Reference of disputes to statutory Arbitration Tribunals: Aiding or sabotaging the cause of arbitration in India?

With a population as large as India’s, a consistent goal of the Constitutional mechanism in terms of the justice delivery system has been to reduce the excessive burden on the civil and constitutional courts in the country. This has given rise to setting up of various statutory tribunals in the country which can serve as expert bodies to deal with specific kinds of issues.

While this appears to be a promising proposition to ensure speedy and effective adjudication, the results of tribunalization have been sub-par across the country. Despite the shortcomings of statutory tribunals, it is not feasible to do away with them, and the only alternative is to work around them. The question still looms large over statutory tribunals to adjudicate arbitrations. These tribunals were set up by various State governments in the 1980s and 1990s when the Arbitration Act, 1940 was in force. The State governments enacted statutes for reference of disputes arising out of works contracts awarded by State authorities for the construction of public projects.

In this article, I wish to focus on the Gujarat Public Works Contracts Disputes Arbitration Tribunal set up under Gujarat Act No. 4 of 1992 and the issues related thereto.

Under the said Act, “works contract” is defined as “a contract made by the State government or the public undertaking with any other person for the execution of any of its works relating to construction, repairs or maintenance of any building or superstructure, dam, weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory or work shop or of such other work of the State government or, as the case may be, of the public undertaking, as the State government may, by notification in the Official Gazette specify.” This takes into sweep majority of the contracts being entered into by the State / its instrumentalities. Evidently, these are high-value contracts and require an effective dispute resolution mechanism.

The Act constitutes the tribunal with a Chairman who has been a judge of the High Court and Members who have been either a District Judge for 5 years / Secretary or Chief Engineer for 3 years. The retirement age for the Chairman is prescribed to be 65 years. Thus, a Judge of High Court who retires at the age of 62 would have only 3 years as Chairman of the tribunal.

After the enactment of the said Act in 1992, the Arbitration & Conciliation Act, 1996 was enacted by the Central government with major advancements. Later, the 1996 Act was amended in the year 2015 to add provisions effectively setting up an 18 months timeframe for rendering of an award by the arbitrator. While the 2024 Amendment to the 1996 Act is under consideration to further advance the arbitration procedure, the 1992 Act has not undergone any of these changes.

The principal problem at the core of the 1992 Act is that there are 1 or 2 benches to handle huge number of arbitrations. Arbitration disputes are generally complex in nature and require a significant amount of time and attention of the adjudicating authority. If 1 bench has numerous arbitrations listed on a single day, it is as good as a dispute before a civil court. Moreover, there have been phases when Chairman or Members positions were vacant and no appointments were made for prolonged periods. This rendered the tribunal dysfunctional/ semi-functional and led to the piling up of pendency of cases. It is a concerning issue that the Act, even today, does not prescribe an outer limit for the adjudication of arbitrations. Moreover, the proceedings undertaken before the tribunal are judicial proceedings and the rigors of CPC and Evidence Act are applicable as if it was before a civil court, thereby further burdening the tribunal with procedural limitations and consequently prolonging trials. It is also a concerning aspect that the Act does not leave any scope for the appointment of experts as arbitrators. There is no provision for fast-track procedure even in fairly simple cases. The challenge to awards is permitted by way of a revision plea before the High Court with abundant scope for challenge on every factual finding and not on the limited grounds prescribed under Section 34 of the 1996 Act. There is no provision akin to Section 36 of the 1996 Act, which effectively mandates deposit of awarded amount for stay of award.

The provisions of the 1992 Act clearly impinge on the basic principles of the law of arbitration and render the very purpose of reference to an Arbitration Tribunal otiose. When the State is in the process of setting up huge infrastructure projects, it is equally necessary to have an independent and effective dispute resolution mechanism. It cannot be expected out of a tribunal with a maximum of 2 benches to adjudicate hundreds of references made every year.

Without working on any of these issues, the State government is seeking to burden the tribunal with even more references by issuing a Notification in December 2024 notifying all Panchayats, Municipalities and Municipal Corporations across Gujarat as ‘public authority’ for the purposes of the Act and thereby mandating reference of any works contracts of these authorities also to be referred to the tribunal.

The marred functioning of the statutory arbitration tribunals take away all the benefits of alternate dispute resolution and creates a one-way traffic of high-value arbitrations.

About the author: Kunal J Vyas is a Partner at Gandhi Law Associates.

Disclaimer: The opinions expressed in this article are those of the author. The opinions presented do not necessarily reflect the views of Bar & Bench.

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