The Emergence Of Arbitration
Author: LawSphereX
Category: Arbitration & ADR
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THE EMERGENCE OF ARBITRATION
Jigisha Agarwal, ITM University
INTRODUCTION
The evolution of arbitration has resulted in a transformation in the way disputes are settled, particularly in business and investment-related situations, in recent years. Therefore, in simple words, arbitration methodology has originated and passed throughout time. Its application in settling complicated international disagreements has grown in popularity. International arbitration, which attempts to resolve conflicts amongst parties from various parts of the world, has become greater in prominence. The changing face of arbitration has resulted in major modifications in its application, rules, and processes in recent years. Technological advances have made the procedure more accessible and efficient, while the expansion of arbitral institutions has resulted in heterogeneity and contradictions in operation.
In consequence of these developments, it is critical to analyse the changing face of arbitration in order to comprehend its influence on conflict resolution practise. HISTORICAL ORIGINATION OF ARBITRATION ANCIENT ERA According to various ancient references, arbitration was prevalent in India since the Vedic era. Some of these references are Mahabharata1 and Brihadaranyaka Upanishad2. In Mahabharata Lord Krishna acted as an arbitrator and persuaded the Kauravas to agree to give some property to the Pandavas, however, the arbitration was unsuccessful and the consequently resulted in war, that came to be known as the greatest war of mankind.
Thus, it is inferred that arbitration 1 Aalok Sikand,“ ADR Dharma: Seeking a Hindu Perspective on Dispute Resolution from the Holy Scriptures of the Mahabharata and the Bhagavad Gita” 7 Pepperdine Dispute Resolution Law Journal 324 (2007) 2 What is History of Arbitration in India, available at: https://theidrc. com/content/adr-faqs/what-is-history-ofarbitration-inindia#:~:text=Arbitration%20under%20The%20Arbitration%20and%20Conciliation%20Act%2C%201996%20 adopted%20the,to%20a%20Civil%20Court%20Decree (last visited March 17, 2023) is a necessary and foremost step to resolve any dispute. Under Brihadaranyaka Upanishad, the different types of Arbitral bodies are enlisted namely, Puga, Sreni and Kulas3. All these are conjointly termed as Panchayats.
Therefore, under this system five people known as panchas were appointed and assigned to try and reach a joint decision, in pursuance of settlement any disagreements between the parties by communication with them. The parties could be local people, people involved in similar business and people of similar social community. One of the many cases wherein the role of panchayat was acknowledged is, Vytla Sitanna v. Marivada Viranna,4. According to the case, the panchayats were proficient in extracting the true facts of the case and settle the disputes accordingly, thereby reducing the time consuming process of litigation. BRITISH RULE Amidst the enactment of the Bengal Regulation in 17725, the first Arbitration law came into existence paving way for the first Arbitration Act of 18996.
Madras, Bombay and Calcutta were the only States in which the mentioned Act was applicable and were called presidency towns under British regime. Thereafter, many procedural amendments were made in the process of arbitration, like making arbitration award binding on the parties or authorizing the courts to introduce the matters of disagreements to the procedure of arbitration between the contracting parties, with the mutual agreement between them. India got its principal Act for arbitration in the year 1899 which was titled as the Indian Arbitration Act, 18997. The English Arbitration Act, 1889 was the primary basis of the formation of the said Act. However, the applicability of the said Act did not go beyond the 3 Judicial Administration in Ancient India, available at: https://ithihas. wordpress. com/2013/10/08/judicialadministration-in-ancient-india/ (last visited March 17, 2023)
4 AIR (1934) 36 BOMLR 563
5 Bengal Regulation of 1772, reg. no.1 of 1772, available at https://legalserviceindia.com/legal/article-9040history-and-development-of-arbitration-law-inindia.html#:~:text=Bengal%20Regulation%2C%201772%3A,Arbitration%20Act%20was%20enacted%2C%20
1899. (last visited on March 16, 2023).
6 Indian Arbitration Act, 1899 (Act IX of 1899)
7 Indian Arbitration Act, 1899 (Act IX of 1899)
towns of Madras, Calcutta and Bombay, named as such under the British regime. The Act was circumscribed to the matters of the suit that were referred in the agreement made for the purpose of arbitration i. e. the subject matter which shall be resolved through the mentioned procedure should be the actual matter giving rise to the suit. The law provides recourse if the contracting parties agree in writing that in the event of any disagreement, the arbitrator would be appointed then the competent court, i. e. the court authorised to hear the abovementioned matters, shall validate such appointment and execute the agreement of arbitration in accordance to the terms and conditions mentioned thereof. Such terms and conditions should be legal. The competent court will also have the authority to appoint an arbitrator if no such term is agreed between the contracting parties.
The duty of such arbitrator would be to hear the matters mentioned above and come to a final conclusion. In accordance with Sections 1 to 16 of the Schedule II, the ambit of arbitration was amended and summarised by the promulgation of CPC, 1908. Nevertheless, the rudimentary nature and lack of oversight of the Indian Arbitration Act along with the provisions of the CPC, 1908 proved that the Act was incompetent to control the arbitration chain, thus, laying foundation for enactment of the Arbitration Act of 19408. In the case of Food Corporation of India v.
Joginderpal Mohinderpal9, the respondents engaged in a contract with the appellant wherein the appellant was supposed to take paddy from the warehouse of the respondents to be converted into rice, however, some dispute arose and consequently, the respondents for the sole purpose of settlement of the dispute, pleaded for an arbitrator to be appointed by an application. The settlement was meant to be done through the procedure of arbitration. The arbitrator was appointed, although some claims of the appellant were disallowed by him and an award was passed much to the chagrin of the appellant. Therefore, the arbitral award was set aside by the subordinate court on its appeal. Thereafter, respondents appealed in the High court and then in Supreme Court because they were not satisfied by the decision passed by the Subordinate Judge.
The Apex court held that the arbitrator had passed a comprehensive award after taking in due considerations all the facts necessary to arrive at a decision. Therefore, no court shall interfere in the working of the arbitrator when no erroneous statements can be observed in the award.
8 Arbitration Act, 1940 (Act 10 of 1940)
9 1989 AIR 1263
Therefore, rather than the time consuming and lengthy process of litigation the method of arbitration was encouraged to be instituted by the Apex court for resolution of the disagreements between the contracting parties. The Arbitration Act, 194010 fills the gaps of previous statutes and establishes a systematic and comprehensive legislation on arbitration. The purpose of the Act was to make amendments, strengthen and consolidate laws associated with the process of arbitration, for seamless arbitration experience. Therefore, to simplify cumbersome, complicated legal procedures, and to strengthen the procedure of resolution of disagreements between the contracting parties through arbitration including those of commercial nature the Parliament passed the Arbitration and Conciliation Act, 199611. In the case of Guru Nanak Foundation v. Rattan Singh and Sons.
12, it was held by the Supreme Court that the Arbitration Act, 1940 as an alternative means of resolving disputes in a less formal, more efficient and faster way. The Court added that the manner in which disputes under the Act have been challenged in court, without exception, defeats its purpose and is full of legal content of unforeseen complexity. AFTER INDEPENDENCE After the Second World War the trade between the countries became more regulated, however, the disputes related to them also increased. In consequence thereof, the United Nations Commission on International Trade Law was established in the year 1966 in the United Nations General Assembly for the purpose of settling the disputes or disagreements at International forums. The commission had headquarters in Vienna.
The UNCITRAL adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985, while UNCITRAL Conciliation Rules were adopted in the year 198013.
10 Arbitration Act, 1940 (Act 10 of 1940)
11 History of Arbitration in India, available at
https://lexpeeps.in/history-of-arbitration-in-india/ (last visited on March 18, 2023)
12 1981 AIR 2075
13 UNCITRAL 1980 And 1985
History and International Developments, available at: https://hindlawedu. com/alternative-dispute-resolution-adr/uncitral-1980-and-1985-history-and-internationaldevelopments/#:~:text=The%20UNCITRAL%20also%20adopted%20in,to%20a%20strict%20legal%20system. (last visited on March 22, 2023) For the sake of developing their own arbitration law majority of the countries have adopted UNCITRAL Model Law. A similar case is of India, wherein the UNCITRAL Model Law on Commercial Arbitration14 was adopted, in pursuance thereof, Justice Malimath Committee was established by the Indian Government. It was done on the recommendation of the Conference of the Chief Justice. Pursuant to the committee’s 1990 report, a new law known as the Arbitration and Conciliation Act, 1996 came into effect on 22nd August 1996.
The purpose of the Act could be inferred to encourage use of different methods of resolution of disputes, other than litigation, like conciliation, mediation, arbitration etc. and lay down guidelines or provisions related to the aforesaid methods so as to ensure speedy resolution of commercial disputes.
CONCLUSION
Arbitration law in India has grown since its inception in 1940. The current arbitration legislation is a compilation of numerous proclamations and decrees issued by the Indian government in response to the country's ongoing economic changes. The 1996 Act is the main source of arbitration law in India. The amendments to the law are laudable but still a few steps away from making arbitration the preferred method of dispute resolution in India. As India continues to make progress on the Arbitration Act, the signs of change in this new area currently make us optimistic.
14 Analysing the law of International Commercial arbitration in India, available at
https://blog.ipleaders.in/analysing-law-international-commercial-arbitration-india-w-r-t-uncitral-model-lawamendment-2006/ (last visited on March 22, 2023)