Owing to Article 141 of the Constitution of India, the decisions of the Supreme Court of India, continue to be the “law of the land” and are binding on all other Courts in the country. However, in light of Section 27 (5) of the Arbitration and Conciliation Act and the decisions of the Delhi High Court, the law on this subject needs to be revisited.
(In the following post, Ms Renu Gupta, Advocate, considers the law on the power of an arbitral Tribunal to enforce its orders and punish for contempt)
The more popular legal understanding is that the orders of an arbitrator are toothless since the arbitrator has no power to enforce them. Accordingly, intervention of a Court to obtain enforceable orders, even in a pending arbitration, becomes inevitable.
This article is aimed at disproving this proposition by elaborating that an arbitrator is vested with the power of contempt (just like the Court), under the [Indian] Arbitration and Conciliation Act, 1996 (hereinafter, the “Arbitration and Conciliation Act”), and has full powers of enforcing its own orders without intervention of any Court.
Arbitrator not a “Court”
An arbitrator under the Arbitration and Conciliation Act exercises various powers similar to that of the Court, for instance, the power to grant interim relief under Section 17. Even though an arbitrator is an adjudicating authority under the Arbitration and Conciliation Act and has to conduct itself judicially, an arbitrator is not a Court.
Premised on the same rationale, under Section 17 of the Arbitration and Conciliation Act, an arbitrator is not bound by the principles of the Code of Civil Procedure, 1908 and the Indian Evidence Act, 1872 (hereinafter, the “Evidence Act”). Even the definition of “Court” under Section 2 of the Evidence Act expressly excludes an arbitrator. Hence, it is evident that an arbitrator is not a “Court”.
Since an arbitral tribunal is not a “Court” and is a creature of a contract between the parties, it has no power to punish a disobedient party for contempt of its orders, either under the Constitution of India or under the [Indian] Contempt of Courts Act, 1971.
Supreme Court of India on arbitrator’s power to enforce its orders
The Supreme Court of India, in the case titled MD, Army Welfare Housing Organisation v, Sumangal Services (P) Ltd. at paragraph 59, while dealing with the provisions of the old Arbitration Act, 1940, made certain observations (which at best could constitute obiter dicta), regarding the power of an arbitrator to enforce its orders under Section 17 of the Arbitration and Conciliation Act, which vests a power in the arbitral tribunal to grant interim relief to the parties, during the pendency of the arbitration proceedings. The Court observed that even under Section 17, no power is conferred upon the arbitral tribunal to enforce its order nor does it provide for any judicial enforcement.
Even in a case titled Sundaram Finance Ltd. v. NEPC India Ltd., the Supreme Court of India has held that although Section 17 gives the arbitral tribunal the power to grant interim relief, such orders cannot be enforced as orders of a Court. Accordingly, Section 9 gives a concurrent power to the Court to pass interim orders even during the arbitration proceedings.
Section 27 (5) of the Arbitration and Conciliation Act
In the author’s view, the decisions of the Supreme Court fail to take notice of Section 27 (5) of the Arbitration and Conciliation Act, which expressly confers the power on the arbitral tribunal to punish for its contempt.
Section 27 (5) specifies that “[P]ersons failing to attend in accordance with such process, or making any other fault, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences is suits tried before the Court”.
Delhi High Court on interpretation of Section 27 (5) of Arbitration and Conciliation Act
In a case titled Sri Krishan v. Anand, reported at (2009) 3 ArbLR 447 (Del): MANU/DE/1828/2009 (a search at the Delhi High Court website did not disclose any appeal having been filed against the judgment), the Delhi High Court was seized of the question whether a whether a petition under Section 9 of the Arbitration and Conciliation Act would lie for the same interim measure which has already been granted by the arbitral tribunal under Section 17.
The petitioner had sought to justify the petition under Section 9 on the ground that orders passed by an arbitral tribunal are toothless and unenforceable.
Justice R.S Endlaw of the Delhi High Court while rejecting the contention of the petitioner held that the legislative intent of enacting Section 17 of the Arbitration and Conciliation Act is to make the arbitral tribunal a complete forum not only for finally adjudicating the disputes between the parties but to also order interim measures. The Court further held that no purpose would be served in approaching the arbitral tribunal under Section 17, if for enforcing orders under Section 17, a separate petition under Section 9 has to be filed subsequently.
The Court held that under Section 27 (5) of the Arbitration and Conciliation Act, any person failing to comply with the order of the arbitral tribunal would be deemed to be “making any other default” or “guilty of any contempt to the arbitral tribunal during the conduct of the proceedings”.
Accordingly, the remedy of aggrieved party in a case of disobedience of the order of the arbitral tribunal is to apply to the tribunal for making a representation to the Court to meet out such punishment to the disobedient party, as would have been warranted for contempt of Court. The arbitral tribunal should make such a representation to the Court only upon being satisfied that the defaulter is in default or in contempt.
Once such a representation is received by the Court from the arbitral tribunal, the Court is competent to deal with such disobedient party as if in contempt of order of the Court. This could be either under the provisions of the Contempt of Courts Act or under the provisions of Order 39 Rule 2A of the Code of Civil Procedure, 1908, which provides for consequences of disobedience or breach of injunction.
This position of law has been upheld by a subsequent judgment of the Delhi High Court in the case of India Bulls Financial Services Limited v. Jubilee Plots and Housing Private Limited, reported at MANU/DE/1829/2009.
Relying upon the afore-mentioned judgments of the Supreme Court of India, all the courts in the country have held that the arbitral tribunals have no power to enforce their own orders. This author has only been able to find two dissenting judgments by the same judge.
When parties are required to take recourse to Courts for assistance despite having agreed to arbitration, the benefits and attractiveness of arbitration gets significantly diminished.
Giving due meaning to Section 27 (5) of the Arbitration and Conciliation Act by the Courts would act as a deterrent to litigants for filing separate proceedings for the same relief under Section 9 and Section 17 of the Arbitration and Conciliation Act, and would also be consistent with the objectives of the Arbitration and Conciliation Act, in reducing interference of Courts in arbitration proceedings.