Entry 13 in the Concurrent List of the Seventh Schedule of the Constitution of India, 1950 (“the Constitution”), gives the Legislature of the States along with Parliament, the power to “make laws with respect to any of the matters” (see Article 246) set out in the entry. Entry 13 has the following subject-matter: “Civil procedure, including all matters included in the Code of...
Entry 13 in the Concurrent List of the Seventh Schedule of the Constitution of India, 1950 (“the Constitution”), gives the Legislature of the States along with Parliament, the power to “make laws with respect to any of the matters” (see Article 246) set out in the entry. Entry 13 has the following subject-matter: “Civil procedure, including all matters included in the Code of Civil Procedure at the commencement of this Constitution, limitation and arbitration”. Suppose a State intended to amend the Arbitration and Conciliation Act, 1996 (“the Arbitration Act”), then would such a State have the power to do so?
Article 246 (2) of the Constitution, “also” gives the power to the Legislature of State (subject to Article 246(1)) to make laws with respect to any matters enumerated in the Concurrent List of the Seventh Schedule. Article 246 ought to be read with Article 254 titled “Inconsistency between laws made by Parliament and laws made by the Legislature of States”. Article 254 (1) clearly states that incase of repugnancy between a State law and a law made by Parliament in the Concurrent List which Parliament is competent to enact, the provision of a law made by Parliament shall prevail “and the law made by the Legislature of the State shall, to the extent of the repugnancy shall be void”. However, Article 254 (2) states that if such State legislation (a) is reserved for the consideration of the President and (b) has received Presidential Assent, the State legislation shall prevail unless of course Parliament enacts a law with respect to the same matter “including a law adding to, amending, varying or repealing the law so made by the Legislature of the State”. Therefore, even for entries in the Concurrent List, Parliament would have the power to undo what a State Legislature undertakes.
The Arbitration Act
The Arbitration Act, as the long title suggests is “An Act to consolidate and amend the law relating to” (a) domestic arbitration, (b) international commercial arbitration and (c) enforcement of foreign arbitral awards and further “to define the law relating to conciliation” and for matters connected or incidental thereto.” The Preamble to the Act recognizes that the United Nations Commission on International Trade Law (“UNCITRAL”) had adopted the UNCITRAL Model law on International Commercial Arbitration in 1985 and the UNCITRAL Conciliation Rules in 1980 which the General Assembly recommended to give due consideration to and to use by nation states. Therefore, Parliament thought it “expedient to make law” with respect to arbitration and conciliation taking into account the aforesaid Model Law and Conciliation Rules. Clause 3 Statement of Objects and Reasons appended to the Arbitration and Conciliation Bill, 1995 (“SOR”) states that though the UNCITRAL Model Law and Conciliation Rules are intended to deal with international commercial arbitration and conciliation it recognized that with appropriate modifications, they could serve as a model legislation on domestic arbitration and conciliation.
The Arbitration Act has five parts. Part I titled, “Arbitration”, Part IA (inserted in 2019) titled, “Arbitration Council of India”, Part II titled, “Enforcement of Certain Foreign Awards”, Part III titled, “Conciliation” and Part IV tiled, “Supplementary Provisions”. On the interplay between Part I and II, the Supreme Court in Bharat Aluminum Company v. Kaiser Aluminum Technical Services Limited (“BALCO”) has held that Part I and II “are mutually exclusive to each other” and Part I would have no application to international commercial arbitrations held outside India.
Does a State have the Legislative Competence amend the Arbitration Act?
If a State intended to amend the Arbitration Act, which would obviously be through an amending act enacted its Legislature, could it derive its power to do so by relying on Entry 13 of the Concurrent List? The answer to this question would be an emphatic “No!”. There are several reasons to come to this conclusion:
1. While interpreting Article 254 (2) of the Constitution, the Supreme Court in Forum for People's Collective Efforts (FPCE) and another v. State of West Bengal sets out three tests of repugnancy:
a. A situation of “an absolute or irreconcilable conflict or inconsistency between a provision contained in a State legislative enactment with a Parliamentary law with reference to a matter in the Concurrent List.” To illustrate, if the State amends Section 29A (1) of the Arbitration Act by extending the period to make an arbitration award from 12 months to 24 months from date of completion of pleadings, there would be a direct conflict between the State amendment and the provision made by Parliament which would make the State amendment void.
b. The second test “involving a conflict between” State and Union legislations may arise in a situation where “Parliament has evinced an intent to occupy the whole field”, thereby prompting Parliament to make a complete and exhaustive code on the subject giving the State no leeway. A reading of the Preamble of the Arbitration Act makes it evident that Parliament intended to occupy the whole field by implementing the recommendation of the General Assembly to follow the UNCITRAL Model Law and Conciliation Rules and by implementing and enforcing the New York and Geneva Conventions (see Part II of the Arbitration Act) by virtue of the powers given to it under Article 253 of the Constitution.
c. “The third test of repugnancy is where the law enacted by Parliament and by the State legislature regulate the same subject. In such a case the repugnancy” would arise “because the subject which is sought to be covered by the State legislation is identical to and overlaps” with the Union legislation on the subject. For instance, a State cannot make its own Arbitration Act as it would conflict with the Union law. The only exception would have been for the State of Jammu and Kashmir up to 2019 prior to the implementation of the Jammu and Kashmir Reorganisation Act of 2019.
Therefore, the aforesaid tests would clearly prohibit a State from either amending the Arbitration Act or enacting its own Act. It would also not be possible for a State to rely on the dictate laid down by the Supreme Court in BALCO by saying that it since Part I and II are “mutually exclusive”, the State would at least have the power to amend Part I of the Arbitration Act. This is because the Union through the voice of Parliament intended to occupy the “whole field” including domestic arbitration as is evident from a reading of Clause 3 of the SOR of the Arbitration Bill of 1995.
2. Apart from what is mentioned above, it would also be useful to peruse the certain Articles of the Constitution and Entries in the Union List of the Seventh Schedule. Entry 13 of List I gives the Union exclusive power to participate and implement decisions made in “international conferences, associations and other bodies”. Entry 14 also gives exclusive power to the Union to implement treaties, agreements and conventions with foreign countries. Both these entries read with Article 253 would be enough to conclude that Parliament had intended to implement the UNCITRAL Model Law and Conciliation Rules and enforce agreements with nation states that have adopted the Model Law and Conciliation Rules and therefore had the exclusive power to enact, alter and amend the Arbitration Act without State interference. Further, assuming for a moment that none of the aforesaid entries apply, Parliament certainly has the residual power under Entry 97 of the Union List read with Article 248 to make laws that don't find place in either the State or Concurrent List.
3. But what of the use of the word “arbitration” in Entry 13 of the Concurrent List? By excluding a State from enacting its own Arbitration Act or by preventing it from amending the Union Act, would it not partially render the use of the word “arbitration” in this Entry meaningless? Afterall, Entries in the Constitution cannot be read so as to override each other or make a particular entry (or a portion of it) meaningless (See Union of India v. Shah Goverdhan L Kabra Teachers' College). While this question would seem logical, it would clearly be missing the wood for the trees because one could very well argue that a State has the power to make a law encouraging parties to arbitrate a dispute, by say exempting arbitration awards from Stamp Duty or to make a law, say under a town planning act which provides an option to parties to arbitrate for disputes on compensation awarded for acquisition of property under a town planning scheme; and hence, it is for this reason that the word “arbitration” finds its place in Entry 13 List III. This would be the extent of the State's power.
Therefore, it is Parliament alone that has the monopoly over the Arbitration Act to the unfortunate exclusion of the States.
The author is an arbitrator and a practicing Advocate at the Bombay High Court. Views are personal.