Arbitration In IndiaFast Track Arbitration In India

INTRODUCTION

Arbitration is envisaged as an evolving method of dispute resolution in India to meet the rising demands of globalization. Indian legislature has taken ample measures to advance arbitration as the preferred mode of dispute resolution at domestic as well as international levels, by bringing forth constant amendments in the Arbitration and Conciliation Act, 1996.

The most remarkable one being the Arbitration & Conciliation (Amendment) Act, 2015 and thereafter, the most recent one being the Arbitration & Conciliation (Amendment) Act, 2019.

Likewise, various High Courts and the Supreme Court of India have passed plethora of judgments supporting and encouraging arbitration as a significant means of dispute resolution and continuously upgrading the interpretations of the law.

One of the major obstacles in pursuing dispute resolution through any mode is the duration for the entire proceeding to take place and the time taken to pass a judgment or award.

Arbitration, being highly efficient and flexible, has reduced the time taken for dispute resolution when compared to the Civil Courts which are overburdened with a vast number of cases.

Nevertheless, arbitration proceedings is time consuming in their own ways. Some of the reasons for delay being the Respondent deliberately delaying the procedure with mala fide or the arbitrator refusing the continue hearing without regular fees payment. Such lapses hamper the realization of full potential of arbitration proceedings being an efficient and smooth mode of dispute resolution.

Fast Track Arbitration or Expedited Arbitration is an effective mode of dispute resolution which is time bound and hence, cannot be delayed due to any reason whatsoever. It is a sub-system of regular arbitration, wherein a sole Arbitral Tribunal is established upon the consent of parties, having fixed time limits and limited procedures to be followed to accelerate the process of dispute resolution.

Through Fast Track Arbitration, a quick and effective award is pronounced by the Arbitral Tribunal thereby, cutting down the costs and delays associated with a regular arbitration. It would also prove to be a practical solution to litigants seeking redressal during the COVID – 19 pandemic, as Courts are unable to conduct normal proceedings and are burdened with pendency of multiple litigations.

Fast Track Arbitration has recently paved its way into the Indian legislation through the Arbitration & Conciliation (Amendment) Act, 2015 after being in talks for a long period. The same shall allow the parties to conclude the arbitration proceedings and have an award resolving the disputes within 6 (six) months only. Like many commercial contracts entered between the people of the country, time is an essence in this procedure.

FAST TRACK ARBITRATION UNDER INDIAN LAWS

1. The 246^th Law Commission Report

The Ministry of Law and Justice referred to the Law Commission in 2010 to conduct a study of the Arbitration and Conciliation Act, 1996 (“the Act”) and propose certain amendments. Pursuant to the reference, an expert committee was established by the Law Commission to study the Act and make suggestions accordingly.

The Report given by the Law Commission highlighted some of the lapses in the Act. The major focus of the Law Commission was to create a balance between judicial interventions in arbitration proceedings and provide for a cost effective and user-friendly method for settlement of commercial disputes.

One such issue with the Act was the need for stringent timelines while determining an Arbitral Award. The Report highlighted the delays faced by Arbitral Tribunal while deciding on an Award and the practice of adopting procedural formalities imitating Court proceedings.

It was suggested by the Report to introduce a method of Fast Track Arbitration, wherein the Arbitral Tribunal would have to pass an Award within a time period as defined by law. Furthermore, it would also eliminate the practice of following unnecessarily the methods of Court proceedings and would only follow the procedures required to conclude the Fast Track Arbitration.

2. Arbitration and Conciliation (Amendment) Act, 2015

The recommendation by the 246^th Law Commission Report regarding introduction of an expedited process of arbitration came in through the Arbitration & Conciliation (Amendment) Act, 2015 (“Amendment Act, 2015”) under Section 29A and 29B.

Section 29A of the Amendment Act, 2015 specifies the time limit within which an Arbitral Award shall be made.

Section 29B of the Amendment Act, 2015 codifies the requirements and procedure to be followed for fast track procedure.

FAST TRACK PROCEDURE UNDER SECTION 29B

1. Applying for a Fast Track Arbitration 

Application is done through an “opt-in approach”, wherein parties to an arbitration agreement can apply for dispute resolution through a Fast Track Arbitration by agreeing to the same in writing, at any stage before or at the time of appointment of Arbitral Tribunal. The Courts are not empowered to impose the process of Fast Track Arbitration upon the parties.

2. Sole Arbitrator

The parties to the arbitration agreement may agree for the appointment of a sole arbitrator for the Arbitral Tribunal.

3. Fees Payable

The amount and manner of payment of fees is to be agreed between the arbitrator and the parties.

PROCEDURE TO BE FOLLOWED BY ARBITRAL TRIBUNAL DURING FAST TRACK ARBITRATION

1. Written pleadings: The dispute shall be decided on the basis of written pleadings, documents and submissions filed by the parties, without any oral hearings.

2. Clarifications, if required: It can call for further information or clarifications from the parties along with the documents and pleadings submitted.

3. Hearings: Oral hearing should be held only when parties request for it or when the Arbitral Tribunal considers it necessary for clarifying certain issues.

4. Expeditious disposal: It may do away technical formalities associated with oral hearings and adopt procedure for expeditious disposal of the matter.

PASSING OF ARBITRAL AWARD

The Award should be made within 6 (six) months from the date the Arbitral Tribunal enters upon the reference.

Section 29A (3) to (9) of the Act mentioning the time-limit for passing of an Arbitral Award shall be applicable to passing of arbitral awards under the fast track procedure.

The parties may consent to extend the period for making award to a period not exceeding 6 (six) months.

If the award is not made within 6 (six) months or within the extended time period, the mandate of the arbitrator shall terminate unless the Court has extended the time period.

If the Court finds that the delay is due to reasons attributable to the Arbitral Tribunal, then it may order for reduction of up to 5% fees of the arbitrator for each month of delay.

While extending the time period, the Court may substitute the arbitrator responsible and the arbitral proceedings shall continue from the stage already reached prior to the substitution of the arbitrator.

JUDICIAL PRONOUNCEMENTS

The concept of Fast Track Arbitration is a recent development in Indian Alternate Dispute Resolution Mechanism. There have not been many cases of Fast Track Arbitration and many have not come to light as awards passed in such cases have not been challenged before the Courts. Few Courts have given significant commentary regarding the concept and procedure of the Fast Track Arbitration.

1. Consensus between the Parties for Fast Track Arbitration 

In the case of Hamara Pump Mithoura HPCL Petrol Pump v. Chairman-Cum-Managing Director Hindustan Petroleum and Ors. 2018 (1) ADJ 363, a dispute between the parties was referred to arbitration. The Applicant made an application regarding appointment and continuance of the arbitrator and prayed for a direction of Fast Track Arbitration to be adopted by the appointed arbitrator.

The Allahabad High Court disposed of the prayer for Fast Track Arbitration proceedings under Section 29B of the Act. It concluded that the said prayer was premature;

“…since there is neither an agreement between the parties for fast tracking the arbitral proceedings nor has the Court reached the stage of constituting an Arbitral Tribunal. As would be evident from a bare perusal of Section 29-B, the prayer to fast track has to be made by parties at any stage either before or at the time of constitution of the Arbitral Tribunal. This application has to be made in writing and is principally consensual. Before this Court, there is no consensus to fast track the proceedings before the Arbitral Tribunal. In view thereof, the prayer to fast track cannot be granted by the Court in the absence of any consent having been expressed in this respect by the contesting parties.”

The High Court held that there must be consensus between the parties to the fast track procedure of arbitration. In absence of a mutual agreement between the parties for the same, the Court cannot direct the parties for a Fast Track Arbitration. It also noted that the Court did not reach the stage of constituting an Arbitral Tribunal and hence, could not direct for fast track proceedings.

2. Consent of both Parties required for Extending the Time Period of making an Arbitral Award

The case referred before the Delhi High Court of Crayons Advertising Private Limited v. Bharat Sanchar Nigam Limited 2018 (2) ArbLR 252 (Delhi) was regarding a dispute between two parties being resolved by arbitration.

They appointed an Arbitrator to conduct the proceedings as per the Fast Track Arbitration under Section 29B of the Act with the consent of both the parties.

The Arbitrator however, failed to pronounce an award within 6 (six) months which lead to expiry of the Arbitrator’s mandate on 30^th May, 2017. The Petitioner did not give consent for extension of the time period for making the Arbitral Award but rather, filed an application on 25^th August, 2017 intimating the mandate of the arbitrator stood terminated by efflux of time and recorded its disinclination to consent for extension of time period. The High Court held that consent of both the parties is required to extend the time period for making an award. In the absence of mutual consent, the mandate of the arbitrator stood terminated and the Court appointed a fresh Arbitrator to continue with the proceedings between the parties.

“Thus, I may only say since the period for pronouncing the award has expired lately on 30.11.2017 and not being extended with the consent of both the parties, the mandate of Mr.Rakesh Kumar stood terminated. The plea raised by the respondent viz the invocation being under the old Act- Section 29 (A) would not be applicable is frivolous in view of clause 12.2 of the Agreement…”

SIGNIFICANCE DURING THE COVID-19 PANDEMIC

The ongoing pandemic of COVID – 19 and socially distancing measures imposed to curb the disease have led to a complete halt in the usual Court proceedings. A plethora of cases are stockpiling at different Courts, with Court dates being missed for months causing inexplicable delay in the justice delivery mechanism.

Although, few of the High Courts and the Supreme Court have begun conducting Court hearings through electronic means, with e-filing and hearings through video conferencing. Despite the electronic reforms in the Court procedures, the Judiciary is able to handle a limited number of cases.

Many businesses have already adopted arbitration as an effective method for dispute resolution. Arbitration proceedings, like Court proceedings, require the parties to be present for hearings and the physical submission of documents, pleadings, etc.

The same is not possible with the current pandemic and parties are looking for alternative means to settle disputes quickly. One such method would be Fast Track Arbitration, as it relaxes the unnecessary procedural requirements of regular arbitration proceedings or Court proceedings such as formal pleadings, witness statements, discovery or oral hearings.

The Arbitrator appointed, could utilize the technological resources for conducting virtual hearings, if required in exceptional circumstances where the parties demand or issues in question make it necessary. The Arbitrator can order for submission of pleadings and documents through an electronic medium such as e-mail.

This would not only ease the financial burden on the parties but also reduce the disputing parties’ troubles of physical submission of documents and physically attending the hearings. It would reduce the travel burdens and enable fast and efficient dispute resolution.

Therefore, this is an emerging mechanism of dispute resolution and has gained tremendous limelight due to the COVID – 19 situation. It can turn tables in favour of the parties in question and help people not fear litigation and dispute resolution procedures.

INTERNATIONAL CHAMBERS OF COMMERCE: INTERNATIONAL COURT OF ARBITRATION RULES FOR EXPEDITED PROCEDURE

The International Chamber of Commerce (“ICC”) introduced rules for expedited arbitration procedure under Article 30. Further, the Expedited Procedure Rules included under Appendix VI of the 2017 ICC Rules.

Under the Expedited Procedure Rules, an expedited procedure would automatically apply to disputes having an amount of USD 2 Million or less. The parties to an arbitration agreement could opt for an expedited procedure for disputes with amounts more than USD 2 Million through mutual consent.

The parties have a right to opt-out of the expedited procedure even when the amount in dispute is less than or equal to USD 2 Million. A lower fee is to be charged in case of expedited proceedings, i.e. 20% less than regular fees.

Some of the major rules are:

1. A Sole Arbitrator is to be appointed, as per Article 2(1) of the Expedited Procedure Rules.

2. After the constitution of an Arbitral Tribunal, the parties cannot make new claims with the authorization of the Tribunal, as per Article 3(2) of the Expedited Procedure Rules.

3. Article 3(4) empowers the Sole Arbitrator to determine the number, length and scope of written submissions and witness evidence on his discretion.

4. The Sole Arbitrator is empowered to pass an award solely on the basis of documents submitted, without oral hearings or examination of witnesses or experts after consultation with the parties, under Article 3(5) of the Expedited Procedure Rules.

5. The Sole Arbitrator shall make an award within 6 (six) months from the date of referral to arbitration, under Article 4(1) of the Expedited Procedure Rules.

It is important to mention that the other Arbitration Institutions also, in their codified rules mention provisions governing Fast track procedures for arbitration. The parties to an Arbitration Agreement can agree upon a favourable Institution to refer for Fast Track Arbitration as they deem fit and easy for resolution of disputes.

DEMERITS OF FAST TRACK ARBITRATION VIS-À-VIS REGULAR ARBITRATION

A Fast Track Arbitration is often advantageous for its cost efficiency, speedy pronouncement of awards and dispensing of the unnecessary proceedings followed in Courts. It proves effective when the quantum of dispute is smaller compared to cost of dispute resolution.

However, a Fast Track Arbitration is prone to certain demerits,

1. Payment of Fees:

Under regular arbitration, the High Court determines the rules for payment of costs to the Arbitral Tribunal under Section 11(14) of the Act and the rates for the same are mentioned in the Fourth Schedule of the Act. Section 29B (6) of the Act enables the parties and the arbitrator to determine the fees and the manner of fee payment.

This could lead to discrepancy between the parties and the arbitrator regarding the amount of fees payable. The Act has failed to provide a maximum limit to the amount of fees charged or criteria for determination of fees payable during Fast Track Arbitration.

2. Consent of Parties:

The provisions of Fast Track Arbitration place substantial dependence on consent and cooperation between the parties for application to Fast Track Arbitration and the appointment of a Sole Arbitrator.

It is unlikely that either of disputing parties would consent for Fast Track Arbitration, as an uncooperative party would attempt to extend the resolution process and delay justice.

As for regular arbitration, in case the parties cannot consent to the appointment of arbitrator(s), the Court is enabled to appoint the same under Section 11 of the Act.

3. Sole Arbitrator:

Moreover, appointing a Sole Arbitrator for handling cases single-handedly might prove disadvantageous for either parties. Such an arbitrator might lack the expertise, proficiency and assistance required to resolve upon the matter in a fair manner.

Regular arbitration provides for the appointment of more than one arbitrator under Section 11(3) of the Act, wherein one arbitrator is appointed by each party and the Presiding Arbitrator is appointed by the two arbitrators appointed previously. This ensures sufficient knowledge and guidance is put forth while determining an Arbitral Award.

CONCLUSION

Fast Track Arbitration proceedings are the way forward for an efficient method of dispute resolution. It would enable the parties to cut down costs and maintain amicable relations amongst themselves, while also ensuring that the rightful party is awarded justice.

However, the success of a fast track proceeding depends upon the cooperation amongst the parties and between parties and the arbitrator.

We are in an era of technology and globalisation, where every second is of value and time wasted is money lost for businesses. At such conditions, businesses would often prefer a quick and cost effective mode of resolution, i.e. Fast Track Arbitration.

Even during the times of this pandemic, technology has held the world together and provided solutions for all the activities halted by the virus. It is crucial that alternate dispute resolution, in particular arbitration and fast track arbitration, take advantage of the benefits of technology in the current times and enable parties to resolve their disputes at the comfort of their homes.

Need of the time at present is to do away with the Court formalities, physical hearings and unnecessary procedural requirements. Fast Track Arbitration can lead the way through and create a path for technologically-savvy modes of dispute resolution.

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