Today the current scenario in India in regard to Business and Market, there is one answer with all the Business Houses and in one word “that the market is bad, very bad” and the reasons for the same is being shifted to Government of India and its policies and newly sated laws. There is no doubt that economy faces upwards/downwards based on the policies that are chartered out by the Government and sometimes the order of the Highest Court of Land.

There is no doubt to the acceptance of the fact that in the last 4 to 5 years there have been many new laws being enacted and there are also new laws in process and this only shows the progressive path of Indian Business, Economy and market. The Laws which have enacted earlier i.e., Companies Act, 2013 was debated a lot and post its effect the changes were made to suit the requirements but now the Companies Act, 2013 is more of a settled provisions but surely one cannot say totally pure as rules have to be amended based on market situation and majority business houses. The real fact is that India in business is on change mode and it will take time to settle but surely it will give the best results in years to come and there is no denying to this aspect by anyone who understands the way of business is done.

The world business market is changing very fast due to technology advancement. Actually this is good for Development of business and humanity too and this gives rise to the importance of IPR, intellectual property rights such as Trademark, Patent, Copyright, Trade-Secret and other forms of intellectual property rights. “Saving” and “costs cutting” has been in Indian culture since long and is now being practiced all over World and this does apply to Litigation expense or Legal expense too.

Most of the SME business entities do not give importance to keep the budget for Legal which is not a good practice. In fact not giving importance to the Legal itself shows the ignorance of the business entities to avoid compliance of law and this in future result in huge monetary loss which could have been avoided if legal compliance would have been done earlier. In my earlier articles, I have stated the importance of having the system of Standard Templates and some time in business such standard templates are bound to be changed for closing the deal and one shall not be adamant not to change the standard templates as parties entering into a business will surely try to secure themselves.

It is relevant to note that all SME business entities shall upfront before the business operates shall ensure availing legal assistance so that the SME business entities can be aware of its no issue in future and for this the SME business entities shall have a small budget for legal expenses and the reasons for the small budget for legal expenses is to understand that “Law in itself is a progressive step towards the success of your Business”.

For SME business entities the main concern to approach Courts for its money claim is paying Court Fee which is on higher end at Mumbai if compared with other states in India and thereafter the time-consuming Litigation matters in court only makes the SME business entities avoid getting into legal mode to claim their rights. This act of SME business entities can be good but most of the times in today market competitiveness it is more relevant to have your legal side strong as this send the message amongst the customers, distributors, etc of being ready to fight legal in case of any wrong done. I am of the view that Litigation will be less in those SME business entities who have been doing their Legal Due Diligence once in 6 months atleast of a year to ensure that their documents are not suffering from legal not being legal and good.

How Arbitration relates to Business Growth?

The term “Arbitration” means a private process set up by the parties as a substitute for court litigation to obtain a decision on their dispute. The Arbitration in India is regulated by Arbitration and Conciliation Act, 1996 (as amended).

The Arbitration in India has been since long time but it was only since Year 1996 it has gain much prominence within SME business Entities but still there are many SME business Entities who are not aware of Arbitration practice and Laws and infact not at all have heard of Arbitration which is quite surprising as nothing is not available online Google Search. Most of the times SME business Entities face big issues in claiming their money or raising their dispute in the Courts as in India the Courts system works not slow but damn slowly and this is very much a concern for even the Government of India and Supreme Court of India as even the cases in Supreme Courts are burdened with the long due matters.

The reason “Arbitration” is the best choice as all the ingredients which is absent in Court matters are present such as

  • No Court Fees,
  • Time-frame of closing of the matters,
  • Refund of Arbitral expenses who wins the matter,
  • No strict procedure being followed,
  • Time Importance
  • Stay on Appeal of Award only on deposit of awarded money in Appeal Court
  • Interim Stay within time-bound
  • Arbitrator Fees
  • Expenses incurred during arbitration proceedings such as venue fees, stenographer, Legal Attorney, traveling, can be claimed and most of the times it is passed and this adds to the boost of Business Entities in going for Arbitration.

The matters before the Court are time-consuming as one is not sure if Opposite Party (Accused/Defendant) comes on time or delays for reasons which are not being known to the other party (Complainant/Plaintiff). In fact as per latest amendment in C.P.C, taking adjournment comes for costs but most of the times in District Courts and Lower Courts, adjournments are taken and this delays the matter for no valid reasons. However, in Arbitration, what saves money is time too. On the first date of Arbitration itself, the dates are decided and is minuted so that the documentary work is done and then the matters are either kept for Cross Examination, if required or Argument’s and also the time allotted is for sure for the arbitration and hence time is used meaningful and this actually saves money and in fact, this reduces lots of costs and this acts as a tool in any business success as the results are time-bound being the arbitration proceedings time bound. As per the latest changes in the Arbitration and Conciliation Act, Arbitration Proceedings has to be completed in 12 months and extension is not possible without mutual consent of Parties to the Arbitration and that too not more than 6 months. The most relevant aspect in Arbitration is of not mandatory filing of Original Papers in Evidence which is not the case in Court matters and this actually means a lot to Business Owners/ Business Entities. The other relevant part of the Arbitration proceedings is that it is a private matter and hence all minutes of proceedings and orders and all discussions are confidential to parties unlike in Courts where it is open for public to know of the same. Another aspect of Arbitration proceedings is that once the Award is passed and though the Opposite Party files an appeal, the Award can be executed till the Stay order is passed or any other order and also in the event if the winning party wants to claim the Award, the Winning Party has to give Bank Guarantee in case the Opposite Party wins the appeal. This is major breakthrough for the reasons that the Opposite Party will think before appealing and remember that filing an appeal by the Opposite Party or Losing Party will have to pay deposit in the Court.

Why Arbitration?

As have been said by me in an earlier article that the businessperson has only two things to do Marketing and Innovations and in this, a successful businessperson put the system in place for its business and one of the systems to be placed in the updated and up-to-date legal documents to be risk-free of doing the business. There is a truth that a Lawyer can bring to the success of business growth and having a lawyer is a system being placed in business to ensure no risk or monetary damages come as a surprise to destroy the business. Having a Lawyer is nothing but a means to save time and money of business entities and thereby making such business entities to focus on what’s important to them which is growing business.

An experienced and skilled lawyer in Business Laws and Arbitration Laws will assist the SME business entities with proper guidance of what and how to use Arbitration Laws to the best interest of the organisation and how to choose the arbitrator and how to draft and vet the Arbitration Clause in case of being agreeing to a clause on arbitration proceedings.

Business Tips! Start using Arbitration Clause in Invoice and Purchase Order.

If you are keen to know about proper usage of Arbitration, its Advantages and benefits to your business, you can email us at [email protected] or call for a free 30 minutes session online or video conference.

*Content of this post is a Copyright work and is owned by Adv. Lalit K Jain (THE LEGAL DESK)

Author Bio

Qualification: LL.B / Advocate
Location: Navi Mumbai, Maharashtra, India
Member Since: 01 May 2020 | Total Posts: 44
I have been in Law Practice for more than 15 Years. My practice areas include: (a) Drafting of Commercial and Non-commercial Agreements/Contracts; (b) Recovery Matters before all Forums/Courts; (c) Arbitration and Conciliation; (d) Cross-Examination, Admission and Interim Stay; (d) Devising Strategy View Full Profile

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April 2021