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Wednesday, June 13, 2018


(First Published on Volume 01 Issue 03, November 2016)

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As an alternative dispute resolution mechanism, the arbitration provides speedier settlement of commercial disputes, whether domestic or international in character.
In the wake of globalization of trade and commerce and also for effective implementation of economic reforms in 1990s, a new Arbitration Law based upon the Model Arbitration Law formulated by the United Nations Commission on International Trade Law (UNCITRAL) was passed by the Indian Parliament repealing the earlier laws on the subject of arbitration. The Arbitration and Conciliation Act, 1996, besides giving statutory recognition to the conciliation, provides for the constitution of the arbitral tribunal to conduct the arbitral proceedings and making of the award in case of both the domestic and international commercial arbitrations. The award made by the arbitral tribunal is final and binding upon the parties and is enforceable as a decree of a Civil Court. An important question pertinent in this regard is whether the doctrine of res judicata as enshrined under the Code of Civil Procedure of 1908 is applicable to the final award of the arbitral tribunal, which is not under a strict compulsion to follow the strict procedure stipulated in the Code of Civil Procedure. This article is an endeavour to analyse the applicability of the rule of res judicata to the arbitration awards in India.

Arbitration is in no way a modern concept, nevertheless it has been well thought-out on the more systematic and scientific patterns, expressed in new clear and elaborative terms and providing wide-ranging resolution in recent years than before. Though its genus can be traced back to the elemental method of village panchayats widespread in primordial India, the complexities of trade and commerce in the country and the cross-border trading with nationals of other countries demanded more systematic approach acceptable to the parties to dispute in such commercial transactions. Besides, the litigation process, which was quite dilatory and costly affair, parties often resorted to alternative dispute resolution methods. The question of enforceability of the decisions by such mechanisms, however, was a very unmanageable issue that compelled the parties to knock the doors of the courts. The arbitration as a method of dispute settlement was resorted to by the English merchants and traders. In India, the earlier laws relating to arbitration were based on the English Arbitration Laws and the first statutory enactment on arbitration law was the Indian Arbitration Act of 1899, which was not a complete code in itself and extended to the matters that were not before a court of law for adjudication. Besides, the provisions relating to arbitration could be found in the Code of Civil Procedure, 1859, which was repealed later on by the Act of 1882 that was further replaced by Code of Civil Procedure of 1908. In 1940, however, the law on arbitration was consolidated and redrafted on the pattern of the English Arbitration Act of 1934. However, due to the globalization in the fields of trade and commerce, the Arbitration Act of 1940 proved to be inadequate in meeting the requirements of both the domestic and international commercial disputes. The Arbitration Act of 1940 was repealed by the Arbitration and Conciliation Act, 1996 (hereinafter, the ‘Act’). This Act marks the beginning of a significant era in the history of legal and judicial reforms in India. Besides conciliation and the matters connected to it, the Act aims to consolidate and amend the law relating
to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards. The Act is in conformity with the Model Arbitration Law framed by the United Nations Commission on International Trade Law (UNCITRAL), especially to address international commercial disputes. The Act minimizes the supervisory role of the courts by allowing the appointment of arbitrators and leaving all the contentious issues to be decided in arbitration in accordance with the terms of the arbitration agreement between the parties.

Settlement of disputes through arbitration is a statutory right and where not prohibited by any other law in force in India, it can be resorted to by the parties by entering into a contract containing arbitration clause in it or by making a separate arbitration agreement in accordance with Section 7 (2) of the Arbitration and Conciliation Act, 1996. By the arbitration agreement, which is either in the form of a contractual clause or as a separate agreement, the parties may submit all or certain disputes that have arisen or may arise between them in respect of defined legal relationship, whether contractual or not (Section 7(1) of the Act). On account of validity of the arbitration agreement, the courts cannot intervene into matters of arbitration as they have been prohibited under section 5 of the Act. Rather the courts are under an obligation to refer the parties to arbitration in terms of their arbitration agreement under section 8 of the Act[1]. Additionally, the court is under the duty to refer the parties to arbitration under Section 8 of the Act where on one hand one of the parties has moved to the court for settlement of the dispute despite the existence of the valid arbitration agreement with the other party to the dispute, and the subject matter of action before the courts is the same as that of the arbitration agreement, and on the other hand the other party before submitting his first statement on the substance of the dispute, makes an application to the court for referring the matter to arbitration[2] . The word ‘matter’ in Section 8 refers to the entire subject matter of arbitration agreement and the court does not allow the division of the cause of action, that is, one to be decided by the court and the other to be decided by way of arbitration, as was made clear by the Supreme Court in the case of Sukanya Holding (P) Ltd. v. Jayesh H. Pandya & another[3]. Besides that the court cannot stay the arbitral proceedings and the same terminates either with the final award of the arbitral tribunal or by an order of termination of the arbitral proceedings made by the tribunal in pursuance of Sub-Section (2) of Section 32 of the Act.

[1] (Paranjape, 2011, p. 95- 96).
[2] Kurlwal, 2011, p. 277
[3] AIR 2003 SC 2252

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