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AN OVERVIEW OF ARBITRATION PROCEDURE IN INDIA
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AN OVERVIEW OF ARBITRATION PROCEDURE
IN INDIA
ATUHORED BY - POORVA CHAWLA
Introduction
This
article gives an overview of Arbitration in India, about its proceedings,
agreement and enforcement of foreign awards.
Earlier
there were no rights and no laws as people were not educated and did not have
any knowledge regarding arbitration. But later, when people started getting
civilized, the rights of individuals were considered which also gave birth to
conflicts. In such cases, one party used to approach a third person whom they
trust and resolve the matter with their suggestions. The same principle applies
in today’s era as well. As the need for globalization and commercial market is
increasing, more disputes are being seen between the parties related to their
contracts and agreement held between them which brings us back to a mutually
decided person who will dissolve their dispute and in legal term, known as an “Arbitrator” or “Mediator”. They are the people who are
assigned the work to dissolve commercial disputes between the parties being an
independent person, without approaching the court and saving their time and
money.
Based
on UNCITRAL model law India enacted the Arbitration and Conciliation Act, 1996 further
amended in 2015 which deals with domestic and international commercial
arbitration in India. The amended Act especially emphasizes minimizing the role
of judiciary court in arbitration proceedings and further to consider every
arbitration order or award as a decree as it is been considered in civil
procedure code. The Act is categorized in two, Part I deals with
significant provisions which deal with domestic and International commercial
arbitration procedure to be conducted in India irrespective of nationality and
Part II talks about enforcement of foreign arbitration award.
Arbitration agreement
It can be defined as a written
statement or exchange of communication between the parties or any statement
made through means of telecommunication. It is not compulsory for the parties
to sign or un sign it. Even if an arbitration clause is present in the
agreement, it would be considered as an arbitration agreement.
Rickners
Verwaltung Gmbh vs. Indian Oil Corporation, 1998 stated that the intention of the party in arbitration gathers
information in the form of expression and the meaning it conveys. An
arbitration agreement would be a statement made by one party regarding the
claim in dispute and not denied by the other party.
Non-Intervention of Court in the Arbitration process
As per Section 5
of the Arbitration and Conciliation Act, 1996 the court cannot interfere in the arbitration proceeding except
wherein provided by the act in the following situations:
·
Where an arbitrator needs to be
appointed when the parties cannot appoint a mutually independent arbitrator.
·
In cases of taking the shreds of
evidence.
·
Where the court is ruling in the
cases as the arbitrator is terminated due to incapacity or other sufficient
reasons mentioned under the Act.
Section 8 is a companion section which says “where a party has approached the judicial court to dissolve
a dispute and it is exclusively to be trialled by the arbitrator, then the
court must direct the person to start the arbitration proceeding first without
any delay and may come later to the court when arbitration award has been
made.”
Interim measure
A party can seek interim measures for
which two avenues are open to them which is:
Section 9 of the Act enables a person
to approach the competent court before or after or during the arbitral
proceedings are made but before the enforcement of the arbitration award.
In the
case, Sundaram Finance v. NEPC, 1999 (2) SCC 479 the Apex Court of India held that if a party approaches the court
before the commencement of arbitration proceedings, he must serve a proper
notice to the opposite party as to invoking the arbitration and further, the
court must satisfy the party as to first approach the arbitrator and take
effective steps to settle the dispute without any delay. For this purpose, the
court must be satisfied as there exists a valid arbitration agreement between
the parties.
Under Section 17 the parties can also approach the arbitral tribunal and in such cases,
the tribunal has the power to grant interim measures related to the subject
matter in dispute. The interim measures are the urgent measures required by the
party to preserve and protect his property; measure related to payment of claim
etc.
Arbitrators
Appointment
of the Arbitrator
The appointment of arbitrator is
given under Section 11 of the Act. The Act provides full freedom to the parties to
appoint an arbitrator as of any nationality unless agreed by the parties.
However, in the case of failure to appoint an arbitrator the parties can
approach the court to make such an appointment. In case of domestic
arbitration, the Chief Justice of the High Court has the authority to appoint
an arbitrator to the parties and in case of International Commercial
Arbitration, the Chief Justice of India has the authority to make such
appointment as in India, the foreign disputes must be dealt by the highest
judicial officers.
In the case of Konkan
Railway Corporation v. Rani Construction Pvt Ltd, 2002 the Supreme Court held that the function of Chief Justice of India
and his designates is to ensure the nomination of an arbitrator who is
independent, competent and impartial and settles the dispute between the
parties to the best of his knowledge.
Power and Duties of Arbitrator
|
Power
|
Duties
|
|
Pass Interim Order
|
Order of Appointment
|
|
Decide the Process of Arbitration Proceedings
|
Timely adjudicate the matter
|
|
He has the power to Terminate the procedure
|
Act Judicially and Impartial
|
|
Appointing an Expert person
|
Encourage settlement of the matter
|
|
Seeks Court permission in taking evidence
|
Misconduct is not allowed
|
Termination of an Arbitrator
The Act provides for the termination
of an arbitrator under Section 14 of the Act and it can be made
in two circumstances which are:
·
If he fails to act without undue
delay, &
·
If he is unable to perform his
function due to De jure or De facto.
·
In case of any controversy regarding
the situation, the parties can approach the court.
Types of Arbitration proceedings
In India, the arbitration proceeding
is broadly categorised into Ad-hoc arbitration and institution arbitration.
Under ad hoc arbitration the parties
themselves commence the arbitration proceedings and determine the conduct of
arbitration proceedings. In ad hoc arbitration if the parties are not able to
appoint a mutual arbitrator, then either of the parties can invoke Section 11 of the Act. Under ad
hoc arbitration the parties and the arbitrator both have to agree on the fee of
the arbitration proceedings which is usually expensive.
Under institutional arbitration,
arbitration is administered by the arbitration institution. The parties can
approach any arbitration institution and they themselves appoint an arbitrator
and the proceedings can be commenced. The Indian Institution includes the Indian Council of Arbitration and International Centre for Alternative Dispute Resolution. The International institution
includes the International Court of Arbitration, American Arbitration
Association. All these institutions have expressly formed rules to deal with
all the possible disputes with arbitration proceedings.
Arbitral proceedings
The arbitrators are the masters of
the arbitration proceedings and can conduct the proceedings in the manner they
feel appropriate. This power includes relevance, the weight of any evidence,
admissibility. The only restriction on them is they need to treat both the
parties with equality and both parties must be given equal opportunity to
present his case, without any biasedness. The Indian Evidence Act, 1872 and the Civil Procedure Code,1908 both do not apply on the arbitration proceedings. Generally, oral
documents are been considered on the request of the parties and a further piece
of evidence can be presented if required. The arbitrator has the power to grant
ex- parte order in a case where the respondent fails to appear in court or
without sufficient cause fails to communicate his statement of defence, the
arbitrator can grant ex-parte order. However, the court should not treat this
order and act of the respondent as admission and use against him to terminate
the proceedings.
The Governing law
To determine the rules of law
applicable to disputes, the law makes a distinction between the Domestic
Arbitration and International Commercial Arbitration proceedings. Under
International Commercial Arbitration, the court must apply the law of land,
where the dispute arises and as agreed by the parties and in case of failure to
do so the tribunal must apply rule of law considering appropriate as per the
circumstances. Indian Courts have accepted long back that in case of absence of
any arbitration agreement the arbitrator can apply the law which is most
closely connected and relevant to the subject matter in dispute. However, the
Indian tribunals are obliged to apply substantive law where the parties are
Indian. Further, the tribunal can grant award as it deems fit and may pass the
interest from the day of arising of the cause of action till the arbitration
award has been granted as it seems reasonable. In the amendment Act, 2015 the
interest rate has been increased by 2%.
In case of foreign dispute the rate
of interest will be governed by The Civil Procedure Code, 1908 as it empowers
the court to grant pendente lite interest as well as interest from the day of
cause of action until the arbitration award is granted. In the case of
commercial disputes, the rate of interest should not increase the contractual
interest and in its absence, the tribunal can make interest as generally
provided by the recognized banks and institutions.
Arbitral Award
The arbitration award granted by the
arbitrator can be challenged under Section 34 of the Act by making an application under it only
based on grounds specified therein and they are as follows:
1.
The party was under some incapability
to make an application;
2.
The arbitration agreement agreed by
the parties was not valid as per the law;
3.
The party making the application was
not given proper notice for appointment of the arbitrator or arbitral
proceedings;
4.
The award made is out of the Scope of
arbitration and does not deal with the dispute;
5.
The award made is contrary to public
policy;
6.
The subject matter dealt is not
capable of settlement by Arbitration.
An application to set aside the award
must be made within 3 months from the date of receipt of such award by the
applicant which can be further extended to 30 days on giving sufficient cause
of delay.
Conclusion
In the early period, the Concept of
Arbitration was introduced but by the efforts of due recognition to Model Law
of International Commercial Arbitration and Conciliation rules given by the
United Nations Commission on trade and law (UNCITRAL). The model law and rules
have played a significant role in the settlement of commercial disputes and
provided rules to various other countries which they can adapt and make
according to their municipal laws as earlier there was no unified law related
to trade and its need felt when globalization started which further gave rise
to disputes related to it. Further the Act was amended in 2015 with better
updates.
Article Information
AN OVERVIEW OF ARBITRATION PROCEDURE IN INDIA
Authors: POORVA CHAWLA
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/05/25
- Volume 2
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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