Arbitration is a dispute resolution process which acts as a means for disagreeing parties to come to an agreement short of litigation. This process involves settlement of disputes by involving third parties. It’s a dispute settlement mechanism which involves private entities such as ‘arbitral tribunals’. The primary objective or aim of it is to obtain a fair resolution of disputes by an impartial third party without any unnecessary expense or delay. Also the decision taken through the arbitration process is binding upon the parties to it.
Though one cannot opt for arbitration for any dispute, in this method the disputes that can be resolved are commodity trade disputes, commercial property disputes, rental disputes, consumer disputes or family matters. Criminal disputes or any other disputes involving public laws cannot be solved here.
The malaise of the Indian Courts articulated in Guru Nanak Foundation v. Rattan Singh and Sons, is as true today as it was so many years ago. In that case, Justice DA Desai succinctly stated:
“Interminable, time consuming, complex and expensive Court procedures impelled jurists to search for an alternative Forum, less formal, more effective and speedy for resolution of disputes, avoiding procedural claptrap and this led them to Arbitration Act, 1940.
SC on whether arbitration agreement can be binding on a third or non-signatory party to the agreement
Cheran Properties Limited v. Kasturi and Sons Limited and Ors. (April 2018)- whether a non-signatory to an arbitration agreement is bound by the same or not, the Apex Court has held that in certain situations, an arbitration agreement between two or more parties may operate to bind other parties as well. The Court’s observation was that the fact that the appellant was not a party to the arbitral proceedings will not conclude the question as to whether the award can be enforced against it on the ground that it claims under a party.