Arbitration A Boon For Businesses And Individuals Seeking Swift, Cost-Effective Dispute Resolution: Justice Sanjay Karol

Recently, Justice Sanjay Karol of the Supreme Court of India addressed a gathering at Ram Manohar Lohiya National Law University, Lucknow, which was hosting the World rounds of the Foreign Direct Investment (FDI) International Arbitration Moot Court Competition.

Speaking during the valedictory ceremony, Justice Karol’s address centered on ADR mechanisms – how they are indispensable in solving pendency of cases, allow parties greater control over the dispute resolution process and employ lesser time.

At the outset, it was highlighted that the concept of arbitration was rooted in Article 51(d) of the Constitution of India, which provides that State shall endeavor to encourage settlement of international disputes by arbitration.

In this regard, an example was given of the settlement of boundary dispute between Gujarat and Pakistan, pursuant to Indo-Pakistan Agreement of June 1965.

Tracing the evolution of arbitration law in India, Justice Karol recapitulated that the Arbitration Act, 1940 was the first comprehensive legislation dealing with arbitration. The same, however, being confined to domestic arbitrations was not bereft of shortcomings.

Following economic liberalization of 1991, foreign investment was stated to have been attracted to India, necessitating ease of doing business. Accordingly, the 1996 Act was passed.

“The fundamental goal of the 1996 Act is to promote arbitration as a costeffective, time-efficient, and acceptable procedure for resolving conflicts in both the national and international spheres… The Act is based on ‘UNICITRAL Model Law’ and New York Convention.”

Briefly, Justice Karol referred to issues that continue to persist despite various attempts to better the arbitration landscape in India, viz. (i) whether appointments by a person himself ineligible to serve as arbitrator are valid or not, and (ii) non-actionability of unstamped agreements.

In a shoutout to former CJI Dipak Misra’s remark that ‘minimum intereference and maximum execution’ is a core principle of arbitration, he applauded the 2019 amendment to Arbitration Act [which inserted Section 34(2)] as well as the decisions in Konkan Railway Corp Ltd. v. Chenab Bridge Project Undertaking and Larsen Air Conditioning and Refrigeration Co. v. Union of India for clarifying the law on scope of judicial interference in arbitral awards.

Critiquing the extensive reliance on retired judges to act as arbitrators, Justice Karol opined that in small scale matters, young advocates with knowledge of arbitration may be encouraged to act as arbitrators, as it would be less costly for the parties and enriching for advocates concerned.

Addressing the question whether the scope of arbitration is confined only to commercial disputes/urban areas, Justice Karol said that it may arguably have been the case for long, owing to historical inheritance. However, the arbitration system is on its way to achieve optimum utilization. He especially acknowledged the advances made by mediation in settlement of family disputes.

Citing Jaycee Housing Private Limited And Others v. Registrar (General), Orissa High Court, Cuttack And Others, he explicated the correlation between Commercial Courts Act, 2015 and Arbitration Act. The former was stated to have an overriding effect over the latter.

“appeals and applications under the Arbitration Act pertaining to commercial dispute of a specified value, other than the international commercial arbitration (“ICA”) shall lie before the Commercial Courts established under the CCA, as Sections 3 and 10 of the CCA prevail over Section 2(1)(e) of the Arbitration Act.”

Speaking also of Singapore’s success in the field of arbitration, Justice Karol underlined that the country is witness to rising trade and commerce. As such, time-effectiveness of the arbitration mechanism works to its advantage and complicated issues get properly resolved following adjudicators’ technical expertise.

Pointing out that Singapore has parallel acts for domestic and international arbitration, unlike India, he added: “Singapore’s judiciary has played a crucial role in giving freedom to the parties. The Singapore judiciary is well-known for its pro-arbitration position and minimal curial intervention practise. The tribunal's conclusions on both law and facts have been upheld by the Singapore courts on several occasions.”

On advancement of the potential of arbitration, it was impressed upon the audience that practitioners and budding lawyers can play a key role by spreading awareness about it being a viable option. Justice Karol further said that for enhancing quality of the mechanism, measures should be taken to streamline procedures and towards capacity building.

He concluded with the following note:

“As we continue to progress, let's ensure that arbitration is not just an option but a preferred choice for resolving disputes both nationally and internationally.”