ARBITRATION, CONCILIATION AND ALTERNATIVE DISPUTE RESOLUTION

SYSTEM 

STUDY OF COMMERCIAL ARBITRATION IN THE FIRMS FOR SETTLING

BUSINESS DISPUTES

SUBMITTED TO: Prof. Aisha Ahmed Sharfi 

SUBMITTED BY

MEGANATH V

BA LLB (HONS) 2016-21, SECTION A

SEMESTER – X

Register no.16040141052

School of Law

Alliance University, Bangalore

Date of Submission: 02/06/2021

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ABSTRACT

Commercial arbitration in the firm to settle business disputes is an efficacious alternative

dispute resolution technique in business community vis-à-vis conventional mechanism of
court litigation. Knowledge and outcome to effective arbitral practices could be a very
effective tool in redressal of disputes that generally arise between different business firms.
We examine the current status of litigations pending at courts and explore the use of
commercial arbitration to develop a low cost and effective dispute resolution settlement
mechanism. We argue that arbitration mechanism at present is not used effectively in Indian
companies for disputes resolution. It is an imperative on part of policy makers to work a
practical and effective incentive mechanism for use and application of arbitration in place of
present routine court litigation. Professionals associated with the business firm can play a
creative and strategic role in promoting use of commercial arbitration in dispute resolution

Keywords-Commercial Arbitration, Alternative Dispute Resolution, Court Litigation,

business firms

CHAPTER -1

1.1 INTRODUCTION

Every business enterprise is subject to variety of disputes whether intentional or unintentional

and financial and other implications of such disputes vary from one company to another
company depending upon the facts and circumstances of each case. Disputes could be
defined, classified and interpreted from different perspectives for different stakeholders
including shareholders, suppliers, workmen, customers and so on. Give the rapid
development in India the caseloads for already overburdened courts have increase manifold
leading to notoriously slow adjudication of commercial disputes. Routine court litigations
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have been posing a serious threat to free decision-making in the business firms since they
cause uncertainty of dispute settlement because of inherent nature of longtivity in the
settlement process. Commercial arbitration has widely been recognized in different parts of
business world as a means of dispute resolution particularly from 1980s and 1990s (Lavin,
2009). Firms in global commerce routinely agree to submit their disputes to private arbitral
panels, and states routinely require firms to honor their agreements (Movensian, 2008). The
concept of commercial arbitration is not so new and has been used since centuries in different
civilizations. It is this concept of “Panch Parmeswar” (meaning, decision of five learned
persons when dispute referred to them, is equal to decision of God), which has been widely
accepted and applied since ages in Indian traditional life. This paper examines the present
status of disputes management in commercial organizations, highlights the importance of
disputes handling mechanism under the Arbitration & Conciliation Act of 1996 and attempts
to establish it (the Act) as a superior alternative to the disputes handling through conventional
litigation mechanism through Court of law.

SCOPE AND OBJECTIVE

 To study about commercial arbitration on business firms

 To study on the role of an arbitration on settling disputes
 To study on the role of corporate arbritration
 To study about how the  contractual obligations can be settled through judicial means.

RESEARCH QUESTIONS

1) Why Arbitration does has to happen and more importantly, why are so many firms
resorting to this mechanism?

2) How to settle dispute without rushing to Arbitration ?

HYPOTHES
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Commercial Arbitration in settling business disputes is very important as any contract agreed
between businesses needs to have a clause that specifies where and how any disputes from
failure to honour the contractual obligations can be settled through judicial means.
Arbitration involves a dispute resolution mechanism as well as a process by which the
judiciary pronounces the verdict on who is at fault or who has to pay up or who has to be
penalized in case of alleged reneging of contractual obligations.

RESEARCH METHODOLOGY

The research work consists of Theoretical and Analytical Study, based on the collection of
data from secondary sources. It is an attempt to understand the significance of commercial
arbitration in the firms for settling business disputes

LITERATURE REVIEW

Praise for the first edition of Born’s International Commercial Arbitration: “An invaluable
companion to students and practitioners of international arbitration in the United States and
elsewhere.” -- Eric Schwartz, former Secretary General, ICC Court of Arbitration “A
landmark achievement.” -- Michael F. Hoellering, General Counsel, American Arbitration
Association

CASE ANALYSIS

II. Damont Developers Pvt. Ltd. v. BRYS Hotels Pvt. Ltd.; 2019 SCC OnLine Del 7478,
Order dated 07.03.2019

The petitioner sought for appointment of an arbitrator in terms of Section 11(6) of the
Arbitration and Conciliation Act, 1996. The arbitration agreement between the parties was
provided under Clause 10(e) of a MOU dated 17th September, 2016. The petitioner invoked
the arbitration and suggested the name of a retired Supreme Court Judge to act as a sole
arbitrator. The respondent did not agree to the appointment of an arbitrator.
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The petitioner contended that there is a valid arbitration agreement between the parties
contained in Clause 10(e) of the MOU dated 17th September, 2016. However, according to
the Respondent, Clause 10(e) of the MOU dated 17th September, 2016 does not constitute a
valid arbitration agreement; MOU provides a remedy of specific performance and therefore,
no arbitration can be carried out for resolution of disputes. It was further contended that the
MOU dated 17th September, 2016 is a compulsorily registerable document but is neither
registered nor requisite stamp duty has been paid thereon and therefore, the document is
liable to be impounded by this Court and cannot be acted upon till the requisite stamp duty is
paid thereon.

The High Court of Delhi referred to SMS Tea Estates Private Ltd. v. Chandmari Tea
Company Private Ltd. (2011) 14 SCC 66 wherein the Supreme Court held that an arbitration
agreement does not require registration under the Registration Act and therefore, an
arbitration agreement contained in an unregistered but compulsorily registerable document,
can be acted upon and enforced.

The High Court of Delhi further referred to various precedents and observed that the
Arbitration and Conciliation Act was amended w.e.f. 23rd October, 2015 by which several
provisions of 1996 Act were amended including Section 11(6A) which provides that the
Court has to confine its examination to the existence of an arbitration agreement only.
Furthermore, the objections of insufficiently stamped document cannot impede the
appointment of an arbitrator and it is for the arbitrator to consider the objections and exercise
the powers under Section 33 and other attendant provisions of the Stamp Act.

The High Court of Delhi thus held:

"In the present case, there is a valid arbitration agreement between the parties contained in
Clause 10(e) of the MOU dated 17th September, 2016. The petitioner has validly invoked the
arbitration vide notice dated 27th September, 2018. Under Section 11(6A) of the
Arbitration and Conciliation Act, this Court has to confine only to the existence of an
arbitration agreement and all other objections including the objection as to insufficient
stamping have to be considered by the arbitrator.
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ARTICLE REVIEW

EMERGING TREND IN THE ENFORCEMENT OF ARBITRATION AWARDS

- A. K. Ganguli

THE ARBITRATION Act, 1940 dealt with only domestic arbitration. In so far as
international arbitration was concerned, there was no substantive law on the subject.
However, enforcement of foreign awards in this country was governed by two enactments,
the Arbitration (Protocol and Convention), Act, 1937 and the Foreign Awards (Recognition
and Enforcement Act), 1961. These two statutes, in their entirety, except for section 3 (in
both statutes) did not deal with international arbitration as such but merely laid down the
conditions for 'enforcement of foreign awards' in India. Section 3 of both statutes provided
that if any party to an arbitration agreement commences any legal proceeding in any court in
India, any party to such legal proceeding may, at any time after appearance and before filing
a written statement or taking any other step in the proceeding, apply to th^ court to stay the
proceedings, and the court, unless satisfied that t agreement is null or void, inoperative or
incapable of being performed or that there is not, in fact, any dispute between the parties with
regard to the matters agreed to be referred, shall make an order staying the proceeding. The
Arbitration Act of 1940, though a good piece of legislation, in its actual operation and
implementation by all concerned - the parties, tłu arbitrators, the lawyers and the courts -
proved ineffective. It is not surprising that just about the time when UN General Assembly
adopted the UNCITRAL Model Law and recommended the members nations to enact
suitable legislation based on the model law, the Supreme Court suggested1 simplification of
the law of arbitration releasing the law from the shackles of technical rules of interpretation.