MODIFYING MINORLY? EVALUATING THE ROLE OF DISSENTING OPINIONS IN THE MODIFICATION OF ARBITRAL AWARDS IN INDIA

I.    Introduction

Recently, the Supreme Court [“SC”] delivered its judgment in Gayatri Balasamy v ISG Novasoft Technologies Limited on the question of whether courts possess the power to modify an arbitral award under the Arbitration & Conciliation Act [“Arbitration Act”.] Over the course of three days, a multitude of arguments and submissions were made before the Court, however, a particular issue seemingly went unaddressed: the practice of courts using minority opinions of the arbitrators to modify the awards. The Indian jurisprudence has demonstrated a trend of referring to minority (and dissenting) opinions to not just modify, but also to overturn the majority awards. This is usually done in cases of party-appointed arbitrators, in which the tribunals consist of multiple arbitrators. The relevance of dissenting opinions in arbitral awards has been a subject of scholarly discourse internationally. However, no jurisdiction apart from India has faced the issue of judicial institutions enforcing minority opinions while intervening in an award.

II.  The Flawed Interpretation Of The Term ‘Minority Award’

The Arbitration Act does not define the term ‘minority award,’ and such terminology is nowhere defined in any jurisdiction. As per the Act, every decision has to be signed by a majority of the arbitrators. This implies that in order to qualify as an ‘award’ under the Act, the same needs to be attested by a majority of the tribunal members. The Hon’ble Delhi High Court in the case of Government of India v. Acome, relying on the Law Commission’s findings, reiterated this position and held that minority decisions have no efficacy as an award.

But the SC has frequently used the term ‘minority award’ to overrule the decisions of the majority. The Court, in the landmark ruling of SsangYong Engineering & Construction Co. Ltd. v. NHAI [“SsangYong”], not only upheld, but also enforced the ‘minority award.’ Subsequently, the Court in the case of Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies (P) Ltd. attempted to clarify that the view of the dissenting arbitrator is an opinion and not an award, and the Court is not precluded from considering the findings of the dissenting opinion. Ironically, the SC, in M/s Hindustan Construction Co. Ltd. v. NHAI, did call the practice of elevating the dissenting opinion as an award to be “inappropriate and improper” and yet, it continued to use the term ‘minority award’.

This is inherently problematic. The usage of the term ‘minority award’ is a paradox, as the opinion of the minority arbitrator cannot have any binding value. The logical corollary of Section 29(1) of the A&C Act is that an award that is not signed by the majority cannot be termed as an award. And a court under Section 34 has jurisdiction only over an arbitral award; therefore, as a dissenting opinion is not a part of the award, the courts enforcing them is a jurisprudential error. The courts using the term ‘minority award’ demonstrates a flawed conception within the minds of the judges, equating a dissent in the award to a judicial dissent. The dissenting opinions are usually partial dissents, differing in issues, such as the rate or quantum of interests. Thus, when the courts intervene and enforce the minority opinions over the awards, the act is akin to a partial modification of the award. Although the SC has recently, in the case of UHL Power Co. Ltd. v. State of H.P., acknowledged that they cannot sit in appeal over a particular view of the majority decision in an arbitral award, there continues to be an erratic trend of judgments that continue to modify the majority awards, and use the term ‘minority awards.’

This judicial inconsistency in the interpretation of the minority opinions and using them to modify the majority awards has led to uncertainty with regard to the challenge of an award under Section 34 or Section 37 of the Arbitration Act.

III.  The ‘Wrong’ In Ssangyong: Usage Of Article 142

The other issue has been the court’s invocation of its plenary powers to enforce the minority opinions, as was observed in the SsangYong case. Interestingly enough, the SC in SsangYong observed that it is not permissible for it to go into the merits of the award in a challenge under Section 34, but nevertheless proceeded to enforce the minority opinion by invoking its powers under Article 142 of the Constitution. It is accepted that the plenary powers in SsangYong were invoked in exceptional circumstances, and the resulting judgment does not act as a binding precedent. However, it is argued that the invocation of the plenary powers by the Court was unnecessary and reflects a flawed outlook that could bolster further undesirable interferences with arbitral awards.

First, if an award is against the public policy of India, then the same is covered under the scope of the Arbitration Act, which clearly defines what amounts to a conflict with public policy in the country. The findings of the SC in SsangYong, including the unilateral addition or alteration of a contract by the arbitral tribunal, could have squarely come under the scope of Section 34(2b) of the Arbitration Act. The remedy lies in the Act itself, but the Court decided to invoke its plenary powers to not just set aside the award, but also to enforce the so-called ‘minority award’ rather than remitting the matter back to arbitration. The SC’s reasoning for enforcing the minority award, i.e., to preserve the legislative intent of speedy resolution of dispute, will be dealt with in the second prong of the argument.

Second, the SC itself has refused to exercise its plenary powers to modify an award in Vijay Karia v. Prysmian Cavi E Sistemi Srl. The Court reasoned that its powers under Article 142 ought not to circumvent the legislative policy as enumerated under the specific arbitral provisions. Though this was a challenge to a foreign award under Section 48 of the Arbitration Act, the specific ratio states that the legislative intent of the specific provision is relevant while ensuring that the plenary powers do not circumvent it. Importing the same, and applying it to SsangYong, the primary legislative intent of Section 34 is to minimise judicial interventions. Therefore, the SC, in SsangYong, while invoking its plenary powers, should have kept in mind that it does not circumvent the legislative intent of Section 34, i.e., to minimise judicial intervention, which it inadvertently did.

Although the decision in SsangYong has not become a binding precedent, given the erratic judicial tendencies when dealing with minority opinions in arbitral challenges, the same creates a precarious possibility of SC enforcing minority opinions through its plenary powers, if the award actually suffers from a defect that could be dealt with under Section 34 of the Arbitration Act, where its remedy lies.

IV.           International Perspectives On Dissent In Arbitral Awards

Dissenting opinions in arbitral awards are treated differently in the common law and the civil law jurisdictions. While the former allows dissents to be a part of the arbitral award, the latter has a general tendency not to include dissents. In the context of civil law jurisdictions, countries such as Germany have shown the recent judicial trend of not recognising dissenting opinions in an arbitral award, calling it inconsistent with the civil procedure. Therefore, given the varied opinions of these jurisdictions, it becomes even more pertinent to refer to the institutions involved in international arbitration that aim to reconcile the jurisdictional differences in cross-border dealings.

In the context of international arbitration, authorities such as the International Chamber of Commerce have addressed the question of dissenting opinions way back in 1986, and they recommended not to suppress dissenting opinions, but to minimise their role in the proceedings. The International Centre for Settlement of Investment Disputes Convention, on the other hand, expressly provides for the right of an arbitrator to provide for a dissenting opinion, be it in part or in its entirety.

Notable authorities have stated that even in the absence of express authorisation in the law, the arbitrators have an inherent right to provide a dissenting opinion, especially in the context of party-nominated arbitrators. Others have expressed concern with regard to the quality of dissent and the intent of the dissenting arbitrator. More importantly, it becomes relevant to understand the arbitrator’s role and intent while delivering a dissenting opinion.

While a well-intended and well-reasoned dissent can be used to rightly challenge an award, the opposite would mean an unnecessary delay in the enforcement of the award because of frivolous challenges. In this context, it is very important to give due attention to a study by Van Den Berg, who found that in party-appointed investment arbitrations, nearly 100 per cent of the dissenting opinions were delivered by the arbitrators in favour of the parties that appointed them. Other scholarly opinions have correlated with this finding, particularly after delving into the issue from the arbitrator’s perspective.

V.  Analysing The Dissenter’s Intent In The Indian Context And The Way Out

Recently, the Expert Committee constituted to examine the working of the arbitration law in India reported that there continues to be an “overwhelming prevalence” of ad-hoc arbitrators in the country and a lack of effective arbitral institutions. Given the fact that party-appointed arbitrators continue to constitute the majority of arbitral cases in the country, there is a very valid apprehension that the arbitrators dissent only for the sake of dissenting, i.e., a “customary dissent.”

Under these circumstances, it becomes a very real possibility that an ad-hoc arbitrator, who often charges exorbitant arbitration fees, may dissent in case the majority award is not in their appointer’s favour. They would do so in order to have a remedy under Section 34 and to challenge the award before the court. One of the obvious grounds for the challenge would be on the basis of the minority opinion, and given the Indian court’s erratic tendency while dealing with minority opinions, it can be validly inferred that the dissent is delivered with the hope that their party succeeds in appeal, and the court modifies the arbitral award based on the minority’s opinion. This has been observed in the case of Oriental Structural Engineers Pvt Ltd. v. State of Kerala, wherein the majority award was modified, and the modification was in concurrence with the dissent.

This presents a two-fold problem: first, the lack of a solid judicial outlook towards minority dissents in arbitral awards, and second, the potential of arbitrators dissenting to create a make-shift appeal mechanism for their appointing parties. This strikes at the very heart of the intent of arbitration proceedings, jeopardising the finality of the awards, as well as the arbitrator’s bias in the context of domestic arbitral proceedings.

A possible way out of this two-fold conundrum is through legislative action. It is unfeasible to curb the dissenting opinions of the arbitrators, which, when bona-fide, are pertinent in case the majority decisions are fundamentally flawed. But at the same time, partial dissents, relating to the particulars of an award or an interpretation of a said law, should not be encouraged to be used as a ground for judicial interference. Although the courts have reasonably tried to limit their jurisdictions while considering challenges under Section 34 and Section 37 of the Arbitration Act, there is a lack of judicial certainty on their part, as has been highlighted in Part II.

Accordingly, it is recommended to insert a proviso within Section 34 of the Arbitration Act, explicitly prohibiting challenges before the Court solely on the grounds of the majority award, relying on the minority opinion. If there are any fundamental defects within the arbitral awards, the existing provisions within Section 34 are well-equipped to deal with the same. Moreover, there needs to be judicial discretion while dealing with minority opinions in arbitral awards and, importantly, on the court’s understanding of the term ‘minority opinion.’ From the side of the arbitrators, it is not feasible to regulate ad-hoc arbitration, and what is recommended is to bring the institutional arbitral alternatives to the mainstream, along with set guidelines, rules, and procedures.

This minor but much-needed legislative intervention, coupled with judicial restraint and promotion of institutional arbitration, would ensure that this thorn of an issue of dissenting opinions, endemic only to India, is nipped at its budding stage.