2. * What is
Arbitration ?
*Arbitration is a form of dispute resolution.
*Arbitration is the private, judicial determination of a dispute,
by an independent third party.
*The disputing parties hand over their power to decide the
dispute to the arbitrator(s). Arbitration is an alternative to
court action (litigation), and generally, just as final and
binding (unlike mediation, negotiation and conciliation which
are non-binding).
3. *Why Arbitration ?
*Choice of Decision Maker – For example,
parties can choose a technical person as arbitrator
if the dispute is of a technical nature so that the
evidence will be more readily understood.
*Efficiency – Arbitration can usually be heard
sooner than it takes for court proceedings to be
heard. As well, the arbitration hearing should be
shorter in length, and the preparation work less
demanding.
*Privacy – Arbitration hearings are confidential,
private meetings in which the media and members
of the public are not able to attend.
4. *Convenience – Hearings are arranged at times
and places to suit the parties, arbitrators and
witnesses.
*Flexibility – The procedures can be
segmented, streamlined or simplified,
according to the circumstances.
*Finality – There is in general, no right of
appeal in arbitration. (Although, the court has
limited powers to set aside or remit an award).
5. *Process of
Arbitration
*Initiating the Arbitration – A request by one
party for a dispute to be referred to arbitration.
*Appointment of Arbitrator – Arbitrators may
be appointed by one of three ways: (1) Directly by
the disputing parties, (2) By existing tribunal
members (For example, each, each side appoints
one arbitrator and then the arbitrators appoint a
third), (3) By an external party (For example, the
court or an individual or institution nominated by
the parties).
6. *Preliminary Meeting – It is a good idea to have a meeting
between the arbitrator and the parties, along with their legal council,
to look over the dispute in question and discuss an appropriate
process and timetable.
*Statement of Claim and Response – The claimant sets out a
summary of the matters in dispute and the remedy sought in a
statement of claim. This is needed to inform the respondent of what
needs to be answered. It summarizes the alleged facts, but does not
include the evidence through which facts are to be proved. The
statement of response from the respondent is to admit or deny the
claims. There may also be a counterclaim by the respondent, which in
turn requires a reply from the claimant. These statements are called
the ‘pleadings’. Their purpose is to identify the issues and avoid
surprises.
7. *Discovery and Inspection – These are legal
procedures through which the parties investigate
background information. Each party is required to
list all relevant documents, which are in their
control. This is called ‘discovery’. Parties then
‘inspect’ the discovered documents and an agreed
upon selection of documents are prepared for the
arbitrator.
*Interchange of Evidence – The written
evidence is exchanged and given to the arbitrator
for review prior to the hearing.
8. *Hearing – The hearing is a meeting in which the arbitrator listens to any
oral statements, questioning of witnesses and can ask for clarification of
any information. Both parties are entitled to put forward their case and be
present while the other side states theirs. A hearing may be avoided
however, if the issues can be dealt with entirely from the documents.
*Legal Submissions – The lawyers of both parties provide the arbitrator
with a summary of their evidence and applicable laws. These submissions
are made either orally at the hearing, or put in writing as soon as the
hearing ends.
*Award – The arbitrator considers all the information and makes a
decision. An award is written to summarize the proceedings and
give the decisions. The award usually includes the arbitrator’s
reasons for the decision
9. *Key Aspects in
Arbitration
*Section 5 of the Act – a deliberate departure from
UNICTRAL Model law.
*Section 5 starts with “non-obstante” clause and limits
the scope of judicial intervention.
*Section 8 limits discretion of courts and mandates the
court to refer the parties to arbitration when there is
an arbitration agreement.
*Arbitral tribunal is competent to rule on its own
jurisdiction including the validity of the arbitration
agreement. [Section 16]
*An appeal lies against an order if the arbitrator decides
that he does not have jurisdiction or if the arbitrator
decides that he has exceeded the scope of his
authority
10. *Enforcement of Arbitral
Award
*In India, enforcement and execution of arbitral awards is
governed both by the Arbitration and Conciliation Act, 1996 and
the Code of Civil Procedure, 1908.
*Subsequent to the amendment of 2015, section 36 of the
Arbitration and Conciliation Act, 1996 stands amended.
*One of the declared objectives of the Arbitration and
Conciliation Act, 1996 is that every final award is to be enforced
in the same manner as the decree of the Indian court would be.
It is upon the losing party to object to the arbitral award and
file an application for setting it aside. However, if the objections
to the award are not sustained or if no objections are filed
within the time limit, the award itself becomes enforceable as a
decree of the court.
11. *A domestic award can be challenged and set aside only by way of an
application under Arbitration and Conciliation Act, 1996, s 36 and only
the basis of the circumstances listed under it. An application for setting
aside an award must be made within three months of receipt of the
award by the applicant subject to a further extension of 30 days on
sufficient cause being shown. An application beyond this period is time
barred and further delay cannot be condoned.
*Proper forum to approach for enforcement
For the purposes of the Arbitration and Conciliation Act, 1996, ‘court’
means the principal Civil Court having original jurisdiction to decide the
question forming the subject matter of the arbitration, if the same were a
subject matter of a suit. The aggrieved party can, thus, bring its
application to set aside the award before the court where the successful
party has its office or where the cause of action in whole or in part arose
or where the arbitration took place.
12. *Time limit
*Any application filed under Arbitration and Conciliation Act, 1996, s 34 for
setting aside the award must be made within 3 months from receipt of
the same. This period can be extended by the court by a further period of
30 days on a sufficient cause being shown, but not thereafter. The court
normally allows a wide scope to the meaning of what constitutes
‘sufficient cause’ and if it is convinced of the genuineness of the delay in
filing an application under Arbitration and Conciliation Act, 1996, s 34,
the delay is condoned.
*Procedure of enforcement
*The provision of enforcement of an arbitral award is given
under Arbitration and Conciliation Act, 1996, s 36 as mentioned above.
The party, after the expiry of the time for setting aside the arbitral
award, as mentioned above, can file an application for execution before
the court of the competent jurisdiction for the enforcement of the
arbitral award.
13. Format of application filed before the court
An application is filed before the court of the competent jurisdiction
seeking enforceability and execution of the award. The application
should state all the important facts and issues framed by the arbitral
tribunal and findings of the arbitral tribunal. The claim as awarded
should be mentioned and specifically the extent to which the award
for enforcement id sought.
Documents required
The documents required for enforcing an arbitral award are:
•
An original award or copy of the award duly authenticated
•
Original arbitration agreement or duly certified copy of it.
14. *Foreign Arbitral Award
*Part I applies to domestic arbitrations, while Part II
applies to international commercial arbitrations.
*“International commercial arbitration” is defined under
section 2 (f) of the Act,
*For the Act to apply, the arbitration must be commercial as
defined under the Indian law and at least one party is
*Foreign national or habitually resides in a foreign country.
*A corporation, which is incorporated in a country other than
India.
*Government of a foreign country.
*Body of Individuals, association or a company whose central
management or control is exercised in a foreign country.
15.
16.
17. *Judicial developments
*Garware Wall Ropes v. Coastal Marine Constructions & Engineering
Ltd dated 10.04.2019 where it was held that the Arbitration Clause in
case of Insufficiently stamped Agreement is not enforceable.
*TRF Ltd. vs. Energo Engineering, (THREE JUDGE BENCH) where it was
held that Once the arbitrator has become ineligible by operation of law,
he cannot nominate another as an arbitrator.
*Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd,(TWO
JUDGE BENCH) where the arbitration clause inter-alia stipulated
the appointment of a sole arbitrator below a certain financial
threshold, and a three-member arbitral panel above that
threshold. However, the relevant aspect of the clause was that
although the petitioner had the right to choose the arbitrator, it
could do so only from the panel of arbitrators suggested by the
respondent. The Supreme Court did not accept the arbitration
clause in its entirety and inter alia, directed the respondent to
broad-base its existing panel of arbitrators, importantly it
upheld the selection of the panel by one party.
18. *D.K. Gupta v. Renu Munjal, Delhi HC held that the
TRF judgment did not lay down a universal proposition that one
party to an arbitration could no longer be an appointing
authority, but was limited to the issue that if a person was
ineligible to act as an arbitrator, such person could not appoint
another in its place.
19. Bharat Aluminium Co. vs. Kaiser Aluminium Technical Service Inc. [2012 (8)
SCALE 333] overruled Bhatia International [(2002) 4 SCC 105] and Venture
Global [(2008) 4 SCC 190].
The most important impact is that in international commercial arbitration held
abroad Part I of the Act will not apply.
Hence, section 34 setting aside the award or Section 9 interim measures
cannot be resorted to.
Other critical implications of Bharat Aluminium Co. vs. Kaiser Aluminium
Technical Service Inc.
The seat of arbitration will decide the applicable law of arbitration.
The venue of arbitration may change, but it will have no effect on the seat of
arbitration. The seat of arbitration remains the place initially agreed by or on
behalf of the parties.
Bharat Aluminum to apply only post 06.09.2012. Therefore, any application for
relief under section 9 or 34 in respect of foreign seated arbitration will
continue to be governed by the Bhatia principle. If existing international
arbitration agreements are pre 06.09.2012, advisable to have them amended.
20. Vinod Bhaiyalal Jain & Ors. Vs. Wadhwani Parmeshwari Cold Storage Pvt. Ltd.
through its Director & ANR. [Civil Appeal No. 6960 of 2011]
what is to be seen is that there has been a reasonable basis for the appellants
to make a claim that in the present circumstance the learned Arbitrator would
not be fair to them even if not biased. It could no doubt be only a perception
of the appellants herein. Be it so, no room should be given for even such a
feeling more particularly when in the matter of arbitration the very basis is
that the parties get the opportunity of nominating a judge of their choice in
whom they have trust and faith unlike in a normal course of litigation where
they do not have such choice
21. *Arbitration Clause
*The parties should decide between institutional and ad-hoc
arbitration. Benefits?
*The parties should select a set of arbitration rules and use the
model clause recommended for these arbitration rules as a starting
point.
*The scope of dispute subject to arbitration should not be limited.
*The parties should select the seat of arbitration – practical and
juridical factors.
*Despite Bharat Aluminum, its better to expressly exclude Part I of
the Act.
*The parties should specify the number of arbitrators – impact on
overall cost, duration and the quality of the arbitral proceedings.
*The parties should specify the method of selection and
replacement of arbitrators and, when ad-hoc arbitration is chosen,
should select an appointing authority.
22. * Material Facts to consider while drafting
arbitration clause
*Where applicable, time limits for each event for e.g.
nominating arbitrator, should be specified.
*The parties should specify the language of arbitration.
Language of documentation, effect of choice on arbitrators /
counsels must be considered.
*The parties should indicate the rules of law governing the
contract, venue, seat of arbitration, etc.
*Alternative dispute resolution mechanisms such as
conciliation, DRBs, expert determination, etc. should be
clearly specified.
*Parties may consider specifying the powers of the arbitral
tribunal to grant interim relief.
*
23. * Present Position of Arbitration in
India
*The Indian judicial system is advancing progressively in the
field of arbitration. In the last three years, India has seen a
growth of nearly 200% in the number of disputes that have
been referred to arbitration.
*Arbitration disputes in India have been rampant in the
construction and infrastructure, and oil and gas sectors.
This is primarily due to the nature of these businesses and
exigencies attached in running the business. Financial
sector disputes are reported at an increasing rate in areas
including private equity, joint ventures and mergers and
acquisitions.
25. *Nani Palkhivala Arbitration Centre opens a new centre for
arbitration in Delhi
*On 20 April 2018, the Nani Palkhivala Arbitration Centre ("NPAC")
opened a new centre for arbitration in Delhi. Established in
Chennai in 2005, NPAC was one of the first arbitration institutions
in India. Its centre in Chennai has overseen institutional
arbitrations under its rules, and has offered administration
facilities for ad hoc arbitrations.
*With the opening of its Delhi centre, NPAC becomes the first
Indian arbitration institution to have two centres in the country.
This growth is timely in light of the Sri Krishna Committee Report
and other actions being taken by the Government of India to
promote institutional arbitration within India.
26. Mumbai Centre for International Arbitration ("MCIA")
provides arbitration facilities to over 250 hearings as of 25 July 2018
In July 2018, over 50 guests came together in Maxwell Chambers in
Singapore for a breakfast seminar on 'Protecting your investments in
India: Developments in Dispute Resolution', co-hosted by the MCIA and
Herbert Smith Freehills and supported by Economic Laws Practice
("ELP").
The panel, comprising Kritika Venugopal (Senior Associate (Disputes),
Singapore), Xinping Chen (Senior Legal Counsel at Accenture, APAC),
Naresh Thacker (Partner, ELP) and Neeti Sachdeva (Secretary General
and Registrar at MCIA), discussed recent developments in Indian
arbitration law and practice, the rise of institutional arbitration and
investment protection in India.
27. SHUBHAM BUDHIRAJA
The author is company secretary by qualification and
is undergoing its management trainee with a reputed
corporate law firm. Further, he is Second Year Law
student at faculty of law, University of Delhi. He is
also enrolled as Para Legal volunteer with Delhi State
Legal Service authority and also active Participant in
Moot Court.
+919654055315
Csshubhambudhiraja1994@gmail.com
Shubhambudhiraja02@gmail.com
