Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
Unless there is an express bar
under law and when there is an arbitration agreement either express or implied,
a dispute between or among the parties can be referred to an Arbitrator or
panel of Arbitrators as specifically agreed to. As everybody knows, Alternative
Dispute Resolution Mechanism is mooted to reduce the burden in traditional
courts and for providing a speedy relief to the parties. Arbitration and
Conciliation Act, 1940 was repealed and Arbitration and Conciliation Act, 1996
was enacted with certain changes and improvements.
Few important points, in simplest
form, concerning the Arbitration Mechanism, are as follows:
1. When there is an agreement
between or among the parties, the agreement can contain a clause saying that
the disputes between or among the parties in the course shall be referred to an
Arbitrator.
2. The clause in any Arbitration
agreement can be detailed with regard to the number of arbitrators, the place
of arbitration, the procedure to be followed and also the cost of Arbitration.
3. Even in the absence of any
agreement and clause, if the parties mutually agree to refer a dispute between
or among those to an Arbitrator, then, such a dispute between or among the
parties can be referred to an Arbitrator.
4. In all cases, unless there is
a specific bar, the parties or the litigants are free to have their own say in
getting an arbitrator appointed, place of arbitration, the procedure to be
followed by arbitrator, the reference of dispute and also costs of Arbitration.
5. The Arbitration and
Conciliation Act, 1996 governs the issue of Arbitration or dispute resolution
through Arbitration and conciliation and as such the parties to the dispute and
even the Arbitrator shall follow the said Act.
6. When there is an Arbitration
Agreement between or among the parties and even then if a party do not
co-operate in getting an Arbitrator appointed, then, the Court can interfere
and appoint an Arbitrator under section 11 of Arbitration and Conciliation Act,
1996.
7. In view of the rights of the parties
and the urgent situations, even before getting an Arbitrator appointed under
section 11, a party can approach the Court under section 9 of Arbitration and
Conciliation Act, 1996 seeking an interim relief. In the absence of section 9
providing an opportunity to a party to approach the Court to get urgent interim
orders, the litigant may become remediless at times.
8. Once an Arbitrator is
appointed by the Court or by the parties to the dispute themselves, then, the
Arbitrator will proceed to decide the dispute before him following the
procedure agreed or as he wishes. There is no compulsion on the Arbitrator to
follow Civil Procedure Code, 1906, but, the Arbitrator is bound by the
principles of natural justice.
9. The Arbitrator is bound to
observe substantial law and substantial law can not be ignored even by the
Arbitrator and he will be having no discretion in applying substantial law to
the dispute before him.
10. The order or the award passed
by the Arbitrator can be appealed against under section 37 of the Arbitration
and Conciliation Act, 1996.
11. On certain grounds, an
aggrieved party can choose to file an application under section 34 of
Arbitration and Conciliation Act, 1996 to set-aside an order or an award.
12. The order or the award of the
Arbitrator is similar to a court order and the decree and the order or the
award as the case may be, can be executed like an order of court or a decree of
a civil court.
13. The Arbitration Clause in the
agreement or a specific Arbitration Agreement between or the among the parties,
precludes him in approaching a Civil Court and in view of the bar under section
8 of the Arbitration and Conciliation Act, 1996, the Civil Court will refer
parties before it to Arbitration when the existence of clause or the agreement
is pointed-out.
Whether an Arbitrator shall be
appointed by the Court on showing the clause in the agreement?
Once it was settled that a Court
exercising jurisdiction under section 11 of Arbitration and Conciliation Act,
1996, discharges only an administrative function. But, the proposition was
changed and now it is settled that a court under section 11 of Arbitration and
Conciliation Act, 1996 exercises judicial functions and it is pursuant to the
landmark judgment rendered by the Hon’ble Supreme Court.
The dispute resolution through
Arbitration has become very costly though we can see that there is no need of
payment of court fee when a dispute is resolved through Arbitrator. In view of
compulsory procedures and other inevitable difficulties, an Arbitrator too can
have many hearings before a final award is passed. Like court, it is very
difficult to ascertain the time to be taken for getting dispute resolved by an
Arbitrator in most cases. It depends upon the complications in the case, the
co-operation rendered by the parties and the advocates representing them and
further proceedings in-between like preferring applications under section 34 of
the Act.
For each hearing before an
Arbitrator, the parties to the dispute should bear the costs like sitting fee
of an Arbitrator, the cost of place of Arbitration and other incidental
expenses apart from professional fee to be paid to the legal professionals or
professionals. In many cases, it is proved that dispute resolution through
Arbitration is very costly and even the Hon’ble Apex Court has rendered
judgments on the aspect.
In view of the costs involved and
other issues which are on logical footing, the Hon’ble Apex Court has said that
the Court while exercising jurisdiction under section 11 of Arbitration and
Conciliation Act, 1996, can look into the issues as to whether there exist any
arbitration agreement, whether there is any live claim, whether the dispute is
capable of being arbitrated upon etc.
Earlier, there was an argument
that all issues or challenges can be made to the Arbitrator under section 16 of
Arbitration and Conciliation Act, 1996 and as such there was no need of looking
into the arguments of the parties even before the Arbitrator is appointed. But,
in view of the costs involved and the unnecessary risk to be taken by the
parties, the proposition is now set that the Chief Justice exercising functions
under section 11 of Arbitration and Conciliation Act, 1996 discharges judicial
functions and can look into certain important issues even before the Arbitrator
is appointed.
As such, the court exercising
jurisdiction under section 11 of Arbitration and Conciliation Act, 1996
discharges judicial functions now and appointment of arbitrator is no more
automatic on showing the clause in the agreement etc.
Is Arbitration better suited to
get corporate disputes resolved?
A corporate dispute can not be
seen at par with other civil disputes. There will be lot of urgency in getting
a corporate dispute resolved and the stakes will be more in many cases. If we
don’t consider the proposed companies bill, at present, a corporate dispute can
be adjudicated by the competent Civil Court at times, the Company Law Board and
the Company Court. Despite getting a special tribunal like Company Law Board
constituted, there tend to be some delay in disposal of disputes and it may not
be solely attributed to the functioning of the Company Law Board and even the
Tribunal in future.
Again, there is a proposition
that an arbitration clause or agreement can not oust the jurisdiction of
Company Law Board and the Company Court. The proposition laid down by the
Courts and followed is on logical footing. For example, there can not be any
alternative to an application under section 397/398 of the Companies Act, 1956
and a petition to the Company Court seeing to wind-up the Company. However, if
there is dispute solely based on a share-purchase agreement, then, such a
dispute can definitely be resolved through arbitration. Giving clarity on the
issue as to which all the corporate disputes can be resolved through
Arbitration is a complicated exercise.
Normally, as everybody knows,
Arbitration proceedings are so costly and it is very costly when the dispute to
be resolved is a corporate dispute. In corporate disputes, normally, an expert
corporate lawyer or a judge having experience of deciding corporate disputes is
appointed or selected as an Arbitrator or Arbitrators. In view of many other
consequential things, a corporate dispute resolution through Arbitration is
more costly. However, the companies or the corporates will be willing to bear
the costs as corporates value time rather money.
Even if the dispute to be
resolved is a corporate dispute, there tend to be delay if the parties or the
professional representing parties do not co-operate for a speedy disposal of
dispute. But, when the parties to a corporate dispute are keen in getting their
dispute resolved, then, Arbitration Mechanism is certainly useful for them.
Few important points connected to
getting a corporate dispute resolved through Arbitration can be summarized as
follows:
1. Not all corporate disputes be
referred to an Arbitrator and in certain cases even the express arbitration
clause, can not oust the jurisdiction of a Company Law Board or a Company
Court.
2. A corporate dispute resolution
through Arbitration is certainly costly.
3. The general rules applicable
to appointment of Arbitrator through court, are applicable to the appointment
of Arbitrator by court under section 11 even if the dispute to be referred is a
corporate dispute or company litigation.
4. The speedy disposal of a
corporate dispute depends upon the complications in the case, the bonafides on
the part of the parties in getting the dispute resolved early and the
co-operation rendered by the professionals representing parties before the
Arbitrator.
Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
