WHAT
IS ARBITRATION? |
Arbitration
is a process of dispute resolution in which a
neutral third party (called the arbitrator) renders
a decision after a hearing at which both parties
have an opportunity to be heard. It is the means
by which parties to a dispute get the same settled
through the intervention of a third person, but
without having recourse to court of law. |
WHAT
IS AN ARBITRATION AGREEMENT? |
|
• |
Arbitration
agreement means an agreement by the 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
parties make an agreement that instead
of going to the court, they shall refer
the dispute to arbitration. |
| • |
The
arbitration agreement may be in the form
of an arbitration clause in a contract
or in the form of a separate agreement.
Where an arbitration clause is included
in a contract and the contract is avoided
due to misrepresentation or fraud, the
arbitration clause may still continue
to be binding. |
| • |
Where,
however, there was no contract at all
between the parties or contract was void
ab initio, the arbitration clause cannot
be enforced. |
| • |
An
arbitration agreement/clause must be in
writing. Although no formal document is
prescribed, however, it must be clear
from the document that the parties had
agreed to the settlement of dispute through
arbitration. |
| • |
Where
the arbitration agreement or clause is
contained in a document, the parties must
sign the document. Besides, the arbitration
agreement may be established by- |
| a. |
an exchange of letters, telex, telegram
or other means of telecommunication; or |
| b. |
an exchange of statements of claim and
defence in which the agreement is alleged
by one party and is not denied by the
other. |
|
| APPOINTMENT OF AN ARBITRATOR |
| WHO MAY BE APPOINTED |
A person
of any nationality may be an arbitrator, unless
otherwise agreed by the parties. In case of an
international commercial arbitration, where the
parties belong to different nationalities, the
Chief Justice of India may appoint an arbitrator
of a nationality other than that of the parties. |
NUMBER
OF ARBITRATORS |
The reference
may be made either to a single arbitrator or a
panel of odd number (i.e. 3, 5,7, etc.) of arbitrators.
The parties are free to fix the number of arbitrators
by agreement. If there is no agreement, the reference
shall be made to a sole arbitrator. |
| GROUNDS FOR CHALLENGING
APPOINTMENT |
| The appointment of an arbitrator
may be challenged if |
|
a. |
circumstances
exist that give rise to justifiable doubts
as to his independence or impartiality or |
| b. |
he
does not posses the qualifications agreed
to by the parties. |
|
| PLACE OF ARBITRATION |
The parties
are free to agree on the place of arbitration
and failing an agreement to do so the place shall
be determined by the arbitral tribunal having
regard to the circumstances of the case and convenience
of the parties. |
WHO
MAY REFER TO ARBITRATION? |
An arbitration
agreement is a contract and thus, any party to
such an agreement must have the capacity to contract. |
WHAT
DISPUTES MAY BE REFERRED? |
The parties
to an arbitration agreement may refer to arbitration,
a dispute which has arisen or which may arise
between them, in respect of a defined legal relationship,
whether contracted or not. |
Thus, all
matters of civil nature whether they relate to
present or future disputes may form the subject
matter of reference. The dispute, however, must
be the consequence of legal relationship arising
out of an obligation, the performance of which
is a duty under the law and for its breach a remedy
is provided. |
BAR
TO SUIT |
When the
parties have entered into an arbitration agreement,
they cannot file a suit in a court of law in respect
of any matter covered by the agreement; otherwise
the very purpose of arbitration will be frustrated.
The court will normally not intervene except where
so provided by the Act. |
| WHAT DISPUTES CANNOT BE
REFERRED FOR ARBITRATION |
| The following disputes cannot
be referred to arbitration: |
|
1. |
Insolvency proceedings. |
| 2. |
Lunacy proceedings. |
| 3. |
Proceedings for appointment
of a guardian to a minor. |
| 4. |
Question of genuineness
or otherwise of a will or matter relating
to issue of a probate. |
| 5. |
Matters of criminal nature. |
| 6. |
Matters concerning Public
Charitable Trusts. |
| 7. |
Disputes arising from
and founded on an illegal contract |
|
INTERIM
ORDERS BY COURT |
A party may,
before or during arbitral proceedings or at any
time after the making of the arbitral award but
before its enforcement, apply to the court for
any of the following matters- |
|
1. |
appointment
of guardian for a minor or a person of
unsound mind for the purposes of arbitral
proceedings; |
| 2. |
preservation,
interim custody or sale of any goods which
are the subject matter of the arbitration
agreement; |
| 3. |
securing
the amount in dispute in the arbitration; |
| 4. |
detention,
preservation or inspection of any property
or thing which is the subject matter of
the dispute, or to authorise for any of
the aforesaid purposes any person to enter
upon any land or building in the possession
of any party, or authorising any samples
to be taken or any observation to be made,
or experiment to be tried, which may be
necessary or expedient for obtaining full
information or evidence; |
| 5. |
interim
injunction or the appointment of a receiver;
or |
| 6. |
such
other interim measure of protection as
may appear to the court to be just and
convenient. |
|
A court has
jurisdiction to pass interim orders even before
arbitral proceedings commence and before an arbitrator
is appointed |
| SETTING ASIDE AN AWARD |
An application
for setting aside an arbitral award may be made
before the court, by a party within three months
of receipt of the award by him. The court may
set aside an award on the following grounds: |
|
1. |
a
party was under some incapacity; |
| 2. |
the
arbitration agreement is not valid under
the law; |
| 3. |
the
party making the application was not given
proper notice of the appointment of an
arbitrator or of the arbitral proceedings
or was otherwise unable to present his
case; |
| 4. |
the
award deals with a dispute not contemplated
by or beyond the scope of the submission
to arbitration; |
| 5. |
the
composition of the arbitral tribunal or
the arbitral proceedings was not in accordance
with the agreement or with the law; |
| 6. |
the
subject-matter of the dispute is not capable
of settlement by arbitration under the
law; or |
| 7. |
the
arbitral award is in conflict with the
public policy of India. |
|
APPEAL |
An appeal
shall lie before the court, against the following
orders- |
|
1. |
granting
or refusing to grant any interim measure
|
| 2. |
setting
aside or refusing to set aside an arbitral
award and |
| 3. |
granting
or refusing to grant an interim measure
of protection. |
|
No second
appeal shall lie against the appellate order of
the court, except, however, that an appeal may
be made to the Supreme Court. |
|
