Report No. 246
Conduct of Arbitral Proceedings
13. The Commission notes that there are numerous provisions in the Act which deal with the conduct of arbitral proceedings, and these are set out in Chapter V of the Act. However, despite existing provisions in the Act which are aimed at ensuring proper conduct of arbitral proceedings, the Commission found that the experience of arbitrating in India has been largely unsatisfactory for all stakeholders.
14. Proceedings in arbitrations are becoming a replica of court proceedings, despite the specific provisions in Chapter V of the Act which provide adequate powers to the arbitral tribunal. The Commission hopes that arbitral tribunals would use the existing provisions in the Act, in order to reduce delays.
15. In ad hoc arbitrations, fees are charged "per sitting" basis (with sometimes two/three sittings in a day in the same dispute and between the same parties), dates are usually spread out over a long period of time, and proceedings continue for years - which results in increase of costs, and denial of justice to the aggrieved party. There is ingrained in the Indian system a culture of frequent adjournments where arbitration is treated as secondary by the lawyers, with priority being given to court matters.
16. The Commission notes that this cultural revolution has to come from within the arbitration community. Arbitrators must eschew purely formal sittings, which are meant only for compliances.
The Courts have already indicated that delay in passing an award can lead to such an award getting set aside [see for instance the decisions of the Delhi High Court in Oil India Ltd v. Essar Oil Ltd, OMP No 416/2004 dated 17.8.2012 at paras 30-40; UOI v. Niko Resources Ltd, OMP No 192/2010 dated 2.7.2012 at paras 43-51; Peak Chemical Corporation Inc v. NALCO, OMP 160/2005 No dated 7.2.2012 at para 29] - and the same should be a nudge to all arbitrators to hear and decide matters expeditiously, and within a reasonable period of time.
Counsel for parties must similarly refrain from seeking frivolous adjournments or insisting upon frivolous hearings or leading long winded and irrelevant evidence. The Commission further notes that a conscious use of technology, like tele-conferencing, video-conferencing etc., should also be encouraged and the same can easily replace the need for purely formal sittings and thereby aid in a smoother and more efficient conduct of arbitral proceedings.
17. In this context, the Commission has proposed addition of the second proviso to section 24 (1) to the Act, which is intended to discourage the practice of frequent and baseless adjournments, and to ensure continuous sittings of the arbitral tribunal for the purposes of recording evidence and for arguments.
18. In order to further demonstrate and re-affirm the Act's focus on achieving the objectives of speed and economy in resolution of disputes, the Commission has also proposed an addition to the preamble of the Act. While this would not directly affect the defined substantive rights and liabilities of parties in terms of the Act, it would provide a basis for Arbitral Tribunals and Courts to interpret and work the provisions of the Act such that it ultimately achieves those objectives for the benefit of the ultimate users of arbitration.