When two legal entities enter into a legal relationship for business purpose, it is obvious that at some point in the business in future dispute will occur. It will be against natural justice if parties to the dispute become judges in their own cause. To, resolve such a dispute, there is a signed legal document between both parties that includes a section for reference to arbitration, through which a dispute is resolved. In the literal sense, a reference is the action of mentioning or suggesting something, or allude to something. Section 7[i] states that both parties agree to submit any dispute between them, contractual or otherwise in writing says. In this case, both parties’ consent is required. A reference to arbitration includes all disputes between the parties or all disputes related to a contract or an especially mentioned dispute.
A reference to arbitration sets out various acts. The acts include appointing an arbitrator through mutual consent, by arbitration agreement, or by court on an application made by a party to an arbitration agreement. These steps are detailed below as follows[ii]–
- If the arbitration agreement states that in the event of a dispute between the parties to the contract, all the disputes must be resolved through arbitration as specified in the agreement. The arbitration decision will be binding and conclusive. The reference in question is the act of the parties to the arbitration agreement referring their dispute to the agreed-upon arbitrator to be settled.
- If the arbitration agreement states that in the event of a dispute between the parties to the contract, all the dispute must be resolved by the authority named in the agreement which will appoint the arbitrator and refer the disputes to arbitration. The act of reference in this case is for the authority named in the arbitration agreement to appoint an arbitrator to settle the dispute.
- In case of failure to appoint an arbitrator by an authority specified in the arbitration agreement, or failure to appoint an arbitrator agreed upon by the parties to resolve the dispute, or failure to comply with the agreed arbitration agreement; The court will appoint an arbitrator and submit the dispute to the appointed arbitrator to resolve the dispute pursuant to the arbitration agreement.
As stated above, referring ‘all the disputes’ to the arbitrator means that the arbitrator has full jurisdiction over the disputes to decide over them. But if an arbitration agreement clearly states which matters are arbitrable and which are not, then the arbitrator will decide only those disputes presented that are arbitrable under the agreement.
Section 8[iii] of the Act provides the power to refer parties to arbitration where there is an arbitration agreement. Section 8 makes reference to arbitration by a judicial authority, before which a matter is brought that was initially subject to arbitration. Until the first statement on the substance of the dispute was submitted, either party to the arbitration agreement or someone claiming under him established the existence of a valid arbitration agreement. The other party must be sent to arbitration if the judicial authority is satisfied that an agreement exists on the same subject. The consent of the parties is required, court cannot do this on its own. While an application is pending before a judicial authority, arbitration may be started, continued, and awarded. The appointment of an arbitrator is discussed in section 11[iv] of the Act talks about the appointment of arbitrator. Appointed arbitrator can be of any nationality unless otherwise agreed by the parties. Both side of the parties appoint one arbitrator each and those two arbitrators will appoint a third arbitrator, who will then preside the arbitration procedure. In all arbitration agreements arbitrator numbers are always kept in odd numbers i.e., 3,5,7,9, etc in order to prevent any bias or prejudice by any arbitrator.
As a result, arbitration is used to settle a dispute that arises between the parties with their consent.
[i] The Arbitration and Conciliation Act, 1996, Act no. 26, Act of Parliament, 1996 (India)
[ii] M Govindarajan, Reference to Arbitration, Tax Management India. Com, Nov. 5,2011 https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=1499
[iii] The Arbitration and Conciliation Act, 1996, Act no. 26, Act of Parliament, 1996 (India)
[iv] Ibid
By- Shaurya Pratap Singh
Semester/Year- 6th /3rd
The ICFAI University, Dehradun