The Supreme Court has told the Mumbai Centre for International Arbitration (MCIA) to appoint an arbitrator in an international dispute between top drug maker Sun Pharmaceutical Industries Ltd and Nigeria-based Falma Organics Limited, signalling a major boost to arbitration in the country, according to legal experts.
This is the first time in India when a court in the country has invoked section 11 of the Arbitration and Conciliation Act, 2015, asking an independent body to appoint an arbitrator in a matter.
Under section 11 of the Act, if a party fails to appoint an arbitrator within 30 days from the receipt of a request to do so from the other party, the appointment can be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
“We are of the view that case for reference to the arbitrator is made out. Accordingly we refer the matter to the Arbitration Centre in Mumbai to appoint an arbitrator for arbitration,” said the Supreme Court order passed by Justices Adarsh Kumar Goel and Uday Umesh Lalit.
According to the order, both Sun Pharma and Falma Organics were told to appear before the MCIA on July 10 for the MCIA to appoint an arbitrator. When contacted the MCIA confirmed that an arbitrator would be appointed as directed by the court. Proceedings in the case will shortly begin in Mumbai.
“We are extremely pleased with the faith that the Supreme Court has reposed in the MCIA. We believe that the courts are integral to improving the quality of arbitration in India, and this is an extremely positive step in that direction,” said Madhukeshwar Desai chief executive officer of MCIA about the SC order.
According to Supreme Court order, the dispute between Sun Pharma and Falma Organics pertains to a distribution agreement of April 2004.
In 2014, Sun Pharma approached the SC to appoint an arbitrator in the case. In August 2015, the apex court sent both the parties to the mediation centre at the Bombay High Court to amicably settle the dispute.
In February 2016, the SC disposed of the case after it was informed that both the firms have agreed for an amicable settlement after mediation. However, on January 9, Sun Pharma once again approached the apex court to appoint an arbitrator as it said the “settlement was not effected”. So far, India has hardly been a preferred seat for settling disputes through arbitration due to lack of credible arbitral institution, excessive judicial intervention, absence of a dedicated arbitration bar and lack of clarity on concept of public policy in the country. According to a study conducted by the Singapore International Arbitration Centre, almost 30 per cent of the disputes it hears annually relate to matters involving Indian businesses. Also, the number of disputes it settled between 2001 and 2013-14 has shown a ten-fold increase.