.

 

The Arbitration Act, from its inception, has endorsed a minimum interference approach. Recently, the judiciary has also strongly adopted a minimal intervention approach to encourage more parties to arbitrate. The key amendments introduced to the Arbitration Act in 2015 and 2019 are also in keeping with the objective of promoting arbitration as well the minimal interference approach, such that India can be transformed into a global hub for arbitration.

 

Before the 2015 Amendment, in relation to Section 34 proceedings, certain High Courts had the practice of allowing new evidence, documentary as well as oral, at the stage of challenge which was akin to a trial. With the amendment in 2015, this practice is now eliminated, and challenge proceedings are strictly summary in nature, requiring parties to establish a challenge based on the arbitral record filed before the Arbitral Tribunal.

 

The 2019 Amendment also provided for establishing an independent body, the Arbitration Council of India (ACI). ACI’s envisaged duties include promoting alternative dispute resolution, policy making, operation and maintenance of uniform professional standards, grading arbitral institutions and accrediting arbitrators.

 

Additionally, the real estate sector, recognising the benefits to parties of a quick and cost-effective resolution of disputes, has adopted conciliation as a mode of dispute resolution. In 2016, the Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted with the aim of protecting homebuyers from unscrupulous real estate developers and to provide quick dispute resolution. RERA has established a Real Estate Regulatory Authority (Authority) in each State for regulation of the real estate sector, which also acts as an adjudicating body for dispute redressal. Section 32(g) of the RERA provides for measures to be taken by the Authority to facilitate amicable conciliation of disputes between the promoters and the allottees through dispute settlement forums comprising of representatives from consumers and promoters associations. In line with this provision, several States have set up conciliation forums.

 

The Mediation Bill seeks to set up a Mediation Council of India (MCI) to promote and regulate domestic and international mediation in India, including online mediation. The Mediation Bill contemplates pre-litigation mediation or a subsequent reference, at the request of the parties, at any stage of the proceeding before a forum. The mediation proceedings envisaged are time bound, to be completed within 180 days, which is further extendable with the consent of the parties by another 180 days. The mediation settlement agreement, being a culmination of the disputes, is envisaged to be final, binding and enforceable in the same manner as courts judgments.

 

The First Schedule of the Mediation Bill enlists the disputes or matters which are not fit for mediation. Further, the Second Schedule enumerates an extensive list of matters which cannot be subjected to mediation. In cases where the Government is a party, the reference is confined to commercial disputes. Although the provisions in the Mediation Bill suggest that these are indicative, the legislature has adopted a restrictive approach and has failed to appreciate that there is a need to make the mediation process more inclusive and that only certain categories of proceedings should be reserved for adjudication by the judicial system, as a matter of public policy. In this regard, the principles set out in the decision of the Supreme Court in Vidya Drolia v. Durga Trading Corpn.[5] on arbitrability of disputes can be a yardstick to determine whether disputes can be referred to mediation or not.

 

The advancement and adoption of technology, as well as the shift towards online dispute resolution, has resulted in popularisation of online mediation. Online mediation has the potential to revolutionise the justice-delivery system by promising simple and affordable justice for all[6]. This shift will likely depend on the legislative framework, which is ultimately adopted by India and steps taken for its enforcement.

 

In a step forward, the Law Department of the Government of Telangana has issued an order dated 17-3-2022 designating the International Arbitration and Mediation Center, Hyderabad (IAMC) as the arbitral or mediation institution (as the case may be) in cases where ministries, departments, public sector companies, or other entities controlled or managed by the Government of Telangana are a party and where the value of the dispute is more than Rs 3 crores. In relation to existing contracts where the contract value is Rs 10 crores or above, parties have been directed to consider amending the dispute resolution clause, in consultation with the other parties to the contract, to designate IAMC.

 


Recommendations


All stakeholders have a role to play to pave the way for ADR to become more seamless, time and cost-efficient, and as such, a preferred and complete system for accessing justice.

 

The non-intervention approach adopted and recommended time and again by the Supreme Court of India should be followed by High Courts as well as lower courts as a rule. In addition, an active role by courts to recognise ADR and encourage parties to mandatorily explore settlement through mediation, before litigation can proceed, could result in early resolution of cases that are fit for settlement.

 

The promptness with which arbitration-related litigation, which comes before a court, either before, during or after the conclusion of the arbitral proceedings, is disposed of by courts is also crucial to increase the efficacy of arbitration as a dispute resolution method.

 

Particularly, expeditious disposal of challenge proceedings under Section 34 of the Arbitration Act, which applies to arbitral proceedings where the legal or juridical seat of arbitration is India. Although, challenge proceedings are now summary in nature and time bound, delays are inevitable in view of an overburdened judiciary. In addition, an appeal lies from an order setting aside or refusing to set aside an arbitral award, under Section 37 of the Arbitration Act, making it a two-tier challenge. The legislature could consider doing away with a Section 37 appeal currently in place, in order to ensure that awards attain finality at the earliest and enforcement can proceed. Additionally, heavy costs should be imposed on litigants where the court finds that the challenge proceedings have simply been preferred as a delay tactic to stall the enforcement of an award.

 

The State Governments could take steps to support and promote institutional arbitration and mediation in a similar manner as the State of Telangana. Both development and promotion of institutional forums for resolution of disputes have the potential of converting India into a global hub for arbitration and mediation, like London and Singapore.

 

In addition, strengthening the pool of arbitrators and professionals conducting mediation proceedings to ensure effective dispute resolution, and in case of arbitration, to reduce the susceptibility of awards to legal challenges is also of significance.

 

Lastly, while there is recognition and public awareness amongst individuals in relation to arbitration as a mode of dispute resolution, the awareness and understanding of ADR as a whole system is lacking. The role of legal professionals, therefore, assumes relevance both for promoting ADR as well as advising on the non-judicial options available to parties.

 


Conclusion


A rapid paradigm shift is the need of the hour where stakeholders start accepting arbitration, conciliation and mediation as primary modes of dispute resolution (PDR). The journey from ADR to PDR is underway and with the efforts of the Supreme Court of India and the legislature, the gap between the two is diminishing. Whether arbitration, conciliation and mediation will become the primary mode of dispute resolution or not will depend on the implementation and enforcement of the existing framework. The implementation must be in line with the overall objective i.e. minimum judicial interference, meeting the interests of disputing parties, cost-effective and speedy justice. Moreover, apart from creating an appropriate regulatory framework for arbitration and mediation, promoting awareness amongst stakeholders is crucial. Further, developing capacities both in terms of infrastructure as well as professionals with the required skill set and specialisation for successfully administering ADR mechanisms for dispute resolution is also critical. The phrase alternative dispute resolution is going to stay but we hope that in times to come it will be used as a reference to litigation at least in commercial disputes.


† Registrar, International Arbitration and Mediation Centre.

†† Advocate.

[1] Arbitration and Conciliation (Amendment) Act, 2015; the Arbitration and Conciliation (Amendment) Act, 2019.

[2]Mediation for Everyone: Realising Mediation’s Potential in India, India-Singapore Mediation Summit, 2021.

[3]Government of India Ministry of Law and Justice, Answer to Unstarred Question No. 5042, Lok Sabha.

[4] See HERE .

[5] (2019) 20 SCC 406.

[6] Speech delivered by Chief Justice of India Shri N.V. Ramana at Mediation and Information Technology Conference, 9-4-2022.

Case BriefsHigh Courts

Calcutta High Court: Ravi Krishan Kapur, J. dismissed an application which was filed under Section 9 of the Arbitration and Conciliation Act, 1996 (‘the Act’) wherein liberty to withdraw a sum of Rs 4,11,89,759/- deposited by the award debtor, State of West Bengal, with the Registrar, Original Side of this Court upon furnishing of appropriate security was sought.

The petitioner was awarded a sum of Rs 2,66,69,73/- on account of various claims and a further sum of Rs 1,37,85,395/- on account of costs alongwith interest @18% per annum from 25 December, 2018 till the date of payment. Being aggrieved by the award, the respondent had filed an application under Section 34 of the Act which is pending. In an application under Section 36(2) of the Act, by an order, a Coordinate Bench had directed the award debtor to furnish security. It was submitted on behalf of the parties, that security had since been furnished by the respondent. Hence, this application.

The State submitted a preliminary point of maintainability and contended that the reliefs sought for by the petitioner are beyond the scope and ambit of Section 9 of the Act. On behalf of the petitioner, it was contended that the applicability of Section 9 was no longer res integra citing a decision passed by the Division bench in connected proceedings.

The Court explained that true object and intention behind Section 9 of the Act is to provide for interim or provisional measures to a party before or during or any time after making an award which are protective in nature. The orders contemplated under Section 9 inter-alia pertain to preservation, interim custody or sale of goods which are the subject matter of the arbitration agreement, securing the amount in dispute in the arbitration, detention, preservation or inspection of any property or thing which is the subject matter of the arbitration, interim injunction or appointment of a Receiver or such other interim measures of protection which may appear to be just and convenient relying on the decision in Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd., (2007) 7 SCC 125.

The Court was of the view that the scope of Section 9 of the Act cannot be extended to enforcement of the award or granting the fruits of the award to the award holder as an interim measure. The Court also acknowledged that there have been a number of decisions passed by the Supreme Court wherein the petitioner has been permitted to withdraw the amount deposited. However, none of the decisions have been passed in applications arising under Section 9 of the Act.

The application was dismissed and prayer for withdrawal was rejected.[Satyen Construction v. State of West Bengal, 2022 SCC OnLine Cal 708, decided on 08-04-2022]


For the Petitioner : Mr Jayanta Mitra, Senior Adv., Ms Nilanjana Adhya, Mr Aniruddha Mitra, Mr N. Das

For the State: Mr S. N. Mookerji, Advocate General, Mr Suman Dutta, Mr Paritosh Sinha


Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Madhya Pradesh High Court: Vishal Dhagat, J. allowed an arbitration appeal against an impugned order passed by the First ADJ of Balaghat (MP).

The facts of the case were that the Court held that limitation for filing application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Act, 1996”) shall be counted from date of passing of award dated 22-06-2017. Application filed for modification of award under Section 33 of Act of 1996 will not have any bearing as said application was filed on merits of award and not on grounds under Section 33(1) (a) (b).

In the present matter the counsel for appellant contended that they should have been given the benefit of Section 33 of the Arbitration and Conciliation Act 1996. Running of limitation should have been considered from the date of the rejection of the application instead of the date of passing of the order. On the other hand the respondent’s counsel contended that the application was dismissed and the award given therein was not modified hence the dismissal stands justified.

The Court was of the view that Dismissal of application under Section 34 of Act of 1996 on ground of limitation will come within the purview of refusing to set aside an arbitration award, therefore, appeal under Section 37 will be maintainable if application under Section 34 is dismissed on ground of limitation. The court eventually ‘set aside’ the impugned order which dismissed the application of the appellant filled under section 34 of the Arbitration and Conciliation Act, 1996.[Sar Parivahan v. Hindustan Copper Ltd., 2021 SCC OnLine MP 2477, decided on 04-12-2021]


Suchita Shukla, Editorial Assistant has reported this brief.


Advocate for petitioner

Adv. C. Veda Rao

Advocate for Respondent

Shri R.K Sanghi

Experts CornerKhaitan & Co

With the advent of the Draft Mediation Bill, 2021, there is a growing interest to understand the functioning of private institutional mediation. It is important to know that besides the popular court annexed mediation programmes, India also has ad hoc private mediators and institutions offering private mediation services. Hundreds of hours have been spent on creating awareness through webinars and workshops, and you would be surprised to learn that private mediators are still misunderstood for money recovery agents, liquidators, investigators, and many other false identities.

 

Additionally, there is a misplaced fact that private mediation is only limited to pre-litigation mediation or mediations held before a case is filed in court. This is not accurate – as many High Court and Supreme Court Judges are referring disputing parties to private mediation centres. Many of these referrals are either initiated under Section 89 of the Code of Civil Procedure, 1908 (CPC), or before appointing the arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (Arbitration Act).

 

The draft Bill on mediation as per reports, is likely to be introduced in Parliament this winter session and we sense that it will be passed into a legislation before the year end. There are plenty of provisions in the draft bill that recognise the roles and responsibilities of private “mediation service providers”; however, this article highlights existing provisions to bust some unfounded myths surrounding private mediation in India, in the pre-legislation era.


Myth: Participating in private mediation means waiving the right to future legal action in court


Fact: Private mediation is a voluntary process. The ultimate goal is to assist the parties in reaching an amicable settlement through dialogue and interaction. If mediation is not successful (parties are unable to arrive at a mutually acceptable solution), parties have the choice to approach the courts to exercise their legal rights and remedies. There is no law in India that prohibits disputing parties from approaching any court because they participated in mediation. In fact, the proposed mediation law [Section 6(1)] strongly advocates for parties taking all possible measures to settle disputes before filing a case in court.

 

As of November 2021, parties can initiate litigation and then pause proceedings to explore mediation, wherein the Judge can refer parties to mediation under Section 89 CPC.

 


Myth: Private mediation is an anti-lawyer practice; legal counsels are not welcome


Fact: Lawyers, who have a dynamic litigation or arbitration practice, continue to play a crucial role in mediation — though, a fundamentally different one. When approached by a client, lawyers orient the client on mediation as an option among other dispute resolution mechanisms. Lawyers assist in identifying the most suitable mediator for the case, bringing to focus relevant documentation and decision-makers, breaking down the complex dispute and streamlining the issues to enhance a fast-track resolution through mediation. Lawyers advise their clients in setting out their expectations, approach, demands and concessions during the mediation process. Of course, any settlement arrived at, during mediation, will also need to be vetted and drafted into a settlement agreement. Although, there is no obligation for parties to bring a lawyer to the mediation table, mediators encourage parties to have sound legal counsel before making and accepting offers.

 


Myth: A private mediation settlement is not recognised by courts, if parties dishonour terms


Fact: A mediation conducted without the reference/supervision/monitoring of the court can be termed as a private mediation. In India, although there is no dedicated legal framework or legislation governing private mediation or settlements reached through private mediation, there are enough legislations already in place giving validity to a mediated settlement reached through a private mediation process.

 

Very often, private commercial mediation in India leans on the procedural framework of conciliation and is governed by Part III of the Arbitration Act. A settlement agreement arrived at through this mechanism is enforceable as a conciliator’s award under Section 74, provided the procedure prescribed under the Arbitration Act is followed.

 

Alternatively, if the parties enter into a privately mediated settlement agreement during the arbitral proceedings, then under Section 30(4) of the Arbitration Act, the settlement agreement is granted the status of an arbitral award which can be enforced under Section 36 of the Arbitration Act.

 

Further, to encourage parties to mediate and settle the disputes, Section 12-A(5) of the Commercial Courts Act, 2015, was introduced. As a step further, it provides that the settlement arrived at under Section 12-A shall have the same status and effect as if it is an arbitral award on agreed terms under Section 30(4) of the Arbitration Act, which can be enforced under Section 36 of the Arbitration Act.

 

Further, an agreement arrived at through private mediation enjoys the same status and enforceability of a “contract” as defined in Section 2(h) of the Contract Act, 1872 i.e. “an agreement enforceable by law”. Thus, if a private mediation settlement agreement satisfies the threshold of being a legally enforceable contract, then the terms of the same can be enforced by seeking recourse to the relevant provisions of the Contract Act.

 


Myth: Private mediators are not recognised by court since they are not trained by the court


Fact: In private mediation, parties mutually agree to appoint a neutral third party as a mediator, based on their trust and comfort levels. Till date, there is no legal requirement that the appointed private mediator should be trained by the court programme — there is no such condition in the Draft Mediation Bill, 2021 too. In private mediation, parties generally appoint a mediator as per the terms stipulated in their contractual mediation clause or upon mutual terms. Once the dispute is resolved, parties enter into a binding settlement agreement. As long as the agreement entered is with the consent of parties and is legally enforceable, the qualifications and accreditations of the mediator have no bearing on the “recognisability” of the settlement.

 

Nevertheless, parties and lawyers are advised to do thorough research, obtaining clarity on their training, background, experience, cultural orientation, etc., before appointing a mediator. Ideally, and as per well-recognised and respected international standards, private mediators should have at the very least completed a 40-hour training by a reputed institute. Private mediators need not be lawyers and may include business and management leaders, teachers, doctors, architects, engineers, artists, social workers, counsellors or any other professionals.

 


Myth: Businesses and corporations must file a court case before considering mediation


Fact: Institution of any action before court is not a precondition to go for mediation. Mediation can be pursued at any time — soon after the disagreement has erupted, after negotiations between the parties have stalled, before filing in court or even after the matter has been pending in court. If the legal agreement between the parties mandates mediation, it would be pursued before a court filing. If not, parties may mutually agree at any time to refer their dispute to be resolved by mediation under the rules formulated by a mediation institution of their choice.

 


Myth: There is no scope for private mediation once arbitration proceedings begin


Fact: Section 30 of the Arbitration Act, which governs the alternate dispute resolution clauses in India, states that the Arbitral Tribunal, with the consent of the parties, may use mediation or conciliation or other procedures at any time during the arbitral proceedings to encourage settlement. This provision gives impetus to settlement by mutual agreement of parties and does not make it incompatible with an arbitration agreement. In the event that the parties settle the disputes during the arbitral proceedings, the Arbitral Tribunal would terminate the proceedings; and if requested by the parties, and not objected by the Arbitral Tribunal, record the settlement terms in the form of an arbitral award on agreed terms.

Of late, courts have referred parties to private mediation while appointing an arbitrator under Section 11 of the Arbitration Act, just innovating an arb-med structure in the Indian justice delivery system.

 


Myth: Mediation settlement agreements are necessarily stored in a depository and registered with the court, as per law.


Fact: A mediation settlement agreement arrived at in a pre-litigation scenario remains completely confidential and is not privy to anyone outside the parties, lawyers and mediators. The common practice by most private mediators and mediation institutes is not to sign on the mediation settlement agreement (even as a witness) as it is completely agreement made by the parties and the mediator has no authority over such an agreement. No outside party can get access to even the knowledge if a mediation has taken place, lest receive information on the mediation settlement agreement.

 

In mediation settlement agreements arising out of a court proceeding or arbitral proceedings, parties may by consent file the same with the arbitrator and request the arbitrator to take the same on record and pass an award in terms thereof or request the Tribunal to just make reference to the mediation settlement agreement and state that as the arbitration is settled in terms of the mediation settlement agreement, the proceedings stand terminated. As regards the court, a similar process may be followed by consent of parties where the court may be informed of and shown the mediation settlement agreement and requested to dispose of the proceedings in terms of the same. Parties may request the court to refer to the same but may not file the same in the court. If filed in the court, a request may be made to the court to place the agreement in a sealed envelope due to the nature of its confidentiality.


† Raj Panchmatia is a Partner in the Dispute Resolution practice group at Khaitan & Co. He has rich experience in the field of dispute resolution and commercial litigation, both at the domestic and international fora.

†† Jonathan Rodrigues leads the Corporate Relations vertical at CAMP Mediation.

Legislation UpdatesRules & Regulations

The Government of Gujarat has issued the Industrial Relations (Gujarat) Rules, 2021 vide notification dated October 5, 2021. The Rules shall extend to the whole of Gujarat in respect to the industrial establishments and matters for which the Gujarat Government is the appropriate Government and shall come into the force from the commencement of the Industrial Relations Code, 2020.

 

Key provisions of the Rules are:

  • Works Committee: The works committee shall be constituted, consisting of an equal number of representatives from employer & workers side, maximum members up to 20.
  • Grievance redressal Committee: The grievance addressal committee shall consist of an equal number of representatives from employer & workers side, maximum members up to 10.
  • Standing Orders: The employer, who adopts the model standing order of the Central Government, shall intimate the concerned certifying officer electronically the specific date from which the provisions of the model standing order have been adopted. On receipt of information the certifying officer within a period of 30 days from such receipt may give his observation & if no observation is made by the certifying officer within a period of 30 days the standing order shall be deemed to have been adopted by the employer.
  • Mechanism for resolution of Industrial Dispute: Chapter VI of the Rules prescribes the mechanism for resolution of Industrial dispute.
  • Strikes and Lockouts: Chapter VII of the Rules prescribe the provision for strikes and lockouts.
  • Lay-Off, Retrenchment and Closure: Special provision with respect to lay off, retrenchment and closure are prescribed under Chapter IX of the Rules.
  • Trade Unions: Provisions for registration, maintenance of registers by the Trade Unions, subscriptions for registered Trade Union, filing of Annual Return by the registered Trade Union, annual audit of accounts of Trade Unions etc are prescribed under the Rules.
  • Key Forms under the code are-
    1. Form-I – Memorandum of settlement arrived at during conciliation/ or settlement arrived at between the employer and his workers otherwise than in the course of conciliation proceeding.
    2. Form-II – Notice of change of service conditions proposed by an employer
    3. Form-III – Agreement for voluntary arbitration
    4. Form-IV – Authorization by a worker, group of worker, employer, group of employer to be represented in a proceeding before the authority under this code.
    5. Form-VI – Notice of strike to be given by union (name of union)/ group of workers.
    6. Form-VII – Notice of lock-out to be given by an employer of an industrial establishment.
    7. Form-VIII – Notice of intimation of retrenchment/ closure to be given by an employer to the state government under the provisions of chapter ix of the industrial relations code, 2020 and rules made there under.
    8. Form-IX – Application for permission of lay-off / continuation of layoff / retrenchment/ closure to be given by an employer / industrial establishment / undertaking to the state government under the provisions of chapter x of the industrial relations code, 2020 and rules made there under.
    9. Form X- Notice to the employer who committed an offence for the First time under this code, for compounding of offence under Sub-section (4) of section 89.
    10. Form XI- Complaint under section 91 of the industrial relation code, 2020
    11. Form-XII – Application for Registration of Trade Union
    12. Form-XIII – Certificate of Registration of Trade Union
    13. Form XXI- Annual Return

*Tanvi Singh, Editorial Assistant has reported this brief.

OP. ED.SCC Journal Section Archives

The jurisdiction of the Arbitral Tribunal emanates from the agreement between the parties.1 Therefore, the existence of the arbitration agreement between the parties is a sine qua non for reference of the disputes between parties to arbitration.2

 

The Arbitration and Conciliation Act, 1996 (“the Act”) is the law governing arbitration proceedings in India. Section 7 of the Act defines an “arbitration agreement” to mean an agreement by the parties to submit disputes that have arisen or which may arise between them in respect of a defined legal relationship to arbitration.3 Further, Section 7(3) of the Act mandates that an arbitration agreement shall “be in writing”. Under the Act, an arbitration agreement is deemed to be in writing if : (a) it is contained in a document signed by the parties;4 (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement;5 (c) an exchange of statement of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other;6 or (d) a contract between the parties making a reference to another document containing an arbitration clause indicating an intention to incorporate the arbitration clause from such other document into the contract.7

 

This article seeks to examine the scope and purport of Section 7(4)(c) of the Arbitration and Conciliation Act, 1996 which stipulates that an arbitration agreement is deemed to be in writing if it is contained in an exchange of statement of claim and defence wherein the existence of arbitration agreement is alleged by one party and not denied by the other. In order to accomplish the aforesaid objective, the authors first examined the legislative history of Section 7 of the Act resulting in its enactment. Thereafter, the authors briefly examined the divergent views expressed by the High Courts and the Supreme Court of India on the scope and meaning of Section 7(4)(c) of the Act. The authors concluded by summarising their views on the true scope and purport of the said sub-section.

 

READ COMPLETE ARTICLE HERE

 

———

Senior Advocate and Additional Advocate General of Karnataka.

†† Advocate enrolled with the Bar Council of India in May 2016. He is a gold medallist from National Law University, Jodhpur and practises law at Bangalore, India.

*The article has been published with kind permission of Eastern Book Company. Cite as (2021) 3 SCC J-32

1 Indu Malhotra, O.P. Malhotra’s the Law & Practice of Arbitration and Conciliation (3rd Edn., 2014), p. 354.

2MTNL v. Canara Bank, (2020) 12 SCC 767, para 9; Yogi Agarwal v. Inspiration Clothes & U, (2009) 1 SCC 372, para 10; Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC 306

, para 13.

3 Section 7(1), Arbitration and Conciliation Act, 1996.

4 Section 7(4)(a), Arbitration and Conciliation Act, 1996.

5 Section 7(4)(b), Arbitration and Conciliation Act, 1996.

6 Section 7(4)(c), Arbitration and Conciliation Act, 1996.

7 Section 7(5), Arbitration and Conciliation Act, 1996; Indowind Energy Ltd. v. Wescare (India) Ltd., (2010) 5 SCC 306, para 12.

8 Generally see, Rohan Tigadi, “Indian Arbitration : Ghost of Implied Exclusion and other related issues”, 12 (2) Asian International Arbitration Journal 181 (2016).

9 See, Article 7 of the Model Law on International Commercial Arbitration 1985 (United Nations Commission on International Trade Law, UN Doc. A/40/17, Annex I).

10 Generally see, Hindustan Construction Co. Ltd. v. Union of India, 2019 SCC Online SC 1520, para 19; BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552, para 68.

11Kalpana Mehta v. Union of India, (2018) 7 SCC 1, paras 123-35.

12 A/RES/40/72, Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (11 December 1985); Preamble, Arbitration and Conciliation Act, 1996.

13K.S. Puttaswamy (Privacy-9J.) v. Union of India, (2017) 10 SCC 1, para 154.

14 It is an international government organisation formed in 1956 to serve as an advisory board to member States on matters of international law.

15 International Commercial Arbitration, Note by the Secretary General (A/CN.9/127)

16 UNCITRAL, Note by the Secretariat further work in respect of International Commercial Arbitration (A/CN.9/169), Para 2.

17 UNCITRAL Report of the Secretary General : Study on the application and interpretation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (A/CN.9/168)

18 Note by the Secretariat : Further work in respect of International Commercial Arbitration (A/CN.9/169), Para 6.

19 Report of Working Group on International Contract Practices on the Work of its Third Session, A/CN.9/216, Para 1.

20 UNCITRAL, Report of the Secretary General : Possible Features of a Model Law on International Commercial Arbitration (A/CN.9/207), Paras 39-43.

21 Article 7(2) of the UNCITRAL Model Law, 1985; Report of the Working Group on International Commercial Arbitration of its Third Session (A/CN.9/216), Para 23.

22 Report of the Working Group on International Commercial Arbitration of its Third Session (A/CN.9/216), Para 24 (in this connection, the question was raised whether a party which had appeared before an Arbitral Tribunal without contesting jurisdiction may later invoke lack of a written arbitration agreement. The prevailing view was that such a party could not in those circumstances invoke lack of written agreement. However, it was agreed that the question should be dealt with in the Model Law, as it was a question which could be adequately dealt by domestic law”.); International Commercial Contract : Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration (A/CN.9/264), Paras 6-8.

23 Generally see, UNCITRAL, Report of the Working Group on International Commercial Practices on the work of its Fourth Session (A/CN.9/232); UNCITRAL, Report of the Working Group on International Commercial Practices on the work of its Seventh Session (A/CN.9/246)

24 Summary records of the 320th UNCITRAL Meetings, available at <https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/320meeting-e.pdf> (last accessed on 31-1-2021), Para 5.

25 Summary records of the 320th UNCITRAL Meetings, available at <https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/320meeting-e.pdf> (last accessed on 31-1-2021), Para 6.

26 Report of the United Nations Commission on International Trading Law on the work of its 18th Session, A/40/17, Para 87.

27Ibid. Introduction to the UNCITRAL 2012 Digest of Case Law on International Commercial Arbitration (1985 with amendments adopted in 2006), p. 1, Para 1 available at <https://www.uncitral.org/pdf/english/clout/MAL-digest-2012-e.pdf> (last accessed 31-1-2021)

28 Report of the Working Group on Arbitration of its Thirty-third Session (A/CN.9/485), Para 38.

29 Report of the Working Group on Arbitration on the work of its Thirty-fourth Session, A/CN.9/487, Para 34.

30 Report of the Working Group on Arbitration on the work of its Thirty-sixth Session, A/CN.9/508, Paras 32-35.

31Id, Paras 34-35; Settlement of commercial disputes : Preparation of a model legislative provision on written form for the arbitration agreement, A/CN.9/WGII/WP.136, Para 10; Report of the Working on Arbitration on the work of its Forty-fourth Session (A/CN.9/592), Para 68.

32 Report of the Working Group on Arbitration on the work of its Forty-fourth Session (A/CN.9/592), Para 65.

33Id, Paras 66-67.

34 Article 141, Constitution of India.

35(2011) 1 SCC 320.

36Id, para 12.

37 Order 8 Rule 5, Code of Civil Procedure, 1908.

38(2020) 12 SCC 767.

39Canara Bank v. MTNL, 2011 SCC OnLine Del 5705; Canara Bank v. MTNL, 2011 SCC OnLine Del 5704.

40MTNL v. Canara Bank, (2020) 12 SCC 767, paras 9, 10.

41(2018) 12 SCC 736.

42Tata Elxsi Ltd. v. Anand Joshi, 2000 SCC OnLine Kar 120; Shyamraju & Co. (India) (P) Ltd. v. City Municipal Council, 2019 SCC OnLine Kar 3177

43G. Kapoor v. Reacon Engineers (P) Ltd., 2019 SCC OnLine Del 10667.

44Gajulapalli Chenchu Reddy v. Koyyana Jaya Lakshmi, 2009 SCC OnLine AP 202.

452000 SCC OnLine Kar 120.

46Id, para 5.

472019 SCC OnLine Kar 3177

48G. Kapoor v. Reacon Engineers (P) Ltd., 2019 SCC OnLine Del 10667, paras 15-17.

49Gajulapalli Chenchu Reddy v. Koyyana Jaya Lakshmi, 2009 SCC OnLine AP 202, para 11.

50Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill, (2012) 2 SCC 108, paras 20-21.

51High Court of Gujarat v. Gujarat Kishan Mazdoor Panchayat, (2003) 4 SCC 712, paras 35 & 36; Rajdeep Ghosh v. State of Assam, (2018) 17 SCC 524, para 23.

52Southern Electricity Supply Co. of Orissa Ltd. v. Sri Seetaram Rice Mill, (2012) 2 SCC 108, para 48; Badshah v. Urmila Badshah Godse, (2014) 1 SCC 188, paras 16-18.

53Badshah v. Urmila Badshah Godse, (2014) 1 SCC 188, para 20.

Case BriefsHigh Courts

Chhattisgarh High Court: Rajendra Singh Samant J. allowed the appeal and directed to take up the proceeding for conciliation under Section 18 (2) of the Act, 2006.

The facts of the case are such that respondent 4 i.e. Core Fab Projects Pvt. Ltd. moved an application under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (in short ‘the Act, 2006’), before the Facilitation Council i.e. respondent 3 which was proceeded with and notice was issued to the petitioner for appearance in that proceeding. The instant petition was filed under Article 227 of the Constitution of India praying to quash the proceeding on application for reference before respondent 3 on grounds that the proceeding so initiated is against the provisions of Section 18 of the Act, 2006.

Counsel for the petitioners Mr Amit Soni submitted that the conciliation proceeding under Section 18 (2) of the Act, 2006 is a must, therefore, it is prayed that respondent 3 be directed to comply with Section 18 (2) of the Act, 2006, before proceeding to decide the reference.

Counsel for the respondents Mr B P Banjare and P R Patankar submitted that respondent 3 has followed the procedure as provided under the Act, 2006. Section 18 (5) of the Act, 2006 provides time within which the matter has to be decided and that time limit has already crossed.

The Court observed that the words in Section 18 (2) of the Act, 2006 give a mandate that the Council shall itself conduct conciliation in the matter or may seek assistance of any institution or center providing alternative dispute resolution services. The only word used in the provision is ‘conciliation’. Conciliation is procedure adopted for alternate dispute resolution in which neutral person proposes the parties in dispute to come to agreement for resolving the dispute between them, further there are specific provisions for conciliation in Arbitration and Conciliation Act, 1996. Therefore, the term ‘compromise’ has different meaning than term ‘conciliation’. In a compromise, both the parties in a dispute strictly negotiate with each other, whereas, in conciliation proceeding one neutral person is engaged in confidential manner to bring about the settlement of dispute between the parties and granted opportunity for compromise itself would not be sufficient.

The Court further observed that the parties were given opportunity to compromise and negotiate for terms and parties failed in that, subsequent to which, the proceeding under Section 18 (2) of the Act, 2006 has been closed and Facilitation Council has ordered for proceeding under Section 18 (3) of the Act. The Court further observed that the proceeding under Section 18 (2) of the Act, 2006 is still not over as the conciliation proceeding has not taken place, therefore, it is held that respondent 3 has failed to exercise its authority under Section 18 (2) of the Act, either by involving itself or by handing over the matter to any other institutions or centers providing alternate dispute resolution services.
The Court thus held “the order of the respondent 3 for proceeding under Section 18 (3) of the Act is erroneous and illegal regarding, in which interference is required for by this petition.”

In view of the above, petition was disposed off.[Sew Infrastructure Limited v. State of Chhattisgarh, 2021 SCC OnLine Chh 905, decided on 12-04-2021]


Arunima Bose, Editorial Assistant has reported this brief.

Op EdsOP. ED.

Introduction

Human beings’ need for survival brought competition for resources, which are limited in nature, with its fellow beings. And, with competition, came disputes and conflict, which were resolved firstly and foremost, part of human existence, by fighting or war. This instinctive phenomenon continues till today. But for particular disputes, human beings have been able to come up with other systems for resolving disputes; firstly, distribution of justice by the king (in case of tribes by the tribal chief); secondly, the most prominent method used in today’s world, litigation.

Litigation as a process involved to party contending of their rights, in front of an impartial Judge, through their respective advocates. The Judge after hearing the contention of both the parties delivers a judgment which determines the rights and liability of the parties. No doubt, this method is better than justice delivered by kings/queens (which can be on their whims and fancies) or war (which leads to damage to both the parties on a massive scale).

Litigation is a consequence of one of the human beings’ another instinct i.e. evolution. War and arbitrary judgments evolved into litigation because of limitations in those systems. Litigation, also, is not devoid of limitations, hence, human being’s quest for a better way of resolving disputes lead them to evolve an efficient and effective way of resolving the disputes i.e. the alternative dispute resolution (hereinafter referred to as “ADR”) system.

ADR is an alternative to litigation; and, involves mediation, arbitration, conciliation, negotiation, settlement by judiciary and any other process of resolving dispute which does not involve court; and is governed by certain rules. The result (or settlement) of the proceedings shall be enforceable in law. With the passage of time, ADR is becoming a popular method of resolving disputes between the parties, particularly, in commercial disputes. These methods allow the parties to make choices with regard to law or rules which will be applicable to these proceedings. All the methods in most of the proceedings use a third party as an adjudicator or mediator (as per the method chosen by the parties) chosen by the parties with their consent. This provides satisfaction to the parties with regards to the process and adjudicator because these processes make people feel empowered and in control of the proceedings. After all, people desire certainty the most in life.

Evolution of Modern Arbitration Law in India

Though arbitration prevailed in India, in the form of panchayats (which have been now given recognition in the Constitution of India)[1] before the Britishers came in and established their authority. In 1923, the League of Nations gathered and agreed to the Geneva Convention. The Geneva Convention also contained clauses for arbitration.[2] The first arbitration dedicated provision in the Civil Procedure Code, 1908 which had Section 89 providing for arbitration but the same was repealed by Section 49 and Schedule III to the Arbitration Act, 1940.[3] Prior to enactment of the Arbitration Act, 1940, the Britishers enacted Arbitration (Protocol and Convention) Act, 1937 wherein the Preamble of the Act stated that India was signatory as a State to the Protocol on arbitration as established by League of Nations.[4] The League of Nations intended to bring the world closer through trade which made it realise the importance of arbitration. As a result, the Protocol on Arbitration Clauses, 1923 came into existence. There were several lacunae in the Protocol, hence, a need for amendment was felt. The League of Nations came up with another Convention for Enforcement of Foreign Arbitral  Awards which was lacking in the 1923 Convention.[5] This Convention of 1927 is also known as the Geneva Convention of 1927. This Convention formed the basis for other enactment i.e. the Arbitration (Protocol and Convention) Act, 1937. Section 3 of the Arbitration (Protocol and Convention) Act, 1937 refers to the existence of the Arbitration Act, 1899.[6] The Arbitration Act, 1940 came into picture repealing all the previous laws governing arbitration. The Arbitration (Protocol and Convention), 1937 failed to achieve its objective. Then after several years of work, in 1958, the world came up with a convention i.e the New York Convention, which is still running its course till date. Then, the Arbitration Act, 1940 was repealed and replaced by the Arbitration Act, 1960. The New York Convention inspired another legislation in the Foreign Awards (Recognition and Enforcement) Act, 1961 which was lacking in the Arbitration Act, 1960.

In 1981, in Guru Nanak Foundation v. Rattan Singh[7], Desai, J. observed with regards to the 1961 Act that the arbitration system has become ineffective. The point was that even in cases if the arbitrator passed an arbitral award, the parties used the provisions of the Act to challenge the award. This observation presented the 1961 Act as an additional layer which party may choose or not, prior to the litigation process. The lacunae in the provisions of the 1961 Act, made it redundant and people ended up approaching the courts for litigation. Arbitration as a process was meant to be cost effective and time efficient, but the 1961 Act failed miserably to achieve this objective. This Act would be further repealed and replaced by the Arbitration and Conciliation Act, 1996. In 1985, United Nations Commission on International Trade Law (UNCITRAL) presented a comprehensive model for arbitration. The present Arbitration and Conciliation Act, 1996 is based on that UNCITRAL model. The Arbitration and Conciliation Act, 1996 has been subjected to two more amendments in 2015 and 2019.

Conciliation

In 1987, prior to the enactment of the Arbitration and Conciliation Act, 1996, the Government enacted another legislation for resolving disputes i.e. the Legal Services Authorities Act, 1987[8]. The proceedings under this Act are in the nature of conciliation and the sitting Judge does not perform any adjudicatory function or there is no determination of rights.[9]

In P.T. Thomas v. Thomas Job[10], the Court highlighted the benefits of the legal Services Authorities Act, 1987 as following:

  1. No court fee is charged and if any fee is already deposited, it is given back on settlement of disputes.[11]
  2. It is very elastic as far as procedural law is considered and speedy in resolution of dispute. There is no application of rigid traditional procedural laws like the Civil Procedure Code, 1908 and the Evidence Act, 1872.[12]
  3. The Act enables the parties to directly interact with Judges (retired Judges who are appointed by the authorities concerned).[13]
  4. The proceedings cannot be conducted in an adversarial manner similar to what is done in courts.[14]
  5. The most important part of this Act is that if the dispute is settled; it is equivalent to a decree and enforceability of a court. The settlement arrived at by the parties is not appealable.[15] No civil appeal can be made from this settlement.[16]

In Bhargavi Constructions v. Kothakapu Muthyam Reddy,[17] the Court ruled that the settlement can be challenged on limited grounds i.e. challenge on the grounds of fraud, through writ jurisdiction under Article 226 or Article 227 of the Constitution of India.[18] [19]

The idea behind bringing the Legal Services Authorities Act, 1987 was “legal technicalities” does not get precedence over the resolution proceedings.[20]

The Arbitration and Conciliation Act, 1996 is another legislation which formally provides for the conciliation process. The conciliation process is mentioned in Part III of the legislation. The legislation also adopted as its rule the United Nation Commission on International Trade Law (UNCITRAL) Conciliation Rules. Section 66 of the Arbitration and Conciliation Act provides that the proceedings would not be bound by the Civil Procedure Code, 1908 and the Evidence Act, 1872[21]; no doubt this provision (and many other provisions) is for streamlining the conciliation procedures.

Section 18 of the Micro, Small and Medium Enterprises Development (MSME) Act, 2006, also provides for mandatory conciliation process by referencing the dispute with regards to payment due under Section 17 of the MSME Act.[22] Section 18(2) provides that Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 should apply to seek conciliation as referred under Section 18(1) of the Micro, Small and Medium Enterprises Development (MSME) Act, 2006.[23]

Mediation

In 1996, the Government brought an amendment to Section 89 of the Civil Procedure Code, 1908 which gave scope to the court to formulate settlements, if it appears to the court that there is a possibility of settlement between the parties and after receiving the referral from the parties to make amendments in such settlement and refer the same to arbitration, Lok Adalat, conciliation or mediation.[24] Mediation in India is governed by the Mediation Rules of 2003.[25] These proceedings are more informal in nature as compared to arbitration and conciliation. The role of the mediator is more of a person who provides guidance and clears any misunderstanding that arises between the parties. The parties reach settlement on their own. Mediator regulates the settlement process. At the end of the process, a settlement is arrived between the parties rather than a decision.

The Law Commission of India suggested establishment of commercial courts, first, in the form of creating division in the High Court itself[26] or establishing separate commercial courts[27]. The second suggestion resulted in the passage of the Commercial Courts Act, 2015. In 2018, the present day Government, in alignment of its policy of improving the ease of doing business, came up with an amendment to the Commercial Courts Act, 2015. The President, in May 2018, promulgated an Ordinance which amended the Commercial Courts Act, 2015. As per this amendment, the Government introduced pre-litigation mediation for all the commercial disputes.[28] The provision concerned is Section 12-A(1) which states that in cases where no interim relief is required, the matter would be referred to compulsory mediation. Section 12-A(2) empowers the Central Government, through notification, to authorise the authorities under the Legal Services Authorities Act, 1987 for pre-institution  mediation.[29]

Section 89 of the Civil Procedure Code 

In 2002, Indian Parliament brought an amendment to Section 89 of the Civil Procedure Code, 1908. The amendment brought in a different alternative dispute resolution mechanism in Section 89. The Bar at Salem was not satisfied by this and other amendments. In Salem Advocate Bar Assn.(I) v. Union of India[30], the constitutionality of Section 89 was challenged. The Court upheld the constitutionality of Section 89. The Court also observed that the availability of such provisions in foreign countries have been very successful. The Court constituted a committee under the chairmanship of Justice M. Jagannadha Rao (Retired) to review the difficulty in workings of the amendments. The Court also ordered for the formulation of rules with regards to meditation[31] and ADR. As per the Committee’s recommendation, the Supreme Court ordered all the High Courts to formulate their own rules for ADR and mediation.[32] The recommendations of the Committee were accepted by the Court in another judgment.[33]

Conclusion

Human civilisation has come a long way forward as far as methods for dispute resolution is concerned. The development of ADR mechanisms has been prominently driven by the objective of resolving the issues in a timely and cost effective manner. The evolution of ADR mechanisms portrays an entangled scenario; and, one thing is sure that both legislature and judiciary has had a hard time in streamlining all the ADR mechanisms and rules regarding them. The history of ADR mechanisms started with the enactment of arbitration laws which evolved a lot over time. With time the other ADR mechanisms knocked on the door of Indian Parliament and Parliament was prudent enough to incorporate these new methods for dispute resolution. The Government also ensured that these methods are used on a specific basis in particular industries, for instance, the Commercial Courts Act, 2015 and the Micro, Small and Medium Enterprises Development Act, 2006. There has been discontent within the legal fraternity with regards to amendments in Section 89, which has been resolved based on the recommendations of Justice (Retd.) M. Jagannadha Rao Committee Report. The present day Indian Government is taking further steps in the evolution of ADR mechanisms wherein it desires to make India a global destination for arbitration and other dispute resolution methods.


* BA LLB (Hons.), Associate at S&P LLP.

[1] The Constitution (73rd Amendment Act), 1992; also refer to Article 40 of the Constitution of India.

[2] League of Nations, Treaty Series, Publication of Treaties and International Engagements registered with the Secretariat of the League of Nations <https://treaties.un.org/doc/Publication/UNTS/LON/Volume%2027/v27.pdf>.

[3] Section 89 (repealed),  Civil Procedure Code, 1908;

 WIPO Document, p. 26 <wipo.int/edocs/lexdocs/laws/en/in/in056en/.pdf>.

[4] Preamble, Arbitration (Protocol and Convention) Act, 1937.

[5] Convention on the Execution of Foreign Arbitral Awards signed at Geneva on 26-9-1927 also known as the Geneva Convention, 1927.

[6] Section 3, Arbitration (Protocol and Convention) Act, 1937.

[7](1981) 4 SCC 634

[8] The Legal Services Authorities Act, 1987

[9] State of Punjab v. Jalour Singh, (2008) 2 SCC 660

[10] (2005) 6 SCC 478

[11] (2005) 6 SCC 478, 486, para 19

[12] Ibid.

[13] Ibid.

[14] Supra Note 8.

[15] Supra Note 9.

[16] Order 7 Rule 11(d) of the Code of Civil Procedure, 1908.

[17] (2018) 13 SCC 480

[18] Id., 487, para 24.

[19] Supra Note 8.

[20] Bar Council of India v. Union of India, (2012) 8 SCC 243

[21]Section 66, the Arbitration and Conciliation Act, 1996

[22] Section 18(1) of the Micro, Small and Medium Enterprises Development (MSME) Act, 2006

[23] Section 18(2) of the Micro, Small and Medium Enterprises Development (MSME) Act, 2006 

[24] Section 89, Civil Procedure Code, 1908

[25] Alternative Dispute Resolution and Mediation Rules, 2003.

[26] 188th Report of Law Commission of India on Proposals for Constitution of Hi-Tech Fast — Track Commercial Divisions in High Courts 

[27] 253rd Report of Law Commission of India on Commercial Division and Commercial Appellate Division of High Courts and Commercial Courts Bill, 2015

[28] Section 12-A of Commercial Courts Act, 2015

[29] Ibid.

[30] (2003) 1 SCC 49 

[31] Under Section 89(2)(d) of Civil Procedure Code, 1908

[32] Salem Advocate Bar Assn. (II) v. Union of India, (2005) 6 SCC 344

[33] Ibid.

Kerala High Court
Case BriefsHigh Courts

Kerala High Court: A.K. Jayasankaran J., allowed the present petition, clarifying the scope and ambit of powers to be exercised by Courts under Section 11 of the Arbitration and Conciliation Act, 1996 and the effect of pre-condition imposed against invoking of an Arbitration Agreement.

Brief Facts

Facts of the case are briefly mentioned hereunder;

  1. That the petitioner is a company incorporated under the Companies Act, 1956, with its registered office at New Delhi and the respondent is the Airports Authority of India, a statutory body under the aegis of the Ministry of Civil Aviation, Government of India that is responsible for creating, maintaining, upgrading and managing civil aviation infrastructure in India.
  2. That the respondent had floated a ‘request for qualification’ (RFQ) and ‘request for proposal’ (RFP) for concession to develop, market, setup, operate, maintain and manage the food and beverage outlets (F&B outlets) at Calicut International Airport, and invited bids from intending bidders in terms of the RFP and RFQ.
  3. That the petitioner submitted its technical and financial bids and in the evaluation procedure that followed, the petitioner was found eligible and was accordingly awarded the concession referred above.
  4. That the parties consequently executed the Letter of Intent to Award (LOIA) dated 07-12-2017 and the Concession Agreement dated 22-3-2018, containing the terms and conditions of the contract between them.
  5. That the respondents allegedly raised wrong invoices against the petitioner which was anyhow paid by them.
  6. That due to continued losses the petitioner was forced to issue a termination notice dated 16-4-2019 and finally vacated the premises on 13-8-2019.
  7. That the respondent unilaterally invoked the bank guarantee that had been furnished by the petitioner as security deposit and also proceeded to blacklist the petitioner from participating in future tenders floated by the respondent for a period of three years.
  8. That the invocation of the bank guarantee was injuncted by an order dated 05-09-2019 of the Principal District Judge, Manjeri passed in an Arbitration preferred by the petitioner under Section 9 of the Arbitration and Conciliation Act, 1996.
  9. That consequently, the petitioner invoked the arbitration agreement vide notice dated 23-09-2019 and nominated its Arbitrator to act as the sole Arbitrator, to adjudicate upon the disputes between the petitioner and the respondent arising out of and in relation to the concession agreement and requesting the respondent to agree to the suggestion.
  10. That on the respondent refuting the claim of the petitioner for recourse to arbitration, the petitioner was constrained to approach this Court through the present Arbitration Request.

 Contentions

Counsel for the petitioner, Sri S. Sreekumar assisted by Sri P.Martin Jose, submitted that obliging the petitioner to choose an Arbitrator from among a panel suggested by the respondent, fall foul of the law declared by the Supreme Court in Perkins Eastman v. HSCC (India) Ltd., 2019 SCC Online SC 1517, as also by the Bombay High Court in the judgment dated 04-12-2019 in Commercial Arbitration Application No.495/2019 between the very same parties and in respect of an identical agreement. Moreover, the condition in clause 5.15 of the RFP that requires the petitioner to pre-deposit amounts as a condition for invoking the arbitration can no longer be seen as a valid clause in the light of the judgment of the Supreme Court in ICOMM Tele Ltd. v. Punjab State Water Supply and Sewerage Board, (2019) 4 SCC 401, wherein it was opined that ‘deterring a party to an arbitration from invoking the alternate dispute resolution process, by insisting on a pre-deposit of 10 per cent would discourage arbitration, contrary to the object of de-clogging the court system, and would render the arbitral process ineffective and expensive’. Lastly, it is pointed out that the amendment made in 2015 limits the scope of examination of this Court, in proceedings under Section 11 of the 1996 Act to the existence of an arbitration agreement and nothing more. Reliance is placed on the decision of the Supreme Court in Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC 455  for the said proposition.

Counsel for the respondent, Sri NN Sugunapalan assisted by Sri V. Santharam, contended that the Arbitration Request is not maintainable for it being a premature step. A reference was made to clause 5.15(i) and (ii) of the RFP, which mandates that the petitioner has to deposit the disputed amount with the respondent as a condition precedent for invoking the arbitration clause. The Counsel further relied on the decision in S.K. Jain v. State of Haryana, (2009) 4 SCC 357, to contend that the Supreme Court had, in that case, found a clause, that required the party invoking arbitration to make a security deposit of an amount as a precondition for invoking the arbitration agreement, on condition that the said amount would be refunded to him if he succeeded in the action, as not illegal.

 Observations

Post Amendment Act of 2015, the role of court while entertaining a petition under Section 11 of the Arbitration and Conciliation Act, 1996 is limited to look at one aspect alone, namely, the existence of an arbitration agreement between the parties. In the instant case, the submissions advanced on behalf of the petitioner and the respondent indicates that there is no dispute among them as regards the existence of an arbitration agreement between them, the question urged being only as to whether the petitioner was required to fulfill certain preconditions before invoking the arbitration under the said agreement.

The condition that requires the petitioner to make a pre-deposit of amounts as a condition for invoking the arbitration, would fall foul of the law declared by the Supreme court in the decisions reported as Perkins Eastman v. HSCC (India) Ltd., 2019 SCC Online SC 1517 and ICOMM Tele Ltd. v. Punjab State Water Supply Board, (2019) 4 SCC 401.

 Decision

While allowing the petition at hand, the Court clarified the effect of a pre-condition for invoking the Arbitration Agreement, in the light of settled precedents. The Court further appointed an Arbitrator and issued relevant directions for the conduct of arbitration proceedings.[Lite Bite Foods v. Airport Authority of India,  2020 SCC OnLine Ker 4736, decided on 28-10-2020]


Sakshi Shukla, Editorial Assistant has put this story together

Hot Off The PressNews

Bar Council of India introduces Mediation with Conciliation as a compulsory subject to be taught with effect from the Academic Session 2020-2021 in 3 years and 5-year LL.B Degree.

BCI directs all the universities to incorporate the above-stated subject as a compulsory paper from the Academic Session 2020-2021.

In times of pandemic and Covid-19, when physical hearings in courts are suspended and norms of social distancing are required to be maintained, Mediation as a tool for conflict resolution has come to the fore. Litigants have been drawn towards Mediation and have begun to realize it’s immense benefits.

Mediation and Conciliation has been seen to lead to resolutions without undergoing arduous trials and moreover resolutions/solutions are arrived at, at a relatively lesser time.

Further BCI states that the teachers for such programs must be trained adequately. The qualification of teachers required to teach Mediation with Conciliation shall be decided by the Bar Council of India in consultation with any authority/institution as it may deem fit including U.G.C. For the moment, applications may be invited from the lawyers having at least 10 years of practice with theoretical knowledge and practical experience in these subjects, inclusive of trained Mediators/Conciliators, and from persons having 2-years LL.M Degrees in these subjects.

Training will also be introduced by the Bar Council of India, in the near future and subsequently, such certificate/ Diploma holders would be preferred for being appointed as Teachers for teaching the subject of Mediation and Conciliation.

Read the detailed Circular, here: Mediation_Mandatory_Bar_Council_Course


Bar Council of India

[Circular dt. 13-08-2020]

COVID 19Op EdsOP. ED.

The Micro, Small and Medium Enterprises (“MSMEs”) are an extremely critical sector for India’s economic growth. This has been highlighted during the tough times of COVID-19, where special financial stimulus packages have been showered on this sector by the Central Government.

MSMEs are regulated under ‘the Micro, Small and Medium Enterprises Development Act, 2006’[1] (“the MSME Act”) and one of the main objectives of the MSME Act has been to protect the MSMEs from defaulting buyers, who clog up payments these enterprises. The MSME Act mandatorily requires a buyer of goods and/or services from a MSME to make payments within forty-five days[2] else be subject to a steep rate of interest[3]. In order to provide a robust and efficient statutory mechanism, resolution of disputes[4] under the MSME Act is through the ‘Micro and Small Enterprises Facilitation Council’ (“the Facilitation Council”).

The reference of disputes to a Facilitation Council under the MSME Act is a statutory tier-wise dispute resolution mechanism[5]. The dispute is firstly attempted to be resolved by the Facilitation Council through conciliation either by itself or by making a reference to an institution/centre for conducting Conciliation under the aegis of the Arbitration & Conciliation Act, 1996[6] (“the A&C Act”). If the disputes remain unsettled through Conciliation, then the Facilitation Council either takes up the dispute itself or refers it to an institution or centre for resolution of disputes by way of arbitration under the A&C Act which ought to be completed within the statutory period of ninety days from making such reference.

Interestingly, in a plethora of decisions by the Supreme Court as well the High Courts across the country, conciliation as a pre-arbitral mechanism has been held to be merely directory and not mandatory. But would such decisions be also applicable to a statutory pre-arbitral mechanism? A possible No!

To aid the sellers further, the MSME Act lays down that in case the buyer challenges (“appeal”) any order/decree/award (specifically “award”), the appeal for setting aside such an award will not be entertained unless the appellant deposits a hefty 75% of the award amount[7] and a portion of that amount, as deemed fit by the Court concerned, pending the appeal would be disbursed to the seller subject to necessary directions. The constitutionality of this provision was put to test before the Kerala High Court[8] which was upheld and later in a different case was also discussed by the Supreme Court[9], thus the mandatory pre-deposit as a sine qua non for filing an appeal, ought to be followed.

Recently, a Single Judge of the Delhi High Court in ‘AVR Enterprises v. Union of India’[10](“AVR Enterprises case”) reignited the on-going debate over the status of arbitration proceedings concerning an MSME enterprise, that, whether such arbitrations originate under the MSME Act or are distinctly originated under the A&C Act? In the case concerned, the petitioner was a registered MSME enterprise which had invoked arbitration under the A&C Act. It was categorically held that, invocation of arbitration was not under the MSME Act as there was no ‘reference’ placed before the Facilitation Council which could have led to the statutory reference of arbitration under the MSME Act. It was also held that, provisions and requirements of Section 19 of MSME Act would only be applicable if the arbitration was initiated by way of a statutory reference made by the Facilitation Council and not when initiated inter-se between the parties based on a contractual arbitration agreement.

This is not the first time that this issue of an overlap between the MSME Act and the A&C Act has come up. It has been an on-going tussle of interpretation by the High Courts across the country. 

The Division Bench of the Gujarat High Court while dealing with the same proposition in ‘Saryu Plastics Pvt. Ltd. v. Gujarat Water Supply and Sewerage Board[11] (“Saryu Plastics case”) held that, upon a reading of Section 18 of MSME Act, the Facilitation Council is authorised to conduct conciliation either itself or refer the same to any center providing alternate dispute resolution services. The council is also authorised to arbitrate and render an award. Further it was held that, Section 19 of the MSME Act cannot be understood in a restrictive manner to be applicable only in a situation where an award is passed under Section 18 of MSME Act. Thus, it was held that, there cannot be a legally tenable situation that Section 19 of MSME Act would apply only in case of an award being passed by the Facilitation Council or any institute or center to which reference is made by the Council. 

It was also held that if such an interpretation was to be accepted, then the term ‘decree’ as provided in Section 19 of MSME Act would be rendered as redundant, as, neither the Facilitation Council nor any institution or center is empowered to pass a decree. Importantly, this judgment of the Gujarat High Court was appealed before the Supreme Court and was disposed of[12] with a slight modification with extension of timeline to make the pre-deposit before the court concerned for filing the appeal.

In our considered opinion, after a careful reading of Section 19 of MSME Act, it appears that the usage of the term ‘decree’ is a case of poor drafting by the Legislature. The Facilitaion Council itself, or any other institution or centre cannot be equated to a civil court which has the authority under law to pass a ‘decree’. Hence, the Gujarat High Court as well as the Supreme Court should have delved into this aspect.

A Single Judge of the Punjab & Haryana High Court, in what appears to be a similar view to that of the Delhi High Court, disagreed with the Division Bench of the Gujarat High Court, and held[13] that Section 19 of MSME Act is not applicable to an ‘award of the arbitrator’ unless the procedure as laid down in Section 18 of MSME Act is followed.

Coming back to AVR Enterprises case[14], it appears that the Single Judge placed reliance on a similar decision of an earlier coordinate Bench, to reach its conclusion and ultimately differed with the views of the Division Bench of the Gujarat High Court. In the earlier decision[15] of the Delhi High Court, it was held that the Facilitation Council is not bound by the terms of the arbitration agreement while making a reference. Further, the Delhi High Court in another case held[16] that the reference under Section 18 of MSME Act is a statutory reference and is dehors any arbitration agreement between the parties.

The incumbent Chief Justice of India, while presiding over a Division Bench at the Bombay High Court in a decision[17] dealt with the question of law that “what would be the next step after such a reference is made, when an arbitration agreement exists between the parties or not?” It was held that, there is no provision under the MSME Act, which negates or renders an arbitration agreement between the parties as ineffective. Referring to Section 24 of the MSME Act, it was pointed out that, it is enacted to give an overriding effect to Sections 15 to 23 of the MSME Act over any other prevailing inconsistent laws. It was further held that Section 18 of the MSME Act provides for the forum for resolution of the disputes which cannot have the effect of negating an arbitration agreement. It was also held that there is no question of an independent arbitration agreement ceasing to have any effect because, the overriding clause only overrides things/instances which are inconsistent therewith and per se there is no inconsistency between an arbitration conducted by the Facilitation Council under Section 18 of the MSME Act and an arbitration conducted under a contractual clause, since both situations would ultimately be governed by the provisions of the A&C Act. However, when both the laws are stacked up against each other, it might be interesting to note that the timeline to complete arbitral proceedings under the MSME Act is a strict 90 days with no provision of extension whereas the A&C Act comparatively has a larger time period for completion, with the option of extension of timelines.

The Calcutta High Court on this issue held[18] that, even when there exists an arbitration agreement between two parties and one of such parties is an MSME enterprise, only the Facilitation Council or any institution/centre identified by it, has the jurisdiction to arbitrate such disputes. The reasoning provided by the Calcutta High Court for reaching this conclusion was by relying on Section 2(4) of A&C Act which stipulates that, provisions of the first part of the A&C Act apply to a statutory arbitration impliedly, as if there was an arbitration agreement between the parties. However, the first part of the A&C Act would not apply in the event there is a conflict between it and the provisions of the Act concerned which enforces statutory arbitration, in this case being the MSME Act. 

Thus, the Calcutta High Court went on to hold that, upon a harmonious construction of the provisions of the MSME Act when read with the A&C Act, the arbitration clause contained in the agreement between the parties, which is governed under the A&C Act, stands superseded by the statutory rights granted under the MSME Act.

Hence, it can be seen that there is a situation of conflicting decisions on this issue of there being an overlap between the MSME Act and the A&C Act. In our understanding, the Delhi, Bombay and Punjab & Haryana High Court(s) have time and again held that in the event an arbitration proceeding is commenced under the A&C Act, it would be separate and dehors the statutory arbitration under the MSME Act. The reasoning of the three High Courts also appears to be similar. On the other hand, the Gujarat and Calcutta High Courts have taken a separate approach though on different principles. 

In our opinion, the Calcutta High Court’s decision appears to suffer from infirmities as it did not consider the settled principles of law. Undoubtedly, the MSME Act is a special Act, however, a three-Judge Bench[19] of the Supreme Court has held that the A&C Act is also a special Act, since it consolidates the law relating to arbitration. Interestingly, there is a conflicting opinion amongst the Supreme Court over the status of the A&C Act itself, where earlier a Division Bench held[20] that the A&C Act is a general law. Keeping the debate aside for the moment, in either of the two circumstances the MSME Act would prevail over the A&C Act, as it is a special Act which came in force later than the A&C Act.

However, what appears to be a more pragmatic and correct view, in our opinion, is that of the Delhi, Bombay and Punjab & Haryana High Court(s). Just by merely being an MSME enterprise does not bind such an enterprise to be taking all its decisions within the ambit of the MSME Act. Further, every such enterprise will have the option to either invoke arbitration if provided contractually, under the A&C Act and if not, then exercise its statutory option under the MSME Act. 

But, by virtue of there being a Facilitation Council, Conciliation and/or arbitration proceedings under the MSME Act cannot automatically exclude the invocation of arbitral proceedings under the A&C Act. Such an interpretation would also be in violation of the constitutional right of a person, for the freedom to choose its own avenue of legal proceedings. Though it is the be kept in mind that, in the event a party chooses to take the route under the MSME Act, then it cannot return to the provisions under the A&C Act. For example, strict timelines under MSME Act would have to be adhered to for completion of proceedings and then the enlarged timelines under the A&C Act cannot come to the aid of such an enterprise, which would stand excluded.

In our understanding, most of the decisions under the MSME Act have been challenged before the High Courts concerned on the issue of the mandatory pre-deposit to file an appeal. Thus, even if the Delhi, Bombay and the Punjab & Haryana High Courts were to hold that Section 34 of the A&C Act does not entail pre-deposit for being dehors the MSME Act, in our opinion, the requirement of 100% pre-deposit of the award as per the prevailing judicial legislation would kick in. Hence, the Delhi High Court in AVR Enterprise case ought to have considered the judgment of the Supreme Court in Hindustan Construction Company Limited v. Union of India[21] wherein, as a measure of protection and as a step in aid of the enforcement of arbitral awards, it was held that, in every case the Court concerned must insist on a 100% deposit, before hearing a petition under Section 34 of the A&C Act or before staying the enforcement of the award, however, the amount of deposit may depend on the facts of the case and would be as per the discretion of the  Court concerned hearing such petition.

When compared prudently, mandatory pre-deposit of 75% under the MSME Act would in fact be lesser than the 100% pre-deposit for a challenge under Section 34 of the A&C Act, as per the Supreme Court’s judicial legislation. Thus, it becomes crucial for the MSME enterprise to make a conscious choice keeping all factors in mind, whether to invoke the arbitral proceedings under the MSME Act or the Arbitration Act?

Hence, in view of the fractured verdict amongst the High Courts and there being divergent views, the stage is now ripe for the tussle amongst the High Courts to be played out before the final decisive authority, the Supreme Court, to finally settle the dust and put this debate to rest and pave a clear path ahead.


*Partner, L&L Partners Law Offices, New Delhi, India who specialise in commercial matters.

 **Managing Associate in Litigation and Dispute Resolution Group at L&L Partners Law Offices, New Delhi Authors can be reached out at sanjeevk@luthra.com and asehgal@luthra.com. The views expressed are personal.

[1] Micro, Small and Medium Enterprises Development Act, 2006

[2] Section 15 of MSME Act.

[3]. Section 16 of MSME Act.

[4] Section 17 of MSME Act.

[5] Section 18 of MSME Act.

[6] Arbitration and Conciliation Act, 1996 

[7] Section 19 of MSME Act.

[8] Kerala S.R.T.C. v. Union of India,  2009 SCC OnLine Ker 6621 

[9] Goodyear India Limited v. Norton Intech Rubbers (P) Ltd., (2012) 6 SCC 345

[10] AVR Enterprises v. Union of India, CM(M) No. 769/2018, judgment dated 08.05.2020

[11] Special Civil Appl. No. 12769 of 2017, judgment dated 11-9-2017.

[12] Gujarat Water Supply and Sewerage Board v. Saryu Plastics Pvt.  Ltd., SLP (C) No. 31022/2017, order dated 24-11-2017 

[13] State of Punjab v. Oasis Contractors and Consultant Pvt. Ltd. 

[14] AVR Enterprises v. Union of India, CM(M) 769/2018, judgment dated 08.05.2020

[15] Bharat Heavy Electricals Limited v. The Micro and Small Enterprises Facilitations Centre, 2017 SCC OnLine Del 10604

[16] Ramky Infrastructure Private Ltd. v. Micro and Small Enterprises Facilitation Council, 2018 SCC OnLine Del 9671

[17] Steel Authority of India Ltd. v. Micro, Small Enterprise Facilitation Council, 2010 SCC OnLine Bom 2208 

[18] NPCC Limited  v. West Bengal State MSEFC, 2017 SCC OnLine Cal 263  

[19] Consolidated Engg. Enterprises v. Irrigation Deptt., (2008) 7 SCC 169

[20] Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd., (2008) 4 SCC 755 

[21] 2019 SCC OnLine SC 1520

Op EdsOP. ED.

The principle of Gram Swaraj is based on the idea of “self-governance” or “self-rule” which teaches human beings to be self sufficient by living in peace and harmony and by understanding and respecting the needs and demands of their fellow brethrens.

In dispute resolution, this principle inspires the conflicting parties to resolve their disputes amicably by understanding and respecting the needs and demands of each other. The true aim of the dispute resolution system based on the principle of Gram Swaraj is to unite the parties towards the path of humanity and love for mankind.

Mohandas Gandhi, in his autobiography, had shared an instance wherein he successfully convinced the parties to arbitrate their dispute and, thereafter, successfully convinced the award holder to allow the award debtor to pay the awarded sum in “moderate instalments”, even though the instalments were to run “over a very long period”. Had his client (the award holder) not gotten convinced for such a settlement, the award debtor would be declared bankrupt “and there was an unwritten law among the Porbandar Memans living in South Africa that death should be preferred to bankruptcy.”[1] Gandhi wrote thereafter that “It was more difficult for me to secure this concession of payment by installments than to get the parties to agree to arbitration. But both were happy over the result, and both rose in the public estimation. My joy was boundless. I had learnt the true practice of law. I had learnt to find out the better side of human nature and to enter men’s hearts. I realized that the true function of a lawyer was to unite parties riven asunder. The lesson was so indelibly burnt into me that a large part of my time during the twenty years of my practice as a lawyer was occupied in bringing about private compromises of hundreds of cases. I lost nothing thereby – not even money, certainly not my soul.[2]

This enshrines the spirit of Alternative Dispute Resolution mechanism in India.

Alternative Dispute Resolution (hereinafter ‘ADR’),which stands as an acronym for a variety of dispute resolution methods such as arbitration, mediation, conciliation, Permanent Lok Adalats, etc., complements the formal justice system. The ADR mechanism gives the autonomy to the parties to select the procedure and the dispute resolution method which are best suited to their needs and preferences. This enables them to resolve their disputes more efficiently by avoiding the complexities involved in court adjudication. This means that they will have more freedom, relaxed rules, tailored remedies, speedy resolution, cost-efficient mechanisms, and an improved access to justice.

However, the parties while deciding to resolve their dispute through any mode of ADR face certain difficulties such as uncertainty in the selection of procedures, uncertainty in the selection of an efficient panel of neutrals (arbitrator, conciliator, mediator, etc.), uncertainty in fixing the fee of the panel of neutral(s), difficulty in searching for a proper place of proceeding etc. To overcome these shortcomings, the institutional ADR offers many advantages. The institutional ADR facilitates the process of ADR by equipping the parties with the prerequisites for effective conduction of the proceedings. For example, it provides to the parties a well built-in infrastructure, a panel of specialised and efficient neutral(s), uniform fees, updated rules, and predetermined procedures, among others.

While these institutional advantages can be avail for the ADR methods such as arbitration, mediation, negotiation, etc, in India, the institutional system of Permanent Lok Adalat (hereinafter ‘PLA’) provides for some additional benefits. Moreover, whenever we think about institutional ADR, we mostly think of Arbitration and Mediation. However, we fail to acknowledge that these mechanisms are predominantly of the rich and the corporate. The common man hardly avails justice through these modes of ADR. Thus, the PLA is an ADR institution for justice to the common man. It is cost-efficient, speedy, government-supported, and promises justice to all, irrespective of their economic, social, or other disability.

PERMANENT LOK ADALATS

Permanent Lok Adalats (hereinafter ‘PLAs’) are one of the most effective tools of ADR in India. PLAs are special tribunals established by the National Legal Service Authority (hereinafter ‘NALSA’) or the State Legal Service Authority (hereinafter ‘SLSA’) with a pre-litigation attempt to resolve the disputes related to public utility in a speedy manner by means of compromise. The latest statistics on PLAs available on the NALSA website reveal that currently there are 298 PLAs in the country which had collectively settled 102,625 out of 143,061 cases from April 2018-March 2019, the total settlement value of those touches Rs. 3,870,578,815[3]. Moreover, the pecuniary jurisdiction of the PLA has been increased from Rupees Ten lakhs to Rupees One crore.[4]

Unlike Lok Adalats which can only be called occasionally, PLAs are established institutions. With the aim of fulfilling the constitutional promise of justice to all, in an affordable, efficient and speedy manner, Parliament in 2002 made certain amendments in the Legal Services Authorities Act, 1987 (hereinafter ‘the Act’), and added Chapter VI-A for pre-litigation conciliation and settlement of the disputes.

This amendment, which gave birth to the system of PLA, was an attempt to further strengthen the system of Lok Adalat in India by institutionalising a forum for compulsory pre-litigation re-conciliation and settlement of disputes related to public utility services such as those related to transport, postal, sanitation, education, dispensary, banking, insurance, housing and real estate, power, light, water, etc.[5]

Further, the unique feature of PLA is that, unlike Lok Adalat, it is a hybrid mechanism of reconciliation and adjudication. In Interglobe Aviation Ltd v. N. Satchidanand,[6] the Supreme Court of India said that the procedural trait of PLA is CON-ARB (that is “conciliation-cum- arbitration”). Further, in Bar Council of India v. Union of India[7], it was said that PLAs are empowered to decide the dispute on merits upon failure between the parties to arrive at a settlement by the way of conciliation.[8]

This means that PLA has twofold power. First: it has the power to conduct the conciliation proceedings between the parties, taking into consideration the circumstances surrounding the dispute, to help them reach an amicable solution in an impartial, speedy, and independent manner.Second: if during the conciliatory proceedings in action, the panel of neutrals realises that one of the parties is unnecessarily becoming adamant to not settle the dispute, even when there exist possible “elements of settlement” for the parties to sign an ‘agreement of settlement on dispute’, then the PLA also has the power to give a decision in the dispute, provided that the dispute does not relate to any non-compoundable offence.[10]

Therefore, the major advantage of PLA is that even though it is a forum for ADR which primarily aims at resolving disputes consensually, yet it is empowered to give a final and binding decision when one of the parties purposefully gets unwilling to settle a fit case.

Are the awards of PLA appealable?

Every award of PLA is final and binding[11] and “shall not be called into question in any original suit, application or execution proceeding”[12]. Here, one may argue that the appeal of the award of PLA should be possible primarily because (i) the Act expressly doesn’t bar the appeal for the award of PLA whereas it does expressly bar the appeal for the award of Lok Adalat under Section 21(2) of the Act which says that “no appeal shall lie to any court against the award [of Lok Adalat]”[13] and (ii) because PLA can adjudicate a dispute on the merits of the case which opens room for the aggrieved party to move the award in appeal, in contrast to Lok Adalat which only conciliates a dispute and passes award on the consent of the parties, thus, leaving no room for an appeal.[14]

However, the Supreme Court of India refuted these arguments in Bar Council of India[15](supra), and held that the award of PLA is non-appealable. It further clarified that (i) the right to appeal is not an inherent right but a creation of statute; if a statute doesn’t expressly prohibits the appeal of an award, that by ipso facto doesn’t make an award appealable especially when the text of the statute strongly suggests otherwise; (ii) that PLAs are special tribunals aiming at resolving public utility disputes at the earliest, and hence, to avoid unnecessary prolongation, the right to appeal is absent; (iii) that if at all, a party is aggrieved by the adjudication of PLA, he always has an option to invoke the special and extraordinary jurisdiction of the High Court under Articles 226 and 227 of the Constitution of India.[16]

Procedure followed by PLA

The procedure followed by the PLA is in complete resonance with what is required to be followed in any ADR mechanism. The legislation requires that the proceedings in the PLA, both at the time of conciliation between the parties and at the time of deciding a dispute on merit if needed, should be guided by “the principles of natural justice, objectivity, fair play, equity, and other principles of justice.”[17] Moreover, it is required that the PLA should remain impartial and independent while conciliating the parties to reach an amicable solution.[18] Further, as far as procedural applicability is concerned, the PLA is not bound by the Code of Civil Procedure, 1908 and the Evidence Act, 1872[19]. However, “for the purpose of holding any determination”, the PLA shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit.[20]

Suggestions

While PLA is one of the fastest growing ADR institutions in the country, its jurisdiction to entertain only the matters related to the public utility services needs to be expanded. I suggest that the civil dispute claims such as breach of contract claims, tort claims, equitable claims, traffic rules claims, negotiable instrument claims, etc., must also be put under the purview of PLA. Here, it is noteworthy that according to the 245th Report of the Law Commission of India, the disputes related to negotiable instruments, police and traffic challan, electricity bills, and sanitation are the source of excessive litigation in the country.[21]

The huge backlog of cases only makes justice less accessible. Therefore, to reduce the backlog of cases, and in the interest of speedy justice, it is suggested that such disputes should compulsorily be resolved through PLA.

Further, after regarding the composition of PLA, it is my suggestion that there should be some definite definition of the term persons “having adequate experience in public utility service”.[22] In SN Pandey v. Union of India[23], the Supreme Court of India said that “We do emphasis that the persons who are appointed on the Permanent Lok Adalats should be person of integrity and adequate experience. Appropriate rules, inter alia in this regard, no doubt will have to be framed, if not already in place”.[24] Hence, it is proposed that the Government should notify certain specifications for the appointment of the neutrals in the panel of a PLA.

Lastly, a time-frame needs to be introduced for resolution of disputes in PLAs. Currently, there is no time limit for the resolution of disputes that are filed before PLAs.Therefore, if disputes are left unresolved for a longer period, there will be ambiguity and instances of unchecked discretionary actions by the PLA panels. Hence, to keep alive the spirit of PLA, a time-frame must be defined by the Government.

PLA vis-à-vis International Arbitration Institutions

Whether it can be said that PLA is an Indian model bearing close similarity to international arbitration tribunals?

While there are a few procedural similarities between the PLA and international arbitration institutions, the system of PLA is a unique one. The unique model devised to grant justice to the common man makes PLA stand out in the world from the rest of the ADR institutions.

The PLA charges zero fee for the resolution of disputes[25]. Also, the parties have the option of arguing their case by themselves, thus allowing them to save on the lawyer’s cost. In contrast, resolving a dispute before an international tribunal through any mode of ADR viz. arbitration, mediation, or conciliation is very costly. It involves hefty administration fee, counsel fee, neutrals’ fee (i.e. the fee charged by the panel of arbitrators, mediators, or conciliators as the case may be) among others.

Further, the PLA model is inherently a ‘multi-tier dispute resolution’ model i.e. it first provides conciliation of the dispute, and, if the conciliation fails because of the adamant nature charged with mala fide of one of the parties, then the PLA can even adjudicate the dispute. Whereas, to avail a multi-tier dispute resolution process before an international tribunal, it requires (i) consent of the parties at dispute, (ii) a multi-tier dispute resolution clause, (iii) time, resources, and efforts to defend any challenge related to the existence, validity, invocation, or qualification of the multi-tier dispute resolution clause, and (iv) multiple costs at every tier of the multi-tier dispute resolution.

Furthermore, under the PLA model, the parties do not have to decide anything ‘mutually’ concerning the dispute resolution before entering into any contractual relationship relating to the use of public utility services. PLAs are government institutions which provide CON-ARB form of ADR with pre-defined procedure, rules, composition and qualifications of the panelists, and which are currently located at 298 different ‘places’ in India. A party can unilaterally invoke the jurisdiction of the PLA without the need for any pre-existing dispute resolution agreement. In contrast, the resolution of a dispute before an international tribunal is purely based on ‘party autonomy’ and existence of a valid ‘dispute resolution agreement’. Thus, the parties have to mutually agree upon the form of ADR, its procedure, forum, place, venue, number of arbitrators (or mediators or conciliators as the case may be), subject-matter, etc., before entering into any contractual relationship. This involves a lot of time, effort, and resources both during the drafting of the dispute resolution agreement and thereafter, during defending its ingredients before the tribunal. The system of PLA, therefore, provides an escape route from these complexities and challenges, thus, saving a lot of time, resources and energy of the parties, and ensuring a time-bound resolution of the dispute.

Finally, the subject-matter of disputes before PLAs and international tribunals is largely different. PLAs aim at resolving public utility disputes at the domestic level while the international tribunals function to resolve international/domestic commercial disputes, investor-State treaty disputes, and State-to-State disputes. Both the tribunals, however, share similarity so far as both are (i) institutionalised forum of ADR and (ii) not bound by the domestic rules of evidence and civil procedure.

The advantages of the PLA cannot be compared readily with those of international tribunals. PLA is a forum that provides justice to the common man whereas international tribunals are predominantly of the rich and the corporate.

CONCLUSION

PLA – the unique hybrid of reconciliation and adjudication in India- is the Indian contribution to the world ADR jurisprudence. The PLA performs the function of promoting and strengthening the principle of “equal access to justice” in the country.  It is very popular among the litigants and legal functionaries not only because of its innovative nature and inexpensiveness but also because it serves the common man. The country which is infected with illiteracy, poverty, downtrodden and pendency of cases, PLA is the institutional ADR mechanism progressing towards the attainment of the principle of “Gram Swaraj” and the constitutional promise of justice to everyone at the doorstep.


*IV Year BA LLB (Hons.) student at Maharashtra National Law University, Nagpur. Email id: prakhar.spc@gmail.com

[1] Mahatma Gandhi, The Story of My Experiments with Truth 158 (1959).

[2] Ibid, 158-59 (1959).

[3] National Legal Service Authority, Permanent Lok Adalat, April 2018 to March 2019, National Legal Service Authority of India (May 02, 2020, 02:05 Am)

[4] Section 22-C(1) of the Legal Services Authorities Act, 1987

[5] See Section 22-A(b) of the Legal Services Authorities Act, 1987

See also, National Legal Service Authority, Lok Adalat: Permanent Lok Adalat, National Legal Service Authority of India (May 02, 2020, 02:25 Am), https://nalsa.gov.in/lok-adalat.

[6] (2011) 7 SCC 463

[7] (2012) 8 SCC 243

[8] See also, Section 22-C(8) of the Legal Services Authorities Act, 1987

[9] S.N. Pandey v. Union of India, (2012) 8 SCC 261

[10] Section 22-C(7) read with Section 22-C(8) of the Legal Services Authorities Act, 1987

[11] Section 22-E(1) of the Legal Services Authorities Act, 1987

[12] Section 22-E(4) of the Legal Services Authorities Act, 1987

[13] Section 21(2) of the Legal Services Authorities Act, 1987

[14] P.T. Thomas v. Thomas Job, (2005) 6 SCC 478

[15] (2012) 8 SCC 243

[16] Bar Council of India v. Union of India, (2012) 8 SCC 243

[17] Section 22-D of the Legal Services Authorities Act, 1987

[18] Section 22-C(5) of the Legal Services Authorities Act, 1987

[19] Section 22-D of the Legal Services Authorities Act, 1987

[20] Section 22(1) of the Legal Services Authorities Act, 1987

See also, Bar Council of India v. Union of India (2012) 8 SCC 243.

[21] Law Commission of India, Report No. 245 on Arrears and Backlog: Creating Additional Judicial (wo)manpower, Government of India, (July 2014) 

[22] Section 22-B(2)(b) of the Legal Services Authorities Act, 1987

[23] (2012) 8 SCC 261

[24] SN Pandey v. Union of India, (2012) 8 SCC 261

[25] National Legal Service Authority, Lok Adalat, National Legal Service Authority of India (May 04, 2020), https://nalsa.gov.in/lok-adalat.

Case BriefsHigh Courts

Himachal Pradesh High Court: A Division Bench of Surya Kant, C.J. and Sandeep Sharma, J. dismissed a letters patent appeal finding no merit in the case as the issue stood settled between the parties in the earlier round of litigation.

In the pertinent matter, the respondent was a workman engaged on daily wage basis as a Beldar, who continuously worked for more than 240 days in each year. On 30-3-1996 he was allegedly retrenched. The respondent-workman, after 14 years, raised a Demand Charter, to give rise to conciliation of proceedings under the Industrial Disputes Act. However, the Labour Commissioner, vide order dated 30-6-2011, eventually declined to refer the matter to Industrial Tribunal-cum-Labour Court, as according to him, there was no justification to raise the dispute after a period of more than 14 years. The Reference was thus declined. The respondent-workman then approached the Court where the matter was ordered to be referred to Labour Court-cum-Industrial Tribunal and the question of limitation of appeal was directed to be kept in view “while moulding the relief”. The appellants did not challenge the order and instead, the matter was referred to the Industrial Tribunal-cum-Labour Court, which further ordered the reinstatement of the respondent with seniority from the date of the demand notice was served and no back wages were granted. The Tribunal found that some juniors to the respondent were allegedly retained in the employment and this Principle of Last Come First Go was violated.

The impugned judgment was then challenged by the appellants-State before the learned Single Judge where the Court held that the State authorities, “cannot be permitted time and again to raise the plea of inordinate delay in raising the dispute”. Industrial Tribunal-cum-Labour Court, in deference to those observations, denied the reinstatement or seniority to the respondent-workman from the date of alleged retrenchment and restricted those benefits from the date when the Demand Notice was served. Therefore, no unjust enrichment has been allowed by denying the back wages to the workman.

The Court opined that “True it is that unexplained and inordinate delay in raising the Industrial Dispute can be effectively fatal to the claim itself but this issue stands already settled between the parties in the earlier round of litigation”. Further, it held that any view contrary to the Judgment already given will nullify the mandate of the same.[Chief Secretary (PW) v. Ram Gopal, 2019 SCC OnLine HP 403, Order dated 03-04-2019]