Covid19, the global pandemic has caused disruption in all facets of life
worldwide. With everything else logging on during Covid-19 outbreak, High Courts
and the Supreme Court of India have also responded by suspending judicial and
administrative work, while making exceptions for urgent matters.
Not only this, amidst Covid19, the Hon'ble Supreme Court of India took suo-moto cognizance
by extending limitation under various laws. Also, the Hon'ble Supreme Court
including various High Courts, District Courts have resorted to different
digital platforms to conduct online hearings in urgent matters.
- Is 2020 turning
into a digital year for almost all sectors across the world?
- Can arbitrations be fully digitized and whether the proceedings can be conducted
and concluded online?
Covid-19 outbreak has undoubtedly changed the dynamics and turned many of us
into thinktanks. Probably the most searched topic of 2020 is Covid-19, has made
us more receptive to words such as “Change” and “Accept”. In consonance with
changing times, the use of technology can be advanced into the procedural aspect
of arbitration to ensure cost effective, efficient and speedy manner in which
arbitrations can be conducted in accordance with substantive law enumerated
under the Arbitration & Conciliation Act, 1996.
E-Dispute Redressal Mechanism (E-DRM)
In India where courts are overburdened and the backlog of cases clogging court
rooms run into lakhs, the argument for E-DRM is strong. Access to justice in
India is a challenge and resolving disputes is evidently a pain point,
considering the time, money and efforts involved.
While Arbitration was intended
as an alternative to court for certain kinds of disputes, that mechanism itself
has become cumbersome and more often than not an expensive affair. E-DRM offers
a more accessible, transparent and faster option, particularly for companies
dealing with high volume and low value transactions. E-DRM can be used across
sectors - from banking, finance to insurance - and also for e-commerce
Innovation, including change and acceptance are two sides of a coin and also,
the need of the hour. Over several years but mostly in the last couple of weeks,
most of us have witnessed a paradigm shift in the traditional to modern and now
digitized way of working under lockdown. E-hearings, today, although being
considered as a make-shift arrangement, is the need of the hour and also, the
future, the wait for which is finally over.
The best part of arbitration is that
parties to an arbitration agreement are free to agree on procedure and manner of
conducting proceedings. The benefits of online arbitration include but are not
limited to speedy conclusion of proceedings, saving of costs such as, venue
booking cost, travel cost, time, convenience, etc.
The need for expeditious resolution of disputes is an evolving process, which
has been appreciated by both the bar and bench. Infact, even legislature has
been conscious of this aspect and has time and again been introducing procedural
Section 29B was introduced vide 2015 amendment, which provides for
fast track procedure. While introducing the fast track procedure, legislature
was conscious of the ongoing dilatory tactics, procedure hurdles, etc. and
therefore, provided an option to the parties to opt for the said procedure
either before or at the time of appointment of the arbitral triunal. Fast track
is a summary procedure in letter and spirit, where the arbitral tribunal can
decide the disputes between the parties on the basis of documents filed before
it. Oral arguments are really not required.
Almost 95% of the disputes between a
Lender and Borrower(s) emanates out of payment defaults and breach of terms of
loan agreements, documents executed between the parties. Therefore, such
disputes, which are part of bulk arbitration matters and where the issue /
disputes are common between a lender and borrower(s), can be efficiently and
effectively decided by the Arbitral Tribunal through E-DRM.
In this article, we are focusing on the following 2 scenarios keeping in mind
companies such as NBFCs and banks which deal with bulk arbitration cases:
- Scenario 1 - Whether Arbitrations can be conducted online in cases where
parties have already executed arbitration agreements and the dispute
resolution clause or the arbitration clause does not provide for online
- Scenario 2 - Whether parties can agree to an online procedure of
conducting arbitration while executing arbitration agreements?
For Scenario 1, following steps can be taken by parties:
- Letter can be exchanged between the parties proposing amendment in the
arbitration clause to incorporate online procedure including venue and seat
- Letter to specifically incorporate acceptance by both the parties to
have their disputes resolved by resorting to fast track procedure through E-DRM as
contemplated in Section 29B (1) of the Act.
- While amending the arbitration clause, E-arbitration can be specifically
introduced while enunciating the procedure of appointment of arbitrator and
the manner in which proceedings can be conducted online;
- Manner of conducting online proceedings can be specifically outlined in
the arbitration clause. Alternatively, a detailed E-DRM can be agreed upon between
the parties which can form part and parcel of the arbitration agreement as an
- E-DRM / procedure can outline the filing procedure such as all filings to
be done electronically via emails or secured applications in a time bound
manner, schedule of filings can be decided by the arbitrator in consultation
with the parties during the first online hearing, no hearing required for any
- All hearings to be conducted online through a secured network platform;
- Awards can be passed by the arbitrator online, which for practical
purposes, for challenge and execution, can be considered as award passed in
terms of arbitration between the parties qua seat and venue.
For Scenario 2, following can be explored by parties:
- Arbitration clause can be amended to incorporate both the physical as
well as digital arbitration procedure making it convenient for the parties
to adapt either of the procedures;
- Arbitration clause to specifically incorporate acceptance by both the
parties to have their disputes resolved by resorting to fast track procedure
through E-DRM as contemplated in Section 29B (1) of the Act.
- E-DRM can be introduced while enunciating the benefits such as speedy
conclusion, saving of cost such as, venue booking, travel cost, time,
- Manner in which the proceedings to be conducted can be specifically
outlined in the arbitration clause and a detailed E-DRM can be explicitly agreed upon
between the parties, which can form part and parcel of the arbitration agreement
as an annexure;
- All filings can be done electronically in a time bound manner via email
or online secured applications, and the schedule of such filings can be
decided by the arbitrator in consultation with the parties during the first
- All hearings to be conducted online on a secured network platform;
- All orders including directions and award can be passed by the
arbitrator online, which for practical purposes, for stamping, challenge and
execution, can be considered as award passed in terms of arbitration
agreement between the parties qua seat and venue.
E-Arbitration - The Model
In our opinion, invocation, procedure, conclusion and enforcement are the key
ingredients to any valid arbitration. Parties need to ensure that e-rules and
procedure for conducting online Arbitration are unambiguous and explicitly
contained in the arbitration agreement. The other important aspect, which would
need deliberation and clarity is passing & enforcing an award passed online:
- Whether the award passed by an arbitrator / arbitral tribunal online is
a legally enforceable award?
- How can a party enforce an award passed online?
- Jurisdiction of courts in execution or challenge of award passed online?
Section 5 of the Information Technology Act, 2000 provides that the digital
signatures have the same effect as paper signature, which fulfils the criteria
of section 31(1) of the Arbitration and Conciliation Act, 1996.
The signed copy
of the arbitral award passed online can be provided to the parties by arbitral
tribunal electronically via email and the actual signed copies can be
simultaneously sent through post or the arbitrators can also put their digital
signatures and provide accuracy and integrity to the award. The original signed
copy received either received by post or it's a digitally signed awards, can be
filed before the courts, for the enforcement of the arbitral award.
There won't be any change in the procedure for enforcing an online award.
Pursuant to passing of valid award online, it can be enforced in accordance with
procedure outlined in the Arbitration Act read with the execution procedure
enshrined under Code of Civil Procedure, 1908 (CPC).
In Sundaram Finance Ltd. v. Abdul Samad and Anr
, the Hon'ble Supreme Court
has clarified that execution proceedings can be invoked by an award holder
before any court in India where assets of the judgement debtor are located.
Commercial courts established under the Commercial Courts, Commercial Division
and Commercial Appellate Division of High Courts Act 2015 (“Commercial Courts
”) would have jurisdiction in cases whether the subject matter of the
arbitration is of a specified value and pertains to monetary award. For other
cases, the jurisdiction of commercial division of a High Court would be
applicable as per CPC.
Online arbitration is not different from that of conventional arbitration model.
With changing times and technology, E-DRM is the future of arbitration, which is
inevitable. Sooner the companies adapt to this futuristic model of conducting
arbitration, better and advantageous it would be for such companies to provide
speedy disposal and resolutions to its customers both in terms of costs and
time. E-arbitral awards in our opinion would have an equivalent effect as that
of traditional arbitral awards and would be final and binding upon parties.
- Writ Petition (Civil) No.3/2020 In Re: Cognizance For Extension of
- (2018) 3 SCC 622
- Commercial Courts Act, s 2(1)(i), “Specified Value”, in relation to a
commercial dispute, shall mean the value of the subject-matter in respect of
a suit as determined in accordance with section 12 which shall not be less
than three lakh rupees or such higher value, as may be notified by the
Shakti Bhog Foods Ltd. Vs. Kola Shipping Ltd.” AIR 2009 SC 12
Trimex International FZE Ltd. Vs. Vedanta Aluminum Ltd.” (2010) 3 SCC
- Prince Pawaiya - GNP Legal,
- Onkar M. Gujar - GNP Legal
- M.B. Kale - GNP Legal &
- Shweta Sharma, Advocates - GNP Legal
This article is not meant to be legal advice and shall the reader have specific question in relation to an agreement, the reader is encouraged to reach out to GNP Legal at [email protected]
, [email protected]
GNP Legal is a full-service law firm with its offices in Mumbai and Delhi. With a team of enterprising lawyers, GNP Legal provides bespoke, creative, timely and practical legal solutions, keeping in mind the objectives and requirements of its clients. GNP Legal has been advising and representing various Indian and multi-national corporations on a host of legal issues.