Arbitral Proceeding:
An arbitral proceeding is a proceeding in which a dispute is resolved by an impartial arbitrator, whose decision is final and binding on both the parties to the dispute.
Key Elements:
1. It is a form of ADR (Alternative Dispute Resolution):
An arbitral proceeding comes within the ambit of ADR mechanism, as it offers an alternative to the court system. Here, the dispute between the concerned parties is resolved with the help of a third party.
2. It settles dispute outside the Court:
Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute for adjudicating their disputes. Thus, through arbitral proceeding, the parties to the dispute can get their disputes resolved outside the courts or tribunals, which are public fora.
3. Arbitrator is appointed by the parties to the dispute:
The parties to the dispute are authorized to appoint an arbitrator, to settle their dispute. This choice is granted to the concerned parties by the provisions of Section 11 of the Arbitration and Conciliation Act, 1996 (“hereinafter referred as Arbitration Act”).
4. Arbitral award is binding on both the parties:
Arbitral award passed by the arbitrators is final and binding on both the parties to the dispute. The concerned parties are under an obligation to adhere to such award.
The subject matter of Arbitral Proceeding:
Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of Arbitral Tribunals is excluded either expressly or by necessary implication.[1]
The Arbitration Act does not specifically exclude any category of dispute from arbitrability. However, The Hon’ble Supreme Court has listed out 6 categories of non-arbitrable disputes[2], as mentioned hereunder:
- Disputes relating to rights and liabilities which give rise to or arise out of criminal offences.
- Matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights and child custody.
- Guardianship matters.
- Insolvency and winding up matters.
- Testamentary matters (grant of probate, letters of administration and succession certificate).
- Eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or to decide the disputes.
Even, the Hon’ble Supreme Court has added the seventh category in the list of non-arbitrable cases, from the case of “Vimal Kishore Shah v. Jayesh Dinesh Shah.[3]”
This seventh category excludes the ‘disputes relating to trusts, trustees and beneficiaries arising out of a trust deed and the Trust Act, 1882’.
The procedure of Arbitral Proceeding:
The procedure of arbitral proceedings in India is specified in the Arbitration Act. The procedure stands as follows:
1. Arbitration Agreement:
The arbitration agreement is sine qua non for the commencement of arbitral proceeding. It is an agreement between the parties to submit to arbitration, all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.[4]
2. Appointment of Arbitrators:
The next step is the appointment of arbitrators by the parties to the dispute. The concerned parties are authorized to appoint an arbitrator for the adjudication of their dispute.[5]
3. Statement of claim and defense:
After the appointment of arbitrators, here comes the stage of filing statement of claim and defense. The claimant files ‘statement of claims’ which consists of facts supporting his claim, the points at issue and the relief or remedy sought. While, the respondentfiles ‘statement of defense’ stating his defense in respect of these particulars.[6]
4. Hearing:
After the statements have been filed by both the parties to the dispute, now it’s time for the commencement of hearing. The Arbitral Tribunal will decide whether to hold oral hearings for the presentation of evidence or for or an argument, or whether the proceedings shall be conducted on the basis of documents and other materials.[7]
5. Settlement by Arbitral Tribunal:
An Arbitral Tribunal can try for settlement between the concerned parties. With the agreement of parties it can use mediation, conciliation or other procedures at any time during the arbitral proceeding to encourage settlement. If during arbitral proceeding, the parties settle the dispute, then the proceeding will be terminated and an arbitral award on agreed terms shall be made by the concerned tribunal.[8]
6. Passing of Arbitral Award:
If there has been no settlement between the parties during the arbitral proceeding. Then, the Arbitral Tribunal will pass an arbitral award. It will state the reasons on which it is based, unless the parties agree not to specify the same or it is based on agreed terms. It is final and binding on both the parties to the dispute.
7. Termination of Proceeding:
The final arbitral award terminates the arbitral proceeding. Such proceeding can also be terminated by an Arbitral Tribunal in certain specific conditions which are embodied under Section 32(2) of the Arbitration Act. For example: the claimant withdrawing his claim orthe arbitral tribunal finding the continuation of proceedings to be unnecessary or impossible.
Merits of Arbitral Proceeding:
The arbitral proceeding provides various benefits to the parties to the dispute, such as:
1. It maintains the confidentiality of the concerned parties:
The arbitral proceeding generally takes place in private. The parties to the dispute can keep the final resolution or award private. Thus, any information regarding their dispute is not disclosed to others and the confidentiality of concerned parties is preserved.
2. It takes less time in resolving the dispute:
The arbitral proceeding resolves the dispute is a very less period of time as compared to the litigation process. Thus, it is a faster way to get disputes resolved.
3. It is less expensive:
The arbitral proceeding is less expensive as compared to the litigation process. It saves a good amount of money of the concerned parties. The fact that such proceeding takes less time, automatically establishes it to be less expensive.
Demerits of Arbitral proceeding:
The arbitral proceeding also proves to be disadvantageous to a certain extent, as mentioned below:
1. An improper and inadequate discovery:
The lack of proper discovery can create problems for a concerned party.The various material facts will not be revealed without a formal discovery being conducted. Thus, it can adversely affect a party to the dispute, whose side may prove to be weak, just because of an improper discovery, as the various material facts from his side can be suppressed.
2. The biasness of the arbitrator can create problems for a concerned party:
If the arbitrator is unfair, unjust or biased, then it will definitely create problems for a concerned party, as such a party will be deprived of an appropriate remedy.
3. Confidentiality can also create problems for a concerned party:
Since the arbitral proceeding takes place in private, it can lead to the suppression of one of the concerned party to the dispute due to the lack of transparency. Thus, confidentiality can also be proved to be disadvantageous for a concerned party.
Conclusion:
The arbitral proceeding proves to be more beneficial and liberal for the parties to the dispute in comparison to the civil or criminal proceedings. The parties to the dispute are authorized to appoint an arbitrator, to choose the place of arbitration and the proceedings are kept confidential. Thus, the concerned parties are given much more leverage in comparison to the other civil or criminal proceedings. Hence, it is a system which is very well suited for the parties to the dispute to resolve their disputes in a faster way and to save their time and money.
However, it is pivotal that the arbitral proceeding must always be fair and it must ensure proper remedy for the aggrieved party via medium of arbitral award.
Modification of arbitral proceeding by resorting to certain improvements, such as formal discovery, cross-examinations, consistency in the arbitral system and an arbitrator basing the decisions on the evidence adduced, will improve the entire system of arbitral proceeding. Hence, the arbitral proceeding will become twice more effective with these developments.
[1]Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd., AIR 2011 SC 2507.
[2]Id. at 1.
[3]AIR 2016 SC 3889.
[4] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s. 7.
[5] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s. 11.
[6] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s. 23.
[7] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s. 24.
[8]The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s. 30.
This article is authored by Vipul Pathak, Second-Year, B.A. LL.B student at CLS-GIBS
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