The Arbitration Ordinance – Leaving India Vulnerable to Another White Industries

(The following guest post is contributed by Kartikey Mahajan, a disputes resolution lawyer based in Singapore and Visiting Fellow, CARTAL (NLU Jodhpur). The views expressed here are personal and do not represent the views of any institution with which Kartikey is associated)

The Indian
Arbitration and Conciliation Act, 1996 (“Act”) has been recently amended by way
of an Ordinance dated 23 October 2015 (“Ordinance”). Much has been written about
the Ordinance (including this Blog – here,
here  and here)
as almost every law firm has come out with client alerts.
Needless to
say that under the Indian parliamentary system, the Ordinance requires
parliamentary approval in due course to make Modi Government’s attempt of
reforming the dispute resolution process a true reality. I see this period
until the formal parliamentary approval can be given as a window of opportunity
to correct an omission, which cost India dearly in the past. I refer to the
award of White Industries v Republic of India (“White Industries”) and how the Ordinance failed to remedy the
lacunae that cost India millions.
In the
background leading to White Industries, an ICC award was delivered in favor of
White Industries. White Industries sought to enforce this award under section
48 of the Act before the Delhi High Court. On the other hand, Coal India (the other
party under the ICC award) applied to the Calcutta High Court to set aside the
ICC award. There was inordinate delay by the Indian courts in the disposal of
both the Set Aside and Enforcement Applications, which was ultimately considered
by the investment tribunal to be a breach of India’s investment treaty
obligations.
The Ordinance
has made a number of changes to the setting aside proceedings of domestic awards
(see section 18 of the Ordinance which amends section 34 of the Act). First, it
proposes that an application to set aside an arbitral award is required to be
decided within twelve months of the notice of such application being served on
the opposite party. Second, the statutory provision for automatic stay on
enforcement of an award during the pendency of a challenge has been deleted.
Therefore, now an award can be enforced during the pendency of a challenge,
unless stay on enforcement is specifically sought and granted by the court with
jurisdiction over the arbitration. Lastly, the Ordinance has narrowed the
meaning of public policy to exclude ‘patent illegality’ as a ground for
challenging international commercial arbitration awards seated outside India.
With respect
to reforms in enforcement of foreign awards, the Ordinance proposes that (1) foreign
arbitral awards be enforced by High Courts and not by any lower court in India;
(2) removal of the “patent illegality” ground in the definition of “public
policy” to resist the enforcement of a foreign arbitral award (see section 22
of the Ordinance which amends section 48 of the Act). Accordingly, Indian
courts are now precluded from reviewing the merits of the dispute during
enforcement proceedings on this ground.
In light of
the above, the Ordinance in its current form tries to prevent another White
Industries by fixing a specific time limit for setting aside proceedings.
However, it fails to address the situation in cases of enforcement proceedings.
It is highly desirable, that the Indian Government fixes a time limit for
dealing with enforcement applications, like it has done for the setting aside
applications under the Ordinance. This will not only ensure that the Government
will adopt a consistent stand with respect to different Parts of the Act but at
the same time prevent India from remaining vulnerable to another White
Industries like situation.

 – Kartikey Mahajan

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V. Niranjan

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