provide quick redressal to commercial disputes by private Arbitration.
Quick decision of any commercial dispute is necessary for smooth functioning of business and industry.
Internationally, it is accepted that normally commercial disputes should be solved through arbitration and not through normal judicial system.
Methods of ADR
There are four methods of ADR
Matters not referable to arbitration:
Certain matters which are not arbitrable are:
Suits for divorce or restitution of conjugal rights
Non-payment of admitted liability
An Arbitration is a dispute resolution process( mechanism) where the opposing parties select or appoint an individual called an Arbitrator.
Objectives of arbitration
i) To comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation.
ii) To make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration.
iii) To provide that the arbitral tribunal gives reasons for its arbitral award.
iv) To ensure that the arbitral tribunal remains with in the limit of jurisdiction.
v) To minimize the supervisory role of courts in the arbitral process.
vi) To permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes.
vii) To provide that every final arbitral award is enforced in the same manner as if it were a decree of the court.
viii) To provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal.
Essence of arbitration
Arbitration is a settlement of dispute by the decision of one or more persons called arbitrators.
It is an arrangement for investigation and settlement of a dispute between opposing parties by one or more unofficial persons chosen by the parties.
In arbitration some dispute is referred by the parties for settlement to a tribunal of their own choosing.
The dispute is not submitted for decision to the ordinary courts but a domestic tribunal.
It is thus a method of settling the disputes in a quasi-judicial manner.
The essence of arbitration is that the arbitrator decides the case and his award is in the nature of a judgement. Arbitration is a speedy and inexpensive method of settling the disputes between the parties.
Essentials of Arbitration Agreement
It must be in writing
It must have all the essential elements of a valid contract
The agreement must be to refer a dispute, present or future, between the parties to arbitration
An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement
Appointment of Arbitrator
The parties can agree on a procedure for appointing the arbitrator or arbitrators. If they are unable to agree, each party will appoint one arbitrator and the two appointed arbitrators will appoint the third arbitrator who will act as a presiding arbitrator [Section 11(3)].
Conduct of Arbitral Proceedings
The Arbitral Tribunal should treat the parties equally and each party should be given full opportunity to present his case [Section 18]. The Arbitral Tribunal is not bound by Code of Civil Procedure, 1908 or Indian Evidence Act, 1872 [Section 19(1)]. The parties to arbitration are free to agree on the procedure to be followed by the Arbitral Tribunal. If the parties do not agree to the procedure, the procedure will be as determined by the arbitral tribunal.
Decision of Arbitral Tribunal is termed as 'Arbitral Award'. 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 [Section 28(2)]. The decision of Arbitral Tribunal will be by majority. The arbitral award shall be in writing and signed by the members of the tribunal [Section 29].
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 [Section 31(8)].
Intervention by Court
- One of the major defects of earlier arbitration law was that the party could access court almost at every stage of arbitration - right from appointment of arbitrator to implementation of final award. Thus, the defending party could approach court at various stages and stall the proceedings.
Modes of Arbitration
(a) Arbitration without the intervention of the court. [Sec.3 to 19]
(b) Arbitration with the intervention of the court when there is no suit pending [Sec.20]
(c) Arbitration with the intervention of the court where a suit is pending. [Sec.21 to 25]
In order that the judicial authority may refer the parties to arbitration under section 8(1), the following conditions must be satisfied.
There must be a valid and subsisting agreement between the parties.
The matter about which a suit has been filed should be within the scope of the arbitration agreement.
The party asking for the stay must have applied at the earliest opportunity, i.e., before submitting his first statement on the substance of the dispute.
The application must be made to the judicial authority before which the proceedings are pending.
The application must be accompanied by the original arbitration agreement or by a duly certified copy thereof.
The judicial authority must be satisfied that there is no sufficient reason why the matter should not be referred.
What can be referred?
1) Disputes concerning movable property;
2) Disputes arising out of breaches of contract;
3) Disputes relating to breach of promise of marriage;
4) Questions of title to immovable property;
5) Questions of law or fact;
6) Disputes regarding, compliment, dignity, trespass, etc.
7) Time barred claims;
8) Questions as to whether judgement has been properly obtained or not.
9) Questions relating to the past or future maintenance of a widow.
What cannot be referred?
A claim for custody of wife, petition for restitution of conjugal rights, divorce, etc;
Claims arising out of illegal transactions;
Questions relating to public charities and charitable trusts;
Cases relating to public nuisance;
Proceedings relating to the appointment of a guardian to a minor;
Questions relating to offences affecting public at large;
Questions relating to the genuineness of a will;
Matters of a criminal nature.
Jurisdiction of Arbitral Tribunals
Competence of arbitral tribunal to rule on its jurisdiction (Section 16)
The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement for this purpose:-
a) An arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
b) A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure by the law it self the invalidity of the arbitration clause [Sec. 16(1)].
An arbitrator is basically a private judge appointed with consent of both the parties. Object of arbitration is settlement of dispute in an expeditious, convenient, inexpensive and private manner so that they do not become the subject of future litigation between the parties.