Litigation and Arbitration

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The first Ordinance came into force on 25.01.1996 and the Arbitration and Conciliation Act, 1996 came into force on 22.08.1996. It was held that the Act came into force in continuation of the first Ordinance and this makes the position clear that although the Act came into force on 22.08.1996, for all practical and legal purposes, it shall be deemed to have been effective from 25.01.1996, particularly when the provisions of the Ordinance and the Act are similar and there is nothing in the Act to the contrary so as to make the Ordinance ineffective as to either its coming into force on 25.01.1996 or its continuation upto 22.08.1996.

Meaning of Arbitration – Romily M.R. in Collins vs. Collins calls an arbitration as a reference to the decision of one or more person of a particular matter in difference between the parties. Its object is the final disposition in a speedy and inexpensive way, of the matters involved so that they may not become the subject of future litigation between the parties.

An arbitration is the reference of a 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 of competent jurisdiction. Sir Robert Raymond C.J., stated “an arbitrator is a private extraordinary judge between the party and party, chosen by their mutual consent to determine controversies between them. An Arbitrators are so called because they have an arbitrary power; for if they observe submissions and keep within due bounds their sentences are definite from which there is no appeal.

Types of Arbitration –

  • Domestic Arbitration: This term refers to the situation where both the parties and the law governing the arbitration are Indian.
  • International Commercial Arbitration and the Enforcement of Foreign Awards: this term applies to the situation where at least one party to the dispute is from another country.
  • Ad Hoc Arbitration: This refers to a situation when parties settle their dispute amongst themselves without referring it to or taking the assistance of a tribunal.
  • Institutional Arbitration: This term refers to a situation where parties agree in a contract that any dispute or difference among them will be settled in accordance to the rules of a particular arbitral institution.
  • Specialized Arbitration: When arbitration is conducted by a particular institution based on special rules set up to meet specific requirements to settle disputes of particular types it is called specialized arbitration. For example, an agreement to provide integrated circuits might require specialized arbitration since the dispute is in a very specialized area.
  • Statutory Arbitration: When a law specifies that if a dispute arises in a particular case it has to be referred to arbitration, the arbitration proceedings are called statutory arbitration. An example of a law, which provides for statutory arbitration is the Land Acquisition Act, 1894.

It is well settled law that the parties are bound by the arbitration agreement. Who shall be the Arbitrators, is also the subject matter of agreement between the parties. It is not possible for one party to arbitration agreement to resile from the agreement and say that the matter be not adjudicated by the Arbitrators as provided in the agreement and another sole arbitrator should be appointed. The Court cannot without a reasonable cause replace an Arbitrator whom the parties have chosen under the terms of the contract. The Court can only interfere where there is legal misconduct of the Arbitrator different from one as stated in the agreement in those cases where the party for a valid reason do not agree to appoint the person named in the contract as Arbitrator unless the Arbitrators named in the arbitration agreement had refused to act and adjudicate the claim or he had neglected to enter upon the reference. In Sarvesh Chopra Builders Pvt. Ltd. Vs Union Of India [146 (2008) DLT 494], Shiv Narayan Dhingra, J. [Decided on 6.12.2007]


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