Divorcing The CPC From The Ad-Doc Domestic Arbitration Landscape

An arbitrator is appointed to adjudicate a domestic dispute. The arbitration clause is silent on the procedure to be adopted by the arbitrator to conduct the proceedings between the parties. There is no separate agreement between the parties agreeing on a procedure to be followed by the arbitrator to conduct the proceedings under Section 19 sub-section (2) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Arbitration Act”). Section 19(1) clearly states that an arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (hereinafter referred to as “CPC”) or the Indian Evidence Act, 1872 (hereinafter referred to as “the Evidence Act”). Therefore, under Section 19(3) of the Arbitration Act, the arbitrator conducts the proceedings in the manner it deems fit. Since Section 19 (4) of the Arbitration Act, clarifies that the power of the tribunal under Section 19(3) includes “the power to determine the admissibility, relevance, materiality and weight of any evidence”, the arbitrator plays it safe and applies the principles of CPC to the dispute.

More often than not applying the principles of CPC entails cumbersome rules of procedure that are applicable to regular civil proceedings in a court of law. These rules of procedure when applied to an arbitration are bound to cause significant delays. Apart from delays, the rigidity of CPC makes it difficult for both parties and arbitrators alike to deviate from the principles of CPC while deciding the dispute. Such flexibility cannot be achieved without formal or informal consensus during the proceedings.

Another complication that arises is when the High Courts and Supreme Court deliver conflicting opinions on certain provisions of the CPC which puts an arbitrator in considerable difficulty. Which would be the correct view to follow?

To illustrate, if an arbitrator applies the principles of CPC and an application for amendment of a Statement of Claim is filed under the principles akin to Order 6 Rule 17 of CPC after the Tribunal has framed issues, then does an arbitrator apply the “due diligence test” set out in the proviso to the Rule 17? The proviso to Order 6 Rule 17 would apply only after “the trial has commenced”. When the trial commences is the pending adjudication before the Supreme Court in Anita v. Anil, where the Supreme Court is faced with conflicting views of the Bombay High Court and Calcutta High Court on the exact moment when a civil trial commences.

Incorporating Procedural Rules within the Arbitration Act

While reports seem to suggest that the Union Government is considering an overhaul to the CPC in line with the Commercial Courts Act, 2015, this would have very limited impact while conducting arbitration proceedings.

The lack of procedural uniformity while conducting domestic arbitration proceedings has not gone unnoticed. In fact, the Report of the Expert Committee to Examine the Working of the Arbitration Law and Recommended Reports in the Arbitration and Conciliation Act 1996 to make it alterative in the letter and spirit (commonly known as the “Vishwanathan Report”) has noticed that different ad-hod arbitrators adopt different rules of procedure while conducting ad-hoc arbitrations and therefore the committee recommended a model procedure to be adopted by arbitrators while conducting its dispute. But the committee has further recommended that the Arbitration Council of India frame this model procedural rules.

This recommendation has been incorporated in the Draft Arbitration and Conciliation (Amendment) Bill, 2024 on which the Government had invited comments and feedback from the general public. The draft Bill has proposed insertion of a proviso in Section 19(3) which reads as under:

“Provided that in cases where arbitration is conducted other than under the aegis of an arbitral institution, the arbitral tribunal shall duly consider to carry on the arbitration proceedings as per the model rules of procedures or guidelines to be issued by the Council from time to time.”

Further, a substitution has been proposed to Section 43D (2) of the Arbitration Act enabling the Arbitration Council in sub-clause (g) to “issue the model rules of procedures or guidelines provided under the proviso” to Section 19 (3).

While it needs to be seen if both the aforementioned draft clauses find their way to a final enactment, the author suggests that rather than entrusting the Arbitration Council of India to frame “model rules of procedure or guidelines” it would be more appropriate for the legislature to draft specific rules of procedure for ad-hoc arbitrations and incorporate these rules of procedure within a Schedule of the Arbitration Act. The reason for this suggestion by the author is that “model Rules of procedure” would only be recommendatory in nature and not enforceable which could enable an arbitrator who is particularly used to applying the principles of CPC to deviate from these model rules due to the discretion given to an arbitrator under Section 19(4). This would defeat the very purpose of applying uniform rules of procedure to ad-hoc arbitrations. It would further require a judicial pronouncement from no less than the Supreme Court to clarify that the model rules are statutory in nature and are binding so far as ad hoc arbitrations are concerned.

Therefore, a statutory incorporation of such rules of procedure into the Arbitration Act, like what has been done by the Commercial Courts Act, 2015, would bring about a considerable amount of uniformity in the procedural landscape so far as ad-hoc arbitrations are concerned. These rules of procedure could be drafted by the executive in consultation with the Arbitration Council of India and various other stake holders to achieve broader consensus and uniformity in this regard. These rules could further be laid before each house of Parliament which could be passed subject to certain modifications and adoptions.

It could be argued that incorporating statutory rules of procedure into the Arbitration Act would hamper party autonomy. However, if parties agree on a particular procedure to be followed under Section 19 (2) of the Arbitration Act, then obviously, the statutory rules of procedure would not apply; but if the parties do not agree to a procedure to be followed in an ad-hoc arbitration then it would be preferable that it be made obligatory for an arbitrator to follow statutory rules of procedure to the arbitration proceedings before it.

Such rules of procedure, if incorporated into the Arbitration Act, would go a long way in achieving a certain degree of uniformity and consistency in the ad-hoc arbitration landscape.