I INTRODUCTION TO DISPUTE RESOLUTION FRAMEWORK
As with most common law countries, Indian law may broadly be classified as substantive or procedural law. While substantive law determines rights and liabilities of parties or confers legal status or imposes and defines the nature and extent of legal duties, procedural laws prescribe practice, procedure and machinery for the enforcement or recognition of rights and liabilities.2 To put it another way, substantive laws are those that are enforced while procedure deals with the rules through which the substantive law is enforced.3
Dispute resolution in India may be through courts, specialised tribunals (such as those for recovery of debt by banks or company disputes among others) or alternative dispute resolution mechanisms that include arbitration, mediation and conciliation. The recent introduction of the Commercial Courts Act, 2016 also provides for the provides for the constitution of commercial courts at a district level, except areas where the High Court exercises ordinary civil jurisdiction, commercial divisions (in all High Courts having ordinary civil jurisdiction) and commercial appellate divisions in each High Court for the adjudication and speedy disposal of commercial disputes4 of a specified value of not less than 10 million rupees or such other notified value within the limits of the relevant territorial jurisdiction.5
The primary laws codifying court procedure in India are the Code of Civil Procedure 1908 (CPC) and the Code of Criminal Procedure 1973 (CrPC). Charter High Courts such as the High Courts of Bombay, Calcutta, Delhi and Madras may also apply Letters Patent Rules, which when applicable may override the provisions of the CPC. The procedure to be applied by tribunals is often governed by the statute that establishes the tribunal (and rules framed thereunder). Courts have held that the principles contained in the CPC would continue to apply to the tribunals even if the tribunals are not bound to follow specific provisions of the CPC.6
While the legislative and executive branches of the Indian government follow a federal structure, the Indian judicial system comprises a unified three-tier structure with the Supreme Court of India (the Supreme Court) holding the position of the apex court. Below the Supreme Court are the High Courts, functioning (in most cases) in each state. Lower in the hierarchy are the subordinate courts, which include courts at district level and other lower courts.
Law declared by the Supreme Court is binding on all other courts in India.7 By acceptance of the doctrine of stare decisis, law declared by High Courts binds subordinate courts8 and may have persuasive value over High Courts of other states.9 The Supreme Court and the High Courts are charged with original, appellate and writ jurisdiction. Under the writ jurisdiction they have the power to review administrative action including for the purposes of the enforcement of constitutional and fundamental rights granted under Part III of the Constitution of India.
The Arbitration and Conciliation Act 1996 (the Arbitration Act) governs the law related to domestic arbitration, foreign-seated arbitration and enforcement of foreign awards, in India. The Arbitration Act is based on the UNCITRAL Model Law as adopted by the United Nations Commission on International Trade Law on 21 June 1985. Mediation and conciliation have also been given statutory recognition through the Arbitration Act.
As a recent trend, even courts often promote alternative dispute resolution. This was discussed in great detail in the case of Afcons Infrastructure Limited v. Cherian Varkey Construction,10 where the Supreme Court laid down guidelines for courts to follow for the effective implementation of Section 89 of the CPC, which encourages parties to settle their disputes by means of alternative dispute resolution.
II THE YEAR IN REVIEW
The primary legislative change brought about this year was the notification of the Insolvency and Bankruptcy Code 2016 (IBC).
The IBC is a comprehensive legislation that seeks to replace extant insolvency and restructuring laws in India and proposes to cover corporate persons (i.e., companies and limited liability partnerships), individuals and partnerships. The provisions relating to the insolvency and restructuring of corporate persons came into effect on 1 December 2016.
The IBC empowers various categories of creditors including foreign creditors to trigger the insolvency resolution process and provides a single forum to oversee resolution and liquidation proceedings. The National Company Law Tribunals (NCLT) have been vested with the jurisdiction in respect of insolvency and restructuring proceedings against corporate persons in India, while the Debt Recovery Tribunal will oversee proceedings against individuals and partnerships. In addition, the institutional infrastructure in place to support proceedings under the IBC include the Insolvency and Bankruptcy Board of India (IBBI) which is the regulatory body, a cadre of regulated insolvency professionals and central information utilities to maintain records of debts and defaults. Some of the important provisions introduced by the IBC include the following.
A financial creditor (who has extended credit for interest or other consideration) or an operational creditor (who has extended credit in exchange for goods or services) may initiate corporate insolvency resolution process (CIRP) against a corporate debtor, by approaching the NCLT bench with requisite territorial jurisdiction.11 The CIRP may be initiated on the occurrence of a single payment default of 100,000 rupees.
The NCLT will determine whether a payment default has taken place, and accordingly admit the CIRP application against the corporate debtor.12 In addition, the NCLT shall declare moratorium of 180 days (that may be extended for a further period of 90 days) against any recovery actions and new cases filed against the corporate debtor and its assets,13 and appoint an interim resolution professional who will oversee the formulation of the restructuring plan.14
Once a restructuring plan has been formulated, it must be sanctioned by the NCLT before it can be implemented.15 In addition, the NCLT has the power to initiate liquidation proceedings against a corporate debtor if either a resolution plan could not be formulated within the stipulated time, or if it rejects the resolution plan submitted to it for approval.16
Once CIRP has been initiated, the NCLT becomes the sole forum to entertain disputes either initiated by the corporate debtor, or against the corporate debtor.17
While the IBC is a fairly recent legislation and provisions are still being tested in courts of law, various benches of the NCLT, and the Supreme Court has had the occasion to interpret certain provisions of the IBC. The NCLAT in several decisions examined the issue of whether a corporate debtor should be heard before an application is admitted and has held that a corporate debtor must be given adequate opportunity of being heard, unless such a hearing is not merited.20 Another issue of relevance that has been examined is the existence of a dispute before the notice is issued by a creditor, which is a ground on which the commencement of insolvency resolution process by an operational creditor can be rejected. The Supreme Court held that the definition of ‘dispute’ under the IBC was inclusive and was not limited to a suit or arbitration only and additionally, need not be a bona fide dispute.21 The key ingredient to keep in mind was that such a ‘dispute’ should be pre-existing or pending prior to issue of the notice of demand by the operational creditor. However, in Innoventive Industries v. ICICI,22 the Supreme Court observed that a financial creditor’s application to initiate CIRP against a corporate debtor should be admitted by the NCLT when the debt is due as a matter of law or fact, regardless of whether it is ‘disputed’. In Surendra Trading Company v. Juggilal Kamlapat Jute Mills Co. Ltd. & Ors,23 the Supreme Court held that certain timelines prescribed under the IBC are directory and not mandatory. It was observed that such provisions are procedural in nature and were introduced with the intention of preventing a delay in hearing the disposal of the cases. However, these cannot be treated to be a mandate of law and in appropriate cases, the adjudicating authority may admit applications made after the prescribed time periods if there are valid, weighty and justifiable reasons for doing so.
The Supreme Court and High Courts have considered several procedural and substantive issues.
In NTT Docomo v. Tata Sons,24 the Delhi High Court rejected the Reserve Bank of India’s (RBI) objections to the enforcement of a foreign arbitral award of damages worth US$1.6 billion, which allegedly violated extant foreign exchange regulations. These objections were filed by the RBI when it attempted to implead itself into the enforcement proceedings. It was determined that the RBI had no locus to object to a foreign award’s enforcement since it was not a signatory to the arbitration agreement. Further, the Delhi High Court observed that since the foreign award directed the payment of damages and not transfer of securities, it did not, in any event, violate any foreign exchange regulations framed by the RBI. Accordingly, it was held that there was no bar on the enforceability of the award under Section 48(2)(b) of the Arbitration Act. In a similar vein, the Delhi High Court in Cruz City 1 Mauritius Holdings v. Unitech Limited25 refused to entertain the argument that even if an arbitral award seemingly violated provisions of the Foreign Exchange Management Act 1999, it remains enforceable and does not attract the public policy bar under Section 48(2)(b) of the Arbitration Act.
In Voestalpine Schinen GmBH v. Delhi Metro Rail Corporation26 (DMRCL), the Supreme Court upheld the appointment of a former employee of DMRCL, a government owned corporation as an arbitrator, while interpreting Section 12 and Schedule 7 of the amended Arbitration and Conciliation Act. It was held that mere former employees of one party, who had no connection to the dispute at hand, could not be barred from acting as arbitrators if the arbitration agreement provided for the same.
In Sasan Power Limited v. North American Coal Corporation India Private Limited,27 the decision of the Madhya Pradesh High Court, which had held that Indian parties are free to opt for a foreign seat of arbitration, was appealed to the Supreme Court. While upholding the decision of the Madhya Pradesh High Court, the Supreme Court did not clarify the legal position and held that as the case involved an adjudication on the rights of a foreign party to the arbitration, parties were free to choose the governing law. Recently, the Delhi High Court in GMR Energy Limited v. Doosan Power Systems India Private Limited & Ors28 relied on the Supreme Court decision in Sasan Power and held that two Indian parties can choose a foreign seat or arbitration.
III COURT PROCEDURE
i Overview of court procedure
It can be seen in connection with the Indian legal system (as a criticism more than a compliment) that ‘there is ample – sometimes excessive – due process; and one has to be patient and persevering’.29 Broadly, court procedure in India is governed by the CPC for civil matters and the CrPC for criminal matters. As discussed above, even where statutes create specialised tribunals and courts to deal with particular disputes, it is sometimes recognised that the principles contained in the CPC and CrPC would continue to apply. This is often so because provisions in the CPC and the CrPC are recognised as the embodiments of the principles of fair play, natural justice and due process.
ii Procedures and time frames
The primary statute governing limitation is the Limitation Act 1963. As a general rule, most suits, especially those relating to contracts and accounts have a limitation period of three years for filing. Some suits relating to immovable property may fall within a longer limitation ranging from 12 to 30 years.30 The periods prescribed under the Limitation Act may not apply in the event a specific statute prescribes a period of limitation.31
Where a plaintiff approaches a court for injunctive relief, especially at an interlocutory stage, the court may require the plaintiff to demonstrate (quite aside from being within limitation) that the plaintiff has acted in a timely manner and has not acquiesced to the infringement of its rights.32
A writ court may require a petitioner (although no limitation is prescribed for writs) to demonstrate that he or she has approached the court without delay, since a delay may disentitle a petitioner to relief.33
After amendments in 2002, the CPC requires written statements of defence to be filed in a timely manner. This is normally within 30 days of the service of summons, which may be extended by a further 60 days.34 The CPC also curtails the number of adjournments that may be sought and attempts to curtail practices that are often perceived as dilatory, such as belated amendments to pleadings35 and belated production of documents.36
It is pertinent to note that the Arbitration Amendment Act now mandates time-bound arbitrations. A time limit of 12 months has been prescribed from the date that the arbitrators have received notice in writing of their appointment. Parties may also agree in writing to have their dispute resolved by fast-track procedures, which would require the award to be made within six months from the date of entry of the arbitral tribunal upon reference.37 If the court passes any interim measure under Section 9 of the Arbitration Act, the arbitral proceedings must commence within 90 days of the court passing such an order.38
The Commercial Court Act has also set a time of 30 days for the submission of written arguments and 90 days from the date of conclusion of arguments for the pronouncement of a judgment. Appeals have to be disposed of by the appellate body within 60 days from the date of the appeal.
The IBC provides a period 180 days from the date of admission of an application for initiating CIRP as the period of the insolvency resolution process that culminates with the submission of a resolution plan to the NCLT.39
In spite of these recent developments to reduce time frames, the time taken for the completion of a trial in civil and criminal proceedings may be several years.
iii Class actions
The CPC recognises that where there are numerous persons with the same interest in one suit, one or more of such persons may, with the permission of the court, sue or be sued, or may defend such suit on behalf of or for the benefit of all persons interested.40
The Companies Act 1956 and the Companies Act 2013 stipulate that a specified number of members or depositors may, if they are of the opinion that the management or control of the affairs of the company are being conducted in a manner prejudicial to the interests of the company or its members or depositors, file an application before the company law tribunal on behalf of the members or depositors.41
The Supreme Court has in the exercise of its writ jurisdiction long recognised the ability of an individual or a group of individuals to bring ‘public interest litigations’ to espouse the cause of larger sections of society.42
iv Representation in proceedings
The Constitution of India guarantees the right of a person accused of an offence to be represented by a legal practitioner of his or her choice.43
In other proceedings, while litigants are typically represented by advocates enrolled under the Advocates Act 1961, there may be exceptions to the rule. For instance, the Family Courts Act44 stipulates that a party may be represented by an advocate only if the court thinks that it is necessary for a fair trial. Further, the Industrial Disputes Act45 restricts the conditions under which a lawyer can appear before the industrial tribunal. The Advocates Act46 empowers a court to permit any person who has not been enrolled as an advocate to appear before it in any particular case.
v Service out of the jurisdiction
Under the CPC, when a defendant resides outside India and no agent in India is empowered to accept service, summons or notice may be sent by courier or post service as approved by the appropriate High Court. This provision must, however, be read together with the procedure prescribed by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 1965 to which India is a party.
The CrPC recognises bilateral arrangements and makes compliance with such an arrangement mandatory. It is prescribed that summons or warrants issued by a court in India should be served and executed in accordance with the bilateral arrangement, if any. Also, the Ministry of Home Affairs in India has, by a circular dated 11 February 2009, clarified the procedure to be followed for the issuance of summons to a foreign resident (the MHA Circular). Under the MHA Circular, all requests for service of summons, notices or judicial processes on persons residing abroad shall be addressed to the Under Secretary (Legal) of the Ministry of Home Affairs. Thereafter, the Ministry, after scrutinising the request, can forward it to the relevant foreign officer.
vi Enforcement of foreign judgments
A money decree obtained from a court of a jurisdiction notified by the Indian Union government as a reciprocating territory under the CPC can be enforced in India directly by filing an execution petition in a court of competent jurisdiction.49 As a result, judgments of courts not notified as reciprocating territories or decrees other than money decrees cannot be executed directly in India. A decree holder in such a case may file a fresh lawsuit in the Indian courts on the basis of the foreign judgment. In either execution proceedings or fresh suits filed on the basis of foreign judgments, parties may rely on Sections 1350 and 1451 of the CPC.
Section 44 of the Arbitration Act prescribes that a foreign award that arises out of (1) an agreement to the New York Convention on the Recognition and Enforcement of Foreign Awards (the New York Convention) applies and (2) is made one of the territories by the Central Government as a territory to which the New York Convention applies may be enforced in India. In this regard, the Arbitration Amendment Act has clarified that a foreign arbitration award may be set aside if it violates the public policy of India on the same grounds as described for domestic awards above. However, unlike domestic awards, foreign awards cannot be set aside on the ground of patent illegality.
vii Assistance to foreign courts
Assistance may be given to foreign courts52 on the basis of bilateral agreements with the reciprocating territories. In civil matters, the CPC provides for the service of foreign summons issued by certain specified courts only. In such cases, assistance is given when a defendant resides or works for gain or carries on trade or business within India and the summons itself may be a summons for the appearance of the defendant, production of documents or furnishing of information.53
Also as discussed above, India is a signatory to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters 1965, whose key objective is to improve the organisation of mutual judicial assistance by simplifying and expediting procedures.
viii Access to court files
Rules relating to access to court files may vary depending on the nature of the proceeding, who is seeking access and whether the proceeding is ongoing or concluded. In most cases a person who is a party to the proceeding is allowed to search, inspect or have copies of all pleadings and other documents or records of the case. A third party seeking the information or record may need to apply to the court and show cause to be allowed to do so.
ix Litigation funding
Disinterested third-party funding is not common. While some courts have found that third-party funding may be permissible,54 other courts have often declined to uphold such agreements on the grounds of public policy or professional ethics.55
IV LEGAL PRACTICE
i Conflicts of interest and Chinese walls
The Bar Council of India Rules (the BCI Rules), notified by the Bar Council of India (BCI) under the Advocates Act, 1961, impose some standards on advocates to ensure that conflicts of interest are avoided. These include:
- a a prohibition on appearing for opposite parties in the same matter, and from taking instructions from anyone other than the client and the client’s authorised agent;
- b a prohibition on lending to a client, or converting funds in the advocate’s hands to a loan, or adjusting fees against personal liability owed by an advocate to the client;
- c a prohibition on bidding for, or acquiring an interest in property of actionable claim involved in litigation;
- d a prohibition on appearing in matters where the advocate has a pecuniary interest;
- e a prohibition on representing establishments of which the advocate is a member;
- f a prohibition on appearing in matters where he or she is a witness;
- g a prohibition on appearing before relatives who are judges;
- h the obligation to make a full and frank disclosure to client relating to his or her connection with the parties and any interest in or about the controversy likely to affect his or her client’s judgement in either engaging him or her, or continuing the engagement; and
- i the obligation not to disclose information or instructions provided by the client.
ii Money laundering, proceeds of crime and funds related to terrorism
While there are no specific obligations on lawyers with respect to money laundering, India has a strong legislative framework, including the Prevention of Money Laundering Act 2002, the Income Tax Act 1961, the Foreign Exchange Management Act 1999, the Foreign Contribution Regulation Act and the Companies Act, that serves to detect and prevent money laundering and the proliferation of the proceeds of crime.
iii Data protection
Data protection in India is primarily governed by the Information Technology Act 2000 and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules 2011 (the IT Rules). These rules define sensitive personal data and information (SPDI)56 and prescribe the manner in which SPDI may be collected, processed, transferred, disclosed or stored. The IT Act provides for damages in the event that the SPDI is not protected and wrongful loss is caused as a result.
The introduction of the IT Rules has affected how lawyers may collect and use SPDI. To the extent that SPDI is collected directly from the data subject, the consent of the data subject is required for the purpose of using the SPDI or transfer of SPDI.
In the context of due diligence and onward sharing of data with other law firms and LPOs, the levels of compliance appear higher in as much as data sharing agreements usually incorporate the requirements of the IT Rules.
However, compliance with the procedures specified in the IT Rules by lawyers generally appear to be relatively lax when it comes to collection and use of data in the course or for the purposes of litigation, especially as damages may be claimed only if wrongful loss can be proved.
iv Other areas of interest
As discussed above, most provisions of the Companies Act 2013 have been notified. There are certain significant changes with respect to the liability of actors such as directors57 and auditors58 under the Companies Act 2013.
For instance, directors of companies facing civil and criminal proceedings are now required to demonstrate that they had ‘acted diligently’ in connection with the subject matter of the dispute in order for them to be excused from personal liability.59 Under the previous jurisprudence, it was acceptable in some circumstances for non-executive and independent directors to take the defence that they were not involved in the day-to-day operations or management of the company.60 It is likely that this defence will no longer be available.
V DOCUMENTS AND THE PROTECTION OF PRIVILEGE
Subject to specified exceptions,61 Section 126 of the Indian Evidence Act, 1872 (the Evidence Act) prohibits an attorney62 from disclosing without his or her client’s express consent any communication made to him or her in the course of and for the purpose of his or her employment as an attorney. Recognising the role of interpreters, clerks and other support staff employed by attorneys, the privilege is extended by Section 127 of the Evidence Act to facts coming into their knowledge in the course of their employment. Section 129 protects a client from being compelled to disclose any confidential communication that has taken place with his or her ‘legal professional adviser’.
As discussed above, an advocate is also prohibited by the BCI Rules from disclosing client communications or advice given by him or her to the client.
A contemporary area of interest around this question is whether the protection of attorney–client communication extends to in-house counsel. The area is not free from doubt. While the Bombay High Court in its judgment in Municipal Corporation of Greater Bombay v. Vijay Metal Works63 took the view that in-house counsel would be covered by privilege, this view was doubted by the same court in Larsen & Toubro Limited v. Prime Displays Private Limited64 in light of the observations of the Supreme Court in Satish Kumar Sharma v. Bar Council of Himachal Pradesh.65
ii Production of documents
Under the CPC, the court can, at any time during the pendency of any suit, order the production (under oath) of such documents, relating to any matter in question in such suit. Further, the Evidence Act provides that a witness summoned to produce a document must, if it is in his or her possession, bring it to court regardless of any objection to its production or admissibility.66
If a party asserts privilege over a document that it is asked to produce and this assertion is disputed by the opposite party or not accepted by court, it is likely that the court would review the claim for privilege and possibly the documents under seal and decide on whether the protection of privilege applies.67
VI ALTERNATIVES TO LITIGATION
i Overview of alternatives to litigation
Since India has permitted foreign investments in various industries and sectors through its new liberal policies, there is a considerable increase in the number of commercial disputes. As a mechanism to deal with its heavy caseload, India has striven to encourage alternative dispute resolution (ADR) mechanisms. In several areas and even at the level of the High Courts and the Supreme Court, the law has allowed for parties to be directed towards ADR.68
Apart from the Arbitration Act, the Supreme Court of India in Salem Bar Association v. Union of India69 recommended the adoption of arbitral rules that were formulated by the Jagannadha Rao Committee. The draft rules made by the Committee were circulated to all the High Courts. The rules provide for the procedure according to which the referral to ADR mechanisms under Section 89 of the CPC can take place, including the stage at which the referral can take place. Guidelines to be observed by the court before making such referral have also been set out.
The arbitration framework, however, has been outlined in the central Arbitration Act, which provides for various matters such as the interpretation of the arbitration agreement, interim measures that can be taken, appointment and termination of arbitrators, place and procedure for the arbitration and grounds for challenges. India is also party to the three main international conventions that govern international arbitrations in different territories and that have been consolidated under the Arbitration Act:
- a the Geneva Protocol on Arbitration Clauses of 1923;
- b the Convention on the Execution of Foreign Awards 1923 (the Geneva Convention); and
- c the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention).
The Arbitration Act is applicable both to domestic and foreign-seated arbitrations. Part I covers the scope of domestic arbitrations, whereas Part II covers foreign-seated arbitrations and the enforcement of foreign awards. Part I defines the scope of what constitutes arbitration,70 the essentials of an arbitration agreement71 and the procedure for determining the validity of such an agreement.72 It is important to note in this regard that there are limited instances and time-bound procedures for challenging the validity of such an agreement and the arbitral tribunal has the power to determine its jurisdiction. Section 5 of the Arbitration Act specifically provides, with respect to Part I, that no judicial authority may intervene in arbitration except in a case where a stipulation to this effect has been made.
The initial years of the implementation of the Arbitration Act saw regressive interpretation that allowed frequent and wide-sweeping judicial intervention from Indian courts. The judgments of the Supreme Court and High Courts have, however, broken the trend and are serving to restore confidence in India as a potential arbitration destination. The Arbitration Amendment Act has also introduced various provisions that promote arbitration by reducing the timelines and costs involved.
Further, although statistically there are more ad hoc arbitrations conducted in India, the use of institutional arbitration is growing gradually. This has to do in part with the reputed arbitration institutions, such as the Singapore International Arbitration Centre, setting up establishments in India. India’s first international arbitration centre, the Mumbai Centre for International Arbitration, was set up in Mumbai in 2016. The High Courts at Delhi, Karnataka, Punjab and Haryana, and Madras, inter alia, have set up arbitration centres with the objective of providing recourse to credible yet affordable arbitration.
The most important component of mediation is that it is the parties to the dispute who decide the terms of settlement. In conciliation on the other hand, the conciliator makes proposals, and formulates and reformulates the terms of settlement. Mediation was first given statutory recognition in the Industrial Disputes Act 1947, where officers appointed under Section 4 of the Act are ‘charged with the duty of mediating in and promoting the settlement of industrial disputes’. Mediation, as a form of dispute resolution has not obtained independent force in India but is mostly institutionally annexed to the courts through Section 89 of the Code of Civil Procedure Code 1809. To that extent, this might compromise the independence of mediations from court-related procedures and interference. Nevertheless, it gives mediations greater legitimacy and compatibility with the formal dispute resolution processes in society.
Another point to be noted is the growing importance of mediation clauses in commercial agreements. Both mediation and consultation form a mandatory aspect of pre-arbitration procedure. It has also been held by courts that mediation and consultation are a substantial part of the agreement and are to be followed prior to any arbitration being initiated.73 In the event that the dispute is referred first to arbitration, the tribunal has the power to render the petition inadmissible on the grounds of the pre-arbitration procedure prescribed by the agreement being violated by the parties.
Akin to the Arbitration Rules 2006, the judges of the Salem bench also recommended the adoption of the Civil Procedure Mediation Rules 2006. These rules govern almost the whole of the mediation process starting from the procedure for appointment of the mediator by both the parties from a panel of mediators who have already been formed for this purpose by the district courts. The qualifications and disqualifications for the panel, the venue of the mediation, the removal of a mediator from the panel, their impartiality and independence, the procedures during the mediation itself, confidentiality, privacy, the settlement agreement and many other aspects are governed by these rules.
It is pertinent to note also the popularity of court-annexed mediation whereby mediation centres have been set up by various High Courts including in Delhi, Chennai and Bangalore.
iv Other forms of ADR
Conciliation has been inserted in Part III of the Arbitration Act and is less formal than arbitration, but more formal than mediation. To the extent that it requires only mutually consenting parties and not a formal written document executed to be able to conciliate,74 it proves an easier form of dispute resolution. The parties can appoint up to three conciliators.75 An important requirement of conciliation proceedings is the independence and impartiality of the conciliator and the attempt to ensure the appointment of a conciliator not having the nationality of either of the parties.76 The conciliators form a medium of communication between the parties inviting them for proceedings and helping them exchange documents and evidence. When the conciliators are of the opinion that elements of a settlement exist, they can draw up the terms of conciliation and, after being signed by the two parties, it shall be final and binding on both to the same extent as an arbitral award.77
VII OUTLOOK and CONCLUSIONS
In India, the judge-to-population ratio is not adequate to meet the huge volume of litigation, effectively adding to the delay in redressal. This phenomenon is often referred to as the ‘docket explosion’. Considering the extensive legal framework and significant backlog of litigation, Indian arbitration has made strong attempts to bring about a dynamic change. However, the ordinances, especially if enacted by Parliament, are expected to reduce many difficulties with regard to timing, cost, finality of awards and interim reliefs faced by both foreign and Indian parties wishing to arbitrate in India.
i Arbitration in India
In a practical scenario, a foreign investor will have the ability to approach a court for protective relief with respect to Indian shares and Indian assets and for other support, such as the recording of evidence in India. On the other hand, the ability to apply to an Indian court for annulment of an award may not be beneficial in all cases. Indian courts in exercise of jurisdiction under Section 34 of the Arbitration Act have previously taken an expansive interpretation of the grounds for challenge of an award. While the Arbitration Amendment Act has attempted to narrow the scope of interpretation around the term ‘public policy’, this remains untested in Indian courts. Therefore, it is possible that an Indian arbitral award may be re-litigated in an Indian court.
ii Arbitration outside India
Unlike the previous regime, where parties to arbitrations seated outside India did not have recourse to Indian courts under Part I of the Arbitration Act, the Arbitration Amendment Act extends certain provisions of Part I (discussed above) to foreign-seated arbitrations, subject to an agreement to the contrary. This amendment may therefore enable a foreign investor who thinks an Indian party may dissipate its assets or transfer or devalue Indian shares, to approach an Indian court for interim relief. Therefore, even if the Indian party does not have a presence or assets at the foreign location where the arbitration is seated, given the extension of certain provisions of Part I of the Arbitration Act by the Arbitration Amendment Act, foreign investors may be able to obtain protective orders in India. This reduces the risks attached to waiting until an award is finally pronounced by the tribunal.
In this regard, an award of a foreign tribunal, if required to be enforced in India, would need to be presented for enforcement under Section 48 of the Arbitration Act. An Indian court can review the foreign award to the limited extent provided under Section 48 of the Arbitration Act to examine whether it may be enforced. As stated above, since the definition of ‘court’ under the Arbitration Act has been amended to mean the jurisdictional High Court for international commercial arbitrations, the proceedings for enforcement of foreign arbitral awards will now lie before the High Court. Additionally, if the subject matter of the dispute resulting in the foreign award is in excess of the ‘specified value’ as defined under the Commercial Courts Act, all such matters will be heard and disposed of by the commercial appellate division of that High Court. The impact of judicial precedents on the arbitration regime in India remains, however, to be seen. It may be too soon to ascertain the prospects for a young country such as India.
1 Zia Mody is the founder and managing partner and Aditya Vikram Bhat is a partner at AZB & Partners. The authors would like to acknowledge Rhea Mathew, who is a senior associate at AZB & Partners, for her assistance.
2 Glanville Williams, Learning the Law (Sweet & Maxwell, 1982) p. 19; Law Commission of India, 54th Report, p. 8.
3 Bharat Barrel and Drum Manufacturing Company Private Limited v. Employees State Insurance Corporation AIR 1972 SC 1935.
4 Section 2(c) of the Commercial Courts Act.
5 Sections 3, 4 and 2(i) of the Commercial Courts Act.
6 See for instance, Groz Beckert Sabool Ltd v. Jupiter General Insurance Co Ltd and Ors AIR 1965 P&H 477 and Sri Ramdas Motor Transport Limited v. Karedla Suryanarayana 110 ComCas 193 (Andhra Pradesh).
7 Article 141 of the Constitution of India.
8 Baradakanta Misra v. Bhimsen Dixit (1973) 1 SCC 446.
9 Pradip J Mehta v. CIT (2008) 14 SCC 283.
10 (2010) 8 SCC 24.
11 Section 7 and Section 9 of the IBC.
12 Section 7 and Section 9 of the IBC.
13 Section 14 of the IBC.
14 Section 13 of the IBC.
15 Section 30 and Section 31 of the IBC.
16 Section 30 and Section 31 of the IBC.
17 Section 60(5) of the IBC.
18 Section 61 of the IBC.
19 Section 62 of the IBC.
20 Sree Metaliks v. SREI Equipment Finance Limited – NCLAT order dated 21 February 2017; Starlog Enterprises Limited v. ICICI Bank Limited, NCLAT 24, May 2017.
21 Mobilox Innovations Pvt. Ltd. v. Kirusa Software (2018) 1 SCC 353.
22 2017 SCC OnLine SC 2025.
23 2017 SCC OnLine SC 1208.
24 2017 SCC OnLine Del 8078.
25 2017 239 DLT 649.
26 (2017) 4 SCC 665.
27 AIR 2016 SC 3974.
28 2017 SCC OnLine Del 11625.
29 Fali S Nariman, ‘India and International Arbitration’, 41 Geo Wash Intl L Rev 367.
30 Schedule I to the Limitation Act 1963.
31 For instance, the Consumer Protection Act 1986 sets out a period of limitation of two years from the date when the cause of action arose for filing a complaint. Or, for instance, under the Arbitration Act an application for setting aside a final award can be made within three months from the date of the award. A court at its discretion taking on record reasons for delay can grant an extension of 30 days.
32 Power Control Appliances v. Sumeet Machines Limited (1994) 2 SCC 448.
33 AP Steel RE Rolling Mill v. State of Kerala (2007) 2 SCC 725.
34 Order VIII, Rule 1 of the CPC.
35 Order VI, Rule 17 of the CPC.
36 Order VII, Rule 14 of the CPC; Order XII Rule 2 of the CPC.
37 Section 15 of the Arbitration Amendment Act.
38 Section 5 of the Arbitration Amendment Act.
39 Section 12 of the IBC.
40 Order I, Rule 8 of the CPC.
41 Section 241 read with Section 244 and Section 245 of the Companies Act 2013. Sections 397, 398 and 399 of the Companies Act 1956.
42 People’s Union for Democratic Rights v. Union of India 1983 SCR (1) 456.
43 Article 22 of the Constitution of India.
44 Section 13 of the Family Courts Act 1984.
45 Section 36 of the Industrial Disputes Act 1947.
46 Section 32 of the Advocates Act 1961.
47 Order V, Rule 25 of the CPC.
48 Section 105 of the CrPC.
49 Section 44A of the CPC.
50 Section 13 of the CPC states:
A foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title except (a) where it has not been pronounced by a Court of competent jurisdiction; (b) where it has not been given on the merits of the case; (c) where it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognise the law of India in cases in which such law is applicable; (d) where the proceedings in which the judgment was obtained are opposed to natural justice; (e) where it has been obtained by fraud; (f) where it sustains a claim founded on a breach of any law in force in India.
51 Section 14 of the CPC states:
The Court shall presume upon the production of any document purporting to be a certified copy of a foreign judgment that such judgment was pronounced by a Court of competent jurisdiction, unless the contrary appears on the record; but such presumption may be displaced by proving want of jurisdiction.
52 Section 2(5) of the CPC defines a ‘foreign court’ as a court situated outside India and not established or continued by the authority of the central government.
53 Section 29 of the CPC.
54 Intertoll Ics Cecons O & M Co Private Limited v. National Highways Authority of India 129 (2006) DLT 146.
55 Re KL Gauba AIR 1954 Bom 478; In Re: Mr ‘G’, A Senior Advocate of The Supreme Court AIR 1954 SC 557.
56 The ‘sensitive personal data or information’ is defined in the IT Rules as personal information that consists of (1) the password; (2) financial information such as bank account, debit or credit card; (3) physical, psychological and mental health condition; (4) sexual orientation; (5) medical records and history; (6) biometric information; (7) any detail relating to the above as provided to the body corporate for providing a service; or (8) any of the information received under each of the heads by the body corporate for processing, or to be stored or processed under a lawful contract.
57 See, for instance, Section 2(60), which includes directors within the definition of ‘officers in default’. Section 166 also lays down duties of directors, which if contravened would result in penal consequences in the form of fines. Section 42(10) stipulates that contravention of the procedure of private placement would impose liability on the directors of the company for a penalty up to 20 million rupees or the amount involved in the offer, whichever is higher. In general, the penal provisions are Sections 447 to 457 of the Companies Act 2013.
58 See, for instance, Section 140, which empowers NCLT to suo moto or on an application, if it is satisfied that an auditor has acted in a fraudulent manner, direct a company to change its auditor. Such auditor will also be liable to penal action under Section 447. Section 147 also penalises auditors for contravention of duties of auditors and auditing standards as set out under the Companies Act 2013. Separately, Section 247 of the Companies Act 2013 imposes penalties on a valuer who has not exercised adequate due diligence.
59 Section 166(3) imposes a specific duty on a director to exercise his or her duties, inter alia, with due and reasonable care. Separately, however, Section 463(1) empowers the court to grant relief if the director has acted honestly and reasonably.
60 Section 149 read with Schedule IV provides for a code of conduct to be followed by independent directors. Specifically, Section 149(12) imposes a liability of independent directors in respect of actions or omissions that had occurred through his or her knowledge or where he or she had not acted diligently.
61 There are two statutory exceptions to the rule of client–attorney privilege. Firstly, any communication made in furtherance of any illegal purpose is not protected and secondly, facts observed by the attorney in the course of his or her employment, showing that any crime or fraud has been committed since the commencement of his or her employment, are not protected.
62 The Evidence Act predates the Advocates Act 1961. The expressions ‘barrister’, ‘attorney’, ‘pleader’ or ‘vakil’ refer to various categories of legal practitioners recognised when the Evidence Act was enacted. The Advocates Act 1961 now recognises a single category of legal practitioner qualified to practise law, and defines them as ‘advocates’.
63 AIR 1982 Bom 6.
64 (2003) 114 CompCas 141 (Bom).
65 (2001) 2 SCC 365.
66 Section 162 of the Indian Evidence Act 1872.
67 See, for instance, the judgment of the Bombay High Court in Larsen & Toubro Limited v. Prime Displays Private Limited (2003) 114 CompCas 141 (Bom).
68 Afcons Infrastructure Limited v. Cherian Varkey Construction (2010) 8 SCC 24.
69 AIR 2005 SC 3353.
70 Section 2(1)(f) of the Arbitration Act.
71 Section 7 of the Arbitration Act.
72 Section 16 of the Arbitration Act.
73 Thermax Limited v. Arasmeta 2008 (1) ALT 788.
74 Section 62 of the Arbitration Act.
75 Section 63 of the Arbitration Act.
76 Section 64(2) of the Arbitration Act.
77 Sections 73 and 74 of the Arbitration Act.