New Horizon in the New Arbitration Age: A case for Case Management in Arbitration under the Arbitration and Conciliation Act, 1996

I. Introduction

The Indian judiciary has largely emerged with flying colours alongside its counterparts in the international arena in interpretation and application of substantive laws. The Supreme Court of India can be stated to have reached its zenith at the turn of the millennium as almost predicted by the Jurist Prof. Laurence Henry Tribe, Professor of Constitutional Law at Harvard Law School. It is as good as any in the world, and reportedly, as much cited and accepted as any other. But in the area of procedural law the Indian judiciary is derided to have fallen short; nay, is stated to have almost reached its nadir at the same time. The mainstream adjudication has, therefore, cried out for alternative means of dispute resolution much as mainstream medicine has accepted streams of alternative medicine as a cure for maladies.

The amendment of the Code of Civil Procedure (CPC) at the turn of the century propounded settlement of disputes outside the court at the heart of its framework as enunciated in Section 89 and as guided and directed under Order 10 Rule 1-A thereof. The first of the modes of the alternative dispute resolution (ADR) is arbitration. It is the adjudication of a dispute between parties by their chosen Judge. There can be as many such Judges as are qualified and eligible persons of law and other specialised areas. The constitution of such judiciary would be endless in its width and breadth, the eligibility attained by the knowledge of law and experience of judging being the two dominant criterias.

Given that the majority of the disputes to be resolved by arbitration would be under the commercial laws, relating to contractual matters, family disputes, etc., a trial lawyer or a trial Judge would expectedly be best suited to adjudicate those disputes in the alternative forum of arbitration. Of course, specialised matters relating to construction and other technical aspects would merit having persons with the required technical knowhow in addition to the legal knowledge which would be required in resolving any dispute.

The ground that would lay beneath such a wide array of disputes would be expected to be fertilised by many a legal mind. The end result would also be expected to be expeditious as what reason would be for such a forum to exist and to receive legislative approval, if it were not for efficacy and expediency?

Alas, that has not come to be. A decade-and-a-half after the legislative mandate of making arbitration, the first of the alternate dispute resolutions (ADRs) almost a mainstream forum, the total production and output has been less than the demand for it.

II. Evolution

The law of arbitration has progressed a great length since the initial Arbitration Act, 1940 which gave way to the Arbitration and Conciliation Act, 1996 (the 1996 Act) and which culminated into extensive amendments and reforms under the latest Amendment Act of 2015 which came into effect from 23-10-2015.

III. Current requirement

We get the Government we deserve. We also get the laws we deserve. In view of the egregiously slow output of arbitral awards despite a legislation which would rival similar legislations in other democratic countries, the good name of alternate resolution system came to be marred. It would require a good deal of “blamestorming” to introspect and unearth the reasons for the malady and an open mind to undo the errors. The two arms of such adjudicatory process — the Arbitral Tribunal and the advocates who appear before it — must take the burden upon their shoulders almost equally and set right the wrong.

The modern day litigation has clearly shown the principles of case management to be the guiding factor in efficacy and expediency of adjudication. Arbitration was expected to go even further and hence expected to follow any meaningful and practical approach to attain the end. Hence, the 1996 Act under Section 19 allowed the Arbitral Tribunal not to be bound by the CPC or the Evidence Act, 1872 and has allowed parties or the arbitrator, to be free to agree on the procedure to be followed by the Arbitral Tribunal in the conduct of arbitration.

IV. Change for the future

What could be the very best procedure to be followed free of the shackles of the CPC or the Evidence Act? The majority of the proceedings relate to a commercial or family agreement. The parties invariably admit the execution of such agreement. They generally refer to and seek to enforce such agreement. Correspondence usually ensues upon the interpretation, acceptance, execution or enforcement of such agreement. There can be two distinct points of view in law and/or in fact arising upon such agreement. These could be propounded by either parties and would require to be adjudicated by the arbitrator. Hence in a majority of the disputes falling within the purview of such agreements, admissions of fact as also admissions of execution and/or receipt of the documents being the agreement, the correspondence and the like would primarily require to be recorded. Since admitted facts need not be proved and admitted documents can be accepted in evidence, recording of such admitted facts and marking as exhibits such admitted documents would be the first and the prime process and requirement to narrow down the underlying disputes which would require adjudication in arbitration.

Framing issues after narrowing down the dispute would greatly result in a focused view of the ambit of the dispute. Only the material facts which are disputed by the parties could be the basis of the issues which the arbitrator would require to decide. The proof of such disputed facts alone would merit oral evidence to be led and only the disputed documents, if any, would require proof by direct oral evidence or by secondary evidence upon the procedure agreed upon by the parties or considered appropriate by the arbitrator, free of the manacles of the Evidence Act but within the principles guiding the proof of such facts in evidence.

V. The time factor

In view of such defined area, would it be too avaricious to say that a complete resolution of such dispute cannot be reached in about one year? A common sense approach by a reasonable person (who is guiding factor for determination of any principle of law) would wholeheartedly accept this as a reasonable period of time for determination of any dispute. It was not so. Hence, the legislature in the amended Act, whilst recommending a period of 6 months for completion of (usual) arbitrations, with additional fees as agreed under Section 29-A(2), has expressly made the period of 1 year a “deemed reasonable” period by setting out the time-limit of a year for making the arbitral award under Section 29-A(1) and also granted an extension of six months under Section 29-A(3) and not further than that. The arbitration would terminate at the end of the period under Section 29-A(4). The legislation has also provided punitive measures of reduction of the fees of the arbitrator for delay attributable to the arbitrator herself/himself. The proviso to Section 29-A(4) in that regard speaks eloquent of the sordid state of affairs that would impel or compel such a legislative measure. The further provision in Section 29-A(6) of substitution of such an arbitrator demonstrates the legislative measure to remedy the malady.

VI. Other legislative amendments

To that end the amendments have sought to address varied issues:

(i) The new provision of fast track procedure under Section 29-B of the amended Act which dispenses with oral hearing by agreement of the parties provides a new way of life for disputes which could be arbitrated upon interpretation of documents or questions of law.

(ii) A whip upon the delay of payment in commercial disputes is also envisioned in the provision of statutory interest at the rate of 2% higher than the current rate of interest prevalent on the date of the award under Section 31(7)(a) of the amended Act.

(iii) The grant of actual and compensatory costs under the sub-title “Regime for costs” under Section 31-A puts in perspective the legislation relating the arbitration on par with any in the commercial world.

(iv) The one aspect where the 1996 Act fell short of even the mainstream judicial adjudication was the enforcement of the awards under Section 36 only after the time for making an application to set aside the arbitral award had expired or such application was refused resulting in an implied stay of all awards at least till the statutory period of limitation for setting it aside. That weakness has been remedied in Section 36(2) of the amended Act which expressly sets out that even the filing of an application for setting aside an award would not by itself render that award unenforceable unless the Court stayed its operation, upon conditions it deemed fit and for reasons it would require to record with a further rider under proviso 2 to Section 36(3) of amended Act for the grant of stay only upon the provisions for stay of a money decree under Order 41 Rule 5(3)(a), (b) & (c) and Order 41 Rule 5(5) CPC. Hence for stay of a money award a substantial loss which has resulted to the party against whom the award is sought to be enforced would have to be shown by such party seeking to set it aside and an order of deposit or security to the extent of the award or a part of it would be opportune where it is stayed.

(v) The Sixth Schedule to the Amendment Act of 2015 requiring the arbitrators to show the number of ongoing arbitrations and the circumstances which are likely to affect her/his ability to devote sufficient time to the arbitration and finish the entire arbitration within twelve (12) months would show the accountability of arbitrators statutorily required and would reflect how multiple arbitrations resulting in nothing is eschewed by the lawmakers. This would also result in the legitimate decentralisation of work and consequently reap benefits of the principle of division of labour.

(vi) The Fourth Schedule to the Amendment Act of 2015 setting out the ad valorum arbitrators’ fees, generous as it is, is derided as inadequate. However, if a neat new procedure is followed abiding case managment principles and avoiding and shunning all technicalities, the extent of avoidable time needlessly taken would be hugely curtailed. Once that is done and the process is streamlined, a reasonable man would accept the model fee in the Fourth Schedule as, perhaps, more than reasonable. Further additional fees statutorily provided for under Section 29-A(2) for completion of arbitration within the recommended six-month period (of course, upon agreement by the parties) and the special fees as agreed payable under Section 29-B(6) for adopting fast track procedure is a further harbinger of an era of streamlined arbitration and the rewards, that follow to the parties in expeditious disposal as also to the arbitrators by way of fees.

(vii) The propulsion towards sole arbitration, as would be apt for commercial disputes as in civil suits, is more than latent. The entitlement to 25% more fee for a sole arbitrator in the note at the foot of the Fourth Schedule accounts even for the arithmetic of the cost-benefit ratio to parties in encouraging expeditious completion by the arbitrators. The fee structure itself would be largest single contributory factor in lessening the time for completion of the arbitration.

VII. The administrative efficacy

An arbitrator must decide according to law. Hence she/he is bound by all substantive laws. An arbitrator is not bound by the procedural laws. She/he need not follow to the letter the CPC or the Evidence Act and may decide her/his own procedure. The principles of time managment would play a part in the passing of directions and abiding them. The merits of procedural simplification would, therefore, be the prime consideration.

VIII. The desired procedure

What would be a neat, business-like, apt, methodical, organised procedure?

(a) Both parties must be directed to produce all the original documents at all arbitration meetings. Inspection (at least partly) can be completed at the venue itself.

(b) In the first meeting after the pleadings are completed and inspection of documents is offered and upon the original documents being brought to the meeting, an address/arguments by the parties upon the Statement of Claim and the Defence would be the initial best step forward. This would be conditioned upon the advocates who represent parties being fully prepared and the arbitrator having fully read the pleadings. This would account for the main relief sought shorn of all the fetters of the CPC on technicalities and applications upon such technicalities. It entails doing “the last thing first” — with focus upon the ultimate destination rather than a circuitous journey. The needless waste of professional time taken up by the “non-value added items” would be put in place.

(c) The second step would be to enumerate all the admitted facts and mark as exhibits all the admitted documents, thus narrowing down the ambit of the dispute. It is the process of simplifying a needlessly complicated state of affairs. As Dwight Eisenhower had said “genius consists in turning the complicated into the simple”. The evidently complicated dispute would be rendered simple by sweeping away the dust that covers the surface.

(d) Just how many thousands of arbitrations, as much as litigations in Court, in our country show advocates accepting the receipt of a letter but not the truth of its contents? No prudent person would expect a party to admit the truth of what her/his adversary has stated in her/his correspondence. He would only expect a party to admit the receipt of the letter which has been replied and upon which much has been stated. Is it even required, at least in arbitration, to specify such mode of admission for every single letter received or a statement made? It is not even required to be so cleared even in judicial adjudication if common sense principles prevail. Admission of receipt of a letter can never ipso facto prove the truth of its contents. However, in our justice system this fact is required to be stated and reiterated thousands of times during the tenure of a trial Judge. As if, that is not outrageous enough, the same practice proudly presence itself even in the flexible system of arbitration. The correction of such an endemic malady may be in stating the obvious initially itself and at the most but once in arbitration.

(e) Of course, for disputed facts and claims — to wit — the claim of damages for mental agony, loss of business, loss of investment opportunity, etc., would be required to be proved by oral and documentary evidence upon a simple and bare denial thereof. Only such claim would necessitate whatever evidence can be mustered and produced before the arbitrator. An affidavit of evidence followed by a record of a memorandum of cross-examination would suffice. Such exercise undertaken at one time until its completion would bring it to fruition.

(f) The penultimate step of the arbitration process would be oral arguments fortified by written submissions in bullet points or written submissions tempered with short oral explanation to assist the arbitrator.

(g) It need hardly be stated that the award, which is the final step in the process of arbitration, must follow close upon the heels.

(h) Though not strictly under the legislation, in consonance with Section 89 CPC which enjoins mediation also as a medium of alternative dispute resolution, Med-Arb, as practised in the UK and Canada would be opportune, more specially in cases of multi-property or multi?contractual disputes of high stakes in which the future of the family or business is involved. Such resolution can be effected upon a written agreement in that behalf by the parties agreeing to refer their (consolidated) disputes to mediation, and failing which, to arbitration. In such cases a win-win situation for the future of the parties is invoked and sought by creating options for solution. If the settlement is not worked out, the mediator, who, by then, would be fully abreast of the facts of the case and the law involved in the dispute, would be entitled to give an award which would be binding upon the parties, subject, of course, to the statutory challenge.

IX. The business principles

The aforesaid procedure would demand “core competence” from both, the “domain arbitrators” e.g. trial lawyers, trial Judges, architects, structural engineers and lawyers committed to the cause of arbitration to make it a parallel adjudicatory system specially for commercial and family disputes. All these steps entailing a complete paradigm shift would be primarily dependent upon the team work between dedicated lawyers and arbitrators to demonstrate professionalism. Truly, the acronym of TEAM (together everyone achieves more) would come into play at work. A “package deal” for the litigators and the litigants in arbitration can work to mutual advantage of all.

X. Conclusion

The legislature has been indeed smart. It has outwitted the indolent, unindustrious, unproductive state of affairs. Yet it has been just. After cracking a whip upon delay it has munificently granted ad valorem, liquidated amount of fees. It has thus been an instrument of social welfare for the resolution of disputes expeditiously and efficaciously. It is now for the arbitrators and the advocates alike to take the reins and steer the course of a smooth journey for alternative resolution of civil disputes.

“The journey of a thousand miles begins with a single step.”


*The author has only articulated her perception of the successful implementation of the amended Arbitration Act upon practical experience of its working in conducting arbitrations in India.  Hence this article bears no reference to case law or commentaries.

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