One of the alternatives to invoking jurisdiction of the court to decide a civil dispute based on a set of rules and regulations by trained judicial officers is the process of Arbitration wherein disputing parties can invite a third party to decide the dispute based on unwritten and uncertain rules that can be set out by the deciding third party, the Arbitrator self. Delay in dispute resolutions through court process is one of the main reasons for emergence of alternative redressal forums. Delay is mostly attributed to the procedural laws that were enacted and fine-tuned to make error-free and abuse free administration of justice. In a desperate bid to strike balance, procedural laws gained strength that to some extend delays the justice delivery system beyond the point of tolerance forcing people to think alternatives such as private court styled as tribunals set up with the consent of two warring groups to decide their fate.

Ironically had this consensus been extended a bit more to work on the dispute, both could have not only settled the dispute but also would have peaceful post-settlement relationships. But that never happens though. The procedural laws are devised for advancing justice and not impeding the same. In Sangram Singh vs Election Tribunal Kotah , The Hon’ble Apex Court observed that a Code of Procedure is designed to facilitate justice and further its ends; not a penal enactment for punishment and penalties. In the case of Sardar Amarjit Singh Kalra (Dead) By Lrs., V. Pramod Gupta (Smt.) (Dead) By Lrs. And Others , a Constitution Bench of the Hon’ble Apex court held thus, "laws of procedure are meant to regulate effectively, assist and aid the object of doing substantial and real justice and not to foreclose even an adjudication on merits of substantial rights of citizen under personal, property and other laws. Procedure has always been viewed as the handmaid of justice and not meant to hamper the cause of justice or sanctify miscarriage of justice." Despite such settled views on procedural laws, Arbitration that need not follow any set procedural laws are considered as better option to knocking the doors of civil courts. Technically, any Tom, Dick, and Harry can be appointed as Arbitrator/s. Since the Arbitration and Conciliation Act 1996 as amended bestows arbitrators with adjudicating power, the arbitrator is supposed to act judicially. There is little or almost no scope to challenge an Arbitration award as the scope of challenge has been narrowed down to handful of grounds set out under section 34 of the Act. Compared to Decree passed in conventional litigation by a civil court after following set of rules and regulations, decided by a judicial officer who is competent as per law, could be challenged in Appeal on unrestricted grounds, an award passed by a private tribunal even if incompetent otherwise, could be challenged only on the limited grounds. The process of litigation sets in motion by sending a notice by an aggrieved to the other.

In reply, the other invariably denies all the allegations including but not limited to the facts known to both the parties. Typical reply to a notice would put the other side on strict proof of all facts. Thanks to the cumbersome procedures set out in Civil Procedure Code, Indian Evidence Act, etc. Litigants have tried and tested trusty worthy methods to prove or disprove their case. The mischievous dishonest denials of facts though in strict principles could be considered perjury, taken very lightly by the courts on most of the occasions. Some judges even consider non-denial of an allegation as admission. Without even tendering proof, some judges go on passing orders as if stating truth by a defendant is like digging own grave. Systems in that sense don’t support honest attempts to admit facts and provide reasoning on the contrary approve stereotype denials and strict proof. Amended CPC provides filing affidavits of evidence in-lieu of examination in chief.

It is worth recalling an incident how affidavit in-leu of evidence was tendered in court. An advocate was tendering an affidavit of evidence in the court. The Court looked at the affidavit and said, it has not been notarized. The lawyer politely replied, “Your Honour, witness is present in the court, he can sign in front of the court.” He then motioned his client to step into the witness box. The judge looked at the lawyer and said, “no, get it notarized”. The lawyer took back the affidavit after a moment of hesitation and asked his junior to get it notarized. Junior hurried somewhere and in about ten minutes came back in the court with a notarized affidavit. All these while the signatory was standing in the witness box, the advocate who identified the signature was also in the court. The court could see with own eyes that person did not sign in front of the attesting notary but gladly accepted it to the file.

Despite such isolated incidents, the litigants can still trust the system because of existence of Sec 340 Cr. PC, as filing false affidavit or false statement before the court is an offense, and the person who filed the same can be prosecuted for the offense of perjury U/s 340 of Cr. P.C for the offenses under section 191,193 to 199,209 of IPC. Section 340 of criminal procedure code reproduced below as; 1. When, upon an application made to it on this behalf or otherwise, any Court is of opinion that it is expedient in the interests of justice that an inquiry should be made into any offense referred to in clause (b) of sub-section (1) of section 195, which appears to have been committed to or in relation to a proceeding in that Court or, as the case may be, in respect of a document produced or given in evidence in a proceeding in that Court, such Court may, after such preliminary inquiry, if any, as it thinks necessary,- a. record a finding to that effect; b. make a complaint thereof in writing; c.

send it to a Magistrate of the first class having jurisdiction; d. take sufficient security for the appearance of the accused before such Magistrate, or if the alleged offense is non-bailable and the Court thinks it necessary so to do, send the accused in custody to such Magistrate; and e. bind over any person to appear and give evidence before such Magistrate. 2. The power conferred on a Court by subsection (1) in respect of an offense may, in any case where that Court has neither made a complaint under sub-section (1) in respect of that offense nor rejected an application for the making of such complaint, be exercised by the Court to which such former Court is subordinate within the meaning of sub-section (4) of section 195. The provisions though not widely used, the existence provides necessary deterrence to prevent filing of false evidence before the court. Unfortunately, it is not available for a litigant under Arbitration proceedings. Lack of such deterrence makes a disputant vulnerable at the hands of unscrupulous litigant. Joining hands with a corrupt Arbitrator, a shrewd litigant can easily abuse the process of arbitration.

An abuser in such cases can not only get a favourable award but also can evade criminal prosecution even if abuse is discovered. An application made under section 340 (1) Cr. PC can be entertained by a Court in relation to proceedings pending before that Court itself in respect of documents produced or given in evidence in the proceedings. Whereas under 340 (2) of Cr. P.C superior Court can exercise powers under certain circumstances in respect of subordinate courts. In Montreaux Resorts Pvt. Ltd. Vs Sonia Khosla & Ors Delhi High Court held that: “An arbitral tribunal appointed by the parties under an arbitration agreement or in case of failure of the parties, it is appointed by the High Court under section 11 of the Arbitration & Conciliation Act or other provisions of the Arbitration & Conciliation. Under no stretch of the imagination, an arbitral tribunal can be considered subordinate to the High Court. Moreover, an arbitral tribunal does not have features of a Court itself. The Hon’ble Apex Court In Afzal & Anr Vs State Of Haryana Held Thus; Section 2 (b) defines "Contempt of Court" to mean any civil or criminal contempt. "Criminal contempt" defined in Section 2 (c) means interference with the administration of justice in any other manner. A false or a misleading or a wrong statement deliberately and wilfully made by a party to the proceedings to obtain a favorable order would prejudice or interfere with the due course of judicial proceedings. Although several judgments underline the importance of taking appropriate measures to curb perjury to maintain the legal sanctity of the court,. The threat of action looms large over a potential abuser of court proceedings providing much needed deterrence. Since threat of prosecution on perjury not available for arbitral proceedings, a dishonest litigant can file false affidavits at will before an Arbitrator to manoeuvre their way out without getting caught either for contempt or for perjury. Banks, financial institutions, and IT companies use arbitration clauses in their agreements to get expedited dispute resolution against defaulters.

Until Perkins Eastman Architects Dpc & Anr V. Hscc (India) Ltd judgment of the Hon’ble Apex Court, those who could dictate terms in a commercial contract used to keep the right of appointing Arbitrator of their choice in the Agreement. Many law firms used to conduct bulk arbitration proceedings by keeping some junior lawyers as salaried arbitrators, mechanically would sign awards made by the advocates for the Claimants. Fortunately, Perkins Eastman's judgment put reasonable restriction to such practice. With the insertion of Act 3 of 2016 to amend section 12 of the Arbitration and Conciliation Act 1996, much needed legal teeth to curb abuse regarding appointment of Arbitrator has been introduced. Still abuse related to filing of false affidavit or tendering fabricated evidence looms large over Arbitration proceedings. When suspicion looms large over the Arbitration proceedings, one wonder what makes an Arbitration award superior to a court Decree?, barring the point that parties decide their fait accompli. In the era of modern jurisprudence where the process of arbitration is undergoing the highest level of judicial scrutiny, how much reliance can be placed on an Arbitrator touching issues that are being discussed by the highest judiciary?. Some important issues in the Arbitration being agitated before the higher courts are worth considering while discussing the point of reliability of Awards. 1. SMS Tea Estates (P) Ltd. V. Chandmari Tea Co. (P) Ltd. The issue of the fate of the arbitration clause in an unstamped or insufficiently stamped document was discussed in this matter. The Hon’ble Court held that whether or not an objection of proper stamping is raised, the Court must look into the issue itself, and if the document is not properly stamped, it should be impounded and dealt with in the manner specified under S.38 of the Stamp Act. 2. Garware Wall Ropes Ltd. V. Coastal Marine Constructions & Engg. Ltd., The introduction of Section 11(6-A) by way of (Amendment) Act, 2015 in Arbitration and Conciliation Act, 1996 does not, in any manner, deal with or get over the basis of the judgment in SMS Tea Estates [SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 and 4 it continues to hold the filed even after the amendment of Section 11(6-A) of the act. This Hon’ble Court further held that a document which is not sufficiently stamped is a document not in “existence”. This Hon’ble Court placed reliance on and adopted the test laid down in the case of United India Insurance Company Ltd. V. Hyundai Engg. & Construction Co. Ltd to hold a distinction between the existence of document as opposed to validity u/s 8, 16 & 45 of the Arbitration Act. 3. Vidya Drolia V. Durga Trading Corpn. Vide this judgment, the Hon’ble Apex court made it clear that the party cannot sue and claim rights based on an unenforceable document and, an arbitration agreement exists only when it is valid and binding. Further, the Court affirmed the ratio laid down in Garware Wall Ropes Ltd. V. Coastal Marine Constructions & Engg. Ltd., and held that the arbitration agreement does not exist if it is illegal or if it does not satisfy the mandate of the legal requirements. 4. NN Global Mercantile Pvt Ltd V Indo Unique Flame Ltd & Ors The Hon’ble Apex Court created a distinction between S.9 and S.11 petitions and disagreed with the ratio of Vidya Drolia. The issue has been now referred to a larger bench. However, In NN Global, Hon’ble Court did not consider the judgment of Firm Ashok Traders V. Gurmukh Das Saluja wherein, it was held that the court can invoke the power under Section 9 Arbitration Act, only if an arbitration agreement “exists”. 5. Arcelor Mittal Nippon Steel India Vs Essar Bulk Terminal Ltd In this case, the Hon’ble Supreme Court held that “Court, while exercising jurisdiction under Sec 9, even at a pre-arbitration stage, cannot usurp the jurisdiction which would, otherwise, be vested in the arbitrator, or the Arbitral Tribunal, yet to be constituted”.

The bar of Sec 9 (3) operates after an Arbitral Tribunal is constituted. There can therefore be no question of usurpation of the jurisdiction of the Arbitral Tribunal under Sec 17 before the Arbitral Tribunal is constituted. The Court is obliged to exercise power under Sec 9 of the Arbitration Act if the Arbitral Tribunal is yet to be constituted. Logically, the ratio of judgments in Firm Ashok Traders and Vidya Drolia should be considered correct as one can’t justify interim relief when no Arbitration proceedings can be held due to defect in the primary document. However, in Widescreen Holdings Private Limited Vs Religare Finvest Limited the Hon’ble Apex Court held thus: “If the original claimant who has initiated the arbitration proceedings relying upon the arbitration clause contained in the loan agreement is not producing the same, it is ultimately for the learned Arbitrator to pass an appropriate order and to take into consideration such a conduct. So far as the impounding of the document is concerned unless and until the same is produced on record before any Court/Tribunal, there is no question of any impounding the same” Obviously, the original documents are produced only at the stage of recording evidence unless otherwise ordered. At the stage of section 11 of the Arbitration and Conciliation Act 1996 no one produces the original to the court. Going by the ratio above unless the Arbitrator orders impounding an unstamped document the proceedings concluded could be set aside only in Appeal u/s 34 of the Arbitration and Conciliation Act 1996. Thus an alternative process commenced for an expedited dispute resolution could get entangled in multiple litigations making the alternative process more cumbersome and expensive compared to the conventional court process. In Vidya Drolia's judgment, the Hon’ble Supreme Court clarified that “to hold that the claims of banks and financial institutions covered under the DRT Act are arbitrable would deprive and deny these institutions of the specific rights including the modes of recovery specified in the DRT Act. Therefore, the claims covered by the DRT Act are non-arbitrable as there is a prohibition against waiver of the jurisdiction of the DRT by necessary implication.

The legislation has overwritten the contractual right to arbitration.” The Hon'ble Court in coming to the above conclusion, by applying the ratio in Transcore V. Union Of India , overruled the judgment of the Full Bench of the Delhi High Court in Hdfc Bank Ltd. V. Satpal Singh Bakshi that held that matters covered under the DRT Act are also arbitrable. But Supreme Court Clarified that the decision in HDFC Bank Ltd, has been referred in M.D. Frozen Foods Exports Private Limited not examined in light of the legal principles relating to non-arbitrability. Thus, the position that emerges from the above is that the financial institution, in addition to the SARFAESI Act, can only invoke the DRT Act for the realization of the remaining amount. It is no longer allowed to invoke arbitration proceedings for recovery as the arbitrability of the disputes falling under the DRT Act has been specifically barred. An arbitrator (other than a person from legal fraternity) most unlikely to even understand complex legal issues. Still, an award passed would get superior recognition to a decree despite suspicion of proper application of current legal provisions. Tendering false and fabricated evidence coupled with suspicion of competency and judicial propriety of an Arbitrator would even make an award more defective than impartial and correct proposition of law. The Arbitrator has to assign merely reasons for arriving at conclusions. Logic or illogic behind such reasoning cannot be questioned in Appeal. Thus a dishonest can always play smart and get a 34 Appeal dismissed upholding a wrongful award. However, In M/S Dyan Technologies Private Limited V/S M/S Crompton Greaves Limited court held that “the award passed by the tribunal must contain proper and adequate reasoning. If the reasoning of the award is improper, it would further divulge a defect in the decision-making process. In case of the lack of reasoning, the efficacy has been provided under Section 34(4) of the Act to antidote defects.

When there is unreasonableness in the award passed by the Tribunal then the same can be challenged under Section 34 of the Act. If the award passed by the tribunal is based on the ground of unintelligible and ambiguous factors, then the same would be equivalent to no reason award. Therefore, under Section 34, the Court has to determine the soundness of an award based on the distinctiveness by providing the reasons in an elaborated manner to avoid complexities involved.” Expecting an Arbitrator to follow the applicable ratios laid down by the courts when anyone can be appointed as an Arbitrator without getting assessed his/her competency or intelligence would be in fact against the spirit of the Act itself. Alternative Dispute Redressal through a common acceptable person itself means a sort friendliness in the process and not stringent hostility. Moreover, even if it casts serious doubts on judicial propriety, forcing an Arbitrator to follow more rules and regulations would delay and could demean the ADR itself. The system placed heavy reliance on the Awards curtailing adequate grounds for appeal, set time lines and trust on disclosure made by the Arbitrators without question. The question however arise as to whether recognition of an arbitral award superior to a court decree perhaps leading to miscarriage of justice?. How one can be sure that an award has passed applying criteria such as fair and impartial scrutiny of facts or is un influenced by fraudulent or fabricated evidence?. what would be the sanctity of such award?. A litigant suffering from an unfaithful/unlawful award would still be vulnerable until such award get set aside by court having jurisdiction in yet another costly litigation. Suffering such pecuniary or mental torture could be the cost one pay for consenting to an Arbitration proceedings. How to guarantee integrity and intelligentsia of an Arbitrator?. Since grounds available for setting aside an Arbitration Award is limited, possibility of upholding an unfaithful award looms large. Some arbitrators even neglect or deliberately ignore set legal principles and pass awards. In a recent arbitration proceedings, objection to unilateral appointment of Arbitrator as per Arbitration Clause akin to the one nullified by Hon’ble Apex Court in Perkins Eastman was rejected by the Arbitrator and went to pass award in favour of financial institution warranting the judgment debtor to go in Appeal against the award. Prima-facie it could be seen as mischievous action by the Arbitrator, but he is most likely to go unscratched throwing the poor suffering litigant to go for a second round of litigation. Thus though an Arbitrator or an unscrupulous litigant accountable for their misdeeds during an Arbitration proceedings, an Award passed even if by abuse is sacrosanct and executable unless set aside. Some of the precedents were Arbitration Awards were set aside by the Courts for not following set principles of laws would give more insights into the unreliability of Arbitration awards. In Sukhbir Singh V/S Hindustan Petroleum Corporation Ltd. the Award challenged on the only ground that the Arbitrator refused to allow cross-examination of the Respondent’s Witness.

The Court held that it is a valid ground for the challenge and set aside the Award. Which makes it clear that the Arbitrator supposed to know basic principles of natural justice. But there is no way to ensure it before appointment. In case of Ssangyong Engineering & Construction Company Limited Vs. Nhai. the Hon’ble Supreme Court concluded that the Award is patently illegal, against the Public Policy and violative of the Principle of Natural Justice, and set aside the Award. This ratio undoubtedly emphasis the point that Arbitrator must possess basic knowledge and quality and must adhere to while rendering award. In the case of Patel Engineering Limited Vs. North Eastern Electric Power Corporation Limited Petition u/s 34 was dismissed. Thereafter in Appeal under Section 37, the Division Bench set aside the Award as well as Judgment of Single Judge under section 34. Finally, the Hon’ble Supreme Court upheld the decision of the Division Bench under Section 37 and maintained that the Award has rightly been set aside on a point of interpretation of contract stating that no prudent man could have interpreted the terms of the contract differently. That would mean that the Arbitrator chosen by the parties must have sufficient understanding of language and subject to interpret a contract. How one can ensure such quality before appointment of an Arbitrator?. In the case of Anvar P.V. Vs. P.K.Basheer. it is held that Section 65B of the Evidence Act applies to any proceedings which involve electronic records whereas it is settled position of law that evidence Act does not apply to Arbitration. However, the judgment reversed the general understanding and emphasises that Arbitrator must possess knowledge of law. In another interesting case Sphere International Vs. Ecopack India Paper Cup Pvt. Ltd. observed that the learned Arbitrator ought to have rendered the award after allowing both the parties to lead evidence. Since the arbitral award dated 10th April 2019 (interim Award) made by the arbitral tribunal directing the petitioner to pay the principal amount based on the alleged admission of liability itself shows patent illegality, the arbitral award dated 29th October 2018 awarding interest thereon by the learned arbitrator in the second arbitral proceedings is also vitiated on that ground and deserves to be set aside. Such errors are bound to happen if unqualified person is appointed to decide a dispute. In another interesting case decided by the Hon’ble Bombay High Court Concrete Additives And Chemicals Pvt Ltd Vs S.N Engineering Services Pvt. Ltd it was held that acceptance of tax invoices required to be held to be relevant for accepting the delivery of the goods and the payment to be made under the invoice. Certainly it cannot be accepted that the unilateral invoices brought about an arbitration agreement between the parties as per section 7 would provide. This judgement read along with the pending issues on stamp duty on arbitration agreement would prove that several past arbitration awards would have rendered unlawful. Thankfully no retrospective effects. The procedural laws are in existence to ensure Independence, Impartiality, Integrity, Propriety, Equality, Competence and Diligence. None of these can be ensured from a private tribunal set up by consensus. No one can claim sainthood overnight upon appointment or elevation. Advising parties to avail alternative remedies could be an admission of inability of the court to administer speedy remedy despite introduction of commercial divisions. At the same time it may also mean to push people to the hands of unscrupulous litigants and dishonest arbitrators, ready to abuse the process taking undue advantage of the lack of adequate deterrent laws. Since a tribunal can even decide own jurisdiction, it is high time we at least rethink on the applicability of section 340 Cr. PC in the Arbitration proceedings to ensure sanctity and propriety, enlarge the scope of challenge to prevent travesty of justice. ************************************