Domestic Arbitration In India- Guide to Procedural And Legal Framework

Authored by - Arsh Anand (Law College Dehradun, faculty of Uttaranchal University)

Introduction

The obtuse process of litigation for adjudicating matters which has created a hunchback to the litigation, now has witnessed a massive shift towards mechanisms of ADR. Particularly Arbitration, which is guided by the United Nations Commission on International Trade Law (UNCITRAL) Model Law provides comprehensive and widely accepted provisions across the globe. The evolution of more than a century of arbitration in India now functions in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (last amended in 2021). For better understanding of the practical nuances of the statute on the ground-level, the article guides procedure of the arbitration in India.

The Act presents itself as:

“An Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards”

Framework of the Statute

The Act has been structured meticulously, comprehending the governing statute and procedural framework of arbitration and conciliation in India while also addressing the concerns regarding enforcement of foreign arbitral awards in India. The statute is divided into four main parts:

·       Part I (Section 2-43): Provides a complete framework only to matters of arbitration seated in India.

·       Part II (Section 44-60): Addresses the enforcement of foreign arbitral awards under- New York Convention and, Geneva Convention

·       Part III (Section 61-81): Deals with the Conciliation

·       Part IV (Section 82-87): Contain supplementary provisions

Apart from this, the act is inclusive of additional 8-Schedules, which assist by providing supplementary information for smooth functioning of provisions of the Act. Not to mention that, the act aims to prioritize party autonomy, minimum judicial intervention from courts and procedural flexibility for smoother function and flow of the arbitration.

Procedure of Arbitration in India

Part I of the Arbitration and Conciliation Act, 1996 govern domestic and international arbitration in India, only for matters seated in India. To bring a matter to arbitration, the foremost required essential is mutual assent of parties to arbitration. This assent should be in the form of a duly signed agreement or, in the form of an arbitration clause of an agreement or, a contract referring to another arbitration clause or agreement, to make it fall within the scope of an “Arbitration Agreement” (defined u/s 7 of Act). The power to refer parties to arbitration on the prima facie of finding of a valid arbitration agreement remains with the court (prescribed u/s 8 of Act). This also implies a mandatory obligation on the court to refer matter to arbitration in case of pre-existing arbitration agreement.

Invocation of Arbitration: A matter of Arbitration officially commences when a notice of arbitration is sent to the other party- as provided by Section 21.

Appointment of Arbitrator: Section 11 of the Act bestow power and free will to the parties to appoint an arbitrator or choose a procedure to appoint an arbitrator. If the parties fail to appoint an arbitrator, an application u/s 11(6) can be moved to the High Court of respective jurisdiction in domestic matters and Supreme Court in international matters. Section 12-15 of the Act deals with the grounds and procedure to challenge the neutrality and mandate and, substitution of the arbitrator, r/w Fifth and Seventh Schedule which provides substantive grounds to doubt of independence and ineligibility.

In institutional arbitration, the Arbitration Centre first receives the order of appointment of arbitrator from the petition moved u/s 11 from HC, facilitating the sending of notice to parties for appearance. Then, appearance of both the parties is noted.

Procedure for Arbitration: Section 19 provides that, the parties are free to agree upon the procedure not bound by the Code of Civil Procedure, 1908. Also, Section 20 provides that parties are free to agree upon the place of arbitration.

Submission of Statements: The written pleadings in arbitration i.e. Statement of Claim (by Claimants) and Statement of Defence (by Respondents) are supposedly filed by the parties, in support of their claim under the light of Section 23 of the Act. Adding up, the SOD can also include counter-claims and set-offs – provided by S. 23(2A). Also, S. 23(3) bestow power upon the tribunal to amend their pleadings. Most importantly, Section 23(4) mandates the pleading to be completed within the time period of 6-months from the date of receival of notice by the arbitrator.

Section 25(a) provide that if the claimant fails to file SOC in the required the time, the arbitral tribunal has authority to terminate the proceeding. While Section 25(b) provides that if the respondent fails to communicate SOD in the prescribed time, then it can shall be considered as an acceptance of claim by the respondent which was filed by the claimant.

Challenge to competency of Arbitral Tribunal: The plea that the arbitral tribunal lacks jurisdiction can be raised by either party only before filing of SOD as prescribed u/s 16(2). In case, the arbitral tribunal allegedly exercises their power beyond the scope of their jurisdiction, a plea u/s 16(3) can be filed at any stage.

Assessment of Arbitrator’s Fees and Other Expenses: The fee of the arbitral tribunal is calculated as per the prescribed procedure under Fourth-Schedule of the Act. Apart from that, bearing of any additional expense by the parties as provided u/s 31A (such as administrative fees in institutional arbitration) lies with the discretion of the tribunal.

Stage of Evidence: Section 19(4) advances the tribunal with the power to determine the admissibility, relevancy and weightage of evidence. Section 24 enables the tribunal to decide whether the hearings shall be oral, document-based or a combination of both. The provision also provides that oral hearings should be put on hold for presentation of argument. S. 19(2) provides that the parties should be informed beforehand while inspection of any relevant documents. And, any relevant document made to the arbitral tribunal must be communicated with the other party.

This stage includes marking of documents which can either be:

·       Marked as exhibit, if the opposite party admit the document and accept the content of document or,

·       Marked as document with objection, if the opposite party admits the document but denies the content of document or,

·       Marked for identification or verification, if the opposite party denies the document.

In addition to it, the parties are free to present witness for examination in support of the documents marked with objection or, marked for identification or verification. If needed, the tribunal or, even a party with the tribunal’s approval may apply for assistance of the court in recording of evidences, including summoning of witness for examination- as provided under section 27 of the Act.

Section 26 provides an additional measure of appointment of an expert, which if needed can be taken into consideration by the tribunal or, by the parties for participation in the hearings for examination of document or testification at any issue.

Interim Measures: Section 9 and 17 of the Act govern the interim measures by the Court and Tribunal, respectively which enable parties to secure relief for themselves before the commencement of arbitration, during the proceedings, or after the award but before its enforcement. S.17(2) provides that, an order issued by the tribunal under this section, shall be considered equivalent to an order of Court and shall be enforceable under the provisions of CPC,1908.

Time Limits: An award by the tribunal must be made within 12 months of the completion of pleadings, which is extendable by another 6 months with mutual consent of both the parties. If the proceeding is not completed within this time frame, then the mandate of the tribunal automatically expires, unless an extension is sought from the court.

Final Argument or, Submission: The tribunal holds authority u/s 24 to hear oral arguments.

Passing of Award: An award passed by the tribunal is primarily governed by Section 31 of the Act which shall be made in writing, signed by tribunal members, state reason (unless parties disagree) and, specifying the date and place of arbitration. A copy of which shall be provided to each party. Conclusively, u/s 32, the mandate of the award gets terminated after passing of the arbitral award.

Post-Corrective Measure: Section 33 provide remedy for the parties to seek correction and interpretation of arbitral award within a period of 30 days from the receipt of the arbitral award. For making the correction or giving the interpretation, the tribunal shall make it within thirty days from the receipt of the request. The request for making an additional arbitral award, shall be made within sixty days from the receipt of request. The extension of time pertaining to making an additional arbitral award stands with the tribunal.

Challenges to Set Aside the Award*: Section 34 of the Act provide grounds to make an application to set aside an arbitral award to the Court. Not to mention that, such application must be filed within a time period of 3 months + 30days (substantiating sufficient cause delay) and a prior notice for the same should be issued to the other party. Also, an application under this section is liable to be disposed withing a period of one year from the date of notice to other party. Let alone application u/s 34 shall not render the enforceability of award. For this, under Section 36(2), a separate order of stay should be granted from the Court to put a stay on it.

Enforcement of Arbitral Awards: Section 36 of the Act provides that once the time limit for filing a challenge to set aside the award under section 34 gets lapsed, the award becomes enforceable as if were a decree of the court.