The Arbitration Acts, 1940

The Arbitration Act, 1940

The Indian judiciary is overburdened by a huge backlog of cases and there is an increasing need for alternative modes of dispute resolution. One such method is arbitration. The law of arbitration is governed by the Arbitration Act, 1940 but it is only recently that it has emerged as a viable option to litigation. Arbitration is a  mode of settling disputes by referring them to a nominated person who decides the issue after hearing both sides. Arbitration normally finds itself included either as an arbitration agreement or an arbitration clause in a contract, where the parties to an agreement agree to refer any future dispute to an arbitrator rather than going to court. An arbitration agreement is a contract by itself and hence any person who is eligible to enter into contracts can enter into an arbitration agreement as well. Persons representing others such as a guardian for a minor or the Karta of a joint Hindu family may enter into an arbitration agreement as well.

The main advantages of arbitration lies in the fact that it is a faster and cheaper way of settling disputes, the dispute resolution is of a private nature as opposed to the publicity which a court case entails, the award of the arbitrator is also of a final and binding nature.

An arbitrator is normally appointed by the mutual consent of the parties. Anyone can be appointed as an arbitrator and it is in generally in the interest of the parties to appoint a person of integrity and competence. If a person has a personal interest in the matter then he is disqualified from becoming an arbitrator. As a rule most disputes may be referred to arbitration but there area few disputes such as a suit for divorce, insolvency proceedings, lunacy proceedings, criminal cases etc cannot be referred for arbitration.

Once the parties have entered into an arbitration agreement then they cannot file a suit in a court of law with respect to any matter covered by the agreement. Secondly the appointment of an arbitrator as a rule is irrevocable but it may be allowed with special permission of the court or through an express provision in the agreement.   The duties of an arbitrator are analogous to that of an umpire in a cricket match and include amongst others, the duty to act judicially, discharge his duty in a  fair manner, uphold the principles of justice, to decide all matters referred to him, not to delegate his functions to another person and not to exceed his authority.
The final decision or the award, made by the arbitrator has he same effect as that of a judgement by a court. It is important that the award be made in a clear and unambiguous manner and it should have addressed all points raised before the arbitrator. After the award is pronounced then it has to be signed by the arbitrator and a copy shall be given to both the parties, and the award is then rendered enforceable after the court pronounces a judgement according to the award and passes a decree accordingly.

It is unfortunate the legal imagination of the general public, spurred on popular images with respect to dispute settlement, is confined only to litigation. It is generally accepted that the experience of having to go to court to settle a matter is both a time consuming and tiring experience. For instance in the corporate world arbitration has become a popular alternative to the corridors of the court rooms because of it’s cost effectiveness and it’s speedy
resolution. If complicated issues related to mega-projects such as infrastructure can be referred to arbitration then it is difficult to imagine why disputes of a common nature cannot be resolved by the same process. The popularity of arbitration in the future will  depend on the adoption of this choice by litigants, thereby making their dispute settlement an easier process as well as easing the backlog in the Indian courts.