Delay in Arbitration Process: Introspecting the Situation

As the former British PM, William E. Gladstone once stated – “Justice delayed, is justice denied”, that if justice is not served in a timely manner, even when it is, it will not be considered as proper justice. The famous Indian movie dialogue-तारीख पे तारीख is also very popular. Delay in legal process is continuous subject of debate in Indian media, judiciary, government and public. No matter what the reason is it erodes public trust and confidence while seeking justice. The present article is discussing about delay in the arbitration process in India which often cause flight of cases outside India for resolution by arbitration. The Supreme Court of India has recently expressed concerns over delay in execution of arbitral awards, calling it “a very sorry state of affairs”. A bench of Justices M R Shah and B V Nagarathna made the observation while hearing a case in which the arbitral award passed in 1992 remained pending for execution despite passage of more than 30 years. The picture is not gloomy and there is work in progress to check the delays but the article is looking into gaps.

Causes of Delay

Adhoc Arbitration, Judicial Intervention and Parties: In a report published by High level Committee on Institutionalisation of Arbitral Mechanism by Government of India, it was identified Adhoc arbitration, a popular dispute resolution mechanism before institutionalisation commenced is found to be vulnerable to delay tactics. The judicial intervention has been another cause for adding to delay in arbitration. Parties also often delay arbitration proceedings by initiating court proceedings before or during arbitral proceedings, or at the enforcement stage of the arbitral award. The high pendency of litigation before Indian courts means that arbitration-related court proceedings take a long time to be disposed. Although Indian courts are pro-arbitration but at times due to inconsistencies in court ruling it was also a barrier in discouraging delays.

Delay in Passing award: vAmendments have been made to Indian Arbitration Law for its advancement. The excessive delay in passing arbitration awards is one of the factors holding India back from becoming a centre for international arbitration, despite numerous amendments. The delay in the arbitral Awards as explained in the Judgment by the Hon’ble High Court of Delhi in Director General Central Reserve Police Force vs. Fibroplast Marine Pvt. Ltd, debilitate the very purpose of resorting to arbitration for expeditious adjudication of the disputes. An arbitral award was overturned by the Hon’ble High Court of Madras in the case of “Mr. K. Dhanasekar vs. Union of India and Ors.” While setting aside the arbitral award, the court ruled that the “The challenged award was initially made after an excessive and unjustified delay. Additionally, this Court believes that the impugned award is tainted by blatant illegality and at conflict with Indian public policy when taken into consideration on its merits.”

Delay in appointment of arbitrators is another reason in arbitration, In the case of  M/s Shree Vishnu Constructions v The Engineer in Chief, Military Engineering Service & Ors., The Indian Supreme Court has directed the High Courts to decide within six months applications to appoint arbitrators that have been pending for over a year.  While the judgment will help reduce a large backlog but it also highlights how even the appointment of arbitrator can be such a big non-starter.

In the case of State of Orissa v. Gangaram Chhapolia, it was said that “Arbitration of late is being viewed as a guaranteed path to instant riches and affluence,”

One of the main causes of arbitration delays in the Indian context was determined to be judicial interference. An award in the case of “White Industries v. Republic of India”(2011), in which an Australian company successfully demanded compensation from the Indian government in an amount equal to the award because of judicial delay. The aforementioned award raises two issues: first, judicial meddling, and second, arbitration delays. Regarding judicial interference, it has been widely discussed and agreed that, as is the case in many other jurisdictions, the judiciary should limit its involvement in the arbitration. 

Change of Counsel: The Court noted in the case of Harji Engineering Works Pvt. Ltd. versus Bharat Heavy Electricals Ltd. & Anr (2008), the Delhi High Court ruled that an arbitral award issued after an inordinate and unexplained delay is contrary to justice. The Court ruled that delay that is obviously bad and unexplained constitutes undue delay and is thus unjust.  A petition under Section 34 ACA was filed in this case 28 days after the expiry of the three months. Chintels sought condonation of this delay of 28 days in due to plea of change of counsels in Chintels India Limited v. Bhayana Builders Pvt. Limited. Justice Jyoti Singh referred to Union of India v. Popular Construction Company, (2001) 8 SCC 470, and concluded that “a plain reading of Section 34(3) of the Act and its proviso as well as the judgments referred to above, can lead to only one conclusion that the outer limit within which the Court has the power to condone the delay is 120 days. Once the delay in filing the petition exceeds, even one day beyond the outer limit of 120 days, Court has no power to condone the delay. It has been repeatedly emphasized by the Courts that the period of limitation under Section 34(3) of the Act is inelastic, as the intention of the Legislature is to provide a speedy and expeditious mechanism of adjudication in arbitration matters.”

India has a longer history of arbitration then rest of the world yet it has not been able to match the world progress of growth as a seat of arbitration. Delay is one of the popular reason for this. Most of the corporate are the ones using the route of arbitration. The delay not only hampers the growth of India as seat of arbitration but causes investment loss. Successful running of the economy also means efficient dispute resolution mechanism. Setting strict deadlines in the arbitration agreement is one way to prevent a delay in the arbitration proceedings. The delay needs to be effectively addressed at all levels-law, judiciary, parties, government. Lack of creditworthy institutions, lack of governmental and legislative support over the arbitration process, delays in Indian courts, excessive interference and involvement in proceedings, and discouragement of foreign parties all work against the success of institutional modes of arbitration.