The Role of Arbitration in Resolving Corporate Issues in India

This article has been written by Shivanii Singh, 2nd year Student studying in South, Calcutta Law College, Calcutta University.

ABSTRACT

Arbitration is getting popularity in India nowadays. Indian courts, overburden with pending cases, are not able to solve the pending cases. It takes a long time for the court to give judgement or solve a case. Whenever any business agrees to enter into an agreement with the other party, an arbitration clause is actually put at the end . The corporate entities do not want to waste their crucial time in courts . So they put arbitration clause at the end. This article highlights the importance of arbitration in resolving corporate issues in India. It highlights it’s advantages in terms of speed , efficiency and confidentiality and also explores how this is one of the best alternative for the corporate offices. It also provides a detailed analysis with relevant provisions of law, the landmark judgements and supreme court cases.

Keywords- Arbitration disputes, Alternative method, Key judgements, awareness, minimum court intervention, Arbitrator,commercial law

INTRODUCTION

In the realm of business or corporate world, when one party enters into an agreement with other, complexities are bound to arise. They need a mediator to resolve the issues. Traditionally, it is always noted that litigation is time consuming -a case take alot of years to solve. The commercial entities do not want to waste their precious and fruitful resources in litigation.

This article explores the multifaceted role of arbitration in resolving disputes highlighting it’s speed, efficiency. Arbitration is actually a a faster method of resolving disputes in India and has been gaining popularity ion India

ARBITRATION PROCESS IN INDIA

A private judge is appointed by both the parties in the arbitration clause. This judge is known as arbitrator. The arbitrator ,after hearing both sides will pass an arbitration award . This decision will be binding upon both the parties.

Both the parties while making the arbitration clause or the agreement decide who will be the arbitrator. When the other party receives the arbitration agreement, they may or may not agree to the arbitrator,thus,leading to disagreements between the parties. This issue then goes to the High Court . The High Court under Section 11 will appoint the arbitrator.

If the outcome of this Arbitral Award is unfavorable , parties have the option to seek recourse at District Courts for Domestic Arbitration and at the High Court for International Arbitration as per section 34 of the Arbitration Act.

LEGAL FRAMEWORK IN INDIA

Arbitration and Conciliation Act, 1996

The arbitration and Conciliation Act ,1996, is a law which was passed on 16th January 1996. The act applies to whole of India. However, The law is valid throughout India, with the exception of Jammu and Kashmir where only certain sections will apply if they deal with international commercial arbitration or conciliation. The United Nations in 1985 adopted the Model Law on International Arbitration and Conciliation and asked all the countries to give due importance to it. This resulted in the enforcement of the said Act. The various features of the act

1. ARBITRATION AGREEMENT

An Arbitration agreement is defined under under Section 7 of the act. It is the basis of agreement. It is an agreement to resolve disputes between parties.

Arbitration agreements are found and made almost everywhere in contractual and non contractual relationships.

2.  ​APPOINTMENT OF ARBITATORS

According to the Arbitration and conciliation Act,1966, in the arbitration agreement,arbitator will be mentioned. An arbitrator is a private judge appointed to resolve the disputes in arbitration disputes. The arbitrator ,after hearing both sides will pass an arbitration award . This decision will be binding upon both the parties.

Both the parties while making the arbitration clause or the agreement decide who will be the arbitrator. When the other party receives the arbitration agreement, they may or may not agree to the arbitrator,thus,leading to disagreements between the parties. This issue then goes to the High Court . The High Court under Section 11 will appoint the arbitrator. If the outcome of this Arbitral Award is unfavorable , parties have the option to seek recourse at District Courts for Domestic Arbitration and at the High Court for International Arbitration as per section 34 of the Arbitration Act.

3. ARBITRATION AWARD

The arbitration award is the final decision of the arbitrator. It is binding upon the parties.

SIGNIFICANT AMENDMENTS

2015 AMENDMENT

The arbitration and Conciliation amendment Act,2015 was introduced on December 3, 2015 . It amends the 1996 Act. It was introduced by by the Minister for Law and Justice, Mr. D.V. Sadananda Gowda. It introduced time limit for the arbitration tribunal to make award within 12 months. It also permits the parties to conduct faster method of resolution in arbitration proceedings.

2019 AMENDMENT

The arbitration and Conciliation amendment Act,2019 was introduced on July 15, 2019.. It was introduced by by the Minister for Law and Justice Mr. Ravi Shankar Prasad.

It established the Arbitration Council of India. The bill provides that arbitration proceedings should be kept confidential.

2021 AMENDMENT

The Act provided certain essential criteria related to the arbitrator in a schedule and was applicable in a different schedule accreditation norms also. The criteria specified in the schedule state that the arbitrator needs to be either: This applies where the person must be either (i) any lawyer who is a member of the bar council under the Advocates Act, 1961 who has a minimum of 10 years experience or (ii) any member of Indian Legal Service, etc.

IMPORTANCE OF ARBITRATION IN RESOLVING COMMERCIAL DISPUTES IN INDIA

• In the realm of business or corporate world, when one party enters into an agreement with other, complexities are bound to arise. They need a mediator to resolve the issues. Traditionally, it is always noted that litigation is time consuming -a case take alot of years to solve. The commercial entities do not want to waste their precious and fruitful resources in litigation. Arbitration is generally a faster approach
• Arbitration is one of the processes that have been known to allow for amendments. Both Parties make choices regarding the venue and time of Arbitration, and the language of the proceedings. It is a flexible approach
• Arbitration disputes unlike litigation is confidential and are not open for the This ensures privacy and confidentiality. This is helpful to the parties in sustaining their image.
• It is a cost effective method of resolving

KEY JUDGEMENTS SHAPING ARBITRATION PROCESS IN INDIA

ONGC v. Saw Pipes Ltd. (2003)

In this case, the Supreme court ruled that an arbitration award could be set aside if it was contrary to public policy.

The companies involved are: ONGC (Oil and Natural Gas Corporation) and Saw Pipes Ltd.

Issue: They received some pipeline work order from ONGC which went in to contract with Saw Pipes Ltd. The weather proved not favorable for the pumping when a disagreement over the contract started, hence resulting to arbitration.

The arbitrator made a decision and awarded Saw Pipes Ltd. company compensations.

In this case, the Supreme court ruled that an arbitration award could be set aside if it was contrary to public policy. It emphasizes on the liberal stand of the court.

This affirmed that although it is the function of the courts to closely follow the discretion of the arbitrators in its matter, the courts has the power to set aside an award in case it violates public policy or the basic principles of law.

Amazon v. Future Retail

This case is one of the most highlighted cases in India and the media. This case emphasizes on the importance of respecting agreements between the parties and the decision made by the arbitrator.

In this case Amazon had invested in Future Coupons. It owned a stake in Future Retail. The agreement between them actually restricted Future retail to sell it’s assets without amazons consent. Despite the agreement, Future Retail sold it’s business to Reliance Retail. It went to the arbitration tribunal and restricted future retail to sell it,s assets to reliance retail. The High Court upheld the decision of the tribunal.

Bharat Aluminum Co. v. Kaiser Aluminum Technical Services Inc. (2012)

This case emphasized the minimum court intervention in arbitration proceedings.

BALCO signed a contract with Kaiser for technical consultancy with respect to setting up an aluminum factory. There was a debate on the contract which resulted in arbitration process.

Arbitration Clause: The signed agreements also provided arbitration clauses to the effect that any arising disputes had to be resolved by reference to a foreign arbitration body.

The court said that Indian courts do not have jurisdiction to interfere in arbitration proceedings which specify foreign disputes.

Bharat Aluminum Co. v. Kaiser Aluminum Technical Services Inc. (2012)

BALCO is an Indian company which , entered into a contract with Kaiser Aluminum for technical services related to the construction of an aluminum smelting plant in India. In the arbitration clause it stated that disputes will be resolved in a foreign jurisdiction in London.

The court again ruled that Indian courts do not have jurisdiction to interfere in arbitration proceedings which specify foreign disputes.

The ruling enforced that India is friendly and open for international arbitrators. CHALLENGES FACED IN ARBITRATION PROCEEDINS IN INDIA

Traditional perception of Indians

India is still a developing country. It’s citizens do not trust much on arbitration and place their full place on courts. It is not necessarily a a bad thing. However, when citizens are ignorant, it only causes harm and a hindrance to the rise of arbitration.

Lack of Proper Laws

The arbitration and reconciliation Act, was amended in 2021. Despite the presence of laws governing arbitration, there are so many loopholes in it. The laws must turn into severe and more carefully specified so that hundreds of thousands earn confidence in Arbitration rather than the Judicial System.

Intervention of Courts in Arbitration Proceedings

Even though the courts have given judgment for minimal intervention, the court’s intervention in arbitration proceedings are still quiet alot. This makes arbitration ineffective as the courts are still intervening. Due to this very reason, people sometimes wish to go to the courts first instead of arbitrators.

Lack of Awareness

This is one of the biggest challenges which is why Arbitration is not growing in India due to the absence of awareness among the people. Civil engineers, businessmen who are advocates or legal advisors are some of them who have limited knowledge regarding the situation regarding arbitration proceedings hence the various newcomers into the small scale business, the various people who have no idea about such remedies are locked out of the mentioned proceedings.

WAY FORWARD

INTRODUCTION TO PROPER LAWS

This is one of the most important steps in ensuring effective arbitration in India. The loopholes in the current laws should be thoroughly examined and it should be actually reformed.

Arbitration laws actually needs to be reviewed and amendment on a regular basis. Then only it can be effective in India

MINIMUM COURT INTERVENTION

It takes a long time for the court to give judgement or solve a case. Whenever any business agrees to enter into an agreement with the other party, an arbitration clause is actually put at the end . The corporate entities do not want to waste their crucial time in courts . So they put arbitration clause at the end. However if the courts intervene in the proceedings, there is no use for an alternative method of resolving disputes in India. This also leads to distrust among people

CREATING AWARENESS

IN India many people do not even know about the existence of alternate dispute resolution. They are not aware of the arbitration proceedings in India. CREATING AWARENESS IS THE MOST CRUCIAL .

These are some of the ways in which arbitration in India can be promoted amongst the peoeple. Arbitration is very effective. Ensuring these steps can also promote arbitration.

CONCLUSION

Therefore, it can be rightly concluded that the element of arbitration is significantly important and efficient in solving various issues in India. It also has many advantages compared to a trial: It provides for flexible means of conflict-solving, it is confidential, and it can be much cheaper. The real life scenario of Antrix Corporation and Devas Multimedia establishment is a good example of how India’s favored means of dispute resolution is arbitration. As such, parties should consider arbitration as another option to litigation, where they find themselves in a dispute in India

REFERENCES

• Legal Service India, The Role of Arbitration in Resolving Business Disputes in India, https://www.legalserviceindia.com/legal/article-12976-the-role-of-arbitration-in- resolving-business-disputes-in-india.html (last visited Oct. 15, 2024)
• Press Information Bureau, Government of India, https://pib.gov.in/PressReleasePage.aspx?PRID=2003844 (last visited 15, 2024).
• PRS Legislative Research, The Arbitration and Conciliation (Amendment) Bill, 2015, https://prsindia.org/billtrack/the-arbitration-and-conciliation-amendment-bill-2015 (last visited Oct. 15, 2024).
• Cyril Amarchand Mangaldas, Law Governing Arbitration Agreement: Which Way Are Indian Courts Headed?, https://disputeresolution.cyrilamarchandblogs.com/2024/08/law- governing-arbitration-agreement-which-way-are-indian-courts-headed (last visited Oct. 15, 2024).
• iPleaders, Arbitration and Conciliation Act, 1996, https://blog.ipleaders.in/arbitration- and-conciliation-act-1996/ (last visited Oct. 15, 2024).
• Awsenate, The Pivotal Role of Arbitration in Resolving Commercial Disputes, https://awsenate.com/publications/articles/The_Pivotal_role_of_arbitration_in_resolving_ pdf (last visited Oct. 15, 2024).