Report No. 176
2.4.6 Situations in which the preliminary issues are to be decided under sec.8:
It has been suggested at the Bombay seminar by retired Judges of the High Court that the position under sec. 8 and sec. 11 of the Act in this behalf should be similar. They proposed that a discretion may be conferred under sec. 8 and sec. 11 upon the Court to decide the jurisdictional issues if facts are all admitted and documents are not in dispute and if oral evidence is not to be adduced and there is no likelihood of undue delay.
They had proposed a similar discretion to be vested in the judicial authority under sec. 8 to decide these jurisdictional issues on the same lines. In fact, the Model Law and the New York Convention give no choice to the judicial authority and it has to decide these jurisdictional issues at the initial stage.
The proposal that is being made by us will, therefore, be an improvement over what is contained in Art. 8 of the Model Law or the New York Convention 1958 inasmuch as we are not compelling the judicial authority to decide these issues at the initial stage but we are proposing to vest a discretion upon the judicial authority to decide these issues, only if the documents and facts are admitted and no oral evidence is required and if the inquiry is not likely to be delayed and if the judicial authority thinks that costs could be saved.
This liberal procedure is also proposed to be introduced in sec. 11. Today arbitration costs are very heavy. Even if a simple issue is to be decided, the arbitral tribunal will have to list the case at least six times before even pleadings are completed. In cases where there are three arbitrators each adjournment can cost at least a lakh of rupees. To eliminate this expense, we propose to adopt the procedure as provided under Section 32 (2) of the English Act, 1996 that the court could decide these issues at the stage of Section 8 only, if facts and documents are not in dispute and if it is found that no oral evidence is necessary.
We, therefore, propose not to include in sec. 8, the compulsive element for a decision on these jurisdictional issues, as in Art. 8 of the Model Law and we are providing a flexible provision which we also propose to provide in sec. 11. Our approach here is, therefore, better than under Art. 8 of the Model Law or under the New York Convention, 1958 and will have the advantage of cutting down arbitration costs substantially. These issues will be decided only if the relevant documents are not in dispute and oral evidence is not necessary and there has been no delay in raising the issues and the Court feels that arbitration costs can be saved.
Our recommendations in this behalf are made at the end of the discussion under section 8. It is, therefore, proposed to bring sec.8 in conformity with the Model Law by adding the words 'unless it finds that the agreement is null and void, inoperative or incapable of being performed', or there is no agreement in existence or no dispute in existence at the end of sec.8(1), subject to the discretionary power to decide these issues or not as mentioned above and these proposals are contained in the proposed sub-sections (4) and (5) of section 8 as extracted below.