Arbitration, as per Section 2(a) of the Arbitration and Conciliation Act, 1996 (Hereinafter referred to as the “Act”) means any arbitration whether or not administered by a permanent arbitral institution. Arbitration is a mechanism in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for private dispute resolution procedure instead of approaching the court.
Prerequisites of Arbitration
To settle a dispute with the help of arbitration, both parties need to mutually agree to the same. This may be included in the contract between two parties in the form of an arbitration clause, or it can be in the form of a separate agreement and such Arbitration Agreement should be in writing.
The Arbitration Agreement is defined under Section 7 of the Arbitration and Conciliation Act, 1996. It means an agreement by rbithe parties to submit to arbitration all or certain disputes which have arisen, or which may arise between them in respect of a defined legal relationship, whether contractual or not. The Arbitration Agreement shall contain the manner of appointment of arbitral tribunal, language of arbitration as well as the place of arbitration.
Initiation of Arbitration
Section 21 of the Act states that arbitration proceeding shall commence from the date on which one of the parties offers to settle the dispute through arbitration. The arbitration proceeding in initiated when a notice is sent under the provisions of this Section.
Composition of the Arbitral Tribunal
Section 10 of the Act provides for the number of arbitrators which comprises the Tribunal. The parties may appoint as many as arbitrators they want but such a number shall not be an even number. Appointing at least 1 arbitrator is mandatory. As per Sections 10 and 11 of the Act, the parties can mutually appoint the Arbitral Tribunal as per their free will. The arbitrator appointed may be of any nationality unless the parties agree otherwise.
Nevertheless, if the parties to the dispute fail to mutually appoint the arbitrator(s), then Section 11 of the Act also provides for the procedure for appointment of an arbitrator by the concerned Court. If the parties fail to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party or the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court. Also, in cases of Arbitral Tribunal comprising of Sole arbitrator, if the parties fail to mutually appoint the same, then upon an application by any party the concerned Court can appoint the arbitrator as per the Arbitration Agreement between the parties.
In the case of appointment of a sole or third arbitrator in international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
Section 11 also states that the arbitrator has to submit a disclosure in writing in regards to the qualification required by the parties and the fact that he would be an independent and impartial arbitrator.
For determining the fees of the arbitral tribunal and the manner of payment of such fees, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule of the Act.
Powers of Arbitral Tribunal
Under Section 19, it is stated that the arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908, or the Indian Evidence Act, 1872. The parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings which should be guided by principles of natural justice. The power of the arbitral tribunal includes the power to determine the admissibility, relevance, materiality, and weight of any evidence.
The arbitral tribunal shall determine the place of arbitration in the event that the arbitration agreement does not specify the same, having regard to the circumstances of the case, including the convenience of the parties. The arbitral proceedings in respect of a particular dispute shall commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
Section 29 of the Act states that in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members. If authorized by the parties or all the members of the arbitral tribunal, questions of procedure may be decided by the presiding arbitrator.
An arbitral award shall be required to be made within a period of a period of twelve months from the date of completion of pleadings in case of any arbitration proceeding other than international commercial arbitration. Further, the Act states that in case of international commercial arbitration the award should be made as expeditiously as possible, and endeavour shall be made to pass such award within twelve months from the date of completion of pleadings.
If the Award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree.
Finality and enforcement of Arbitral Awards
An arbitral award shall be final and binding on the parties and persons claiming under them respectively. Section 36 states, that the arbitral award shall be enforced as per the provisions of the Code of Civil Procedure, 1908. Such award shall be final and binding on the parties.