rules of arbitration in India

In this blog post, Apoorav Arya describes the Rules of Arbitration, framed by Indian Council of Arbitration. 

Since arbitration is cost effective and a quick way of settling disputes and has become a preferred alternative to the courts, its understanding is necessary for all entrepreneurs, managers, students, academicians, in addition to judges and lawyers.

The way in which the proceeding under the arbitration rules are conducted and without an exception challenged in courts has made lawyers laugh and legal philosophers weep.

Arbitration is the process in which an agreement is sought between the parties, that, a party other than the court will resolve the dispute between them.

  • Arbitration is controlled by the Arbitration and Conciliation Act, 1996.
  • The proceedings for dispute resolution can either be controlled by the parties themselves or by an institution set up for the purpose of arbitration such as Indian Council of Arbitration.
  • The Arbitration proceeding is very flexible in nature and this is often called ‘Party Autonomy’.

Conduct of arbitration, details can be as per the decision of parties to arbitration.

The Arbitration and Conciliation Act 1996 do set rules and guidelines which are to be followed by the parties entering into arbitration but, these rules, as well as the guidelines, are very flexible in content. But with the flexibility, the act is rigid as well. There exist certain provisions which are referred as Non-derogate provisions. E.g. equal treatment of parties. This cannot be taken away by any means.

Although, the result of arbitration is to be binding on the parties but there is a certain class of provision which explains when and in what matters judicial intervention may be permissible in arbitration proceedings.

Additional Read: Applicability of law of limitation to Arbitration

Institutional Arbitration

There are certain institutions established with the purpose of administering arbitration proceedings. They have their own rules of procedure which, in an obvious sense, is guided by the provisions of Arbitration and Conciliation Act. It is common for the parties to arbitration to refer to such institutions in the term of their agreements. Some of the Indian institutions which provide their own set of rules and procedure for arbitration are –

  • Indian Council of Arbitration
  • NSE
  • BSE
  • Indian Merchant Chambers etc.

Further Read: Institutional Arbitration in India

Rules of Arbitration: Indian Council of Arbitration

How to Register for Arbitration through Indian Council of Arbitration

A written application to the registrar, asking for an arbitration, has to be initiated by the parties. Registrar, as deem fit, may reject the request on reasonable grounds. Such grounds will be subject to judicial scrutiny.

Along with an application request the following are required:

  • The names and full addresses of the parties to the dispute.
  • Statement of the claim and facts supporting the claim points at issue and relief or remedies sought with other details of the claimant’s case.
  • Original or duly certified copies of the arbitration agreement, any contract or agreement out of or in connection with which the dispute has arisen and such other documents and information relevant or relied upon.
  • INR 1000, registration fee.
  • Where the arbitration has been ordered by the court then, a certified copy of the order of such court.[1]

Extra Read: Evidence in Arbitral proceedings

When Do these Rules Apply? [2]

The rules of Indian Council of Arbitration will apply where the parties decide that –

  • Either a dispute has arisen, or
  • A dispute is likely to arise and such a dispute, either contractual or not, will be settled under the rules of Indian Council of Arbitration.

What are the Issues which Can be Taken Up for Arbitration and Who Can Be A Party to Arbitration?

  • Disputes relating to commercial matter including shipping, sale, purchase, banking, insurance, building construction, engineering, technical assistance, know-how, patents, trademarks, management consultancy, commercial agency or labor are taken up by the Indian Council of Arbitration.
  • Parties to arbitration can be a resident of India or foreigner. Even two or more foreign parties might enter into arbitration under the rules of Indian Council of Arbitration. What is required is their mutual consent.[3]
  • In the case where a party to a dispute referred for arbitration is a foreign national, it will be assumed that he has submitted to the jurisdiction of India and all the substantive and procedural law to be applied will be Indian.[4]

Is the Decision of Indian Council of Arbitration Binding?

Yes. Under Rule 8 of Indian Council of Arbitration Rules, the decision of the arbitrators over any dispute will be final and the parties to the arbitration are bound to follow it.

Who are Appointed as Arbitrators Under the Rule?

  • A register is maintained by the registrar of ICA which includes the name and other such important details of the arbitrators of Indian Council of Arbitration.
  • The panel of arbitrators includes both Indian and foreign arbitrators. Arbitrators from time to time are recommended by the members of the Council or any other person or organization.
  • Where a party to dispute ask for an arbitrator living in the foreign land, it will be the duty of the party to dispute to accommodate the arbitrator he demanded. Subject to certain exceptions, all the expenses will be incurred by the party demanding such foreigner arbitrator.
  • Age limit or retirement tenure of an arbitrator is 80. After the age of 80, any person automatically ceases to be an arbitrator as per the rules of Indian Council of Arbitration.[5]

What are the Steps towards Filing for an Arbitration?

  • Step 1
    Party to a dispute can directly approach the registrar through an application as mentioned in the first paragraph. After the application is duly accepted, a notice is sent to the other party or parties, as the case may be.
  • Step 2
    On receiving the receipt of the application, the registrar will send a notice to the other party to the dispute. The letter will include a copy of the claim statement and the attached documents and a time period of 30 days or as the time period set up by the registrar will be given to the other party to the dispute to show cause of their side of the case.

How Communication Is to be Made

All the communication will be made through the post. Letters will be sent to the address as mentioned in the agreement clause. All possible efforts will be given to reach out to the parties.

In the case where a party refuses to accept the letter and the letter comes back to council, in such cases, the proceeding will deem to start assuming that the other party or parties know well about the arbitration.

  • Step 3
    A counterclaim can be made by the respondent, provided the counterclaim arises from the same transaction as the original claim. Counterclaim have to be supported with all the relevant documents and to the counterclaim, the claimant may within twenty-one days of the notification of the counterclaim or within such extended time, submit a statement in reply to the counterclaim.
  • Step 4
    Three copies of all statements, replies and other documents and papers, as well as appended documents, must be supplied to the registrar.

Step 5: Number of Arbitrators to Settle the Dispute

  • Where the amount involved in the dispute is less than or equal to INR 1 crore, the arbitration will be arbitrated by a single arbitrator. Provided, where the parties specifically ask for arbitrators, it will be the duty of ICA to provide the parties in a dispute with such three arbitrators.
  • Where the amount involved in the dispute is more than INR 1 crore and less than or equal to INR 15 Crore, the ICA will be duty bound to provide the parties with three arbitrators. If the party insists the arbitration is to be instituted by a sole arbitrator in such case, ICA will be duty bound to comply with the demands of the parties to a dispute.
  • In the cases where parties cannot come to a unanimous selection of arbitrator If the parties fail to agree on the person to be appointed as sole arbitrator within the time granted by the Registrar, the Registrar in consultation with the Chairman of the Committee and in his absence in consultation with the member of the Governing Body designated by the Chairman, shall appoint the sole arbitrator from among the Panel of Arbitrators.
  • In the cases where one party to a dispute is a foreign national- In such cases, the registrar will appoint an arbitrator who does not belong to any country as the proposing parties do.
  • Where parties are not satisfied with the selection of arbitrator by the registrar-The Challenge of an arbitrator shall be made within 30 days after his appointment has been communicated to the challenging party or within 30 days of his becoming aware of the reasons for which the challenge is made. The judge will be members of ICA committee.

What is the Amount of Money to be Deposited before Initiation of Arbitration?

Registrar orders the party to pay a particular amount before the initiation of arbitration to incur the expenses in arbitration. This includes the procedural cost as well as expenditure to support the arbitrators. Equal share is drawn from both the claimant and the respondent.

What if any Party to a Dispute Defaults in Paying the Advance Amount Before Arbitration?

When one of the parties neglects or refuses to make the deposit, the Registrar or the arbitral tribunal as the case may be may require such deposit whether in relation to a claim or a counterclaim to be made by the other Party to the dispute (Claimant or Respondent as the case may be).

Lump Sum Cost of Arbitration as per Indian Council of Arbitration Rules

Amount in dispute (INR) Arbitrator charge per head (INR) Lump sum
Up to Rs. 5 lac Rs.8,000/- Rs.1,000/-
From Rs. 5 lac one to Rs. 25 lac Rs.8,000/- plus Rs.200/- per lac or part thereof subject to a ceiling of Rs.18,000/- Rs.2,000/-
From Rs. 25 lac one to Rs. 1 crore Rs.18,000/- plus Rs.200/- per lac or part thereof subject to a ceiling of Rs. 33,000. Rs.2,000/-
From Rs. 1 crore one to Rs. 5 crore Rs.33,000/- plus Rs.5,000/- per crore or part thereof subject to a ceiling of Rs.53,000 Rs.2,000/-
From Rs. 5 crore one to Rs. 10 crore Rs.53,000/- plus Rs.3,000/- per crore or part thereof subject to a ceiling of Rs.68,000 Rs.5,000/-
Over Rs. 10 crore Rs.68,000/- plus Rs.2,500/- per crore or part thereof Rs.5,000/-

 

In addition to all these, INR 500 is a concession charge of ICA for providing of basic infrastructures for facilitating the arbitration.

Where any Party to a Dispute Fails to Cooperate with Indian Council of Arbitration

  • The Case Where a Claimant Refuses to Cooperate

Where a claimant does not file all the requisite documents, papers, etc. or does not deposit the appropriate fees, the arbitration procedure will come to a halt.

  • The Case Where Respondent Refuses to Cooperate

In such a case, the arbitration proceedings will proceed as it is assuming the presence and awareness of the respondent.

Place of Arbitration.

The place or venue of arbitration shall be India. The Arbitration proceedings shall be held at such place or places in India as the arbitral tribunal may determine to have regard to the convenience of the arbitrators and the parties.

In a case in which one or both the parties are from overseas, the arbitration proceedings may also be held at any place outside India at the discretion of the arbitral tribunal.

Fast Track Arbitration

The party to a dispute can opt for fast track arbitration. The arbitration will be done within 3-6 months.

What to Do if One is Not Satisfied with Arbitration Process

In such a case, parties are free to approach the court but only in special circumstances. First, an application has to be forwarded to the registrar who in turn will forward it to arbitration tribunal and if the arbitration tribunal is satisfied, an appeal may lie in the court.

Rules of Arbitration are quite complicated but is worth a try for out of court settlement. What do you think? Drop a comment & Share the article.

 

References –

[1] Rule 15, Indian Council of Arbitration rules.

[2] Rule 1 ICA, rules

[3] Rule 4, ICA rules.

[4] Rule 6, ICA rules.

[5]http://www.intracen.org/Rules-of-Arbitration-of-the-Indian-Council-of-Arbitration/

Apoorav can be contacted at, [email protected]

 

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