When an arbitrator embarks on their initial appointment, they often carry a sense of idealism about the arbitration process. The Arbitration and Conciliation Act of 1996, particularly in its amended form, appears to be a straightforward and efficient framework. It outlines a six-month period for pleadings under Section 23(4) and a twelve-month timeline for awards following pleadings as per Section 29A. Additionally, it provides a limited scope for challenges under Section 34 and grants the power to award costs under Section 31A. At the first procedural meeting, one might be optimistic about adhering to these statutory guidelines. However, by the third or fourth hearing, the disparity between the legislative intent and actual practice becomes glaringly evident.
This article aims to candidly discuss the practical obstacles Indian arbitrators face daily. Such challenges are seldom highlighted, as arbitrators are typically expected to maintain a level of discretion regarding their difficulties. Consequently, a misconception persists that the issues within arbitration practice are solely tribunal-related, whereas, in reality, they stem from a broader cultural issue that tribunals are compelled to manage.
The Challenge of Timelines
Timelines, as stipulated by Section 23(4), require the completion of claims and defenses within six months from the date the tribunal is informed of its appointment. Unfortunately, this provision is rarely met in complex cases. Delays are commonplace, with parties frequently requesting extensions for filing claims, citing voluminous documentation requirements. This results in a cascade of counter-claims, replies, and sur-rejoinders, each accompanied by an extension request. Tribunals striving to adhere to the six-month limit may be perceived as unjust, while those granting leniency find pleadings extending well beyond the intended timeframe. Consequently, the twelve-month period outlined in Section 29A begins much later than anticipated.
The Adjournment Culture
The prevalent adjournment culture exacerbates the issue. Prominent counsel often handle multiple cases simultaneously, including those in the Supreme Court and High Court, leading to scheduling conflicts with arbitration proceedings. The result is extended gaps between hearings, undermining the discipline required to conclude substantial commercial cases within a reasonable timeframe. While Section 24(1) addresses sufficient cause and costs, meaningful cost imposition is rare, with nominal penalties failing to deter delays. This leniency fosters a perception that arbitrators who enforce strict timelines are unduly harsh, causing significant harm to the arbitration process.
Tactical Jurisdiction Challenges
Jurisdictional challenges, intended as safeguards under Section 16, have become strategic tools for delay. Respondents often file comprehensive applications challenging the arbitrability of the matter, the validity of the agreement, or the scope of the dispute. Tribunals are then required to hear these challenges, consider written submissions, and issue detailed orders before merits pleadings commence. If the ruling is unfavorable to the respondent, proceedings move slowly forward; if adverse to the claimant, a writ petition may ensue, stalling the process further.
Parallel Court Proceedings
Parallel court proceedings have become routine, with parties seeking interim relief under Section 9, even when the tribunal is fully engaged. Courts often entertain these applications, sometimes granting relief that the tribunal could have provided under Section 17, thereby undermining the tribunal’s authority. Applications for witness assistance under Section 27 can languish for extended periods, and executing interim orders often necessitates fresh proceedings in commercial courts.
Document Production and Discovery
The discovery process presents its own challenges. Parties often make broad requests for document production, resulting in excessive, often irrelevant, submissions. Targeted requests may be met with resistance, and privilege claims are frequently asserted without merit. Tribunals scheduling inspections face postponements due to unavailability of counsel, further delaying the proceedings. Witnesses, when eventually presented, may be unable to testify to the documents in their affidavits, and cross-examinations often devolve into technicalities unrelated to the core issues.
The Section 34 Shadow
The specter of Section 34 hangs over arbitration proceedings, with every tribunal decision being scrutinized for potential grounds for setting aside petitions. Arbitrators, wary of future challenges, may adopt a cautious approach, sometimes at the expense of straightforward decision-making. This defensive posture is partly driven by recent interpretations of Section 34, which have expanded concepts of patent illegality and fundamental policy, compelling arbitrators to tread carefully.
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Fee Challenges
Fee-related issues, though less dignified, are nonetheless significant. Institutional arbitrations face challenges when a party defaults on its fee share, often resulting in proceedings being paused. In ad hoc arbitrations, tribunals themselves must manage fee collection under Section 38, dealing with parties who may treat fee payments as optional. The uncertainty surrounding fee enforcement undermines the perceived authority of arbitrators.
The Path Forward
To address these challenges, Section 23(4) must be enforced stringently, with extensions granted only for valid reasons. Meaningful adjournment costs should be imposed, and Section 16 applications should be resolved expeditiously based on documents. Section 9 petitions should be redirected to the tribunal post-constitution, as contemplated by Section 9(3). Courts must apply Section 34 with discipline, avoiding its use as a de facto appellate process. Arbitration institutions should maintain firm stances on deposit enforcement.
India’s aspiration to become an arbitration hub hinges on addressing these systemic delays. Arbitrators, who quietly endure these frustrations, must be empowered to manage proceedings effectively, with parties held accountable for strategic obstructions. Until this balance shifts, the role of an arbitrator will remain a demanding and often thankless one.
About the Author: Saurabh Seth serves as a Senior Panel Standing Counsel for the High Court of Delhi and is an empanelled Arbitrator with the Delhi International Arbitration Centre (DIAC) and the India International Arbitration Centre (IIAC).
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the opinions of Bar & Bench.
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