From UPSC perspective, the following things are important :
Prelims level : Not much
Mains level : Paper 2- Arbitrations and issues with it in India
Plagued by delays and rising costs, arbitration in India needs urgent attention. The pandemic has only worsened the situation.
Issues with arbitrations process in India
- Arbitrations in India suffers from rising costs and sluggish proceedings.
- Arbitration proceedings are often dragged on by lawyers on either side filing misconceived applications at various stages of the proceedings.
- Litigants, too, at times contribute to this delay with their stubbornness in not conceding a loss or defeat.
- The courts have narrowed down the scope of judicial interference under Section 34 of the Arbitration and Conciliation Act.
- The very limited recourse for setting aside an arbitral award under the Act invariably means that it will be upheld, even if it appears unfair or illogical.
- The aggrieved party may well be stuck with the award and precluded forever from challenging it.
- Arbitration hearings are generally held in camera, and decisions are usually not publicly accessible, giving rise to doubts about impartiality and fairness.
- Arbitration proceedings have become more complex with time.
- The Supreme Court, in Guru Nanak Foundation v. Rattan Singh and Sons, had expressed disappointment against the procedural delays and tardiness in the resolution of disputes through arbitration.
- Even the clauses providing for fees of the arbitrators and fixed timelines for disposal are often disregarded by the players
- The inevitable consequence of these drawbacks is a slow departure of the biggest litigant, the government, from the arbitration spectrum.
- A sector that is dominated by approvals, protocols and scrutiny, uncertainty about the budget outlay towards arbitrations and unexpected delays in disposal does not inspire confidence and detracts from the sanctity of the process.
- Arbitrators have endeavoured to simplify the proceedings by limiting the pleadings, insisting on written arguments, reducing the number of sittings and laying down a schedule for various milestones.
- Some restraint is needed from all quarters to bring its wheels back on the tracks. These are:
- A small check on the arbitral fees and timelines.
- Careful drafting of arbitration clauses.
- Stringent procedural safeguards to curb delays.
- Expeditious disposal of the court proceedings and legislative intent towards all of the above.
Consider the question “What are the issues faced by the arbitration in India? Suggest the measures to deal with these issues.”
Arbitration still has the inherent potential and characteristics to outperform other modes of dispute resolution, but for that to happen, some changes are a must.
From UPSC perspective, the following things are important :
Prelims level : Tribunals
Mains level : Paper 2- Need for the National Tribunals Commissions
- The Centre has abolished several appellate tribunals and authorities and transferred their jurisdiction to other existing judicial bodies through the Tribunals Reforms (Rationalisation and Conditions of Service) Ordinance 2021.
Issues with the abolitions of tribunals
- The Ordinance has met with sharp criticism for not bypassing the usual legislative process.
- Several tribunals such as the Film Certification Appellate Tribunal were abolished without any stakeholder consultation.
- Despite the Supreme Court’s direction in Rojer Mathew v. South Indian Bank (2019), no judicial impact assessment was conducted prior to abolishing the tribunals through this Ordinance.
- While the Ordinance has incorporated the suggestions made in Madras Bar Association v. Union of India (2020) on the composition of a search-cum-selection committee.
- But it has disregarded the court’s direction in Madras Bar Association v. Union of India (2020) for fixing a five-year term.
No NCT constituted
- Further, the Centre is yet to constitute a National Tribunals Commission (NTC), an independent umbrella body to supervise the functioning of tribunals, appointment of and disciplinary proceedings against members, and to take care of administrative and infrastructural needs of the tribunals.
- The idea of an NTC was first mooted in L. Chandra Kumar v. Union of India (1997).
- Developing an independent oversight body for accountable governance requires a legal framework that protects its independence and impartiality.
- Therefore, the NTC must be established vide a constitutional amendment or be backed by a statute that guarantees it functional, operational and financial independence.
- As the Finance Ministry has been vested with the responsibility for tribunals until the NTC is constituted, it should come up with a transition plan.
Advantages of NTC
- The NTC would ideally take on some duties relating to administration and oversight.
- It could set performance standards for the efficiency of tribunals and their own administrative processes.
- It could function as an independent recruitment body to develop and operationalise the procedure for disciplinary proceedings and appointment of tribunal members.
- Giving the NTC the authority to set members’ salaries, allowances, and other service conditions, subject to regulations, would help maintain tribunals’ independence.
Consider the question “What are the issues with Tribunals Reforms (Rationalisation and Conditions of Service) Ordinance 2021? How the constitution of the National Tribunals Commission would help to improve the role played by tribunals?”
The way to reform the tribunal system is to look at solutions from a systemic perspective supported by evidence. Establishing the NTC will definitely entail a radical restructuring of the present tribunals system.
From UPSC perspective, the following things are important :
Prelims level : Lok Adalat and their role
Mains level : Paper 2- Importance of Lok Adalats and concerns over speed undermining idea of justice
The article highlights the important role played by the Lok Adalats in dispute resolution and raises concerns over underminig of justice for the sake of speedy disposal.
Background of Lok Adalat
- The Constitution (42nd Amendment) Act, 1976, inserted Article 39A to ensure “equal justice and free legal aid”.
- To this end, the Legal Services Authorities Act, 1987, was enacted by Parliament and it came into force in 1995.
- The Act seeks “to provide free and competent legal services to weaker sections of the society” and to “organise Lok Adalats to secure that the operation of the legal system promotes justice on a basis of equal opportunity”.
- As an alternative dispute resolution tool, Lok Adalats are regularly organised to help parties reach a compromise.
- Motor-accident claims, disputes related to public-utility services, cases related to dishonour of cheques, and land, labour and matrimonial disputes (except divorce) are usually taken up by Lok Adalats.
Significance of Lok Adalats
- As per the National Judicial Data Grid, 16.9% of all cases in district and taluka courts are three to five years old.
- For High Courts, 20.4% of all cases are five to 10 years old, and over 17% are 10-20 years old.
- Furthermore, over 66,000 cases are pending before the Supreme Court, over 57 lakh cases before various HCs, and over 3 crore cases are pending before various district and subordinate courts.
- Moreover, Lok Adalats are economically affordable, as there are no court fees for placing matters before the Lok Adalat; finality of awards, as no further appeal is allowed.
- As a result, litigants are forced to approach Lok Adalats mainly because it is a party-driven process, allowing them to reach an amicable settlement.
Why Lok Adalats are fast
- When compared to litigation, and even other dispute resolution devices, such as arbitration and mediation, Lok Adalats offer parties speed of settlement.
- Cases are disposed of in a single day.
- The speed is due to procedural flexibility, as there is no strict application of procedural laws such as the Code of Civil Procedure, 1908, and the Indian Evidence Act, 1872.
- More importantly, the award issued by a Lok Adalat, after the filing of a joint compromise petition, has the status of a civil court decree.
Some figures about cases disposed
- In 2015 and 2016, ten National Lok Adalats (NLAs) were held each year that disposed of 1,83,09,401 and 1,04,98,453 cases respectively.
- In 2017 and 2018, the number of NLAs dropped to five, with 54,05,867 and 58,79,691 cases settled respectively.
- In 2019, four NLAs were organised, and they disposed of 52,93,273 cases.
- In 2015, the average number of cases settled per NLA was 18,30,940, which came down to 10,81,174 in 2017, but rose to 11,75,939 in 2018, and 13,23,319 cases in 2019.
- This throws up questions about the efficiency of NLAs.
- The data show that the average number of cases disposed of per NLA since 2017 has gone up even when the number of NLAs organised each year has reduced.
- This proves that on average, the system is certainly efficient.
- The Supreme Court, in State of Punjab vs Jalour Singh (2008), held that a Lok Adalat is purely conciliatory and it has no adjudicatory or judicial function.
- As compromise is its central idea, there is a concern that in the endeavour for speedy disposal of cases, it undermines the idea of justice.
- In a majority of cases, litigants are pitted against entities with deep pockets, such as insurance companies, banks, electricity boards, among others.
- In many cases, compromises are imposed on the poor who often have no choice but to accept them.
- Similarly, poor women under the so-called ‘harmony ideology’ of the state are virtually dictated by family courts to compromise matrimonial disputes under a romanticised view of marriage.
- Even a disaster like the Bhopal gas tragedy was coercively settled for a paltry sum, with real justice still eluding thousands of victims.
Consider the question “Examine the significance of Lok Adalats as an alternative dispute resolution tool. What are the concerns with speedy disposal of cases by Lok Adalats?”
A just outcome of a legal process is far more important than expeditious disposal, so what we need is concrete and innovative steps in improving the quality of justice rendered by National Lok Adalats.
From UPSC perspective, the following things are important :
Prelims level : Nothing Much
Mains level : Ways to make India as an arbitration hub.
The government’s recent initiative and push for the New Delhi International Arbitration Centre Bill, 2019, to make India an ‘arbitration hub’ has to be seen in the larger and overall context, and not as a one-off measure.
Singapore as an ideal
- Singapore attracts a vast majority of its international commercial disputes of Indian vintage and connection.
- It has become the lead destination for dispute resolution as there was a clear vision and steady determination.
- This made Singapore the ‘seat’ of arbitration and a preferred venue.
Ways to achieve it
1.A pro-arbitration culture backed by the trio
Judiciary – Courts particularly need to take a pragmatic approach towards ‘minimum intervention and maximum execution’, which will respect the arbitral process and honour arbitral awards.
Legislature – The legislature had amended the Arbitration Act in 2015 and set timelines to increase the pace of arbitration, and make it more time-bound, result-oriented and disciplined. However, India requires gigantic measures to emerge as a ‘hub’.
Executive – The government has echoed the same sentiment and has given the need for making India an ‘arbitration hub’ and promoting ease of doing business the stature of a national priority.
2. Sanctity of contracts
- Respecting the sanctity of contracts and honouring awards are vital to emerge as an ‘arbitration hub’.
- However, an effective dispute redressal mechanism is not enough.
- It is equally important to reduce the number of artificial disputes.
- Numerous times needless disputes, particularly by PSUs, are pushed to arbitration where the arbitrator simply has to direct the parties to adhere to the terms of the contract.
3.Independent and expert arbitrators
This would bring in much-needed commercial certainty, uphold the sanctity of the award/contract, and enhance the quality of decision-making.
4. Effective enforcement of awards involving public bodies
- Courts are highly cautious in enforcing awards against the government as they are swayed by unfounded nationalism and emotion.
- What is required is a no-nonsense approach and a mindset tuned towards compliance, adherence and enforcement.
- The answer lies in creating a culture of finality of arbitral awards so that a winner can get a touch-and-feel of the fruits of victory.
- This will inspire confidence and create a vibrant arbitration culture for resolving commercial disputes.
A step in the right direction
- The catalyst has to be government initiative, judicial and legislative support, and, above all, a conducive commercial mindset and environment.
- What we need is a well-thought-out road map to establish a credible and trustworthy institutional framework.
- Once the script is in place, a robust institutional framework will automatically trigger/take off.
A superstructure on a solid base is essential to meet the objective of making India an ‘arbitration hub’ and promote ease of doing business. This will ensure durability and longevity, which will serve India’s interests well, and who knows it may just open doors to ‘arbitration tourism’.
From UPSC perspective, the following things are important :
Prelims level : Arbitration
Mains level : NDIAC
- The Union Cabinet has approved the Bill New Delhi International Arbitration Centre (NDIAC) Bill, 2019 for introduction in the ensuing session of Parliament.
About the Bill
- In view of the provisions of the Article 107 (5) and 123 (2) of the Constitution, the New Delhi International Arbitration Centre Bill, 2019 is proposed to be introduced in the Parliament.
- The Bill provides for setting up of an independent an autonomous body for institutional arbitration.
- It aims to acquire and transfer the undertakings of International Centre For Alternative Dispute Resolution (ICADR) to New Delhi International Arbitration Centre (NDIAC).
New Delhi International Arbitration Centre (NDIAC)
- The NDIAC will be headed by a Chairperson, who has been a Judge of the Supreme Court or a Judge of a High Court or an eminent person, having special knowledge and experience in the conduct or administration of arbitration, law or management,
- He is to be appointed by the Central Government in consultation with the Chief Justice of India.
- Besides, it will also have two Full-time or Part-time Members from amongst eminent persons having substantial knowledge and experience in institutional arbitration in both domestic and international.
- In addition, one representative of a recognized body of commerce and industry shall be nominated on rotational basis as a Part-time Member.
- The Secretary, Department of Legal Affairs, Ministry of Law & Justice, Financial Adviser nominated by Department of Expenditure, Ministry of Finance and Chief Executive Officer, NDIAC will be ex-officio Members.
Aims and objectives of NDIAC
- bring targeted reforms to develop itself as a flagship institution for conducting international and domestic arbitration
- provide facilities and administrative assistance for conciliation, mediation and arbitral proceedings;
- maintain panels of accredited arbitrators, conciliators and mediators both at national and international level or specialists such as surveyors and investigators;
- facilitate conducting of international and domestic arbitrations and conciliation in the most professional manner;
- provide cost effective and timely services for the conduct of arbitrations and conciliations at Domestic and International level;
- promote studies in the field of alternative dispute resolution and related matters, and to promote reforms in the system of settlement of disputes; and
- co-operate with other societies, institutions and organisations, national or international for promoting alternative dispute resolution.
- The benefits of institutionalized arbitration will be manifold for the Government and its agency and to the parties to a dispute.
- This will result in quality experts being available in India and also an advantage in terms of cost incurred.
- It will facilitate India becoming a hub for institutional arbitration.
International Arbitration in India
- It has been the endeavor of the Government of India to establish an independent and autonomous institution for resolving International and domestic commercial disputes expeditiously by Alternative Dispute Resolution (ADR) mechanism.
- In this regard, a HL Committee headed by Mr. Justice B.N. Srikrishna, former Judge of the Supreme Court of India, was constituted in the year 2017.
- The HLC recommended that the Government may take over the International Centre For Alternative Dispute Resolution (ICADR), an existing institution which has been established in the year 1995 using the public funds and develop it as an Institution of National Importance.
- Taking into consideration the HLC’s recommendations, a Bill, namely the New Delhi International Arbitration Centre (NDIAC) Bill 2018 was approved.
Mains Paper 2: Polity | Dispute redressal mechanisms and institutions.
From UPSC perspective, the following things are important:
Prelims level: New Delhi International Arbitration Centre Bill 2018
Mains level: Arbitration mechanism in India – pros, cons, challenges and way forward
- The Lok Sabha has passed the New Delhi International Arbitration Centre Bill 2018.
Propositions of the Bill New Delhi International Arbitration Centre Bill
- The Bill aims for creating an independent and autonomous regime for institutionalized arbitration and their better management so as to make it a hub for institutional arbitration.
- It will replace the International Centre for Alternative Dispute Resolution set-up in the year 1995, which is a society registered under the Societies Registration Act.
- It is based on the opinion of the High Powered Committee appointed by the Centre that the International Centre for Alternative Dispute Resolution has failed to address the growing needs of the institutional arbitration.
- The proposed New Delhi International Arbitration Centre will be a statutory body.
- It will consist of:
- Two eminent persons having substantial knowledge in international and domestic arbitration,
- One representative of a recognized body of commerce,
- Secretary to the Ministry of Law & Justice and
- Finance Advisor and a Chief Executive Officer.
Eligibility Criteria for Members
- The Chairperson should have been a judge of the Supreme Court or High Court, or an eminent person having special knowledge and experience in the conduct or administration of arbitration.
- He will be appointed by the Central Government in consultation with the Chief Justice of India.
- The two eminent persons and the representative of commerce body are to be appointed by the Central Government.
Objectives of the Arbitration Centre
- to bring targeted reforms to develop itself as a flagship institution for conducting international and domestic arbitration;
- to promote research and study, providing teaching and training, and organising conferences and seminars in arbitration, conciliation, mediation and other alternative dispute resolution matters;
- to provide facilities and administrative assistance for conciliation, mediation and arbitral proceedings;
- to maintain panels of accredited arbitrators, conciliators and mediators both at national and international level or specialists such as surveyors and investigators;
- to collaborate with other national and international institutions and organisations for ensuring credibility of the Centre as a specialised institution in arbitration and conciliation;
- to set-up facilities in India and abroad to promote the activities of the Centre;
- to lay down parameters for different modes of alternative dispute resolution mechanisms being adopted by the Centre
Assist this newscard with the op-ed given below:
Do we really need a National Court of Appeal?
The Supreme Court recently admitted an SLP (Special Leave Petition) under Article 136 of the Constitution on the setting up of a National Court of Appeal (NCA) with regional benches which will act as final courts of appeal in civil, criminal, revenue and labour matters <Can you tell us, what is SLP in comments>.
In 1987, in the case of Bihar Legal Support Society v. the Chief Justice of India, the proposal to set up the National Court of Appeal was mooted and welcome by the then Chief Justice P N Bhagwati. The current petition by Chennai based lawyer has once, again brought the issue to the fore.
The Supreme Court will set up a Constitution Bench to decide on the proposed NCA as primarily, it raises the following question related to the interpretation of the Constitution
As of now, the Supreme Court is the final court of appeal in all cases. With the NCA, the role of the Apex Court would be restricted to hearing only constitutional and public law cases. Would this amount to tinkering with the ‘basic structure’ of the Constitution?
REASONS WHY NCA COULD BE A WELCOME PROPOSITION?
Given the never-ending and ever –increasing case-load on the Apex Court, the NCA could be a welcome change on the following grounds:
(a) Clearing the massive backlog: With the huge pendency of cases in all three levels of Judiciary, the National Court of Appeal with its regional benches may prove to be crucial in clearing the massive backlog of cases. About 98% of the Apex Court’s time is wasted on routine matters like bail pleas, dishonor of cheques, traffic violations, correcting errors in HC judgments.
With the NCA hearing matters pertaining to civil, criminal, labour and revenue laws, Supreme Court would be able to concentrate on the more important public law concerns.
(b) Restoring the Apex position of the Apex Court: With the Supreme Court getting an opportunity to hear exclusively on constitutional and public law matters, its position as the final arbiter on constitutional cases and on developing the law will be further strengthened.
This is in tune with the scenario in England, UK and Wales where the Supreme Court only rules on matters of constitutional importance or sets a new legal precedent.
(c) Greater access to justice: Access to justice is a fundamental right for all
WHY SHOULD THE STATUS QUO BE MAINTAINED?
The Centre has been challenging the move to set up the NCA on the following grounds:
(a) Dilution of the powers of Apex Court: Currently, many citizens resort to Article 136 of the Constitution in any sort of matter. With the subject matter of disputes being divided amongst NCA and the Supreme Court, Supreme Court’s exclusive power to entertain appeals under Article 136 will be significantly diluted.
(b) Compromise the unified structure of the Judiciary: Currently, there is one Apex Court with the High Court in states followed by subordinate courts. This integrated structure will suffer a backseat with NCA somewhere in the middle between High Courts and Supreme Court
Moreover, earlier proposals to set up Regional Benches of the Supreme Court with one bench in each region have been rejected by the Supreme Court on the ground that it will affect the unitary character of the Judiciary and that there can be only one Supreme Court.
For providing greater access to citizens from far-flung areas, it has been proposed that there could be dedicated courtrooms with video conferencing facilities for litigants and lawyers from far-flung areas. This will avoid the need of setting up regional benches and even NCA to a great extent.
(c) Large-scale Constitutional amendments required: For bringing the NCA into existence, several provisions of the Constitution related to independence of Judiciary, hierarchy of Courts, powers of Supreme Court etc. will have to be amended. Moreover, Article 136 of the Constitution is a part of the basic structure and in view of the decision in Keshvananda Bharati case, limiting the powers of Supreme Court through NCA will be extremely difficult.
The solution does not lie with creating courts of appeal because it would not bring down litigation. The Supreme Court has to exercise restraint on the manner of interference under its constitutional power. Today people take chances and come to Supreme Court on every issue, including challenging an adjournment order – Attorney General
Law Commission Recommendation
- Law Commission in its 229th report submitted to the government in 2009 recommended setting up of four regional benches at Delhi, Chennai/Hyderabad, Kolkata and Mumbai to deal with appeals arising out of high courts. Earlier 125th report had recommended setting up of NCA
Answer in comments>.
- It said, if necessary Article 130
may be amended to implement its suggestion that Cassation Benches may be set up in four regions, while the Constitution Bench sits in Delhi . < Is Law commission a constitutional or statutory or executive body? Answer in comments>
But the Supreme Court rejected it in 2010, saying dividing the Supreme Court would affect the country’s unitary character. A Full Court comprising all SC judges reiterated its earlier resolutions passed in 1999, 2001, 2004 and 2006 in this regard.
CONCLUSION: The burgeoning backlog of cases plaguing all the three levels of judiciary demand more resources and institutional reforms to deal with the problem. However, any proposals to set up institutions like the NCA will require Constitutional amendments and major Legislative will to go through. This at present is not forthcoming. The idea of a National Court of Appeal requires consideration, but in a manner that would not undermine the undoubted authority of the Supreme Court of India. The next hearing for the matter is slated up for April 4.
P.S. This article is published with inputs from a CD user Joyousjojo (name changed on request).
P.P.S. If you want to write explainers for CD, mail us your explainer at email@example.com