Court Intervention in ADR

What do you understand by Arbitration?

“Arbitration” is a dispute settlement process between two or more parties. It is the objective through which conveyed by a Contract or Agreement. In this, parties agree to resolve their conflicts, utilizing mediation or conciliation.  

 The Arbitration and Conciliation Act, 1996 of Section 2 defined Arbitration as (a) Arbitration means any arbitration whether administered by permanent Arbitral Institution (b) “Arbitration Agreement”, means, and Agreement referred to in Section 7.”   

Arbitration is a form of [ADR] Alternative Dispute Resolution. It is a process to resolve disputes outside the courts. One or more persons will decide the argument, which renders the “Arbitration Award”. It is legally binding to both parties and enforceable in courts. It is an agreement per se.  

Thus, it contains all the essential characteristics of a valid contract. The main features of an Arbitration Contract are;  

i) The Agreement should be in writing.  
ii) Any documents signed by the parties and agreed upon as an arbitration agreement. It can be justified as a written Agreement. 
iii) Electronic communication exchange must be produced as a record of the Agreement. iv) Arbitration agreement can be in the form of an Arbitration Clause inserted in the Agreement. So, the entire Agreement on Arbitration isn’t necessary. v) The party’s intent in the Arbitration Clause must be clear. Disputes should be referred to Arbitration.  

According to the principle of separability, two Agreements shall come into effect. The first one will be the main Agreement between the parties. At the same time, the second one is an agreement of Arbitration to refer all disputes to Arbitration. Remarkably, an arbitration clause is incorporated in the Agreement. Thus, an arbitration award is binding on both parties of the dispute and is enforceable under the Court of law.   

COURT INTERVENTION, WHEN AN ARBITRATION AGREEMENT EXISTS  

The law of non-intervention is rooted in the premise. It is when parties to any commercial contract by their consent have decided to resolve the mediation of their dispute. By Arbitration, the judiciary would not have any reason to intervene in the proceeding. The Court of other Judicial Authority does not interfere in any arbitration proceedings.  

SECTION 8 States that “if an Arbitration Agreement exists between the parties, the judicial courts shall at the first instant refer any matter brought before them for deliberation through Arbitration. The courts are empowered to consider any point where it feels that prima facie, no valid arbitration agreement between the parties”.  

COURT INTERVENTION [ IT IS WHEN ONE PARTY DOES NOT POSSESS A COPY OF THE ARBITRATION AGREEMENT]  

The Act certify the Court to entertain all application for intervention in matters of Arbitration’s making application. The Court must be satisfied that the applying party does not own a copy of the Arbitration Agreement if a document is not getting in the ordinary course by the process of Arbitration. It has the power to intervene and give appropriate direction, `on the prayer of one party to the other party, to produce the Original Arbitration Agreement or its certified copy before the Court. Yet, this tiny intervention of the Court directing other parties to make an Original Arbitration Agreement or certified true copy before the Court does not bar parties to refer the case to Arbitration THE SUPREME COURT JUDGEMENT ON JUDICIAL ARBITRATION  

In the case of M/s. Ssangyong Engineering & Construction Co. Ltd. Vs. National Highway Authority of India Limited. The SC cleared that “when it comes to the Public Policy of India argument based upon “most basic notions of justice”. It must be clear that the ground can be attracted only in infrequent circumstances. It is when the moral of the Court is shocked by infraction of fundamental notions or principles of justice.” “Further, a circular, issued by one party, cannot possibly bind the other party to the Agreement without that other party’s consent.——————This being the case, it is clear that the majority award has created a new contract for the parties applying the said unilateral Circular and substituting a workable formula under the Agreement with another formula dehors the Agreement. The case is, that a fundamental principle of justice has been breached. Plus, an extra contract can never be imposed upon an unwilling party, nor can a party to the Agreement be liable to perform a bargain not entered into with the other party. A way of conduct would be contrary to fundamental principles of justice as followed in this country and would shock the conscience of this Court.   

The Court further said, “Despite the fact, we repeat that this ground is available only in infrequent circumstances. Under no circumstances can any court interfere with an arbitral award because justice has not been done in the opinion of the Court. It would be an entry into the merits of the dispute, which, as we have seen, is contrary to the ethos of Section 34 of the Act, 1996, as has been noted earlier in this judgement. The judgement of the Single Judge and the Division Bench of Delhi High Court is set aside. Consequently, the majority award is also set aside. As per Section 34 of the Act, 1996, the disputes decided by the majority would have to be referred afresh to another arbitration. The cause considerable delay and is contrary to one of the important objectives of Act 1996. It is a speedy resolution of disputes by the arbitral process under the Act, of 1996. Thus, for complete justice between the parties, invoking our power under Article 142 of the Constitution of India——–.”   

Indian judicial system has been burdened with uncountable cases pending justice. In India, the Judicial Proceedings are lengthy. India needs requirement of a speedy dispute resolution system for better development. One of the best Alternate Dispute Resolution Procedures in Arbitration. Parties to an Arbitration Agreement refer all their disputes to arbitration for resolution. For an arbitration proceeding, there should be an Arbitration Agreement or an Arbitration Clause in the main contract mentioning that all disputes will be referred to Arbitration aroused due to any breach of terms and conditions of the main Agreement. The parties to the Agreement will appoint Arbitrators, and the award of arbitrators are binding on both parties and enforceable under the Court of law. Whereas when there is an injustice to one party, the award is against public policy. The agreement is not followed correctly, and one suffers more than the other due to recognition. Also, competent courts may even intervene and set aside Arbitration Award.  

References:

https://taxguru.in/corporate-law/judicial-intervention-arbitration-proceedings.html

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