REUTERS | Jayanta Dey

Amendments to the Indian Arbitration Act: the need to adhere to finality is good, but justice is better

One of the most criticised aspects of Indian arbitration is the slow pace with which proceedings are conducted. The recent amendments to the Indian Arbitration Act 1996 seek to address this problem. This is a very positive and encouraging development for promoting India as one of the leading centres for international arbitration.

The Indian Arbitration and Conciliation Act 1996 now contains a provision which provides that an award should be rendered by an arbitration tribunal within 12 months from the date the dispute is referred to arbitration. It also provides that, in the event the arbitrator fails to make an award within 12 months, or 18 months in cases where the parties have agreed a six month extension, the mandate of the arbitrator terminates automatically unless the court grants an extension on such terms and conditions as it deems fit.

Justice delayed is justice denied is a well-recognised principle. The legislators seem to have embodied it in this amendment. In the present context, the principle that finality is good but justice is better is equally significant. There are likely to be occasions, such as in cases involving complex factual matrixes, where an arbitration tribunal will need substantially more time than that provided by the Act to carefully consider and render an award.

In the context of English arbitrations, the principle that finality is good but justice is better is commonly applied by the English courts to determine when and to what extent they should intervene in an arbitration proceeding.

In Indian Oil Corporation v Coastal (Bermuda) Ltd, a well-known case in which my firm acted, this principle was recognised and applied by the English court. The Indian Oil Corporation had made an application to the court alleging that the arbitrators had misconducted themselves; it therefore requested that the court remit the award back to the tribunal for further adjudication. Evans J exercised his powers and remitted the award as he considered it was necessary in order to do justice between the parties.

Recently, in BV Scheepswerf Damen Gorinchen v The Marine Institute, Flaux J, in the English Commercial Court, held that delay in rendering an award could amount to a breach of the arbitrator’s duty under section 33 of English Arbitration Act 1996. Hence, if a party can prove that the delay has caused it substantial injustice, a challenge to an award may well succeed on the grounds of serious irregularity.

The International Chamber of Commerce (ICC) has also recently set out a policy according to which it can penalise arbitrators if they are unjustifiably late in rendering their awards.

The Indian Arbitration Act gives the Indian courts wide discretion in the event that the arbitrator is unable to conclude the arbitration proceedings within the statutory time limits set out in the Act. Even though each case would stand or fall on its own facts, the application of the principle that finality is good but justice is better is likely to be central to any decision of the Indian courts when exercising their powers under the Act. An approach requiring strict adherence to the time limits set out in the Act would be wrong. Justice would demand a degree of flexibility to ensure that arbitration proceedings are conducted in a careful and considerate manner. This is with a view to doing justice between the parties, as opposed to feeling under pressure to meet deadlines.

Zaiwalla & Co Solicitors Sarosh Zaiwalla

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