“ARBITRAL PROCEEDING”

A research paper submitted in partial fulfilment of the course Alternative Dispute Resolution
for the requirement of degree of B.A., LL. B. (Hons.) for the Academic Session 2020-21

Researched &Submitted: Accession and Supervision:

Andlib Imrose Mr. Hrishkesh Manu

B.A. LL.B. (Hons.) Faculty: Alternative Dispute Resolution

3rd Year, 6th Semester

Roll no. 1915

CHANAKYA NATIONAL LAW UNIVERSITY,

PATNA

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 ACKNOWLEDGEMENT
Writing a project is one of the most significant academic challenges, I have ever faced. Though
this project has been presented by me but there are many people who remained in veil, who gave
their all support and helped me to complete this project.

First of all I am very grateful to my subject teacher Mr. Hrishikesh Manu the kind support and
help of whom the completion of the project was a herculean task for me. He donated his valuable
time from his busy schedule to help me to complete this project and suggested me from where
and how to collect data .I am very thankful to the librarian who provided me several books on
this topic which proved beneficial in completing this project.

I acknowledge my friends who gave their valuable and meticulous advice which was very useful
and could not be ignored in writing the project.

Last but not the least, I am very much thankful to my parents and family, who always stand aside
me and helped me a lot in accessing all sorts of resources.

I thank all of them!

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 DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B.A., LL.B. (Hons.) Project Report entitles
“Arbitral Proceedings”Submitted at Chanakya National Law University, Patna is an authentic
record of my work carried out under the supervision of Mr. Hrishikesh Manu. I have not
submitted this work elsewhere for any other degree or diploma. I am fully responsible for the
contents of my Project Report.

(Signature of the Candidate)

Andlib Imrose

Chanakya National Law University, Patna

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 1. INTRODUCTION

Arbitration proceedings are not in complex in nature unlike in regular courts, it’s
pretty simple and easy. A party commences an arbitration proceeding by issuing a
notice in written to the other party of its intention to refer the matter to  arbitration.
The respondent replies to the arbitration by filing answer against the arbitration
claim within stipulated time period specifying relevant facts and available defences
against the claim. Unless otherwise agreed by the parties, Arbitration proceedings
are deemed to be commenced on the date on which the respondent receives such
notice from the claimant. After the selection of Arbitrators, parties meet in persons
for the conduct of the hearing in front of arbitrators. Lastly, after the examination of
witnesses and evidences. The arbitrator, in concluding stage, gives ‘award’ which is
binding in nature. Conduct of Arbitral proceedings are provided in Chapter V of
Arbitration and Conciliation Act, 1996.

1.1Aims and Objective

 To study the concept of Arbitration.

 To analyze the matters which affect the arbitration, rules of procedure etc.

 To analyze the steps followed in the Arbitration process.

1.2 Research Methodology

The researcher will be relying on Doctrinal method of research to complete the

project

1.3 Hypotheses

Arbitration proceeding reduces the burden of pending litigation in the courts in

India.

1.4 Sources of Data

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 The researcher will be relying on both primary and secondary sources to complete
the project.

(a) Primary Sources: Acts & Articles

(b) Secondary Sources: Books, newspapers, journals, cases and websites.

1.5Limitation

 There is a time limitation for the researcher to finish the research.

 The researcher is limited to his own self for the research.

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 2. THE CONCEPT OF ARBITRATION

Halsbury’s Laws of England define Arbitration as a reference of a dispute or difference between

not less than two parties for determination after hearing both parties in a judicial manner by a
person or persons other than court of competent jurisdiction1.

Arbitration is a recognized private legal procedure used to resolve disputes between two or more
parties where the parties entrust the dispute resolution process as well as the outcome of the
dispute to a neutral third party i.e. the arbitrator (or the arbitral tribunal). 2The arbitrator/ arbitral
tribunal considers the case of the parties on merits, follows as simplified procedure to adjudicate
the dispute and the arbitral proceedings then culminate into a binding decision i.e. the arbitral
award3. Arbitration is a creature of agreement. An agreement to arbitrate is therefore really an
agreement between the parties to substitute a tribunal other than the courts of the land to
determine their rights and substitution of the decision or award of such tribunal for the judgment
of the established courts of justice. The object of arbitration is to obtain fair resolution of
disputes by an impartial tribunal without unnecessary delay or expense and the parties are free to
agree how their disputes are resolved and intervention by the courts should be restricted.

The nature of most ADR processes is fundamentally non adjudicatory whereas arbitration is
essentially an adjudicatory process and is similar to litigation in that sense. However since it is
still an alternative to the conventional litigative process of dispute resolution conducted before
law courts established under the writ of the state, arbitration finds its place in the galleries of
what has been described as ADR. In India also the availability of arbitration as a dispute
resolution process in section 89 CPC indubitably endorses its status as an ADR mechanism.

1
https://shodhganga.inflibnet.ac.in/bitstream/10603/26666/10/10_chapter%204.pdf (Last visited on March 24,
2021 at 9:50pm)

http://www.icaindia.co.in/icanet/quterli/jan-march2002/ICA2.htm (Last visited on March 24, 2021 at 10:00pm)

3
S.31,ArbitrationandConciliationAct,1996.

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2.1 Historical Background of Arbitration In India

Arbitration as a mode for settlement of disputes between the parties has a tradition in India. The
decisions rendered by Panchayats, which are recognized since times immemorial in India,
represent a crude form of arbitration. With the advent of the British Rule commenced the era of
codified legislation, rules and regulations and arbitration also made its way into the statute
books. The first comprehensive law on the subject was enacted in India in the year 1899 viz.the
Indian Arbitration Act, 1899. The Code of Civil Procedure, 1908 also contained various
provisions relating to arbitration under section 89 and section 104. In 1940 the Government of
India passed the Arbitration Act, 1940, the precursor to the contemporary legislation.

However with the passage of time, experience revealed that the Arbitration Act, 1940 was laden
with inadequacies and defects. The Arbitration Act, 1940 even had to face stringent criticism
time and again from none other than the Apex Court itself. The functioning of the Act of 1940 in
fact dented the conception of arbitration in India and the government decided to refer the matter
to the Law Commission of India, pursuant to which the Law Commission 4 recommended far-
reaching amendments in the ArbitrationAct,19405.

During this period the UNCITRAL after exhaustive research and due deliberations adopted the
Model law on Arbitration. The necessity to amend the Arbitration Act, 1940 had become evident
and imminent. The General Assembly of the United Nations had also recommended that all
countries give due regard to the UNCITRAL Model Law on Arbitration, to bring about
uniformity and consistency in arbitration law all across the globe so as to develop arbitration as a
wide spread and international mode of dispute resolution. Consequently, the government decided
that enactment of a new comprehensive legislation in sync with the international standards was a
better course of action rather than effecting radical amendments to the existing Arbitration Act,
1940. The result was the enactment of the Arbitration and Conciliation Act of 1996 on the lines
of the UNCITRAL Model Law. While the UNICITRAL Model Law on Arbitration primarily

4
Law Commission of India, 76th Report, The ArbitrationAct, 1940(1978)-Eighth Law Commission headed by
Justice H.R.Khanna.
5
8 The UNCITRAL Model Law on International Commercial Arbitration,1985(The Model law has lately been
amended in 2006)
https://globalarbitrationreview.com/insight/know-how/commercial-arbitration/report/india (Last visited on March
24, 2021 at 10:50pm)

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applied only to international commercial arbitrations, the Arbitration and Conciliation Act of
1996 aimed to consolidate and amend Indian laws relating to domestic arbitration, international
commercial arbitration and enforcement of foreign arbitral awards.

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 3. MATTERS THAT AFFECTS THE ARBITRAL PROCEDURE

The matters which affects the arbitral procedure has been given in Sec.18 of the Act. The section
provides that arbitrators are supposed to perform their functions honestly and impartially 6. They
should provide equal opportunity to the parties to present their case without taking sides. Thus,
they are to follow the principle of natural justice in dispensation of justice through arbitral
proceedings. The necessity of expressly making a provision regarding equal treatment of parties
in Section 18 of the Act was failed because it is quite likely that the arbitrators appointed by
individual parties may be favorably inclined to the parties appointing them. Therefore, the
section provides that no arbitrator should identify himself with the interest of a particular party
merely because of the reason that he was appointed by that party7.

Emphasizing the need for just and fair treatment of parties by arbitrators Russell observed, ‘Once
the arbitrators enter into a ‘reference’ they virtually become judges in the ‘cause’ and must act
impartially……. They must observe in their proceeding the ordinary rules of administration of
Justice. The section expects the arbitrator/ arbitrators to be completely impartial in dealing with
the parties during the arbitral proceedings and they should refrain from showing any undue favor
to a particular party which may be detrimental to the interest of the other party.

The section embodies the basic principle of natural justice which is an inseparable ingredient of
fairness and reasonableness in the process of adjudication and includes within it the minimum
requirement as follows:

 Each party to arbitration should have notice of date time and place of hearing sufficiently
in advance;
 Parties should be given reasonable opportunity to present their case;
 Each party must be supplied with relevant statement, documents and evidence produced
by the other party;
 Reasonable opportunity to cross-examine the witnesses;

6
https://blog.ipleaders.in/powers-and-functions-of-an-arbitrator-under-arbitration-and-conciliation-act-1996/ (Last
visited on March 25, 2021 at 8:50pm)

7
Dr.N.V.Paranjape,LawrelatingtoArbitration&ConciliationInIndia.(7th Edition,2016).

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The Tribunal should not hear the witness evidence in absence of parties unless parties have
otherwise chosen to remain absent despite proper notice 8. In other words an arbitrator should not
hear one party for his witness in the absence of the opposite party or his representative.

The supreme court in International Airport Authority of India v. K.D. Bali 9, noted that ‘once the
arbitrator enters in an arbitration, he must not be guilty of any act which can be construed as
indicators of partiality or unfairness.’ While conducting the arbitral proceedings, the arbitrator
must extend equal opportunity to both the parties to present their ‘cause’. As far as possible we
should not examine one party in the absence of another. The parties should be given proper
notice of hearing and each party mustbe given a chance to put up his case if it is found that the
arbitral proceedings were unfair, unreasonable, arbitrary or violative of principles of natural
justice, the decision of the arbitrator itself become questionable and his award is likely to be set
aside.

It is one of the Cardinal principle of natural justice that no person should be condemned unheard,
he should be given reasonable opportunity of presenting his case and the authority should act
fairly, justly and impartially. If a party needs the help of Counsel or an advocate to represent its
case the arbitrator should permit him to do so. However in Impex Corporation v. Electrical
Aquamarine Exports Limited10., the High Court of Kerala held that Arbitral Tribunal is not
bound by technical rules of the Code of Civil Procedure. Therefore where one of the parties was
declared ex parte due to continued absence in the arbitral proceedings, it could appear before the
arbitrator in future proceeding and would be entitled to further hearing in the case. Thus, it would
be seen that the fundamental juristic principle of Indian law contained in the maxim Audi
alteram partem is enshrined in Section 18 of the Arbitration Act, 1996, which mandates that the
party should be treated with equality and each party shall be given a full opportunity to present
his case. The principal constitutes a fundamental policy of Indian law.

8
https://blog.ipleaders.in/examination-of-witnesses/ (Last visited on March 25, 2021 at 11:00pm)

9
International Airport Authority of India v. K.D. Bali, AIR 1988 SC 1099.

10
Impex Corporation v. Electrical Aquamarine Exports Limited, AIR 2008 Ker119.

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Similar provision exist in section 34( 2) (a) (iii) of the Arbitration Act which provides that an
arbitral award may be set aside by the court if the party making the application furnishes proof
that he was not given proper notice of the appointment of an arbitrator or was otherwise unable
to present his case11.

In C B Gautam v. Union of India12, the Supreme Court observed, “the doctrine of natural justice
provides the procedural law of arbitration. Its observance is the pragmatic requirement of fair
play in action.” The concept of natural justice has widened over the years and it now expect the
arbitrator:

 To act fairly without bias in a dispassionate manner;

 To give proper notice of hearing to the parties and opportunity to contradict the case of
opponent;
 not to hear one side or accept evidence behind the back of the other party and finally;
 state reasons in the award.

The Arbitral Tribunal should avoid to act on personal knowledge and must derive its conclusion
and findings on documents and evidence submitted before it by the parties. Where it appears to
the arbitrator that the parties do not have the knowledge, of a particular point or fact of which he
has the knowledge it would be fair on his part to appraise the party for parties about that or fact
giving them an opportunity to consider if they could make use of that information in their pleas.
This will enable the parties to have additional assistance in presenting their case before the
Arbitral Tribunal. However, where the parties employ an arbitrator who has expert knowledge
and authorises him to make use of the knowledge, the arbitrator can do so if he thinks its proper
and reasonable. But, “if the agreement does not empower the arbitrator specifically, or by
necessary implication, to decide the dispute on the basis of their personal knowledge, use of such
knowledge would vitiate the award.

11
https://nishithdesai.com/information/news-storage/news-details/article/introduction-of-fresh-evidence-for-setting-
aside-arbitral-award.html Last visited on March 25, 2021 at 11:10pm)

12
ibid

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 4. RULES OF PROCEDURES IN ARBITRATION

Section 19 provides that arbitral tribunal is not bound to follow the procedure contained in the
Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. It is so for two obvious
reasons. Firstly the arbitrator being the creation of an agreement, he is supposed to follow the
procedure described by the agreement under which he has been appointed by the parties. Where
no procedure has been prescribed by the agreement he (arbitrator) may conduct the proceedings
in a manner he thinks appropriate.

Secondly, the Code of Civil Procedure applies only to judicial proceedings in courts. The
proceeding before the arbitrator are not judicial proceedings in a court but are of a quasi-judicial
nature, therefore, the arbitrator is not bound by the procedure of the Code of Civil
ProcedureortheEvidenceAct,1872.

The purpose of freeing arbitral tribunal from the bondage of rules of Civil Procedure and
evidence is to get rid of technicalities and rigours of the law. Arbitrators are not bound by all
judicial formalities or strict rules of procedural law. They may decide ex aequo et bono i.e. make
use of their own knowledge in taking decisions but they must not ignore the fundamental
principle of natural justice in conducting the arbitration proceedings.

It is not necessary for the arbitral tribunal to record formal order sheet or record statements of
witnesses during the arbitration proceedings, nor is it necessary for it to make a long and
reasoned order on preliminary objections. The arbitral tribunal can make an award on the whole
case instead of giving an award on each point separately.

The supreme court in R. Mc Dill & Co. v. Gauri Shankar 13 observed that the provision of CPC
must not be applied in arbitration proceedings where mere procedure is likely to handle speedy
justice, but there should be no hesitation to invoke them if they may be helpful in rendering
justice.

13
R. Mc Dill & Co. v. Gauri Shankar, 9 (1991)1ArbLR290(SC

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4.1 Where Arbitration is administered by a Permanent Arbitral Institution

In cases where the parties agree to submit to arbitration by a permanent arbitral institution the
arbitral proceedings are governed by the rules of that institution and they become a part of the
arbitration clause by implication as provided by section 2(8) of the Arbitration and Conciliation
Act, 1996.14 Thus where the parties have agreed to submit to arbitration by the International
Chamber of Commerce (ICC) shall be deemed to have submitted ipso facto to the rules of that
Arbitral Institution (i.e.ICC).

Admissibility of Evidence---An arbitrator is not tied down by the rules of procedure and
evidence like Judge of a Civil Court. The contention finds support in the Supreme Court decision
in Kalyan Corporation versus Dulhin Bibi15,10 where it was held that “the question of mode of
prove is a question of procedure and is capable of being waived; and therefore, evidence taken in
a previous judicial proceeding can be admissible in a subsequent proceeding by consent of
parties.” However, the arbitrator is supposed to act honestly in deciding as to the admissibility of
the evidence tendered before him. But an arbitrator has no right to call a witness himself without
the consent of the parties. If he does so it shall vitiate the award. A mistaken refusal by the
arbitrator to hear evidence on matters within arbitral reference will amount to a gross omission
and therefore it will invalidate the proceedings and the award.

Similarly, though the rules of evidence do not apply to arbitration proceedings, the documents
produced by the parties before the tribunal have to be proved unless admitted. Objections if any
as to admissibility or relevance must be taken when the documents are taken on record otherwise
they would be deemed to have been waived. Thus where the dispute relates to petitioners claim,

14
https://blog.ipleaders.in/arbitral-process/ (Last visited on March 26, 2021 at 5:00pm)

15
Kalyan Corporation versus Dulhin Bibi, 10 AIR 1996 SC 1072.

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he has to discharge the burden of proof by substantiating evidence to support the same failing
which arbitrator would be free to reject the claim.

Arbitrator may proceed Ex-parte In general, an arbitrator is not justified in proceeding ex-parte
without giving absenting party due notice. Where party does not attend the hearing despite
various notice and there is reason to believe that the recalcitrant party has no intention to appear
before the tribunal despite several notices, the arbitrator may proceed ex-parte. However, as a
rule of prudence and convenience,

the ex-parte notice should be in writing making it expressly clear that arbitrator shall proceed ex-
part e if the notice remains unheeded by the party. It is true that the arbitral tribunal is not bound
by the provisions of the Code of Civil Procedure, 1908 and the Evidence Act, 1872, yet it must
not proceed ex-parte against a party unless it is satisfied on the basis of material available to
show effective service of notice to the absenting party. According to Russell, the very nature of
the office of arbitrator presupposes that he may proceed ex-parte for a good cause and it is not
unnecessary to give him this power in express terms in the arbitration clause.

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 5. PLACE OF ARBITRATION

Section 20 postulate that the parties are free to agree on the place of arbitration as the venue of
the arbitrator is to be fixed by the parties by mutual consent. In the absence of parties consent for
the place of arbitration, it is, for the arbitrator to decide the venue of arbitration keeping in view
the convenience of the parties and the circumstances of the case. Sub-section (3) further gives
discretion to the arbitral tribunal to fix a place in the absence of the consent of the parties for

1) Consultation among its members

2) Hearing witnesses experts are the parties, or
3) Inspection of documents goods or other property.

If the parties so desire, they may restrict the freedom of arbitral tribunal in choosing the meeting
places other than the venue of the arbitral tribunal. In Sulaikha Clay Mines v. Alpha Clay &
Others16, the arbitral tribunal granted oral hearings of parties at the premises of parties without
notice to the other party and inspection were conducted by it without notice to both the parties.
Even evidence collected from one party was kept secret from the other party and it was not
disclosed even at the time of hearing. The place of arbitration was also determined and not
intimated to the parties. Thus the entire arbitral proceedings suffered from gross procedural
irregularities violating the provision of section 18, 19, 20 and 24 of the Arbitration and
Conciliation Act, 1996. It was evident that arbitrator was not fair and had not treated both the
parties equally. The Kerala High Court, therefore, set aside the award because of the procedural
violation and directed the applicant to approach the Civil Court for redressal of its grievances.

In Videocon Industries Limited v. Union of India & Another 17, as per the clause of agreement
seat of arbitration was Kuala Lampur in Malaysia but due to outbreak of epidemic SARS, the

16
Sulaikha Clay Mines v. Alpha Clay & Others, 11 AIR 2005 Ker.3.

17
Videocon Industries Limited v. Union of India & Another, AIR 2011 SC 2040.

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arbitral tribunal decided to hold the settings first at Amsterdam and then at London although
there was no agreement between the parties to shift the juridical seat of arbitration nor was any
instrument signed by them for amending this clause of agreement.

This decision of change of seat of arbitration was opposed by the Union of India (Petroleum
Ministry, ONGC and Videocon Petroleum Limited) and an injunction prayed under section (9)
seeking directions from the Delhi High Court to the arbitral tribunal to continue hearing at
KualaLampur in terms of clause (34) of Production Sharing Contract (PSC).

The Supreme Court held that the parties, in this case, had agreed to be governed by the
arbitration law of England and therefore it implies that parties had agreed to exclude application
of provision of Part I of the Indian Arbitration and Conciliation Act, 1996. Consequently, Delhi
High Court had no jurisdiction to entertain petition under section 9 of the Act. The court further
noted that the real fact that the parties to this arbitration had agreed for shifting of the seat of
arbitration to London due to outbreak of epidemic SARA in Kuala Lampur cannot be integrated
anything except physical change in the venue of arbitration from KualaLampur toLondon.

The Gas Authority of India Limited v. Govind Glass Industries 18 the parties to arbitration failed
to reach an agreement on the appointment of the third arbitrator and they were interlocked in
civil suit in Ahmedabad and the document and supplies were also made in Ahmedabad, then it
was proper to appoint the third arbitrator who was living in Ahmedabad more so when it was
stipulated in the arbitration agreement that place of arbitration will be at Delhi or Ahmedabad19.

6. COMMENCEMENT OF ARBITRAL PROCEEDINGS

18
Gas Authority of India Limited v. Govind Glass Industries, 2002 Supp.Arb.LR467(Del).

19
Dr.N.V.Paranjape,LawrelatingtoArbitration&ConciliationInIndia.(7th Edition,2016).

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The new Act of 1996 has dispensed with the requirement that an order of reference has to be
made by the court on filing the arbitration agreement in court. It is so because the present Act is
intended to avoid intervention of court in arbitration and now a reference for resolving the
dispute by arbitration can be made directly to the arbitrator/arbitrators nominated in the
arbitration agreement without the necessity of requesting the other party. However, request to
other party as contemplated by this section (i.e, Section 21) becomes necessary when the
arbitrator or arbitrators are not named in the agreement itself and the parties are yet to appoint
the arbitrator. Section 11 of the Act envisages that the appointment of arbitrator may be made (a)
by the parties,or (b) by the designated authorityor (c) by apermanent arbitration institution. It is
only after the appointment of the arbitrator or arbitrators that the question arises as to who would
make a reference of dispute to the arbitral tribunal. Though the definition of the word ‘reference’
has been omitted from the present Act of 1996 but by implication it means “the actual
submission of a particular dispute under an arbitration agreement”. Section 21 provides that
arbitral proceedings in respect of a particular dispute shall commence on the date on which a
request for that dispute to be referred to arbitration is received by the respondent. It is therefore
clear that the date of commencement of arbitral proceedings does not relate to arbitrator’s
entering upon the reference or having been called upon to act as an arbitrator but on “receipt of
request by the respondent” that the dispute be referred to arbitration for settlement. It, therefore,
follows that arbitration proceedings cannot commence until the notice of invocation is not
received by the respondent and the issue whether respondent had received such notice of
invocation has to be denied by the arbitral tribunal itself. In Neeraj Munjal & others v Atul
Grover (Minor) and another20, the respondent had filed a complaint before the National
Consumer Dispute Redressal Commission, New Delhi, for recovery of compensation from the
appellant for deficiency of service. When the matter came up before the Commission both the
parties agreed for an consensual adjudication by an arbitrator. Consequently, the commission
referred the matter to a retired Judge of the Delhi High Court for adjudication. The arbitrator
gave an award and the same was remitted to the Commission who decided the complaint in terms
of the award. Aggrieved by this decision, the appellant preferred an appeal before the High Court
contending that as per section 21 of the Arbitration and Conciliation Act, 1996 since the dispute

20
Neeraj Munjal & others v Atul Grover (Minor) and another, 15 AIR 2005 SC 2867.

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was referred to the arbitrator by an order dated 19-5-95 the provision of Arbitration Act, 1940
would be applicable and not that of 1996 Act. The respondent, on the other hand, contended that
the Arbitration and Conciliation Act of 1996 having came into force on 22-8-1996, the award
having been passed on 29-8-1996, the Act of 1996 would be applicable. The court held that the
arbitration act of 1940 apply in relation to arbitral proceedings which commences before the new
Act of 1996 came into force unless otherwise agreed to by the parties The apex court noted that
there is difference between ‘commencement of arbitration proceeding’ and ‘commencement of
proceedings before an arbitrator’. A notice of arbitration is the first essential step towards
commencement of arbitration proceedings in terms of Chapter II of the Arbitration Act, 1940 and
therefore the Act of 1940 is applicable as the arbitration proceeding commenced prior to
enforcement of the Arbitration and Conciliation Act, 1996. The Appeal was therefore allowed
and the matter was remitted to High Court for considering appellants objections raised under
section30 and 33 of the Arbitration Act of 1940. The apex court also expressed a view that a
complaint which was filed before the National Consumer Dispute Redressal Commission under
section 22 of the Consumer Protection Act should have been decided by the commission in
accordance with evidence documents and the respective submissions of the parties and not by
referring the matter to an arbitrator and giving an award.

6.1 Language or Languages of Arbitral Proceedings

Section 22 gives the parties freedom to agree upon the language or languages to be used in
arbitral proceedings. In case the parties fail to agree, the arbitral tribunal shall determine the
language to be used in the arbitral proceedings and such language shall be used for any written
statement by a party, in hearing the arbitral award, decision or other communication by the
arbitral tribunal. Further, the arbitral tribunal has discretion under Section 22 (4) to order that
documentary evidence shall be accompanied by a translation into the language agreed by the
parties or determined by the arbitral tribunal. The provision of this section has been incorporated
in the Act keeping in view the ever increasing demand for International Arbitration which
involves language of different countries. The earlier Arbitration Act, 1940 did not contain any

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provision on ‘language’ since it exclusively dealt with domestic arbitration, there being two
separate Acts for enforcement of foreign awards.

7. ORGANISING THE PROCEEDINGS

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7.1 Statement of Claim on defiance

The Arbitration Act, 1940 (now repealed) was silent about pleadings and deficiency was often
supplied by appropriate provision in the institutional rules where such rules applied, or
occasionally by the arbitration clause. In the absence of such provision, the filing of statements
of claim or defence was not obligatory under the old Act of 1940. However, the arbitrator at his
discretion could require parties to deliver such statements. But since the present Act seeks to
minimise the intervention of courts in arbitration matters, this section clarifies the procedure to
be followed by the parties in respect of statement of claims and the statement of defence to be
filed by the respondent.

Sub-section (1) of Section 23 allows freedom to the parties to prescribe the time limit for
submission of these statements to the arbitral tribunal 21. If the parties do not prescribe any time
limit mutually, the arbitrator that is arbitral tribunal shall determine the period within which the
parties would be required to file the statement of claim and the statement of defence. The
claimant shall include in his statement of claim the facts in support of the claim, the points at
issue and the relief or remedy claimed and the respondent state his defence in respect of these
particulars. He may also include in his statement of defence the ‘counter claim’ against the
claimant.

Sub-section (2) leaves and option with the parties to submit all the relevant document along with
the statement supporting their cause or alternatively, instead of submitting the documents along
with the statement they may simply quote reference to the document which they propose to rely
to justify their claim or defence, as the case maybe22.

7.2 Amendment of Pleadings

21
https://www.barandbench.com/columns/survey-on-arbitration-law-in-india-2020 (Last visited on March 26, 2021
at 6:00pm)
22
Dr.N.V.Paranjape,Law relating to Arbitration & Conciliation In India.(7th Edition,2016).

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Sub-section (3) empowers the arbitral tribunal to allow amendment of the same or supplement
the statement in suitable circumstances. The arbitral tribunal is also empowered to reject the
amendments or refuse to accept supplements if in its opinion there has been inordinate delay in
filing those amendments for supplements.

However, where the parties to the contract have agreed between themselves that none of them
will aid, alter, delete, substitute, amend all or any part of the statements for documents after
being placed on record of the arbitrator, then entertaining any material for amendment by the
arbitrator against express agreement will be bad in law and the award by the arbitrator on such
material is liable to be set aside. But where the parties have not placed such restriction the
arbitrator may permit amendment of pleading at his discretion.

Where the petitioner submitted his statement of claim before the arbitrator but latter found some
mistakes in the said claim-statement, the arbitrator had the power to allow a party to make
correctionsinapparanterrorsinstatementofclaimaswellasintheaffidavit. The word ‘claim’ used in
the section should not be interpreted to include monetary claim alone but it also includes any
right of which the parties to arbitration are likely to be deprived because of the dispute or
difference arising between them in relation to the contract.

7.3 Hearing and Written Proceeding

Section 24 empowers the arbitral tribunal to decide whether to hold oral hearings for the
presentation of the evidence or oral arguments or whether the proceedings shall be conducted on

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the basis of documents and other materials submitted by the parties before the tribunal 23. The
arbitral tribunal shall hold oral hearing unless agreed to the contrary by the parties. Thus the
parties agree that no oral hearing shall be held. Sub-section (2) makes it mandatory for the
arbitral tribunal to give an advance notice to the parties before the oral hearings so as to offer
them an opportunity of inspection of relevant documents goods or other property. A party may
himself appear before the arbitral tribunal and participate in the arbitral proceedings.
Alternatively, the party may choose to be represented by his lawyer or any other professional
who may be an Indian or a foreign national. There is no restriction on foreigner being appointed
as arbitrators in fact the arbitration institutions do maintain the panels of foreign professionals
and experts so that the foreign parties may have the satisfaction that they are being educated by
the foreign arbitrator of their choice with whom they feel homely. The arbitral tribunal has the
discretion to examine a witness on oath or affirmation and power to administer oath or
affirmation itself. This is subject to agreement otherwise by the parties. If no objection is raised
to witness depositing without taking oath and his evidence is recorded then, it will be deemed
that the other party has waived his right to objection. A party admitting the claim made against
him is by itself not a sufficient reason for not giving opportunity to such party to rebut his
admission. The arbitrator should have given an opportunity to the party making admission of
claim to explain and clarify or give justification for his admission. Sub-section (3) provides that
all statements, documents or other informations or application made by a party to the arbitral
tribunal shall be communicated to the other party. This provision underlies the basic principle
that nothing should transpire at the back of the parties and each party must be apprised by the
other party’s stand in the matter under arbitration so that full justice is done to each of them.

7.4 Default of Party

Section 25 contains an innovative provision which empowers the arbitral tribunal to dismiss for
default of the claimant on his failure to submit the statement of claim within the time as
prescribed in Section 23(1). The reason is obvious. When the claimant himself fails to present his
case by submitting the statement of claim, there is nothing to arbitrate and therefore the arbitral
tribunal would be justified in terminating the arbitration proceeding under section25(a).

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7.5 Termination of Proceedings

A conjoint reading of section 25(a) and section 32(2)(c) would make it clear that arbitrator can
terminate the proceeding under section 25(a) if the claimant fails to communicate his statement
of claim. The arbitrator can also terminate the proceeding under Section 32(2)(c) when he finds
that the continuation of such proceeding has for any reason become unnecessary or impossible.
Thus in both these cases, the arbitration proceeding comes to an end without an arbitration award
made by the arbitrator because of the factor unconnected with the adjudicatory process
culminating into the award. In other words in both these cases, the arbitration proceedings
terminate not by virtue of an award made by the arbitrator but by an order of the arbitral tribunal.

Section 25(b) refers to the consequences where the respondent commits default in filing his
statement of defence. Where the respondent fails to submit his statement of defence, the arbitral
tribunal will not give an ex-parte decision or abandon the arbitration but it shall continue with the
proceedings without treating the respondent failure as an admission of the allegation by the
claimant. Thus Section 25(b) contemplates that the arbitral tribunal award should be on merits
without treating the failure of respondent to file the statement of defence as an admission of the
claimant’sallegation. Section 25(c) reflect at the logical consequence flowing from the default on
the part of a party as stated in sub-clause (a) and (b) of the section. In such cases, the arbitral
tribunal can proceed ex-parteinsection25(c)of the Act.

7.6 Ex-parteAwards

Before starting an ex-parte hearing, the arbitral tribunal must ensure that the respondent has been
properly informed about the place, date and time of hearing and he has been sufficiently warned
about arbitral tribunal intention to proceed ex-parte if he does not respond to the notice. The
decision of the Calcutta High Court in Indian Iron & Steel Company v. Satna stone24 is an
important judgement on ex-parte awards. In this case the arbitral tribunal i.e. the Bengal
Chamber of Commerce has given an ex-parte award without giving sufficient notice or pre-
warning to the respondents. Therefore the award was set aside by the court on the ground
thatitviolatedthebasicprinciplesofnaturaljustice.TheCourtinteraliaobserved: “The power in

24
Indian Iron & Steel Company v. Satna stone, 17 (1991) 1Arb.LR208(SC).

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respect of ex-parte hearing should be exercised with great caution. It is not an inflexible rule of
law that the arbitrator shall hear and make award ex-parte merely because a notice to that effect
is given….. Allowing the arbitrator to proceed ex-parte without giving an opportunity to the
defaulting party would cause immense hardship. It is the duty of the arbitrator to apply his mind
in the facts and circumstances of each case and not proceed ex-parte automatically merely
because such notice was given…... however, if on the basis of materials before him the arbitrator
is of the opinion that the absence of party is deliberate with the intention to avoid or delete the
proceedings the arbitrator is certainly entitled to proceed ex-parte in case of non-appearance. The
fact which is to be taken into consideration is the attitude or the conduct of the party concerned.

The court further held that since no appeal lies against an ex-parte award because as soon as the
award is made and published, the arbitrator becomes functus officio and also no review or
revision lies in such a case, therefore, the arbitrators should exercise their powers very carefully
while making an ex-parte award.

The Court had found in this case that the defaulting respondent was not only defending his claim
but had also filed a counter claim and the party had given explanation as to why it would not
attend the proceedings on the given date 25. Under the Circumstances, the arbitral tribunal that is,
the Bengal Chamber of Commerce and Industry had acted in an arbitrary and high handed
fashion and therefore the award was set aside.

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 8. EXPERT APPOINTMENT BY ARBITRAL TRIBUNAL

Section 26 permits the arbitral tribunal to seek the assistant of experts. 26 The arbitral tribunal has
also been conferred with the authority to appoint an expert on specific issues to be determined by
it or it may also require a party to give to the expert, any information or to provide access to any
relevant documents, goods or property for his inspection. The expert may also be requested to
participate in an oral hearing if deemed necessary. Generally speaking, the arbitral tribunal
should not seek the assistance of experts or appoint them without first securing the consent of the
parties. But the arbitrator or arbitrators are not supposed to delegate their authority under the
guise of seeking expert’s advice. The assistance of experts may be in the form of taking the
opinion of a ‘legal expert’ or an Engineer or of a surveyor or value for assessing the value of
property or value of damage to goods in carriage or that of a Chartered Accountant in accounts
matters etc. However, this provision should not be misused by the arbitrators or arbitral
institutions to show their responsibility or to oblige the person appointed as expert with financial
benefits.

Where the parties have laid down in terms of appointment of an expert in the arbitration
agreement, the arbitral tribunal must ensure that the appointment of the expert conforms to those
terms. The arbitrator or arbitrators are supposed to take the parties into confidence before they
decide to refer a specific issue for opinion of an expert. Their decision regarding the appointment
of expert or experts should be in the overall interest of the parties. The reason being that the
arbitration being in the nature of a trust, the parties have reposed trust and confidence in the
arbitrator who shouldnot do anything which may be against the interest of the parties.

The arbitrator's function does not end up with the appointment of an expert in technical matters
but he must form his own judgement upon thein formation or opinion received from the expert.
An arbitrator may for his own guidance consult experts having special knowledge and skill on
questions arising in the course of reference. He need not seek consent of the parties for this
purpose. However, where a witness is being examined as an expert it has to be shown that he
possesses special knowledge of the subject and has acquired sufficient experience therein or is
skilled and has adequate expertise in the subject under reference.

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Sub-section (3) requires the expert appointed by the arbitral tribunal to make available to the
party or parties for examination of all document, goods, properties etc. on which his report is
based, if so desired by the parties.

8.1 Evidence

Section 27 provides new procedure for seeking assistance of court in taking evidence. The
arbitral tribunal or a party may seek such assistance. The court may at its discretion execute the
request by ordering witness or expert to provide evidence to the arbitral tribunal directly. The
court’s assistance in securing the evidence of a witness under this section is deemed necessary
because power has been conferred on the arbitral tribunal to summon witnesses or to issue
processes. Besides the arbitral tribunal, a party may also apply to the court for assistance in
taking evidence or summoning a witness but before applying to the court for this purpose it has
to take prior approval of the arbitral tribunal.

This section enables the arbitral tribunal to apply suo moto or on request by a party, to the court
for assistance in taking evidence because the tribunal has no power to issue summons to persons
other than the parties to the dispute under arbitration. It is thus an enabling provision and has
therefore, to be read as such.

In K.P Poulose v. State of Kerala27, the Supreme Court observed that where the facts of the case
disclose that the Earth is equal to one has arrived at a decision by ignoring the every material
evidence which throw abundant light on the controversy to help ajust and fair decision, his award
would be rendered invalid and liable to be set aside.

The Delhi High Court in its decision in Mehta Teja Singh Company v. Union of India &
another28 follow the ruling in Poulose case and held that any decision of the arbitral tribunal
without taking into consideration the vital report of a technical expert despite party repeated
requests, would amount to gross misconduct of the arbitrator and the award could rightly be set
aside. In this case the subject matter of the dispute was execution of the work under a building
27
K.P Poulose v. State of Kerala, 18 AIR 1975 SC 1259.

28
Mehta Teja Singh Company v. Union of India & another

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contract. The technical expert had stated in his report that the contractor had been over paid. The
government formulated its claim on the basis of this report and referred it to arbitrator.
Thereupon, the contractor made a request to the arbitrator to order production of that report. The
request was opposed by the government. The arbitrator did not make any order and give the
award which was challenged by the contractor. The court held that the arbitrator ought to have
ordered the production of the report and making an award without considering this vital report
amounted to miscarriage of Justice. The award was therefore set aside by the court.

9. CONCLUSION & SUGGESTION

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The researcher concludes that the arbitration proceeding reduces the burden of pending litigation
in the courts in India. ADR is the best and most effective solution to reduce the Himalayan
pendency in various courts of our country. It is not to forget that the ADR is more effective as it
is an amicable solution and both parties are in win – win position and brings about harmonious
relationship between both the parties unlike in the conventional courts, thus it is permanent
solution to any dispute, as it don’t lead to appeal or revision, and hence reducing the burden of
appellate courts as well and also it saves valuable time and energy of the courts which can be
utilized erstwhile in other matters pending before court and it renders justice on time (Justice
delayed is justice denied, but ADR saves time and timely judgment is possible). As a judge it is
our duty as envisaged by the new CPC to encourage the ADR, in civil matters in the interest of
justice.

Despite many advantages of using Alternative dispute resolution mechanisms, our society has
been reluctant to give it its due recognition. The predominant reason being that a litigation ridden
society is generally unable to explore consensual dialogue or arrive at an amicable solution 29.
The ADR practitioner therefore acts like a healer of conflicts rather than a combatant. It is
similar to the Panchayat system we have in our villages.

The ADR movement needs to be carried forward with greater speed. This will considerably
reduce the load on the courts apart from providing instant justice at the door-step, without
substantial cost being involved. If they are successfully given effect then it will really achieve the
goal of rendering social justice to the parties to the dispute.

BIBLIOGRAPHY

Books:

1. K.K. Kovach, Mediation: Principles and Practice 143 (1st ed., St. Paul: West Publishing Co.,

1994).
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2. L. Boulle & M. Nesic, Mediation: Principles, Processes and Practice 501 (1st ed.,
London:

Butterworths, 2001).

3. Lloyd’s Introduction to Jurisprudence 495 (M.D.A. Freeman Ed., 6th ed., London: Sweet
&

Maxwell, 1996).

4. P.C. Rao, The Arbitration and Conciliation Act, 1996 76 (1st ed., New Delhi: Universal Law

Publishing Company, 1997).

5. R.W.M. Diaz, Jurisprudence 28 (5th ed., New Delhi: Aditya Books, 1994).

6. Ratanlal and Dhirajlal’s The Law of Evidence 90 (Justice Y.V. Chandrachud & V.R.

Manohar, Ed., 19th ed., Nagpur: Wadhwa & Co., 1997).

7. Ronald Bernstein, Handbook on arbitration Practice 99 (1 st ed., London: Sweet &

Maxwell,

1987).

8. S.B. Goldberg et al., Dispute Resolution: Negotiation, Mediation and Other Processes 180

(2nd ed., New York: Aspen Law & Business, 1992).

Dictionaries:

1. Black’s Law Dictionary, 1979

2. Oxford English Dictionary, 1995

Statutes:

1. Arbitration and Conciliation Act, 1996.

2. Indian Evidence Act, 1872.

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3. Indian Penal Code, 1860.

4. Industrial Disputes Act, 1947.

5. Legal Services Authority Act, 1987.

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