A Study of Appeals under Arbitration and Conciliation Act, 1996

By: Arryan Mohanty, Symbiosis Law School, Nagpur

Published on April 25, 2022 at 13:21 IST

Introduction

ADR (Alternative Dispute Resolution) is a process for resolving conflicts outside of the courtroom. Despite the fact that it is still in its infancy, this mechanism has gained more traction than litigation.

ADR’s global success can be ascribed to its effectiveness and time-saving method.

Due to the large number of pending cases in the Indian judiciary, justice must be delivered in the shortest possible period.

ADR, on the other hand, could cut down on this time by giving disagreeing parties more room to negotiate.

Arbitration, mediation, conciliation, and negotiation are some of the ADR options available.

In many places of the world, however, a specific form is employed to resolve conflicts.

The process of ADR first emerged in underdeveloped countries such as India and the African subcontinents, where the cost of a legal suit could be prohibitive.

As a result, most parties prefer to settle their disputes outside of court.

The Arbitration & Conciliation Act, 1996 governs arbitration proceedings in India, and it is based on the UNCITRAL Model Arbitration Rules, 1976, and the UNCITRAL Model Law on International Commercial Arbitration.

The UNCITRAL Model Rules have been updated to reflect current needs and to speed up the resolution of disputes.

The Indian Arbitration Act intended to modernize and standardize the law in order to align it with worldwide arbitration rules.

The quick resolution of disputes is one of the stated goals of the Arbitration and Conciliation Act of 1996.

In order to achieve this goal of expeditious resolution of arbitral disputes, Parliament amended the Arbitration Act, 1996 thrice, in 2016, 2019, and in 2021 adding provisions such as an outer time limit for the conclusion of arbitral proceedings, the commencement of arbitral proceedings within 90 days of the date of the interim order issued by the court, and a limited judicial inquiry and role at the stage of arbitrator appointment, among other things.

Provisions of Appeal

Section 37 of the Arbitration and Conciliation Act of 1996 includes a provision for appeal. The following orders of the Court are subject to appeal:

Whether or not to grant any of the interim measures requested under Section 9 of the Act.
Under Section 34 of the Act, an arbitral award may be set aside or refused to be set aside.
The Amendment Act expanded the scope of the Act’s appeals. The arbitral tribunal’s order awarding shall also be appealable to a court.
Accepting the plea related to in section 16 sub-section (2) or (3), which may be challenging the arbitral tribunal’s jurisdiction or scope of competence.
Making a decision on whether or not to grant interim measures under Section 17.

No second appeal shall lie from an order entered in an appeal under section 37(3), and nothing in the section changes or takes away any right to appeal to the Supreme Court.

This basically means that if the first appeal is quashed, a second appeal challenging the same order cannot be filed in the same court under the appellate jurisdiction provisions of the Arbitration Act.

However, Section 37 does not preclude an appeal to the Supreme Court to challenge an order of any other appellate court.

It’s worth noting, however, that this clause makes no mention of a time restriction for such appeals.

Furthermore, it is unclear whether or not the Limitation Act of 1963 will apply to the Arbitration Act. Hence, the limitation time for appeals under section 37 is unclear.

The Supreme Court’s Appellate Jurisdiction is addressed in Part II of the Supreme Court Rules 2013.

The topic categories for which an appeal to the Supreme Court may be brought are listed in Part IV of the Supreme Court Rules.

Arbitration cases are covered by Rule 11 of the Supreme Court’s Appellate Division.

Apart from that, Part I of the Supreme Court Rules states that memorandums of compromise or arbitral awards that finally result in a court decree are considered part of the Supreme Court record and are required to be archived in perpetuity.

Determination of Limitation Period of 120 days

Position in High Courts

Bombay High said in Oil and Natural Gas Corporation Ltd. v. Jagson International Ltd^[1]. (2005), “…despite providing an appeal under Section 37, the Legislature has opted not to prescribe any time of limitation”.

In light of this, the Court will not be justified, in my opinion, in importing the term of limitation given by Section 34 for submitting an application and applying it to an appeal filed under Section 37.

So, there is no provision in the Limitation Act dictating the time limit for submitting an appeal under Section 37,” and it was concluded that the time restriction for appeals under Section 34 would not apply to appeals under Section 37.

It was also determined that the Limitation Act of 1963 did not contain a provision establishing a time limit for filing an appeal under Section 37.

In Oil & Natural Gas Corporation Ltd v. M/s Dynamic Corporation^[2], the Bombay High Court reconsidered the Jagson decision (2012).

The Court stated that the decision in the Jagson case was faulty because it was based on an incorrect assumption and that Section 29 of the Limitation Act, 1963, and Section 43 of the Arbitration & Conciliation Act, 1996 were not taken into account while reaching the decision.

In this case, the appeal was brought against a High Court ruling that set aside an arbitral award under Section 34. The Court decided that the appeals under Section 37 would be subject to Section 117 of the Limitation Act, and that the limitation period would be 30 days.

According to Section 116(a) of the Limitation Act, the time of limitation for filing an appeal against a judgement granting or refusing interim relief is 90 days from the date of the decree, as determined by the Rajasthan High Court in Shivraj Singh v. Shri Ram Transport Finance Co Ltd (2013).

Therefore, if the appeals are brought after the limitation period has passed, they will be time-barred.

In North Eastern Electric Power Corporation Ltd v. M/s Patel Unity Joint Venture^[3] (PUJV) (2017), the Meghalaya High Court found that appeals under Article 37 of the Arbitration Act are covered by clause (a) of Article 116 of the Schedule to the Limitation Act.

As a result, we can observe that different High Courts have issued varied limitation periods for appeals in their judgements, and there is no universal limitation term for appeals under Section 37 of the Arbitration Act.

As a result, there is still some ambiguity surrounding appeals under Section 37 of the Arbitration Act.

Position in the Supreme Court

The Supreme Court, in M/s Consolidated Engineering Enterprises v. The Principal Secretary (Irrigation Department) & Ors.^[4], ruled that Article 116 of the Limitation Act, which provided a 90-day limitation period for appeals to the High Court under the Code of Civil Procedure 1908, would regulate the terms of limitation for appeals under Section 37 of the Arbitration & Conciliation Act, 1996, unless expressly excluded by the Arbitration Act.

The Supreme Court decided the 120-day limitation period under Section 37 of the Act by comparing it to the limitation time granted under Section 34 of the Act in the case of Union of India versus M/s Varindera Const. Ltd^[5] (2018).

“Because a Section 34 application must be filed within a maximum of 120 days, including the grace period of 30 days,” the Court reasoned, “an appeal filed from the same action under Section 37 should be covered by the same drill.”

In M/s N.V. International v. The State of Assam & Ors^[6] (2019), the Supreme Court upheld the 120-day limitation period for appeals under Section 37 of the Act, saying, “…We may only add that what we have done in the aforesaid judgement is to add to the period of 90 days, which is provided by statute for filing of an appeal under Section 37 of the Arbitration Act”, following Lakshmeshwar Prasad Shukul^[7], a grace period of 30 days under Section 5 of the Limitation Act, as well as having regard to the object of speedy resolution of all arbitral disputes, which was foremost in the minds of the 1996 Act’s framers, and which has been strengthened from time to time by amendments made thereto.

Therefore, the current delay, which exceeds 120 days, cannot be excused.”

Is the 120 days limitation period a settled position?

There was no uniformity in the limitation period even after the N.V. International case. The decision in the N.V. International case, which had some flaws, resulted in the High Courts taking opposing views.

These were the flaws in the M/s N.V. International case:

Will the verdict be applicable to intra-court appeals as well?
Will it also cover appeals from commercial court orders made under the Arbitration Act’s Sections 9 and 34?

The Supreme Court’s decision in Executive Engineer v. Borse Brothers Engineers & Contractors Pvt. Ltd.^[8] (2021) overruled the N.V. International, fixed its flaws, and clarified the issue of the limitation period under section 37 of the Arbitration Act.

The following is the time limit for submitting an appeal, according to the Court:

If the claim amount is less than three lakh rupees, the Arbitration & Conciliation Act, 1996 will be read with Article 116 of the Limitation Act, 1963, and the period of limitation will be 90 days.
In the case of an intra-court appeal where the claim amount is less than three lakh rupees, the Arbitration & Conciliation Act, 1996 shall be read in conjunction with Article 117 of the Limitation Act, 1963, and the limitation period will be 30 days.
If the claim amount exceeds three lakh rupees, the Arbitration & Conciliation Act, 1996 will be read with Section 13(1A) of the Commercial Courts Act, 2015, and the period of limitation will be 60 days in both inter-court and intra-court appeals.

As a result, it is apparent that the time restriction for filing an appeal will be determined by the type of dispute (commercial or non-commercial).

The Court also stated that delays would be tolerated only in extraordinary circumstances when the parties operated honestly and in good faith rather than negligently.

In addition, the Court stated that this decision would only be applied prospectively.

Because of this decision, the Supreme Court has definitively clarified the law on the appeals limitation time under Section 37 of the Arbitration Act.

Jurisdiction of Arbitration Tribunals

It is incorrect to assert that an arbitral tribunal has statutory authority. To meet the needs of the parties, the tribunal establishes its jurisdiction.

The arbitral tribunal’s jurisdiction is primarily determined by the arbitral agreement.

The core concept of party autonomy is that when two parties have the ability to resolve their conflicts on their own, they also have the ability to demonstrate that right to any third party, allowing that squabble to be resolved overtly.

So, it is critical to consider a well-drafted agreement because it gives the tribunal complete authority to decide on subjects pertaining to the jurisdiction.

In Section 17 of the Arbitration and Conciliation Act of 1996, the jurisdiction to determine particular matters is clearly mentioned.

Appointment of a guardian for a person of unsound mind or minor age during the arbitration process Safety/Security/ Confinement/ temporary injunction of the arbitration’s subject matter.

In some situations, the arbitral tribunal’s competence is conditional on obtaining answers to inquiries.

Important Cases Related to Appeals under Arbitration & Conciliation Act, 1996

Centrorade Minerals Vs. Hindustan Copper^[9]

A three-judge Supreme Court bench recently ruled that if the contract’s arbitration clause called for a two-tiered arbitration, the first in India, which may be challenged by the unsatisfied party through a second arbitration in London.

Such a clause would not be in violation of the country’s laws, and hence would be enforceable.

In such circumstances, it appears that the scope of appeal is broader than in court cases. This indicates that by including a language like this in the arbitration agreement, the scope of an arbitral appeal can be expanded.

MMTC Limited Vs. Anglo American Metallurgical Coal^[10]

The Court concluded that, under the basic principles of Section 37, the Court should refrain from interfering with the Arbitral Tribunal’s conclusions of inference, even if they are sustained in Section 34 proceedings and are not supported by a simple, objective, and straightforward interpretation of the documents.

The Court would have no hesitation in interfering with or correcting such a decision, particularly if it goes to the heart of the problem.

Hyder Consulting Ltd. Vs. Governor, State of Orissa^[11]

There was no express provision in the Act of 1940 dealing with the arbitrator’s competence to grant interest. Furthermore, it is well established that the Supreme Court’s decision on interest awards granted under the 1940 Act does not apply to arbitrations performed under the Arbitration Act.

Alka Chandewar Vs. Shamshul Ishrar Khan^[12]

The contention was that if orders made under Section 17 were enforceable, the consequence of the provision would be rendered ineffectual, and that Section 9 and Section 17 were alternative remedies accessible to the parties before the Tribunal.

In light of sub-section (2) to Section 17 added by the Amendment Act 2015, the Supreme Court dismissed the argument, stating that such orders would now be deemed to be orders of the Court for all purposes and would be enforceable under the Civil Procedure Code 1908 in the same manner as if they were orders of the Court.

Conclusion

The Supreme Court’s decision in the Borse Brothers case clarified the ambiguity surrounding Section 37 appeals.

Finally, the Court stated, “Given the object sought to be achieved under both the Arbitration Act and the Commercial Courts Act, that is, the speedy resolution of disputes, the expression “sufficient cause” is not elastic enough to cover long delays beyond the period provided by the appeal provision itself,” while emphasizing the intent of the Arbitration Act and the Commercial Courts Act.

Given the backlog of cases, India needs to strengthen out-of-court settlements. Furthermore, these agreements provide a number of advantages in terms of litigation.

Their effectiveness has been questioned multiple times, despite the fact that they are still considered a supplementary option for resolving conflicts. As a result, the awards made as a result of these proceedings are void.

Arbitration is a form of alternative conflict resolution that resembles litigation. Even binding arbitration is increasingly seen as part of the legal process. When it comes to enforcement, however, arbitral rulings are called into question.

The Arbitration and Conciliation Act has been updated multiple times to reflect current circumstances.

The principal Act of 1996 has recently been amended to bring it up to date with international arbitration law. By virtue of the amending Act of 2021, two substantial revisions were introduced, raising various issues and questions.

The recent amendment to the Act added that if the court finds prima facie evidence of fraud and corruption in an arbitral award, the court will issue an unconditional stay over that award, thus limiting arbitral awards.

When dealing with such concerns, this can lead to a slew of other issues. The removal of the Eighth Schedule, on the other hand, provides a wide range of opportunities for international arbitrators to exercise arbitration in India under UNCITRAL Model Laws.

References

blog.ipleaders

appeal-under-section-37-of-the-arbitration-and-conciliation-act-1996-to-condone-or-not-to-condone-delay-beyond-120-days-that-was-the-question/

how-can-you-appeal-after-the-decision-of-the-arbitrator#post-11995-endnote-1

trials-appeals-compensation/880718/10-landmark-judgments-on-arbitration-by-supreme-court-of-india-in-the-year-2019

arbitration-and-conciliation-amendment-act/