Introduction

Arbitration is the dispute settlement process between two agreeable parties to appoint an arbitrator to give a binding solution on the dispute. It is a way to settle disputes outside the courts thereby saving time and resources at the same time.Arbitration is a legal mechanism encouraging settlement of disputes between two or more parties mutually by the appointment of a third party whose decision is binding on the parties referring the said dispute.

All disputes however are not arbitrable and there are certain disputes which fall outside categories of arbitrable disputes as held by the Hon’ble Apex Court in the matter of Booz Allen and Hamilton Inc V. SBI Home Finance Ltd. These are:

a) criminal offences
b) guardianship matters
c) insolvency and winding up proceedings
d) matters of probate, letters of administration, succession certificate etc
e) eviction proceedings
f) patents, trademarks, copyright
g) Anti Trust/ competition laws
h) Bribery/Corruption Laws
i) Fraud

Types of Arbitration

Ad hoc Arbitration: Conduct of arbitration by the tribunal following the rules already agreed between the parties or following the rules laid down by tribunal in case of non existence of agreement between parties. Ad hoc arbitration helps in a greater control over arbitration process, flexibility to decide the procedure and also ensures cost effectiveness. However the success of the ad hoc arbitration is ensured only in case of mutual agreement of parties.

Institutional Arbitration: Administration of arbitration in accordance with the rules of procedure of an institution. The same provides for important aspects of arbitration such as appointment of arbitrators, managing the arbitration process, identifying venues for holding arbitration hearings. Much such Indian arbitration is administered by international arbitral institutions such as Court of Arbitration of the International Chamber of Commerce, the Singapore International Arbitration Centre, and the London Court of International Arbitration.

There are at the moment 35 Arbitral Institutions in India for a) Domestic; b) International; c) PSUs; d) Trade and merchant associations; and e) City specific chambers of commerce and industry

Such institutions either have their own rules or are governed by the rules of UNCITRAL.

This form of arbitration helps in getting a clear set of arbitration rules, a clear timeline to conduct arbitration, panel of arbitrators to choose from, assistance from highly trained staff, helps when parties lack proper knowledge regarding arbitral proceedings.

The success of this mode of arbitration is thwarted by lack of creditworthy institutions, lack of governmental support, lack of legislative support, no autonomy of parties over the arbitration process, delays in Indian courts, excessive interference and involvement in proceedings thereby discouraging foreign parties.

Vinod Bhaiyalal Jain Vs. Wadhwani Parmeshwari Cold Storage Pvt. Ltd.

The Supreme Court, while dealing with the challenge against the arbitrator on the grounds of potential perceived bias, held that there should be no room for even a perception of bias against the arbitrator.

The aggrieved party had raised an objection on the independence of the arbitrator, on the ground that the arbitrator had acted as counsel for one of the parties in the dispute. This fact was also brought to the notice of the arbitrator on multiple occasions. The Supreme Court observed that the aggrieved party had a reasonable bias against the arbitrator and its ability to render independent and impartial award and therefore the award should be set aside.

M/s Icomm Tele Ltc. vs. Punjab State Water Supply & Sewage Board

The two-member bench of Hon’ble Mr. Justice Rohinton Fali Nariman and Hon’ble Mr. Justice Vineet Saran (Bench) has struck down a clause which required a 10% pre-deposit of the claim amount prior to invoking arbitration proceedings.

The Bench observed that the clause requiring 10% pre-deposit is arbitrary and has no nexus with filing of frivolous claims, since the clause applies to all type of claims. It observed that a 10% deposit had to be made prior to determining if the claim is frivolous or otherwise.

The Bench was of the view that deterring a party to an arbitration by a pre-deposit requirement of 10% would discourage the arbitration process and would be contrary to the object of de-clogging the court system.

Conclusion

In the recent times, there has been an exponential growth in international dealing and contracts and thus increase in disputes pertaining to the international arbitration. India is no more a closed economy and is picking up the pace with the changing times and judgments like BALCO are showing the world that the parties can easily enter into arbitration without worrying about facing any inconvenient orthodox procedures.

The Indian judiciary is thus now leaving no stones unturned to simplify the procedures in the cases of International Commercial Arbitration. Moreover, the amendment in Section 36 has given more teeth to the Act as now in order to challenge an Award under Section 34 of the Act the stay is not automatic as was the scenario in pre amended Arbitration and Conciliation Act 1996 prior to its amendment in 2015 and conditions akin to Order 41 Rule 5 of Code of Civil Procedure are to be imposed by the Court adjudicating the correctness of the Award. This factor would also cut out unnecessary challenges to an Arbitration Award in line with the purpose of the Act and the authoritative judicial dicta in this regard.

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