The Rights of the Deceased: Moral Rights Incidental to Copyright Law
- Vanshika Agrawal
- 2024-04-25
The Arbitration and Conciliation Act, 1996 (“the Act”) doesn’t explicitly exclude any specific category of disputes from arbitrability. Usually, a dispute can be refer to as arbitration if, the arbitration agreement covers the dispute, the parties intend to refer the dispute to arbitration, and pertinently if the dispute is capable of being adjudicate and settle by arbitration. Then the question arises what is the standard for a dispute ‘capable’ of being arbitrated. The lack of legal certainty on the standard has given rise to many contentious debates surrounding ‘subject-matter arbitrability’. The term ‘arbitrability’ signifies that disputes capable of being ‘adjudicated beyond public fora, through a private tribunal chosen by parties’[1].
Section 34(2)(b)(i) of the Act sets out the significance of objective arbitrability which is in parallel Article 34(2)(b)(i)- ‘Application for setting aside as exclusive recourse against arbitral award’ of the UNCITRAL Model Law. According to these provisions, awards contemplating a non-arbitrable subject matter would be set aside. Section 5 of the Act prohibits judicial intervention in matters governed by the Act except explicitly provided. Such an exception is enumerate in Section 8 of the Act which provide that when an action is bring before a ‘Judicial Authority’ in a dispute, which is the subject of an arbitration agreement, the party could be refer to arbitration base on the exception stipulate in this provision.
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That is, a burden is form on the Judicial Authority to refer to arbitration based on the terms of the Agreement. This means that they also have the authority to refuse to refer the parties to arbitration under Section 8 of the Act in some matters. In Booz Allen and Hamilton v. SBI Home Finance Limited and others[2], set out a “Test of arbitrability”. Broadly the test was rights in ‘rem’ are to be adjudicat by courts and public tribunals and
that rights in ‘personal to be amenable to arbitration. The court cautioned against a strict implementation of this ‘rem – personam’ division by clarifying that
‘this is not however a rigid or inflexible rule’. As could be identified, test suffers lacunae, as observed by the court in Rakesh Kumar Malhotra[3], where the parties to the suit attempted to circumvent the standard by intentionally bringing the purview of the case outside right in personam and as a right in rem to ensure that it falls outside the arbitrator’s jurisdiction. Over the years the courts have categorized few matters as non-arbitral disputes[4].
a) ensure that matters sensitive to the public interest would be debated and resolved before national courts b)responsibility to promote arbitration as a ‘vibrant system of dispute resolution for parties who independently chose arbitration over litigation[5]. In this article, we would enquire if matters related to fraudulent activities could be subject to arbitration.
In Bharat Rasiklal[6] the court held that, when fraudulent activity is of such a nature that it vitiates the arbitration agreement in itself, it is the Court’s discretion to decide on the validity of such an arbitration agreement by asserting its jurisdiction to determine the issue of fraud. Therefore, in a significant number of disputes where this issue has arisen for consideration, courts have had conflicting decisions.
The Supreme Court in, N. Radhakrishnan v. Maestro Engineers & Ors[7]observed that issues of public consequences and an issue of fraud are not arbitrable. Ostensibly, the court followed the decision of the three-judge bench of the Apex Court in Abdul Qadir v. Madhav Prabhakar[8]. In Swiss Timings Ltd. vs. Commonwealth Games, 2010 Organizing Committee[9]observed that the decision in N. Radhakrishnan case is ‘per incuriam’ and is not good law. In a similar vein in 2016, the court in Penguin GmbH v. Nandan Petrochem Ltd[10] appointed an arbitrator and referred the dispute to arbitration, even though issues of fraud were involved.
As a result, had to make a distinction between a ‘serious issue of fraud’ and a ‘mere allegation of fraud’ while deciding arbitrability. If on the face of it, if the allegations could virtually constitute an offense of criminal fraud, which is complex in nature where the adjudication would require elaborate and voluminous evidence as a result, only a Court would be proper and appropriate, Arbitral Tribunals’ jurisdictions wouldn’t be asserted.
Recently, the Supreme Court in A. Ayyasamy vs. A. Paramasivam & Ors[11], observed that unless the ‘fraud in question is of a serious and complicated nature, the jurisdiction of the arbitrator could not be ousted. Building upon the above observation, the Court in Rashid Raza[12] laid down a two-pronged test to determine ‘complex fraud’: (a) Does the plea of fraud permeate the entire contract and particularly, the agreement of arbitration, by making it void? (b) Whether the allegations of fraud affect the internal affairs of the parties intense by having no implication in the public domain? As a result, a mere allegation of ‘fraud simplicity may not become a ground to oust the jurisdiction of the arbitral tribunal.
Through past experiences and past claims in court, parties set up a plea of ‘complex fraud’ to wriggle out of the arbitration agreement. This makes it necessary for the court to set out a strict and meticulous inquiry into the allegations of fraud. This points out the lacunae in the decision in Ayyasamy too, as the court failed in setting out laying ‘affirmative principles’ on what would be simple or serious allegations of fraud which could become the basis for a certain and unambiguous litmus test analysis?
The 246th Laws Commission report took notice of this legal uncertainty too[13], and the report noted that the commission believes that it is important to set this entire controversy to rest and make issues of fraud expressly arbitrable’. It recommend that Subsection 7 be add to section 16 of the Act to be read as ‘the arbitral tribunal shall have the power to make an award or give a ruling notwithstanding that the dispute before it involves a serious question of law, complicate
questions of fact or allegations of fraud, corruption, etc’. Though this conclusively sets out that in issues related to fraud it the court’s discretion to recognize
Over the years there has been growing acceptance of Arbitration as a popular and efficient redressal mode, especially in the international circuit. At a time when India is growing into a socio-economic powerhouse, with the boom in the
inflow of investments and capital, there is a need for effective, autonomous, and efficient adjudication of disputes, specifically
in the commercial sphere. The seeds favoring such growth of arbitration were sown in the case of Booz Allen itself. But with much such legal uncertainty and ambiguity surrounding the Act and
its implementation, the courts are met at a crossroads of determining an arbitration-friendly regime.
[1] Booz Allen and Hamilton v. SBI Home Finance Limited and others, (2011) 5 SCC 532
[2] (2011) 5 SCC 532
[3] Rakesh Kumar Malhotra v. Rajinder Kumar Malhotra (2015) 2 CompLJ 288 (Bom)
[4] Article 34 (b) (i) UNCITRAL Model Law on International Commercial Arbitration (1985)
[5] YVES L. FORTIER, ARBITRABILITY OF DISPUTES, 269, ( Gerald Aksen, Karl-Heinz Böckstiegel, Paolo Michele Patocchi &
Anne Marie Whitesell ed., Global Reflections on International Law, Commerce and
Dispute Resolution, ICC Publishing, 2005).
[6] Bharat Rasiklal v. Gautam Rasiklal (2012) 2 SCC 144
[7] (2010)1 SCC 72
[8] AIR 1962 SC 406
[9] (2014) 6 SCC 677
[10] (2016) 10 SCC 422
[11](2016) 10 SCC 386
[12] Rashid Raza v. Sadaf Akhtar Civil Appeal no. 7005 of 2019
[13]Report No. 246: Amendments to the Arbitration and Conciliation Act 1996, Law Commission of India, (Jan. 4, 2021,https://lawcommissionofindia.nic.in/reports/report246.pdf)
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