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WHAT IS ARBITRATION?�

Arbitration is a private dispute resolution process where a neutral third party (arbitrator) gives a binding decision (known as award) on the merits of the dispute.
In India, the first Arbitration Act was enacted in 1899. After which several other acts were enacted, which were all replaced and consolidated by way of the Arbitration and Conciliation Act, 1996 (amended periodically).
As a general practice, most commercial contracts these days contain an arbitration clause. This is owed to the multi-fold advantages it provides over litigation:

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ADVANTAGES OF ARBITRATION OVER LITIGATION

GROUND	ARBITRATION	LITIGATION
Nature of proceedings	Private and confidential	A formal court-based process where disputes are resolved by judges in a public forum.
Cost	less expensive due to faster resolution and fewer procedural complexities.	Generally, cost more due to prolonged procedures, multiple hearings, and court fees.
Time	Time-bound resolution of dispute as per the statutory prescribed timelines.	Long drawn process, may take years to resolve due to backlogs.
Appeal process	Limited scope for appeals; arbitrator's award is final and binding, with only specific grounds for challenge.	Multiple levels of appeals are possible in the judicial system (e.g., District Courts, High Courts, Supreme Court).
Party autonomy	Parties can choose their arbitrator(s) having expertise in the subject matter. Parties have significant control over the process, including choosing the seat, rules, and timing of arbitration.	Any competent Judge may hear the matter, with no say of the parties. Strict rules of civil or criminal procedure are followed.
Enforceability abroad	Arbitration awards are more easily enforceable in foreign countries under treaties like the New York Convention.	Indian court judgments may not always be easily enforceable abroad unless bilateral or international agreements exist.

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WHAT CONSTITUTES AN ARBITRATION AGREEMENT?��

An "arbitration agreement" means an agreement by the parties to submit to arbitrator disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
The Apex Court, in the cases Jagdish Chander v. Ramesh Chander, (2007) 5 SCC 719 stated certain conditions to be followed for an applicable arbitration agreement: -
The arbitration agreement must be in writing. An agreement will be deemed to be in writing if it is contained in:
A document signed by the parties.
Exchange of letters, telex, telegrams or telecommunications (includes electronic means)
Allegation of such agreement is made by one party and not denied by the other.
The parties shall agree to refer any dispute (present or future) arising out of a contract to arbitration.
The arbitrator/private tribunal should be empowered to adjudicate upon the disputes in an impartial manner.
The intention of the parties to refer the dispute to an arbitrator/private tribunal and be bound by the same, must be unequivocally reflected.
There must be ‘consensus ad idem’ between the parties i.e. they should agree to the same thing in the same sense.

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�COMMENCEMENT OF ARBITRATION & APPOINTMENT OF ARBITRATORS��

An arbitration commences when the respondent party receives a notice invoking arbitration.
The parties have the discretion to select any number of arbitrators, not being even in number.
In case the parties fail to select the number of arbitrators, then the arbitral tribunal must consist of a sole arbitrator.
The parties can agree upon any procedure for the appointment of an arbitrator. Some salient features of the appointment of an arbitrator are:
Arbitrator can be any person of any nationality unless the parties agree otherwise.
Parties may agree on a procedure for appointing the arbitrator or arbitrators. On such failure, each party may appoint one arbitrator, and the two appointed arbitrators can appoint a third arbitrator.
On failure to reach an agreement as per the above point, within 30 days, the appointment shall be made by an arbitral institution designated by the Supreme Court (in International Commercial Arbitration) and High Court (in domestic arbitrations).

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APPOINTMENT OF ARBITRATORS: CONTINUED

Unilateral arbitration refers to the appointment of arbitrator by either of the party without the permission/consensus of other party.
The Hon’ble Supreme Court in Voestalpine Schienen GmbH v. DMRC Ltd., (2017) 4 SCC 665 opined that the principles of impartiality and independence were the foundation of any adjudicatory process and could not be discarded at any stage of the arbitral proceedings.
In Perkins Eastman Architects DPC v. HSCC (India) Ltd. 2019 S.C.C. Online SC 1517: the court took the following stance: in general, the unilateral appointment of a sole arbitrator is void ab initio, and any person who is proposed to be appointed as an arbitrator unilaterally is ineligible to become an arbitrator in terms of Section 12(5) read with the Seventh Schedule of the Arbitration Act.
The only exception to this rule is that the parties may waive off this restriction by way of a written agreement between the parties.

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CONDUCT OF ARBITRATION PROCEEDINGS

Rules governing arbitration

The parties can agree upon the any rules of procedure for the conduct of the arbitration proceedings. In this regard the parties can form their own rules, take assistance of statutory provisions or rules framed by any institution (LCIA, DIAC, SIAC, MCIA, etc.) or by associations (International Bar Association, CIarb, etc.)
Failing any agreement between the parties, the arbitral tribunal can conduct the proceedings in a manner it deems appropriate while ensuring that each party is given full opportunity to present its case.
The arbitrator is not bound by the strict rules of procedure under the CPC and Evidence Act in the conduct of the arbitration proceedings.

Documents and timelines

In the first procedural meeting, typically the arbitrator in consultation with the parties, determines the timelines for the conduct of the arbitral proceedings and the manner in which it will be conducted.
The claimant, as per the timelines agreed between the parties or as determined by the tribunal. files the Statement of Claim, containing the facts supporting his claim, the points at issue and the relief sought.

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CONDUCT OF ARBITRATION PROCEEDINGS

In response, the respondent shall file a Statement of Defence to the claims made.
The submission of both Statement of Claim and Statement of Defence must be completed within six months from the date of commencement of the arbitration proceedings.
The arbitral tribunal thereafter hears the dispute on merits and renders the award.
The award must be made within a period of twelve months from the date when both the statement of claim and defence has been submitted. This timeline is extendable by 6 months through mutual consent of the parties. Any further extension can only be through an application made to the court.
Fast-track procedure: the parties can agree to fast-track procedure under the Act, where the award is to be made within 6 months.

[Note: the timelines prescribed above are only applicable to domestic arbitration]

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GROUNDS FOR CHALLENGE

The Arbitration Act prescribes a limited list of grounds on basis of which the award can be challenged. Barring these, the award cannot be set aside on any other grounds.
The award must be challenged within 3 months from when the parties received the signed copy of the award. Delay up to a month may be allowed in the event of sufficient cause.
On rejection of a challenge to an award, even lesser grounds have been prescribed to prefer an appeal against such rejection.

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WHO CAN BE AN ARBITRATOR?�

A person of any nationality can be appointed to be an arbitrator, unless otherwise agreed to by the parties.
Before the 2019 amendment, there was no meticulous requirement for being an arbitrator. The only qualifiers were – must possess the qualifications prescribed by the parties, must be independent and impartial and should be competent to contract.
Through the 2019 amendment, meticulous requirements being enumerated under the Act. There were nine categories of people designated who could be appointed as an arbitrator.
This included Chartered Accountants under the Chartered Accountants Act, 1949, with 10 years of practice.
Besides specific qualifications, the Act also prescribed eight general norms that would be applicable to all the arbitrators.
Through the 2021 amendment, Section 43J of the Act and Schedule Eighth has been deleted. This effectively means that parties are free to appoint arbitrators regardless of their qualifications.
Therefore, the present position is the same as existed before the 2019 amendment. Except for the qualifiers mentioned above, any individual can be appointed as an arbitrator.

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ROLE OF CAs IN THE ARBITRATION PROCEEDINGS�

Arbitrators: CAs are eligible to be appointed as arbitrators. Due to their in-depth knowledge of finance, taxation, and compliance, they can be appointed as arbitrators in commercial disputes, those involving financial and corporate matters. Their technical skills make them ideal for resolving contract disputes, tax issues, and shareholder disagreements.
Role as experts: the arbitrator is empowered to appoint experts with respect to specific issues in an arbitration. The CAs in this regard can act as:
Financial Experts: Chartered Accountants can a critical role as expert witnesses in arbitration proceedings, especially in disputes related to financial matters, accounting discrepancies, or valuations. Their expertise would aid the arbitral tribunals understand complex financial data.
Assistance in Forensic Accounting: CAs are frequently involved in forensic accounting in arbitration, where they investigate potential fraud, financial mismanagement, or discrepancies in financial records uncovering hidden liabilities or assets, affecting the arbitral award.

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