Purpose Of Arbitration(Expedience) defeated

Purpose Of Arbitration(Expedience) defeated

Author :- Pushpendra Sharma

 (RGNUL)Rajiv Gandhi National University Of Law

Arbitration is the process of bringing a trade dispute before an undisputed third party for resolution. The third party, an arbitrator, listens to the evidence brought by both parties and decides. Sometimes that decision is binding on the parties. To arbitrate a case is to be brought before an arbitrator. An arbitrator is an audience, witness or listener. Arbitration is a form of alternative dispute resolution (ADR), used in place of litigation in the hope of settling a dispute without the cost and time of going to court. Litigation is a court-based process involving a decision that is binding on both parties and a process to appeal the decision. The difference between arbitration and litigation is the result of decisions on the procedures themselves and disputes. Mediation is often confused with arbitration, an informal process of bringing in a third party who goes to help settle a dispute between disputed parties. The arbitration process is not binding on the parties, and the arbitrator does not hear evidence. The arbitrator meets with the parties for discussion. The arbitrator tries to bring the parties together by discussion and caution (a separate discussion). Litigation, arbitration and arbitration are all involved in settling business disputes.

Arbitration clause
Usually, mediation begins when two parties agree to settle their dispute through mediation. The decision may also be to them that there is a contract other than an arbitration clause that both parties have signed. A specific arbitration clause in a business contract may look like this (from the American Arbitration Association):

Any dispute or claim relating to this Agreement, or its breach, shall be decided by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and a decision may be entered on an award rendered by the arbitrator (s). Any court has jurisdiction.
Arbitration is the process of bringing a trade dispute before an exiled third party to the proposal. The third party, an arbitrator, listens to the evidence brought by both parties and decides. Sometimes that decision is binding on the parties.

Selecting an arbitrator
Arbitrators are trained professionals with expertise in specific areas of arbitration, including employment, labor, construction, commercial and international disputes. The American Arbitration Association maintains a roster of arbitrators in these and other areas that a party can use to select an arbitrator.[1]
How the arbitration process works?
Arbitration clause– An agreement or specifically stating that if a dispute arises between the parties, they will settle it through a process of arbitration.

Arbitration notice– If a dispute has arisen and the party has opted to follow the process of arbitration, the party against whom the default is made will send an arbitration notice to enforce the arbitration process steps between the parties.

Appointment of arbitration– After receiving notice by other parties, both parties shall appoint arbitrators as specified in the arbitration agreement or arbitration clause.

Statement of Claim or defense – The next step in arbitration proceedings in India is to prepare a statement of claim. The statement of claim contains a dispute between the parties, events that lead to a dispute and compensation claimed from the defaulting party. The other party may file a statement of defense with an answer to the statement of claim. Get details of your claim, respond to the statement of claim or defense through top arbitrator lawyers.

Hearing of the parties– The arbitral tribunal will hear both the parties and their evidence. After hearing the award, the arbitral tribunal will pass the decision. The decision of the tribunal is known as ‘award’ and is binding on the parties. However, an appeal can be filed against the arbitral award before the High Court.

Execution of award– Once the award is passed by the tribunal it has to be executed. The party to whom the award is passed must file for the execution or enforcement of the award with the help of a good arbitral advocate.

How the purpose of Arbitration is getting defeated?
Arbitration in India is a difficult process as there are a large number of reasons, one of which is the huge delay in the final conclusion of the arbitration proceedings.[2] For example, the recent decision of the Delhi High Court in the case of Rakesh Kumar v. Cideas Investment India Pvt. Ltd.[3]. The arbitration award was conferred on 09.12.2000. It was challenged in the court under Section 34 of the Arbitration Act and the judgment was pronounced on 05.10.2015. Subsequently, the decision was unsuccessfully appealed in the Delhi High Court. Thus, the mediation took about 15 years to conclude. While this case may be an example from the extreme end of the spectrum, it demonstrates the need for change. A new provision, Section 29A of Arbitration and Conciliation Act, 1996 has been promulgated which will impose a 12-month time restriction on the Tribunal, to provide incentives when the award is granted in 6 months. The 12-month time period may be extended by the parties to a period of 6 months, but the time period thereafter may only be extended by the court on sufficient cause. The court is empowered to reduce the fees of arbitrators if it finds that the delay was attributable to the tribunal.

First and foremost, the Arbitration and Reconciliation Act aims to minimize judicial intervention as much as possible. Section 5 of the 1996 Act is as follows:
Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part..”[4]
However, section 29 (4) enables parties to proceed to arbitration proceedings to extend the time limit beyond the 18-month time limit from the competent court, even if the parties agree to such extension. Such conduct by the parties fails judicial intervention on them which is a complete contradiction to the scheme and purpose of arbitration specified under the 1996 Act. In fact such judicial intervention is likely to further delay the resolution of the dispute. The Amendment Act, 2015 provides that the application for extension shall be disposed of at the earliest and the court shall endeavor to dispose of the said application from the date of service on the notice of the opposite party from a period of sixty days.  Given the overpopulation of the Indian judiciary, this solution may be overly simplistic and optimistic.[5]

Secondly, section 29A of the 1996 Act provides that an arbitral award must be passed within the time limit of 12 months from the date of entering the reference (the effective day on which the tribunal is constituted). It is pertinent to mention that Section 29A (3) gives the parties to arbitration, by consent / agreement, to extend this period of 12 months to another 6 months. The UNCITRAL model law provides that parties to an arbitration agreement are free to agree on the procedure to be followed by the arbitral tribunal in the conduct of arbitral proceedings.[6]The purpose of the said provision under the UNCITRAL Model Law is to provide independence and autonomy to the party and allow the parties to arbitrate the structure of the tribunal, the structure and the process keeping in mind the magnitude and complexity of the nature of the dispute. Section 29A of the 1996 Act indirectly compels the parties to mediate in the event that a dispute cannot be resolved by arbitration within the time limit of 18 months. By adding the aforesaid provision, the parties are prohibited from deciding the nature of arbitration and more importantly according to the dispute according to their requirements.

Third, there is a substantial possibility that the fact that arbitration proceedings are underway in many disputes may be protected by an agreement of confidentiality between the parties. The situations in which the parties to the arbitration agreement are compelled to appear before the competent court and record the status of the arbitration may have to breach their own confidentiality agreements.

Fourth, section 29A (4) provides that if the court finds that the reason for the delay is due to the arbitral tribunal, it may order a reduction in the fees of the arbitrators. According to the principles of natural justice and Audi Parivartan Patel, it is important that the party concerned be heard, which in the present scenario would itself be an arbitral tribunal. In the event that the application is decided in favor of the arbitral tribunal and against a party in which the party had urged the Arbitral Tribunal to impose costs, such party may also seek reconsideration of the ar
bitral tribunal based on the presumption of prejudice Can. On the part of the tribunal.

Thus, Section 29A is introduced to fix the issue of lengthy arbitral proceedings, but the said provision may give rise to more problems which it seeks to solve. In order to resolve the aforesaid problem which has been created by adding section 29A, it is necessary to ensure that the autonomy of the party still remains and the parties decide to extend the arbitration proceedings as long as necessary for arbitration ( Freedom to take is allowed by clause for just six months taking into account the nature and complexity of the case). The court should only intervene in the event that the parties to the arbitration cannot come to a consensus, agreeing on whether the deadline should be extended.
In addition, courts should take due care when dealing with the issue of imposing costs on arbitral tribunals. Courts should consider a certain amount of cunning and with great care so that arbitration proceedings are not unduly obstructed.

In its present form, Section 29A only allows for further proceedings to be prolonged and parties to prolong arbitration proceedings which are ongoing when they believe that the arbitral tribunal is unlikely to rule in their favor.
The Sec.29(A) Arbitration and Conciliation Act, 1996 provides that the arbitration process should be completed within a time period of 12 months is only a prima facie. When we go into the depths of this section we come to know that this 12 months time period preceded by a 6 months time period for filing the statement of claims and Statement of Defense under section 23(4) Arbitration and Conciliation Act, 1996. Now the time period which was prima facie was of 12 months now appearing as of 18 months.

Now Section 29(A)(3) Arbitration and Conciliation Act, 1996 implies that the parties by mutual consent can further extend the time period for 6 more months. This took the time duration for Arbitration to 24 months or 2 Years.
In Section 29(A)(4) Arbitration and Conciliation Act, 1996 it is stated that the court may extend the time period for Arbitration further if any of the parties made a application under Section 29(A)(5) Arbitration and Conciliation Act, 1996. The party that is giving the application for extension of time period to the court must specify some reason to extend the time period.
The time limit which was prima facie of 12 months is really of more than 24 months. This somehow defeats the purpose of Arbitration process of dispute resolution. So we can say that if a party wants to delay the matter it can do that even in Arbitration process but the delay in arbitration is much less than the delay in litigation process.

Also the Arbitration and Conciliation Act, 1996 provides for section 29(B) which have provisions for Fast Track Procedure. This can be more helpful for the parties which requires that the dispute should be concluded as soon as possible.

Moreover Sec.34 of Arbitration and Conciliation Act, 1996 gives provisions for further delay by giving an opportunity to set aside the Arbitral award. Although this section was inserted to avoid any injustice as the award can be reviewed by a Judge but at the same time it leads to delay.
I want to conclude the article with my view that the Domestic Arbitration in India have provisions which helps both, the person seeking speedy trial and person who wants to delay the matter, by adding new provision in 2019 like Sec. 29(A), 29(B)[7]. It depends on how the advocates mould the Act for the benefit of their client. It is advisable for the Advocates to not to defeat the purpose of Arbitration i.e. Expediency because expediency is one of the important feature of Arbitration process if expediency don’t have a place in the Arbitration process then there is no use of Arbitration.

[1] Ramanujan Mukhrjee, Why Arbitration is not working in India,(October 23, 2019, 8:01 P.M.), https://www.livelaw.in/columns/why-is-arbitration-not-working-in-india-148803.

[2] Arbitration and Conciliation Act, 1996

[3] Rakesh Kumar v. Cideas Investment India Pvt. Ltd. (2015) SCC Online Del 14014

[4] Section 5 of the Arbitration and Conciliation Act, 1996

[5] Section 29A(9) ) of the Arbitration and Conciliation (Amendment) Act, 2015

[6] Article 19 of the UNCITRAL Model Law

[7] Section 29(A), 29(B), Arbitration and Conciliation(Amendment) Act, 2019

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