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ARBITRATION DISPUTE RESOLUTION IN INDIA- UNDERSTANDING BASICS

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ARBITRATION IN INDIA

Arbitration in India is an age old concept, originating in ancient India. The same is a grass root system called Panchayat(s). It is still prevalent today in villages where the seniors of the village or community sit and resolve disputes of villagers and/ or community. Therefore, it cannot be said that Arbitration as a concept or Alternate Dispute Resolution is a foreign import on the Indian legal system

BRIEF HISTORY OF ARBITRATION

Arbitration is a part of Alternate Dispute Resolution or ADR with other popular ADR processes like Conciliation and Mediation. Arbitration in India is governed by the Indian Arbitration and Conciliation Act 1996. The Arbitration and Conciliation Act, 1996 as applicable in India today was created on the lines of the Model Law of the UNCITAL (United Nations Commission on International Trade Law). The popularity of choosing arbitration over mediation and/ or conciliation has created the term Arbitration Dispute Resolution.

The Arbitration and Conciliation Act, 1996 as applicable in India today was created on the lines of the Model Law of the UNCITAL (United Nations Commission on International Trade Law) but Alternate Dispute Resolution as such was incorporated in laws of India as way back in 1840. Over a period of time, processes, procedures and powers pertaining to Arbitration and the right of parties to the same were incorporated in The Civil Procedure Code, Indian Contract Act, Specific Relief Act and by further incorporation of Indian Arbitration Act 1899, subsequently repealed by the Indian Arbitration Act of 1940 and them finally by the Arbitration and Conciliation Act, 1996 which came in force with effect from 25th January 1996.

The Arbitration and Conciliation Act 1996, seeks to consolidate and amend the laws pertaining to arbitration as were in force pre 25 January 1996 and seeks to fortify the domestic and international commercial arbitration including enforcement of the foreign arbitration awards on the lines of Model Law on International and Commercial Arbitration adopted by UN commission on International Trade Law, 1985

Arbitration is a part of Alternate Dispute Resolution or ADR with other popular ADR processes like Conciliation and Mediation. Arbitration in India is governed by Indian Arbitration and Conciliation Act 1996. The Arbitration and Conciliation Act, 1996 as applicable in India today was created on the lines of the Model Law of the UNCITAL (United Nations Commission on International Trade Law). The popularity of choosing arbitration over mediation and/ or conciliation has created the term Arbitration Dispute Resolution.

PREPARING FOR ARBITRATION- PROCESS, SETBACKS AND PROBLEMS

The USP of resolving disputes through Arbitration was its relative simplicity, economy, speed and privacy though this now can only be found in Institutional Arbitrations where Associations or Societies like The “Indian Council for Arbitration’ , FICCI, ASSOCHAM etc. conduct Arbitration as per rules laid down which have stood the test of time and where the reputation of the Arbitrator is impeccable while at the same time the parties to arbitration know very clearly what the cost of the said arbitration be. This unfortunately cannot be said for standalone Arbitrations conducted by retired Govt. servants, professionals and retired Judges etc. which are financially unviable and exhorbitant.

The basic problem with arbitration and it’s practical implementation is the pre-appointment of in house arbitrators in a standalone format by the parties especially companies, corporate houses as well as government and government corporations. This becomes a pressurising drill on the individual parties, contractors and companies who are left with no choice but to agree to the one sided and predrawn arbitration which usually has been created to their pecuniary or territorial disadvantage.

This misuse of the process of arbitration is even prevalent in international commercial arbitration where the arbitration agreement or the arbitration clause may stipulate sole and mixed arbitral commissions. These depends primarily on whether the disputes are to be referred to a single arbitrator or the parties may appoint an arbitrator each with an umpire presiding over the arbitration commission.

The umpire who is appointed in cases of mixed arbitration, may be appointed in terms of the agreement, the arbitration clause the Arbitration and Conciliation Act, 1996, Rules of Arbitration as laid down, rules of Arbitration of the Institution, arbitration association rules, the arbitration is being referred to or by mutual agreement of the parties to the agreement in case of dispute or seek help of the Courts in this respect.

Problems as discussed again arise when the party to the agreement in power may force the other party or parties to sign an arbitration agreement or arbitration clause created to cause pecuniary or territorial discomfort to ensure a quicker or unfair settlement.

INSTITUTIONAL ARBITRATION IS THE WAY

It is unfortunate that most litigants and parties do not opt for institutional arbitration which has time and again proven its mettle in providing fast, economical and completely impartial resolutions of disputes within the ambit of strongly laid down process and guidelines. Misuse of the process of Arbitration by companies and parties is also not unheard of. A party may incorporate an Arbitration clause choosing venue of arbitration guaranteed to cause difficulties to the other party or name an arbitrator or quantify his per hearing fees guaranteed to cause financial hardship to the other party. The conclusion is obvious. If arbitration is to survive, the Courts and Covenanting Advocates must insist on institutional arbitration to safeguard this wonderful concept of dispute resolution lest it gets hijacked by expensive arbitrators and fraudulent companies.

Author

Kapil Sankhla, Advocate is Managing Partner at Sankhla & Associates, Law Firm, having their office in New Delhi, India. The firm Deals with Corporate and Commercial laws and has clients in field of realty, construction, hospitality, retail and aviation. Please visit www.sankhla.in for further details.

This article is copyright of Sankhla & Associates, who reserve complete right over the same. Please contact the author if you wish to republish the same or part thereof.

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