The document provides guidance for NBFCs on conducting arbitral proceedings as an alternative to dispute resolution. It outlines the basic process, including pre-arbitration steps like case identification, selecting an arbitrator and counsel. During arbitration, key steps include filing statements of claim and reply, submitting evidence and witnesses, and framing issues. Post arbitration involves receiving and enforcing the award, including through attachment of property or garnishee orders. Supplements include fee schedules and forms to support the arbitration process.

1. Arbitral Proceeding
(a guide note for NBFC as an Alternate to Dispute Resolution)
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2. Preface…
Law derives its authority from the obedience of the people. However, the corpulent
backlog and sluggish delays of our litigation redressal system defeats the very purpose of
fair and just system of law. Though the civil judicial system assures independent and
impartiality of judiciary in delivering justice with consistency in procedure, long drawn
procedures, complicated laws, shortage of judges, inadequate infrastructure facilities in the
courts all result in delays in obtaining relief and legal disputes started piling up in courts.
ADR (Alternate Dispute Resolutions) therefore, particularly in the form of Arbitration, has
done yeoman’s service in restoring faith in our system because ADR methods for
settlement of disputes outside court are flexible, speedy, efficient and economical.
This Presentation explains briefly the conduct of arbitral proceedings being followed by
most of Non-Banking Finance Companies in effecting recoveries from their debtors
borrowers)/settlement of dispute and outlines the ways and means available to genuine
borrowers to challenge the arbitral award to safeguard their interest.

3. Basic Concept…
In the past, NBFCs and Financial Institutions were provided with powerful and effective means by which they could recover
dues from the borrowers quite easily through exhaustive discovery, pre-judgment remedies such as attachment etc. But with
the passage of time Courts changed its views in favor of consumers holding that lenders owe their customers a ‘fiduciary duty’
and hence they cannot deal with them at arms length like other parties to business transactions.
Normally three alternatives are available to NBFCs for
recovery of outstanding loans and dues from the defaulting borrowers :-
• The first alternative is to issue notice and file criminal complaint under section 138 of the Negotiable Instruments Act,
against EMI cheques bounce or blank cheques collected initially from the borrowers by NBFCs towards repayment of
loans, by filling the amount of outstanding loan/disposal loss.
• The second alternative available with NBFCs (where the loan agreement/hire purchase agreement does not contain the
‘arbitration clause’ for resolution of dispute) is to file Civil Suit for the amount outstanding. However filing a civil suit is a
time consuming and costly affair.
• The third best alternative for recovery of outstanding's is to invoke arbitration clause (in case loan agreement/hire
purchase agreement contains ‘arbitration clause’), and commence arbitral proceedings and file execution application on
passing the arbitral award.

4. Regulatory Framework…
As per Section 18 on "Conduct of Arbitral Proceedings", “the parties shall be treated with equality and
each party shall be given a full opportunity to present his case.”
• Equal treatment of the parties (parties must be granted same procedural rights (as, e.g. with regard
to written submissions, questioning of witnesses, filing of documentary evidence)
• Right to be heard in adversarial proceeding includes:
• to participate in evidentiary hearings
• to rebut the other party’s allegations, and
• to examine and challenge the evidence brought forward by the other party
• by bringing evidence of its own
• Violations:
• Restrictive approach?
• Causality?
• Safeguard: Right to challenge the award in case of a violation of due process
• (see, e.g., Art 34 (2) (a) (ii) “the party making the application was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was otherwise unable to present his case”)
• Duty to object to procedural irregularities (see, e.g., Art 4 Model law)
For BARE ACT Click at OBJECT

5. Arbitration Timeline
Pre - Arbitration
Commencement
of Arbitration
Arbitral
Proceedings
Post Arbitration
Contract &
Legal
Agreement
for
Arbitration Dispute
& Case
Analysis
Request for
Arbitration
Constitution of
Arbitral Tribunal
(Appointing an
Arbitrator)
Exchange of
Submissions
Hearing
Arbitral Award
Challenge
Enforcement and
Recognition of
Arbitral Awards
PRE (10 Days) DURING (90 Days)
POST (90 +30
Days)
YES -
Arbitration

6. Concept Outline…
(Minimum Standard of Due Process)
Pre Arbitration II During Arbitration II Post Arbitration

7. Pre Arbitration…
Case
Identification
• Selecting the
cases against
which Arbitral
Proceedings
need to be
started
• Ideal Process
of
Identification
of Cases
Should be Via
System Pop-
up*
Selection of
Arbitrator
• Selecting a
arbitrator
which has
credentials of
delivering
unbiased
judgments
Appointment of
Counsel
• Selecting and
Appointing an
Advocate for
taking our
plea and
representing
company
during Arbitral
Proceedings
Filing &
Documentation
• Preparing a
set of
documents
required by
our counsel
for
substantiating
and
advocating or
plea during
Arbitral
Proceeding
This part of process note explains the system readiness for starting any arbitration
cases and making due process by which it become helpful in taking the arbitral
proceeding smoother and on predefined way
*Annexure-7

8. Case Identification & Allocation
to Legal
Case Identification Criteria
Identification:
 3 (Three) Unpaid EMI
 70th Days Past 1st EMI Due
 No Payment History during Last 70 Days
(Internal Software MIS)
 Negative Field Collection Report
Allocation to Legal Cell*:
 “Internal Software” allocation on 5th
& 20th of Every Month by MIS to CM
(Legal) and copy to MD, BH & SH*
 Closure Report by CM (Legal) in
“Internal Software” for start of
Arbitration with 15 Days*
* There is restriction on case allocation
numbers with Arbitrator & Advocate.
Please refer Annexure – 5& 5A
Selection of Arbitrator
Appointment of Advocate
File Preparation

9. Case Identification
Selection of Arbitrator
Basic Criteria :
 LLB Degree (Full Time)
 10 plus year of Legal Practice
in Session Court
 Conducting Experience
Arbitration Proceedings
 High Level of Reputation &
Credentials for Fairness to the
Proceeding
Desired Criteria (Additional):
 High Court Practicing
Experience
 Experience conducting
Arbitration for Banks / NBFC
* Refer Annexure-1 for Fee Structure
Selection of Arbitrator
Appointment of Advocate
File Preparation

10. Case Identification
Appointment of Counsel
Basic Criteria :
 LLB Degree (Full Time)
 10 plus year of Legal Practice
in Session Court
 Conducting Experience
Arbitration Proceedings
 Fee Agreement as per
Company Policy*
Desired Criteria (Additional):
 High Court Practicing
Experience
 Experience conducting
Arbitration for Banks / NBFC
* Refer Annexure-2 for Fee Structure
** Refer Annexure-3 for Counsel Hiring Criteria
Selection of Arbitrator
Appointment of Advocate**
File Preparation

11. Case Identification
File Preparation
This is an exhaustive exercise of
preparing a FULL set of documents
generally required during the entire
course of arbitral proceeding.
Customer Document :
 Application Form
 Loan Agreement (Duly Filled-up)
 Guarantee Documents (Duly Filled-up)
 Sanction Letter
 Board Resolution
Internal Documents (Internal Software):
 Loan Repayment Schedule
 Loan Account Statement
 Loan Foreclosure Statement
 Loan Sanction Term Sheet
Internal Documents (Additional):
 Detailed Net-Worth Statement (From Credit
CAM)
 Detailed Debtor's Analysis Sheet (From Credit
CAM)
 Copy of all Communication Demanding
Overdue EMI & Charges
 Summery Sheet of Other Parallel Legal
Proceedings
Selection of Arbitrator
Appointment of Advocate
File Preparation

12. During Arbitration…
Demand Notice
Termination of
Agreement & Loan
Recall
Appointment of
Arbitrator
“Statement of
Claim” by Claimant
Reply to the
“Statement of
Claim” by
Respondent
Rejoinder by
Claimant
Submission of
Witness & Evidence
Arguments & Cross
Framing of Issue
and Accepting
Written Submission
Award Pending /
Award
Execution of Award
This a general outline of various steps involved in the arbitral proceeding where both parties
are heard and given time to submit reply and witness as per the fair practice under the Law.
1st
Day
10th
20th
30th
70th
60th
50th
40th
80th
110th
200
Or
230
To be
sent on
75th Day
of No
Payment

13. During Arbitration…
Demand Notice
• mentioning the loan
amount
outstanding/disposal
loss incurred by NBFC
(Claimant), is sent to
the principal borrower
as well as guarantor
(Respondents) of the
borrower, giving time
period to pay the
amount mentioned in
the demand notice
Appointment Of
Arbitrator
• After expiry of the
time period allowed to
pay, NBFC intimates
the
arbitrator/arbitration
tribunal appointed by
them to commence
the arbitral
proceedings
requesting the
arbitrator to act as
sole arbitrator and
brief him about the
history of the case and
amount claimed with
supporting
documents.
• A commence letter is
issued to the arbitrator
marking copy to the
borrower/guarantor
Acceptance of
Appointment by
Arbitrator
• The arbitrator will
accept to act as sole
arbitrator by
commencing arbitral
proceedings giving
arbitral proceedings
number and inform
the NBFC to file
"Statement of Claim"
within time limit
prescribed.
Annexure-4

14. During Arbitration…
Filing of Statement of Claim
•NBFC files "Statement of
Claim" with the arbitrator
giving all the details of
borrower/ guarantor, loan
amount, EMI, assets finance
etc. with all the supporting
documents.
•On submission of
"Statement of Claim" the
arbitrator issue ‘Summon’
for appearing and answering
the claim filed by the NBFC,
to the Borrower and the
Guarantor and to file their
reply/statement of defense,
if any, with supporting
documents.
Reply to Statement of Claim
•On receipt of "Statement of
Claim" from the lenders,
after study of the claim, a
suitable reply/ statement of
defense should be
submitted to the Arbitrator
with supporting documents
by Respondents (Borrower &
Guarantor).
•Arbitrator as a fair practice
gives 2/3 opportunities to
the borrower/guarantor to
represent his case and if
borrower does not appear
or does not file statement
of objections, the Arbitrator
passes an ‘Exparte arbitral
award’ directing the
borrower/guarantor jointly
and severally to pay the
amount mentioned in the
award served to both
parties to the dispute.
Rejoinder by NBFC (Claimant)
•On receipt of Defense by
respondents, along with
supporting documents,
NBFC again files the reply
with supporting documents
stating his claim. At the
filing of Rejoinder, NBFC
submit the LIST of
WITNESSES & EVIDENCES
after which ADMISSION &
DENIAL of both the parties
are HEARD. It Normally takes
2-3 Dates for REPLY /
SUBMISSION and
ARGUMENTS and sufficient
time is provided for same

15. During Arbitration…
Argument &
Evidences /Witness
Examination
•In this situation of
Proper contest, all
the evidences and
Witnesses are
Examined by
Arbitrator.
Sufficient time is
provided for
making the arbitral
proceeding free &
fare to both the
party
Framing of Issue &
Cross of Both Party
•After Arguments
where both the
parties are heard
properly and
making
examination of
documents
submitted as
evidence, Cross
Examinations are
done and Issue
Framing starts
taking shape.
Award Pending /
Award
•After successfully
conducting the free
and fare TRAIL
proceeding where
both the parties are
able to provide
and get sufficient
time to counter and
claim and make
defense, Arbitrator
makes the award
pending.
•After certain period
which is defined at
the date of last
hearing AWARD is
delivered.

16. Post Arbitration…
Receipt of Award
•The award is due
30 days after the
arbitrator closes
the record and
should address all
claims raised in the
arbitration. The
award may direct
one or more parties
to pay another
party a monetary
amount or it may
direct parties to
take specific
actions based on
how the arbitrator
decided the
matters in the case.
Execution of Award
•If borrower/ guarantor
does not challenge the
arbitral award, within 3
months of the receipt of
award, the NBFC shall
lodge the award with the
concerned High Court for
preparing "Transfer
Decree" to transfer the
award to concerned
District Civil Court where
the borrower/guarantor
resides having jurisdiction
to entertain execution
proceedings.
•On filing the Execution
Application with the
concerned District Civil
Court, the Court issues
‘returnable notice’ to the
borrower/guarantor
through the court bailiff.
Enforcement of Award
•After giving reasonable
opportunities to both the
parties, suitable order is
passed attaching the
properties of the
borrower/guarantor by
the Court.
•The DECREE can be
utilized by NBFC to have
GARNSHEE also on the
expected receivable.

17. Award Utilization…
Every final arbitral award is enforceable and acceptable in the same manner as if it were a “decree of the Court”. it is up to the losing party
to object to the award and petition the court for setting it aside (Refer Annexure -6 for Ground for Setting Aside). The
winning party has to make no procedural move. If the objections to the award are not sustained (or if there are no objections within the
time allowed) the award itself becomes enforceable as if it were a “decree of the court”.
This decree can be utilized in TWO Prominent ways
1. Attachment of Movable & Immovable Property
Here Court allows the winning party to take a course of recovering their awarded claim by selling the identified property of loosing party.
The best way to identify the immovable property of defaulting client is OUR CREDIT APPRAISAL MEMORANDUM (CAM). We can have real
estate detail analysis of client from it and / or ask our Field Officer to prepare report as per ANNEXURE-8. Local enforcement agencies
are bound to co-operate and extend support in getting the order successfully executed.
1. Garnishee
If winning party can provide a information on definitive cash flow expected from any third party to the loosing party, court can provide a
stay or injunction on same ,forcing loosing party to come for settlement of alternatively the expected cash-flow may be directly diverted for
settlement of claim and as per award. Here NBFC will be treated as Judgment Creditor and Looser of Award as Judgment Debtor as per legal
terminology. Third party is treated as GARNISHEE. For taking Garnishee Order and cutting short on timeline for its execution we need to
have following information as per Format ANNEXTURE - 9
For Recovery of Money as per award, winning party can make following third party as Garnishee
Banks where funds are parked
Third party which owes money to Loosing Party
Business associates (Debtor’s) of Loosing party

18. Supplements to Presentation…
ANNEXUREs & SCHEDULEs

19. Annexure - 1
ARBITRATOR INDICATIVE FEE SCHEDULE (Multiple & Periodic Allocation)
S. No. Net POS
Arbitrator Fee Range* –
Both Party Charges (Rs.)
Clerkage (Extra) Taxes Payment Term
1 Less than 25 Lac 10,000 to 12,000 10% Actual 50% Advance at
the time of
Sending Loan
Recall cum
Arbitrator
Appointment &
Balance 50%
plus Clerkage &
Taxes at
RESOLUTION /
AWARD /
WITHDRAWAL
2
Between 25-50
Lac
12,000 to 14,000 10% Actual
3
Between 50-75
Lac
14,000 to 16,000 10% Actual
4
Between 75-100
Lac
16,000 to 20,000 10% Actual
5 Above 100 Lac 20,000 to 25,000 10% Actual
• Up to 25% Variation is permitted subject to Approval of President / MD with relevance to Fast
Proceeding and Quality Delivery
• Fee conclusion has been arrived keeping the market practice, company’s cost consideration on legal
expenditure &with respect to volume of cases to be handled.
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20. Annexure - 2
ADVOCATE INDICATIVE FEE SCHEDULE RANGE ( FINAL)
S.
No.
Net POS
Maximum
Advocate Fee
(Upto Rs.) *
Clerkage
(Extra)
Taxes
Incentive for Time
bound Proceeding
(120 Days from Loan
Recall Notice)
Payment Term
1 Less than 25 Lac 12,000 /- 10% Actual 5000/- 50% Advance at
the time of
Sending Loan
Recall cum
Arbitrator
Appointment &
Balance 50% plus
Clerkage & Taxes
at RESOLUTION /
AWARD /
WITHDRAWAL
2 Between 25-50 Lac 12,000/- 10% Actual 5000/-
3 Between 50-75 Lac 16,000/- 10% Actual 5000/-
4 Between 75-100 Lac 18,000/- 10% Actual 5000/-
5 Above 100 Lac 20,000/- 10% Actual 5000/-
• Up to 25% Variation is permitted subject to Approval of President / MD with relevance to Fast
Proceeding and Quality Delivery
• ADVOCATE EMPANELMENT PROCESS – Refer ANNEXURE - 10
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21. Annexure - 3
ADVOCATE SELECTION CRITERIA FOR EMPANALMENT ( SUBJECTIVE & BROADLINE) **
S.
No.
Net POS
Education
Qualification
Practicing
Experience
(Min. No of
Year)
Practicing
Experience
Set –up
(Office &
On
Panel)**
Arbitration
Experience
General
Requirement
(Before
Empanelment)
1
Less than 25
Lac
LLB 08
Session
Court
Reasonable &
1-2 Assistant
NA
1. Profile of
Firm with
LIST of Client
2. Profile of
Main
Promoter of
Firm
3. Bio Date of
All Advocate
on Panel
2
Between 25-50
Lac
LLB 10
Session
Court
Reasonable &
1-2 Assistant
MUST (2-5)
3
Between 50-75
Lac
LLB 10
Session &
High Court
Reasonable &
1-2 Jr.
Advocate
MUST (5-10)
4
Between 75-
100 Lac
LLB 12
Session &
High Court
Reasonable &
2-4 Jr.
Advocate
MUST (10+)
5 Above 100 Lac LLB + Other 14
Session /
High /
Supreme
Court
Reasonable &
5-10 Jr.
Advocate
MUST (NBFC)
** For further reference, request you to refer Annexure - 10
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22. Annexure - 4
BY REGISTERED AD/COURIER
__.__.2015
To,
______ [Borrower]
______ [Gaurantor]
SUBJECT: Demand of Rs. ______/-
RE: Loan Agreement dated _____ between ______[Borrower] and M/s ABC Ltd. and ________ [Gaurantor]
Dear Sir,
In reference to the above said Loan Agreement dated _____, whereby you were granted loan of Rs. _______/-. In terms of the said Loan Agreement you
have undertaken to pay back the loan in installments, in accordance with the schedule annexed with the said loan agreement.
Despite your assurances, you have failed to maintain your commitment to pay the installments/ EMIs on time. As on day, Rs. _____/- is pending towards
your installments/ EMIs for the date =======. In terms of the loan agreement, you are also liable to payment penalty @__% per month on the defaulted
amount.
Therefore, in the facts and circumstances stated above, please pay Rs. _____/- to regularize your installments/ EMIs, within 7 days from today.
Thanks
M/S ABC LIMITED.
TO BE SENT BY NBFC / COMPANY SEEKING ARBITRATION AWARD BEFORE START OF
ARBITRATOR HIRING & SENDING CLAIM.
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23. Annexure - 5
NUMBER OF PROCEEDING PER UNIT OF ARBITRATOR & ADVOCATE*
Arbitration – Below 50 Lac (Net POS)
0-30 Days 30-60 Days 60-90 Days 90-120 Days
Start of Arbitration Rejoinder Stage
End of Proceeding
(Award Pending)
AWARD
First Allocation ( Day
Zero)
10
On Time (80%
Success Rate)
On Time ( 80%
Success Rate )
AWARD
On Time ( 80%
Success Rate )
First LOT Out after
120 Days
Second Allocation
(Day 50th or Later)
0 10
On Time ( 80%
Success Rate )
On Time ( 80%
Success Rate )
Second LOT entering
Rejoinder Stage
Third Allocation
(90th or Later)
0 0 10
On Time ( 80%
Success Rate )
Third LOT Finishing
Start Stage
Fourth Allocation /
First Allocation
(120th Day)
0 0 0 10 …..and so on….
TOTAL (No. of
Simultaneous
Proceeding)
10 20 30 30
* At any Point of Time none of Arbitrator & Advocate should have 20 Cases under proceeding.
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24. Annexure – 5 (A)
NUMBER OF PROCEEDING PER UNIT OF ARBITRATOR & ADVOCATE*
Arbitration – Above 50 Lac (Net POS)
0-30 Days 30-60 Days 60-90 Days 90-120 Days
Start of Arbitration Rejoinder Stage
End of Proceeding (Award
Pending)
AWARD
First Allocation ( Day Zero) 08
On Time (80% Success
Rate)
On Time ( 80% Success
Rate )
AWARD
On Time ( 80% Success
Rate )
First LOT Out after 120
Days
Second Allocation (Day 50th
or Later)
0 06
On Time ( 80% Success
Rate )
On Time ( 80% Success
Rate )
Second LOT entering
Rejoinder Stage
Third Allocation (90th or
Later)
0 0 04
On Time ( 80% Success
Rate )
Third LOT Finishing Start
Stage
Fourth Allocation / First
Allocation (120th Day)
0 0 0 08 …..and so on….
TOTAL (No. of
Simultaneous Proceeding)
08 14 18 18
* At any Point of Time none of Arbitrator & Advocate should have 20 Cases under proceeding.
* With above constraints, Company should have ideally a panel of 30 Arbitrator & 15 Advocate on Panel with the Optimum
Cases Volume (Average) of 300 Cases under Trial / Arbitral Proceeding
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25. Annexure - 6
Grounds for Appeal against Arbitral Award and Setting Aside of Award :
Law, provides opportunity to loosing party for challenge to an arbitrator on the
ground of lack of independence or impartiality or lack of qualification.
In the first instance, a challenge is to be made before the arbitral tribunal itself. If
the challenge is rejected, the tribunal shall continue with the arbitral proceedings
and make an award. Section 13(5) of the 1996 Act provides that where the
tribunal overrules a challenge and proceeds with the arbitration, the party
challenging the arbitrator may make an application for setting aside the arbitral
award under Section 34 of the 1996 Act. Hence, approach to a court is only at the
post-award stage.
Historical Analysis says that “Violation of natural justice & Haste in proceeding”
is among the prominent ground where Objection on Award Execution were
sustained by High Court.
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26. Annexure - 7
SOFTWARE MIS FORMAT / TEMPLETS
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27. Annexure - 8
REAL ESTATE DETAIL (COMPANY & GUARANTOR)
S.
No
Property Address Owner
Property
Type (Flat
/Plot /Kothi)
Nature Of Property
–Res. / Comm. /
Ind. / Agri. / Other
Area
(Sq.Yd /
Sq.Ft)
Approx.
Value
(Lacs)
Mortgaged / Free
(Write Financer if
Mortgaged)
1
2
3
…
TOTAL
VALUE
______ Lac
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28. Annexure - 9
DEBTOR’s CUSTOMER ANALYSIS REPORT (COMPANY & GUARANTOR)
S.
No
Customer / Debtor’s
Name
Volume of
Supply
(Approx. in
Lac / PM
Percentage of
Business
(Only TOP
FIVE )
In Relationship /
Business (No. Of.
Years)
Product
Supplied
Contact
Person at
Customer
(Name)
Mobile & E mail
ID
1
2
3
4
5
PROMOTER’s / GUARANTORS’s OTHER INCOME SOURCE (Rent / Investment etc) As Per Computation
1 Mr. A
2 Mr. B
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29. Annexure - 10
ADVOCATE EMPANELMANT PROCESS
S. No. Selection Criteria
Scoring Marks
10 (TEN) 20 (TWENTY) 30 (THIRTY)
1 Experience (Years) 8-10 Year 11-15 Year 16 Year Plus
2 Court (Practice) Session Court High Court Supreme Court
3 Arbitration Experience (No. of Cases) 0-10 11-25 25Plus
4 NBFC / Bank Arbitration NIL Yes / No Yes / No
5 Office Set-up (Visit Remarks) Average Good Excellent
6 No of Advocate on Panel 0-2 3-5 6 Plus
CASES ALLOCATION WRT SCORING**
Opting
Advocate
for
Net POS 0-25 Lac Net POS 25-50 Lac Net POS 50-75 Lac Net POS 75-100 Lac Net POS 100 Lac Plus
Score
Required
Minimum 70 Minimum 80 Minimum 90 Minimum 110 Minimum 130
** Selection are again subjective and power of deviation from standard practice lies with President /
MD on recommendation to CM (Legal)
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30. Thank You
DISCLAIMER NOTE :
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