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Unit-8

Arbitration
Meaning
In legal language, arbitration means the act of setting present or
future disputes (civil nature) between two parties out of court by
one or more persons. It refers to a written agreement to submit
present or future differences to arbitration whether an arbitrator
is named therein or not.
According to M.C. kuchhal, an arbitration may be defined as
the settlement of disputes & differences relating to the civil
matters (money or property) between one party & another in a
judicial manner by the decision of one or more persons, called
arbitrator appointed by the contending parties without having
resources to a concern of law.
According to blacks law dictionary, arbitration is a method of
dispute resolution involving one or more neutral 3rd parties who
are usually agreed to be the disputing parties & whose decision
is binding.
Thus, an arbitration agreement means a written agreement
between the parties to submit present or future dispute. Hence,
arbitration is a method of alternative dispute resolution.
Importance of arbitration

Arbitration has to act judicially. The basic judicial conditions are


followed by them while coming into conclusion of the dispute.
In practice, it is more important than litigation.
The following points highlight the importance of arbitration in a
greater detail:1) Prompt decision
Except otherwise provided in the agreement, the decision shall
be rendered within 120 days from the receipt of the document.
2) Practicable
The parties of the dispute can resolve the dispute more
practically. The place of arbitration can be of their choice & they
can fix more convenient place.
3) Confidential
The secrecy of trade or business is a necessary condition for
business- men. The parties by agreement can exclude 3rd party
from the proceeding for keeping their trade secrets being
preserved.
4) More expertise service
There are certain custom & uses in different business without
proper understanding of which the decision would be inadequate
this problem is solved by appointing the persons who are expert
to understand it.
5) More economical

In litigation, the prolonged process naturally takes more


economic expenses. If there is no agreement to the contrary, the
expenses in the proceeding & remuneration of the arbitrator
shall be fixed by the arbitrator in consultation with the parties.
6) Binding force of award (decision)
The decision of an arbitrator cannot be appealed, only in
extreme cases of an application can be filled in appellate court.
To set aside the award of arbitral tribunal.
Who can refer dispute to arbitration
the parties who are directly involved in disputes & competent to
create a legal contract can refer disputes to arbitration. In other
words, the party who is directly affected by disputes & age of
maturity of sound mind & not disqualify by any law can refer
disputes to arbitration. The following persons may not generally
refer disputes to arbitration :1) Minor person or person of unsound mind
A lunatic or minor is incapable to enter into contract & is in case
of arbitration contract also.
2) Agent
An agent cannot refer dispute to arbitration unless he is given a
special right by his principal to do so.
3) An attorney

An attorney engaged in case has no implied authority to refer


disputes to arbitration.
4) An insolvent person
since, an insolvent person cannot deal with his property because
he has no authority to refer any disputes to arbitration.
5) Partner
A partner in solving in partnership business cannot refer
disputes to arbitration even on behalf of his partnership.
6) Joint stock company
A joint stock company can refer disputes to arbitration if it is
permitted by his memorandum & articles of association.
However, the following persons can refer disputes to
arbitration:a) Karta of a joint hindu family
b) Trustee
c) Heirs
d) Official assignee (receiver)
what may be referred to arbitration?
Nepalese arbitration act 1999 seems silent as to the question
what may be referred to arbitration by the disputed parties.
Generally, what types of matter may or may not be referred to
the arbitration is discussed below respectively:

1) matters that may be referred to the arbitration are as


follow:a) Matters of civil mature:- such as disputes concerning
properties, money or concerning the amount payable for
breach of contract etc.
b) Matters relating to personal rights:- such as questions of
maintain payable to a wife by the husband, questions of
terms of partition & separation between husband & wife &
so on.
c) Disputes as to dignity & reppectioor reputation.
d) Matters of time barred debt as well as disputes between
creditor & insolvent.
e) Matters relating to both the questions of fact & law.
2) Matters that may not be referred to the arbitration are as
under:a) Disputes relating to matrimonial relations relations
between the parties. E.g. suit for divorce, suit for restitution
for conjugal right.
b) Testamentary matters: such as responsibility of the will
paper written by a person on behalf of the other.
c) Matters relating to insolvency of a person: an arbitration
has no right to declare a person as insolvent.
d) Matters relating to guardianship: such as minor, lunatic
person, etc.
e) Matters relating to charity & charitable trust.
f) Criminal matters
Powers and duties of arbitration

an arbitration is a person who is appointed for the settlement of


disputes between the parties. After getting appointment, he
enjoys & exercises some rights & powers along with the
obligation of performing duties. So rights & powers of the
arbitration is entitled to exercise in the course of setting disputes
submitted before him. Unless, otherwise mentioned in the
arbitration agreement, an arbitration may, according to section
21.1 of Nepalese arbitration act, 1999 AD enjoys the following
powers & rights:
1) To ask concerned parties to appear before him & submit
documents & give particulars according to the need.
2) To record deposition of witness.
3) To appoint an expert on any specific issue to examine & to
get his opinion.
4) If a party is a foreign national due to which the award made
by the arbitration is not likely to be enforced on him, to
obtain from him a bank guarantee or any other appropriate
surety prescribed by the arbitrator
5) To exercise any specific power conferred on him by the
parties.
6) To issue preliminary order.
7) To issue certified copy of document.
8) Ti exercise any such power as conferred by this act.
Duties
In the course of arbitration proceeding , the arbitrator need to
perform some duties along with the exercise of power. The

important duties that the arbitrator is supposed to perform are


briefly discussed below:
1) To act judicially
The arbitrator should not make any discrimination between the
parties but should always play neutral role. He must try to settle
the dispute judicially.
2) Not to misconduct
The arbitrator must act in good faith & must not misconduct
through himself or by others.
3) Not to act as an agent or advocate to any party
The arbitrator must not act as an agent or a lawyer, whether he is
appointed by any party or by the court. He must not plead on
behalf of the party who appointed him.
4) To disclose material fact
A person who has some interest in matters relating to arbitration
cannot act as an arbitrator.
5) To discharge all the functions personally
The arbitrator has no power to delegate his authority to
somebody else. He must decide dispute even if he took any
opinion of any export on any issue.
6) To use all reasonable documents

While conducting arbitral proceedings & making award


thereafter he should use or examine all essential & reasonal
papers & documents.
7) To be present in all the meetings of arbitrators
Where there are two or more arbitrators appointed to settle the
disputes of the parties, all the arbitrators must participate in the
meetings hold for arbitral proceedings.
8) To give award within 120 days
Unless otherwise provided for in the agreement the arbitrator
should pronounce his award ordinarily within 120 days from the
date of submission of claims by a party.
9) To specify clearly in the award
Unless otherwise mentioned in the agreement, the arbitrator
must specify clearly the essential matter in his award.
10)

To sign the award

The arbitrator must affix his signature on the award. But if any
arbitrator could not sign it due to any reason, the rest of the
arbitrator must sign it.
11)

To make award available

The arbitrator mainly the umpire, must read out the award
before all the parties & give a copy of such award to each party.
12)

To keep the file

The arbitrator must keep the file of the arbitration proceedings.


He must refer the file to the district court for safe custody.

revocations of arbitrators authority


revocation of arbitrators authority means to restrict a person
appointed as an arbitrator from initiating arbitral proceeding. It
is also termed as revocation of an arbitration agreement.
Because of this, right of the arbitrator to arbitrate gets
discharged.
Arbitrators authority ordinarily remains static unless & until
arbitration function are performed & the decision made by him
is also binding. This is the general rule as to arbitration.
However the parties to the arbitration agreement may revoke the
arbitrators authority by applying any of the following way:1) by mutual agreement of the parties
basically, in the following two circumstances the parties can
revoke the arbitrators authority:
a) if the arbitrator has been appointed for arbitration but the
dispute has not bot been yet referred.
b) If the dispute has been referred, but the award has not yet
made.
2) By permission of the court

Generally, authority of arbitration is irrevocable. But in certain


circumstances, that may be referred by the permission of a court.
It is possible only when the arbitrator doesnt perform his duties
& crosses his rights & jurisdication to against the natural law of
justice, acts in the biased manner, delays arbitration, commits
irregularities & mistakes, is no more qualified & losses
qualification etc.
Meaning of award
award means judgement or final decision made by arbitrator or
umpire on the basis of all the matter referred to arbitration.
The Nepalese arbitration act 2055 has not defined the term
award, according to section 2 B of the previous indian
arbitration act 1940, an award is a judgement pronounced by
an arbitrator.:
From the above definition, it is clear that an award is the
decision or the final judgement of the arbitrator. Hence, the
degree on decision or determination, the judgement or
settlement or conclusion of the arbitrator can be termed as
award which is known as the judgement in the regular court
context.
essentials of a valid award
so as to make the award valid, it should contain the following
elements:1) award in writing

an award verbally made is not valid. According to section 27 of


Nepalese arbitration act 2055, the following matters must be
specified in the award:a) if any party has questioned as regards to the jurisdiction of
the arbitration existence as to existence of such jurisdiction.
b) Brief statement of the matters refer to arbitration by parties.
c) The arbitrators award & the reasons & grounds that he had
taken for reaching such award.
d) Matters as regards to the amount to be realized or
compensated.
e) Interest on amount to be realized an additional rete of
interest accrued due to non-enforceable of the award within
45 days from the date on which they receive a copy.
f) Place & date of a award.

2) Period of award (section 24)


Unless otherwise mentioned in the agreement the arbitrator
should pronounce his award ordinarily within 120 days from the
date of submission of disputes.
3) Curtain & final award
The award of the arbitrator must not be vague, uncertain or
unclear. Once the award is made, the arbitrator shouldnt receive
it again unless they get order from the shouldnt receive it again
unless they get order from the appealable court to do so.

4) Binding award
In the course of arbitration proceedings, if a party dies or
disappears or becomes insane, all his rights & liabilities pars to
his hire or legal representatives.
5) Restriction on repeating award
A valid award is final decision & it shouldnt be repeated by the
arbitrator himself or the court.
voidable award
the award of the arbitrator being final & binding in not generally
valid, ordinarily, the court also does not cancel the award. So ,
the parties of the agreement are bound to execute the award.
According to Nepalese arbitration act 2055 section 30.1, :any
dis-satisfied party may file a petition to the appealable court to
make void the award within 35 days from the date of award or
the day the notice of award is received.
On receipt of the petition so submitted, if the court finds the
following faults in the arbitral award, it may according to
section 30.2 may declare the award void.
a) If at the time of agreement, one of the parties was
incompetent to contract due to any reason.
b) The party is not given proper & timely notice for the
appointment of arbitrator or arbitral proceedings.

c) The arbitrator has given his decision out of jurisdiction


specified to him.
d) The mode of composition of arbitration of procedures
werent made in accordance with the agreement or in
accordance with the law.
Provision relating to madhyasthata ain in Nepal
The formal history of arbitration in Nepal dates back to the year
2014 B.S. but arbitration act 2055 of Nepal has 6 chapters, 44
section & 1 schedule. The major provisions of the act can be
shown under certain headings as under:1) definition
the act has defined a no of technical terms under section 2 used
in the act & can be used while handling case of arbitration.
2) Arbitral dispute
The act has categorized civil matters of commercial nature in
arbitral able dispute & can be taken out from the court for
settlement through arbitration.
3) No of appointment
Except otherwise is agreed, in contrary, each concerned party
will appoint one arbitrator and the appointed arbitrators will a 3rd
person as an arbitrator. Such a person will be the arbitrator of
odd number.
4) Provision as to oath & qualification

the arbitrator has to take oath & to hold essential qualification


under law.
5) Rights & duties of arbitrator
Except otherwise agreed, the general rule is that, power & rights
of an umpire or arbitrator are determined by the agreement and
the law of arbitration. The act has fixed a no of duties of
arbitrator.

6) termination of arbitration
by going through the different positions stipulated in the act,
unless otherwise agreed by the parties, arbitration is terminated
after giving award or with the event of the filing the case.
7) Working procedure
The arbitrator has to work in line of procedures that have been
fixed by the agreement or by the act in the silence of the
agreement.
8) provision as to award
as stated in section 24, award must be made within 120 days
from the date of submitting rejoinders. The disputing parties
have to execute award within 45 days from the ate of receipt of a
copy of the award.
9) Invalidity of the award

The award of arbitrators may be made void through the court.


The grounds upon which it can be invalidated in competence of
the parties to sign an agreement, it is unlawful or unclear, excess
exercise of jurisdiction, against agreement, non-arbitrability,
against public policy or morality etc.