transforming commercial dispute resolution - the hindu
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3/7/2015 TransformingcommercialdisputeresolutionTheHindu
http://www.thehindu.com/todayspaper/tpopinion/transformingcommercialdisputeresolution/article6967749.ece 1/2
Today'sPaperOPINION
Transformingcommercialdisputeresolution
AnirudhKrishnanTheenactmentofanActtoamendtheArbitrationandConciliationActandpassingtheCommercialDivisionofHighCourtsBillwillchangethefaceofcommercialdisputeresolution
HANDINHAND:Inpursuanceofitseaseofdoingbusinesspropaganda,thegovernmentissettointroducethetwobillsinParliament.PictureshowsPrimeMinisterNarendraModiwithIndianbusinessmeninGujarat.PHOTO:AP
Mostjudicialsystemsundergoperiodsofhighpendencyanddelayindispensationofjusticewhichareusuallyfollowedbyarealisationfromwithinandgiverisetowidescalelegislativereforms.WhileitwastheLordWoolfReportandtheChiefJusticesWorkingCommitteeReportthatspurredsuchachangeintheU.K.andHongKong,theJusticeA.P.ShahledLawCommissionReportsnumbered246and253couldpotentiallybewhattheIndiancommercialdisputeresolutionsystemhasbeenwaitingfor.ThesereportssuggestwidescalereformsbysuggestingtheenactmentofanActtoamendtheArbitrationandConciliationAct,1996,andaCommercialDivisionandCommercialAppellateDivisionofHighCourtsandtheCommercialCourtsAct(CommercialDivisionsBill/Act),respectively.
Inpursuanceofitseaseofdoingbusinesspropagandaandanoverallattempttoattractinvestors,theBharatiyaJanataPartygovernmentissettointroducethesetwobillsinthebudgetsessionofParliament.Ifpassedandimplemented,theseenactmentsarelikelytochangethefaceofcommercialdisputeresolutioninIndia.
CommercialDivisionsBill/Act
TheCommercialDivisionsActintroducesacommercialdivisionineveryhighcourthavingoriginaljurisdiction(i.e.Madras,Delhi,Bombay,CalcuttaandHimachalPradesh)andcommercialcourtsinsuchdistricts,astheCentralgovernment,inconsultationwiththeconcernedStategovernmentandChiefJusticeoftheconcernedHighCourt,mayestablish.ThesespecialisedcourtswillresolveallcommercialdisputesofvalueofoverRs.1crore.Simultaneously,thejurisdictionallimitsofallhighcourtswhichhaveoriginalsidejurisdictionwouldbeincreasedtoRs.1croreacrossthecountry.Thesedisputeswillbeheardbyjudgeswhonotonlyhaveabackgroundincommerciallawsbutwillalsoreceivespecialtraininginthisarea.
TheActwillhavewideramificationsasthetermcommercialiswidelydefinedandincludesdisputesrangingfromintellectualpropertyrightsdisputestodisputesarisingoutofjointventureagreementsandproceedingsinaidofarbitrations.TheBillprovidesforafasttrackmechanismwithstringenttimelines.AndforthefirsttimeitintroducesintheIndiansystemtheconceptofacasemanagementconferencewhereinaproceduralorderispassedpriortotrial,settingoutatimetable(includingtimeboundoralargumentssupplementedwithwrittenarguments)whichhastobestrictlyadheredto.Thecourtisgivenwidepowerstoensurethatstrictcomplianceisenforced.Moreover,thecourt,too,ismandatedtodeliveritsjudgmentwithinaperiodof90days.
TheBilladoptsthecarrotandstickapproachandjudiciouslyofferscarrotsforcomplianceandprovidescourtsthepowertowieldthestickincaseofdelaybyoneoftheparties.TheBillalsomakesmandatorythecostfollowtheeventregime,whereby,asageneralrule,thepartyagainstwhomtheorder/judgmentispassedbearstheentirecostoflitigation,subjecttoexceptionswheredelayingparties,evenifsuccessful,havetobearpartofthecost.
WhileanearlierversionofthisbillhadbeenintroducedduringtheUnitedProgressiveAllianceregime,theBill,inthewordsoftheLawCommission,didnotmakeanefforttofundamentallyalterthelitigationcultureinIndiaandthatthechangessuggestedwerecosmeticinnature.TheRajyaSabhahadraisedcertainvalidconcernsincludingtheunworkabilityofsomeoftheproceduralmeasuressuggested.TheLawCommissionhascarefullyscrutinisedtheseobjectionsandintroducedprocedureswhichhavebeeninternationallytested(morespecificallyintheU.K.andSingapore).
Amendments
Anattemptisalsobeingmadetoencouragearbitration,whichisaformofalternativedisputeresolutionwhereinprivateparties,usuallybyconsent,appointanarbitraltribunaltoadjudicateonthedisputeoutsideoftheregularcourtsystem.Oneofthemajorproblemsthathaveplaguedthissystemisexcessivejudicialinterventionandtheproposedamendmentsareprimarilyaimedatreducingsuchinterventions.
Today,interventionsbycourtshappenatallstagesprearbitrationproceedingsforappointmentofatribunalandpostarbitrationchallengestotheaward.Theproposedamendmentsrestrictthescopeofprearbitrationreviewtoaprimafaciereviewoftheexistenceofanarbitrationagreementandnarrowdownthescopeofthechallengeofan
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3/7/2015 TransformingcommercialdisputeresolutionTheHindu
http://www.thehindu.com/todayspaper/tpopinion/transformingcommercialdisputeresolution/article6967749.ece 2/2
awardbyprohibitingananalysisonmerits.Specifically,thescopeofchallengetoaforeignawardhasbeengreatlynarrowed.
Perhapsthebiggestshortfallofthepresentarbitrationregimeisthefactthatasuccessfulpartyinarbitrationisnotinapositiontoenjoythefruitsofitssuccessformanyyearsasthemerefilingofapetitionchallengingitsvalidityrendersthearbitralawardunenforceable.TheLawCommissionhassuggestedamendmentstoSection36oftheActandalosingpartywillhenceforthhavetosatisfyaCourtastowhyitisafitcaseforthearbitralawardtobestayedandtheCourtwillhavepowerstoorderthelosingpartytodepositpartoftheawardsumintoCourt.
Anothermajorareawheretheproposedamendmentswouldmakeasignificantdifferenceisinrelationtoneutralityofthearbitraltribunalwhichisconstituted.TheSupremeCourtofIndia,inIndianOilv.RajaTransport,hasdeclaredatribunalappointedbyapublicsectorundertakingcomprisingitsownemployeestobevalidsubjecttocertainnarrowlycarvedoutexceptions.ThisdecisionissoughttobelegislativelyoverruledbyincorporatingtheInternationalBarAssociationguidelinesonconflictofinterestasascheduletotheAct.
Further,theproposedamendmentssuggestamorerealisticinterestandcostsregime,permittingcompoundinteresttobeawardedandincorporatingthecostsfollowtheeventruleasthebaseruleinrelationtoarbitration.
TheinvestmenttreatyarbitraltribunalinWhiteIndustriesv.UnionofIndiahasheldthattheIndiansystemdoesnotprovideeffectivemeansforaforeigninvestortoenforceitsrights.Thebillsproposedtobeintroducedinthebudgetsessionnotonlyexpeditecommercialdisputeresolutionbutalsoeffectivelydisincentiviseinitiationoffrivolousproceedings.
However,enactingalawisonlypartofthesolutionimplementingiteffectivelybyselectingtherightpersonnelisasimportant.EffectiveimplementationoftheLordWoolfreportresultedineradicatingfrivolouscommerciallitigationintheU.K.statisticssuggestthatthenumberoflitigationsinitiatedfellbyaround80percent.CommercialdisputeresolutioninourcountryisatitscrossroadsandtheenactmentoftheselawsandtheirimplementationoverthenextcoupleofyearswoulddeterminewhetherinIndiathemaximUbijusibiremedium,i.e.everyrighthasaremedy,translatesintosomethingmorethanadejureprinciple.
(AnirudhKrishnan,anadvocateoftheMadrasHighCourt,hasbeenaconsultanttotheLawCommissionfordraftingthereportsmentionedherein.Email:[email protected])
Oneofthemajorproblemsthathaveplaguedthesystemofarbitrationisexcessivejudicialintervention,whichtheproposedamendmentsaimatreducing