“Our Focus Right Now Is To Streamline The Arbitration Process”
Sanjay Raman Sinha (SRS): Why was the India International Arbitration Centre established? Under your leadership what initiatives have been taken to promote arbitration and strengthen the arbitration infrastructure?
Justice Hemant Gupta (JG): Arbitration is prevailing in India for a long time, but hasn’t got proper importance or recognition. In 1995, an organization was formed by the name of ICADR. The government gave land and Rs 30 crore for building construction, but till 2019, only 55 arbitrations were done. When the government felt that arbitration was not getting proper push, it made the International Arbitration Centre Act, 2019. As the Delhi High Court ran the Delhi International Arbitration Centre, its name was changed to India International Arbitration Centre. The Act aimed at making it an institute of international importance. The Centre was given full autonomy. The members were given tenure security and can be removed by a procedure employed for the removal of a Supreme Court judge. Hence, there is no day-to-day interference by the government in the Centre’s activities. It is considered to be autonomous, independent and aimed at promoting arbitration. For arbitration, a credible, independent and efficient body is necessary. That is the objective behind setting up the Centre. India is trying to achieve the ease of doing business.
There are considerable problems in the arbitration set up. In the 1996 Arbitration and Conciliation Act, chief justices of the Supreme Court and High Courts were empowered to appoint arbitrators. There was a clause in the Arbitration and Conciliation Act wherein the chief justices of the Supreme Court and High Courts had powers to designate an institute to do arbitration. However, no institute could be nominated for a considerable period of time. Therefore, in 2019, an amendment was effected in which, instead of chief justice of the Supreme Court or chief justice of a High Court, the Supreme Court and High Courts, respectively, were also empowered to designate an institute for arbitration. But to my knowledge, there was no designation of institutes by the courts.
Recently, Chief Justice of India DY Chandrachud had designated Delhi International Arbitration Centre to nominate an arbitrator. But examples are far and few. I was in Punjab, Haryana, Patna and Madhya Pradesh High Courts and there were no such designation. The chief justice had empowered me twice to exercise power under Section 11(6), and I exercised power for one year, but institutes were not designated. So, institutions are going to be the backbone of international arbitration.
Worldwide, the trend is that arbitrators are designated by institutes and not by courts, whether it is Singapore International Centre, London International Centre, or for that matter, any international centre. The courts have no expertise to know the calibre and specialization of arbitrators.
The courts have a pool of retired judges from which they choose the arbitrators. Recently, Chief Justice of India DY Chandrachud had appropriately said that there should not be any old boys club, referring to retired judges.
Whatever rules we have formulated regarding empanelment of arbitrators is pending with the government. Per group, the number of arbitrators range from 35 to 75. Thirty Five means young lawyers whom we will empanel. This includes young professionals, engineers and chartered accountants who are willing to don the role of an arbitrator.
SRS: With the opening up of the economy, increasingly more international companies are operating in India. In conflict situations, how much are they opting for India for dispute resolution? How much is our legal framework in tune with international arbitral laws and practices?
JG: India is entering into agreements with foreign companies, both at the private and governmental levels. But, all foreign companies who strive to resolve disputes do not choose India as a dispute seat. They either keep the dispute seat in London, Paris or Singapore. So, there is not much participation of foreign companies in the India-based arbitral process. Now, even Indian firms can mutually decide to have their arbitration in a foreign country like Singapore or London. The companies can say that they will abide by Indian arbitration laws, but will have their seat of arbitration in a foreign country.
The reason is that after the award, it takes too long for implementation. Objections are filed and the hearing is delayed and judgment on objections come in very late. So, if we get an award in India, it will take much time to get it implemented.
There is a famous case of Australian company White Industries’ agreement with Coal India Limited. The award went against Coal India. Objections were filed under Section 34, but it was not decided for a long time. It was contended by White Industries that the Indian system is not effective and that the hearing is taking long. Thereafter, Coal India had to recompense the award.
SRS: Singapore has emerged as the mecca of international arbitration. Singapore has also become the preferred destination of arbitration for Indian companies. What is this Singapore model which has garnered so much acclaim and recognition?
JG: Though the Singapore International Arbitration Centre (SIAC) was established by the Singapore government, it is now an independent body. It was certainly patronized by the government and it grew as a strong independent body. SIAC provides many facilities to foreign companies and arbitrators. Visa and immigration priorities are given to foreign participants. An independent Maxwell Chambers building provides high-end facilities for arbitration. There is also a feeding room for mothers. In Delhi, they made four courtrooms for arbitration. Now, the courtroom type structure is not preferred by arbitrators, so it is lying unused. It is not arbitration friendly. That’s why the Centre could not succeed in its laudable objective.
Sangeeta Sharma (SS): What is the current level of involvement of women in the arbitration process? As Chairperson of the India International Arbitration Centre what are your plans to improve women participation?
JG: Women are equal participants, if not more. But, we have lesser number of women at the top, as compared to men. We have kept the 35 age group for young arbitrators in which both male and female lawyers and professionals are included who are competent. So, we are looking at the active role of women in arbitration. We don’t have any percentage-wise reservation for women. We will take as many women as are available. For training, we have a mandate for an arbitration academy. However, our first priority is to set up the ground rules or roadmap so that we can begin the process. As for infrastructure, we will enter into an agreement with hotels wherein we can hold our arbitration sessions.
SS: We find arbitration practices mostly concentrated in metros. What are your plans to expand the ambit of arbitration activity in non-metro cities?
JG: Our mandate is for a pan-India arbitration activity. Right now, we have arbitration centres in Mumbai, Hyderabad and it is city-centric. Our approach is pan-India. However, we are ready to hold arbitration anywhere in India.
SS: Will India International Arbitration Centre provide arbitrators to parties?
JG: The basic rule of arbitration is that parties’ agreement prevails. If the parties want arbitration from a particular institute, then it will happen from there. If the parties don’t choose, then court order prevails. The parties can also choose us and we can appoint arbitrators.
In the scheme of the Act, Section 28 contains Chamber of Arbitration. Herein we will choose 10 members who are national and international arbitration experts. They will be empanelled and the parties can choose from them. However, if the parties want to choose their own arbitrators that also may be allowed, but the rules will be ours.
SS: What are your plans regarding mediation? Will mediation be encouraged? If arbitration is continuing and parties want to go for mediation will it be allowed?
JG: Yes. Even during the time of arbitration, anytime they can settle. For settlement if the arbitrator can mediate then good enough. We have not decided on the mediators. Our focus right now is to streamline the arbitration process.
SRS: Today glocalization is the buzzword for major sectors. Glocalization essentially means globalization with special reference to local needs. For India to emerge as an international hub of arbitration laws and norms, we need to be attuned to international best practices. How do you see this challenge?
JG: When an Indian company has a dispute with a foreign company, the seat of the dispute is decided on the basis of agreement. In most of the agreements, a foreign country is chosen as the seat of dispute or arbitration. We have to first ensure that India should be the seat of arbitration. For that, we have to streamline the Section 34 procedure. Appeals should be decided fast. After a dispute, glocalisation is difficult. Before a dispute, glocalisation can happen in the sense that foreign companies set up their businesses in India and manufacture products. After a dispute, it is an altogether different scenario.
SRS: Are there any shortcomings in laws which must be removed to attract more companies for arbitration in India?
JG: Public policy is one such clause. It is a debatable issue. The question often arises, what is the fundamental policy of public issue? The law says that an arbitral award may be set aside by the court only if the court finds that the arbitral award is in conflict with the public policy of India. This is a contentious issue.
Laws apart, in our court delay is an inherent part of the system. That is a factor which we have to keep in mind. But in case of international disputes, we can’t take that risk. The courts have to be aware of this fact. As I said earlier, in the White Industries case, because of the delay, the government of India had to suffer and satisfy the award passed in the favour of White Industries.
SRS: Timely and cost-effective hearings are the heart and soul of the arbitration process. The rule provides for a 12-month period after pleadings for the award. However, a recent World Bank report says that in India dispute resolution, on an average, takes 1,445 days and 31% of the claim value is spent on the process. Also in 2020, India ranked 163rd in enforcing contracts. Clearly there are time and cost overruns. In this context, how can the arbitration process be streamlined?
JG: Ad hoc arbitration is the basic cause of time and cost overruns. The court appoints the arbitrator and the arbitrator is free to choose the procedure. The matter has gone in courts too that fees are exorbitantly high.
In one of my experiences in Chandigarh, a three-member tribunal couldn’t frame an issue despite being paid Rs 80 lakh. The Chandigarh administration was one of the parties and it had given an application to terminate the mandate of the arbitrators. I had entertained the plea and then the parties had gone to the Supreme Court. It was settled that the parties would go by a one-member arbitral tribunal. So, these are the issues which the ad hoc arbitration raises.
SRS: National Legal Services Authority (NALSA) and State Legal Services Authority are involved in judicial outreach to dispense justice. You were the executive chairman of the State Legal Services Committee, Chandigarh, between July 2012 and January 2016. So, how much mediation is used to resolve disputes?
JG: Arbitration or settlement of commercial dispute is not the mandate of NALSA, but mediation does happen. In Delhi, mediation is more prevalent and successful in commercial matters. In Punjab, the mediation was centred on family disputes, husband and wife disputes, child custody disputes, etc.
SRS: As a judge of the Punjab and Haryana High Court, you were the member of the Computer Committee for over a decade. The Committee successfully introduced a Case Management System which digitised the Court’s records and introduced an e-filing system. In the Supreme Court also you showed your commitment for computerised judicial system and paperless court. As the e-courts project is currently being implemented, what are your views on it?
JG: E-court is a very important initiative taken up by the Supreme Court with financial help from the government of India. It had participating contributions from the states. Some states have contributed, some haven’t. Punjab Haryana had fortunately contributed and our demands were always met.
When we gave the tender for digitization, we expected that it would be around 10 crore pages and we had given a timeframe of five years. But, the company finished the entire digitization within four years. We also got our current records digitized in the remaining one year. We could then assure download of records/orders and soft copies of orders. Now, because of digitization, we can make available an order copy on the same day.
SRS: First generation lawyers usually find it difficult to get a foothold in the judiciary. You are a third-generation lawyer. Your grandfather was a prominent civil lawyer and your father Justice Jitendra Vir Gupta retired as chief justice of the Punjab and Haryana High Court. It is said that you declined to start practice in your father’s official bungalow. You got an office space elsewhere. Why did you choose to make things difficult for yourself?
JG: A lawyer makes his own norms as to whether to use his father’s position or not. I had decided that I will not use my father’s position. I decided that I will independently develop relationships with the bar. God has been kind to me that I can do that. I had a good equation with my seniors. Maybe they knew my father, but they patronized me and that gave me the benefit.
SRS: Recently, Union Law Minister Kiren Rijiju said that India can become an international arbitration hub provided the executive and the judiciary work together. With constant conflicts between the government and the judiciary, it seems a challenging task.
JG: Arbitration practices do not depend on the government. The laws created by the government create the ecosystem, then it is an independent field. We also maintain our independent status. The government does appoint the judges, but it stops at that. As for the news that the judiciary is in conflict with the government, it is speculative and the debate may go on the social media.
SRS: How do you see the future of arbitration in India? How successful can it become?
JG: In all the worldwide arbitration institutes, India-related arbitration is maximum. If we are able to provide better services than them, if our services become efficient and our courts could decide faster on the post-award verdicts, then India will overtake all other institutes.