ARBITRATION PROCEDURE

INTRODUCTION:

First and foremost, it is pivotal to know the importance of arbitration, arbitration is the process through which parties can resolve the dispute out of court by at least one authority and stay away from extensive court procedures. The dispute resolution mechanism’s component materializes to forestall court prosecution and resolve disputes in convenient, viable, and friendly ways. Be that as it may, an agreeable settlement between the gatherings doesn’t mean compromising in conditions.

The authority directs the intervention procedures and resolves the questions between the parties. The authority should be the third impartial party who might be a specialist in the field of arbitral issues with the goal that decency of the “principle of natural justice” is kept up. The two players are limited by the choices and rules made by the referee.

HISTORICAL BACKGROUND: 

• Ancient and Pre-Colonial Periods

Discretion in India follows its starting points back to antiquated times when town seniors, known as panchayats, would determine debates inside networks. This casual arrangement of question goals was well established in Indian culture, stressing friendly settlement and local area concordance.

• Colonial Period

The advanced system for arbitration started to come to fruition during the time of the English frontier. The primary formal regulation, the Indian Arbitration Act, 1899, was restricted in scope, applying to the Presidency towns of Calcutta, Bombay, and Madras. The Code of Civil Procedure, 1908, further coordinated discretion arbitration provision, but to a restricted limit. 

• Post-Independence Developments

Post-autonomy, the Arbitration Act, of 1940, was authorized, merging and amending the regulations connecting with arbitration. Be that as it may, this Act was frequently scrutinized for its procedural shortcomings and exorbitant legal impedance, prompting delays and expanded cases.

The Supreme Court in Guru Nanak Foundation v Rattan Singh made many scathing observations vis-à-vis the 1940 Act stating that “how the proceedings under the Act are conducted and without exception challenged in Courts, has made Lawyers laugh and legal philosophers weep”.

• Modern Reforms

The Arbitration and Conciliation Act,  1996 (hereinafter alluded to as the “Act”), was instituted to resolve these issues and line up with international guidelines. The Demonstration depends on the UNCITRAL Model Regulation on Global Business Discretion and the UNCITRAL Placation Rules, denoting a critical shift towards a more productive and successful arbitration system in India.

The Arbitration and Conciliation Act, 1996

The Act is the cornerstone of arbitration law in India, providing a comprehensive legal framework for both domestic and international arbitration, as well as conciliation. It is divided into four parts:

Part I: Domestic Arbitration and International Commercial Arbitration

Part II: Enforcement of Certain Foreign Awards

Part III: Conciliation

Part IV: Supplementary Provisions

Part I: Domestic Arbitration and International Commercial Arbitration.

Before beginning the arbitration procedures there should be an agreement between the parties with the goal that they can summon procedures. Above all else, how about we examine the arbitration agreement. 

ARBITRATION AGREEMENT: 

Section 7 of the Arbitration & Conciliation Act, of 1996, states that an arbitration agreement should be recorded in writing, which can be through marked signed documents, exchanged letters telecom, or electronic means.  If a contract refers to another document with an arbitration clause, and the contract is in writing, the clause becomes part of the contract. For the dispute to be resolved through arbitration, there must be an arbitration agreement. Such an agreement can be made even during court proceedings, and if made under Part I of the Act, the rules of this part will govern the parties’ rights and obligations.

Reckitt Benckiser (India) Private Limited Vs. Reynders Label Printing India Private Limited & Anr.,

In this case, the Supreme Court held that the third party who is not part of the arbitration agreement should not be subjected to the arbitration proceedings. But  if it needs to prove that a third party is part of the agreement then the burden always lies on the applicant who asserted that the third party had the intention to create the agreement.

Booz Allen Hamilton vs. SBI Home Finance

The Supreme Court contemplates some non-arbitration subject matters and held that such action would be an action in rem and not in personam and is thus not arbitrable even if parties agreed to refer such dispute by consent. 

The disputes refer as:

 (1)Disputes relating to criminal offence

 (2) Matrimonial disputes

 (3) Guardianship matters 

(4) Insolvency and winding up matters

 (5) Testamentary matters 

(6) Eviction or tenancy matters

 (7) Suit for enforcement of mortgage by sale of property. 

(8) Intellectual Property Dispute.

PROCEDURE FOR THE ARBITRATION PROCESSES 

• NOTICE TO OTHER PARTY: (section 21) 

To begin discretion procedures, parties should ensure, that their agreement is analyzed for any necessary procedure before conjuring arbitration. Consistency with these methods is significant to keep away from the objection. On the off chance that a party neglects to follow obligatory arrangements yet the rival doesn’t mention criticisms, it postpones freedoms under section 4 of the Arbitration & Conciliation Act, 1996. At the point when questions emerge, the party summoning discretion should give a notification and solicit the arrangement abitrtor . If the understanding determines a sole arbitrator or is quiet on the number, just a single referee is designated. The arbitration is viewed as started on the date determined in section 21, which is the point at which the respondent gets the solicitation. The constraint time period for the dispute is stopped from the receipt of the notification.

Bhanumati J. Bhuta Vs. Ivory Properties and Hotels Private Limited

The Bombay High Court, in the case of Bhanumati J. Bhuta vs. Ivory Properties and Hotels Private Limited, held that arbitral proceedings commence when the notice invoking the arbitration agreement is received by the other party, not when the notice is merely served to the arbitral tribunal. The responsibility lies with the applicant who issued the notice to prove that the notice was delivered to the other party.

 

National Spot Exchange Ltd., Applicant, In the matter of Lotus Refineries Private Ltd. Vs. National Spot Exchange Ltd

The Bombay High Court, in the case of National Spot Exchange Ltd. vs. Lotus Refineries Private Ltd., held that a party making an application under Section 8 of the Arbitration and Conciliation Act, 1996 must meet several conditions:

1. There is an arbitration agreement.
2. a party Involved in the agreement brings an action against the other party to the agreement.
3. The subject matter of the action is equivalent to the topic of the arbitration agreement.
4. The other party moves the court to allude to the party’s arbitration before presenting its first statement on the substance of the dispute.

It is up to the court to decide whether these conditions have been met.

2. REQUEST FOR APPOINTMENT OF ARBITRATOR: 

Section 11 of the Arbitration and Conciliation Act, 1996: Key Provisions and Amendments

1. Appointment of Arbitrators: 

If a party fails to appoint an arbitrator within 30 days of receiving a request, the other party can apply under Section 11(6). If two arbitrators nominated by the parties cannot appoint a presiding officer, an application can be made to the Court for this appointment.

• Amendments to Section 11:

The Court’s power in selecting arbitrators is restricted to confirming the presence of an arbitration agreement and dismissing different decisions, decrees, or orders. The power given to people or foundations by the Supreme Court or High Court to name judges isn’t a designation of judicial power. Orders by the Supreme Court, High Court, or their designees concerning arbitrator appointments are conclusive and non-appealable, under Article 136 of the Constitution of India. Before appointing arbitrators, the Court or assigned authority must obtain a written disclosure from the forthcoming mediator concerning their qualifications and pertinent contemplations to guarantee an independent and unprejudiced agreement.

• Timely Disposal of Applications:

Applications for arbitrator appointments ought to be settled in something like 60 days of notice to the contrary party (Section 11(13)).

• Determining Arbitrator Fees:

The Bombay High Court has established rules for arbitrator fees, following the Fourth Schedule, amended by the Arbitration and Conciliation (Amendment) Act, 2019.

• Establishment of the Arbitration Council of India:

Section 43B empowers the Central Government to establish the Arbitration Council of India to oversee arbitration functions. The Council will be a corporate body with various members, and the Chairperson appointed in consultation with the Chief Justice of India.

• Grading and Designation of Arbitration Institutions:

The Council can grade arbitration institutions designated by the Supreme Court or High Courts. If no graded institutions are available, the Chief Justice of the relevant High Court can maintain a panel of arbitrators.

Party-appointed arbitrators are entitled to fees specified in the Fourth Schedule.

• Application of Section 11(4):

For International Commercial Arbitration, the Supreme Court designates the arbitration institution; for other arbitrations, the High Court does so. Sections 11(6A) and 11(7) have been deleted.

• Timely Processing by Arbitration Institutions:

Arbitration institutions must resolve arbitrator appointment applications within 30 days of notice and determine fees and payment methods for the Arbitral Tribunal, subject to Fourth Schedule rates.

• Exclusions:

Sections 11(11) to (14) do not apply to International Commercial Arbitration or cases with agreed fee determination rules of an arbitral institution.

• Pending Notification:

Sections 2 and 3 of the Arbitration and Conciliation (Amendment) Act, 2019, introducing Section 2(1)(ca) and amending Section 11, have not been notified by the Central Government and are not yet in effect.

In the case of S.B.P. & Co. vs. Patel Engineering Ltd. & Anr.,

The Supreme Court held that the Chief Justice or their assign’s powers under Section 11(6) of the Arbitration and Conciliation Act, 1996, are judicial. They should check the right High Court, really look at conditions for delegating an arbitrator, affirm the arbitration agreement, and evaluate if the claim is barred or stale, based on affidavits, documents, or additional evidence. Nonetheless, these procedures are not official actions under judicial proceedings of the Court.

Under section 12, a prospective arbitrator should disclose any circumstances that could influence their freedom or fair-mindedness, incorporating any associations with the parties or the dispute. This exposure ought to likewise affirm the arbitrator’s ability to dedicate the sufficient opportunity to the assertion and complete it in twelve months or less. Justification for testing authority is determined in the Fifth Schedule, and disclosures ought to follow the 6th Sixth Schedule form. Challenges should be founded on these divulgences and any concurred techniques under Section 13(4). If a test fizzles, the party might look to save the arbitral honor under Segment 34.

Section 14, specifies that the command of an arbitrator will terminate and be supplanted by another arbitrator under the accompanying conditions:

Inability to Perform Functions: Assuming the mediator turns out to be legitimately or essentially incapable of playing out their obligations.

Failure to Act Promptly: if the arbitrator neglects to act without unjustifiable.

Withdrawal:  If the arbitrator withdraws from their office

Agreement by Parties: Assuming the parties consent to end the arbitrator’s order.

In such cases, another arbitration will be appointed to proceed with the assertion cycle.

Section 15, gives that the order of an arbitrator is ended assuming The referee pulls out from office under any circumstance. The end is by or according to the agreement of the parties.

In such cases: a new arbitrator (substitute) will be named by the very decisions same rules that applied to the appointment of the replaced arbitrator.

Under section 16, the arbitral court has the authority to decide on its jurisdiction, including any protests connected with the presence or legitimacy of the arbitration agreement.

On account of Bharat Oil Organization Restricted v Go Carriers (India) limited the Supreme Court held that the issue of whether a counterclaim is arbitrable or falls past the extent of the intervention reference ought not be entirely set in stone by the arbitral council during the mediation cycle, not at the underlying stage. A counterclaim can’t be dismissed inside and out at the limit because the arbitral council needs a ward. The council should address and determine such jurisdictional issues during its examination.

Amendments to Section 17 (Effective  from October 23, 2015)

The arbitral tribunal can initiate measures with a similar authority as a court during arbitration or before grant implementation (Segment 36). Orders under Segment 17(1) are enforceable as court orders under the Code of Common Technique, 1908, except if remain by an allure under section 37.

3. STATEMENT OF CLAIMS AND DEFENCE: AMENDMENT, COUNTERCLAIMS AND DOCUMENT SUBMISSION: 

Section 23: 

The claimant should frame the facts supporting their case, the issues in question, and the relief or remedy sought. The respondent should give a defense concerning the petitioner’s assertions. The two parties can likewise present any important explanations and documents unless otherwise agreed. The respondent is allowed to present a counterclaim or argue a set-off, which the arbitral tribunal will adjudicate if it falls within the scope of the arbitration agreement. deferrals.  Parties may amend or supplement their claims or defenses during the arbitral proceedings unless otherwise agreed by the parties. The arbitral tribunal may refuse such amendments if they are deemed inappropriate due to delays.

4. PROCEDURE OF ORAL HEARING AND COMMUNICATION OF SUBMISSION

Section 24:

 The arbitral tribunal must conduct daily oral hearings for evidence or arguments, granting adjournments only for valid reasons and imposing costs for unjustified requests. The tribunal decides on the necessity of oral hearings unless agreed otherwise. Adequate notice must be given for hearings, and all submissions, including expert reports, must be communicated to both parties.

Section 27 of the Arbitration and Conciliation Act, 1996

 Section 27 accommodates help from the court in taking proof for arbitral procedures. Under Section 27(5), if an individual fails to comply with a court order issued under Section 27(1) won’t give proof, or is in contempt of the arbitral tribunal, they will have to deal with similar damages and outcomes as they would for comparative offenses in court procedures. The court upholds this in light of the arbitral tribunal’s representation.

5. ARBITRATION AWARD:

Section 29-A of the Arbitration and Conciliation Act, 1996:

The arbitral award should be given something like a year from the arrangement, everything being equal, with a potential half-year expansion by party agreement. On the off chance that not finished on time, the judge’s command closes except if reached out by the Court. Deferrals might bring about a 5% month-to-month charge reduction. Expansions require substantial reasons and Court terms.

Cabra Instalaciones Y. Servicios, S.A. Vs. Maharashtra State Electricity Distribution Company Limited (2019)

The Bombay High Court decided that section 29A of the  Arbitration and Conciliation Act, 1996 is a substantive provision that deals with:

• Time limits for making arbitral awards.
• Extensions of these time limits.

Extension must be allowed for adequate reason and under terms set by the Court.

 Section 31 of the Arbitration and Conciliation Act, 1996:

The arbitral awards should be recorded as a hard copy and endorsed by the individuals from the arbitral court. While perhaps not all individuals sign, the purposes behind the exclusion should be expressed. The award ought to remember the explanations behind which it is based except if the gatherings concur in any case or the award depends on concurred conditions under section 30. A marked duplicate of the honor should be conveyed to each party by the arbitral council. The council can give break grants on issues that could be remembered for the last honor. The court might grant interest on the sum in debate for the period between when the reason for the activity emerged and when the award is made. If the award doesn’t determine revenue from the date of the award until payment, it will build revenue at a pace of 2% higher than the ongoing rate, as characterized by the Interest Act, of 1978. The tribunal should decide the expenses of arbitration under Section 31-A.

CONCLUSION: 

All in all, section 7  of the Arbitration & Conciliation Act, 1996, commands that arbitration agreements be recorded as a hard copy, whether through marked signed documents, exchanged communications, or references in the contract. Such agreements are fundamental for disputes to be settled using arbitration and can be laid out during continuous legal disputes. At the point when made under Part I of the Act, the arbitration will comply to the principles and commitments determined inside this part.