Tag: #ArbitrationandConciliationAct

–Report by Umang Kanwat

Arbitration is the out-of-court resolution of a dispute by one or more (odd number) individuals chosen by both parties to serve as arbitrators. Any type of arbitration, regardless of its nature, has been legally recognised in India by placing it under the purview of the Arbitration and Conciliation Act. The arbitral award has the same legal force and effect as a judicial order or judgement. The present case of Union of India v Pushkar Paint Industries talks about the power or ability of the arbitrator.

Facts:

In the present case of Union of India v Pushkar Paint Industries, the Arbitral Tribunal’s mandate has been terminated under the current petition, which had been submitted under Section 14 of the Arbitration & Conciliation (Amended) Act. The Indian Army’s Ordnance Department, which is a division of the Ministry of Defence, was the petitioner in this case and the respondent in the arbitration procedures. Due to the respondent’s failure to produce the advance sample by the deadline specified in the contract, the petitioner suffered significant losses and was forced to revoke the previously approved Supply Order.

Petitioner’s Contentions:

The petitioner stated that the learned Arbitrator began pressuring the petitioner’s conducting officer to assist him in receiving the maximum amount as his fee, but the conducting officer retorted that it was beyond his purview. Furthermore, it ed claimed that the proceedings were not concluded by the learned Tribunal within the allotted year. The petitioner believed that the learned Arbitrator was biased towards the respondent/claimant and was operating in their favour.

He argued that the learned Sole Arbitrator failed to determine the case’s final fee because he continued to oppose the petitioner’s schedule of fee payment and insisted on paying under the Fourth Schedule of the Act. Allegedly the learned Arbitrator’s actions do not reflect well on the Office and instead, he was vehemently opposing the petitioner to further his interests. By bringing false accusations, he had attempted to harm the Conducting Officer’s career. He was not accurately capturing the events. In reality, he never documented the events as they happened but instead created fictitious orders later on according to his whims and fancies.

Therefore, a request was made that the learned Arbitral Tribunal’s mandate is terminated and replaced by the appointment of another Arbitrator.

Respondent’s Contentions

The petitioner’s claims that the arbitrator was demanding a high charge were unjustifiable in that he had been acting on his whims without ever getting the respondent’s permission to agree to any such fee structure. No agreement would be possible without the other party’s approval.
According to the Act, which does not make a distinction between Government and private parties and is equally applicable to both, the petitioner was not an exception.

It is submitted that the petition is without merit and is liable to be dismissed.

JUDGEMENT

The petitioner’s assertion was unfounded. It was plain that the petitioner was bringing frivolous objections, which are clearly against the statute’s requirements, to evade its obligation to pay the arbitrator’s fees. In the current instance, there is no evidence to suggest that the learned Arbitrator ever agreed to the petitioner’s proposed fee schedule, nor at any stage did he ever admit to it. According to the court, this claim made by the petitioner had no support. The petitioner in this matter, in the view of the court, was unable to show any of the grounds listed in Sections 14 or 15 of the Act. The current petition was determined to be without merit and dismissed with the remark that the learned Arbitrator may continue the arbitration and publish the Award following the Rules.

Conclusion

The dedication of the Indian government to turning India become a hub for arbitration and other ADR mechanisms is demonstrated by the several revisions made to the Arbitration and Conciliation Act to meet the demands of the constantly changing international business community. India can only strengthen its position as the global leader in rapid and effective dispute resolution by continuous adjustments based on lessons learned from the relevant commercial jurisdictions throughout the world and proper execution of those learnings concerning arbitration.

READ FULL JUDGEMENT: https://bit.ly/3I7Pp2p

CITATION: 2003/DHC/000894

-Report by Shreya Gupta

In the case of UNIVERSITY OF DELHI Vs. M/S KALRA ELECTRICALS, the two parties Delhi University and M/S Kalra Electricals were the former was the petitioner and the latter was the respondent. The dispute between the parties arose from a work contract and the dispute was referred to the arbitration for settlement where the arbitrator ordered the petitioner to pay rupees 20 lakhs for other 44 contracts which were not referred to it.

FACTS:

The case was filed under section 34 of the Arbitration and Conciliation act, of 1966. The dispute arose from the work contract dated 09.06.2005. There was no dispute regarding the other 44 contracts between the parties. The dispute was regarding the sum of Rs. 92,101.25. It was referred to arbitration in view of clause 25.

PETITIONER’S CONTENTIONS:

The petitioner’s advocate contends whether the arbitral tribunal can provide relief for the case that has not been referred to it. She contends that the awarded sum was time-barred. She further states about section 34 of the Arbitration and Conciliation Act, 1966 which states that “the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside”. She contended that the relief provided under the other 44 contacts to the respondent was not disputed and the respondent would have filed a claim under it if that was the case.

The court has separated the subject work contract from all other contracts and therefore it was beyond the arbitral tribunal’s jurisdiction. She further in support stated some of the previous cases- Ssangyong Engineering and Construction Company Limited vs. National Highways Authority of India (NHAI), MSK Projects India (JV) Limited vs. the State of Rajasthan and Another, State of Goa vs. Praveen Enterprises, Alupro Building Systems Pvt Ltd vs. Ozone Overseas Pvt Ltd, Indus Biotech Private Limited vs. Kotak India Venture (Offshore) Fund (Earlier Known as Kotak India Venture Limited) and Others5 and DLF Home Developers Limited vs. Rajapura Homes Private Limited and Another.

RESPONDENT’S CONTENTION:

The respondent’s advocate stated that the arbitrator was well within his jurisdiction because the case arose regarding the other 44 contracts from the subject contract and that the petitioner paid for it maliciously. He stated that the assistant engineer gave the letter to the arbitrator to give orders for the other 44 contracts as well.

JUDGEMENT:

The court stated that the payment of Rs. 93,033 is not due and is in order and so DU should deduct any amount in payment to KE. The court ordered DU to make the pending payments of 20lakh at 9% per annum interest to KE from the date of raising the bill to the date of actual payment. The court stated that the award of Rs. 20 lakhs regarding the other 44 contracts were out of the arbitral jurisdiction and is set aside. The court further stated that the arbitrator fell foul of Section 34 (2) (a) (ⅳ) which is impermissible in law as it caused patent illegality. The order of arbitration was set aside from the other contracts and was followed for the subject contract. The court stated in its order “I find that since there is no fraud committed by KE and since the contracts are not inter-related it was wrong and illegal on part of DU to withhold the amount of Rs 20 Lakh in 44 contracts for settling an amount of Rs.92,033/- or Rs. 93,688/-or even both related to just one or two contracts”.

Introduction

The utilization of third-party funding in international commercial arbitration is one of the most intensely discussed subjects in the field. Third-party funding is a technique wherein a third-party funder pays for one of the gatherings’ arbitration costs to some degree or in full. In case of a positive honor, the third-party funder is typically paid a piece of the honor sum that was recently settled upon. The funder’s cash is lost assuming the honor is negative. Referee irreconcilable situation inferable from nondisclosure of the third-party funder’s commitment in the process is one of the numerous troubles created by the presence of third-party funders in international commercial arbitration procedures.¹

International commercial arbitration is a technique for resolving disputes that emerge from international agreements. It is utilized as a substitute for litigation and is administered generally by the getting parties’ earlier arrangements, instead of by public regulation or procedural guidelines. Most agreements incorporate a debate resolution condition that expresses that any agreement-related issues will be settled by arbitration instead of litigation. At the hour of the agreement, the parties could characterize the discussion, procedural techniques, and controlling regulation.

International arbitration is a gathering who meets up to tackle an issue. Everything begins with a private arrangement between the two parties. It continues through private procedures in which the party’s desires play representative importance. In any case, it closes with an honor that has lawful weight and impact and that, under the right conditions, most nations’ courts will perceive and implement. To put it plainly, this previously private technique currently makes a public difference, because of the help of each state’s public power and as revered in that state’s public regulation. The connection between public regulation and international arrangements and shows is pivotal for international arbitration to work successfully.²

Types of Arbitration

Arbitration might be “institutional” or “ad hoc” in nature. The sort of arbitration will be determined by the contract’s conditions.

Institutional Arbitration
Institutional arbitration is one that is administered by a specialist arbitral organization and directed by its own arrangement of rules. There are various comparable associations, some of which are more deeply grounded than others. The ICC, ICSID, the LCIA, and the International Center for Dispute Resolution are among the most notable (ICDR). There are other provincial arbitral foundations (for instance, in Beijing and Cairo), as well also known offices of exchange, like those in Stockholm, Switzerland, and Vienna.

The principles of these arbitral associations depend on a premise that is extensively practically identical. Some rulebooks depend on common regulation discoveries, while others depend on customary regulation revelations. All arrangements of rules share one thing for all intents and purposes: they’re composed explicitly for arbitrations that will be checked by the important establishment, and they’re as often as possible fused into the fundamental agreement between the parties that incorporates an arbitration provision.

Ad-hoc Arbitration
Ad hoc arbitrations are run autonomously by the parties, who are answerable for settling on the scene, the number of authorities, the type of arbitration, and any remaining parts of the procedures. As an issue of decision, and all the more normally, the parties might concur that the arbitration will be led without the association of an arbitral organization, but instead as per a deep-rooted set of rules, for example, those laid out by UNCITRAL, which give a sane system inside which the council and the parties might add any comprehensive arrangements as they see fit, for example, rules requiring the accommodation of pre-preliminary briefs or the understanding of master reports.³

Laws used in International Arbitration

International treaties and national laws, both procedural and substantive, as well as the procedural norms of the relevant arbitral organization, are totally utilized in arbitration. The Geneva Protocol of 1923 and the Geneva Convention of 1927 managed the understanding and requirement of international arbitration arrangements, as well as the authorization of unfamiliar arbitral decisions. The Bustamante Code of 1928 and the European Convention of 1961 were then trailed by a few local arrangements until the main show in the field of international commercial arbitration, the New York Convention, was pronounced in 1958.

The Geneva Treaties were trailed by the New York Convention. The expression “Show on the Recognition and Enforcement of Foreign Arbitral Awards” is a misnomer. The acknowledgment and implementation of arbitration arrangements is, actually, the Convention’s beginning stage. It accommodates the overall implementation of grants that meet the specified circumstances, as well as the affirmation of the legitimateness and enforceability of arbitration arrangements.

A brief notice of BITs should be made with regards to international treaties and shows. States that worked with one another in the past regularly marked ‘treaties of kinship, business, and route.’ To energize exchange and speculation, the nations included would offer each other alluring exchanging conditions and consent to resolve any disputes through arbitration. Respective venture treaties, or BITs as they are all the more for the most part known, have to a great extent supplanted such treaties.

A proposition to change the New York Convention started the production of the model regulation. This brought about the UNCITRAL report expressing that a model or uniform legislation would be more viable in orchestrating the arbitration laws of various nations all over the planet. The last phrasing of the Model Law was acknowledged by UNCITRAL as a regulation to oversee international commercial arbitration during its meeting in Vienna in June 1985. In December 1985, the United Nations General Assembly passed a resolution underwriting the Model Law and prescribing it to the Member States. The Model Law has demonstrated to be a colossal achievement. The text clears up the arbitral cycle from starting for end in a direct and straightforward way. Many states have taken on it as their arbitration legislation, either completely or with minor adjustments.

International arbitration necessitates the consent of all parties. An agreement to arbitrate, which is normally concluded ‘in writing and signed by the parties, demonstrates such permission. Third parties to an arbitration agreement have been found to be bound by the agreement in a variety of circumstances, including:

1. By virtue of the ‘group of companies’ theory, which allows the benefits and obligations deriving from an arbitration agreement to be extended to other members of the same group of companies under certain circumstances.
2. General rules of private law, particularly those governing assignment, agency, and succession, are in effect.

The English Contracts (Rights of Third Parties) Act 1999 states that a third party may enforce a contractual provision if the contract specifically allows it or if the contract purports to benefit the third party. When a contract includes an arbitration clause, the third party is obligated by the clause and must follow the arbitration procedure.⁴

International Arbitration in India

In India, International Commercial Arbitration is defined by Section 2 (1) (f) of the Arbitration and Conciliation Act 1996 as “an arbitration dealing with disputes arising out of legal connections, whether contractual or not, treated as commercial law in effect in India and where at least one party is:

• A person who is a citizen of, or has a habitual residence in, a country other than India.
• A company that is incorporated in a country other than India.
• Any firm, organization, or group of individuals whose central management and control are exercised outside of India.
• A foreign country’s government

Both the courts and the government have taken a supportive of arbitration position. “The Government of India is effectively supporting International Arbitration as a fair and legal system of resolving International Business Disputes,” as indicated by the arrangement. A survey of ongoing Supreme Court of India cases uncovers that courts presently seldom intercede in the arbitration cycle, permitting councils to manage the issues brought up in the case. The “fundamental rule that should help court administering attempting to make is that Arbitration is basically a consensual ramification of a commitment by contracting parties to settle their disparities through a private council” and that “the obligation of the court is to bestow to that commercial understanding a feeling of business viability,” as indicated by the new translation.

The Hon’ble Supreme Court, in maintaining the courts’ negligible cooperation in arbitral procedures, likewise expressed that courts ought to remember that the pattern is to keep away from obstruction with the arbitration interaction since it is the favored gathering. That is additionally the approach that the 1996 Act uncovers. Courts should utilize uncommon mindfulness and even hesitance in impeding arbitration processes. While Indian courts might have the jurisdiction to end arbitration procedures, they should do so sparingly and just based on contemplations like those expressed in sections 8 and 45 of the 1996 Act, all things considered.

The Hon’ble Supreme Court, in maintaining the courts’ negligible cooperation in arbitral procedures, likewise expressed that courts ought to remember that the pattern is to keep away from obstruction with the arbitration interaction since it is the favored gathering. That is additionally the approach that the 1996 Act uncovers. Courts should utilize uncommon mindfulness and even hesitance in impeding arbitration processes. While Indian courts might have the jurisdiction to end arbitration procedures, they should do so sparingly and just based on contemplations like those expressed in sections 8 and 45 of the 1996 Act, all things considered.

The Hon’ble Supreme Court of India’s arbitration approach was additionally reflected in a new judgment, which held that “the Court shouldn’t settle on the benefits of whether the debate connects with excepted matters under the arrangement being referred to or not while managing an application under Section 11(6) of the Act.” In Indus Mobile Distribution Private Ltd versus Datawind Innovations Private Limited and Ors, the Hon’ble Supreme Court maintained the restrictiveness of arbitration, taking note of that “the second the seat is picked, it is comparable to an elite jurisdiction arrangement.”

International Commercial Arbitration is divided into two categories in India:

• India-based International Commercial Arbitration (Part 1 of the Act)
• International Commercial Arbitration has a seat in a country other than India (Part 2 of the Act)

In a progression of decisions, the Hon’ble Supreme Court of India explained and smoothed out the law of arbitration, holding that Indian courts have no association by any means in issues of unfamiliar situated arbitrations, and that main Part 2 will apply in such cases.

The Hon’ble Supreme Court of India’s choice in BALCO, which overruled the prior Bhatia International versus Bulk Trading judgment, has accordingly moved Indian arbitration regulation in a legitimate way.

The Bombay High Court and the Calcutta High Court have affirmed that Part 1 of the Act won’t make a difference in unfamiliar situated arbitrations, continuing in the strides of the Hon’ble Supreme Court of India. It is actually quite significant that the Hon’ble Supreme Court and the Hon’ble High Court have over and again underscored the worth of arbitration.⁵

The Arbitration and Conciliation (Amendment) Act 2015, which was enacted in 2015, considerably expanded the scope of arbitration in India, as follows:

a) The provisions apply to international commercial arbitrations as well, even if the arbitration takes place outside of India.
b) Unless there is a valid arbitration agreement, the courts must submit the parties to the arbitration.
c) If a court issues an interim order before the start of arbitral proceedings, the procedures must begin within 90 days of the order or such other time as the court specifies;
d) Courts will only accept an application if they believe they will be able to provide a remedy;
e) Include rewards that are in violation of India Law’s fundamental policy or ideas of morality and fairness;
f) The court’s role is limited to determining whether or not an arbitration agreement is valid.
g) The arbitral tribunal must issue its decision within 12 months, with a 6-month extension option. If awards are not rendered within 6 months, the arbitral tribunal will receive additional fees, and the arbitrator’s remuneration will be reduced by up to 5% for each month over the prescribed time.
h) Awards made in court must be resolved within one year; parties might choose to undergo arbitration proceedings in a more expedited way.

Third-Party Funding

Funding activity has expanded drastically lately, at first zeroing in on financial backer state arbitration yet progressively moving to commercial international arbitration. Not at all like in public litigation, which was not set in stone by court-named judges, the utilization of third-party funding in private arbitration with party-named authorities has raised various moral and procedural worries. Third-party funding (TPF) has turned into a disagreeable issue in international arbitration and has started different worries.

Third-party funding is an understanding where a third party gives monetary help to a party in return for a portion of the inevitable financial honor. By and large, the cash will pay the subsidized party’s lawful charges and arbitration consumptions. On the off chance that the supported party is requested to pay the adversary’s expenses, the funder may consent to do so and offer security for the rival’s expenses.

The assortment and complexity of funding items and constructions offered have developed as the business has developed. There is no such thing as a one-size-fits-all arrangement, and the funding depicted above is at its generally fundamental level. Third-party gathering pledges, otherwise called “litigation finance,” has created after some time. Litigation finance is being utilized for a bigger scope of purposes than just funding one-off claims, with the returns of the litigation or arbitration being utilized as insurance. Portfolio funding, in which lenders give a funding bundle that covers an arrangement of cases, is another new pattern. Albeit third-party funding enjoys a ton of benefits – growing admittance to equity being one of them – it likewise accompanies a ton of risks and snags, like irreconcilable circumstances, exposure, and (security for) costs. The new ascent of third-party funding in international arbitration, as well as persistent disputes regarding the matter, have brought about massive changes in its guideline, both on a public and international level.

The utilization of third-party funding in international commercial arbitration is one of the most fervently discussed subjects in the field. Assuming you’re needing to support an oddball case, use the accompanying agenda as a beginning stage: “Funders are reluctant to support claims that do exclude financial harms.” Because funders are paid in light of how much cash is recuperated, claims having a damaging result are specifically noteworthy to them. Subsequently, support is generally restricted to petitioners or respondents who have a counterclaim.

Funders will need to see that you have a decent possibility of succeeding. They will lead their own free examination concerning the case and will possibly finance it assuming that they are certain about it and the manner in which it is being introduced. Funders will need to know whether the objective (i.e., the respondent) will actually want to cover the case, charges, and interest. What is its installment record corresponding to arbitration grants, especially assuming it is a state? The funder will likewise need to know where the resources are found; the gamble of requirement is a significant concern. A few benefactors might be put off by the way that they are situated in locales where authorization is troublesome. Different variables, for example, whether the objective will battle as far as possible, may likewise affect the funder.

The arbitration’s seat is critical since it decides if funding is allowable under nearby regulations. The area of requirement will be pivotal, as supporting might be used to disclose strategy contentions to ruin authorization.” Funders will need to see that you have a decent possibility of succeeding. They will lead their own free examination concerning the case and will possibly subsidize it on the off chance that they are sure about it and the manner in which it is being introduced. Funders will need to know whether the objective (i.e., the respondent) will actually want to cover the case, charges, and interest. What is its installment record corresponding to arbitration grants, especially in the event that it is a state? The funder will likewise need to know where the resources are found; the gamble of authorization is a significant concern. A few benefactors might be put off by the way that they are situated inwards where implementation is troublesome. Different elements, for example, whether the objective will battle as far as possible, may likewise affect the funder.

In international arbitration, there are primarily two reasons why parties seek third-party funding. They are as follows:

1. Third-party funding allows a claimant to pursue a claim that they would not have been able to pursue otherwise, facilitating access to justice.
2. Another key advantage of third-party funding in international arbitration is that it allows the claimant to share the financial risk and operational cost of pursuing his claim with the commercial funder.

In India, especially in the states like Maharashtra, Gujarat, Madhya Pradesh, and Uttar Pradesh, the notion of third-party funding is legally recognized in civil cases under the Civil Code of Procedure. The Civil Procedure Code of 1908, which governs civil court procedures in India, can be used to prove this agreement to third-party funding. XXV Order The first rule of the code (as amended by Maharashtra, Gujarat, Madhya Pradesh, and Uttar Pradesh). The courts have the authority to secure lawsuit costs by asking the financier to join as a party and depositing the fees in court.

Bombay High Court Notification P 0102/77, dated September 5, 1983, revised Order XXV of the Civil Procedure Code for Maharashtra. It goes like this: “3. (1) If any plaintiff has transferred or agreed to transfer any share or interest in the suit’s property to a person who is not already a party to the suit for the purpose of being financed in the suit, the Court may order such person to be made a plaintiff to the suit if he consents, and may order such person, either on its own motion or on the application of any defendant, to give security for the payment of all costs incurred. If such security is not provided within the time specified, the Court may issue an order dismissing the suit as to his right to or interest in the property in suit, or declaring him banned from claiming any right to or interest in the property in the suit in the future.….”

Third-party funding is not mentioned in the 1996 Arbitration and Conciliation Act. The presence of third-party funding clauses in particular state revised Civil Procedure Codes does not imply that a comparable clause in arbitrations is also legal. As a result, any third-party funding agreement would have to be a legally binding contract under the Indian Contract Act of 1872.

The logistics of getting third-party funds into and out of India provide their own set of problems. The Foreign Exchange Management Act of 1999 (‘FEMA’) and its associated rules and regulations govern this procedure. All transactions involving foreign exchange and/or non-residents are divided into two categories by FEMA: current account and capital account transactions. It’s unclear how third-party funding would interact with the regulatory environment because FEMA doesn’t clearly designate it as either a current or capital account transaction.⁶

Third-Party Funding in International Arbitration: Concerns

Concerns about third-party funding in international arbitration have been highlighted as follows:

• The premise that a third-party funder pays for a party’s legal bills may have an impact on arbitrators’ independence. A third-party funder with whom one of the arbitrators has a conflict of interest may fund a party. For example, the arbiter in the first arbitration where one of the parties is sponsored by a funder could be the claimant’s counsel in a subsequent arbitration where the claim is funded by the same funder. This compromises the arbitrator’s independence and impartiality and may have a direct impact on the arbitral tribunal’s legality, making the award vulnerable to appeal.
• The fact that a claimant receives third-party money could indicate that the claimant is impoverished and so unable to pay an adverse cost award. The successful party is frequently allowed to recover reasonable costs from the losing party through tribunals. The number of costs awarded to the successful party can be extremely large given the duration and complexity of international arbitration proceedings.
• The presence of third-party money is likely to create a situation in which the self-funded party suspects that the party acquiring funding is financially strapped and will be unable to pay any adverse cost award. Because the third-party funder is not a signatory to the arbitration agreement or a party to the arbitration proceedings, the arbitral panel lacks the authority to order the funder to pay adverse costs. To avoid a situation where the impecunious award debtor may not be able to pay, the self-funded party may seek security for expenses.

Regulations for Third-Party Funding

Regardless, domestic norms and procedures are probably going to contrast between jurisdictions, taking into consideration misuse “Discussion shopping happens when parties pick an ideal or even non-existent overseeing resolution. Second, there is a gamble of “over-guideline,” which would actually restrict the utilization and use of third-party cash past what is required. Third, it’s almost difficult to resolve all issues and worries with a solitary arrangement of clear and restricting standards; third-party funding issues, for instance, are intricate “contrast from one case to another, starting with one jurisdiction then onto the next, and will without a doubt advance after some time, as will the manner in which third-party funding is utilized and seen.

There is no such thing as a “one-size-fits-all” solution, and adaptability is crucial. This leaves us with the capacities that arbitral organizations and international principles can play in this climate, which we accept are more powerful. Institutional arbitration rules are all the more especially expected for the arbitral methodology and have more noteworthy appropriateness than domestic regulation. As a rule, international guidelines are non-restricting and give more scope. The International Bar Association Guidelines on Conflicts of Interest, distributed in 2014, were quick to address third-party funding to give guidance to specialists, and they were not without progress.

Maintenance & Champerty

Maintenance is the funding or arrangement of monetary assistance to a case holder that permits the case to be legitimately sought after in spite of the way that the funder or provider of monetary help has no relationship to or substantial interest in the case. Champerty goes above and beyond by expressing that the funder or monetary source has a direct monetary stake in the case’s result. The cash is given in return for a level of harm on the off chance that the case is fruitful. The accompanying remarks best reflect why these ways of behaving were judged ethically and morally against the public approach, bringing about their being made crooks.

The thoughts of “maintenance” and “champerty” host generally blocked third get-togethers from supporting litigation in precedent-based regulation jurisdictions. The reasoning behind this was to keep third parties from profiting from litigation in which they had no certified stake, as this could prompt negligible or vexatious litigation. Nonetheless, jurisdictions have adopted a more logical strategy for third-party funding to elevate admittance to equity.

Maintenance and champerty are as yet thought about misdeeds and violations in certain jurisdictions, like Ireland. On the grounds of champerty, the Irish Supreme Court barred a third-party benefactor from supporting significant litigation against the Irish government in May 2017. Be that as it may, mentalities on third-party funding are moving in Asia. Hong Kong and Singapore have both passed regulations permitting and directing its utilization in international arbitration.⁷

Emerging Issues

Third-Party Funding has been consumed by an assortment of difficulties in its new long stretches of improvement. The “prohibitive nature of relevant regulations (counting the meaning of ‘party’ and ‘expenses’) and the seldom practiced jurisdictional powers of courts over third parties (with the exception of customary standards of organization and task) bring about a deficiency of arbitral practice versus third-party funders” right now. While most of the appropriate regulations say that the honor is restricting just between parties, the English Arbitration Act 1996 incorporates “people asserting under or through them” in the meaning of “party.” This could be interpreted to imply that funders are incorporated. Courts, then again, have given a prohibitive development of the expression “party” to just incorporate parties under office and subrogation tenets.

Except if an arbitral practice or appropriate legislative changes to unequivocally remember funders for costs orders, this power will remain essentially dependent upon tact and use of third-party standards, saving the broad support of arbitration, specifically, party assent. While the starting points of consensual struggle settlement should be thought of, the arbitral system offers a more extensive reach to remember third-party agents for explicit cases to accomplish the motivations behind equity and value.

Conclusion

Third-party funding is a quickly rising business that will presumably assume a critical part in international commercial arbitration in the future as a standard supporting system for international arbitration cases. While the market is as yet minuscule as far as suppliers and cash, applicable assets are accessible for arbitrations, and they are at present being put resources into cases that are decided to be solid and have great recoverability possibilities. TPF will ostensibly assume a much greater part in venture arbitration because of the demand for receptiveness in the field. TPF is a fabulous way to deal with delegating the monetary dangers related to arbitral procedures. TPF, then again, involves handing over a capacity to the funder.

The major issue with TPF arrangements is that they are separated from the fundamental struggles, both regarding pertinent legislation and council jurisdiction. This likewise makes sense of why councils have been reluctant to survey whether a funding plan has any bearing on the topic of cost portion. In spite of the absence of a general obligation to uncover TPF arrangements, the need to protect mediators’ fair-mindedness and freedom, which is broadly viewed as a center precept of arbitral strategy, may require exposure.

TPF would assist India with accomplishing public arrangement objectives by upgrading admittance to equity, giving equipped portrayal, and further developing cases for the executives, in addition to other things. Nonetheless, agents have been not able to enter the Indian market because of an absence of an official system and exact legitimate clearness. Considering ongoing regulative changes in Singapore and Hong Kong, it is the previous time for India to exploit its well-established dismissal of champerty and maintenance to contend successfully in the international arbitration landscape by securing itself as a middle for international commercial arbitration. Accordingly, it will be interesting to see the Hyderabad High Court’s possible decision on third-party finance courses of action.

Third-party finance can possibly assume a critical part in international commercial and speculation arbitrations. Despite the fact that there has been a lot of conversation about this theme in scholastic circles, great endeavors taken by nations all over the planet to follow up regarding the matter might hurry the reception of third-party funding. Permitting such contribution in elective compromise techniques would prepare for third-party funding in customary question resolution components like litigation. Therefore, the second has come for India to unambiguously make the way for third-party finance, a move that will without a doubt help its populace as well as India’s international standing.

References:

1. https://www.latestlaws.com/articles/third-party-funding-in-international-commercial-arbitration-indian-and-international-perspective-by-harleen-kaur/#_ftn1
2. https://www.international-arbitration-attorney.com/wp-content/uploads/2018/09/Thibault-De-Boulle-Thesis-On-Third-Party-Funding.pdf
3. https://kluwerlawonline.com/journalarticle/Journal+of+International+Arbitration/32.3/JOIA2015013
4. https://www.ashurst.com/en/news-and-insights/legal-updates/quickguide—third-party-funding-in-international-arbitration/
5. https://www.thestatesman.com/india/arbitration-law-in-india-everything-you-want-to-know-1502757528.html
6. https://viamediationcentre.org/readnews/NTUy/Arbitration-law-in-India-Everything-you-want-to-know#:~:text=It%20is%20a%20legal%20technique,they%20agree%20to%20be%20bound.&text=The%20Indian%20law%20with%20respect,on%20the%20English%20Common%20Law.
7. https://deliverypdf.ssrn.com/delivery.php?ID=800100124064064089092085007074099081036046034042033020101002096072120066106095106095110003010016007048098011020092029022127014118055068037012100089121120083098112077091053022067069081079107124066095066066094068088120088108022099074006068087105079026001&EXT=pdf&INDEX=TRUE

This article is written by Arryan Mohanty, a 2nd Year Student student of Symbiosis Law School.

This is a major decision by the Supreme Court, which determined that the online arbitration agreement is the most relevant arbitration document. Because the parties do not meet in person, but rather online, it is important to clarify all details of the dispute resolution method in the agreement. Furthermore, the court found that when entering into an agreement, a meeting of minds is critical, and the agreement must comply with Section 7 of the Arbitration and Conciliation Act, 1996.

Facts

Trimex offered VAL the supply of bauxite through email, which the latter accepted after several exchanges of e-mails, confirming the supply of 5 ships of bauxite from Australia to India. Despite the fact that a draught contract had been developed, it still needed to be formalized. After receiving the first consignments of goods, VAL requested that Trimex hold back the next consignment of goods so that they may check the utility value of bauxite. Shipowners, on the other hand, nominated the ship for cargo loading on the same day. Trimex later requested damages from VAL for damages paid to ship owners after the contract was canceled, but VAL rejected by denying any contract. The Petitioner Company is based in Dubai and trades minerals globally. The Respondent is an Indian company that uses Aluminum Ore as one of its primary inputs. Supply of Bauxite (15.10.2007 Offer) (Shipment) The reply accepted the offer through e-mail on October 16, 2007, confirming the provision of 5 shipments of bauxite, in accordance with the contract’s material terms.

The response acknowledges the offer’s acceptance at a subsequent meeting. On November 8, 2007, the respondent sent the petitioner a formal contract with a detailed arbitration clause, which the petitioner accepted with some changes. On 09.11.2007, the petitioner signed a formal Bauxite sales agreement with Rio Tinto of Australia for the supply of 225000 tonnes of bauxite. On 12.11.2007, the respondent requested that the petitioner hold the next consignment. On 13.11.2007, the petitioner informed the respondent that the cargo could not be postponed and requested that they sign the Purchase Agreement. The ship owners nominated the ship for loading the material on November 28, 2007. The petitioner terminated the contract on November 16, 2007, reserving the right to seek damages. The petitioner formally informed the shipowners of the cancellation on November 18, 2007. The shipowner filed a claim for US$ 1 million in a commercial settlement. The Petitioner asked the Respondent to pay the shipowner the stated amount plus an additional 0.8 million US dollars in compensation for lost profits and other expenditures and expenses.

The Respondent denied the Petitioner’s claim, and as a result, the Petitioner was forced to pay the shipowners 0.6 million US dollars in two installments after negotiations. The Petitioner served the Respondent with a notice of claim-cum-arbitration on September 1, 2008, requesting that it either pay up or accept the notification as a referral to arbitration. The Respondent denied the arbitration notice, claiming that the parties had not yet reached an agreement. As a result, the Petitioner filed a request for the appointment of an arbitrator.

Issue

Whether there was any valid subsisting contract between the parties in absence of any formal contract?

Petitioner’s Arguments

The primary position of the Petitioners is that the Contract was legal and binding. The Petitioner argued that: the contract was formed upon the Respondent’s acceptance of the offer for five shipments. the offer of October 16, 2007, was made in response to the Respondent’s request and was based on a previous month’s similar transaction.• the offer that was accepted by the Respondent contained the arbitration clause, which was never objected to The Petitioner also argued for the Contract’s validity, claiming that the Respondent agreed to place an order for 5 (five) shipments only after several e-mail exchanges and agreement on the contract’s material terms, based on which the Petitioner contracted with a bauxite supplier in Australia and also entered into a charter party agreement with the shipowner. The Petitioner emphasized that the arbitration clause was included in Respondent’s copy of the Contract, and because it had not been changed, the apparent conclusion was that the arbitration clause was acceptable to both parties. It also claimed that the offer dated October 15, 2007, containing all of the necessary elements for the Respondents to accept it, including the offer validity period, product description, quantity, price per tonne, delivery (CIF), and payment terms (irrevocable L/C), shipping lots, discharge port, governing law, and arbitration.

Respondent’s Arguments

The Respondent, on the other hand, maintained that no contract could be made because the parties were not ad idem on a number of key and substantial aspects of the transaction. • the product specifications, price, contract price inclusions, delivery point, insurance, contract commencement and conclusion dates, transfer of title, quality check, and demurrage remain undecided, as evidenced by several email exchanges between the parties.• the product specifications, price, contract price inclusions, delivery point, insurance, contract commencement and conclusion dates, transfer of title, quality check, and demurrage remain undecided, as evidenced by several email exchanges between the parties. As a result, the Respondent asserted that in such a situation, (a) the parties cannot be said to be “of one mind” with respect to all parts of the transaction, and (b) the parties cannot be said to be “in agreement” with respect to all aspects of the transaction.

Despite the fact that the Respondent acknowledged exchanging e-mails with the Petitioner, it claimed that there was no concluded contract because the Contract remained unsigned, preventing the Petitioner from enforcing certain obligations reflected in those e-mails and invoking the arbitration clause as if there was a formal agreement. The Respondent argued that an agreement on the parameters that will govern a contract is not the same as entering
into the contract itself, citing the Court’s ruling in Dresser-Rand S.A. v. Bindal Agro Chem Ltd.

Judgment

The fact that the parties did not prepare a formal contract after the deal was completed orally or in writing has no bearing on the parties’ acceptance or implementation of the contract. A contract is said to be completed when the parties have agreed on the ‘terms and conditions’ of the contract, though small details can be left for them to decide later, is somewhat subject to other prerequisites as provided by S.10: without such necessary elements being decided, the contract cannot be enacted by law because it is deemed incomplete. After hearing both parties at length, the Court dismissed the Respondent’s arguments and declared that the offer made on October 15, 2007, was accepted on October 16, 2007, and that any dispute between the parties must be resolved through arbitration in line with the terms and conditions agreed to.

When a contract is signed orally or in writing, it becomes legally binding.
The Supreme Court held that all necessary elements for enforcing these types of shipment contracts, such as price, quantity, product specifications, delivery and payment terms, discharge port, shipment lots, demurrage rate, quality benchmark, applicable arbitration laws, and so on, were decided by the parties. Furthermore, minute-by-minute correspondences between the parties plainly reveal that both parties were fully aware of the contract’s different conditions and were ad idem (S.13) with respect to them.

According to S.4, communication of acceptance was complete as against VAL as soon as Trimex received confirmation of 5 shipment lots. Furthermore, the acceptance was unqualified and unconditional (S.7): “We affirm the transaction for five shipments”

The Court restated its position that one of the Act’s principal goals is to reduce the courts’ supervisory function. In reaching this conclusion, the Court noted that adding a variety of other conditions, such as seals and originals, stamps, and so on, to an arbitration agreement would amount to enhancing rather than decreasing the function of courts. The Court concluded, based on UNCITRAL Model Law, that adding a number of extra formalities not contemplated by the legislation would be improper and undesirable. The goal of the court should be to carry out the legislative intended. As a result, the Court ruled in the Petitioner’s favor and assigned a retired judge to arbitrate the case.

References

1. Trimex International Fze Limited v. Vedanta Aluminium Limited | Indian Case Law
2. Judgment Analysis Format | PDF | Arbitration | Justice (scribd.com)

Written by Vidushi Joshi student at UPES, Dehradun.

ARBITRATION is a means of resolving a disagreement between two or more parties by the involvement of a third party. Parties can also use a permanent arbitrator to settle their disagreements. Institutions such as the Indian Council of Medical Research Arbitration, the Chamber of Commerce, and other similar institutions are available. Arbitration is defined by Halsbury as follows:
“Arbitration is the process of resolving a dispute between at least two parties.” A person or body that makes a decision after hearing both sides in a judicial way is a person who isn’t a judge in a court of competent jurisdiction.

1. PRIVACY is guaranteed by arbitration. The procedures in a civil court are held in public, which often embarrasses the parties.
2. Arbitration allows you to choose an arbiter who is a specialist in the dispute’s subject matter. The arbitrators may be professionals who can settle the issue fairly and quickly since they are familiar with the trade or industry’s customs and procedures.
3. The arbitration can take place in a location that is convenient for both parties. It isn&’t necessary for it to be a formal platform. It is sufficient to have a small office cabin. Similarly, the parties can use any language they want.
4. Even the rules that govern arbitration hearings might be voluntarily agreed upon by both parties. A court case is an expensive endeavor. Advocates, court costs, processing fees, and other incidental charges must be paid by the claimant. The costs of arbitration are lower, and the parties frequently argue their own claims. There are few procedural stages in the arbitration, and there are no court fees.
5. Arbitration is a speedier and more efficient method of resolving disputes. The court must operate on its own schedule and take an unusually long time to resolve cases. It is a cliche to say that there are millions of unsolved cases pending in the courts.

ARBITRATION Agreement

Arbitration Agreement implies an agreement between the parties to submit all or certain disputes that have occurred or may arise between them in respect of a defined legal relationship, whether contractual or not, to arbitration, according to Section 7(1) of the Act. An arbitration agreement should be in writing and both parties should sign it. It doesn’t have to be in a particular format. The intention to go to arbitration must, however, be proved.

An arbitration agreement can be reached via letter, telex, telegram, fax, or other means. When creating an Arbitration Agreement, extreme caution should be exercised. The statute places a strong emphasis on party autonomy. In most passages, it assumes that unless particular matters are specifically included in the Arbitration Agreement, the arbitral tribunal will have the authority to decide on them. With the exception of a few mandatory requirements in the Act, practically all of the provisions are subject to the parties’ agreement. The number of arbitrators, the mechanism for appointing arbitrators, the rules of procedure, the site of arbitration, the language of the arbitration proceedings, the procedure for challenging an arbitrator, and other factors are up to the parties to decide.

In general, any disagreement of a civil or quasi-civil nature that can be resolved by a civil court can be referred to as arbitration. Arbitration can be used to resolve disputes involving property, the right to hold any office, questions of marriage or maintenance and money, compensation for non-fulfillment of a contract clause, partnership issues, and so on. With the permission of the court, the official receiver or the official assignee can submit conflicts between an insolvent and his creditors to arbitration. Thus, arbitration can be used to resolve conflicts arising out of a defined legal relationship, whether contractual or not.

Although anyone can be nominated as an arbitrator, normally impartial and independent people in whom the parties have faith should be chosen and appointed. Chartered accountants, company secretaries, engineers, retired judges, and other experts are frequently sought.

Parties are free to choose the number of arbitrators they want, as long as it is not an even number. If the Arbitration Agreement is silent on this point, the arbitral tribunal will be made up of only one arbitrator. Each side will nominate one arbitrator, and the two appointed arbitrators will jointly appoint a third arbitrator, who will be the presiding arbitrator, in circumstances where three arbitrators are required.

The Arbitrator should allow the parties to the reference a reasonable chance to appear before the Arbitral Tribunal in person or through an authorized representative and present evidence in support of their respective claims. Whether the information is delivered orally or in the form of a document, an arbitrator shall not receive information from one side that is not disclosed to the other.

Arbitrators must be impartial and disinterested. He must have no financial or other vested interest in any of the disputants or the outcome of the award.
Arbitration is a private dispute-resolution tribunal. As a result, if either party to the reference or the arbitral tribunal objects to admission, the public may not be allowed. Section 12 states that before accepting his appointment, the arbitrator must inform the parties in writing of any facts that could give rise to reasonable doubts regarding his independence or impartiality. The same is true throughout the arbitral procedures, and if such situations emerge after his appointment, he must notify the parties in writing. The Sixth Schedule to the Act, established by the Amendment Act of 2016, specifies the format of disclosure to be provided by the arbitrator.

The 1996 Act authorizes arbitrators to rule on their own jurisdiction, including any criticisms to the validity or existence of the arbitration agreement, and for that purpose, a) An arbitration clause that is part of a contract will be treated as an agreement separate from the other terms of the contract, and b) A decision by the arbitral tribunal that the contract is null and void will not ipso jure imply the invalidity of the arb agreement.

References

AN OVERVIEW OF THE LAW ON ARBITRATION (wirc-icai.org)

This article is written by Vidushi Joshi student at UPES, Dehradun.

INTRODUCTION

In the current globalization period of the electronic and IT age where providers, clients, purchasers, and laborers are all at better places and are isolated by various time regions questions which emerge should be settled through electronic intervention so that time and cash both can be saved. This article attempts to harp to a greater degree toward the thrilling fate of e-assertion gave frameworks of checks and equilibrium are kept up with like conventional discretion ¹.
The utilization of innovation in debate goals is presently not an uncommon event. The ideas of worldwide exchange and unfamiliar venture are cherished in the crucial idea of global business assertion and online debate goal. 2021, the time of hope, brought a limit with regards to more noteworthy work and global venture. Because of the uncommon dependence on virtual or advanced advances in 2020, substances, for example, organizations, firms, and legal counselors began encountering digital assaults.
While, the innovative progressions have now overcome much enough for everybody to know that, in a limited way, information and security hazards are constantly implied, the highly sensitive situation in 2020 constrained attorneys, customers, and foundations towards remote working frameworks that are intensely reliant upon online innovation and administrations².
In India, an internet-based mediation statement in customary and e-contracts is substantial under Section 7 of the Arbitration and Conciliation Act of 1996 (the “Act”). This has released Pandora’s container of specialized and lawful intricacies. Law offices have turned into a most loved objective for such exercises. Law offices work in a framework that is dynamic, non-static and various briefs are taken care of all the while by lawyers over messages and online records.

GOING INTO AN ONLINE ARBITRATION AGREEMENT

The different ways by which gatherings go into an internet-based assertion arrangement are by:

• Commonly consenting to determine any questions through the internet-based discretion instrument, and
• Consenting to an internet-based assertion proviso via purchasing any item or administration where the terms of purchasing give so. The agreements of each exchange are available by a hyperlink or are given toward the finish of a page. The permeability of the said agreements assumes a vital part in examining the extent of a noteworthy/enforceable web-based discretion understanding.
  

There are two sorts of sites with regards to deciding if huge consideration of the purchaser was brought towards the state of online intervention or not:

1. Browse-wrap sites
   These sites are of such nature that they expect to agree to the hyperlinked agreements by the purchaser essentially entering the site. Since the hyperlink is regularly dark and, in some cases, thought to be agreed to, these agreements are without any web-based intervention provisos.
2. Click-wrap sites
   Click-wrap sites require the purchaser to effectively show that the purchaser is consenting to their agreements for the buy ¹.

LEGITIMATE VALIDITY OF ONLINE ARBITRATION IN INDIA

While Section 31 (1) of the Act gives that an intervention arrangement will be recorded as a hard copy, it will be perused with Section 4 of the Information Technology Act, 2000 (“IT Act”) which expresses that where any law gives that any matter will be recorded as a hard copy/type-composed/printed, then, at that point, such prerequisite would be considered fulfilled assuming such matter is: (i) made accessible in an electronic structure; and (ii) available to be usable for ensuing reference¹.
In web-based business connections, the issue of checking the character of the restricting gatherings is very normal. One should make certain of the individual’s character with whom they are managing. Section(s) 4 and 5 of the IT Act read with Section 65-B of the Evidence Act explains the legitimate acknowledgment of electronic records and marks. Such online endorsements are crucial in guaranteeing the character, validness, and non-disavowal/legitimacy of information correspondence, along these lines catalyzing trust.
Under the said segments, the Supreme Court, in State of Maharashtra v. Dr. Praful B. Desai, 2003 4 SCC 601, has likewise recognized the execution of video conferencing frameworks to record observer explanations. For consistency, the rules given by the International Chamber of Commerce might be followed.
Online assertion and ADR overall happen under the shadow of the appropriate laws to the topic. The result from the appropriate law where no arrangement is reached (in an internet-based mediation continuing) gives the gatherings included a sensibly solid thought of their negotiating posture in a debate during the period of planning in the intervention procedures. Hence, a steady and all-inclusive methodology in managing the internet-based case the executives’ frameworks for online mediation stay to be in shortfall.
The current law in India can be perceived from two milestone Supreme Court cases, Trimex International FZE Ltd. v. Vedanta Aluminum Ltd., (2010) 3 SCC 1, and Shakti Bhog Foods Ltd. v. Kola Shipping Ltd., AIR 2009 SC 12, wherein the Hon’ble Court has maintained the legitimacy and enforceability of an assertion understanding recorded as a hard copy closed through a trade of messages and electronic archives that were endorsed by the gatherings.

TRUST IN ONLINE ARBITRATION

The capacity of trust and equity in web-based assertion is intricate and incorporates a few variables which need due thought. Because online intervention procedures are virtual, it is hard for the authority to build up trust in and among the gatherings. In internet-based mediation, parties frequently host not met the contradicting get-together, not to mention the judge. This forces a constraint on the comprehension of the referee concerning the gatherings in question, their relationship, and their foundation. The referee passes up the different social signals and a chance to peruse the gatherings’ body language.

CONCLUSION

With the coming of innovation in the developing internet business time, e-mediation are the future anyway the equivalent must be effective on the off chance that there are laws, computerized security, digitization of courts and online paperless legal executive ought to be set up in India, which are followed in any case there will be ascending in more questions and the premise motivation behind discretion will be foiled and shoppers will be denied evenhanded equity.

References

1. Scope of Online Arbitration and its Future in India. usllsadrblog.com. [Online] https://usllsadrblog.com/scope-of-online-arbitration/.
2. Future of arbitration : everything you need to know about e-arbitration . blog.ipleaders.in. [Online] https://blog.ipleaders.in/future-arbitration-everything-need-know-about-e-arbitration/.

This article is written by Sara Agrawal student at Sinhgad Law College, Pune.

Introduction

Industrialization has resulted in a dramatic increase in global trade and business. To keep up with financial growth and avoid lengthy lawsuits, the parties have chosen arbitral proceedings as their preferred method of dispute resolution¹.
Arbitration is not at all a modern process, especially in India. It can be traced back to the Vedic ages². Even though it had been in practice for ages, it is still in its evolving stage. Arbitration is a type of “alternative dispute resolution” (ADR). Some other forms of ADR include mediation, Lok adalats, negotiation, etc. There are a number of pending cases that need resolution. Hence, ADR techniques have been proven to be very useful to reduce the pressure on the conventional court system. The recommendation made by the “Malimath committee” was related to mandating the usage of ADR techniques. In the article, there is mention of certain problems with these techniques (especially arbitration).

History of arbitration in India

If we want to trace back the origins of arbitration procedures in India, we would find the reference to the panchayat system ³. It showed a lot of improvement mainly in the nineteenth century. The “Indian Arbitration Act, 1899” had been very very important legislation that has changed the dynamics of the arbitration process. This Act was relevant only in Calcutta, Madras, and Bombay. This Act was quite lengthy and confusing. The same was held in the case of Dinkarrai Lakshmiprasad vs. Yeshwantrai Hariprasad ⁴ . To end the complexities of the Act, a new Act needed to be enacted. Therefore, in the year 1940, “The Arbitration Act, 1940” came into action. It applied to the whole country and not only to specific presidency towns. Later arbitration was codified under Section 89 and Schedule II of the “Code of Civil
The procedure, 1908”.

Arbitration had also been mentioned in ancient times. “Brihadaranyaka Upanishad” is one of the ancient scriptures that supposedly talks about arbitration. In the 1700s and 1800s, separate regulations were present that were applicable in Calcutta, Bombay, and Madras. In the case of Gajendra Singh v. Durga Kunwar _⁵, it was considered that arbitration is more of a “compromise between two parties”.
In the year 1996, following the UNCITRAL model, the “Arbitration and Conciliation Act” came into action.

Advantages and disadvantages of arbitration

Arbitration has proven to be more effective as compared to litigation (going to the court). It is more flexible than litigation techniques. Also, arbitration is comparatively less time-consuming and more cost-effective when compared to litigation. Many believe that justice provided through arbitration is of better quality.

Along with the pros mentioned above, there are some cons too. When compared to other ADR techniques (for instance, mediation), arbitration is a more expensive and time-consuming method. In the case of an arbitration proceeding, the arbitrator has to study the evidence and hear both sides before making a decision. This whole procedure takes quite some time. Unlike mediation, in the case of an arbitral proceeding, there is a scene where a party
wins and the other loses. Due to such a win or loss situation, the relation between the two parties often gets stressed.

Present status of arbitration in India

Judiciary in India has been trying a lot to simplify the processes of arbitration (especially in cases of “International Commercial Arbitration”) ⁶. There are some significant differences that the 1996 Act had when compared to the previous legislation. One of the most significant changes in the judicial involvement to the arbitral product. If an arbitration agreement is present, the judicial system has to direct the parties to opt for arbitration. The powers that an
arbitrator can exercise have been improved too. A specific mention of “domestic arbitration”⁷ had also been mentioned in the Act. In 2015, an act was enacted in order to make amendments to the existing 1996 Act. This 2015 Act was declared to be applicable to arbitral as well as court proceedings⁸.
Recently, an “Arbitration and Conciliation (Amendment) Act” was enacted in March 2021. One of the main purposes of this Act was to promote India as a center of international arbitration. To ensure the above purpose, Schedule VIII of the 1996 Act was scrapped off. This schedule banned certain categories of people from being selected as arbitrators in India.

Conclusion

From this article, it can be concluded how arbitration had become a preferred method of dispute resolution. We can see how arbitration in India is in an evolving stage. Lots of amendments are still required to make. This process had already evolved a lot if the scenario is compared to the pre-British era and in the past in general. It has also been mentioned by the experts that more professionalism is expected on the part of the arbitrators. This would
improve the scenario of this dispute resolution process in India. In order to improve the situation of arbitration procedures in India, the mechanism should be made more time effective and cost-efficient. People should be made more aware of the ADR techniques.

References:

1. “India: Evolution of Arbitration in India”, [October 21, 2016], https://www.mondaq.com/india/arbitration-dispute-resolution/537190/evolution-of-arbitration-in-india.
2. Ashutosh Singh, “Evolution of arbitration in India and the lack of professionalism”, [October 9, 2021], https://blog.ipleaders.in/evolution-arbitration-india-lack-of-professionalism/#Arbitration_in_pre-British_era.
3. “Evolution Of the Arbitration Law in India”, https://www.legalserviceindia.com/legal/article-4145-evolution-of-the-arbitration-law-in-india.html.
4. Dinkarrai Lakshmiprasad v. Yeshwantrai Hariprasad, [1930 AIR BOM 98].
5. Gajendra Singh v. Durga Kunwar, [1925 ILR 47A II 637].
6. Aditi Goyal, “Arbitration Law in India: Everything You Want to Know”, https://viamediationcentre.org/readnews/NTUy/Arbitration-law-in-India-Everything-you-want-to-know.
7. Section 2(7), Arbitration and Conciliation Act 1996.
8. Abhinav Kumar, “Making India a global hub for arbitration”, [March 24, 2021], https://www.thehindubusinessline.com/opinion/making-india-a-global-hub-for-arbitration/article34152992.ece.

This article is written by Aaratrika Bal student at National Law University Odisha.

Case Number:

Writ Petition (Civil) No. 1074 of 2019

Bench:

Rohinton Fali Nariman

Aniruddha Bose

V. Ramasubramanian

Date of Judgment:

27/11/2019

Relevant Acts:

Arbitration and Conciliation Act, 1996

Constitution of India

Insolvency and Bankruptcy Code, 2016

Facts of the Case:

The petitioners were construction firms that had worked as contractors for government agencies on large-scale infrastructure projects such as roads, bridges, hydropower, and nuclear reactors, tunnels and rail facilities, etc. The petitioners were aggrieved by the fact that if a cost surge occurred, the government bodies contested it, resulting in a delay in the recovery of their rightful dues, which could only be retrieved either through an arbitration process or civil proceedings. They were unable to recover their debts from government bodies through insolvency proceedings as government bodies were not covered by the Insolvency and Bankruptcy Code, 2016.

The petitioner argued that the unamended Act violated the UNCITRAL Model Law by prohibiting the use of two key aspects of award debtor, one during setting aside procedures under section 34 and the other during enforcement proceedings under section 36 of the Arbitration and Conciliation Act, 1996. It was also contended that Section 87 enacted was violative of Article 14, 21, and 300-A of the Constitution as it weakened the binding nature of an arbitral ruling by removing the vested power of enforcement.

The respondents stated that the 2019 amendment inserting Section 87 and revocation of Section 26 by claiming that the interpretation of Section 26 in the BCCI case was purely declaratory and there was no merit in the petitioner’s statement that the interpretation is unconstitutional. The respondents also asserted that the BCCI ruling, it was said, was just declaratory and did not invalidate any executive action. As a result, section 87 merely clarified the original legislative meaning and had no incidence on the BCCI judgment.

The issue before the High Court:

Whether Section 87 of the Arbitration and Conciliation Act, 1996 introduced by the 2019 Amendment Act is valid?

The ratio of the Case:

The SC concurred with the respondents that no direct and substantiating reference to the BCCI decision was required to negate it through legislation. The court also concluded that, when read in conjunction with the IBC, Section 87 had ludicrous effects, such as award holders being unable to recover funds from award debtors and being insolvent. Subsequently, the court ruled that the addition of Section 87 and the repeal of Section 26 were in violation of Article 14. 

The Supreme Court explained in BCCI v. Kochi Cricket Private Limited (2018) that while the 2015 Amendment Act was prospective in nature, the change in the position regarding the former automatic stay against enforcement was applicable retrospectively. The Supreme Court stated that section 87 was enacted solely to implement the Srikrishna Committee Report’s advice to remove doubt around the potential applicability of the 2015 Amendment Act when such uncertainty had already been resolved by the BCCI ruling.

The decision of the Court:

The Supreme Court concurred with the Petitioner that the addition of section 87 resurrects the problem that the 2015 Amendment Act attempted to address and is thus unconstitutional. The SC further agreed with the Petitioners that, when read in conjunction with the IBC, section 87 results in an illogical result, namely, the award holder becoming insolvent due to its inability to recover money under arbitral awards. As a result, the Supreme Court concluded that the 2015 Amendment Act’s inclusion of section 87 and deletion of section 26 violated Article 14 of the Indian Constitution.

The present article has been written by Aathira Pillai.

The present article has been edited by Shubham Yadav, a 4th- year student from Banasthali Vidyapith.

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-Report by ANAND PATIL

Introduction

The judgment of the Supreme Court would have the unintended consequence of exacerbating issues relating to non-payment of dues to MSME.

Facts

The respondent who in this case is Kerala state road transport corporation (KSRTC) invited the tenders for the supply of thread rubber for making tyres. The appellants who gave the purchase orders. As per terms of the agreement, 90% of the total purchase price was payable on the supply of materials and the other 10% was to be paid subject to the final performance. This condition was there as the thread rubber supplied by appellants was to run a minimum number of kilometers. When the other 10% was not paid as per the agreement of purchase order, the appellants approached the industrial facilitation council which is presently MSMED Act. Further arbitration was referred under provisions of the 1996 Act. The awards were passed in favour of appellants. And further, the respondents have appealed before Kerala high court and the order was passed in favour of appellants. Further, the respondents appeared before Supreme Court.

Petitioner Contention

Shri V. Giri learned senior counsel for appellants has contended that the various provisions under chapter V of the 2006 Act make it clear that conciliation and arbitration are referred to claims of the supplier only. It is also submitted that the 2006 Act is beneficial to micro and small scale enterprises and such a scope of the Act cannot be expanded the claims by the buyer. It is also submitted by the appellant that the object of the 2006 Act is to protect micro and small scale enterprises. If the claims are allowed from respondents then the scope of this Act would be expanded.

Respondent Contention

On the other hand Ms. Aishwarya Bhati, Advocate on behalf of the respondent stated by referring to section 16 of the Act, it is submitted that when any buyer fails to make payment to supplier, as required under section 15 the buyer shall notwithstanding anything contained in any agreement between buyer and supplier or any law for the time being in force be liable to pay the compound interest. They further claimed that referring to section 19 of the Act it is submitted that application filed for getting an award or order shall not be entrained until the appellant has deposited 75% of the amount in terms of award or order. Further, it is also submitted that when conciliation is failed according to the arbitration and conciliation Act 1996 are made applicable if there is an agreement between the parties under subsection (1) of section 7 of the 1996 Act. And further, the advocate pointed that no claim or counterclaim under section 18 is permissible. Further, it is submitted that in any event as the supply of goods and services were made much before the memo by the appellant the appellant cannot claim before the MSMED Act.

Judgment

The court while referring to the judgment of the high court in the case of Andhra Pradesh Power Coordination Committee and Ors v Lanco Kondapalli Power Ltd and Ors held that the limitation act 1963 applies to arbitrations covered by section 18(3) of the 2006 Act. And the reading of section 43 itself makes it clear that the limitation act 1963 shall apply to the arbitrations as it applies to the court proceedings. When there is no settlement concerning dispute necessarily the micro and small enterprises facilitation council shall take up the dispute for arbitration under section18(3) of the 2006 Act or it may also provide for the alternate dispute resolution services. Thus the court is of the view that no further elaboration is necessary on the issue and we hold that provision of limitation act 1963 will apply to arbitrations covered by section 18(3) of the 2006 Act. Hence the court dismissed the civil appeals.

Case Number

Civil Appeal No. 5251 of 1993

Equivalent Citations

(2000) 4 SCC 539

Bench

D.P. Wadhwa, Ruma Pal

Date of Judgment

March 28, 2000

Relevant Act/ Sections

Section 7 of Arbitration and Conciliation Act 1996

Section 2(e) of Arbitration and Conciliation Act 1996

Section 8(1) & 8(2) of Arbitration and Conciliation Act 1996

Section 2(e) of Arbitration Act, 1940

Facts of the Case:

During the pendency of this appeal, all the parties have entered into an arbitration agreement. The arbitration agreement covers all the disputes between the parties in the proceedings before the court and even more than that. They have agreed to refer their disputes in this appeal and others to Justice S. Ranganathan, a retired Judge of this Court as sole Arbitrator. The arbitration agreement is in the form of an application and has been signed by all the parties, The agreement meets the requirements of Section 7 of the Arbitration and Conciliation Act, 1996 (new Act).

Relevant Legal Provision:

Section 8 of the New Act lays down the conditions which are required to be satisfied for referring a suit to arbitration. The relevant parts of the law are reproduced below: – 

“8(1). A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement, shall if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

(1) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

(2) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, and arbitration may be commenced or continued and an arbitral award made.”

Issues before the Court:

1. Whether this Court in appeal can refer the parties to arbitration under the Arbitration and Conciliation Act, 1996.
2. Whether the Court is, in circumstances where the entire subject matter of the suit is considered in the arbitration agreement, obliged to refer the parties to arbitration and if so with what effect.

Ratio of the Case

•  Section 5, which is contained in Part I of the new Act, defines the extent of judicial intervention in arbitration proceedings. It says that notwithstanding anything contained in any other law for the time being in force, in matters governed by Part I, no judicial authority shall intervene except where so provided in that Part. 
• Section 5 brings out clearly the object of the new Act, namely, that of encouraging resolution of disputes expeditiously and less expensively and when there is an arbitration agreement, the Courts intervention should be minimal.
• The conditions which are required to be satisfied under sub-section (1) and (2) of Section 8 before the Court can exercise its powers are: 
  • (1) there is an arbitration agreement; 
  • (2) a party to the agreement brings an action in the Court against the other party; 
  • (3) subject matter of the action is the same as the subject matter of the arbitration agreement; 
  • (4) the other party moves the Court for referring the parties to arbitration before it submits its first statement on the substance of the dispute.
• The last provision (4) creates a right in the person bringing the action to have the dispute adjudicated by the Court, once the other party has submitted his first statement of defense. But if the party, who wants the matter to be referred to arbitration applies to the Court after submission of his statement and the party who has brought the action does not object, as is the case before us, there is no bar on the Court referring the parties to the arbitration.
• In the matter before us, the arbitration agreement covers all the disputes between the parties in the proceedings before us and even more than that.
• The arbitration agreement satisfies the requirements of Section 7 of the new Act. The language of Section 8 is peremptory. It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement.
• There is no question of stay of the proceedings till the arbitration proceedings conclude and the Award becomes final in terms of the provisions of the new Act.
• All the rights, obligations, and remedies of the parties would now be governed by the new Act including the right to challenge the Award.
• An application before a Court under Section 8 merely brings to the Courts notice that the subject matter of the action before it is the subject matter of an arbitration agreement.

Final Decision:

The Court allows the application and would refer the parties to the arbitration. No further orders are required in this appeal and it stands disposed of accordingly.

This case analysis is done by Prateek Chandgothia, a first-year BA LLB (Hons.) students at Rajiv Gandhi National University of Law, Punjab.

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