(MENAFN- KNN India)
New Delhi, Nov 8 (KNN) In a landmark decision aimed at preventing abuse of arbitration procedures, the Supreme Court of India has upheld the authority of arbitral tribunals to impose costs on parties that misuse the legal process.
This judgment, authored by Justice JB Pardiwala, was delivered by a bench led by Chief Justice DY Chandrachud and including Justices JB Pardiwala and Manoj Misra in the case of Aslam Ismail Khan Deshmukh v. ASAP Fluids Pvt. Ltd. & Anr. (Arbitration Petition No. 20 of 2019).
The court ruled that if a party manipulates the limited judicial interference allowed at the referral stage under Section 11(6-A) of the Arbitration & Conciliation Act, 1996 (“Arbitration Act”), it may be held liable for the arbitration costs.
This decision comes as a safeguard for parties compelled to enter arbitration proceedings because of another party's undue advantage of minimal court intervention.
"In order to balance such a limited scope of judicial interference with the interests of the parties who might be constrained to participate in the arbitration proceedings, the arbitral tribunal may direct that the costs of the arbitration shall be borne by the party which the Tribunal ultimately finds to have abused the process of law," the court stated.
This decision reinforces the tribunal's role in ensuring that arbitration remains a fair and efficient dispute resolution mechanism, free from exploitation by parties intent on causing unnecessary delays or financial strain on others.
Under current provisions, referral courts have limited jurisdiction to investigate issues such as the existence of an arbitration agreement or whether claims fall within the permissible three-year filing period.
The bench reiterated that referral courts are not expected to delve deeply into issues like time-barred claims or non-signatory inclusion at this stage. Such determinations should be left to the arbitral tribunal, which can conduct a thorough examination of the case.
The Court's ruling references previous cases, including In Re: Interplay and SBI General Insurance v. Krish Spinning, to clarify that referral courts should focus on validating the arbitration agreement and application timeliness, leaving substantive inquiries to the arbitrator.
In this case, Kunal Cheema appeared for the petitioner, while Jasmine Damkewala represented the respondent.
This judgment sets a precedent for discouraging frivolous arbitration claims and reinforces the tribunal's authority in cost-imposition, aligning with the principles of justice and fairness in arbitration.
(KNN Bureau)
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