Necessity of arbitration clause after the advent of Commercial Courts Act, 2015
Whenever two entities enter into any commercial arrangement, the first thing they do is reduce their vows on paper, termed as an agreement or a Memorandum of Understanding. During that journey of narrating those vows, one destination comes when parties decide the forum and mechanism, “to go to” …….in case there is any breach of terms of the contract.During that journey of narrating those vows, one destination comes when parties decide the forum and mechanism, “to go to” …….in case there is any breach of terms of the contract.
And when that time comes, many mind-boggling sessions are there equating benefits and shortcoming qua regular courts viz a viz Arbitration as a dispute resolution mechanism. Long-drawn battles in courts are a deterrent factor because of which parties do not resort to regular courts, and instead, they prefer the route of Arbitration.
In this article, we shall now do a small comparative analysis between domestic Arbitration and adjudication of disputes through courts, especially in the light of “THE COMMERCIAL COURTS, COMMERCIAL DIVISION AND COMMERCIAL APPELLATE DIVISION OF HIGH COURTS ACT, 2015” (hereinafter referred to as “The Commercial Courts Act”). The Commercial Courts Act, was promulgated with a view to bring in more confidence amongst the entities dealing in commercial activities qua courts of India (need not mention International Political factors). Various well thought provisions were introduced in this said Act, enabling expeditious disposal of Commercial Matters. The term “Commercial Disputes” defined under The Commercial Courts Act, engulfs almost every transaction under the sun dealing with money.
One of the most phenomenal provisions of The Commercial Courts Act, is that any suit falling under the realm of the said Act is to be disposed of within six months of its first date of case management hearing. Moreover, an appeal is to be disposed of within six months. Section 12 A of The Commercial Courts Act , talks about one more distinctive feature of the said Act , wherein pre-litigation mediation is made mandatory, whereby a party will have to resort to mediation before the institution of a case, although there is an exception.
In my experience, many times it is only because of the egos of the officers or managers who are the vocal cords between two entities, issues which can be conveniently be addressed at the inception becomes a deep wound. Mediation is a prestigious, legally binding & effective platform to resolve disputes, and the glorious success rate of matters being settled by mediation is known to all. By refereeing disputes before mediation, a comfortable environment can be given to the parties to resolve the issue. Moreover, it is seen at times that higher hierarchy of both sides is not updated adequately about the actual issue in the right tone and tenor because of which grudges are there resulting into disputes, by venturing into mediation decision making corners of a corporate setup are roped in.
While envisaging prospective breaches, parties look towards a viable mechanism in terms of time and finances. Under the realm of Arbitration a party can go to court pre-arbitration which is called as emergency arbitration, interim arbitral awards are amenable to the jurisdiction of courts and arbitral awards are also amenable to various grounds available under Section 34 of the Arbitration and Conciliation Act. Losing party, prima-facie if not conclusively, able to impeach the arbitral award’s credibility, I am sure many of you reading this article must have encountered or heard of such a situation. An entity who resorted to Arbitration with a view to bypass the rigmarole of court ends up in courts only.
“So a battle which will end up with old school style, it’s better to fight it that way.”
If parties have to go “to and fro” from one arbitral tribunal to regular courts often or if there is a scope of such “to and fro” then, it is better to join the line where one need not change the lanes.
Arbitration and conciliation act came into being to meet three purposes, and to a great extent, it has completed its purpose.
- Consolidation of Arbitration related laws.
- Enforcement of foreign arbitral awards.
- Consolidation of international commercial Arbitration.
If financial analysis is done of regular courts viz a viz Arbitration, ordinary courts are more cost-effective.
Every case has its own peculiar facts and circumstances, so one should weigh what route one should take. Under Commercial Courts Act, a list of documents is to be filed in a comprehensive manner which reduces the possibility of unnecessary delay, if judicial precedents in law are applied in correct perspective, there would seldom be an occasion where there would be a full blown trial, most of litigation can be deflected at an initial stage. Most commercial matters pertain to documentary evidence that do not require oral evidence, in a way unnecessarily time consumed in oral testimonies are saved. At the same time, we cannot negate the importance of International Commercial Arbitration, for which we shall dwell into some time later.
At the same time, we cannot negate the importance of International Commercial Arbitration, for which we shall dwell into some time later.
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