Third-Party Funding (TPF) is the process wherein aid, and assistance is given to the parties to a dispute case by another party who is not directly involved in the proceedings of the issue so that the business of the person in need or the monetary needs of the requesting party is met for the sake of resolution. India has been involved in an increasing number of international commercial transactions, which has also given rise to arbitration as a means of dispute resolution.
Indian Perspective on TPF
While the governing act for arbitration procedures make no specific mention of the concept, third party funding is a concept that is usually permitted in arbitration proceedings, so long as the agreement entered into contains clauses for the same, making the Indian Contract Act the deciding factor of whether third party funding is permissible for a particular case.
The states of Maharashtra. Gujarat, Madhya Pradesh and Uttar Pradesh give statutory recognition to the concept of third party funding by employing the provisions laid down in Rule 1 of Order 25 of the Code of Civil Procedure, 1908. The same was iterated by a Bombay High Court notification post the amendment to the CPC Order in question.
Through a range of judgements delivered across different country courts, such as the case of ‘G, A Senior Advocate’, the Supreme Court has clarified the Indian stance regarding third-party funding in arbitration cases.
The judiciary has declared that in a situation where the arbitration is seated in India, or the third-party funder is Indian, the provisions of the Foreign Exchange Management Act (particularly section 5&6) would be the governing rules for the procedures.
It is safe to say that as long as the subject matter involved in disputes at hand surround legal matters, there is no reason for the judiciary to deny permission for third-party funding in arbitration procedures. The Indian judiciary recognises the noble motive behind third-party financing. As a result, there is not very much resistance seen when a request for the same is made in arbitration disputes. International arbitration procedures and questions involving third-party funding in those kinds of conflicts are often sought to be solved by turning to the judgements that have been delivered internationally, mainly because the questions regarding the seat of arbitration, the residence of the party requesting the third-party funding, as well as the validity of the arbitral award are often solved by the precedents that tackle such issues.
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