This blog is inscribed by Anupama Vernekar
Definition of Arbitration
Arbitration, is a method of Alternative Dispute Resolution, where the disputes are settled outside courts of law, on the basis of a voluntary agreement of both the disputing parties. Arbitrators are invited as a neutral third party to come and settle the matter between them and their decision is deemed final and binding upon both the parties. This decision is made in an Arbitration tribunal which is a panel of one or more adjudicators appointed to resolve disputes.
It is increasingly becoming a preferred form of dispute resolution because of the following reasons:
1) Neutrality in decision making: Arbitrators are third parties who expertise in the subject matter of dispute and thus they can make unbiased decisions while exerting expertise and resolving the dispute in a manner that suit both the parties.
2) Flexibility of Procedure: Arbitration allows parties autonomy to decide the best suited procedure as well as provides procedural flexibility as opposed to litigation.
3) Cost efficiency- It fastens the procedure as opposed to litigation and also reduces fees and other expenses.
Difference between Arbitration and Mediation
In mediation, the trial is put on stay until the mediator is able to negotiate such that both the parties are convinced whereas in arbitration the procedure of the trial court is replaced by that of an Arbitration Tribunal. In the former method of dispute resolution, the role of mediator ends when the parties reach an amicable resolution however the role of an arbitrator ends only when he has made a final decision that is binding and both the parties have agreed and acknowledged the decision.
Arbitration and Conciliation Act 1996
This Act was based on the UNCITRAL[1] model law on International Commercial Arbitration,1985 and UNCITRAL Arbitration rules,1976. The Rationale of the act was:
1) To minimize the intervention of trial courts where the disputes can be resolved outside the courts of law
2) To legally identify the arbitral awards given by the adjudicators, such that impartiality and the spirit of justice prevails in a flexible and efficient manner.
3) To ensure that the arbitral award will have the same legal status as a settlement reached through conciliation.
Court for Arbitration Proceedings
‘Court’ [2] means-
(I) The principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes; in case of an arbitration within the country, other than international commercial arbitration.
(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court.
Limited Scope of Judicial Intervention
Section 5 of the Arbitration and Conciliation says the trial courts cannot interfere into such matters that are looked into by arbitrators, except in the following cases. The purpose of this section is to curb the intervention of the judiciary so as to ensure that the arbitration process is carried out undisturbed.
However, courts can refer the parties to an arbitration process if they deem it fit in those circumstances.
Power to refer parties: If an arbitration agreement is in existence and if a party to the arbitration so applies with a duly certified copy of the arbitration agreement or the original agreement itself, when submitting his/her first statement on substance of dispute. The courts will then refer the matter to an arbitration tribunal, u/s 8 of the Act.
Temporary provisions by courts
Till such time that the matters between the parties are pending, the courts provide for the following interim reliefs:
i) Appointment of a guardian for a minor or a person of unsound mind
ii) Protection of assets and safe custody of goods
iii) Securing amount in dispute
iv) Injunction orders
v) The preservation and detection of any property that is the subject matter of the dispute
And Any other orders that the court may deem fit
Appointment of Arbitrators
The disputing parties can decide upon the arbitrator through an agreement or otherwise and
1) A person of any nationality can be appointed as an arbitrator.
2) Each of the disputing party is at liberty to appoint one arbitrator as per their
Discretion. The appointed arbitrator then shall appoint a third
Arbitrator who he may deem fit.
3) In case the parties fail to appoint the Arbitrator, the Chief Justice of the
High court, within which the civil courts are situated makes the decision.
Moreover, on the event that the disputing parties are of the opinion that the appointed arbitrator is unable to discharge his functions, they may apply to the courts to remove him from his post.
Circumstances when the award is set aside: The court may refuse to sanction the arbitral award in the following situations:
· When the arbitral award falls outside the scope of the subject of matter of the dispute
· If it is found that the arbitration agreement is not valid and binding under the law to which it is subjected to
· And if it does not comply with public policy norms.
Recent Amendments to the Arbitration and Conciliation Act 1996
Arbitration and Conciliation Act 2015:
· The 2015 Amendment to the original arbitration Act was aimed at reducing judicial intervention as much as possible. In the case of Konkan Railway Corporation v Rani Construction Pvt. Ltd.,2002[3] it was held that the function and powers of the Chief Justice must be limited to the appointment of arbitrators since it is an administrative function and nothing beyond that.
· This amendment also proposed that the power of the courts limited to studying and examining the existence of the arbitration agreement.
Arbitration and Conciliation Act 2019
The following were the salient features of the Act:
· Arbitration Council of India: The arbitration council of India would be composed of either the Judges of Supreme Court or High court or the chief justice of the High court; or any other individual having an expertise on the subject of arbitration. They would have to perform the following functions
(1) Ensuring that uniform standards previously designated are followed and maintained in the Arbitral proceedings
(2) Framing suitable policies for Grading of Arbitral institutions
(3) Maintenance of records of Arbitral awards for future referring
The Supreme court and High court shall have to oversee the appointment of arbitral institutions and ensure that the time limit for making decisions is 12 months.
Also it has to strictly ensured that all matters discussed in the course of the proceedings are kept confidential, except those that give information regarding the arbitral award.
Conclusion
In India, the practice of any form of Alternate Dispute Resolution including the practice of Arbitration is frowned upon, because of a traditional mindset. However creating awareness and building trust about such alternative practices would help address legal problems in a more efficient manner.
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