Arbitrability of Anti-Trust Disputes in India
The Author, Mahima Jain, is currently pursuing her LL.M from NALSAR University of Law, Hyderabad.
Over the years, arbitration has become a preferred private and consensual mode of dispute resolution. Arbitral tribunals and courts have been dealing with complex contracts and rapidly evolving the law relating to arbitrations. An issue commonly faced by arbitral tribunals is whether the dispute referred to it is arbitrable in the first place. These questions commonly arise when allegations of fraud/corruption are made before a tribunal, or when a reference is made to decide about the issues which are related to the competition/antitrust law etc.
In case where an Arbitral Tribunal adjudicates on a dispute which is not capable to be adjudicated through arbitration or which is not arbitrable, then that award can be set aside or will not be enforced. Though there is no proper codified definition of arbitrability but in common parlance it means the ability of a matter to be settled by arbitration. Three main points important to come to the inquiry regarding the arbitrability are (i) whether the dispute is capable of being resolved by a arbitration, (ii) whether it is exclusively reserved for the adjudication by the courts, (iii) whether the parties have referred the dispute to arbitration.[1]
ARBITRABILITY OF COMPETITION LAW DISPUTES IN INDIA :-
The arbitrability regime of India is governed by the Arbitration and Conciliation Act, 1996. It is not the position with regards to the act that any kind of dispute can be arbitrable. Section 2(3) of the 1996 Act, provides that the act would not affect any law by virtue of which certain dispute may not be submitted to arbitration.[2] The Arbitration and Conciliation Act, 1996 does recognize the concept of non-arbitrability of certain disputes by listing it as a express ground for setting aside[3], along with the non enforceability of the arbitral award[4]. Earlier the act did not provided for the subject matter of disputes which cannot be forwarded for arbitration. There was a general consensus about excluding certain categories of matters which are to be excluded from the domain of arbitration. Gradually, there was development in the area and certain matters were restricted to be held for private adjudication.
The SC in the case of Booz Allen Hamilton Inc. V SBI Home Finance Ltd[5], held that the matters which are capable of settling outside the court are considered to be the feature of arbitrability. This generally covers the areas of civil matters. The matters which cannot be resolved by arbitration are criminal matter, matrimonial disputes, insolvency issues, testamentary, guardianship etc. Arbitrability means a matter should be decided by a court or a tribunal, it depends upon the arbitration agreement. Also the SC stated that, disputes which are related to Rights in Personam are amenable to arbitration and those which are Rights in Rem are to be adjudicated by the courts and other tribunals only.
In India, to promote and sustain the competition among the different market players and to protect the interests of the consumers, the Competition Act, 2002 was enacted. The Competition Act 2002, provides for the Establishment of Competition Commission of India, to regulate and govern on the anti-competitive practices taking place in India as well as outside India resulting in having adverse impact on the national and international markets.[6] The Competition act states that it will have an overriding effect with respect to the other laws in force and that it is in addition to the provisions of any other law in force.[7] In addition to that, the Act bars the jurisdiction of civil courts to entertain any suit or proceeding with respect to any matter which is to be adjudicated by CCI. But the main question that arises as to the Competition Act, is whether it prevents the parties from using arbitration as a method of dispute resolution by conferring exclusive jurisdiction to CCI. Arbitrability in the Indian context would require a two-fold enquiry. At the first stage, it needs to be determined whether the subject matter of the dispute is a right in rem, in which case, the dispute would not be amenable to arbitration. If, however, the dispute involves a right in personam, then the next question to be answered is whether the adjudication of such a dispute is reserved by the legislature exclusively for the public as a matter of public policy. An affirmative answer to the second question would imply that arbitration in the subject matter is not permissible.[8]
ADJUDICATION BY CCI OR ARBITRATION :-
The issue of arbitrability of competition law disputes was first dealt with in the case of Union of India V CCI[9], where the Delhi High Court dealt with the issue of maintainability of the proceedings before the CCI, in case of arbitration agreement between the parties to the contract. The CCI in this case concluded that a prima facie case existed and thus directed the Director-General (DG) to investigate, followed by issuance of notice to the “Ministry of Railways”. DG based on the above order of the Commission issued notice to the petitioner. The petitioner then filed a writ petition before the Delhi High Court challenging the issuance of notice and raised jurisdictional issues. Delhi High Court dismissed the writ petition. The Bench held that all issues raised before Competition Commission were entirely different from contractual obligations dealt before an arbitral tribunal, and the Act had overriding effect over all the other laws. The High Court added that, “An arbitral tribunal decides in the light of the contractual clauses and does not look into the aspects of abuse of dominance. Arbitral tribunal does not have the mandate, neither the expertise, nor the ability to conduct an investigation necessary to decide issues of abuse of dominant position by one of the parties to the contract. In view of the above, disputes on abuse of dominance were held to be non arbitrable.” The judgment of the High Court creates a situation in which two types of dispute resolution methods are employed, with CCI and arbitral tribunal dealing with separate issues within their respective areas in a bid to resolve the aspects of the dispute without encroaching upon each other’s jurisdiction and avoiding contradictory outcomes. From the High Court’s decision, it is sufficiently clear that the “Competition Commission” was established to adjudicate on rights created under the “Competition Act”. Thus, exclusive jurisdiction of Commission can be construed as excluding arbitrability of the competition law disputes. This view has been further strengthened by the Bombay High Court in “Central Warehousing Corporation v Fortpoint Automotive Pvt. Ltd[10]”, wherein the Bench expounded that, “Section 5[11] of the Arbitration Act cannot be read in isolation. It has to be necessarily juxtaposed with Section 2(3)[12] of the Arbitration Act which states that provisions of the Arbitration Act will not affect any other law by virtue of which certain disputes cannot be submitted to arbitration”. In view of the above stated observations by the Bench, it can be concluded that, exclusive jurisdiction of the Competition Commission of India restricts arbitrability of the disputes involving competition law issues. Hence, the position is that the scope of proceedings in CCI/ MRTP Commission is different from the scope of proceedings before an arbitral tribunal whose mandate is circumscribed by the terms of the contract. However it cannot be seen as a blanket denial of arbitration for competition matters.[13] In such a scenario, whether the Courts would enforce the arbitration agreement continues to remain inconclusive. Since there is no authoritative judgment which considers these issues from a public policy perspective, arbitrability of competition law disputes still remains an open question in India.
VIDYA DROLIA FOUR FOLD TEST IN CASE OF ARBITRABILITY OF ANTI TRUST DISPUTES :
The firm lines separating arbitration and competition proceedings have blurred. In the case of Mitsubishi Motors Corp V Soler Chrysler Plumouth[14], where the US supreme court held that the competition matters can be dealt by arbitration proceedings, by the arbitrators who are more acquainted with the competition matters, in an international contract. As compared to our Indian perspective, this pro-arbitration stance has yet to be reached. In the recent celebrated case of Vidya Drolia V Drug Trading Corporation[15], the SC applied the “four-fold” test to the antitrust disputes. The four parameters deciding a dispute shall not be arbitrable in India, mentioned by the SC were:
· When the cause of action and the subject matter of the dispute relates to actions in Rem, that do not pertain to subordinate rights in Personam that arise from the rights in Rem.
· When the cause of action and the subject matter of the dispute affects the right of third parties and have erga omnes effect (which means rights and obligations are owed towards all), require centralized adjudication.
· When the cause of action and the subject matter of the dispute relates to inalienable sovereign and the public interest functions of the state; and
· When the subject matter of the dispute is expressly or by necessary implication non-arbitrable as per mandatory statutes.
An affirmative involvement of any of the above will render the dispute non-arbitrable. Further the supreme court also specified that these four fold tests are not “watertight compartments”, they will assist in determining when a particular subject matter of the dispute would be non-arbitrable in India.[16] The SC here in this case recognized the arbitrability of the disputes that in case of subordinate rights in Personam arising from the actions in rem. This case overruled the earlier SC judgment in the case of N. RadhaKrishnan V Maestro Engineers[17], and held that dispute related to fraud are arbitrable. Himangi Enterprises V Kamaljeet Singh Ahluwalia[18], where the SC said that the Landlord-Tenant disputes are arbitrable in India. Hence along with other subject matter of the disputes, arbitrability of the competition disputes will depend upon these four parameters.
[1] Anshuman Sakle, “Arbitrating Competition Law Disputes in India”, Cyril Amarchand Blogs, Dec 12 2017, https://competition.cyrilamarchandblogs.com/2017/12/arbitrating-competition-law-disputes-india/ [2] The Arbitration and Conciliation Act, 1996, “This Part shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration”, Section 2(3). [3] The Arbitration and Conciliation Act, 1996, “Application for setting aside the awards”, Section 34. [4] The Arbitration and Conciliation Act, 1996, “Finality of Arbitral Awards”, Section 35. [5] 2011 5 SCC 532 [6] Payel Chatterjee, Simone Reis, ‘Private Enforcement of Competition Law Issues Competition Commission of India vis-à-vis Alternate Forums - Is it actually an option?’, Nishith Desai Associates, accessed on 5 August 2019. [7] The Competition Act, 2002, Act to have Overriding effect, Section 60. [8] Neelam Meshram, “Arbitrability of Competition Law Issues : An Indian Perspective”, The RMLNLY Blog, 1st February 2018. [9] W.P. (C) 993 of 2012 & C.M. Nos. 2178-79 of 2012 [10] 2010 (1) Bom C.R. 560 [11] Arbitration and Conciliation Act, 1996, Extent of judicial intervention.– Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part, Section 5. [12] Arbitration and Conciliation Act, 1996, Scope: This Part shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration, Section 2(3). [13] Anubha Dhulia, ‘Arbitrability of Competition Matter: With Special Reference to India’ ,Competition Law Reports, 2012, https://rmlnlulawreview.com/2018/02/01/arbitrability-of-competition-law-issues-an-indian-perspective/#_ftn8 [14] 473 US 614 (1985) [15] 2019 SCC OnLine SC 358 [16] Shahzad Kazi and Gladwin Issac, “Supreme Court Of India Clarifies 'What Is Arbitrable' Under Indian Law And Provides Guidance To Forums In Addressing The Question”, 7th January 2021, https://www.mondaq.com/india/trials-appeals-compensation/1023030/supreme-court-of-india-clarifies-39what-is-arbitrable39-under-indian-law-and-provides-guidance-to-forums-in-addressing-the-question [17] 2010 1 SCC 72 [18] 2017 10 SCC 706