Commercial Arbitration

Last verified on Thursday 2nd April 2020

Commercial Arbitration: India

Madhur Baya

LexArbitri

Infrastructure

1. Is your state a party to the New York Convention? Are there any noteworthy declarations or reservations?

India

India is one of the original signatories to the New York Convention. It, however, ratified it under domestic law on 13 July 1960 by enacting the Foreign Awards Recognition & Enforcement) Act 1961 (since repealed by the Arbitration and Conciliation Act 1996). India has made three reservations on the applicability of the New York Convention:

  • India will apply the Convention only to recognition and enforcement of awards made in the territory of another contracting state.
  • India will apply the Convention only to differences arising out of legal relationships, whether contractual or not, that are considered commercial under the national law.  
  • India will recognise for enforcement, awards made under the New York Convention, only where the award has been made at a seat in a country notified by India under section 44 of the Arbitration and Conciliation Act 1996 as one that has made reciprocal provisions at its domestic laws for recognition and enforcement of awards made in India.

These reservations are statutorily incorporated in section 44, in Part II of the Arbitration and Conciliation Act 1996. Part II of the Arbitration and Conciliation Act 1996 provides the legislative framework for the recognition and enforcement of "foreign awards".

Answer contributed by Madhur Baya

2. Is your state a party to any other bilateral or multilateral treaties regarding the recognition and enforcement of arbitral awards?

India

Other than the New York Convention and the 1923 Geneva Convention on the Execution of Foreign Arbitral Awards, India is not a party to any other bilateral or multilateral treaties regarding the recognition and enforcement of arbitral awards.

Answer contributed by Madhur Baya

3. Is there an arbitration act or equivalent and, if so, is it based on the UNCITRAL Model Law? Does it apply to all arbitral proceedings with their seat in your jurisdiction?

India

The Arbitration and Conciliation Act 1996 (last amended on 09 August 2019 by the Arbitration and Conciliation (Amendment) Act 2019), is largely based on the UNCITRAL Model Law, with minor variations. Part I of the Arbitration and Conciliation Act 1996 applies to all arbitral proceedings with their seat in India. On a derogable basis, certain provisions of Part I of the Arbitration and Conciliation Act 1996, namely section 9 (interim measure of protection), section 27 (court’s assistance in taking evidence), section 37(1)(a) (appeal from an order refusing to enforce an arbitration agreement) and 37(3) (no right of a second appeal) also apply to arbitral proceedings seated outside India. As is obvious, these provisions are in aid of arbitration. Part II of the Arbitration and Conciliation Act 1996 applies to arbitral proceedings seated outside India.

Answer contributed by Madhur Baya

4. What arbitration bodies relevant to international arbitration are based within your jurisdiction? Do such bodies also act as appointing authorities?

India

The Arbitration and Conciliation (Amendment) Act 2019 (2019 Amendment) majorly overhauled the scheme for appointment of arbitrators. By the 2019 Amendment, the Supreme Court and the High Courts have been vested with the power to designate arbitral institutions that have been graded by the Arbitration Council of India ((ACI), to be set up under Part IA of the Act, inserted by the 2019 Amendment). Under the law, as amended by the 2019 Amendment, on an application by a party to a dispute, the appointment of an arbitrator under section 11 of the Arbitration and Conciliation Act, 1996 shall be made by the institution designated by the Supreme Court (in the case of an international commercial arbitration, ie, an arbitration involving at least one non-Indian Party) or the relevant High Court (in the case of an arbitration involving only Indian parties). The arbitral institution us required to dispose of the application within 30 days from the date of service of notice on the opposite party.

The ACI, to be set up, has been tasked with taking all such measures as may be necessary to promote and encourage arbitration, mediation, conciliation or other alternative dispute resolution mechanism and for that purpose to frame policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration. Its duties include the framing of policies governing the grading of arbitral institutions, reviewing the grading of arbitral institutions and arbitrators, promotion of institutional arbitration by strengthening arbitral institutions. On 12 February 2020, the Indian Ministry of Law had put up the Draft Rules for the ACI for public consultation. Once the Final Rules are notified, the ACI will formally be set up. Until such time as the ACI is set up and in the event that there is no graded arbitral institution within the jurisdiction of a High Court, the High Court may maintain a panel of arbitrators for discharging the functions and duties of arbitral institution.

CIArb has an India chapter. SIAC has a liaison office in India. LCIA India, an affiliate of LCIA shut up shop in India in early 2016 after almost six years of existence. The Indian Council of Arbitration (under the aegis of the Federation of Indian Chambers of Commerce and Industry) is one of the larger home-grown institutions. There is also the Nani Palkhivala Arbitration Centre in Chennai. The Mumbai Centre for International Arbitration was set up in August 2016 and published its revised Rules in early 2017. Of these, the Mumbai Centre for International Arbitration, the Indian Council of Arbitration and the Nani Palkhivala Arbitration Centre act as appointing authorities in arbitration agreements providing for such appointments. The Delhi High Court set up the Delhi International Arbitration Centre in 2009, which has its own Rules, last updated in 2018.

On 26 July 2019, The New Delhi International Arbitration Centre Act, 2019 came into force. The Act provides for the establishment of the New Delhi International Arbitration Centre (NDIAC) to conduct arbitration, mediation and conciliation proceedings. The key objectives of the NDIAC include (i) promoting research, providing training and organising conferences and seminars in alternative dispute resolution matters, (ii) providing facilities and administrative assistance for the conduct of arbitration, mediation and conciliation proceedings in a professional, timely and cost-effective manner, and (iii) maintaining a panel of accredited arbitrators, mediators and conciliators. The NDIAC will take over all functions of the International Centre for Alternative Dispute Resolution (ICADR), a society formed by the Supreme Court of India. On 12 February 2020, the Indian Ministry of Law had put up the Draft Rules for the NDIAC for public consultation. Once the Final Rules are notified, the NDIAC will formally be set up.

Answer contributed by Madhur Baya

5. Can foreign arbitral providers operate in your jurisdiction?

India

Foreign arbitral providers cannot operate in India for taxation issues. It is for this reason alone that the three most prominent arbitral providers, namely ICC, LCIA and SIAC have chosen to operate through liaison offices or from their respective home offices. Other than tax, however, there are no legal impediments to foreign arbitral institutions operating in India.

Answer contributed by Madhur Baya

6. Is there a specialist arbitration court? Is the judiciary in your jurisdiction generally familiar with, and supportive of, the law and practice of international arbitration?

India

Under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 (legislated on 31 December 2015), specialist courts for handling commercial cases (including arbitration) have been set up in the various High Courts in India. Arbitration cases are listed before specific Commercial Division benches and appeals are heard by Commercial Appellate Division benches. Though the roster assigns works other than arbitration also to these commercial courts, arbitration matters do get reasonable priority. The judges assigned the commercial court roster in the principal courts dealing with large, complex commercial disputes, namely the Supreme Court of India, the Delhi High Court and the Bombay High Court are very familiar with and supportive of the law and practice of international arbitration. The maturity of Indian courts on issues arising in international arbitration and their pro-arbitration stance is evident in the judicial pronouncements of the past seven to eight years.

Answer contributed by Madhur Baya

Agreement to arbitrate

7. What, if any, requirements must be met if an arbitration agreement is to be valid and enforceable under the law of your jurisdiction? Can an arbitration agreement cover future disputes?

India

Section 7 of the Arbitration and Conciliation Act 1996 sets out the requirements of a valid arbitration agreement. It must be in writing, including by an exchange of letters, faxes, communication through electronic means (emails, SMSs, chats, etc) and through an exchange of statement of claim and defence in which the existence of an agreement is alleged by one party but not denied by the other.

In addition, the agreement must also satisfy the requirements of enforceability of contracts under the Indian Contract Act 1872, such as capacity of the parties to contract (age, soundness of mind, etc), free consent, lawful consideration and lawful object (section 10, Indian Contract Act).

An arbitration agreement would cover future disputes, as the use of the words “disputes which have arisen or which may arise” in section 7(1) of the Arbitration and Conciliation Act 1996 amplifies. For the avoidance of doubt, while an arbitration agreement can, and most commonly does cover future disputes, an arbitral reference cannot be used as an advance ruling to secure a pre-emptive decision on disputes that have not arisen at the stage of invocation of arbitration.

Answer contributed by Madhur Baya

8. Are any types of dispute non-arbitrable? If so, which?

India

While the Arbitration and Conciliation Act 1996 does not list out disputes considered to be non-arbitrable, Indian courts usually assess arbitrabililty by differentiating between actions in personam (arbitrable) and actions in rem (non-arbitrable). Well-recognised examples of non-arbitrable disputes are those relating to criminal offences, family disputes (divorce, child custody, guardianship, etc), insolvency and winding-up matters, testamentary matters, taxation disputes and tenancy matters. Further, a dispute for which a special forum has been constituted by statute is not arbitrable, such as recovery of debts by banks, disputes under the Electricity Act, or disputes relating to service law, labour law and military law (see: Punjab State Electricity Board Guru Nanak Cold Storage and Ice Factory (1996) 5 SCC 411; Sathish Raj v. Atlanta Applied Dynamics (India) Pvt Ltd (2007) 1 Arb LR 436 (Mad)).

Answer contributed by Madhur Baya

9. Can a third party be bound by an arbitration clause and, if so, in what circumstances? Can third parties participate in the arbitration process through joinder or a third-party notice?

India

Until the 2015 amendments to the Arbitration and Conciliation Act 1996, the inclusion or otherwise of third parties was a matter of much debate in India. In what exposes the dichotomy of jurisprudence on the issue, in the context of purely domestic arbitration, Indian courts have held that non-parties to an arbitration agreement cannot be bound by the agreement, and that reference to arbitration can only be with respect to the parties to the agreement (see: Sukanya Holdings Pvt Ltd v Jayesh H Pandya (2003) 5 SCC 531). With respect to international arbitrations, in exceptional circumstances involving composite agreements between multiple parties, where the non-signatory sought to be joined is a person “claiming through or under” one of the parties to the arbitration agreement, courts have been of the view that such non-signatories may be joined to the arbitration (see: Chloro Controls (India) (P) Ltd v Severn Trent Water Purification Inc (2013) 1 SCC 641), although in recent months the courts have been applying the Chloro Control (ibid) test even in domestic arbitrations.

The 2015 amendments to section 8 of the Arbitration and Conciliation Act 1996, however, make it plain that persons claiming through or under a party to an arbitration agreement may claim the benefit of an arbitration agreement. Though the definition of a “party” has not been amended to include non-signatories claiming through or under signatories to an arbitration agreement, it is arguable that a non-party to an arbitration agreement may be joined in an arbitration between signatories to the arbitration agreement.

As a general rule, a third party may, in any event, be joined in an arbitration proceeding with the consent of all parties (including the third party), but it is permissible to join third parties to an arbitration without their prior consent in exceptional cases (See: Chloro Control ibid and Cheran Properties Limited v Kasturi and Sons Limited and Ors (2018) 16 SCC 413).

Answer contributed by Madhur Baya

10. Would an arbitral tribunal with its seat in your jurisdiction be able to consolidate separate arbitral proceedings under one or more contracts and, if so, in what circumstances?

India

An arbitral tribunal may consolidate separate arbitral proceedings under one or more contracts upon an application being made in that behalf and subject to:

  • identity of parties (including those claiming through or under them) being the same; and
  • the arbitration agreements not being incongruous.

Consolidation is not expressly provided for under the Arbitration and Conciliation Act, 1996, but is not unheard of, especially in cases involving a suite of agreements or where identical or similar disputes arise under more than one agreement.

Courts usually consider multiplicity of proceedings, conflicting decisions and a likelihood of injustice to be sufficient grounds for consolidation of arbitral proceedings (See: PR Shah, Shares and Stock Brokers Private Limited v BHH Securities Private Limited (2012) 1 SCC 594). There are also instances where the court has looked at multiple arbitration agreements between the same parties for the same project but not permitted consolidation on the basis of incorporation by reference (See: Duro Felguera, SA v Gangavaram Port Limited (2017) 9 SCC 729).

On balance, though, the position in India remains that the Tribunal has the power to order consolidation of proceedings in the interest of efficiencies and to avoid conflicting decisions.

Answer contributed by Madhur Baya

11. Is the "group of companies doctrine" recognised in your jurisdiction?

India

India, in its arbitral jurisprudence, has only very recently permitted the invocation of the “group of companies doctrine” for piercing the corporate veil and enjoining the “real” parties to the contract, in any arbitration, being those “claiming under” an ostensible part to the arbitration agreement (See: Cheran Properties Limited v Kasturi and Sons Limited (2018) 16 SCC 413). 

Answer contributed by Madhur Baya

12. Are arbitration clauses considered separable from the main contract?

India

Yes, arbitration clauses are considered separate and separable from the main contract. This is statutorily recognised by section 16 of the Arbitration and Conciliation Act 1996. Section 16(1)(a) of the Arbitration and Conciliation Act 1996 provides that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. Section 16(1)(b) of the Arbitration and Conciliation Act, 1996 then provides that a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

The Supreme Court of India has consistently recognised the application of the doctrine of severability of arbitration agreements in distinguishing the law applicable to the contract and the law applicable to the arbitration agreement (see: Reliance Industries Limited & Anr v Union of India (2014) 7 SCC 603).

Answer contributed by Madhur Baya

13. Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunals jurisdiction and competence?

India

The principle of competence-competence is statutorily recognised by section 16 of the Arbitration and Conciliation Act 1996. It provides that the arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement. Further, if the arbitral tribunal rejects a challenge, pursuant to section 16(5) of the Arbitration and Conciliation Act 1996, it may proceed to an award, and under section 16(6) of the Arbitration and Conciliation Act 1996, the only recourse available to the party challenging the jurisdiction of the tribunal is to await the award and then challenge the award on such grounds as may be available.

There is, however, an important limitation placed on the Tribunal’s power to determine its own jurisdiction by a Constitution Bench judgment from the Supreme Court of India in SBP & Co v Patel Engineering Ltd and Anr (2005) 8 SCC 618, wherein it has been held that the Tribunal’s power to determine its own jurisdiction can only be exercised in all instances except where either the dispute has been referred to arbitration by court under section 8 of the Arbitration and Conciliation Act 1996 or where the court has appointed the arbitrator(s) under section 11 of the said Act. This has very recently been reiterated by the Supreme Court of India in State of West Bengal v Sarkar & Sarkar (2018) 12 SCC 736.

Answer contributed by Madhur Baya

14. Are there particular issues to note when drafting an arbitration clause where your jurisdiction will be the seat of arbitration or the place where enforcement of an award will be sought?

India

Where India is the “seat” of an arbitration, it would be recommended that a prominent commercial centre such as New Delhi or Mumbai is nominated as the seat. This is because the courts at the seat, namely the Delhi High Court and the Bombay High Court have a rather well-established jurisprudence on arbitration and have a reputation of being pro-arbitration. It is always preferable to have agreed institutional rules, or at least nominate an institution to make the appointment of arbitrators. This alone should save some time and cost in the matter of formation of the arbitration tribunal.

The 2015 amendments to the Arbitration and Conciliation Act 1996 should otherwise ensure an efficient and orderly conduct of an arbitration, and an equally efficient and orderly disposal of any applications or petitions by courts.

Where India is likely to be the place where enforcement of an award is sought, one would ensure that the provisions of sections 9 and 27 of the Arbitration and Conciliation Act 1996 are not excluded from the arbitration agreement. An express inclusion of section 9 and 27 of the Arbitration and Conciliation Act 1996 may actually help matters more.

Answer contributed by Madhur Baya

15. Is institutional international arbitration more or less common than ad hoc international arbitration? Are the UNCITRAL Rules commonly used in ad hoc international arbitrations in your jurisdiction?

India

Institutional arbitration has historically been less common in India, and statistically, well over 90 per cent of all arbitrations are ad hoc. Increasingly, however, sophisticated parties are preferring institutional arbitration over ad hoc. The institutionalisation of arbitration has got a major fillip through the Arbitration and Conciliation (Amendment) Act 2019 (See: Question 4 for details). Even prior to the Arbitration and Conciliation (Amendment) Act 2019, a definite trend making institutional arbitration a preferred option in contracts executed by government-owned entities and private Indian corporations alike was distinctly and sharply shaping up.

UNCITRAL Rules are commonly used in high-value, complex ad hoc arbitrations particularly where the government of India or the government of a state is a party to the dispute.

Answer contributed by Madhur Baya

16. What, if any, are the particular points to note when drafting a multi-party arbitration agreement with your jurisdiction in mind? In relation to, for example, the appointment of arbitrators.

India

In relation to multi-party agreements, there aren’t any peculiar issues that arise in India. However, in such arbitrations, particularly where every party is independent of the others, it is best to let an institution appoint the tribunal, as that could avoid a debate on who had the right to make an appointment, and also a debate as to the number of arbitrators.

Answer contributed by Madhur Baya

Commencing the arbitration

17. How are arbitral proceedings commenced in your jurisdiction? Are there any key provisions under the arbitration laws of your jurisdiction relating to limitation periods of which the parties should be aware?

India

An arbitration is invoked by a party communicating its desire to commence arbitration by way of a notice in writing. The notice invoking arbitration is usually unaccompanied by any Exhibits (unlike an institutional Request for Arbitration) and it usually nominates an arbitrator, and gives a period of 30 days to the counterparty to respond. The date when the respondent receives the notice of arbitration is the date when an arbitration proceeding commences, pursuant to section 21 of the Arbitration and Conciliation Act 1996.

The Limitation Act 1963 and the various entries in the Schedule annexed thereto set out the statutory periods of limitation for various types of claims. For most common commercial and contractual disputes that get to arbitration, the period of limitation prescribed is no longer than three years from the date the right to sue arises. The Limitation Act 1963 being a statute of prescription, has the effect of barring the right to sue upon the expiry of the prescribed period of limitation, even if it does not have the effect of extinguishing the claim. Provisions of the Limitation Act 1963 apply to an arbitration seated in India, pursuant to section 43(1) of the Arbitration and Conciliation Act 1996.

Answer contributed by Madhur Baya

Choice of law

18. How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?

India

The parties’ choice of substantive law is the primary factor determining the substantive law of the dispute.

Where the parties have not expressly chosen a substantive law of the dispute:

  • In the case of a purely domestic arbitration (parties being Indian and seat being in India), the substantive law of India shall apply, pursuant to section 28(1) of the Arbitration and Conciliation Act 1996.
  • In the case of an international commercial arbitration seated in India, section 28(1)(b)(iii) of the Arbitration and Conciliation Act 1996 permits the tribunal to determine the substantive law it considers appropriate given the circumstances surrounding the dispute.

Where the substantive law is unclear, Indian law endeavours to impute an intention by identifying the legal system with which the transaction has its closest and most real connection. While determining the intention of the parties with regard to such substantive law, considerations of a bona fide choice and public policy are also taken into account.

Answer contributed by Madhur Baya

Appointing the tribunal

19. Does the law of your jurisdiction place any limitations in respect of a partys choice of arbitrator?

India

The law prohibits an even number of arbitrators, pursuant to section 10(1) of the Arbitration and Conciliation Act 1996 (principal Act). Otherwise the parties are free to determine the number of arbitrators, and failing any agreement, the default position pursuant to section 10(2) of the Arbitration and Conciliation Act 1996 is a sole arbitrator.

There are some restrictions at Indian law on who may be appointed an arbitrator, and these may be classified under two broad heads:

  • conditions introduced by the Arbitration and Conciliation (Amendment) Act 2015, which effectively hard legislates the IBA Guidelines on Conflict of Interests into the legislative framework through amendments to section 12 and introduces the conditions for automatic disqualification of an arbitrator in the Seventh Schedule to the Arbitration and Conciliation Act 1996, which may only be waived after a dispute has arisen, besides setting out in the Fifth Schedule the grounds that may give rise to justifiable doubts as to the independence or impartiality of the arbitrator. While the grounds set out in the Fifth Schedule do not ipso jure lead to disqualification of the arbitrator it indicates the possibility of a challenge.
  • Conditions introduced by the Arbitration and Conciliation (Amendment) Act 2019, which seeks to prescribe the qualifications, experience and norms for accreditation of arbitrators, which are set out in a new schedule to the principal Act, namely, the Eighth Schedule. Apart from the soft skills, the Eighth Schedule is rather restrictive. It would, as it were, come to play once the full impact of the Arbitration and Conciliation (Amendment) Act 2019 is felt, upon the constitution of the Arbitration Council of India.

Answer contributed by Madhur Baya

20. Can non-nationals act as arbitrators where the seat is in your jurisdiction or hearings are held there? Is this subject to any immigration or other requirements?

India

Foreign nationals can act as arbitrators where the seat or the venue is in India. There is at present a lack of clarity as to whether the requirements of the Eighth Schedule (introduced by the Arbitration and Conciliation (Amendment) Act, 2019) would have to be met by the arbitrator in such cases. Where the arbitration involves only an Indian venue, it might be clearer as to the exclusion of the Eighth Schedule but where the seat is in India, it appears that the Eighth Schedule might apply. Clarity on this will emerge once the Arbitration Council of India Rules are notified.

As is generally the case in most jurisdictions, a limited time work visa or business visa would be required.

Answer contributed by Madhur Baya

21. How are arbitrators appointed where no nomination is made by a party or parties or the selection mechanism fails for any reason? Do the courts have any role to play?

India

Where no nomination is made by a party or the parties or the selection mechanism has failed:

  • In respect of an arbitration between two or more Indian parties, an application for appointment of an arbitrator has to be made to the High Court having jurisdiction over the designated seat, or any person or institution designated by the High Court, under section 11(6) of the Arbitration and Conciliation Act 1996.
  • In respect of an arbitration where at least one party is non-Indian, an application for appointment of an arbitrator has to be made to the Supreme Court of India, or any person or institution designated by the Supreme Court, under section 11(6) of the Arbitration and Conciliation Act 1996.

By the Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment), the Supreme Court and the High Courts have been vested with the power to designate arbitral institutions that have been graded by the Arbitration Council of India (ACI, to be set up under Part IA of the Act, inserted by the 2019 Amendment). Under the law, as amended by the 2019 Amendment, on an application by a party to a dispute, the appointment of an arbitrator under section 11 of the Arbitration and Conciliation Act, 1996 shall be made by the institution designated by the Supreme Court (in the case of an international commercial arbitration, ie, an arbitration involving at least one non-Indian party) or the relevant High Court (in the case of an arbitration involving only Indian parties). Until such time as the ACI is set up and in the event that there is no graded arbitral institution within the jurisdiction of a High Court, the High Court may maintain a panel of arbitrators for discharging the functions and duties of arbitral institution.

Answer contributed by Madhur Baya

22. Are arbitrators afforded immunity from suit under the law of your jurisdiction and, if so, in what terms?

India

The Arbitration and Conciliation (Amendment) Act, 2019 has inserted section 42B into the Arbitration and Conciliation Act 1996 and introduced immunity for arbitrators. Until the said amendment, arbitrators did not enjoy any immunity from being sued for negligence or otherwise. Post the amendment, however, no suit or other legal proceedings shall lie against the arbitrator for anything that is done or intended to be done in good faith.

Answer contributed by Madhur Baya

23. Can arbitrators secure payment of their fees in your jurisdiction? Are there fundholding services provided by relevant institutions?

India

The arbitral tribunal has a lien on the Award for any unpaid costs of the arbitration, pursuant to section 39 of the Arbitration and Conciliation Act 1996. Unlike section 41 of the English Arbitration Act 1996, the tribunal is not vested with any power to make peremptory orders non non-compliance with its directions.

As a general rule, costs and deposits for the tribunal are to be shared equally by the parties. However, pursuant to section 38(2) of the Arbitration and Conciliation Act 1996, if one of the parties is in default on the direction for payment of fees, the tribunal may call upon the other party to make good that part of the fees, and on a failure of the other party also to pay, the tribunal may dismiss the claim or counterclaim (as the case may be) in respect of which the fees has remained unpaid.

None of the domestic institutions provide fundholding services. It is not uncommon, however, for parties to appoint an LCIA or an SIAC or ICC to provide fundholding services even where the arbitration is not under the Rules of any of these institutions, but is, say, a UNCITRAL ad hoc arbitration.

Answer contributed by Madhur Baya

Challenges to arbitrators

24. On what grounds may a party challenge an arbitrator? How are challenges dealt with in the courts or (as applicable) the main arbitration institutions in your jurisdiction? Will the IBA Guidelines on Conflicts of Interest in International Arbitration generally be taken into account?

India

The procedure for challenging an arbitrator in various circumstances is set out in sections 12, 13 and 14 of the Arbitration and Conciliation Act 1996. Section 12 of the Arbitration and Conciliation Act 1996 has been amended by the Arbitration and Conciliation (Amendment) Act 2015 to introduce the requirement of a disclosure by the potential arbitrator of any circumstance which are likely to give rise to justifiable doubts as to his or her independence or impartiality or which are likely to affect his ability to devote sufficient time to the arbitration, and in particular his or her ability to complete the entire arbitration within a period of 12 months. The newly introduced Fifth Schedule to the Arbitration and Conciliation Act 1996 then lists out the circumstances that are deemed to give rise to justifiable doubts as to the independence or impartiality of an arbitrator. These are not very dissimilar to the Orange List under the IBA Guidelines on Conflict of Interests.

Pursuant to section 12(3) of the Arbitration and Conciliation Act 1996, an arbitrator may be challenged only in two circumstances: (i) circumstances exist that give rise to justifiable doubts as to his or her independence or impartiality; or (ii) the arbitrator does not possess the qualifications agreed by the parties.

The challenge procedure is set out in section 13 of the Arbitration and Conciliation Act, 1996. The parties may agree a challenge procedure. Failing an agreement, a party must make a challenge before the tribunal, setting out the statement of reasons for the challenge within 15 days of becoming aware of the constitution of the tribunal or the circumstances justifying a challenge. Unless the arbitrator challenged withdraws or the other party agrees to the challenge, the tribunal shall decide the challenge. If the tribunal rejects the challenge, it shall continue the proceedings and make an award, which shall, however, be susceptible to challenge, including on the grounds of arbitrator bias.

Other than the grounds in section 12 (supra), section 14 of the Arbitration and Conciliation Act 1996 provides for the termination of the mandate of an arbitrator when he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay or where either the arbitrator withdraws from office or indeed the parties agree to the termination of the mandate. If a controversy remains on such a termination of the arbitrator’s mandate, an application would lie to the court to decide that issue.

The threshold of showing circumstances giving rise to justifiable doubts as to the arbitrator’s independence or impartiality is a rather high bar. (See: Ladli Construction Company Private Limtied v Punjab Police Housing Corporation Limited and Ors (2012) 4 SCC 609; Indian Oil Corporation Limited and Ors v Raja Transport Private Limited (2009) 8 SCC 520).

Interestingly, a Constitution Bench of the Supreme Court of India had held that even where the arbitrator has been appointed by the Supreme Court or its designate under s 11 of the Arbitration and Conciliation Act, 1996, challenging such an arbitrator remains the right of a party having justifiable doubts as to the arbitrator’s independence or impartiality. (See: Konkan Railway Corporation and Anr v Rani Construction Pvt Ltd (2002) 2 SCC 388.) This indicates the healthy approach of the judiciary to challenges to its own appointees on tribunals.

Even prior to the hard-coding of the IBA Guidelines on Conflicts of Interest in International Arbitration into the Fifth and Seventh Schedule to the Arbitration and Conciliation Act, 1996, the courts have relied on the IBA Guidelines on Conflicts of Interest in International Arbitration on a few occasions, but in any event apply principles analogous to the IBA Guidelines in disposing of challenges to arbitrators.

Answer contributed by Madhur Baya

Interim relief

25. What main types of interim relief are available in respect of international arbitration and from whom (the tribunal or the courts)? Are anti-suit injunctions available where proceedings are brought elsewhere in breach of an arbitration agreement?

India

Pursuant to the 2015 amendments to the Arbitration and Conciliation Act 1996, interim measures of protection under section 9 of the Arbitration and Conciliation Act 1996 are available in case of domestically seated and foreign-seated arbitrations alike. These measures may be granted by the court. However, if the tribunal has been constituted, the court shall not entertain an application in respect of an arbitration resulting in a domestic award, and such an application would then have to be made to the tribunal (except where such a remedy before the tribunal is deemed by the court to be non-efficacious).

The court or tribunal may (their powers having been made up in identical terms by the 2015 amendments):

  • appoint a guardian for a minor or a person of unsound mind for the purpose of the arbitration proceedings;
  • grant an interim measure of protection, of the preservation, interim custody or sale of any goods that are the subject matter of the arbitration agreement;
  • grant an interim measure of protection, of securing the amount in dispute in the arbitration;
  • grant an interim measure of protection, of the detention, preservation or inspection of any property or thing that is the subject matter of the dispute in arbitration;
  • grant an interim measure of protection of an interim injunction or the appointment of a receiver.
  • grant such other interim measures of protection as may appear to be just and convenient.

The powers for grant of interim measures of protection are thus very widely cast. One key area where the power of the court in India is wider than, say, in England & Wales is the matter of directing the making of security – in India, the court or tribunal may in fact secure the entire amount in dispute and not just the costs of the non-applicant. It is, for obvious reasons, a very effective tool, and a remedy that is frequently used.

Indian courts do enforce arbitration agreements, including by the grant of an anti-suit injunction in respect of proceedings brought in breach of the arbitration agreement. Having said which, Indian courts are equally mindful of the comity of courts and would not rush in to order an anti-suit where the foreign court is at an advanced stage of adjudicating the disputes brought before it. An instance where the grant of an anti-suit injunction was upheld by the Supreme Court of India was Enercon (India) Limited v Enercon GmbH (2014) 5 SCC 1.

Answer contributed by Madhur Baya

26. Does the law of your jurisdiction allow a court or tribunal to order a party to provide security for costs?

India

As real or actual costs were never awarded in India, applications for security for costs were equally rare. However, the newly inserted section 31-A into the Arbitration and Conciliation Act 1996, statutorily recognises the “costs follow the event” rule, while permitting the tribunal to make a different order for reasons to be recorded in writing. On the other hand, while section 9 of the Arbitration and Conciliation Act 1996 always permitted the court to direct security for the amount in dispute (and that includes security for costs), section 17 has also been amended simultaneously with the introduction of section 31-A (supra), permitting the tribunal to so direct as well. Conceptually, therefore, now the tribunal is empowered to order security for costs.

It is also pertinent that Order XXV of the Civil Procedure Code 1908 provides for the grant of security for costs, and the court or tribunal would be at liberty to so order on analogous principles under sections 9 and 17 respectively, of the Arbitration and Conciliation Act 1996.

At a practical level, though, the threshold for the Court or Tribunal to order security for costs is very high and one would have to demonstrate real prejudice and inability to recover costs.

Answer contributed by Madhur Baya

Procedure

27. Are there any mandatory rules in your jurisdiction that govern the conduct of the arbitration (eg, general duties of the tribunal and/or the parties)?

India

There are a few provisions of the Arbitration and Conciliation Act 1996 that are in the nature of mandatory provisions qua the conduct of the arbitration, the rest being derogable. The key mandatory provisions are:

  • the tribunal’s competence to decide on its own jurisdiction (section 16);
  • equal treatment of parties (section 18); and
  • time limit for arbitral award (section 29-A).

Other than these, section 19 of the Arbitration and Conciliation Act 1996 permits the parties to agree the procedure and failing an agreement, for the tribunal to determine the procedure, including on matters of language, date of commencement of arbitration, etc. The Tribunal’s general duty in the making of an award in a purely domestic arbitration are contained in section 28 of the Arbitration and Conciliation Act 1996.

As for the general duties of the parties, sections 23–25 cover the field, other than the broad general duty to not act disruptively and to comply with the Tribunal’s directions.

Answer contributed by Madhur Baya

28. What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration?

India

Where the respondent fails to participate in an arbitration:

  • section 11 of the Arbitration and Conciliation Act 1996 provides for an application for appointment of the arbitrator to be made before the Supreme Court (in case of an international commercial arbitration, ie, where at least one party is non-Indian) or the High Court (in case of a domestic arbitration);
  • section 25(b) of the Arbitration and Conciliation Act 1996 permits the tribunal to treat the right of the respondent to file a statement of defence as having been forfeited;
  • section 25(c) of the Arbitration and Conciliation Act 1996 permits the tribunal to proceed ex-parte to make an award if the respondent fails to appear at an oral hearing or to produce documentary evidence;
  • the newly introduced section 31-A of the Arbitration and Conciliation Act 1996 would enable the tribunal to determine the costs payable by the parties, considering, amongst other things, their conduct;
  • Finally, under another newly inserted provision, namely section 29A(8), in case the arbitral proceedings are delayed beyond the statutorily prescribed period of 12 months – including by reason of the non-participation by the respondent – and an application is made to the court for an extension of time for making an award, the court could impose actual or exemplary costs upon any party. In certain circumstances, this provision may result in a recalcitrant respondent being visited with exemplary costs by an order of court.

In practice, as is the norm in most common law countries, a tribunal in India would give recalcitrant respondents “sufficient opportunity” to participate (even if only to prevent a challenge to the award on the ground of breach of principles of natural justice), but on continued recalcitrance, proceed to making an award.

Answer contributed by Madhur Baya

29. What types of evidence are usually admitted, and how is evidence usually taken? Will the IBA Rules on the Taking of Evidence in International Arbitration generally be taken into account?

India

Although section 19(1) of the Arbitration and Conciliation Act 1996 disapplies the provisions of the Indian Evidence Act 1872 to arbitrations seated in India, it is not uncommon for ad hoc domestic tribunals to continue to apply the provisions of the Indian Evidence Act 1872, and at the very least, principles analogous to the said Act, in the conduct of an arbitral reference.

The practice of taking evidence is not dissimilar to other common law jurisdictions. Both documentary and oral evidence is admissible. Again, oral evidence that is in the face of or contradicts documents on record is frowned upon, although oral evidence to explain any ambiguity in any document may be accepted.

Parties may seek the assistance of court in matters of taking evidence (see question 30 for more details).

Again, the IBA Rules on the Taking of Evidence in International Commercial Arbitration are increasingly being take into account in evidentiary matters, though this was not the case until a couple of years ago.

Insofar as the Prague Rules’ (the Rules on the Efficient Conduct of Proceedings in International Arbitration) are concerned, it may be some time before they become commonplace in arbitrations in India.

Answer contributed by Madhur Baya

30. Will the courts in your jurisdiction play any role in the obtaining of evidence?

India

While the parties (with the approval of the tribunal) or the arbitral tribunal in an arbitration seated in India could have always sought the assistance of the court in taking documentary or oral evidence, pursuant to section 27 of the Arbitration and Conciliation Act 1996 – and the court would, according to its rules on taking evidence, execute the request by ordering that the evidence be provided directly to the tribunal by the person(s) in whose name(s) the requests have been made – the recent amendments to the statute have made this provision applicable by default (but on a derogable basis) even to arbitrations seated outside India. The non-compliance with the court’s orders in this behalf or non-cooperation in the matter of giving evidence with the tribunal would be subject to the same disadvantages, penalties and punishments by an order of the court as they would in case of a suit before the court, making this an effective tool in the hands of the parties and the tribunal.

Answer contributed by Madhur Baya

31. What is the relevant law and prevailing practice relating to document production in international arbitration in your jurisdiction?

India

While there are no prescriptive statutory guidelines on document production in international arbitration, it is not uncommon for a document discovery phase being included in an arbitration, again, in synch with common law practices. The document production, however, is limited and not as extensive or exhaustive as in the United States.

Increasingly, parties are content to follow the Redfern Schedules, consistent with the global best practices.

Answer contributed by Madhur Baya

32. Is it mandatory to have a final hearing on the merits?

India

Pursuant to section 24(1) of the Arbitration and Conciliation Act 1996, it is not mandatory for an oral hearing to be conducted on the merits and the parties may well agree or the tribunal may determine (absent an agreement to not have an oral hearing) for it to be a documents-only arbitration. Again, unless the parties have agreed that no oral hearing shall be held, the tribunal may hold oral hearings on the request by a party.

Further, where an arbitration is conducted as a fast track arbitration under section 29B, sub-section 3(a) provides for a documents-only arbitration without any oral hearing.

Answer contributed by Madhur Baya

33. If your jurisdiction is selected as the seat of arbitration, may hearings and procedural meetings be conducted elsewhere?

India

Yes, it is possible to hold the hearings and procedural meetings outside of India even if a place in India is nominated as the seat of the arbitration. This freedom is legislated through s 20(3) of the Arbitration and Conciliation Act 1996. [See: SVG Molasses Co BV v Mysore Mercantile Co Ltd (2007) 5 RAJ 1 (SC)].

Answer contributed by Madhur Baya

Award

34. Can the tribunal decide by majority?

India

Like most common law jurisdictions and consistent also with the Model Law, section 29(1) provides that subject to an agreement to the contrary between the parties, any decision of the tribunal shall be made by a majority of all its members. Thus, on a derogable basis, the tribunal can decide by majority. While conceptually the parties may, however, agree that the tribunal shall only decide by majority, in practice, such is never the case.

Further, pursuant to section 29(2) of the Arbitration and Conciliation Act 1996, questions of procedure may be decided by the presiding arbitrator on behalf of the tribunal, if such a course of action is authorised by the parties or all the members of the tribunal.

Answer contributed by Madhur Baya

35. Are there any particular types of remedies or relief that an arbitral tribunal may not grant?

India

The tribunal may grant such reliefs as are not in the exclusive domain of a public forum such as a court. This implies, for example, that in a shareholder dispute, while the tribunal may award compensation or a buy-out or sell-out, it cannot direct the winding up of the company nor can it appoint independent directors to the board. Similarly, the tribunal cannot decide whether a person is liable to pay tax or not or if liable, at what rate.

Answer contributed by Madhur Baya

36. Are dissenting opinions permitted under the law of your jurisdiction? If so, are they common in practice?

India

Dissenting opinions are permitted at Indian law. This logically flows from section 29(2) of the Arbitration and Conciliation Act 1996, which permits the tribunal to decide by majority. Though not very common, there are a number of instances where one of the members of the tribunal has authored a dissenting opinion.

As in all common law jurisdictions, a dissenting opinion is just that – an opinion – and has no legal effect of and by itself.

By and large, the dissenting opinion is provided to the parties at the same time as the majority’s award, but that is not by reason of any statutory prescription.

Answer contributed by Madhur Baya

37. What, if any, are the legal and formal requirements for a valid and enforceable award?

India

The following are the legal and formal requirements for a valid and enforceable award at Indian law:

  • It must be in writing [section 31(1) of the Arbitration and Conciliation Act 1996]
  • It shall be signed by the members of the tribunal [section 31(1) of the Arbitration and Conciliation Act 1996] Where the award is by majority, the best practice is for all members to sign the award with appropriate reservation by the dissenting arbitrator or for the majority to sign and state the reason why the other member has not signed it [section 31(2) of the Arbitration and Conciliation Act 1996].
  • Unless the award is on agreed terms or the parties have waived the requirement for the tribunal to give reasons, the award must state the reasons upon which it is based [section 31(3) of the Arbitration and Conciliation Act 1996].
  • The award shall state its date and place of arbitration [section 31(3) of the Arbitration and Conciliation Act 1996].
  • While deciding and making an award, the tribunal shall in all cases, take into account the terms of the contract and trade usages applicable to the transaction [section 28(3) of the Arbitration and Conciliation Act 1996.

Answer contributed by Madhur Baya

38. What time limits, if any, should parties be aware of in respect of an award? In particular, do any time limits govern the interpretation and correction of an award?

India

Under section 29-A(1) of the Arbitration and Conciliation Act 1996, as amended by the Arbitration and Conciliation (Amendment) Act 2019 (2019 Amendment), the tribunal in a matter other than an international commercial arbitration (ie, an arbitration involving at least one non-Indian party) must make the award within 12 months of the date of completion of pleadings, as to which, the newly inserted section 23(4) provides that the statement of claim and defence shall be completed within a period of six months from the date the tribunal receives notice in writing of their appointment. In the case of international commercial arbitrations, the award may be made as expeditiously as possible and endeavour may be made to make the award within 12 months of the date of completion of pleadings.

The parties may extend the period of 12 months by consent, by a period not exceeding six months (section 29-A(3) of the Arbitration and Conciliation Act 1996). If the award is not made within the period of 12 months or the extended period, the mandate of the arbitrator shall terminate unless the court has, on an application in writing made before it, extended the period for making the award, either prior to or after the expiry of the period of 12 months or 18 months, as the case may be. Where an application for extension is pending before the Court, the mandate of the arbitrator shall continue until the disposal of the application by the Court.

An arbitral award made in an arbitration seated in India may be challenged before the court within a period of three months from the date a copy of the award was received by the party challenging the award. The court may, however, on an application made in writing and on being satisfied that the applicant was prevented by sufficient cause from making the application for setting aside an award within the said period of three months, entertain a challenge within a further period not exceeding 30 days from the expiry of the said period of three months (section 34(3) of the Arbitration and Conciliation Act 1996).

Subject to an agreement on timelines between the parties, an application for interpretation of a specific point or correction of any typographical or computational errors in an award may be made within a period of 30 days from the date of receipt of the award (section 33(1) of the Arbitration and Conciliation Act 1996). The tribunal may make the correction or give the interpretation within a period of 30 days from the date of receipt of the request (section 33(2) of the Arbitration and Conciliation Act 1996), although the tribunal may extend the period within which it shall make a correction or give an interpretation (section 33(6) of the Arbitration and Conciliation Act 1996).

Answer contributed by Madhur Baya

Costs and interest

39. Are parties able to recover fees paid and costs incurred? Does the "loser pays" rule generally apply in your jurisdiction?

India

The newly inserted section 31-A of the Arbitration and Conciliation Act 1996 (inserted into the legislation by the 2015 Amendments) legislates, for the first time, a costs regime at Indian arbitration law. It empowers the tribunal to decide whether costs are payable by one party to the other, in what amount and when? (section 31-A(1) of the Arbitration and Conciliation Act 1996). Under the amended law, the default rule is “costs follow the event” or “loser pays” (section 31-A(2)(a) of the Arbitration and Conciliation Act 1996). The tribunal may, however, for reasons to be recorded in writing, make a different order on costs (section 31-A(2)(b) of the Arbitration and Conciliation Act, 1996).

The guidelines for the determination of costs are set out in section 31-A(3) of the Arbitration and Conciliation Act 1996 and the factors that have a bearing on this include: (i) the conduct of all the parties; (ii) whether a party has succeeded partly in the case; (iii) whether a party has delayed the conduct of the proceedings by making a frivolous counter-claim; and (iv) whether any reasonable offer to settle the dispute is made by one party but rejected by the other. These factors are not different from the tests applied by arbitral tribunals in other common law jurisdictions.

What the tribunal could do in its costs order is then set out in section 31(4) of the Arbitration and Conciliation Act 1996.

Answer contributed by Madhur Baya

40. Can interest be included on the principal claim and costs? Is there any mandatory or customary rate?

India

Unless otherwise agreed by the parties, section 31(7)(a) of the Arbitration and Conciliation Act 1996 empowers the tribunal to award interest at such rate as it deems reasonable on the whole or any part of the money for the whole or any part of the period from the date when the cause of action arose until the date of the award.

Unless the tribunal otherwise directs, pursuant to section 31(7)(b) of the Arbitration and Conciliation Act, 1996, any sum directed to be paid by the tribunal shall carry interest at a rate 2 per cent higher than the highest of the maximum prevailing (as on the date of the award) rates at which interest may be paid on different classes of deposits (other than those maintained in savings accounts or those maintained by charitable or religious institutions) by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act 1949. This interest shall be payable for the period from the date of the award until the date when the monies are paid under the award. Until the 2015 amendment to the Arbitration and Conciliation Act 1996, the statute provided for a default rate of interest of 18 per cent per annum.

Answer contributed by Madhur Baya

Challenging awards

41. Are there any grounds on which an award may be appealed before the courts of your jurisdiction?

India

At Indian law, subject to the provisions of sections 33 and 34 of the Arbitration and Conciliation Act 1996, an award is final and binding [section 35 of the Arbitration and Conciliation Act 1996] and cannot be appealed. The only recourse against an award made in an arbitration seated in India is an application for setting aside, under section 34 of the Arbitration and Conciliation Act 1996, which proceeding is, in essence, in the nature of an annulment proceeding. See question 42 and the response thereto, for the grounds for seeking setting aside.

In respect of an award made in an arbitration seated outside India, the only recourse is an application resisting the enforcement of a foreign award, pursuant to section 48 of the Arbitration and Conciliation Act 1996.

Answer contributed by Madhur Baya

42. Are there any other bases on which an award may be challenged, and if so what?

India

The various grounds for seeking setting aside of an arbitral award made in an arbitration seated in India, pursuant to section 34 of the Arbitration and Conciliation Act 1996, are as under:

(a) The party seeking the set aside furnishes proof that:

  • it was under some incapacity [Legal Incapacity, section 34(2)(a)(i)]; or
  • the arbitration agreement is not valid under the agreed law or failing an agreement, Indian law for the time being in force [Invalidity of Arbitration Agreement, section 34(2)(a)(ii)]; or
  • it was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present its case [Natural Justice, section 34(2)(a)(iii)]; or
  • The award deals with a dispute not contemplated by or not falling within the terms of submission to arbitration, or it contains decisions on matters beyond the scope of submission to arbitration [Jurisdiction, section 34(2)(a)(iv)], severability exception being applicable.
  • The composition of the tribunal or the arbitral procedure was not in accordance with the agreement of the parties or failing such agreement, not in accordance with Part I of the Arbitration and Conciliation Act 1996 [Procedural, section 34(2)(a)(v)]. All complaints of arbitrator misconduct and all challenges to arbitrator appointments fall in this bracket.

(b) The court finds:

  • The subject matter of the dispute is not capable of settlement by arbitration at Indian law [Arbitrability, section 34(2)(b)(i)];
  • The arbitral award is in conflict with the public policy of India [Public Policy, section 34(2)(b)(ii)]. This ground is delimited to apply only if (a) the making of the award was induced by fraud or corruption; (b) the award is in conflict with the fundamental policy of Indian law; or (c) the award is in conflict with the most basic notions of morality or justice;
  • In cases other than an international commercial arbitration (ie, only in an arbitration seated in India and between only Indian parties), that the award is vitiated by a patent illegality appearing on the face of the award [Patent Illegality, section 34(2-A)].

The court does not, in dealing with the application, engage in a review on the merits of the dispute, nor would it set aside an award merely on the ground of an erroneous application of the law or by re-appreciation of evidence [See: Associate Builders v Delhi Development Authority (2014) 3 SCC 49].

Pertinently, section 34(4) of the Arbitration and Conciliation Act, 1996 permits the Court, in appropriate circumstances, to suspend the setting aside proceedings to permit the tribunal to resume the proceedings or to take such other action as in the opinion of the tribunal, will eliminate the grounds for setting aside the award.

Answer contributed by Madhur Baya

43. Is it open to the parties to exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?

India

The parties cannot, at Indian law, exclude the right to seek annulment or setting aside of the award. Indian law does not recognise agreements in restraint of legal proceedings (see: section 28 of the Indian Contract Act 1872). Parties may not, therefore, exclude recourse to any legal remedy that may be available to them.

Answer contributed by Madhur Baya

Enforcement in your jurisdiction

44. Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?

India

At Indian law, an award which has not yet become binding on the parties or has been set aside or suspended by a competent Court of the country in which, or under the laws of which, the award was made, will not be enforced in India, pursuant to section 48(1)(e) of the Arbitration and Conciliation Act 1996. Thus, an award that has been set aside by the courts at the seat will not be enforced in India. It is, however, permissible for a party to secure a decree or judgment in terms of the Award in another jurisdiction and then attempt to enforce that decree or judgment under the Civil Procedure Code, 1908. We have not come across any instance where this has been done, though.

Answer contributed by Madhur Baya

45. What trends, if any, are suggested by recent enforcement decisions? What is the prevailing approach of the courts in this regard?

India

The recent trends in enforcement decisions in India are of respect for the arbitral process and non-interference by the Court in India. This trend can be traced back to the judgment of the Supreme Court of India in Shree Lal Mahal Ltd v Progetto Grano SpA (2014) 2 SCC 433, which has narrowed down the grounds for refusing enforcement of the arbitral award to what is consistent with the statutory language of section 48 of the Arbitration and Conciliation Act 1996 and with the provisions of article 36 of the Model Law, rejecting the then-prevalent expansive interpretation of the court’s power to interfere with a foreign award. Foreign awards are rarely, if ever, interfered with or refused enforcement since the judgment in Shree Lal Mahal (supra).

In terms of the statutory language of section 48 of the Arbitration and Conciliation Act 1996, which has received a narrow interpretation in Shree Lal Mahal (supra), a foreign award made in a country that is a signatory to the New York Convention and which has been notified by India as a reciprocating territory under section 44 of the Arbitration and Conciliation Act 1996, is directly enforceable as a decree of the Court in India, except where:

(i) A party seeking to resist the enforcement furnishes proof that:

    • it was under some incapacity, under the law applicable to it [Legal Incapacity, section 4(1)(a)]; or.the arbitration agreement is not valid under the agreed law or failing an agreement, the law of the country where the award was made [Invalidity of Arbitration Agreement, section 48(1)(a)]; or
    • it was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present its case [Natural Justice, section 48(1)(b)]; or
    • The award deals with a dispute not contemplated by or not falling within the terms of submission to arbitration, or it contains decisions on matters beyond the scope of submission to arbitration [Jurisdiction, section 48(1)(c)], severability exception being applicable.
    • The composition of the tribunal or the arbitral procedure was not in accordance with the agreement of the parties or failing such agreement, not in accordance with Part I of the Arbitration and Conciliation Act 1996 [Procedural, section 48(1)(d)].
    • The award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made [Set Aside Or Not Yet Binding At The Seat, section 48(1)(e)].

(ii) The court finds:

    • The subject matter of the dispute is not capable of settlement by arbitration at Indian law [Arbitrability, section 48(2)(a)];
    • The arbitral award is in conflict with the public policy of India [Public Policy, section 48(2)(b)]. This ground is delimited to apply only if (i) the making of the award was induced by fraud or corruption; (ii) the award is in conflict with the fundamental policy of Indian law; or (iii) the award is in conflict with the most basic notions of morality or justice.

The court does not, in dealing with the application, engage in a review on the merits of the dispute.

More recent judicial pronouncements, including that of the Supreme Court of India in Vijay Karia v Prysmian Cavi E Sistemi Srl, 2020 SCCOnLine SC 177, have left judgment debtors with next to no wriggle room in resisting the enforcement of foreign arbitral awards. The courts have consistently demonstrated their willingness to ensure that a well-reasoned foreign arbitral award is enforced as expeditiously as possible and towards this end, has construed the grounds for resisting enforcement in section 48 ibid, in the narrowest terms and as an exhaustive enlisting of such grounds.

Answer contributed by Madhur Baya

46. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

India

Sovereign immunity is not recognised as a good defence to enforcement of an arbitral award, arise as it does, in a commercial dispute. At Indian law, states and state entities do not enjoy sovereign immunity in commercial transactions. As a matter of fact, the Union of India, the various states and state-owned entities constitute a majority of party litigants in commercial disputes in India.

Though section 86 of the Civil Procedure Code 1908 provides for immunity to foreign states from being sued without prior written consent of the government of India, this has not been tested yet in the matter of enforcement of an award against a foreign state in India. Having said which, there are numerous examples of state-carriers (airlines, ships, etc) being sued for commercial or contractual claims (see: Ethiopian Airlines v Ganesh Narain Saboo (2011) 8 SCC 539). In recent years, foreign sovereigns have had interim orders of protection made against them by Indian courts.

Answer contributed by Madhur Baya

Further considerations

47. To what extent are arbitral proceedings in your jurisdiction confidential?

India

The Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment) fills a long-standing gap in the legislative scheme whereby Confidentiality was expressly provided for under section 75 in the context of conciliation but not in the case of arbitrations under the Arbitration and Conciliation Act 1996. By the 2019 Amendment, section 42A has been inserted, which expressly provides, on a non-obstante basis, that notwithstanding anything contained in any other law for the time being in force, the arbitrator, the arbitral institution and the parties to the arbitration agreement shall maintain confidentiality of all arbitral proceedings except award where its disclosure is necessary for the purpose of implementation and enforcement of award.

Even otherwise, the common law precepts on confidentiality in arbitration are well accepted and recognised. Invariably tribunals and parties do impose such confidentiality in the procedural directions. It is in any case possible to apply to the tribunal or the competent court to restrict disclosure of sensitive information. This may be done under sections 9 (for court) or 17 (for tribunal) as an interim measures application.

Answer contributed by Madhur Baya

48. What is the position relating to evidence produced and pleadings filed in the arbitration? Are these confidential? Is there any way that they might be relied on in other proceedings (whether arbitral or court proceedings)?

India

There is no statutory protection offered to evidence and pleadings submitted in arbitral proceedings. There is no bar to relying upon such documents in other proceedings. In fact, if an award or any order of the tribunal is challenged in court, by default, all documents filed in court are part of the public domain and may be used and relied upon by anyone, unless appropriate orders for protecting the confidentiality of the documents is made by the court on an application made by any party or jointly by the parties.

Please also see answer to question 47 to the extent that is relevant.

Answer contributed by Madhur Baya

49. What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?

India

There are no ethical codes or other professional standards that apply to counsel and arbitrators conducting arbitral proceedings in India, other than those that apply to the legal profession at large, namely, the provisions of the Advocates Act 1961, the Bar Council of India Rules 1975 framed thereunder. Having said that, the arbitrator’s duties are prescribed by various provisions under Chapters III, V, VI and VII of Part I of the Arbitration and Conciliation Act 1996 such as those in relation to disclosures, keeping time, the making of the award, equal treatment of parties, etc.

As for arbitrators, the Arbitration Council of India (ACI), when set up, shall issue appropriate guidelines, other than those that have been set out in the newly inserted Eighth Schedule to the Arbitration and Conciliation Act 1996.

Answer contributed by Madhur Baya

50. Are there any particular procedural expectations or assumptions of which counsel or arbitrators participating in an international arbitration with its seat in your jurisdiction should be aware?

India

Counsel or arbitrators participating in international arbitration with its seat in India are subject to the mandatory provisions of Part I of the Arbitration and Conciliation Act 1996 (see question 27), but other than that, the tribunal is free to mould its procedure as the nature and circumstances of the case may demand.

Answer contributed by Madhur Baya

51. Is third-party funding permitted in your jurisdiction? If so, are there any rules governing its use?

India

Third-party funding is neither expressly permitted nor expressly barred in India. While there is no express bar to third party funding, it is still understood that no party other than a party to the lis must have any pecuniary interest in the fruits of the lis. Although this is untested, an award where the successful party has availed of third party funding, is likely to face a challenge in India, founded in the common law doctrine of champerty (which, however, has been held by certain decisions not to apply in India). There are also concerns around the control or influence that the funder exercises over the conduct of the trial. There are many lawyers and clients actively exploring third-party funding in India.

Finally, unlike certain other jurisdictions where rules have been framed to permit and regulate third-party funding, no such framework exists in India as yet.

Answer contributed by Madhur Baya

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