Arbitration, an age old concept in India, is a part of Alternate Dispute Resolution (ADR) with other popular ADR processes like Conciliation and Mediation. In India Alternate Dispute Resolution is governed by the Indian Arbitration and Conciliation Act 1996 which is created on the lines of the Model Law of the UNCITAL (United Nations Commission on International Trade Law). This article identifies certain problem areas of the Arbitration Laws of India, highlights some of the revolutionary decisions by Supreme Court and points out some of the misuses as well.
Over the past decade, the lofty objective of enacting this Act stands substantially diluted due to various reasons as follows:
a.Inability of parties to exercise their rights explicitly provided under the statute
b.The overdependence on retired judges as arbitrators
e.Legal professionals treating arbitrations as an extension of the court proceedings and converting them to lengthy trials.
f.Exercise of appellate power under Section 34 of the Act – a virtual practice to challenge each and every award irrespective of whether it fits within the limited grounds specified in Section 34.
These render nugatory the stated intent of creating an arbitral process that is fair, efficient and capable of meeting the needs of the specific arbitration resulting in an explosion of litigation as against the stated intent of reducing the same.
The Supreme Court, while dealing with such rival contentions has held that interpretation of a contract may fall within the realm of the arbitrator. The Court while dealing with an award would not reappreciate the evidence. An award containing reasons also may not be interfered with unless they are found to be perverse or based on a wrong proposition of law like an error apparent on the face of the award. If two views are possible, it is trite, the Court will refrain itself from interfering. Jurisdiction of the court to interfere with an award made by an arbitrator is limited. On contrary to this, in recent times, the courts were impelled to have fresh look on the ambit of challenge to an award by the arbitrator so that the award does not get undesirable immunity.
The Court also quoted it is correct that courts shall not ordinarily substitute their interpretation for that of the arbitrator. It is also true that if the parties with their eyes wide open have consented to refer the matter to the arbitration, then normally the finding of the arbitrator should be accepted without demur. There is no quarrel with this legal proposition. But in a case where it is found that the arbitrator has acted without jurisdiction and has put an interpretation on the clause of the agreement which is wholly contrary to law then in that case there is no prohibition for the courts to set things right.
While the conclusion may not be so relevant, it is the reiteration of the aforementioned principles that is reassuring. One can only hope that this would guide the hands of all judicial authorities while entertaining appeals under Section 34.
Misuse of the process of Arbitration by companies and parties is also not unheard of and is even prevalent in international commercial arbitration where the arbitration agreement or the arbitration clause may stipulate sole and mixed arbitral commissions. These depend primarily on whether the disputes are to be referred to a single arbitrator or the parties may appoint an arbitrator each with an umpire presiding over the arbitration commission.
Problems as discussed again arise when the party to the agreement in power may force the other party or parties to sign an arbitration agreement or arbitration clause created to cause pecuniary or territorial discomfort to ensure a quicker or unfair settlement. The conclusion is obvious. If arbitration is to survive, ADR lawyers must insist on institutional arbitration to ensure Alternate Dispute Resolution becomes a better alternative to Court litigation.
The USP of resolving disputes through Arbitration was its relative simplicity, economy, speed and privacy. However, over the time it has been observed that Institutional Arbitration through Associations or Societies like The Indian Council of Arbitration (ICA) , Federation of Indian Chambers of Commerce and Industry (FICCI), FICCI Arbitration and Conciliation Tribunal (FACT), The Associated Chambers of Commerce and Industry of India (ASSOCHAM) etc. is the best since they conduct Arbitration as per rules laid down which have stood the test of time and where the reputation of the Arbitrator is impeccable while at the same time the parties to arbitration know very clearly what the cost of the said arbitration be.
It is unfortunate that most litigants and parties do not opt for institutional arbitration which has time and again proven its mettle in providing fast, economical and completely impartial resolutions of disputes within the ambit of strongly laid down process and guidelines.
The commission paid to the Real Estate agent is a serious amount of money and a concern in any transaction involving the sell of Real Estate. Where did this six percent commission come from?
The idea of a 6% Real Estate commission being paid to the agent originated during the 1940s when local Real Estate Boards openly engaged in price fixing to establish a standard rate. This process was an out and out case of an unfair practice, but the 1940s was a time when the attention of the country was directed to some serious external matters and the idea took hold and spread quickly through the industry.
In the early 1950s, the Supreme Court ruled that an established 6% commission was illegal. Rather than open up commissions to a more competitive and free market system, the Real Estate Boards merely shifted gears with a bit of fancy linguistic footwork and began to call the 6% commission the suggested amount. During the 1950s and 1960s, they managed to get away with this practice without much trouble as the majority of real estate agents complied with the suggestion.
In the 1970s lawsuits brought against the Real Estate Boards effectively put the skids on this practice. The Real Estate agents commissions were opened up to competition without the Boards either being able to mandate or even suggest 6% as the carved into stone rate. However, the rate did not alter very much in the years following these court cases. Although the rate may not have been carved into stone, it was pretty much established in the Real Estate market as a standard.
Generally, competitive markets benefit consumers. As long as someone is willing to offer a discounted rate, it would seem that the consumer stood to save money. However, the proponents of a standard 6% rate commission point to such things as health care to argue that the standard rate may actually be helping the consumer by holding the commission down to 6% rather than propping it up to that level. Although the cost of health care is not regulated, the general trend has been straight up off the charts.
Real Estate agents would be quick to point out that if you were to take a close look at just about any service or product being offered or sold in the 1940s, you would find a very serious increase in cost to the consumer. Except for Real Estate commissions which are still right around 6%. The amount being paid to the agents has increased greatly merely because the value of the property being sold has increased. Today, the internet has been responsible for a few chips in the rock of the 6% commission by offering some straight fee or reduced rate services that allow the sellers to list their own properties. The results are still mixed and the 6% commission is still the standard.