Arbitration is a medium of resolving civil and commercial disputes between two parties outside the court. Over the period of time, it has emerged as an effective and better tool to resolve disputes. The scope of Arbitration is not only confined to the domestic boarders but also it is extended outside the boarders.

Prior to enactment of the present statute the law governing Arbitration Proceedings was Arbitration Act, 1940 but later for the demand of time and under the International need and pressure Arbitration And Conciliation Act, 1996 (26 of 1996) was enacted w. e. f. 16th August, 1996 now the Arbitration proceedings are rules by the Act of 1996. The need for bringing a new law in this field emerged to cope up with the model law of United Nations Commission on International Trade Law (UNCITRAL) on international commercial Arbitration. Halsbury has defined Arbitration as follows :-

“Arbitration is the reference of dispute between not less than two parties, for determination, after hearing both sides in a judicial manner, by a person or persons other than a court of competent jurisdiction.”

The new Act as amended time to time, especially emphasized on minimizing the role of judiciary in arbitration proceedings and further to consider every arbitration order or award as a decree as it is been considered in civil procedure code. The Act is categorized in two, Part I deals with significant provisions which deal with domestic and International commercial arbitration procedure to be conducted in India irrespective of nationality and Part II talks about enforcement of foreign arbitration award.

ADVANTAGES AND DISADVANTAGES OF ARBITRATION OVER COURT LITIGATION

1.     Arbitration proceedings are held as a private affair whereas in a civil court, the proceedings are held in public.

2.     Arbitration provides liberty to choose an arbitrator of choice, who can be a specialist in the subject matter of the dispute. The arbitrators may be experts and can resolve the dispute fairly and expeditiously as they are well versed with the usages and practices prevailing in the trade or industry.

3.     The place of arbitration is a place convenient to both the parties.

4.     Even the rules governing arbitration proceedings can be defined mutually by both the parties.

5.     A court case is a costly affair. The claimant has to pay for the advocates, court fees, process fees and other incidental expenses. In arbitration, the expenses are lesser and many times the parties themselves argue their cases. The arbitration involves few procedural steps and no court fees.

6.     Arbitration is faster and can be expedited.

7.     A judicial settlement is a complicated procedure.

8.     Section 34 of the Act provides very limited grounds upon which a court may set aside an award.

In spite of the need for arbitration and having various advantages attached to it, there are some disadvantages where arbitration cannot be used as an effective mode of settlement, as:

1.  Arbitration lacks in granting authoritative remedies such as permanent injunction and specific performance order.

2.  In certain cases, the arbitrators do not have jurisdiction and are excluded to try the case.

3.  The cost can be a major factor as, if the arbitration proceeding if delayed, the cost keeps on increasing and especially, in the cases where three arbitrators are appointed by the parties.

4.  No appeal can be made for an arbitration order granted by the arbitrator.

5.  Lack of cross-examination as the process relies on evidence and not on witnesses.

ARBITRATION AGREEMENT is defined under Section 2(b) read with Section 7 of the Act.

(1) “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

Section 5 of the Act of 1996 provides that the courts cannot interfere in the arbitration proceeding except wherein provided by the act in the following situations where:

·         For the appointment of an arbitrator when the parties cannot mutually agree upon appointment of an independent arbitrator.

·         Under section 27 assistance is taken to record evidence.

·         Where the arbitrator is terminated due to incapacity or other reasons mentioned in the Arbitration Act.

The appointment of arbitrator is provided under Section 11 of the Act. The Act provides full authority to the parties to appoint an arbitrator as agreed by the parties. In case of failure to appoint of an arbitrator the parties can approach the court to make such an appointment. In case of domestic arbitration, the Chief Justice of the High Court has the authority to appoint an arbitrator to the parties and in case of International Commercial Arbitration, the Chief Justice of India has the authority to make such appointment as in India, the foreign disputes must be dealt by the highest judicial officers.

The powers of an arbitrator includes passing an interim order/award, deciding the process of Arbitration proceedings as agreed by the parties without being influenced by the CPC. The arbitrator has power to terminate the procedure also. The arbitrator could seek assistance from Expert person by making such appointment, could seeks Court permission in taking evidence and correct the error in interpretation of the award. The

A party can seek interim order/award may approach the court under Section 9 before the commencement of  the arbitration tribunal or during the arbitration proceedings or the parties may approach the arbitral tribunal under Section 17 of the Act.

An arbitrator can be challenged under Section 12 of the Act in the following two circumstances such as when his independence or impartiality is being compromised or if he does not possess sufficient qualifications as to agreed by the parties.

The Section 14 of the Act provides for the termination of an arbitrator under  and it can be made in two circumstances by approaching the court which are:

·         If he fails to act without undue delay, &

·         If he is unable to perform his function due to De jure or De facto.

The arbitrators are the masters of the arbitration proceedings and can conduct the proceedings in the manner they feel appropriate. This power includes relevance, the weight of any evidence, admissibility. The only restriction on them is they need to treat both the parties with equality and both parties must be given equal opportunity to present their case, without any biasedness. The Indian Evidence Act, 1872 and the Civil Procedure Code,1908 both do not apply on the arbitration proceedings as a whole.

Arbitral Award

The arbitration award granted by the arbitrator can be challenged under Section 34 of the Act by making an application under it only on the basis of grounds specified therein and they are as follows:

o   Either of the parties were under some incapability to make an application;

o   The arbitration agreement agreed by the parties was not valid as per the law;

o   The party making the application was not given proper notice for appointment of the arbitrator of arbitral proceedings;

o   The award made is out of the Scope of arbitration and does not deal with the dispute;

o   The award made is contrary to public policy;

o   The subject matter dealt is not capable of settlement by Arbitration.

An application to challenge the award has to be made within 3 months from the date of receipt of such award by the applicant which can be further extended to 30 days on giving sufficient cause of delay.

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