Arbitration Act
Table of Contents
Q.1: What are the aims and objects of arbitration act. Discuss? 1
Q.2: When the authority of appointed arbitrator or umpire can be revoked by the leave of the court? 2
Q.3: Discuss the power of the court to appoint arbitrator or the umpire? 4
Q.4: Describe the power of Court to remove an arbitrator? 5
Q.5: Explain the power of the arbitrator or the umpire? 6
Q.6: Where and on what grounds can an award aside? 7
Q.7: Discuss Arbitration in a pending suit? 9
Q.8: Define Arbitration agreement? Discuss competency of suit during its existing? 11
INTRODUCTION:
The law of arbitration is not a new law in Pakistan. It was applied 10 British India through various regulations promulgated by the Presidency Governments of Bombay, Bengal and Madras. Then in 1859, it emerged in the form of an enactment known as Act VIII of 1859. In 1899 came the Arbitration Act of 1899, which was based on English Arbitration Act of 1899, which was applied to the Presidency towns and to such other local areas to which the Act was made applicable by the appropriate provincial Govt. while the Arbitration in other parts of the country was governed by schedule II of the code of civil Procedure 1908 10 remove this state of inconsistency, the present Act of 1940 has been passed and it came to force on 1st July, 1940 with a object, to promote settlement of dispute amicably through persons, 10 whom both parties have trust.
MEANING OF ARBITRATION:
The word Arbitration has not been defined by the Act, so it may be defined as under. "The reference of a dispute to an impartial (third) Person chosen by the parties to the dispute who agree in advance to abide by the arbitrators award issued after a hearing at which both parties have an opportunity to be heard."
NATURE OF ARBITRATION ACT 1940:
Arbitration Act, 1940 is a consolidating Act and is a complete code relating to the matters of Arbitration.
The provisions of this Act follows the two main Acts though with some changes.
Provisions relating to arbitration without intervention of Court follow the English Act.
The remaining provisions follows the provisions of second schedule to the code of Civil Procedure, 1908.
SCOPE OF ARBITRATION ACT 1940:
This Act lays down the rules to be followed by the parties, arbitrators and Courts but it is not exhaustive as some of its provisions may be excluded by parties by an express agreement between them. This act is applicable only to awards made as a result of a reference made under this Act and not to awards filed under any other Act.
NO RETROSPECTIVE EFFECT:
By virtue of section 48 of the Arbitration Act,
1940 This act has not retrospective effect and it is inapplicable to any reference pending at the commencement of this Act.
CONDITION PRECEDENT FOR ARBITRATION:
The existence of arbitrable dispute is an essential condition for the purpose of arbitration, if there is no dispute there can be no right to demand arbitration.
OBJECT AND PURPOSES OF ARBITRATION ACT 1940:
Following are the objects and purposes of Arbitration Act, 1940.
TO GIVE EXPEDITIOUS RELIEF:
One of the object of the Act is to give expeditious relief to parties unhampered by rules of procedure laid down in C.P.C 1908 and Evidence Act. [PLD 1958
Karachi 158]
NOT TO PROLONG PROCEEDINGS:
The arbitration has its purpose to not to prolong proceedings and to provide speedier remedy to the parties.
TO CONSOLIDATE THE LAW OF ARBITRATION:
One of the objects of the Act is to consolidate and amend the law relating to arbitration so it may be taken as exhaustive Act of the law of Arbitration.
ENFORCE THE ARBITRATION AGREEMENT:
One of the objects of the Act is to enforce the Arbitration agreement by which parties have decided and agreed to resolve their disputes through arbitrators.
TO GIVE UNIFORMITY TO THE LAW: The object of the Act is to give uniformity in the application of the law over the whole of the country.
TO REMOVE POINTS OF DIFFERENCES IN EXISTING LAW:
The Arbitration Act, 1940 has also its purpose to remove the points of differences to the existing law under CPC 1908 judgment entered in accordance with the award and a decree follows but under an Act of 1899 an award was executable as a decree but it was not a decree for all purposes.
TO GIVE EFFECT THE CHOICE OF PARTIES:
The Arbitration Act, 1940 gives effect to the choice of the parties as regard the forum to which their disputes shall be taken.
TO CURTAIL LITIGATION:
The purpose of Arbitration Act 1940 is to curtail litigation in courts and promote settlement of disputes amicably through persons in whom both parties have trust.
CONCLUSION:
To conclude, I can say that the law favours a speedy and expeditious relief to the parties and also favours to avoid technicalities in the disposal of justice Arbitration Act. 1940 fulfills these aims of law and provide the procedure to be followed by the parties and courts in deciding the dispute arising out of transaction in respect of which arbitration clause has been put in such an agreement Arbitration in substance ousts jurisdiction of Court except for the purpose of controlling arbitrators, preventing misconduct and for regulating procedure after award.
Q.2: When the authority of appointed arbitrator or umpire can be revoked by the leave of the court?
INTRODUCTION:
It is a general principle of Law that the parties should be bound by that what they have agreed to do so once a proper arbitrator or umpire is appointed by the parties his authority cannot be revoked except in cases mentioned in Section 5 of the Arbitration Act 1940. It applies to those cases in which the authority of the appointed arbitrator or umpire subsists and has to be revoked.
MEANING OF ARBITRATOR AND UMPIRE:
ARBITRATOR:
"A private disinterested person chosen by the parties to a disputed question for the purpose of hearing their contention and giving judgment between them, to whose decision (award) the litigants submit themselves either voluntarily or in some cases compulsorily"
UMPIRE:
When matters in dispute are submitted to two or more arbitrators and they do not agree in their decision it is usual for another person to be called in as umpire to whose sole judgment it is then referred An umpire strictly speaking makes his award independly of that of the arbitrators.
MEANING OF REVOCATION:
"Revocation means withdrawal, recall, annulment or repudiation."
RELEVANT PROVISIONS:
Section 5 of Arbitration Act, 1940
REVOCATION OF THE AUTHORITY OF ARBITRATOR OR UMPIRE:
GENERAL RULE:
The authority of appointed or named arbitrator cannot be revoked
EXCEPTIONS TO GENERAL RULE:
Following are the cases where the authority of appointed
arbitrator or umpire can be revoked,
Where there is provision of revocation in the arbitration agreement.
With the leave of the Court.
WHERE PROVISION OF REVOCATION IN ARBITRATION AGREEMENT:
Arbitration agreement in nature is just like any other ,contract and parties can make and set provisions in it according to their wishes, so if an arbitration agreement provides for the revocation of authority of the arbitrator, than any party to the arbitration agreement can revoke his authority,
WITH THE LEAVE OF THE COURT:
If there is no provision in the arbitration agreement for the revocation of the authority of the appointed arbitrator or umpire then the party can only apply to the Court for grant of leave to revoke the authority,
PROCEDURE FOR GRANT OF LEAVE:
For obtaining leave of the Court, following procedure has to be followed:
Application to the Court: For obtaining leave, application, to Court is necessary and it may be made by any party to the arbitration agreement
Application appointed arbitrator or umpire: An application must be moved against an appointed or named arbitrator for revoking his authority.
Time for making application: An application must be made before the award is delivered.
iv) Notice to Arbitrator: Notice of filing revocation application should be given to the arbitrator.
CIRCUMSTANCES WHERE AUTHORITY OF ARBITRATOR OR UMPIRE MAY BE REVOKE:
Following are the cases or the circumstances where the authority of the appointed arbitrator may be revoked.
Where the arbitrator is indebted to one of the parties.
Where there is unreasonable delay in the conduct of proceedings and such delay is not caused by the party seeking to revoke.
Where arbitrator is partial or bias
Compromise between the parties regarding the matter in dispute.
Where arbitrator is Interested and parties are unaware of it.
Where a arbitrator has no jurisdiction to decide a particular dispute.
Where the arbitrator is related to one of the parties which are unknown to the other.
Where the arbitrator has misconduct himself
Where the agreement is obtained by fraud.
Where the arbitrator or umpire has been acting as a rnukhtiar of one of the parties without remuneration.
BURDEN OF PROOF:
Burden of proof lies on the applicant seeking revocation to show some good cause for such revocation.
DISCRETION OF COURT:
The power of revocation vested in Court is discretional and the Court has to exercise such discretion in a cautious manner.
EFFECT OF LEAVE:
The authority of the arbitrator or umpire shall not be revoked automatically on the grant of leave and the party has to revoke it himself.
REQUISITES THE ATTIRACT SEC 5:
To attract section 5, following conditions has to be fulfilled
ARBITRATOR MUST BE APPOINTED OR NAMED:
Section applies only when as arbitrator or umpire has been appointed or named Where he has not been named or appointed then there is only an arbitration agreement and sec 5 will not attract.
PROCEEDINGS NOT COMMENCED IN THE COURT:
An application is made under sec 5 only when the proceedings have not been commenced in the Court otherwise sec 34 of the Act will be attracted.
SCOPE OF SECTION 5:
Section 5 applies to arbitration without the intervention of the Court. It makes provision for the revocation of a reference or authority of an appointed arbitrator or umpire and not the revocation of the arbitration agreement which is irrevocable Section 5.
CONCLUSION:
By the above discussion, I can say, that once the arbitrator or umpire is appointed, his authority cannot be revoked except where provided in the arbitration agreement or with the leave of the Court and where leave of the Court is sought by the party, the Court has to
grant it in only exceptional cases.
1) INTRODUCTION:
Arbitration is a domestic forum which parties chooses with their our choice, so naturally they have the powers to appoint arbitrators or umpire of their own choice, but if they fail to do that or where the appointed arbitrator or umpire fails to act or is removed or his authority is revoked by the Court then the Court has the power to appoint original or subsequent appointments of arbitrator or umpire as mentioned in section 8, 12 and 20(4) of the Arbitration Act, 1940.
3) RELEVANT PROVISIONS: Section 8, 12 and 20(4) of Arbitration Act, 1940.
4. POWER OF COURT TO APPOINT ARBITRA TORS:
The power of Court to appoint arbitrators may be discussed under the fallowing head:
POWER TO APPOINT U/SEC 8:
Provisions 9f Secti9n 8 applies to initial as well as subsequent appointment of arbitrators and applies to such cases where the arbitrator are arbitrators are to be nominated by the consent of all parties and not to those where each party is to appoint his awn arbitrator, [2001 CLC 2&9]
CASES OF APPIOINTMENT:
Initial appointment where all parties to agreement not agree u/see 8(1)(a):
Where according to arbitration agreement the arbitrator or arbitrators are to be appointed by all the parties jointly but they do not agree among themselves about their names after the differences have arisen then the Court may appoint them.
Subsequent appointment where arbitrator fails to Act u/see.8(1)(b): Where a valid nomination has been made and an arbitrator refuse to act and the parties fails to agree fulfill up the vacancy of the office of .the arbitrator than the Court may an the application of party appoint an arbitrator or to fill up the vacancy.
PROCEDURE FOR APPOINTMENT BY COURT:
Service of notice by one party to other party: Any party may serve the other parties with a written notice u/sec 42 to concur in the initial appointment or in supplying the vacancy.
Failure of other party to appoint within 15 days: The party to whom the notice is given may appoint an arbitrator or within 15 days from the date of service of notice and it fails to do so.
Application before the Court: The party who has served the opposite party with a notice must apply to the Court for an appointment of an arbitrator.
Hear the other side: On receiving an application, the Court will give an opportunity to the other side to be heard and for this purpose the Court will serve a notice to the other party.
Appointment: If all the requirements of section 8(2) are fulfilled the Court is empowered to make appointment of its choice under any of circumstances mentioned in Section 8(1)(a) and 8(1)(b).
POWER TO APPOINTMENT U/SEC 12:
The Court may make subsequent appointment of arbitrators where they are removed under Section 11 of the Act or their authority is revoked under Section 5 of the Act.
A) CASES OF APPOINTMENT:
Appointment where Court removes one or more but not all arbitrators u/s12(1): Where the Court removes one or more arbitrators u/sec II (out of two or more) but not an the arbitrators the Court may appoint an arbitrator on the application of any party to the arbitration agreement.
Appointment where Court removes sole or an arbitrators a/see 12(2): Where Court removes the sole arbitrator or all arbitrators if there are more arbitrators than one then the Court may on the application of any party to arbitration agreement appoint a person to act as sole arbitrator in the
place of the person or persons so displaced.
Appointment where authority of arbitrator is revoked u/sec, 12(2): Where the authority of the arbitrator or arbitrators is revoked by leave of the Court under section 5 the Court may on the application of any party to arbitration agreement appoint a sole arbitrator in the place of person or persons to displace.
Ill) POWER TO APPOINTMENT U/SEC 20(4):
The Court may make an appointment under section 20(4) if the following conditions are fulfilled:
There must be a valid arbitration agreement.
There is provision in the arbitration agreement for appointment of one or more arbitrators.
The arbitrator or arbitrators is or are to be appointed with the commons consent of all the parties,
The parties fall to agree upon the arbitrator or the arbitrator appointed fails to act.
POWER OF COURT TO APPOINT UMPIRE:
The power of Court to appoint umpire may be discussed under the following heads:
APPOINTMENT U/SEC 8: The necessity for an appointment of an umpire arises only when the differences have arisen between the parties.
CASES OF APPOINTMENT:
Initial appointment of umpire u/see 8(1)(c): Where the parties or the arbitrators are required to appoint an umpire and do not appoint him then the Court may appoint an umpire on the application of the party.
Subsequent appointment of umpire where he fails to Act u/see 8(1)(b):
Where a valid nomination has been made and at umpire refuses to act and the parties or the arbitrators fails to agree fill up the vacancy of the office of the umpire then the Court may on the application of party appoint an umpire to fill up the vacancy.
PROCEDURE FOR APPOINTMENT:
The procedure for appointment of the umpire is the same as that of the arbitrator u/sec 8.
APPOINTMENT U/SEC 12:
The Court may make subsequent appointment of umpire where he is removed under section 11 of the Act or his authority is revoked under section 5 of the Act.
A) CASES OF APPOINTMENT:
Appointment where Court removes an umpire not entered on reference u/sec 12(1): Where the Court removes an umpire who has not entered on reference then the Court rimy on the application of any party to the arbitration agreement appoint a person to fill the vacancy.
Appointment where Court removes an umpire who has entered on reference or revoke his authority u/sec 12(2): Where the Court removes an umpire who has entered on reference or revoke his authority then the Court may ion the application of any party to the arbitration agreement appoint a person to act as sole arbitrator In the place of displaced person or persons.
CONCLUSION:
To conclude, I can say that generally the matter of appointment of arbitrators or umpire is left to the parties but under certain circumstances the Court may make an original or subsequent appointment of arbitrators or umpire though it has to do only when the party to an arbitration agreement applies to it.
INTRODUCTION:
Law of Arbitration aims at an economic and early decision of disputes it is the duty of the arbitrator or the umpire to finish the arbitration proceedings as quickly as possible section II of the Arbitration Act gives powers to Court to remove dilatory arbitrators or the umpire as the case may be.
MEANING OF ARBITRATOR AND UMPIRE:
ARBITRATOR:
"A private disinterested person chosen by the parties to a disputed question for the purpose of hearing their contention and giving judgment between them, to whose decision (award) the litigants submit themselves either voluntarily or in some cases compulsorily"
UMPIRE: When matters in dispute are submitted to two or more arbitrators and they do not agree in their decision it is usual for another person to be called in as umpire to whose sole judgment it is then referred an umpire strictly speaking makes his award independly of that of the arbitrators.
RELEVANT PROVISIONS:
Section 11 of the Arbitration Act, 1940
REMOVAL OF ARBITRATOR OR THE UMPIRE U/SEC 11:
Under Sec 11 of the Arbitration Act, an authority has been given to the Court to remove an arbitrator or the umpire,
GROUNDS FOR REMOVAL:
The Court may remove the arbitrator or the umpire on the following grounds:
FAILURE TO USE REASONABLE DISPATCH:
The words reasonable dispatch implies that the arbitrator of the umpire should proceed with the arbitration without unnecessary delay. If the arbitrator or the umpire fails to use reasonable dispatch in the following cases, he may be removed by the Court.
Entering upon reference: These words mean taking up and starting arbitration proceedings. An arbitrator enters on reference when he applies his mind and does something in furtherance and execution of the work of arbitration.
Proceeding with the reference: It means the actual conduct of the proceedings and sub-section
(4) of sec 11 says that it include in a case where reference to the umpire becomes necessary giving notice of that fact to the parties and to the umpire.
Making of Award: It is the duty of the arbitrator or the umpire to make the award within 4 and 2 months respectively otherwise they are liable to removed.
ARBITRATOR MISCONDUCTED HIMSELF:
Misconduct means legal misconduct. Misconduct of arbitrator himself has reference to the conduct of the arbitrator which has a personal element in it. It may involve moral turpitude. He is liable to be removed when he misconduct himself.
ARBITRATOR MISCONDUCTED THE PROCEEDINGS:
Misconduct of proceedings means adoption of such procedure in the conduct of an arbitration which is either not warranted by the facts of the case or opposed to the principles of justice. Court may remove an arbitrator or the umpire if he misconduct the proceedings.
NO REMUNERATION WHERE ARBITRATOR OR UMPIRE IS REMOVED:
Where an arbitrator or umpire is removed under sec 11 he shall not be entitled to receive any remuneration in respect of his services.
SCOPE OF SECTION 11:
Section 11 mentions the grounds on which Court may remove an arbitrator or the umpire. In case of ground of failure to use reasonable dispatch by the arbitrator the Court may exercise its power only on the application of a party to the reference and in other case the Court may exercise its power on application of party to the reference or suo motu.
DISCRETIONARY POWER:
The power of the Court under sec 11 is discretionary but the Court has exercised such discretion judicially.
APPEAL:
An order of the Court removing or refuses to remove the arbitrator is unappealable but a revision is competent under section 115 of C.P.C.
CONCLUSION:
By the above discussion, I can say that if any person has been named as the arbitrator or umpire but does any act mentioned in sec 11, then the Court may remove him for the purpose of valuable substitution and the Court is also empowered to set aside an award on the grounds of arbitrator misconduct himself or' the proceedings.
INTRODUCTION:
It is well settled that proceedings before' an arbitrator are judicial proceedings. The powers has been given to the arbitrators by the legislature so that same sanctity may envelop the arbitration proceedings. The section 13 of the Arbitration Act, 1940 sets out the powers of the arbitrators when there is no different intention expressed in the arbitration agreement.
MEANING OF ARBITRATOR:
"A private disinterested person chosen by the parties to a disputed question for the purpose of hearing their contention and giving judgment between them, to whose decision (award) the litigants submit themselves either voluntarily or in some cases compulsorily"
RELEVANT PROVISIONS:
Section 13 of Arbitration Act, 1940
POWERS OF THE ARBITRATOR OR UMPIRE U/SEC 13:
Section 13 sets out the powers of the arbitrator subject to the agreement of the parties. The parties may by agreement confer powers on the arbitrator or curtail the powers conferred on them by section 13 of the Arbitration Act. Following powers have been give to the arbitrator or an umpire unless different intention is expressed in the agreement.
STATEMENT ON OATH:
An arbitrator or an umpire has power to administer oath either to the parties or the witnesses before taking down their statements
POWE TO SEEK OPINION OF COURT:
The arbitrator or umpire may refer any question of law for the opinion of Court and the arbitrator will proceed with the arbitration after he has received the opinion of the Court.
POWER TO STATEAWARD FOR THE OPINION OF THE COURT:
The arbitrator are the umpire may state the award itself in the form of a special case for the opinion of the Court an any question of law and then the Court will determine the rights of the parties effectively.
POWER TO MAKE CONDITIONAL AWARD:
The general rule that the award should be certain. The arbitrator or the umpire may make a conditional ward if it is certain.
POWER TO MAKE AWARD IN AN ALTERNATIVE:
An arbitrator or the umpire may make an award in alternative form. A award is an alternative form when it directs one of two things.
POWER TO CORRECT AWARD:
An arbitrator or the umpire may correct in an award any clerical mistake or error arising from any accidental slip or omission but he cannot add to or vary it is any way.
POWER TO ADMINISTER INTERROGATORIES:
The arbitrator or the umpire may administer to any party to the arbitration such interrogatories as may be necessary in the opinion of the arbitrators or umpire.
LIMITATIONS ON POWERS: Following are the limitations on the powers of the arbitrators or umpire.
LIMITATION SET BY ARBITRATION AGREEMENT:
The powers of the arbitrator or the umpire u/sec 13 are subject to the restrictions imposed by the parties by the arbitration agreement. So the parties may limit the powers by arbitration agreement.
NOT QUESTIONED THE VALIDITY OF ARBITRATION AGREEMENT:
Where the validity of the arbitration agreement is questioned the arbitrators have no power to decide that point. It is the function of the Court to decide. [2002 PLR (Lahore) 658]
CONCLUSION:
To conclude, I can say, that the arbitration is a matter between the parties so the parties have the authority to make provisions for themselves and mentions the powers of the arbitrators but if they fail to do so the arbitration act, 1940 provides the powers of the arbitrators or the umpire, of course this is subject to the arbitration agreement. Sec 13 mentions the powers and this is applicable in statutory arbitrations as well.
1) INTRODUCTION:
The finality of award is a general principle of law and the reason behind this is that when the parties choose their own arbitrator to be the judges in the dispute between them they cannot when the award is good on the face of it object to his decision upon law or on facts. This rule is however subject to certain exceptions and the Court may modify remit or set aside an award in certain circumstances.
¬2) MEANING OF AWARD:
"The decision or determination rendered by arbitrators or commissioner or other private or extra judicial deciders upon a controversy submitted to them also the writing or documents embodying such decision,
RELEVANT PROVISIONS:
Section 15, 16 and 30 of Arbitration Act, 1940 Rule 7 of schedule 1 Arbitration Act, 1940
FINALITY OF AWARD OF ARBITRATOR:
GENERAL RULE U/RULE SCHEDULE 1:
The decision or award given by the arbitrator is final.
ll) EXCEPTIONS TO GENERAL RULE:
Following are the exceptions to the above said general rule:
Modification of an award
Remittance of an award. iii) Setting aside of an award
MODIFICATION OF AN AWARD U/SEC 1-5:
When the award is filed in the Court to make it a rule of the Court then the Court has to give notice of the same to all the parties to an award and can modify correct or alter an award if objected by any party.
MODE OF EXERCISING POWER:
u/sec .15 of Arbitration Act, Court may exercise powers. i) Suo motu ii) On application by any party to the award
CIRCUMSTANCES WHERE AWARD CAN BE MODED:
Following are the circumstances where the award can be modified.
WHEN MATIERS CONTAINED IN AWARD NOT REFERRED:
This clause is. based on the principle of severability of invalid part from the valid part of the award.
WHEN AWARD IS IMPERFECT IN FORM:
Formal defects in the award can be corrected or modified where it is imperfect in form or contains any obvious error.
AWARD CONTAINS CLERICAL MISTAKE OR ERROR:
This clause is based on Paragraph 12(c) of schedule II of C.P.C and Court may correct or modify a clerical and accidental errors and omissions.
SCOPE OF SECTION 15:
Section 15 is an exhaustive section arid sets out cases where the Court may correct or modify award. The Court cannot go beyond this section and if a Court goes beyond that and makes substantial modification.
EFFECT OF MODIFICATION:
When the award is modified under Sec. 15, the decree should follow the modified award and .not the original award.
LIMITATION PERIOD:
By virtue of Article 158 of Limitation Act, 1908, an application for modification or correction of an award must be made within 30 days of filing notice to the award.
REMITTANCE OF AN AWARD: When the award is filed in the Court to make it a rule of the Court, then the Court has to give notice of the same to all the parties to an award and may remit the award to arbitrator for reconsideration if objected by any party to the award within 30 days or suo motu.
MODES OF EXERCISING POWER:
The Court may remit the award reconsideration.
i) Suo motu or ii) On application by any party to the award.
ll) PROCEDURE IN REMITTING A WARD:
Where an award is remitted by the Court it shall adopt the following procedure:
Fixing of Time: The Court shall fix time within which the arbitrator or umpire shall submit his decision to the Court.
Extension of Time:
The Court may extend the time so fixed for submission of decision and the Court may do this at any time before or after the expiry of the time originally fixed.
Failure to submit award within time: If the arbitrator or the umpire fail to submit the award
within time allowed by the Court then it become void.
DISCRETION OF COURT:
The remittance of an award is a matter which is
within the discretion of the Court and the Court may refuse to remit the award if substantial justice has been done or the error has not resulted in failure of justice.
SCOPE:
The powers of the Court to remit an award is limited only to circumstances mentioned in section 16 and 26-A an award can be remitted only if it is alive and in existence and there is no power in the Court to remit an award if it is nullity.
LIMITATION:
By virtue of Article 158 of Limitation Act, 1908, the application has to be made within 30 days from the date of service of the notice of filing of the award.
SETTING ASIDE AN AWARD U/SEC 30:
When the award is filed in the Court to make it a rule of the Court then the Court has to give notice of the same to all the parties to an award and may set aside an award if objected by any party within 30 days or suo motu.
MODE OF EXERCISING POWER:
The Court may set aside an award.
Suo motu; or ii) On application by party'to an award.
ll) GROUNDS FOR SETTING ASIDE AN AWARD:
Following are the grounds on which award may beset aside by the Court:
ARBITRATOR MISCONDUCTED HIMSELF:
Misconduct means legal misconduct which is used in judicial sense of the word and not from a moral point of view and it means some honest though erroneous breach of duty causing miscarriage of justice.
ARBITRATOR MISCONDUCT THE PROCEEDINGS:
Misconduct of proceedings means adoption of such procedure in the conduct of an arbitration which is either not warranted by the facts of the case or opposed to the principles of justice.
WHERE COURT SUPERSEDES AN ARBITRATION:
The expression supersedes means to set aside or annual section 19 provides that arbitration may be superseded by the Court if an award becomes void und r Sec 16(3) by reason of failure submit award within time.
WHERE ARBITRATION PROCEEDINGS BECOME INVALID:
If an award is made after the arbitration proceedings have become invalid under section 35 which has to take effect on the expiry of the time within which an application to stay legal proceedings may be made or on the refusal of such an application under section 34,
AWARD IMPROPERLY PROCURED:
Obtaining an award in one's favour by unfair means or by suppressing facts come within the meaning of improperly procured and it is liable to the set aside.
III) APPEAL:
An appeal lies under section 39(i)(vi) against an order of setting aside or refusing to set aside an award
CONCLUSION:
To sum up, I can say, that finality of award is a general principle of law but this general rule is subject to some exception, when the award is made by the arbitrator or umpire, it has no legal effect until it is filed in the Court for making it a rule of the Court and upon such filing the Court is to serve notice to the parties concerned in, the award and receive objections if any within the period of 39 days from the date of service of the notice of filing award and upon such objections may modifying.
INTRODUCTION:
The Law of Arbitration Act, 1940 provides the ways and procedure in which the parties to the arbitration agreement, may settle their disputes amicably either with or without the intervention of the Court. It is upon the parties to decide whether they want arbitration with or without the intervention of the Court. Arbitration with the intervention of the Court may be in a case where there is no suit pending and the effect of it that the entire proceedings are arranged
through the Court.
MEANING OF ARBITRATION:
"The reference of a dispute to an impartial (third) person chosen by the parties to the dispute who agree in advance, to abide by the arbitrator's award issued after a hearing at which both parties have an opportunity to be heard."
RELEVANT PROVISIONS:
Section 20 and 21, 22, 23, 24, 25 of Arbitration Act, 1940 Where there is suit pending
MODES OF ARBITRATION: Following are the different modes of arbitration as contemplated in Arbitration Act, 1940.
ARBITRATION WITHOUT INTERVENTION OF COURT
ARPITRATION WITH INTERVENTION OF COURT
ARBITRATION WITH IN TERVENTION OF COURT:
This may be discussed under the following two heads:
WHERE NO SUIT PENDING U/SEC 20
WHERE SUIT IS PENDING U/SEC 21
ARBITRATION WITH INTERVENTION OF COURT WHERE THERE IS NO SUIT PENDING U/SEC 20: Whenever there is dispute arises between the parties to an arbitration agreement before' the institution of any suit to which such agreement applies then the any or all of the parties may:
refer the dispute the arbitration without intervention of Court; or
may apply to Court that the agreement be filled in Court
I) APPLICATION FOR FILING ARBITRATION AGREEMENT:
II) When any or all the parties to an arbitration agreement wants arbitration with the intervention of the Court then it has to apply to the Court for filing of an arbitration agreement.
Il) PERSON WHO MAY APPLY:
The application u/sec 20 may be made either by
One or more parties to an arbitration agreement or
All of the parties to an arbitration agreement
AUTHORITY TO HEAR APPLICATION:
The application u/sec 20 must be made to the Court having jurisdiction in the matter to which the agreement relates.
FORM OF APPLICATION:
The application filed u/sec 20 must be in written form.
LIMITATION FOR FILING AN APPLICATION:
U/article 181 of limitation Act,1980 an application u/sec 20 has to be filed within 3 years computed from the time at which differences has arisen.
PROCEEDINGS ON ARBITRATION:
After making the reference to the arbitrator the arbitration shall proceed in accordance with and shall be governed by the other provisions of this Act so far as they can be made applicable.
APPEAL:
An order filing or refusing to file an agreement under section 20 is an appeal able order under section 39(1)(iv) of the Act.
SCOPE of SEC 20:
Section 20 of the Act is attracted when arbitration agreement was already entered into before filing of suit with respect to the subject matter of agreement relating to which differences had arisen between the parties to which the agreement was applicable. [PLD 2002 S. C 310]
ARBITRATION WITH INTERVENTION OF COURT WHERE THERE IS A SUIT PENDING:
When any matter or controversy lies before a Court for adjudication and no final judgment is pronounced such matter or suit is said to be pending.
APPLICATION FOR AN ORDER OF REFERENCE:
Where in any suit all the parties interested agree that any matter in difference between them in the suit shall be referred to arbitration they may apply for the Court for an order of reference.
WHO MAY APPLY:
All the parties Interested in the suit must apply under this section
FORM OF APPLICATION:
The application u/sec 21 must be in written form.
COURT WHICH MAY ENTERTAIN AN APPLICATION:
The application must be made to the Court in which the suit is pending.
TIME FOR MAKING AN APPLICATION:
An application under this section can be filed at any
time before the judgment is pronounced. It may be made even after a preliminary decree is passed.
Vl) APPOINTMENT OF ARBITRATOR U/SEC 22:
The arbitrator shall be appointed in such manner as may be agreed upon between the parties. If the parties do not agree upon the nomination of arbitrator or the arbitrator appointed refuses to act.
VII) ORDER OF REFERENCE U/SEC 23:
When application is made u/sec 21 after fulfilling all the requirements mentioned in it the Court shall make an order of reference to arbitrator appointed u/sec 22, to deal with the pending suit and that can be made at any before the passing of final decree.
CONCLUSION:
To conclude. I can say that when parties to art arbitration agreement wants then dispute settle through the intervention of the Court, they may apply u/sec 20 and the proceedings will be referred as Civil suit while if there is already a pending suit between the parties and they want to settle the dispute involved in the suit through the medium of arbitration they may enter into an arbitration agreement and apply to the Court for the order of reference to the arbitrator and it must be applied by all the parties Interested m the suit unless It is of such a nature that the Interest ,of the parties applying can be separated from the interest of the rest of the parties of the suit.
INTRODUCTION:
The law permits the parties to make a valid agreement to have the present or future disputes settled out of Court by private arbitration. But however mere existence of a clause providing for arbitration would not bar institution of a suit or other legal proceedings.
RELEVANT PROVISIONS:
Section 34 of Arbitration Act 1940.
ARBITRATION AGREEMENT:
DEFINITION U/SEC 2(a):
Arbitration agreement means a written agreement
to submit present or future differences to arbitration Whether an arbitrator is named there in or not.
ESSENTIALS OF ARBITRATION AGREEMENT:
Following are the essentials of an arbitration agreement:
Agreement: There must be an agreement that is to say the parties must be of common understanding. The consideration in an arbitration agreement is the willingness of either party to abide by the decision or award of the arbitrator.
Written agreement: The agreement must be in written form. Written agreement means as agreement in which the terms on both sides are reduced into writing but it is not necessary that the agreement must be signed.
Certainty:
The arbitration agreement must be certain. If it is not certain it is void under section 29 of the contract Act
Agreement relate to differences: The agreement must relate to submission of present or future differences to arbitration that means differences should not have arisen when the arbitration agreement is made.
Name of Arbitrator is not necessary: The name of the arbitrator or the word arbitration is not necessary in thee arbitration agreement
FORM:
There is no specific form required by the Arbitration Act. It may be in any document or series of documents.
CONTENTS:
Arbitration agreement may provides to contents and terms which the party wishes but in the absence of such the terms given in First schedule will be implied,
STAMP DUTY ON AN ARBITRATION AGREEMENT:
An arbitration agreement required to be stamped under section 3 read with Article 5(c) of the stamp Act.
REGISTRATION OF ARBITRATION AGREEMENT:
An agreement to refer a dispute to arbitration is not register able but if it relates to immoveable property either creates, nor declares, assigns, limits or extinguishes either in present or in future.
COMPETENCY OF SUIT DURING EXISTENCE OF ARBITRATION AGREEMENT:
The suit may be filed by a party to an Arbitration agreement even though there is a valid arbitration agreement existed but by virtue of Section 34 of the Arbitration Act, 1940 that suit or legal proceedings may be stayed.
DISCREATION OF THE COURT:
Grant of stay by the Court is not obligatory rather it is the discretionary power of the Court.
EFFECTS OF STAY:
By granting stay the Court does not lose its powers and duties with respect to the subject matter of the suit. It is bound to exercise control.
EFFECT WHERE STAY NOT GRANTED:
Where the defendant files a written statement or enters into his defense or fails to apply under section 34 or the suit refuses to grant stay in its discretion then the Court has to go on with the suit and decide the dispute itself and settled the rights of the parties.
SCOPE OF SEC 34:
Section 34 applies to those cases where the proceedings have been instituted in respect of the matter agreed to be referred for arbitration It does not apply- to cases where existence of arbitration agreement or validity thereof has been challenged or when parties to the suit and parties to the arbitration agreement are not the same.
APPEAL:
According to section 39(i)(u), an order of the Court staying or refusing to stay the proceedings is an appeal able order.
CONCLUSION:
To conclude I can say that where a party to an arbitration agreement starts a legal proceedings with respect to the subject matter of such agreement, the other party has a right to get such proceedings stayed so as to enable arbitration to proceed in terms of the agreement but if the other party does not avail this remedy the Court will proceed with the suit and its decision will be binding on the parties.
Short Notes
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Arbitration does mean the determination of disputes by the decision of one or more persons who are called arbitrators, e.g., in commercial matters. An umpire decides differences between the arbitrators.
No appeal lies to Court against the award of arbitrator but application can be made to District Judge.
An agreement to refer a dispute to arbitrators is called an arbitration agreement, and if legal proceedings are instituted in contravention of the submission the defendant may, but only before delivering pleadings, or taking any other step in the proceedings, apply to the Court to stay them. The decision of arbitrator is called an award, which can be appealed against to the High Court on the ground of mistake of law. A legal process can enforce a valid award. The Court may remove an arbitrator for misconduct or set aside his award.
Arbitration agreement: It means a written agreement to submit, present or future differences to arbitration, whether an arbitrator is named therein or not.
Reference: It means a reference to arbitration.
Appeal against award: The decision made by the arbitrator is called award. Appeal cannot be instituted in Court. An application can be made against the award by both looser and gainer on the grounds lesser or greater remedy. Both parties may put their objections in application. Court must have territorial and pecuniary jurisdiction.
This Act does not provide number of arbitrators but it should be one preferably. More parties may appoint more arbitrators but if the appointment bears even numbers then one umpire must be appointed to give award.
Time period for award: Arbitrators are obliged by law to give award within four months. Only Court may extend this period upon justifiable grounds. Clause for the award may not be necessarily incorporated in agreements. It is considered implied incorporation if not specifically provided.
Time period for award remains two months for umpire. This period may also be extended with the permission of Court.
Arbitration is not a Court. No specific qualification is required for appointment. Court cannot change or alter award of arbitrator and if any change is desired, Court orders to arbitrator to alter such award.
If witnesses refuse to testify the truth in question, Court may call them also to testify the truth.
Arbitrator and party mutually decide the fee for the purpose of arbitration. Court cannot intervene in the appointment of the arbitrator and alteration of the award. When agreement is written, parties have right to appoint arbitrator to anybody whosoever. Power to appoint the arbitrator can be delegated.
Appointment of the arbitrator remains irrevocable unless he commits misconduct in proceedings or illegality or fails in the dispensation of justice. Death of the appointing authority normally does not affect his appointment but if a person upon personal qualification appoints him then death of the appointing authority revokes his appointment.
The purpose of the S. 7 is to standardize the law as to the effect on an arbitration agreement and proceedings on insolvency of a party thereto.
Where any contract to which a bankrupt is a party contains an agreement to refer to arbitration any dispute which may arise thereunder, and the trustee in bankruptcy adopts the contract, the agreement to refer will be enforceable by or against him. Even where there has been no such adoption, the Court has discretion upon the application either of the justice, with the leave of the committee of inspection, or of any other party to the agreement, to make an order that the matter be referred to arbitration.
Origin of S. 7: Andrew v. Plamer was a leading case on this point. In that case the Court observed, “The bankruptcy did not operate as a revocation of the submission. It would not have put an end to the suit, which the bankrupt had instituted, nor could it, therefore, put an end to the arbitration founded upon that suit. If he has commenced an action without having any cause for it, the bankruptcy neither does nor ought to protect him against the consequences of it.”
Power of liquidator to refer: The powers, which living companies as regards reference of disputes to arbitration may posses are not co-extensive with the power to be exercised by the liquidators. The directors of the company are supposed to know their own business being businessmen, while an Official Liquidator is very often a new man unconnected with the business carried on by the company. His knowledge and information of men and things is not likely to be co-extensive with similar knowledge of the directors. It, therefore, does not follow that because a living company is allowed to refer matters in difference to arbitration in a particular way that an official assignee is allowed to make a reference to private arbitration. But where an arbitration agreement has been entered by a company and then goes into liquidation it appears that the principles underlying this section should apply in the case of a liquidator.
Where during the pendency of the insolvency proceedings the receiver and the secured creditors referred the matter to arbitration and the award directed the receiver to bring the insolvent’s property, which was ancestral (inherited, hereditary) and revenue paying, to sale and realize the sale proceeds through Court: held, that the Insolvency Act has no provision to prevent secured creditors from acting according to the award, but the better way would be to obtain the insolvent’s discharge under S. 38 and deal with the property outside the jurisdiction of the insolvency Court. The receiver would then cease to be a receiver under the insolvency, but being a person vested by the arbitrator with authority to sell the property under the arbitration provisions, would be able to sell the property under the terms of the award.
Agreement of arbitration: Arbitration does mean solution of dispute before going to Court. Parties put their disputes before the person to whom they appoint at their own choice under agreement made between them. When parties form contract, they may incorporate a clause of arbitration in agreement that they shall refer their disputes toward arbitrator. Where this clause is not incorporated in agreement, it is presumed that it has been incorporated.
Where parties are agreed to refer dispute to arbitrator, they cannot invoke to Court of law before going into this forum.
Agreement of reference: Where parties remain fail to resolve their dispute by way of arbitration, they may agree to refer the case to Court for its interpretation.
How agreement of arbitration is enforced: Following are the method by which agreement of arbitration is enforced:
1. By appointment: When dispute is arisen, parties may appoint arbitrator on their part. As soon appointment of arbitration is made, agreement of arbitration is enforced.
2. By notice: Party may give notice to other party for appointment of arbitration on his part where other party remains fail to appoint arbitrator.
3. By Court: Court may also enforce this agreement where one party remains fail to appoint arbitrator either upon dispute or notice of other party.
Qualification of arbitrator: As far as qualification of an arbitrator is concerned, this Act does not describe any particular qualification for him. He may either be person of ordinary prudence or/and person of sound mind and major. Following are the qualifications:
1. Major: He must be major as minor is not competent to act under contract of any type.
2. Sound mind: Person who is person of unsound mind and could not understand the requirement under arbitration cannot be appointed as arbitrator.
3. Competent: It does mean that he is not debarred under any law of land, i.e., bankrupt or insolvent.
4. Appointment under contract: His appointment is made under contract which parties make. If the clause for arbitration is not provided in agreement, even than it is deemed that it has been incorporated.
Power of Court to appoint arbitrator or umpire: In normal circumstances Court does not intervene in the appointment of arbitrator. But there are certain factors, which put pressure on Court to act for the compliance of law. Responsibilities of parties and power of Court can be described as under:
1. Agreement: There must be agreement for the appointment of arbitrator. If agreement does not provide the appointment of arbitrator then question of his appointment does not arises.
2. Agreement between parties: If two persons form one party then this Act is not applicable on them. Agreement must be within two or more parties who have agreed to appoint arbitrator upon requirement.
3. Consents of parties: Appointment of the arbitrator is made with mutual consents of the parties concerned. No one can be compelled in contrast. Both parties shall appoint arbitrators of their own choice.
4. Disputes: Appointment of the arbitrator is subject to the rise of dispute. In the absence of dispute appointment of arbitrator becomes needless.
5. Filling of the vacant position: Appointment becomes compulsion when arbitrator appointed dies, mentally becomes incapable to act upon, neglects in working, or refuses to act with or without reason. In case of even number of arbitrator one umpire is also becomes necessary.
6. Notice of appointment: If one party fails to appoint arbitrator in original or upon occurrence of vacancy or umpire in case of even number arbitrators, other party shall give clear notice to do so within fifteen days failure of which shall cause intervention of Court.
7. Application to Court: Non-compliance of the notice shall give rise to make application to Court for the appointment of arbitrator. Court shall give chance to parties for the explanation. Upon satisfaction, Court shall appoint arbitrator or arbitrators or umpire, as the case may be to act in references. New appointee shall make award. This appointment shall be considered as made by the parties.
8. Agreement for the appointment of two arbitrators: Where agreement provides to appoint two arbitrators by the parties, both are obliged by law to appoint them upon the rise of dispute. Negligence of one party may put other party to give clear notice of fifteen days for the compliance of the provisions of contract.
9. Arbitration upon default: When other party fails to appoint arbitrator on its part, first party may compel to its arbitrator to work as sole arbitrator.
10. Filling of vacant position: If any appointed arbitrator refuses to work, neglects, dies, or incapacitated to work, party is duty bound to fill in the vacancy incurred. Other party has to serve a clear notice of fifteen days to fill in vacancy incurred.
11. Excusable default: When party commits default in compliance of law to appoint arbitrator either original or substitute, may apply Court to get more time for the appointment of arbitrator by giving justifiable reasons.
12. Appointment of three or more arbitrators: Parties may provide in agreement for the appointment of three or more arbitrators to reach conclusion. Award of majority shall be binding on parties.
13. Appointment by parties: Only parties are competent to appoint arbitrator under law. Arbitrators cannot appoint arbitrator or arbitrators. Appointment made by arbitrator shall be termed umpire.
14. Need of third appointment: Where contract provides appointment for two arbitrators, and both reach on equal conclusion and are divided in two parties, there parties or arbitrator may appoint another person as umpire who shall second the opinion of one of both and his decision shall be binding on parties. He may vary in the decision of the arbitrators. He is independent. Arbitrators may refer their decision toward umpire. Umpire does not interfere in the proceedings of arbitrators.
Removal of arbitrator and punishment u/s 11: Although Court cannot intervene in the appointment or removal of the arbitrator but there are certain grounds, which lead his removal such as:
1. Fail to use all reasonable despatch: It means if arbitrator fails to give award, Court may remove him provided other party applies to Court for his removal on such ground. They have to record evidence or inspect documents to reach on conclusion and their failure to do put in their removal.
2. Misconduct: It is another reason to remove him upon application to Court. It includes his personal misconduct or misconduct in proceeding.
3. Failure in unanimous decision: Where more than one arbitrators fail to give their unanimous decision then party or parties may apply to Court for their removal. Upon failure in unanimous decision other party has to give notice of such failure to defaulter. After serving a notice application can be moved to Court for the termination of arbitrator or umpire whatsoever situation is.
Punishment upon removal: Arbitrator or umpire who fails to do for what he is appointed is punished by debarring his remuneration, which was decided at the time of his appointment. His entitlement of remuneration under law becomes ineffective. His right of remuneration ends when he is terminated upon failure to give award.
Revocation of authority u/s 12:
Filling of the vacancies: When Court removes umpire or arbitrator in non-compliance of the agreement for which entered upon, Court appoints umpire or arbitrator upon occurrence of vacancy provided party applies for such appointment.
Where authority of arbitrator or arbitrators or umpire is revoked by the leave of Court or upon application, then Court either shall appoint another arbitrator as he appointed by the parties concerned or shall order to cease the arbitration agreement upto the extent of difference.
Powers of arbitrators or umpire: Law recognizes certain powers to arbitrators or umpires to reach on conclusion. They are as under:
1. Administration of oath: He or they may call witnesses to appear before them and take oath to give evidence. The arbitrator may give his reasons for shutting out certain amount of evidence sought to be tendered.
2. Reference to Court: Since they are not special person and have no specific qualification so they may refer the case toward Court for its opinion.
3. Correction of mistakes: If any clerical mistake is found in their award, they may rectify it to make the award fair and just.
4. Administration of cross-questions: To avoid time consuming they may collect the objections of one party in term of questions and may forward toward second party to answer them and put their own questions, if any. Such interrogations may be sent to Court for cross-examination through Court.
5. Making award: They may make award which may be either conditional or in the alternative.
Finality of award: Upon the completion of the work of award, arbitrators shall do as follows:
1. Signature on award: Whenever award is made, makers are required to sign it as a sign of finality.
2. Notice to parties: Arbitrators are required by law to notify such making of award to parties. They also may notify their fees and other charges payable in respect of arbitration and award.
3. Deposition of award: Arbitrators may deposit award to Court on the desire of parties.
4. Orders of Court: If arbitrators have referred the case toward Court for the opinion of Court and Court has given instruction, Court shall revert the case toward arbitrators after making some suggestions so that it may form the part of award. Court itself cannot make its orders as part of award.
Exceptions: Under the following circumstances, award remains not final:
1. Remit award:
2. Interim order:
3. Supercede arbitration:
4. Payment of remuneration:
5. Stay where agreement:
Powers of Court in respect of modifications u/s 15: Court may at any stage modify the award to some extent but not at all. Powers of Court are as follows:
1. Modification on irregularity: If it appears that arbitrators have made award on the matters which were not referred toward them, Court may separate it if it does not effect the original or substantial award referred.
2. Modification on imperfection: If award contains any error, which can be modified without effecting such decision, Court may alter award. It may be any matter un-referred. It does not amount intervention of the Court but mere procedural intervention.
3. Modification of clerical error: Court may modify in any clerical error if occurred.
Powers of Court to remit award: Court may remit award when presented to Court to arbitrators or umpire whatsoever case is in certain cases, such as:
1. Remittance upon non-determination of referred matter: Court may remit the award toward arbitrators or umpire, whatsoever case is, for reconsideration if any of the matter remains undetermined which were referred for arbitration. Here again intervention of Court is mere procedural.
2. Remittance upon determination of un-referred matter: Where arbitrators or umpire has determined any matter actually not referred for arbitration, Court remits it back to arbitrators or umpire for reconsideration provided it is not separable by the Court. Court intervenes if the matter is separable. Here again Court shall not intervene for the modification of award but shall leave it to its originators whatever they may do.
3. Remittance upon incapacity of execution: If award remains incapable to execute, Court shall remit it to arbitrator or umpire for reconsideration.
4. Remittance upon the question of apparent illegality: Award can be remitted only where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award and that question ex-facie has been decided wrongly; otherwise not.
Powers of Court in case of remittance of award: Court exercises certain power when remit award, including:
1. Fixation of time: Court fixes the time for arbitrators or umpire so that they may reconsider and submit their decision to Court.
2. Subsequent extension of time: Court may subsequently extend the time period to reach on the conclusion.
3. Declaration of award null and void: When arbitrators or umpire fails in reconsideration of award within time limit which Court grants, Court may declare such award void.
4. Grant of decree on award: Court is entitled to a decree upon award if party in whose favour the award is made, if no application is filed or if the application is filed and dismissed on merits.
5. Power to set aside award: Opportunity is given to party challenging or disputing the award to file an application to set aside the award and the application has got to be filed within the period of limitation prescribed by Limitation Act.
6. Power to pass interim order: Court exercises this power in a case where an award has been filed and a decree has been passed. But where some one of the parties had been trying to defeat or delay or obstruct the execution of the decree passed upon the award, in such cases, the Court is specifically empowered by law to pass interim orders that may be deemed necessary. The power of Court is discretionary. The order of the Court is not appeal-able.
7. Power to reverse order: Aggrieved party may approach Court to reverse order being not having mala-fide intention, which may occur after the decree of Court.
8. Power to supersede arbitration: If award becomes void on the ground of failure of the arbitrators or umpire for reconsideration of award upon remittance, Court may supersede the arbitration at all. This is exclusive power of Court.
Arbitration with intervention of Court: Court may intervene in arbitration in certain circumstances provided:
1. Non-pendency of suit: If agreement has been framed but no suit is pending in any Court regarding the subject matter of the agreement.
2. Arising out of dispute: A dispute regarding the subject matter has arisen between the parties, which requires arbitration.
3. Application of parties to Court: Parties have applied to Court for its intervention. Application must follow the procedure provided in Arbitration Act, 1940.
Procedure of Court on application: When the application is moved to Court for its intervention in arbitration, Court follows the procedure provided in Arbitration Act, 1940. Procedure follows rules as follows:
1. Notices to parties: Court serves notices to the parties interested as defendant in the application except plaintiff who is physically presented in the Court to file suit.
2. Order for filing of agreement: Where no sufficient cause is shown in the application, Court orders the agreement to be filed. In the absence of a “sufficient cause” the Court shall order the agreement to be filed and shall call upon the arbitrator, mentioned in the agreement of the parties or otherwise agreed by them, to decide the dispute. If the parties cannot agree, then the Court shall have a right to appoint another arbitrator.
Previously the Court was not entitled to fill up the place of an arbitrator who had refused to act. But now if the arbitrator named in the agreement declined to act, the Court could ask the parties to agree to another person as arbitrator, and if the parties still could not come to an agreement, the Court could intervene.
3. Reference to arbitration: Court may refer the case toward arbitrators appointed by parties or in case of their failure appointed by Court for their determination.
4. Arbitration under Arbitration Act, 1940: All the provisions of the Arbitration Act, 1940, shall apply on the case where Court refers case towards arbitrators after making of an application by parties.
Arbitration in suits u/ss 21 – 24: Court may also intervene in arbitration when suit is under litigation before they enter in arbitration agreement. Following are requirement for arbitration in suits:
1. Agreement of parties:
2. Matter is related with suit:
3. Reference to arbitration:
4. Application writing:
5. Application to Court: All interested parties are required to apply Court for the reference of arbitration.
6. Application before judgement:
Agreement of arbitrators: Number of arbitrators and the manner of their appointment and award should be pre-decided.
Order of Court to make reference:
Determination of time: Only Court determines the time for arbitration.
Determination of disputed matter: Only Court determines the matter of dispute.
Stay of Court’s proceedings:
Reference only for joining parties: It is not binding for the non-joinders.
Time of application: This application for reference to Court must be submitted before the pronouncement of the Court. Once the Court has decided the case and judgement has been made, not application is liable to submit in Court for reference to arbitrators.
Appointment of arbitrator: Appointment of arbitrator is made in a manner as, he is appointed by the parties.
Order of reference: Court refers the matter to arbitrators which is to be determined.
Time limit: Court fixes the time limits for the arbitrators, during which they have to determine the matter referred. Court determines that how much time shall be suitable to determine the matter.
Responsibility of Court: Court does not interfere in the matter, which is referred to arbitrator unless it is saved and required under law.
Partial arbitration: Where some of the parties apply for arbitration for rest matter to Court, Court shall refer the matter to arbitrator for those who apply. It should be kept in mind that such matter is referred to arbitrator, which is separable and applied. Remaining case is rest in Court for decision and judgement.
Award is binding for the parties who applied to do so and rest shall wait for Court’s judgement, which shall be binding for them. Award and judgement have no effect over each other. These are two separate matters.
Applicability of other provisions: The provisions of the other Chapters shall so far as they can be made applicable, apply to arbitration under this Chapter. Court may supercede the arbitration where due appointments are not made by the parties concerned.
Application of Chapter V: Provisions of this Chapter are applicable in all cases provided they are not saved.
Making interim award: Where arbitrators or umpire feels necessary they may make interim award.
Time extension for award: Court may time to time extend the time so that award can be made. Arbitrators cannot extend time without consents of the parties.
Interest on award: Interest is not payable unless Court grants it. Only Court is competent to grant interest on principal amount due on award.
Grounds to set aside award u/s 30: Award can be set aside on the following grounds:
1. Misconduct: If arbitrator has committed misconduct during or at the time of making award.
2. Making award after Court’s order: When Court has made order to cease the proceeding and award has been made shall be declared null and void.
3. Determination of un-referred matter:
4. Left matter referred:
5. Incapable to execute:
6. Illegality:
7. Irregularity:
8. Disregard of Court’s order:
9. Non-separation of undesirable matter:
10. Sufficient reasons u/s 26 – A:
11. Fraud:
12. Coercion:
No suit can be instituted in civil Court against the award. Only application can be moved in civil Court having jurisdiction.
Decree is a part of judgement based upon reason. Every judgement is appeal-able. Order is also judgement. Every order is not appeal-able. Locus standi does mean person who is competent to stand before Court. He may either be plaintiff or defendant.
Determination of award: A person is permitted to challenge the arbitration agreement or award only. The existence of contract itself cannot be challenged. Ordinarily, the Court should decide the questions on affidavits. But where such questions cannot be conveniently tried by affidavits, the Court is entitled to examine witnesses.
Power to stay legal proceedings on arbitration agreement: Where suit is pending in Court against the other party of the agreement and other party applies for the determination of the case by the arbitrator, Court shall stay the proceedings and upon satisfaction case shall refer to arbitrators. Court set-asides its proceedings.
Where any party to an arbitration agreement commences any legal proceedings against any other party to the agreement such party may apply to the judicial authority before which the proceedings are pending to stay the proceedings. And if the judicial authority is satisfied that there is sufficient reason why the matter should not be referred in accordance with the arbitration agreement then such authority may make an order staying the proceedings.
Effects of legal proceedings on arbitration: Where concurrent proceedings are started and Court has served notice to arbitration or umpire and they have received such notice and they are present in Court for proceedings, Court shall not set aside the proceedings. Proceedings are not a guarantee to stop the arbitration or award. Where notice has been served and parties are present in Court, Court shall not invalidate its proceedings.
Stay or continuous of proceedings in Court are subject to the no objection of the parties. Proceedings after order of the Court or making award undergo null and void.
Condition precedent: Condition precedent if provided in agreement is not maintainable in courts. It is first essential that the Court should order that the agreement shall cease to have effect as regards the particular dispute. And upon making such order, if the agreement contains a provision that an award under an arbitration agreement shall be a condition precedent to the bringing of an action in respect of any matter to which the agreement applies, may further order that the provision making an award a condition precedent to the bringing of an action shall also cease to have effect as regards that dispute.
Limitations: Limitation period for the purpose of arbitration is as in other proceedings in Court appended in Limitation Act, 1908.
The terms and conditions of the agreement cannot change limitation period and if so, they are null and void.
Limitation for appointment of arbitrator: Time limit for the appointment of arbitrator commences when the notice is served to him for his appointment. If one party has appointed arbitrator, she is required to serve a notice to other party to do so for the appointment of the arbitrator on its part. When one party serves notice to other party, then limitation commences.
Waive off limitation period: Where limitation period has been expired but party applies to Court for the waiver of the lapsed time period, Court may, if thinks fit, extends the limitation period. Limitation in suit is not waived off while limitation in appeal may be waived off.
Dispute of remuneration: Where dispute arises regarding the remuneration, arbitrator or umpire may seize to deliver award until or unless his remuneration or fee is paid. He may file an application to Court for the payment of his remuneration or fee.
Order of Court: Court may order to arbitrator or umpire to deliver award to applicant provided party deposits the amount of remuneration or fee to Court whatsoever he has demanded.
Inquiry of Court: As soon as party deposits the amount in Court, Court proceeds an inquiry to arrive at the conclusion. If Court arrives at the conclusion that amount demanded is justifiable then it shall be given to arbitrator or umpire. If Court thinks fit that he has demanded unreasonable amount, Court may deduct such an extra amount and balance shall be refunded to the party deposited. Assessment is responsibility of the Court. Until fee is not paid, award shall not come into force.
Non-maintainability of the application: No application is maintainable where there is a written agreement between the parties and the arbitrator as regards his remuneration. Case is maintained where express provision so as to remuneration is not provided and mere implied consents for the payment of remuneration are made.
Appeal-able orders: Following are the order against which appeal can lie in the Court having jurisdiction:
1. Superseding arbitration;
2. On an award stated in the form of a special case;
3. Modifying or correcting an award;
4. Filing or refusing to file an arbitration agreement;
5. Staying or refusing to stay legal proceedings where there is an arbitration agreement;
6. Setting aside or refusing to set aside an award.
Only one appeal lie in the Court of having jurisdiction but provisions of this law cannot take away the right to appeal to the Supreme Court, which is second appeal.
When a dispute has been referred to arbitration, the Court’s jurisdiction to interfere in the findings of the arbitrator is very limited and confined to the grounds specified herein. It is therefore obvious that it is not open to ask the Court to go into the details of the claim and counter claim to reassess the questions as if this was Court of appeal from a decision of a civil Court in its ordinary jurisdiction. No appeal lies unless law gives it.
Small Cause Court
Small Cause Court shall have neither jurisdiction over the proceedings of arbitration which have started not will it have jurisdiction to entertain any application which may arise out of those proceedings. A small Cause Court can, therefore, pass an order staying suit.
These courts are not likely Civil Courts like grade 1, 2, or 3. These have less power confined for pecuniary jurisdiction upto Rs. 5,000/-. Neither application can be moved for arbitration nor they can administer arbitration nor they can make correction in award. But where already dispute is pending in Small Cause Court , Court can refer the arbitration to arbitrators or umpire upon application.
Code of Civil Procedure is not applicable on arbitrators. Mere parties empower to arbitrators. In case of Court Code of Civil Procedure is applicable and law grants power to Court and not the parties.
Service of notice: Court, arbitrator, or umpire shall deliver the notice to party in the manner provided in the agreement. In the absence of provision in agreement notice shall be served in the following manner:
1. Personal delivery: It shall be delivered to the person to whom it is to be served.
2. By post: It can be mailed by registered post to the last known abode (home, dwelling, or residence) address or business in Pakistan .
Power of Court to issue notice: Court adopts the same process to service the notice as its own case provided under Order 5 of the Code of Civil Procedure.
Failure in the presence before Court or arbitrator is punishable offence.
Power of High Court to make rules: High Court has power under this Act to frame rules as to how:
1. Award is filed.
2. The filing and hearing of special cases and all proceedings.
3. Staying powers.
4. Making of forms to be used in Act.
5. All proceedings of the Court under this Act.
Various modes of arbitration: Following are the modes of arbitration:
1. Without intervention of Court:
2. With intervention of Court:
3. Agreement of arbitrators:
4. By notice of parties:
5. Statutory arbitration:
6. By appointment of arbitrators:
Different ways to refer arbitration: Following are the ways to refer arbitration:
1. By parties:
2. By liquidator:
3. By agreement:
4. By Court:
5. By receiver:
6. By administrator:
7. By executor:
8. By legatee:
Statutory arbitration: Some time arbitration is made as the requirement of statute. It is called statutory arbitration. Under this arbitration agreement is not necessary. Statutory arbitration is such arbitration which do not flows from any arbitration agreement between the parties but by virtue of some provisions of some statute, such as:
1. The Contract Act, 1872 (Ss. 260 to 265).
2. The Companies Ordinance, 1984 (S. 283).
3. The Co-operative Societies Act, 1925 [S. 43 (2) (b)].
4. The Electricity Act, 1910, (S. 52).
5. The Industrial Relations Ordinance, 1969 (S. 31).
6. The Land Acquisition Act, 1894 (Ss. 11, 12, 18, and 26).
7. The Insolvency (Karachi Division) Act, 1909 [S. 68 (h)].
8. The Provincial Insolvency Act, 1920 (S. 52).
9. The Railways Act, 1890 (Ss. 46, 46 – A, 46 – B, and 48).
10. The Religious Endowments Act, 1863 (Ss. 16 and 17).
11. The Trusts Act, 1882 (S. 43).
Application on all arbitration: If any proceedings are being carried on according to former Act, shall not be defeated by new enactment and shall be continued according to former enactment. Running matters are not effected with new enactment.
There are four kinds of arbitration, i.e., with intervention of Court, without intervention of Court, where case is pending in Court, and where Small Cause Court is involved.
Aims and objectives of Arbitration Act: Following can be put in this regard:
1. Determination of disputes:
2. Easy methodology:
3. Protection of rights:
4. Awareness of people:
5. Inexpensive justice:
6. Trust on award:
7. Trust on arbitrators:
8. Reference to Court where dispute persists:
9. More understandability:
10. Nearness of arbitration:
11. Involvement of common people:
12. Education of public:
13. Power of award:
14. No Court
15. No stamp duty:
16. Amicable settlement:
17. Avoid technicalities:
18. Expeditious justice:
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