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Report No. 222

1.41 Institutional arbitration is an arbitration administered by an arbitral institution. The parties may stipulate in the arbitration agreement to refer an arbitral dispute between them for resolution to a particular institution. The Indian institutions include the Indian Council of Arbitration and the International Centre for Alternative Dispute Resolution. International institutions include the International Court of Arbitration, the London Court of International Arbitration and the American Arbitration Association.

All these institutions have rules expressly formulated for conducting arbitration. These rules are formulated on the basis of experience and hence, they address all possible situations that may arise in the course of arbitration.

1.42 The following advantages accrue in the case of institutional arbitration in comparison with Ad hoc arbitration:

1. In Ad hoc arbitration, procedures will have to be agreed to by the parties and the arbitrator. This needs cooperation between the parties. When a dispute is in existence, it is difficult to expect such cooperation. In institutional arbitration, the rules are already there. There is no need to worry about formulating rules or spend time on making rules.

2. In Ad hoc arbitration, infrastructure facilities for conducting arbitration is a problem, so there is temptation to hire facilities of expensive hotels. In the process, arbitration costs increase. Getting trained staff is difficult. Library facilities are another problem. In institutional arbitration, the arbitral institution will have infrastructure facilities for conduct of arbitration; they will have trained secretarial and administrative staff. There will also be library facilities. There will be professionalism in conducting arbitration. The costs of arbitration also are cheaper in institutional arbitration.

3. In institutional arbitration, the institution will maintain a panel of arbitrators along with their profiles. The parties can choose from the panel. It also provides for specialized arbitrators. While in Ad hoc arbitration, these advantages are not available.

4. In institutional arbitration, many arbitral institutions have an experienced committee to scrutinize the arbitral awards. Before the award is finalized and given to the parties, it is scrutinized by the experienced panel. So the possibility of the court setting aside the award is minimum. This facility is not available in Ad hoc arbitration. Hence, there is higher risk of court interference.

5. In institutional arbitration, the arbitrator's fee is fixed by the arbitral institution. The parties know beforehand what the cost of arbitration will be. In Ad hoc arbitration, the arbitrator's fee is negotiated and agreed to. The Indian experience shows that it is quite expensive.

6. In institutional arbitration, the arbitrators are governed by the rules of the institution and they may be removed from the panel for not conducting the arbitration properly, whereas inAd hocarbitration, there is no such fear.

7. In case, for any reason, the arbitrator becomes incapable of continuing as arbitrator in institutional arbitration, it will not take much time to find substitutes. When a substitute is found, the procedure for arbitration remains the same. The proceedings can continue from where they were stopped, whereas these facilities are not available inAd hocarbitration.

8. In institutional arbitration, as the secretarial and administrative staff is subject to the discipline of the institution, it is easy to maintain confidentiality of the proceedings. InAd hocarbitration, it is difficult to expect professionalism from the secretarial staff.

1.43 In Food Corporation of India v. Joginderpal Mohinderpal, 1989(2) SCC 347, the Supreme Court observed:

"We should make the law of arbitration simple, less technical and more responsible to the actual realities of the situations, but must be responsive to the canons of justice and fair play and make the arbitrator adhere to such process and norms which will create confidence, not only by doing justice between the parties, but by creating sense that justice appears to have been done."

1.44 The object of the alternative dispute resolution process of arbitration is to have expeditious and effective disposal of the disputes through a private forum of parties' choice.9

1.45 Favouring institutional arbitration to save arbitration from the arbitration cost, the Supreme Court has recently in Union of India v. M/S. Singh Builders Syndicate10 observed:

"When the arbitration is by a Tribunal consisting of serving officers, the cost of arbitration is very low. On the other hand, the cost of arbitration can be high if the Arbitral Tribunal consists of retired Judge/s. When a retired Judge is appointed as Arbitrator in place of serving officers, the government is forced to bear the high cost of Arbitration by way of private arbitrator's fee even though it had not consented for the appointment of such non-technical nonserving persons as Arbitrator/s. There is no doubt a prevalent opinion that the cost of arbitration becomes very high in many cases where retired Judge/s are Arbitrators.

The large number of sittings and charging of very high fees per sitting, with several add-ons, without any ceiling, have many a time resulted in the cost of arbitration approaching or even exceeding the amount involved in the dispute or the amount of the award. When an arbitrator is appointed by a court without indicating fees, either both parties or at least one party is at a disadvantage. Firstly, the parties feel constrained to agree to whatever fees is suggested by the Arbitrator, even if it is high or beyond their capacity.

Secondly, if a high fee is claimed by the Arbitrator and one party agrees to pay such fee, the other party, who is enable to afford such fee or reluctant to pay such high fee, is put to an embarrassing position. He will not be in a position to express his reservation or objection to the high fee, owing to an apprehension that refusal by him to agree for the fee suggested by the arbitrator, may prejudice his case or create a bias in favour of the other party who readily agreed to pay the high fee. It is necessary to find an urgent solution for this problem to save arbitration from the arbitration cost.

Institutional arbitration has provided a solution as the Arbitrators' fees is not fixed by the Arbitrators themselves on case to case basis, but is governed by a uniform rate prescribed by the institution under whose aegis the Arbitration is held. Another solution is for the court to fix the fees at the time of appointing the arbitrator, with the consent of parties, if necessary in consultation with the arbitrator concerned.

Third is for the retired Judges offering to serve as Arbitrators, to indicate their fee structure to the Registry of the respective High Court so that the parties will have the choice of selecting an Arbitrator whose fees are in their 'range' having regard to the stakes involved. What is found to be objectionable is parties being forced to go to an arbitrator appointed by the court and then being forced to agree for a fee fixed by such Arbitrator.

It is unfortunate that delays, high cost, frequent and sometimes unwarranted judicial interruptions at different stages are seriously hampering the growth of arbitration as an effective dispute resolution process. Delay and high cost are two areas where the Arbitrators by self regulation can bring about marked improvement".

1.46 Section 89 providing for settlement of disputes outside the Court was inserted in CPC in 1999 and brought into force with effect from 01.07.2002. The 'Notes on Clauses' of the CPC (Amendment) Bill 1999 stated with regard to this provision thus:

"Clause 7 provides for the settlement of disputes outside the court. The provisions of Clause 7 are based on the recommendations made by Law Commission of India and Malimath Committee. It was suggested by Law Commission of India that the Court may require attendance of any party to the suit or proceedings to appear in person with a view to arriving at an amicable settlement of dispute between the parties and make an attempt to settle the dispute between the parties amicably.

Malimath Committee recommended to make it obligatory for the court to refer the dispute, after issues are framed, for settlement either by way of arbitration, conciliation, mediation, judicial settlement or through Lok Adalat. It is only when the parties fail to get their disputes settled through any of the alternate dispute resolution method that the suit could proceed further. In view of the above, clause 7 seeks to insert a new section 89 in the Code in order to provide for alternate dispute resolution."

1.47 Section 89 has been introduced for the first time for settlement of disputes outside the Court, with the avowed objective of providing speedy justice:

1. It is now made obligatory for the Court to refer the dispute after issues are framed for settlement either by way of -

(a) Arbitration,

(b) Conciliation,

(c) Judicial settlement including settlement through Lok Adalat, or

(d) Mediation.

2. Where the parties fail to get their disputes settled through any of the alternative dispute resolution methods, the suit could proceed further in the Court in which it was filed.

3. The procedure to be followed in matters referred for different modes of settlement is spelt out in sub-section (2).

4. Clause (d) of sub-section (2) of section 89 empowers the Government and the High Courts to make rules to be followed in mediation proceedings to effect the compromise between the parties.

1.48 In Salem Advocate Bar Association v. Union of India, AIR 2003 SC 189 and (2005) 6 SCC 344, the Supreme Court rejected the challenge to the constitutional validity of the amendment made in CPC and took note of the Reports of the Committee headed by M. Jagannadha Rao, J., a former Supreme Court Judge and Chairman of the Law Commission of India, including the one dealing with Model Alternative Dispute Resolution and Mediation Rules.

1.49 We should endeavour to inspire parties to settle their disputes outside the Court by more and more utilizing section 89 CPC. It is a very beneficial provision.

1.50 A new section 16 has been inserted in the Court-fees Act 1870 by the CPC (Amendment) Act 1999, which reads as follows:

"Where the Court refers the parties to the suit to any one of the mode of settlement of dispute referred to in section 89 of the Code of Civil Procedure, 1908, the plaintiff shall be entitled to a certificate from the Court authorising him to receive back from the collector, the full amount of the fee paid in respect of such plaint."

1.51 Where a matter referred to a Lok Adalat in terms of section 89(2) CPC read with section 20(1) of the Legal Services Authorities Act is settled, the refund of the court-fee is governed by section 16 of the Court-fees Act read with section 21 of the Legal Services Authorities Act and the plaintiff is entitled to the refund of the whole of the court-fee paid on the plaint.1

1.52 A Lok Adalat award is on a par with a decree on compromise, final, unappealable, binding and equivalent to an executable decree, and ends the litigation between the parties.2

1. Vasudevan V. A. v. State of Kerala, AIR 2004 Kerala 43.

2. P. T. Thomas v. Thomas Job, (2005) 6 SCC 478.

1.53 Public confidence in the Judiciary is the need of the hour more than ever before. The Judiciary has a special role to play in the task of achieving socio-economic goals enshrined in the Constitution. While maintaining their aloofness and independence, the Judges have to be aware of the social changes in the task of achieving socio-economic justice for the people.

1.54 Socrates said that four things improve a great Judge:

(a) To hear courteously;

(b) To answer wisely;

(c) To consider soberly; and

(d) To decide impartially.

1.55 The judges of the subordinate judiciary, which can be termed as the root of our judicial system, must be able to inspire confidence in themselves and do justice to the society. It is rightly said that judicial officers discharge divine functions though they are not divine themselves. Every judicial officer of the subordinate judiciary has to lead a disciplined life. The judges of all cadres should strictly observe punctuality in court. Integrity is an essential quality of a judicial officer. A judicial officer must follow the standards of integrity, morality and behaviour.

The members of the judiciary should pronounce judgments within the stipulated time. Judges must decide cases without fear or favour, affection or ill will, or the feeling of a friend or foe. They must work very hard, be very honest and courteous to the litigants, witnesses and the members of the Bar and discharge their judicial functions with all humility at their command. They should not speak out their verdict, unless they propose to pronounce it in open court then and there. Judges should cultivate the art of writing judgments, which is a creative process.

The language should be plain, precise and pointed. Long sentences lose their punch. Words should be chosen with apt precision. The facts should be stated precisely, the issues written clearly, the evidence should be discussed threadbare, ratiocination should be logical and should follow in a sequence from one point to another and then a case be decided.

In the present times, judicial education and training too is a must, which may be called an effective and rather indispensable means to enhance fair administration of justice. Education enhances knowledge and sensitivity, whereas training revolves round skills, attitude and professionalism. The two reinforce each other in judicial performance.

That is why there have come into existence the National Judicial Academy at Bhopal and other judicial academies or training directorates at the State level. Dr A. P. J. Abdul Kalam, a former President of India, has been supportive of mediation and conciliation as ADR mechanisms and emphasized the need for their training in order that they are persons of impeccable integrity and ability to persuade and create conviction among parties.

1.56 The issue of under-trials detained in various prisons in the country has been a matter of concern. The Central Government realizing the plight of under-trials and to ensure justice to common man, made allocation of Rs.502.90 crores for creation of 1734 courts named as "Fast Track Courts" all over the country. The scheme was for a period of five years, which after intervention of the Supreme Court has been continued for another five years, that is, until 31st March 2010 with a provision of Rs.509 crores.

1.57 A successful judicial system is a hallmark of any developed civilization. The failure of criminal justice system in bringing criminal conduct under tight control is viewed as leading to the breakdown of the public order and disappearance of an important condition of human freedom. The crime-control implies orderly and efficient method for arresting, prosecuting, convicting and punishing the guilty and for deterring crime by others.

The protection of individual rights is necessary to guard the accused against arbitrary exercise of powers by the State. Long delay in courts causes great hardship not only to the accused but even to the victim and the State. The accused, who is not out on bail, may sit in jail for number of months or even years awaiting conclusion of the trial.

Thus, effort is required to be made to improve the methods of investigation and prosecution. More professionalism needs to be infused in them. The State Government should create a special wing in the Police Department solely for the purpose of investigation and attending to court-work, and the prosecuting agency should be independent.

1.58 A prosecutor occupies a unique position in the criminal justice system. In Hitendra Vishnu Thakur v. State of Maharashtra, AIR 1994 SC 2623 , the Supreme Court observed that a public prosecutor is an important officer of the State Government and is appointed by the State under the Code of Criminal Procedure. He is not a part of the investigating agency. He is an independent statutory authority.

The success of a trial depends mainly on effective prosecution, which is possible only through well-qualified, trained, fair and dedicated prosecutors. It goes without saying that integrity and impartiality of the public prosecutor is essential in the administration of justice. It is essential that efforts are made to improve the quality of the management of prosecution in order to secure fair, just and expeditious conclusion of trials.

1.59 In criminal matters also, settlement is recognized by the Code of Criminal Procedure in that its section 320 provides for compounding of offences mentioned therein.



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