A REGULATORY BODY IN THE FIELD OF ARBITRATION:A Boon or Bane

Arbitration
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About the author:

Riya Luhadia is a law student in Seedling School of Law and Governance, Jaipur Law University

ABSTRACT

This paper focuses on arbitration as a field of law in resolving the disputes between the parties outside the court which can also be termed as a settlement outside the court. Many of the people are aware of the process and procedure of conducting arbitral proceedings but at the same time some are not aware of this and consider this as the same like of the court proceedings but in general, both are completely different and possess different process and procedure in resolving the dispute between the parties.

Nowadays arbitration process in resolving disputes have become famous as it has many methods within it, with the change in people there is an automatic change in the society which tends to change the law also as per their needs to have a pace with the world for that alternation and changes are necessary for the aspect of the law that’s why arbitration was introduced as a regulatory body in the field of law other than the court to resolve disputes without wasting any time of the court. Therefore, alteration is needed in the law field and by analyzing it we can judge that the change which has taken place is beneficial or not by applying it to the public and getting a response.

DEFINITIONS

  • Arbitration– It is a form of alternative dispute resolution where the dispute resolves outside the court.
  • Dispute- any matter in issue between the parties.
  • Settlement- resolution of a dispute
  • Agreement- written contract between the parties
  • Proceedings- From when the trial starts till the trial ends is known as proceedings.

INTRODUCTION

“Differences we shall always have but we must settle them all, whether religious or other, by arbitration.” – Mahatma Gandhi

Arbitration is a process, where the dispute is submitted to an impartial 3rd party called arbitration, whose decision, or who made the decision which is usually binding on both the parties. It is the process of setting/settling disputes outside the parties.

Process of arbitration:

  1. Filing of case
  2. Arbitration selection process
  3. Preliminary and scheduled order
  4. Discover process
  5. Hearing mediation
  6. Arbitration hearing
  7. Post arbitration benefits
  8. Final Arbitration Award

There are many matters like matters related to partnership, civil matters, property, contract, business, time-barred debts, and commercial, etc. They are mainly related to business and industry and impacts directly on business and industries so there is a need to resolve these disputes as soon as possible

Laces of pending cases are there because courts need to follow the strict/rigid procedure so that justice is done, that’s why all the purposes and pieces of evidence are recorded and analyze to form a conclusion if there comes a criminal case then this procedure becomes more strict and rigid and this is the reason of denying injustice as judicial process is too costly, time-consuming, build stress, etc. and this all is because the whole burden is on courts of our judicial system.

With that, there are lots of businesses decision which may not be taken because of some pending commercial disputes, which also impacts the growth of our economy. And to resolve these disputes there is a need for alternate dispute resolution (ADR) so disputes among them can be resolved as soon as possible but only for the matters mentioned above.

The mere existence of an arbitration clause does not bar the jurisdiction of civil courts.

The arbitration act is about counseling the disputed parties and reaching a conclusion where all the settlements can be done. The Act is good for the parties who wish to avoid disputes or delay and intense court work and want the dispute to be settled quickly and in a proper way[1].

THE MOTIVE OF THIS ACT IS AS FOLLOWS;

  • To comprehensively cover – international, domestic arbitration, and conciliation
  • To create provisions regarding an arbitration procedure that is – fair, efficient, and capable of meeting the needs.
  • To ensure that the arbitral tribunal remnants are within the limit.
  • To underrate the supervisory role of courts.
  • To permit the arbitral tribunal to use – mediation, conciliation, and other procedure among the arbitral proceedings.
  • To encourage the settlement of disputes.

The Act explains the procedures that shall be terminated when a settled agreement is signed by the parties. It explains the written declaration made by the conciliators after the consultation is made with the parties.

Arbitration has become the popular way for resolving disputes, as arbitrators on daily basis decide thousand millions or even billions matters as it is frequently billed cheaper as well and faster than the litigation with added benefit shorter timelines and to the conclusions.

Arbitration agreement means that an agreement by the parties to acknowledge to arbitration complete or convinces disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

ARBITRATION CLAUSES[2]

It identifies specific disputes that will be resolved through arbitration as part of a larger agreement or contract. What all things which are not specified in the arbitration clause are subject to litigation. Arbitration clauses administer the resolution of a large variety of disputes, over everything from construction contracts to the consequences of allegedly misappropriated intellectual property. Agreements describing the purchase and sale of a business generally consist of detailed arbitration clauses sheltering, during other things, post-sale working capital adjustments and earn-out agreements. Those arbitral clauses, if widely written, it mainly come into force when a large variety of post-transaction “problems” arise, including those about representations and warranties, due-diligence obligations, and other commitments.

PARTIES AND ARBITRATION PROCEEDINGS[3]

Generally speaking, the nature of the arbitration proceedings tends not to be subject to appeal, in the ordinary sense of the word. The courts maintain a supervisory role to set aside awards in extreme cases, such as fraud, in the case of some serious legal irregularity on the part of the tribunal. Only domestic arbitral have the subject to set aside the proceedings.

In this, parties often seek to resolve the disputes with this process because of the bone over the judicial proceeding. Companies mostly prefer arbitration with their customers as there are some bones of the court with the companies.

If there arise a dispute between the parties and they before the dispute arises decided and planned that they will not go to the court as that is very much time consuming as well as energy will also be wasted and for that both the parties planned and decided that if any disputes arise between the two then instead of referring this issue to the court of law they will resolve the dispute by appointing the third person as arbitrator and for that they can appoint a sole arbitrator or a panel of arbitrator depends on their wish but the number should be odd and not in even and they will know as they arbitral tribunal and the work of the arbitral tribunal mainly is to solve the dispute among the parties. This can be done by a written agreement between the parties containing this clause or things related to it.

Now the appointment of the arbitrators is done by the parties to the dispute only and with that basically, they are appointing the judges of their own choices leads to more flexibility. In addition, this is also a kind of judicial system. In addition, one more vital component is that if both the parties are not satisfied with the result of arbitrators then they can approach the court no binding rule is there of not approaching the court. It is also possible if one of the parties is not satisfied then they can approach the court via appeal also.

The person who is appointed as an arbitrator shall give his consent to act as an arbitrator to the arbitration agreement otherwise it will not be considered as a valid agreement or will not have any value. He must be a disinterested and impartial person. In addition, usually, the decision of the arbitrator is binding on the parties to the disputes.

However, his decision has to be impartial and he should also be not biased but if the appointment of arbitrator at that time is then will not be considered as a valid appointment. This is provided under the arbitration and conciliation act under a schedule. If any interest of arbitrator in any of these parties at any time be revealed then parties will decide whether the dispute should be referred to him or not and if he conceals his interest then he will be disqualified to act as an arbitrator. Dispute resolution is a rational process.

SUCCESS OF ARBITRATION ACT, 1996:-

This act was brought on the statute book in the earlier law, the 1940 act but it did not live up to the aspiration of the people of India in general. The 1996 act has plugged the loopholes of the 1940 act, the system that involved its failure. The main aim of this act is to provide speedy justice to the parties in the existing judicial system. However, the reasoning of the arbitration as skilled under the 1996 act is that it fails to accomplish its desired objectives.

There is a need for arbitration because the efficacy of time is maintained that is the parties in a time-bound manner have to get over with them arbitral proceedings if not done then they had to face consequences.

STAGES AND PROCEDURE OF ARBITRATION

Arbitration usually proceeds through the following general stages.

  1. The case initiation stage[4]: During this level of the case they ship out a letter or e-mail notifying the parties to the dispute that the case has been filed and this verbal exchange will also provide information regarding the arbitration system like dates for when the respondent should file an answer, etc so that later in the proceedings there should be no confusion and give all the information as needed from time to time.
  2. Arbitrator invitation stage[5]: The process is set forth according to the rules that govern the arbitration. It invites an arbitrator or arbitrator to serve on the case as a part of this system the arbitrator opinions case facts information, checks for conflicts, and returns a signed document with disclosures if any.
  3. Arbitrator appointment stage: Parties get notification of the appointment of the arbitrator and offer the possibility to object the arbitrator serving at the case; due date for any objection is set and if there is any objection regarding that received then a process is conducted to decide that the arbitrator should be kept on or removed from the case. If in case, it is decided that the arbitrator is to be removed then the case returns to the arbitrator invitation stage. In addition, in case if the arbitrator is kept on then the case continues to the next stage.
  4. Preliminary hearing and information exchange stage: The preliminary hearing conference call between the parties and the arbitrator will be scheduled and held. Basically, at the time of the call, preliminary issues are forwarded, the exchange of information between the parties is anticipated, and the hearing date is confirmed. A written document is issued after the call is done known as the scheduling order which affirms full necessary dates and information discussed on the call stage.
  5. Hearing stage: At this stage, the parties usually present their case to the arbitrator. This process can take place in person over the telephone or by parties submitting the written documents. The process of an arbitration agreement between the parties to the proceeding is governed by the arbitration law. Constantly parties will also acknowledge their written arguments after the hearing at the discretion of the arbitrator.
  6. Award stage: After the hearing is completed, the arbitrator determines, and no more pieces of evidence will be presented a date for the issuance of the award is set.

There is a proper procedure that is to be followed while arbitral proceeding takes place.

  • Either the parties in the agreement can decide as to what would be the procedure like whether oral arguments have to be heard or evidence has to be lead or by the help of documents also they can decide the arbitral proceeding, so basically, that is left to the parties and if the parties said that we don’t want to lead any evidence which means that they do not want to put or bring any witness then the arbitrator has the discretion and can decide the case based on documents that are on record before the arbitrator.
  • If one is opting for this then make sure that the documents that you have filed sustain your case whether one is a claimant or respondent.
  • In an ideal situation if a person is involved in the day-to-day execution of the agreement or contract then he should be brought in and that person should be aware of all the happenings that have been taking place since the contract or agreement was signed or the dispute came into the picture.
  • Claimant and respondent both have given the equal opportunity to do their arguments, show their evidence because the arbitrator is not bound by the civil code or evidence act to follow the procedure or principles but they are bound to follow the principles of natural justice so that’s why it is necessary to provide equal opportunities to both the parties to avoid the violation of natural justice.
  • While delivering the decision after analyzing all facts and evidence an arbitrator must give legal reasoning in the support of the judgment.

IS LITIGATION BETTER OR ARBITRATION[6]

Both are appropriate at their places as lawyers practicing litigation say litigation is the best and at the same time arbitration, lawyers say arbitration is the best. Therefore, we can say that both are good at their places but with that, some differences are there because as we all know everything has advantages but at the same time also has disadvantages. There are some points of differences which are as follows:

  • Speed and cost considerations are largely neutral: in the case of arbitration, we have to pay a much hefty fee but in case of court cases the fees of the court are nominal but lawyers charge the high fees depending upon the case and all. However, a final hearing in the case of arbitration is generally shorter and therefore cheaper than the trial in the court at the end of litigation. The truth, therefore, is that they both are a kind of expensive process because in some way or the other the fee to be paid is hefty.
  • Strong case: if one is a claimant and has a strong case then litigation is the better option this is because in litigation we can apply for the summary judgment which directly saves a lot of time and costs. While summary judgment is not available in arbitration but this the two parties are free to put their views without any hesitation in front of the arbitrator with that parties get to interrogate with each other and social and emotional factors can also be seen which is absent in the case of litigation.
  • Dispute commercially sensitive: If the dispute is commercially sensitive then one should prefer arbitration this is because arbitration is a confidential process, taking place behind closed doors, whereas litigation is a public exercise, where the press can have access to and report on the case. As it sometimes set an example, so that one before committing any crime should know the harshness of the punishment. In the case of court proceedings, the punishment is harsh as compared to that of the arbitration process as there is settlement instead of punishment.

Advantages can be the expertise of the arbitrators because an arbitrator is chosen because of their knowledge and expert skill in the respective areas. Definite resolution is there because of the fast and quick procedure, it is a kind of private process, and it is a more efficient way of maintaining an ongoing business or favorable relationships between the parties.

THE BENEFITS OF THESE ACTS ARE MORE THAN COMPARED TO DISADVANTAGES SO IT IS A BOON NOT A BANE

Because it is faster than litigation like the arbitrator hired, it is a private person a retired judge or a lawyer that hired by the parties to hear the disputes and as it’s a private person that the parties are paying for, the scheduling and getting time in front of the arbitrator goes a lot quicker and faster than trying to schedule a hearing and resolve a dispute before a judge. It just moves a lot quicker, one also doesn’t have the calendaring restrictions that a judge has and setting up of trial or anything like that, so the arbitrator can typically hear a case within some particular months so in short, it moves very quickly.

It is less formal than litigation means there is less rigidity and deadlines, getting deputies resolved. It can be as simple as making a phone call to the arbitrator if there is a dispute and having the arbitrator decide on the phone. The arbitrator can accommodate the parties schedule a lot more and there is more flexibility so if for whatever reason a party needs to move a date that was set prior an arbitrator is more likely to do that as it is a lot easier to do or to get that moves as opposed to and having judge move a trial, etc. usually it results in fewer attorneys fees because it is faster and more flexible. The arbitration agreement has the potential to have an enforceable class action waiver in the agreement.

Like the risk allotment methods, that highlight the particulars of any agreement, the arbitration clause at the beginning can help to lessen the ultimate business risks. By thinking strategically from the surroundings, we can draft an agreement to increase the odds of the parties and decrease unnecessary costs.

CONCLUSION

It is noticeable that arbitration has got over the years as the optimal tool for the resolution of disputes that salvage the court’s time and is chiefly instrumental in assisting the parties to resort to quick remedial quantum. Arbitration is arranged on an insightful operation of law and its progression is proof or we can say that the reason of its connotation in the actual proceedings. Therefore, arbitration has appeared as the highest preferred platform for the speedy resolution of disputes especially in the industrial and the corporate.

REFERENCES

  • Dhingra Aarushi, Arbitration and Conciliation Act, 1996 – An overview, April 22, 2020 Available at SSRN, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3582896.
  • Chauhan Vatsala, Arbitration in India: The process and problems with a special focus on International Commercial Arbitration, July 1, 2020, available at SSRN, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3713559
  • Moonka, Rohit & Mukherjee, Silky (2017), Impact of the recent reforms on Indian arbitration law, BRICS Law Journal,
  • Vikram Raghavan – New Horizons for Alternative Dispute Resolution in India -The New Arbitration Law of J. Int’l Arb, volume 13, December, 1996.
  • S C Tripathi – Law of Arbitration & Conciliation in India with Alternative Means of Settlement of Disputes Resolution, 10, Central Law Publications, (2012).
  • Saurendra Rautray, India: Law of and Procedure of Appointment of Arbitrators, Mondaq, 30 November 2012, https://www.mondaq.com/india/arbitration-dispute-resolution/205186/law-of-and-procedure-for-appointment-of-arbitrators
  • India – The Arbitration and Conciliation (Amendment) Act, 2019 -Key Highlights
  • The Arbitration and Conciliation Act, 1996.

[1] Chauhan Vatsala, Arbitration in India: the Process and the Problems with a Special Focus on International Commercial Arbitration (July 1, 2020). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3713559.

[2] India – The Arbitration and Conciliation (Amendment) Act, 2019 -Key Highlights

[3] S C Tripathi – Law of Arbitration & Conciliation in India with Alternative Means of Settlement of Disputes Resolution, 10, Central Law Publications, (2012).

[4] The Arbitration and Conciliation Act, 1996.

[5]  Saurendra Rautray, India: Law of and Procedure of Appointment of Arbitrators, Mondaq, 30 November 2012, https://www.mondaq.com/india/arbitration-dispute-resolution/205186/law-of-and-procedure-for-appointment-of-arbitrators

[6] Vikram Raghavan – New Horizons for Alternative Dispute Resolution in India -The New Arbitration Law of J. Int’l Arb, volume 13, December, 1996.

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