Arbitration is an open-ended mechanism of resolving disputes permitting parties to adjudicate their disagreements beyond the processes of traditional court. Its fundamental strength lies in procedural autonomy in that parties themselves may make decisions on conducting the arbitration according to their own set of rules. Section 19 of Arbitration and Conciliation Act, 1996, reflects the principle in permitting parties the leeway to set procedural rules in addition to also permitting the arbitral tribunal room in matters relating to procedure.
Breakdown of Section 19 of Arbitration and Conciliation Act, 1996
Section 19 of Arbitration and Conciliation Act, 1996 establishes both arbitral tribunal freedom in procedures and independent powers for arbitration parties. There is flexibility under this section to determine arbitration procedures because it moves away from established courtroom procedures.
Sub-section (1): Arbitral Tribunal Not Bound by Procedural Laws
Key Points:
This subsection excludes arbitration proceedings from the strict application of procedural and evidence rules that govern normal court trials.
Code of Civil Procedure (CPC), 1908 regulates court litigation, prescribing intricate procedures regarding pleadings, evidence, conduct of trial, and judgments.
Indian Evidence Act, 1872 provides stringent regulations with regard to admissibility, relevance, and proof of evidence in court cases.
By not tying arbitration to such legislation, the Act provides more room for flexibility and efficiency in conflict resolution.
But tribunals can still refer to the principles of these laws as a guideline, but not as obligatory.
Implications:
Arbitration can proceed faster without procedural delays.
Arbitrators can adopt simpler methods to ascertain facts and evidence.
No requirement to follow formal rules of presenting evidence, cross-examinations, etc.
For instance, a tribunal may accept email, WhatsApp message, or spoken words as proof even if not strictly in compliance with the Indian Evidence Act.
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Sub-section (2): Freedom of Parties to Decide Procedure
Grants complete autonomy to the parties to jointly determine the procedural guidelines for arbitration.
This implies the parties can decide upon:
The language of the proceedings
The mode of evidence (documents, witnesses, affidavits, electronic records)
The timeline of submissions, hearings, and awards
The place and mode of hearings (in-person, online, hybrid)
The rules to be adopted, like institutional arbitration rules (e.g., ICC, SIAC, LCIA) or any other tailored procedures.
Implications:
Promotes flexibility and enables parties to design a dispute resolution procedure that will meet their needs.
Reduces unnecessary legal formalities and speeds up resolution.
Example: Two international companies in arbitration may agree that Singapore International Arbitration Centre (SIAC) rules will govern the arbitration, even if the dispute originated in India.
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Sub-section (3): Tribunal's Power in Absence of Agreement
Key Points:
If parties fail to agree on procedural rules, the arbitral tribunal has the discretion to decide the procedure.
The wide-ranging authority of arbitrators allows them to decide the operational procedures during proceedings.
Under fair tribunal operation the parties must be allowed an adequate chance to introduce their case material.
Implications:
Prevents procedural deadlocks when parties cannot reach an agreement.
Guarantees that the arbitration proceeds effectively.
Example: If parties cannot agree on how to present evidence, the tribunal can decide that all evidence be submitted in writing, without oral hearings.
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Sub-section (4): Tribunal’s Power to Assess Evidence
Key points:
The tribunal has complete authority over what evidence to accept and how much importance to give it.
The tribunal follows different evidence evaluation standards than courts because it has discretion to consider information based on practicality and its relevance to the case.
The tribunal decides:
Admissibility – Whether a piece of evidence should be considered at all.
Relevance – Whether the evidence relates to the dispute.
Materiality – Whether the evidence is significant in deciding the dispute.
Weight – How much importance should be given to the evidence.
Implications:
The procedure becomes faster when objections regarding procedural grounds are eliminated from the process.
This modification creates a favorable business environment for arbitration because it allows the consideration of documentation along with verifications and digital evidence outside strict evidentiary requirements.
Example: A WhatsApp conversation can be accepted as evidence, even if it would have been subject to strict admissibility objections in a formal court.
Practical Applications of Section 19 of Arbitration and Conciliation Act
Fast-Track Arbitration: Many commercial contracts use this provision to adopt fast-track procedures, reducing time and costs.
International Arbitration: Since the parties can decide the procedural rules, this section is useful in cross-border disputes.
Customizing Process: Start-ups, Business and Individual can customize the process as they desire.
Reducing Legal Formalities: Avoids unnecessary legal technicalities, making arbitration more accessible and efficient.
Case Laws
Under the Arbitration and Conciliation Act of 1996 Section 19 gives arbitral tribunals complete authority to set their procedures separate from the procedures outlined in the Code of Civil Procedure 1908 and the Indian Evidence Act 1872. Different courts view the self-governing powers of arbitral bodies in conflicting ways. Below are notable case laws elucidating the application of Section 19:
1. Union of India v. Reliance Industries & Ors.
Facts: In this case, a dispute arose between the Union of India and Reliance Industries regarding the production-sharing contract. The Union of India contested before the tribunal procedural document orders by claiming they were subject to judicial review under Section 17 of the Act.
Issue: Whether the arbitral tribunal's power to order the production of documents falls within the ambit of Section 17 or Section 19 of the Arbitration and Conciliation Act, 1996.
Judgment: The Delhi High Court held that the tribunal's power to order the production of documents is derived from Sections 19 and 27 of the Act, not Section 17. According to the court the tribunal maintains full authority to establish evidence procedures which remain beyond the scope of judicial intervention according to Section 37. According to this reading the tribunal has complete discretion to determine appropriate procedures which support its independence in administrative matters. This stance harmonizes with Section 19 objective to provide tribunals freedom in running their proceedings.
2. Sahyadri Earthmovers v. L & T Finance Limited and Anr.
Facts: Sahyadri Earthmovers entered into a financial agreement with L & T Finance Limited. A dispute arose, leading to arbitration. During the proceedings, questions were raised about the applicability of the Code of Civil Procedure and the Indian Evidence Act to the arbitration process.
Issue: Whether the arbitral tribunal is bound by the procedural laws outlined in the Code of Civil Procedure, 1908, and the Indian Evidence Act, 1872, during arbitration proceedings.
Judgment: The Bombay High Court clarified that, under Section 19 of Arbitration and Conciliation Act, 1996, arbitral tribunals are not bound by the Code of Civil Procedure or the Indian Evidence Act. The court recognized procedural laws do not directly bind tribunals but these bodies must maintain principles of natural justice to provide both parties with fair play and equal treatment. The judgment shows that arbitral tribunals can establish their procedural methods as long as they maintain basic fairness.
3. Hindustan Shipyard Limited v. Essar Oil Limited
Facts: Hindustan Shipyard Limited and Essar Oil Limited were involved in a contractual dispute that was referred to arbitration. During the proceedings, the admissibility and evaluation of certain pieces of evidence became contentious points.
Issue: Does the arbitral tribunal have the authority to determine the admissibility, relevance, materiality, and weight of evidence presented during arbitration proceedings?
Judgment: The Allahabad High Court opined that, in the absence of an agreed-upon procedure by the parties, the arbitral tribunal is empowered to determine the admissibility, relevance, materiality, and weight of any evidence, as per Section 19(4) of the Act. According to the court's clarification the tribunal must follow principles of natural justice yet it does not strictly adhere to standard evidence rules during its evaluation process.
Summing Up
Section 19 of Arbitration and Conciliation Act, 1996, enforces the doctrine of party autonomy and flexibility of procedure, rendering arbitration a mode of choice for dispute resolution. Through the provision of parties to choose their own procedure and the exercise of discretion by the tribunal when necessary, this section makes arbitration efficient, flexible, and free from court-enforced formalities.
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Section 19 of Arbitration and Conciliation Act, 1996: FAQs
Q1: What is Section 19 of Arbitration and Conciliation Act, 1996?
Section 19 gives procedural autonomy to arbitration, so that parties have the freedom to frame their rules, and in case of non-agreement, the tribunal acts.
Q2. Is arbitration governed by the Civil Procedure Code and the Indian Evidence Act?
No, according to Section 19(1), the proceedings in arbitration are free from these statutes, and therefore, the procedure is more liberal.
Q3: May parties determine their own arbitration procedure?
Yes, under Section 19(2), parties may freely agree on the rules of procedure for the arbitral process.
Q4: What if parties do not determine a procedure?
Where parties do not agree, Section 19(3) gives the arbitral tribunal the authority to decide on the procedure.
Q5: Why is Section 19 crucial in arbitration?
It maintains flexibility, minimizes formalities, accelerates the settlement of disputes, and empowers tribunals to control proceedings effectively.
