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Today'sPaperOPINION
Transformingcommercialdisputeresolution
AnirudhKrishnan
TheenactmentofanActtoamendtheArbitrationandConciliationActandpassingtheCommercialDivisionofHighCourtsBillwill
changethefaceofcommercialdisputeresolution

HANDINHAND:Inpursuanceofitseaseofdoingbusinesspropaganda,thegovernmentissettointroducethetwobillsinParliament.
PictureshowsPrimeMinisterNarendraModiwithIndianbusinessmeninGujarat.PHOTO:AP

Mostjudicialsystemsundergoperiodsofhighpendencyanddelayindispensationofjusticewhichareusuallyfollowed
byarealisationfromwithinandgiverisetowidescalelegislativereforms.WhileitwastheLordWoolfReportandthe
ChiefJusticesWorkingCommitteeReportthatspurredsuchachangeintheU.K.andHongKong,theJusticeA.P.
ShahledLawCommissionReportsnumbered246and253couldpotentiallybewhattheIndiancommercialdispute
resolutionsystemhasbeenwaitingfor.ThesereportssuggestwidescalereformsbysuggestingtheenactmentofanAct
toamendtheArbitrationandConciliationAct,1996,andaCommercialDivisionandCommercialAppellateDivision
ofHighCourtsandtheCommercialCourtsAct(CommercialDivisionsBill/Act),respectively.
Inpursuanceofitseaseofdoingbusinesspropagandaandanoverallattempttoattractinvestors,theBharatiya
JanataPartygovernmentissettointroducethesetwobillsinthebudgetsessionofParliament.Ifpassedand
implemented,theseenactmentsarelikelytochangethefaceofcommercialdisputeresolutioninIndia.
CommercialDivisionsBill/Act
TheCommercialDivisionsActintroducesacommercialdivisionineveryhighcourthavingoriginaljurisdiction(i.e.
Madras,Delhi,Bombay,CalcuttaandHimachalPradesh)andcommercialcourtsinsuchdistricts,astheCentral
government,inconsultationwiththeconcernedStategovernmentandChiefJusticeoftheconcernedHighCourt,may
establish.ThesespecialisedcourtswillresolveallcommercialdisputesofvalueofoverRs.1crore.Simultaneously,
thejurisdictionallimitsofallhighcourtswhichhaveoriginalsidejurisdictionwouldbeincreasedtoRs.1croreacross
thecountry.Thesedisputeswillbeheardbyjudgeswhonotonlyhaveabackgroundincommerciallawsbutwillalso
receivespecialtraininginthisarea.
TheActwillhavewideramificationsasthetermcommercialiswidelydefinedandincludesdisputesrangingfrom
intellectualpropertyrightsdisputestodisputesarisingoutofjointventureagreementsandproceedingsinaidof
arbitrations.TheBillprovidesforafasttrackmechanismwithstringenttimelines.Andforthefirsttimeitintroduces
intheIndiansystemtheconceptofacasemanagementconferencewhereinaproceduralorderispassedpriortotrial,
settingoutatimetable(includingtimeboundoralargumentssupplementedwithwrittenarguments)whichhastobe
strictlyadheredto.Thecourtisgivenwidepowerstoensurethatstrictcomplianceisenforced.Moreover,thecourt,
too,ismandatedtodeliveritsjudgmentwithinaperiodof90days.
TheBilladoptsthecarrotandstickapproachandjudiciouslyofferscarrotsforcomplianceandprovidescourtsthe
powertowieldthestickincaseofdelaybyoneoftheparties.TheBillalsomakesmandatorythecostfollowthe
eventregime,whereby,asageneralrule,thepartyagainstwhomtheorder/judgmentispassedbearstheentirecostof
litigation,subjecttoexceptionswheredelayingparties,evenifsuccessful,havetobearpartofthecost.
WhileanearlierversionofthisbillhadbeenintroducedduringtheUnitedProgressiveAllianceregime,theBill,inthe
wordsoftheLawCommission,didnotmakeanefforttofundamentallyalterthelitigationcultureinIndiaandthat
thechangessuggestedwerecosmeticinnature.TheRajyaSabhahadraisedcertainvalidconcernsincludingthe
unworkabilityofsomeoftheproceduralmeasuressuggested.TheLawCommissionhascarefullyscrutinisedthese
objectionsandintroducedprocedureswhichhavebeeninternationallytested(morespecificallyintheU.K.and
Singapore).
Amendments
Anattemptisalsobeingmadetoencouragearbitration,whichisaformofalternativedisputeresolutionwherein
privateparties,usuallybyconsent,appointanarbitraltribunaltoadjudicateonthedisputeoutsideoftheregularcourt
system.Oneofthemajorproblemsthathaveplaguedthissystemisexcessivejudicialinterventionandtheproposed
amendmentsareprimarilyaimedatreducingsuchinterventions.
Today,interventionsbycourtshappenatallstagesprearbitrationproceedingsforappointmentofatribunaland
postarbitrationchallengestotheaward.Theproposedamendmentsrestrictthescopeofprearbitrationreviewtoa
primafaciereviewoftheexistenceofanarbitrationagreementandnarrowdownthescopeofthechallengeofan
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3/7/2015

TransformingcommercialdisputeresolutionTheHindu

awardbyprohibitingananalysisonmerits.Specifically,thescopeofchallengetoaforeignawardhasbeengreatly
narrowed.
Perhapsthebiggestshortfallofthepresentarbitrationregimeisthefactthatasuccessfulpartyinarbitrationisnotina
positiontoenjoythefruitsofitssuccessformanyyearsasthemerefilingofapetitionchallengingitsvalidityrenders
thearbitralawardunenforceable.TheLawCommissionhassuggestedamendmentstoSection36oftheActanda
losingpartywillhenceforthhavetosatisfyaCourtastowhyitisafitcaseforthearbitralawardtobestayedandthe
CourtwillhavepowerstoorderthelosingpartytodepositpartoftheawardsumintoCourt.
Anothermajorareawheretheproposedamendmentswouldmakeasignificantdifferenceisinrelationtoneutralityof
thearbitraltribunalwhichisconstituted.TheSupremeCourtofIndia,inIndianOilv.RajaTransport,hasdeclareda
tribunalappointedbyapublicsectorundertakingcomprisingitsownemployeestobevalidsubjecttocertainnarrowly
carvedoutexceptions.ThisdecisionissoughttobelegislativelyoverruledbyincorporatingtheInternationalBar
AssociationguidelinesonconflictofinterestasascheduletotheAct.
Further,theproposedamendmentssuggestamorerealisticinterestandcostsregime,permittingcompoundinterestto
beawardedandincorporatingthecostsfollowtheeventruleasthebaseruleinrelationtoarbitration.
TheinvestmenttreatyarbitraltribunalinWhiteIndustriesv.UnionofIndiahasheldthattheIndiansystemdoesnot
provideeffectivemeansforaforeigninvestortoenforceitsrights.Thebillsproposedtobeintroducedinthebudget
sessionnotonlyexpeditecommercialdisputeresolutionbutalsoeffectivelydisincentiviseinitiationoffrivolous
proceedings.
However,enactingalawisonlypartofthesolutionimplementingiteffectivelybyselectingtherightpersonnelisas
important.EffectiveimplementationoftheLordWoolfreportresultedineradicatingfrivolouscommerciallitigationin
theU.K.statisticssuggestthatthenumberoflitigationsinitiatedfellbyaround80percent.Commercialdispute
resolutioninourcountryisatitscrossroadsandtheenactmentoftheselawsandtheirimplementationoverthenext
coupleofyearswoulddeterminewhetherinIndiathemaximUbijusibiremedium,i.e.everyrighthasaremedy,
translatesintosomethingmorethanadejureprinciple.
(AnirudhKrishnan,anadvocateoftheMadrasHighCourt,hasbeenaconsultanttotheLawCommissionfor
draftingthereportsmentionedherein.Email:anirudh@aklawchambers.com)
Oneofthemajorproblemsthathaveplaguedthesystemofarbitrationisexcessivejudicial
intervention,whichtheproposedamendmentsaimatreducing

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