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This article is written by Aryan Chaudhary, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from Lawsikho.com. Here he discusses “Challenges for Arbitration in India”.

Introduction

According to recent reports, India is estimated to have 3.53 crore pending cases in total, where 58,669 cases are pending in supreme court, 43,63,260 pending cases across all high courts and a whopping 3.11 crore pending cases only across all District and Subordinate courts in India. Despite these statistics, more and more people are tilted towards the judiciary to resolve their disputes. Alternate dispute resolution methods are very helpful and very crucial for any business firm. It helps them to resolve any disputes internally and with a greater pace than any judicial system can ever do. The parties involved in an arbitration proceeding have power to add their own terms and conditions, like they would do in any other form of contract or agreement. 

The above mentioned chart depicts the World Bank rankings for measuring business regulations, concerning two factors: 1) Ease of doing Business and 2) Enforcing Contracts (rankings).

India ranked at 131 out of 189 countries in 2016 World Bank ranking for ease of doing business.

According to 2019 rankings, India has gained 63th rank out of 190 countries, while the United states ranked 6th, United Kingdom ranked 8th, United Arab Emirates ranked 16th and Singapore ranked at 2nd place for Ease of doing business 2019. On the other hand, India has a very lower ranking in Enforcement of contracts, that is, 163, while it may have improved in comparison to before, it is still very low. Singapore ranks at 1st place. Similarly, other countries ranks in enforcement of contracts are as follows:

United states- 17th place

United Kingdom- 34th place

United Arab Emirates- 9th place

According to the data mentioned herein, it is clear that Singapore has a better framework in regard to conducting business activities. Many business houses in Singapore opt for Alternate Dispute Resolution methods like Arbitration in their contracts and agreement for a speedy method to resolve disputes. And hence, it is clear that Arbitration has many advantages and useful applications.

Various forms of Alternate Dispute Resolution 

Alternate dispute resolution involves settling disputes outside the court. There are various forms of alternative dispute resolution like early neutral evaluation, arbitration, conciliation, mediation and negotiation. Although they fall under the same head but they vary a lot from one another. Some important provisions relating to alternative dispute resolution are provided in Section 89 of the Civil Procedure Code, 1908, Arbitration and Conciliation Act, 1996 and Legal Services Authority Act, 1987. Some of them are explained below:

  • Arbitration is typically used to resolve disputes between private entities, outside the court machinery. 
  • Negotiation is a dialogue between two or more people or parties intended to reach a beneficial outcome over one or more issues where a conflict exists with respect to at least one of these issues.
  • Conciliation refers to the process where the parties use a conciliator, who meets the parties both separately and together, and tries to resolve the dispute(s).
  •  The fourth method of Alternate Dispute Resolution is Mediation, it refers to a process a person called as a mediator, sits between/with the parties and helps them to negotiate and come to a final decision/settlement. The mediator tries to facilitate open communication between the parties.

The present paper focuses on the reasons for slow growth of arbitration in india. But, first we should discuss arbitration and the process of arbitration to better understand and evaluate the topic in question.

Arbitration and its Process

Arbitration as explained above, is a process of resolving disputes between private entities, outside the court machinery. In simple terms, arbitration is a process when two or more parties decide to settle a dispute outside the court(s). 

A simplified arbitration agreement involves following steps: 

  • First of all, the parties to a contract/agreement, adds arbitration clause into their agreement/contract and if and when any dispute arises between them, one party informs the other party about the dispute by issuing arbitration notice.
  •  This is followed by response by the other party and subsequent appointment of an arbitrator, decision on rules and procedures, place of arbitration and language. 
  • Once the arbitration proceedings commence, there are formal hearings and written proceedings.
  •  The arbitrator, if the matter so requires, issues interim reliefs followed by a final award which is binding on both parties.
  •  The tricky part arises if either of the parties, unhappy with the award, challenges it before the court. This can be before the appellate court or the Supreme Court depending upon the matter. 
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Reasons for Hindrance in Growth of Arbitration in India

The Constitution of India provides ‘one’ with many reliefs and aims to deliver justice to each and every person, who has been wronged. One such relief is the Process of arbitration that has been provided under Arbitration and Conciliation Act, 1996 (A&C Act). But due to the following reasons, Arbitration in India has not grown properly as it is accepted to be:

  • Conventional thinking of Indians 

Although India is moving towards modernisation, it is yet a developing country. Which means, most people are ignorant towards arbitration and still trust courts more than alternate dispute resolution. This is not necessarily a bad thing, putting faith in one’s judicial system, but when the citizens of a country are ignorant and are unwilling towards change, this kind of orthodox thinking can really harm rather than helping anyone.

  • Lack of Proper Laws

The Arbitration and Conciliation Act was introduced in 1996, and last amended in 2015. In India, there is a serious need for introduction of more comprehensive law regarding arbitration process and proceedings. The law makers need to extensively study the problems regarding the needs and requirements of business houses, that usually deals with arbitration proceedings. The laws must become strict and more carefully elaborated so that more and more people gain assurance in Arbitration than the Judicial System. In simple terms, most of the people are still not willing to take risks or a leap of faith regarding matters of large magnitude that they may face in a business. 

  • Intervention of Courts in Arbitration Proceedings

The intervention of courts in arbitration proceedings shall be kept to minimum. Due to such interventions, those who opt for arbitration rather than pleading to a court, also result in inclination towards courts furthermore. People sometimes find it better to approach the court at first. Court intervention should be kept in check, not only the intervention during arbitral proceedings, but the intervention after the proceedings are concluded. This means, there must be a limited scope to challenge the arbitral award under Section 34 of Arbitration Act, 1996. In White Industries Vs. Republic of India, two issues arise: a) Intervention of judiciary and, b) Delay in arbitration. And, so it was well debated and agreed that the involvement of the judiciary should be minimised to an extent.

  • Lack of Awareness

One of the major issues due to which Arbitration is not growing in India is because of lack of awareness among the people. Some businessmen, advocates or legal advisors are only aware of the situation relating to arbitration proceedings and due to this unawareness many small scale businessmen or various newcomers who are not aware of such remedies are left out of the scope of such proceedings. 

The above mentioned points are the main reason as to why arbitration is not growing faster in India. And now, we must discuss how we can overcome these problems, so as to create a better image of India as a business and arbitral destination.

Addressing Issues and Overcoming them

  • Creating Awareness

 Among the people is the first and foremost need, if we want to create a better position for arbitration in india.Messaging is critical. Promoting arbitration and, therefore, preventing private players to rush to the courts without resorting to the relevant provisions of arbitration in the contract, must be a goal. If people are unaware of their rights, they can never seek justice. Keeping this in mind, it is very essential for us to create awareness about arbitration, it’s needs and its importance.

  • Mandatory Arbitration

Should be introduced. India will not have a robust domestic arbitration environment unless institutional arbitration becomes mandatory. This can only be done if arbitration agreements mention the specific institution that will conduct arbitral proceedings.

  • Minimum Court Intervention

Minimum court intervention is required. Arbitration is an Alternate Dispute Resolution (ADR) method, which means resolving disputes by some other method than courts, and even then Courts are allowed to intervene in arbitration proceedings, the whole concept of ADR is lost. Court intervention should be kept to minimum and in check, like there must be a limited scope to challenge the arbitral award  under Section 34 of Arbitration Act, 1996.

  • Introduction of Proper Laws

Introduction of proper laws is also a necessary requirement in such scenarios. Arbitration laws are required to be amended on a regular basis, and are crucial if our goal is to improve the conditions of the arbitration in India.

Conclusion

Indian legal system needs a way to deal with cases that are pending in the courts, and arbitration has proved itself a boon in this regard. Arbitration is not only helpful in reducing the excess burden that is put upon the Legal System but is also helpful in many more ways, like faster decision making, less costly, parties can put forward their own terms and conditions, etc. If the above mentioned reasons are somehow overcome, and both legislature and judiciary keep a strict check on arbitration laws, growth of arbitration in India is certain.


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