ARBITRATION IN INDIA: AN OVERVIEW

AUTHORS:

Manav Bhagat, Nirma University

Subhadra, SOA National Institue of Law, Bhubaneswar

J S Kaushalya, TNNLU

EDITOR: Varshita Girish, CAIL, Bengaluru



INTRODUCTION

Arbitration is a mechanism which is available to the parties to solve their dispute outside the court. This method has emerged to be a popular mechanism to resolve the dispute and provides relief against the long-lasting trials in the court which delays the justice delivery system. With a growing economy, the disputes need to be resolved quickly, with less hassle; Arbitration is an answer to such problems.

Origin of the Arbitration and conciliation Act, 1996 has arisen due to many lacunas in the Arbitration Act of 1940 which had many irregularities and due to growing and expanding economy, the Act was amended in 1996 to solve the disputes quickly. The 1940 Act was not having any provisions regarding the appointment of a new arbitrator in case of death of the previous and many other issues. The 1996 Act intended to include both commercial and international arbitration, to explain reasons for the award passed, and minimize the role of the court in the arbitration process.[1] The Act has been divided into two parts where part one of the Acts explains provisions regarding domestic arbitration while part two of the Act explains provisions regarding international arbitration. This Act has covered all the aspects regarding the appointment, removal of the arbitrator, grounds to challenge the award passed by the arbitrator or the tribunal etc. [2] The Act has tried to include all such provisions which help the parties to resolve the disputes quickly and efficiently.

Arbitration is a process to solve the disputes makes it a more viable option for the parties to choose it as a medium to solve their dispute instead of delaying litigation. The process of arbitration gives the parties the freedom to choose the law which will govern the proceedings, the arbitrator, venue, and place of the arbitration. The parties also have the freedom to choose the rules which will govern the proceedings, the substantial law, etc. If the parties are not satisfied with the award passed by the arbitral tribunal then they can challenge the same award in the court under section 34 of the Arbitration and conciliation Act 1996[3] which has laid down grounds on which the parties can challenge the award.

NEED FOR ARBITRATION

More than 3 crore cases are pending in different courts of India. A lot of these cases are pending for more than 10years. The judicial system in India is not very efficient. Counsels of the parties keep postponing the litigation process resulting in costly and time-consuming litigation.

Arbitration is considered to be a great alternative to litigation because unlike the courts it is quicker, less expensive, confidential and provides greater flexibility. Arbitration is a private process where both disputing parties agree to have one impartial adjudicator who makes decisions about the dispute after receiving evidence and hearing arguments. It’s necessary to have a proper arbitration mechanism in place for faster resolution of cases.


LEGISLATION IN INDIA

The Indian parliament while amending the Code of Civil Procedure, 1908 in the year 1999 introduced a new provision of section 89 which gave courts the power to refer matters to one of the ADR track listed Arbitration, Conciliation, Judicial settlement, Lok Adalat and Mediation. Section 89, coupled with Order X Rules 1A, 1B, 1C of the CPC and allied laws, allows the judiciary to offer the parties a range of avenues to resolve their issues.

The Indian law in respect to arbitration is based on English common law. It is governed and regulated by the Arbitration and Conciliation Act, 1996, which derives its basis from an international convention entitled, United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, 1985. The Act replaced the earlier existing statutory provisions namely, The Arbitration Act, 1940, The Arbitration (Protocol and Convention) Act,1937, and the Foreign Awards (Recognition and Enforcement) Act, 1961.

ADVANTAGES OF ARBITRATION

  • The parties have the liberty to select the arbitrator so there is no conflict regarding favouritism towards the specific party. The setting of the Arbitration process is less formal than that of a Court which is decided by the parties.

  • The Indian Courts are known for its ever pending cases. Here, Arbitration acts as a much faster relief as it saves a lot of time for both the parties as well as the court. As per Section 6 of The Arbitration (and Conciliation Amendment) Act, 2019[4] which amends Section 29 of The Arbitration and Conciliation Act, 1996[5] states that for non-international commercial arbitration cases, an award has to be given within 12 months thus making it a speedy process for relief.

  • Arbitration is usually less expensive than litigation. Setting up trials is also a lot more costly than arbitration.

  • Arbitration is much more private and provides parties with privacy in their cases. The information shared here is treated as highly confidential matters. A new Section namely 42A was inserted by The Arbitration (and Conciliation Amendment) Act, 2019[6] which states that the arbitrator, arbitral institution and parties shall all maintain the confidentiality of the arbitration process except the award where disclosure is mandatory. Moreover, it is a win-win situation for all the parties involved, unlike courts where one has to lose for the other to win.

  • As per Section 19 of the Act, the rules of procedure and evidence required under the Code of Civil Procedures, 1908 or the Evidence Act, 1872 do not hold good here. So the overall process is less complicated and more flexible.

DISADVANTAGES OF ARBITRATION

  • In India, an Arbitration award is binding, therefore the right to appeal is lost and an incorrect decision cannot be rectified. The losing party will have to resort to the courts for setting aside the arbitration award. As the discretional power of arbitrator is more than that of a Judge, it leaves room for bias in the process.

  • Sometimes, Arbitration tends to be costlier than other Alternate dispute resolutions such as Mediation and Negotiation. Some cases do not require an arbitrator and can be resolved cost-effectively in a district court itself.

CONCLUSION

Arbitration is a very effective tool for resolving disputes but careful consideration has to be given whether the case is appropriate for arbitration or not. With the setting up of the Mumbai Centre for International Arbitration, India has taken a step towards making the country a good international arbitration hub. The arbitration may have its few shortcomings but its benefits far outweigh the shortcomings and therefore this should be encouraged.

Though India has taken a few initiatives in the right direction in this field by amending The Arbitration and Conciliation Act, 1996, setting up arbitration centres and promoting arbitration, it still has a long way to go when compared with its counterparts such as Singapore and UK who are way ahead in the playing field of arbitration.

[1] Dhirassociates.com (2020), https://www.dhirassociates.com/images/Evolution-of-Arbitration-in-India.pdf (last visited Jul 7, 2020). [2] Arbitration and Conciliation Act, 1996, No. 26, Acts of Parliament, 1996 (India). [3] Arbitration and Conciliation Act, 1996, No. 26, Acts of Parliament, 1996 (India). [4]The Arbitration and Conciliation (Amendment) Act, 2019, No. 33, Acts of Parliament, 2019 (India). [5]The Arbitration and Conciliation Act, 1996, No. 26, Acts of Parliament, 1996 (India). [6]Id.

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