ARBITRABLE DISPUTES.

[Mr. M. GOVINDARAJAN]

                        Arbitration is the alternate way for resolving disputes since the regular judicial courts are having much pending cases.  Arbitration is to be conducted as per the provisions of Arbitration and Conciliation Act, 1996.  Arbitral tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and such tribunals are constituted under the laws of the country.  Every civil or commercial dispute either contractual or non contractual, which can be decided by a court, is in principle capable or being adjudicated and resolved by arbitration unless the jurisdiction of arbitral tribunals is excluded either expressly or by necessary implication.  As a matter of public policy certain categories of proceedings are reserved by the Legislature exclusively for public fora.  Certain other categories, though not expressly reserved for adjudication by a public courts and tribunals, may by necessary implication stand excluded from the purview of the private fora.  Where a suit is pending before the court, the court will refuse to refer the parties to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes. 

                        According to Russel all matters are not capable of being referred to arbitration.  English law reserves certain matters for the court alone and if a tribunal purports to deal with them resulting award will be unenforceable.  Mustill and Boyd in their ‘Law and Practice of Commercial Arbitration’ have observed – “In practice, therefore, the question has not been whether a particular dispute is capable of settlement by arbitration, but whether it ought to be referred to arbitration or whether it has given rise to an enforceable award.   No doubt for this reason, English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not.   The types of remedies which the arbitrator can award are limited by considerations of public policy and by the fact that he is appointed by the parties and not by the State.  For example he cannot impose a fine or a term of imprisonment, commit a person for contempt or issue a writ of subpoena; nor can be make an award which is binding on third parties or affects the public at large.” 

                        The following are non arbitrable disputes- 

• Disputes relating to rights and liabilities which give rise to or arise out of criminal offences;
• Matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody;
• Guardianship matters;
• Insolvency and winding up matters;
• Testamentary matters;
• Eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide on the disputes. 

The above said non arbitral disputes are relating to actions in rem.   The right is of two types; one is right in rem and the other is right in personam.   A right in rem is a right excisable against the world at large.   A right in personam is a right protected solely against specific individuals.  Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject matter of the case whereas the actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property.   A judgment in personam is a judgment against a person.  It is distinguished from a judgment against a thing, right or status.   The judgment in rem is the judgment that determines the status or condition of property which operates directly only the property itself. 

                        Therefore the resolution of dispute by means of arbitration is based upon the right involved.  All disputes relating to rights in personal are considered to be amenable to arbitration.   All disputes relating to rights in rem are required to be adjudicated by courts and public tribunals.  These disputes are not referable to arbitration.  Some exceptions may be there.  The disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable. 

                         The distinction between disputes which are capable of being decided by arbitration and those which are not is brought out in the following decisions of the court:

• In ‘Haryana Telecom Limited V. Sterlite Industries India Limited’ (1999) (5) SCC 688 the Supreme Court held that Section 8(1) of Arbitration and Conciliation Act, 1996 provides that the judicial authority before whom an action is brought in a matter, will refer the parties to arbitration the same matter in accordance with the arbitration agreement.  This, however, postulates, in the opinion of the court, that what can be referred to the arbitrator is only that dispute or matter which the arbitrator is competent or empowered to decide; The claim in a petition for winding up is not for money.  The petition for winding up is to be filed under the Companies Act.  The company has become commercially insolvent and therefore, should be wound up.   The power to order winding up of a company is contained under the Companies Act and is conferred on the court.   An arbitrator, notwithstanding any agreement between the parties, would have no jurisdiction to order winding up of a company.   The matter which is pending before the High Court in which the application was filed by the petition herein was relating to winding up of the company.   That could obviously not be referred to arbitration.
• In ‘Olympus Superstructures (P) Limited V. Meena Vijay Khetan’ – (1999) 5 SCC 651 the Supreme Court considered whether an arbitrator has the power and jurisdiction to grant specific performance of contracts relating to immoveable property.  In this regard the Supreme Court held that there is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immoveable property cannot be referred to arbitration.   Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or Section 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immoveable property.
• In ‘Keventer Agro Limited V. Seegram Co. Limited’ Apo 498 of 1997 the Supreme Court held that disputes arising out of illegal agreements and disputes relating to status, such as divorce, which cannot be referred to arbitration.   However if in respect of the facts relating to a criminal matter, say, physical injury, if there is a right of damages for personal injury, then such a dispute can be referred to arbitration.   Similarly a husband and wife may, refer to arbitration the terms on which they shall separate, because they can make a valid agreement between themselves on that matter.
• In ‘Chiranjilal Shrilal Goenka V. Jasjit Singh’ (1993) 2 SCC 507 the Supreme Court held that grant of probate is a judgment in rem and is conclusive and binding not only the parties but also the entire world; and therefore, courts alone will have exclusive jurisdiction to grant probate and an arbitral tribunal will not have jurisdiction even if consented concluded to by the parties to adjudicate up on the proof or validity of the will.