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Process of Arbitration in India

Arbitration in India is governed by the law of arbitration in India which states that the for adopting the arbitration as a dispute resolution mechanism an agreement to that effect should be signed between the disputing parties. The parties can either opt for a separate arbitration agreement to be signed between them or include an arbitration clause in the main contract between the parties.
Written by:
Simran Bhullar
Published on
01-Aug-19

Arbitration process in India is something which is followed to end a business dispute. The Arbitration and Conciliation Act 1996 is the key law governing arbitration in India. The Act provides for the procedure of arbitration proceedings in India and steps of arbitration. The act has four parts:

Part I sets out general provisions on domestic arbitration. Part II addresses the enforcement of foreign awards (Chapter 1 deals with New York Convention awards and Chapter II with awards under the 1927 Geneva Convention). Part III deals with conciliation and Part IV sets out certain supplementary provisions.

Parts I and II are the most significant and are based on the UNCITRAL Model Law and the New York Convention respectively.

Let us understand what is arbitration in India? Arbitration in India is governed by the law of arbitration in India which states that for adopting the arbitration as a dispute resolution mechanism an agreement to that effect should be signed between the disputing parties. The parties can either opt for a separate arbitration agreement to be signed between them or include an arbitration clause in the main contract between the parties. Arbitration agreement or the arbitration clause should clearly state that the dispute will be resolved through arbitration only. Further, it should specify the number of arbitrators to be appointed and the manner of their appointment. Arbitrators in India are to be appointed in odd numbers only. Arbitrator in India has to be an unbiased independent third party who resolves the disputes between the conflict party in an impartial manner.

The Arbitration and Conciliation Act is broadly based on the UNCITRAL Model Law and was enacted to consolidate, define and amend the law in relation to domestic arbitration, international commercial arbitration and the enforcement of foreign arbitral awards.

The Indian courts are increasingly adopting a pro-arbitration approach and enforcing valid arbitration agreements. The statement of objects and reasons of the Arbitration and Conciliation Act also recognises the principle of non-intervention by courts in the arbitration process. However, the Indian courts will refuse to enforce an arbitration agreement where it finds prima facie that - no valid agreement exists or the dispute is not arbitrable.

The parties are free to decide on the number of arbitrators, as long as this is not an even number. Appointment of the arbitrator is the most important step in the arbitration process. If the parties fail to specify the number of arbitrators, the tribunal will consist of one arbitrator. When the parties fail to agree on a procedure for appointing a three-member tribunal, each party will nominate one arbitrator and the two party-appointed arbitrators will then appoint the presiding arbitrator. If a party fails to appoint an arbitrator within the stipulated period, the other party can apply to the Supreme Court or the High Court seeking the appointment of the arbitrator.

Indian Arbitration and Conciliation Act provides no specific guidance on the manner and method in which the parties must communicate with the tribunal. In practice, all substantive communications are in writing. The parties can agree on the language(s) to be used in the arbitration process. In the absence of such agreement, the tribunal can determine the language(s).

The Arbitration and Conciliation Act does not require unanimous agreement from the tribunal. Unless otherwise agreed by the parties, any decision of the tribunal can be made by a majority of all its members. If the parties and the tribunal agree, the presiding arbitrator may be authorised to decide questions of procedure. In case of disagreement, a dissenting arbitrator can issue a separate opinion, but the Arbitration and Conciliation Act prescribes no rules as to the form of such a dissenting opinion.

 

Following are the stages of arbitration or arbitration process step by step:

  • Arbitration Clause - An agreement or the clause specifically stating that if the dispute arises between the parties they will resolve it through the process of arbitration.
  • Arbitration notice - In case a dispute has arisen and the party has opted to follow the procedure of arbitration then the party against whom the default has been committed will send an arbitration notice for invoking arbitration process steps between the parties.
  • Appointment of Arbitrator- After receiving the notice by other parties both the parties will appoint the arbitrators in the manner as specified in the arbitration agreement or arbitration clause.
  • Statement of Claim- Next step in an arbitration proceeding in India is to draft a statement of claim. Statement of claim contains the dispute between the parties, events which lead to the dispute and the compensation claimed from the defaulting party. The other party can file a statement of counterclaim along with reply to the statement of claim. Get your statement of claim, reply to the statement of claim or counterclaim through top arbitration lawyers.
  • Hearing of Parties - Arbitral tribunal will hear both the parties and their evidence.
  • Award - After hearing the parties, 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 against the arbitral award can be filed before the High Court.
  • Execution of Award - Once the award has been passed by the tribunal it has to be executed. The party in whose favour the award has been passed has to file for execution or enforcement of award with the help of a good arbitration lawyer.

Arbitration process in India does not follow the procedure of the Civil Procedure Code and the arbitrator also the arbitration proceeding does not need to follow the procedures enlisted in the Civil Procedure Code, 1908(1). Arbitrator in India, however, has the following powers:

  • To make awards
  • To take assistance
  • To rule on its jurisdiction
  • To pass interim relief
  • To determine procedures
  • To decide on the official language of the proceedings
  • To appoint an expert
  • To seek the court’s assistance for evidence
  • To terminate proceedings
  • To impose interest and deposits

Other than the above powers, the arbitrator has also given certain powers of civil court as under the Civil Procedure Code:

  • To administer the oath to parties and witnesses appearing before him;
  • To state a special case for the opinion of the court on any question of law or state the award in the form of a special case for the opinion of the court;
  • To make the award conditional or in the alternative;
  • To correct in an award any clerical mistake or error arising from any accidental slip or omission;
  • To administer any party interrogatories

The Limitation Act 1963(2) applies to all proceedings under the Arbitration and Conciliation Act, just as it applies to proceedings in the Indian courts, except to the extent expressly excluded by the Arbitration and Conciliation Act. Any arbitration proceedings commenced after the limitation period (three years from the date on which the cause of action arose) will be time-barred.

Local courts can intervene in domestic arbitration proceedings. This includes the power to issue interim orders and appoints arbitrators.

While arbitrators cannot compel third parties to appear before them, the tribunal or a party, with the tribunal’s approval, may apply to the court for assistance in taking evidence. The court may make an order requiring third parties to provide evidence directly to the tribunal. If a person fails to attend in accordance with such order of the court, it is subject to the same penalties and punishments as it may have incurred during court proceedings.

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External Links:

[1] The Code of Civil Procedure, 1908: A sitemap to The Code of Civil Procedure

[2] The Limitation Act 1963: A detailed view of The Limitation Act 1963