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:
Mains Paper 2: Polity | Structure, organization & functioning of the Executive & the Judiciary
From UPSC perspective, the following things are important:
Prelims level: Not much
Mains level: Vishwa Lochan Madan versus Union of India and Others case and its significance in diminishing parallel justice system in India
Advocating Sharia courts
- Many people have advocated the concept of Sharia courts in recent past
- They claim that Sharia courts are mere arbitration centres and not a parallel judicial system
Huge difference between the two
- Mediation and arbitration centres are very different from Sharia courts
- In the case of arbitration/mediation, an issue can be referred only when both the parties agree to it and choose their own counsellors
- They don’t have judges(qazis) but counsellors who settle the disputes by consulting both the parties
International operations argument is flawed
- Sharia courts are operational in the UK, Israel and other countries
- This claim is not relevant to the current issue in India
- In the UK, for example, Sharia councils and not Sharia courts are operational which provide advice to those Muslims who voluntarily choose to use them to resolve civil and family disputes
Presence in India
- Sharia courts are operational in Bihar and other states
- An argument is put forward that their decisions are never challenged by the people
- If the orders of Sharia courts are not challenged, this doesn’t show the acceptance of people
- It shows how the Muslim associations have successfully misled the common people to believe these bodies are courts and if they do not follow their orders, it would be anti-Islamic
SC decision on the issue
- There is also a claim that the Supreme Court never declared Sharia courts unconstitutional
- This too is a false claim.
- In Vishwa Lochan Madan versus Union of India and Others in 2005, the Supreme Court held that: “In any event, the decision or the Fatwa issued by whatever body being not emanating from any judicial system recognised by law, it is not binding on anyone including the person, who had asked for it
- Further, such an adjudication or Fatwa does not have a force of law and, therefore, cannot be enforced by any process using coercive methods
- Any person trying to enforce that by any method shall be illegal and has to be dealt with in accordance with law.”
Alternative way for India
- Even if both the parties agree to settle their disputes outside the court, these bodies can be called Sharia councils or arbitration centres but under no circumstances can they be called Sharia courts
- Also, if these bodies are to be given this power to settle disputes outside the court, this decision has to come from Parliament by proper legislation and not by a private entity like the All India Muslim Personal Law Board (AIMPLB)
- All claims put in favour of Sharia courts are baseless
- It is an attempt to mislead the common man and improve the image of this parallel judicial system in the country, which is a threat to the rule of law
Mains Paper 2: Polity | Separation of powers between various organs dispute redressal mechanisms & institutions
From UPSC perspective, the following things are important:
Prelims level: Arbitration and Conciliation (Amendment) Bill 2018, The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Bill 2018
Mains level: Alternative Dispute Resolution mechanism in India
Strengthening the dispute resolution process
- The Cabinet has approved two Bills to be introduced in Parliament aimed at speeding up and strengthening the dispute resolution process in the country
Arbitration and Conciliation (Amendment) Bill 2018
- It is a part of the efforts of the Government to encourage institutional arbitration for the settlement of disputes
- It aims to make India a center of robust Alternative Dispute Resolution (ADR) mechanism
- Bill will establish an independent body—the Arbitration Council of India (ACI)
- It will lay down standards, make arbitration process more party friendly, cost-effective, and ensure timely disposal of arbitration cases
- The Chairperson of ACI shall be a person who has been a Judge of the Supreme Court or Chief Justice or Judge of any High Court or any eminent person
The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Bill 2018
- It seeks to bring down the specified value of a commercial dispute to ₹3 lakh from the present ₹1 crore
- Now commercial disputes of a “reasonable value” can be decided by commercial courts
- This would bring down the time taken (presently 1,445 days) in the resolution of commercial disputes of lesser value and thus further improve India’s ranking in the Ease of Doing Business
- Bill provides for the establishment of commercial courts at the district judge level for the territories over which the respective High Courts have ordinary original civil jurisdiction—Chennai, Delhi, Kolkata, Mumbai and the state of Himachal Pradesh
- The SC verdict refers to a speech by sitting Supreme Court judge, Justice J. Chelameswar, in 2014 about the decline in the stature of a Supreme Court inundated by routine appeals
- HC certificate: Parties ignore the fact that a certificate of the High Court is required to appeal to the Supreme Court
- Exception is the rule: Only in exceptional circumstances would the Supreme Court admit a case without the High Court’s certificate but the exception has become the rule now
- Result: More and more unsuccessful people are encouraged to have another go at it by approaching the Supreme Court
- SC: The rush of humdrum commercial and private appeals had thwarted the Supreme Court’s constitutional objective to hear matters of only national and public interest
- Strength: Even an increase in the sanctioned strength of Supreme Court judges to 31 has not helped because they are busy hearing routine cases at the cost of pending constitutional matters
- Post 1990s phenomena: The judgment endorsed former Solicitor-General T.R. Andhyarujina’s view that the Supreme Court started losing its character after 1990, when it began entertaining cases of all kinds
- Context: SC is hearing a petition for setting up National Courts of Appeal with regional benches to hear civil and criminal appeals
- Context: Issue on setting up of National Court of Appeal
- Attorney General: NCA will add one more level of adjudication
- It will not help to decrease litigation
- It will mean more expense and hardship to the litigant
- Article 136: Power provided under this should be invoked only in exceptional cases
- Bifurcation of juriciary through NCA is a constitutional
- Context: The nationwide Access to Justice survey by DAKSH, a civil society organisation
- Cost: 90% of the litigants in the country earn less than Rs. 3 lakh a year and the median expected cost of litigation for them is around Rs. 16,000
- Legal aid: Though it aims to provide free legal services to the poor, just 1% of the respondents were making use of this service
- Accountability of legal aid lawyers towards their clients and lack of communication between the two are serious concerns plaguing the system
- Finance: The main reason individuals could not meet the conditions of bail was found to be lack of funds
- Context: Constitutional Bench hearing on the issue of establishing National Courts of Appeal
- Amicus curie argument: The Supreme Court is situated in the far North in Delhi
Litigants from the southern States find it unduly long and expensive to come here in search of justice
- CJI Thakur: Isn’t access to justice a fundamental right for all? Does this mean access to justice has become an illusion for people of Kerala and Tamil Nadu?
- The Centre had no suggestions to offer yet, on the issue
- Context: A Chennai lawyer had filed a petition for setting up a National Court of Appeal
- News: The Supreme Court decided to set up a 5-judge Constitution Bench to debate the establishment of a National Court of Appeal
- Attorney General expressed that it was not possible or desirable to have a National Court of Appeal
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 firstname.lastname@example.org