School of Law

University of Petroleum and Energy Studies

Dehradun

2019

ASSIGNMENT
EXTENT OF JUDICIAL INTERVENTION IN ARBITRATION

DHIRAJ SINGH
ROLL NO: 37

B.A, LL.B. (Hons.) With Specialization in ENERGY LAW

2015-2020
  The Principle of Non-intervention by the Courts

 The principle that the courts shall not interfere in arbitral proceedings is a fundamental theme
underlying the Act. Indeed the Act contemplates of only three situations where judicial authority
may intervene in arbitral proceedings. These are:

By and large the Indian courts have well understood the spirit and intent behind the principle of
non-intervention. Thus, the respondent obtained an anti-arbitration injunction from the High
Court on the ground that the pledge of shares, which was sought to be enforced through
arbitration, would enable the claimants to take control of a telecom company which (as it was a
foreign company) would be contrary to Indian law. On appeal, the Supreme Court rejected this
contention, stating that this was a plea on merits and thus within the sole jurisdiction of the
arbitrators. Interestingly, the court not only vacated the injunction, it also restrained the
respondent from moving any further applications ‘which would have the effect of interfering
with the continuance and conclusion of the arbitration proceedings’1. 

however, Hon’ble Supreme Court refused to stay the court action on the ground that the subject
matter of the arbitration agreement was not the same as the subject matter of the civil suit.
Besides, the parties in the two actions were not identical. The court held that the entire subject
matter of the suit should be the subject matter of the arbitration agreement in order for the
mandatory provisions of Sec. 8 to be applied.2

INTERVENTION OF INDIAN COURTS IN ARBITRATION

PROCEEDINGS
1
CDC Financial Services (Mauritius) Ltd vs. BPL Communications, 2005(2) RAJ 43 (SC).
2
Sukanaya Holdings vs. Jayesh Pandya, (2003) 5 SCC 531.
Section 5 of the Act expressly lays down that no judicial authority will interfere with any
arbitration proceeding except as provided in Part I of the Act. The section opens with a clause
"Notwithstanding anything contained in any other law for the time being in force" which
excludes other statutes from operation in so far as they relate to intervention by any judicial
authority in such proceedings. Set out below is the scope of interim relief and enforcement of
arbitral awards by Indian Courts under the Act.

1. SCOPE OF INDIAN COURTS JURISDICTION TO GRANT INTERIM RELIEF

Section 9 of the Act empowers judicial courts to grant interim relief. These reliefs can be
claimed at any time before, or during arbitral proceedings or at any time after the making of the
arbitral award but before such an award is enforced. Set out below are the circumstances under
which such interim relief can be granted by judicial courts.

i. for the appointment of a guardian for a minor or person of unsound mind for the purposes
of arbitral proceedings; or

ii. for an interim measure or protection in respect of any of the following matters, namely:-

a. the preservation, interim custody or sale of any goods which are the subject-matter
of the arbitration agreement;

b. securing the amount in dispute in the arbitration;

c. the detention, preservation or inspection of any property or thing which is the

subject-matter of the dispute in arbitration, or as to which any question may arise
therein and authorising for any of the aforesaid purposes any person to enter upon
any land or building in the possession of any party or authorising any samples to
be taken or any observation to be made, or experiment to be tried, which may be
necessary or expedient for the purpose of obtaining full information or evidence;

d. interim injunction or the appointment of a receiver;

e. such other interim measure of protection as may appear to the Court to be just and
convenient.

It is critical to note that initially courts in India interpreted section 9 so as to apply to both
International Commercial Arbitration and Domestic Arbitration. the Supreme Court decided that
the courts had the power to grant interim relief in International Commercial Arbitration along
with Domestic Arbitrations and that section 9 did not just apply to Indian arbitrations but could
also apply to foreign arbitrations unless the arbitration agreement expressly excludes the
application section 9 of the Act.3 However this was subsequently overturned,wherein the Apex
Court held that Part I (Section 2-43) would only apply to Domestic Arbitrations and not
International Commercial Arbitration.4 In Bharat Aluminium, the Supreme Court restricted the
application of the judgment to disputes arising from arbitration agreements that are executed
after the date of the judgment (6 September 2012).

2. APPOINTING THE ARBITRATORS

 Intervention in appointing the arbitrators – Sec11 prescribes for the procedure of appointment
of arbitrator by the parties. When the parties/arbitrators/any person including an institution fails
to agree/act/perform any function entrusted to them or any procedure they are expected to agree
upon under sub clauses (4), (5) or (6), then a party may request Chief Justice or any person or any
institution designated by him to take the necessary measure. This is the first instance where the
act envisages recourse to a court in relation to arbitration proceedings. The difference between
model law and Indian law is that the model law envisages the court to appoint the arbitrator
whereas the Indian law requires the Chief Justice of the High court in national and Chief Justice
of India in case International Commercial Arbitration to appoint the arbitrator. As explained by
the Supreme Court, the idea behind this is to ensure that nomination for the arbitrator is made by
a high judicial designate who would appoint a competent, independent and qualified arbitrator in
good faith. But judicial authority appointing the arbitrator can lead to conflicting decisions. On
this, the court has held that the function of appointment of arbitrator is not judicial but
administrative in nature.5 Even if any ‘doubt’ arises in the mind of the Chief Justice or any person
so designated by him as to the existence or validity of the arbitration agreement, same has to be
referred to the arbitral tribunal to resolve but the judiciary is not to intervene with the arbitration.

 Challenging the appointment of the arbitrator – Under sec12, an arbitrator can be challenged
under only two conditions:
            
(a) Circumstances exist to indicate that justifiable doubt exists as to the impartiality or
independence of the arbitrator; or  
(b) The arbitrator so appointed is not aptly qualified.

Further, subject to the parties’ agreement that, it is the arbitral tribunal, which shall decide over
the challenge. In case, the challenge fails, the arbitration proceedings shall continue and the
arbitral tribunal will render award. 

3
Bhatia International v. Bulk Trading S.A. and Anr (2002) 4 SCC 105.
4
Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.(Civil Appeal No. 7019 of 2005).
5
Konkan Rly. Corp v. Rani Construction Pvt. Ltd. Appeal (civil) 5880-5889 of 1997.
 3. ENFORCEMENT OF ARBITRAL AWARDS

The Act also distinguishes between Domestic Awards and Foreign Awards in respect to
enforcement of such Awards.

i. Domestic Arbitration

Section 36 of the Act deals with enforcement of Domestic Arbitral Awards which states "Where
the time for making an application to set aside the arbitral award under award under section
34 has expired, or such application having been made, it has been refused, the award shall be
enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were
a decree of the Court."

As per the 1996 Act, arbitral award includes final and interim awards passed by the arbitrator.
Both interim as well as final awards can be challenged under S. 34. The Supreme Court of India
confirmed the powers of the courts to entertain S.34 applications while dealing with the case
McDermott International Inc. Vs. Burn Standards Co. Ltd. 6, The Only recourse against any
arbitral awards as per the act is by filing an application for setting aside arbitral awards under S.
34.

Section 34 which deals with recourse against Domestic Arbitral Awards provides an exhaustive
list of the circumstances under which such Awards can be set aside by Judicial Courts . Section
34(2) lays down that an arbitral award may be set aside by the Court only if

a. The party making such an application for setting it aside furnishes proof that –

 A party was under some incapacity.

 The arbitration agreement was not valid under law

 The applicant was not given proper notice of the appointment of the
arbitrator or of the arbitral proceedings or was otherwise unable to present
his case or

 The award deals with a dispute not contemplated by or not falling within the
terms of the submission , or it contains decision on matters beyond the scope
of the submission to arbitration. However, if the decision on matters
submitted can be separated from those not so submitted only that part
dealing with matters not submitted may be set aside.

 The composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties, unless such agreement was in
conflict with the mandatory provision of part I of the Act; or
6
(2006) 11 SCC 181
 b. The Court finds that –

 The subject-matter of the dispute is not capable of settlement by arbitration

under the law for the time being in force; or

 The arbitral award is in conflict with the public policy of India. The
explanation clarifies that without prejudice to the generality of expression,
an award is said to be in conflict with the public policy of India if its making
was induced or affected by fraud or corruption or it was in violation of the
obligations of confidentiality of matters relating to conciliation
proceedings(Section 75) or the bar on admissibility of evidence of
conciliation proceedings(Section 81).

Based on the aforesaid it is well established, that judicial courts can only set aside a domestic
arbitral award only if it fulfills the grounds stated in Section 34. The Act expressly denies the
court the authority to decide the case on its merits if the Arbitrator(s) has already looked into it.