This article is written by Chandan Kumar Pradhan from KIIT School of Law, Odisha. This article talks about the challenges under the arbitration process.
The Arbitration process in India is something, which usually works as a dispute resolution forum for the termination of business disputes. The Arbitration and Conciliation Act, 1996 is the key to the law governing arbitration in India. Arbitration in India is provided by the law of arbitration in India, which is only for adopting the arbitration dispute resolution, which consists of only business purposes, any dispute between companies, or any other civil issues. This process does not entertain any kind of criminal cases. People opt for the arbitration custody because of the pendency of the cases in the Court. And in the arbitration sector, the cases mostly get solved within a year according to the Amendment of the Act in 2015. Here, the proceedings are initiated very quickly and arbitrators give their judgements speedily. The parties, those are coming to the arbitration sector, don’t disclose the issues to the public. The judgement of a case can not be used further in the next case in arbitration.
Challenges and Conflict of Interests under Arbitration
Appointment of Arbitrator
A prominent person should have the grounds of qualification by which he can be appointed as an arbitrator. And which should be checked by the Arbitral Tribunal, then only the prominent person will be capable of giving a decision in the tribunal.
Section 11 of the Arbitration and Conciliation Act, 1996 provides for the appointment of arbitrators. And the arbitrator will be appointed by two cases
- Appointment by parties
- Appointment by Court
Number of Arbitrators
The Arbitration and Conciliation Act, 1996 provides that the parties can elect any number of arbitrators as they wish to. But the group of arbitrators must not constitute an even numbered group, they should be an odd number of arbitrators. And if the parties are unable to do so, the arbitral tribunal will consist of a sole arbitrator.
Qualification of Arbitrator
The arbitrator who was appointed, he/she should be satisfied with some conditions of qualification. The Head person of the institution, who appointed the arbitrator, should check the qualification of that prominent person according to the agreement of the parties. The appointment of an arbitrator can be challenged within a period of 30 days. The following essential features should be satisfied to act as an arbitrator:
- Confidence of parties
- Disinterested party to litigation and no conflict of interest
- Technical and legal qualification
On what grounds appointment of an arbitrator is challenged
In Section 12(1) of the Arbitration and Conciliation Act, 1996, it is given that on what grounds the appointed arbitrator can be challenged.
There are some conditions under the following, from which if the arbitrator satisfied then he can be challenged:
- Arbitrator’s relationship with any of the party
- Arbitrator’s relationship to the dispute
- Arbitrator’s interest in the dispute
- Relationship of arbitrator between each other
- Any other situation can be happen
Seat and Venue of Arbitration
According to Section 20 of the Arbitration and Conciliation Act, 1996, Venue of Arbitration are selected by the parties if it had already in the agreement and no one can change the Seat because there is a difference between Seat and Venue. Seat is the business place where the dispute is going on and the Venue is the place where the arbitration will happen. But the venue also can not be changed in one situation, which is institutional arbitration. And If the case proceeds in an institutional arbitration then the parties have to present in the institution at the proceeding time.
And the other type of arbitration is Ad hoc arbitration, in this arbitration, the parties will decide the place of Venue where the arbitration will happen.
On what grounds Seat and Venue is challenged
- If either of the parties are absent at the time of the proceeding.
- If the arbitrator accepts the choice of place of one of the parties.
Choosing of Language
According to Section 22 of the Arbitration and Conciliation, freedom is given to the parties to choose the languages which will be used in proceedings. But in many situations like abroad, one party is from Russia and one party is from Japan and the arbitrator is from England then there will be a big problem to understand the languages. Here, a common language will be decided by the arbitrator and the parties.
On what grounds language is challenged
- If anyone doesn’t obey the rules and change the language which is not understandable to the other party or the arbitrator.
Arbitrability of Dispute
Generally, all disputes can be resolved by the arbitration which is decided by a Civil Court. Like involving private rights, disputes about property or money, dispute about the amount of damages payable for breach of contract etc., under the Arbitration and Conciliation Act, 1996.
But, there are some cases, where a person can not come to arbitration for help, which are in the following:
- Matrimonial problems like divorce and others
- Matter which is relating to guardianship of a minor
- Testamentary matters
- Insolvency matters
- Criminal proceedings
- Dispute related to charities
These are some main matters. Basically, many other matters are also there which are not coming in the jurisdiction of the Arbitration.
On what grounds Arbitrability of the dispute is challenged
- Whether the disputes are capable of resolution or not and can it be settled by the arbitration?
- Whether the disputes are coming under arbitration or not?
The arbitral award means the decision given by the arbitrator in a case proceeding like judgement in a Court. Such an arbitral decision is also binding on the parties. And this term is defined under Section 34 of the Arbitration and Conciliation Act, 1966.
On what grounds Arbitral Award is challenged
- If the agreement is void.
- The parties are under some incapacity.
- The formation of the proceeding is not in accordance with the arbitration agreement.
- The decision given by the arbitrator is suspended by a competent authority of the country.
- The dispute can not be solved by the arbitration law.
- The application of the decision would be contrary according to the Indian public policy.
- The decision was made by fraud or corruption or in violation of Section 75.
- If it is in contravention with the basic notions of morality.
If the award (decision) of the arbitration was not satisfied by any parties then, what is the role of the Court?
After the award is passed by the arbitrator and if either of the party considers that the decision is not satisfied then he/she has to deliver a notice to the other party. According to Section 34 of the Arbitration and Conciliation Act, 1996, if the parties are not satisfied with the decision of the arbitration then they can file an application according to Section 48 which mentions some conditions for refusal of the decision and such conditions are mentioned in the topic of “Arbitral award” above.
According to Section 34(2A) of the Arbitration and Conciliation Act, 1996 deals with the domestic awards, which the Court can also suspend the arbitration decision if the Court finds any wrongs.
Public policy is defined as a set of principles, which communities need to be organized to achieve the good of the whole community of the public.
Any decision, which is made by the arbitration and which is a conflict with the public policy of India, it can also suspend but this policy is not given in the Arbitration and Conciliation Act, 1996.
According to Section 34(3) of the Arbitration and Conciliation Act, 1996 there is a specific time period given (3 months) and within this time period, the application for suspension of the award has to be made. Another 30 days is given to the applicant for filing the application, and if the applicant is able to show that he was restricted by many causes from making the application within 3 months then the award will be implemented.
Re-decision by the Court against the arbitral award
It is compulsory that there must be another file for a stay application, in which a conditional order may be passed by the Court.
The applicant has to prove the sufficient cause of substantial loss and explain the delay of the application.
Accordingly, the Court will decide the case and at that time Court has sufficient powers to allow only legitimate challenges against the award, which is given by the arbitration.
Recent Case laws
Centrotrade Minerals and Metal Inc. Vs. Hindustan Copper Ltd.
In this case, a three-judge bench of the Supreme Court decided that it should be arbitration of two rounds of the arbitration proceeding and it was permitted under Arbitration and Conciliation Act, 1996. The fact of the case is that an award was accomplished in an arbitration proceeding in India. The award, which was delivered, was already given in the case of London. The London arbitration award was tried to be implemented in India.
The Court held that the parties had the right to select that, will it be two-tier arbitration or not. The Court held that there is no prohibition against the arbitration and Conciliation Act, 1996 and a procedure can not violate the public policy of India. In the end, it came to know that the two-round arbitration procedure is acceptable in the laws of India.
Ms Sheetal Kurundwade Vs. M/s Metal Power Analytical(l) Pvt. Ltd and Ors.
A single judge of the Bombay High Court was called to decide the situation in which arbitrators also disqualified from the proceeding. Specifically, the Court was asked to decide whether the arbitrator should be removed from his position or disqualified from the proceeding only. If the arbitrator worked with any of the parties had any relationship with that party.
In this case, the petition was filed about the removal of the arbitrators under the amended Arbitration and Conciliation Act, 2015. Here, the petitioner alleged that the arbitrator, who was appointed by the respondent should be detached from the proceedings. Because the arbitrator already had a position of lawyer respect to the respondent.
The Court abandoned the petition, by saying that an arbitrator could be a lawyer of any parties and he couldn’t disqualify in regards to being a counsel to the parties. In the Arbitration and Conciliation Act, 1966, it was given that an arbitrator can be disqualified from the proceeding if he has a direct relationship with a party of the arbitration. An arbitrator can be disqualified on the grounds that, if he is representing a lawyer appearing for one of the parties to the arbitration in their matter.
Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India
In this case, the problem came out from the contract which was made between them for the construction of a four-lane bypass on a National Highway in the State of Madhya Pradesh. The plaintiff was to give the compensation under the contract for extension in prices of ingredients which to be used in the construction of the road. The agreed method of compensation for extension price was (the WPI) following 1993-1994 as the base year. Even so, NHAI thereafter issued a circular revising of the WPI that to follow 2004-2005 as the base year for calculating the extension price, which was disputed by the plaintiff.
The Court held that the analysis assumed by the majority of the tribunal in their award of using the circular in place of the contract amounted to the Tribunal rewriting the contract. The Court found that this case would be contradictory to the most basic notions of justice.
Accordingly, the Court overturned the decision. The Court noted that the matter would have to have proceeded to the fresh tribunal consideration.
Judicial intervention is mandatory if the arbitration is delaying in giving the decision or giving an improper decision, which is not satisfied with the applicant. Arbitration is having a great role because the judiciary has very less time and many cases are pending in the Court. In this case, if the judiciary takes the running cases which can be solved by compromise then in future the decision will be full of pendency cases and the public will only wait for the decision and can not do anything.
Therefore, arbitration is only the future of the society, where the cases can be solved within one year and the decision is also satisfied by the public.
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