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Online Arbitration In India

Published on 11 May 2016 by Team

With technological advancement at its zenith, the number of e-commerce companies is growing to carry with its rising number of consumer disputes which need to be resolved in few weeks or month so that it doesn’t create a hassle for the effective functioning of such companies. India has two ways of dispute resolution system - either through litigation or through arbitration. Litigation is very expensive and time taking method of resolution of the dispute. However, Arbitration proves to be a speedy settlement mechanism. Despite 1996 Act, there is a backlog of civil cases pending. This mechanism can further be improved by adopting online Dispute Resolution System.

Online Arbitration as depicted by its name means a resolution of disputes by using technology. It has to be understood by Arbitration & Conciliation Act, 1996 and Information Technology Act, 2000. (Section 3 & 4)

Mechanism of Online Arbitration

Online arbitration comprises mainly of an arbitration agreement, arbitration proceedings and arbitral award.

Arbitration Agreement

For referring the case for online arbitration there are three modes- either incorporation online arbitration clause in the agreement, Secondly, a written contract providing for online arbitration; and lastly, reference to online arbitration after the dispute has arisen. According to Section 7 of Arbitration Act, arbitration agreement should be in writing which includes an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or an exchange of statements of claim and defense in which the existence of the agreement is alleged by one party and not denied by the other. The question here arises is whether an agreement entered online will be valid?  For that Section 4 of Information Technology Act, 2000 states that agreement in writing is deemed to be satisfied if the agreement is in electronic form and is accessible to be used for a subsequent reference. The arbitration agreement entered into between the parties by exchange of emails through no formal agreement in writing signed by the parties is valid and enforceable as the validity of such agreements is upheld by Hon’ble Supreme Court of India in the matter of “Shakti Bhog Foods Ltd. Vs.Kola Shipping Ltd.” and “Trimex International FZE Ltd. Vs. Vedanta Aluminum Ltd.”. Also, such agreement is admissible as evidence as per Section 5 of Information Technology Act, 2000.

However other details as prescribed under the act relating to the place of arbitration, the law applicable and other rules should be prescribed both in an online and offline arbitration agreement.

Arbitration Proceeding

The arbitration proceeding as in case of conventional arbitration can be in conducted either ad-hoc or through the institution. It is solely at the discretion of parties how they want to conduct arbitral proceeding. They have to spell out rules in their agreement if they want to conduct it online. As prescribed in the act parties have to submit a statement of claim and defence as per Section 24 within prescribed limit online. The hearing and cross-examinations of a witness can take place through video conferencing. The place of arbitration in online arbitration is virtual. Such proceedings face few challenges relating to power failure, system failure and link failure. For that International Chambers of Commerce has prescribed few standards:-

  1. The rules for giving file names with a unique name/identifier for each electronic document. 
  • To identify the originator,
  • Class of document
  • Place of arbitration
  1. This file naming system shall be used throughout the arbitration for all electronic documents.
  2. The file name and the date of the original document (e.g. the date is shown on a letter that is submitted as evidence) shall appear on the first page of the electronic document, either at the top right corner or at the bottom.
  3. If data loss occurs and the affected participant cannot itself reconstitute the lost electronic documents, the other participants shall help to reconstitute the electronic file(s) by providing copies of the pertinent files that they control
  4. Mode of transmission and storage of emails
  5. Whether any confirmation of receipt of email has to be given.
  6. The file format for sending attachments, like. PDF, Doc, HTML, ASCII
  7. Rules for audio and video conferencing-
    • Day and hour and applicable time zone; 
    • Places where a conference front-end is required;
    • Who shall participate and number of persons at each front-end;
    • Special requirements, such as visualization of documents;
    • Any other requirements.

Arbitral Award

Section 31 of the Arbitration and Conciliation Act, 1996 deals with form and contents of the arbitral award. Such an award must be in writing and signed by the members of the arbitral tribunal. Such an award must state the reasons upon which it is based unless the parties have agreed that no reason is required or the award is pursuant to the settlement between the parties Section 31(5) states that after the arbitral award is made, a signed copy shall be delivered to each party.  The award can be issued through email by sending scanned copies online. The signature of the arbitrator on the award can be a digital signature. Section 15 read with Section 11 of IT Act, 2000 states that digital signature has same evidentiary value as of handwritten signatures. It can be attributed to original attributor of that document.

The enforcement of an award can be as per Section 36 of Act which states that it will be enforced in the manner provided under Civil Procedure Code. For enforcement of the award, the original signed copy received by post or the digitally signed awards, as the case may be, can be filed before the courts. As per the functional equivalent approach promoted by Model Law of Electronic Commerce, electronic documents can be considered original for enforcement.

Online Dispute Resolution mechanism in India is at a nascent stage and various steps need to be taken to implement it successfully. However, it is an effective and inexpensive method of the mode of settlement which is accepted as per Indian laws. Precautions should be taken while drafting arbitration agreement. Online arbitration can prove to be boon for disposal of backlog cases by Indian judiciary. For effective implementation and removing difficulties in electronic communication, parties should formulate rules in the agreement itself.

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Tags: Arbitration 

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