-Report by Harshita Kaul
The Arbitration and Conciliation Act, 1996 was enacted with the object of resolving disputes within a certain time framework which will promote confidence among the individuals who are opting for this Alternative Dispute Resolution Mechanism.
Therefore, the view of the Supreme Court was in the right direction that the applications filed must be decided within a specific time period as provided in the Act to foster and protect the very idea for which the Act was enacted in the first place.
Facts
On 06.10.2010, M/s Shree Vishnu Constructions, who was the applicant in this case entered into a Contract Agreement with Engineer in Chief, Military Engineering Services and others, who were the respondents for the construction of two blocks of Admin-cum-Technical accommodation with double storey in RCC framed structure with PCC solid block masonry along with connected services.
During this period, certain modifications were requested by the Respondents, and accordingly, the Applicant carried out the required modifications as per the instructions. The dispute arose when the Applicant requested for the release of payment and even after making persistent requests, the Respondent kept postponing the same as according to them the items used for modifications were not scheduled items.
When the dispute was not been able to settle amicably, the Applicant on 30.03.2013 issued a notice to the Respondents for appointment of the Arbitrator within 30 days as per the conditions 70 and 71 of IAFW-2249 under the contract but the Respondents did not give any reply to the notice. Due to this unresolved issue, an Arbitration Application was filed by the Applicant under Section 11(5) of the Arbitration and Conciliation Act, 1996 before the High Court for the State of Telangana seeking to appoint an Arbitrator for resolution of the dispute between the parties.
On 30.06.2020, the Application filed under Section 11(5) of the Act was dismissed by the High Court on the basis that in the case no Arbitral Dispute exists as satisfaction and accord was established.
Aggrieved by the impugned final judgment and order passed by the High Court, for the appointment of an Arbitrator, a Special Leave Petition was filed by the Applicant before the Hon’ble Supreme Court of India.
Judgement
Pursuant to the earlier orders, the respective High Courts have sent the statements regarding the pending applications under Section 11(6) of the Arbitration and Conciliation Act, pending in the respective High Courts. It is seen that the number of applications under Sections 11(5) and 11(6) of the Arbitration Act are pending for more than one year. In many High Courts, applications for appointment of the arbitrator(s) are pending for more than four to five years. Even, in the statement of the High Court of Rajasthan at Jodhpur, many applications are pending, which are found to be defective. Some of the defective applications are pending since 2016 onwards. The pendency of a large number of applications under Sections 11(5) and 11(6) of the Arbitration Act, shows a very sorry state of affairs.
The arbitration proceedings under the Arbitration and Conciliation Act are said to be a part of the Alternative Dispute Resolution System. Having found that it takes a number of years in deciding and disposing of suits by the civil courts for a variety of reasons and with a view to see that Commercial disputes are decided and disposed of and resolved at the earliest, the Arbitration and Conciliation Act has been enacted and hence, the Arbitration proceedings have been accepted as an effective Alternative Dispute Resolution Mechanism. Therefore, if the arbitrators are not appointed at the earliest and the applications under Sections 11(5) and 11(6) of the Arbitration Act are kept pending for a number of years, it will defeat the object and purpose of the enactment of the Arbitration Act and it may lose the significance of an effective Alternative Dispute Resolution Mechanism. If the Commercial disputes are not resolved at the earliest, not only it would affect the commercial relations between the parties but it would also affect the economy of the country. It may affect the ease of doing business in the country. If the country has to compete with global business, confidence has to be fostered that in our country commercial disputes are resolved at the earliest and it does not take a number of years in resolving such Commercial disputes.
Even the amended Arbitration Act as well as the Commercial Courts Act mandate that the Commercial disputes are to be decided and disposed of within a period of one year. Further, the Arbitrators are mandated to declare the award within a period of one year. Therefore, if the applications under Sections 11(5) and 11(6) of the Arbitration Act for the appointment of arbitrators are kept pending for a number of years, it would defeat the object and purpose of the enactment of the Arbitration and Conciliation Act as well as the Commercial Courts Act. The litigant may lose faith in the justice delivery system, which may ultimately affect not only the rule of law but commerce and business in the country. Therefore, the applications under Sections 11(5) and 11(6) of the Arbitration Act and other applications, either for substitution and/or change of the Arbitrator have to be decided and disposed of at the earliest.
In that view of the matter, we request all the Chief Justices of the respective High Courts to ensure that all pending applications under Sections 11(5) and 11(6) of the Arbitration Act and/or any other applications either for substitution of arbitrator and/or change of arbitrator, which are pending for more than one year from the date of filing, must be decided within six months from today. The Registrar General(s) of the respective High Courts are directed to submit the compliance report on completion six months from today. All endeavours shall be made by the respective High Courts to decide and dispose of the applications under Sections 11(5) and 11(6) of the Arbitration Act and/or any other like application at the earliest and preferably within a period of six months from the date of filing of the applications.
Conclusion
A key step towards strengthening the process of appointing arbitrators is to amend the Act in light of the Supreme Court’s direction in Shree Vishnu Constructions and prescribe a time limit for the Courts’ appointment of arbitrators. Second, the government should notify the 2019 Amendment at the earliest by establishing arbitral institutions and providing a procedure for the appointment of arbitrators by such institutions. Further, it could adopt international best practices which allow for the quick and timely appointment of arbitrators while also involving the disputing parties in the process of constituting an arbitral tribunal. In the meantime, the respective High Court could, in its first hearing, designate an existing arbitral institution to appoint arbitrators as per institutional rules. These measures will not only help address the issue of the pendency of arbitration applications but also streamline the entire process in the long term.
Arbitration provides a sense of confidence to the parties to resolve their dispute but the delay in disposing the case not only dilutes the purpose of the Act, but the litigants may also lose faith in the justice delivery system. It will raise the question of Arbitration as an effective mechanism to resolve the dispute and will also affect the ease of doing business as well as the economy of the country.
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