ARBITRATION IN INDIA- OVERVIEW OF THE ARBITRATION ACT AND LANDMARK JUDGEMENTS
INTRODUCTION
Arbitration, is a form of alternative dispute resolution, has gained significant prominence in India over the years. It provides parties with a quicker, cost-effective, and confidential method of resolving their disputes outside the traditional court system. In this blog, we will delve into the concept of arbitration, the legal framework governing it in India, and highlight some landmark judgments that have shaped the arbitration landscape in the country.
Various strategies, such as mediation, conciliation, and negotiation, are employed to resolve problems under the alternate dispute resolution process. Arbitration is one such approach.
ARBITRATION
Arbitration, in its most basic form, involves disputing parties and a neutral third party who settles the issues without prejudice and is known as an arbitrator; the dispute goes through resolution proceedings outside the courts. This mechanism’s rulings are binding on all parties involved. The Arbitration and Conciliation Act of 1966 governs the entire procedure of arbitration in India. The core objective to enforce the Arbitration Act was to enable quick, low-cost, and effective dispute settlement. This process occurs in both the national and international domains, and both are governed by this act.
Further, this act was enacted to align Indian arbitration laws with international standards, primarily based on the UNCITRAL Model Law. It establishes a comprehensive framework for conducting arbitration proceedings, enforcement of arbitral awards, and sets aside specific provisions for domestic and international arbitration.
ARBITRATION AGREEMENT
According to Section 7, “arbitration agreement” is “an agreement by the parties to submit to arbitration all or certain disputes that have arisen or may arise between them with respect to a defined legal agreement, whether contractual or not.” A party can choose to resolve the dispute through a separate written agreement, a contract amendment, or any other means of communication amongst the parties. However, section 2(3) of the act specifies a number of issues that are beyond resolution by the arbitration procedure.
SEAT OF ARBITRATION
The seat of arbitration refers to the location of the arbitration. The arbitration provision or arbitration agreement, usually determines the place of arbitration which is mutually agreed by the Parties. The seat of arbitration is critical for the reason that it governs the standards of arbitration and the procedures to be adopted in settling the dispute if the parties have not already mutually agreed on a method.
If a party fails to decide on the seat of arbitration under section 20(1) of the Act, the arbitral tribunal may appoint the seat of arbitration based on the convenience and circumstances of the case under section 20(2).
Kush Raj Bhatia v. DLF Power in this case , the Delhi High Court held that the place of arbitration would not tantamount to the seat of arbitration in a situation where the agreement confers exclusive jurisdiction on a court situated in a different place.
VENUE OF ARBITRATION
Arbitration venue often refers to the most convenient location for performing the arbitration processes. As a result, the place of the arbitration will be referred to as the seat of arbitration. The venue will also determine which courts will have jurisdiction of the arbitration processes, as well as the norms and procedures that will be followed. Meenakshi Nehra Bhat v. Wave Megacity Centre The High Court of Delhi held that the mere designation of venue of arbitration would not make it the seat of arbitration when there is a contraindication in the agreement in the form exclusive jurisdiction on a court in a different place.
APPOINTMENT OF ARBITRATOR
Section 10 of the Arbitration and Conciliation Act of 1966 specifies the number of arbitrators who can be authorised to decide the case. The parties can choose a single arbitrator or a panel of arbitrators. If the parties are unable to reach an agreement, the appointment may be determined by an appointed arbitral body or the court. Sawera Township v. Faisal Bin Tirif The High Court of Telangana held that a party cannot seek appointment of a substitute arbitrator on mere allegations of collusion. Further, such allegations even if existing cannot be decided in an application filed under Section 11 of the Act, 1996 and such an issue has to be necessarily decided by the tribunal under Section 13 of the Act.
TERMINATION OF ARBITRATOR
Sections 14 and 15 of the Arbitration and Conciliation Act of 1966 contain provisions for terminating the arbitrator. It states that the arbitrator is terminated by-
- Withdrawal
- the parties
- Not able to perform his functions without undue delay
JURISDICTION
Section 16 of the Arbitration and Conciliation Act of 1966 states that an arbitral tribunal has no inherent authority. Instead, its jurisdiction is drawn from the parties’ agreement to resolve a specific dispute through arbitration. As a result, an arbitral tribunal’s jurisdiction is not drawn from any legislation. There is a high level of party autonomy.
PROCEEDINGS
Section 21 of the Arbitration and Conciliation Act of 1966 specifies the procedure for commencing the procedures. The party initiating arbitration (the claimant) provides the opposite party (the respondent) a notice of arbitration specifying the matters in dispute and the remedies desired.
ARBITRAL AWARDS
Section 31 of the Arbitration and Conciliation Act of 1966 contains provisions for arbitral awards. The arbitrator(s) render a final decision known as the “award,” which is legally binding on the parties. The award must be written, signed, and justified. Tribunals have the authority to issue interim awards in any dispute. When the award becomes enforceable, the successful party can seek court enforcement.
APPEAL
Section 37 of the act states that if an individual feels unsatisfied with the tribunal’s decision, he or she may file an appeal with the court. The parties have some legal grounds to appeal the award. The parties can apply to the court to set aside the award within a specified time frame.
AMENDMENTS
The Arbitration and Conciliation Act, 1996, has undergone several amendments in recent years. The most recent amendment was in 2021,
Some of the key changes introduced by this amendment are:
- New obstacles to execution: The 2021 Amendment introduced new barriers to the execution of arbitral rulings, modifying the 1996 Act’s framework.
- Limiting court power: The 2021 Amendment limits courts’ discretion to adapt remedies to the attendant circumstances, eliminating the 1996 Act’s enforcement-friendly amendments.
- Stay on arbitral award: According to the 2021 Amendment, a stay on the arbitral award can be provided (even while the application for setting aside is pending) if the court is satisfied that the relevant arbitration agreement or contract, or the making of the award, was induced or effected by fraud or corruption.
The Arbitration and Conciliation (Amendment) Bill, 2019, sought to establish an independent body called the Arbitration Council of India to promote arbitration, mediation, conciliation, and other alternative dispute resolution mechanisms. The Arbitration and Conciliation (Amendment) Ordinance, 2015 revised the 1996 Act to make arbitration a preferred mechanism of business dispute resolution and to establish India as a centre of international commercial arbitration.
CASE LAWS
In the landmark case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services(2012), the Apex Court clarified the scope of judicial intervention in arbitration proceedings. The Court further held that the power of the court to set aside an arbitral award is limited and can only be exercised in exceptional cases where the award is contrary to the public policy of India.
In the case of Amazon.com NV Investment Holdings LLC v. Future Retail Ltd. (2021), which was a high-profile dispute between Amazon and Future Retail. The dispute was over an alleged breach of a shareholder agreement. The Delhi High Court ruled in favour of Amazon, granting an interim injunction to enforce an emergency arbitration award restraining Future Retail from proceeding with a proposed deal. The case highlighted the enforceability of emergency arbitration awards in India.
In BALCO v. Union of India (2012), the Supreme Court clarified the law on seat and venue of arbitration. The court held that the choice of seat determines the applicable law governing the arbitration proceedings. It emphasized the importance of party autonomy and reinforced the principle of minimal judicial interference in the arbitration process.
The Judgement passed in Swiss Timing v. Organizing Committee, Commonwealth Games (2014), dealt with the issue of arbitrability of disputes arising out of public contracts. The court held that disputes arising from contracts entered into by the State or its instrumentalities can be referred to arbitration, subject to certain exceptions. This decision expanded the scope of arbitration in India by allowing disputes involving public entities to be resolved through arbitration.
CONCLUSION
Subsequently, the Arbitration and Conciliation Act is a crucial component of legislation that governs India’s alternative dispute settlement procedure. This blog has thoroughly covered of the Act, including its history, the procedural framework, notable case law, and key modifications. The Arbitration and Conciliation Act of India has been instrumental in promoting arbitration as a preferred method of conflict settlement in India. Its provisions, which have been bolstered by significant case law and recent changes, have facilitated the creation of a favourable climate for fast and successful arbitration proceedings, boosting corporate confidence, and assuring access to justice. With ongoing reforms and a supportive judicial approach, arbitration is poised to become an even more attractive option for parties seeking timely and effective resolution of their disputes in India.