Introduction to Arbitration in India.
-By Abhishek Kumar Bansal
Arbitration is a process for resolving business dispute through adjudication by an arbitral tribunal consisting of sole arbitrator or more arbitrators appointing by the parties.
Halsbury defines “arbitration” as the reference of dispute or difference between not less than two parties for determination after hearing both sides in a judicial manner by a person or persons other than a Court. In other words, arbitration is the means of dispute settlement in which instead of going to the court, the parties, by mutual consent, or by the terms of their agreement, refer the dispute to a third person, who is called the arbitrator and the award passed by him is final and binding on the parties and has the same effect as that of a court’s decision. The main essence of arbitration is the settlement of disputes by a tribunal chosen by the parties of a dispute themselves rather than a Court which is chosen by the State.
The present law on arbitration in India is the Arbitration and Conciliation Act, 1996 which is based on the UNCITRAL Model Law on international commercial arbitration.
Preamble of the 1996 Act aims to consolidate and amend Indian laws relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards. The object of the 1996 Act is to minimize supervisory role of courts and to render speedy justice.[1]
The Act consolidates domestic and international commercial arbitration in one statute. The Arbitration Act of 1996 has 86 Sections which are divided into four parts. Part I relates to arbitration held in India, Part II relates to foreign awards, Part III relates to consolation and Part IV relates to supplementary provisions.
Prior to the enforcement of the 1996 Act, the law of arbitration in this country was substantially contained in three enactments namely (1) the Arbitration Act, 1940 (hereinafter referred to as ‘the1940 Act’) (2) the Arbitration (Protocol and Convention) Act, 1937 (hereinafter referred to as ‘the 1937 Act ’) and (3) the 1961 Act.
In the year 1993, the Supreme Court of India in the landmark judgment in National Thermal Power Corporation[2] had reversed judgment of Delhi High Court which had led to amendment and consolidation of the arbitration law in India in 1996.
The judgment in National Thermal Power Corporation[3] was based on Section 9(b) of the 1961 Act, it resulted in reactions by the foreign investors that how an award made in England can be set aside by courts in India merely because Indian law is applicable to it. It led the Govt. of India to decide to delete Section 9(b) from the 1961 Act. It was further decided to consolidate the entire arbitration law into one statute. This decision of the Govt. of India resulted in enactment of the 1996 Act.
The basic concept at the root of Arbitration under the Indian Arbitration and Conciliation Act, 1996 is an Arbitration agreement. In other words, the foundation of Arbitration is the Arbitration agreement between the parties to submit to arbitration all are certain disputes which have arisen or which may arise between them. Thus, the provision of arbitration can be made at the time of entering the contract itself, so that if any dispute arises in future, the dispute can be referred to arbitrator as per the agreement.