Short Note on Arbitral Proceedings

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June 27, 2019

The Arbitration and Conciliation Act, 1996 envisages provisions pertaining to arbitral proceedings and awards in India. The paper illustrates the provisions and relevant case laws for better understanding of the topic. On account of surge in commercial transactions in our day-to-day lives, arbitration agreement and resort to arbitral proceedings for settlement of disputes has become a mundane topic.

Scheme of the Act

Chapter V of the Act deals with the conduct of arbitral proceedings. The Act provides for giving of equal opportunity to all parties to arbitration to present their case. It further enumerates that the parties are free to decide the manner in which the arbitral proceedings are to be conducted. If the parties to fail in arriving at a decision, the Arbitral Tribunal may determine the manner of proceedings and also the admissibility, relevance, materiality and weight of any evidence.

Place of Arbitration- Section 20(1) of the Act gives the parties the freedom to decide on a place of arbitration, however, failing such agreement the place is to be decided by the Arbitral Tribunal having regard to the circumstances of the case including the convenience of parties.

Language of Arbitration- Section 22 of the Act gives freedom to the parties to agree upon the language or languages to be used in arbitral proceedings. It provides that the Tribunal subject to agreement between the parties has the power to determine the language/es to be used in arbitral proceedings.

Sections 23 to 27 of the Act stipulate the procedure to be followed in arbitration proceedings. The Act entails a comprehensive guidance regarding the procedure to be followed like submission of claim and defence, amendment of claims etc.

Statement of Claim and defence- Section 23 of the Act provides that within the period of time agreed, the claimant shall state the facts supporting his claims and also the relief sought. The act also provides for the amendment of statement of claims during the arbitral proceedings under Section 23(3). However, the Law empowers the Arbitral Tribunal to disallow amendment of claims on the grounds of delay.

Section 24 of the Act also enumerates the manner in which proceedings are to be conducted. It envisages the law regarding hearings and submission of written proceedings before the Tribunal. Under this provision, the Act empowers the Tribunal to decide whether the proceedings shall be conducted orally or on the basis of documents and other materials on record.

Power to terminate the proceedings– The Act under Section 25 empowers the arbitrator to terminate the proceedings where the without any sufficient cause, the claimant fails to communicate his statement of claim within the stipulated period. However, if the respondent fails to submit his statement of defence within the predetermined period, the arbitrator shall continue with the proceedings without treating such a failure in itself as an admission of claimant’s allegations.

Appointment of experts by the Arbitral Tribunal (Section 26) – The Act also empowers the Tribunal to appoint one or more experts to report to it in specific issues to be determined by the Arbitral Tribunal. The provision also requires the party to give expert any relevant information or to produce, or provide access to any relevant documents, goods or other property for his inspection.

Court Assistance- The Act under Section 27 provides that an Arbitral Tribunal can take Court’s assistance in securing the attendance of witness or for the production of documents. The Act also extends the Court the authority to issue summons for examination of witnesses and for the production of documents.

TYPES OF ARBITRATION PROCEEDINGS

The arbitral proceedings in India have been broadly classified into Ad-hoc arbitration and Institutional arbitration. The Law Commission’s 222nd Report on Need for Dispensation of Justice through ADR (Alternative Dispute Resolution) elaborated on the concept of Ad-hoc and Institutional arbitration.

The Commission stated that under Ad-hoc arbitration parties determine the conduct of arbitration proceedings i.e. arbitration proceedings are agreed to and arranged by the parties themselves without recourse to an arbitral institution. In ad hoc arbitration, if the parties are not able to agree as to who will be the arbitrator or one of the parties is reluctant to cooperate in appointing the arbitrator, the other party will have to invoke Section 11 of the Act, whereunder the Chief Justice of a High Court or the Supreme Court or their designate will appoint the arbitrator. In case of domestic arbitration, it will be the Chief Justice of a High Court or his designate. In case of international commercial arbitration, it will be the Chief Justice of India or his designate. In ad hoc arbitration, the fee of the arbitrator will have to be agreed to by the parties and the arbitrator. The Report also states that under the prevailing circumstances, the fee of the arbitrator is quite high in ad hoc arbitration.

Under Institutional arbitration, arbitration is administered by an arbitral institution. The parties may stipulate in the arbitration agreement to refer an arbitral dispute between them for resolution to a particular institution. The Indian institutions include the Indian Council of Arbitration and the International Centre for Alternative Dispute Resolution. International institutions include the International Court of Arbitration, the London Court of International Arbitration and the American Arbitration Association. All these institutions have rules expressly formulated for conducting arbitration. These rules are formulated on the basis of experience and hence, they address all possible situations that may arise in the course of arbitration.

ARBITRAL AWARD

STATUTE

Essential elements of an Arbitral award– According to the Act, an Arbitral Award:

  1. Shall be in writing;
  2. Shall be signed by members of Arbitral Tribunal;
  3. Shall state the reasons on which the Award is based;
  4. Date and place of arbitration;

The Act provides that after passing the Award, a signed copy of the Award shall be delivered to each party. The Tribunal if required can also pass an interim arbitral award.

Correction and Interpretation of Arbitral Award- Section 33 of the Act deals with the correction and interpretation of Arbitral award. It provides that the Tribunal may correct the award within 30 days from the receipt of award. If the Tribunal finds the request for correction to be reasonable, then it shall make a correction or interpretation of a specific point or part of the award within 30 days of the receipt of request. However, if the Tribunal deems it necessary it can also extend the period of time within which it will make correction in the Award or interpretation of the Award.

The Act also makes provision for Additional Award- It states that unless otherwise agreed by the Parties, a party with notice to the other party may request the Tribunal for passing an Additional Award as to the claims presented in the Arbitral proceedings but erroneously omitted from the Arbitral Award.

Enforcement of Arbitral Award- Section 36 of the Act provides that if the time for making application to set aside an award under Section 34 has expired or the application has been refused then the Award shall be enforced under the Code of Civil Procedure in the same manner as a decree of a Court.

JUDICIAL DICTA

Unreasoned Arbitral Award [Section 31(1)]- In this case, the Petitioners filed for setting aside the award under Section 34 on the ground that the award passed by the Arbitral Tribunal is an unreasoned award and liable to be set aside in view of the provision under Section 31(1) of the Act. In the case of Hemadari Cements Pvt. Ltd. v. Walchandnagar Industries Ltd., the Division Bench of Andhra Pradesh High Court held that an award even if it is valid is liable to be set aside, if the award in question does not contain any reasons.

What is a reasoned or speaking award?

The Supreme Court in the case of Jajodea (Overseas) Pvt. Ltd. v. IDC of Orissa Ltd., settled the legal position that a speaking or reasoned award is one which discusses or sets out the reasons which led the Arbitrator to make the award. Setting out the conclusions upon the questions of issues that arise in the arbitration proceedings without discussing the reasons for coming to these conclusions does not make an award a reasoned or speaking award. A similar observation was made by the Court in the case of Union of India v. Hindustan Motors Ltd., wherein the Supreme Court stated that there is no elaborate discussion does not mean that the reasons have not been articulated. The rational basis of the award is revealed in the narration. In our opinion it is a speaking award, and not a silent award, though it speaks in few words. We must therefore proceed on this footing.

Stamping of Arbitral Award- On several occasions, the Courts have been confronted with the issue whether an arbitral award which is not stamped is enforceable or not. In the case of Naval Gent Maritime Ltd. v. Shivnath Rai Harnarain (I) Ltd., In any case the issue of Stamp Duty cannot stand in the way of deciding whether the award is enforceable or not. The Supreme Court decided a similar issue in the case of M. Anasuya Devi & Anr. v. M. Manik Reddy and Ors., wherein the Apex Court had observed that the question as to whether the award is required to be stamped and registered, would be relevant only when the parties would file the award for its enforcement under Section 36 of the Act. It is at this stage the parties can raise objections regarding its admissibility on account of non-registration and non-stamping under Section 17 of the Registration Act. In that view of the matter the exercise undertaken to decide the said issue by the Civil Court as also by the High Court was entirely an exercise in futility. The question whether an award requires stamping and registration is within the ambit of Section 47 of the Code of Civil Procedure and not covered by Section 34 of the Act.