This guest post is authored by Ashutosh Choudhary. Ashutosh is a BA.LLB. student at National Law University Odisha. He has a keen interest in the laws of arbitration, taxation, and companies. He can be reached at 17ba027@nluo.ac.in

Extending Legal Aid Services to Arbitration Proceedings

It cannot be gainsaid that arbitration has seen a rapid growth in India. This is a positive development from the larger perspective, given that arbitration reduces the burden on national courts. On a closer look, however, arbitration is a niche and expensive mechanism. Not all signatories to arbitration can obtain and afford effective legal representation to commence or defend arbitration.

Indian laws provide for legal aid to indigent persons[1]. The right to legal aid is a means to protect the right of a litigant to seek justice, when the party fails to meet the litigation expenses.[i] Presently, however, Indian laws do not provide for a legal aid mechanism for indigent persons who have agreed to resolve their disputes by arbitration.

In fact, lawyer Rishabh Dheer has recently filed a public interest litigation (the PIL) before the Delhi High Court seeking appropriate directions to ensure that the benefits of legal aid services are made available to indigent parties in arbitration proceedings.[ii]

In this post, the author has analyzed the need and viability of extending legal aid in arbitration matters. The post has also analyzed whether it would be feasible for the State to meet the arbitration expenses of an indigent party to the arbitration agreement.

Legal aid in litigation

Articles 14 and 21, read with article 39A, of the Constitution of India embody the principles of ‘ensuring access to justice’ to everyone.[iii] Accordingly, legal aid comprises the provision of free legal services in civil and criminal matters for those poor and marginalized people – who cannot afford legal representation in proceedings before courts, tribunals, and other authorities. On an international plane, these principles are also recognized in article 14(3)(d)[2] of the International Covenant on Civil and Political Rights (ICCPR).

Section 304 of Criminal Procedure Code 1973 (CrPC) provides that where in a trial if the accused is not represented by a pleader due to insufficient means the Court shall assign a pleader for his defence at the State expenses.

Order 33 of Code of Civil Procedure, 1908 (CPC) provides for the suits instituted by an indigent person. Similarly, Order 44 of the CPC provides for instituting an appeal as an indigent person. The object of Orders 33 and 44 is to ensure that persons of lesser means are also provided an opportunity to seek justice from courts of law.

These principles have been codified in the Legal Services Authorities Act, 1987 (the LSA Act) and administered by the National Legal Services Authority (NALSA). Section 2(1)(aaa) of the LSA Act defines “court” to mean a civil, criminal or revenue court and includes any tribunal or any other authority constituted under any law for the time being in force, to exercise judicial or quasi-judicial functions. Section 12 of the LSA Act enumerates the persons who can take the benefit legal aid under the Act.[3]

Section 13 of the LSA Act provides that persons who satisfy or any of the criteria specified in section 12 are be entitled to receive legal services, provided that the concerned authority is satisfied that such person has a prima-facie case to prosecute or to defend. An affidavit made by a person as to his income is sufficient for making him eligible for legal aid unless the concerned Authority has reason to disbelieve such affidavit.

Extending legal aid to arbitral proceedings

As readers would be aware, arbitration is a costly affair. Parties are required to bear fees of arbitrators, arbitral institutions, experts, arguing advocates, and attorneys – in addition to other administrative expenses. When parties have agreed to resolve their disputes by arbitration, parties cannot later choose to approach courts for this purpose. Existing Indian law does not allow parties to avoid arbitration on grounds that either party suffers from a lack of funds.

In fact, section 38 of the Arbitration and Conciliation Act, 1969 (the Act) provides that if a party to the arbitration does not pay its share of costs/fees towards the claim or counterclaim, the arbitral tribunal may suspend or terminate the arbitral proceedings. The arbitral tribunal also a lien on the arbitral award for any unpaid costs of the arbitration.[iv] Given the economic realities of arbitration and these statutory provisions, an indigent party would be severely disadvantaged in arbitration proceedings. The question is, therefore, if the legal aid provisions in the LSA Act be extended to arbitration?

An arbitral tribunal would ideally be construed as being constituted under a contract in accordance with Section 7 of the Arbitration Act. On this interpretation, arbitral tribunals may be read to have been excluded the definition of courts under the LSA Act. Parties in arbitration would then be disentitled from the benefits provided under the LSA Act.

However, Section 11(6) of the Arbitration Act empowers courts to appoint an arbitrator(s).  In SREI Infrastructure Finance Limited v. Tuff Drilling Private Limited,[v] the Supreme Court of India held that the power exercised by an arbitral tribunal is quasi-judicial. The power and functions of an arbitral tribunal are statutorily regulated. As such, it can be said that arbitral tribunals are brought into existence by or under a statute, ie the Arbitration Act. It should then be possible to bring an arbitral tribunal within the purview of Section 2(1)(aaa) of the LSA Act. The provisions of section 13(1) of the LSA Act can be extended to any person who is a party to an arbitral dispute.

Unfortunately, de hors the aforesaid interpretation, provisions of the LSA Act are not expressly applicable to arbitrations. If so, it can be argued that the lack of legal aid for arbitration proceedings is discriminatory; in that there is no specific or discernible reason why the legal aid extended for civil and criminal litigation should not be extended to arbitral proceedings. Similarly, there is also no intelligible differentia or rational nexus for making a classification between litigants and parties to arbitration.

In fact, free legal assistance is arguably a facet of the fundamental right to life under Article 21. In Kishor Chand v. State of H.P., the Supreme Court held that assigning an experienced defence counsel to an indigent accused is a facet for fair procedure and an inbuilt right to liberty and life envisaged under Article 21 of the Constitution of India.[vi]

Similarly, in Suk Das vs Union Territory of Arunachal Pradesh[vii], the Supreme Court had observed that free legal assistance at the State’s cost is a fundamental right when a person is accused of an offence that involves jeopardy to life or personal liberty. This fundamental right is implicit in the requirement of reasonable, fair and just procedure prescribed by Article 21.

While the chance criminal liability invites greater protection for litigants, it may not be out of place to say that fair and adequate legal representation in commercial arbitrations is also an extension of the right to life under Article 21.

Besides, if an indigent person is unrepresented or underrepresented in an arbitration, it can also be argued that there is a violation of audi alteram partem, i.e. no man should be condemned unheard, or both the sides must be heard before passing any order.

Implementing legal aid in Arbitration

In 2018, Former Law Commission Chairman Justice A.P. Shah, in the Commonwealth Human Rights Initiative (CHRI) report, titled Hope Behind Bars?, on legal aid for persons in custody, revealed that about 15% of the total funds allocated to state legal service authorities remain unutilized.

Raja Bagga, author of the report, pointed out that the per capita expenditure on legal aid in India is just ₹ 0.75. The total fund allocated to State legal service authorities was ₹ 257 crore, of which National Legal Services Authority (NALSA) allocated 31% (₹79 crore), State governments allocated 61% (₹156 crore), and miscellaneous funds accounted for 8%. Thus, as per the report, ₹37 crore (15%) of the entire amount remained unutilized.[viii]

Once it is settled that legal aid should indeed be extended to arbitration, India may require legislative or judicial clarification on the manner and extent of legal aid to be provided in arbitration. Among other things, these unutilized funds can be used in paying the fees of the arbitral institution, arbitrators, and attorneys.

Exemption to Indigent Litigants from paying fees of the arbitral institution                 and arbitrators.

Orders 33 and Order 44 of the CPC exempts indigent persons from paying requisite court fee at the first instance; and allows them to institute suit or prosecute appeal in forma pauperis.  In UOI vs Khaders International Construction Ltd,[ix] it was observed that the provisions of Order 33, Rule 1 of CPC is aimed at enabling poor persons to seek justice without having to bear court fees.  Under Order 33, Rule 1, it was pointed out that an ‘indigent person’ is one who is not possessed of sufficient means. In O.P. Neelam Hosiery Works and Anr. vs State Bank of India,[x] the court clarified that, It is possible that one may be possessed of sufficient property but still may not be possessed of sufficient means. The sufficient means would not be sufficient property and includes such means on which the bare living of the person who are plaintiff and their family members is dependent.

Parties are required to pay administrative fees when they opt to arbitrate under institutional rules.[xi] In the spirit of providing adequate legal aid, the objective of Orders 33 and 44 of the CPC can be transposed into the Arbitration Act and exempt indigent parties from paying fees to the arbitration Centre, especially if the indigent party is a respondent in the arbitration On the other hand, if the indigent party is a successful claimant, then the respondent may be directed to bear the claimant’s share of the administrative fees.

Similarly, financial aid can be extended towards arbitrators’ fees as well.

 Legal representation to the indigent parties in arbitration proceedings.

The National Legal Services Authority (NALSA) and District Legal Services Authority (DLSA) have been constituted to provide free Legal Services to the weaker sections of the society.  According to Section 2(c) of the LSA Act, “Legal Services” includes any service in the conduct of any case or other legal proceeding before any court or other authority or tribunal and the giving of advice on any legal matter. Legal Services include providing Free Legal Aid to those weaker sections of the society who fall within the purview of Section 12 of the LSA Act. Provision of free legal aid includes the following:

a) Representation by an Advocate in legal proceedings;

b) Payment of process fees, expenses of witnesses and all other charges payable or incurred in connection with any legal proceedings in appropriate cases;

c) Preparation of pleadings, memo of appeal, paper book including printing and translation of documents in legal proceedings;

d) Drafting of legal documents, special leave petition etc.

e) Supply of certified copies of judgments, orders, notes of evidence and other documents in legal proceedings.[xii]

According to Section 13 (1) of the LSA Act, any individual who satisfies any criteria enumerated under Section 12 of the LSA Act is entitled to receive legal services, provided that the concerned Legal Services Authority is satisfied that such person has a genuine case to prosecute or defend the matter. Financial assistance provided by NALSA and DLSA can be effective and possible mediums to provide legal assistance to indigent parties in arbitration matters.

Conclusion

In the PIL proceedings referenced above, the Delhi High Court had called upon the DLSA to explain their stance on extending legal aid in arbitration proceedings. Interestingly, the DLSA has accepted the request to provide financial assistant to indigent litigants in Arbitration Matters in accordance with the law.[xiii]

While this is an encouraging development, many practical factors remain unanswered. The Indian executive and legislature should provide clarity on how the existing legal aid mechanism can be extended to arbitration.

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[1] See e.g, Order 33 Rule 1 of the CPC

Explanation I.–A person is an indigent person,–

(a) if he is not possessed of sufficient means (other than property exempt from attachment in execution of a decree and the subject-matter of the suit) to enable him to pay the fee prescribed by law for the plaint in such suit, or

(b) where no such fee is prescribed, if he is not entitled to property worth one thousand rupees other than the property exempt from attachment in execution of a decree, and the subject-matter of the suit.

Explanation II.–Any property which is acquired by a person after the presentation of his application for permission to sue as an indigent person, and before the decision of the application, shall be taken into account in considering the question whether or not the applicant is an indigent person.

Explanation III.–Where the plaintiff sues in a representative capacity, the question whether he is an indigent person shall be determined with reference to the means possessed by him in such capacity

[2] “Right to be tried in his presence, and to defend himself in person or through legal assistance of his own choosing; to be informed, if he does not have legal assistance, of this right; and to have legal assistance assigned to him, in any case where the interests of justice so require, and without payment by him in any such case if he does not have sufficient means to pay for it.”

[3] 12. Every person who has to file or defend a case shall be entitled to legal services

under this Act if that person is–

(a) a member of a Scheduled Caste or Scheduled Tribe;

(b) a victim of trafficking in human beings or beggar as referred in article 23 of the Constitution;

(c) a woman or a child;

(d) a person with disability as defined in clause (i) of section 2 of the

Persons with Disabilities (Equal Opportunities, Protection of Rights and

Full Participation) Act, 1995

(e) a person under circumstances of undeserved want such as being a victim of a mass disaster, ethnic violence, caste atrocity, flood, drought, earthquake or industrial disaster; or

(f) an industrial workman; or

(g) in custody, including custody in a protective home within the meaning of clause (g) of section 2 of the Immoral Traffic (Prevention) Act, 1956, or in a Juvenile home within the meaning of clause (j) of section 2 of the Juvenile Justice Act, 1986, or in a psychiatric hospital or psychiatric nursing home within the meaning clause (g) of section 2 of the Mental Health Act, 1987; or

(h) in receipt of annual income less than rupees nine thousand or such other higher amount as may be prescribed by the State Government, if the case is before a court other than the Supreme Court, and less than rupees twelve thousand or such other higher amount as may be prescribed by the Central Government, if the case is before the Supreme Court.

[i] Delhi High Court Bar Association and Ors. v. Govt. of NCT of Delhi and Ors, 203 (2013) DLT 129.

[ii] Rishabh Dheer v. Union of India, WP (C) 11085/2019.

[iii] Pooja P Pradhan, ‘Right to Legal Aid: A Constitutional Commitment’, available at https://pib.gov.in/newsite/mbErel.aspx?relid=118011 (last accessed on 18 March 2020).

[iv]  Section 39, Arbitration and Conciliation Act, 1996.

[v] Srei Infrastructure Finance Limited v. Tuff Drilling Private Limited, Civil Appeal No. 15036 of 2017, decided on September 20, 2017.

[vi] 1990 Cr.LJ 2289 (SC).

[vii] Suk Das v. Union Territory of Arunachal Pradesh, (1986) 2 SCC 401.

[viii] Soibham Singh, ‘15% of funds allocated to State legal services stay unused’, available at https://www.thehindu.com/news/cities/Delhi/15-of-funds-allocated-to-state-legal-services-stay-unused/article24911399.ece (last accessed on 23 March 2020).

[ix] Union of India v. Khaders International Construction Ltd, (2001) 5 SCC 22.

[x] AIR 1994 HP 1.

[xi] The Delhi High Court Arbitration Centre (Administrative Costs and Arbitrators’ Fees) Rules 2018, available at http://www.dacdelhi.org/topics.aspx?mid=21 (last accessed on 22 March 2020).

[xii] NALSA FAQ 7, available at https://nalsa.gov.in/faqs (last accessed on 20 March 2020).

[xiii] Rishabh Dheer v. Union of India, WP (C) 11085/2019, Order dated 23/10/2019.