Lawyer Sanskriti Tyagi writes about the role that the modern day judiciary plays in the process of Arbitration
Arbitration has long been heralded as a key alternative dispute resolution mechanism, particularly in commercial disputes where the stakes are high, and the parties seek a resolution outside the often slow-moving judicial process. In India, arbitration has evolved significantly, aligning itself with international standards, particularly with the enactment of the Arbitration and Conciliation Act of 1996, which drew heavily from the UNCITRAL Model Law. Yet, despite its potential for efficiency, arbitration in India remains fraught with challenges, many of which arise from the interplay between the arbitral process and the judiciary.
The Promise of Arbitration
Arbitration offers several advantages over traditional litigation: it is consensual, allows for the selection of a neutral and specialized arbitrator, ensures confidentiality, and is generally faster and more flexible than court proceedings. These attributes have made arbitration a preferred choice for resolving commercial disputes globally. In India, the need for a robust arbitration framework has been driven by the increasing complexity of commercial transactions and the imperative to reduce the burden on the judiciary, which is already overwhelmed with a backlog of cases.
“Given the constricted ambit of curative petitions and the limited scope of interference under sections 34 and 37 of the Arbitration Act, the Supreme Court’s decision to set aside its own judgment to overturn an arbitral award is puzzling.”
The Reality: Judicial Intervention and Its Consequences
However, the practical application of arbitration in India has not fully realized its promise. Judicial intervention, particularly in the enforcement or setting aside of arbitral awards, has been a significant roadblock. The recent Supreme Court ruling in the Delhi Metro Rail Corporation (DMRC) vs. Delhi Airport Metro Express Private Limited (DAMEPL) case is a case in point. The Supreme Court’s decision to overturn an arbitral award on grounds of “patent illegality” highlights the judiciary’s active role in arbitration, a role that, while intended to ensure justice, can also undermine the efficiency and finality that arbitration seeks to provide.
In this case, the Supreme Court invoked its extraordinary powers under Article 142 of the Constitution to overturn a previously upheld arbitral award. While the Court’s intention was to prevent a grave miscarriage of justice, the decision has sparked debate within the legal community about the appropriateness of such intervention, particularly when it involves overturning a commercial award where a public utility is involved.
Perspectives
Reflecting on this case and the broader implications for arbitration in India, one cannot ignore the tension between ensuring justice and maintaining the efficiency of arbitration as an alternative dispute mechanism. The arbitration landscape evolve but there exist persistent challenges that prevent it from reaching its full potential.
Arbitration was supposed to be an antidote to the delays and complexities of traditional litigation. Yet, when courts frequently step in to review and overturn arbitral awards, the process becomes nearly as time-consuming and uncertain as litigation itself. This trend is particularly troubling in cases involving government entities, where the stakes are high, and the government, driven by the desire to protect public funds, is more likely to challenge unfavorable awards.
The Impact on Commercial Dispute Resolution
The DMRC vs. DAMEPL case is emblematic of a broader issue: the lack of finality in arbitration. When arbitral awards can be easily challenged and overturned, the incentive for parties to choose arbitration diminishes. Moreover, the perception that the judiciary might overturn an award, particularly one involving large sums or public interest, could deter international businesses from choosing India as a seat for arbitration. This is a setback for India’s ambition to become a global hub for arbitration.
Conclusion: A Call for Balance
While judicial oversight is essential to prevent miscarriages of justice, there needs to be a balance. The judiciary should respect the autonomy of the arbitral process and intervene only in cases of genuine procedural unfairness or when an award is fundamentally flawed. The key to achieving this balance lies in the consistent application of legal principles and a clear understanding of when judicial intervention is warranted.
As India continues to refine its arbitration framework, the focus should be on enhancing the professionalism and efficiency of the process while ensuring that the courts play a supportive, rather than intrusive, role. Only then can arbitration truly serve as a viable alternative to litigation, offering parties the speed, certainty, and finality they seek.
