T.S.V. Diwakar

Introduction :- Arbitration process is a mechanism to avoid delay in securing justice and preserving right between the disputants / litigants. The objects of arbitration as held by the Supreme Court are to settle all disputes between the parties in order to avoid litigation and further litigation. Arbitration is the reference of a dispute or difference between the parties for determination after hearing both sides in the judicial manner by a person or persons without involvement of the court. In fact, arbitration is a procedure for quick settlement of disputes/ differences between the parties in accordance with the provisions of arbitration agreement in which a third person takes part. It is true that, arbitration process will come within the concept of Alternate Dispute Resolution (ADR) which forms part of “Access to Justice”, Jurisprudence. “Arbitrium est judicium” that is to say, the award of an Arbitrator is equalient to the judgment or decree of the court. Though the Arbitration Tribunal has the characteristics of a court it has its special features like quick disposal, low cost, save time, can understand by the parties the root cause of the exact problem raised, settlement, conciliation etc. It is an alternate process to the existing court system. But it has to be well understood that it is meant for to reduce the over burden of the court. The main intention is to provide  easy and speedy disposal / resolution of disputes, based on mutual discussion and understanding. The parties normally accept the arbitral award not with a negitive mind but with a open respecting the views of each contesting disputants. The faith of the litigating public in the impartiality and independence of the Arbitral Tribunal create vigor and vitality to its conclusions as also sustenance to its continued existence.

Arbitration and Conciliation Act, 1996

The Arbitration Act, 1940 was enacted with an object to consolidate and amend the laws relating to the arbitration in India. In view of the various lacunas in its implementation, this Act.

Hence the Act was repealed along with two more enactments i.e. the Arbitration (Protocol and Convention) Act of 1937, the Foreign Awards (Recognition and Enforcement Act) 1961.

Section 85 of the Arbitration and Conciliation Act of 1996, which came into force with effect from 16th August 1996. The objects of the 1996 Act was to consolidate and amend laws relating to domestic arbitration, International Commercial Arbitration and enforcement of foreign arbitral awards as also to define law relating to conciliation. The preamble of the Act provides that the General Assembly of the United Nations has recommended that all countries give due consideration to the United Nations Commissions on International Trade Law (UNCITRAL), Model Law, keeping in view of the necessisity  of uniformity of the law of arbitral procedures and need the practice of  international commercial arbitration. It is further provided that the said model Law and Rules make significant contribution to the establishment of a United legal framework for the fair and efficient settlement of disputes / differences arising in International Commercial relations. Therefore, the Government of India enacted the Arbitration & Conciliation Act. 1996  to make law relating to arbitration and conciliation keeping in view of  the aforesaid UNCITRAL Model Law and Rules.

In this connection, we are reminded of what Lord Mc Cluskey said: “Law is a social instrument. It embodies and enforces moral, social, political, cultural and economic choices. It translates those choices into rules which are intended to realize both ultimate and intermediate social goals.” This is what is sought to be achieved by the present proposal for amendment.

Proposed Amendments – objections – Suggestions:

While examining the acceptability of the proposed amendments there is necessity to make a note, for the proposal  and also the objectives of the main enactment. Un-reasonable delay in dispensing justice is sine qua non for accomplishment of Alternate Dispute Resolution (ADR). Arbitration cases do not fall outside the above precinct.

Suggestion / Comment:

1. The proposed amendment is already in existing sub-section (7) of Section 2 which defines domestic award.  Hence no further amendment is required.

2. Domestic Arbitration will mean:

(i)     where all parties are Indian nationals or

(ii)   where at least one party is not an Indian National, (i.e. where arbitration is international in nature), whether arbitration is commercial or not and arbitration is in India. Here a deeming provision is sought to be introduced as thus: “International Arbitration in India shall be deemed to be domestic arbitration. That means the scope of domestic arbitration goes beyond its original meaning. The impact of this deeming provision goes throughout the provisions of the Act, which relates to the International Arbitration as also the domestic arbitration.

3. The delay in bureaucratic actions, arbitration proceeding and court procedure are some of the hurdles which forbid development.

4.  There is a say that the Alternate Dispute Resolution in urgent matters is being blocked up due to inadequate infrastructure facilities.

5.  In view of the aforesaid background, we are suggesting that there shall be two parts in the enactment, one for domestic arbitration and other for international arbitration. By clubbing these two set of arbitration processes in one, would lead to confusion and complexities which would result in delaying the process of settlement of the disputes between the parties. When there are two parts in the enactment as suggested above, the litigating parties would be able to know the respective procedure leaving no room for doubt. We cannot forget the complexities involved in the International Trade Practices and Procedures and different laws applicable to them, which may sometimes conflict with the domestic law practices. In the event of not introducing two separate parts in the enactment, in future there is every possibility for much more amendments may be found necessary in substantive and procedural laws regarding arbitration.

As per Section 2(2), in the case of arbitration between the Indian nationals and also where one party is not Indian national, and where the place of arbitration is in India, part 1 of the Act will apply

6.  Article 17 thereof authorises the Arbitral Tribunal to grant interim measure or protection at the request of a party as the Tribunal may consider necessary in respect of the subject matter of dispute. It is not uncommon that with the grant of such interim protection the dispute between the parties, may, sometimes come to an end permanently.

7. Section 8 deals with power to refer parties to arbitration where there is an arbitration agreement and Section 27 authorises Arbitral Tribunal or party to apply to the court for assistance in taking evidence.

8. Sections 35 and 36 deals with finality and enforcement of arbitral award.

9. In the case of arbitration outside the country, the article of the Model law like 8, 9, 35 and 36 would apply. However, those provisions are absent in 1996 Act. This is found to be an omission and sought to be filled up.

10. In this context it is necessary to examine the disadvantages of an Indian party in the absence of the provision of Section 9. In such cases Indian party is unable to obtain interim measures from Indian Courts before arbitration starts outside India.

11. Article 9 of the Model law is thus: “It is not incompatible with an arbitration agreement for a party to request before or during arbitral proceedings from a court an interim measure of protection and for a court to grant such measure.”

12. It is advised that the courts shall not interfere in giving interim protection.  The job shall be done by the arbitral tribunal. Arbitral Tribunal shall be established.  It shall be headed by the judge in the rank of High Court Judge.  This arbitral tribunals shall be situated in a town/city where the population is more than 10 lakhs or one or two arbitral tribunals in one State.

13. It is suggested to allow Section 9 to be invoked whenever arbitration is outside India.

14. It is further suggested that the provisions contained in Sections 8, 27, 35 and 36 are made available whenever arbitration is held outside India. These sections are major provisions to be invoked in an arbitration proceeding.

15. There shall be a separate Part in the case of international arbitration.

16. In Section 11(2) is sought to be added as Section 8 (1A) “to require judicial authority to stay the action pending a decision on the preliminary issue of jurisdiction and subject to the out-come of a decision on those preliminary issues.” The preliminary issues to be decided as proposed only relate to jurisdiction. Only when the question of jurisdiction is decided, judicial authority gets power to deal with the matter

We suggest that, no power shall be conferred on the judicial authority to grant stay  or similar interim orders, before finally deciding the question of jurisdiction

For instance: Suppose judicial authority has granted stay in view of Section 8 (1A) pending decision on the question of jurisdiction and later it finds, there is no jurisdiction to deal with the matter, then the stay initially granted has become null and void. Because of such stay orders the parties must have already achieved certain advantages. Even assuming such advantages are null and void, what about the undue privilege already enjoyed. No provision is suggested to impose damages or compensation in such an event. Therefore what we suggest is, when the question of jurisdiction is raised, the judicial authority shall determine such question immediately on raising such question and if it is thereafter found it has jurisdiction it can take up the petition for grant of stay or other interim orders. Therefore, the proposal contained in 11(ii) be dropped or suitable amended.

17. Section 8 (5) mandates the judicial authority not to decide the above preliminary issues in case six conditions specified therein are not satisfied. It is also commended  that the frivolous jurisdictional issues are not raised at the beginning stage so as to delay the reference. If that object can be achieved on insistence of the said conditions, it is to be accepted. It will promote justice between the disputants avoiding unnecessary delay. There is no question of oral evidence at the time of deciding the issues at the preliminary stage. The facts relating to these issues shall be clearly stated in the application and that must be made clear in the S. 8(5). No doubt it will remove all causes for delay in deciding the preliminary issues.

18.In regard  to Section 8(A) and Explanation – When the proposal is accepted, the parties can file objections against the award in the same court which has made the reference.

In this context it must be noted that under Section 8 (1), the judicial authority has power to refer the dispute. The expressions judicial authority and action are wider in scope than the expressions court and suit. Therefore it is appropriate to state that the parties can file objections in the same court or judicial authority which made the reference during the pendency of a suit or action. An Explanation is sought to be added to Section 8. Then the explanation in regard to legal proceeding in Section 8 will cover writ petition also where civil disputes between the parties are involved.

In the case referred to above, the Supreme Court was considering a reference made by a writ court. When a writ petition was pending between the parties the writ court referred the dispute in view of the terms of the agreement. It was therefore found necessary to amend the explanation of judicial proceeding to cover up writ petitions also.

In this context it is to be pointed out that under Sect. 8(1) the judicial authority is authorised to refer the dispute. Writ court is no doubt a judicial authority.

The provision does not apply to international arbitration agreement when the place of arbitration is in India. This provision also supports the view that there must be separate part for the international arbitration. What course then is adopted by the parties when the agreement is declared invalid?

19. In view of Section 10A When an arbitration agreement is found to be null and void it is not possible to obtain an award in such cases. Therefore the parties are permitted under sub Sections shall have to avail of the procedure under Section 11 for appointment of Arbitral Tribunal because the arbitral agreement is held to be null and void.

20.  Section 11 shall be amended for the reason that if a party to whom a request is made for appointment of an Arbitral Tribunal does not choose to take any action to make an appointment, the said party must be deemed to have waived the right to make such an appointment. Hence amendment is become necessary because several parties who receive notices for appointment of Arbitral Tribunal do not send any reply and thus make the arbitration process ineffective. It is therefore highly necessary to have provisions to curb such dilatory tactics of the parties to defeat the rights of others.

21. Section 11  : Amendment with an object is to make the appointment of Arbitral Tribunal on the judicial side. Our suggestion is that the appointment of Arbitral Tribunal shall be made by the Chief Justice of the Supreme Court or Chief Justice of the High Court as the case may be.  In that situation the whole sinario would be available before him so as to evaluate the advantages and disadvantages of such appointment and qualification of the members of Arbitral Tribunal to be appointed.

22. Section 11 shall include sub-sections requiring the Supreme Court or the High Court to decide the preliminary issues specified therein. If the preliminary issues are simple enough those courts may decide, otherwise they will refer the questions to the Arbitral Tribunal. While adopting this course the parties shall not be allowed to raise frivolous primary issues in order to delay to the process. However We  suggest that no interim orders are to be allowed by the judicial authority before the primary issues deciding the jurisdiction.

23. Section 12 to be amended to preserve independence and impartiality of the Arbitrators to be appointed by the judicial authority. It shall be the bounded duty of the Arbitrators to disclose the details specified in the Section before taking up assignment.

24. Section 23 shall be suitably amended  that the Arbitral Tribunal is authorised to fix the time for stating the facts in support of the claim or submitting the defence. So that the parties cannot themselves delay the proceedings for arbitration. That means healthy practice is guaranteed.

25. Section 24 shall also to be amended to grant powers to the Arbitral Tribunal to fix the procedure as well as the time schedule for taking evidence. This is also to avoid delay due to collusive agreement between the contesting parties. This is in consonance with the object of the arbitration process for speedy resolution of disputes.

26. Section 24  Obedience is the essence of law. The disobedience of the orders passed by the court or Arbitral Tribunal is to be treated as contempt of rules of law and such tendency has to be dispelled. In the case of disobedience the power is given to the Tribunal to strike out pleadings or impose costs.  In this connection we opined

that this power sometimes found to be inadequate. Therefore we suggest that even at the time of passing orders interim or final,  the parties may be cautioned as to the drastic compensation or damages and also prosecution not less than 3 months in the case of disobedience may be made. The orders must specifically indicate the cost or compensation and period prosecution that may follow in the case of non observance of such orders.

27. Sub- section to Section 24  to be made to compel the parties to obey the interim orders passed by the Tribunal under Section 17, 23 or 24. This provision also enables the parties or the Arbitral Tribunal to approach the court for the purpose of implementation of the interim orders passed by the Arbitral Tribunal. But before approaching the Court the Tribunal is to pass a peremptory order on the same lines of interim order. Such order according to us must indicate the amount or compensation levied for non observance of the interim order passed by the Tribunal. This provision according to us will operate as a deterrent provision so as to compel the parties to obey the interim order passed by the Tribunal.

28. Section 29 to be amended  to the effect that the minority opinion shall be appended to the award of the Tribunal is liable to be accepted. The reason, according to us, in case of an appeal is filed either in the High Court or Supreme Court, such court may get an opportunity to study minority view also before passing interim or final order in the appeal.

29. Section 29 also to be amended to fix limits for passing of the award and also for speeding up the arbitral process. It is pointed out that this provision has become necessary in view of the peculiar condition prevailing in India even after enacting Arbitration & Conciliation Act, 1996. It shall grant initially a period of six months for passing the award after the commencement of the arbitration process and also to permit the parties to agree for an extension up to maximum of one year. During the pendency of the application for extension before the court there shall be no stay of arbitration proceedings. According to us, these are effective measures so as to eliminate delay in completing the arbitration proceedings particularly in view of our social set up.

30. Section 34 to be amended for domestic arbitration where an award is passed between Indian nationals. The parties are allowed to raise two more additional grounds of attack in the application to set aside award under sub section (1) if Section 34. Those grounds are :

(i)    there is an error apparent on the face of the award giving rise to a substantial question of law and

(ii)  (ii) that the award has not given reasons though it is an award required to contain reasons.

The law as it stands now is that the award not containing reasons for the conclusion is no award at all the eye of law. The recording of reasons in the award is mandatory requirement unless otherwise agreed upon.  Section 31 (3) provides that the Arbitral Award shall state the reasons upon which it is based unless the parties have agreed that no reasons are to be given or the Award is an Arbitral Award on agreed terms under Section 30.

31. Section 36 to be amended in case of misuse of the provisions contained in Section 36 by the parties can be avoided. The effect of the existing Section 36 is that an Award can be enforced under the provisions of C.P.C. as if it is  a decree of the Court, when the time of making an application to set aside the Arbitral Award under Section 34 has expired or such application has been refused. It means in a case where there is an application to set aside the Award is pending the enforcement of the award cannot be proceeded with even if there is no substance in the application. This is really an injustice to the parties in whose favour the award is made. Such injustice is sought to be removed and it shall be liable to be accepted. It is also to be added that mere filing of an application under the section will not amount to stay of the enforcement of the award. In this regard it is to be noted that to enable the court to order stay of operation of the award subject to certain conditions. At any rate there shall not be any automatic grant of stay of the enforcement of the Award when an application to set aside the award is filed. Such a amendment will no doubt discourage the parties in filing frivolous application to set aside the award passed by the Arbitral Tribunal. Misuse of the provision contained in Section 34 in order to obtain an hidden stay can be avoided.

32. In regard to Section 37 there is necessity for amendment that the Arbitral Proceedings as an alternate dispute resolution would be defeated in case the application to set aside the award and the appeals are kept pending for disposal for years together. Hence the remedial measures are proposed and they are liable to be adopted. In this context it is advised that it shall specifically noted that the court has given power to dismiss the application to execute the award in limine under Section 34 (1). This power has to be exercised by the court with due care and caution.

33. Section 42 to be amended suitably stating that a writ court has also power to refer the parties to the Arbitral Tribunal. The question to be examined, is whether the application to set aside the award is to be filed before the writ court which made the reference or the court referred to in Section 34. The court is defined in Sec. 2(e). According to us a clarification is necessary whether the application to set aside the award and all other subsequent applications are to be filed in writ court which made the reference.

34. Section 43 to be suitably amended the introduction of Fast Track Arbitration. This type of arbitration can be opted by the parties if they agree unanimously. Such arbitration can be conducted by a single arbitrator and separate procedure is prescribed in Chapter XI and Schedule IV of the Act. The Award is to be passed by the Arbitral Tribunal within six months. The object is very evident, namely the speedy trial and passing of the award within a prescribed period. The success of this system depends on the disputed parties. There is no doubt a whole object if for speedy trial on unanimous agreement.

CONCLUSION

We conclude with the following suggestion:

Arbitraton

As for as Arbitration & Conciliation Act, 1996 is concerned we are of the opinion that there should not be any type of involvement of the Courts.  Any graveness / difficulties / stay or setting a side of the awards shall be deal by the Arbitral Tribunal.  The Arbitral Tribunal shall be constituted and shall be headed by the Judge whose rank shall be High Court judge.  Whose decision shall be final and binding on the parties.  So that there will be finality to the litigation.   Of course even on the Arbitral Tribunal order is suffering from technical fault or missing of question of law then the aggrieved party can file appeal before Hon’ble High Court.  Like Human Rights Commission, Lokayukta etc.,

Conciliation

The Government of India, judiciary and other organizations such as ICADR and CARD are trying their best to propagate to provide awareness to the public at large to adopt Alternative Dispute Resolution methods (ADR) but it is not sufficient.  We doubt whether we are adopting correct way of propagation of ADR methods or not?

We suggest that if courts accept cases only after exhausting alternative remedies i.e. ADR Methods.  Then the awareness among the public is automatic.  We are sure 90% of cases will be solved without going to the courts.  We have also seen that no Civil Court Judge invoke powers of section 89 of CPC.  Only in family dispute cases the Judge ordering for Conciliation.  The process of conciliation in the court is not conciliation at all.  An advocate will be appointed as a Conciliator who draws nearly 100 questions and asking individually in different days and submitting report to the court stating that the conciliation is failed.  It is advised to send the cases to private agencies and other organizations such as ICADR, CARD etc., so that the conciliation process can be done in scientific and systematic method.

Several organizations are ready to render their services of conciliation in family disputes on free of charge to the courts.  If required they will come to the court and conciliate the cases by spending their valuable time minimum of 4 hours a day.  But it is very unfortunate nobody availed their services.  If that is the case there is no point in providing awareness to the public at large.

If the Government want to adopt and encourage ADR methods to resolve disputes then to advice / suggest the courts to accept cases only after exhausting ADR methods.

Thanking you & With regards

Yours faithfully,

For CENTRE FOR ALTERNATIVE RESOLUTION OF DISPUTES

(A house of Arbitrators & Conciliators)

T.S.V. DIWAKAR, CHAIRMAN

Address:- 303, III Floor, Jamuna Towers, Malakpet,

HYDERABAD – 500 036

Tel : 040-24551736; 24554074, e-mail: cardgroup @ rediffmail.com

Recommendation Made to

Syt. T. K. Viswanathan

Advisor to Minister for Law & Justice,

Ministry of Law & Justice

Room No. 404, “A” Wing, 4th Floor,

Shastri Bhawan

NEW DELHI – 110 001.

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0 responses to “Alternative Resolution of Disputes Vs Law Ministry’s Proposals for Amendment in The Arbitration and Conciliation Act, 1996”

  1. S.L.GOYAL says:

    15-6-10

    it is urgently required that alternative mechanisms for dispute resolution are established which are effective and easy to follow and widely publicised.

    One problem in seeking arbitration is that both parties are required to seek and agree to arbitration. However, it is seldom the case because if both parties were ready for arbitration, dispute will surely be resolved. It is often that one party is ready for arbitration, but the other not.

    It is our suggestion that if one party shows readiness for arbitration, the other party may be forced by court or any other authority to cooperate and go for arbitration.

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