Is an Online Arbitration Award Legally Valid in India?

On 31 July 2023, SEBI issued a circular that moved investor disputes in the securities market onto an online portal. Complaints against stock brokers and depository participants could be registered on it from 16 August 2023, with conciliation and arbitration handled online by empanelled ODR institutions. The regulator of one of India's most closely watched markets had decided that disputes could be settled without anyone stepping into a hearing room.

Yet many business owners still ask one question before they try online arbitration. Will the award actually hold up?

The short answer is yes, provided the process follows the law. Here is a look at why.

The Arbitration Agreement Can Be Electronic

Every arbitration starts with an agreement to arbitrate, and Section 7 of the Arbitration and Conciliation Act, 1996 requires that agreement to be in writing. But the Act also accepts an agreement found in an exchange of letters or other means of telecommunication, including communication through electronic means, as long as it provides a record of the agreement. So an arbitration clause agreed over email or inside an online contract can meet the requirement.

The Information Technology Act, 2000 backs this up. Section 10A says a contract cannot be treated as unenforceable merely because it was formed using electronic records.

The Hearing Does Not Need a Physical Room

Section 19 of the Arbitration Act leaves the parties free to agree on the procedure the tribunal will follow. That can include video hearings and document exchange on a digital platform. The seat of arbitration still matters, though, because it decides which court has supervisory jurisdiction. An online arbitration should name a seat, just like a physical one.

The Award Must Meet the Same Standards

Section 31 requires an arbitral award to be in writing and signed by the arbitrators. It must state the reasons it is based on, unless the parties have agreed otherwise, and it must carry the date and the place of arbitration. Since the IT Act gives legal recognition to electronic and digital signatures, a properly signed electronic award can meet this requirement.

A party that wants to challenge the award has to apply to court under Section 34, generally within three months of receiving it, and the grounds are narrow. Once that window has passed, Section 36 allows the award to be enforced under the Code of Civil Procedure in the same manner as a decree of the court.

Where Online Arbitration Can Go Wrong

Online arbitration is not a magic fix. The risks usually sit in the process rather than the format. Was the notice actually delivered to the other party? Did each side get a fair chance to present its case? Was the arbitrator appointed the way the agreement required? Under Section 34, an award can be set aside if a party was not given proper notice or was otherwise unable to present its case. That is why the platform you use needs to keep a clear record of every notice, submission and hearing.

What This Means for Your Business

Take stock of your contracts first. Do they carry an arbitration clause that allows online proceedings and names a seat? If not, update your templates. Keep customer and vendor contact details current, because valid notices depend on them. And pick a provider of online dispute resolution services that documents every stage of the case.

Policy is moving the same way. In November 2021, NITI Aayog released its ODR Policy Plan for India, which recommended training professionals as neutrals and pushing government departments and ministries to adopt ODR for their own disputes.

If your contracts are in order and your process is clean, the next award you receive may well arrive in your inbox. It will count.

About The Author

Aditya Aryan is a lawyer and mediator. He is currently building marketing at Sama, India’s leading online dispute resolution company.