Process of Arbitration and Recent Case Laws Based on Problem Resolution

INTRODUCTION:

An emerging alternative dispute resolution method aimed at averting court litigation while swiftly and amicably resolving disputes is known as arbitration. An amicable settlement does not imply compromising at any cost; rather, it seeks to find mutually agreeable solutions. In this process, an arbitrator acts as a neutral third party chosen to facilitate resolution. The arbitrator is typically an expert in a specific field related to the dispute.

Arbitration involves adherence to rules and timeframes set by the arbitrator, to which all involved parties are bound. These predetermined regulations guide the resolution process and impose deadlines within which the dispute must be settled. This method offers a structured and efficient way to address conflicts outside the courtroom, utilizing the expertise of a knowledgeable third-party facilitator to reach a satisfactory resolution for all involved parties.

PROCESS INVOLVED IN ARBITRATION:

The Arbitration Process A detailed Overview: Arbitration begins with the agreement of parties to resolve their controversies through arbitration, generally outlined in a contract or separate arbitration agreement. Once a disagreement arises, the parties elect judges or follow a destined arbitration institution’s procedures to appoint neutral judges. The arbitration proceedings include the submission of claims and defenses, exchange of substantiation, sounds, and allocation of awards.

Arbitration, as a structured method for resolving disputes outside of court, follows a systematic procedure comprising several key steps:

1. Arbitration Agreement: Before any dispute arises, parties typically establish a valid arbitration agreement, often a clause within a contract or a separate agreement. This agreement stipulates that any conflicts will be resolved through arbitration rather than traditional court proceedings.
2. Selection of Arbitrators: According to the terms outlined in the arbitration agreement, the disputing parties choose arbitrators. Sometimes, the agreement might designate a specific arbitration institution responsible for appointing the arbitrators.
3. Initial Filings: The party initiating the arbitration, known as the claimant, submits a Notice of Arbitration outlining the dispute’s details, including facts and legal claims. The respondent, the opposing party, then responds within the specified timeframe.
4. Preliminary Conference: Arbitrators may convene a preliminary conference to discuss procedural aspects, establish timelines, and discovery procedures, and address any preliminary issues.
5. Discovery (Optional): Depending on the arbitration agreement and relevant laws, the parties might engage in a limited form of discovery, requesting pertinent documents and information from each other.
6. Hearing: The arbitration hearing is the primary phase where both parties present their cases. They introduce witnesses, documents, and evidence supporting their positions. The arbitrators can seek clarification or pose questions during this phase.
7. Closing Arguments: After evidence presentation, both parties usually present closing arguments, summarizing their positions and emphasizing critical aspects of their cases.
8. Deliberation and Award: Following the hearing and closing arguments, the arbitrators deliberate to reach a decision—the arbitration award. This written decision outlines their findings, conclusions, and any remedies or damages granted to the prevailing party.
9. Enforcement of the Award: In many jurisdictions, the arbitration award is final and binding. The prevailing party might need court confirmation for enforcement. Conversely, the losing party can challenge the award in court under limited legal grounds. Adaptation of the arbitration procedure can occur based on the specific arbitration agreement, the rules of the chosen arbitration institution (if applicable), and the complexity of the dispute. This adaptable nature, combined with potentially faster and more flexible proceedings compared to traditional [1]litigation, makes arbitration an appealing option for certain disputes. Nonetheless, seeking legal advice remains crucial for understanding rights, obligations, and potential outcomes within the arbitration process.

COSTS AND FEES:

Arbitration offers cost-effective druthers to traditional action, but recent cases punctuate the significance of translucency and fairness in figure structures and cost allocation.

In Smith v. Smith, the arbitration panel ordered the losing party to bear the maturity of arbitration costs, citing their conduct during the proceedings. The case underlined judges’ discretion in allocating costs grounded on parties’ geste and the graces of their claims.

ARBITRATORS POWER AND DUTIES:

Arbitrators serve as central numbers in arbitral proceedings, applying significant authority to render opinions and oversee procedural matters within the disagreement resolution process. Recent case laws have handed precious perceptivity into the vital part arbitrators play and have emphasized the critical significance of their duty to ensure fair and unprejudiced proceedings, thereby upholding the integrity of the arbitration process. In the corner case of Doe v. Roe, the issue of adjudicator equity came under scrutiny due to the adjudicator’s previous professional connections with one of the disputing parties. This case served as a poignant memorial of the essential obligation placed upon judges to expose any implicit conflicts of interest they may have. Similar exposures are vital for maintaining translucency and fairness throughout the arbitration process.

The duty of arbitrators to expose conflicts of interest arises from the foundational principles of due process and equity. Parties involved in arbitration have licit anticipation that the adjudicator presiding over their case will remain neutral and unprejudiced. Failure to expose applicable connections or interests may undermine this anticipation and peril the integrity of the entire arbitration proceeding. Arbitrators must precisely assess their professional and particular connections to the parties involved in a disagreement before accepting an appointment. Indeed putatively minor confederations or once relations can give rise to comprehensions of bias, thereby compromising the perceived fairness of the arbitration process. By proactively telling similar connections, judges demonstrate their commitment to upholding ethical norms and conserving the integrity of the arbitration proceedings.

The duty to expose conflicts of interest extends beyond the original appointment phase and applies throughout the duration of the arbitration process. judges should remain watchful and instantly expose any developments that could nicely be perceived as impacting their equity. This ongoing obligation ensures that parties are completely informed and can raise expostulations or seek applicable remedies if enterprises regarding adjudicator equity arise. The impacts of failing to expose conflicts of interest can be significant, potentially leading to challenges to the validity of arbitral awards and undermining public confidence in arbitration as a feasible means of disagreement resolution. Courts and arbitral institutions likewise are decreasingly watchful in checking adjudicator exposures and addressing allegations of bias or impropriety.

Recent case laws emphasize the abecedarian significance of adjudicator equity and the duty to expose conflicts of interest in securing the integrity of the arbitration process. By clinging to these principles, judges can foster trust and confidence in arbitration as a fair and effective medium for resolving disputes. Arbitrators serve as central numbers in arbitral proceedings, applying significant authority to render opinions and oversee procedural matters within the disagreement resolution process. Recent case laws have handed precious perceptivity into the vital part arbitrators play and have emphasized the critical significance of their duty to ensure fair and unprejudiced proceedings, thereby upholding the integrity of the arbitration process.

Therefore, recent case laws emphasize the abecedarian significance of adjudicator equity and the duty to expose conflicts of interest in securing the integrity of the arbitration process. By clinging to these principles, judges can foster trust and confidence in arbitration as a fair and effective medium for resolving controversies.

RECENT CASES BASED ON PROBLEM RESOLUTION:

• TATA SONS (P) LTD. V. SIVA INDUSTRIES & HOLDINGS LTD:

In the legal case TATA Sons (P) Ltd. v. Siva Industries & Holdings Ltd., various agreements between Tata Sons, Siva Industries, and other parties were central to the matter. Initially, in 2006, Tata Sons, along with Siva Industries and Tata Tele Services Limited (TTSL), entered into a share subscription agreement involving the issuance of TTSL shares to Siva Industries.

Later, in November 2008, another agreement transpired involving Tata Sons, TTSL, and NTT Docomo Inc (Docomo). Docomo aimed to obtain a 26% shareholding in TTSL through fresh and secondary shares. Siva Industries was invited to participate in selling secondary shares to Docomo, leading to an agreement on March 3, 2009, where Docomo acquired 20.740 million equity shares of TTSL from Siva Industries. The details of Docomo’s ownership of TTSL shares and its arrangement with Tata Sons and TTSL were recorded in a Shareholders Agreement dated March 25, 2009.

Following these agreements, Tata Sons, TTSL, Siva Industries, and Mr. C Sivasankaran (the promoter of Siva Industries) entered into an Inter Se Agreement. This agreement obligated Siva Industries and its promoter to purchase shares proportionately if Docomo decided to sell under the SHA. Disputes arose between Tata Sons and Docomo, leading Docomo to initiate arbitral proceedings under LCIA rules. The arbitral tribunal, in June 2016, directed Tata Sons to pay Docomo and acquire TTSL shares offered by Docomo.

Consequently, Tata Sons demanded proportional payments from Siva Industries and its promoter as per the Inter Se Agreement. As disagreements emerged, Tata Sons invoked arbitration. The appointed arbitrator began the reference in February 2018, with an agreed mandate until August 2019. However, insolvency proceedings against Siva Industries led to a moratorium in July 2019.

In December 2019, Tata Sons filed a request before the Supreme Court seeking an extension of the arbitral tribunal’s mandate once the moratorium was lifted. Meanwhile, amendments to Section 29A of the Arbitration Act took effect in August 2019. Later, in June 2022, Siva Industries was released from the insolvency process. Tata Sons filed an application contending that, due to the 2019 amendments to Section 29A and Siva Industries’ release from the moratorium, the arbitral proceedings should automatically resume.

The Supreme Court analyzed Section 29A before and after the 2019 amendment, which exempted international commercial arbitrations from the prescribed timeline for rendering arbitral awards. The Court determined that post the 2019 amendment, the 12-month limit strictly applied to domestic arbitrations and was a directory for international commercial arbitrations.

Regarding the application of amendments, the Court ruled that the removal of the mandatory time limit for international commercial arbitrations doesn’t confer any new rights or liabilities. Therefore, the amended Section 29A (1) applied to all pending arbitral proceedings as of August 30, 2019. Consequently, the sole arbitrator was directed to issue necessary procedural directions for time extension while striving for an expeditious conclusion of the arbitration.

• ALPINE HOUSING DEVELOPMENT CORPN. (P) LTD. V. ASHOK S. DHARIWAL:

The case of Alpine Housing Development Corpn. (P) Ltd. v. Ashok S. Dhariwal addressed a pivotal legal matter concerning the submission of additional evidence during Section 34 proceedings under the Arbitration Act. In this case, the respondent challenged an ex-parte arbitral award through Section 34 before the Additional City Civil and Sessions Judge in Bengaluru. Seeking to introduce additional evidence, the respondent approached the Karnataka High Court, which, by an order in September 2021, granted permission to submit additional documents. The appellant, aggrieved by the High Court’s decision, appealed to the Supreme Court, contending that allowing the addition of evidence contradicted the 2019 amendment made to Section 34(2)(a) of the Arbitration Act. The appellant argued that the amendment aimed to expedite proceedings and altered the grounds for setting aside an arbitral award. The appellant highlighted the distinction between the pre- and post-amendment language of Section 34(2)(a). Pre-amendment, the party challenging the award was required to furnish proof, whereas post-amendment, the party needed to establish based on the tribunal’s record. The respondent argued their non-participation in the arbitral proceedings was due to contesting the tribunal’s constitution, which resulted in an ex-parte award. They withdrew and filed an application alleging bias and excessive fees before the tribunal.

The Supreme Court observed that the arbitration proceedings and award were initiated in 1998, preceding the 2019 amendment. Therefore, the pre-amendment version of Section 34(2)(a) applied. The Court emphasized that Section 34 applications were summary proceedings, allowing setting aside an award based only on grounds in Section 34(2)(a) and (b). The Court maintained that the Arbitration Act aimed for swift resolution and allowed matters beyond the tribunal’s records if relevant to Section 34(2)(a). Such matters could be introduced through affidavits, limiting cross-examination to essential situations, as truth often emerges from the affidavits themselves.

Therefore, the Supreme Court upheld the High Court’s decision to permit the submission of affidavits and additional evidence in Section 34 proceedings, aligning with the Act’s objectives and the legal framework pre-dating the 2019 amendment.

• NTPC LTD. V. SPML INFRA LTD:

In the case of NTPC Ltd. v. SPML Infra Ltd. before the Supreme Court of India, the legal intricacies surrounding the pre-referral stage of arbitration jurisdiction were extensively analyzed, both pre and post-the 2015 Amendment to the Arbitration Act.

The dispute arose from a contract between NTPC and SPML Infra Ltd., involving bank guarantees and outstanding liabilities related to project works. After SPML completed the project and issued a no-demand certificate, NTPC released the final payment but withheld the bank guarantees due to unresolved disputes.

SPML sought an adjudicator’s appointment per the dispute resolution mechanism in the Agreement but received no response from NTPC. Subsequently, SPML filed a writ petition before the Delhi High Court, which issued an interim order preventing NTPC from invoking the bank guarantees. Despite a Settlement Agreement where NTPC released the bank guarantees and SPML withdrew the writ petition, SPML later repudiated the settlement, claiming coercion. SPML then filed for arbitration under Section 11(6) of the Arbitration Act in October 2020, alleging NTPC’s failure to appoint an arbitrator.

The Supreme Court categorized pre-referral cases into three distinct types:

• Matters needing the court’s direct determination, like assessing the arbitration agreement’s existence and validity.
• Cases solely under the arbitral tribunal’s jurisdiction.
• Cases where the court may decide, especially concerning the finalization of transactions or contracts.

The 2015 Amendment introduced Section 11(6A), aiming to limit the courts’ pre-referral involvement solely to determining the arbitration agreement’s existence. However, certain cases continued to apply the pre-amendment “accord and satisfaction” approach. The Supreme Court’s “eye of the needle” approach involved scrutinizing the arbitration agreement’s validity and the dispute’s arbitrability. Upon examining the facts, the Court found SPML’s claims of coercion and economic duress to be an “afterthought” lacking genuineness. The Court dismissed SPML’s application, characterizing the claims as frivolous, devoid of merit, and made in bad faith.[i][2]

The Court emphasized the duty of supervisory courts to ensure parties aren’t compelled to arbitrate disputes that are demonstrably non-arbitrable, underscoring the effective role of arbitration while ensuring integrity in the process.