What is an arbitrary agreement in India?

The Indian judicial system is known for its heavy burden, and long years of litigation which is the reason, alternative dispute resolution processes have been put into place to resolve disputes speedily and arrive at a settled situation for parties under a commercial understanding.

An arbitration agreement is one of such alternative dispute resolution mechanisms that is governed by the Arbitration & Conciliation Act, 1996 which upholds party autonomy and speedy disposal. The system is constantly evolving and more and more business contracts/agreements acknowledge the method of arbitration as their mode of dispute resolution.

The same is emerging as a preferable means and a topic of interpretation by the Indian Courts to make India a suitable seat for arbitration around the globe.

What is the importance of arbitration agreements in India?

  • Appointment of Arbitrators (Section 11): - The Act provides that parties are given liberty to choose their own professional arbitrator. Even if the parties fail to decide the appointment of a professional arbitrator then in that case the Chief Justice of the High Court for domestic arbitration and the Chief Justice of the Supreme Court of India for International Commercial Arbitration are approached for the same.

  • Interim Relief (Section 9) & (Section 17):- The Arbitration & Conciliation act provides for making orders for interim relief in respect.  The petition for relief is maintainable under section 9 if there is a prima facie finding that an arbitration agreement exists and an arbitration dispute must have arisen. The parties can move to the Indian Court before the commencement of the arbitral proceedings or after making the arbitral award but before it is enforced as per section 36 of the Act. With respect to Section 17 of the Act, at the request of the party, the Arbitral Tribunal may order the other party to take interim measures as it may deem necessary in respect to the subject matter of the dispute.

  • Finality of an arbitral award (Section 34):- An arbitral award is regarded as the final and binding order arbitral applicable upon the parties and once the decree is granted by the Court, it shall be enforceable as per section 34 of the Act. With respect to the setting aside of an arbitral award given under section 34 if the arbitrator was prejudiced or such awards is in contradict with the public policy.

  • Appeal (Section 37):- Generally, the decisions of the Arbitration courts matters are considered as final and it is very difficult to get a court to review or vacate them. As per section 37, an appeal lies under section 37(1) against an order of the indian court granting or refusing to grant any measure under section 9 and also against setting aside or refusing to set aside an award. An appeal shall also lie to a court under section 37(2) against an order of the arbitral tribunal accepting the plea referred to in section 16 (2) or (3) or granting or refusing to grant an interim measure under section 17. There is no provision for appeal against orders under section 11 appointing or refusing to appoint an arbitrator.

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