ARBITRATION – A COMPLETE OVERVIEW
What is Arbitration?
Arbitration is an alternative dispute resolution mechanism subject to an agreement between the parties and is effective in both domestic and International contractual disputes. With the advent of time ‘Arbitration’ has become immensely prevalent, especially, in contractual matters between companies, organizations, and individuals. It is a straightforward approach that saves the parties the time and expense incurred in tedious and lengthy formal court proceedings.
When does Arbitration come to action?
When executing an Agreement/ Covenant, the parties may incorporate an Arbitration Clause suggesting the authority and place of Arbitration, to address disputes arising out of the instant agreement/ covenant. Any commercial matter including action in tort, if it arises out of, or relates to a contract can be referred to Arbitration.
Arbitration excepts cognizance of acts against public policy.
How many kinds of Arbitration Agreements are there?
There are two kinds of Arbitration Agreements:
- Agreements which stipulate that if a dispute arises it will be resolved by arbitration.
- Agreements which are executed after a dispute has arisen, asserting that the difference/ dispute shall be determined by arbitration.
HISTORY OF ARBITRATION IN INDIA
Arbitration has come a long way to attain its current form and status. Let us briefly focus on the various important enactments in the field of arbitration:
Arbitration Act, 1940
Legislated in British India, the Arbitration Act, 1940 consolidated and modified the law relating to arbitration given in the Indian Arbitration Act, 1899, and the second schedule of the Code of Civil Procedure 1908. The Act purported quick disposal of disputes through a nominated forum, however, the act fell short of attaining its objectives since every award was being challenged till the ‘Apex Court’. As is the case with most intellectual conceptualizations, the Arbitration Act failed to win its recognition of a mainstream dispute resolution medium for a long long time (even by the higher judiciary). Therefore, the necessity arose for a systematic, lawful and speedier redressal arrangement which thoroughly gets recognized by the courts. Upon much scrutiny of various discrepancies in the Act of 1940, the Arbitration and Conciliation Act, 1996 was formulated and enacted. Since the 1940 Act was repealed.
The new act maintained that notwithstanding the abolishment, the enactments of the previous act shall apply in relation to arbitral proceedings instituted before the new enactment came into force, unless, otherwise decided by the parties.
The Arbitration and Conciliation Act, 1996
The Arbitration and Conciliation Act, 1996 has united and altered the rule of law relating to domestic/ inland Arbitration, international/ global commercial Arbitration and application of foreign arbitral awards/ verdicts, and, also defines the law relating to conciliation. Under the present Act, if the parties fail to reach an arrangement within a period of 30 days from the receipt of a request for the appointment of an Arbitrator, the Chief Justice can be approached directly under clause (5) or (6) of Section 11 for the purpose of appointment of Arbitrator. Most significant, every law is to be respected, so, if both the parties agree upon the appointment procedure then that procedure can be adopted rather than to adopt the court’s procedures.
- The challenge to the appointment of Arbitrator:
An arbitrator may be challenged only if –
(a) Situations exist that give rise to uncertainties as to the independence or impartiality of the arbitrator, or
Whereas, under the 1996 Act, an aggrieved party can send a written statement mentioning the reasons to challenge the ‘Arbitral Tribunal’ under Sec.13 of the Act where the parties are not ad-idem to challenge an Arbitrator. In Case the aggrieved party remains unsuccessful in the challenge or the appointed Arbitrator does not withdraw from the Office, the nominated Arbitrator or Arbitral Tribunal shall continue the proceedings and will pass the award/ verdict. Again as per Sec.13 (5), the aggrieved party who had challenged the Arbitrator may approach the competent Court of Law for setting aside such an arbitral award in accordance with Sec.34 of the Act.
- Power/ Jurisdiction of Arbitral tribunal:
Unconstrained powers have not been given to the Arbitral Tribunal by the Act of 1996. The mistaken verdict deciding of the issue of jurisdiction is subject to judicial analysis like, If the Arbitrator has wrongly decided the issue of jurisdiction and has made the award by virtue of Sec.34 (b) of the 1996 Act, the award/ decision can be challenged before the any Court of the applicable jurisdiction.
- Time limit for publishing award:
The Act of 1996, does not contain any provision prescribing a time limit for the Arbitral Tribunal to complete the proceedings and to circulate the award. However, since the intrusion of the courts has been reduced in the present Act the time taken for passing the award is minimized.
- Award treated as decree:
If the award/verdict passed by the Arbitral Tribunal is not challenged/ confronted within a period of 3 months either in the Principal Court i.e. District Court or original jurisdiction of High Court or with the permission of such court within 4 months from the date of the award, it becomes a decree.
- Grant of interest on the award:
Unless the award otherwise directs, Sec. 31 (7) (b) of the New Act provides for automatic application of interest @ 18% from the date of award till the date of payment.
As per the new Act, the Umpire will be the Chairman of the tribunal who shall also sit with the Arbitrators and take part in the proceedings unlike under the old Act.
- Challenge to Arbitral Award:
Under the Act of 1996, the award passed by the Tribunal can be challenged under Sub-section (2) & (3) of Section 34 of the Act. Also setting aside or refusing to set aside the award is again re-appealable under section 37 of the Act.
- Termination of proceedings:
As per Sec.32 of the 1996 Act, the following are the certain situations, when the Arbitral proceedings can be terminated by passing of the final award or by the order of the Arbitral Tribunal.
- In case the claimant withdraws the claim; or.
- In case the parties decide on the termination of the proceedings, or
- In case the Arbitral Tribunal finds that the continuation of the proceedings as for any other reason became needless or impossible.
An Arbitrator as a Conciliator has been recognized under Sec. 30 (1) and there is a separate chapter for conciliation in the new Act.
The Arbitration & Conciliation (Amendment) Act, 2015
In the year, 2015, the Act of 1996 was amended/ modified as a move to ease the doing of business in India. On Oct 23, 2015, The Arbitration & Conciliation (Amendment) Act, 2015 came into force and On Jan 1, 2016, the same was notified in the Official Gazette of India. The Arbitration and Conciliation Amendment Act, 2015 will not have retrospective effect, until otherwise decided upon by the parties to the Arbitration.
- Key amendments and Appointment of Arbitrator as per Amendment Act, 2015:
Section 11 of the Act contains the procedure in relation to the appointment of Arbitrator(s). As per the Amendment Act, 2015 a person of any nationality can be appointed as an Arbitrator. Also, an Arbitrator can be appointed mutually. The parties are free to settle the number of Arbitrators, but the number of Arbitrators should not be an even number. Otherwise, in case of failure of the parties, the arbitral tribunal shall be a sole arbitrator.
- Procedure for appointment of Arbitrator:
In case of International Commercial Arbitration, if the parties fail to employ an Arbitrator then, upon the request of a party the appointment shall be made by the Hon’ble Supreme Court of India but in case of domestic arbitration, the Hon’ble High Court has the jurisdiction to appoint the Arbitrator.
- Challenge of Appointment of Arbitrator
In CIVIL APPEAL NO. 11126 OF 2017 (ARISING OUT OF S.L.P. (C) NO. 20679 OF 2017) in the case titled as HRD CORPORATION (MARCUS OIL AND CHEMICAL DIVISION) VERSUS GAIL (INDIA) LIMITED (FORMERLY GAS AUTHORITY OF INDIA LTD.) and CIVIL APPEAL NO. 11127 OF 2017 (ARISING OUT OF S.L.P. (C) NO. 20675 OF 2017), the Hon’ble Apex Court of India held that Under Section 12, it is clear that when a person is approached in connection with his possible appointment as an arbitrator, he has to disclose in writing, regarding the existence of any direct or indirect present or past relationship or interest in any of the parties or in relation to the subject matter in dispute, which is likely to give justifiable doubts as to his independence or impartiality. He is also to disclose whether he can devote sufficient time to the arbitration, in particular, to be able to complete the entire arbitration within a period of 12 months. Such disclosure is to be made in a form specified in the Sixth Schedule, grounds stated in the Fifth Schedule being a guide in determining whether such circumstances exist.
Since ineligibility goes to the root of the appointment. Section 12(5) read with the Seventh Schedule makes it clear that if the arbitrator falls in any one of the categories specified in the Seventh Schedule, he becomes “ineligible” to act as arbitrator. Once he becomes ineligible, it is clear that, under Section 14(1)(a), he then becomes de jure unable to perform his functions inasmuch as, in law, he is regarded as “ineligible”. In order to determine whether an arbitrator is de jure unable to execute his functions, it is not necessary to go to the Arbitral Tribunal under Section 13. Since such a person would lack inherent jurisdiction to proceed. On this ground, an application may be filed under Section 14(2) to the Court to decide on the termination of his/her mandate. As opposed to this, in a challenge where grounds stated in the Fifth Schedule are disclosed, which give rise to justifiable doubts as to the arbitrator’s independence or impartiality, such doubts as to independence or impartiality have to be determined as a matter of fact. If a challenge is not successful, and the Arbitral Tribunal agrees that there are no reasonable doubts as to the independence or impartiality of the arbitrator/arbitrators, the Tribunal must then continue the arbitral proceedings under Section 13(4) and make an award/ verdict. It is only after such award is made, that the party challenging the arbitrator’s appointment on grounds contained in the Fifth Schedule may make an application for setting aside the arbitral award in accordance with Section 34 on the aforesaid grounds.
- Disclosure Regarding impartiality by the Arbitrator
It may be noted that under Section 12(1) of the Act, a responsibility/ compulsion has been thrown upon the prospective Arbitrator to make an express disclosure on
- Situations which are likely to give rise to reasonable suspicions regarding his independence or impartiality; or
- grounds which may affect his capacity to complete the arbitration within 12 (twelve) months.
The purpose of this provision is to secure the appointment of a fair and impartial arbitrator.
- Expeditious Disposal of Arbitration matter:
Speedy/ quick disposal of applications for appointment of an Arbitrator(s) is emphasized by the Act and an attempt/ effort shall be made to dispose of the matter within a period of 60 days from the date when the notice is served on the other party.
Stages of Arbitration or Arbitration process:
- Arbitration Clause – A clause in the Agreement or an Agreement explicitly stating that if the difference/ dispute arises between the parties they will settle it through the process of Arbitration.
- Arbitration notice – In case a dispute has arisen and the party has chosen to follow the procedure of arbitration then the aggrieved party will send an arbitration notice for initiation of arbitration process 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– Thereafter a Statement of claim is drafted, which comprises the difference/ dispute between the parties as well as the events which lead to the difference/ dispute. The other party files a statement of counterclaim besides the reply to the statement of claim.
- Hearing of Parties – Arbitral tribunal will hear both the parties and their evidence.
- Award – After hearing the parties, Arbitral tribunal will pass the decision/ Verdict. The decision of the Tribunal is known as ‘Award’ and is binding on the parties. However, an Arbitral Award can be challenged before the Hon’ble High
- Execution of Award – Once the award has been passed by the Tribunal it has to be executed. The party in whose favor the award has been passed has to move for execution.
If the matter is not resolved through the Arbitral Tribunal between the parties as per the Agreement/ Covenant then they can approach the court of law. The Arbitrator has the right to indicate, if the hearings are needed or if the documented evidence and written statements will suffice. They also decide the manner and method of producing and handling evidence during the proceedings. The Indian Evidence Act and the CPC, 1908 don’t apply to the Arbitration proceedings except for the general principles of the Evidence. The proceedings are conducted in harmony with the Agreement to Arbitration between the disputing parties, the applicable provisions of the statute, the discretion of the Arbitrators and principles of Natural Justice.
The provisions of the Act, as well as terms of the agreement between the parties, are to be taken care of by the arbitrators while deciding Arbitration cases apart from this they are free to decide the appropriate manner and method in which the proceedings need to conduct.
Section 18 – It is mandated that the Parties to the Arbitration shall be treated equally by the Arbitrators and equal opportunity will be given to each party to present his case.
Under Section 19 – The Arbitrator has the power to govern the admissibility, relevance, materiality, and significance of the evidence.
Unless there is an agreement to the contrary an oral hearing will be held by the arbitrator on the request(s) of the parties. If a party does not appear for the oral hearing, without a valid reason or does not communicate his statement or produce evidence, the Tribunal can decide the case ex-parte. The Tribunal will decide the case on the basis of the evidence before it and shall not treat the failure of the respondent as his admission and the Tribunal has the power to terminate the proceedings in case the Claimant fails to present his claim statement.
Evidence Under the Act under the Indian Oath’s Act, 1969
The Indian Oath’s Act, 1969 extends to Arbitration. As per Section 8 of the Indian Oath’s Act, 1969 it is mandated for every person to state the truth while giving evidence before a person authorized to administer an oath.
Assistance in Collecting Evidence:
Section 27, empowers the Tribunal to apply to the Court for assistance in collecting evidence. If any witness fails to attend in accordance with any order of the Court or making any other default or declining to give evidence or guilty of any contempt of the Arbitral Tribunal, shall be subject to like penalties and punishment as he may incur for like offenses in suits tried before the competent court of law.
The court is empowered to appoint a commissioner for taking evidence or it can order that the evidence is delivered directly to the arbitral tribunal.
- Kinds of Evidence
- Extrinsic Evidence is admitted by the Arbitral Tribunal to determine the issue of an excess of jurisdiction. The court can resolve the uncertainty by admitting the extrinsic evidence.
- Fresh Evidence is when the three conditions are met.
- It must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial.
- The evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive;
- The evidence must be apparently credible, though it need not be incontrovertible.”
- A person who is especially skilled and trained in the field for which his advice was sought provides Expert Evidence.
Admissibility of Evidence
- The arbitrator is not bound by the mechanical rules of procedure, which the courts have to observe, nor the Evidence Act, Limitation Act, CPC. Unless the same is provided in the agreement. Admissibility, materiality, and relevancy are within the jurisdiction of the Tribunal.
- The Arbitral Tribunal has to follow the statutory procedure laid down in Section 19 (4) of the Act when the parties have not settled any specific procedure.
- An Arbitrator must nevertheless observe the fundamental principles of natural justice.
- An arbitral tribunal must not disregard the rules of evidence, but he is not bound by the mechanical and stringent rules of evidence.
- A breach of the principles of natural justice would make the award liable to be declared invalid and defective.
Appointment of Experts.
Section 26 states for the nomination of experts by the Tribunal for any definite issue and any relevant information shall be provided to the expert. After the delivery of the report, a party can participate in an oral hearing where he would be having the opportunity to put questions to an expert.
Interim reliefs are provided under Sections 9 and 17 of the Arbitration and Conciliation Act, 1996 (the “Arbitration Act”). Four major changes with respect to the interim reliefs made to the Arbitration (Amendment) Act. Both are contained in Part – I of the Arbitration Act and were applicable to domestic Arbitrations. While Section 9 comprises the power of a court to grant interim measures, Section 17 is a similar power conferred to an Arbitral Tribunal. Interim measures are generally granted to preserve the status of the property in dispute, or to avoid prejudice to any party before the initiation or during the pendency of the Arbitration. Several defects were noticed in the practical application of these remedies that resulted in several amendments being made to them.
The changes to these provisions include,
(1) Interim measures have been extended to international commercial Arbitration as per section 9 of the Act.;
(2) After obtaining an interim relief as per Section 9 of the Act, there are fixed timelines of initiating an arbitration.
(3) Bar on parties to approach a Court for interim reliefs during the pendency of the Arbitration;
(4) interim reliefs are now enforceable as decrees of Courts.
Fixed timelines for initiating Arbitration after interim measures under Section 9
In Section 9 of the Act sub-section (2) and (3) have been inserted through an amendment. As per Section 9(2), the Arbitral proceedings shall be commenced within a period of 90 days of the passing of interim order U/s 9(1) .
Section 9 cannot be availed during the conduct of the Arbitration
The insertion of Section 9(3) reduces the amount of involvement by the judiciary in terms of interim measures. After the constitution of the Arbitral Tribunal, if such circumstances exist, which can render relief provided under section ineffective, only under such circumstances an application Under Section 9(1) will be maintainable.
Interim Measures under Section 17 now enforceable as decrees
By replacing Section 17 of the Act with a new section the Arbitral Tribunal has been given more powers for interim measures. As per the new section, any order passed by the Arbitral Tribunal will be considered as an order of the court, which can be enforceable under the Code of Civil Procedure, 1908.
In Sundaram Finance Ltd v. NEPC India Ltd. [(1999) 2 SCC 479], the Supreme Court held that though section 17 gives the arbitral tribunal the power to pass orders, the same cannot be enforced as orders of a court. In M.D. Army Welfare Housing Organisation v. Sumangal Services Pvt. Ltd. [(2004) 9 SCC 619], the Court had held that under section 17 of the Act no power is conferred on the Arbitral Tribunal to enforce its order nor does it provide for its judicial enforcement.
An attempt has been made by the Delhi High Court tried to find a way out to this problem in the case of Sri Krishan v. Anand [2009) 3 Arb LR 447 (Del). The Court held that any person committing default in complying with the order of the Tribunal will be liable for contempt to the arbitral tribunal during the course of the proceedings” under section 27 (5) of Act. The aggrieved party can apply to the arbitral tribunal for representing to the Court to mete out appropriate punishment. Thereafter, the Court will be empowered to deal with a defaulting party like the defaulting party has committed a contempt of an order of the Court.
Extensions if Interim Measures under Section 9 to International Commercial Arbitrations:
A proviso has been added to Section 2 of the Principal Act, which now makes Section 9 of the Arbitration applicable to international commercial Arbitration, even if the place of arbitration is not in India. These are Bhatia International vs. Interbulk Trading SA [(2002) 4 SCC 105] and Bharat Aluminum and Co. vs. Kaiser Aluminium and Co. (BALCO) [(2012) 9 SCC 552].
This situation was followed in several cases until the BALCO judgment. In which it was decided by the Hon’ble Supreme Court that sections 9 and 34 will be applicable only when the seat of Arbitration is in India.
Major lacunae in Balco’s judgment i.e. the Judgment of the Hon’ble Supreme Court of India in Bharat Aluminium Co. v/s Kaiser Aluminium Technical Services INC (2012) 9 SCC 552 has been removed by the Amendment Act of 2015 in the Arbitration and Conciliation Act, 1996.
The ‘BALCO’ judgment was although for the favorable purpose of reducing judicial interference but it also led to certain unwanted results. A bar persisted from allowing interim relief and support in collecting evidence in the case of international commercial Arbitrations. The anomaly has now been resolved with the applicability of section 9 and as well as section 27 to International commercial Arbitrations as well. After the Amendment of the definition of court, the parties to an international commercial Arbitration will not be required to approach lower courts to get relief. By the enactment of the Arbitration and Conciliation Amendment Act, 2015, the government seeks to speed up the arbitral process and help the government to achieve its purpose of making India a seat for international commercial arbitration.
Challenges to the Award:
The 1940 (repealed) Act comprised of three remedies against an award i.e. modification, remission and setting aside, but under the new Act of 1996 these remedies contains into two groups. In case the remedy if for rectification of errors, the same has been handed over to the parties as well as the Tribunal. The remedy for setting aside has been molded with returning back the award to the Tribunal for removal of defects.
Grounds for Challenging the Award
An Arbitral Award can be challenged and may be set aside by the Court on certain grounds specified under Section 34 of the Arbitration and Conciliation Act. As per section 34 of the Act, an Arbitral award can be challenged on the grounds mentioned below:
- In case of some incapacity of the parties to the agreement;
- In case the agreement/ Covenant is void;
- the award is passed outside the scope of the Arbitration Agreement;
- The composition of the Arbitral authority or the procedure adopted for Arbitration was not in harmony with the Arbitration Agreement;
- The competent authority has either suspended or set aside the award.;
- Under the Indian law the subject matter of dispute is non-arbitrable.; or
- The implementation of the Arbitral award would be in contravention to Indian public policy.
- The Amendment Act has added an explanation to Section 34 of the Act.
- the passing of the award/ verdict was the result of the commission of fraud or corruption or the same was in violation of Section 75 or 81; or
- In case the award is in contravention with the fundamental/ essential policy of Indian law, or
- it is in contravention with morality or justice.
Two more grounds have been mentioned U/s 34(2)(b to resolve whether to set aside the arbitral award:
- In case the dispute/ difference is not arbitral.
- The award is inconsistent with the public policy of India.
Discretion has been provided to arbitrators by the National Arbitration laws. The Arbitral Tribunal has the choice/ discretion either to admit any relevant evidence or to reject evidence that is immaterial or repetitious or inappropriate to prove the facts it purports to prove. The parties are free to render any evidence to prove the facts essential to establish their cases in the case of International Arbitration.
Key Changes made in the Amended Act, 2015
Some major changes have been introduced in the principal Act by the Amendment Act. The following is a brief summary of the key amendments:
- Amendment to definition of the term ‘Court’ in Section 2(e): Definition of the term ‘Court’ is amended to provide that certain provisions of Part I of the Act such as interim relief, court assistance in taking evidence and appeal to interim relief order shall also apply to International Commercial Arbitration, even in case subject to the agreement to the contrary executed between the parties the place of arbitration is outside India. The High Court shall be the ‘court’ for reliefs under the Act in case of International Commercial Arbitration.
- Amendment to Section 7: A communication through electronic means shall also be treated as an arbitration agreement in writing.
- Amendment to Section 8: In case the Judicial authority finds that no valid arbitration agreement exists, said judicial authority shall not refer to the parties for Arbitration. In case the party applying for reference to arbitration does not possess either original or certified copy of arbitration agreement/ covenant or else the said copy of the agreement is retained by the other party then such party can file an application to the court for the production of original or certified copy of the agreement in the court.
- Amendment to Section 9: The arbitral proceedings shall be commenced within a period of ninety days from the date of court’s order for an interim measure, before the commencement of arbitral proceedings. In case of constitutional of the arbitral tribunal, no application for the interim measure will be entertained provided that it finds circumstances that may render the remedy provided under section 17 inefficacious.
- Amendment to Section 11: Appointment of the arbitrator shall now be made by the Supreme Court or the High Court, as the case may be, instead of the Chief Justice of India or the Chief Justice of the High Court. An application for appointment of arbitrator(s) shall be decided expeditiously and an effort shall be made to decide the matter within a period of 60 days from the date of service of notice on the other party. The High Court is empowered to frame rules for the purpose of determination of fees of the arbitral tribunal and the manner of such payment. The High Court shall take into account the rates of the fee specified in the 4th Schedule of the Act while framing rules.
- Amendment to Section 12: Ensuring neutrality of arbitrators, when a person is approached in connection with the possible appointment as an arbitrator, he is required to disclose in the writing the existence of any relationship or interest of any kind which is likely to give rise to justifiable doubts as to his neutrality. Also, it is mandatory for him to disclose circumstances which can affect his ability to devote sufficient time to the arbitration and complete the arbitration within the prescribed period. Relationships, as specified in the Seventh Schedule, makes the person ineligible to be appointed as an arbitrator;
- Amendment to Section 14: On termination of the mandate of an arbitrator, he is to be substituted by another arbitrator.
- Amendment to Section 17: All kinds of interim measures can be granted by the arbitral tribunal in which the court has the power to grant as per section 9 of the Act. Interim measures can be granted by the tribunal during the arbitral proceedings or after the verdict, but before the same is enforced under section 36 of the Act. Any order passed by the tribunal for grant of interim relief shall be enforceable as if it were an order of the Court.
- Amendment to Section 23: The Opposite party, may also submit a counterclaim or a set-off provided the same is within the scope of the agreement.
- Amendment to Section 24: The Arbitral Tribunal shall hold an oral hearing for the presentation of evidence or oral arguments on the day-to-day basis and shall not grant any adjournments without any sufficient cause.
- Amendment to Section 25: The right of the respondent to file the statement of defense has been forfeited, if the respondent fails to communicate such statement in accordance with the timeline agreed by the parties or Arbitral Tribunal (section 23(1) of the Act) without reasonable cause.
- Amendment to Section 28: The Arbitral tribunal while deciding and making an award, shall take into account the terms of the contract and trade usages applicable to the transaction.
- Insertion of a new provision- Section 29A: The speedy disposal of arbitration proceedings will be ensured by the Tribunal. Also, the award is required to be passed within a time period of 12 months commencing from the date when the arbitral tribunal enters upon the reference. However, such period may be extended by the parties but the extension shall not be beyond the period of 6 months.. If the award is made within a period of six months, the arbitral tribunal shall be entitled to receive additional fees as the parties agree. The mandate of the arbitrator will be terminated in case the award is not passed within the specified period or extended period.
- Insertion of a new provision- Section 29B: This Section provides for a fast track procedure for conducting arbitral proceedings, in cases where the parties mutually agree for such procedure. In such cases, the arbitral tribunal consisting of a sole arbitrator shall decide the dispute on the basis of written pleadings, documents, and written submission and shall not hold an oral The award is to be made within a period of six months from the date the arbitral tribunal enters upon the reference.
- Amendments to Section 31: A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two percent higher than the current rate of interest prevalent on the date of award, and shall be payable from the date of award to the date of payment.
Fee Structure of the Appointed Arbitrator under the Arbitration and Conciliation (Amendment) Act.
The fee of the Arbitrator has been provided in the Fourth Schedule of the Amended Act of 2015:
‘THE FOURTH SCHEDULE
[See section 11 (14)]
|Sum in dispute||Model fee|
|Up to Rs. 5,00,000||Rs. 45,000|
|Above Rs. 5,00,000 and up to Rs. 20,00,000||Rs. 45,000 plus 3.5 percent. of the claim amount over and above Rs.
|Above Rs. 20,00,000 and up to Rs. 1,00,00,000||Rs. 97,500 plus 3 percent. of the claim amount over and above Rs.20,00,000|
|Above Rs. 1,00,00,000 and up to Rs. 10,00,00,000||Rs. 3,37,500 plus 1 percent. of the claim amount over and above Rs.100,00,000/-|
|Above Rs. 10,00,00,000 and up to Rs. 20,00,00,000||Rs. 12,37,500 plus 0.75 per cent. of the claim over and above Rs.100,000,000|
|Above Rs. 20,00,00,000||Rs. 19,87,500 plus 0. 5 percent. of the claim amount over and above Rs. 20,00,00,000 with a ceiling of Rs. 30,00,000|
Fee of Sole Arbitrator: In the event, the arbitral tribunal is a sole Arbitrator, he shall be entitled to an additional amount of twenty-five percent. on the fee payable as per the table set out above.
THE FIFTH SCHEDULE
[See section 12 (1)(b)]
The following grounds give rise to justifiable doubts as to the independence or impartiality of arbitrators: Arbitrator’s relationship with the parties or counsel.
- The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.
- The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.
- The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties.
- The arbitrator is a lawyer in the same law firm which is representing one of the parties.
- The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.
- The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself. Insertion of new Fourth Schedule, Fifth Schedule, Sixth Schedule, and Seventh Schedule.
- The arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties.
- The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.
- The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company.
- A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties.
- The arbitrator is a legal representative of an entity that is a party in the arbitration.
- The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.
- The arbitrator has a significant financial interest in one of the parties or the outcome of the case.
- The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom. Relationship of the arbitrator to the dispute.
- The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties.
- The arbitrator has previous involvement in the case. Arbitrator’s direct or indirect interest in the dispute.
- The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held.
- A close family member of the arbitrator has a significant financial interest in the outcome of the dispute.
- The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute. Previous services for one of the parties or other involvement in the case.
- The arbitrator has within the past three years served as counsel for one of the parties or an affiliate of one of the parties or has previously advised or been consulted by the party or an affiliate of the party making the appointment in an unrelated matter, but the arbitrator and the party or the affiliate of the party have no ongoing relationship.
- The arbitrator has within the past three years served as counsel against one of the parties or an affiliate of one of the parties in an unrelated matter.
- The arbitrator has within the past three years been appointed as an arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.
- The arbitrator’s law firm has within the past three years acted for one of the parties or an affiliate of one of the parties in an unrelated matter without the involvement of the arbitrator.
- The arbitrator currently serves or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties. Relationship between an arbitrator and another arbitrator or counsel:
- The arbitrator and another arbitrator are lawyers in the same law firm.
- The arbitrator was within the past three years a partner of, or otherwise affiliated with, another arbitrator or any of the counsel in the same arbitration.
- A lawyer in the arbitrator’s law firm is an arbitrator in another dispute involving the same party or parties or an affiliate of one of the parties.
- A close family member of the arbitrator is a partner or employee of the law firm representing one of the parties but is not assisting with the dispute.
- The arbitrator has within the past three years received more than three appointments by the same counsel or the same law firm. Relationship between arbitrator and party and others involved in the arbitration.
- The arbitrator’s law firm is currently acting adversely to one of the parties or an affiliate of one of the parties.
- The arbitrator had been associated within the past three years with a party or an affiliate of one of the parties in a professional capacity, such as a former employee or partner. Other circumstances.
- The arbitrator holds shares, either directly or indirectly, which by reason of number or denomination constitute a material holding in one of the parties or an affiliate of one of the parties that are publicly listed.
- The arbitrator holds a position in an arbitration institution with appointing authority over the dispute.
- The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties, where the affiliate is not directly involved in the matters in dispute in the arbitration.
Explanation 1.—The term “close family member” refers to a spouse, sibling, child, parent or life partner.
Explanation 2.—The term “affiliate” encompasses all companies in one group of companies including the parent company.
Explanation 3.—For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialized pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above.
THE SEVENTH SCHEDULE [See section 12 (5)]
Arbitrator’s relationship with the parties or counsel
1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.
2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.
3. The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties.
4. The arbitrator is a lawyer in the same law firm which is representing one of the parties.
5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.
6. The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself.
7. The arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties.
8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.
9. The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company.
10. A close family member of the arbitrator has a sign.
The amendment of the 1996 Act (Arbitration and Conciliation Act, 1996) is undoubtedly a constructive step towards making arbitration speedy & effective remedy. The new amendments seek to control the practices, which leads to wastage of time and making the arbitration process excessively an expensive affair. The new law also ensures independent and impartial arbitrator.
The above article is written and compiled by Advocate Mr. Ashutosh Gupta who is a senior associate at B&B Associates LLP and an expert arbitration lawyer in Chandigarh. Mr. Gupta has vast experience in handling hundreds of arbitration matters. Mr. Gupta also invests himself as a professional in civil and criminal law proceedings.