Section 34 of Arbitration Act and timely disposal: Two roads that never meet

As on September 1, 2023, there are 2,106 petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996 pending before the Delhi High Court. The disposal of Section 34 petitions is on average taking 1,327 days or roughly more than 3.5 years. The average number of hearings for final disposal of a Section 34 petition is 23.

The disposal of enforcement petitions under Section 36 does not fare any better. There are 878 enforcement petitions pending, with an average final disposal taking 1,022 days or more than 2.5 years. The average number of hearings for final disposal being 23.

The Arbitration Act mandates in no uncertain terms that Section 34 petitions shall be expeditiously disposed of with an outer timeline of one year. Hence, we as lawyers and members of the arbitration space in India have undoubtedly failed.

I have chosen the Delhi High Court as a sample, as it is considered one of the most proactive commercial courts. However, it is ridden with the same malady that most other commercial courts ail from.

Diagnosis and possible cures

All awards are challenged on merits and courts while stating that they are not exercising appellate jurisdiction vis-à-vis an arbitral award, do act like appellate courts - reappreciating evidence and facts.

There are no practice directions or guidelines issued by the Delhi High Court apropos drafting and adjudication of Section 34 petitions. Counsel challenge each claim awarded and counter-claim not awarded on the usual ground of the award being in conflict with public policy, and post the 2016 amendment, the award being vitiated by patent illegality.

While there is a specific diktat that the Court shall not venture into the merits of a dispute with respect to a challenge predicated on the contravention of the fundamental policy of Indian law, courts have clearly not conformed to this rule.

Lawyers cleverly attempt to fit their grounds of challenge to meet the criteria laid down in Section 34, as explained by the Supreme Court in Associated Builders and Ssanyong.

The Supreme Court has attempted to narrow down the scope of the grounds in Section 34(2) and 34(2A) of the Act and has reiterated that a challenge must not involve a review on the merits or reappreciation of evidence. It has simultaneously held that an award may be set aside if there is “a finding based on no evidence, or if an arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or ignores vital evidence in arriving at its decision”.

Therefore, it is natural for counsel and courts to reappreciate evidence and enter into the merits of the dispute. Assuming there is a challenge to an award on the ground that the award has ignored vital evidence, the court will be forced to assess the vitality of the evidence, which is alleged to have been ignored.

The Supreme Court or the legislature ought to clarify and explain the context of “patent illegality” in Associated Builders and Ssanyong, in the context of how a court dealing with a challenge under Section 34(2A) -specifically an issue of evidence - cannot re-appreciate or enter into the merits of the dispute.

Till such time as there is no substantive solution, the Delhi High Court must direct counsel to restrict their grounds and specifically point out the ground on which they are seeking setting aside of the award. Adopting standards of pleadings similar to a special leave petition (SLP) before the Supreme Court consisting of a brief synopsis, list of dates and specific grounds may make the adjudication less cumbersome. If an award is challenged on the ground that vital evidence was ignored, the party must restrict the pleading to that specific piece of evidence and its impact on the award.

Long and cumbersome hearings as a result of entering into merits of a dispute

There are no guidelines or practice directions that regulate oral arguments for any matter in the Delhi High Court, or as a matter of fact, even before the Supreme Court. The Delhi High Court has rebuked counsel for over-arguing matters, but has unfortunately failed to lay down any standards/timelines for oral arguments. Specifically in the context of Section 34 petitions, there is an urgent need for such guidelines.

Every court dealing with a Section 34 petition ordinarily directs both the parties to file written submissions, and in some cases, a convenience compilation of documents. The endeavour of the court is to reduce time spent on oral arguments. However, in some cases where notice has been issued, the direction to file written submissions and a convenience compilation comes only after a few hearings, which is yet again a waste of judicial time. Alternatively, it could be directed that in matters where notice has been issued, the parties should mandatorily file their written submissions and a convenience compilation without a specific order to that effect and the matter shall be placed before the joint registrars on shorter dates, who would ensure the same is complied with.

Which brings me to another grave issue which must be flagged – there is no requirement for formal replies and rejoinders to Section 34 petitions. Empty formalities of completion of pleadings take up multiple dates, with parties usually seeking time to complete pleadings. Once notice has been issued, the respondent would be able to address his response to the petition by way of written submissions and documents part of the convenience compilation prepared jointly by the parties.

Time spent in adjudicating applications for condonation of delay

The strict mandate of filing Section 34 petitions within 90 days of the award (delay upto 30 days thereafter) has been scrupulously followed by the High Court. However, in most cases where there is a delay, the respondent, on advance service takes an objection regarding limitation. What follows is an unnecessary process of the Court seeking the details of filing and re-filing of the petition from the registry. Thereafter, there are a series of hearings specifically on the issue of limitation and lengthy judgments adjudicating the same.

The process may be shortened by placing the matter before the joint registrars of the Court to assess the dates of filing and re-filing with a report submitted by the registry, prior to the first listing before the Court. Since the law on non-est filings has now been settled by a division bench of the Delhi High Court in ONGC v. JV of SREE & MEIL, there exists no grey area. Once the matter is listed before the Court, it would have the benefit of the factual assessment of the joint registrar as well as the report of the registry to decide the application for delay on the very first day of listing.

Case categorisation and listing

The Delhi High Court implements an alphabetical listing of cases. Illustratively, in the context of commercial courts that deal with commercial suits, non-commercial suits, miscellaneous petitions and miscellaneous arbitration petitions, Section 34 petitions, having a nomenclature of OMP(Comm), would be listed towards the end of the causelist. Subject to exception, and yet again as a consequence of exercising jurisdiction akin to appellate courts, commercial courts are not able to devote time to dispose of Section 34 petitions.

There is no matter of doubt that Section 34 petitions should not be given special treatment in terms of listing. However, a scientific approach of listing may be adopted by the Court. While the larger issue of specialist-based rosters continues to be debated, the endeavour on the administrative side should be to list Section 34 petitions before judges who are known to be faster decision-makers. This would meet the objective of the Act.

The fallout - execution petitions continue to languish

In view of the practice directions issued by the High Court, execution petitions and Section 34 petitions are ordinarily to be listed before the same judge on the same day. Since the Court is not able to proceed with Section 34 petitions, execution petitions are also not adjudicated. The issue is reinforced by the effect of the alphabetical listing as enforcement petitions have a nomenclature of OMP(Enf)(Comm), which comes towards the end of the causelist.

Therefore, the High Court on the administrative side must ensure that enforcement petitions are listed higher on the list and on the judicial side. De hors adjudication of the Section 34 petition, courts must finally dispose of enforcement petitions.

There can be no panacea for all our ills and I don’t remotely suggest that I have one, but the Court does the option of imposing costs. It must start imposing substantial costs whilst dismissing Section 34 petitions, which may deter counsel from filing petitions which are on the face of it, a waste of judicial time.

There is an impending need for the Supreme Court to clarify it’s interpretation on patent illegality, so that commercial courts do not exercise appellate jurisdiction and the mandate and objective of the Act is fulfilled.

Amer Vaid is a practicing advocate based in Delhi.