ARBITRATION – procedural aspects – quick view
By Sri Y. SRINIVASA RAO, Reaserch Scholar (Ph.D), Principal Senior Civil Judge, Tirupati
TABLE OF CONTENTS
- What matters cannot be settled under Arbitration
- Vidya Drolia v Durga Trading Corporation – Case -law
- The Period of Limitation for Arbitration matters
- Where are Arbitration Instituions situated in India?
- High Courts in India set up Arbitration Centres
- Jurisdiction for Arbitration Matters
- Commencement of arbitral proceedings
- Rules of Procedure
- Statement of Claim and Defence
- Default of a party
- Key Points of Arbitral Tribunal
Introduction:- The practical aspects and the procedure relating to arbitration proceedigns are discussed in this paper. The recent trends in this dispute resolution of arbitration proceedings is a key factor during these recent times. Legislative provisions, what disputes cannot be resolved in arbitration in India, and applicability the law of limitation are slightly discussed in this paper.
What matters cannot be settled under Arbitration:-
The following categories of matters cannot be resolved under the scheme of Arbitration. To say in short, a dispute in rem, either it relates to a thing or property, cannot be settled under Arbitration.
- Matters relating to matrimonial disputes
- Matters relating to Trust disputes
- Matters reating to Criminal Offences
- Matters relating to Labour and Industrial disputes
- Matters relating Tenancy and Eviction which are controlled by Renct Control Enactments
- Matters relating to Guardianship
- Matters relating to Testamentary suits and
Vidya Drolia v Durga Trading Corporation (2019):-
The Hon’ble Apex Court of India made it clear that ‘Fraud’ is only a ground to refuse for reference of the matter for arbitration. As was observed in Abdul Kadir Shamsuddin Bubere vs Madhav Prabhakar Oak , 1962 AIR 406, “There is no doubt that when a serious allegation of fraud is laid against the party and the party who charged with the fraud desires that the matter should be tried in the open court it would be sufficient cause for the court for the court not to order an arbitration agreement to be filed and not to make the reference.”
In Vidya Drolia’s case (supra). the Supreme Court held that Courts, while analyzing a case under Section 8, may choose to identify the issues which require adjudication pertaining to the validity of the arbitration agreement. If the Court cannot rule on the invalidity of the arbitration agreement on a prima facie basis, then the Court should stop any further analysis and simply refer all the issues to arbitration to be settled.
To understand the scope of judicial interference under Section 11, the 246th Law Commission Report is to be noted.
The scope of the Court to examine the prima facie validity of an arbitration agreement, as was held in Mayavati Trading Case (supra) and Garware Wall Ropes Ltd. v. Coastal Marine Construction and Engineering Ltd.,  9 SCC 209, includes only the determination of the following:
Whether the arbitration agreement was in writing? or
Whether the arbitration agreement was contained in exchange of letters, telecommunication, etc?
Whether the core contractual ingredients qua the arbitration agreement were fulfilled?
In Vidya Drolia, the Apex Court noted that section 8 of the Act mandates that a matter should not be referred to an arbitration by a court of law unless it finds that prima facie there is no valid arbitration agreement. The negative language used in the Section is required to be taken into consideration, while analyzing the Section. The Court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above. Therefore, the rule for the Court is ‘when in doubt, do refer’.
The Period of Limitation for Arbitration matters:-
Like in a Civil suit, the law of limitation applies to the Arbitration proceedigns. The limitation period, to arbitration proceedings, is to be calculated from the date the cause of action arose to the date the arbitral proceedings commence. See. Sec. 21 of the Arbitration Act. The period of limitation in arbitration proceedings varies based on nature of dispute and releif claimed.
Where are Arbitration Instituions situated in India?:-
International and Domestic Arbitration Institutions.
Domestic Arbitration Instituion includes, in India, .
Mumbai:- visit . www.mcia.org.in. This was set up in 2016. This is a centre for International Arbitrations which deals with large commercial disputes.
Nani Palkhivala Arbitration Centre which is recognized by the Hon’ble Madras High Court. Advocates, Retired judges, , chartered accountants and Civil servants are formed as panel of arbitrators in Nani Palkhivala Arbitration Centre. Visit. www.nparbitration.com
High Courts in India set up Arbitration Centres:- in fact, most of arbitrations in India are being conducted on an ad-hoc basis. However, some High Courts in India set up Arbitration Centres. It is curious to note that recent amendment in 2019 encourages ‘Instituional Arbitration’ in India.
Bengaluru – Visit www.arbitrationcentreblr.org
Delhi – Visit www.dacdelhi.org
Jammu and Kashmir- J&K International Arbitration Centre.
Jurisdiction for Arbitration Matters:- Section 16 of the Arbitration and Conciliation Act,1996 deals with ‘jurisdiction’. This section reads as follows:-
16. Competence of arbitral tribunal to rule on its jurisdiction.—(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,—(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34
Commencement of arbitral proceedings:- Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. See. Sec. 21 of the Arbitration and Conciliation Act, 1996.
Sec. 22 of the Arbitration and Conciliation Act, 1996 says that (1) The parties are free to agree upon the language or languages to be used in the arbitral proceedings.(2) Failing any agreement referred to in sub-section (1), the arbitral tribunal shall determine the language or languages to be used in the arbitral proceedings.(3) The agreement or determination, unless otherwise specified, shall apply to any written statement by a party, any hearing and any arbitral award, decision or other communication by the arbitral tribunal.(4) The arbitral tribunal may order that any documentary evidence shall be accompanied by a translation into the language or languages agreed upon by the parties or determined by the arbitral tribunal.
Rules of Procedure:- Section 19 of the Arbitration and Conciliation Act says as follows: Determination of rules of procedure.—
(1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).
(2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings
.(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.
(4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence.
Statement of Claim and Defence:- The procedure for the statement of claim and defence is provided ins ection 22 of the Arbitration and Conciliation Act, 1996.
(1) Within the period of time agreed upon by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of those statements.(2) The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit.(3) Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow the amendment or supplement having regard to the delay in making it.
Hearing:- Section 24 of the Act speaks about hearings and written proceedings. This provision says that
(1) Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials: Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held.(2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of documents, goods or other property.(3) All statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties.
Default of a party:– Section 25 of the Act says that unless otherwise agreed by the parties, where, without showing sufficient cause,—(a) the claimant fails to communicate his statement of claim in accordance with sub-section (1) of section 23, the arbitral tribunal shall terminate the proceedings;(b) the respondent fails to communicate his statement of defence in accordance with sub-section (1) of section 23, the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant;(c) a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it.
Key Points of Arbitral Tribunal:-
- This Arbitral Tribunal empowers to grant interim releifs
- The Arbitration and Conciliation Act, 1996 is applicable to arbitrations proceedigns in India. Part I of the Act provides procedure for arbitrations seated in India whereas Part II provides procedure as to arbitrations seated outside of India.
- It can grant ex-parte interim releif
- It can pass appropriate orders tp provide security
- It can grant – injunction, declaration, specific performance and payment of money
- It can order for damages which are compensatory in nature; but not punitive in nature
- Its award must be considered as final, when such award is passed on merits and then no appeal lies.
- However, under section 34 of the Act (Application for setting aside arbitral award), its award can be challeged in Local Court or by way of Appeal.
- Award (Domestic Award) passed in Arbitral Tribunal is executable before the Competent Civil Court.
- As foregin Awards are concerned, it is important to refer to the New York Convention and the Geneva Convention on the Execution of Foreign Arbitral Awards 1927 (Geneva Convention) wherein India is one of the members of the Convention. It makes it clear that an foreign award is only enforceable if it was made in the territory of another state that is identified by the Government of India in the Official Gazette . See. 47 of the Arbitration and Conciliation Act.
- Like a Civil Suits, the Indian Limitation Act applies to the Arbitration proceedings.
- As to breach of an arbitratiaon agreement, see. Sec. 8 (relating to Domestic ) and Sec. 45 (relating to Foreign ).
- No qualifications and characteristics of arbitrators are prescribed by enactment. However, The 2021 Amendment Act provides that qualifications, experience and standards for the accreditation of arbitrators will be specified by regulations passed by the Arbitration Council of India. See. Section 43J of the Arbitration Act).See. Recent Amendments. the Arbitration and Conciliation (Amendment) Act, 2021.See. 2015, and 2019 Amendment Acts.
- See section 11 of the Act, as to Appointment of arbitrators.
- Section 8 of the Act speaks about reference of disputes to arbitration.
- Section 17 lays down the procedure for enforcing interim orders of the arbitral tribunal.
- The arbitral tribunal, or a party with the approval of the arbitral tribunal, may apply to the Court for assistance in taking evidence under section 27 of the Act.
- This Tribunal has the same powers as the courts relating to discovery, inspection, production of documents and summoning of witnesses. See. 19 (3) says that failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate. See also. secs. 26 and 27 of the Act.
- Sec. 27 (5) of the Act says that persons failing to attend in accordance with such process, or making any other default, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the Court.
- Sec. 39 says about lien on arbitral award and deposits as to costs.
- Sec. 43 of the Act speaks about certain limitations.
- Application to set-aside award – Sec. 34 of the Act.
- Hearing Appeal on Arbitration Award – Sec. 37 of the Act.
- Fees. Refer to the famous cases of Jayaswal Ashoka Infrastructure (P) Ltd. v. Pansare Lawad Sallagar, 2019 SCC OnLine Bom 578 and Spentex Industries Ltd. v. Quinn Emanuel Urquhart Sullivan LLP.
- The fee structure for arbitrators – See. Schedule IV to the Arbitration and Conciliation Act.
- Applicability of Code of Civi Procedure, 1908 to matter before Civil Court under Arbitation Act – See. ITI Ltd. v. Siemens Public Communications Network Ltd, (2002) 5 SCC 510. Pushpa P. Mulchandani v. Admiral Radhakrishin Tahilani, (2001) 2 Arb LR 284 (Bom)
- Important case law on Arbitration matters – Central Inland Water Transport Corporation Limited v. Brojo Nath Ganguly, AIR 1986 SC 1571; Foregin seated arbitrations and international commercial arbitrations – Union of India Vs. Vedanta Ltd, AIR 2020SC 4550.,-Cruz City – 1 Mauritius’s case, (2017) 239 DLT 649.