Arbitration: An emerging trend and its importance in India

  • Post category:Blog
  • Reading time:11 mins read

Arbitration:  An emerging trend and its importance in India

 Written by Vaishnavi Bandhakavi

Abstract:

This research paper is about how arbitration as an alternative dispute resolution/mechanism is gaining importance over the stressed judicial system with a huge pendency of cases with a lot of commercial disputes, it’s necessary to have a proper arbitration mechanism for a faster resolution of issues. Thus, Arbitration is emerging as a reliable source of settlement of disputes avoiding the hustle in the courtrooms. Arbitration is a form of alternative dispute resolution, a method of resolving disputes between two parties outside the court of law but with the help of a third party who is unbiased and impartial or an arbitrator appointed with the consent and willingness of both parties.[1]

INTRODUCTION

Conflicts commonly arise whenever two people get together for a transaction of a business. Such commercial agreements and transactions will lead to conflicts that need quick and effective resolution. Fundamentally, Arbitration is an alternative disputer mechanism through which the parties sort out the disputes through a third party called an arbitrator. Arbitration as a means of resolving disputes with other mechanisms has come before society. In India, the mindset of the people in regards to resolving disputes or accessing justice is only by the means of court rather than going for arbitration for the same. [2]

Arbitration is a form of alternative dispute resolution that enjoys significant advantages such as lower costs, greater flexibility of process, confidentiality, choice of forum, choice of solutions etc. and it is the most popular and widely recognized and practiced form of ADR.

In an attempt to make arbitration a preferred mode of settlement of commercial disputes and make India a hub of international commercial arbitration, some major Amendments were introduced in the years 2015 to 2019.

Evolution of Indian arbitration:

  1. Pre-1940: The Indian Arbitration act of 1899 was the first law in India dedicated completely to arbitration. Its applicability however, was restricted to presidency towns of Calcutta, Bombay and Madras. The second schedule of the civil procedure code 1908 was at the specific statute for arbitration. The Indian contract act of 1872, section 10 and 28 and specific relief act of 1877. Both mention arbitration section 21. as previously stated, the legislation governing arbitration was dispersed throughout the various statutes there was was no unified law in place. Legislators were concerned about the lack of consolidated legislation. Therefore, multiple committees were formed to amend the current law and develop a more comprehensive framework for arbitration.

The years 1940 to 1996:

The arbitration act of 1940 in the year 1940, a combined regulation practice with the intervention was instituted which revoked the current regulations .The arbitration act of 1940 was dependent on the English arbitration act of 1934 notwithstanding the act, contained no arrangements, connectivity, authorization of the honours.

The 1940 administration was seen as an antithesis to the post economic liberalization boom in India. As a result, a new legislative system was required. One that would complement such growth in the country.

in this context of arbitration and conciliation act, 1996 was a watershed point in the act was modelled after 1985, UNCITRAL model of international commercial arbitration and the 1980 UNCITRAL conciliation rules, it was passed with the following primary goals in mind establishing a quick and cost-effective dispute resolution system reducing judicial intervention and monitoring establishing a unified legislative framework for arbitration and conciliation, both local and international

WHY THERE MUST BE ARBITRATION IN INDIA:

The importance of arbitration in India is that the legal machinery of a country is extremely slow and time-consuming. The arbitration process is both time and cost-effective compared to litigation. There is a higher level of expertise in arbitration as the arbitrators are usually retired judges or lawyers who have specialized knowledge and experience in dispute resolution. The arbitration process is both time and cost-effective compared to litigation[3]. Arbitration has gained a lot of popularity in India in recent years.

It is a process in which a neutral third party known as the arbitrator is appointed to resolve a dispute between two or more parties and like litigation arbitration is a confidential process which means that the proceedings are not open to the public.

It is a faster and more efficient way of resolving disputes compared to litigation in India. The judicial system is overburdened and cases can take years to be resolved. However, arbitration proceedings are resolved within 6 to 12 months which makes it a more efficient way of resolving disputes.

Secondly, arbitration is a confidential process. Unlike litigation the proceedings are not open to public. The details of the disputes are not disclosed to the media or the public. This confidentiality ensures that the parties can protect their reputation in business interest.

Arbitration is more flexible and cost-effective compare to litigation. The cost of arbitration is significantly lower. This is because the proceedings are less formal and streamlined and parties not have to pay for court fees or legal representation.

Arbitration is a flexible process. Parties can choose a place and time of the arbitration seat as well as the language in which the proceedings would be confidential.

The flexibility:  the parties can resolve a dispute in a way that is convenient and suitable for them. There are no rules of procedure in arbitration. Instead the parties can agree on whatever they want just.

In the present era. There is a need for arbitration keeping in mind the delays in litigation, the Expenses, the number of legal formalities involved.

The types of arbitration in India:

  1. Ad hoc arbitration:

Adhoc arbitration can be defined as a procedure of arbitration where a tribunal will conduct arbitration between the parties following the rules which have been agreed by the parties, beforehand or by following the rules which are been laid down by the tribunal. In case a part does not have any agreement between them. it is only effective and both the parties are ready to cooperate with each other[4]. When the administration charges are levied by the arbitral tribunal, the institution constitute a significant portion of the overall cost.

The flexibility to decide the procedure and the great control of the arbitration process.

2. Institutional arbitration:

Institutional arbitration refers to administration of arbitration by an institution in accordance with its rules of procedure. The institution provides appointment of arbitrators, case, management services, including oversight of an arbitral process, avenues for holding hearings et cetera[5]. Presently, there are over 35 arbitral institutions in India which are domestic international arbitral institutions, arbitration facilities, trade and merchants, associations and city, special Chambers of commerce and industry. Many have their own role and some follow the arbitration rules of the UNCITRAL.

 Arbitration involving Indian parties are administered by international arbitration institutions, such as international chamber of commerce, ICC court, the Singapore, international arbitration Centre, SIAC and London Court of international arbitration LCIA.

CONCLUSION:

Arbitration is a recent trend in the judicial system. There are a lot of advantages for the cases in arbitration, which would attract more people to resolve their issues quickly instead of going to a long-term court “process. Though many cases have been referred to arbitration recently, there are many drawbacks for which people don’t prefer arbitration.

These reforms aim to make India a hub of international commercial arbitration centres of robust ADR mechanisms. Also, it reduces the workload of the judicial system and will ensure that justice is attained by all in the shortest time span possible.[6]

REFERENCE

https://gitarattan.edu.in/wp-content/uploads/2022/07/22.pdf

https://economictimes.indiatimes.com/small-biz/legal/the-future-of-arbitration-in-india-strengthening-the-process-of-alternative-dispute-resolution/articleshow/82114707.cms

https://uk.practicallaw.thomsonreuters.com/1-618-5252?transitionType=Default&contextData=(sc.Default)&firstPage=true

https://www.thestatesman.com/india/arbitration-law-in-india-everything-you-want-to-know-1502757528.html


[1] Sakshi Gupta1, Kushagre Baweja, ARBITRATION IN INDIA: AN EMERGING JUDICIAL REVOLUTION IN INDIA, Volume 4, Number 1, December 2021, https://gitarattan.edu.in/wp-content/uploads/2022/07/22.pdf

[2] Arvind Sehdev, The Importance of Arbitration in India: A Comprehensive Guide, February 28, 2023,

https://www.linkedin.com/pulse/importance-arbitration-india-comprehensive-guide-arvind-sehdev/

[3] Aditi Goyal, ARBITRATION LAW IN INDIA: EVERYTHING YOU WANT TO KNOW, VIA mediation and arbitration centrehttps://viamediationcentre.org/readnews/NTUy/Arbitration-law-in-India-Everything-you-want-to-know

[4] Arbitration in India – Mechanism and Challenges, SEPTEMBER 21, 2023, https://www.clearias.com/arbitration-in-india/