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Unless there is an express bar under law and when there is an arbitration agreement either express or implied, a dispute between or among the parties can be referred to an Arbitrator or panel of Arbitrators as specifically agreed to. As everybody knows, Alternative Dispute Resolution Mechanism is mooted to reduce the burden in traditional courts and for providing a speedy relief to the parties. Arbitration and Conciliation Act, 1940 was repealed and Arbitration and Conciliation Act, 1996 was enacted with certain changes and improvements.

 

Few important points, in simplest form, concerning the Arbitration Mechanism, are as follows:

 

1.    When there is an agreement between or among the parties, the agreement can contain a clause saying that the disputes between or among the parties in the course shall be referred to an Arbitrator.

 

2.    The clause in any Arbitration agreement can be detailed with regard to the number of arbitrators, the place of arbitration, the procedure to be followed and also the cost of Arbitration.

 

3.    Even in the absence of any agreement and clause, if the parties mutually agree to refer a dispute between or among those to an Arbitrator, then, such a dispute between or among the parties can be referred to an Arbitrator.

 

4.    In all cases, unless there is a specific bar, the parties or the litigants are free to have their own say in getting an arbitrator appointed, place of arbitration, the procedure to be followed by arbitrator, the reference of dispute and also costs of Arbitration.

 

5.    The Arbitration and Conciliation Act, 1996 governs the issue of Arbitration or dispute resolution through Arbitration and conciliation and as such the parties to the dispute and even the Arbitrator shall follow the said Act.

 

6.    When there is an Arbitration Agreement between or among the parties and even then if a party do not co-operate in getting an Arbitrator appointed, then, the Court can interfere and appoint an Arbitrator under section 11 of Arbitration and Conciliation Act, 1996.

 

7.    In view of the rights of the parties and the urgent situations, even before getting an Arbitrator appointed under section 11, a party can approach the Court under section 9 of Arbitration and Conciliation Act, 1996 seeking an interim relief. In the absence of section 9 providing an opportunity to a party to approach the Court to get urgent interim orders, the litigant may become remediless at times.

 

8.    Once an Arbitrator is appointed by the Court or by the parties to the dispute themselves, then, the Arbitrator will proceed to decide the dispute before him following the procedure agreed or as he wishes. There is no compulsion on the Arbitrator to follow Civil Procedure Code, 1906, but, the Arbitrator is bound by the principles of natural justice.

 

9.    The Arbitrator is bound to observe substantial law and substantial law can not be ignored even by the Arbitrator and he will be having no discretion in applying substantial law to the dispute before him.

 

10.                   The order or the award passed by the Arbitrator can be appealed against under section 37 of the Arbitration and Conciliation Act, 1996.

 

11.                   On certain grounds, an aggrieved party can choose to file an application under section 34 of Arbitration and Conciliation Act, 1996 to set-aside an order or an award.

 

12.                   The order or the award of the Arbitrator is similar to a court order and the decree and the order or the award as the case may be, can be executed like an order of court or a decree of a civil court.

 

13.                   The Arbitration Clause in the agreement or a specific Arbitration Agreement between or the among the parties, precludes him in approaching a Civil Court and in view of the bar under section 8 of the Arbitration and Conciliation Act, 1996, the Civil Court will refer parties before it to Arbitration when the existence of clause or the agreement is pointed-out.

 

Whether an Arbitrator shall be appointed by the Court on showing the clause in the agreement?

 

        Once it was settled that a Court exercising jurisdiction under section 11 of Arbitration and Conciliation Act, 1996, discharges only an administrative function. But, the proposition was changed and now it is settled that a court under section 11 of Arbitration and Conciliation Act, 1996 exercises judicial functions and it is pursuant to the landmark judgment rendered by the Hon’ble Supreme Court.

       

        The dispute resolution through Arbitration has become very costly though we can see that there is no need of payment of court fee when a dispute is resolved through Arbitrator. In view of compulsory procedures and other inevitable difficulties, an Arbitrator too can have many hearings before a final award is passed. Like court, it is very difficult to ascertain the time to be taken for getting dispute resolved by an Arbitrator in most cases. It depends upon the complications in the case, the co-operation rendered by the parties and the advocates representing them and further proceedings in-between like preferring applications under section 34 of the Act.

 

        For each hearing before an Arbitrator, the parties to the dispute should bear the costs like sitting fee of an Arbitrator, the cost of place of Arbitration and other incidental expenses apart from professional fee to be paid to the legal professionals or professionals. In many cases, it is proved that dispute resolution through Arbitration is very costly and even the Hon’ble Apex Court has rendered judgments on the aspect.

 

        In view of the costs involved and other issues which are on logical footing, the Hon’ble Apex Court has said that the Court while exercising jurisdiction under section 11 of Arbitration and Conciliation Act, 1996, can look into the issues as to whether there exist any arbitration agreement, whether there is any live claim, whether the dispute is capable of being arbitrated upon etc.

 

        Earlier, there was an argument that all issues or challenges can be made to the Arbitrator under section 16 of Arbitration and Conciliation Act, 1996 and as such there was no need of looking into the arguments of the parties even before the Arbitrator is appointed. But, in view of the costs involved and the unnecessary risk to be taken by the parties, the proposition is now set that the Chief Justice exercising functions under section 11 of Arbitration and Conciliation Act, 1996 discharges judicial functions and can look into certain important issues even before the Arbitrator is appointed.

 

        As such, the court exercising jurisdiction under section 11 of Arbitration and Conciliation Act, 1996 discharges judicial functions now and appointment of arbitrator is no more automatic on showing the clause in the agreement etc.

 

Is Arbitration better suited to get corporate disputes resolved?

 

          A corporate dispute can not be seen at par with other civil disputes. There will be lot of urgency in getting a corporate dispute resolved and the stakes will be more in many cases. If we don’t consider the proposed companies bill, at present, a corporate dispute can be adjudicated by the competent Civil Court at times, the Company Law Board and the Company Court. Despite getting a special tribunal like Company Law Board constituted, there tend to be some delay in disposal of disputes and it may not be solely attributed to the functioning of the Company Law Board and even the Tribunal in future.

 

        Again, there is a proposition that an arbitration clause or agreement can not oust the jurisdiction of Company Law Board and the Company Court. The proposition laid down by the Courts and followed is on logical footing. For example, there can not be any alternative to an application under section 397/398 of the Companies Act, 1956 and a petition to the Company Court seeing to wind-up the Company. However, if there is dispute solely based on a share-purchase agreement, then, such a dispute can definitely be resolved through arbitration. Giving clarity on the issue as to which all the corporate disputes can be resolved through Arbitration is a complicated exercise.

 

        Normally, as everybody knows, Arbitration proceedings are so costly and it is very costly when the dispute to be resolved is a corporate dispute. In corporate disputes, normally, an expert corporate lawyer or a judge having experience of deciding corporate disputes is appointed or selected as an Arbitrator or Arbitrators. In view of many other consequential things, a corporate dispute resolution through Arbitration is more costly. However, the companies or the corporates will be willing to bear the costs as corporates value time rather money.

 

        Even if the dispute to be resolved is a corporate dispute, there tend to be delay if the parties or the professional representing parties do not co-operate for a speedy disposal of dispute. But, when the parties to a corporate dispute are keen in getting their dispute resolved, then, Arbitration Mechanism is certainly useful for them.

Few important points connected to getting a corporate dispute resolved through Arbitration can be summarized as follows:

 

1.    Not all corporate disputes be referred to an Arbitrator and in certain cases even the express arbitration clause, can not oust the jurisdiction of a Company Law Board or a Company Court.

 

2.    A corporate dispute resolution through Arbitration is certainly costly.

 

3.    The general rules applicable to appointment of Arbitrator through court, are applicable to the appointment of Arbitrator by court under section 11 even if the dispute to be referred is a corporate dispute or company litigation.

 

4.    The speedy disposal of a corporate dispute depends upon the complications in the case, the bonafides on the part of the parties in getting the dispute resolved early and the co-operation rendered by the professionals representing parties before the Arbitrator.

 

Note:

 

        I have focused on the substance of a small area under Arbitration and Conciliation Act, 1996 and its usefulness in getting the corporate disputes resolved. The specific wording in the Act, the sections and the case law is not referred.

 




Category Corporate Law, Other Articles by - Durga Rao 



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