A PRESENTATION ON
ARBITRATION LAWS IN INDIA
Submitted by,
060104- B. Annapurna
060106 – A. Anusha
060110- Devaki Sakhamuru
INTRODUCTION
The significant increase in the role of international
trade in the economic development of nations over
the last few decades has been accompanied by a
considerable increase in the number of
commercial disputes as well.
• In India too, rapid globalization of the
economy and the resulting increase in
competition has led to an increase in
commercial disputes.
• At the same time, however, the rate of
industrial
growth,
modernization,
and
improvement of socio-economic circumstances
has, in many instances, outpaced the rate of
growth of dispute resolution mechanisms.
• In many parts of India, rapid development has
meant increased caseloads for already
overburdened courts, further leading to notoriously
slow adjudication of commercial disputes.
• As a result, alternative dispute resolution
mechanisms, including arbitration , have become more
crucial for businesses operating in India as well as
those doing businesses with Indian firms.
Areas where arbitration has proved
especially effective include:
• Building and civil engineering contracts
• Shipping
• Imports
• Exports and international trade
• Partnership disputes
• Insurance contracts
• Intellectual property agreements
• and rent review in commercial leases.
For almost any commercial dispute which
can be resolved by litigation in court, can
be resolved by arbitration, which has now
become a globally popular choice .
Arbitration is preferred to litigation not merely
because of the length of time taken in commercial cases
in courts – especially in a three tier court system that is
prevalent in India; but more importantly, because
there is simply no other option.
Developments in Arbitration Laws in India
• In India prior to 1996 Arbitrations were governed by Arbitration and
Conciliation Act of 1940.
• New Act was passed in 1996 which brought changes in the said law in
India.
Changes under the new Act called Arbitration and
Conciliation Act of 1996 are summarized as under:
One of the important changes brought in by the Arbitration
and Conciliation Act, 1996, (hereinafter referred to as the
1996 Act or Act of 1996) in the field of law concerning
arbitration, compared to the analogous provisions in the
earlier enactment, Arbitration Act of 1940 (herein after
referred to as the 1940 Act or Act of 1940) is relating to
`enforcement of awards'.
The Indian legislature on Arbitration
The Arbitration and Conciliation Act, 1996
The present Act is based on model law drafted
by United Nations Commission on International
Trade Laws( UNCITRAL), both domestic
arbitration as well as international commercial
arbitration, to provide uniformity and certainty
to both categories of cases
The Act is divided into following parts:
(a) Part I – Domestic arbitration
(b) Part II – Enforcement of foreign awards
(c) Part III – Conciliation procedures
(d) Part IV – Supplementary provisions
(e) First Schedule – Convention on recognition and
enforcement of foreign arbitral award as per New York
convention
(f) Second Schedule – Protocol on Arbitration clauses
(g) Third Schedule – Convention on the execution of
foreign arbitral awards as per Geneva Convention.
What is Arbitration
The object of
arbitration is
settlement of dispute
in an expeditious,
convenient,
inexpensive and
private manner
Arbitration is a process of dispute
resolution in which a neutral third
party ( called the arbitrator) renders a
decision after a hearing at which both
parties have an opportunity to be
heard. It is the means by which parties
to a dispute get the same settled
through the intervention of a third
person, but without having recourse to
court of law. An arbitrator is basically a
private judge appointed with consent of
both the parties.
Arbitration Agreement – The foundation of
arbitration is the arbitration agreement between
the parties to submit to arbitration all disputes
which have arisen or which may arise between
them.
•Thus, the provision of arbitration can be made at
the time of entering arisen.
• An arbitration agreement may be in the form of
an arbitration clause in a contract or in the form
of a separate agreement.
•The agreement must be in writing and must be
signed by both parties.
Parties need not have a prior Conciliation clause
or Arbitration clause or agreement to refer their
dispute to FACT. Cases may be registered on the
spot after written consent from both parties.
Court may refer the matter to arbitration in some cases
– If a party approaches the court despite the arbitration
agreement, the other party can raise an objection.
– However, such objection must be raised before
submitting his first statement on the substance of
dispute.
– Such objection must be accompanied by the original
arbitration agreement or its certified copy. On such
application the judicial authority shall refer the parties
to arbitration.
– Since the word used is “shall ” , it is mandatory for
judicial authority to refer the matter to arbitration.
Arbitration Procedure
Submission of statements
Submission of Statements of claim and Defense – The claimant
should submit statements of claims, points of issue and relief or remedy
sought. The respondent shall state his defense in respect of these
particulars. All relevant supporting documents must also be submitted.
Such claim or defense may be amended or supplemented any time.
Hearings and written proceedings – After submission of documents
and defense, unless the parties agree otherwise, the Arbitral Tribunal
can decide whether there will be oral hearing or proceedings can be
conducted on the basis of documents and other materials. However, if
one of the parties requests, the hearings shall be oral. Sufficient advance
notice of hearing should be given to both the parties.
Settlement
during arbitration – It is permissible for parties to
arrive at mutual settlement even when arbitration is proceeding. In
fact, even the tribunal can make efforts to encourage mutual settlement.
If parties settle the dispute by mutual agreement, the arbitration shall be
terminated. If parties settle the dispute by mutual agreement, the
settlement can be recorded in the form of an arbitral award on agreed
terms. Such Arbitral Award shall have the same force as any other
Arbitral Award.
Arbitral Award – The decision of Arbitral Tribunal is termed as
‘Arbitral Award’. The arbitrator can decide the dispute ex aequo et bono (
In justice and in good faith) if both the parties expressly authorize him
to do so. The award must state the reasons unless the parties agree
otherwise. The award should be dated and place where it is made
should be mentioned. Copy of the award should be given to each party.
Cost of Arbitration – Cost of Arbitration means reasonable cost relating
to fees and expenses of arbitrators and witnesses, legal fees and expenses,
administration fees of the institution supervising the arbitration and other
expenses in connection with arbitral proceedings. The tribunal can decide
the cost and share of each party. If the parties refuse to pay the costs, the
Arbitral Tribunal may refuse to deliver its award.
Intervention by Court – One of the major defects of the 1940
Arbitration Act was that the party could access court almost at every stage
of arbitration – right from appointment of arbitrator to implementation of
final award. The New 1996 Act has drastically curtailed the right of appeal
and such appeal to the court is now only on restricted grounds . In some
cases, if an objection is raised by the party, that objection is decided upon
the Arbitral Tribunal itself, after which the arbitration proceedings are
resumed and the aggrieved party can approach the Court only after the
Arbitral Award is made.
Parties to all kinds of international contracts mostly prefer arbitration as the
favored alternative of resolving their disputes because it promises freedom
from the national courts of the other party, among other advantages above
mentioned.
ADVANTAGES OF ARBITRATION
•Final, binding decisions – While several ADR mechanisms
can help parties reach an amicable settlement, all of them
depend ultimately, on the goodwill and mutual collaboration
of the parties. However, a final and enforceable decision may
be obtained by recourse to arbitration
•Limited right of Appeal – Although arbitral awards may be
subject to being challenged, the grounds of challenge
available against arbitral awards have been limited by the
new Arbitration and Conciliation Act, 1996
• Flexibility of procedure – Further, arbitration also offers the
parties freedom and flexibility to decide on the number of
hearings, selection of arbitrators, the venue of arbitration,
procedure that may be conducted within an agreed time frame
expeditiously and as economically as the circumstances allow.
• Confidentiality – Unlike trials, arbitration hearings do not
take place in public and only the parties themselves receive
copies of the awards.
• Neutrality – As per the arbitration agreement signed by the
parties, arbitration may take place in any country, under any law
in any language and with arbitrators of any nationality. With
this flexibility, it is generally possible to structure a neutral
procedure offering no warranted advantage to any party.
•Specialized competence of arbitrators – The judicial
system of any country will not permit the parties to a
dispute to select their own judges. On the other hand,
arbitration presents the parties an opportunity to
nominate persons of their choice as arbitrators, provided
they are independent. This enables the parties to have
their disputes resolved by people who have specialized
competence in the relevant field.
INTERNATIONAL RECOGNITION OF ARBITRAL AWARDS -
Arbitral awards enjoy much larger global recognition
than judgments of national courts. Over 160 countries
have pledged adherence to the “1958 New York
Convention” and its provisions have been incorporated
into domestic laws of the contracting States. The
Convention facilitates enforcement
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