This Article is written by Shreya Tripathi of Banasthali Vidyapith, Jaipur. In this article she 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 didn’t have any knowledge regarding arbitration. But later on, 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.
Arbitration is considered as an alternative dispute resolution procedure under which mediation and conciliation are also included. It is considered as International commercial arbitration where two parties from two different countries approach an international arbitrator either by their mutual consent or through an arbitration institution and dissolve their dispute accordingly. The alternative dispute resolution procedure has gained importance in the last few years due to the increase in commercial market dispute and also it is a speedy, cost-effective and efficient way of settlement. The United Nations have given 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. These can be adapted and made according to their municipal laws as earlier there was no unified law related to trade and its need was felt with globalization which further gave rise to disputes related to it.
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.
In spite of the need for arbitration, there are some disadvantages where arbitration cannot be used as an effective mode of settlement, as:
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 unsign 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.
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:
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.”
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.
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.
