SC requires the Ministry of Law and Justice to study the prevailing arbitration system in India
While expressing strong disapproval over the continued absence of statutory clarity on the power of arbitrary tribunals to implement non-signatories to the arbitration agreements, it said what is expressly missing in the Arbitration and Conciliation Act 1996 is still missing in the 2024 Bill, despite a category of decisions by the apex court and various high courts, a Bench comprising a bench of Justices JB Pardiwala and R. Mahadevan said.
“Unfortunately, even the new bill does not take any action as it can improve the position of the law or the litigation power of the arbitral tribunal or join the arbitral tribunal,” it said.
The court pointed out that the Arbitration Act was the first legislative regulation to deal with arbitration that came into effect in 1940.
Fifty years later, the legislation was replaced by the Arbitration and Reconciliation Act of 1996. It has been 30 years since the bill in 1996. Over the years, various amendments were made to the 1996 bill to ensure that the arbitration proceedings were conducted and that they ended quickly.
“To keep arbitration feasible, effective alternative dispute resolution mechanisms, it is necessary to ensure that commercial reality does not transcend such mechanisms. The mechanisms of arbitration must be sufficiently resilient to accommodate the complexity of multi-party and multi-constitutional arrangements without compromising the fundamental principles such as consent and partying automated enterprises.”
The judge added that measures by the court and the arbitral tribunal must respond to emerging business practices and expectations of parties submitted to the bill.
These observations were conducted in a judgment that dismissed the parties' appeal to resort to arbitration litigation as a party, although the arbitration agreement does not comply with the arbitration agreement.
