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ARBITRATION: A Brief Analysis

Updated: Feb 20, 2022

Written By - Sanchi Agarwal

INTRODUCTION

“Justice delayed is justice denied” as quoted by William goldstone describes the Indian judiciary and its justice delivery mechanism system. The Indian judiciary is a conventional mode of ensuring justice to the citizens of the country. The Indian judicial system is often criticized for its ‘lacunas’ – pendency of cases, delay in justice, a smaller number of judges, corruption, slow and lengthy trials, inefficient system. The pendency of cases has also significantly risen adding the total number of cases to four crores covering the supreme court, high court, and the district courts, and the number of judges also fall short of the required number of judges. A new form of justice delivery system is required to be developed for sharing the burden faced solely by the Indian courts.


What is arbitration?

Arbitration is one such option that can aid and supplement the role of Indian courts. Arbitration is a process that binds the parties to the dispute by the decision taken by a selected third party known as the arbitrator. It is less formal, less adversarial, and more flexible. Arbitration can be chosen by the parties either by way of an Arbitration Agreement or through the reference of the Court. The parties in arbitration have the freedom to select a qualified expert known as an arbitrator. The award given by the arbitrator is final and binding on the parties. In addition to an arbitral award, the arbitrator also holds [1]power and authority to grant interim measures, like a judge in the court. These interim measures are in the form of temporary relief and may be granted while the legal proceedings are on-going to preserve and protect certain rights of the parties, till the final award is rendered.

Arbitration in India

The Arbitration and Conciliation Act, 1996 predominantly regulates the arbitration process in India. It provides for the arbitration process, settlement, manner of appointment of arbitrators, the arbitration agreement, and other aspects governing the arbitration process. India enacted this legislation in accordance with the international convention entitled, United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, 1985. The Arbitration and Conciliation Act, 1996 was introduced to attract the 'international mercantile community' and the same has been asserted by the Supreme Court in “Konkan Railways Corp. Ltd. v. Mehul Construction Company”1

The arbitration as mentioned earlier can be done through arbitration agreement or court reference, where parties include in their agreement to refer a dispute to arbitration, “arbitration agreement" means “an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or the form of a separate agreement.”

In the case of “Visa International Ltd. vs. Continental Resources (USA) Ltd. (2009)”2 the Supreme Court held that to determine the validity of the arbitration agreement what is important is the intention of parties when entering into such agreement.

The matters which cannot be dealt with arbitration are matrimonial matters, criminal matters, charitable matters, matters relating to the validity of a will, and insolvency matters. “Keventer Agro Ltd vs. Seegram Comp. Ltd (1998)”

Arbitration in India has not yet reached its full potential and suffers from certain issues. Primarily being, interference of courts in the arbitration process, continuous unwanted intrusion of courts in the process hampers the efficacy and results in prolonged delays, [2]defeating the very exact purpose of the arbitration. The appointment of arbitrators is also done by courts. Another difficulty is the lack of awareness among the citizens and their dependence on conventional court processes. Last, but not least of the problems faced is, no time constraint. The parties to dispute did not have a time limit to submit the statement of claim and defence until the recent amendments

Recent changes in the act

The recent amendments brought about by the arbitration and conciliation amendment act 20193 take into consideration given by B.N.Srikrishna committee. The amendments essentially emphasize reducing the role of the Supreme Court or High Court in the appointment of arbitrators to a system where the arbitrators shall be appointed by the "arbitral institutions" designated by the Supreme Court or High Court. One of the important amendments is the establishment and incorporation of an independent body namely, the Arbitration Council of India to grade arbitral institutions and accreditation of arbitrators.

The problems discussed earlier in the given article are also somewhat remedied by the amendments. The esteemed Arbitration council of India is entrusted with the role of creating awareness among the citizens to increase the use of arbitration and reducing the burden on the courts. The time frame also has been altered, now the parties are required to submit the statement of claim and defence, within a period of six months from the appointment of an arbitrator.

The 2019 amendment along with the 2015 amendment in the Act has naturally made the act at par with other domestic legislation. These amendments also focus on improving the ease of doing business ranking and attracting foreign investors and making India, a centre for international commercial arbitration.

Future prospects

Many of the developed countries of the world employ arbitration as a tool for speedy dispute resolution which helps them secure high ranks in ease of doing business and attract high investments, one such example is Singapore, Singapore has improved its ease of doing business ranking significantly one of the major reasons being arbitration. India also being a developing country needs to ensure a strong dispute resolution mechanism for protecting the interests of foreign companies that tend to businesses in India.

The majority of the current arbitration is in the form of ad-hoc arbitration resulting in absence of uniformity and standards failing to meet global standards. According to a report issued by Forbes, more than thirty percent of arbitration in Singapore tribunals constitute Indian companies. Here, steps are being taken in this regard such as setting up of Mumbai Centre for International Arbitration (MCIA) in October 2016, which will boost the growth of India-related arbitration.

Conclusion

The above discussion makes it clear that various steps are being taken to make India a nucleus for international commercial arbitration by reducing court intervention significantly. Also, it has highlighted the importance of arbitration for ensuring that India creates a strong base to resolve any disputes which are commercial in nature. For instance – had been the arbitration institutions strong in India disputes like Vodaphone would have not moved out of the country. Hence, there is a need to create expertise and a favorable arbitration environment in the country.

REFERENCES

1. Konkan Railways Corp. Ltd. v. Mehul Construction Company

2. Visa International Ltd. vs. Continental Resources (USA) Ltd. (2009)

3. Keventer Agro Ltd vs. Seegram Comp. Ltd (1998)

4. Forbes article -India Aims To Be The World's Newest International Arbitration Hub

5. Amendment act 2019

[1](2000) 7 SCC 201 2(2009) 2 SCC 55 3 Arbitration and Conciliation (Amendments) Act 2019

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