The Justice Nariman Series (Part I) - Advocating Arbitration in India



[This article is the first part of a two-part series that has been specially curated by the Editorial Team of the Mapping ADR Blog.]


Keywords: Rohinton Nariman, Counsel, Arbitration, Arguments, Interpretation


Introduction

The retirement of Hon’ble Justice Rohinton Fali Nariman (“Mr. Nariman/Justice Nariman”) on 12th August 2021 has resulted in significant discussion about his feat as a judge of the Supreme Court of India (“SC”). In his seven years as a judge, Mr. Nariman has rendered some stellar decisions on matters ranging from insolvency, arbitration and corporate litigation to constitutional law. While his contribution to the development of the Indian arbitration scenario as a judge has received substantial attention, his role as counsel in certain landmark cases cannot be discounted.


Notably, Mr. Nariman was only the fifth ever counsel to be elevated from the Bar to the SC bench directly. He was designated as a Senior Advocate at the young age of 37 and also served as the Solicitor General of India for 18 months. With an illustrious career of 35 years, it becomes pertinent to examine Mr. Nariman’s contributions as an advocate as well to truly understand his influence in developing arbitration law in India. In this special two-part editorial series, Part I shall trace Mr. Nariman’s contribution as counsel, particularly to the promotion and growth of the arbitration framework in India. Part II shall draw from the discussions in Part I and analyse his role as a judge who moulded the Indian arbitration framework for the last seven years.


The Early Years

One of the earliest landmark decisions on arbitration law that Mr. Nariman appeared before the Court was Sukanya Holdings Pvt. Ltd v. Jayesh H. Pandya (“Sukanya Holdings”). In Sukanya Holdings, Mr. Nariman, appearing for the Respondents, opposed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (“the Act”). He contended that the matter cannot be referred to arbitration as reliefs have been claimed against non-signatories to the arbitration agreement. He further argued that parts of the relief claimed by the Petitioners were not within the scope of the arbitration agreement. The Court, relying on Mr. Nariman’s arguments held that the claim could not be bifurcated, and therefore the matter could not be referred to arbitration.


While Chloro Controls dissented from this view in the context of international commercial arbitration under Part II of the Act, the SC has also moved away from the ratio in Sukanya Holdings in their recent decision in Ameet Lalchand Shah, where the Court was of the view that non-signatories could be referred to arbitration under Section 8 of the Act. Despite Sukanya Holdings not fully capturing the law of the land anymore, Mr. Nariman's foresight in understanding the best course for arbitration law is displayed in landmark decisions starting from Venture Global Engineering v. Satyam Computer Services (“Venture”).


The Turning Point?

In Venture, Mr. Nariman, acting as counsel for the Respondent, argued that the provisions of Part I of the Act would not apply to various aspects of an arbitration under Part II of the Act. Since Part II, dealing with foreign awards, provides a separate definition of an arbitral award and provisions for enforcement of such foreign awards, Part I would not apply to that extent. The bench in Venture relied on the decision in Bhatia International v. Bulk Trading SA (“Bhatia”), and largely rejected the arguments put forth by Mr. Nariman, despite his reliance on a plethora of both domestic and international case laws. Notably, these decisions (Bhatia, Venture, etc.) have faced significant criticism on account of the erroneous interpretation of the provisions of the Act adopted by the SC.


While the SC in Venture rejected Mr. Nariman's understanding, subsequent cases starting with Bharat Aluminium Co. v. Kaiser Aluminium Technical Services (“BALCO”) decided in 2012, have in fact upheld the same. The SC’s decision in BALCO that overturned both Venture and Bhatia stands as good law to this day. This is testament to Mr. Nariman’s excellent understanding and interpretation of the Act, something that even the SC did not correctly analyze when faced with the issue.


Later Hits and Misses

In another display of his excellent understanding of arbitration law, Mr. Nariman, acting as senior counsel for the appellants in Enercon (India) Ltd. v. Enercon GmBH (“Enercon”), put forth his arguments on the correct seat of arbitration. In doing so, he stated the closest nexus test and interpreted the language of the arbitration clause to gauge the intention of the parties. Further, he adequately distinguished the concept of the seat of arbitration with concepts like the venue of the arbitration and the curial law, which often cause confusion, particularly in a poorly drafted arbitration clause such as the one in this case. His view and reasoning on the seat of arbitration being India, as opposed to London, was strongly endorsed by the SC as well.


However, it is also pertinent to note that in the Enercon case, Mr. Nariman argued that the arbitration clause would not be severable from the main agreement that had not been finalized/concluded. This contention was rejected by the SC because the main contract and the arbitration agreement are considered as independent contracts as specified in Section 16 of the Act. In the spirit of the policy of least intervention of courts aimed at fostering arbitration, coupled with the clear text of the statute, Mr. Nariman’s contention for precluding arbitration is an arguably peculiar one.


Conclusion

Mr. Nariman’s contribution as a counsel falls on both ends of the spectrum - as a lawyer putting forth forward-looking arguments that would soon become the law of the land to peculiar arguments that any good lawyer would make to successfully represent their client, irrespective of its effect on the arbitration policy of India. Nevertheless, his vociferous opinions crept into his legal arguments and saw him contribute immensely in bringing certainty and direction to Indian arbitration law. The next Part in this series carries forward this discussion and focuses on his time as a judge of the Supreme Court during one of the most trying periods for arbitration in India.


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