A ‘Minority’ Award in India- Is it a battle half won? And comparative legal position in other jurisdictions

Overview

The 1899 Hague Convention allowed arbitrators to“record their dissent,”[1] but a proposal to let them state the reasons for their dissent was rejected for fear of “the possibility of having two awards in each case and of bringing the disagreement of the arbitrators before the public”. By 1907, at the Second Hague Peace Conference, it had become too controversial to allow arbitrators to record any dissent. Accordingly, the 1907 Hague Convention does not refer to any option for arbitrators to record their dissent.[2] This volte-face on dissent was a Dutch initiative. The Dutch delegation held that the rule on dissent in the 1899 Convention would “lead rather to harmful than to useful consequences and …. for this reason, should be omitted altogether.”[3]

While Indian Courts are entitled only to ‘set aside’ an arbitral award under Section 34 of the Indian Arbitration and Conciliation Act, 1996 (“the Act”), there have been instances of modification of arbitral awards by upholding the opinion of the dissenting arbitrator(s). The ‘minority awards’, which were completely overlooked back in time, were being referred to not only for finding defects in the majority award but also in some cases for replacing them altogether. In fact, no other Model Law jurisdiction has witnessed such overemphasis on the significance of the awards of the minority. The Hon’ble Supreme Court has in recent times carried forward the dictum that the power to modify, vary or remit the award does not exist under Section 34 of the Arbitration & Conciliation Act, and clarified that all prior judgments of the Supreme Court modifying or varying the Award were presumably under the powers of the Supreme Court under Article 142 of the Constitution of India. The effect of the Supreme Court judgment is that Courts in exercise of power under Section 34 of the Act can accept the views of the minority Opinion/Award and set aside the majority Award but cannot replace or modify or vary the majority Award with the opinion of the dissenting arbitrator (except in exceptional circumstances by the Hon’ble Supreme Court under the powers of Article 142).

 

In the Context of Indian Arbitration & Conciliation Act 1996 (“the Act”)

In any legal system, a majority court decision is considered as the Court's final decision on the issue or dispute. The same rule applies even in the case of adjudication by arbitral tribunals and is in fact expressly recognised under Section 31 of the Arbitration and Conciliation Act 1996 (as amended), which deals with the form and content of the Arbitral Award. Section 31 states as follows:

"31. Form and contents of arbitral award

1. An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal.

2. For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated.

3. The arbitral award shall state the reasons upon which it is based, unless—

   • the parties have agreed that no reasons are to be given, or

   • the award is an arbitral award on agreed terms under section 30."

 

It can be inferred from the above that where there is more than one arbitrator in an arbitral proceeding, the majority's decision will be upheld, provided that reasons for the omitted signature are stated. Therefore, in an arbitral proceeding with more than one arbitrator, only the arbitral award signed by the majority of the arbitrators would be considered as an arbitral award that is enforceable by the Courts under the Act.

 

In the context of International Chamber of Commerce (ICC) Arbitration Rules, 2021

Article 32(1) Making of the Award

“32(1): When the Arbitral Tribunal is composed of more than one arbitrator, an Award is made by a majority decision. If there is no majority, the Award shall be made by the president of the Arbitral Tribunal alone.”

The object of most of the Presidents of the Arbitral Tribunal is to reach a unanimous agreement on an Award or agreement on an Award that all members of the Tribunal are willing to sign, even if they have reservations about the specific findings. Most Awards rendered in ICC arbitrations are rendered by unanimity[4]. In 2020, out of the 289 final awards rendered by three-member tribunals, 46 awards (16%) were rendered by majority. All majority awards were accompanied by a dissenting opinion, in 18 cases the dissenting opinion was incorporated in the award itself and in 28 cases the dissenting opinion was made by way of a separate document.[5]. But there may be cases, where the President is not even able to reach a majority. In such a case, the second sentence of Article 32(1) permits the president to render the decision alone.

• The ICC Court scrutinises dissenting opinions, when they are available, at the same time as scrutinising awards under Article 34 of the ICC Rules.
• On receipt of a dissenting opinion, the Secretariat sends a copy to each of the majority arbitrators if it appears that they have not already received it
• Dissenting opinions are normally sent to the parties by the Court of Arbitration at the same time as notification of the award under Article 35 of the ICC Rules

The International Chamber of Commerce’s Commission on International Arbitration through the Working Party on Dissenting Opinions reported that: “[…] it is neither practical nor desirable to attempt to suppress dissenting opinions in ICC arbitrations. A minority opinion was expressed to the effect that the ICC should seek to minimize the role of dissenting opinions, but the prevailing view was that the ICC should neither encourage nor discourage the giving of such opinions.”[7]

Trend setting authorities in India from an interventionist to a non- interfering approach while dealing with dissenting views of Arbitrators

1. In 2012, the Bombay High Court while deciding the question on the Court’s power to modify award under Section 34 of the Act in the case of Axios Navigation v Indian Oil Corporation Ltd.[8]held in para 15 that “the loosing party and/or the Petitioners cannot be totally debarred from pointing out the opinion expressed by the dissenting arbitrator. Every Arbitrator in my view is entitled to express his opinion as the institution has at the instance of the parties selected all these Arbitrators to adjudicate their dispute. To say that the dissenting arbitrator should not express his opinion and/or should not sign even the award, considering the scheme and purpose of the arbitration act and or the principle of fair and equitable justice, will cause hardship and injustice will hamper the scheme of the Arbitration Act.” Further the Bombay High Court held that it cannot be stated that the Court ought not to have looked into the reasons given by dissenting arbitrator’s opinion. Any opinion given by any of the Arbitrator whether by majority and or by minority, if based upon the valid foundation of law and the record, just cannot be overlooked by the Court under Section 34 of the Arbitration Act 1996.
2. In 2017, the Bombay High Court in ONGC Ltd v Interocean Shipping (India) Pvt Ltd[9] and the Delhi High Court in Modi Entertainment v Prasar Bharati[10], while deciding on applications for setting aside arbitral awards under Section 34 of the Act, and while setting aside the respective arbitral awards under challenge, upheld the findings of the minority member of the arbitral tribunal.
3. In 2019 in the case of Ssangyong Engineering & Construction Co. Ltd. v. NHAI[11], the Hon’ble Supreme Court upheld the view taken in the dissenting opinion to be the correct position in law. In this case, the Court was hearing a special leave petition from an order passed by a division bench of the Delhi High Court. This Court noted that

“12. A Section 34 petition which was filed by the appellant was rejected by the learned Single Judge of the Delhi High Court, by a judgment and order dated 9-8-2016 [Ssangyong Engg. and Construction Co. Ltd. v. NHAI, 2016 SCC OnLine Del 4536], in which it was held that a possible view was taken by the majority arbitrators which, therefore, could not be interfered with, given the parameters of challenge to arbitral awards Having so held, the learned Single Judge stated that even though the view expressed in the dissenting award is more appealing, and that he preferred that view, yet he found that since the majority award is a possible view, the scope of interference being limited, the Section 34 petition was dismissed. A Section 37 appeal to the Division Bench of the Delhi High Court yielded the same result, by the impugned judgment dated 3-4-2017 [Ssangyong Engg. And Construction Co. Ltd. v. NHAI, 2017 SCC OnLine Del 7864 : (2017) 240 DLT 711].”

The Hon’ble Supreme Court upheld the view taken by the dissenting arbitrator in exercise of its powers under Article 142 of the Constitution, in order to do complete justice between the parties. The reason for doing so is mentioned in paragraph 77 i.e. the considerable delay which would be caused if another arbitration was to be held.

“77. The judgments of the Single Judge [Ssangyong Engg. And Construction Co. Ltd. v. NHAI, 2016 SCC OnLine Del 4536] and of the Division Bench [Ssangyong Engg. and Construction Co. Ltd. v. NHAI, 2017 SCC OnLine Del 7864 : (2017) 240 DLT 711] of the Delhi High Court are set aside. Consequently, the majority award is also set aside. Under the scheme of Section 34 of the 1996 Act, the disputes that were decided by the majority award would have to be referred afresh to another arbitration. This would cause considerable delay and be contrary to one of the important objectives of the 1996 Act, namely, speedy resolution of disputes by the arbitral process under the Act. Therefore, in order to do complete justice between the parties, invoking our power under Article 142 of the Constitution of India, and given the fact that there is a minority award which awards the appellant its claim based upon the formula mentioned in the agreement between the parties, we uphold the minority award, and state that it is this award, together with interest, that will now be executed between the parties."

4. In 2021, following the dictum of the Hon’ble Supreme Court in the case of Mc. Dermott International Inc vs. Burn Standard Co. Ltd.[12] which held that the Court in exercise of powers under Section 34 of the Act cannot correct errors of arbitrators, the Hon’ble Supreme Court has in two recent judgments of Dakshin Haryana Bijli Vitran Nigam Ltd v Navigant Technologies Pvt. Ltd.[13] and NHAI v M. Hakeem & [14] emphatically stated that there is no power to modify an arbitral award as follows :-

“In law, where the Court sets aside the award passed by the majority members of the Tribunal, the underlying disputes would be required to decide afresh in a appropriate proceeding. Under Section 34 of the Act, the court may either dismiss the objections filed, and uphold the Award or set aside the award if the grounds contained in sub section (2) and (2A) are made out. There is no power to modify an arbitral award. It can only quash the award leaving the parties free to begin the arbitration again if it is desired.”

 

CONCLUSION

In our view a dissenting opinion/’Minority’Award rendered by a Co-arbitrator in the arbitration proceedings would more often than not be a ‘sheet anchor’ to the aggrieved party in its challenge to the majority Award as it may in a given case appeal the conscience of a Single Judge hearing the Section 34 Petition or Division Bench hearing an Appeal as the case may be. Further, keeping in mind the above trend of judgments and the use of the discretionary power under Article 142 of the Constitution of India, it would be every aggrieved party’s endeavour to try and make out an exceptional circumstance before the Hon’ble Supreme Court for use of power under Article 142 when there is a dissenting opinion. This may in effect lead to a rise in the number of challenges before the Hon’ble Supreme Court.

 

MINORITY AWARD/DISSENTING OPINION UNDER THE ARBITRATION REGIME IN FOREIGN JURISDICTIONS

ENGLAND:

Although dissenting opinions are allowed under English law, they are infrequent. Section 52(3) of the English Arbitration Act provides that a dissenting member of the tribunal need not sign the award. A dissenting opinion does not form part of the award under the Act. Consequently, a party cannot rely on a dissenting opinion to sustain a challenge for serious irregularity under section 68.[15] But a dissenting opinion might be admissible as evidence in relation to procedural matters or on an Appeal on a point of law under Section 69 under the English Arbitration Act[16].

 

FRANCE[17]:

Under French law, a ‘Domestic’ Award may be challenged (“recourse for annulment”) on the ground that the Award was not made by a majority vote. This is not available as a ground of challenge to an ‘International’ Award.  Dissenting opinions may be annexed to a majority Award, however, the deliberations between the members of the Tribunal must be kept confidential in the dissenting opinion. 

 

HONG KONG[18] AND SINGAPORE[19]:

Award is enforceable if made by a majority. Presence of a dissenting award is not a ground for challenge. Section 67 of the Arbitration Ordinance (adopting article 31 of the UNCITRAL Model Law) provides that where there is a dissenting opinion, the signature of the dissenting arbitrator need not be included on the final award. This will not affect the award's validity, provided that the reason for the omitted signature is stated.

 

GERMANY:

Under German Law, Judges of Courts are prohibited from publishing or communicating dissenting opinions in their judgements, as it is considered a violation of ordre public or the principle of secrecy of proceedings. Some German Courts have held this principle to apply to Arbitration proceedings as well. The Frankfurt Regional High Court has in a recent decision dated 16^th January 2020 held a majority Award may be set aside on account of a dissenting award being published, as it would be violation of ordre public and therefore against the public policy. Unless the Federal Court of Justice (Bundesgerichtshof) clarifies and ideally rectifies the position advanced by the Regional High Court, the Frankfurt decision has potential to harm Germany’s position as an internationally recognized place of arbitration.[20]

[1] Art. 52 (2nd para.) Convention for the Pacific Settlement of International Disputes (1899) 1 American Journal of International Law 103

[1] Instead, the President is the only tribunal member to sign the award: Art. 79 Convention for  the  Pacific  Settlement  of  International  Disputes  (1907)  2  American  Journal  of  Inter-national Law Supplement 43

[3] Statement Mr. Loeff (The Netherlands), First Commission 11th mtg. The Proceedings of the Hague Peace Conferences: The Conference of 1907 (Vol. 2, J.B. Scott dir., Oxford University Press, New York: 1920) 363.

[4] See (2007) ICC bull ICArb Vol 18 No.1, p.13

[5] ICC Dispute Resolution 2020 Statistics

[6] https://library.iccwbo.org/content/dr/COMMISSION_REPORTS/CR_0003.htm?l1=bul#TOC_BKL1_3

[7] first Interim Report of the Working Party, dated 1 October 1986 was discussed by the Commission at its meeting in Paris on 23 October 1986