CHALLENGES TO ARBITRATION IN INDIA- APRATIM DE & SHREYA CHAKRABORTHY

Challenges to Arbitration in India[1]

Author: Apratim De, New Law College, Bharti Vidyapeeth Deemed to be University, Pune

Co-Author: Shreya Chakraborty, Amity Law School, Amity University Rajasthan

ISSN: 2582-3655

Challenges to Arbitration in India[1]

Abstract

Arbitration is one of the means of alternate dispute resolution for the settlement of disputes where the parties to the dispute turn to one or more persons known as arbitrators, by whose decision they agree to abide by. In this process a third party reviews the evidence in the case and imposes a decision which is legally binding on both and enforceable. Authors in the following paper will focus on the process of Arbitration and its significance in the times where disputes are a common phenomenon and the judicial courts are overburdened with lakhs and lakhs of pending cases. Apart from that, the paper will also throw light on the benefits of the process of arbitration. There will also be a detailed analysis of the scope of this alternate dispute resolution method and what are the laws that govern the process of arbitration. India being a country is heavily dependent upon the Judicial Courts for the dispute resolution, the paper will also focus upon the challenges that India is facing in adopting the process of Arbitration as the preferred mode of dispute resolution, along with the suggestive measures to overcome the same.

Introduction

Arbitration is one of the means of alternate dispute resolution for the settlement of disputes where the parties to the dispute turn to one or more persons known as arbitrators, by whose decision they agree to abide by. In this process a third party reviews the evidence in the case and imposes a decision which is legally binding on both and enforceable. This process is different from judicial proceedings a Mediation. In India, Arbitration Law is regulated by the Arbitration and Conciliation Act, 1996. The Indian Law has its origins in the UNCITRAL Model Law, 1985. India had seen its first legislation on arbitration promulgated in the year 1899 entirely based upon the British Arbitration Act. But the previous arbitration act based on the British law created a sense of uncertainty due to the absence of provisions and procedures to deal with arbitration cases.[2]

An Arbitration clause stating that arbitration will cover “any dispute arising out of, or related to,” the contract containing the clause, is considered to be broadly worded as the arbitration clause. Arbitration clause has the effect of sometimes requiring parties to arbitrate disputes that do not arise directly from the contract where the arbitration clause is located[3]. This basically states that an arbitration clause located in one contract may require parties to arbitrate on a dispute arising under a separate agreement, provided that both the agreements must be related.

Scope

Under the Arbitration and Conciliation Act there are no express provisions given or laid down as such which particularly mention that which are the subject matters which exclusively come under the purview of the said act and which are the cases that are excluded from the ambit of the said act. But however in certain cases like for instance if Moratorium is imposed u/s 14(1) (a) of the IBC then such cases cannot be taken before a arbitral tribunal for hearing.[4] Then another such example is where the court has ordered initiation of winding up proceedings against a company then such a matter cannot go for arbitration nor can an arbitrator order for the same as the express provisions related to winding up are laid down under the Companies Act and under the said act only the court or the tribunal has the power to order for winding up of a company.[5] Moreover cases related to Matrimonial Disputes and Criminal Offences such as murder, theft, kidnapping etc. cannot go for arbitration[6] however on the other hand issues related to Specific Performance of a Contract related to immovable property are not prohibited from Arbitration under the Specific Relief Act 1963 which is in contrast to the Section 15 and Section 48(5)(b) of the English Arbitration Act of 1950 and 1996 respectively which prohibits the same.[7]

Hence it can be concluded that unless it is specifically mentioned under an act that the court has the jurisdiction to try the cases under the particular act then such cases can be tried by an arbitrator on an order passed by the court wrt same or on an agreement entered between the parties.

Advantages

  1. Economical:- Nowadays the litigants prefer arbitration over litigation as the former is faster as compared to the later one, as a result, it prevents unnecessary expenses such as filing charges, advocate fees, etc. and also prevents the people from unnecessary hassle too.
  2. Expedient: – As compared to litigation, arbitration is considered to be expedient as under the Arbitration and Conciliation Act 2015 (amendment) there is a fixed time frame within which the arbitral proceedings should be concluded.
  3. Confidential: – The Arbitral Awards can be kept confidential as the same is laid down under the Arbitration and Conciliation Act (Amendment) 2015.
  4. Ease of Appointment: – Unlike the judges, the Arbitrators can be appointed by the party themselves as a result of which there are meager chances of arousal of issues such as challenging the impartiality of the arbitrator as the same is appointed by them. However, under the Arbitration and Conciliation, Act 2015 (Amendment) parties can challenge the impartiality of the arbitrator on certain grounds laid under section 12 of the Arbitration and Conciliation Act.

Challenges to the practice of Arbitration in India

In India many times during various arbitration proceedings it is seen that the parties are in conflict with one another related to the appointment of arbitrators. Most of the time appointment of the sole arbitrator is challenged alleging that they are partial, lacked transparency and are not competent to be appointed as arbitrators so there is a need for professionals and specialists who can act as Arbitrators.

Another challenge is to set up an institution for arbitration so that India can also be a center for arbitration handling international disputes. Setting up arbitration institutions with international standards with hearing centers on widened jurisdiction of India is one of the foremost challenges as ambiguity arises that whether India should have one central institution for Arbitration or it should have various centers spread across the length and breadth of the country. E.g.: China has multiple arbitral centers whereas Singapore has only one center.

Lack of funds is also a major challenge for the smooth functioning of arbitral institutions in India. Most of the institutions that have been set up for the arbitration on international standards are mostly self-sufficient and there is no government interference but on the contrary, though India has its own arbitration centers none of them have been able to succeed as an institution having a global reputation due to several reasons but majorly due to lack of funds. Thus there is a challenge in front of India, in unifying the seats of arbitration and create a central seat of Arbitration or a central institution for arbitration.

Another challenge that lies is that of minimal judicial interference. Though under various sections like Section 8, Section 34 of Arbitration and Conciliation Act thus limiting the participation of the courts and the judiciary in the arbitral proceedings rather than being a boon it has become a curse for the parties as the views of the arbitrators cannot be substituted by that of the courts.[8] But such an award can only be set aside only if the court thinks fit and the parties agree to the same and thus making the entire arbitral proceeding de novo. The basic idea behind limiting the judicial intervention was to save the time of the parties and expedite the arbitral proceedings but rather than doing any good it’s worsening the situation of the parties.  

Justice B.N Srikrishna Committee

So in order to curb the challenges discussed above a High-Level Committee was constituted under the leadership of Retired Justice B.N. Srikrishna in 2016 for the purpose of reviewing the Institutionalization of Arbitration Mechanism in India.

The Recommendations suggested by the committee are as follows:-

After the removal of the trade barriers and end of the license raj system in 1991, many large MNC’s came to India to carry out business. For these large companies, time is money, as a result, most of these companies use Arbitration as a means of dispute settlement as it is an expedient method of dispute resolution. But on the contrary, there are several challenges such as difficulty in enforcing the arbitral award, issues related to appointment and impartiality of the arbitrators and a lack of experienced professionals in the field are some of the major hurdles persisting in the practice of arbitration. So in order to curb these problems, there is an immediate need of setting up an autonomous body that will be responsible for appointing the professionals in the field along with imparting proper education and training to the law students and other young professionals desirous of setting up a career as an arbitrator. 


[1]Apratim De (B.A. LLB 4Th Year) New Law College, Bharti Vidyapeeth Deemed to be University, Pune

  Shreya Chakraborty (B.A. LLB 3rd Year) Amity Law School, Amity University Rajasthan

[2] Vignesh, “Decoding the scope of Arbitration and analysis of Section & of the Arbitration and Conciliation Act, 1996”, Legal Service India (Mar’24,2020, 11:00 AM), < http://www.legalserviceindia.com/legal/article-1252-decoding-the-scope-of-arbitration-and-analysis-of-section-7-of-the-arbitration-and-conciliation-act-1996.html>

[3]“Arbitration: Scope and Enforcement of Any dispute arising out of, or related to,”, BTLG Attorneys At Law (Mar’24,2020, 11:10 AM), <http://www.btlg.us/News_and_Press/articles/Arbitration-scope-Griggs%20v.%20Evans>

[4]Alchemist Asset Reconstruction Pvt. Ltd & Anr.vs. M/S Hotel Gaudavan Pvt. Ltd. & Anr, SCC 1362 (2017)

[5]Haryana Telecom Ltd. v. Sterlite Industries Ltd., 5. SCC 688 (1999)

[6]Keventer Agro Ltd vs. Seegram Comp. Ltd (1998) 

[7]Olympus Superstructures Pvt. Ltd vs. Meena Vijay Khetan and others, 5. SCC 651,652 (1999)

[8]Ssangyong Engineering & Construction v. National Highways Authority of India(2019)

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