CONDUCT OF ARBITRAL PROCEEDINGS

CONDUCT OF ARBITRAL PROCEEDINGS

Author-Rishita Khare, Rani Durgavati Vishwavidyalaya, Jabalpur

INTRODUCTION

Alternative Dispute Resolution mechanisms are becoming a more popular choice for parties, especially for commercial disputes. In India, these concepts are not new. This process had been practised traditionally by village councils. The Britishers created the Indian Arbitration Act of 1940. After independence, The Arbitration and Conciliation Act, 1996 was enacted to ensure speedy, flexible and efficient dispute resolution. This not only provides a less complicated procedure but also ensures expertise in giving decisions which could not be attained in traditional ligation.

Keywords (Minimum 5): Arbitration, Conduct of Arbitration proceedings, Arbitration Procedure, Alternative Dispute Resolution (ADR), Arbitral Tribunal

Meaning of Arbitration

According to Section 2(1)(a) of the Arbitration and Conciliation Act, “arbitration means any arbitration whether or not administered by permanent arbitral institution.”[1]

According to Halsbury—Arbitration means “the reference of dispute or

difference between not less than two parties, for determination, after hearing

both sides in a judicial manner, by a person or persons other than a Court

of competent jurisdiction.”[2]

Arbitration is generally preferred over traditional court litigation. Parties agree to resolve disputes with a neutral third party in arbitration. Its decisions are binding and equivalent to the court judgments. It is regulated and enforced by the courts. Awards from arbitration can be challenged only under certain conditions.

Arbitration and Conciliation Act, 1996

The Arbitration and Conciliation Act, 1996 is a modern as well as a comprehensive enactment based on the UNCITRAL Model Law and Rules. It covers both domestic and international arbitration in India.

The Act reduces court intervention in arbitration processes, allowing parties to choose laws, venues, and arbitrators freely. It mandates the tribunal to justify its awards and stay within its jurisdiction which did not exist in the previous laws of 1940. The Act requires the arbitral tribunal to provide reasons for its award and allows for the use of mediation and conciliation to settle disputes.

Settlement agreements through conciliation have the same status as arbitral awards under this Act which is an improvement from the previous laws which lacked such options and flexibility. This act also allows the process of conciliation and mediation along with the arbitration process to settle disputes. This has made the settlement of disputes in India at par with global standards.

Kinds of Arbitration

The Arbitration and Conciliation Act provides 7 different kinds of arbitration.

  • Ad-hoc arbitration occurs when parties in a commercial transaction seek arbitration without prior agreement or involvement of a specific institution.
  • Institutional arbitration involves parties with a prior agreement to resolve disputes through a named institution.
  • Contractual arbitration includes an arbitration clause in any of its commercial agreements for dispute resolution.
  • Statutory arbitration is one which is mandatory and binding by law.
  • Domestic arbitration takes place within India under Indian law.
  • International arbitration involves a foreign element and can be governed by foreign or Indian law.
  • Foreign arbitration is conducted outside India, which results in any foreign award needing enforcement in India.

Each type of arbitration has its own unique process and rules, with parties agreeing to the terms based on their specific situation and requirements.[3]

Principles involved in the Conduct of arbitration proceedings

Arbitration proceedings are guided by key principles:

  • Independence, Impartiality, and Objectivity of arbitrators
  • Party Autonomy in setting arbitration rules
  • Equal Treatment for all parties
  • Confidentiality in dispute resolution
  • Finality of Awards.

CHAPTER 5- CONDUCT OF ARBITRAL PROCEEDINGS

SECTION 18- EQUAL TREATMENT OF PARTIES

According to section 18. “The parties shall be treated with equality and each party shall be given a full opportunity to present this case.”

The principle of “the audi alteram partem rule which means ‘hear the other side’” is to be followed.[4]

The principles of natural justice must be followed to conduct a fair procedure. These emphasize that a person cannot be a judge in their own case, and a person’s defence must always be heard impartially. Even if the arbitrator is not bound by technical rules of procedure, it still cannot ignore principles of natural justice.

Hence arbitrators must be impartial and unbiased. They have a binding obligation to ensure a fair trial in arbitration proceedings, going beyond just treating parties equally. Fair trial includes giving each party a reasonable chance to present their case. Parties must be aware of the evidence presented and given a chance to defend themselves against it.

If any of the parties was not properly notified of the appointment of the arbitrator or arbitration proceedings an award from such a proceeding may be set aside per Section 34(2)(a)(ii) of the act. [5]

SECTION 19- DETERMINATION OF RULES OF PROCEDURE

Section 19 says that-“The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872)”

Constraining the arbitral proceedings by the rigidity of the Evidence Act or the CPC is not the legislative intent of this act. Parties have the freedom to set rules for arbitration proceedings and allows them to customize it to their needs

The arbitral tribunal has discretionary powers to determine the proceedings if they do not agree. This flexibility in choosing procedural rules is an appealing factor for parties that are considering arbitration for dispute resolution as held in Henry Sotheran Ltd. v. Norwich Union Life Assurance Society.[6]

Section 19(4) of the Act gives the tribunal the discretion to conduct proceedings as it sees fit, including deciding on the admissibility, relevance, materiality, and weight of any evidence as held in Steel Authority of India Ltd. vs. Salzgitter Mannesmann international GMBH.[7]

In Punjab State Industrial Development Corporation Ltd., vs. Sunil K. Kansal[8] it was held that while recording the evidence in a case the tribunal is not bound by the Indian Evidence Act. It can use a fair, equitable, and reasonable procedure. If evidence is needed, parties can submit affidavits and allow cross-examination of deponents on such affidavits. If no procedure is agreed upon, the Act’s provisions apply to the proceedings.

SECTION 20- PLACE OF ARBITRATION

The place of arbitration is crucial as it determines the applicable laws for the arbitral process. Parties can choose the place of arbitration, and institutional rules may designate the seat of arbitration as well according to the convenience of the parties.

The seat and place of arbitration differ: the place is the physical location, while the seat determines legal jurisdiction, governing law, and supervisory courts. Thus, the seat of the arbitration does not change even if the place of arbitration is changed. The place of arbitration has to be decided as per the terms of the contract.[9]

In Enercon (India) Limited and others v. Enercon GMBH and another it held that “The Supreme Court held that “the location of the seat will determine the courts that will have exclusive jurisdiction to oversee the arbitration proceedings. It was further held that the seat normally carries with it the choice of that country’s arbitration law”[10]

SECTION 21- COMMENCEMENT OF ARBITRAL PROCEEDINGS

According to Section 21, the arbitration process commences when the respondent receives a formal request to arbitrate that dispute unless agreed otherwise.[11] This means that if there is a disagreement between parties the process begins once the party being sought for arbitration receives a request. The request for arbitration does not have to be explicitly written; it can also be implied through the parties’ conduct. However, the notice or request must be sufficient to prompt the other party to take action.

Failure to receive or recognize this notice as a formal request for arbitration will prevent the commencement of arbitration proceedings. This principle was emphasized in the Nea Agrex SA vs. Baltic Shipping Co. Ltd. (1976) case, where the first notice demanding arbitration was deemed crucial in invoking Section 21.[12]

It is important to determine the date of receipt, as outlined in Section 3 of the Act, which details how written communication is considered received. The commencement date plays a significant role in calculating time limits and adhering to time-bar clauses within arbitration agreements. The request for arbitration must clearly outline the dispute, initiating the formal arbitration proceedings. Ultimately, Section 21 ensures that arbitration proceedings officially start upon the respondent receiving a clear request, paving the way for resolution.

The limitation for a counter-claim must adhere strictly to Section 43(1) of the Act with Section 3(2)(b) of the Limitation Act, 1963 as decided in Voltas Limited vs. Rolta India Limited. The date for figuring out the limitation period is when the arbitration request is made, especially when the respondent initiates the process and raises counterclaims.[13]

SECTION 22- LANGUAGE TO BE USED IN THE ARBITRAL PROCEEDINGS

“This section provides that parties can mutually agree on the language to be used in arbitration proceedings.”

The arbitral tribunal shall decide the language to be used if no agreement is reached by the parties. All written submissions, hearings, awards, decisions, and all other communications from the tribunal will be affected accordingly in a dispute. The tribunal may also order the translation of documents into the agreed language. The tribunal must ensure impartiality and fairness in language determinations to guarantee understanding and fairness for all parties involved in the proceedings.

SECTION 23- STATEMENT OF CLAIM AND DEFENCE

Under Section 23 the claimant is required to submit a statement of claim with supporting facts, points at issue, and relief sought within the agreed timeframe.

The respondent must then file a statement of defence addressing each claim and may provide additional information. Both parties can submit relevant documents with their statements or refer to them later.

Parties can amend their pleadings unless rejected by the tribunal for causing delay in proceedings. The procedure allows for flexibility in timing and elements of pleadings, enabling parties to adopt rules from arbitral institutions or civil procedure codes. After the tribunal is established, parties exchange and file their pleadings to present their case and respond to each other’s claims, ensuring a fair and transparent arbitration process.[14]

The failure of a claimant to file a statement of claim within the specified time may result in the termination of proceedings by the arbitral tribunal, as per Section 25(a) of the 1996 Act. However, if the claimant provides a valid reason for the delay, the proceedings need not be terminated.[15]

SECTION 24- HEARINGS AND WRITTEN PROCEEDINGS

Section 24 of the Act, 1996 covers the conduct of hearings and written proceedings in arbitration. The arbitral tribunal decides whether oral hearings are necessary, but must hold them upon request unless agreed otherwise.

The notice of hearings and meetings must be given to parties in advance and communication of statements and documents is required. Evidence can be presented in various forms, following guidelines from the Indian Evidence Act, 1872. Fair trial principles are emphasized throughout the process to ensure transparency and communication between parties and the tribunal. Overall, Section 24 aims to facilitate fair arbitration proceedings with opportunities for oral hearings, document inspections, and effective communication, guided by the principles of fairness and equity outlined in the Indian Evidence Act and the Arbitration and Conciliation Act.[16]

In litigation, facts are proven through witness testimony and documentary evidence. In arbitrations, evidence is primarily presented through documents, which is considered more efficient. Documents not in the arbitration language require translations agreed upon by both parties.

Witness evidence is usually taken under the arbitrator’s direction, but written affidavits may be accepted to save time. Witnesses must speak to facts, not opinions. The arbitral tribunal has wide powers, including inspecting the subject matter and determining the admissibility of evidence. The burden of proof lies on the party wishing to present evidence, particularly if the fact is within their knowledge.[17]

Application of production of documents and order passed therein by the arbitrator there cannot be interfered by the High Court by way of writ when alternative remedy is provided under Section 37 as held in Radiant Info Systems Ltd. vs. Karnataka SRTC Ltd.[18]

SECTION 25-DEFAULT OF A PARTY

Section 25 says that if the claimant fails to submit their statement of claim on time, then the tribunal can end the proceedings. Whereas, if the respondent fails to submit their statement of defence, the tribunal can still proceed without assuming that the allegations are true.

If either party does not attend a hearing or provide evidence, the tribunal can still make an award based on existing evidence. Section 25 also outlines the repercussions of failing to do so without a valid excuse, promoting fairness and efficiency in the process.[19]

After pleadings are completed, parties must present documentary evidence. If a party fails to appear at an oral hearing or provide evidence without cause, Section 25(c) allows the arbitral tribunal to proceed and make a decision based on existing evidence. This was seen in M/s. Auto Craft Engineers vs. Akshar Automobiles Agencies Pvt. Ltd.[20], decided by the Bombay High Court.

SECTION 26- EXPERT APPOINTMENT BY ARBITRAL TRIBUNAL

Section 26 of the Act allows the arbitral tribunal to appoint experts to help with technical issues. The arbitral tribunal can appoint one or more experts as per need since they are experts in specific fields. Experts can be asked to report on specific issues determined by the tribunal, with parties providing necessary information or access to documents, goods, or property.

This helps the tribunal make informed decisions.  The appointed expert may participate in an oral hearing if requested by a party or deemed necessary by the tribunal, and parties can question the expert and present their own expert witnesses. The expert must make all relevant information available upon request. Hence, this section enables the tribunal to get technical assistance through expert appointments, ensuring a fair consideration of technical matters in arbitration proceedings.[21]

SECTION 27- COURT ASSISTANCE IN TAKING EVIDENCE

“Section 27 allows the arbitral tribunal or a party, with the tribunal’s approval, to seek court assistance in obtaining evidence.” The application to the court must detail the parties’ names, claim nature, relief sought, and required evidence. The court can issue processes for evidence provision, penalizing witnesses for non-compliance.

Processes” include summons and commissions for witness examination and document production. This section allows parties to ensure a fair arbitration process by involving the court in obtaining necessary testimony and documents for dispute resolution. Since it is the court only which can issue them.

Non-compliance or contempt towards the tribunal may lead to consequences. Court assistance can be requested for recording evidence, with details like parties’ names and claim nature required. While the court can assist in recording evidence, it cannot directly order production. If the arbitrator denies the court approach, objections can be filed under Section 34.[22]

CONCLUSION & COMMENTS

The Arbitration proceedings in the above act are driven by providing greater autonomy to the parties as well as allowing them to decide procedural aspects. This includes selecting the applicable laws, the place of arbitration and the language used to be used. The Arbitration and Conciliation Act of 1996 in India restricts judicial interference in arbitration which further emphasizes autonomy, confidentiality, and efficient dispute resolution. It empowers parties to customize the arbitration process to meet their unique requirements, promoting a more adaptable and effective resolution method beyond traditional legal modes of litigation.

REFERENCES

  1. Books / Commentaries / Journals Referred
    1. Sc Tripathi, Arbitration and Conciliation Act, 1996 (6th ed. Central Law Publications, 2012)
    2. The Arbitration and Conciliation Act, 1996 (Prepared by Chandrashekhar U, Senior Faculty Member, Karnataka Judicial Academy) (30.06.2022)
  2. Online Articles / Sources Referred
    1. Manupatra- Chapter 5 Conduct of Arbitration Proceedings http://student.manupatra.com/Academic/Abk/Arbitration-and-ADR/CHAPTER-5.htm
    2. Garg R and Law L, “Live Law” (Live Law, October 3, 2022) <https://www.livelaw.in/news-updates/calcutta-high-court-arbitration-act-section-21-section-11-210816>
    3. Parina Katyal, Order Passed by The Arbitrator Allowing Meetings As Per Convenience Of Parties, Would Not Change The Seat Of Arbitration: Delhi High Court, Live Law, 7 June 2022 2:00 PM, https://www.livelaw.in/news-updates/delhi-high-court-justice-v-kameswar-rao-arbitration-and-conciliation-act-arbitrator-ongc-201044?infinitescroll=1
    4. Priyanshi Bhageria Arbitral Tribunal’s Power To Recall: A Hasty Judicial Creation?RMLNLU Arbitration Law Blog
    5. https://www.indiacode.nic.in/
    6. https://indiankanoon.org/
  3. Cases Referred
    1. Henry Sotheran Ltd. v. Norwich Union Life Assurance Society. [1992] ADRLJ 245
    2. Authority of India Ltd. vs. Salzgitter Mannesmann international GMBH. 2012 (2) Arb LR 296 (Delhi).
    3. Punjab State Industrial Development Corporation Ltd., vs. Sunil K. Kansal2013 (1) Arb LR 327 (P&H) (DB)
    4. Enercon (India) Limited and others v. Enercon GMBH and another (2014) 5 SCC 1
    5. Nea Agrex SA vs. Baltic Shipping Co. Ltd. (1976) [1976] 2 All ER 842
    6. Voltas Limited vs. Rolta India Limited (2014) 4 SCC 516: 2014 (1) Arb LR 343 (SC): AIR 2014 SC 1772.)
    7. Bharat Heavy Electricals Ltd. vs. Jyothi Turbopower Services P. Ltd., 2017 (1) Arb LR 289 (Mad) (DB): (2016) 4 CTC 1
    8. Radiant Info Systems Ltd. vs. Karnataka SRTC Ltd. (2018) SCC Online Kar 1209
    9. M/s. Auto Craft Engineers vs. Akshar Automobiles Agencies Pvt. Ltd Arbitration Petition Nos. 556/2014 & 680/2014
  1. Statutes Referred
    1. Arbitration and Conciliation Act, 1996

[1] Arbitration and Conciliation Act, 1996

[2] DR. SC TRIPATHI, ARBITRATION AND CONCILIATION ACT, 1996 (6TH ed. CENTRAL LAW PUBLICATIONS, 2012)

[3] DR. SC TRIPATHI, ARBITRATION AND CONCILIATION ACT, 1996 (6TH ed. CENTRAL LAW PUBLICATIONS, 2012)

[4] https://kjablr.kar.nic.in/assets/articles/Arbitration%20and%20Conciliation%20Act,%201996.pdf

[5] https://kjablr.kar.nic.in/assets/articles/Arbitration%20and%20Conciliation%20Act,%201996.pdf

[6] [1992] ADRLJ 245

[7] 2012 (2) Arb LR 296 (Delhi).

[8] 2013 (1) Arb LR 327 (P&H) (DB)

[9] Parina Katyal, Order Passed by The Arbitrator Allowing Meetings As Per Convenience Of Parties, Would Not Change The Seat Of Arbitration: Delhi High Court, Live Law, 7 June 2022 2:00 PM,

[10] (2014) 5 SCC 1

[11] Garg R and Law L, “Live Law” (Live Law, October 3, 2022) <https://www.livelaw.in/news-updates/calcutta-high-court-arbitration-act-section-21-section-11-210816>

[12] [1976] 2 All ER 842

[13] Voltas Limited vs. Rolta India Limited. (2014) 4 SCC 516: 2014 (1) Arb LR 343 (SC): AIR 2014 SC 1772.)

[14] https://indiankanoon.org/doc/1460737/

[15] Bharat Heavy Electricals Ltd. vs. Jyothi Turbopower Services P. Ltd., 2017 (1) Arb LR 289 (Mad) (DB): (2016) 4 CTC 1

[16] https://indiankanoon.org/doc/569211/

[17] https://kjablr.kar.nic.in/assets/articles/Arbitration%20and%20Conciliation%20Act,%201996.pdf

[18] 2018 SCC Online Kar 1209

[19] Law VAPBSFEIA, “Arbitral Tribunal’s Power to Recall: A Hasty Judicial Creation?” (RMLNLU Arbitration Law Blog, May 24, 2023) <https://rmlnluseal.home.blog/2023/03/12/1856/>

[20] Arbitration Petition Nos. 556/2014 & 680/2014

[21] https://indiankanoon.org/doc/1752162/

[22]“Arbitration and ADR – Chapter 5 – Conduct of Arbitral Proceedings” <http://student.manupatra.com/Academic/Abk/Arbitration-and-ADR/CHAPTER-5.htm>

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