Madras High Court Arbitration Rules, 2020 Validity Challenged

What is the case

• A writ petition challenging the Madras High Court Arbitration Rules, 2020 as ultra vires the Arbitration and Conciliation Act, 1996 and the Commercial Courts Act, 2015 was accepted by the Madras High Court on Friday.
• The matter has been set for hearing on July 2, 2021, by a Division Bench consisting of Chief Justice Sanjib Banerjee and Justice Senthilkumar Ramamoorthy.

Grounds as per Commercial Courts

• The purpose of Parliament is to establish Commercial Courts as an exclusive court for commercial arbitration, as stated in Section 10 of the Commercial Courts Act.
• Section 15 of the Act provides for the transfer of all litigation relating to the Arbitration and Conciliation Act to the said courts, and it expressly states that all pending cases must be resolved in compliance with the Commercial Courts Act's procedure.
• In Tamil Nadu, however, all of the Principal District Courts have been classified as Commercial Courts. They, on the other hand, regard petitions filed under the Arbitration and Conciliation Act as if they were some other form of the petition.

Grounds as per Arbritational and Conciliation

• By way of contempt of Tribunal under the Contempt of Courts Act, Section 29(5) of the Arbitration and Conciliation Act may be used to enforce the Tribunal's order. The contested Rules, on the other hand, do not specify a protocol to be followed in such situations.
• Section 2(e) of the Arbitration and Conciliation Act, which contemplates the transfer of arbitral proceedings to an Additional District Judge who is not a Principal Court of Original Jurisdiction as specified in Section 3(17) of the General Clauses Act, is incompatible with Rule 12(IV) of the said Rules.

Grounds as per Information Technology Act

• Electronic records of arbitral proceedings are covered by Rule 6 of Order XI of the Commercial Courts Act. The provision is based on the provisions of the Information Technology Act of 2000, which designates the Union of India as the appropriate government for enacting rules under the Act.
• Under the said Act, no further delegation to powers of any responsible government is possible. As a result, the High Court cannot amend certain Rules by the subordinate legislative authority under Section 82 of the Arbitration and Conciliation Act 1996, because the impugned Rules lack parliamentary approval.