Speedy Justice And Lengthy Delays, The Arbitration Process

Decades pass away and an arbitral award is ‘stuck’ despite the award achieving its finality. Deliberations on the setting aside of an arbitral award cause immense deterrence to it from being enforced and perused by the party in whose favor the award stands to be. It is only after some time when the court provides for its decision and there is potential advancement towards enforcement or in some cases, even appeal provisions as under Section 37 are utilized to get suitable recourse. The latter yet again pushes the proceedings further and the arbitration becomes endless.

Shortcomings within the Indian Arbitration scenario:

To determine what entails as ‘shortcomings’ in the much-contented setting aside stage, it is important to analyze two broad elements namely, Section 34 of the Arbitration Act and the catena of judgments wherein such delays were witnessed.

Firstly, the Arbitration Act itself contributes to the interminability of a setting aside application. Section 34(6) explicitly provides for the expeditious disposal of a Section 34 application in one year from serving notice to the other party. However, this provision is construed merely as a directive rather than a mandate[i] as there exists no consequence in case there is any violation of Section 34(6). This simply buttresses the argument that the statute itself presents an inconsistency with the objectives of speedy resolution which it was intended to uphold.

Ultimately, this leaves courts with very little scope to essentially comply with the said provision especially if it is followed as a norm more than a legal mandate. Therefore, it is questionable if this statutory requirement is a ‘limitation’ or something discretionarily molded by courts to suit themselves.

Lengthy Section 34 applications:

Owing to the latency in courts’ behavior, the precedents wherein it is factually evident that the courts have failed to follow any time constraint in the setting aside stage comes to light. For instance, in the case of Sepco Electric Power Construction Corporation v. Power Mech Projects Ltd.,[ii] an arbitral award was passed on 17^th October 2017, an application to set aside the same was made before the Delhi High Court on 3^rd December 2017. Subsequently, an application under Section 36(2) and Section 9 of the Arbitration Act was filed. Eventually, when the matter pertaining to the subsequent applications reached the Supreme Court it was noted by the apex court that the setting aside application still stood pending before the Delhi High Court for the past 5 years. Therefore, apart from deciding on the subsequent applications, the Supreme Court in its judgment dated 19^th September 2022 was also cognizant about instructing the Delhi High Court to dispose the application under Section 34 preferably 3 months from the communication of this judgement. Despite the explicit mention of expeditious disposal, the Delhi High Court has yet failed to dispose the application. This case is a classic example of how the setting aside stage causes endlessness in the procedure. A year has passed since the Supreme Court judgement and almost 6 years have gone by since the final award. There is no surety that the same wouldn’t be further appealed. Unfortunately, this isn’t the only instance.

The case of M/s Alpine Housing Development Corporation Pvt. Ltd. v. Ashok S. Dhariwal and Others[iii] is yet another instance wherein an award dated, 12^th March 1998 is still pending in at its setting aside stage under Section 34 of the A&C Act, 1996 before the Additional City Civil and Sessions Judge, Bangalore. The Supreme Court on 19^th January 2023 had decided on a crucial matter of adducing additional evidence in an interim application filed with the Section 34 application under this precedent and had specifically urged the expeditious disposal of the pending application. Yet, the Section 34 application stands to keep the arbitration alive since its filing on 16^th November 1998. To add to that, the initial hearing of the application began only on 7^th November 2002, which was almost 3 years later than its filing date and is continuing to date.

Similarly, the Supreme Court also reiterated in the case of All India Aircraft Engineers Association v. Air India Limited and others[iv], recognizing how an award passed on 25^th June 2016 still had a pending Section 34 application till 2023. Despite so, the award wasn’t considered unenforceable by virtue of Section 36(2) and requested the Chief Justice of Delhi High Court to ensure that there is expeditious disposal of the Section 34 application. In such a scenario, the court had recommended that it would have been appropriate to execute the award as a decree considering it had been on hold for the past 6 years, with no finality.

While all the above cases have similar factual matrices, it is imperative to note that the common factor in all of them was the pendency of the Section 34 application for lengthy periods. This simply implies that the flaws carried forth by in-court proceedings in terms of expansive time consumption cannot be mitigated from Arbitration as well.

Changes in the Act:

Owing to the extreme delay in the procedure and failure of the ultimate objectives of Arbitration, certain amendments in context with the Arbitration Act were introduced. In simpler terms, the element of judicial intervention is what is attempted to be curtailed at this juncture.

In a bid to ensure speedy enforcement, Section 34(6) as discussed earlier, was introduced. However, as understood it is not able to fulfil its objective to the extent it promises owing to the lack of repercussions attached to non-compliance.

A Case Study:

The above chart is a compilation of judgements of the Supreme Court with respect to Arbitration under Section 37 of the Arbitration act. While most would be simply concerned with the ratio of the cases, it is crucial to note that none of these cases were disposed in the timeframe Arbitration really promises. The chart explores this period of delay by firstly finding out the dates of reference/invocation of Arbitration or in some cases the date of the Arbitral Award. Following this the date of actual disposal of cases by the Apex Court have been mentioned to trace the journey of delay caused during the said periods.

Out of the cases taken for the purpose of this case study, the minimum period of delay is approximately 4 years, and the maximum delay is as much as 24 years. This delay is caused generally due to the involvement of the court. An arbitral award is passed timely however, the recourses available to challenge the said award in the courts is what is problematic. Courts are already burdened with heavy litigation, taking upon Arbitrations adds to this burden. Such cases are then stuck in appeals and hearings before the court and decades simply pass away, as witnessed in the above chart. This is where the conundrum continues. The beauty of Arbitration offering appropriate recourse is what is ironically making it disadvantageous.

Regretfully, there exists no end despite the disposal of a Section 34 application. This means that parties are still left with options to either enforce the arbitral award or if a contention still exists, appeal the decision on a Section 34 application via Section 37.

Taking the instance of the landmark case of M/S Dyna Technologies Private Limited v. M/S Crompton Greaves Limited[v] (also mentioned above in point 5) is of utmost significance in explaining the continuous conundrum being contended. Under this precedent, an award dated 30^th April 1998 was challenged before the High Court of Madras under Section 34 to be set aside. However, it was 3 years after, on 8^th February 2001 when the application was dismissed. Aggrieved by this dismissal, the case was appealed before the division bench in 2001 itself and since then got settled only 25 years after the said appeal. It was only in the Supreme Court wherein the question of law over an inadequately reasoned award was settled and the award was set aside, putting an end to the 25-year-old proceeding.

This case, among others, simply portrays how the time taken under a Section 34 application coupled with a plea for enforcement or appeal, can stretch an arbitration to an unlimited extent.

Based on the paramount evidence used to substantiate the unnecessary longevity of Arbitration, it is not incorrect to suggest that the adage “Once a litigator, always a litigator” gets exemplified.

Despite catena of judgments and amendments made to the Arbitration Act to restrict parties from re-deliberating the award in a Section 34 matter, delays still prevail. Today, courts are too burdened with cases. When arbitration which upheld the principle of outside court settlement, becomes statutorily mandated to allow court interference, there is an additional burden. This is enough to destroy the essence of Arbitration at its core.

It is also equally important to note that relying on courts post or pre-arbitration still means that the judiciary will be duly involved. This is exactly why it is high time to recognize that there is no mitigation of court interference in arbitration proceedings at any juncture. This is a huge issue and can only be curtailed if the parties take active steps to not approach the court at every step. This can be achieved with proper client counselling in terms of exploring newer avenues of dispute resolution. While it might be a hard pill to swallow, it is indeed time to discover alternatives like mediation, wherever possible to amicably work through issues instead of being stuck in an arbitration which will stay the course for decades to come.