Arbitration Proceedings And Contempt: Will The Contempt Of Courts Act, 1971 Apply To Arbitration Proceedings?

Section 27 of the Act predominantly deals with seeking assistance of Courts in taking evidence, further providing in sub-section (5) that persons failing to attend the Tribunal or making any other default or refusing to give 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 in suits tried before the Court.

In Sundaram Finance Ltd v. NEPC India Ltd[i] the Supreme Court had held that although Section 17 of the Arbitration and Conciliation Act, 1996 gives powers to the Arbitral Tribunal to pass interim orders, the same cannot be enforced as orders of a Court and it is for this reason only that Section 9 of the Act gives the Court powers to pass interim orders during the Arbitration proceedings. Subsequently in M.D., Army Welfare Housing Organisation v. Sumangal Services Pvt. Ltd[ii]., the Supreme Court held that no power is conferred on the Arbitral Tribunal to enforce its order nor does it provide for judicial enforcement thereof. In the face of such categorial judicial opinion, the Delhi High Court ventured to perceive a suitable legislative basis for enforcing the orders of the Arbitral Tribunal under Section 17 in the case of Sri Krishnan v. Anand[iii] holding that any person failing to comply with the order of the Arbitral Tribunal under Section 17 would be deemed to be making "any other default" or "guilty of any contempt to the arbitral tribunal during the conduct of the proceedings" under Section 27(5) of the Act.

Given the inconsistent views taken by respective Courts and in an attempt to promote implementation of arbitration proceedings, the Government of India felt it necessary to amend the Act to reduce interference of Courts and to make its application expeditious, effective and lacunae-free. The President of India promulgated an Ordinance on October 23, 2015 thereby amending the Arbitration and Conciliation Act, 1996.

The 2015 Amendment modified certain provisions including Section 17 of the Act which essentially gave teeth to orders passed by the Arbitral Tribunal. Section 17(2) was incorporated by virtue of the Ordinance, a bare perusal of which reads as under-

"(2) Subject to any orders passed in an appeal under Section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the court."

In Alka Chandewar v. Shamshul Ishrar Khan[iv] the Supreme Court, while elucidating on the scope of Section 17(2), overturned the decision of the Bombay High Court wherein the High Court, while dismissing a Contempt Petition filed on representation made by an Arbitrator for breach of his order under Section 17, held that Section 27(5) of the Act would not empower the Tribunal to make representation to the Court for Contempt if the orders passed by the Arbitrator except in respect of taking evidence are violated by the party. The Supreme Court observed –

"10…In the present case we must go by the plain meaning of sub-section (5). This being the case, we find it difficult to appreciate the reasoning of the High Court. Also, in consonance with the modern rule of interpretation of statutes, the entire object of providing that a party may approach the Arbitral Tribunal instead of the Court for interim reliefs would be stultified if interim orders passed by such Tribunal are toothless. It is to give teeth to such orders that an express provision is made in Section 27(5) of the Act.

15.…sub-section(2) to Section 17 was added by the Amendment Act 2015, so that the cumbersome procedure of an Arbitral Tribunal having to apply every time to the High Court for contempt of its orders would no longer be necessary. Such orders would now be deemed to be orders of the Court for all purposes and would be enforced under the Civil Procedure Code, 1908 in the same manner as if they were orders of the Court. Thus we do not find Shri Rana Mukherjee's submission to be of any substance in view of the fact that Section 17(2) was enacted for the purpose of providing a "complete solution" to the problem."

It is therefore a settled position that orders of the Arbitral Tribunal would be deemed to be orders of the Court and would be enforced in the same manner as if they were orders of the Court. The judgment manifests that not only would Section 27(5) be applicable in such cases but the cumbersome procedure of an Arbitral Tribunal having to apply every time to the High Court for Contempt of its orders would also no longer be necessary. We would have to fall back upon provisions of C.P.C., more particularly Rule 2A of Order XXXIX which essentially deals with temporary injunctions and interlocutory orders and contemplates the consequence for disobedience or breach of injunctions.

To further canvass the application and scope of Contempt in Arbitration Proceedings, it would be expedient to peruse Section 22 of the Contempt of Courts Act, 1971 along with Sections 17(2) and 27(5) of the Arbitration and Conciliation Act, 1996. Section 22 of the Contempt of Courts Act beholds that the provisions of the Act would be in addition to, and not in derogation of the provision of any other law relating to Contempt of Courts. The settled position in Alka Chandewar's judgment (supra) along with Section 22 of the Contempt of Courts Act cumulatively makes it clear that the Contempt of Courts Act, 1971 would also apply to Arbitration Proceedings.

APPLICATION OF CONTEMPT OF COURTS ACT

Section 2(a) of the Act states contempt to mean civil contempt or criminal contempt.

Section 2(b) of the Act states civil contempt to mean wilful disobedience to any judgment, decree, direction, order, writ or other process of a court or wilful breach of an undertaking given to a court;

Section 2(c) of the Act states criminal contempt to mean the publication (whether by words, spoken or written, or by signs, or by visible representations, or otherwise) of any matter or the doing of any other act whatsoever which—

• scandalises or tends to scandalise, or lowers or tends to lower the authority of, any court; or
• prejudices, or interferes or tends to interfere with, the due course of any judicial proceeding; or
• interferes or tends to interfere with, or obstructs or tends to obstruct, the administration of justice in any other manner;

The Act would therefore be applicable to Arbitration Proceedings provided that-

1. The "Act of Contempt" is with respect to the Arbitral Tribunal and is emanating within the purview of Sections 2(b) and/or 2(c) of the Act ; and
2. The "Act of Contempt" is committed in course of Arbitration Proceedings before such proceedings are terminated in accordance with Section 32 of the Arbitration and Conciliation Act, 1996.

COGNIZANCE/PUNISHMENT UNDER CONTEMPT OF COURTS ACT IN ARBITRATION PROCEEDINGS

Section 15 of the Act contemplates the procedure for taking cognizance of criminal contempt with respect to the Arbitral Tribunal. The High Court may take cognisance of a Contempt on a reference/motion made to it by the Arbitration Tribunal indicating the perpetrated "act of contempt" by a party, or on a motion filed by the Advocate General. The Court can then proceed to try a person for Contempt as if the Contempt emanated from proceedings in the High Court itself.

Section 24 of the Contempt of Court Rules state that every civil contempt, including civil contempt by a sub-ordinate Court, must be heard, and disposed of by a Single Judge.

Section 18 of the Act provides that every case of criminal contempt shall be heard and decided by a Bench of not less than two Judges.

Section 12 of the Act provides the punishment for contempt.

CONCLUSION

Strictly speaking, the Arbitral Tribunal is not bound by the Code but for interpretation purposes of certain provisions, it would be necessary to refer to corresponding provisions in the Code. The Supreme Court has clearly augmented the scope of Contempt in the Arbitration and Conciliation Act 1996 pursuant to the 2015 amendment, giving teeth to orders of the Arbitral Tribunal and making it crystal clear that not only would Contempt apply in case of breach of orders of the Tribunal but it would also no longer be necessary for the Arbitral Tribunal to apply to the High Court for Contempt of its orders. The said observation would however be limited to the Arbitration and Conciliation Act, 1996 and a separate procedure under the Contempt of Courts Act, 1971 could be instituted to that effect.