Section 27(5) of Indian Arbitration Act: A Dark Horse?


[This article is authored by Chandni Dewani, a Litigation and Dispute Resolution Associate at Little and Co.]


Keywords: Arbitration, Contempt of Court, Section 27(5).


Introduction

Enforcement of order in civil contempt is for the benefit of one party against another, while the object of criminal contempt is to uphold the majesty of law and the dignity of the court [i] Section 2(a) of The Contempt of Courts Act, 1971 has divided contempt of court in the following manner “civil contempt” as defined under Section 2(b) or “criminal contempt” as defined under Section 2(c). There is no straitjacket formula provided by the Indian legislature as to what would amount to contempt. Therefore, the court shall have to decide what constitutes contempt, as per the circumstances and facts of each case.


Arbitrations are an important aspect of the dispute resolution system, and arbitral proceedings are very much akin to court proceedings. Hence, if a particular act amounts to contempt of court, then would the same act amount to contempt of an arbitral tribunal under similar circumstances? If yes, then what actions can be taken against the contemnor?


What does the legislation state?

Though an arbitral tribunal is not considered a court of law [ii] but with the 2015 Amendment Act, its powers to make orders and the enforceability of such orders have been identified to be similar to that of a court [iii]. When it comes to Arbitrations, contempt is governed by Section 27(5) of the Arbitration and Conciliation Act, 1996 (“the Act”), which reads as follows: “27. Court assistance in taking evidence.- …(5) Persons failing to attend in accordance with such process, or making any other default, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the Court.”


A bare perusal of the section title and text of Section 27(5) would show that, majorly, this section deals with the different outcomes resulting from disobedience of an Arbitral Tribunal’s orders in the context of taking evidence. However, what exactly do the “or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings” mean? There is certainly more to it than meets the eye when one delves deeper into them. One of the early decisions on this was of the Bombay High Court in Anuptech Equipments Private Ltd. v. M/s. Ganpati Cooperative Housing Society Ltd. & Ors. [iv] The Court took note of the words “or guilty of any contempt” and interpreted Section 27(5) liberally to include any contempt committed during the arbitral proceedings. In a way, the court equated contempt in arbitral proceedings to those in court proceedings. The court took the view that “….a person can be punished for contempt of the tribunal, which can be done where the Act tends to bring the administration of justice into disrespect or interference with the administration of justice, shows that such a tribunal discharges the inherent judicial functions of the State.”


Subsequently, there are two types of contempt under this provision, described as follows:


1. Civil Contempt under Section 27(5) of the Act

What kind of contempt does Section 27(5) embrace? Contempt, as provided for under Section 27(5) of the Act, was inter alia, used for disobedience of various orders passed by the arbitral tribunal, especially the interim orders passed under Section 17 of the Act before the 2015 Amendment. Un-amended Section 17 reads as: “17. Interim measures ordered by arbitral tribunal.—

(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute. (2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).


Before the 2015 Amendment, the Act did not provide for any specific provisions for the enforcement of an order passed under Section 17 of the Act. Therefore, one solution that parties to an arbitration resorted to was to file an application under Section 9 of the Act, praying that the same orders as were passed by the arbitral tribunal in the Section 17 application maybe passed by the court. An avant-garde judgment, which considered this point, was the decision rendered by Justice Endlaw in Sri Krishan v. Anand [v]. The court was reluctant in passing such an order because it would render Section 17 wholly otiose and redundant. The court also held that merely because sub-section (5) is hedged under the heading/title of Section 27 as "Court assistance in taking evidence”, it cannot be considered to limit or narrow the otherwise wide amplitude of sub-section (5) thereof. While doing so, the court highlighted the significance of Section 27(5) “11. ….Any person failing to comply with the order of the arbitral tribunal would be deemed to be “making any other default” or “guilty of any contempt to the arbitral tribunal during the conduct of the proceedings”. Thus, the remedy of the other party is to apply to the arbitral tribunal for making a representation to the court to meet out such punishment, penalty to the guilty party, as would have been incurred for default in or contempt of the court. Naturally, the arbitral tribunal would make such a representation to the court only upon being satisfied that the party/person is in default or in contempt. Once such a representation is received by this court from the arbitral tribunal, this court would be competent to deal with such party in default or in contempt as if in contempt of order of this court, i.e., either under the provisions of the Contempt of Courts Act or under the provisions of Order 39 Rule 2A CPC. Later on, Section 17 was amended w.e.f. 23rd October 2015, and the interim orders passed under Section 17 were deemed to be orders of the Court and could be enforced in the same manner as an order of the Court. Post which, contempt under Section 27(5) was left as an alternate remedy.


Prior to notification of the 2015 amendment, a contrary view on the subject was taken by the Bombay High Court in Alka Chandewar v. Shamshul Ishrar Khan [vi]. A two-pronged reasoning was given by the court while dismissing a contempt petition under 27(5). Firstly, the court held that the tribunal is not a “Court” as defined under Section 2(1)(e) of the Act. Secondly, the applicability of the words “guilty of any conduct to the arbitral tribunal” is limited to only those provisions that pertain to the “conduct” of arbitral proceedings, i.e., Section 18 to Section 27 of the Act, and not to the entirety of the arbitral proceedings. Section 17 forms part of Chapter IV of the Act, which deals with the “jurisdiction” of the tribunal.


The above decision of the Bombay High Court was appealed before the Supreme Court [vii]. The Supreme Court, while setting aside this order, held that the Bombay High Court had taken a restrictive view and that the words “guilty of any contempt” appearing in Section 27(5) must be given its plain meaning. The said words cannot be limited to “a person being guilty of contempt only when failing to attend in accordance with such process.” The cumbersome requirement of an arbitral tribunal having to apply every time to the High Court for contempt of its orders was also done away with by the Supreme Court. Hence, a party can now directly approach the court for any contempt arising out of the orders passed during an arbitral proceeding without the leave of the arbitral tribunal.


2. Criminal Contempt under Section 27(5) of the Act

An interesting question that arises is whether contempt of an arbitral tribunal ever lands a perpetrator in jail? Since the term “contempt” is not defined under the Act, it is important to digress into Section 2(a) of the Contempt of Courts Act, which enumerates “contempt of court” as both “civil contempt” and “criminal contempt”. It can be transpired from the above-mentioned judgments is that the words “any contempt” is of wide amplitude. It would be denying a liberal approach if the words “any contempt” is expounded to comprise only civil contempt and not criminal contempt. It is plausible that during an arbitration proceeding, a party/witness may do such an act which may scandalize or tend to scandalize the authority of any court or interferes or tends to interfere with the administration of justice. Filing a false affidavit before the arbitral tribunal, a scurrilous attack on the arbitral tribunal questioning their authority, making libellous allegations against the arbitral tribunal etc., are various instances of criminal contempt. One thing to be borne in mind is that criminal contempt involves no element of personal injury. It is directed against the power and dignity of the court. Although no authorities are available on this reasoning yet, a recourse to Section 27(5) for criminal contempt cannot be ruled out in light of judicial interpretation of Section 27(5).


In Kanwar Singh Saini v. High Court of Delhi [viii], the Supreme Court held that for a grievance of non-compliance of the terms of a decree passed in a civil suit, the remedy available to the aggrieved person is to approach the execution court. In such a case of violation of a judgment or decree provisions, criminal contempt is not attracted. Drawing analogy from this decision, a party cannot have recourse to criminal contempt for violation of a final award and an available remedy would be to file an execution application under Section 36 of the Act or, in appropriate cases, provisions of civil contempt may be invoked [ix].


Conclusion

The difference between civil and criminal contempt basically is one of purpose. If the purpose of the contempt order is punitive, the contempt is criminal; if the purpose of the contempt order is remedial, the contempt is civil [x]. Civil contempt under Section 27(5) has been time and again invoked by the parties to an arbitration, especially when it comes to non-compliance with an arbitral order. Criminal contempt can certainly be an unexpected, albeit a welcomed entrant while interpreting Section 27(5). The judiciary is yet to come across such a specific scenario, nevertheless, it has shed light on the potential of Section 27(5) by showing its inclination towards a broader interpretation.


[i] Samee Khan v. Bindu Khan, AIR 1998 SC 2765.

[ii] MD, Army Welfare Housing Organization v. Sumangal Services (P) Ltd., [2004] 9 SCC 619.

[iii] M/s. Shakti International Pvt. Ltd. v. M/s. Excel Metal Processors Pvt. Ltd., [2017] SCC OnLine Bom 321.

[iv] AIR 1999 Bom 219.

[v] 2009 (112) DRJ 657.

[vi] [2016] 1 Mah LJ 52.

[vii] [2017] 16 SCC 119.

[viii] [2012] 4 SCC 307.

[ix] Rama Narang v. Ramesh Narang & Anr., [2006] 11 SCC 114.

[x] Donner et al. v. Calvert Distillers Corp., 77 A. 2d 305 (Md. 1950).





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