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Alternate Dispute Resolution system: ARBITRATION ( Part 2 )

Updated: Mar 6

Arbitration agreement:

The set of promises made between both the parties to consult the Arbitrator/Arbitral Tribunal, forming consideration to attain a mutually accepted decision by both the parties, with the help of an unbiased 3rd party (which is the Arbitrator), for the disputes presently at hand or for issues which may arise in future is called arbitration Agreement is called an Arbitration agreement.



Elements of the Arbitration agreement:

1. This agreement can be inserted as a ‘prevention in case of the contingency of dispute’ clause in the contract formulated by 2 parties whereby it is predetermined that in case of any impasse amongst the parties, the Arbitrator/ Arbitrary tribunal will be appointed for the settlement of such disagreement.

2. This agreement can be made to settle either specific disputes or to settle all disputes that may arise/ are present between the parties.

3. This Agreement can be made separately by 2 parties or they can insert it in their original contract in the form of Arbitration clause.

4. This agreement must be an express agreement and not implied. This written agreement can be given in 3 forms, which are:

a) In the contract signed by the parties.

b) In the form of letters, telegraph etc. exchanged between the parties which acts as evidence of the Arbitration agreement amongst the parties.

c) If in an argument one of the parties allege the presence of any such agreement between the 2 parties and the other party doesn’t refute such stance.



Composition of Arbitral Tribunal:

1. An odd number of Arbitrators can be appointed by both the parties at dispute unanimously.

2. In case the parties couldn’t reach a unanimous decision about appointment of the arbitrator then the Arbitral tribunal must be consulted, comprising of only one Arbitrator.

Scope of Arbitral Tribunal:

1. The Arbitration clause inserted in a contract acts as an independent clause which cannot be influenced by other provisions of that contract.

2. Even if both the parties have appointed the Arbitrators/ have unanimously consulted the Arbitral Tribunals, if either of the parties had come to believe that the matter of dispute is outside the scope of Arbitration, then also they may raise an objection but they are only allowed to do so before the submission of the statements by the defense.

3. In case the plea exceeds the jurisdiction of the process of Arbitration then it can be objected by either party as soon as it gets put up in the Arbitration proceeding.

4. The Arbitrator/ the Arbitration tribunal can deal with the above mentioned please in 2 ways and those are:

a) Accept those pleas if they are justified.

b) Reject those pleas and continue the Arbitral proceeding until an Arbitral award gets issued by the Arbitrator/ the Arbitral Tribunal.

5. According to Section 34 of the Arbitration and Conciliation Act 1996, An Arbitration award can be considered invalid by the parties in certain cases.



Conduct of Arbitral Proceeding:

1. Determination of rules of Arbitral proceeding:

The conditions of the proceedings are governed by the provisions mentioned in the Arbitration and Conciliation Act, 1996 and not by Code of Civil Procedure, 1908 and Indian Evidence Act, 1872, including the admissibility, relevance, materiality and weightage of evidence etc.

2. Beginning of the Arbitral proceeding:

The beginning of the proceeding is marked on the date on which the respondent receives the request made by the other party to refer the dispute to the Arbitrator/ the Arbitration Tribunal. Provided that there is no other provision present in the Contract between the parties regarding the same.

3. During the proceeding:

There are following ways in which The Arbitral Tribunal deals with the matter at its hand:

a) According to the manner prescribed in the agreement made by both the parties.

b) In the absence of provisions relating to specific manner in which the proceeding is to be held in the agreement between the 2 parties, the Arbitral Tribunal can conduct Oral hearing for Argument over the evidence that has come to light.

c) The Arbitral Tribunal may also decide the relevance of the documents produced in front of it by the parties or if other documents are required to conduct an effective proceeding.

d) The Arbitral Tribunal may allow Oral Proceeding on the request of the parties at any stage of the proceeding.

e) The Arbitral Tribunal can issue a notice in advance to either the parties to inform them about Oral hearing.

f) The Tribunal may also scrutinize any document or property which it deems relevant to the case at hand by way of issuing a notice in advance to either of the parties.

g) There should be an open communication between the parties and the Tribunal about any material or documents produced in front of the Tribunal or any document which is relied on by the Arbitral Tribunal to ensure a mutual agreement between the parties and resolve the dispute.



Termination of Proceeding:

There are 2 ways by which the Arbitral Proceeding can be Terminated and they are as follows:

a) By the issuance of the Arbitral award by the Arbitral Tribunal

b) By the order of the Arbitral tribunal:

The Order is issued by the Arbitral Tribunal in the following cases:

 If the claim is withdrawn by the Claimant. Provided that the Respondent doesn’t raise objections to such an order and on the merit of such objection the Arbitral Tribunal doesn’t deems it fit to provide the final settlement by issuing the Arbitral Award.

 The parties mutually agree to end the Arbitral proceeding.

 The Arbitral Tribunal believes that the continuation of the proceeding will not serve the purpose of resolving the dispute at hand.

According to Section 33 and Section 34(4), the authorization of the Arbitral Tribunal ceases with the termination of the Arbitral Proceeding.





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