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Report No. 176

2.8.4 Preliminary issues to be decided only if some conditions are satisfied (as in the case of section 8):

The Commission, therefore, proposes to take care to see that these issues are, if possible, decided at sec. 11 stage and also that there are no delays. The Commission is proposing a via media procedure as suggested at the Bombay seminar by several eminent Judges and as suggested by the Indian Merchants Chamber, Bombay.

The procedure is like this. In case the jurisdictional issues can be decided on the basis of the documents which are not in dispute and if oral evidence is not necessary, and if the enquiry is not likely to take time, then in such cases alone, these issues can be permitted to be decided at the stage of sec. 8 or sec. 11 applications by the Court. If documents are in dispute or oral evidence is necessary or there is likelihood of delay, then the jurisdictional issues will also have to be referred by the judge to the arbitrators proposed to be appointed.

Such a procedure will, in the view of the Commission, balance the avoidance of unnecessary expense on the one hand and avoidance of delays on the other. The Commission has, therefore, felt that additional stringent conditions are to be attached to such situations - as done under section 8 -, such as those under sec. 32 (2) of the English Arbitration Act, 1996, namely that the Judge, if he wants to decide the preliminary issues, is to be satisfied that

(i) the determination of the questions is likely to produce avoidable savings in costs;

(ii) the application for decision of these issues was made without delay;

(iii) there is good reason as to why these issues should be decided at that stage, and

(iv) the decision on the issues is not likely to lead to delay.

Such a flexible provision which was proposed at the Bombay seminar will, in our view, squarely meet the objection about delays. If the point raised is simple and can be decided without oral evidence on the basis of the documents which are not in dispute, it is better the judge dealing with sec. 8 or 11 applications decides them at the threshold rather than leave these issues invariably in all cases to be decided by the arbitrators after six adjournments. There need not, therefore, be an automatic appointment of arbitrators whenever applications are filed under sec. 11 or sec. 8.

The Commission is aware of the normal rates of fee charged by arbitrators for each hearing. Whether it is the case of a sole arbitrator or three arbitrators, the savings to the litigants is surely a matter which cannot be ignored. Experience shows that if one party is the Government or a public sector undertaking, nobody bothers about the public monies which are spent towards expenses of arbitration. Once the delay part is taken care of as stated above, the above procedure will meet the ends of justice and there can be no serious objection to the procedure on the ground of delay.

Thus, with the flexible provision that is proposed, there can, therefore, be no objection if the preliminary issues are allowed to be decided, as in the ICC Court, at the stage of appointment under sec. 11 or at sec. 8 stage. The provisions which we have proposed in sections 8 (4) and (5) as also in sub-sections (13), (14) of section 11 (see para 2.8.15) are, in fact, an improvement even over the ICC Rules.



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