VOLUNTARY ARBITRATION

This article is written by Namrata Dube of 9^th Semester of B.A.LL.B of South Calcutta Law College, Kolkata, an intern under Legal Vidhiya.

Abstract: –

Voluntary Arbitration is an alternative dispute resolution mechanism that allows the parties to settle the disagreements between them without going to the court. The aim of this article is to provide a basic understanding of the concept of “Voluntary Arbitration”. Besides, this article also deals with the need and importance of voluntary arbitration and also there are various cases on the subject.

Keywords: –

Arbitration, appeal, law, arbitrator, Grievance Redressal Committee, Industrial Disputes Act, Constitution

 Introduction: –

Many a times, there arises small dispute between two parties, but if they decide to move to the court for that, it will be very cumbersome. So, in these cases people generally prefer this method of Arbitration. Voluntary Arbitration is a process by which disputes are settled between the parties by submitting the issue to a neutral third party for a binding decision. This process is mainly done by a formal, written agreement entered into between the two parties. This is sometimes known as arbitration at common law. This type of arbitration usually begins when the parties who are in dispute submit their dispute to the arbitrators (neutral third party) for determination. To cite one example, if there arises a dispute between an employer and the union of a company and they cannot come into an agreement, then they may choose to go through the process of voluntary arbitration, which will help them to resolve their dispute and come to an agreement.

 Therefore, the term Voluntary Arbitration means when two parties voluntarily or on their own will, submits their issue to a third (neutral) party, whose decisions are binding on them and can only be overturned by courts only as per the Arbitration act.

Difference between Mandatory and voluntary arbitration:

Arbitration can either be voluntary or mandatory, and the decision can be binding or non-binding. Mandatory Arbitration is a mandate that means in this type of arbitration both the parties are bound to resolve their dispute using arbitration only. On the other hand, voluntary arbitration means that both the parties can explore any other options, if they want, before going through arbitration, for solving their dispute. The mandatory arbitration is mainly seen in the workplaces where the worker is bound to sign a mandatory arbitration as a requirement for getting the job in that place, while voluntary arbitration is mainly seen in business matters. The voluntary arbitration is equally valuable in personal matters such as in cases of divorce proceedings. The main difference which lies between the two is that in case of voluntary arbitration, parties voluntarily or on their full consent submit the dispute between them to the third neutral party. On the other hand, in case of mandatory arbitration the parties are bound or ordered to move to the third party with their disputed matter, it is basically a compulsion.

Generally voluntary takes place in its two forms, they are enumerated below: –

1. Pre-dispute Arbitration: This type of Voluntary Arbitration means in any agreement when any dispute is arbitrated, that has not yet aroused in the time of making that agreement. For instance, if a person makes a contract to purchase a car. It is stated in the contract that any legal disputes related to the contract will be arbitrated. This is the meaning of predispute arbitration clause.
2. ii. Post-dispute Arbitration: This type of Voluntary Arbitration means in any agreement when any dispute is arbitrated, after the dispute aroused. In other words, when parties enter into a contract after the dispute has aroused, to solve that dispute through the process arbitration. For instance, continuing the above example between the person buying the car and the salesman, if the agreement which they have entered into does not contain any arbitration clause. And a dispute arises between the person and the salesman, then both them can enter into an agreement to submit the dispute to arbitration instead of moving to the court.

Pros and Cons: –

There are various reasons for which people prefer this method; all of them are enumerated below:

1. It is a simple and informal procedure; both the parties do not have to hire advocates for representing them. They can appoint any neutral third party (arbitrator) and present their issue before him, and let him give the decision. Thus, the process becomes more comfortable for both the parties.
2. In this method both the parties have the liberty to choose their arbitrator by themselves, which results in a fair decision, given by the arbitrator.
3.  Unlike litigation, it does not take too much time (years) to solve a case. It is more flexible and efficient, and the parties can schedule the hearings conveniently.
4.  In this process the parties can choose the date according to their and their arbitrator’s convenience. They can choose a particular date and time which is suitable for them.
5. Here the legal process is very confidential. This means the process and the matters in it are kept private and are not open to the public.
6.  In this process there is no winner or loser, i.e., both the parties agree to the outcome decided by the arbitrator.

 Along with so many advantages, this process (just like any other processes) involves some of the disadvantages. In this process the arbitrator follows the law but their standards are not clear, which indicates that the arbitrator may inconsistently follow the laws. Also, as the process involves privacy i.e., it is not open to the public, there may occur biasness and ultimately which will result into injustice.

The process is attractive, but along with the advantages, it also includes some disadvantages. So, one should keep all the cons in mind before choosing an arbitrator to solve their dispute.

Indian Law: –

Voluntary Arbitration is an easy and convenient process for settling disputes, but it was not introduced in India earlier. After several arguments and criticism, the introduction of Section 10A of Industrial Disputes Act, 1947 took place, which gave a binding force to some extent. The section allows for the establishment of Grievance Redressal Committee (GRC) in the workplaces. This committee contains equal number of delegates from the employers and employees. The main function of this committee is to listen and scrutinize the complaints submitted by the staffs and to take necessary steps. If the dispute is still not solved by the committee, then the matter is referred to voluntary arbitrator, where speedy, hassle free and effective decision is provided. This section provides a peaceful environment in the workplace. The reason being that, in case of any dispute aroused between the employee and the employer, they can choose a neutral third party, who will listen to their issue and will provide a decision which will be binding for both the parties.

 In relation to its Jurisdiction: –

The jurisdiction of the arbitrators is obtained from the agreement of parties under section 10A when he is appointed by both the parties. The arbitrator acts beyond his jurisdiction when he decides matters which are not referred to him by both the parties. Under Sec 10A, an arbitrator desists to have jurisdiction after the time period expires, which was mentioned in the agreement. It is also stated by the court that if both the parties do not challenge the expiry of the time limit of the arbitrator then they cannot challenge it later on.

Power of the High Court over voluntary arbitration: –

One can challenge the decision of an arbitrator by filing a writ petition under Article 226 of the Indian Constitution. Under Article 227 of the Indian Constitution, the High Courts have the power of control over all tribunals and lower courts within its jurisdiction. But Supreme Court placed Article 227 on par with Article 136, and stated that since arbitrators are not tribunals, so the High Court do not have the power of control over the voluntary arbitrators.

Case Laws: –

1. In the case of The Engineering Mazdoor Sabha … vs The Hind Cycles Ltd., Bombay (1963 AIR 874), it was observed by Supreme court of India that the decision given by an arbitrator was a quasi-judicial decision and it is open to judicial review.
2.  In the case of Rohtas Industries Ltd. & Anr vs Rohtas Industries Staff Union (1976 AIR 425), the meaning of section 10A was expanded. The Apex Court observed that the section has the power to bind the parties who are not directly involved in the agreement; it was amenable to the jurisdiction of High Courts.
3. In the case of Gujarat Steel Tubes Ltd vs Gujarat Steel Tubes Mazdoor Sabha (1980 AIR 1896), it was held that the amendment of 1964 to Industrial Disputes Act extends the application of Article 136 to an award of an arbitrator.

Conclusion: –

Thus, to summarize, voluntary arbitration is a process by which disputes are settled between the parties by submitting the issue to a neutral third party for a binding decision. It is a growing trend which is very convenient, quicker and cheaper method of solving disputes between the parties. Time is an essential factor, and delay of time may cause deleterious effect to the interest of the parties. Voluntary arbitration is choice able by many as it requires less time for solving disputes. Besides it is very convenient, as in this process the parties can choose the date according to their and their arbitrator’s convenience. They can choose a particular date and time which is suitable for them. It is more flexible and efficient, and the parties can schedule the hearings conveniently It is more flexible and efficient, and the parties can schedule the hearings conveniently. Though it provides a peaceful environment in the workplace, where there is a good relationship between the employers and the employees. But the employer being in a dominant economic position, there is sometimes a biasness of bargaining power in their favour.

Reference: –

• Industrial Disputes Act,1947 (D.D.Seth, 2022) (10^th Edition, 2022)
• (Gudla, n.d.) Voluntary Arbitration under Industrial Disputes Act 1947-an analysis of the law and reality
• (Arbitration, n.d.) Voluntary Arbitration