Arbitration Process
What is Arbitration?
It is a method of alternative dispute resolution that emerged to prevent Court litigation and resolve the disputes quickly and amicably. An amicable settlement doesn’t mean compromising at any cost. The arbitration provides an alternative mode of dispute resolution through an arbitrator. It includes a selection of the neutral third person who is an expert in the area of the arbitral issue. All the parties are bound by the rule and the time limits fixed by the arbitrator within which the dispute is to be settled.
Arbitration in India is governed by the law of arbitration in India which states that the for adopting the arbitration as a dispute resolution mechanism an agreement to that effect should be signed between the disputing parties.
The parties can either opt for a separate arbitration agreement to be signed between them or include an arbitration clause in the main contract between the parties. The formal requirements of an enforceable arbitration agreement are contained in section 7 of the Indian Arbitration Act, which provides that an arbitration agreement is an agreement to submit to arbitration all or certain disputes that may arise in respect of a defined legal relationship, whether contractual or not.
Pertinently, an arbitration agreement must be in writing and the same may be in the form of an arbitration clause in a contract or a separate agreement.
If an arbitration agreement and relevant rules are silent on the matter, the arbitral tribunal would consist of a sole arbitrator to be appointed by mutual consent of the parties. On failure of consensus, parties can approach the court having jurisdiction for appointment of a sole arbitrator.
The right to challenge appointment of an arbitrator is fairly restricted as the same is available only in the following scenarios: In the case of appointment of an arbitrator by the court, appointment can only be challenged on the ground that there is no arbitration agreement between the parties. Extending the scope of this challenge, the Supreme Court of India, in a recent judgment, has held that an arbitration agreement cannot be enforced if it is contained in a contract that is not stamped or is insufficiently stamped under the extant provisions for payment of stamp duty; In the case of a challenge to appointment to be made before the arbitrator so appointed, that challenge must be made within a period of 15 days from becoming aware of the appointment. The only grounds for that challenge are existence of circumstances giving rise to justifiable doubts as to independence and impartiality of the arbitrator; or the arbitrator not possessing the required qualification.
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