In the contemporary commercial landscape, it is observed that the corporate entities are increasingly opting for arbitration over traditional court litigation for dispute resolution. It is due to the more streamlined and more flexible process that the arbitration provides over the traditional litigation. However, a in respect to this, a pivotal question arises: should the parties be inclined towards including an arbitration clause in their contracts, or should they aspire to resolve their disputes under the provisions of the Commercial Courts Act?[1]

This dilemma is particularly significant for commercial litigants, who have to consider and take note of the various facets before coming to the conclusion. The key considerations often revolve around the time efficiency of the dispute resolution process along with the associated costs and the practical feasibility of each method.

It is pertinent to assert that arbitration is primarily weighed over the typical litigation process due to its speed and confidentiality aspects, but at the same time, it can be expensive due to arbitrator fees and procedural costs. While, litigation under the Commercial Courts Act, known for its stringent timelines and cost-saving measures, offers a more predictable legal framework.[2]

Having an understanding of dynamics is important for businesses that are aiming of choosing the most effective dispute resolution mechanism aligning with their operational/strategic goals.[3]

Arbitration Timelines and Costs

Under the Arbitration and Conciliation Act of 1996, the timeline for concluding an arbitration proceeding is set at one year, but this is extendable to additional six months. However, this time line starts when the pleadings are completed and this is the phase that is in itself, time consuming.[4]

During this preliminary stage, it is important for the parties to file a statement of claim and a statement of defence. This process often involves numerous extensions granted by the arbitration tribunal. also, these extensions are important for various factors, for example, the complexity of case, the availability of relevant documents or scheduling conflicts.[5] [6]

If there is a situation that the parties involved are not agreeing to further extensions, the only option that they can choose seeking the court's intervention. In general practice, the court are much accommodating in these situations, as they often grant the additional extension above the original timeline. But the only cons is that this has in some cases led to the arbitration process exceeding the 24-month limit, further delaying the dispute resolution.[7]

Challenges in Commencing Arbitration

Initiating the arbitration proceedings can pose significant challenges, especially in appointment of arbitrators and this is a rare aspect for the parties that are involved in the mutual agreement on the selection of the arbitrators. Due to this, the parties often desire court's intervention.[8]

When parties cannot agree on an arbitrator, the responsibility falls to the courts to make the appointment of the same and also, it is to be clarified that this process primarily depends upon the jurisdiction which lead to significant delays. In some jurisdictions, the arbitrators are elected within a month and in some jurisdictions, it might extend over a year.[9]

If we observe these, it is seen to be detrimental to the parties as they are adding up the extra time to the already lengthy process of the arbitration proceedings. Th extended timeframes and timelines for the appointment not only hinder the easy dispute resolution but they also increase the costs as the parties generally incur the additional expenses while waiting for the appointment of the final arbitrator.[10]

These particular challenges in commencing the arbitration highlight the complexities and potential inefficiencies within the current system. It pertinent to assert that the parties should navigate these shortcomings to initiate the arbitration process, which must add proper time and cost burdens.[11]

Commercial Courts Act: A Comparative Advantage

In contrast to arbitration, a civil suit under the Commercial Courts Act of 2015 offers a more structured and time-bound process, especially in disputes involving a matter of specified value. The Act imposes strict rules and time frames for various stages of litigation, including a strict deadline for filing a written statement, which is initially set within a specific period but is extendable up to total of 120 days.[12]

During case management hearings, the courts generally incline themselves to these timelines, advocating a prompt aversion to adjournments or any extensions. This rigorous approach ensures that the legal process progresses efficiently, minimizing unnecessary delays.[13]

It is pertinent to note that the courts are now obligate themselves to deliver judgments within 30 days of the conclusion of arguments, with an extension of another 30 days if necessary. This inclination to the timely adjudication displays the Act's effectiveness in easy dispute resolution of, providing a reliable and quick alternate option to the generally-prolonged arbitration process.[14]

Pre-Mediation and Cost Efficiency

The Arbitration and Conciliation Act offers provisions for conciliation, giving the parties the option of negotiation and the amicable dispute settlement instead or before resorting to formal arbitration or court proceedings. Similarly, the Commercial Courts Act includes provisions for pre-mediation setups. In this, the parties can opt for mediation to resolve their disputes before going to the court. And if these pre-litigation efforts or attempts don't do any good, then the parties go to the court to file their cases.[15] [16]

Considering the aspect of cost efficiency, the Commercial Courts Act provides mechanisms such as Summary proceedings and Summary judgments. These processes avoid the lengthy and expensive trial processes as they allow quicker resolutions. This plays an important role in overall cost reduction along with parties' entitlement for application for commercial costs under Sections 35 and 35A of the Act. Also, it is true that the costs incurred under these provisions are primarily lower compared to the expenses involved in the arbitration including the arbitrator fees, administrative charges, and other related expenses.[17]

Throught these provisions, the Commercial Courts Act aims to provide a more cost-effective and efficient dispute resolution process, making it more parties friendly alternative to arbitration for many commercial litigants.[18]

Conclusion
It is pertinent to assert that the Commercial Courts Act has ended the redundant process of taking adjournments due to which domestic arbitrations dominated the process. By advocating about the faster dispute resolution process, the Act is more efficient in handling the commercial disputes.[19]

If we consider both time and cost efficiency, the commercial litigants can make better decisions in regards to whether they should include arbitration clauses in their agreements or should they go for the dispute resolution process under the Commercial Courts Act.

The development of these legal frameworks encourages fast-paced to provide, cost-effective justice while addressing the practical challenges of commercial litigation. By resorting to these, tis Act balances the need for quick resolutions with the complexities of modern commercial disputes.[20]

End Notes:

1. Anil Xavier, Interplay Between Commercial Courts Act 2015 And Arbitration & Conciliation Act, 199, IIAM, pg.1, 1-19, 2019, IIAM-ARB
2. ibid
3. Century Law Firm, Commercial Courts Act, 2015: Ultimate Guide For Businesses & Legal Professionals, MONDAQ, (24 November, 11:20 A.M.), Commercial Courts Act, 2015: Ultimate Guide For Businesses & Legal Professionals - Arbitration & Dispute Resolution - Litigation, Mediation & Arbitration - India
4. ibid
5. Anil Xavier, Interplay Between Commercial Courts Act 2015 And Arbitration & Conciliation Act, 199, IIAM, pg.1, 1-19, 2019, IIAM-ARB
6. Vikash Kumar Singh, Arbitration In India: Recent Developments And Key Challenges, IJCRT, Vol. 11, pg.86, 85-88, 2023, IJCRT2307247.pdf
7. ibid
8. Palash Taing and Moonmoon Nanda, Commercial Courts Or Arbitration: An Unpopular Opinion On Why Opt For Commercial Civil Courts Over Domestic Arbitrations In India, MONDAQ, (24 November, 11:20 A.M.), Commercial Courts Or Arbitration: An Unpopular Opinion On Why Opt For Commercial Civil Courts Over Domestic Arbitrations In India - Arbitration & Dispute Resolution - Litigation, Mediation & Arbitration - India
9. ibid
10. Century Law Firm, Commercial Courts Act, 2015: Ultimate Guide For Businesses & Legal Professionals, MONDAQ, (24 November, 11:20 A.M.), Commercial Courts Act, 2015: Ultimate Guide For Businesses & Legal Professionals - Arbitration & Dispute Resolution - Litigation, Mediation & Arbitration - India
11. ibid
12. Palash Taing and Moonmoon Nanda, Commercial Courts Or Arbitration: An Unpopular Opinion On Why Opt For Commercial Civil Courts Over Domestic Arbitrations In India, MONDAQ, (24 November, 2024, 11:20 A.M.), Commercial Courts Or Arbitration: An Unpopular Opinion On Why Opt For Commercial Civil Courts Over Domestic Arbitrations In India - Arbitration & Dispute Resolution - Litigation, Mediation & Arbitration - India
13. ibid
14. ibid
15. Payal Chawla, Navigating Commercial Disputes: The Draft Arbitration and Conciliation (Amendment) Bill, 2024 - An Analysis, BAR & BENCH, (24 November, 2024, 12:30 P.M.), Navigating Commercial Disputes: The Draft Arbitration and Conciliation (Amendment) Bill, 2024 - An Analysis
16. Vikash Kumar Singh, Arbitration In India: Recent Developments And Key Challenges, IJCRT, Vol. 11, pg.86, 85-88, 2023, IJCRT2307247.pdf
17. Vikash Kumar Singh, Arbitration In India: Recent Developments And Key Challenges, IJCRT, Vol. 11, pg.86, 85-88, 2023, IJCRT2307247.pdf
18. ibid
19. Anil Xavier, Interplay Between Commercial Courts Act 2015 And Arbitration & Conciliation Act, 199, IIAM, pg.1, 1-19, 2019, IIAM-ARB
20. ibid

Written By: Mridul Sinha