Bombay High Court Chief Justice DK Upadhyay calls for stricter oversight over arbitrators' conduct
Bombay High Court Chief Justice DK Upadhyay recently urged the government and legal fraternity to ensure stricter regulation to govern arbitrators' conduct during arbitral proceedings.
The Chief Justice flagged serious issues relating to arbitrators operating in far-flung areas, often disadvantaging weaker parties by conducting unfair and biased proceedings.
In this regard, he highlighted the challenges faced by vulnerable parties like farmers.
He cited his experience as a judge in Uttar Pradesh where farmers are often lured into purchasing agricultural equipment with loans from non-banking financial institutions (NBFCs), only to find themselves facing arbitration proceedings in distant locations like Chennai.
"Most of the time, such misfortune comes to the farmer on account of unlawfully conducted arbitration proceedings by the arbitrator at far-off places or because of misconduct on the part of the arbitrator. This needs to be addressed and checked," he emphasized.
Farmers, he noted, are often unaware of loan agreements' fine print and find themselves trapped in proceedings where they neither receive notices nor can contest the cases in faraway locations, leading to severe repercussions including the attachment of their agricultural properties.
The Chief Justice spoke at a plenary session on September 21 co-hosted by the Arbitration Bar of India and the Bombay Bar Association.
Justice Upadhyay also pointed out that the enforcement and execution of interim awards often take place without the farmers’ knowledge leaving them with little recourse.
Even when served notice, farmers are usually unable to travel the long distance or afford legal representation, further compounding their predicament.
"He is baffled and is unable to find any solace anywhere, including the courts," the Chief Justice observed
This pressing issue underscores the need for the Arbitration Council of India (ACI) to take proactive steps in regulating the conduct of arbitrators, he opined.
Although the parliament introduced reforms through the Arbitration and Conciliation (Amendment) Act of 2019, which included the establishment of the ACI to enforce uniform professional standards, the Act has not yet been implemented due to a lack of notification.
He called on Attorney General for India R Venkataramani, who was present at the event, to urge the government to notify the 2019 Act and ensure the ACI is established.
"I would urge on my behalf, and if permitted, on behalf of all present here, that the Attorney General for India may persuade the Government to notify the Amending Act so that the Arbitration Council of India is established, and steps may be taken to regulate the conduct of arbitration," Justice Upadhyay stated.
He also shared instances of interim arbitral awards often being upheld due to procedural and geographic barriers.
"The interim award can be challenged as you know, under Section 34 of the Act. However, it can only be challenged at the place where the arbitrator has pronounced the award, say for that matter, at Chennai," he said.
On the broader theme of the session, 'Judicial Support and Role of Courts in Arbitration', the Chief Justice acknowledged the increasing use of arbitration as a preferred dispute resolution mechanism, particularly in commercial transactions.
He also stressed the delicate balance between arbitration's autonomy and the courts' supportive role, particularly in enforcing awards and ensuring fairness in proceedings.
However, while the Act limits judicial interference in arbitration, especially under Section 5, courts still play a vital role in ensuring that arbitration proceedings are conducted fairly. This includes appointing arbitrators, enforcing agreements, granting interim relief and addressing misconduct.
Chief Justice Upadhyay also flagged a key issue often overlooked in arbitration conferences—the absence of stakeholders, particularly government representatives and companies.
"I would urge the Arbitration Bar of India and the Bombay Bar as well that users should also be involved so that you can know what causes them the difficulties and ultimately creates a dent on the entire process," he remarked, calling for more user-oriented discussions in future arbitration forums.
The event was hosted by the Arbitration Bar of India and the Bombay Bar Association and powered by Alvarez and Marsal.
It was attended by legal luminaries including Justice Bharati Dangre, Justice GS Kulkarni, Justice AS Chandurkar, former Bombay High Court Chief Justice SR Dhanuka, Attorney General R Venkataramani, Solicitor General Tushar Mehta, and Maharashtra Advocate General Birendra Saraf.