The pendency of cases in India soared to a fly–high in recent days. According to the Supreme Court Observer, there were more than 80,000 cases pending in the Supreme Court and a similar stack of cases across various courts in India. These figures highlight the emerging need for faster and more reliable modes of dispute resolution.
In the past, to curb these issues, alternative dispute resolution techniques were adopted, such as arbitration, mediation, etc. These techniques were governed by acts such as The Arbitration and Conciliation Act, 1996, which were made to strengthen and provide legal backing to these techniques. These acts delve into the proper functioning of these techniques and prescribe the role of neutral third parties such as arbitrators. After the enactment of these acts, there has been a surge in cases through ADR techniques. A 2024 survey by Khaitan & Co. revealed that 75% of companies prefer domestic arbitration for small disputes and 85% for large disputes over traditional litigation.
Role Of Arbitrators In ADR
Arbitrators, who are the neutral third parties, were appointed either by the courts or the rules mentioned in the statutes that act like private judges between the parties in dispute. The purpose of arbitrators is to facilitate discussions between the parties peacefully without conflicts and ensure that the conduct of the parties is in compliance with the existing frameworks.
However, the extent to which they facilitate discussion depends upon the technique in which the parties are engaged, so either they provide solutions or just provide them the platform to discuss.
One of the primary roles of arbitrators is to be involved in the issue where some specific technicalities are involved. Thus, the arbitrator so appointed must be familiar with those technicalities to provide a fair decision. These flexibilities allow for impartial decisions in ADR techniques.
Arbitrators hold the responsibility of maintaining the confidentiality of the disputes while rendering services, which was the reason for the extensive use of ADR techniques in businesses in which reputation is at stake.
The role of the arbitrator is crucial in delivering justice. For the arbitral award to be successful, he must possess relevant legal knowledge of the acts, statutes, and principles of natural justice to apply the same in the form of an equitable and reasonable award.
Competence – Competence
The doctrine of Competence-Competence, also known as the doctrine of Kompetenz-Kompetenz (referred by its German origin), is an internationally accepted and followed doctrine that is usually present in countries that follow the UNCITRAL Model Law in their legal justice-delivering mechanism.
This principle stipulates that generally, arbitrators or arbitration courts (Tribunals) have the ability or competency to adjudicate disputes regarding their own jurisdiction, with the possibility of subsequent judicial review. This doctrine is also incorporated under Rule 53(1) of the ICSID Additional Facility Rules, which states that:
“The Tribunal shall have the power to rule on its jurisdiction and competence.”
The founding aim of this doctrine is to denounce the notion that tribunals are not competent to resolve the disputes or challenges that arise out of their first arbitration agreement. This doctrine is usually, by default, incorporated in the arbitration agreement, but if somehow there is a dispute over the validity of a legal document that contains the arbitration agreement, the sanctity of the agreement stands immaterial for the enforcement of this particular doctrine alone.
In India, Section 16 of the Arbitration and Conciliation Act, 1996, which is primarily based on the UNCITRAL Model, throws light upon this doctrine. This section confers authority and power to tribunals to resolve challenges regarding the validity of the arbitration agreement. This provision also lays emphasis on two principles:
Firstly, it states that the clause containing the arbitration agreement should be considered individual and independent from the rest of the contract so that in case of any dispute regarding its validity, no effect shall be made upon the proceedings in the court.
Secondly, if the arbitration court considers the whole of the contract as null and void, then it will not invalidate the arbitration clause to ensure that the proceedings can be made smoothly.
Challenges In Ensuring A Valid Arbitrator
As the method of arbitration is widely adopted and growing on a large scale, so are its challenges. One of the major challenges is the biasedness of the arbitrator or corruption through him, which hinders the success of ADR methods. The conduct of an arbitrator while facilitating discussions is crucial to ensure impartial justice in ADR methods; the arbitrator appointed must be unbiased, independent and must be competent enough to understand the dispute.
In the case of Perkins Eastman Architects DPC v. HSCC (India) Ltd, the major contention was that the arbitrator was unilaterally appointed by one of the parties and was thus likely to be biased. The Supreme Court ruled that a person who has a controlling influence in appointing a sole arbitrator is likely to be biased. This decision strengthened the principle of independence and impartiality in arbitrator appointments while delivering arbitral awards.
In the case of Associated Builders v. Delhi Development Authority, allegations of fraud or corruption were held by the court against the arbitrator, affecting the arbitral award. The Supreme Court reiterated that an arbitral award induced by fraud or corruption could be set aside. It emphasized that fraud is a key element that undermines the legality and enforceability of arbitration proceedings. This case strengthened the legal framework for handling arbitrator misconduct involving fraud.
However, to curb these issues, several provisions were incorporated in the Arbitration and Conciliation Act, 1996, which mandates the arbitrators to work accordingly:
Section 12 mandates the arbitrator to disclose all the circumstances if any doubt of impartiality or independence has arisen.
Section 13 talks about the procedure for challenging the arbitrator; parties dissatisfied must submit a written list of reasons for challenging.
Section 14 talks about the termination of the mandate of the arbitrator either by nonfulfillment of the performance or by undue delay.
Section 15 talks about the substitution of the arbitrator; it is done due to death, resignation, challenge or other valid reasons.
Conclusion
The role of arbitrators in alternative dispute resolution techniques is crucial for delivering impartial and fair justice in the form of arbitral awards. To ensure the success of arbitration methods, which is the need of the hour due to the high pendency of cases, arbitrators must act as neutral third parties facilitating discussions with no personal interests.
However, challenges such as corruption, incompetency and biasedness hinder the smooth functionality of these mechanisms. But robust frameworks such as the Arbitration and Conciliation Act, 1996, provide provisions that govern the conduct and mandate the role of arbitrators as well as provide remedies for irregularities made. Cases like Perkins Eastman and Associated Builders highlight the importance of impartiality and integrity.
Moving forward, strict adherence to these legal principles and continued reforms will be essential to uphold trust in arbitration as a preferred mechanism for dispute resolution in India.
