Arbitration is one of the mechanisms under Alternative Dispute Resolutions (ADR) which deals with the ‘out of court’ settlement of disputes. Its main objective is to reduce the over-burden of cases on the Courts of Law within lesser time and is inexpensive as well. The scope for arbitration is increasing in India gradually. The purpose of this article is to analyze the relationship between the Code of Civil Procedure and Arbitration Law and to study the applicability of provisions of CPC to the Arbitration proceedings.
It is generally presumed by all that the Arbitration Law and Code of Civil Procedure are not related to each other. This was what intended by the Indian Judiciary too, but to uphold the principles of natural justice, certain provisions of CPC are still applied to the arbitration proceedings.
Arbitrationisthedisputesettlement procedure betweentwo agreeable parties to appoint an arbitrator to give a binding solution on the dispute. It is a legal mechanism to settle disputes outside the courts, thereby saving time and resources at the same time.Arbitration is one of the mechanisms under Alternative Dispute Resolution (ADR) which has got legal sanctity, where usually a third party (one or two persons) settles the dispute between the disputant parties and the whose decision is binding on the parties to the dispute.
Arbitration is an effective mechanism of expediting the resolution of disputes in these modern times when time is scarce. All disputes are therefore not arbitrable and there are certain disputes which fall outside the categories of arbitrable disputes and they are:
- Criminal offenses
- Guardianship matters
- Insolvency and winding-up proceedings
- Matters of probate, letters of administration, succession certificate, etc.
- Eviction proceeding
- Patents, trademarks, and copyright
- Anti-trust/Competition law
- Bribery/corruption laws etc.
The Relation between CPC and Arbitration Law:
It is the general opinion that Arbitration is a separate subject, complete and independent by itself, but the Code of Civil Procedure applies to the matters of arbitration which are referred before the Civil Courts under the Arbitration and Conciliation Act, 1996. Section 19(1) of Arbitration and Conciliation Act, 1996 states that the Arbitration Tribunal shall not be bound by the Civil Procedure Code, 1908 (5 of 1908), or the Indian Evidence Act, 1872 (1 of 1872).
From the reading of Sec. 19, it can be inferred that the legislature intended to curtail the interference by the Civil Courts, which are known for their delay, expensive and long judicial proceedings. “So far as the application of the CPC in the arbitral proceedings is concerned, Section 19 of the Act exempts the Tribunals from the shackles of the Code as well as to the rules of evidence contained in Indian Evidence Act, 1872 and empowers it to formulate its own rules of procedure”.
However, the CPC provides an exception to Section 19 of the Act. Sections 36 and 37 of the Act provide for resorting to civil courts. In the case of Mahanagar Telephone Nigam Ltd. vs. Applied Electronics Ltd. the Delhi High Court has observed by putting rest to the contradictory provisions that, “the parties are required to approach the Civil Courts either for setting aside the award or its effective enforcement under Sec. 36 and 37 of the Act only when the arbitral proceeding is complete and arbitral award is made”.
As stated above, if a party is not satisfied, he may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it’s enforced, apply to a court of law under Section 36 of Code of Civil Procedure, 1908 for certain matters as follows:
- For the appointment of a guardian for a minor or a person of unsound mind for arbitral proceedings; or
- For an interim measure of protection in respect of any of the following matters, namely:
(i) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(ii) securing the amount in dispute in the arbitration;
(iii) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party or authorizing any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for obtaining full information or evidence;
(iv) an interim injunction or the appointment of a receiver;
(v) such other interim measures of protection as may appear to the court to be just and convenient and the court shall have the same power for making orders as it has for, and concerning, any proceedings before it.
Further Section 37(3) of the Arbitration and Conciliation Act, 1996 denies the right to second appeal against the order passed under sub-section (1) and (2) of the Act, which does not fulfill the objective of section 115 of the Code of Civil Procedure, 1908. Therefore, the Supreme Court in its landmark judgment of I.T.I. Ltd. vs. Siemens Public Communications Network Ltd. examined the issue of whether a revision petition under the Section 115 of the Code of Civil Procedure lies to the High Court as against the order made by a Civil Court in an appeal preferred under Section 37 of the Arbitration and Conciliation Act, 1996 and held that, “…there is always a strong presumption that the Civil Courts have the jurisdiction to decide all questions of civil nature, therefore, if at all there has been an inference the same should be in favor of the jurisdiction of the court rather than the exclusion of the Code in specific terms except to the extent stated in Section 37(2), we cannot draw an inference that merely because the Act has not provided the CPC to be applicable, hence, by inference, it should be held that the Code is inapplicable.”
Section 39(2) of the Act states that on the refusal by the Arbitration Tribunal to deliver the award except on payment of the costs demanded by it, the court, may, on an application in this behalf, order that the arbitral tribunal shall deliver the arbitral award to the applicant of the costs demanded, and shall, after such inquiry, in any, as it thinks fit. The court can further order that out of the money so paid into Court there shall be paid to the arbitral tribunal through costs such sum as the Court may consider reasonable and that the balance of the money, if any, shall be refunded to the applicant; though this is not the only exception. For the conduct of Arbitration Proceedings, the parties may agree to make the tribunal rely on specific provisions of the code.
In the case of Anup Kumar Biswas vs. Baul Kumar Biswas, it was held that, unless a provision is provided for a specific procedure to be followed, a normal procedure for a High Court or Forum to which the appeal lies becomes applicable, the jurisdiction of the court concerned to deal with such appeal is a procedure under which it is governed, and the same cannot be excluded.
Order 4 Rule 11:
The application of Order 4 rule 11 of the Code, 1908 cannot be excluded in respect of an appeal preferred under Sec. 37(1) of the Arbitration Act, 1996.
In India, the CPC governs the execution of decrees whether foreign or domestic. If the award is not performed by the losing party, the successful claimant can enforce it in the same manner as if it were a decree of the courtunder the CPC. This provision includes the enforcement in the case of the Arbitration award also.
In India, the courts do not review the merits of an award in arbitration, unless it is at the request of the party and only if it is under the restricted ground of challenge laid down in the Act of 1996.
The Code of Civil Procedure, 1908 has laid down that cases must be encouraged to go in for ADR under Sec. 89(1). Various schedules in the Code places a duty on the court to provide for settlement between the parties, Under the First Schedule, Order XXXII A, Rule 3 a duty is cast upon the courts to endeavor to assist the parties in the first instance, in arriving at a settlement in respect to the subject matter of the suit.
The Second Schedule is related to arbitration in suits while briefly providing arbitration without the intervention of a court. Order 1 Rule 1 of the Schedule says that wherein any suit, all the parties agree upon any matter in difference between them shall be referred to arbitration, they may, at any time before the judgment is pronounced; apply to the court for an order of reference. This Schedule in a way supplemented the provisions of the Arbitration Act of 1899. The general principle is unquestionable that the arbitration is governed by the law of the seat of arbitration.
Judicial Decisions regarding the applicability of provisions of CPC to the Arbitral proceedings:
1. The Apex Court in the case of Municipal Corporation of Delhi vs. International Security and Intelligence Agencyhas held that “The applicability of provisions of the CPC to the Arbitral proceedings under the Arbitration and Conciliation Act shall be subject to affect any rights of a party under a special law or local law in force concerning the arbitration proceedings. And that the provisions of the Code of Civil Procedure can be applied if they are not inconsistent with the provisions of Arbitration and Conciliation Act.” A similar view was upheld by the High Court of Karnataka in the case of Sky Bag industries, Proprietor, Mr. T.K. Yahoo, and Mrs. Zubaida vs. ICDS Limited rep. By its GPA holder, K. Balakrishna Rao and Sri B.I. Sharma, Advocate and Arbitrator.
2. In Sahyadri Earthmovers vs. L and T Finance Limited and Anr The High Court of Bombayexamined the fact of applicability of CPC during the arbitration proceedings and held that “although the Code and the Evidence Act are not strictly applicable, their settled principles do apply. The court further observed that “Section 19 of the Arbitration Act, which contemplates when the parties agree upon a particular procedure to be followed by the arbitral tribunal, all are bound to follow the same, but in its absence, the Arbitral Tribunal is bound to conduct the proceeding in the manner it considers appropriate. It also means that the Arbitrator has the power to determine the admissibility, relevance, materiality, and weight in evidence through the provisions of the CPC and/or the Evidence Act, are not binding upon the Tribunal.”
“The principles of natural justice, fair play, equal opportunity to both the parties and to pass an order, interim or final, based upon the material/evidence placed by the parties on the record and after due analysis and/or appreciation of the same by giving a proper and correct interpretation to the terms of the contract, subject to the provisions of the law, just cannot be overlooked.”
3. The Division Bench of the Hon’ble Supreme Court in Mahanagar Telephone Nigam Ltd. vs. Applied Electronics Ltd. has raised confusion over the Judgement of another case, ITI Ltd. vs. Siemens Public Communications Network Ltd. wherein it was held that the applicability of provisions of the Code of Civil Procedure is not prohibited in an arbitration appeal proceedings under Sec. 37 of the Act. The matter is before the larger bench of Apex Court for reconsideration and till then, the Judgement of ITI Ltd. case will be a binding precedent.
Although Section 19 of the Arbitration and Conciliation Act, 1996 forbids the interference of the Civil Courts by stating that the arbitral tribunals shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872, the Sections 36 and 37 of the Act provide for resorting to Civil Courts. Hence, the Supreme Court and the High Courts of different states have made attempts to clarify the issue regarding the applicability of the provisions of CPC to the arbitral proceedings. Moreover, the original jurisdiction of the Civil Courts will not be barred unless otherwise it is provided by the stature. Further, it can be concluded that, though the arbitration proceedings do not have to strictly abide by the provisions of CPC, yet it should be conducted keeping in mind the basic principles of fair trial and evidence appreciation as they are the fundamentals of natural justice. And also the most awaited case before the Apex Court regarding the applicability of CPC is hoped to clarify regarding this issue.
- What is arbitration Law? Which are those disputes that fall outside the categories of arbitrable disputes?
- Explain Section.19 of the Arbitration and Conciliation Act regarding the CPC and Evidence Act.
- Explain the extent of applicability of provisions of CPC to the arbitration proceedings with the help of cases.
- What is the stand of the Courts in India regarding the applicability of CPC to the arbitration proceedings?
1.The relation between Arbitration Law and the Code of Civil Procedure from https://blog.ipleaders.in/relation-between-arbitration-and-civil-code-procedure/
2. Arbitration Law in India: Everything you want to know: https://www.thestatesman.com/india/arbitration-law-in-india-everything-you-want-to-know-1502757528.html
3. The extent of applicability of the provisions of Code of Civil Procedure, 1908 in Arbitration Proceedings: https://www.mondaq.com/india/arbitration-dispute-resolution/623960/extent-of-applicability-of-the-provisions-of-code-of-civil-procedure-1908-in-arbitration-proceedings
4. Code of Civil Procedure, 1908
5. The Arbitration and Conciliation Act, 1996.
 Arbitration law in India: Everything you want to know From https://www-thestatesman-com.cdn.amproject.org/v/s/www.thestatesman.com/india/arbitration-law-in-india-everything-you-want-to-know-1502757528.html/amp?amp/
 Mahanagar Telephone Nigam Limited vs. Applied Electronics Ltd.; AIR 2014 Delhi 182
 Relation Between Arbitration Law and the Code of Civil Procedure From https://blog-ipleaders.in/relation-between-arbitration-and-civil-code-procedure/amp/
 AIR 2002 SC 2308
 Section 19(2) of Arbitration and Conciliation Act, 1996.
 (2004) 1 Arb LR 183
 Saurabh Kulkarni vs. Tata Finance Ltd., 2003 Arb LR 217, 238 (Bom).
 The Arbitration & Conciliation Act, 1996
 The Code of Civil Procedure (Amendment) Act, 2002 Act N. 22 Of 2002
 The brace of Daoune Wind Farm vs. Alfred McAlpine Business Services,  EWHC 426 (TCC);
 Bhatia Trading vs. Bulk S & Anr., (2002) 4 SCC 105
 AIR (2002) SC 2308
 2007 (4) KCCRSN 240
 2011 (7) ALLMR 279
 Supra 6
 Supra 3