Contract Drafting and Resolving Commercial Disputes In India

Crafting a contract with accurate evidence requires an excellent drafter to integrate comprehensive writing, appropriate terms of business deals and relevant legal concepts to promote unambiguous contracts. A critically drafted and reviewed contract does not only save substantial manpower and hours of labour but the effort in the growth of corporate and the viability of the commercial contracts.

What is Commercial Contract?

A Commercial contract is a legally binding agreement between parties in which they are obligated to do or restrain from doing particular things. Commercial contracts can be written, verbal or implied in a formal or informal manner. Commercial contract can include all aspects of a business, such as hiring, wages, leases, loans and employee safety. A breach of commercial contract takes place when a contracting party fails to live up to the agreements.

Commercial Disputes

The term “Commercial Dispute” has been very broadly defined in the Act to encompass almost every kind of transaction that gives rise to a commercial relationship. The subject matter of disputes is very wide including but not limited to issues relating to maritime law, construction and infrastructure contracts, ordinary commercial transactions, intellectual property rights disputes, disputes involving exploitation of natural resources, insurance and re-insurance disputes. Such Commercial Disputes shall now be adjudicated upon by these Commercial Courts/Divisions.

Current market challenges at the centre of commercial disputes in India

In India, delay in cases caused due to litigation and the inadequate number of judges. Although India has an excellent court of system and also independent of its executives, there are infrastructural inadequacies and shortage of judges. This comes delay in resolving disputes. Any commercial dispute ought to be disposed of as early as possible. Because of the delays, default in payment have also increased, so defaulters stand to benefit.

Arbitration facilities and processes in India

Arbitration facilities are insufficient. Despite this, there are some excellent retired judges who are doing a commendable job. There are a few institutionalized forums of repute which carry out arbitration. Recently enterprises have been made in different parts of India to provide more institutionalized arbitration, and several such forums have jumped up.

Obstacles or challenges to the Indian arbitration process that companies should bear in mind

Nature of judgments relies upon the identity of judges. This is considerably more applicable on account of discretion. Organizations ought to pick the arbitrator wisely. Frequently, arbitrators who are badly outfitted to manage the many-sided quality of the case are picked, bringing about tremendous defers settling debate. The mastery and ability of the authority to manage the particular issues which emerge must be weighed before appointing as arbitrator. It is always advisable to fix a lump sum arbitral fee, to ensure early disposal of cases, as the arbitral fee fixed on the basis of date of hearing often results in prolonging the process.

Why companies should implement an effective dispute resolution strategy to deal with conflict taking in the pros and cons of in-court versus out-of-court methods?

Resolving disputes through the court can delay recovery, end a business relationship, and lead to depreciation in respect to money claims. Court action also wastes the precious time, resources, and money of the company fighting the litigation. Out of court settlements result in faster dispute resolution, a continued business relationship, and quicker receipt payments in respect of money claims. Out of court settlement means a reduced expenditure of time, resources and money, which a business can better utilise elsewhere. Out of court settlements should be the preferred route. Litigation should be the last resort.

What are the circumstances in which Courts may interfere in arbitral proceedings?

The principle objective of the Act was to minimise court intervention. Owing to several rulings of the Apex Court, that objective has been lost. Indian courts must now take on an arbitrating role even in constituting the committee. If jurisdictional issues should arise such as whether a dispute is covered by the arbitration stipulation  until such issues are decided, the committee cannot be constituted. It is also difficult to have awards passed in a non-notified, non-convention country executed in India because such awards are not recognised by the Arbitration and Conciliation Act, 1996. In such cases the parties might have to file a suit before an Indian Court and based on such an award obtain a judgement from Indian Courts for enforcement, or such non-convention awards may be enforced as domestic awards, as per reasoning in [(2002) 4 SCC 105].

What clauses should Indian companies insert into their commercial contracts to manage potential disputes down the line?
As a broad statement, three areas must be addressed: first, choice of law/governing law; second, dispute resolution, including seat of arbitration if arbitration is agreed; and third, jurisdiction for enforcement purposes. While the natural preference for Indian companies is to apply Indian law as the governing law, it is not uncommon for Indian corporate to agree on English law as the governing law.

                                                                           ----Rimjhim Priyadarshini