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Online Arbitration- India's Step Towards Digitisation And Boon In Adversity

Covid19, the global pandemic has caused disruption in all facets of life worldwide. With everything else logging on during Covid-19 outbreak, High Courts and the Supreme Court of India have also responded by suspending judicial and administrative work, while making exceptions for urgent matters.

Not only this, amidst Covid19, the Hon'ble Supreme Court of India took suo-moto cognizance by extending limitation under various laws[1]. Also, the Hon'ble Supreme Court including various High Courts, District Courts have resorted to different digital platforms to conduct online hearings in urgent matters.
  • Is 2020 turning into a digital year for almost all sectors across the world?
  • Can arbitrations be fully digitized and whether the proceedings can be conducted and concluded online?
Covid-19 outbreak has undoubtedly changed the dynamics and turned many of us into thinktanks. Probably the most searched topic of 2020 is Covid-19, has made us more receptive to words such as “Change” and “Accept”. In consonance with changing times, the use of technology can be advanced into the procedural aspect of arbitration to ensure cost effective, efficient and speedy manner in which arbitrations can be conducted in accordance with substantive law enumerated under the Arbitration & Conciliation Act, 1996.

E-Dispute Redressal Mechanism (E-DRM)

In India where courts are overburdened and the backlog of cases clogging court rooms run into lakhs, the argument for E-DRM is strong. Access to justice in India is a challenge and resolving disputes is evidently a pain point, considering the time, money and efforts involved.

While Arbitration was intended as an alternative to court for certain kinds of disputes, that mechanism itself has become cumbersome and more often than not an expensive affair. E-DRM offers a more accessible, transparent and faster option, particularly for companies dealing with high volume and low value transactions. E-DRM can be used across sectors - from banking, finance to insurance - and also for e-commerce disputes.

Innovation, including change and acceptance are two sides of a coin and also, the need of the hour. Over several years but mostly in the last couple of weeks, most of us have witnessed a paradigm shift in the traditional to modern and now digitized way of working under lockdown. E-hearings, today, although being considered as a make-shift arrangement, is the need of the hour and also, the future, the wait for which is finally over.

The best part of arbitration is that parties to an arbitration agreement are free to agree on procedure and manner of conducting proceedings. The benefits of online arbitration include but are not limited to speedy conclusion of proceedings, saving of costs such as, venue booking cost, travel cost, time, convenience, etc.

The need for expeditious resolution of disputes is an evolving process, which has been appreciated by both the bar and bench. Infact, even legislature has been conscious of this aspect and has time and again been introducing procedural amendments.

Section 29B was introduced vide 2015 amendment, which provides for fast track procedure. While introducing the fast track procedure, legislature was conscious of the ongoing dilatory tactics, procedure hurdles, etc. and therefore, provided an option to the parties to opt for the said procedure either before or at the time of appointment of the arbitral triunal. Fast track is a summary procedure in letter and spirit, where the arbitral tribunal can decide the disputes between the parties on the basis of documents filed before it. Oral arguments are really not required.

Almost 95% of the disputes between a Lender and Borrower(s) emanates out of payment defaults and breach of terms of loan agreements, documents executed between the parties. Therefore, such disputes, which are part of bulk arbitration matters and where the issue / disputes are common between a lender and borrower(s), can be efficiently and effectively decided by the Arbitral Tribunal through E-DRM.

In this article, we are focusing on the following 2 scenarios keeping in mind companies such as NBFCs and banks which deal with bulk arbitration cases:

  1. Scenario 1 - Whether Arbitrations can be conducted online in cases where parties have already executed arbitration agreements and the dispute resolution clause or the arbitration clause does not provide for online arbitration?
  2. Scenario 2 - Whether parties can agree to an online procedure of conducting arbitration while executing arbitration agreements?

For Scenario 1, following steps can be taken by parties:

  1. Letter can be exchanged between the parties proposing amendment in the arbitration clause to incorporate online procedure including venue and seat of arbitration;
  2. Letter to specifically incorporate acceptance by both the parties to have their disputes resolved by resorting to fast track procedure through E-DRM as contemplated in Section 29B (1) of the Act.
  3. While amending the arbitration clause, E-arbitration can be specifically introduced while enunciating the procedure of appointment of arbitrator and the manner in which proceedings can be conducted online;
  4. Manner of conducting online proceedings can be specifically outlined in the arbitration clause. Alternatively, a detailed E-DRM can be agreed upon between the parties which can form part and parcel of the arbitration agreement as an annexure;
  5. E-DRM / procedure can outline the filing procedure such as all filings to be done electronically via emails or secured applications in a time bound manner, schedule of filings can be decided by the arbitrator in consultation with the parties during the first online hearing, no hearing required for any filings;
  6. All hearings to be conducted online through a secured network platform;
  7. Awards can be passed by the arbitrator online, which for practical purposes, for challenge and execution, can be considered as award passed in terms of arbitration between the parties qua seat and venue.

For Scenario 2, following can be explored by parties:

  1. Arbitration clause can be amended to incorporate both the physical as well as digital arbitration procedure making it convenient for the parties to adapt either of the procedures;
  2. Arbitration clause to specifically incorporate acceptance by both the parties to have their disputes resolved by resorting to fast track procedure through E-DRM as contemplated in Section 29B (1) of the Act.
  3. E-DRM can be introduced while enunciating the benefits such as speedy conclusion, saving of cost such as, venue booking, travel cost, time, convenience;
  4. Manner in which the proceedings to be conducted can be specifically outlined in the arbitration clause and a detailed E-DRM can be explicitly agreed upon between the parties, which can form part and parcel of the arbitration agreement as an annexure;
  5. All filings can be done electronically in a time bound manner via email or online secured applications, and the schedule of such filings can be decided by the arbitrator in consultation with the parties during the first online hearing;
  6. All hearings to be conducted online on a secured network platform;
  7. All orders including directions and award can be passed by the arbitrator online, which for practical purposes, for stamping, challenge and execution, can be considered as award passed in terms of arbitration agreement between the parties qua seat and venue.

E-Arbitration - The Model

In our opinion, invocation, procedure, conclusion and enforcement are the key ingredients to any valid arbitration. Parties need to ensure that e-rules and procedure for conducting online Arbitration are unambiguous and explicitly contained in the arbitration agreement. The other important aspect, which would need deliberation and clarity is passing & enforcing an award passed online:
  1. Whether the award passed by an arbitrator / arbitral tribunal online is a legally enforceable award?
  2. How can a party enforce an award passed online?
  3. Jurisdiction of courts in execution or challenge of award passed online?

Section 5 of the Information Technology Act, 2000 provides that the digital signatures have the same effect as paper signature, which fulfils the criteria of section 31(1) of the Arbitration and Conciliation Act, 1996.

The signed copy of the arbitral award passed online can be provided to the parties by arbitral tribunal electronically via email and the actual signed copies can be simultaneously sent through post or the arbitrators can also put their digital signatures and provide accuracy and integrity to the award. The original signed copy received either received by post or it's a digitally signed awards, can be filed before the courts, for the enforcement of the arbitral award.

There won't be any change in the procedure for enforcing an online award. Pursuant to passing of valid award online, it can be enforced in accordance with procedure outlined in the Arbitration Act read with the execution procedure enshrined under Code of Civil Procedure, 1908 (CPC).

In Sundaram Finance Ltd. v. Abdul Samad and Anr[2], the Hon'ble Supreme Court has clarified that execution proceedings can be invoked by an award holder before any court in India where assets of the judgement debtor are located. Commercial courts established under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 (“Commercial Courts Act”) would have jurisdiction in cases whether the subject matter of the arbitration is of a specified value[3] and pertains to monetary award. For other cases, the jurisdiction of commercial division of a High Court would be applicable as per CPC.

Online arbitration is not different from that of conventional arbitration model. With changing times and technology, E-DRM is the future of arbitration, which is inevitable. Sooner the companies adapt to this futuristic model of conducting arbitration, better and advantageous it would be for such companies to provide speedy disposal and resolutions to its customers both in terms of costs and time. E-arbitral awards in our opinion would have an equivalent effect as that of traditional arbitral awards and would be final and binding upon parties.

  1. Writ Petition (Civil) No.3/2020 In Re: Cognizance For Extension of Limitation
  2. (2018) 3 SCC 622
  3. Commercial Courts Act, s 2(1)(i), “Specified Value”, in relation to a commercial dispute, shall mean the value of the subject-matter in respect of a suit as determined in accordance with section 12 which shall not be less than three lakh rupees or such higher value, as may be notified by the Central Government”
    Shakti Bhog Foods Ltd. Vs. Kola Shipping Ltd.” AIR 2009 SC 12
    Trimex International FZE Ltd. Vs. Vedanta Aluminum Ltd.” (2010) 3 SCC
Written By:
  1. Prince Pawaiya - GNP Legal,
  2. Onkar M. Gujar - GNP Legal
  3. M.B. Kale - GNP Legal &
  4. Shweta Sharma, Advocates - GNP Legal
This article is not meant to be legal advice and shall the reader have specific question in relation to an agreement, the reader is encouraged to reach out to GNP Legal at [email protected], [email protected] GNP Legal is a full-service law firm with its offices in Mumbai and Delhi. With a team of enterprising lawyers, GNP Legal provides bespoke, creative, timely and practical legal solutions, keeping in mind the objectives and requirements of its clients. GNP Legal has been advising and representing various Indian and multi-national corporations on a host of legal issues. 

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