.....................................................................................................................................................................

Short Notes

1. Alternate dispute resolution in Banking sector:-..................................................................................25

a. Arbitration and Conciliation:-..........................................................................................................25

Debt Recovery Tribunals:-...............................................................................................................25

b. Lok-Adalats:-...................................................................................................................................26

c. Court annexed mediator:-.................................................................................................................26

Party 1

Party 2

Arbitrator

I. Introduction:-

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Arbitration is one mode of alternative dispute resolution. It is one of the ways to

resolve disputes outside the court. The dispute is decided by an independent, impartial

third person or persons. Such a person, persons or a body is called as an ‘arbitrator’ or

‘arbitrators’ or ‘arbitration tribunal’. An arbitrator renders a judgment on the dispute,

which is called an “arbitration award”. It resembles a court.

II. Definition of Arbitration: -

The term ‘arbitration’ is derived from Roman law. In fact, the Arbitration and

Consolation Act, 1996 (Henceforth called “the Act”) does not descriptively define the

term arbitration. To understand the concept very well, we will discuss some of the

definitions as follows-

1. As per section 2 (a) of the Act. “Arbitration” means any arbitration, whether or not

administered by a permanent arbitral institution.

2. As per Article 2 (a), UNICTRAL Model Law “Arbitration” is the means by

which parties to a dispute get the matter settled through the intervention of an

agreed third Person.

3. As per Halsebury “Arbitration” mean “the reference of a dispute or difference

between not less than two parties, for determination, after judicially hearing both

sides, by a person or persons other than a court of a competent jurisdiction”

III. Ingredients or attributes of arbitration: -

From the above definitions. We may lay down the following characteristics or

attributes of arbitration, viz¹.

1. Arbitrator:-

An arbitrator is a person appointed by the parties to the Arbitration agreement.

His position is akin to a judge of a court. (We will discuss his position in detail in this

topic)

2. Arbitration agreement: -

‘Arbitration agreement’ is a precondition for referring the dispute for arbitration.

The arbitration document is a very important one, which states that the parties want to

resolve their future disputes by arbitration. (We will discuss arbitration agreement in

detail next in this topic).

3. Arbitration award:-

The decision rendered by arbitrator is called as ‘arbitration award’. (Will discuss

it in detail next in this topi)

¹Means ‘namely’ or “as follows”.

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4. Confidentiality –

Confidentiality is an important attribute of arbitration. Arbitration proceeding is

expected to be conducted in an unbiased manner and with confidentiality. The success

of arbitration process depends upon the confidentiality of the proceeding.

IV. Kinds of arbitration: -

There are following kinds / types of arbitration –

1. Ad hoc arbitration:-

Ad hoc Arbitration takes place when parties have agreed to settle their dispute

through arbitration, without referring to the rules of any arbitral institutions. Ad hoc

arbitration is that which is not administered by an institution and therefore the parties

are required to determine all aspects of the arbitration themselves. Since this type of

arbitration is selected by the parties they need to select arbitrator, design rules, decide

applicable laws, procedure to be followed etc.

In other words, an ad-hoc arbitration is an arbitration in which the parties have not

selected any institution to administer the administration but they themselves name the

arbitrator.

2. Institutional arbitration: -

S. 2 (ca) of the Act, defines “arbitration institution” means an arbitrary institution

designated by the Supreme Court or a High Court under this Act.”

An arbitral institution conducts arbitration; it is called an ‘institutional

arbitration’. The parties in this case have a choice of specifying in the arbitration

agreement, to refer the differences to be determined in accordance with the rules of

selected arbitrator institution. In this case, parties name specific arbitral institution or

generally ‘any arbitral institution’ to which future dispute is referred.

3. Fast track arbitration: -

Fast track arbitration is a form of arbitration where the rules are stricter and the

process of disposal is time bound, which excludes the chance of any type of delay. It is

a useful type of arbitration wherein hearing or examination of witnesses is not

necessary.

4. Domestic arbitration: -

When the arbitration proceedings take place within India, under the Indian laws

and when the cause of dispute occurs in India, such arbitration is described as domestic

arbitration.

5. International arbitration: -

As per S. 2 (1) (f), ‘international commercial arbitration’ means an arbitration

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relating to disputes arising out of legal relationships (whether contractual or not),

considered as commercial under the law in force in India and where at least one of the

parties is-

(i) an individual who is a national of, or habitually resident in, any country other

than India; or

(ii) a body corporate which is incorporated in any country other than India; or

(iii) a company or an association or a body of individuals whose central

management and control is exercised in any country other than India; or

(iv) the Government of a foreign country.

As per S. 28 (1) (b) in international commercial arbitration-

(i) the arbitral tribunal shall decide the dispute in accordance with the rules of

law designated by the parties as applicable to the substance of the dispute;

(ii) any designation by the parties of the law or legal system of a given country

shall be construed, unless otherwise expressed, as directly referring to the

substantive law of that country and not to its conflict of laws rules;

(iii) failing any designation of the law under clause (a) by the parties, the arbitral

tribunal shall apply the rules of law it considers to be appropriate given all

the circumstances surrounding the dispute.

6. Foreign arbitration: -

When the arbitration proceedings is conducted in a place outside India, it is

called “Foreign arbitration”.

7. Statutory arbitration:-

When the statute of Parliament or a state legislature provides for referring a

matter to arbitration, such arbitration is called ‘statutory arbitration’.

In this type of arbitration, the consent of the party is not necessary. if law

provides for arbitration.

This shows that even though there is no formal agreement for referring disputes

through arbitration, if the law provides for referring the dispute for Arbitration, the

matter needs to be referred to an arbitrator.

V. Arbitration agreement (S. 7 and 8): -

1. Arbitration agreement (S. 7):-

“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.

Such an arbitration agreement may be in the form of an arbitration clause in a

contract or in the form of a separate agreement.

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An arbitration agreement shall be in writing. It should be a documentary form signed by

the parties.

In fact, the Act does not lay down any format of agreement.

However, in K.K.Modi v. K. N. Modi²

The Supreme Court in this landmark judgement has laid down attributes/ requirements

of an arbitration agreement as follows –

(1) The arbitration agreement must contemplate that the decision of the tribunal will be

binding on the parties to the agreement,

(2) That the jurisdiction of the tribunal to decide the rights of parties must derive either

from the (a) consent of the parties or (b) from an order of the Court or (c) from a

statute, the terms of which make it clear that the process is to be an arbitration,

(3) The agreement must contemplate that substantive rights of parties will be

determined by the agreed tribunal,

(4) That the tribunal will determine the rights of the parties in an impartial and

judicial manner with the tribunal owing an equal obligation of fairness towards both

sides,

(5) That the judgment of the parties to refer their disputes to the decision of the tribunal

must be intended to be enforceable in law.

(6) The agreement must contemplate that the tribunal will make a decision upon a

dispute which is already formulated at the time when a reference is made to the

tribunal.

2. Power to refer parties to arbitration (S. 8):-

Where there is an arbitration agreement. —

(1) A judicial authority before which an action is brought in a matter which is the

subject of an arbitration agreement shall, if a party so applies not later than when

submitting his first statement on the substance of the dispute, refer the parties to

arbitration.

(2) The application referred to in sub-section (1) shall not be entertained unless it is

accompanied by the original arbitration agreement or a duly certified copy thereof.

(3) Notwithstanding that an application has been made under sub-section (1) and that

the issue is pending before the judicial authority, an arbitration may be commenced or

continued and an arbitral award made.

In P. Anand Gajapathi Raju v. P.V. G. Raju³

The Supreme Court has laid down the requirements of referring the dispute to

²(AIR 1998 SC 1297)

³AIR 2000 Supreme Court 1886

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arbitration as- (i) there must be an arbitration agreement; (ii) a party to the agreement

brings an action in the court against the other party, (iii) the subject-matter of the

action is the same as the subject-matter of the arbitration agreement; (iv) the other party

moves the court for referring the parties to arbitration before submitting the first

statement on the substance of the dispute.

VI. Arbitral Tribunal:-

Arbitrator plays an important role in arbitration. However, there should be an

agreement between the parties in which there is an arbitration clause to resolve the

future arising dispute by appointing an arbitrator. The procedure of appointment, name

or number of arbitrators may or may not be mentioned in the agreement.

Therefore, we will discuss the provisions as to the appointment of arbitrators as

follows:-

1. As to number of arbitrators (S. 10):-

The Parties are free to determine the number of arbitrators, provided such

number shall be even number. If there is no mention as to number of arbitrators in the

agreement the arbitral tribunal shall consist of a sole arbitrator⁴.

2. Person of any nationality (S. 11 (1)):-

A person of any nationality maybe an arbitrator, unless otherwise agreed by the

parties.

3. Procedure of appointment (S. 11 (2), (6)):-

The parties are free to agree on a procedure for appointment of an arbitrator or

arbitrators.

However, if -

a. A party fails to act as required under the procedure, or

b. The parties, or the two appointed arbitrators, fail to reach an agreement expected

from them under the procedure, or

c. If a person including any institution, fails to perform any function entrusted to him or

it, under an agreement, then a party may request to the Supreme Court or as the case

may be to the High Court or to any person or institution designated by such court to

take necessary measures (unless the agreement on the appointment procedure

provides other means for securing the appointment).

4. In case of three arbitrators (S. 3, 4):-

In the absence of an agreed procedure, where the arbitration has to be by three

arbitrators each party has to appoint one arbitrator. The two appointed arbitrators have

to appoint a third arbitrator who will act as a presiding arbitrator. Where the two

⁴Single Arbitrator

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appointed arbitrators fails to agree on the third arbitrator within 30 days from the date

of their appointment, a party may make a request to the Supreme Court or a High Court.

The appointment will then be made by the Chief Justice of the Supreme Court or the

High Court or his nominee. Moreover in the case of an agreed procedure, if the two

appointed arbitrators fails to reach an agreement expected of them under the agreed

procedure, a party may make request to the Supreme Court or a High Court or their

nominee to take necessary measures, unless the agreement on the appointment

procedure provides for some other means for securing the appointment.

5. In case of a sole arbitrator (S. 11 (5) and (9)):-

If the parties fail to agree upon appointment of the arbitrator (as mentioned

above) within 30 days from receipt of a request by one party form the other party to so

agree, the appointment shall be made, upon request of a party, by the Chief Justice or

any other person or institution designated by him.

In the case of appointment of a sole or third arbitrator in an international

commercial arbitration, the Supreme Court or the High court or the person appointed by

them, may appoint an arbitrator of a nationality other than the nationalities of the parties

where the parties belong to different nations.

6. Challenge of the appointment (12):-

Where a person is approached in connection with his possible appointment as an

arbitrator, he shall disclose in writing any circumstance likely to give rise to justifiable

doubts as to his independence or impossibility. Such doubt maybe of any nature like

financial, business, professional or any other kind. An arbitrator may be challenged

only if –

(a) circumstances exist that gives rise to justifiable doubts as to his independence or

impartiality, or

(b) he does not possess the qualifications agreed to by the parties.

The applicable grounds have been stated in the fifth schedule. The disclosure has

to be made in the form specified in the 6th schedule.

Where, the mandate of an arbitrator terminates, a substitute arbitrator shall be

appointed according to the rules that are applicable to the appointment of the arbitrator

being replaced (S. 15).

VII. Jurisdiction:-

(1) Jurisdiction of Arbitral Tribunal⁵(S. 16):-

The Tribunal has power to decide-

(i) the question as to its jurisdiction, and

⁵Henceforth described as “the Tribunal”.

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(ii) the objections as to the existence or validity of the arbitration clause.

For this purpose an arbitral clause in a contract shall be treated as an

arbitration agreement.

The question as to jurisdiction needs to be decided as a preliminary issue by the

Tribunal.

In International Pharmaceutical v. Union of India⁶

Delhi High Court observed that the legislative intention is manifested in view of the

enactment of S. 16, to have the disputes between the parties adjudicated by arbitral

forum expeditiously.

(2) Time for filing objection as to jurisdiction (S. 16 (2)):-

The application as to the objection that the Tribunal does not have jurisdiction to

entertain the matter shall be filed along with or before the submission of the statement

of defense. A party will not be stopped from raising this plea merely because he was a

party to the appointment of the arbitrator, or that he participated, in his appointment.

(3) Plea as to exceeding the scope of authority (S. 16 (3)):-

An objection that the Tribunal is entertaining the matter beyond its jurisdiction

or authority can be raised before the tribunal. Such an objection shall be raised as soon

as such matter is raised before the tribunal. The Tribunal has also to decide whether it

has territorial jurisdiction or not.

(4) Condonation of delay (S. 16 (4)):-

The Tribunal can entertain the objections regarding lack or excess of jurisdiction

even after the time for raising them has expired, if it considers the delay justified. The

mater relating to the limitation can also be considered and decided by the arbitrator.

(5) Decision on objections (S.16 (5)):-

Where, objection as above-mentioned are raised, the Tribunal shall decide them

first. If it rejects the objections, it shall continue with the arbitral proceedings. The order

as to jurisdiction of the Tribunal can be challenged as an arbitral award under S. 34

before the Court having jurisdiction (S. 16 (6)).

VIII. Interim measures by Tribunal (S. 17):-

A party may, during the arbitral proceedings or at any time after the making of

the arbitral award but before it is enforced in accordance with S. 36, apply to the

arbitral tribunal—

(i) for the appointment of a guardian for a minor or person of unsound mind for

the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters,

⁶1998 (3) R.A.J 248 (Del).

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namely—

(a) the preservation, interim custody or sale of any goods which are the subject

matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration; the detention, preservation

or inspection of any property or thing which is the subject matter of the

dispute in arbitration, or as to which any question may arise therein and

authorizing for any of the aforesaid purposes any person to enter upon any

land or building in the possession of any party, or authorizing any samples to

be taken, or any observation to be made, or experiment to be tried, which

may be necessary or expedient for the purpose of obtaining full information

or evidence;

(c) interim injunction or the appointment of a receiver;

(d) such other interim measure of protection as may appear to the arbitral

tribunal to be just and convenient, and the arbitral tribunal shall have the

same power for making orders, as the court has for the purpose of, and in

relation to, any proceedings before it.

Any order issued by the arbitral tribunal under this section shall be deemed to be

an order of the court for all purposes and shall be enforceable under the Code of Civil

Procedure, in the same manner as if it were an order of the court. However, the order is

subject to any order passed in an appeal under S. 37.

IX. Arbitral Proceeding (Ss. 18 to 27):-

There are no hard and fast rules of procedure applicable to an arbitration

proceeding. The Tribunal is not bound by the procedure laid down in CPC or in the

Indian Evidence Act. The parties are free to select the arbitrator and also to decide the

procedure to be adopted by the arbitrator. However, in the absence of a specific

procedure adopted by the parties in an agreement, the Act has laid down from S. 18 to

27 minimum or important rules of procedure to be followed by the arbitrator (S. 19).

The procedure mentions the rules from start to the end i.e. till passing award by the

arbitrator. We will discuss the rules as follows: -

1. Equal treatment to the parties (S.18): -

The parties shall be treated with equality and each party shall be given a full

opportunity to present his case.

The section cast two-fold duty upon the Tribunal viz.-

a. to treat parties equally, and

b. to give a full opportunity to present their case.

These, duties are cast upon Tribunal to act unbiased, impartial and indecent to

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resolve dispute between the parties. These are natural rights of the parties in any

proceeding.

2. Place of arbitration (S. 20):-

The parties are free to agree on the place of arbitration. If they don’t agree, the

arbitrator shall determine the place of arbitration. In spite of the place fixed by the

parties or the tribunal, the tribunal may (unless otherwise agreed by the parties)

determine any other place which it considers appropriate for consultation among its

members, for hearing witnesses, experts or the parties, or for inspection of documents,

goods of other property.

3. Commencement of arbitral proceeding (S. 21):-

Unless otherwise agreed by the parties, the arbitral proceedings in respect of a

particular dispute commences upon the date on which a request for the dispute to be

referred to arbitration is received by the respondent.

It is open to the parties by agreement to determine the date of commencement of

the proceedings. However, in the absence of such provision in an agreement S. 21

provides that such date shall be the date on which a request is received by one party

from the other to make a reference of the dispute to arbitration.

4. Language of proceeding (S. 22):-

The parties are free to agree upon the language to be used in the arbitral

proceedings. However, in absence of such agreement the Tribunal shall determine the

langue or languages to be used in the arbitral proceedings. The language determined

shall apply to written statements hearing and any arbitral award, decision or other

communication by the Arbitral Tribunal.

The arbitral tribunal may order that any documentary evidence shall be

accompanied by a translation into the language or languages agreed upon by the parties

or determined by the Arbitral Tribunal.

5. Statements of claim and defence (S. 23):-

Within the period of time agreed upon by the parties or determined by the

Arbitral Tribunal-

(i) the claimant shall-

(a) state the facts supporting his claim,

(b) the points at issue, and

(c) the relief or remedy sought,

(ii) the respondent-

(a) shall state his defence in respect of these particulars.

(b) may submit a counter claim or plead a set-off (if any).

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The procedure shall be followed unless parties otherwise agrees.

The parties may submit with their statements all documents they consider to be relevant

or may add a reference to the documents or other evidence they will submit.

The parties may, during the arbitral proceedings, amend or supplement their

claim or defence unless- (a) the parties have agreed otherwise, or (b) the Arbitral

Tribunal considers it inappropriate to allow the amendment or supplement due to the

delay in making it.

6. Hearing and written proceedings (S. 24):-

Unless otherwise agreed by the parties, the Arbitral Tribunal shall decide

whether to hold oral hearings for the presentation of evidence or for oral arguments, or

whether the proceedings shall be conducted on the basis of documents and other

materials.

The Tribunal has to allow oral hearing if asked for, by a part, unless the parties

have agreed that no oral hearings shall be held.

The Tribunal shall, as far as possible, hold oral hearings for the presentation of

evidence or for oral argument on day-to-day basis, and not grant any adjournments

unless sufficient cause is made out, and may impose costs including exemplary costs on

the party seeking adjournment without any sufficient cause.

The parties shall be given sufficient advance notice of any hearing and of any

meeting of the Tribunal for the purpose of inspection of documents, goods or other

property.

All statements, documents or other information supplied to or application made

to the Tribunal by one party shall be communicated to the other party and any expert

report or evidentiary document on which the Tribunal may rely in making its decision

shall be communicated to the parties.

7. Default of a party (S. 25):-

If the claimant fails to submit the statement of his claim within the time

determined, the Tribunal shall terminate the proceedings. If the respondent fails to

submit the statement of defence within the time determined, the proceedings shall be

continued, and the award shall be made on the material and evidence before the

Tribunal and the failure will not be treated as an admission of the allegations made by

the claimant. If either of the parties fails to appear at an oral hearing or to produce

documentary evidence, the Tribunal may continue the proceedings and make the award

on the evidence before it.

8. Appointment of expert by the Tribunal (S. 26):-

The Tribunal can appoint one or more experts unless there is a contrary

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agreement between the parties. The expert has to report Tribunal on specific issue to be

determined by the Tribunal. The Tribunal may require a party to give ot the expert any

relevant information or to produce, or to provide access to any relevant documents,

goods or other property for his inspection.

If a party so requests or if the Tribunal considers it necessary (and there is no

contrary agreement), the expert shall, after delivery of his written or oral report,

participate in an oral hearing where the parties have the opportunity to put questions to

him and to present expert witness in order to testify on the points at issue.

If there is no contrary agreement, the expert shall, on the request of a party,

make available to that party, for examination, all documents, goods or other property in

the possession of the expert with which he was provided in order to prepare his report.

9. Court’s assistance in taking evidence (S. 27):-

The Tribunal or any party with the approval of the Tribunal, may apply to the

Court for assistance in taking evidence. The application shall specify details as to the

name and address of any party or person to be heard as a witness, or of expert witness,

and a statement of the subject-matter of the testimony required, giving the description

of any document to be produced, or of the property to be inspected.

The Court may, within its competence and according to its rules on taking

evidence, execute the request by ordering that the evidence be provided directly to the

Tribunal. The Court may issue the same process of summons, commission etc. to

witnesses as it issues in suits tried before it.

Persons who disobey court’s order shall be subject to the same disadvantage,

penalties and punishments as they would incur for the like offences in suits tried before

the Court.

X. Making of Arbitral Award and termination of proceedings:-

a) Making of Arbitral Award:-

An ‘Arbitral Award’ refers to a decision made by an Arbitral Tribunal in an

arbitration proceeding. It is analogous to a judgment.

Ss. 28 to 35 of the Act, deal with the making of arbitral award and termination of

proceedings. We will discuss them as follows:-

1. Rules applicable to substance of dispute (S. 28):-

Where the place of arbitration is situated in India and the matter is domestic i.e.

within India, the Tribunal shall decide the dispute in accordance with the substantive

law of India. However, in case of international commercial arbitration, the law

applicable is (i) that which is designated by the parties, (ii) failing by parties to decide

applicable law, the Tribunal shall apply the rules of law it considers to be appropriate

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taking into consideration all the circumstances surrounding the dispute.

The Tribunal shall decide the dispute by applying principle of equity and good

conscience⁷or amicable settlement⁸.

While deciding and making an award, the arbitral tribunal shall, in all cases, take

into account the terms of the contract and trade usages applicable to the transaction.

In National Thermal Power Corporation v. Singer Co⁹.

Facts- The contract was between an Indian company and a foreign company. There was

arbitration clause in the agreement mentioning that the Indian law shall apply to all

matters arising out of the contract and in case of arbitration, it has to be governed by the

Rules of the International Chamber of Commerce, Paris.

Issue- the issue before the Supreme Court was as to which law applies?

The Court Observed that- the dispute between the parties had the closet connection

with India therefore, Indian law shall apply. The parties have further opted for Indian

law to be applied for all contracts, therefore Indian law should be applied.

2. Decision making by panel of arbitrators (S. 29):-

Unless otherwise agreed, in arbitration proceedings with more than one

arbitrator, any decision of the tribunal shall be made by a majority of all its members.

However, the question of procedure may be decided by (1) all members of the tribunal

or if authorized by the parties or all the members of the Tribunal, (2) by the presiding

arbitrator.

In short, the section provides a method of decision-making by the panel of

arbitrators.

In Numaligarh Refnery Ltd v. Daelim Industrial Co. Ltd¹⁰

The Supreme Court declined to interfere with the arbitral award passed by a majority

of arbitrators and affirmed by the High court.

3. Time limit for passing arbitral award (S. 29-A):-

This section and S. 29-B are inserted to impose time limit for the completion of

arbitration proceeding. The object is obvious, to complete the proceeding speedily and

within time. The section provides that the award shall be made within a period of

twelve months from the date the arbitral tribunal enters upon the reference. The date of

entering upon the reference by arbitral tribunal is the date of receiving notice in writing

of their appointment.

⁷The term used in S. 28 (2) is “ex aeqo et bono”.

⁸The term used in S. 28 (2) is “amiable composieur”.

⁹(1992) 3 SCC 551

¹⁰(2007) 8 SCC 466

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If the award is made within a period of six months from the date the arbitral

tribunal enters upon the reference, the tribunal shall be entitled to receive such amount

of additional fees as the parties may agree.

The parties by consent may extend the period of one year for next six months.

If the award is not made within one year or in extended six months, the mandate

of the arbitrator shall terminate, unless the court has, either prior to or after the expiry

of the period so specified, extend the period. While extending such period if court finds

that the proceedings have been delayed for the reasons attributable to the arbitral

tribunal, then, it may order reduction of fees of arbitrator by not exceeding five per cent

for each month of such delay. The court should dispose-off the application for

extending period within 60 days from the date of service of the notice on opposite

party.

Such extension of period by the court may be on the application of any of the

parties and may be granted only for sufficient cause and on such terms and conditions

as may be imposed by the Court. While extending the period the Court may substitute

one or all of the arbitrators. In such case, the arbitral proceedings shall continue from

the stage already reached and on the basis of the evidence and material already on

record and the arbitrator appointed under this section shall be deemed to have received

the said evidence and material. The tribunal so reconstituted shall be deemed to be in

continuation of the previously appointed Tribunal.

It shall be open to the court to impose actual or exemplary costs upon any of the

parties under this section.

4. Fast track procedure (S. 29-B):-

The parties to an arbitration agreement may, at any stage either before or at the

time of appointment of an arbitral tribunal, agree in writing to have their dispute

resolved by a fast-track procedure. The fast-track procedure is specified in sub-section 3

of this section as-

a. The award under this section shall be made within a period of six months from the

date the tribunal enters upon the reference. If the award is not so made, the

provisions of S. 29-A shall apply to the proceeding.

b. The Arbitral Tribunal shall decide the dispute based on written pleadings,

documents and submissions filed by the parties without any oral hearing;

c. The Arbitral Tribunal shall have power to call for any further information or

clarification from the parties in addition to the pleadings and documents filed by

them;

d. An oral hearing may be held only if all the parties make a request or if the Arbitral

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Tribunal considers it necessary to have oral hearing for clarifying certain issues;

e. The Arbitral Tribunal may dispense with any technical formalities, if oral hearing

is held, and adopt such procedure as deemed appropriate for expeditious disposal of

the case.

The fees payable to the arbitrator and the manner of payment of the fees shall be

such as may be agreed between the arbitrator and the parties.

5. Settlement (S. 30):-

The Tribunal may encourage the parties to settle their dispute at any time during

the arbitration proceedings. The Tribunal for that purpose can take initiative and find

out whether there is an element of settlement, and for this purpose it may use mediation,

conciliation and other procedures. If a settlement is reached, the same may be

incorporated in an arbitral award and signed by the arbitrators. However, this can be

done only if requested by the parties and not objected to by the Arbitral Tribunal. An

arbitral award on such agreed terms shall have the same status and effect as any other

arbitral award on the substance of the dispute.

6. Form and contents of arbitral award (S. 31):-

An award shall be made in writing and shall be signed by the members of the

Tribunal. However, in arbitral proceedings where there is more than one arbitrator, the

signatures of the majority of all the members of the Tribunal shall be sufficient so long

as the reason for an omitted signature (if any) is stated.

The award shall state the reasons upon which it is based, unless:-

(i)The parties have agreed that reasons are not to be given.

(iii) The award is the outcome of a settlement and on agreed terms as mentioned in

S. 30.

Thus, we may say that the award shall be speaking one. The award shall state its

date and the place of arbitration. After the arbitral award is made, a signed copy shall be

delivered to each party.

In Tamil Nadu Electricity Board v. M/s Bridge Tunnel Constructions¹¹

The Supreme Court observed that the award should state the reasons in support of

the determination of the liability or no liability. It is a mandatory requirement to state.

The Tribunal may, at any time during the arbitral proceedings, make an interim

arbitral award on any matter with respect to which it may make a final award. In

practice, a request for interim award by a party is entertained by arbitrators, when there

are numerous subject matters in the same dispute and each one of them is separate and

distinct from the other.

¹¹AIR 1997 SC 1376

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When the award is for the payment of money, the tribunal may include in the sum of

the award, interest at such rate as it deems reasonable. Such interest may be awarded on

the whole or any part of the awarded money for a specific period.

If the rate of interest is not specified in the award by the tribunal, a sum shall carry

interest at the rate of two per cent higher than the current rate of interest prevalent on

the date of award, from the date of award to the date of payment.

7. Application for setting aside the arbitral award (S. 34):-

Recourse to a Court against an arbitral award may be made only by an

application for setting aside such award. The award may be set aside

(1) by the Court only if-

(a) the party making the application furnishes proof that-

(i)

the party was under some incapacity; or

(ii)

the arbitration agreement is not valid under the law to which the parties

have subjected it,

(iii)

(iv)

No proper notice- 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; or

Ultra virus award: - the award deals with a dispute not contemplated by

or not falling within the terms of the submission to arbitration, or it

contains decisions on matters beyond the scope of the submission to

arbitration.

(v)

Agreement is not followed: - the composition or the tribunal or the

arbitral procedure was not in accordance with the agreement of the

parties.

(b) The court finds that-

(i)

the subject matter of the dispute is not capable of settlement by

arbitration under the law for the time being in force; or

(ii)

the arbitral award conflicts with the public policy of India.

(2) Patent illegality in award: - A domestic award may also be set aside by the court if

the court finds that the award is vitiated by patent illegality appearing on the face of the

award.

An application to set the award aside on the above grounds should be made

within three months from the receipt of the award by the party.

Stay by the Court (S. 36 (3)):- Where an application to set aside the arbitral

award is filed in the court, and an application for stay on execution is filed, the court

may subject to such conditions as it may deem fit, grant stay of the operation of such

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award for reasons to be recorded in writing.

Provided that the court, while considering the application for grant of stay in the

case of an arbitral award for payment of money, shall have due regard to the provisions

for grant of stay of a money decree under C.P.C.

b) Termination of proceedings: -

Sections 32 and 33 deal with the termination of proceedings after the award.

1. Termination of proceedings (S. 32):-

This section contains the provisions regarding conditions and procedures for the

termination of arbitral proceedings. According to the section, the arbitration proceeding

is terminated-

(i) as soon as the final arbitral award is made by the arbitrators, or

(ii) by an order of the Arbitral Tribunal where:

a) the claimant withdraws his claim,

b) parties agree to the termination of the proceeding,

c) the Tribunal finds that the continuation of the proceedings has for any

other reason, become unnecessary or impossible.

Thus, by the above-mentioned two ways, the arbitral proceeding terminates.

2. Corrections, interpretation and additional award (S. 33):-

The section provides that the arbitrator has the jurisdiction to correct and

interpret his award and, if necessary for that purpose, may amend core award.

According to the section,

(i) A party to a proceeding may, within thirty days from the receipt of the award and

by giving notice to the other party, request to the Tribunal to correct-

a) any computation error,

b) any clerical or typographical error, or

c) any other error of a similar nature occurring in the award.

The Tribunal can even correct such mistakes on its own within thirty days from

the date of the award.

(ii) If parties to the proceeding agree and request that the Tribunal give an interpretation

of a specific point or part of the award.

The tribunal may, if it considers the request justified, correct or give an

interpretation, within thirty days from the receipt of the request. Such correction or

interpretation shall form part of the award.

Similarly, an additional arbitral award may be passed on the claims

presented in the proceeding but omitted from the award.

XI. Finality and enforcement of award (Ss. 35 and 36):-

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Ss. 35 and 36 deal with the topic of finality and enforcement of award. These

sections are related to the enforcement of the domestic award. The provisions as to

enforcement of foreign award are mentioned in Ss. 55 to 58.

1. Finality of arbitral award (S. 35):-

`

An arbitral award shall be final and binding on the parties and persons claiming

under them. However, the award is only final if appeal or review is not pending as

mentioned under this topic.

2. Enforcement of award (S. 36):-

The award of Tribunal shall be enforced in accordance with the provisions of

the C.P.C. in the same manner as if it were a decree of the court. However, such

execution can only be done

(i) unless the time for making an application to set aside the arbitral award under S.

34 has expired,

(ii) If application is made but the stay for execution has not been granted by the

Court.

In Leela Hotels Pvt. Ltd v. Urban Development Corp. Ltd¹².

The Supreme Court held that an arbitral award is to be enforced under C.P.C in the

same manner as if it were a decree of the Court.

Note: -

1. Alternate dispute resolution in the Banking sector: -

Non-recovery of debt, non-performing assets Bad debts, etc., are serious

problems for banks and financial institutions. The problem is worsened due to so

many pending cases before courts and the delay in disposing of them. It adversely

affects economy of India. It is being said that there is more than 1 lac-crore rupees

bad debt in India.

To avoid problems in recovery of debts, alternate dispute resolution methods

are adopted, by the banks or financial institution as follows-

a. Arbitration and Conciliation: -

The Arbitration and conciliation Act, 1996, is often used by the Banks to

recover outstanding debts.

Debt Recovery Tribunals: -

The Recovery of Debts due to Banks and Financial Institutions Act, 1993,

provides for the establishment of Debt Recovery Tribunals for expeditious, less

expensive adjudication and recovery of debts due to banks and financial institutions.

¹²(2012) 1 SCC 302

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The Act, came into existence on recommendation of Tiwari Committee Report. The

Tribunal has pecuniary jurisdiction of rupees 20 lakh and above.

The Debt Recovery Tribunals play crucial role in recovery of debts of banks

and financial institutions.

The Securitisation and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002, (SARFAESI) is also a special legislation for enforcement

of security interest. It allows non-judicial or non- adjudicatory enforcement of

security interest in addition to the judicial or adjudicatory remedies, available under

other statutes.

b. Lok-Adalats: -

Through Lok Adalat’s, many cases of debt recovery are settled, and even pre-

litigation cases are also settled.

c. Court-annexed mediator: -

S. 89 of the Civil Procedure Code, 1908, provides for referring cases pending

in the Courts to alternate dispute resolution, and mediation, through court-annexed

mediation.

In India, under the RBI, Financial Literacy and Credit Counseling Centers are

being appointed for debt conciliation. Debt Conciliation is a process which is used to

help individual debtors come out of the debt crisis through credit counselling.

Pre-Institution Mediation: -

Section 12-A of the Commercial Courts Act, 2015, provides parties with an

alternative means to resolve disputes through discussions and negotiations with the

help of a mediator. The provision states that a plaintiff must initiate mediation before

filing a suit before a Court, except for the suits filed with applications for urgent

interim relief.

Thus, in conclusion, it can be said that alternate dispute resolution has played

an important role in recovering bad debts of banks and of financial institutions, but

taking into consideration the pile of pending cases, a lot needs to be done through

alternate dispute resolution.

*****