Author : Poulami Sarkar, Student at Sharda University.
INTRODUCTION – CONCEPT OF ADR
ADR stands for Alternative Dispute Resolution. ADR is the settlement process practiced outside of the courtroom. It is an informal method of resolving disputes between two parties. It provides effective and quick procedurals for this purpose. ADR helps resolve dispute at a much shorter time as compared to that of courtroom proceedings. This is one of the main reasons why ADR was introduced, to save time and make legal proceedings more economical.
Court encourages the disputed parties to settle their disputes by various methods of Alternative Dispute Resolution. Some of those methods are Negotiation, Conciliation, Mediation, Arbitration and many more. These methods act as a way to resolve issues without lengthy court proceedings, between two unsettled parties.
In India, earlier there was no official Act or provision to legalize these alternative methods, that is, in case if there were any problem or consequences regarding these methods, no remedy was available to compensate or punish the ones responsible. Such was the case until the Parliament passed the Arbitration and Conciliation Act, which made Arbitration and Conciliation legally obligatory and if any provision of the Act was violated or damage caused, parties can claim for violation of rights and compensation under this Act.
Arbitration is one of the techniques or methods of Alternative Dispute Resolution, resolving disputes between unsettled parties. Arbitration is a quasi-judicial adjudicatory process where the arbitrator or arbitrators appointed by the parties or the Court resolve and decide the dispute between the parties. The judgment passed in case of Arbitration is called an Award and such an award is binding upon the parties to the dispute.
Essentials of Arbitration
- To encourage the disputed parties to resolve their disputes
- Such dispute is resolved by an arbitrator appointed by the parties or the Court. The Award passed should be a negotiation between both the parties which they both have agreed upon.
- Arbitration is effective only in case of civil proceedings.
- Arbitration proceeding does not require to follow the exact provisions for civil case which are mentioned under Code of Civil Procedure, 1908.
In India, Arbitration is governed under Arbitration and Conciliation Act, 1996.
Benefits of Arbitration
There are various advantages of Arbitration to why parties choose to resolve their disputes by an alternative method. Such benefits are as follows:
- Arbitration is an informal method and as a benefit to the parties, the details of the proceedings are kept private or confidential, unless the parties request otherwise.
- The parties in arbitration can appoint their own arbitrator or arbitrators, unlike court proceedings, where appointment of judges is not in control of the parties. Therefore, in case of arbitration the parties can appoint any qualified arbitrator who fits the criteria of their dispute.
- The main advantage of arbitration is that court proceedings are time consuming since it has to follow the litigation process step by step in accordance to the provisions of law. But, arbitration need not require following every provisions. Hence, it helps manipulate the outcome and the time duration of the arbitration proceeding, making it quick and efficient.
- In arbitration, decision or judgment or decrees are called Award. Such an award is confidential in nature.
- Limited arbitration awards are allowed for appeal. In a way, this helps limit the duration of the arbitration proceedings.
ARBITRATION UNDER ARBITRATION AND CONCILIATION ACT, 1996
Arbitration and Conciliation is an act that governs Arbitration in India. This Act empowers courts to encourage parties to the dispute to resolve their disputes by alternative methods. The Parliament was of the opinion that the Courts were not able to implement the entire justice system. This led the Courts to redress many disputes to be resolved by alternative modes such as arbitration, negotiation, mediation, conciliation and many more. The resolution of dispute benefits the procedural flexibility; it also saves valuable time and money and; avoid the stress of conventional trial in a Court.
DEFINITIONS UNDER THIS ACT
Section 2 (1) of the Act provides for the various definitions related to the provisions of the act. Some of those definitions are as follows:
“Arbitration” means any arbitration whether or not administered by a permanent arbitral institution.
“Arbitration Agreement” means an agreement referred to in section 7.
“Arbitral Tribunal” means a sole arbitrator or a panel of arbitrators.
The Arbitration and Conciliation Act, 1996, not only provides for the provisions for domestic arbitration but also for certain international arbitration, whose commercial working is partly in India and partly in foreign. International Arbitration means an arbitration where the parties agree for arbitration for any present or future disputes. Such can be of a legal relationship in a form of a contract. The legal relationship should be commercial in nature and be governed under the laws of India and where –
- At least one party has a nationality of a country other than India.
- A corporate body which is incorporated in a foreign country.
- An association whose main management and control is outside of India
- The Government of a foreign country.
An arbitration Agreement is an agreement between two parties, where such parties have agreed for arbitration, in case of an ongoing dispute or for any dispute that may arise in the future. Such a dispute may have arisen or will arise due to a legal relationship between them. Legal Relationships may or may not be contractual in nature. The arbitration agreement has to be in a written form and such a document will be considered as writing when it is signed by the parties. Except in the case of statements exchanged by the parties, such mere exchange of statements shall also be considered as in the written form.
There are three types of arbitration agreement. Arbitration agreement clause may be defined or mentioned in the same contract under which arbitration agreement is filed. It can also be filed under a different agreement separate from the arbitration agreement. A reference mentioned in the contract or agreement, to a different agreement, may also be considered as arbitration agreement.
Therefore, any document or exchange of statements that mention that the parties are agreeing to resolve their present or future disputes by arbitration, shall be constituted as an arbitration agreement.
Power of the Court to refer parties to Arbitration
According to Section 8, the Court has the power to refer or encourage the parties to the dispute to Arbitration. In this scenario, the presence of an arbitration agreement is necessary. Upon the filing of a case in a corresponding Court relating to a dispute and presence of an arbitration agreement, any Judicial Authority has the power to refer such parties to arbitration. Such a reference should be made before the submission of the first statement by the party regarding the disputed matter.
If there is an issue or case pending under such Court, even then, the Judicial Authority has the power to refer such party to arbitration. Once the arbitration begins the tribunal is bound to pass an award.
COMPOSITION OF ARBITRATION TRIBUNAL
Arbitrators in Arbitral Tribunal are appointed by the Parties or the Court. The parties can appoint any number of arbitrators but it should be an odd number and not an even number. In case, the parties are unable to determine or appoint the arbitrators, there shall be a sole arbitrator or can be appointed by the Court.
Essentials for appointing an Arbitrator
- The first essential is that the arbitrator may be of any nationality. A person should be appointed as an arbitrator irrespective of his or her nationality. Though the party has the ultimate power here and hence, they can decide the nationality of the person before appointing.
- Again, the parties have full discretion in the matters of appointment of arbitrator and therefore, they can decide any procedure for the appointment of arbitrator.
- Failing to do so, the parties may follow the procedure mentioned in the Act. Each party shall appoint one arbitrator and in turn, both of those arbitrators shall appoint the third, that is, the presiding arbitrator. In case, the parties fails to appoint the two arbitrators or the two arbitrators fails to appoint the presiding arbitrator within 30 days, then the Supreme Court or the High Court or any person or institution shall be giver the power to appoint upon request by the parties.
- In case of appointment of a sole arbitrator, if the parties fail to appoint within 30 days, then again, the Supreme Court or High Court or any person or institution shall have the power to appoint upon request by the parties.
- Finally, in case where the parties have decided on a procedure of their on for the appointment of arbitrators, may request the supreme Court or High Court or any person or institution to take necessary steps to resolve the issues of the procedure agreed upon by the parties. Such issues may include that a party fails to act in accordance to the procedure, or, the parties or the arbitrators fails to reach an agreement as suggested in the procedure.
- While considering any application filed by the parties or the arbitrators requesting the Supreme Court or High Court, under that given provisions of section 11, the Court shal examine the validity of arbitration agreement or its existence.
The parties are empowered under this act to appoint arbitrators. Upon such appointed the parties shall continue with the arbitration proceeding along with the arbitrators, trying to resolve their disputes. Once the proceeding starts, the arbitrator shall follow the procedure to resolve the issue and then finally, pass a decision that the tribunal has come to after listening to both the parties and taking into account of all the facts and witnesses. Such a decision is known as Arbitral Award.
Decision making of an award shall be a majority vote. That is, if there are more than one arbitrator, the award shall be pass based on the decision preferred by the majority of arbitrators. Exception to this is sole arbitrator, in such case, the decision making or award shall be completely vested upon the sole arbitrator. Whereas the parties to the proceeding and the two arbitrators unanimously decide that a question regarding the procedure shall be decided by the presiding officer, then such shall be followed, notwithstanding the fact that there shall be a majority decision.
Essentials of an arbitral award
- Under Section 31 of the Act, an Arbitral award shall be in writing and shall signed by the members of the tribunal. In case of a majority vote, the signatures of the majority member are required along with reason mentioned for the omitted signature.
- The arbitral award shall also contain the reason for making such an award, unless the parties requests not to do so.
- The arbitral tribunal may pass an interim award at any time before making the final arbitral award. The final arbitral award may depend on the sequence of interim awards passed.
- A signed copy of arbitral award shall be provided with each of the parties.
- If the arbitral award includes money, then such money to be paid shall be mentioned by the tribunal at a rate which the tribunal may deem fit.
Termination of proceedings
The arbitral tribunal proceedings can be terminated under two circumstances. First is upon the termination of arbitral proceedings. Once the final arbitral award is passed, the arbitral tribunal shall be deemed to have been terminated. Second is an arbitral tribunal may terminate the arbitral proceedings before the passing of the final arbitral award, in the following cases:
- When the claimant withdraws his claim. The respondent may object to the tribunal’s issuing an order of termination and finds a reasonable interest in obtaining the final award.
- When both the parties agrees on the termination of arbitral proceedings together.
- The tribunal also has the power to terminate a tribunal proceeding on its own. If the tribunal is of the opinion that the proceeding has become unnecessary to continue or that it is impossible to continue.
Finality of Arbitral Award
Finality of an award means the decision or the arbitral award passed by the arbitral tribunal shall be final and binding upon the parties to the arbitral proceedings or any any other person involved.
Enforcement of Arbitral Award
After the termination and finality of arbitral awards, which mentions that the award shall be binding upon the parties to the proceedings, there shall be execution, that is, enforcement of such award. When the time for filing an application for setting aside is over, the award shall be enforced. In the enforcement, the procedures of Code of Civil Procedure, 1908 shall be followed.
Even when an application for setting aside an award is filed, this does not cease the award from executing or enforcing. Though the tribunal has the power to grant a stay for the execution of said award, then such an award shall be rendered from enforcing.
The Court encourages the disputed parties to settle their disputes by various methods of Alternative Dispute Resolution. Some of those methods are Negotiation, Conciliation, Mediation, Arbitration and many more. But the Arbitration and Conciliation Act, 1996, provides only for arbitration and conciliation, whereas it does not provide settlement provisions and proceedings for other alternative dispute resolution techniques. Mediation is a negotiation process and not an adjudicatory process. The parties directly participate in the negotiation of their dispute. Procedures and settlements are not controlled, governed or restricted by statutory provisions, thereby, allowing freedom and flexibility. The Court supports alternative dispute resolution which acts as an additional tool to resolve disputes. The Court has the central authority and power to control these alternate resolutions. This will establish a relationship and will show that the Court works with the alternate dispute resolution methods, which in turn, provide much faster and much efficient settlement to the disputes.