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Growing expenses and slow processes beset arbitration in India. Arbitration proceedings are frequently dragged out by lawyers on both sides making erroneous applications at various stages. Also, litigants might contribute to the delay by refusing to accept a loss or defeat.
The courts have reduced the extent of judicial interference under Section 34 of the Arbitration and Conciliation Act. Still, the lack of credible arbitral institutions often makes the legal cases end up in the courtrooms.
What is Arbitration?
In simple terms, arbitration is the process of resolving a disagreement by using an arbitrator. An arbitrator is a neutral third party not involved in the issue.
It is an alternative dispute resolution system that seeks to resolve disputes outside the courtroom.
Agreement on Arbitration
The arbitration mechanism may be used only if there is an agreement between the parties. It indicates the parties’ mutual agreement (consensus ad idem) that if a dispute occurs over their responsibilities to one another, the matter will be resolved by an arbitral tribunal.
The Arbitration and Reconciliation Act of 1966 allows parties to an arbitration agreement to pick an arbitrator to resolve their dispute.
A written arbitration agreement is required. Even after a conflict has arisen, the parties to a dispute might use the arbitration technique to resolve their differences. Parties can send their disagreement to arbitration at any time, subject to the statute of limitations.
Clause of Arbitration
An arbitration provision is the source of the arbitrator’s authority or jurisdiction. This section is primarily a portion of the contract that governs the dispute parties and stands out from the rest of the contract’s terms. Although contracts must be signed, there is no requirement that arbitration clauses be signed.
If the parties have granted their verbal or implied approval to refer their disputes to arbitration, an arbitration clause is regarded as binding.
Arbitration mechanism
Arbitration, as previously stated, is a method of resolving conflicts between private parties outside the court system. Arbitration is when two or more parties agree to settle a disagreement outside the courtroom(s).
The steps in a simplified arbitration agreement are as follows:
To begin, the parties to a contract/agreement include an arbitration clause in their contract/agreement. If a dispute occurs between them, one party notifies the other by issuing an arbitration notice.
This is followed by the opposite party’s response and the eventual appointment of an arbitrator, as well as decisions on rules and processes, arbitration location, and language.
Formal hearings and written proceedings follow the start of the arbitration proceedings.
If the case needs it, the arbitrator will give interim reliefs before issuing a final ruling binding both parties.
The difficulty comes when one of the parties, dissatisfied with the award, takes it to court for challenging the arbitration. Depending on the case, this could be before an appellate court or the Supreme Court.
Arbitration challenges
Even though India is not a litigious market, the increase in foreign investment has necessitated a closer examination of dispute resolution systems to avoid protracted litigation for international investors. Both foreign and domestic parties have recently begun to prefer arbitration or alternative dispute resolution approaches over litigation, which has hitherto been the preferred mode of conflict resolution in India.
Despite India’s massive backlog of cases – which serves as a powerful barrier to potential litigants from bringing claims — litigation was the primary option for most until recently. Even though enforcing a contract or judgement takes much too long for low-value litigation to be commercially viable, the number of litigations in India greatly outnumbers the number of arbitral settlements. This is large because arbitrators almost always appeal their decisions, resulting in protracted legal battles that can last up to even ten years. As a result of the hurdles to jurisdiction enforcement, duplicative litigation becomes unavoidable, rendering the conflict resolution mechanism monetarily unviable. Although there has been a noticeable change in favour of arbitration as a preferred method of dispute resolution in India, arbitration has been mainly ineffectual compared to the legislative intent. The Arbitration and Conciliation Act, 1996, India’s main ADR legislation, contains some ambiguities that have been abused by losing parties when challenging arbitral results, resulting in a lack of finality of awards. Allowing an arbitral tribunal to use mediation, conciliation, or other techniques to facilitate dispute settlement during the arbitral proceedings may be more effective, although it is rarely used in India.
Reasons for the Failure of the Institutional Arbitration in India
The development of Institutional Arbitration has been hampered by a lack of support from the federal and state governments.
More court intervention in the arbitration process.
In the arbitral institutions, there is a lack of infrastructure.
Lack of credible arbitrary institutions.
The Arbitration and Conciliation Act of 1996 contains no provisions relating to institutional arbitration.
Insufficient legislative support.
There is a lot of misunderstanding about Institutional Arbitration.
Conclusion
Arbitration has proven to be a blessing for the Indian legal system, which needs a proper arbitration mechanism to deal with cases languishing in the courts. Arbitration is beneficial in lessening the excessive strain placed on the legal system and in a variety of other ways, such as faster decision-making, lower costs, the ability for parties to present their terms and conditions, and so on. If the obstacles mentioned earlier are overcome, and the legislature and the judiciary keep a close eye on arbitration legislation, the future of arbitration in India is certain.
