Scope of Arbitration in Legal Field

Scope of Arbitration in Legal Field
Tanisha Jain 


ABSTRACT

The formal method of settling a dispute through arbitration is the selection of an arbitrator by both parties to the dispute. Even though there are a few instances where arbitration may have failed due to a variety of factors, it still proves to be a successful medium of dispute resolution.

One of its strong points is the fact that the courts interfere with the arbitration process very little. This is one of the reasons why the concept of arbitration is growing and changing the time landscape in India day by day. Nowadays, it's rare to come across a contract without an arbitration clause stating that any disagreements between the parties must be resolved by arbitration.

The majority of the several types of arbitrations, including institutional, ad hoc, fast track, domestic, international, and international commercial arbitrations, take place in India. Although ad hoc arbitration is still the most popular type of arbitration in India, institutional arbitration is becoming more and more popular as governments place more emphasis on foreign direct investments and new types of disputes. In this article, we will discuss the concept and scope of Arbitration including its merits and demerits.

Keywords- Arbitration, Dispute, Arbitrator, Judgment, Act.

1.      Introduction

Three laws—the Arbitration Act of 1940, the Arbitration (Protocol & Convention) Act of 1937, and the Foreign Awards (Recognition & Enforcement) Act of 1961—previously provided the bulk of the legal framework for arbitration in India. The General Law Act of 1940 had outlived its usefulness, forcing the creation of the 1996 Arbitration and Conciliation Act. In Babar Ali Vs. Union of India[2], a judicial review of the 1996 Act was successful.

The Foreign Awards Act, 1961, the Arbitration Act, 1940, and the Arbitration Act, 1937 were among the prior arbitration-related legislation in India that were codified, improved, and authorized by the Arbitration and Conciliation Act, 1996. It monitors and unifies the laws regulating domestic arbitration, commercial dispute arbitration, and the enforcement of international arbitral awards. It also lists the legislation pertaining to conciliation.

2. Arbitration- Arbitration, according to the definition, is the process of assisting parties to a dispute in reaching a mutually agreeable resolution. Parties that prefer to forego the customary drawn-out process of going to the local courts to resolve their issues might benefit from the Alternative Dispute Resolution system that includes arbitration. The parties to a disagreement send it to one or more arbitrators, whose judgment (the "award") they agree to be bound by. This is really a legal approach for the resolution of disputes outside of the courts.

3.      Arbitration types

The many forms of arbitration in India are categorized as:

4.      Scope of Arbitration

The Act neither lists situations that would be excluded from the arbitration's main focus nor does it include provisions for issues of inclusivity within the arbitration's purview.

4.1 In the case of Booz-Allen & Hamilton Inc vs. SBI Home Finance Ltd.[3] & Ors, the Supreme Court ruled that no particular disagreement types are expressly excluded from the 1996 Arbitration and Conciliation Act's definition of arbitrable issues. Going back in time, we are unable to deduce any rules about the kind of disputes that fall under the purview of arbitration from either the Indian Arbitration Act, 1899, or the Arbitration Act, 1940. This presupposes that the arbitrator can only be consulted with disputes or matters that they are qualified or authorised to determine. But other situations fall under the purview of the relevant judicial courts.

4.2 In an unusual instance under the Insolvency and Bankruptcy Code of 2016, the Income Tax Appellate Tribunal (Delhi) cited the Supreme Court of India's ruling in the case of Alchemist Asset Reconstruction Pvt. Ltd vs. M/S Hotel Gaudavan Pvt. Ltd. & Anr[4] that even arbitration proceedings cannot be started after the imposition of the moratorium under Section 14(1)(a) of the Code. So the question arose as to whether there were any particular requirements, or rather provisions, in various statutes that would allow the subject to be sent to arbitration.

4.3 The significance of the Calcutta High Court's significant decision might be derived in order to define the parameters of arbitration. In the case of Keventer Agro Ltd vs. Seegram Comp. Ltd (1998)[5], the Calcutta High Court expressed its opinion that while cases related to criminal crimes and marriage disputes may not be brought to arbitration, they may. There is mention of some conflicts that cannot be submitted to arbitration, including those involving status disputes like divorce, public criminal crimes, and disputes resulting from unlawful agreements. However, it has been established that a disagreement can be directed to arbitration if the facts of a criminal issue, such as bodily harm, give rise to a right to damages for personal injury.

The conclusion that follows is that such matters do not fall under the purview of arbitration unless a special legislation establishes the authority of a certain autonomy of the Court. It was customary for the legal system's courts to determine which types of conflicts would be subject to arbitration and which would not. The judiciary handled the severity of the issue in a cautious approach and stressed that problems should be resolved through arbitration in order to prevent time-consuming litigation.

5.      Merits of Arbitration

Going with arbitration over lawsuit has several benefits. The following are the salient ones among them:

5.1 Effective in terms of cost- Arbitration doesn't involve a lot of legal research. Both parties split the majority of the fees or expenses spent throughout the arbitration procedure. Due to this, this approach is far less expensive than regular litigation.

5.2 Convenience- The Court is responsible for choosing the hearing date in legal proceedings. The parties' comfort is not taken into account for this. When scheduling court dates, the parties can have a long wait. The right to choose a specific date that works for each side and their witnesses in arbitration, however, exists.

5.3 Flexible and effective- Too much time is spent trying to resolve traditional lawsuits. A specific situation could also take years to solve. Arbitration provides a legal conclusion considerably more quickly than litigation. When it comes to scheduling, arbitration is more flexible. Based on the availability of the parties and the arbiter, arbitration sessions can be easily planned.

5.4 Straight forward and informal method- The parties are not required to retain solicitors to represent them in arbitration. Before the arbitrator, the parties may individually convey their concerns and demands. The absence of formal mannerisms creates a relaxed atmosphere in this procedure.

5.5 Fairness- In a typical court proceeding, neither party is allowed to select the judge who will hear their case. But in arbitration, each party is free to select their own arbiter. This leads to a just outcome.  

6. Demerits of Arbitration

The coin always has two sides. Arbitration has many benefits, but there are also certain drawbacks that parties should be aware of if they decide to use arbitration which are as follows:

6.1 Inconsistent application of the law- While it is proper for the arbitrator to uphold the law, the requirements are unclear. It is very likely that the arbitrator would evaluate the "apparent fairness" of the views taken by the different parties rather than strictly applying the law. This becomes more important when a rigorous interpretation of the law favours our side.

6.2 Limited arbitrator authority- The Court has the authority to impose sanctions on parties that hinder or drag out the course of the proceedings. However, an arbitrator does not have the same authority as a judge to declare somebody in contempt of court.

6.3 Zero appeals- The arbitrator's judgment is regarded as being final. The arbitration process does not have an appeals mechanism. Even if one side thinks the arbitration's decision was unfair, unreasonable, or biassed, they are unable to challenge it.

6.4 Principles of Evidence- A judge must adhere to certain standards and guidelines when admitting evidence in a court of law. Arbitration, though, is an exception. Arbitrators are able to use whatever information provided to them.

6.5 Inadequate transparency- Typically, the arbitration sessions are done in secret and are not made public. This may be both a benefit and a drawback of arbitration. This lack of openness might lead to prejudice in the process and, ultimately, unfairness.

7. Conclusion