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Why Arbitration as a Dispute Resolution Mechanism?

Author - Nishant Nigam

Background

The common phrase we hear is “Justice delayed is justice denied’’. It is a legal maxim meaning that if legal redress is available for a party that has suffered some injury, but is not forthcoming in a timely fashion, it is effectively the same as having no redress at all . India is a large democracy and the faith of the people in the judicial system is strong and vital, as people believe in Rule of law and consider justice to be given in a timely and profound manner.

As per the recent statistics of National Judicial data grid, around 8172260 civil cases are pending in the country without considering the criminal cases and if we look at the total pendency of cases, the number is around 27928667. The courts are understaffed and pressure on the judicial system is very high. 

Depending on the court and the case, it can even take upto 10 years or more for a Court to pronounce judgement at the level of the trial court let alone the time taken at the Appellate levels. A reform is the need of the hour to ease the burden of the courts and look for other alternatives to redress grievances and early adjudication of cases especially in the field of commercial disputes. One of the ways to ease the burden of courts in commercial matters is through Alternative Dispute Resolution. Alternative Dispute Resolution or ADR is a fine substitute for common judicial process. ADR includes methods like Arbitration, Conciliation, and Mediation. All of them have some common features.

Introduction: ARBITRATION

It is one of the mechanisms to resolve the dispute between two or more parties/entities under the adjudication of an unbiased, impartial and independent person(s) appointed by the parties to the dispute. This mechanism is known as Arbitration. The legislation governing Arbitration is the Arbitration and Conciliation Act, 1996 (as amended by the Amendment Act of 2015).

Arbitration is usually the preferred mode of dispute resolution for civil disputes in the real estate sector, construction sector, basic contractual disputes, investment disputes, in the field of insurance etc. The speedy redressal of cases and early award and justice to the people who have subjected themselves to arbitration make it a viable option for resolving disputes. Arbitration led to a major change in adjudication of civil/commercial disputes. It provides a platform to the parties to resolve disputes in a timely manner which assists the parties to avoid lengthy litigation through courts. Arbitration helps to ease the burden of courts to some extent and with recent developments, it has become more transparent and effective. 

ADVANTAGES OF ARBITRATION

1. Customized Procedure and Privacy

Arbitration provides absolute freedom and power to the parties to customize the process to be followed during the adjudication process. For instance, the parties can agree to waive any oral evidence and may agree that adjudication of the dispute may only be done based upon documentary evidence. The parties have the right to determine the number of arbitrators. Arbitration is a private procedure, whereby privacy regarding the dispute, the procedure followed and the eventual outcome is maintained unless either party challenges the decision of the Arbitral Tribunal before a Court of Law. However, to choose arbitration as the preferred mode of dispute resolution, the parties should incorporate an Arbitration clause in this regard in the Agreement they execute by and between themselves. 

2. Avoid Lengthy Litigation and Cost

Arbitration helps in avoiding the lengthy procedural delays which are a norm in courts and saves a significant time to allow the parties to reach a conclusion. Further, the process of arbitration allows the costs to be managed in a manner suitable to the parties and in the end the party in whose favor the Award is passed, is also entitled to costs of the Arbitration. It can be said without a doubt that sometimes arbitration proceedings also become a place for amicable resolution of disputes as parties sometimes under the guidance of the Arbitral Tribunal explore the possibility of arriving at an amicable settlement thereby saving on eventual costs of dispute resolution. 

3. Awards – Finality and Challenge

Award is basically a decision made by arbitral tribunal on the matter referred to it. It is the final judgement made by the arbitral tribunal, and is binding in same manner as a decision of court. With the recent amendments to the Arbitration law of the country, the procedure to challenge an Award before a Court of Law has become extremely difficult. It has been held through various judgments of the Supreme Court that an Award can only be challenged if it strictly falls under the ambit and scope of the grounds for challenge enunciated under the Arbitration and Conciliation Act. Hence, it is perceived that if the Arbitral Tribunal has passed an Award on merits which does not suffer from any irregularity the same will be upheld even by the Court of Law and will not be interfered with. Thus, reposing faith in the sanctity of the procedure of arbitration as also the conclusion after the adjudication process which comes in the form of an Award.

4. Early Settlement of Dispute

The process of arbitration has become a time – bound procedure courtesy the amendment to the law. The arbitration proceedings are mandatorily required to be concluded within a period of 12 months from the date of initiation of the procedure. Though, the timeline could be extended by another 6 months by consent of parties, yet, the procedure is much faster than adjudication through court. Also, as stated above, since the Courts have minimized their intervention in the Awards passed by Arbitral Tribunals, hence, even if the Award is challenged by a Party; the said challenge is dismissed clearing the path for quick and efficient execution of the Award.