India In Dire Need Of Arbitration Reforms, Says Calcutta High Court

The reform must not only reflect in the legislation itself, but also in the mindset of all the stakeholders, it says.

<div class="paragraphs"><p>(Source:&nbsp;Calcutta High Court website)</p></div>
(Source: Calcutta High Court website)

The Calcutta High Court has upheld a Rs 1,354-crore arbitral award in favour of Reliance Infrastructure Ltd., which it had won in a dispute against Damodar Valley Corp. in 2019.

The dispute emanated from a 2007 contract between Reliance Infra and DVC for the construction of a power plant in West Bengal. At the time, the total contract price was upwards of Rs 4,000 crore.

However, certain delays in the construction of the power plant units gave rise to disputes over payment of dues, which led DVC to claim liquidated damages from Reliance Infra.

This prompted both sides to settle the matter through arbitration, which was ultimately decided in favour of Reliance Infra.

Challenging this order of the arbitral tribunal, DVC filed an appeal before the high court, which upheld a majority of the arbitral award on Sept. 29.

A single-judge bench of Justice Shekhar Saraf observed that India is a country with increasing infrastructural needs, and with such growing demand, there is a significant rise in commercial disputes arising out of the contracts that form the bedrock of these projects.

Although arbitration is envisaged to be free of the redundancies, inefficiencies, and delays that plague India's litigation system, the court pointed out that the arbitration process in India is struggling to keep up in the backdrop of the increasing involvement of courts at every stage of the process.

This not only impacts the viability of arbitration as a dispute-resolution mechanism but also demotes the country's standing as a business-friendly destination in a globalised world, according to the court.

There is a dire need of arbitration reform in India. This reform must not only reflect in the legislation itself, but also in the mindset of all the stakeholders.
Calcutta High Court

It was underscored that DVC tried to evade the arbitral award on each possible avenue.

While the court said that a party cannot be barred from raising any particular ground, it emphasised that there should be a shift in the tendency of parties challenging an arbitral award.

A final award should not be interfered with by the courts unless there is severe infirmity or patent illegality involved, it said.

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