Law > Civil Laws > Alternate Dispute Resolution > Arbitration
Everybody has their own opinion and views, hence there may be a conflict of opinions. In today’s society, such conflicts are inevitable and a quick, easy, and strong mechanism for resolution of such conflicts at minimum cost is need of time. Such a mechanism reduces the burden on the judiciary. Arbitration, Mediation, Conciliation, Negotiations, Lok Adalats are some methods that can be used in such situations. These methods are collectively known as the Alternate Dispute Resolution (ADR) System. Arbitration is a procedure in which parties submit present or future disputes, to one or more arbitrators (arbitral tribunal) who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court. The decision given by the arbitral tribunal is called an award. In this article, we shall study statutory arbitration in detail.
Different kinds of arbitrations are as follows:
- Domestic Arbitration: Domestic arbitration is that type of arbitration, which happens in India, wherein both parties must be Indians and the conflict has to be decided in accordance with the substantive law of India.
- International Arbitration: When arbitration happens within India or outside India containing elements which are foreign in origin in relation to the parties or the subject of the dispute, and the dispute is decided in accordance with substantive law in India or any other country, then it is called as International Arbitration.
- Institutional Arbitration: When an arbitral Institution conducts arbitration in accordance with the prescribed rules of such institution, it is called Institutional Arbitration.
- Ad-hoc Arbitration: If the parties agree among themselves and arrange for arbitration, it is called Ad-hoc Arbitration without having an institutional proceeding. It can either be domestic, international, or foreign arbitration.
- Statutory Arbitration: It is mandatory arbitration, which is imposed on parties by the operation of law. There are many central and State Acts which make arbitration mandatory.
- Fast Track Arbitration: Fast track arbitration is a method, which is time-dependent in the provision of the arbitration and conciliation act. Its procedure is established in a way that it has abandoned all the methods, which consume time.
Statutory Arbitration:
Generally, arbitration flows from an arbitration clause or arbitration agreement entered by two or more parties. Thus, arbitration is an act of parties. Parties decide themselves the arbitral tribunal, the procedure, the place, the language of procedure, etc. Thus, the process of arbitration is voluntary and solely depends on the existence of the arbitration clause or the arbitration agreement. But there are certain statutes, which provide statutory arbitration which is compulsory or mandatory under those statutes. The Electricity Supply Act, 1948, for example, provides for disposal by arbitration the disputes that may arise about its provisions.
“Statutory Arbitrations” are arbitrations conducted in accordance with the provisions of certain special Acts which provide for arbitration in respect of disputes arising on matters covered by those Acts.
Section 2(4) of the Arbitration and Conciliation Act, 1996, lays down that Part I of the Act except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder.
Government contracts generally provide for compulsory arbitration in respect of disputes arising thereunder and usually the arbitrator appointed to decide such disputes are senior government officials. A large number of public sector undertakings also follow a similar procedure. There is also the Government of India’s Scheme, evolved on the directions of the Supreme Court, with regard to the settlement of disputes between one Government Department and another and one Government Department and a public enterprise and between public enterprises themselves. This Scheme provides for the constitution of a standing committee of senior officers who ensure that no litigation involving such disputes is taken up in a court or tribunal without the matter having been having first examined by the said committee and the committee’s clearance on litigation is obtained. The Ministries concerned in specific cases are also represented in the said committee. The committee assesses the reasonableness of the rival stands before it decides. This procedure has helped in an amicable settlement of a large number of disputes which would have otherwise ended in litigation.
There is also permanent machinery of arbitrators constituted by the Government of India to settle all current and future commercial disputes between public sector undertakings inter se as well as between a public sector undertaking and a Government Department. The award of the arbitration in such a dispute is binding on the parties to the dispute. Any party aggrieved by the award may make a reference for setting aside or revision of the award to the secretary, Minister of Law, Justice and Company Affairs, Government of India, whose decision binds the parties finally and conclusively.
Some acts which provide for statutory arbitration or conciliation are as follows:
- The Industrial Disputes Act, 1947 (Ss. 4, 5, and 12)
- The Bombay Industrial Relations Act, 1946 (Ss. 6 and 7(1))
- The Hindu Marriage Act, 1955 (S. 23(2))
- The Family Courts Act, 1984 (S. 9)
- The Code of Civil Procedure, 1908 (O. 23 r. 3, O. 27 r. 5b, Ss. 80, 89(1) and 107(2))
- The Land acquisition Act, 1894 (Ss. 11, 12, 18 and 26)
- The Presidency Towns Insolvency Act, 1907 (S. 68(h))
- The Indian Trusts Act, 1882 (S. 48)
- The Indian Electricity Act, 1910 (S. 52)
- The Indian Railways Act, 1890 (Ss. 46 and 48)
Distinction Between Ordinary Arbitration and Statutory Arbitration:
| Ordinary Arbitration | Statutory Arbitration |
| Ordinary arbitration flows from an arbitration clause or arbitration agreement entered by two or more parties. | “Statutory Arbitrations” are arbitrations conducted in accordance with the provisions of certain special Acts which provide for arbitration in respect of disputes arising on matters covered by those Acts. |
| For this type of arbitration, an arbitration clause or an arbitration agreement must exist. | The statutory provisions initiate the course of the arbitration |
| It is voluntary | It is mandatory |
| Proceedings in ordinary arbitration are due to the meeting of the minds of the parties in dispute. | Proceedings in statutory arbitration are a creation of parliament |
| It is linked with International Laws and Conventions | It is closely linked to the domestic provisions of each individual legal system. |
Conclusion:
Strictly speaking, statutory arbitrations are not arbitrations, but they arise out of some provisions of the statutes. These provisions direct the parties to refer to the matter to arbitration. Thus this direction can be called as a statutory reference and the proceeding itself is a statutory arbitration. Provisions of the Arbitration and Conciliation Act, 1996 are applicable to this arbitration.
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