Page 18 - Banking Finance March 2025

LEGAL UPDATE

Don't misread arbitration

¹
¿
»
ruling
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In the recent Supreme Court's judgment Ô Ô Ô Ô Ô » »» »¹ ¹¹ ¹ ¿ ¿¿ ¿ ´ ´´ ´
in the CORE (Central Organisation for
Railway Electrification) vs ECI-SPICSMO-
MCML case on the appointment of ar-
bitrators, the intended result and reac- Ò»©­
tions have been contrasting. The court
has doubled down on the legal position
that was laid down by it in TRF v. Energo
Engineering Projects (2017) and Perkins
Eastman Architects DPC v. HSCC (India)
Ltd (2019) cases: unilateral appoint-
ment of an arbitrator - where one party
actions, like insurance claims and rooms. The showrooms packed the
has direct or indirect control over the
credit card defaults. Such an interpre- footwear and put them in carry bags
selection of an arbitrator to resolve dis- for which an additional charge of Rs 3
putes - is prohibited. tation of the judgment would be a set-
back in India's plans to become an ar- was levied in the bill.
But India Inc seems to have misunder- bitration hub.
stood the judgment. What was a judg- The bags had Bata's name and logo
Industry could consider the option sug- printed on them. Therefore, Raturi and
ment in favour of neutral, transparent
and process-driven arbitration has re- gested by solicitor general Tushar Bhowmik filed consumer cases before
Mehta. He argued that there is a use their respective consumer commissions
sulted in the industry moving away
for arbitration institutions like online to challenge the charge levied for the
from arbitration. Yes, most loan agree-
dispute resolution (ODR) platforms that bags. They contended that Bata should
ments that India Inc used until 2019
leverage an institutional structure and allow customers to bring carry bags
contained arbitrator appointment
clauses that were unilateral in nature. infuse tech to make the arbitration instead of compelling them to pur-
But this does not mean that the only process accessible, convenient and af- chase bags.
recourse available to them is to go to fordable. Instead of approaching and Secondly, if a customer requires a
courts and ask them to appoint arbi- overburdening courts, referring such carry bag, a plain carry bang should be
trators or to abandon arbitration alto- disputes to arbitration institutions shall sold, not one with the seller's name
gether. ensure impartiality, fairness and party and logo, as it would result in the cus-
autonomy. tomer paying for an advertisement of
An arbitration clause would not be the company's products. Bata con-
deemed void solely because it provides Arbitration institutions can eliminate
any imbalance of power or conflict of tested the complaint, arguing that it
for a unilateral appointment mecha- was only recovering a part of the cost
nism. Delhi, Bombay and Calcutta high interest in the process of arbitrator
appointment. Further, these institu- of the bag.
courts have relied on the doctrine of
tions will also make arbitrations more After considering the rival contentions,
severability to allow arbitrations in
cases where clauses contained a uni- efficient by providing administrative the Chandigarh District Commission
and technical support. ordered Bata to discontinue the unfair
lateral appointment mechanism. Par-
trade practice and refund the amount
ties merely need to choose a different
mechanism for arbitrator appoint- Seller can't charge for bag of Rs. 3 charged for the bags. Addition-
ally, Raturi was awarded Rs. 3,000 as
ment. carrying its name compensation and Rs. 1,000 towards
Declaring all arbitration agreements In two unconnected incidents, Dinesh litigation costs. Furthermore, Bata was
containing unilateral appointment Parshad Raturi of Chandigarh and Rana saddled with punitive damages of Rs.
clauses invalid will lead to problems for Pratap Bhowmik of Agartala purchased 5,000 to be deposited in the Consumer
institutions dealing with multiple trans- footwear from different Bata show- Legal Aid Account.

16 | 2025 | MARCH | BANKING FINANCE