Conference/Seminars/LecturesLaw School News

   

The CCADR, CNLU, is going to organise a guest lecture on “Arbitration: Emerging Trends for Dispute Resolution” on 14th October 2022 by Mr. Bheem Singh, Deputy Manager (Law) in the Arbitration Cell of POWERGRID

About Chanakya National Law University

Chanakya National Law University [CNLU] is an autonomous law university in Patna, Bihar, India. It was established in 2006 by the Government of Bihar as a public university dedicated to the field of Legal Education.

About Chanakya Centre for Alternative Dispute Resolution

The Chanakya Centre for Alternative Dispute Resolution (CCADR) was established at Chanakya National Law University, Patna, in the year 2021, to promote academic research on themes pertaining to the resolution of disputes.

With the establishment of this research centre, we aim to develop a congenial environment for students and researchers to further their interest in ADR, which enables skill development and helps us compete at the national and international levels. CCADR will strive to promote different dispute resolution methods, get involved in the policy framework related to ADR, and encourage law students to participate in ADR by conducting competitions, and workshops, and promoting research.

About the Guest Lecture

The lecture is a vision of CCADR to provide a platform for students as well as young practitioners to learn from the experience of ADR, such as Arbitration, Mediation, and Negotiation experts.

Event Details

  1. Topic: “Arbitration: Emerging Trends for Dispute Resolution”

  2. Speaker: Mr. Bheem Singh, Deputy Manager (Law) in the Arbitration Cell of POWERGRID

  3. Date & Time: 14th October, 2022 at 03:00 PM onwards

Speaker's Details

Mr. Bheem Singh is working as a Deputy Manager (Law) in the Arbitration Cell of POWERGRID & Posted at the corporate Centre/Head Office at Gurgaon. He has a stellar academic record wherein he pursued LL. B (Hons.) from Banaras Hindu University in the year 2009-2012, LL.M. from Banaras Hindu University in the year 2012-2014, UGC-NET (2013) JRF-2014 and enrolled in PhD. Program in 2015 of Banaras Hindu University.

Mr. Singh has various publications under his name, including his book titled “Patent and Public Health in India” and various articles, namely, “Economic Reservation in India”, “Husband is not the master of wife: Sec 497 IPC”, “Arbitration and Conciliation Amendment Bill 2019: An assessment”, “Implications of Moratorium order under IBC”.

He has been a renowned Guest Faculty at various Legal training and awareness programs/seminars/workshops and invitees to judge various competitions related to legal and non-legal programs.

Mr. Singh joined POWERGRID as an Executive trainee (Law) on 01.11.2016. During his training, he got myriad exposure to law and working of corporations while getting posted at different Regional Headquarters situated across the country. After his training, he got posted as Asst. Manager (Law) at POWERGRID's Regional Head Quarter/ERTS-I RHQ/Patna, wherein he independently handles cases related to contracts, arbitrations, conciliation, Insolvency and liquidation/IBC, labour and statutory compliances, electricity laws, writ petitions, SLPs, title suits, injunctions, executions, lease, Land Acquisition, Forest land, tax matters, criminal matters, etc.

Apart from his above-stated credentials, he also undertakes other functions like furnishing in-house counselling to the management, being a member participant in meetings with the state government., District administration, and other local authorities, being a Nominated member in various in-house committees and vetting of agreements, deeds, documents, loans & advances applications, replying to legal notices, RTI applications, preparation and vetting of draft replies of cases, etc. Additionally, Mr. Singh is a Certified internal auditor for Information Security Management Systems (ISMS).

Registration & Meeting Link

  • The Registration is Free. Click HERE to register for the guest lecture.

  • Click HERE to join the meeting on 14th October 2022 from 02:55 PM onwards.

Contact Details

  • In case of any query, feel free to write to us at ccadr@cnlu.ac.in or contact the undersigned: Aridaman Raghuvanshi (Convener, CCADR): +919519621777 OR, Dakshita Dubey (Co-convener, CCADR): +918571918879

  • Contact Ayush Kumar (Co-convener, CCADR) in case of any technical difficulty: +91 7480830235.

  • For further updates about our events, follow CCADR on LinkedIn, Facebook, and Instagram!

Note: The lecture is open to all, irrespective of registration; however, the Certificate of Participation will only be provided to those who have attended the session and filled out the feedback form.

The official link to the post is here.

Dispute Resolution
Interviews

Vivek Shetty is a Partner in the Mumbai office of AZB & Partners. He has about 14 years’ experience in manifold areas of law and specialises in dispute resolution. He completed his bachelor’s degree in Law from Government Law College, Mumbai University in the year 2008 and successfully cleared the solicitor’s exam (Bombay Incorporated Law Society) in the year 2012.

The main focus of his practice has been dispute resolution pertaining to insolvency and bankruptcy and securities law. He has been involved in complex and high value disputes in this sector.

He has been interviewed by Shambhavi Anand, EBC/SCC Online Student Ambassador who is currently pursuing law from Amity Law School, Lucknow.

Q1. Please share with our readers something about yourself, your journey in the profession and your formative years.

Law was not a natural choice for me. I belong to a family involved in business and I am the first in my family to have worked in the service industry. I was decent with my academics and as hence, managed to get in Government Law College. The other option for a commerce graduate at that point in time was Chartered Accountancy, but the perception which was created for giving the CA exam was that one would end up giving attempts after attempts. Therefore, I opted for law. As my father is into politics, I was keen on doing law which would also eventually help me shape my career in politics.

That was the idea, but during my first year of law I met a relative of mine who works at a reputed law firm and he suggested that I should consider taking up internships and articleships in order to gain some practical experience. I joined DSK Legal, Mumbai as an articled clerk from where I cleared my Solicitors as well. At DSK Legal, I started working with the real estate team. However, thereafter got an opportunity to work for a litigation matter. Once I started doing litigation there was no looking back. I like litigation as the work is never monotonous and one would have an occasion to learn something new every day. Altogether, the journey has been a good roller-coaster ride and I wish the journey continues the same way.

Q2. What motivated you to pursue a career in the legal field and not in politics? Moreover, what were the difficulties and most important lessons which you came across in your journey from being a law student to a partner at AZB & Partners?

Politics require you to dedicate a lot of time. For instance, organising a blood donation camp would require you to be personally present there. After my first year in law school, I had joined DSK Legal, where the working hours would be normally long. Therefore, I barely had any time left to focus on anything else. At first I thought that I may get time to get involved in politics, but when I started my articleship I realised that I enjoy law and the applicability of mind in the ever-evolving field of law was shaping me nicely as a professional. Thus, I chose to pursue law over my ambition to pursue a career in politics.

In terms of the difficulties in my journey, as I mentioned earlier that I come from a business family background. Since childhood the idea was to get involved in the family business. Therefore, it was not easy for me to understand the professional expectations of a law firm, which involved a lot of unlearning process. Additionally, the technological challenge as I was not very good with computers and could not type fast. Therefore, when asked to draft a document, I would take assistance of a steno, which helped me in developing a skill of dictating drafts which is extremely helpful for a lawyer. As I am a first lawyer from my family, I had no contacts in the industry, which makes it more challenging than others to create a name for you in this fraternity. However, a strong will to do well has helped me to deal with the above challenges, amongst others.

Q3. What was the driving force which made you explore the field of dispute resolution and litigation? Furthermore, since you have been in this field for 14 years now, so according to you what are the set of skills which are necessary to grow in this field and what shall be the key focus areas?

I started my career with real estate and I realised that somewhere down the line it became monotonous for me. Today, I am doing matters in Small Causes Court, City Civil Court, Bombay High Court, Supreme Court, National Green Tribunal, Competition Commission of India, Securities Appellate Tribunal, Securities Exchange Board of India, etc. and am dealing with so many different areas of law. This is what excites me as every matter brings a new challenge, teaches me something new and forces me to think deep. I remember, doing matters for two different clients, where you are trying to interpret a provision of law differently for both clients. This is where litigation makes you think differently.

In order to excel in the field of dispute resolution and litigation (or for that matter any other branch of law) one should be hardworking, dedicated and focused. As an articled clerk, we were taught to make our own set of propositions based on our reading of the papers/proceedings, conduct research and circulate the material to every member of the team. So, if you are involved in a matter, do not wait for your senior to tell you what is to be done, instead be focused, own up the matter, inculcate the leadership skills and prepare beforehand based on what you think can be helpful for the matter. The most important mantra which I have always followed and will keep following is that “one should keep trying”. When you do that, you either win or lose, but you will never fail. Moreover, it is important that a junior focuses on his knowledge building as a priority and not think much about the monetary compensation in the formative years.

Q4. What are your cherished success stories and memorable litigation?

The most cherished moments for me are when I cleared my Solicitors, when I was first hired as an associate and when I was admitted to partnership. For me to reach here there was a lot which went into it not only from my end but also from my family’s end. In the background, lot of sacrifices were made and hence my family feels more proud of my achievements than what I do. The same is the reason why I say that these are the moments which I cherish the most because effectively it is the family’s wish which came true. There is one moment in my career which I will always remember. I was involved for a matter to advise Mr Sachin Tendulkar and we could successfully represent him, which was personally very satisfactory for me. Have always been a huge fan of the little master and to meet him personally as an advisor was probably the biggest high point of my career.

Q5. Can you please share with our readers any personal thing or trait which you enjoy about yourself?

I love playing cricket, football and in fact any games (but for indoor games) interest me a lot. One would see the same amount of passion in me when I am playing as when I am working. I never do anything half-heartedly and I think this is something which has always helped me in my life. Even if you ask me to play a sport which I have never played in my life, you will not see me going there and not giving my best. The other thing which I am obsessed about is going to the gym and working out. I need my one/two hours of exercise everyday and I do not remember the last day when I had missed my training. In terms of personal traits, I am extremely stubborn when it comes to achieving something and will give my heart and soul for it. I will always do things passionately and with all seriousness. I am confident and always believe in my abilities to do well in any situation. Moreover, I am a huge bollywood fan.

Q7. What does “exhaustion of research” mean to you and how much, according to you, is the impact of it in the field of litigation?

In my opinion there should not be any restrictions in terms of how much one can look at. As a team we will be a much improved set if we have done an exhaustive research. The reason being, we would have looked at the ratio, we would have looked at the proposition which we are targeting and also looked at the laws which are incidental to the proposition that we are targeting. Thus, in future if situation demands of you a research data which is incidental to the proposition that you were earlier researching on, then the team would be ready with the data that was researched earlier, subject of course to further research. At the end of the day, if you have done your research properly, you will have a clear mindset as to what is the proposition to target and will be able to give a clear and meticulous answer to the client. Therefore, research has to be exhaustive.

Q8. What are the key attributes and skills which AZB & Partners consider while hiring an associate and what are the most important points and activities which a law student should focus on, if he/she wants to start his/her career with a law firm?

In terms of the attributes that AZB & Partners or for that matter any other professional law firm would generally look for while hiring juniors is academics, your internship experiences and most importantly how dedicated and focused were you when you worked as an intern for a short period (normally a month). Whether you were always available when the team required you to be and could work well with the team and whether you have the urge/hunger to work and learn.

Q9. How much importance would you attach to proper legal research at an undergraduate level and the tools used for doing it? How should law students equip themselves with legal research skills?

I would say that this is one of the most important tool or weapon which you are creating for yourself when you actually go into the real world and start practising as a lawyer. Therefore, if your research skills are good, I would say that fifty per cent of your job is done. At any age, if your research skills are good you tend to work more efficiently and effectively.

From my experience, SCC Online has been immensely helpful. Even as a student, I preferred using SCC Online. I found the software to be extremely user friendly and has the best image quality, which is why even Judges prefer to read judgments printed from SCC Online. I remember, as a student, one of my priced possessions was the SCC key which I had bought around sometime in 2008-2009.

Q10. Any advice which you would like to give to our readers?

One should be true to oneself. Whether you are in the legal profession or any other profession, the focus should be more on learning than on earning, at least in your formative years. As long as you are focused on learning everything else will follow. As you grow in life, try and become more humble. Life is unpredictable, and you never know what is in store for you. Never burn your bridges with anyone. Try and work with a smile even when stressed. It surely helps is dealing better with stress. Last but not the least, always make time for exercise.

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Introduction

Multi-tiered dispute resolution clauses are even termed escalation, multi-step, or “ADR first” agreements. Both parties understand that if an issue arises, they will use a process-based approach, which may include negotiation, mediation, or conciliation, along with expert determination or arbitration, if appropriate.[1] These preliminary procedures are designed to help both parties to resolve any disputes before taking the subject to court or arbitration. Such articles often begin with an obligation to negotiate, including bringing in top management or involving being involved in conciliation or mediation processes. The adjudicatory process (arbitration) is the final tier of these clauses to speed up the resolution of disputes, and it is employed only if the initial stages have failed. Multi-tier provisions are found in all of these types of construction contracts, service contracts that need specialised knowhow, and turnkey contracts.[2]

One of the most critical questions is whether the non-adjudicatory portions of these articles, such as the tiers requiring dialogue and/or mediation, are mandatory and enforceable. Let us say a party does not do anything, in the beginning, to move forward in the talks or mediation, and submits an arbitration request instead. These initial efforts are a requirement to further arbitration, correct? The outcome of this lawsuit will be decided by tribunals or courts. Should the parties complete the preliminary stages of a conflict before initiating arbitration proceedings? Respondents in several International Chamber of Commerce (ICC) cases have taken exception to the request’s admissibility because they could not comply with the arbitration requirement, which required them to negotiate amicably.[3] A court will grant a motion to proceed with a case only if it believes that an arbitration agreement may exist and will allow the Arbitral Tribunal to make the ultimate determination of whether the parties have upheld their end of the agreement.

This clause is of critical importance, but it must be crafted with great care. If the wording is unclear, then it could lead to uncertainty and the unenforceability of the agreement. While scholars, courts, and Arbitral Tribunals have been split on the enforceability of such consensual and non-deterministic forms of conflict resolution. One school of thought holds that the non-determinate nature of the clauses makes them impossible to enforce, while the other holds that the parties’ choice of such clauses should be given precedence and so be binding and enforceable.[4]

Commonly adopted tiers in multi-tier clauses

When used to refer to alternative dispute resolution (ADR), it can be defined as a variety of dispute resolution techniques that do not include the court or arbitration. As such, avoid the imposition of any mandatory obligation.[5] These are in contradistinction of arbitration and litigation, which are judicial processes leading towards binding obligations; therefore, categorised as more formal processes. Some of the commonly adopted ADR methods that form part of the hierarchy in a multi-tiered dispute resolution clause leading finally to an arbitration process are —

Negotiation.— Negotiation is a well-accepted technique in commercial contracts.  It is a non-binding method in which direct discussions are used to arrive at a probable conclusion, and a third party is not used. A properly written conflict resolution clause that describes the subject-matter to be negotiated and the negotiating method and composition of the group may reduce or even eliminate the chances of the disagreement lingering. While a poorly conceived clause could cause any binding dispute resolution mechanism to be delayed, on another side, appropriately crafted clauses could expedite the process.[6]

Mediation.— Mediation envisions a skilled expert who serves as a neutral facilitator by aiding the parties in reaching a mutually agreeable settlement to the problem, all while staying outside the resolution process itself.[7] This type of practice is sometimes referred to as mediation, which involves a voluntary agreement on the side of both parties or a court-sponsored program. Aiding in the consolidation of trust between the parties and removing any psychological barriers results from the technique. To ensure that the third party’s intervention is not counterproductive and gives the parties control, the procedure begins with the parties’ consent.

Expert Determination.— A third person facilitated process expert determination is similar to arbitration – it results in a binding decision.[8] The critical distinction between the two, depending upon immunity from liability. An arbitrator in arbitration has immunity from liability, whereas an expert must bear liability for carelessness. Even further, the difference results from the way the binding judgment is enforced. In the absence of voluntary compliance by the parties, an arbitral award is enforceable under the New York Convention on the Enforcement of Foreign Arbitral Awards, 1958[9], but an expert determination can only be enforced through judicial actions.

Dispute Adjudication Boards.— Dispute Adjudication Boards (DABs) are created under a distinct agreement. Many firms have adopted the International Federation of Consulting Engineers’ model clauses and procedures since they are considered an industry standard (FIDIC). The DABs are dedicated to resolving any concerns that emerge while the contract is in effect, and they keep this up for the duration of the agreement. These Boards serve multiple purposes; they are both preventive and restorative. The usage of these particular terms in international construction and engineering contracts is increasing. When it comes to large initiatives supported by the World Bank, such forums can be found with a total value above $50 million.[10] One of the ICC’s Rules, called the ICC Dispute Board Rules, includes three alternative Dispute Boards, which it terms the Dispute Resolution Board, the Dispute Adjudication Board, and the Combined Dispute Board.[11]

Arbitration.— The private technique of conflict settlement known as arbitration is a final and binding solution when all parties agree. Unlike Judges, arbitrators appointed by the parties via an agreement do not have to adhere to the same strict standards of procedure and law that apply in courts but can instead follow the procedure and substantive law that fits the particular situation as spelled out in the arbitration agreement’s framework. All of these international agreements, as well as national arbitration legislation and even the rules that govern arbitrations, have all helped increase the binding nature of the process.

Indian position in terms of enforceability

Although frequently included in dispute resolution clauses, the legal status of pre-arbitration procedures in India is uncertain. According to the data, courts have had to deal with this topic multiple times, and there have been contradictory results. One approach, in general, has been that of the courts, which generally have taken two approaches. For the most part, courts have ruled that all pre-arbitration procedures must be carried out, including things like gathering evidence and issuing subpoenas. Courts, in general, consider voluntary and non-mandatory pre-arbitration steps to be applicable (the minority opinion).

In M.K Shah Engineers & Contractors v. State of M.P.[12], the Supreme Court held that the prerequisites procedures mentioned in the arbitration clause are essential in nature. Parties cannot bypass or skip the prerequisites to invoke arbitration directly.

In Simpark Infrastructure (P) Ltd. v. Jaipur Municipal Corpn.[13], the Rajasthan High Court held that the procedure of dispute resolution has to be made a condition precedent for invoking arbitration. In this case, the clause stated that the parties will resolve the dispute amicably as a condition precedent.

In Tulip Hotels (P) Ltd. v. Trade Wings Ltd.[14], the Bombay High Court held that the pre-arbitral step was mentioned in the clause as a mandatory procedure to be followed for invoking arbitration. The procedure mentioned in the clause is mandatory in nature to invoke arbitration.

In Nirman Sindia v. Indal Electromelts Ltd.[15], the Kerala High Court on the escalation clause was of the opinion that:

  1. … When the parties to a contract agree to any special mode for resolution of the disputes arising out of the agreement and they are bound to comply with the mode prescribed under the agreement. Without resorting to the first step provided for the resolution of the dispute in the agreement they cannot jump to the second step or to the final step to settle the disputes between the parties.

However, some of the High Courts have taken a divergent view on the same “Whether the clause is mandatory or directive in nature.” The Bombay High Court while analysing the issue in S. Kumar Construction Co. v. Municipal Corpn. of Greater Bombay[16] held that the language of the clause was not able to establish a mandatory nature of pre-arbitral steps.

On the other side, the Delhi High Court (DHC) has adopted a firm position. The Delhi High Court in legion of cases has held that the pre-arbitral steps or multi-tier dispute resolution clause is directive in nature. In Ravindra Kumar Verma v. BPTP Ltd.[17] the Court has considered pre-arbitral requirements as a directive and not mandatory. In Sikand Construction Co. v. SBI[18] and Saraswati Construction Co. v. East Delhi Coop. Group Housing Society Ltd.[19] and a legion of cases, the Delhi High Court has reiterated the pre-arbitral steps as not mandatory requirement for invoking arbitration.

Analysis

Courts and arbitrators have employed a wide range of dispute resolution mechanisms in the event of multi-tier clauses. Many times, emphasis was put on discovering practical responses to the many specific situations, as opposed to a focus on doctrinal concerns and on more exact legal concepts. Arbitrators should ultimately be permitted to make this decision if there is a legitimate arbitration agreement in place.[20] This illustrates the principle of kompetenz-kompetenz. Arbitrators must rule on the issue of whether or not the conditions for the initiation of arbitration have been met.[21] This concludes that the correct parties to make the arrangement for performing a mediation obligation are those with authority to mandate specific performance under the applicable law. The Tribunal, not the courts, will decide this because there is an arbitration clause in the contract. Such orders may or may not be accessible in State courts as preliminary measures. An argument can be raised against such an order being preliminary or intermediate, rather than final, because it would not be in keeping with the agreement.[22]

There are also other points that must be addressed. Among these points is whether or not a failure to meet the agreement’s conditions for negotiation or mediation impacts the Tribunal’s jurisdiction. There are competing views, but the correct answer is “no” unless the parties have already agreed to exclude[23] the Arbitral Tribunal from hearing the matter if there are any delays in proceeding to the pre-arbitral phases. The Tribunal’s jurisdiction describes its authority to decide a dispute. Both parties agreed to choose a tribunal to act as a stand-in for the State courts and also agreed to exclude State courts from the arbitration agreement. To say that this depends on prior pre-arbitration steps means that a party can back out of the arbitration agreement if they fail to comply. It is difficult to believe that parties agreed to forego State courts in favour of arbitration only if, prior to the pre-arbitration negotiation and/or conciliation, the other party made it clear that he or she would not follow the agreed-upon pre-arbitration steps.[24] If a party realised that the other party would not follow the agreed-upon pre-arbitration steps, then that party would prefer to litigate rather than arbitrate the dispute. The parties did not intend this. Therefore, it should not be assumed that the process by which the parties have reached their ultimate decision-making body was influenced by the question of whether they went through the agreed-upon settlement procedures. Both Articles 13 and 14 of the UNCITRAL Model Law[25] appear to be grounded on the same conclusion. According to the document, a project of this magnitude should be accomplished by the Arbitral Tribunal with power. Also, if one were to consider the pre-arbitral steps as conditions precedent to the arbitrators’ jurisdiction (as opposed to conditions precedent to the admissibility of the request for arbitration), this could create difficulties in connection with the potential necessity of preliminary measures prior to completion of the pre-arbitral steps and could have an adverse effect on the question of lis pendens and the interruption of limitation periods.[26] In any event, the issue of whether a multi-tiered dispute resolution clause raises a valid condition precedent to the Tribunal’s authority to decide on the matter is a question of jurisdiction, which under the principle of kompetenz-kompetenz is to be decided by the Tribunal itself.[27]

The language of the clause also plays an important role in deciding the nature of the pre-arbitral steps. While drafting the clause, the draftsmen should emphasise on the words which are clear and mandatory in nature. The draftsmen can use the word “should comply” rather than “may comply” or the pre-arbitral steps should be described in more detailed manner rather than using the terms like amicable settlement. In engineering contracts, the adjudicating authority in beginning phase of dispute should not be the Engineer-in-Charge or any other head from the companies an independent mediator or lawyer should be appointed to be resolve in the beginning phase only.  Justice N.V. Ramana, Chief Justice of India in his address at the India-Singapore Mediation Summit said that mediation should be made compulsory as the first step of dispute resolution[28]. If the disputes arising from the multi-tier dispute clause can be stopped by mentioning in the clause that mediation is compulsory which needs to be followed by the parties and parties agree to abide by the pre-arbitration steps, and the non-fulfilment of the clause should not be entertained by the court or the Arbitration Tribunal.

Conclusion

Multi-tiered dispute resolution clauses use several dispute resolution procedures to handle different levels of cases, with cases proceeding through a number of dispute resolution stages as long as the first stage does not solve the issue. When one of the parties fails to abide by the steps agreed upon in the contract, issues relating to multi-tiered dispute resolution clauses are not handled properly, and thus the dispute resolution clause’s enforceability is in jeopardy. Despite the growing usage of multi-tier dispute resolution clauses around the world because of their flexibility in dealing with a wide range of issues, a few countries remain unclear on how to enforce the clauses.


3rd Year student, BA LLB (Hons.), NMIMS School of Law, Bangalore. Author can be reached at <ashish.kumar11@nmims.edu.in>

[1]Klaus Peter Berger, Integration of Mediation Elements into Arbitration — Hybrid Procedures and Intuitive Mediation by International Arbitrators, 19 Arb. Int’l 387 (2003).

[2]James H. Carter, Issues Arising from Integrated Dispute Resolution Clauses: Part I, in New Horizons in International Commercial Arbitration and Beyond, ICCA Congress Series No. 12, 446 [A.J. van den Berg (Ed.), 2005].

[3] Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration 43 (2004).

[4]Dana H. Freyer, Practical Considerations in Drafting Dispute Resolution Provisions in International Commercial Contracts — A US Perspective, 15 J. Int’l Arb. 7, 9 (No. 4, 1998).

[5]Kayali, Enforceability of Multi-Tiered Dispute Resolution Clauses, 553.

[6]Dana H. Freyer, Practical Considerations in Drafting Dispute Resolution Provisions in International Commercial Contracts — A US Perspective, Journal of International Arbitration 15, No. 4 (1998), 7.

[7] Martin Hunter, The Freshfields Guide to Arbitration and ADR: Clauses in International Contracts, Kluwer Law and Taxation Publishers, 1993), 64.

[8]Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, (London: Sweet & Maxwell, 2004), 50.

[9] New York Convention, 1958 (Enforcement of Foreign Arbitral Awards).

[10]Walter Mattli, Private Justice in a Global Economy: From Litigation to Arbitration, International Organization, 55 No. 4, (Autumn 2001), 920.

[11]James H. Carter, Issues Arising from Integrated Dispute Resolution Clauses: Part I, in New Horizons in International Commercial Arbitration and Beyond, 2005, A.J. van den Berg (Ed.) (Kluwer Law International, 2005), 446.

[12] (1999) 2 SCC 594.

[13] 2012 SCC Online Raj 3833.

[14] 2009 SCC Online Bom 1222.

[15]1999 SCC Online Ker 149, 442.

[16] 2017 SCC OnLine Bom 130.

[17] 2014 SCC OnLine Del 6602.

[18] 1978 SCC OnLine Del 180 : ILR (1979) 1 Del 364.

[19] 1994 SCC OnLine Del 563 : (1995) 57 DLT 343 : 1994 RLR 458.

[20] A decision by Zurich Court of Appeals of 9-11-2001, published in ZR 101 (2002), No. 21, 77-81; Bernardo M. Cremades, p. 7 et seq.

[21] Kathleen Scanlon, Country Report for the US, in Enforcement of Multi-Tiered Dispute Resolution Clauses, IBA Newsletter of Committee D (Arbitration and ADR), Vol. 6, No. 2, October 2001.

[22]Philip Naughton Q.C., Country Report for England in Enforcement of Multi-Tiered Dispute Resolution Clauses, IBA Newsletter of Committee D (Arbitration and ADR), Vol. 6 No. 2, October 2001.

[23]Robert N. Dobbins, The Layered Dispute Resolution Clause: From Boilerplate to Business Opportunity, Hastings Business Law Journal, 2005.

[24] Decision BGH, reported in (1984) Neue Juristische Wochenschrift, Heft 12, pp. 669-670.

[25] UNCITRAL Model Law on International Commercial Arbitration.

[26] Nathalie Voser, Sanktionen bei Nichterfullung einer Schlichtüngsklausel, case note decision of 15-3-1999, of the Zurich Court of Cassation, ZR 99 (2000) No. 29; ASA Bulletin 2002, pp. 376-381.(not clear please check)

[27] Craig Tevendale, Hannah Ambrose and Vanessa Naish, Multi-Tier Dispute Resolution Clauses and Arbitration, The Turkish Commercial Law Review No.1, February 2015, 37.

[28]Make mediation first step to settle disputes: CJI N. V. Ramana, The Times of India, dt. 18-7-2021, <https://timesofindia.indiatimes.com/india/make-mediation-first-step-to-settle-disputes-cji-n-v-ramana/articleshow/84515193.cms>

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One of the basic tenets of arbitration as a dispute resolution mechanism is the resolution of parties’ disputes by “independent” and “neutral” adjudicator(s). In line with this principle, the 2015 Amendment1 to India’s Arbitration and Conciliation Act, 19962 (the Act) introduced Section 12(5)3 and the Seventh Schedule4, which when read together rendered a person de jure ineligible to act as an arbitrator in specified circumstances.

To further enhance the integrity of the arbitral process, the Supreme Court of India through its decisions in TRF Ltd. v. Energo Engg. Projects Ltd.5 and Perkins Eastman Architects DPC v. HSCC (India) Ltd.6, expounded that the essence of the 2015 Amendment is that a person who is statutorily ineligible to act as an arbitrator by virtue of Section 12(5) read with Seventh Schedule to the Act must also be de jure ineligible to unilaterally and exclusively appoint anyone else as an arbitrator.

In light of the above, it is necessary to consider the stages at which a challenge can be mounted against the unilateral appointment of arbitrator by a de jure ineligible appointing authority (unilateral appointment). Should such a challenge be mandatorily raised during the pendency of arbitral proceedings or can it be raised for the first time in proceedings to set aside the award? Since there is no clarity on this issue, this article attempts to minimise the grey area in this regard.

Challenge to unilateral appointment during pendency of arbitral proceedings

It is open to a party to challenge the unilateral appointment of an arbitrator at any stage during the pendency of the arbitral proceedings itself. Further, mere participation in the arbitration proceedings i.e. filing of pleadings or leading of evidence, etc., would not come in the way of raising objections against unilateral appointment at any stage of the arbitral proceedings. In order to understand the mechanism for such challenge, it is necessary to first briefly examine the legal validity/effect of unilateral appointment.

 Effect of unilateral appointment

The de jure ineligibility to act as an arbitrator imposed by Section 12(5) read with Seventh Schedule to the Act goes to the “root of the appointment”. An arbitrator who is so ineligible would therefore “lack inherent jurisdiction” to proceed with the arbitration.7

In TRF8 and Perkins9, in light of the principles underlying Section 12(5) and the Seventh Schedule, the Supreme Court has interpreted these provisions as not only imposing de jure ineligibility to act as an arbitrator in certain specified cases, but as also imposing de jure ineligibility to act as an appointing authority, since a person cannot indirectly purport to do that which he cannot do directly.10 Consequently, in Bharat Broadband Network Ltd. v. United Telecoms Ltd.11, the Supreme Court observed that unilateral appointment in violation of Section 12(5) read with the Seventh Schedule to the Act would be void ab initio.12

To sum up, it can be said that unilateral appointment vitiates the very root of the appointment, rendering it void ab initio and therefore, an arbitrator so appointed would lack inherent jurisdiction to conduct the arbitration.

Mechanism for challenge

In view of the legal validity/effect of unilateral appointment explained above, an arbitrator who has entered into reference through unilateral appointment ought to withdraw from the arbitration, even without any application by a party to challenge the unilateral appointment, since the dejure ineligibility of the appointing authority would strike at the root of the appointment. In any event, under Section 14(1)13 of the Act, the mandate of such an arbitrator would terminate immediately if the parties agree to such termination. However, in case of any controversy in this regard, the party challenging such appointment may approach the court to decide on the termination of the arbitrator’s mandate and appointment of a substitute, under Section 14(2) of the Act.14

This avenue for challenge is available at any stage of the arbitral proceedings in any arbitration which has commenced and in which unilateral appointment of arbitrator was made on or after 23-10-2015 [the date on which Section 12(5) came into effect], as is evident fromBharat Broadband15as well as the decision of  the Delhi High Court in Proddatur Cable TV Digi Services v. Siti Cable Network Ltd.16.

Waiver of right to challenge unilateral appointment

The statutory requirements for waiver of the applicability of Section 12(5) of the Act are strict. Reference in this regard may be made to Bharat Broadband17 as well as the Delhi High Court’s decision in Reom Infrastructure and Construction Ltd. v. Air Force Naval Housing Board18.

Unlike Section 4 of the Act19 (a generic provision on the waiver of right to object to non-compliance with requirements under the arbitration agreement or non-mandatory provisions of the Act) which permits deemed waiver, the proviso to Section 12(5) is explicit that a waiver under Section 12(5) can happen only through an express agreement in writing i.e. an agreement made in words as opposed to an agreement which is to be inferred from conduct or an exchange of documents.

In JMC Projects (India) Ltd. v. Indure (P) Ltd.20, the Delhi High Court further expounded that any waiver in writing of the applicability of Section 12(5) must necessarily reflect the parties’ awareness of the applicability of the provision and the resultant invalidation of the arbitrator’s eligibility to arbitrate the dispute as well as a conscious intention to waive the applicability of the provision.

Thus, mere silent participation in the arbitral proceedings through filing of pleadings, filing of applications to the arbitrator for extension of time to file evidence, filing of applications for extension of time for continuance and completion of the arbitral proceedings, etc. can neither be construed as a party’s waiver of the applicability of Section 12(5) nor as an estoppel against the party’s right to challenge the unilateral appointment of arbitrator.

Challenge to unilateral appointment after issuance of final award

There is no bar under Section 34 of the Act21 to set aside an award rendered by an arbitrator who was appointed through unilateral appointment. In fact, in Bharat Broadband22, although the Supreme Court was dealing with an appeal from a decision of the High Court rendered in proceedings under Section 14(2) of the Act, it set aside the award which had been rendered by the arbitrator in the interim, upon reaching the conclusion that the challenge to unilateral appointment was maintainable and justified.

Based on the authors’ analysis, an award rendered by an arbitrator appointed through unilateral appointment can be set aside by the Court under Section 34(2)(b)(ii) of the Act, on the ground of violation of fundamental policy of Indian law, since as explained in TRF23 and Perkins24, unilateral appointment militates against the very essence of the 2015 Amendment to the Act.

The authors are not aware of any Supreme Court precedent involving a situation wherein unilateral appointment was considered as good ground for setting aside an arbitral award, despite the fact that no challenge to the unilateral appointment was raised by the party during the pendency of the arbitral proceedings. However, the Madras High Court when faced with such a situation in JV Engg. Associate v. CORE25, set aside the arbitral award since the case involved a scenario wherein both the appointing authority and the arbitrator were de jure ineligible under Section 12(5) read with the Seventh Schedule to the Act. However, the Madras High Court, beyond observing that the parties had never waived the applicability of Section 12(5), did not expound on the jurisprudential basis for the maintainability of a challenge against unilateral appointment for the first time in proceedings to set aside the award under Section 34 of the Act.

In this context, the authors argue that such a challenge is maintainable primarily because a unilateral appointment is void ab initio resulting in the arbitrator inherently lacking jurisdiction to enter into reference, as already explained in the preceding paragraphs. Since an award passed by an arbitrator without inherent jurisdiction would be a nullity in any event (principle of coram non judice), it is possible to agitate lack of jurisdiction for the first time even at the stage of Section 34 proceedings. This position of law has been settled by the Supreme Court in decisions such as Lion Engg. Consultants v. State of M.P.26 and Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran Nigam Ltd.27.

Closing remarks

Where an arbitrator has entered into reference through unilateral appointment, the ideal and ethical route to proceed would be to ask the parties if they are willing to state that they have full confidence in the Tribunal despite the unilateral appointment and therefore, waive the applicability of Section 12(5) in writing. Should the parties be reluctant to do so, the arbitrator ought to withdraw from the arbitral proceedings since he or she is de jure ineligible to act as an arbitrator.

Further, it is advisable for the affected party to challenge a unilateral appointment at the inception of arbitral proceedings under Section 14 of the Act, to avoid wastage of time and resources. Doing so would also eliminate the necessity to wade into the question of whether such a challenge can be raised for the first time in Section 34 proceedings.

As a matter of caution, parties wishing to reserve the right to challenge unilateral appointment should be wary of any boilerplate language in procedural orders issued by the arbitrator which states that parties do not have any objection to the appointment of the arbitrator, since the same may be considered to be a waiver in writing of the applicability of Section 12(5).


*Senior Associate, AK Law Chambers.

**Associate, AK Law Chambers.

1Arbitration and Conciliation (Amendment) Act, 2015.

2http://www.scconline.com/DocumentLink/QWdt5a4f.

3http://www.scconline.com/DocumentLink/9ajA4z9b.

4http://www.scconline.com/DocumentLink/9ajA4z9b.

5(2017) 8 SCC 377.

62019 SCC OnLine SC 1517.

7See HRD Corpn. v. GAIL (India) Ltd., (2018) 12 SCC 471.

8(2017) 8 SCC 377.

92019 SCC OnLine SC 1517.

10See TRF Ltd. v.EnergoEngg. Projects Ltd., (2017) 8 SCC 377, paras 55-57.

11(2019) 5 SCC 755.

12See Bharat Broadband Network Ltd. v. United Telecoms Ltd., (2019) 5 SCC 755, para 18.

13http://www.scconline.com/DocumentLink/y0QTX63N.

14See Bharat Broadband, (2019) 5 SCC 755, paras 14-17.

15Bharat Broadband, (2019) 5 SCC 755, paras 18 and 20.

162020 SCC OnLine Del 350, paras 26-27.

17(2019) 5 SCC 755, para 20.

182021 SCC OnLine Del 2857, paras 8 and 9.

19http://www.scconline.com/DocumentLink/D8UZ7ger.

202020 SCC OnLine Del 1950, paras 35 and 38.

21http://www.scconline.com/DocumentLink/teuo89l3.

22(2019) 5 SCC 755.

23(2017) 8 SCC 377.

242019 SCC OnLine SC 1517.

252020 SCC OnLine Mad 4829.

26(2018) 16 SCC 758, para 6.

27(2019) 17 SCC 82, paras 9 and 10.

Op EdsOP. ED.

The international trade has increased manifold with infrastructural advancements i.e. transportation from ships, railroads, automobiles to airplanes. With influx of international trade, the bilateral and multilateral trade agreements have increased and so the disputes arising thereof. The disputes arising therein have always been preferred to be resolved through arbitration rather than the routine course of litigation. The parties to the international trade prefer arbitration for dispute resolution. However, there are several conventions and treaties which regulate and enable the enforcement of a foreign award in a signatory country.

A. Historical background and evolution of recognition and enforcement of foreign arbitral award in India

While tracing down the path of development in the field of “enforcement” and “recognition” of foreign arbitral award, India had two statutes i.e. the Arbitration (Protocol and Convention) Act, 1937[1] and the Foreign Awards (Recognition and Enforcement) Act, 1961[2] to deal with it. The Arbitration (Protocol and Convention) Act, 1937 was an offspring of the Geneva Protocol, 1923 and the Geneva Convention, 1927. Whereas, the Foreign Awards (Recognition and Enforcement) Act, 1961 came into picture as a result of the New York Convention, 1958. After the First World War, the need to have a robust mechanism to resolve the disputes arising out of the international trade across the countries was very strongly felt. The International Chamber of Commerce (ICC) formulated an International Convention for smooth implementation of arbitration clause which used to be mentioned in definitive agreements. Thereafter, the Protocol on Arbitration Clauses was ratified by 30 countries on 24-9-1923 which categorically dealt with the arbitral procedure and execution of arbitral awards. Article I of the Protocol provided for recognition with respect to the international agreements between the countries, which were part of the Protocol which shall ensue that any future differences were to be resolved by arbitration[3].

The Government of India adhered to the Geneva Protocol on Arbitration Clauses, 1923 and the International Convention on the Execution of Foreign Arbitral Awards, 1927. The idea was to be included among the countries, which adhered to the abovementioned Protocol and Convention, in order to enable the resolution of commercial disputes through arbitration arising out of various underlying international agreements. However, subsequent to the implementation of the Geneva Protocol on Arbitral Clauses, there were few predicaments which came into light for instance; the beneficiary of the award was required to show to the executing court that award has attained finality in the country in which it was made in the first place. The said procedure was not very effective and was not in lines with the spirit and objective with which the Convention came into picture i.e. speedy and smooth enforcement of an arbitral award.

After several rounds of deliberations, a new International Convention on recognition came into picture for the recognition and enforcement of foreign arbitral awards i.e. the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention, 1958). The Indian Legislature adopted the New York Convention, 1958 and enacted the Foreign Awards (Recognition and Enforcement) Act, 1961, which was enacted with an objective to put in place a robust mechanism, wherein the commercial disputes of contracting countries can be referred to arbitration. It aimed at providing an effective and speedy disposal and consequent smooth enforcement of the foreign awards[4]. The Arbitration (Protocol and Convention) Act, 1937 incorporated the Geneva Protocol and Geneva Convention as First and Second Schedules. The Foreign Awards (Recognition and Enforcement) Act, 1961 similarly embodied the Schedules of the New York Convention, 1958[5].

The United Nation Convention on the Recognition and Enforcement of Foreign Arbitral Awards was ratified by India on 13-7-1960. After the enactment of the Arbitration and Conciliation Act, 1996[6] (“the Arbitration Act, 1996”), the two Acts i.e. the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961 were repealed. The Arbitration Act, 1996 was enacted in consonance with the UNCITRAL Model Law and Rules. Note that Part II of the Arbitration Act, 1996, deals with enforcement of a foreign award in India.

B. Definition of “enforcement” and “recognition”

The term “recognition” is more of a defensive mode to secure an arbitral award. The “recognition” secures protection to an arbitral award if the same parties to a convention go for a subsequent arbitration. The contesting party may seek recognition of an arbitral award to set off any other claim qua arbitration between the parties within whom the issues arising therein have already been settled. However, at the same time if, there are new issues which have arisen and which were not a part of earlier round(s) of arbitration, then those issues may be looked into and the very idea to set off while getting the award recognised arrives to a standstill.

“Enforcement” on the other hand is more on an offensive front. A party seeking enforcement of an award not only intends to get the award recognised but also to enforce the same by using appropriate legal sanctions. One may argue that “recognition” and “enforcement” are contemporaries and they act in tandem.

In Brace Transport Corpn. of Monrovia v. Orient Middle East Lines Ltd.[7], the Supreme Court held that:

  1. … An award may be recognised, without being enforced; but if it is enforced then it is necessarily recognised. Recognition alone may be asked for as a shield against re-agitation of issues with which the award deals. Where a court is asked to enforce an award, it must recognise not only the legal effect of the award but must use legal sanctions to ensure that it is carried out.

Now, before going any further, let us try to understand the meaning of “foreign award”. The term “foreign award is defined under Section 44 of the Arbitration Act, 1996[8]. It states that “foreign award means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after 11th day of October, 1960—

  • in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and
  • in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette.”

The New York Convention, 1958 defined an “arbitral award” as “The term ‘arbitral award’ shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which parties have submitted.”

The High Court of Calcutta in Serajuddin & Co. v. Michael Golodetz[9] observed that the term “foreign arbitration” would also include arbitrations where one of the parties belongs to a country which has not ratified the Geneva Convention. The Court went on to examine the decisions where the terms “foreign arbitration” and “foreign award” were used and concluded that they were used in connection with the following:

  1. arbitrations in foreign lands;
  2. foreign arbitrators;
  3. application of foreign law; and
  4. foreign nationals.

The Court observed that the countries that have ratified the Geneva Conventions have included certain class of such arbitrations and awards within the definitions under the Arbitration (Protocol and Convention) provisions, however, the definitions were not exhaustive. In this case where one party was Indian and the other US citizens, the Court was of the view that even though the arbitration did not fall within the ambit of the Indian Arbitration (Protocol and Convention) Act, 1937[10] and American laws were applicable, it satisfied all the characteristics of foreign arbitration as aforementioned.

The Delhi High Court in GAILv. Spie Capage SA[11] has very beautifully dealt with the evolution of “enforcement” and “recognition” of foreign award as per the provisions of two primitive Acts i.e. the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961.

Procedure of “recognition” and “enforcement” of an arbitral award under the Arbitration and Conciliation Act, 1996

The procedure for enforcement and execution of decrees in India is governed by the Code of Civil Procedure, 1908[12] (CPC, 1908) while, arbitral awards in India is primarily governed by the Arbitration Act, 1996. There are specific provisions i.e. Sections 44 and 49[13] dealing with “recognition” and “enforcement” of arbitral awards under the Arbitration Act, 1996.

India is a signatory to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (New York Convention, 1958) as well as the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 (Geneva Convention, 1927). If a country, which is a party to any of the Conventions, receives an award to be enforced, then the recognition and enforcement is governed by that particular Convention.

The process of enforcement of a foreign award is basically a three-stage process. Firstly, the party which is seeking to enforce the award shall make an application under Section 47 of the Arbitration Act, 1996 to the court having appropriate jurisdiction. The party or the judgment- debtor thereafter may challenge the enforcement before the court under the grounds such as the agreement not having a valid arbitration clause or failure to give proper notice of the appointment of an arbitrator or the Arbitral Tribunal committed a mistake of law or fact. As it has been held in plethora of judgments that Part I of the Arbitration Act, 1996 is not applicable to foreign-seated arbitrations and therefore, grounds of challenge available under Section 34 of the Arbitration Act, 1996[14] cannot be availed to challenge a foreign award.

The award before getting enforced has to fulfil the essential conditions as enshrined under the Arbitration Act, 1996. Once, the award fulfils the essential conditions of the Arbitration Act, 1996, it gets executed just like a court decree under CPC, 1908. The essentials for the enforcement of an award are enshrined under Section 47[15] of the Act, 1996. The award shall be in original or in the manner as required by the laws of the country in which it is intended to be enforced. Secondly, the agreement out of which the dispute had arisen shall accompany and the agreement shall be in original or a certified copy along with such evidence as may be necessary to prove that the award is a “foreign award”. However, in order to create a more pro-enforcement environment, the Supreme Court in PEC Ltd. v. Austbulk Shipping Sdn. Bhd.[16] held that the word “shall” under Section 47 read as “may” must be restricted only to the initial stage of filing of the application. It means that the applicant might not be necessarily required to file the required documents at the time of making the application. The Court observed that certain courts have taken a strict view with respect to the filing of documents while others have held that non-filling of documents does not necessarily call for ejection of the application.

The requirement of an award being appropriately stamped while executing an award has been a contentious issue. However, as far as stamping of the awards is concerned, the Supreme Court inShriram EPC Ltd.v. Rioglass Solar SA[17] very categorically held that, the stamping in not a mandatory condition. The Supreme Court also held that there is also no such requirement of registration and the award can be enforced as a court decree.

C. Forum for enforcement of foreign award

The Supreme Court in Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.[18] held that while enforcing a foreign award there in no such requirement under the statute to initiate separate proceeding seeking an order to file execution of a foreign award. Relying upon the Supreme Court judgment, the Bombay High Court in Noy Velissina Engineering Spa v. Jindal Drugs Ltd.[19] held that a person seeking execution of a foreign award can execute it as a decree of the court.

 The term “court” is defined under the Arbitration Act, 1996 under Section 2(1)(e)[20] as:

  1. (1)(e).…(i) in the case of an arbitration other than international commercial arbitration, the Principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court, or any Court of Small Causes;

(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court.

It was held by the Supreme Court in State of Maharashtra v. Atlanta Ltd.[21] that the award-holder shall file the application for enforcement of a foreign arbitral award before the competent court in whose jurisdiction the assets of the judgment-debtor are located. Also, if in a situation, where assets of the judgment-debtor are located within territorial jurisdiction of multiple courts, the application for execution of the award can be filed simultaneously in all such courts having jurisdiction.

Moreover, the Supreme Court in Sundaram Finance Ltd. v. Abdul Samad[22]  while providing some clarity as to the appropriate court to approach for enforcement of a foreign award held that a foreign award-holder can initiate execution of the award before any court in India having territorial jurisdiction where the assets are located. It is important to note that, after the establishment of commercial courts under the Commercial Courts Act, 2015[23] if the foreign award is of a specified value, the designated commercial court of the appropriate court having the territorial and pecuniary jurisdiction shall have the jurisdiction to enforce the award.

For the awards arising out of India seated arbitration although being an international commercial arbitration, after the introduction of the Commercial Courts Act, 2015 and Arbitration and Conciliation (Amendment) Act, 2015[24], the jurisdiction lies with the Commercial Division of the particular High Court, where assets of the judgment-debtor is situated.

D. Enforcement in case of award passed in reciprocating and non-reciprocating countries

Section 2(6) CPC, 1908[25] defines “foreign judgment” as “foreign judgment means the judgment of a foreign court”. Therefore, any court which is outside the territorial jurisdiction of India and a judgment passed by it shall be deemed to be a “foreign judgment”. The perplexity occurs for a party who is intending to enforce a foreign award in two situations, one when the award is passed by a reciprocating country and one when the award is passed by a non-reciprocating country.

A party seeking enforcement of an award passed by a reciprocating country may do so by filing an execution petition just like an execution of a decree under the court having appropriate jurisdiction under Section 44-A CPC, 1908[26]. As explained above, the execution is filed in a court under whose jurisdiction the assets of the judgment-debtor are located. Also, after the establishment of commercial divisions in various high courts of the country, the execution shall be filed accordingly in the appropriate high court if there is money/claim which is to be realised out of the award passed. Otherwise, place of execution will depend on the location of the assets of the judgment-debtor.

On the other hand, if a party seeking enforcement of an award passed by a non-reciprocating country has to file a fresh suit in the court having appropriate jurisdiction in terms of Orders 5, 6 and 7  CPC, 1908. Thereafter, the suit will run like a routine civil suit wherein written statement would be filed as per Order 8 CPC, 1908, after completion of pleadings the issues would be framed as per Order 9 CPC, 1908 followed by evidence stage i.e. recording of evidence. After hearing the parties, the court will pass a judgment and within 15 days of passing, the court draws a decree. Note that, the limitation period for filing for enforcement in the appropriate court is three years from the date on which the award was made. It is to be further noted that upon filing of a fresh suit, the foreign award annexed with the suit shall be treated as evidence by the court in terms with Section 86 of the Evidence Act, 1872[27].

It is of paramount importance to remember that in both the cases, the execution or suit has to fulfil the essential criteria under Section 13 CPC, 1908[28], which postulates certain conditions which are to be fulfilled in order to hold the foreign judgment to be conclusive. Those conditions are as below:

  1. Where it has not been pronounced by a court of competent jurisdiction?
  2. Where it has not been given on the merits of the case?
  3. Where it appears on the face of the proceedings to be founded on an incorrect view of incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable?
  4. Where the proceedings in which the judgment was obtained are opposed to natural justice?
  5. Where it has been obtained by fraud?
  6. Where it sustains a claim founded on a breach of any law in force in India?

E. Public policy and its evolution through various precedents

The concept of “public policy” has been a contentious issue lately in the Indian judicial diaspora. It is used as one of the grounds for refusal for enforcing an arbitral award. However, in a landmark decision in Bharat Aluminum Co. v. Kaiser Aluminium Technical Services Inc. (Balco)[29] came as a silver lining in the regime of Indian jurisprudence bringing together the age of “pro-enforcement stance”. The Bench of five Judges in Balco case[30] while drawing a clear line between vires of a domestic and foreign-seated arbitration held that Part I of the Arbitration Act, 1996 would not be applicable to foreign-seated arbitration. The judgment also while limiting the quantum of judicial interference, held that a foreign award cannot be challenged under Section 34(2) of the Act, 1996. While, again applying a little restrained approach, the Supreme Court in Renusagar Power Co. Ltd.v. General Electric Co.[31], held that merely a violation of Indian laws would not attract refusal to enforce an award under the ground of “public policy”.

The Supreme Court later on while deviating from a “pro-enforcement stance”, in ONGC v. Saw Pipes Ltd.[32] expanded the test of “public policy” and held that such awards which violate the Indian laws would be held to be “patently illegal” and the same would be held to be against the “public policy” of India. Such an interpretation opened up a Pandora’s box for the contesting party to contest the issues involved in the arbitration again and thereby delaying the entire process of enforcement of the award.

Furthermore, in Phulchand Exports Ltd. v. O.O.O. Patriot[33] the Supreme Court again went ahead and expanded the purview of “public policy” under Section 48 of the Arbitration Act, 1996[34] and interpreted the purview in consonance with Section 34. The Supreme Court after Saw Pipes[35] went two steps backward with the judgment in Phulchand[36] and provided an opportunity to the contesting parties to challenge the finality of the award on merits.

The Supreme Court in ONGC v. Western Geco International Ltd.[37] held that:

  1. …What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an arbitral tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest.

The judgment in Associate Builders v. DDA[38] followed the preposition set forth in ONGC[39]and held that the term “public policy” shall be interpreted broadly. These judgments were passed with a regressive approach as the Supreme Court conjointly interpreted Sections 48 and 34 of the Act, 1996 thereby allowing the parties to go into the merits of the arbitral award.

Very recently, the Delhi High Court in Campos Brother Farms v. Matru Bhumi Supply Chain (P) Ltd.[40] refused to enforce a foreign arbitral award under the Arbitration Act, 1996. The Court held that, if the arbitrator while passing the award had missed to consider a material issue relating to the maintainability of the arbitral proceedings then such an issue can be a ground to refuse the enforcement of an arbitral award under the ground of “public policy”. It was considered by the court that such an approach would violate the basic principles of justice.

The Supreme Court in National Agricultural Coop. Mktg. Federation of India v.  Alimenta SA[41], observed that enforcement of a foreign arbitral award is subject to the “public policy of India” test. The case can be adjudged to be homage to the parochial attitude regarding quantum of interference in the enforcement of a foreign arbitral award. However, the aforementioned judgment was a major divergence from its earlier judgment in Vijay Karia v. Prysmian Cavi E Sistemi SRL[42] which canvassed a pro-arbitration stance from the Supreme Court.

F. The silver lining in the enforcement of a foreign award: The public policy conundrum

In Shri Lal Mahal Ltd. v. Progetto Grano Spa[43], the Supreme Court brought the purview of “public policy” in lines with the New York Convention, 1958 and overruled the preposition set forth in the judgment of Phulchand[44]. In Shri Lal Mahal[45], the award was challenged under Section 48 of the Act, 1996 on the ground of it being “patently illegal” and thereby violating the Indian laws. The Court held that the ground of the award being “patently illegal” cannot be entailed within the purview of Section 48 of the Act, 1996 and such a ground will only be limited within the purview of Section 34 of the Arbitration Act, 1996. The Court held that while deciding upon the enforcement of a foreign award, the role of the court is very limited and Section 48 of the Arbitration Act, 1996 does not afford an opportunity to review the award on merits.

In the year 2015 by way of an amendment, a Second Explanation was added to sub-clause (b) to sub-section (1) of Section 48, which states that, within the purview of evaluating the prospects of “public policy”, the opportunity given to the enforcing court shall be very minimal. It can very well have understood from the nomenclature used in the said Explanation which stated:

Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.”

In Cruz City Mauritius Holdings v. Unitech Ltd.[46] a balancing test to determine the issue of refusal of enforcement of a foreign arbitral award was laid down by the Delhi High Court. It further held that the scope of discretion to refuse a foreign arbitral award is narrow and limited but the same can be done if sufficient grounds exist.

Similarly in Govt. of India v. Vedanta Ltd.[47] a three-Judge Bench of the Supreme Court discarded the regressive stance taken by the Supreme Court in Alimenta case[48] and held that minimal interference shall be exercised by the courts in enforcing foreign arbitral awards.

The Supreme Court in Vijay Karia[49] referred to the “pro-enforcement bias” of the New York Convention, 1958 on which Section 48 of the Act, 1996 was based in its entirety. It was held that under the guise of “public policy”, the enforcing courts cannot enjoy the leeway to interfere with the merits of the award and there should be a narrow scope of interference as contained in the New York Convention, 1958.

Moreover, the Supreme Court in Centrotrade Minerals and Metals Inc. v.  Hindustan Copper Ltd.[50], while allowing the enforcement of an award passed under the rules of the International Chamber of Commerce interpreted Section 48(1)(b) of the Act, 1996. The Supreme Court held that the word “otherwise” cannot be read and interpreted “ejusdem generis” and held that a narrower meaning and interpretation should be afforded keeping in mind the primary object of Section 48(1)(b) i.e. enforcement of a foreign award.

G. Parting thoughts

Indian jurisprudence, especially with respect to dispute resolution has been under perennial evolution. Indian courts have evolved with the change in circumstances owing to opening up of economy, considerable enhancement in international trade and foreign direct investments. For any country which intends to invest in India, the process and feasibility of commercial dispute resolution is of paramount significance. An effective dispute resolution mechanism of a country instils confidence in the foreign investors. A dilapidated and regressive system will only make the entire resolution mechanism crippled.

From the advent of Arbitration and Conciliation Act, 1899 till the present statute i.e. the Arbitration Act, 1996, Indian jurisprudence have had different interpretation of “recognition” and “enforcement” which converged into an attempt of the judiciary to make it work on the lines of the New York Convention, 1958. Despite many judgments passed by the Supreme Court and various High Courts of the country, in our view the battle is only half won. India is still not considered as among the favoured nations when it comes to “recognition” and “enforcement” of a foreign arbitral award.

There has always been a debate over the quantum of interference that the Indian judiciary ought to make while enforcing a foreign arbitral award. There have been judgments where the Indian judiciary has gone into the merits of the award thereby, rehearing the case all over again and compromising the entire process of smooth “recognition” and “enforcement”. Such an act brings back the regressive attitude which was in place when the Arbitration Act, 1940[51] used to govern the dispute resolution mechanism. Also, there is a common problem of various High Courts holding views and passing judgments on the same question of law and facts arising thereby from Arbitration Act, 1996 which further complicates the enforcement process.

The purpose of Section 48 of the Arbitration Act, 1996 is nothing but enabling a smooth enforcement process. It may be noted that Section 48 is in parity with Article V of the New York Convention, 1958. It is important to note that in Section 48 and Article V of the New York Convention, 1958, the words “may be” have been used for refusing the enforcement of an award thereby, making the intention and objective of the section very clear. The judgments passed by various High Courts of India show that the grounds for refusing the enforcement of an award shall be construed narrowly, yet sometimes, the courts have overstepped the guarded wall of interference.

We have tried to summarise the history of commercial dispute resolution in India and the process involved therein in the enforcement of a foreign arbitral award in India. It may not be out of place to state that with modest efforts being made by the Indian judiciary, the entire process of recognition and enforcement is eased down a bit. However, India as a country has to work towards building a pro-enforcement regime while working in consonance with the spirit of Article V of the New York Convention, 1958. The recent decisions in Vijay Karia[52] and Centrotrade[53] are a step forward towards having a more conducive enforcement mechanism in place. Yet, the decisions like National Agricultural Coop. Mktg. Federation of India[54] was an attempt to again dismantle the progress that the Indian judiciary has made to make India a pro-enforcement destination thereby, compelling the “recognition” and “enforcement” mechanism to trawl down in search of a formidable shore.


* Advocate, New Delhi. Author can be reached at ksumit25@outlook.com

**Vth year student, ICFAI Law School, Hyderabad.

[1]Arbitration (Protocol and Convention) Act, 1937. http://www.scconline.com/DocumentLink/b6djW2F4.

[2]Foreign Awards (Recognition and Enforcement) Act, 1961. http://www.scconline.com/DocumentLink/Ye3wnUO3.

[3]Chapter  6.– Enforcement of Arbitral Awards in India; available at <https://shodhganga.inflibnet.ac.in/bitstream/10603/110130/16/16_chapter%206.pdf> (accessed on 27-5-2020).

[4] Recent Developments in Enforcement of New York Convention Awards in India, by Sahil Tagotra and Ishita Mishra; available at<http://arbitrationblog.kluwerarbitration.com/2020/07/06/recent-developments-in-the-enforcement-of-new-york-convention-awards-in-india/?doing_wp_cron=1598853711.0668098926544189453125> (accessed on 27-5-2020)/

[5] Report and the India Resolutions for the 1958 Convention on the Recognition and Enforcement of Foreign Awards by Fali Nariman andMarike Paulsson; available at <https://www.arbitration-icca.org/media/7/92930493591493/indiaresolutions16formatted.pdf>  (accessed on 27-5-2020).

[6]Arbitration and Conciliation Act, 1996. http://www.scconline.com/DocumentLink/QWdt5a4f.

[7]1995 Supp (2) SCC 280, 287.

[8]Section 44, Arbitration  & Conciliation Act, 1996. http://www.scconline.com/DocumentLink/6WVZQ7Gd.

[9]1959 SCC OnLine Cal 196.

[10] Arbitration (Protocol and Convention) Act, 1937. http://www.scconline.com/DocumentLink/b6djW2F4

[11]1993 SCC OnLine Del 561.

[12]Code of Civil Procedure, 1908. http://www.scconline.com/DocumentLink/fW5E2p7z.

[13]Section 49 CPC. http://www.scconline.com/DocumentLink/Qdz3P4AP.

[14]Section 34 of the Arbitration & Conciliation Act, 1996. http://www.scconline.com/DocumentLink/teuo89l3.

[15]Section 47 of the Arbitration & Conciliation Act, 1996. http://www.scconline.com/DocumentLink/kc7Y1ogo.

[16](2019) 11 SCC 620.

[17](2018) 18 SCC 313.

[18](2001) 6 SCC 356.

[19]2006 SCC OnLine Bom 545.  http://www.scconline.com/DocumentLink/Z547En23

[20]Section 2, Arbitration & Conciliation Act, 1996.  http://www.scconline.com/DocumentLink/TA0St4w3.

[21](2014) 11 SCC 619.

[22](2018) 3 SCC 662.

[23]Commercial Courts Act, 2015. http://www.scconline.com/DocumentLink/7566Y3w5.

[24]Arbitration and Conciliation (Amendment) Act, 2015. http://www.scconline.com/DocumentLink/9ajA4z9b.

[25]Section 2 CPC, 1908. http://www.scconline.com/DocumentLink/jadpgT2n.

[26]Section 44-A CPC, 1908. http://www.scconline.com/DocumentLink/Of6WYoXr.

[27]Section 86, Evidence Act, 1872. http://www.scconline.com/DocumentLink/a577IffO.

[28]Section 13 CPC, 1908. http://www.scconline.com/DocumentLink/Mw0TY9U5.

[29](2012) 9 SCC 552.

[30](2012) 9 SCC 552.

[31](1994) Supp (1) SCC 644.

[32](2003) 5 SCC 705.

[33](2011) 10 SCC  300.

[34]Section 48, Arbitration & Conciliation Act, 1996. http://www.scconline.com/DocumentLink/1f9D98bq.

[35](2003) 5 SCC 705.

[36] (2011) 10 SCC  300.

[37](2014) 9 SCC  263, 280.

[38](2015) 3 SCC 49.

[39](2014) 9 SCC  263, 280.

[40] 2019 SCC OnLine Del 8350. http://www.scconline.com/DocumentLink/c63f5U6g

[41] 2020 SCC OnLine SC 381. http://www.scconline.com/DocumentLink/X5L0eClA

[42](2020) 11 SCC 1.

[43](2014) 2 SCC  433.

[44](2011) 10 SCC  300.

[45](2014) 2 SCC  433.

[46]2017 SCC OnLine Del 7810.

[47]2020 SCC OnLine SC 765.

[48] 2020 SCC OnLine SC 381

[49](2020) 11 SCC 1.

[50]2020 SCC OnLine SC 479.

[51]Arbitration Act, 1940. http://www.scconline.com/DocumentLink/3610ik0w.

[52] (2020) 11 SCC 1.

[53] 2020 SCC OnLine SC 479.

[54] 2019 SCC OnLine Del 8350. http://www.scconline.com/DocumentLink/c63f5U6g.

Op EdsOP. ED.

In Part 2, firstly this article shall analyse the existence of an alternative dispute resolution mechanism in India. Secondly, this article shall study various arbitration cases in space-related disputes and conduct a brief comparative analysis to litigation cases in space-related disputes. Thirdly, this article shall suggest the requisite means and measures to improve the dispute resolution mechanism for space-related disputes.

 

  1. Space Law from the Lens of Indian Standpoint: Does any Alternative Dispute Resolution Mechanism Exist at the Domestic Level?

 

In 2017, the Government of India released the Draft Space Activities Bill, 2017. The Government sought for comments on this draft from the public. This Bill addressed the aspect of private participation in the Indian space sector. It essentially acknowledged the importance and the crucial role that the private sector would play in the near future for the development and enhancement of space-related technology for humanity. However, at the same time, substantial discretion was rested in the hands of the Indian State to essentially control the access to outer space. Regardless of this, the Bill emphasised on the creation of a public-private partnership model to meet the future goals of the space sector, alongside Indian Space Research Organisation (ISRO) inviting the private sector to develop the future satellites.

 

However, the point of conundrum arises is that, when we carefully scrutinise the 2017 Bill, we comprehend that powers have been given to the domestic Indian courts whereas there is no mention of resolution of disputes through arbitration, mediation, and/or negotiation. This lack of mention, accompanied by the Arbitration and Conciliation Act, 1996 and the Indian jurisprudence on arbitration, both being in their nascent stages, proves highly detrimental to the resolution of space-related disputes. This is because, even though the parties in space sector have commercial contracts and agreements that may consist of an arbitration clause, it is pertinent to note that not all disputes may be arbitrable. For example, landlord-tenant disputes were not arbitrable in India until 2020 as they dealt with matters related to public policy and interest. This meant that matters which relate to public policy and interest cannot be arbitrated as such arbitration happens in privacy and confidentiality whereas, these matters are to take place in public forums as that of the civil courts. Due to this, there were multiple conflicting decisions of the High Court and the Supreme Court. However, in December 2020, the Supreme Court finally held that the landlord-tenant disputes are arbitrable as they dealt with subordinate rights in personam that arose from rights in rem.[1] All these conflicts and confusion could have been avoided had there have been an explicit mention about resolution of landlord-tenant disputes through arbitration in the Transfer of Property Act, 1882 with the necessary exemptions of State-specific legislations that provide for specific forums for landlord-tenant disputes redressal.

 

Similarly, in the case of space-related disputes, if there is no mention of arbitration about space-related disputes in the 2017 Bill, it may highly lead to heavy turmoil and confusion despite having arbitration clauses in space-related commercial contracts and agreements, thereby hindering the objective of just, effective, and efficient justice. Although the Supreme Court developed a four-pronged guiding test in Vidya Drolia (2) case[2] –– to ascertain which disputes are non-arbitrable –– that can be applied to decide the arbitrability of space-related disputes, it is pertinent to note that there will be a massive time and resource drainage.

 

This drainage will take place because there will be a substantial time and resources drainage and wastage in deciding whether a space–related dispute is arbitrable. If the Court decides that such outer-space disputes are arbitrable, then there is an unnecessary time and resources lag to commence and conclude arbitration proceedings. This lag can cost both the Parties heavily considering outer-space disputes are enormously expensive. Further, if any Party is unsatisfied with the arbitral award, then they would approach the Court to set it aside. This process of setting aside the arbitral award only adds on to the stress of the previous time and resource lag.

 

Or, if the Court decides that such outer-space disputes are non-arbitrable, then resorting to the traditional, tedious litigation process for adjudication of that space–related dispute and/or getting the previous judgment, that outer–space disputes are non-arbitrable, reviewed by a higher Court/Bench, causes similar time and resources detriment to both the Parties.

 

  1. Study of Arbitration in Space-Related Disputes with a Comparative Analysis of Outer Space Litigation

 

As previously mentioned, the types of space-related disputes may be, but not limited to, late delivery of satellites, problem regarding the launch of a satellite, defective satellites in the orbit, sale and purchase of satellites in the orbit, lease of satellite capacity, right to operate at certain orbital positions, revocation of leased spectrum, and reservation of capacity for governmental use. Thus, taking the aforementioned into consideration, certain arbitration case laws shall be scrutinised for better comprehension.

 

Firstly, the case of Spacecom v. Israel Aerospace Industries was a dispute regarding late delivery of satellites.[3] In this case, Israel Aerospace Industries was supposed to build a satellite for Spacecom and deliver the same by August 2015. However, there were certain delays due to which the satellite was delivered to Spacecom by September 2016. Further, during a prelaunch test, this newly delivered satellite disintegrated. Spacecom initiated arbitration proceedings against Israel Aerospace Industries wherein Spacecom secured an award of USD 10 million in its favour.

 

Secondly, the case of Avanti Communications Group v. Space Exploration Technologies was a dispute regarding launch of satellites.[4] In this case, Avanti contracted with Space Exploration Technologies (hereinafter “SpaceX”) wherein Avanti’s satellite was to be launched aboard a SpaceX Falcon 9 launch vehicle. In pursuance to this contract, SpaceX was mandated to show a certain number of successfully completed launches for their launch vehicle, which they failed to show. Due to this failure, Avanti terminated the contract with SpaceX and requested for a refund as Avanti had already paid the launch cost deposit of USD 7.6 million to SpaceX. SpaceX denied refunding the same amount and Avanti initiated arbitration proceedings against Space X wherein Avanti secured an arbitral award of USD 7.6 million in its favour.

 

Thirdly, the case of Thuraya Satellite Telecommunications v. Boeing Satellite Systems International was a dispute regarding defective satellites in the orbit.[5] Generally, satellite manufacturer’s liability stops from the launch of the satellite. However, in this particular case, a group of insurers brought a claim against Boeing as Boeing’s manufactured satellite lost power in the orbit due to the alleged defective solar panels. Boeing acknowledged that its earlier satellite models contained defects; however, it said that it was not aware about these problems before such satellites were launched and denied concealing such defects from the purchasers of its satellites. The Arbitral Tribunal rejected the insurers’ claim and ordered them to pay Boeing’s full “costs”.

 

Fourthly, the case of ABS v. KT Corpn.[6] was a dispute regarding sale and purchase of satellites in orbit. In this case, ABS contracted with KT Corporation and KTSAT (hereinafter “KT”) for the purchase of a satellite from KT. This satellite was purchased with the requisite US regulatory approvals, but not any Korean regulatory approvals. In 2011, KT delivered the satellite to ABS wherein ABS paid the requisite purchase price of USD 500 million. However, in 2013, Korea’s Ministry of Science, ICT and Future Planning (hereinafter “MSIP”) declared the contract –– between KT and ABS –– as null and void as KT did not comply with Korean regulatory approval. Further, KT was ordered for returning the satellite to its original operating condition. Due to this, KT sent a letter to ABS wherein KT asserted its ownership of the satellite. However, ABS denied the same on two counts: (i) MSIP did not have the authority to nullify the contract between KT and ABS; and (ii) Korean export approval was not necessary because the satellite was not a Korean export but a US export. ABS initiated arbitration proceedings against KT and secured an arbitral award in its favour wherein the title was declared to have been transferred to ABS even before the MSIP nullified the contract. This was because:

 

… ABS and KT fulfilled every prerequisite defined in Article 10.1 of the purchase contract as a condition precedent to the passage of title to the satellite: obtaining export approval by KT and Lockheed Martin for a US export under the regime of the US International Traffic in Arms Regulations (ITAR), delivery of the satellite, payment of the purchase price and issuing of bills of sale.[7]

 

Further, the Arbitral Tribunal also held that the Korean Government did not have any authority to nullify the contract as it held that MSIP was not the competent agency to issue an order of nullification, but the Korean Ministry of Trade, Industry and Energy was competent that remained silent throughout the matter.

 

Fifthly, the case of Avanti Communications v. Govt. of Indonesia was a dispute regarding leasing of satellite capacity.[8] In this case, Indonesia’s satellite malfunctioned in 2015 due to which Indonesia could have lost its orbital slot. The filling of this orbital slot with a new satellite would have taken more than three years but this was problematic to Indonesia because, according to the “use it or lose it” policy, a State may lose its orbital slot if the State leaves the orbital slot vacant for more than three years.[9] To avoid the same conundrum, Indonesia leased capacity on another satellite that could be brought and maintained in Indonesia’s orbital slot until a new Indonesian satellite could be placed. This replacement satellite was owned by Avanti. The lease capacity agreement was worth USD 30 million. Indonesia paid only USD 12 million, leaving a remaining balance of USD 16.8 million as it claimed that the satellite was not fulfilling the requisite purpose. Failure to pay even after a year, due to this, Avanti initiated arbitration proceedings against Indonesia in 2017 and secured an arbitral award in its favour in 2018 wherein Indonesia was ordered to pay Avanti a total sum of USD 20.075 million.

 

Sixthly, the case of Eutelsat SA v. United Mexican States[10] is a dispute regarding reservation of capacity for governmental use. In this case, Eutelsat, a satellite operator, acquired a satellite in 2014. However, according to the regulatory rules of United Mexican States i.e. Mexico, satellite operators are mandated to reserve ninety per cent of their satellite’s overall capacity for governmental use, which the operators could otherwise commercialise. The problem arose at the point wherein Eutelsat claims that it was required to reserve a larger capacity for Mexican Government than its competitors which, in turn, violated the principle of fair and equitable standard under the Mexico-France Bilateral Investment Treaty (BIT). The case is still pending.

 

Seventhly and in finality, there are two noteworthy arbitral disputes that are the Devas arbitrations[11] and the Eutelsat arbitrations[12] that relate to revocation of lease spectrum and the right to operate at orbital positions respectively.

 

Thus, considering the aforementioned cases, it is lucidly evident that a plethora of international arbitration cases have taken place that are related to a conventional manufacturing, purchase, title, or contract-related dispute.

 

However, the query is that whether litigation takes places for space-related disputes. The answer is affirmative as already evident from the 1991 case of Martin Marietta Corpn. v. Intelsat.[13] In this case, Martin Corporation (hereinafter “Martin”) and Intelsat entered into an agreement to launch two satellites. Martin agreed to launch the satellites in return for a consideration worth USD 112 million from Intelsat. Soon after the lift off of the first launch, the payload’s separation system failed to eject the satellite and the satellite’s booster. Although Intelsat’s engineers eventually separated the payload from the rocket, this delay caused in the separation of the payload from the rocket left the satellite in a useless orbit. It was estimated that the cost to rescue and place the satellite in a proper orbit was USD 90 million due to which Martin filed a case in Maryland District Court. In response to this, Intelsat filed a counter case claiming a breach of contract. Further, Intelsat also brought the claims of negligent misrepresentation, negligence and gross negligence to recover the damages for loss of profits, loss of use of satellite, and rescue costs. The District Court’s case lasted for a significant period of time, but it did not end there as the case went to appeal to the Fourth Circuit that disagreed on the District Court’s decision on multiple counts.

 

Thus, the point of consideration, rather than a conundrum, arises is that this significant time and resource lapse, alongside changing decisions of the courts, in Martin case[14], could have been avoided had the matter been referred to arbitration proceedings as arbitration would have not only offered a higher chance at time and resource savings, but also mutual development and agreement for the claim amounts, thereby enabling the development of sustainable and long-lasting relationship between the parties. Similar problems have arisen in the space-related litigation disputes of Appalachian Insurance Co. v. McDonnell Douglas Corpn.[15] and Lexington Insurance v. McDonnell Douglas.[16]

 

Thus, it is lucidly evident that litigation proceedings in already complex and highly technical space-related disputes add on to the existing layers of complexity. Further, it also leads to massive cost and resource drainage and wastage which, in turn, further detriments the space sector from gaining traction in terms of growth, development, and innovation. Therefore, arbitration, mediation and/or negotiation offer the best chance at saving time and resources alongside building long-lasting and sustainable commercial relationships which, in turn, enable the space sector to bloom while protecting its manufacturers, sellers, and service providers.

 

In the following, the author shall conclude with certain recommendations to improve the scenario of dispute resolution in space-–related disputes.

 

  1. Conclusion: What is Actually Written in the Stars for the Future of Dispute Resolution Mechanism in Space-Related Disputes

 

We comprehend that the disputes in the space sector are highly technical and complex in nature due to which the need for arbitration substantially rises and for litigation reduces. However, it is pertinent to note that, in the space sector, the disputes are usually resolved through the process of mediation.[17] The parties resort to arbitration only if the matter escalates.[18] Taking this into account, it can be inferred that mediation is quintessential to resolve space-related disputes. However, considering the fact that the conventions and accords regarding space law are obsolete and ineffective, an imperative need to update and upgrade the same becomes the need of the hour because failure to do so will obstruct in the delivery of justice to the parties. The reason behind the same is that there is a burning need to develop a dispute resolution mechanism that is akin to space-related disputes only, rather than resorting to a general and standard dispute resolution mechanism as previously argued.

 

Thus, firstly, a new, effective, and efficient dispute resolution mechanism of arbitration, mediation, and negotiation (hereinafter “AMN”) can be developed through a top-to-down approach (hereinafter “TDA”). This means that that the law and its related provisions shall flow from the lawmakers to the parties wherein the updation and upgradation of the related conventions, treaties, and accords, alongside the development of specific rules and procedures shall be the responsibility of the lawmakers. It shall involve inclusion of specific and comprehensive provisions related to the dispute resolution mechanism of AMN in the newly updated and upgraded conventions, treaties, accords, and so on. Further, the relevant and requisite suggestions/amendments may be sought from various actors of the space sector for a comprehensive and inclusive development of the dispute resolution mechanism. This approach takes precedence over a down-to-top approach (hereinafter “DTA”) wherein the law and its related provisions flow between the parties while ensuring adherence to the general norms of international law. In other words, in DTA, the parties shall set their own rights, duties, and obligations, while ensuring that such setting does not violate any basic provisions of international law such as justice, fairness, equality, and good faith. DTA is not a preferrable mode because in this approach, there is a lack of uniformity and standardisation in the rights, duties, and obligations of the parties. This lack of uniformity and standardisation may inherently lead to the creation of stark differential treatment for each AMN proceedings which, in turn, may be perceived as discriminatory. Thus, to avoid the same, TDA is preferrable for the creation of an AMN dispute resolution mechanism.

 

Adding on to the aforementioned updation and upgradation of the treaties and so on, it is of quintessence importance for us to comprehend that the PCA Outer Space Arbitration Rules already exist for the purpose of arbitration in space-related disputes. Considering the dynamic and rapid changes in the space sector, wherein the probability of space-related disputes exponentially rise in times of Covid-19 — owing to halt and delay in various businesses and their ancillary industries — the need for utilising and applying these Rules becomes inevitable. This is to ensure faster, effective, and efficient redressal of space-related disputes owing to these Rules expertise and specific draft for space-related disputes. However, to achieve the same, there is a need for creating an awareness regarding these Rules within the space sector. Further, these Rules scope can also be expanded by including provisions and measures for mediation and/or negotiation. The benefit of the same would essentially be of standardisation and uniformity in the Rules for dispute resolution mechanisms as earlier argued.

 

Secondly, it is also imperative for us to comprehend that if the parties choose to go for litigation, then they may choose to go for the International Court of Justice (hereinafter “ICJ”) ad hoc litigation rather than a traditional ICJ litigation. The reason behind the same is that, in the ICJ Statute, there is a provision that enables the creation of ad hoc litigation chambers of the ICJ.[19] According to Article 26 of the ICJ Statute, we comprehend that it enables the creation of two types of chambers: a chamber that deals with a particular case;[20] or one or more chambers that deal with a particular “category” of cases.[21] Thus, we need to comprehend that this type of ad hoc ICJ litigation is far more beneficial than a traditional ICJ litigation because: (i) the ad hoc chambers will be specially equipped with experience and expertise to deal with space-sector related disputes as Article 26(1) enables the creation of chambers for a particular category of cases. This benefit of experience and expertise shall enable ICJ to deliver judgments of higher effectiveness and efficiency which, in turn, will enable the parties to receive appropriate and speedy justice. (ii) Ad hoc chambers act in a manner similar to that of Arbitral Tribunals because these chambers are created especially for specific disputes which is the same case in Arbitral Tribunals. This essentially offers similar benefits of Arbitral Tribunal but in the form of a decision rendered by an ICJ chamber. Further, it is also quintessential to note that these ad hoc chambers decisions are considered as a judgment rendered by the ICJ[22] which, in turn, makes it binding on the parties as per Article 59[23] and thereby increases the authenticity of these decisions.

 

However, the advantages of an ad hoc ICJ chamber over an Arbitral Tribunal must be discussed. These advantages are as follows: (i) From a political standpoint, it has already been observed that ICJ judgments have a higher visibility than an Arbitral Tribunal which, in turn, creates an increased probability of compliance with these judgments.[24] Further, these ICJ judgments are termed as “more prestigious” when compared to arbitral awards.[25] This, in turn, enables a party to bring the other party under the accountability and responsibility factor which may be due to the other party’s inability to fully or partially comply with the judgment. (ii) An ad hoc ICJ litigation chamber is comparatively lesser expensive than an Arbitral Tribunal because, according to Article 33, the “expenses” of the ICJ proceedings shall be borne by ICJ. The parties would be required to only bear their “own costs” for the ICJ proceedings. This encourages small actors of space-related disputes to undertake the same proceedings. Thus, it is lucidly evident that the parties can also resort to ad hoc ICJ litigation, provided the mutual settlement talks and/or mediation and/or arbitration has failed between them.

 

Therefore, considering the fact that there are ample amounts of opportunity for the dispute resolution mechanism for space-related disputes to grow, develop, and evolve, an inevitable need for constant updation and upgradation of the laws and rules arises alongside the creation of an awareness regarding the same.


† Iram Majid, Director of Indian Institute of Arbitration and Mediation (ILAM) and Executive Director of Asia Pacific Centre for Arbitration and Mediation.

[1] Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : 2020 SCC OnLine SC 1018.

[2] Ibid.

[3] Jan Frohloff, Arbitration in Space Disputes, 35 Arbitration Int’l 309, 311 (2019).

[4] Id. at 311-312.

[5] Id. at 313.

[6] ICC Case 19958/ AGF/RD/MK (ABS).

[7] Frohloff, supra note 2, at 315.

[8] Id. at 316.

[9] Id. at 317.

[10] ICSID Case No. ARB(AF)/17/2.

[11] See also CC/Devas (Mauritius) Ltd. v. Republic of India, PCA Case No 2013-09 and Devas Multimedia (P) Ltd. v. Antrix Corpn. Ltd., ICC Case 18051/CYK.

[12] See also Eutelsat v. Media Broadcast, Deutsche Telekom; Eutelsat v. SES (Eutelsat) <https://www.international-arbitration-attorney.com/icc-space-arbitration-eutelsat-communications-v-ses/>.

[13] 763 F Supp 1327 (D Md 1991).

[14] Ibid.

[15] 262 Cal Rptr 716, 718 (Cal Ct App 1989).

[16] 49 USC app § 2615 (1988).

[17] Frohloff, supra note 2, at 328.

[18] Ibid.

[19] 1945 3 Bevans 1179, Art. 26 (hereinafter “ICJ Statute”).

[20] Id. at Art. 26(2).

[21] Id. at Art. 26(1).

[22] Id. at Art. 27.

[23] Id. at Art. 59.

[24] Andreas Zimmermann, Ad Hoc Chambers of the International Court of Justice, 8(1) Dickinson Journal of International Law 9, 1-32 (1989).

[25] Ibid.

Law Firms NewsNews

Mr. Hiroo Advani, Senior Managing Partner, Advani & Co. retains ranking as ‘Band I’ Dispute Resolution Lawyer under Chambers and Partners Asia-Pacific Rankings, 2021.

Mr. Advani is a leading dispute resolution lawyer and an Arbitration Specialist, and has consistently held the position of a Tier 1 dispute resolution Lawyer in the country as reported by reputed publications such as Chamber & Partners and Legal 500.

He has conducted, as Lead Counsel a wide range of Arbitration’s in a variety of fields, including, construction projects, infrastructure, Power Projects, Oil Refineries, Metro/Rail Contracts, conventional sources of power generation and renewable sources of power.

Punjab and Haryana High Court
Case BriefsHigh Courts

Punjab and Haryana High Court: The Division Bench of Dr S. Muralidhar and Avneesh Jhingan, JJ., dismissed the instant petition upon discovery of availability of alternate remedies to the petitioner.

In the present case, the petitioner has questioned the demand for concession fees to the tune of Rs 2,19,10,897 sought from the Petitioner by the Respondent/Airport Authority of India, through minutes of meeting dated 25-05-2020 and letter dated 01-07-2020.

During the course of the proceedings, Article 22.1 of the Concessionaire Agreement (CA) dated 11-12-2019, caught the attention of the Court which affirmed the liability of the petitioner to pay the respondent for actual advertisement area made available to it at Amritsar Airport. The Dispute Resolution clause is reproduced below for reference-

“22.1 – Dispute Resolution – Any dispute, difference or controversy of whatever nature howsoever arising under or out of or in relation to this Concession Agreement (including its interpretation) between the parties, shall be governed and regulated in accordance with the provisions contained at Clause 5.16 of the RFP and in accordance with the provisions of Arbitration and Conciliation Act, 1996 as amended from time to time.”

On perusal of the above stated Clause 22.1 along with Clause 5.16 of the Request For Proposal (RFP), the Court was successful in grasping that any grievance under the CA has to be resolved via a two-tier mechanism. The mechanism includes submission of a written application before the Dispute Resolution Committee (DRC) and later, resolution under the Arbitration and Conciliation Act, 1996, if the same remains unresolved.

The petitioner invoked the dispute resolution mechanism subsequent to which a meeting of DRC was held on 25-05-2020. Counsel for the respondent, Vivek Singla has asserted that the petitioner ought to have availed all the further remedies in terms of the CA.

When the counsel for the petitioner, Varun Singh was catechized over the maintainability of the present petition, he referred to a plethora of cases such as Harbanslal Sahnia v. Indian Oil Corpn. Ltd., (2003) 2 SCC 107, Hindustan Petroleum Corpn. Ltd. v. Super Highway Services, (2010) 3 SCC 321 and Union of India v. Tantia Construction (P) Ltd., (2011) 5 SCC 697. However, unfortunately, the Court found all of them to be of no assistance in the petitioner’s case. The Court was not content with the arguments advanced by the petitioner with respect to the maintainability of the present petition.

Thus, the Court declined to exercise its jurisdiction under Article 226 of the Constitution of India since an “efficacious and effective alternative remedy” is available to the petitioner in view of the CA. In the event of a dispute, the parties could also plead for interim relief under the Arbitration and Conciliation Act, 1996.

Given the circumstances, the Court declined to examine the factual dispute leaving it open for the parties to avail other remedies under the law.

In view of the above, the petition has been dismissed by the Court.[Proactive In and Out Advertising (P) Ltd. v. Airport Authority of India, 2020 SCC OnLine P&H 1172, decided on 11-08-2020]

COVID 19Cyril Amarchand MangaldasExperts Corner

I. Introduction

For eons, Indians have been reliant on court-driven litigation and, more recently on arbitration for resolving commercial disputes. The significance and impact of mediation in amicable dispute resolution is vastly underrated and under appreciated as reliance on mediation has been restricted to only family disputes and other elementary matters. However, the advent of COVID-19 has forced the world, including the legal industry, to change the norms and to adapt and reform around the new normal and we believe that the insurgence of COVID-19 will give us an opportunity to re-discover the significance of mediation as an effective form of dispute resolution mechanism, especially in commercial matters.

II. Evolution of Mediation

Mediation was popular even before it found a place in the books of law. Ancient Greek civilisation had village elders resolving fights between the locals. In India, instances of mediation can be found in the village panchayat system, wherein, the village elders or ‘Panchs’ resort to mechanisms like mediation to amicably resolve family and land related disputes between the  locals.

Acknowledging the importance of mediation, the Indian legislature enacted the Legal Services Authorities Act, 1987[1], which introduced the Lok Adalat system. Lok Adalats provide a platform to resolve disputes in the pre-litigation stage by way of amicable settlement.

Thereafter, in 1988, the 129th Law Commission Report on Urban Litigation and Mediation as Alternative to Adjudication and the Arrears Committee Report, also known as the Justice Malimath Committee Report was published. Considering the backlog of cases lying before the Indian courts, Justice Malimath Committee Report recommended that the parties be encouraged to refer their disputes to alternate dispute resolution mechanisms (“ADRs”)[2]. These recommendations eventually paved the way for the Code of Civil Procedure (Amendment) Act, 1999[3], which introduced Section 89 of the Code of Civil Procedure, 1908 (“CPC”). Section 89 CPC empowered the courts to refer disputes, with the potential to be settled to ADRs (which included arbitration, conciliation, mediation, judicial settlement)[4].

On April 9, 2005, the Tamil Nadu Mediation and Conciliation Centre, the first court annexed mediation centre was inaugurated[5]. Thereafter, in August 2005, the ex-Chief Justice of India, Justice R.C. Lahoti, constituted a Mediation and Conciliation Project Committee for imparting mediation training for Judges[6]. As of date, several High Courts have their own mediation centres and rules governing them.

Please see below a table providing the various initiatives taken by different High Courts in India:

Sl. No.

High Court

Initiative

Delhi

The Delhi High Court has its own Mediation and Conciliation Centre known as Samadhan and they have regular training workshops of advocates enrolled in the Delhi Bar Association.

Mumbai

The Mediation Monitoring Committee of the Bombay High Court operates a mediation scheme to resolve pending cases before the District Courts, Taluka Court, City Civil Court, Small Causes Court, etc., by providing litigants an opportunity to resolve their disputes by mediation.

Calcutta

The Calcutta High Court recently organised a workshop for Judges at different courts to promote mediation. Experts were brought in from  US to impart their expertise on the subject- matter.

Realising the potential of mediation for speedy and cost-effective dispute resolution, an amendment to the Commercial Courts Act, 2015, was made in 2018, introducing Section 12-A, which mandatorily requires the parties to attempt to mediate their disputes before initiating judicial proceedings[7]. Recently, the Supreme Court in January 2020, set up a panel, headed by Mr Niranjan Bhat, to recommend and draft legislation, codifying mediation practice in India.

These attempts made by the legislature and judiciary to bring mediation in the mainstream have been futile as the true potential of mediation still remains underutilised.

III. Statistical Analysis of Mediation in India

Vidhi Centre for Legal Policy (“Vidhi”) published a report called “Strengthening Mediation in India” in December 2016 (“the Report”)[8], wherein Vidhi, in collaboration with the Department of Justice, Ministry of Law and Justice, analysed the progress of court referred mediation[9], focusing on the data provided by Bangalore Mediation Centre and Delhi High Court Mediation and Conciliation Centre.

The table below shows certain key trends in mediation[10]:

Sl. No.

Mediation Centre

Cases referred

Success Rate

2011

2015

Karnataka

2.79%

4.83%

66%

Delhi

2.86%

2.31%

56%

According to the statistics available on the website of Kerala State Mediation and Conciliation Centre, matters referred to mediation show a success rate of 35.42% in 2016[11]. These abysmal figures can be attributed to various factors, including reluctance of litigants to mediate, lack of awareness and inadequate infrastructure.

IV. Why Mediation?

Mediation is different from other forms of ADR such as arbitration, conciliation and settlement. Unlike litigation and arbitration, which are adversarial in nature, mediation is founded on pillars of cooperation and trust, and is similar to negotiation. A mediator acts as a facilitator between the parties to arrive at a solution, without dictating the settlement terms.

The main difference between mediation and conciliation lies in the role played by a mediator and a conciliator. A conciliator has broader powers of intervention and is empowered to draft the terms of settlement. However, a mediator is a facilitator, who helps parties to resolve their problems on their own. A mediator can give suggestions and persuade the parties to arrive at a solution.

Indian courts have always been over-burdened and the backlog of pending cases is daunting. Even though litigation provides an effective dispute resolution method, it does have various drawbacks, including exorbitant costs, undue delays and cumbersome procedure.

In recent times, arbitration has gained popularity. Although arbitration provides solution to the various drawbacks of litigation, it remains to be an expensive ADR.On the other hand, mediation provides for a cost-effective manner of dispute resolution. It also provides parties an opportunity to resolve their disputes amicably, within a pre-decided time-frame. This helps them avoid the exorbitant cost incurred due to litigation and the undue delays, which are beyond their control.

Mediation gives the parties the flexibility to decide the manner and procedure to be followed to resolve their disputes, depending on the nature of their dispute and the relation between the parties. It also allows the parties to arrive at a tailor-made solution, minimising an unfavorable impact. Parties have the autonomy to conduct a cost-benefit analysis before arriving at the most favourable solution. Additionally, unlike litigation, where the documents once filed become public, mediation allows the parties to keep their documents and discussions undertaken during the mediation, confidential. This is specifically relevant for the companies, as any adverse information about the company, can fluctuate share prices of the company.

It is worth mentioning here that various multi-national corporations, companies and partnership firms have also realised the above mentioned benefits of mediation, which has resulted in them introducing clauses for mandatory mediation in cases of any disputes or disagreements between the parties. Even with all these advantages, mediation is still not a popular choice.

V. Mediation in the wake of COVID-19

As already discussed in the introduction, this pandemic has placed us in a situation where we are forced to adapt to survive. Slowly and gradually, we are shifting from the traditional ways to modern and innovative ways.

Mediation provides a viable alternative to resolve disputes. Under the current circumstances, it would be beneficial for the parties to act in cooperation instead of being adversarial, as an adversarial approach may not always yield a beneficial outcome.

In light of the virus outbreak, jurists contemplate that a number of disputes will arise on the interpretation of force majeure clauses, material adverse effect clauses and termination clauses. While doing so, it is not always advisable to knock on the doors of the courts to seek justice, especially when such key clauses are missing or inadequately drafted. Therefore, while the courts are grappling with the existing backlog of cases, the restrictions in its functioning due to the lockdown and the fresh set of disputes arising due to the current scenario, we feel there might be a shift in the manner in which commercial disputes are or will be resolved, with increased reliance on mediation.

Several Indian High Courts, including the High Court of Judicature at Bombay, Delhi High Court, Kerala High Court, etc., and various international organisations like the Singapore International Arbitration Centre, London Court of International Arbitration, International Chamber of Commerce have already formulated mediation rules. These rules are comprehensive, extensive and can be adopted by parties to deal with the procedural aspects of mediation. Parties also have the option of opting for adhoc arbitration, allowing them to decide on the procedure to be followed during mediation.

Keeping in mind the above benefits and the role mediation can play in the times to come, Singapore International Mediation Centre has launched the SIMC COVID-19 Protocol[12], providing business with an effective solution by way of expedited mediation for dispute resolution. A similar project has been launched by Georgian International Arbitration Centre in collaboration with Resolve and with assistance of European Union and United Nations Development Programme, allowing the parties to either refer their dispute to facilitation or mediation[13]. These moves show the preparedness of various organisations in accepting that mediation will bring the new dawn in dispute resolution, during and even after the pandemic.

IV. Conclusion

The outbreak of the COVID-19 pandemic has resulted in the introduction of various restrictions and changes in law by the legislature, thereby disrupting the functioning of business. Due to the lockdown initiated on account of the COVID-19 outbreak, the Indian economy is experiencing a steady downfall. People and businesses are fending for themselves and are making all efforts to survive. Market leaders are contemplating that the present situation will act as a hotbed for disputes. These new disputes would require speedy and cost-effective solutions. To contain the impact of the fast spreading virus, the courts have also been functioning at minimal capacity and only hearing urgent matters, which makes approaching the courts for dispute resolution a slightly challenging exercise. In the wake of the current situation, mediation appears to be a viable and effective alternative to traditional dispute resolution methods as it can deliver cost-effective and speedy resolution of disputes, especially in cases of commercial disputes. Considering the pandemic and the repercussions to follow, we envisage a shift in the dispute practice being driven by mediation. This shift would require us to be prepared and hence it is imperative to ensure we obtain the requisite training and the skill set to be able to meet the changing demands.


*Partner, Cyril Amarchand Mangaldas

**Associate, Cyril Amarchand Mangaldas

***Associate, Cyril Amarchand Mangaldas

[1] Legal Services Authorities Act, 1987  

[2] https://delhicourts.nic.in/dmc/history.htm, last visited on May 28, 2020.

[3] Code of Civil Procedure (Amendment) Act, 1999

[4] Section 89  CPC 

[5] http://www.hcmadras.tn.nic.in/mashist.html last visited on June 10, 2020.

[6] https://delhicourts.nic.in/dmc/history.htm last visited on June 10, 2020.

[7] Section 12-A, Commercial Courts Act, 2015

[8] https://doj.gov.in/sites/default/files/Final%20Report%20of%20Vidhi%20Centre%20for%20%20Legal%20Policy.pdf last visited on May 28, 2020.

[9] There are two broad categories of mediation: (i) Court referred mediation, wherein, the courts while exercising their powers under Section 89 CPC, refer appropriate matters to mediations; and (ii) Private mediation, wherein, the parties to a dispute agree to mediate their disputes.

[10] https://dakshindia.org/Daksh_Justice_in_India/14_chapter_04.xhtml#fn21 last visited on May 28, 2020.

[11] http://keralamediation.gov.in/Statistics  last visited on May 28, 2020.

[12] http://mediationblog.kluwerarbitration.com/2020/05/21/international-mediation-and-covid-19-the-new-normal/?doing_wp_cron=1591162205.3996729850769042968750 last visited on June 3, 2020

[13] http://giac.ge/giac-and-resolve-are-joining-forces-to-launch-covid19-business-support-initiative/last visited on June 3, 2020.

Op EdsOP. ED.

Session 3: Conflict Resolution in the NBFC and FinTech Sector

[L-R – Ms. Kritika Krishnamurthy; Mr. Sameer Karekatte; Mr. P K Malhotra; Mr. Ashok Barat]

Owing to recent scams that have been uncovered, the regulatory supervision of NBFCs has been tightened. At the same time, there is a need for effective dispute resolution of existing disputes between various participants of the NBFC ecosystem. Ease of dispute resolution shall also assist in streamlining the system, making it more efficient in terms of time and finances for both NBFCs and other stakeholders. Inter alia the panel discussed the need for looking at the demand side of conflict resolution in India and the scope of the same to diametrically reduce the same by resorting to various ADR mechanisms.

 

Hot Off The PressNews

In the Union Budget 2019-20, the Hon’ble Finance Minister announced the “Sabka Vishwas – Legacy Dispute Resolution Scheme, 2019”.

The Scheme has now been notified and will be operationalized from 1st September 2019. The Scheme would continue till 31st December 2019. The government expects the Scheme to be availed by a large number of taxpayers for closing their pending disputes relating to legacy Service Tax and Central Excise cases that are now subsumed under GST so they can focus on GST.

The two main components of the Scheme aredispute resolution and amnesty.

The dispute resolution component is aimed at liquidating the legacy cases of Central Excise and Service Tax that are subsumed in GST and are pending in litigation at various forums.

The amnesty component of the Scheme offers an opportunity to the taxpayers to pay the outstanding tax and be free of any other consequence under the law. The most attractive aspect of the Scheme is that it provides substantial relief in the tax dues for all categories of cases as well as full waiver of interest, fine, penalty, In all these cases, there would be no other liability of interest, fine or penalty. There is also a complete amnesty from prosecution.

For all the cases pending in adjudication or appeal – in any forum – this Scheme offers relief of 70% from the duty demand if it is Rs. 50 lakhs or less and 50% if it is more than Rs. 50 lakhs. The same relief is available for cases under investigation and audit where the duty involved is quantified and communicated to the party or admitted by him in a statement on or before 30th June, 2019.

Further, in cases of confirmed duty demand, where there is no appeal pending, the relief offered is 60% of the confirmed duty amount if the same is Rs. 50 lakhs or less and it is 40% if the confirmed duty amount is more than Rs. 50 lakhs. Finally, in cases of voluntary disclosure, the person availing the Scheme will have to pay only the full amount of disclosed duty.

As the objective of the Scheme is to free as large a segment of the taxpayers from the legacy taxes as possible, the relief given thereunder is substantial. The Scheme is specially tailored to free a large number of small taxpayers of their pending disputes with the tax administration. Government urges the taxpayers and all concerned to avail the Sabka Vishwas – Legacy Dispute Resolution Scheme, 2019 and make a new beginning.


[Source: PIB]

Press Release dt. 22-08-2019

Ministry of Finance