Arbitration at DIAC in Delhi for Commercial Dispute Resolution

Arbitration at DIAC in Delhi for Commercial Dispute Resolution: Legal Rights, Remedies and Business Protection?

Business can halt because of a commercial dispute. It could mean not being able to pay salary. Due to supply contract not being honoured you might be stuck with costly inventory. Or maybe a joint venture has fallen apart leaving your money stuck in limbo. If you are a business based out of Delhi or India you might come across such disputes. Which not only affect your contracts but can also hinder your business growth and lead to monetary losses.

You can resolve certain disputes related to your contracts through Arbitration at DIAC Delhi. When parties wish to arbitrate their dispute they can choose to use DIAC as their arbitral institution.

A business based in Delhi sells machinery to another business in Gurugram. After receiving the machinery the buyer refuses to pay the balance amount claiming that the work was sub-standard. The seller believes that buyer altered some requirements after receiving the product. Both parties have a lot of money invested in this situation and want it resolved as quickly as possible.

If they have an arbitration clause they can take their dispute to an arbitral tribunal instead of a regular court proceeding.

Many businesses just want to get their money back or save there products from losing more value and money. They don't just want to prove a point in court.

At LEGALS365 we offer a platform to consult about any contractual dispute, arbitration notice or if your trying to recover money from a business deal. We can provide guidance on if you can arbitrate your dispute through DIAC.

While arbitration is known to be quicker, less expensive and more beneficial then litigating your case. It all depends on the situation at hand.

There are many things to consider before investing a large sum of money and time into arbitration.

Why Commercial Arbitration Matters in Delhi and India ?

New Delhi continues to be a hub for commercial dealings between corporate houses, manufacturers, dealers, service providers, contractors and investors.

Companies based out of New Delhi have ties with various companies in Noida, Greater Noida, Ghaziabad, Gurugram and Faridabad. There could be dealings with vendors and clients from cities like Mumbai, Bangalore, Hyderabad, Pune, Ahmedabad and so on.

Disputes arising out of these ties can often go beyond one cheque.

The dealer may not have access to stock, IT company may have failed to install the software or the contractor may not be able to get his retention amount back. It could also be that the business associate doesn't agree with how the profits were divided.

If these issues are left unattended they only become worse.

There could be outstanding amounts affecting the working capital and money which you owe may come into question while doing an audit or receiving investments. If your company is already financially stressed it may find it difficult to incur costs towards arbitration.

DIAC Arbitration can help resolve disputes that are arbitrable. It allows for an arbitrator to be appointed and can help conduct proceedings according to the rules of the institution.

At LEGALS365 we advise you to look at what kind of agreement was breached before taking the route of Arbitration.

Every dispute is not arbitrable. Some disputes need to be taken up before statutory bodies and certain forums. Just because you have an arbitration clause doesn't mean you cannot approach the appropriate authority.

Knowing where to approach is one of the most basic decisions a business has to make.

Quick Facts

Some important facts regarding Arbitration for commercial purposes

1. There is an Arbitration Act that governs most of these cases. The act is called The Arbitration and Conciliation Act, 1996 (amended).
2. DIAC is the institution that falls under the Delhi High Court.
3. The DIAC Arbitration Proceedings Rules 2023 can be used to apply Institutional Arbitration with amendment if any.
4. Most contracts will contain an arbitration agreement which would be valid.
5. Sections 9 and 17 allow the court to pass some orders.
6. Once an award has been passed it can be enforced under Section 36 of the act.
7. Section 34 of the act allows an award to be set aside but not re-try the entire matter.

What Is Arbitration at DIAC in Delhi for Commercial Dispute Resolution?

When you have a dispute that can be arbitrated at DIAC there will be an arbitral tribunal that will make a decision on your case based on an arbitration agreement or by court order or any other lawful method. Once the tribunal has been appointed they will decide on the merits of each partys case and the Institution simply administers the process.

What is the difference between arbitration and normal litigation?

If a party goes to a court to resolve a commercial dispute then this would be considered litigation. If a party takes their dispute to arbitration there will be an arbitral tribunal that has been appointed usually by way of an arbitration agreement.

When using an institution to resolve your dispute the institution will provide you with their set of rules and help administer your case.

This is something to keep in mind when looking at commercial disputes and DIAC. DIAC does not decide every commercial dispute that comes to them it is up to the Arbitral Tribunal to decide if a party is liable for their actions and award them with something they are owed.

There is also ad hoc arbitration which you should be aware of when comparing to institutional arbitration. With ad hoc arbitration the parties and tribunal will run the arbitration with out the help of an institution.

Companies who want to use DIAC will find that institutional arbitration is beneficial to them.

If you are unsure whether your current arbitration clause allows for DIAC to help with your dispute LEGALS365 can help.

What types of disputes can I arbitrate with DIAC?

If there is an arbitration agreement in place there are many disputes that can be arbitrated. Some may include but are not limited to: Supply contracts, Distribution agreements, Commercial lease agreements, Construction contracts, Consultants and joint ventures.

These disputes could involve non payment of money, breach of contract and termination of agreement to name a few.

Lets say Company A supplied equipment to Company B and has billed them for 75lakh. Company B claims that the equipment was faulty and they lost money due to delayed installation. Both of these scenarios could be taken to arbitration.

Each dispute will need to be looked at individually and see if they fall under an arbitration agreement.

Which Business Disputes Can Create the Greatest Arbitration Risks?

Commercial Arbitration usually arises from monetary disputes but can take on more aspects than just that.

Unpaid bills and Commercial debts

This can become very delicate when you are a supplier who has not much cash flow.

Supplier may have supplied what they contracted to supply and buyer claims that there were sub par quality goods delivered. Deduction's interest etc may arise from here as well as disputes around accepting goods.

They may also have remedies available under MSME Acts in certain instances. This will need to be analysed separately as your arbitration clause may not align with these acts.

We at LEGALS365 advise clients to understand what they are owed money for and what avenue you should take.

Construction and Infrastructure related disputes

Disputes may arise from unpaid amounts, time extensions, variation works, liquidated damages or terminating a project.

As most construction related disputes can involve technical aspects and many communications regarding why a project took longer than expected.

Maybe the contractor feels that they did not get enough access to the building from the employer. The employer may claim that the contractor did not have enough employees or the work done was poor quality.

You could incur a large debt if your involved with Bank guarantees or retention.

Shareholder disputes / Joint Ventures

Shareholders or business partners may find themselves in dispute with each other when money is not injected as per the agreement. They may also have different views on what should be controlled by each party and profits made from the venture.

Certain private disputes can be arbitrated.

However you need to look at what remedies are available under company law and whether the matter affects any third party. If so it may need to be resolved in front of the correct forum. Having an arbitration clause does not solve this problem.

Can DIAC Arbitration Protect Business Assets Before the Final Award?

There are some interim orders you can get when going through arbitration. You can use section 9 if it meets the criteria for court protection and section 17 allows the tribunal to grant certain interim measures. It will depend on each situation.

They could include but are not limited to keeping hold of property that is in dispute. Keeping goods safe. Interim injunction's and etc. If you have a business and there is assets that may be disposed of you should speak to a lawyer.

Interim orders are not always successful in helping you gain money back or freezing all of your opponents assets.

It must be able to be proven that you are entitled to this.

What happens if valuable goods are being transferred?

If a distribution company feels that their supplier is taking away goods that are in dispute they may be able to get these items preserved.

This would depend on the situation at hand.

What the applicant has at stake, how urgent it is, if there is enough proof and where they would file would all play a factor.

Can arbitration prevent the encashment of a bank guarantee?

Banks guarantee have to be handled with care.

As far as Indian law goes bank guarantees that are unconditional are usually seen as standalone obligations. So the courts will only allow restraint on invoking a bank guarantee if very stringent conditions are met.

Just because there is a commercial dispute does not mean you will be granted an injunction.

LEGALS365 can advise you on your exposure under a contract should your business receive demands that need to be actioned immediately, bank guarantee threatened to be encashed or you may incur an irreparable commercial loss.

How Long Does DIAC Arbitration Take and What Does It Cost?

There isn't a stipulated time limit to conclude a dispute at DIAC. Nor is there a set amount of money you would have to pay in every commercial dispute.

As per Section 29A of the Arbitration Act. The law prescribes a timeline for award in case of domestic arbitration. It will be calculated from the date of completion of pleadings and there are certain provisions for extension as well. For international commercial arbitration there are different provisions.

One must not mention that their dispute will be over in 12 months if the law states so.

What could play a role in the time period?

If your case has complicated technical evidences to be presented. Many respondents, counter claims, applications to be filed and delays in court dates. These factors can increase the time period of your dispute.

For example if it is a simple contractual dispute where only a certain sum of money is due you would not need much evidence. On the other hand if it is a construction matter where there are various years of documentation.

It may also depend on settlement negotiations.

Is there a set price for DIAC arbitration?

DIAC has its own pricing structure which includes the charges payable to the institution and the arbitrators. You will also have to factor in legal fees and other expenditure.

This will vary depending on what rule you fall under and what your claim is worth. There is no fixed price you can assume.

The cost of arbitration can be divided by the tribunal under certain circumstances and laws.

Delhi International Arbitration Centre

Companies should be aware of how much they can recover from a claim and what they will have to spend.

This will especially apply to lower value disputes.

We at LEGALS365 can advise you on what costs you may incur while arbitrating.

When Should a Business Consult a DIAC Arbitration Lawyer in Delhi?

When money is at stake. If your business has received a notice that could cause you to lose money as a result of a contractual disagreement you should seek legal advice.

Particularly if time limits or interim reliefs may be available.

Commercial Contract has been ended

There may be money that is owed to you as a result of the contract being terminated or the other party may be liable for wrongfully terminating the contract. There may be other issues such as damages or confidentiality clauses that still need to be abided by.

This will depend on the circumstances of your contract.

The other party will not pay for services rendered.

If you have spoken to the other party multiple times about a large sum of money they owe you and have not received any resolution you should seek legal advice.

You may be able to claim under the terms of your contract or statute or negotiate or arbitrate.

Received an Arbitration Notice

Do not ignore an arbitration notice. An arbitration can take place without your involvement if certain criteria is met.

You should act quickly if an arbitration notice has been sent to you. Especially if there are any issues regarding the court having jurisdiction, arbitrator or amount being claimed.

You have received an Arbitration Award that is significant in nature.

If a party awards you money they may enforce this decision against your company.

You may have an opportunity to challenge under section 34 but must meet the requirements set out in the Act. You have 3 months from the day that the above occurred. A further 30 days can be condoned for good reason.

You should act quickly.

If you are experiencing any of the above issues please contact LEGALS365 and we can assist you with your matter.

How Can LEGALS365 Help With Commercial Arbitration at DIAC?

Business disputes need to be looked at from a rights point of view as well as what's commercially practical.

One party may have a valid right to take action but not enough funds to do so. The opposing party may have been issued with a high quantum claim and can show the contract has been performed defectively.

LEGALS365 will provide you with a professional to speak to when you require advice with DIAC arbitrations and commercial contract disputes and associated Court claims.

Advice can be sought with regards to non payment against contracts, ending of business relationships, Arbitration clause and any cross claims. What to be aware of with regards to protection and enforcement.

You may want to know how much arbitration will cost and if your able to reach settlement. What is the difference between receiving an arbitral award and being paid.

What you think is right will need to be assessed with possible legal consequences and cost.

LEGALS365 cannot ensure that arbitration will allow you to recover your claim or that you will be paid and within a certain time frame.

This will depend on the Contract, Facts and Evidence and the Law.

Frequently Asked Questions

Final Thoughts

If your commercial disputes are escalating it's best not to let them spiral just because its hard to work with the other party on business terms.

You can opt for Arbitration through DIAC in Delhi to settle commercial disputes that fall under contract terms of unpaid amounts due to you, your business, terminations and any other form of damages.

As long as you have proper backing of law. Evidence, remedy and take into account cost involved.

If you are a company that has received an Arbitration notice or are dealing with receivable's in question it may be wise to speak with legal counsel to help mitigate losses.

Contact LEGALS365 for legal guidance on DIAC Arbitration, Contractual Disputes and what remedies are available to you.

Author Bio

LEGALS365 deals with legal content regarding commercial arbitration, contract related disputes, corporate insolvency and dispute resolution laws in India. LEGALS365 tries to keep business readers informed about their contracts and money involved in it. LEGALS365 will try to help you with your legal remedies. We aim to educate business readers about the laws of arbitration in India especially Arbitration and Conciliation Act, 1996 and DIAC in Delhi. LEGALS365 does not intend to dumb down legal jargon when trying to simplify certain aspects of the statute. All information provided is for informational purposes only and you should always consult your own attorney if you have any questions about legal claims, arbitration notices or execution of an award.