Arbitration comprises of a panel of Arbitrators which can be selected by the parties and such process is a very common gesture to analyse and consummate a dispute through understanding the disparity between any contractual obligations or indenture. Notwithstanding, such freedom of process imparted to the parties, “The Arbitration and Conciliation Act” (amendment in 2016) is bound to be acknowledged wherein, according to Section 12 it has been chronologically stated wherein, the duties of the parties before appointing an Arbitrator, the said Act also deals with provisions concerning the appointment and the impact on proper proceedings of Arbitration, the same provisions are quoted in verbatim herein below;Arbitration as far as it needs to be distinguished from lawsuit on the basis of process wherein, Arbitration is said to be “Sitting Advocacy”. For brevity there are two types “Standing Advocacy” and “Sitting Advocacy”, the one we come across in Courts is the former and the latter is the one enumerated concerning arbitration proceedings which are not bound to be undertaken on any specific platforms i.e. “Courts”. Under Arbitration, the places for such proceedings can be organized and proceeded with as per the opinion and preferences of the parties.
“(a)such as the existence either direct or indirect, of any part or present relationship with or interest in any of the parties or in relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and (b) which are likely to affect his ability to develop sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months.”
Explanation 1. – The grounds stated in the Fifth Schedule shall guide in determining whether the stated circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.
Explanation 2. – The disclosure shall be made by such person in the form specified in the Sixth Schedule. ; (ii) after sub-section (4), the following sub section shall be inserted, namely: –
“(5) Notwithstanding, any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject – matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.” 1 Such objective under section 12 is to set forth an ethical and efficient code conduct and avoid any manipulative ambiguous surreal opinion over the arbitral award in the eyes of either party.”
The said provision was noticed in the matter of M/s Braham Prakash Modi V/s Public Works Department Ans Ors.
Arbitration necessarily not only includes cases wherein, sound people having disputes relating to the breach of contract are approaching for resolution, instead, it includes a complete sphere of civil cases wherein, 99% of the matters relating to the Civil Procedure Code (CPC) can be resolved.
1. Arbitration and Conciliation Act, 1996, page no. viii and ix of the Amendment Section 12
Arbitration is said to be the most efficient and reliable form of dispute resolution mechanism due to its structural formation wherein, parties have their benefits of deciding the Arbitrator for their “Dispute Resolution” on the basis of the competency of the Arbitrator and handful evidences to confer upon, unlike the burden of colossal evidences and the litigation proceedings as are faced by the Judges of Courts which sometimes turns outrageous for the Respondents and Petitioners or the both the parties.
CHALLENGES TO ARBITRATION AND AMENDMENTS
It is not necessary that the all parties are bound by the subject to Arbitral Award and such situation may exist under two circumstances;
(a) Any arbitral award that may give rise to question on the grounds of the applicability and justification;
(b) Qualification of the Arbitrator does not fall within the ambit of agreed terms by the parties.
A party may challenge the proceeding of an Arbitration within 15 days of the constitution of Arbitral proceedings. Major Amendments have been initiated after 2015, considering the nature of Arbitral proceedings and the people opting for the process of Arbitration on the first place before approaching the Court of Justice. The Government of India envisaged and amended certain sections for the prosperous growth of “Dispute Resolution” and proceedings under Arbitration and Conciliation Act, 1996 whereas;
Before, 2015 Section 2 i.e. “Definition of Court”, encompassed Domestic Arbitration and International Commercial Arbitration all the courts were included such as: District Court and High Court for the proceedings of Litigation.
According to the new provision only matters pertaining to the Domestic Arbitration will be dealt under Principal Civil Court wherein, as per the Jurisdiction in a district, such Domestic Arbitration may also include High Court.
Note: – An important aspect which must be highlighted concerning the Arbitral Award which will come into force after an Arbitration proceeding is complete, the same Award will be subject to that it has been accepted and passed by the Court which approved Arbitration.
Matters pertaining to the International Commercial Arbitration according to new provision will not include District Court, Hon’ble High Court will exercise Ordinary Civil Jurisdiction. The said provisions were enforced considering the critical nature of International Arbitral matters for example: – Docomo vs. Government of India. It can also be said such matters comprises of high capital and investment portfolio and also the reason behind such steps would be to ascertain the retention of FDI (Foreign Direct Investment).
Under Section 7 previously (before 2015) comprises of the forms of Arbitration Agreements between the parties, wherein, there is;
(a) Written communication between the parties;
(b) Written Agreement;
(c) or, there is any clause in agreement.
Such substantiated documents whether written statements or communications or clauses can be considered as Arbitration Agreement. Whereas, according to the new provision it involves any communication between the parties even if that has been processed through electronic modes will fall under the definition of the Arbitration Agreements (the same proviso as per the Act in its definition states “communication through electronic means shall also be treated as arbitration agreement in writing”).
Section 8 Amendment is pertaining to the copy of Arbitration Agreement. Any, aggrieved party may request the Court to retrieve the copy of Arbitration agreement from the party and thereafter the certified copy will be made available by the Court.
Under Section 9, the earlier provision provided application for “Interim Relief” which may be placed before the Court for enforcement of Arbitral Award.
The abovementioned provision clearly makes the section sterner about the independent nature of the Judicial System as the Arbitrator by merely passing the Arbitral Award shall not enforce the same until such matter has been taken up to the Court and the same Arbitral Award is not passed by the Court. Albeit, Arbitration makes the process of advocacy faster and more accurate.
Whereas, according to the new provision under Section 9 of Arbitration and Conciliation Act, 1996, the Court may pass an order for an “Interim Relief” before the commencement of Arbitral proceedings, whereafter under such circumstances the proceedings shall commence within 90 days from the date of such order. Such cases might be related to disputes concerning perishable products.
Under Section 11, the provisions before 2015 authorized only the Chief Justice of India or the Chief Justice of High Court as the case may be to appoint the Arbitrators for International Commercial Arbitration.
According to the new provisions under Section 11 of Arbitration and Conciliation Act, 1996 and Amendment of 2015. The said Amendment provides the same authority to the Chief Justice of Supreme Court of India or the person or institution designated by him or the High Court or their designates as the case may be. Moreover, the Court must dispose of the matter within a period of 60 days from the date of serving of notice from the opposite party. Further, High Court has also been empowered to frame rules for the purpose of determination of fees of Arbitration process.
ALTERNATIVE DISPUTE RESOLUTION (ADR):
Arbitration is one of the forms of Alternate Dispute Resolution which is the most common and effective method to settle the disputes arising for the commercial matter especially with respect to International Commercial Transactions. In the absence of Arbitration, a lot of Business decisions were pending due to the delay in process of civil adjudication whereafter an act was enforced Arbitration and Conciliation Act, 1996 for the purpose of settlement of disputes under which a forum can be entailed and matter be settled outside court.
The objective of the Act was to eliminate the delay with respect to time, the cost in the form of energy and money and also the stress which the parties had to face during the judicial proceedings.
Arbitration may be invoked in matters pertaining to (the list is not exhaustive, but includes some of the list of major Arbitration matters):-
All civil matters;
Contract Matters such as Time barred debts;
ADVANTAGES TO INVOKE ARBITRATION
Arbitration is deemed flexible as the parties involved in the dispute may appoint their own panel of Arbitrators with mutual consent and thereafter the proceedings will be undertaken, wherein the Arbitrators will carry on with the proceedings and thereafter will put forth his/her ideas and logic concerning the dispute. The parties in dispute also have the authority to either appoint a Sole Arbitrator or Panel of Arbitrators; in no circumstance the appointment of Arbitrators can be even in number and also as specified hereinabove “mere existence of Arbitration clause does not bar Jurisdiction of Civil Court”.
Arbitration is a process which works on the Principles of Natural Justice involving logical or rational approach and “Stare Decisis” (Judicial Precedents) and the final judgement of the Arbitrator is known as Arbitral Award. Arbitral Award can either be final or interim in nature.
DISQUALIFICATION OF AN ARBITRATOR
Acceptance of the person to not Act as an Arbitrator; partial and interested party; As per the mutual consent of the parties involved in disputes. Under no circumstance the Arbitrator can directly or substantially be related to the matter of the parties or if so, the Arbitrator must disclose this fact to the parties whereafter the parties will decide whether or not to appoint him or her as Arbitrator.
If we are talking about Alternative Dispute Resolution (ADR), ADR has some silent features on it. Generally, ADR is classified into at least four features as under;
3. Collaborative Law;
Sometimes, Conciliation is included as a fifth category, but it forms a part of the Mediation. However, ADR is moreover increasingly being adopted by the public at large as a tool to help and settle the disputes between the parties alongside the court system itself.
As far as the profession as ADR is concerned, the next generation of India is more inclined and curious to take part in the process of ADR. Further, recently it has been traced, Chartered Accountants, Company Secretaries and Cost Accountants have been recognised as Arbitrators subject to fulfilling some criteria and considerably this is one of the developing platforms, they may opt for and establish their practice in the field of Arbitration Law.
The Ministry of Law and Justice on 9th of August, 2019 has published notification in official gazette of India with respect to the amendment in the Arbitration and Conciliation Act, 1996, which may be called the Arbitration and Conciliation (Amendment) Act, 2019 as mentioned above. In which the qualification and Experience to act as Arbitrator has been changed. However, as per the Eighth Schedule; A person shall not be qualified to be an arbitrator unless he –
1“(ii) is a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 having ten years of practice experience as a Chartered Accountant. Or (iii) is a Cost Accountant within the meaning of the Cost and Works Accountants Act, 1959, having ten years of practice experience as a Cost Accountant. Or (iv) is a Company Secretary within the meaning of the Company Secretaries Act, 1980 having ten years of practice experience as a Company Secretary.”
Further, the below image categorizes the chart of Disputes in Industries as per the report presented by Singapore International Arbitration Centre (SIAC).
ARBITRAL AWARD CHARACTERISTICS
The Arbitral Award must be in writing as oral decisions are not considered as an Award according to Arbitration Act; A date must be entered when the Award has been passed; the Award must be on a Stamp Paper; Award must be signed by the members of the Arbitration panel or Arbitrator.
In Arbitration, where a panel is involved the authenticity of the Award will rely on whether it has been signed by all the members or most of the panel members. Award must contain all the reasons and findings concerning the Award of final decision. The requirement of reasons can be avoided only in two circumstances, (1) if the Agreement allows the Arbitrator not to mention any reasons and (2) in case where parties settle their dispute within themselves and inform the Arbitrator. Reasons must be based on evidences and conclusions. Place of Arbitration must be within the ambit of the Jurisdiction of the concerned court.
CHALLENGE TO AN ARBITRAL AWARD AND RECENT CASE LAWS:-
Section 34 of the Act provides for the grounds for challenge to an Arbitral Award. The time period for the challenge is before expiry of 3 months from the date of receipt of the Arbitral Award and further period of 30 days may be granted on sufficient cause being shown for condonation of delay. On expiry of that period, the Award holder can apply for execution of the Arbitral Award as a decree of the court.
Under Section 34 of the Act, a party can challenge the arbitral award on the following grounds;
1. The party making an application or parties to the agreement are under some incapacity;
2. The Arbitration Agreement is void;
3. The composition of the arbitral authority or the arbitral procedure was not in accordance with the arbitration agreement;
4. Proper notice of appointment of Arbitrator was not given by either of the parties to the agreement.
5. The subject matter of the dispute was not capable of settlement by arbitration;
6. The award contains decisions on matters beyond the scope of the arbitration agreement;
7. The enforcement of the award would be contrary to Indian public policy.
RECENT CASE LAWS ON SETTING ASIDE ARBITRAL AWARD: –
1. 2Kinnari Mullick v. Ghanshyam Das Damani, AIR 2017 SC 2785:
In the above cited case, a short of question arose as to whether section 34(4) of the Arbitration and Conciliation Act, 1996 empowers the court to relegate the parties before the Arbitral Tribunal, after having set aside the Arbitral Award in question and mereso suo moto in absence of any application made on behalf by the parties to the Arbitration proceedings?
Whereafter, the Hon’ble Supreme Court, in the above case law, has held that a Courts can relegate the parties to the Arbitral Tribunal, only if there is a specific written application from one party to this effect; and relegation has to happen before the Arbitral Award passed by the same Arbitral Tribunal is set aside by the court. Once the Award is set aside, the dispute cannot be remanded back to the Arbitral Tribunal.
2. 3BCCI v. Kochi Cricket Pvt. Ltd., (2018) 6 SCC 287
In the above cited case, there were question of Amended Section which would apply to a Petition filed before the Court or amended section would apply to it?
The above present case states that the Appellants were praying for dismissal of the execution applications under section 36 of the Act, as the Appellants had filed an application under section 34 of the act for setting aside the Arbitral Award, stating that the old Section 36 would be applicable, therefore, there would be an automatic stay of the awards until the Section 34 proceedings had been decided. The chamber summons was argued before a Single Judge, by the impugned judgment [Rendezvous Sports World v. BCCI, 2016 SCC OnLine Bom 6064] in Special Leave Petitions (Civil) Nos. 19545-46 of 2016, dismissed the aforesaid chamber summons and found that the amended Section 36 would be applicable in the facts of this case.
The Hon’ble Supreme Court inter alia held:
1. Section 36, prior to the Amendment Act, is only a clog on the right of the decree-holder, who cannot execute the award in his favour, unless the conditions of this section are met. This does not mean that there is a corresponding right in the Judgment-Debtor to stay the execution of such an Award.
2. It would be clear that looking at the practical aspect and the nature of rights presently involved, and the sheer unfairness of the unamended provision, which granted an automatic stay to execution of an award before the enforcement process of Section 34 was over (and which stay could last for a number of years) without having to look at the facts of each case, it is clear that Section 36 as amended should apply to petitions filed under Section 34 before the commencement of the Amendment Act also for the aforesaid reasons.
Though the Arbitration and Conciliation Act was enacted in the year 1996, with the passage of time many amendments in the year 2015 and 2018 were carried out. Moreover, on 9th August of 2019, The Arbitration and Conciliation Amendment Bill 2019 has been notified in the official gazette and the same is an updated version of the Bill passed by the Lok Sabha in 2018 which lapsed due to the dissolution of the Houses of Parliament.
The Judicial system in India with respect to Arbitration is in progressive mode and in the recent past three years, India has seen a major growth in the number of disputes that have been referred under Arbitration. With the increase in number of Arbitration Institutions in India and many steps have been initiated to overcome the issues faced under Arbitration Law from time to time, India is now become the Arbitration hub. Arbitration, as mentioned is a speedy mechanism to render to the disputes/challenges as faced by the parties and the said process also enables a satisfactory procedure wherein, the Arbitrator can be appointed by the parties.
Arbitration has helped the Indian judicial system to a great extent as the number of matters which were due/pending in the Court of Law, many of which have been settled successfully through the process of Arbitration, therefore, Arbitration is rightly said to be a process wherein, justice can be served in specific time and the parties can actually seek justice through a speedy resolution mechanism which also works on the Principles of Natural Justice.