Judicial Outlook of the Miscellaneous Provisions under the Arbitration Regime
The Arbitration and Conciliation Act, 1996 (“Act”) was enacted and ratified with the objective to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards and to define the law relating to conciliation and all allied matters. The present situation in the arbitration and mediation scenario is a healthy one and therefore it needs a stimulus for its betterment and improvement. This research article strives to present a detailed and thorough study or in other words an assessment of the ‘Miscellaneous’ provisions of the Act as it provides us with the position of the law and how the judicial institutions have understood it in their interpretation and have subsequent to this passed vital judgements while upholding the validity of these provisions. Although it has been over the years put to efficient use, there has been a lack of importance being given to the miscellaneous provisions which have been laid down under Chapter X of the legislation as they don’t in the perceptiveness of intellectuals, researchers and students reflect a substantial part of the act. These provisions are the foundation of an arbitration proceeding as they command the movement of the parties by restricting them to do something in a certain manner with regard to the monetary aspects of the proceedings, various contingencies that occur over a period of time and how they affect the result of the court, procedures that have to be implemented in insolvency situations, jurisdictional objections and connected issues and at last the limitation period.
JUDICIAL INTERPRETATIONS OF THE MISCELLANEOUS PROVISIONS OF THE ACT:
A. Section 38: Deposits
1. This section enumerates that the Arbitral Tribunal (“Tribunal”) may fix the amount of deposit or supplementary deposit to be payable in equal shares by the parties as an advance for the costs referred in Section 31(8) of the Act which in its expectation will be incurred in respect of the claim submitted to it. It also contains a proviso which says that if a counter-claim other than the claim has been submitted to the tribunal, the tribunal can fix separate amount of deposit for the claim and counter-claim and another proviso talks about failure of either party or one of the parties to pay the share of the deposit. On termination of the Arbitral Proceedings (“Proceedings”), out of all the deposits received by the tribunal any unexpended balance will be repaid to the parties.
2. The Judicial establishments on three occasions have upheld the provisions of Section 38 as follows:
a) The Bombay High Court while considering a petition against an interim award where a counter-claim filed by the petitioner was rejected by the tribunal on the ground that the petitioner had not deposited the fees of the tribunal and the respondent refused to pay the share of fees and expenses the petitioner for the counter-claim observed that a tribunal is permitted a separate fee for the claim and the counter claim that have been submitted before it. Therefore on this observation the petition was dismissed on the ground that it was devoid of any merits and the petitioner was directed by the court to pay the requisite amount.
b) The Delhi High Court had also with regard to this provision held in a matter before it as follows:
“……A reading of Section 38 would show that the Tribunal may fix separate amounts of deposit for the claims and counter claims. Though the deposit is payable in equal shares by the parties, on the failure of a party to pay its share of the deposit, the other party may pay that share and in case of failure of the other party to pay the aforesaid share in respect of the claims or the counter claims, the tribunal may suspend or terminate the arbitration proceedings in respect of such claims or counter claims…….” 
c) The Delhi High Court has in another case observed that the proviso to Section 38(1) will only apply when the tribunal has not fixed the fees in terms of the fourth schedule of the Act. The tribunal is free to fix the schedule of fee in an ad-hoc arbitration which is conducted without the interference of the court.
B. Section 39: Lien on arbitral award and deposits as to costs
- Under this section the tribunal will have a lien on the arbitral award (“Award”) for any unpaid costs of the arbitration. If the tribunal in a situation refuses to deliver an award except on payment of costs, the court may after an application that can be filed before it by any party, pass an order directing the tribunal to deliver the award and out of the money paid to the court, the tribunal will receive such amount that the court deems reasonable. Let us trace the discussion over the years.
- The Punjab and Haryana High Court while dealing with an appeal where the fees and cost of the arbitration was not filed by the petitioner but respondent paid his share and subsequently filed an application for the enforcement of the award. The tribunal can refuse to deliver its award if the costs of the arbitrator has not been paid After hearing both the parties the court came to the decision that there is no dispute with regard to lien on the award predicted that the assessment of costs incurred during the proceedings is well within the scope of the arbitrator and they can be recovered. The court further added that the arbitrator has a right to not deliver the award except on the payment of all the expenses and therefore the petition was dismissed as it was deemed to be not maintainable.
- The Bombay High Court in a subsequent judgement observed that the first clause of Section 39 does make a provision where the tribunal can have a lien on the award for any unpaid costs of arbitration. But this does not override the power of the arbitrator under section 38(2) to terminate the proceedings with regard to a claim or counter-claim for failure to pay the advance towards deposits of costs, the court further observed. One cannot have an expectation that an arbitrator will continue to adjudicate on a claim or counter-claim without the mandatory fees and expenses being deposited to the tribunal. It was pointed out by the court that a party which does not comply with an order will make all efforts to delay the proceedings and therefore it can lead to an abuse of the arbitral process.
C. Section 40: Arbitration agreement not to be discharged by death of party thereto
Under this provision no arbitration agreement can be discharged by the death of any party, but can be enforceable to by or against the legal representative of the deceased. Also the mandate given by the arbitrator shall not be terminated on the death of any party which appointed him. Nothing in this provision will affect the operation of any law where any right of the deceased is extinguished. A holistic view has been taken by the courts for this provision:
- In Ravi Prakash Goel vs. Chandra Prakash Goel and Ors the Supreme Court held that from a plain reading of Section 40 of the Act it can be ascertained that there is no ambiguity in the provision. The Apex court also observed that a person who has the right to represent the estate of deceased person occupies the status of a legal person. In this case Section 2(1) (g) of the Partnership Act, 1932 was explained by the court as it had a direct nexus with section 40 of the Act. Under the definition, Legal Representative means ‘a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased person , and, where a party acts in a representative character, the person on whom the estate develops on the death of the party so acting.’ The definition of became necessary according to the court, because such representatives are bound by and also entitled to enforce an arbitration agreement. It was also observed that:
“…..Persons claiming under the rights of a deceased person are the personal representative of the deceased party and they have the right to enforce the award and are also bound by it. The arbitration agreement is enforceable by or against the legal representative of a deceased party provided the right to sue in respect of the cause of action survives…..”
- Upholding a similar view the Allahabad High Court held that if an award can be enforced against the legal representatives who are not parties to the arbitral agreement, conversely the legal representatives of a partner who is party to the arbitral agreement can also invoke the arbitral clause to the extent of the right of the deceased party.
D. Section 41: Provisions in case of Insolvency
The provisions with respect to a party who becomes an insolvent and is subject to a term in a contract that can be enforced by or against him if any dispute arises from it are contained in this section. It also talks about a situation where if a person is adjudged as an insolvent and he has before the initiation of insolvency proceedings became a party to an arbitration agreement and any matter linked or associated with that agreement which is necessary to be decided, then if the first part of the section does not apply to such a condition, then any party or receiver can apply to the judicial authority for an order that it be submitted to arbitration in consonance with the agreement and pass a suitable order. The following contains the analysis of the courts:
- The Supreme Court had in a noteworthy verdict pronounced that the directive of the Insolvency and Bankruptcy Code, 2016 (“Code”) says that the moment an insolvency petition is admitted, the moratorium under section 14(1) (a) of the code prohibits the institution of pending suits or proceedings against the corporate debtors. Therefore proceedings started after the moratorium is non est in law. The term “proceedings” under Section 14(1)(a) of the Code was analysed and it was held that it will include ‘all legal proceedings’. A plain reading of the provision makes it clear that it includes all legal proceedings of any nature. This discussion also took place in another case.
- The National Company Law Tribunal had also in another landmark judgement held that an award against the corporate debtor will be treated as a default as has been stipulated under the code, and that the pendency of proceedings for execution of an award or a judgment and decree does not bar an operational creditor from preferring any petition under the code.
C. Section 42: Jurisdiction
Any application with regard to any dispute arising from an arbitration agreement has been submitted before a court, then that court solely will have jurisdiction over the proceedings and all subsequent applications connected to the proceedings and the agreement will be made in only that court and no another. The courts have the following views on this provision:
- The Supreme Court has held that Section 42 does not apply to appeals under Section 37 of the Act and execution applications by applying the same reasoning. The Bench observed that an Execution application is not a proceeding and also not a subsequent application arising out of the agreement and the proceedings within the meaning of Section 42 of the Act. The proceedings come to an end when the time for filing an application to set aside an award expires. This was also subsequently held in another case where the same reasoning was given. It was also observed by the Supreme Court that any application under Section 8 or Section 11 of the Act submitted to the Chief Justice of a High Court or his designate would be considered to be outside the scope of Section 42 as they are not considered as a “court” under Part-I of the Act.
- In a recent finding the Calcutta High Court opined that once a petition or application under Part-I of the Act has been made to a court and there is no objection as to the jurisdiction, then only that court will entertain all subsequent application arising from the proceedings and the arbitration agreement. The High Court also held that Section 42 covers both the arbitration agreement and the arbitral reference.
F. Section 43: Limitations
- The Limitation Act, 1963 applies to all the proceedings as it applies to other courts and the proceedings will be deemed to have started from the date as laid down under Section 21 of the Act. The court can extend the period of any claim to be submitted in future with regard to an arbitration agreement if it will cause undue hardship. The period of setting aside of an award which if confirmed by the court will exclude the time between the beginning of the proceedings and the date of the order of the court as the limitation period.
- The Supreme Court has held in terms of Section 43 of the Act that:
“…..The purpose of Section 43 of Arbitration and Conciliation Act, 1996 is to make the provisions of Limitation Act applicable to arbitrations. As already noticed, the Limitation Act applies only to proceedings in court, and but for the express provision in section 43, the Limitation Act would not have applied to arbitration, as Arbitrators are Private Tribunals and not courts. Section 43 of the act, apart from making the provisions of Limitation Act, 1963 applicable to arbitrations, reiterates that Limitation Act applies to proceedings in court. Therefore, the provisions of Limitation Act, 1963 apply to all proceedings under the AC Act, both in court and in arbitration, except to the extent expressly excluded by the provisions of the Arbitration and Conciliation Act, 1996……”
- In Murlidharan vs. M/S. Venkataraman and Company the Madras High Court has held that:
“…..An application for extension of time under Section 43(3) can be made even after the time mentioned in agreement to refer the case for arbitration has ended however such application should be forwarded only before any step is taken to begin the arbitration proceedings and not thereafter…..”
4. The Supreme Court has also held that:
“…..The history and scheme of the 1996 Act support the conclusion that the time-limit prescribed under Section 34 to challenge an award is absolute and unextendible by Court under Section 5 of the Limitation Act…..”
After having a look at the provisions which form a significant part of the act, we can with without a doubt in our mind say that they are an important part of the proceedings as they provide security to the tribunals along with the parties and also in the determination of the award as it has a direct nexus or bearing on the successful, efficient and speedy delivery of justice to the parties concerned. We can say the above because of the simple fact that the objective of the act was to come forward and become an alternative system of dispute settlement/resolution which could reduce the time and resources that would have been employed if one would have adopted the court litigation procedure. These provisions and the act when considered in a consolidated form bring a sense of confidence and trust in its proficient and competent use as they are emerging as the primary option in the dispute resolution process because of the achievements that it has garnered over the years since its inception. In the recent times a trend has been observed that whenever two parties want to enter into a contractual relationship and agreement, they tend to insert the arbitration, conciliation or mediation clause in these contracts in case of disputes arising between them which would be governed and settled by referring the disputes to arbitration. In the ever evolving world with fast paced transactional and international disputes, alternative dispute resolution is the ideal solution to all the outstanding issues that crop up and can be dealt upon accordingly. Therefore these provisions although minuscule in nature, are an integral part of the act and cannot be overlooked or ignored.
 Arbitration and Conciliation Act 1996, The Preamble.
Arbitration and Conciliation Act 1996 §38.
 Gammon India Ltd. Vs. Trenchless Engineering Services (P) Ltd, 2014 ABR 389
 Chandok Machineries Vs. S.N. Sunderson and Co., 2017 DHC 140
 Delhi State Industrial Infrastructure Development Corporation Ltd. (DSIIDC) Vs. Bawana Infra Development (P) Ltd., 2018 (4) ArbLR 168 (Delhi)
 Arbitration and Conciliation Act 1996 §39.
 Punjab State Warehousing Corporation Vs. Shiv Shankar Rice Mills and Ors, (2007) 4 PLR 399.
 Rehmat Ali Baig Vs. Minocher M. Deboo, 2012 (4) ARBLR 410 (BOM).
 Arbitration and Conciliation Act 1996 § 40.
 Ravi Prakash Goel Vs. Chandra Prakash Goel, (2008) 13 SCC 667.
 Parwati Devi and Ors. Vs. Kesarwani and Company, 2011 SCC OnLine All 786.
 Arbitration and Conciliation Act 1996 § 41.
 Alchemist Asset Reconstruction Company Ltd. Vs. Hotel Gaudavan Pvt. Ltd., AIR 2017 SC 5124.
 Power Grid Corporation Of India Ltd. Vs. Jyoti Structures Ltd.,  142 CLA 285 (Del.).
 M/s. Annapurna Infrastructure Pvt. Ltd. and Anr. Vs. M/s. SORIL Infra Resources Ltd., Company Appeal (AT) (Insolvency) No. 32 of 2017.
 Arbitration and Conciliation Act 1996 § 42.
 Pandey & Co. Builders (P) Ltd. Vs. State of Bihar and Another, (2007) 1 SCC 467.
 Daelim Industrial Co. Ltd. Vs. Numaligarh Refinery Ltd., (2009) 159 DLT 579.
 State of West Bengal Vs. Associated Contractors, (2015) 1 SCC 32.
 Dalim Kumar Chakraborty Vs. Gouri Biswas, APO No. 33 of 2018, Order Dated 16-02-2018.
 Arbitration and Conciliation Act 1996 § 43.
 Consolidated Engg. Enterprises and Ors. Vs. Principal Secy. Irrigation Deptt. and Ors., (2008) 7 SCC 169.
 Dr. Murlidharan Vs. M/S. Venkataraman and Company, AIR Mad. 40 DB 2009.
 Union of India Vs. Popular Construction Company, AIR 2001 SC 4010.
The Opinions expressed in this article are that of the author(s).The facts and opinions expressed here do not reflect the views of http://www.ibclaw.in.
The opinions expressed herein are those of the contributors (which shall, for these purposes, include guests) in their personal capacity and do not, in any way or manner, reflect the views of the organizations that the contributors are presently associated with, or that have previously employed or retained the contributors. Postings on this blog are for informational purposes only. Nothing herein shall be deemed or construed to constitute legal or investment advice. Discussions on, or arising out of this, blog between contributors and other persons shall not create any attorney-client relationship.