Conduct of Arbitral Proceedings and Making of Award notes — Unit 3

The essence of arbitration is flexibility. The strict, archaic rules of court procedure do not apply.

⇒Equal Treatment of Parties (Sec 18)

The parties shall be treated with equality and each party shall be given a full opportunity to present his case. (This is the bedrock of Natural Justice).

⇒Determination of Rules of Procedure (Sec 19)

• The arbitral tribunal shall NOT be bound by the Code of Civil Procedure, 1908 (CPC) or the Indian Evidence Act, 1872.
• Subject to the Act, the parties are free to agree on the procedure to be followed by the tribunal.
• Failing any agreement, the arbitral tribunal may conduct the proceedings in the manner it considers appropriate. This includes the power to determine the admissibility, relevance, materiality, and weight of any evidence.

⇒Place of Arbitration (Section 20)

The parties are free to agree on the place of arbitration. If they fail to agree, the place shall be determined by the tribunal having regard to the circumstances of the case and the convenience of the parties.

⇒Language (Section 22)

Parties are free to agree upon the language(s) to be used. Failing agreement, the tribunal determines it. The tribunal can order that any documentary evidence shall be accompanied by a translation.

This is the equivalent of the Plaint and Written Statement in civil courts.

• Statement of Claim: Within the time agreed upon (or determined by the tribunal), the claimant must state the facts supporting his claim, the points at issue, and the relief or remedy sought.
• Statement of Defence: The respondent must state his defence in respect of these particulars. The respondent can also submit a counter-claim or plead a set-off.
• Pleadings Timeline: The 2019 Amendment added a strict timeline: The Statement of Claim and Defence MUST be completed within 6 months from the date the arbitrator receives notice of appointment.

Parties may submit all documents they consider relevant along with these statements.

⇒Hearings (Section 24)

Unless parties have agreed otherwise, the tribunal decides whether to hold oral hearings for the presentation of evidence or oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials only (Documents-only arbitration).

However, if a party requests an oral hearing, the tribunal must hold it (unless they specifically agreed beforehand that no hearings would be held).

⇒Default of a Party (Section 25)

• If the claimant fails to submit the Statement of Claim without sufficient cause, the tribunal shall terminate the proceedings.
• If the respondent fails to submit the Statement of Defence, the tribunal shall continue the proceedings (it does not treat the failure as an admission of allegations).
• If a party fails to appear at an oral hearing or produce documentary evidence, the tribunal may continue and make the award on the evidence before it (Ex-parte award).

We saw earlier that parties can go to Court under Section 9 for interim injunctions. But what if the tribunal is already formed?

⇒The Power of the Tribunal

Under Section 17, a party can apply to the Arbitral Tribunal for the same interim measures as they could ask a court under Section 9 (e.g., preserving property, freezing accounts).

⇒The 2015 Game-Changer

Before 2015, if a tribunal gave an interim order, it had no "teeth." If a party disobeyed it, the tribunal couldn't do anything, and the party had to go to court anyway. The 2015 Amendment changed everything.

Now, an interim order issued by an Arbitral Tribunal under Section 17 is deemed to be an order of the Court and is enforceable exactly like a court order under the CPC. Disobeying it can lead to contempt/attachment of property.

Arbitrators are private individuals. They don't have police powers. They cannot force a reluctant third-party witness to attend a hearing, nor can they compel a bank to produce documents.

⇒How to force evidence?

The arbitral tribunal, or a party with the approval of the tribunal, may apply to the Court for assistance in taking evidence.

The Court may execute the request by issuing summons to the witness, ordering them to attend the arbitration or produce documents. Persons failing to attend may be subject to the like disadvantages, penalties, and punishments (e.g., arrest warrants) as they would incur for failing to attend the Court itself.

When deciding the case, what law must the arbitrator apply?

⇒Domestic Arbitration

In an arbitration between Indian parties, the tribunal MUST decide the dispute in accordance with the substantive law for the time being in force in India. (They cannot choose to apply US law).

⇒International Commercial Arbitration

The tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute. (e.g., Two companies, one Indian and one French, can agree that English Law will apply to their contract).

⇒Terms of Contract

In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.

Historically, arbitrations in India dragged on for years, just like court cases. To fix this, a strict time limit was introduced.

⇒The 12-Month Rule

The award shall be made within a period of twelve months from the date of completion of pleadings.

⇒Extension

The parties may, by consent, extend the period for making the award for a further period not exceeding six months (Total 18 months).

⇒Consequence of Delay

If the award is not made within the specified period (or extended period), the mandate of the arbitrator(s) shall terminate, unless the Court has, either prior to or after the expiry of the period, extended the period. The Court can even order a reduction of the arbitrator's fees if the delay is attributable to the tribunal.

(Note: This strict time limit does NOT apply to International Commercial Arbitrations, though they are urged to endeavor to finish within 12 months).

The final decision of the tribunal is called the Arbitral Award.

⇒Mandatory Requirements:

• In Writing & Signed: The award must be in writing and signed by the members of the arbitral tribunal. (In an arbitral tribunal with more than one arbitrator, the signatures of the majority are sufficient, provided the reason for any omitted signature is stated).
• Must State Reasons: The award shall state the reasons upon which it is based. A totally unreasoned award is invalid, UNLESS the parties explicitly agreed that no reasons are to be given, or it is a settlement award on agreed terms.
• Date and Place: It must state its date and the place of arbitration.
• Interest: The tribunal can award interest for the pre-reference period, pendente lite (during arbitration), and post-award period. If the award is silent, it automatically carries interest at 2% higher than the current bank rate from the date of the award till payment.

After it is made, a signed copy is delivered to each party.

⇒Summary of Master Concepts

• Procedure (Sec 19): Tribunal is not bound by CPC or Evidence Act. Utmost flexibility.
• Interim Measures (Sec 17): Tribunal can pass interim orders which have the same enforceability as a court order.
• Time Limit (Sec 29A): Pleadings in 6 months. Award in 12 months (+6 months extension by consent). Mandate terminates if delayed.
• Award (Sec 31): Must be written, signed, and reasoned (unless agreed otherwise).

⇒University Exam Tips for this Unit (Premium Advice)

• Section 17 (Interim Measures): Discuss the 2015 amendment. Explain how giving "teeth" to the tribunal's interim orders stopped parties from rushing to court under Section 9, thus strengthening the arbitration process.
• Section 29A Time Limits: Examiners love asking about the recent timeline amendments. Clearly outline the 6-month pleading phase, the 12-month award phase, and the consequences of delay (termination of mandate and fee reduction).
• Form of Award: Always mention that unlike older laws, the 1996 Act makes it mandatory for the arbitrator to give a reasoned award (speaking award). Unreasoned awards violate natural justice.