CHAPTER VI

CONCLUSION

The Law of arbitration in India has gone through deep changes in recent
decades. Regulations on enforcement of foreign awards have significantly improved
in recent years.

This has been achieved through adoption of new legislations as well as

accession to international and regional conventions. India became a party to the New
York Convention of 1958, as the single most important convention on the recognition
and enforcement of foreign awards with effect from October 11,1960. It has been a
breakthrough that erased the uncertainties and suspicions that marred an interest to
resort to arbitration with Indian parties. At the regional level, India did not join any
convention.

India should, however, accelerate the process of considering accession to, and
ratification of, international and regional conventions on enforcement of
international arbitration awards in order of their priority for its commercial
relationships with the outside world. At the international level, it has been said the
convergence of legal systems or harmonization of commercial law will, in the long
run, stabilize and strengthen national economies and will create a healthy competitive
environment.

As to arbitration legislation, alongside the modernization of the Indian legal

system, its law of arbitration has also been significantly improved since 1940. While
arbitration practice used to be regulated according to the New York Convention of
1958, since then there has been a trend towards codification and institutionalization of
the practice. It can be said that the legal structure required for modern arbitration is
now in place in the country. The diversity of religious and custom, have not been
major impediments on the way towards modernization of arbitration, save for foreign
arbitration.

Nevertheless, the existing Indian law of arbitration law has departed, to a large
extent, form traditional law. It can be said that the Indian law of arbitration is

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primarily influenced by modern internationally accepted patterns of arbitration, such
as the Model Law. Such influence is mainly conveyed through western legal systems,
particularly that of the United Kingdom. This is an advantage of the type of legal
transplant experienced with regard to the Indian law of arbitration that it has been
made possible through the English legal system, whose rich background in arbitration
is very much similar to that of India.

The United Kingdom has been the pioneers of western countries to adopt
modern laws. The long history of its legal system, the magnitude of the cases brought
before its courts, and the insightfulness of many of its legal writers have made it into a
relatively reliable authority for the adoption new laws. As touched upon before, many
other pieces of legislation in India have been inspired by the English model. Hence,
the adoption of an arbitration law identical to the English Arbitration Law guarantees
some degrees of compatibility with the rest of the legal body in India.

The modernization of the Indian arbitration law can be better understood

within the wider context of the Asian region, where most of countries, in recent
decades, have adopted present arbitration laws conforming to international standards,
and established modern arbitration centers. They have intended to enhance their
domestic arbitration practice, as demanded by their business communities, and to
attract international arbitration. Present Indian law of arbitration is an achievement
realized in a relatively short period of time.

Nevertheless, there are some difficulties and lacunae that need to be dealt
with. The Indian legal system provides for a comprehensive set of rules governing
commercial arbitration. Most of these rules are provided for in a statute, separate from
other sets of laws, that is, Law of Arbitration 1940, while the rest are integrated in
other statutes such as the Arbitration Act, 1996 for civil and commercial disputes. The
Indian legislature has intended to encourage and facilitate arbitration.

Under the law, arbitration is a regulated and reliable method of dispute

resolution, with binding and enforceable outcomes. Present Indian law of arbitration
allows both institutional and Ad hoc types of arbitration. There are several bodies
engaged in international arbitration in India, such as such as Indian Council of
Arbitration, Federation of Indian Chamber of Commerce and Industry, etc.

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 The law is, however, particularly in favor of Ad hoc arbitration, where the
parties can freely choose arbiters as well as procedural and substantive rules of
arbitration. The process of the development of the Indian law of arbitration indicates a
move towards strengthening the contractual features of arbitration, at the expense
of its judicial features. Such a move can bolster the confidence of foreign businesses.
The extent of court intervention in the arbitration process is now
limited. Nevertheless, safeguarding arrangements are stipulated to guarantee a healthy
arbitration process and, more importantly, compliance with its outcome.

For instance, an arbitration tribunal decides on its own jurisdiction; and only
after the issuance of the award, the competence of the tribunal can be challenged at a
court. On the other hand, dilatory tactics such as a challenge to the appointment of an
arbitrator cannot obstruct the proceedings, unless either the tribunal or the court grants
such a challenge.

The move towards emphasize on the contractual feature of arbitration has,

however, been undermined by giving too much power to the court, in case of
disagreement between the parties. Under Article 34 the Arbitration Act, 1996, the
competent court has the power to set aside an award made under the Act, if the
applicable law has not been applied. This may be interpreted as allowing the
substantive review of awards, which is contrary to what is accepted in many advanced
legal systems.

Moreover, specifying too many formal requirements for an arbitral agreement

or award, in order to be valid, might frighten foreign parties from resort to
arbitration in India. An important issue, in this regard, is the power of the court to set
aside an award, which is to secure a just and rightful solution for the
dispute. Internationally, however, the tendency is towards restricting the power, in
order to prevent its abuse by a reluctant party. Indian law, too, should move in this
direction, without compromising the rights of the parties to have an effective judicial
control.

This can be achieved by limiting the grounds for setting aside an award. Particularly,
the ground of failure to apply the applicable law to the dispute should be removed, as
it unnecessarily opens the way for the substantive review of awards. Similarly, the
provision allowing the court to set aside an award, if there is a defect or indicates of

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them in the arbitration award or in the proceedings to the extent that it affects the
terms of the award, should be removed, as it does not provide a clear definition of
such defects.

Moreover, Indian law should allow the parties to agree on a waiver of their
right to bring before the court a request for vacating the award, what is not
permitted under the current law. Unlike the Arbitration Act, 1940, the Arbitration Act,
1996 recognizes International Commercial Arbitration, but somehow treats it
similarly from domestic arbitration, as same Courts have jurisdiction to deal with the
issues relating to the two types of arbitration.

Nevertheless, the distinction between domestic and international arbitration is

not sufficiently taken into consideration, as international arbitration should be subject
to less restrictions and scrutiny, and be provided with a more favorable treatment. The
grounds for vacating a domestic award can be more than those leading to setting aside
a foreign award. For instance, a crystal distinction should be made between domestic
public policy, which is applied to domestic awards, and international public policy,
which in certain circumstances is applied to international awards issued under Indian
law. More importantly, the Arbitration Act, 1996 recognizes recourse to foreign
arbitration.

It also contains a definition of foreign arbitral awards, and makes a distinction

between domestic and foreign awards. Under the Arbitration Act 1940, it was
assumed that foreign awards must be treated as if they were domestic ones, that is,
they were subject to the legal procedure and scrutiny applicable to domestic awards
and, more importantly, subject to judicial review. This is no longer the case. However,
again, lack of a definition of international public policy applicable to foreign awards
is a deficiency of Indian law that needs to be addressed.

The Arbitration Act, 1940 addressed the issue of enforcement very briefly; and
the Indian court was assumed to have the power to examine meticulously an award,
when considering its enforcement. Since there was no rule on the enforcement of
foreign awards, they, too, were assumed to be subject to retrial and to the similar
extent of legal scrutiny. By enacting the Arbitration Act, 1996, the Indian arbitration
law has shifted towards a pro-enforcement position, to the extent that it can also be

4
said that the law is generally more than the Model Law facilitative of enforcement of
arbitral awards.

It is relatively straightforward to apply for the enforcement of awards made

under the Act, 1996, whether in or outside of India. Since it has already been possible
to challenge such awards at the Indian court by drawing upon the relatively extensive
grounds for vacating them, the grounds for refusing enforcement of an award are
restricted. Awards can be refused enforcement, only if they are:

(a) against a decision already made by Arbitral Tribunal and Courts,

(b) contrary to the public policy of India, or

(c) if the requirements of due process have not been observed in making them.

A feature of the Act, 1996 is that while a request for enforcing an award can only be
made after the expiry of the ninety day period for challenging the award,
the suspension of enforcing the award is also permitted, if the award is being
challenged in the court. Making a distinction between domestic and foreign awards,
the Act, 1996 even more facilitates the enforcement of foreign and international
awards. Also, the Supreme Court decision allows enforcement of foreign arbitral
awards, without requiring a review of their merit.

While Indian law of arbitration recognizes the effect of multilateral

conventions or bilateral treaties, if they are applicable to a foreign award, under the
New York Convention (1958) or Geneva Convention (1927), the most favorable law
or conventions can be applied, when enforcing a foreign award. Hence, it is possible
to go for the most favorable regime of enforcement available within the Indian legal
system and treaties joined by India. As a matter of fact, in many aspects, the current
Indian law is more than the New York Convention facilitative of enforcement of
foreign and international awards.

In certain aspects, however, the Indian law lags behinds the Convention and
universally accepted standards. For instance, while the grounds expressed in Article V
of the Convention may result in the non-enforcement of an award, Indian law obliges
the court to refuse enforcement of an award, if such grounds exist. The latter also
mentions non-compliance with the rules of morality as a ground for the refusal of
enforcement of an award, whereas no such a ground is recognized under the

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Convention. Such a requirement may lead to broad or conflicting interpretations,
undermining the required Uniformity.

Finality, It is an ideal time for a reform of Indians arbitration legislation. By

acknowledging globally accepted practices and rules, the Indian law of arbitration
should be amended with a view to removing the serious lacuna and
difficulties mentioned above and to improve its arbitration landscape on a domestic as
well as international level. Adoption of various legislations regulating arbitration,
including international arbitration, setting up several bodies engaged in arbitration,
whether domestic or international, and accession to international and regional
conventions and treaties should be accomplished while an attempt is made at co-
ordination between them.

Lack of such co-ordination leads to confusion, and undermines the very

rationale of resort to arbitration, which is simplicity and saving of time. Careful
regional or international convergence and legal transplants in the area of International
Commercial Arbitration may be useful, if they are compatible with the rest of legal
body in India.

Reference:-

1. http://etheses.whiterose.ac.uk/494/2/DX231171.pdf
2. https://hydra.hull.ac.uk/assets/hull:2182a/content
3. https://www.lexology.com/library/detail.aspx?g=a10b5dda-d7dd-4295-8ca7-
e60d5664a862