INTRODUCTION

“Differences we shall always have but we must settle them all, whether religious or other by
arbitration “-Mahatma Gandhi
Arbitration has always remained the preferred form of settlement for dispute. In India, one of the
earliest treatises that mentions it is “Brhadaranayaka Upanishad”. The Modern Arbitration Law came
into play in the form of the Bengal Regulation Act of 1772. It then started coming up in other
presidency towns such as Bombay (1799) and Madras (1802).
The First Indian Arbitration Act came into force on 1stJuly 1899. It was based on the British
Arbitration Act, 1899 and applicable only in the major towns – Calcutta, Bombay,and Madras. A
more specific arbitration act came into the picture from 1stJuly 1940. There were major
shortcomings of the Act and was revamped more officially into the Arbitration and Conciliation Act,
1996. There were further amendments to this law in 2005, 2015 and 2018. The amended Act (2015)
primarily sought to portray to the world that India promotes faster arbitration and ease of doing
business.

NEED
The economy of the county runs on the basis of contracts and agreements between the various
parties which are involved in the day to day work. A report states that as of 31.12.2015 there were
59,272 cases pending in the Supreme Court, around 3.8 million cases in the High Courts. This dispute
settlement delay has a bad impact on the perception of the ease of doing business in India from the
international point of view. India ranked 131 out of 189 countries on the ease of doing business as of
2016. The amount of money spent went as high as 39.6% of the claim value for dispute resolution.
This brought about the need for speedy settlement of disputes both on and off the court.
There have been cases throughout which have warranted the need for not only speedy but also the
effective settlement of the disputes. A case involving Enercon (India) Ltd and Enercon Gmbh&Anr,
the question faced by the Supreme Court was whether the arbitration clause is a part of an
Agreement/contract which is not concluded is a valid arbitration agreement.

PURPOSE
The Arbitration Act,1996 sought to bring about the speedy and effective settlement of the disputes
between the two parties through arbitration. The Amendment of 2015 brought about the following
reforms to the Act.
 The High Courts will be having exclusive jurisdiction over matters of international
commercial arbitration
  The arbitral tribunal will have the power to grant interim measures
 The Court has been provided with the power to provide interim relief
 It has also been provided with the power to refer parties to arbitration
 The arbitral award must discourse on the basis of the public policy
 The arbitrators must be neutral to the parties involved in the dispute
 The Supreme Court has the power to appoint an independent arbitrator if the disputing
parties are unable to decide on one
 A time limit of one year has been set for the resolving of disputes and a fine vested on
further delay
 A fast track procedure designed for arbitral proceedings
 A comprehensive costs regime has been designed for the settlements
The measures will seek to ensure that there is less delay and it will help India in pushing towards a
more inclusive economy. This Act has played a big role in ensuring that India climbs up the ladder in
ease of doing business especially. It will also seek to bring in international investments and build a
state which is ripe for transactions.

ALTERNATE DISPUTE SETTLING MECHANISM

Once the problem is decided, there are various methods of resolving the same. It could be done
either via
Negotiation: This is a non-binding procedure where discussions are initiated between the concerned
parties but without the intervention of any third party, the objective being to arrive at a negotiated
settlement of the dispute.
Arbitration: This is a method of resolving the disputes outside the court, where the parties take the
help of a neutral person(s) (may or may not be decided by the parties) who reviews the case and
makes the decision which is legally binding on both the parties. Arbitration is of two types
 Institutional arbitration: In this form, there is an institution which assumes the role of
administering the entire process of arbitration. The institution follows its own sets of rules
and guidelines. It also has its own set of pre-determined arbitration framework and own
method of arbitration to facilitate the process.
 Ad Hoc arbitration: In this form, there is no institution which assumes the roles of an
arbitrator. Herein, the parties are themselves responsible for determining the aspects of the
process which includes setting the number of arbitrators, appointing them, the laws
applicable to them as well as the procedure and framework for the arbitration process.
 There are chances of further disputes arising over the appointment of the arbitrator if the
parties cannot come to mutual consent.

IMPORTANT PROVISIONS:

In India, arbitration has been affected by problems such as excessive costs and lengthy procedures
that lead to long delays. On October 23, 2015, the President of India approved an ordinance
amending the Arbitration and Conciliation Law to address these problems and strengthen the trust
of the parties that chose India as a seat of Arbitration.
However, the 2015 Amendment Act did not address certain issues, including the importance of
institutional arbitration, at a time when international institutions such as ICC, LIAC, SIAC, and HKIAC
are playing a key role in the settlement of disputes through arbitration.
Another disadvantage of the 2015 Amendment Act, which created legal obstacles, was the question
of its applicability to judicial proceedings initiated as a result of the arbitrations invoked before
23.10.2015. Therefore, another amendment was absolutely essential to eliminate the obscurities
created by the amendments introduced in 2015.
To remedy the above-mentioned difficulties and problems, the Cabinet introduced and approved the
"Draft Law on Arbitration and Conciliation (Amendment) of 2018". It is commendable that the laws
of the 2015 Amendment Act will be noticed very soon and it is now proposed to correct them.

 The most welcome modification introduced by the order refers to the definition of "court".
The amended law makes a clear distinction between international commercial arbitration
and domestic arbitration as regards the definition of "court". With respect to domestic
arbitration, the definition of "court" is identical to that of the 1996 Act (means the principal
Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its
ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same had been the subject-matter of a suit, but does
not include any civil court of a grade inferior to such principal Civil Court). However, for the
purposes of international commercial arbitration, the term "court" refers only to the
corresponding Superior Court. As a result, in the context of international commercial
arbitration, under the new law, the district court will have no jurisdiction and the parties can
expect the Supreme Court to resolve the problem quickly and effectively.
 In response to criticisms that the Indian arbitration system is a lengthy process that calls into
question the very existence of the arbitration act, the amended law proposes to provide for
fixed-term arbitrations. According to the amended law, the arbitral tribunal must render its
decision within 12 months of its appearance. This period may be extended for up to six
months with the consent of the parties. The arbitrator's mandate shall be terminated
thereafter unless the court extends it for a cause or in such other terms as he deems
appropriate. In addition, while extending the above period, the court may order a reduction
in arbitration costs of up to 5% per month, for reasons attributable to the arbitrator. In
addition, the request for extension must be dealt with by the Court within 60 days from the
date of notification to the adverse party.
The order also provides that the parties, at any stage of the arbitration proceedings, may opt
for an expedited dispute settlement procedure, in which the court must render its award
within six months. The court will decide the dispute on the basis of written submissions,
documents,and summaries submitted by the parties without a hearing unless the parties
request it or the court does not consider it necessary to clarify certain issues. When the
court resolves the dispute within six months, additional costs may be paid to the arbitrator
with the consent of the parties.

 Under the new amendment, an international arbitral award may be annulled only if it is
contrary to Indian public policy if and only if: (i)the award is tainted by fraud or corruption;
(ii) contravenes the basic policy of Indian law; (iii) conflicts with fundamental notions of
morality and justice. This amendment clarifies that the additional "manifestly unlawful"
ground for challenging an arbitral award can only be invoked for domestic arbitration and
not for international arbitration. In addition, the amendment states that national awards
may be challenged by the illegality of a patent, but that the award should not be overturned
simply by the incorrect application of the law or the reassessment of evidence. The new law
also provides that an application for the annulment of an arbitral award can only be made
after prior notice to the other party. The party filing the application must submit an affidavit
with the application that proves compliance with the prior notice requirement to the other
party. A period of one year from the date of notification of the other parties has been
established to eliminate the Section 34 application. Significantly, the new law does not
contain any provision authorizing the court or parties with a limit of one year for the
provision of the request under Article 34.
Major Cases:

Oriental Insurance Company Limited (Appellants) Vs M/s Narbheram Power and Steel Pvt. Ltd.
(Respondents) case presented in the Supreme Court of India to the three judges bench
comprising of Hon’ble Chief Justice of India, Deepak Mishra, Hon’ble Judge A.M. Khanwilkar,
Hon’ble Judge Dr. D.Y. Chandrachud. The case was filed by the Oriental Insurance Company
Limited to contest the arbitration clause invoked by the respondents when the appellants had
clearly declined the claim filed by the respondents.
Case Facts:
 In the case presented, the aforementioned parties had entered into an insurance
agreement vide policy 31150/11/2014/65 for Fire Industrial all risks. The policy was
taken to insure the factory situated in Odisha.
 In October 2013, the state of Odisha was hit by a cyclone name “Phailin” which the
respondent said affected the facility and caused a damage estimated by the respondent
at Rs. 3,93,36,244.00 and the respondent raised a claim against the policy.
 The appellant appointed Ashok Chopra & Company as the surveyor of the facility and
the report along with the comments was submitted on 22.12.2014 and a request to
settle the claim was formally submitted to the appellant.
 The claim wasn’t settled and the respondent on 21.01.2017 vide a written
communication intimated the appellant that it had invoked the arbitration clause and
requested the appellant to appoint its arbitrator.
 The appellant on this written communication responded by repudiating the claim and
declined the request to appoint an arbitrator.
 The respondent filed an application under the section 11(6) of the arbitration act of
1996 for the appointment of the arbitrator on the behalf of the appellant so the
appointed arbitrator and the arbitrator nominated by the respondent could go ahead
and appoint the presiding arbitrator and award the damages after the arbitration
process.
 The appellant contested the application in the High Court in accordance with the
language employed in clause 13 of the policy and the High Court appointed a retired
judge of the High Court as the arbitrator.
 The appellant contested the judgement of the High Court in the Supreme Court of India.
  During the course of the case hearing the appellants advocates placed reliance on
General Assurance Society Ltd. v. Chandumull Jain and another , Oriental Insurance Co.
Ltd. v. Samayanallur Primary Agricultural Co-op. Bank and United India Insurance Co.
Ltd. v. Harchand Rai Chandan Lal.

 The counsel for the respondents placed reliance on The Vulcan Insurance Co. Ltd v.
Maharaj Singh and another, Chloro Controls India Private Limited v. Severn Trent
Water Purification Inc. and others, A. Ayyasamy v. A. Paramasivam and others , M/s.
Jumbo Bags Ltd v. M/s. The New India Assurance Co. Ltd and Essar Steel India Limited
v. The New India Assurance Co. Ltd.
Case Proceedings & Decision:
 After careful discussion of the case facts and the precedents laid by the aforementioned
cases the Hon’ble bench of Judges laid forward the following points:
o In a case where one of the parties repudiates the claim, the conflict doesn’t arise
neither can it be referred to the arbitration clause as the arbitration clause
clearly states that if the claim is repudiated then the claim can’t be referred to
the arbitration.
o In case there arises a conflict and the arbitration clause can’t hold the issue
should have been raised in the civil court challenging the validity of the reasons
stated for repudiating the claim.
o The court further observed that in this particular case, the claim isn’t refused on
the pretence to decline the claim by claiming fraud or by falsifying some
information.
o The claim has been repudiated on the basis of the report filed by the
independent surveying agency in this case Ashok Chopra & Company who laid
forward the following in their report:
 Alleged loss of imported coal is clearly an inventory shortage.
 There was no actual loss of stock in process.
 The damage to the sponge iron is due to inherent vice.
 The loss towards building/sheds etc. are exaggerated to cover insured
maintenance.
 As there is no material damage thus business interruption loss does not
triggered.
o The claim was rejected in a letter dated 26.12.2014, and on the basis of the
same the appellants have the right to refuse the request for the arbitration.
 o After observing the facts of the case the Hon’ble Supreme Court acknowledged
the erroneous approach followed by the High Court in understanding the clause
and accepting the respondent’s request.
o The Supreme Court decided in the favour of the Appellants and advised the
Respondents to file a civil lawsuit within two months from the judgement under
the benefit of Section 14 of the Limitation Act 1963.

Cheran Properties Limited (Appellants) Vs Kasturi and Sons Limited and Ors (Respondents) case
presented in the Supreme Court of India to the three judges bench comprising of Hon’ble Chief
Justice of India, Deepak Mishra, Hon’ble Judge A.M. Khanwilkar, Hon’ble Judge Dr. D.Y.
Chandrachud. The case was filed by the Cheran Properties Limited to contest the award given by
the arbitrators invoked by the respondents when the appellant was not a direct signatory to the
Shareholders Agreement (SHA).
Case Facts:
 In the case presented, four stakeholders Sporting Pastime India Limited (SPIL), Kasturi
Sons and Limited (KSL), KC Palamisamy (KCP), and Hindcorp Resorts Private Limited
(Hindcorp) entered into a Shareholder Agreement (SHA) wherein SPIL agreed to allocate
240 Lach equity shares of Rs 10 each to KSL against the debts owed by SPIL to KSL.
Further it was agreed that KSL will sell 243 lakh equity shares to KCP or its nominees
representing 90 percent of the total paid up share capital for a lumpsum consideration
of Rs. 2,31,50,000. The agreement mentioned that KCP intended to take over the
business, shares and the liabilities of SPIL.
 The agreement also recognised the rights of KCP and or of its nominees to sell or
transfer their holdings in SPIL to any other person of their choice given that the
proposed terms of the financial liabilities are acceptable to the transferee through
clause 14 of the agreement.
 In the unlikely event of a conflict the parties agreed to refer to the arbitration under the
Indian Arbitration Law. With one arbitrator being appointed by each KCP and KSL and
the two arbitrators hence selected appointing the third arbitrator.
 KCP paid a sum of Rs. 2.5 Crores against the total consideration of Rs. 30 crores. And KSL
transferred 90% of the shares to KCP and its nominees in the following manner:
o One share to KCP
o Ninety five per cent shares to Cheran Properties Limited, the appellant
 o One share each to Cheran Enterprises Pvt.Ltd., KCP Associates Holdings P. Ltd.,
CG Holdings (P) Ltd. and Cheran Holdings P. Ltd.
 Since the respondent made the necessary transfers but did not receive the amount the
arbitration clause was invoked and the arbitral tribunal made the following award:
o KCP and SPIL were to return documents of titles and share certificates relating to
2.34 crore shares with KSL paying an amount of Rs. 3,58,11,000 together with an
interest at 12% pa on sum of Rs. 2.55 Crore.
 KCP challenged the award in Madras High Court however, the appeal was repelled and
the award was held.
 Further the appeal was taken with the Supreme Court of India and the appeal was again
repelled and the awards of the arbitral tribunal held.
 To enforce the order KSL initiated proceedings, under Section 111 of the Companies Act,
1956, for rectification of the register of SPIL. NCLT allowed the petition by its order
dated 6 March 2017. The decision of the NCLT was affirmed by NCLAT on 3 May 2017.
 It was held by NCLT and NCLAT that Cheran Properties Limited was a nominee of the
signatory party (KCP) and hence KSL was in the right in initiating the proceedings and the
action was in the jurisdiction of NCLT and NCLAT.
 This case was filled by appellant to repel the action by NCLAT and NCLT as it observed
that it wasn’t a signatory to the agreement and hence, it should not be bound by any
award made by the arbitral tribunal.
 The appellant counsel laid reliance on Indowind Energy Limited v Wescare (India)
Limited, S.N.Prasad, Hitek Industries (Bihar) Limited v Monnet Finance Limited
 The counsel for the respondent laid reliance on Chloro Controls India Private Limited v
Severn Trent Water Purification Inc

Case Proceedings & Decision:

 After careful discussion of the case facts and the precedents laid by the aforementioned
cases the Hon’ble bench of Judges laid forward the following points:
o The court agreed that the appellant was not the direct signatory of the
agreement however, the agreement directly benefitted the appellant and in the
clause 14 of the agreement it was clearly laid that KCP and or its nominees were
entitled to transfer or sell their shares in SPIL.
o The aforementioned observation made the appellant a direct nominee of the
signatory party making him an involved stakeholder
 o It was further agreed that in the aforementioned clause 14, there was a clear
agreement to the transfer of the obligation to the transferee of KCP which in the
mentioned case was Cheran Properties Limited.
o The court also agreed with the decision of the High Court in allowing the
respondent to involve NCLAT and NCLT in the matter as they had the jurisdiction
over the issue and it was the competent authority to make the necessary
transfers.
Conclusion
Over the yeas Indian government and the legal bodies have tried to make India an attractive place
to do business in arbitration act of 1996 and its amendment in 2015 has played a major role in
ensuring this. By including arbitration clause majority of the commercial disputes have the tendency
of being solved outside court and the damages being awarded by the arbitral tribunal helping
businesses conduct themselves with ease. It is however worth noting that the clause must be
formed in a manner that is understood by all the parties without any doubt as the language of the
clause has sometimes been used by one of the parties to evade the terms of the agreement and due
to the language of the contract has allowed one of the parties to walk away from fulfilling their part
of the consideration as the court refrains from indulging itself in the rewriting of the clause. The
amendment made to the act in 2015 has helped clarify a few ambiguous terms including the
meaning of court being restricted to High Court along with defining a strict timeline for the arbitral
tribunal to decide on the award by including a punishment on the tribunal by including a fee
deduction clause for each month of decision delay.