Why judicial discipline is necessary for international trade to blossom in India

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New Delhi | Published: April 3, 2018 3:08:59 AM

Judicial discipline is mandatory if international trade and commerce has to be nurtured in India, as many international ventures and companies prefer to resolve their disputes by arbitration and not through adjudication by courts.

trade, international trade, sc, supreme courtThe immediate message was to trade with India, resolve disputes amicably with least interference from courts and settle disputes in your preferred territories.(Reuters)

Judicial discipline is mandatory if international trade and commerce has to be nurtured in India, as many international ventures and companies prefer to resolve their disputes by arbitration and not through adjudication by courts. This is becoming more important as the world braces for global trade wars.

It is unfortunate that the will of Parliament, which was for encouraging international trade, has been whittled down recently by the Bombay High Court. Such cases are initiated in civil courts only to choke arbitration proceedings and they should be shot down at the inception stage itself.

Taking note of global trends, Parliament enacted the new arbitration law in 1996, which scrapped the pre-Independence archaic law of arbitration and adopted the model of the United Nations Commission on International Trade Law where the fillip was to smoothen the creases in international trade by giving primacy to the agreement for arbitration, which is provided in all such international contracts and agreements. The immediate message was to trade with India, resolve disputes amicably with least interference from courts and settle disputes in your preferred territories.

The objective was that parties should decide who should adjudicate their dispute. Thus, parties running to Indian courts for seeking restraint orders or orders of sufferance would not be obliged.

An Indian party to an arbitration agreement covered under Part II of the Arbitration Act, 1996, which has international flavours and contours, could not approach Indian courts by invoking any provision of the Code of Civil Procedure to start a civil court litigation. The legislative intent could not be clearer. The Supreme Court, too, in the Chloro Controls case held that Part II of the Arbitration Act, 1996, was a “self-contained code” and no one could look for any other aid but seek relief within its four corners. It should prevail over all others forms of litigation.

The objective was also to make the international community believe that India is no banana republic and the people would honour their word in case of a breach. Thus, Indian courts would stay away and not interfere and impair the delicate balance which the parties had chosen (arbitration) to settle their disputes.

Finally, the Supreme Court held that Section 45 of the Arbitration Act was overriding and should prevail over all provisions of the Code of Civil Procedure when the court was a satisfied that the arbitration agreement was not a nullity or void.
In the TAI Pharma vs Wockhardt case, the Bombay High Court chose not to send the matter for international arbitration even though Section 45 of the Arbitration Act was staring at it, as also the Supreme Court’s decision. The Bombay High Court, thus, did not follow judicial discipline and decorum, which was mandatory.

The logic used by the court was that the foreign party had invoked the provisions to arbitrate in the matter which had arisen out of summary procedure under the civil code initiated in an Indian court by an Indian party, where a suit which had been initiated under order XXXVII of the Civil Procedure Code, 1908, under Bill of Exchange. This was, however, an independent right and thus the suit would carry on even though there was one agreement only and the Bill of Exchange plea arose out of the ‘Mother Agreement’ which provided for arbitration. It glossed over the underlying emphasis of Section 45 of the Arbitration Act, 1996.

Today, when our economy is just taking off, such aberrations by courts should be rectified immediately and they must follow the law of the land and not deviate. Judicial obstinacy shouldn’t enter the portals of any court and it should not whimsically find loopholes, as such orders affect the economy and look down upon our impeccable justice delivery system, which has maintained the golden thread that the rule of law always prevails in India.

By DN Goburdhun, Senior practising Supreme Court lawyer

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