HISTORY OF ARBITRATION
Arbitration is prevalent in India from Vedic Era, hence it is not the new concept but has been developed over the ages. As per the Hindu Law, one of the earliest known treaties that mentions about arbitration is "Brhadaranayaka Upanishad". Some arbitration bodies like Sreni, Puga and Kula which were known as Panchayat during ancient time.
History of arbitration in commercial disputes began when merchants were approached by the traders in ancient time mainly in Egypt and Greece where the latter would act as arbitrator and try to amicably resolve the disputes, which was soon developed to proper structure of merchants’ court when trade expanded in French. In 18th-19th century, arbitration took huge place in England when statue of Arbitration was framed in 1554 which recognise arbitral conduct and rules with expanding scope of commerce. The next major significant took place in US when Federal Arbitral Act come into force in 1925 which gave robust to other countries as well as to opt for this method which is evident from the amalgamation of Model Law on International Commercial Arbitration in 1985, by the United Nations Commission on International Trade Law (UNCITRAL) promoting uniformity and best practices in international arbitration. And if we particularly talk about India, arbitration act come into force in 1960 but its scope was limited to domestic arbitration due to which arbitration and conciliation act was against passed in 1996 based on UNCITRAL model which provide robust comprehensive framework in arbitration.[2]
WHY ARBITRATION IS PREFERRED OVER LITIGATION IN COMMERCIAL DISPUTES
Savage of time and money: As it is well known fact that litigation require a lot of time due to backlogs of cases and proper documentation at individual step, Arbitration can save the parties from standing in lines of court and thus engaging in daily court proceeding thereby giving them table solution by hiring an independent arbitrator who will solve the entire case and provide an amicable solution by hearing both side, which is time effective and less costlier solution as compared to giving fee to advocate, court fee, documentation fee and the like. Thus, this is the main reason why today arbitration is more popular and seen as better solution by the parties.
Privacy: in arbitration, the matter stay on the table within arbitrator and parties without involving third party thereby no loss of reputation and certain internal conflicts between the parties. But that is not the situation with litigation because the entire matter is heard in open court which involves number of parties.[3]
SBI General Insurance Ltd. vs. Krish Spinning[4]
The example of this case can be taken to better understand the scenario of arbitration where this case deals with contract between the insurance company and the concerned party.
FACTS:
Krish Spinning brought the insurance worth 72000000 against fire incident in his company where the the first incident of fire took place on 28.05.2018 in which the respondent claims to have suffered a total loss amounting to Rs 1,76,19,967/-. The second incident of fire took place on 17.11.2018 wherein the respondent claims to have suffered a total loss amounting to Rs 6,32,25,967/-. When the insurance company come to inspect it, they made respondent isgn the agreement hereby where they gave claim on January 4, 2019, confirming receipt of INR 84,19,579 . This discharge voucher also stated, inter alia, which mean that the Respondent was discharging the Appellant of the liability arising under its claim.
When the respondent come to know he will not get any other claim he tend to brought this matter to arbitration as he alleged that the voucher has been signed by the company with fraud whereas the company was not in favour
of bringing this matter in arbitration due to which they filed petition in SC where the court said that:
- No such clause exists within the agreement which can restrain the arbitration proceeding and acknowledged both parties by appointing an arbitrator for them.
- No referral court can go beyond the scope of enquiry under Arbitration and Conciliation Act 1996.
LEGAL FRAMEWORK GOVERNING THE ARBITRATION ACT
ARBITRATION AND CONCILIATION ACT,1996[5]
In India, matters related to arbitration are governed by Arbitration and Conciliation Act 1996.
The law relating to arbitration is Arbitration and Conciliation Act 1996. It comes into force on 25th of Jan 1996. It extends to whole of India except State of Jammu and Kashmir.
This act is of consolidating and amending nature and is not exhaustive.
OBJECTIVE OF ACT
- To comprehensively cover international commercial arbitration and conciliation as well as domestic.
- To make provision for an arbitral procedure which is fair, efficient and capable of meeting needs off specific arbitration.
- To provide that every final arbitration award is enforced in same manner as if it were decree of court.
- To minimize supervisory role of courts in arbitral process.
- To ensure arbitral tribunal award remain within limit of its jurisdiction.[i]
SUPREME COURT has also declared the benefits of act as follows:
Fair resolution of a dispute by an impartial tribunal without any unnecessary delay or expense, party autonomy is paramount subject only to such safeguard as are necessary in public interest.
PRACTISES FOR DRAFTING ARBITRATION AGREEMENT
SEAT, VENUE, LANGUAGE AND ARBITRATION LAW[6]
Although words like “seat” and “venue” are not defined under Arbitration Act which surprisingly is mentioned in Arbitration agreement where this words are often correlated with ‘place’ which is mentioned under Section 20 of Arbitration and Conciliation Act,1996.
Venue means geographic jurisdiction where the arbitration will take place which may be same as seat but not necessarily whereas seat mean legal jurisdiction which will be more concerned towards procedural laws of arbitration.
Language ; The mode of communication is mostly decided by parties but if the agreement does not disclose it, arbitrator decide it according to the rules of arbitration, which if is not understood by any party and create linguistic barriers translator is appointed to make common ground for understanding the procedures.
Furthermore, every document and entire proceeding must be undertaken in that language.
DIFFERENCE BETWEEN AD-HOC AND INSTITUTIONAL ARBITRATION
Ad- Hoc Arbitration means when the proceeding take place between both the parties without appointing any institution without predetermined rules but both the parties have more flexibility proceeding and appointing arbitrator in arbitration.
Institutional arbitration involves certain institution to guide the proceeding for example international chamber of commerce where the fee to arbitrator is also given according to rules of institution rather than negotiation between parties unlike ad-hoc arbitration.[7]
PROCESS FOR ENFORCING DOMESTIC AND INTERNATIONAL ARBITRATION IN INDIA
If any party want to address conflicts with arbitrator, both can agree on the same either one can send the letter for pursuing arbitration process and other can agree on the same after which both can appoint each independent arbitrator which will allow two arbitrator to appoint one more arbitrator and in this way both the side get equal recognition and can therefore put the matter on single table which will help them to reach one solution but most importantly this is not binding on the both and can be challenged in court of law if any party feel it arbitrary. Another situation can be taken when the parties are unable to decide on the matter amicable by appointing an arbitrator they can approach court and under Section 11(6) of Arbitration and Conciliation Act 1996 court can appoint arbitrator but application must be filled within 3years from the date of arise of action, which is known as limitation period. However, an arbitral award has to be given within 12 months from the date of starting of arbitration which can be extended by parties for further 6 months and arbitral award has to be given within 3 years in case of foreign arbitration.
APPOINTMENT OF ARBITRATOR
- Arbitrator has to be an independent person having pre-requisite knowledge and eligibility.
- He or she must have served or have experience of at least 10 years in field of law, architect or engineering.
WHAT IS ARBITRAL AWARD
Arbitral award is same as decree of court which means it is net result of all the proceeding of arbitration which can be in form of compensation to either party. It can also include demand or reward after deciding on merit of issue.
Arbitral award shall be made in writing and shall be signed by all members of arbitral tribunal.
1. The arbitral award shall state its date and place of arbitration in accordance with section 20 and award shall be deemed to have been made at that place.
2. After an award is made, a signed copy shall be delivered to each party.
3. The arbitral award at any time during arbitral proceeding, make an interim award on any matter with respect to which it may make a final arbitral award.
COMMON GROUND FOR CHALLENGING ARBITRAL AWARD
Section 34 of Arbitration and Conciliation Act provide some common grounds under which arbitral award can be challenged which are as follow:
- It is against public policy as such it is made by fraud or any illegal method against the morality of law.
- It is unable to settle subject matter of dispute or the agreement so made is void.
- It can also be made inapplicable if any competent authority of country set it aside or suspend it.
- If the composition of arbitral award is not in consonance with the arbitral agreement.
