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A SYNOPSIS ON ARBITRATION PROCEEDINGS

Prepared by:

V.PARVATHESAM
Manager (Legal Affairs)

LEGAL AFFAIRS DEPARTMENT


RINL, Visakhapatnam Steel Plant
VISAKHAPATNAM

A SYNOPIS ON ARBITRATION PROCEEDINGS


1. Introduction: Arbitration is one of the Alternative Dispute Resolution
Mechanisms. It is less expensive and a speedier remedy. It provides for
resolution of disputes between the parties to the contract by a chosen
judge(s).

The Arbitration and Conciliation Act, 1940 used to govern the

law relating to arbitration in India. The said Act is repealed and


substituted by the Arbitration and Conciliation Act 1996. The present Act
is in line with the Model Law on International Commercial Arbitration
adopted by United Nations Commission on International Trade Law.
2. Arbitration Agreement: Parties to the contract can resort to arbitration
either by entering into a separate arbitration agreement or the arbitration
Clause can be made a part of the contract. It may even emerge out of
exchange of letters/correspondence or out of reference to arbitration
clause contained somewhere else. Assertion by one party about the
existence of an arbitration agreement and non-denial by the other party
also amounts to deemed existence of arbitration agreement.
3. Institutional Arbitration: The parties to a contract can also agree to
submit their dispute to an institution, which conducts the arbitration as per
its rules. In such case, the parties agree between themselves that the
disputes, if any between them will be referred to and decided by Rules
of such an institution. A standard arbitration clause will be incorporated
by the parties in the contract.

It is called an institutional arbitration.

Indian Council of Arbitration (ICA), New Delhi, Indian Council of


Alternative Dispute Resolution(ICADR), New Delhi and International
Chamber of Commerce(ICC), Paris are such institutions. These
administrative institutions have their own separate set of arbitration rules
for conducting arbitration proceedings. However these rules should not
be in conflict with the Act. Normally, in industries like VSP, we find
arbitration clause in the General Conditions of Contract (GCC).

In

contracts pertaining to import of material by sea, the arbitration clause is


found in charter party agreement.

4. Initiation of Arbitration: A dispute is said to have arisen between the


parties to a contract when one party asserts a thing and the other party
denies the same. Arbitration clause for adjudication of the said dispute is
invoked by giving a notice invoking Arbitration Clause.

As per the

Section-21 of the Act, arbitration proceedings are deemed to have


commenced on the date on which the notice invoking the arbitration
clause is received by the other party(respondent). The above deeming
provision is subject to contract to the contrary. For example, in cases
where arbitration by ICA is agreed, arbitration proceedings are deemed to
have commenced on the date on which the application for arbitration is
received by the Registrar of ICA. In arbitration by ICA, the initiation of
arbitration is to be made by a party by making his claim statement in
writing supported by the documents and sending the same to the
Registrar of ICA.
5. Appointment of Arbitrator(s) / Constitution of Arbitral Tribunal:
As per the provisions under the Act, unless otherwise agreed between
the parties, the disputes will be heard and determined by a

Sole

Arbitrator. The number of arbitrators should always be odd in number. If


it is agreed by the parties that there shall be three arbitrators, in which
case, each party shall appoint one arbitrator and those two arbitrators
shall appoint the third arbitrator. In case of arbitration by ICA, depending
on the value of the claim, the number of arbitrators will be decided. If the
dispute is to be heard and determined by a Sole Arbitrator, the parties to
the dispute should mutually agree and nominate a person (from among
the panel maintained by ICA) to act as the Sole Arbitrator. In case of
failure to agree, ICA would nominate the Sole Arbitrator. If the dispute is
to be heard by three arbitrators, each party shall nominate their nominee
arbitrator from out of the panel of ICA and the third arbitrator will be
appointed by ICA.

The third arbitrator

is called as the Presiding

Arbitrator. Under the Act, the expression Arbitral Tribunal is referred to


a Sole Arbitrator as well as a Tribunal consisting of more than one
Arbitrator.

6. Remedy in case of failure by the parties to adhere to the


appointment procedure agreed: As per Section-11 of Arbitration and
Conciliation Act 1996, in case of failure by the parties to adhere to the
appointment procedure agreed for appointment of arbitrator, one can
approach the Chief Justice of High Court having jurisdiction, with a prayer
to appoint an arbitrator. Thereafter, the Chief Justice would examine the
case and appoint an arbitrator. In case of arbitration by ICA, on failure by
the parties, ICA shall appoint the arbitrator.
7. Challenge to the jurisdiction of Arbitrator: After appointment of
arbitrator, any party may challenge the appointment of arbitrator if there
are circumstances giving rise to doubt as to his independence or
impartiality. Even the party appointing his arbitrator can also later on
challenge his appointment. The arbitrator himself would hear and decide
such petition.
8. Preliminary meeting: After appointment of arbitrator, the arbitrator would
issue notices directing both the parties to attend a preliminary meeting
fixed by him on a specific day.

In this preliminary sitting, broadly, the

arbitral procedure i.e. as how the proceedings would be conducted, will


be decided.
9. Venue of arbitration: The parties are free to agree with regard to the
venue of arbitration in the arbitration clause itself. If it is not agreed in
advance, the arbitrator shall decide the venue. Even in cases where the
venue is agreed in advance, depending upon the convenience of the
parties and as the circumstances warrant, the arbitrator may hold sittings
at one or more places as he may deem fit and proper.
10. Language: The parties have the freedom to agree on the language in
which the proceedings are to be conducted. However, in majority of the
cases, the proceedings will be conducted in English language.

11. Arbitrators fees: Depending upon the value of the claim, the arbitrator
would fix his fees and the said fees fixed by him should be shared equally
by both the parties. In case of arbitration by ICA, there is a separate fee
schedule and the parties have to deposit the amount towards arbitrators
fees with ICA.
12. Law applicable: In case of a domestic arbitration within India, all the
laws in force in India will be applicable and the proceedings will be
governed by the Arbitration and Conciliation Act 1996.

In case of

international commercial arbitration i.e where one party is a foreign


national, the parties are free to agree on the law that will be applicable to
the contract. In such cases, either Indian Law or the law of the country to
which the other party belongs can be made applicable depending upon
the agreement between the parties. However, the proceedings will be
governed by Arbitration and Conciliation Act 1996 only.
13. Procedure: The procedure that is adopted in arbitration proceedings is
sufficiently flexible.

The arbitrator is not bound by the rigid rules of

procedure relating to proof of documents etc. since Indian Evidence Act


and Code of Civil Procedure are not strictly applicable. The arbitrator has
power to decide on the procedure to be followed in the proceedings.
However, such procedure should be a reasonable procedure following
the basic Principles of Natural Justice.
14. Interim measures: For protection of the subject matter of the arbitration,
arbitrators and courts are given power to pass appropriate orders in the
interest of justice. For example, under Section-9 of the Act the local
District Court can entertain an application for Injunction. Similarly, the
arbitrator also has power to pass appropriate orders for protection of the
subject matter of the arbitration at any time during the course of the
proceedings.
15. Pleadings: The party who initiates arbitration will file a claim statement
before the arbitrator.

The opposite party is called as Respondent.

In answer to the claim statement, the respondent would file his Counter.

Again the claimant will be given an opportunity to file his reply to the
counter called as Rejoinder. Reply to the Rejoinder if any, permitted and
therefore filed by the respondent is termed as Sur-Rejoinder. The above
documents are referred to as Pleadings.
16. Steps: At the end in each sitting of the Arbitral Tribunal, the arbitrator
would record the proceedings on a separate sheet of paper wherein the
details like the persons present in the sitting, the date and venue of
hearing, the date and venue of next hearing, the party who should make
the arrangements and the purpose for which the next sitting is fixed etc.
will be recorded.
17. Admission/denial of documents: After completion of pleadings, both
the parties will be asked to admit or deny the documents filed by the
opposite party. This step namely admission/denial of documents would
minimize the number of documents to be proved because the admitted
documents need not be proved under law.
18. Issues: Basing on the pleadings and admissions/denial of documents,
the parties will be asked to submit draft issues that are in dispute. After
considering the draft issues filed by both the parties, the arbitrator would
finalize the issues to be decided. The importance of framing issues is
that the evidence can be adduced by the parties keeping in mind those
issues. Framing of issues facilitates knowing what is to be proved and by
whom it is to be proved. Accordingly, the parties adduced the evidence.
19. Marking of documents: Each document filed by either party is given an
Exhibit No. for the purpose of reference. Documents filed by the claimant
are numbered as Exhibit C-1, C-2, C-3 Similarly, the documents filed
by the respondent are numbered as Exhibit R-1, R-2, R-3 respectively.
Under law, the burden of proving the genuineness and contents of any
document lies on he who asserts and relies on such document.

20. Evidence: Evidence could be oral evidence or documentary evidence.


Examination of a witness before the arbitrator is called oral evidence.
Normally, the witness will be examined first in chief by the party who
summons him and then he will be cross-examined by the opposite party.
Now-a-days instead of examination in chief, an affidavit sworn by the
witness is being filed. In cross examination of the witness, the opposite
party can put any question including a leading question (but not a
scandalous question) to the witness. A leading question is a question
that suggests the answer to the witness. At first, all the witnesses on
behalf of the claimant will be examined. Thereafter, the witnesses on
behalf of the respondent will be examined. Throughout the proceedings,
the parties can take the assistance of their legal counsel to present their
case before the arbitrator.
21. Arguments: After completion of evidence adduced by the parties, matter
will be posted for arguments. Initially, the counsel for the claimant would
submit his oral arguments citing case laws in support of the claimants
case. Thereafter, the counsel for the respondent would argue. After
submission of arguments by the respondent, the counsel for the claimant
may give his reply, if any, in answer to the arguments submitted by the
respondents counsel. Both the parties may, in addition to the oral
arguments, file written arguments. After completion of arguments, the
matter would be reserved for award by the arbitrator. There would be no
formal sittings after completion of arguments.
22. Award: The judgment passed by the arbitrator(s) is referred to as
Award. The law requires that the arbitrator should give a reasoned
award, giving his findings on each issue framed in the matter. Every
arbitrator should necessarily sign on each page of the award. In case of
an Arbitral Tribunal comprising odd number of arbitrators, there may be
difference of opinion between the arbitrators which may result in one
arbitrator giving a dissenting judgment. However, the award would go by
majority. In other words, the award passed by majority of arbitrators
would prevail. The award will be drawn on a stamped paper and copies
of the award would be sent to the parties. The award should be passed

by the arbitrators within a reasonable time after completion of the


arguments.
23. Enforcement of the Award: Under the old Act i.e Arbitration Act 1940,
an award passed by the arbitrator is to be made a rule of the court by
filing a separate petition in court with a prayer to pass a decree on the
lines of the award so that the same can be enforced. Under Section-36
of Arbitration & Conciliation Act 1996, the award can be enforced in the
same manner as if it were a decree of the Civil Court.
24. Challenge to the Award: The party aggrieved by the award passed by
the arbitrator, within three months of receipt of the arbitral award by him,
can challenge the award. Even after the expiry of three months period, if
the court is satisfied that there is sufficient cause for not making the
application, the court may entertain the application for challenge within a
further period of thirty days but not thereafter. However, under Section34 of the Act the grounds for challenge are limited.

The challenge

petition is to be filed in the local District Court having territorial jurisdiction


over the matter. The courts have held that the award can be challenged
if it is opposed to public policy. The expression Public Policy has been
interpreted to mean that if the award is against the law of the land, then it
is treated as opposed to public policy. Incapacity, non-adherence to the
procedure agreed for appointment of arbitrator, subject matter of the
dispute not being capable of settlement by arbitration etc. are some of the
other grounds provided under law to challenge an award.
25. Appeal: Under Section-37(b) of the Act, the order passed by the District
Court either setting aside or refusing to set aside the award can be
appealed before the High Court. Against the order passed by the High
Court in such an Appeal, no second appeal is provided for under the Act.
However, a Special Leave Petition (SLP) under Article -136 of
Constitution of India can be moved before the Supreme Court challenging
the order passed by the High Court and if leave is granted by the
Supreme Court, the matter would be decided by the Supreme Court. If
leave is not granted, the SLP would be dismissed and order of High Court
attains finality.