TYPES OF ARBITRATION & NON-ARBITRABLE MATTERS

AUTHORS:

Ipsa, IMS Unison Dehradhun

Khushi Malhotra, JEMTECH Noida

Priyanshu Bhayana, NLU Orissa

EDITOR: Tanya Kanchan Soni, HNLU Raipur





INTRODUCTION

Arbitration refers to a method of Alternate Dispute Resolution wherein contracting parties, either by way of a clause in the contract or by way of a separate agreement, agree to resort to the appointment of an arbitral tribunal i.e. institutional or a panel of persons, to resolve the disputes amongst them.

Arbitrability of matters has been laid out in the New York Convention on Recognition and Enforcement of Foreign Arbitral Award. The United Nations has developed the UNCITRAL Model Law, to be ratified by its member dignitaries so as to integrate international jurisdictions pertaining to Arbitration.

The scope of Arbitration shall be briefly explained through this article.


TYPES OF ARBITRATION


INTERNATIONAL ARBITRATION

Cross border investment and trade, while leading to the integration of global economies, has also led to the inception of this branch of Arbitration Law. For all intents and purposes, we shall focus on International Commercial Arbitration.

International Commercial Arbitration refers to the process of resorting to an alternative dispute resolution mechanism, i.e. bereft of court intervention, by appointing Institutional Arbitrators, as is the case mostly.

In the general course of action, cross border arbitration consists of a handful of essential characteristics namely:

  • Lawfully enforceable arbitral awards.

  • A neutral forum for dispute resolution is elected for by both the parties.

  • Arbitrational agreements are mostly streamlined, with the flexibility to suit the needs of both the parties both jurisdictionally and objectively.

  • Parties to the agreement retain certain autonomic decision-making powers regarding the agreement’s constitution.

  • To govern Indian Arbitration law, the Arbitration and Conciliation Act, 1996 has been put into force, encompassing both Domestic and International matters of Arbitration.

  • Indian Arbitration laws have developed massively over the years, to map such developments; a plethora of judgments is resorted to.

BHATIA INTERNATIONAL V. BULK TRADING S.A.

D.O.J: 13 March 2002

Coram: Ex-CJI GB Pattanaik, SN Phukkan and SN Variava JJ.

Citation: [2002] 37 SCL 434 (SC)


A Study in Brief

This case is perhaps one of the most renowned cases in the field of Indian Arbitration. This case, both flawed and of insurmountable importance, brought forth the need for a discernible differentiation between Part 1 and Part 2 of the Arbitration and Conciliation Act, 1996 (hereinafter known as the Act).

The honourable (hereinafter referred to as Hon’ble) Judges, wrongfully .of the view that the Act is to extend to even those countries which do not subscribe to either of the Arbitration Conventions, i.e. Geneva and New York Conventions, pronounced the judgement stating that the jurisdiction of the Indian judicial institutions would extend to even international cases of arbitration, held outside the Indian territory. However gross miscarriage of law took place when the Hon’ble Judges assented to the judicial interpretation of the act to let no discernible factor remain while enforcing Part I and Part II of the Act, thus providing a flawed interpretation to Section 1(2) of the Act.

This flawed judgement was overturned by Bharat Aluminium Co. V Kaiser Aluminium Technical Services Inc.[1]

HARAT ALUMINIUM CO. V. KAISER ALUMINIUM TECHNICAL SERVICES INC.

D.O.J: 6 September 2012

Coram: Ex-CJI SH Kapadia, DK Jain, Surender Singh Nijjar, Ranjana Prakash Desai and Jagdish Singh Khehar JJ.

Citation: [2012] 116 SCL 36 (SC)


A Study in Brief

This case, decided by a bench of five, overturned the aforementioned case and led to a number of flawed interpretations being corrected. The Judges prescribed to a dissenting view to that of the constitutional bench in the case of Bhatia International v. Bulk Trading S.A[2]., and went on to state that enforceability and application of Part I and Part II shall remain severed from either of its counterparts, thus providing a judicially prudent view to section(1)(2)[3] of the Act and application of Part I of the Act shall only extend to the territory of India exclusively.

This judgement further solidified the position of two very crucial rules of interpretation of statutes, i.e. ‘Casus Omissus’ and Expressum Facit Cessare Tacitum’ meaning ‘a situation not provided for by the law’ and ‘to follow such interpretation and objective which the lawmakers had in mind while enacting the law’.

This case set in stone a benchmark at the very least for international commercial arbitration w.r.t. to Indian laws concerning the same.

DOMESTIC ARBITRATION

Domestic Arbitration refers to the arbitration proceedings that take place in India domestically, in which the subject matter of the contract and the merits of the disputes are wholly governed by the Indian Law, or the cause of actions for the disputes and the parties are governed by the Indian Jurisdiction. In such arbitration the cause of action for the disputes should wholly arise in India or the parties will subject to the Indian Jurisdiction. This type of arbitration is an attractive option for the parties for the settlement of their disputes.

Domestic arbitration comprises of the characteristics that are discussed below:

i. The arbitration takes place in India.

ii. The subject matter of the contract must be in India.

iii. The merits of the dispute are governed by Indian Law.

iv. The procedure of the arbitration must also be governed by Indian Law.

According to Indian Arbitration and Conciliation (Amendment) Bill, 2003 the definition of the term Domestic Arbitration was given as -

‘Domestic Arbitration’ means an arbitration relating to a dispute arising out of legal relationship whether contractual or not where none of the parties is:

i. An in individual who is a nationality of, or habitually resident in any country other than India;

ii. A body corporate which is incorporated in any country other than India;

iii. An association or a body of individuals whose central management and control is exercised in any country other than India;

iv. The government of a foreign country.

HINDUSTAN CONSTRUCTION COMPANY LIMITED & ANR. VS. UNION OF INDIA & ORS.

D.O.J: 27 November 2019

Coram: Hon'ble Mr. Justice R.F. Nariman, Hon'ble Mr. Justice Surya Kant and Hon'ble Mr. Justice V. Ramasubramanium

Citation: 2019 SCC Online SC 1520


Case in brief:

In this case, a bench of three Hon'ble Judges of the Supreme Court struck down the section 87 of the Arbitration & Conciliation Act, 1996 (Arbitration Act) as it was ‘manifestly arbitrary’ in terms of Article 14 of the Indian Constitution.

The Bench observed that the section 87 of the Arbitration Act was against the intent of the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) which further nullifies the ration in the judgment in the case Board of Control for Cricket in India Vs. Kochi Cricket Pvt. Ltd[4], after that it was observed that section 87 was overall against the intent of the Arbitration Act and the 2015 Amendment.

And by 2015 Amendment the Supreme Court revived section 26 and the decision in the case Board of Control for Cricket in India Vs. Kochi Cricket Pvt. Ltd[5] continues to apply as a guiding principle for determining the applicability of the 2015 Amendment.


PURUSHOTTAM S/O TULSIRAM BADWAIK V. ANIL & ORS.

D.O.J.: 2 May 2018

Coram: Justice Arun Mishra, Justice UU Lalit

Citation: Civil Appeal No.4664 of 2018


Case brief:

In this case, the Supreme Court observed that if an arbitration agreement is entered after 1996 Act was to make references to the provisions in 1940 Act and such stipulation would be of no consequence and the matter must be governed under the provisions of 1996 Act and this case also focused on the object of the Arbitration and Conciliation Act, 1996, that is the promotion of alternate dispute resolution mechanisms.

By this case, clarity was brought on the matter of the applicability of the Arbitration Act of 1996 and 1940 by formulating a fixed principle for determining which action is to be applied when based on the facts of each case


NON ARBITRABLE MATTERS

Under the Indian law, there exist certain matters which are not arbitrable that is, some matters within the start useful beyond the scope of arbitration. These are-

1) Matrimonial Matters

2) Criminal Offences

3) Guardianship Matters

4) Insolvency Disputes

5) Testamentary Matters

6) Labour and Industrial Dispute

7) Trust Dispute

8) Tenancy and Eviction Matters

9) Competition Law, although to justify this there exists no judicial pronouncement but just stated in the existing jurisprudence

The above mentioned is almost the exhaustive list of the matters which cannot be resolved by means of arbitration. This implies that through Arbitration many matters and disputes can be resolved that is the reason, Arbitration is considered to be a way forward in the Indian Judicial System. The expedient hearings and fast disposal of the cases serve justice better and effectively, yet with these advantages, there exist some drawbacks to the process of arbitration.

[1] Civ App 3678 of 2007 (28 January 2016) [2] (2002) 4 SCC 105 [3] Arbitration and Conciliation Act [4] CIVIL APPEAL Nos.2879-2880 OF 2018 [5] SUPRA note 1.

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