Introduction:
Arbitration is a form of Alternative Dispute Resolution. Alternative Dispute Resolution methods are considered more favourable as they serve perks like low cost, splendid flexibility, top-level confidentiality, choice of solution and much more. To consolidate the laws related to domestic and international arbitration and its enforcement, the Arbitration and Conciliation Act, 1996 was passed by the Indian government to meet the need to solve disputes taking place in the country. Arbitration has its own procedure that is to be followed to reach the final solution along with the elucidation.
Pre-requisites of Arbitral Proceedings
1. Arbitration Agreement
The most initial and important step to arbitration is the arbitration agreement. All the specifications and requirements of an arbitration agreement are mentioned in section 7 of Arbitration and Conciliation Act,1996.
Key elements of Arbitration Agreement stated in the case Bihar State Mineral Dev. Corpn. v Encon Builders (I) Pvt. Ltd [1]
- A present dispute or possibility of future contention
- The agreement must be very expressive
- The agreement must be in writing and signed by both the parties
- There must be the intention of both the parties to get into this arbitration agreement
- There must be an intention to resolve the matter in dispute
- There must be full determination and obligation
- The agreement to be bound by the decision of the arbitrator
2. Notice
A notice to be addressed to one party by the other prior to referring the dispute to arbitration is required. It is mentioned in section 21 of Arbitration and Conciliation Act, that it is mandatory to send a notice before the arbitration starts so that both the parties are aware of the same. The notice is necessary as it lays out the date of commencement based on the receipt of the notice provided by the other party. Another purpose behind the provision is that the party against whom the arbitration proceedings are to be held should know the claims that are made by the first party[2]. Therefore, it was observed that proceedings without prior notice are non-viable and unfavourable in the eyes of law.
3. Appointment of Arbitrators
The parties have this power in their hand to choose their arbitrator or arbitrators. According to Section 10 of the Act, parties are free to decide the arbitrators that must be odd in number. If in case, the parties fail to appoint the arbitrators, the arbitral tribunal shall incorporate a sole arbitrator. Appointment of an arbitrator is outright only when the communication of the same is done with the other party.
Arbitral Proceedings
Parties have the liberty to decide the date of commencement from when the proceedings should start. Rules governing the commencement of arbitral proceedings are laid down in section 21 of the Act. Such proceedings are bound by certain rules that need to be followed during the arbitral proceedings.
1. Equal Treatment of Parties
Section 18 provides two main statements of fair arbitration that are,
- Both the parties must be treated equally, and
- Both the parties must be given equal opportunities to present their case
This bounds the tribunals to act in an impartial way and conduct the arbitral proceedings with the principle of fair play.
2. Place of Arbitration
Section 20 states that the parties are free to decide and agree upon the place of arbitration. It failed to agree upon a place of arbitration, the arbitral tribunal will appoint a place for that particular arbitral proceeding.
However, the arbitral tribunal can also ask the parties to meet at a certain place, which it considers to be appropriate for consultation among its members, or taking evidence, or for the hearing witness, or for hearing experts or the parties, or for the inspection of goods, documents or other property.[3]
3. Language
Parties are free to choose language/languages by themselves for the proceedings. Section 22 deals with the language that is to be used in the arbitral proceeding. In case the parties fail to agree upon a language for arbitration the tribunal has to determine the language in which the proceedings will make a start. The language so chosen will be used for written statements, hearings, arbitral award or any other decision or communication regarding the arbitration by the arbitral tribunal.
4. Procedure of the Proceedings
The tribunal shall conduct the proceedings in the manner that is prescribed in the Arbitration and Conciliation Act. The parties also have the right to agree upon the procedure for the arbitral proceedings according to section 19 of the Act. The arbitral tribunal shall not be bound by the Civil Procedural Code,1906 or The Evidence Act,1872. In a recent case, one party objected to the material evidence and call for documents and disclosure by the other. The aggrieved party appealed to the court for relief and Delhi High Court on 5th April 2018, upheld the arbitrator’s decisive power when stating that, ”Moreover, this Court does not find the learned arbitrator’s approach unreasonable. Pursuant to section 19 of the Arbitration and Conciliation Act, the arbitrator has the power to determine the admissibility, relevance, materiality and weight of any evidence.”[4] With the support of the courts now, the trend looks positive as more autonomy is being granted in ADR and the court’s interference is seen declining.
5. Statement of claim and defence
Section 23 of the Act states the proceeding of the pleading of parties before the tribunal. The pleading must include the claim, the prayer for relief which they seek to receive as an award, the legal grounds and facts on which the prayer of relief is based and the evidence that must support the claim. The parties are free to submit all the documents and evidence, they contemplate to be relevant and necessary for the pleading. The respondent is then allowed to submit a counterclaim, which shall be adjudicated upon the arbitral tribunal.
6. Hearings and Written Proceedings
The parties or the tribunal shall decide whether the proceedings can be oral or they are going to be in written (only) through the documents. The tribunal is free to decide at which stage the oral proceedings are to be held according to the need of arbitration. Advance notice is required for any oral hearings or for the purpose of inspection of documents or goods. All the documents, expert reports, extra evidence or other information supplied to the tribunal by one party shall be communicated to the other party as well. [5]
7. Default of Party
In accordance with section 25 of the Act, the tribunal shall terminate the arbitral proceeding if the claimant fails to communicate his claims submissions within the agreed timelines. The tribunal shall continue the proceedings if the respondent fails to communicate his statement of defence within agreed timelines, without treating the failure in itself as an admission of the allegations by the claimant.
8. Expert Appointed by Tribunals
The tribunal can appoint experts to the parties as per the requirement or request of the parties according to section 26 of the Act. The appointment can be of one or more experts for looking into a specific matter. The expert will prepare a report for that specific issue and that report shall be communicated to all. Tribunal may ask the expert to appear in the oral hearing to testify his reports, findings or to be cross-examined by the tribunal
9. Court Assistance
According to section 27, if necessary, the tribunal itself or tribunal may permit any party to seek the court’s assistance to gather any evidence. The application must be in the particular form will all the necessary details of the parties, their address, the arbitrators, the nature of the dispute, nature of relief, type and full particulars of evidence produced.
In a case, the petitioners applied for production of further documents and examination of witnesses. Court held that the courts are not empowered to adjudicate upon the validity of an order passed by an arbitral tribunal under section 27 of the Arbitration and Conciliation Act,1996. Further, the court held that when an arbitral tribunal or a party to the arbitral proceedings files an application seeking assistance under section 27 in the pursuance of an order passed by an arbitral tribunal, the court goes into the merits of such an application and/or the order itself.
Once an order is passed under the section 27 by the court, any deviance from the same during the arbitral proceedings will be held to be as contempt of court and the penalties relating to the contempt will be applicable to the defaulting party. [6]
Conclusion
The process of arbitration is a very flexible process to resolve disputes as it gives the parties a lot many powers and decisions to make on their own. All the rules are in the hands of parties and they both play an essential role in reaching the final decision. Tribunal mostly has a secondary role in arbitral proceedings as mentioned above in choosing the place of arbitration, date of commencement, the language of proceedings, etc. the confidentiality is another advantage of arbitral proceedings. The Arbitration and Conciliation Act restricts judicial intervention and promotes the significance of party autonomy.
References:
- https://blog.ipleaders.in/
- https://www.lexology.com/
- https://lovdata.no/
[1] (AIR 2003 SC 3688)
[2] Alupro Building Systems Pvt Ltd v. Ozone Overseas Pvt. Ltd.
[3]Section 20(3), Arbitration and Conciliation Act,1996
[4] M/S. Jayaswal Neco Industries vs M/S. Goyal Mg Gases Pvt. Ltd.
[5] Section 24Arbitration and Conciliation Act,1996
[6] Montana Developers Pvt. Ltd. vs Aditya Developers
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