How to make Arbitration Mechanism truly effective?

With a very laudable objective of speedy disposal of cases, Alternative Dispute Resolution Mechanism (ADR) is mooted. Among the modes of Alternative Dispute Resolution Mechanism, Arbitration is most discussed issue always as many agreements or contracts contain an Arbitration Clause now-a-days. The difference between Arbitration Mechanism and the adjudication through Civil Court etc. issues can be summed up as follows:

1. There is no need of paying court fee when a dispute is adjudicated by an Arbitrator.

2. Arbitrator is less burdened compared to Civil Court and the parties have the liberty of choosing their own judge.

3. Arbitrator need not follow the procedure prescribed under Civil Procedure Code, 1908 though he will follow the principles of natural justice.

4. The procedure, the fees, the place of Arbitration etc. can be mutually agreed by the Parties and in the absence of any consensus, the Court or the Arbitrator will take a decision on the issues.

Despite so much relaxation in the established civil procedure, the adjudication before the Arbitrator or the issue of getting an Arbitrator appointed is delayed very often. The general issues or challenges to the adjudication through Arbitrator are as follows:

a. Even when there is no real lis between the parties, one party to an agreement containing Arbitration clause, may initiate Arbitration proceedings with untenable claim. The issue is settled to some extent now in view of the recent development that the Court entertaining an application under section 11 of Arbitration and Conciliation Act, 1996 discharges judicial function and can look into the issues as to whether there is any existing agreement prima facie, whether there is any lis between the parties and whether the subject matter is capable of being arbitrated.

b. When there exist a special mechanism dealing with certain issues, the adjudication before the Arbitrator may not appear to be effective. For example, Rent Control Laws provide many reliefs to the tenants and also the landlords. There is a provision for deposit of rent by the tenant when the landlord refuses to receive the rent under the Rent Control Laws. When it comes to depositing rent, the Arbitrator may not be effectively deal with the issue.

c. Even when there is no specific provision under the Arbitration and Conciliation Act, 1996, litigants who wants to drag the case may file many interim applications. When an interim application is filed, the same can be rejected by the Arbitrator when it is found that the interim application is unnecessary and motivated to drag the case. But, in many cases, the Arbitrator entertains the interim applications and disposes the same in accordance with law and it consumes time as is the case before the Civil Court. Against the order in the Interim Application, an aggrieved party tends to approach the High Court under section 34 as we see practically.
d. When hearing fees is fixed or agreed to the Arbitrator, then, at times, the Arbitrator may feel it convenient to grant so many adjournments and it is happening as we wee.

e. Even when a fixed fee is ordered to pay to the Arbitrator or agreed upon, the parties usually not pay the entire fee in the beginning. Till the fee is paid the Arbitration proceedings will go on at times, though the Arbitrator can exercise his right of lien over the award until his agreed remuneration or fee is paid.

Looking at the pendency of cases before various courts in India, if we think about the time to be taken for disposing all the pending cases, it is recently reported that it will take some 320 years to dispose of the pending cases or to clear the backlog.

Arbitration mechanism is always Alternative, but, still we depend on the Civil Courts and the procedure lay down under the Code of Civil Procedure, 1908 for getting the civil disputes adjudicated. We need many reforms in our judicial system in India to ensure speedy disposal of cases and it will certainly take years to bring the proper reforms.

Simultaneous to bringing the proper reforms or initiating measures to bring the reforms in our Indian Judiciary aiming at speedy and effective disposal of cases, we also need to concentrate as to how make the Arbitration Mechanism truly effective.

The measures to make the Arbitration Mechanism truly effective, as I think, are as follows:

1. Rather practicing to appoint retired judges as Arbitrators, it is better to have panel of Arbitrators who are talented and with very good legal knowledge. There is nothing wrong if a practicing legal advocate is appointed as an Arbitrator when he is willing to act as such.

2. When it comes to the fee or the remuneration to be paid to the Arbitrator, it is better to fix lumsum remuneration for deciding an issue and having mechanism that the entire fee is paid to the Arbitrator at once.

3. It is better to avoid the practice of paying sitting fees to the Arbitrators if one needs to make the adjudication through arbitration really speedy.

4. Applications under section 34 of Arbitration and Conciliation Act, 1996 to be carefully gone into and the implications of entertaining an application under section 34 on the main Arbitration claim before the Arbitrator to be carefully considered.

5. The present legal position with regard to appointment of Arbitrators to be continued and the process of appointment of arbitrators to be judicial always.

I am of the strong opinion that with few reforms, Arbitration Mechanism can be made truly effective and I don’t think that the mechanism is truly effective as of now for the few among many reasons referred to above.