UNIT – I

INTRODUCTION
During the pre-independence period the arbitration law was contained in The Indian Arbitration
Act 1899, which was followed by the Arbitration (Protocol and Convention) Act 1937 that
concerned with International commercial arbitration as well as Indian arbitration. The major
development occurred with the passing of the Arbitration Act 1940 exclusively dealing with
domestic arbitration. After independence, to implement the provisions of the New York
Convention 1958, the Foreign Awards (Recognition & Enforcement) Act 1961 was passed. Later
in 1985 the UNCITRAL (UN Commission on International Trade Law) passed a model law on
international commercial arbitration. Inorder to keep in line with the UNCITRAL model law as
recommended by the 77th report of the Law Commission of India, the Arbitration and Conciliation
Act 1996 was enacted.

Thus the law relating to Arbitration is contained in the Arbitration and Conciliation Act 1996,
which came into force on 25.01.1996. It extends to the whole of India except J &
K. It provides for domestic Arbitration, International Commercial Arbitration andEnforcement
of Foreign Arbitral Awards.

SALIENT FEATURES OF THE ARBITRATION AND CONCILIATION

ACT,1996
1. Minimum or no interference from courts.
2. Provides for Domestic and international arbitration.
3. Provisions for enforcement of foreign awards, recognises the Geneva Conventionof 1927
and the New York Convention of 1958.
4. The arbitrator can decide on his own jurisdiction. This has reduced interference by courts.
5. At the same time, an award can now be set aside if it is in conflict with “the public policy
of India”, a ground which covers "inter-alia" fraud and corruption.
6. The importance of transnational commercial arbitration has been recognized andit has been
specifically provided that even where the arbitration is held in India, the parties to the
contract would be free to designate the law applicable to the substance of the dispute.
7. ACA confers the status of a decree on the arbitral award which shall be final and binding
on the parties and persons claiming under them respectively.
8. The grounds on which the award of an arbitrator could be challenged is limited

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 and is in line with UNCITRAL Model Law on International Commercial Arbitration in
1985.
9. If one of the parties is non-Indian the arbitration shall be considered as international
commercial arbitration.
10. International Commercial Arbitration can take place either within India or outsideIndia in
cases where there are ingredients of foreign origin relating to the parties or the subject
matter of the dispute.
11. In International Commercial Arbitration the sole arbitrator/ third arbitrator can befrom a
neutral country.
12. The law applicable to the conduct of arbitration and the merits of the dispute may be Indian
law or foreign law, depending on the contract in this regard, and the rules of conflict of
laws.

The main objectives of the Act are:-

1. To comprehensively cover International Commercial Arbitration and
Conciliation and also domestic Arbitration and Conciliation
2. Intend for an Arbitral Procedure which is fair, efficient and capable of meetingthe needs
of the specific Arbitration
3. To provide that the Arbitral Tribunal gives reasons for its Arbitral Awards
4. To ensure that the Arbitral Tribunal remains within the limits of its jurisdiction
5. To minimize the supervisory role of courts in the Arbitral process
6. To permit an Arbitral Tribunal to use other ADR mechanisms during the Arbitral
proceedings to encourage settlement of disputes
7. To provide that Arbitral Award is enforceable as if it were a decree of the court
8. To provide that a settlement agreement reached by the parties as a result of conciliation
proceedings will have the same status and effect as an Arbitral Award on agreed terms
on the substance of the disputes rendered by an Arbitral Tribunal
9. To provide that for the enforcement of Foreign Awards every Arbitral Award made in
a country to which either of the International convention applies, in which India is a
signatory, will be treated as a Foreign Award.

ARBITRATION – MEANING, SCOPE AND NATURE

Meaning of Arbitration : Arbitration is not a new concept for the administration of

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justice without any delay. It is an age old alternative dispute resolution method all over the world.
It is an alternative way to resolve the disputes without any access to the regular judicial system i.e.
regular courts. Arbitration has been adopted from time immemorial and it has been given the
sanctity of law after its efficacy was tested by theGovernments.
According to Byrne’s Law dictionary the term ‘arbitration’ includes practically every question,
which might be determined by a civil action, referred to arbitration. Thus underthe English Law,
arbitration means the settlement of disputes by the decision of one or more persons called
arbitrator. As Russel rightly pointed out, “The essence of arbitration is that some dispute is referred
by the parties for settlement to a Tribunal of their own choice instead of a court”.

Definition : According to the definition given in Section 2(1) (a) of the Arbitration and
Conciliation Act, 1996 - “arbitration” means any arbitration whether or not administered by
permanent arbitral institution;

In the terms of sub-section (1) (a) “arbitration means any arbitration whether or not administered
by permanent arbitral institution”.

When the parties agree to have their disputes decided with the mediation of a third person, he with
all the formality of a judicial adjudication, may be, speaking broadly, called an arbitration. An
arbitration, therefore, means the submission by two or more parties of their dispute to the judgment
of a third person, called the “arbitrator” and whois to decide the controversy in a judicial manner.
“An arbitration is the reference of a dispute or difference between not less than two parties for
determination, after hearing both sides in a judicial manner, by a person or persons other than a
court of competentjurisdiction.”

In the case of Collins Vs. Collins (1858), Romilly M.R. has defined the Arbitration as – “An
arbitration is a reference to the decision of one or more persons, either with or without an umpire,
of a particular matter in difference between the parties.”

Scope of Arbitration : The Arbitration and Conciliation Act 1996 applies where the place of
arbitration is India. For the application of this Act, there must be some pre-requisites.
1) There must be Arbitration agreement between the parties to refer the matter to

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arbitration.
2) There must be a dispute between them.
3) A dispute must be of a civil nature.
4) The dispute must be referred to the Arbitration Tribunal for Arbitration by theconsent
of the party.

Nature of Arbitration
The law of arbitration is based on the principle of withdrawing the dispute from the ordinary courts
and enabling the parties to substitute a domestic tribunal consisting of persons of their own choice
called as arbitrators. As defined by Russel who is an authority on arbitration law, “an arbitrator is
neither more nor less than a private Judge of a Private Court (called an arbitral tribunal) who gives
a private judgment (called an award).” There is another synonymous term commonly used, that is
‘mediator’. But there is a definite distinction between an ‘arbitrator’ and a mediator’. Arbitrator
is a person to whom differences or disputes are submitted by the parties and he adjudicateson behalf
of the parties. His functions are, therefore, quasi-judicial in nature. A mediator,on the other hand, is
one who is requested to mediate or intervene in the matters of theparties as a friend to bring about
an amicable settlement. The settlement brought about by him is not an ‘award’ within the meaning
of Arbitration Act. Again, the provisions of the Arbitration Act are not attracted in case of
mediation and the settlement brought about by mediator is not an award as observed by the
Supreme Court in Wali Mhod. Kar Vs. Habibullah Kar.

The Indian law relating to arbitration provides that any dispute or difference relating to commercial
matters including shipping, sale, purchase, banking, insurance, building construction, engineering,
technical assistance, scientific know-how, patents, trade- marks, management consultancy,
commercial agency, labour etc., arising between the parties in India or a party in India and a party
in a foreign country or between foreign parties who agree or have agreed for arbitration, shall be
determined and settled in accordance with the Arbitration and Conciliation Act, 1996 and the rules
framed thereunder.
The connotation of the term ‘commercial’ in context of Arbitration Act has been considered
by the Supreme Court in its decision in R.M. Investment and Trading Co. Pvt. Ltd. Vs.
Boeing Company.

UNCITRAL MODEL LAW

Uncitral Model Law on International Commercial Arbitration was adopted by the United

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Nations on 21st June, 1985. This model law contains detailed provisions about scope of this
application, definitions, composition of arbitral tribunal, jurisdiction of arbitral tribunal, conduct
of arbitral proceedings, making of awards and termination of proceedings, recourse against award,
recognition and enforcement of award.

The General Assembly, in its Resolution dated 11th December, 1985 recommended thatall States
should adopt UNCITRAL Model Law on International commercial arbitration. India, being a
member-country, has adopted the Uncitral Model Law by enacting the Arbitration and Conciliation
Act, 1996 with a view to bringing about uniformity inarbitration procedures and meet the needs of
International commercial arbitration in its commercial transactions with foreign countries.

The recent trends in international commercial arbitration which is based on UNCITRALModel

Law clearly indicate that there has been greater emphasis on :
1. Greater party autonomy and non-intervention of Court in the arbitral process;
2. Preference for institutional arbitration instead of adhoc arbitration;
3. Recourse to arbitral process instead of Court litigation.
The justification for adopting the Model Law on International Commercial Arbitration lies in the
fact that with the liberalisation and globalisation of Indian economy in recent past more and more
non-resident Indians (NRIs) and Foreign Investment Institutions are entering the Indian market
which necessitated re-drafting of Arbitration Act of 1940 tobe made more responsive to the change
in Indian economy.

The Preamble of The Arbitration and Conciliation Act, 1996 reflects that the UNCITRAL Model
Law has been taken into account. It was realised that the Uncitral Model law andRules could serve
as a model for domestic arbitration and conciliation law in India with appropriate modifications to
suit the Indian conditions.

INTERNATIONAL COMMERCIAL ARBITRATION

In Arbitration and Conciliation Act 1996, International Commercial Arbitration has been defined
in Sec. 2(f).
According to Section 2(f) “international commercial arbitration” means an arbitration relating to
disputes arising out of legal relationships, whether contractual or not, considered as commercial
under the law in force in India and where at least one of the parties is :
1) An individual who is a national of, or habitually resident in, any country other thanIndia; or
2) A body corporate which is incorporated in any country other than India; or
3) A company or an association or a body of individuals whose central managementand control
is exercised in any country other than India; or
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4) the Government of a foreign country.

ARBITRATION AGREEMENT - ESSENTIALS, KINDS AND VALIDITY

According to Section 7 of the Arbitration and Conciliation Act, 1996 the term Arbitration
Agreement has been defined in Section 7 of the Act as :
1) “Arbitration agreement” means an agreement by the parties to submit to arbitration all or
certain disputes which have arisen or which may arise between them in respect of a defined
legal relationship, whether contractual or not.
2) An arbitration agreement may be in the form of an arbitration clause in a contractor in the
form of a separate agreement.
3) An arbitration agreement shall be in writing.
4) An arbitration agreement is in writing if it is contained in :
a) a document signed by the parties;
b) an exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the agreement; or
c) An exchange of statements of claim and defense in which theexistence of
the agreement is alleged by one party and not denied by the other.
5) The reference in a contract to a document containing an arbitration clauseconstitutes an
arbitration agreement if the contract is in writing and the referenceis such as to make that
arbitration clause part of the contract.

Arbitration agreement is a written agreement between the parties to a dispute to designate a

particular arbitrator to resolve their disputes arising out of a particular business relationship. It
calls for a mandatory arbitration before an arbitrator. AnArbitration agreement is usually legally
binding. Companies often require employees to sign an arbitration agreement which prevents the
employee from suing the company in court. Arbitration agreements are unsafe to employees
because they often require an employee to pay thousands of dollars to file a claim with an
arbitration association where s/he could have paid a few hundred dollars, or in some cases nothing
at all to filein court.

Essentials of Arbitration Agreement : On the basis of definition given above, thefollowing

are the essentials of an Arbitration Agreement :
1) There must be an agreement between the parties.
2) The agreement must be to submit all certain disputes to Arbitration.
3) There must be some disputes between the parties.
4) The dipuste may be existing or may arise in future.
5) The dispute must be in respect of a defined legal relationship.

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6) The defined legal relationship may be contractual or not.
7) The Arbitration agreement must be in writing.
The reference should be by means of a written agreement. Section 7(3) most emphatically
prescribes that “an arbitration agreement shall be in writing”. An oral agreement to submit a dispute
to arbitration is not binding. If the agreement is in writingit will bind, even if some of its details are
filled in by oral understanding. It is not necessary that the agreement should be on a formal
document nor it is necessary that the agreement should be signed by both or either party.
Act recognises in Section 7(4) three methods of arriving at a written agreement. One of them is an
exchange of letters or raising a claim under an alleged arbitration agreementwhich is not denied by
the other party. The Act provides in Section 7 (4) that an arbitration agreement is in writing if it is
contained in an exchange of letters, telex, telegrams, or other means of telecommunication which
provide a record of the agreement or in an exchange of statements of claim and defence in which
the existenceof the agreement is alleged by one party and not denied by the other.

Whatever be the form or contents of the agreement, it is necessary for the Act to apply that there
should be a mandatory requirement for settlement of disputes by means of arbitration. An
agreement that the parties may go in for a suit or may also go in for arbitration is not an arbitration
agreement.

Kinds of Arbitration
Broadly speaking arbitration may be (1) Ad hoc (2) Institutional (3) Contractual, or (4) Statutory.
The first two types i.e. Ad hoc and Institutional arbitration have already been discussed earlier. The
contractual and statutory arbitration may be explained thus :
1) Ad hoc Arbitration : Ad hoc arbitration refers to an arbitration where the procedure is
either agreed upon by the parties or in the absence of an agreement the procedure is laid
down by the arbitral tribunal. Thus it is an arbitration agreedto and arranged by the parties
themselves without seeking the help of any arbitral institution. In Ad hoc arbitration, if the
parties are not able to nominate arbitrator/arbitrators by consent, the appointment of
arbitrator is made by the Chief Justice of a High Court (in case of domestic arbitration) and
by the Supreme Court (in case of international arbitration) or their designate. The fees to
be paid to the arbitrator is agreed to by the parties and the arbitrator concerned.
2) Institutional Arbitration : In an institutional arbitration it may stipulate in the arbitration
agreement that in case of dispute or differences arising between them,they will be referred
to a particular institution such as Indian Council of Arbitration (ICA) or International
Chamber of Commerce (ICC), Federation of Indian Chamber of Commerce & Industry
(FICCI),etc. All these institutions have framed their own rules of arbitration which would
be applicable to arbitral proceedings conducted by theseinstitutions.
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3) Contractual Arbitration : With the increase in trade and business and growth of
economy, commercial transactions increased by leaps and bounds. Therefore, there were
frequent occasions for clashes and disputes between the parties which needed to be
resolved. In order to seek early settlement of disputeswithout approaching the court, the
parties usually chose to insert an arbitration clause as an integral part of the contract to
refer their existing or future disputes to a named arbitrator or arbitrators to be appointed by
a designated authority. This has been termed as contractual in-built arbitration.
4) Statutory Arbitration : There are certain areas where arbitration is statutorily imposed on
the parties by law of the land and the parties have no option but to abide by such arbitration
in two vital aspects. First, while ad-hoc, contractual andinstitutional arbitrations are based
on the consent of the parties, there is no question of consent in case of statutory arbitration.
Secondly, the first three arbitrations are voluntary whereas statutory arbitration is
obligatory and bindingon the parties as the law of the land. To illustrate, Section 43(c) of
the Indian Trusts Act, 1882, Sections 24, 31 and 32 of the Defence of India Act, 1971;
Section 31 of the North-Eastern Hill University Act, 1973, Section 5 of the Delhi Transport
laws (Amendment) Act 1971, are some of the examples which contain provisions relating
to statutory arbitration.

Validity of Arbitration Agreement

Reference without agreement or under void agreement : The court may stay arbitration
proceedings where the parties have not agreed to refer the particular dispute to arbitration or where
the contract which carried the arbitration clause is itself void. The proceedings remain stayed till
the matter as to the validity of the reference is decided. Asituation of this kind came before the
Court of Appeal in England in Ben & Co. Ltd. v. Pakistan Edible Oils Corporation Ltd. (1979).

There was a contract to purchase palm-oil by a Karachi firm from a Singapore seller. The contract
included a London arbitration clause. The Karachi firm contended that the agent who purported to
contract on their behalf had no actual or apparent authority to do so . The seller commenced
arbitration proceedings in London.

Statutory Arbitrations : The disputes which may be the subject of an arbitration agreement need
not necessarily arise out of a contract. They may also arise out of statutory provisions.

Who can make reference : Reference to arbitration may occur in any of the following ways :
Under Statutory Provisions : A reference can be made under the provisions of an Act. There are
many Acts of Parliament which provide that any dispute about their provisions shall be settled by
arbitration. The Electricity Supply Act, 1948, for example, provides for disposal by arbitration the

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disputes that may arise about its provisions.

Effect of Arbitration Agreement : Stay of Suits (Section 8)

Power to refer parties to arbitration where there is an arbitration agreement :
1) A judicial authority before which an action is brought in a matter which is the subject of an
arbitration agreement shall, if a party so applies not later than when submitting his first
statement on the substance of the dispute, refer the to arbitration.
2) The application referred to in sub-section (1) shall not be entertained unless it is
accompanied by the original arbitration agreement or a duly certified copy thereof.
3) Notwithstanding that an application has been made under sub-section (1) and that the issue
is pending before the judicial authority, an arbitration may be commenced or continued and
an arbitral award made.

Power of court to order parties to arbitration : The Arbitration and Conciliation Act, 1996
is intended to help the parties to settle their differences privately by conciliation or by arbitration
and thereby to spare themselves of wasteful and vexatious litigation. If the matter covered by an
arbitration agreement could still be litigated upon, the arbitration, instead of being a cheaper and
less time-consuming alternative to litigation, would involve duplicity of expenditure and effort and
would in essence be self-defeating. It is, therefore, necessary to provide, to make arbitration
meaningful and a real alternative to litigation, that the matter covered by an arbitration agreement
shall not be litigated uponin any court of law whatsoever, except for the purposes of making the
arbitration really effective.

In recognition of this principle Section 8(1) of the Arbitration and Conciliation Act, 1996 provides
that if any party to an arbitration agreement brings before a judicial authority the matter covered
by the agreement, the other party may apply for stay of the suit and for order of reference to
arbitration.

The question whether the dispute in question is arbitrable or not has to be decided by the court. It
has also to decide whether the dispute brought before it is the subject- matter of the arbitration
agreement. In satisfying itself whether the dispute is arbitrable or not the court has to go into the
aspects of validity, existence etc. of the agreement.

Under the Arbitration and Conciliation Act, 1996 (Section 8), the word used is “shall”. The effect
is that the court has no choice or discretion in the matter and is bound to refer the parties to
arbitration.

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 In order that a stay may be granted it is necessary that the following conditions should be fulfilled
:
1) The proceedings must have been commenced by a party to an arbitration agreement against
any other party to the agreement;
2) The legal proceeding which is sought to be stayed must be in respect of a matteragreed to
be referred. The subject-matter of the action should be the same as thesubject-matter of the
arbitration agreement.
3) The applicant for stay must be a party to the legal proceedings and he must havetaken no
step in the proceedings after appearance. [Under the 1996 Act, the requirement is before
‘submitting first statement on the substance of the dispute’] It is also necessary that he
should satisfy the court not only that he is but also was at the commencement of the
proceedings ready and willing to do everything necessary for the proper conduct of the
arbitration; and
4) The court must be satisfied that there is no sufficient reason why the matter should not be
referred to an arbitration in accordance with the arbitration agreement.

The discretionary element in the power of the court is not applicable under the 1996 Act.Under the
new provision (Section 8 of 1996 Act) the requirements of stay application and of an order for
reference to arbitration were stated by the Supreme Court in P. Anand Gajapathi Raju v. P.V.G.
Raju AIR 2000 SC 1886 as follows :
1) There must be an arbitration agreement;
2) A party to the agreement brings an action in the court against the other party;
3) The subject-matter of the action is the same as the subject-matter of the arbitration
agreement;
4) The other party moves the court for referring the parties to arbitration before submitting
the first statement on the substance of the dispute.”

Matter of stay should be within arbitration agreement : Firstly, the matter about which a
suit has been filed should be within the scope of the arbitration agreement. The words used in the
section are : “In a matter which is the subject of an arbitration agreement”.

Impartiality of Nominated Arbitrator : The impartiality of the arbitrator or lack of independence

on his part is under the 1996 Act a ground for having him substituted and not
for staying legal proceedings because Section 8 is couched in mandatory form. Thecourt has no
choice in the matter but to order the parties to reference.

Agreement to exclude courts altogether : An arbitration agreement which seeks to exclude

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altogether the jurisdiction of the courts would be void, being contrary to the Arbitration and
Conciliation Act, 1996 itself. For example, the court’s power to ask the arbitrator to submit a
question of law for determination by the court under the earlier 1940 Act could not be ousted. But
it is open to the parties to stipulate that the award of the arbitrator shall be a condition precedent to
the maintainability of any suit. In such cases no action may be allowed until an award has been
obtained. This was laid down in Scott Vs. Avery (1856) HCL 811 and such a clause is also known
by the name of that case.

Effect of Legal proceedings upon Arbitration (Section 8, 1996 Act): Sub-section (3)
of Section 8, 1996 Act deals with this point :
“Notwithstanding that an application has been made under sub-section (1) and that the issue is
pending before the judicial authority, an arbitration may be commenced or continued and an
arbitral award made.”

Under Section 8 of the new Act unless a party objects to the legal proceedings, they are valid. The
arbitration agreement does not oust the jurisdiction of the courts by itself. Where no party comes
forward to object to the suit, the arbitration agreement becomes ousted. A suit would have no effect
on the arbitration proceeding if it is pending, or even commenced. Such proceedings can be
continued and an award made.

Waiver of Rights
Waiver of Right to Object : A party who knows that :
1) Any provision of this Part from which the parties may derogate,or
2) any requirement under the arbitration agreement, has not been complied with the yet
proceeds with the arbitration without stating his objection to such-non- compliance without
undue delay or, if a time limit is provided for stating that objection, within that period of
time, shall be deemed to have waived his right to so object.

Extent of Judicial Intervention : Notwithstanding anything contained in any other law for the
time being in force, in matters governed by this Part, no judicial authority shall intervene except
where so provided in this Part.

Judicial Intervention : This section bars the jurisdiction of courts to interfere or to intervene in
arbitration proceedings except to the extent provided in Part I. This Part provides for intervention
of Courts in the following cases :
1) Section 8 – making reference in a pending suit
(1) A judicial authority before which an action is brought in a matter, which is the subject of an
arbitration agreement, shall, if a party so applies not later than when submitting his first statement
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on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied
by the original arbitration agreement or a duly certified copy thereof.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is
pending before the judicial authority, an arbitration may be commenced or continued and an
arbitrat award made.

2) Section 9 – passing interim orders.

A party may, before or during arbitral proceedings or at any time after the making of thearbitral
award but before it is enforced in accordance with section 36, apply to a court: -
(i) For the appointment of a guardian for a minor or a person of unsound mind for thepurposes
of arbitral proceedings; or
(ii) For an interim measure of protection in respect of any of the following matters,namely: -
(a) The preservation, interim custody or sale of any goods, which are the subject matter of the
arbitration agreement;
(b) Securing the amount in dispute in the arbitration;
(c) The detention, preservation or inspection of any property or thing which is subject matter
of the dispute in arbitration, or as to which any question may arise therein and authorising for
any of the aforesaid purposes any person to enter upon any land or building in the possession of
any party, or authorising any samples to be taken or any observation to be made, or experiment
to be tried, which may be necessary or expedient for the purpose of obtaining full information
or evidence;
(d) Interim injunction or the appointment of a receiver;
(e) Such other interim measure of protection as may appear to the court to be just and convenient,
And the Court shall have the same power for making orders as it has for thepurpose of, and in
relation to, any proceedings before it.

3) Section 11 – appointment of arbitrators.

(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the
arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators,
each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third
arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and-
(a) A party fails to appoint an arbitrator within thirty days from the receipt of a request to do so
from the other party; or
(b) The two appointed arbitrators fail to agree on the third arbitrator within thirty days from the
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 date of their appointment, The appointment shall be made, upon request of a party, by the Chief
Justice or any person or institution designated by him.
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if
the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party
from the other party to so agree the appointment shall be made, upon request of a party, by the
Chief Justice or any person or institution designated by him.
(6) Where, under an appointment procedure agreed upon by the parties, -
(a) A party fails to act as required under that procedure; or
(b) The parties, or the two appointed arbitrators, fail to reach an agreement expected of them under
that procedure; or
(c) A person, including an institution, fails to perform any function entrusted to him or under it
that procedure, A party may request the Chief Justice or any person or institution designated by him
to take the necessary measure, unless the agreement on the appointment procedure provides other
means for securing the appointment.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section
(6) to the Chief Justice or the person or institution designated by him is final.
(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator,
shall have due regard to-
(a) Any qualifications required of the arbitrator by the agreement of the parties; and
(b) Other considerations as are likely to secure the appointment of an independent and impartial
arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration,
the Chief Justice of India or the person or institution designated by him mayappoint an arbitrator
of a nationality other than the nationalities of the parties where theparties belong to
different nationalities.
(10) The Chief Justice may make such scheme, as he may deem appropriate for dealingwith matters
entrusted by sub-section (4) or sub-section (5) or subsection (6) to him.
(11) Where more than one request has been made under sub-section (4) or subsection
(5) or sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief
Justice or his designate to whom the request has been first made under the relevant subsection shall
alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7),(8) and (10) arise in an
international commercial arbitration, the reference to “Chief Justice” in those subsections shall be
construed as a reference to the “Chief Justice of India”.
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other
arbitration, the reference to “Chief Justice” in those sub-sections shall be construed as a reference

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to the Chief Justice of the High Court within whose local limitsthe principal Civil Court referred to
in clause (e) of sub-section (1) of section 2 is situate and, where the High Court itself is the Court
referred to in that clause, to the Chief Justice of that High Court.
4) Section 14(2) – terminating mandate of arbitrator.
If a controversy remains concerning any of the grounds refer-red to in clause (a) of sub-section (1),
a party may, unless otherwise agreed by the parties, apply to the court to decide on the termination
of the mandate.
UNIT - II

ARBITRATION TRIBUNAL - APPOINTMENTS

Chapter 3rd of the Act of 1996 deals with the composition of arbitral tribunal. Section10 of
this Act deals with the number of arbitrators while Section 11 deals with the appointment of
arbitrators.

According to Section 10(1) the parties are free to determine the number of arbitrators, provided
that such number shall not be an even number and Section 10(2) provides that failing the
determination referred to in sub-sec. (1), the arbitral tribunal shall consist of asole arbitrator.

An arbitrator is a neutral third person to decide a dispute, when the parties decided to resolved the
dispute by appointing an arbitrator as per the arbitration clause in the contract. The process of
arbitration has not been defined in the law.1There may be a sole arbitrator or a panel of arbitrators
as per the agreement between the parties. Whether the arbitrator is sole or more than one it is called
an Arbitral Tribunal2 The award given by the Arbitral Tribunal is equal to that of the decree of a
Civil Court. The arbitration and the office of Arbitrator flow from the arbitration agreement. The
term arbitrator is not defined in the Arbitration and Conciliation Act 1996. An arbitrator is a private
extra judicial judge and a referee.

According to Section 11 of the Act of 1996 –

1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the
arbitrator or arbitrators.
3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators
each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the
third arbitrator who shall act as the presiding arbitrator.
4) If the appointment procedure in sub-section (3) applies and –
a. a party fails to appoint an arbitrator within thirty days from the receipt of a
request to do so from the other party; or

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 b. The two appointed arbitrators fail to agree on the third arbitrator within
thirty days from the date of their appointment.
The appointment shall be made, upon request of a party, by the
Chief Justice or any person or institution designated by him.
5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator,
if the parties fail to agree on the arbitrator within thirty days from receipt of a request by
one party from the other party to so agree the appointment shall be made, upon request of
a party, by the Chief Justice or any person or institution designated by him.
6) Where, under an appointment procedure agreed upon by the parties –
a. a party fails to act as required under that procedure; or
b. the parties, or the two appointed arbitrators, fail to reach an agreement
expected of them under that procedure; or
c. a person, including an institution, fails to perform any functionentrusted
to him or if under that procedure.
A party may request the Chief Justice or any person or institution designated
by him to take the necessary measure, unless the agreement on the appointment
procedure provides other means for securing the appointment.
7) A decision on a matter entrusted by sub-section (4) of sub-section (5) on sub- section (6)
to the Chief Justice or the person or institution designated by him is final.
8) The Chief Justice or the person or institution designated by him, in appointing anarbitrator,
shall have due regard to –
a. any qualifications required of the arbitrator by the agreement of theparties;
and
b. other considerations as are likely to secure the appointment of an
independent and impartial arbitrator.
9) In the case of appointment of sole or third arbitrator in an international commercial
arbitration, the Chief Justice of India or the person or institution designated by him may
appoint an arbitrator of a nationality other than the nationalities of the parties where the
parties belong to different nationalities.
10) The Chief Justice may make such scheme as he may deem appropriate for dealing with
matters entrusted by sub-section (4) or sub-section (5) or sub- section (6) to him.
11) Where more than one request has been made under sub-section (4) or sub- section (5) or
sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief
Justice or his designate to whom the request has

15
 been first made under the relevant sub-section shall alone be competent to decide on the
request.
12) a. Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10)
arise in an international commercial arbitration, the reference to “Chief Justice” in
those sub-sections shall be construed as a reference to the “Chief Justice of India”.
b. Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10)
arise in any other arbitration, the reference to “Chief Justice” in those sub-sections
shall be construed as a reference to the Chief Justice of the High Court within whose
local limits the Principal Civil Court referred to in clause (e) of sub-section (1) of
Section 2 is situate and, where the High Court itself is the Court referred to in that
clause, to the Chief Justice of that High Court.

Section 11 empowers the Chief Justice to appoint arbitrator in certain conditions. Appointment by
Chief Justice : The expression Chief Justice in this connection virtually means the court because in
most cases the Chief Justices have authorised Civil Judges.In the three cases mentioned in the
section the Chief Justice gets the power to appoint an arbitrator. They are :
1) Where he parties fall to appoint or concur in the appointment of an arbitrator orarbitrators;
2) Where the two appointed arbitrators fail to appoint or concur in the appointmentof the
presiding arbitrator.
3) Where the person or institution designated by the parties for appointment fails toact.

Thirty-day Notice : Before asking the Chief Justice to act in the matter, a thirty clear days’ notice
should be given to the other party to concur in the appointment and if he fails to do so then an
application can be made to the court. The court will also give an opportunity to the other party to
explain his position. The Chief Justice must have due regard to the qualifications of the arbitrators
required by the parties under their agreement and also independence and impartiality of the person
in question. An application for appointment of arbitrator made before giving any notice to the other
party or raising a demand against him was held to be incompetent.

16
17
GROUNDS FOR CHALLENGE
According to Section 12 of the Arbitration and Conciliation Act, 1996 -
1) When a person is approached in connection with his possible appointment as anarbitrator,
he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to
his independence or impartiality.
2) An arbitrator, from the time of his appointment and throughout the arbitralproceedings,
shall, without delay, disclose to the parties in writing any circumstances referred to in sub-
section (1) unless they have already beeninformed of them by him.
3) An arbitrator may be challenged only if –
a. circumstances exist that give rise to jusificable doubts as to his
independence or impartiality, or
b. he does not possess the qualifications agreed to by the parties.
4) A party may challenge an arbitrator appointed by him, or in whose appointment he has
participated, only for reasons of which he becomes aware after theappointment has been
made.
Doubt as to Independence or Impartiality at Initial Stage : According to Section 12(1) of
the Act, one of the grounds for challenge is the existence of a doubt about the arbitrator’s
independence or impartiality. Section 12 (1) says that when a person is approached in connection
with his possible appointment as an arbitrator, he is under a duty to disclose in writing any
circumstances likely to give rise to justifiable doubts as to his independence or impartiality.

Disclosure of Circumstances by Arbitrator After Appointment : Section 12(2) casts a

duty upon a person who has been appointed as an arbitrator from the time of his appointment and
through out the arbitral proceedings to disclose in writing any circumstances which are liable to
cast justifiable doubts as to his independence or impartiality.

The arbitrator must be, and must be seen to be, disinterested and unbiased. Unless both

18
parties, with full knowledge of the facts expressly agree to his acting, no one should adjudicate in
proceedings in the outcome of which he has a direct pecuniary interest. For example, no one should
accept appointment in a dispute if he holds shares in one ofthe parties, or if he would benefit in
some other way from a decision in favour of one of the parties. And the arbitrator in a valuation
dispute should not be remunerated on a scale such that the higher the amount of his award, the
higher his fee.

The arbitrator should have no connection, direct or indirect, with a party such that it creates an
appearance of partiality. It is easier to recognise than to define the boundarybetween what previous
connections do and what do not disqualify. Actual bias is irrelevant for this purpose. The test is
whether a reasonable person who was not a party to the dispute would think it likely that the
connection was close enough to cause the arbitrator to be biased. Thus, personal friendship or
hostility; an employment relationship; a previous professional relationship either direct or through
other membersof a firm in which the arbitrator is a partner; these are examples of a relationship
whichmight create in a responsible outsider a reasonable suspicion of bias. If there is any realdoubt
about the matter, the arbitrator should disclose the facts to the parties and should ask if they object
to his accepting the appointment. If the facts become known to him after appointment, he should
disclose them and ask if they object to his continuing.

It is well-settled that there must be purity in the administration of justice as well as in

administrative or quasi-judicial functions as are involved in the adjudicatory process before the
arbitrators.

An arbitrator ought to be an indifferent and impartial person between the disputants. When the
parties entrust their facts into the hands of an arbitrator, it is essential that there must be abundant
good faith. The arbitrator must be absolutely disinterested and impartial. An interested person is
disqualified from acting as an arbitrator. The interest disqualifies the arbitrator if it is calculated to
produce a bias in his mind. The test is whether he is likely to be biased. Actual bias need not be
proved.

Section 12(2) takes care of doubts which develop after the appointment. It requires the arbitrator to
disclose to the parties in writing and without any delay any circumstances developing after the
time of his appointment and during the course of the arbitral

19
proceedings which give rise to a justifiable doubt about his independence or impartiality. Thus an
arbitrator can be challenged, whether he discloses his disqualification or not if there are justifiable
doubts about his independence or impartiality.

The appointment of an arbitrator can be challenged only on one or more of the followinggrounds :
a) That circumstances exist which give rise to justifiable doubts as to hisindependence of
impartiality, or
b) That he does not possess the qualifications agreed to by the parties. Theappointment can
not be challenged on any other grounds.

Party’s Challenge to his Own Arbitrator : According to Section 12(4), an arbitrator can be
challenged by the party who appointed him or in whose appointment he participated only for
reasons of which the party became aware after the appointment has been made.

Procedure to Challenge the Appointment of an Arbitrator

Section 13 of the Act deals with the challenge procedure. According to the section
1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an
arbitrator.
2) Failing any agreement referred to in sub-section (1), a party who intends to challenge an
arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral
tribunal or after becoming aware of any circumstances referred to in sub-section (3) of
Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.
3) Unless the arbitrator challenged under sub-section(2) withdraws from his office or the other
party agrees to the challenge, the arbitral tribunal shall decide on thechallenge.
4) If a challenge under any procedure agreed upon by the parties or under the procedure under
sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings
and make an arbitral award.
5) Where an arbitral award is made under sub-section (4), the party challenging thearbitrator
may make an application for setting aside such an arbitral award in accordance with Section
34.
6) Where an arbitral award is set aside on an application made under sub-section

20
 (5), the Court may decide as to whether the arbitrator who is challenged isentitled to
any fees.

On this point also the Act gives freedom to the parties to settle by agreement the procedure by
which the arbitrator in question would be challenged. If there is noagreement on the point or the
parties have failed to agree, then the procedure to be followed is that the party wishing to challenge
the person has to inform the Arbitral Tribunal of the matter. This should be done within fifteen
days. If the other party agrees to the challenge and the arbitrator does not voluntarily withdraw, the
Tribunal shall decide the matter. If the challenge is not successful, the Tribunal shall continue with
theproceeding and make an award. The party who challenged the arbitrator may challenge the
award also and make an application for setting aside in accordance with Section 34.If the award is
set aside, the court can consider whether the arbitrator shuld be entitled to his remuneration or not.

The grounds on which leave to revoke could be given were put under five heads :
1. Excess or refusal of jurisdiction by the arbitrator.
2. Misconduct of arbitrator.
3. Disqualification of arbitrator
4. Charges of fraud.
5. Exceptional cases.

Termination of Authority of Arbitration : Section 14 of the Act deals with the termination
of authority or arbitration on the grounds of his failure or impossibility to Act. Sub- section (1) of
Section 14 sets out the following grounds on which the mandate or authority of an arbitrator can
be terminated :
a. if the arbitrator either in law or factually becomes unable to perform his functions,or fails to
act without undue delay; and
b. if he withdraws from his office, or
c. the parties agreed to the termination of the mandate.
There was no provision corresponding to Section 14 in the repealed Arbitration Act, 1940. Section
11(1) of the old Act gave power to the Court to remove an arbitrator in circumstances similar to
those mentioned in Section 14(1) (a) of the present Act. Section 11(1) of the old Act provided :
“The court may, on the application of any party to a reference, remove an arbitrator or

21
umpire who fails to use all reasonable despatch in entering on the proceeding with the reference
and making an award.”

There is a famous case on the topic of Retirement or Change of Posting of Ex-officio Arbitrator.
The facts of this case in brief are that an arbitration agreement provided for reference to an engineer
officer to be appointed by a third party. The arbitrator so appointed retired during the pendency of
the proceedings. The Supreme Court held thatthe retirement resulted in the termination of the
authority of the arbitrator. A new arbitrator would be appointed and the proceedings would be
deemed to have continuedbefore the new arbitrator.

Court’s Assistance : If there is a dispute between the parties as to the existence of the grounds
mentioned in clause (a) of sub-section (1) of Section 14, any party may apply to the Court for
resolution of the dispute. Such grounds are –
1. de jure or de facto inability to act or
2. failure to act without undue delay.

But the section does not contemplate a dispute as regards the grounds mentioned in Section 14 (1)
(b) and there is no provision for a reference to the Court in this regard. These grounds are
withdrawing from office or termination of authority under parties’ agreement. There can hardly be
any doubt about the operation of these grounds.

Effect of withdrawal : Where – (a) an arbitrator withdraws from his office, or (b) a party agrees
to the termination of his mandate, it will not be inferred that any of the grounds referred to in
Section 14 (1) or in Section 12 (3) have been established. Withdrawal fromoffice by the arbitrator
is not on account of any decision on the merits of grounds for termination of his mandate. Likewise
the agreement of the parties to the termination of the mandate does not entail any decision on
merits. The mandate of an office-holder arbitrator comes to an end on his withdrawal from office.
The court cannot provide an extension except perhaps, where he was appointed by the court.
Additional Grounds for Termination : Section 15 also provides certain additional grounds
for termination of mandate and substitution of arbitrators. Section 15(1) purports to set out an
additional ground for terminating the mandate of an arbitrator namely, where he withdraws from
office for any reason or by or pursuant to agreement of the parties. But the provisions being of
overlapping nature, it seems that the ground

22
mentioned is already covered by Section 14(1) (b).

Removal of Arbitrator (Sections 12 and 13) : The provisions of the Arbitration and Conciliation
Act, 1996 about removal of arbitrators are somewhat different. They do notconfer a straight power
on the court. Section 12 casts a duty upon a would be arbitratorto disclose in writing if there is
anything which gives rise to a justifiable doubt as to his independence and impartiality. An
arbitrator’s appointment can be challenged on that ground and also on the ground of his being not
in possession of requisite qualifications as agreed to between the parties. A party can challenge his
own appointee only on the basis of a ground which he discovered afterwards. If the arbitrator does
not withdraw after the challenge, the Tribunal would decide the question. If the challenge is
successful the mandate of the arbitrator would be terminated. The mandate of an arbitrator also
becomes terminated under Section 14 if he becomes unable to perform his functions de facto or de
jure or if he withdraws or agrees to the termination of his mandate or fails to act without under
delay.

Jurisdiction of Arbitral Tribunal : Section 16 & 17 of the Arbitration and Conciliation Act 1996
deals with the jurisdiction of arbitral tribunal. In Section 16 competence of ArbitralTribunal to rule
on its jurisdiction is given. According to this section -
1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections
with respect to the existence or validity of the arbitration agreement, and for that purpose :
a. an arbitration clause which forms part of a contract shall be treated as an
agreement independent of the other terms of the contract; and
b. a decision by the arbitral tribunal that the contract is null and void shall not
entail ipso jure the invalidity of the arbitration clause.
2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not laterthan the
submission of the statement of defence; however, a party shall not be precluded from
raising such a plea merely because that he has appointed, or participated in the appointment
of, an arbitrator.
3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as
soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral
proceedings.
4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section
(3), admit a later plea if it considers the delay justified.

23
5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub- section (3)
and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral
proceedings and make an arbitral award.
6) A party aggrieved by such an arbitral award may make an application for setting aside such
an arbitral award in accordance with Section 34.

Challenge to Jurisdiction : Section 16(1) empowers an Arbitral Tribunal to decide :

a) The question as to its jurisdiction, and
b) The objection as to the existence or validity of the arbitration agreement.
For this purpose an arbitration clause in a contract shall be treated as an arbitrationagreement
independent of the contract.

If the Arbitral Tribunal holds that the contract is null and void it will not result in the automatic
invalidity of the arbitration clause. Though there was no similar provision in the erstwhile 1940
Act, the position in law was more or less the same.

JURISDICTION OF ARBITRAL TRIBUNAL

Jurisdiction means the power to decide. The arbitral tribunal is empowered to:
1. Rule on its own jurisdiction. This includes the power to give a ruling on anyobjection
with respect to the existence or validity of the arbitration agreement.
2. Pass orders for interim measures of protection.

1. Arbitral tribunal competent to rule on its own jurisdiction sec. 16.

The arbitral tribunal is competent to rule on its own jurisdiction it can also decide any objections
with respect to the existence or validity of the arbitration agreement. While deciding these
questions it shall take into account the following factors:
(a) an arbitration clause shall be treated as an agreement independent of the other terms of the
contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not ipso jure (by
the mere operation of law) result in the automatic invalidity of the arbitration clause.
The plea of lack of jurisdiction of the arbitral tribunal shall be raised not later than the submission
of the statement of defence. However, a party shall not be precluded from raising such a plea
merely because he has appointed or participated in the appointmentof an arbitrator.

24
Likewise, a plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as
soon as the matter alleged to be beyond the scope of its authority is raised during the course of
arbitral proceedings.

The arbitral tribunal may admit any such plea even at a later stage if it considers the delay justified.

The arbitral tribunal shall decide on any such plea and where it takes a decisionrejecting
the plea, it shall continue with the arbitral proceedings and make an arbitral award.

A party who is aggrieved by such an arbitral award may apply for having it set aside under sec. 34
of the Act.

There was a sharp conflict of judicial opinion among various Courts in regard to the jurisdiction
to decide the existence, validity or effect of arbitration agreement. Secs. 31 (2), 32 and 33 of the
1940 Act generated a plethora of cases which are no longer good law in the light of the provisions
of sec. 16 of the new Act which has finally put the controversy at rest by doing away with the
division of powers between the Courts and the arbitral tribunal which existed under the old Act.

Under sec. 16 of the new Act the arbitral tribunal is conferred full powers to decide on its own
jurisdiction, namely, the scope of arbitration and the scope of its authority. The Scope of arbitration
is dependent upon the existence or validity of the arbitrationagreement while the scope of authority
depends on the actual reference made to the arbitral tribunal. The expression scope of arbitration
is much wider than scope of authority. These two expressions need to be distinguished.
Arbitrability of the claim depends upon the dispute and the reference to the arbitral tribunal. If the
matter in dispute falls within the arbitration agreement it is within the scope of the arbitration or
jurisdiction of the arbitral tribunal. Conversely, a claim which is beyond the scope of jurisdiction
of the arbitral tribunal. But all that is arbitral need not necessarily be referredfor arbitration. The
jurisdiction of arbitral tribunal is, therefore, further limited by the actual reference. In other words,
what is outside the jurisdiction would also be beyond the scope of authority, but a matter which is
beyond the scope of authority (or actual reference) may not necessarily be outside the jurisdiction
of the arbitral tribunal.

25
The Model Law considers the question of jurisdiction as a preliminary or threshold question,
because no arbitration proceedings can commence in the absence of jurisdiction. The Indian Law
however deviates from the Model Law in that it neither offers the arbitral tribunal the option to
deal with the questions of jurisdiction or scope of authority as a preliminary issue nor does it permit
any party dissatisfied with the arbitral tribunals ruling to approach the Court. Under the Indian law
if the objection as tojurisdiction or scope of authority is rejected the arbitral tribunal may continue
with the arbitral proceedings and make an award. A party aggrieved by such an award may haveto
apply to have it set aside in accordance with sec. 34 of the Act.

POWER AND PROCEDURE OF ARBITRAL TRIBUNAL

Interim Measures Sec. 17
Except where the parties have agreed otherwise, the arbitral tribunal may, at the requestof a party,
order a party to take any interim measures of protection as the arbitral tribunal may consider
necessary in respect of the subject matter of the dispute. It may also require a party to provide
appropriate security for carrying out the interim measures ordered by it.

Under the old Act of 1940 Courts alone had the power to grant interim measures of protection.
The new Act has, however, also conferred these powers upon arbitral tribunals. The provisions of
Sec. 17 are similar in effect to the provisions of sec. 9 whichempowers the courts. But there is no
conflict between the provisions of these secs. A few points of difference between these powers
may be noted. Sec.9 provides for the making of an order for interim measures by the Court in
respect of arbitration and sec. 17 empowers the arbitral tribunal to order a party to the reference to
take interim measures of protection in respect of the subject matter of the dispute. There is no
restriction on Court’s power but the arbitral tribunal’s power is conditional and can be exercised
only where it is not otherwise agreed by the parties, Further, the arbitral tribunal can exercise the
power only during the arbitration proceedings and within the limits defined by sec. 17 that is, it
can order a party to take interim measures upon request in that behalf by the other party, and it
may require a party to provide appropriate security for carrying to the interim measures ordered
by it. On the other hand, the Courts are empowered to exercise this power to make orders before,
during, or after the arbitral proceedings, and their powers are not restricted or defined within

26
strict limits as those placed on the powers of the arbitral tribunal.

Powers, Duties & Obligations of Arbitral Tribunal

The new Act has made some far reaching changes in the law of arbitration. Several powers in
respect of which the courts exercised jurisdiction under the old Act have beenwithdrawn from the
Court’s jurisdiction and have now been vested in the arbitral tribunalitself. The Arbitral tribunal
also has certain duties and obligations while these powers, duties etc. have been discussed in
necessary details at their appropriate places and attempt has been made here to enlist these powers,
duties and obligations, this is just an illustrative list and it does not purport to be exhaustive.

Powers : The arbitral tribunal has inter alia the following powers:
a) To determine any issue relating to procedural aspects of arbitration (except under sec. 28)
under Part I of the Act where parties have not determined it or authorised the arbitral
tribunal to determine it for instance, to determine the place, language, procedure etc. for
conduct of arbitration proceedings.
b) To rule on its own jurisdiction and decide objections raised by a party during arbitration
proceedings regarding the competence of an arbitrator or of an arbitral tribunal, its own
jurisdiction or scope of authority (arbitrability), existence or validity of an arbitration
agreement and challenge to appointment of anarbitrator.
c) To decide ex aequo et bono or as amiable compositeur where expressly authorised by the
parties to do so.
d) To order a party to take interim measures of protection and also to order a party to provide
security for carrying out interim measures.
e) To encourage parties to settle the dispute at any time even whilst the arbitration proceedings
are on by mediation conciliation or other procedures.
f) To appoint one or more experts to report to it on specific issues and require a party to give
the expert any relevant information or to produce or provide access to. any relevant
documents, goods or other property for his inspection.
g) Not to follow the technical rules of procedure and evidence prescribed by the
C.P.C. and Evidence Act for Court procedures.
h) To seek court assistance in taking evidence.
i) To order parties to make deposits as advance for meeting the costs of arbitration.

27
j) To exercise lien on the arbitral award for its unpaid costs.
k) To take administrative assistance and delegate ministerial acts.
l) To decide on limitation.
m) To award interest.
n) To make interim, ex parte, partial, de praemissis, consolidated, additional awardand to
correct or interpret its own award.
o) To order termination of arbitral proceedings.

Award : Introduction
When an award has been made after rejection of the objections as to lack of or excess of jurisdiction
the aggrieved party may make an application under Section 34 to set aside the award. In these
proceedings the award can be challenged, inter alia, on the ground that the objections were wrongly
rejected.

Arbitration Clause is Collateral or Ancillary Contract : The arbitration agreement

contained in the arbitration clause in a contract is often referred to as a collateral or ancillary
contract in relation to the main contract of which it forms a part in the sense that it survives even
after the parties have broken or repudiated the rest of the contract and will remain applicable for
the settlement of the resulting dispute. The repudiation orbreach of the main contract does not put
an end to the arbitration clause. The failure of the main contract constitutes the occasion for the
application of the arbitration clause. The main contract does not become irrelevant. That still
provides the framework within which the rights and liabilities of the parties would be determined.
The arbitration would,therefore, proceed according to the proper or applicable law of contract.
Section 7(2) ofthe Arbitration and Conciliation Act, 1996 provides that an arbitration agreement
may bein the form of an arbitration clause in a contract or in the form of a separate agreement.
Section 16 (1) (b) further provides that a decision by the Arbitral Tribunal that the contract is null
and void shall not entail ipso jure the invalidity of the arbitration clause.

Interim Measures by Tribunal

According to Section 17 of Arbitration and Conciliation Act, 1996 , the Arbitral Tribunalmay
grant interim measures.
Section 17 Interim Measures Ordered by Arbitral Tribunal
1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of

28
 a party order a party to take any interim measure of protection as the arbitral tribunal may
consider necessary in respect of the subject-matter of the dispute.
2) The arbitral tribunal may require a party to provide appropriate security in connection with
a measure ordered under sub-section (1).
While Section 9 provides for the taking of interim measures by the Court in certain matters, Section
17 provides for the taking of interim measures in respect of the subject
-matter of the dispute by the Arbitral Tribunal. The opening words of Section 17(1) indicate that
the parties may be agreement exclude the exercise of such a power by the arbitral Tribunal.
Sub-section (2) empowers the tribunal to order the furnishing of adequate security by aparty for
carrying out the interim measure ordered under Sub-section (1) of Sec. 17.

Conduct of Arbitral Proceedings : Section 18 - 27 of the Arbitration and Conciliation Act 1996
has provisions related with the conduct of arbitral proceedings.

The Arbitrator has to come to a conclusion on the matters of difference between the parties which
are referred to him and to express it in terms of an award. He cannot delegate this function to any
other person. The parties have appointed him because of their trust and confidence in him and they
may not repose the same trust in any other person. But he may obtain legal assistance of drawing
up his award.

Equal Treatment of Parties : The Tribunal has to treat the parties with equality. They should be
given full opportunity to present their respective cases. According to Section 18, the parties must
be treated equally by the Arbitral Tribunal and each party shall be given a full opportunity to
present his case.

This section casts a two fold duty on the arbitral tribunal :

a) It must be independent and impartial and must mete out equal treatment to eachparty.
b) It must give each party a full opportunity to present its case. Sections 23 and 24provide for
the giving of such opportunity.

Time and Place of Hearing (Section 20)

A time and place should be fixed for hearing and notice should be given to the parties accordingly.
Section 20 provides that the parties are free to agree on the place of

29
arbitration. Failing such agreement the place is to be determined by the Arbitral Tribunal.In doing
so, the Tribunal has to give due consideration to the circumstances of the case and also the
convenience of the parties. Unless otherwise agreed by the parties, the Tribunal may meet at any
appropriate place for mutual consultation, for hearing witnesses, experts or other parties or for
inspection of documents, goods or other property.
Rules of Procedure : The arbitral tribunal is not bound by the technical laws of procedures like
CPC 1908, Cr.P.C. 1973 or Indian Evidence Act, 1872. Section 19 of this Act deals with the rules
of procedure of arbitral Tribunal. It prescribes the determination of rules of procedure by the
tribunal itself.
1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of1908) or
the Indian Evidence Act, 1872 (1 of 1872).
2) Subject to this Part, the parties are free to agree on the procedure to be followed by the
arbitral tribunal in conducting its proceedings.
3) Failing any agreement referred to in sub-section (2),the arbitral tribunal may, subject to
this Part, conduct the proceedings in the manner it considers appropriate.
4) The power of the arbitral tribunal under sub-section (3) includes the power to determine
the admissibility, relevance, materiality and weight of any evidence.

CPC & Evidence Act : Sub-section (1) provides that the Code of Civil Procedure, 1908, and the
Evidence Act, 1872 are not to be binding in arbitration proceedings. The positionunder the repealed
Arbitration Act, 1940 was the same.

Natural Justice : No doubt arbitrator is not bound by technical rules of procedure but he cannot
ignore rules of natural justice. The thread of natural justice should run through the entire arbitration
proceedings and the principles of natural justice require that the person who is to be prejudiced by
the evidence ought to be present to hear it taken, to suggest cross-examination or himself to cross-
examine and to be able to find evidence,if he can, that shall meet and answer it, in short, to deal
with in the same manner as in the ordinary course of legal proceedings. Except in a few cases
where exceptions are unavoidable, both sides must be heard, each in the presence of the other.

COURT ASSISTANCE IN TAKING EVIDENCE (SECTION 27)

The Tribunal may by itself, or any party with the approval of the Tribunal, apply to the

30
court of assistance in taking evidence. The application has to specify the particulars as stated in
Section 27 –
1) The arbitral tribunal, or a party with the approval of the arbitral tribunal, may applyto the
court for assistance in taking evidence.
2) The application shall specify :
a. the names and addresses of the parties and the arbitrators;
b. the general nature of the claim and the relief sought;
c. the evidence to be obtained, in particular –
i. the name and address of any person to be heard as witness or
expert witness and a statement of the subject-matter of the testimony
required;
ii. the description of any document to be produced or property
to be inspected
3) The court may, within its competence and according to its rules on takingevidence, execute
the request by ordering that the evidence be provided directly to the arbitral tribunal.
4) The court may, while making an order under sub-section (3), issue the same processes to
witnesses as it may issue in suits tried before it.
5) Persons failing to attend in accordance with such process, or making any other default, or
refusing to give their evidence, or guilty of any contempt to the arbitraltribunal during the
conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and
punishments by order of the Court on the representation of the arbitral tribunal as they
would incur for the like offences in suits tried before the Court.
6) In this section the expression “Processes” includes summonses and commissions for the
examination of witnesses and summonses to producedocuments.

Seeking Court’s assistance : Under Section 27(1), the Arbitral Tribunal as well as any party
with the approval of the Arbitral Tribunal can apply to the court for assistance in taking evidence.
Under Section 43 of the old 1949 Act only the arbitrator or umpire could apply and not a party.

Orders of Court : The court may order that the evidence be provided directly to the Arbitral
Tribunal. It will issue to the witnesses the same processes as it issues in the

31
suits before it. The processes that may be issued include :
a) summonses for the examination of witnesses,
b) commissions for the examination of witnesses, and
c) summonses for the production of documents.

Disobedience of Orders : Persons who fail to attend as required, or make any otherdefault; or
refuse to give evidence; or are guilty of contempt of the Arbitral Tribunal, shall be dealt with by
the Court on the representation of the Arbitral Tribunal in the sameway as a person who was guilty
of like offences in suits before the court.
Default of Party (Section 25)
Unless otherwise agreed by the parties, where, without showing sufficient cause :
1) the claimant fails to communicate his statement of claim in accordance with sub
-section (1) of Section 23, the arbitral tribunal shall terminate the proceedings :
2) the respondent fails to communicate his statement of defence in accordance with sub-
section (1) of Section 23, the arbitral tribunal shall continue the proceedings without
treating that failure in itself as an admission of the allegations by the claimant;
3) a party fails to appear at an oral hearing or to produce documentary evidence, thearbitral
tribunal may continue the proceedings and make the arbitral award on the evidence before
it.

Principles Governing ex parte Proceedings : The principles governing the arbitrator’s right
to proceed ex parte are :
1) If a party to an arbitration agreement fails to appear at one of the sittings, the arbitrator
cannot or, at least, ought not to proceed ex parte against him at that sitting;
2) Where non-appearance was accidental or casual, the arbitrator should ordinarily proceed in
the ordinary way, fixing another date of hearing and awaiting the future behaviour of the
defaulting-party;
3) If, on the other hand, it appears that the defaulting party had absented himself fordefeating
the object of the reference, the arbitrator should issue a notice that he intended at specified
time and place to proceed with the reference and that if theparty concerned did not attend
he would proceed in his absence;
4) But if after making such premptory appointment issuing such a notice the arbitrator did
not in fact proceed ex parte on the day fixed, but fixed another

32
 subsequent date, he could not proceed ex parte on such subsequent date, unlesshe issued a
similar notice in respect of the date as well; and
5) If he issued a similar notice and the party concerned did not appear, an award made ex
parte would be in order. But, if he did not issue such notice on the second occasion but
nevertheless proceeded ex parte, the award would be liable to be set aside in spite of a notice
of premptory hearing having been given in respect of the earlier date, subject, however, to
the condition that prejudice was caused to the party against whom the ex parte order was
made. Arbitrator’s action ought to be in due compliance with the concept of natural justice.
In the event of there being any such violation, courts oughts not to hesitate to strike down
an action of the Arbitrtrator and set aside the award if made.
In the case of Juggilal Kamlapat Vs. General Fibre Dealers Ltd., AIR 1955 Cal 354, the
Calcutta High Court laid down the procedural rule to be followed by the arbitrators : “If aparty fails
to appear, the arbitrator ought ordinarily to fix another date of hearing and await the future
behaviour of the defaulting party, and give the party notice that is he does not appear, he (the
arbitrator) would proceed ex parte against him. If after having issued such a notice the arbitrator
does not proceed ex parte on the adjourned date, andfixed another date, he cannot proceed ex parte
on that date, unless similar notice has been given in respect of that date as well.” The same view
was been taken by the Punjab High Court.

If no such notice was given, and it could be shown that no prejudice was caused to the absenting
party, the award would not be set aside. But it has been held in the very samecase that where no
such notice was given, there will always be a presumption that prejudice has been caused.

Power to limit Evidence [Section 19(4)] : The arbitrator may restrict evidence to the necessities
of the case and the court may not interfere in such matters. According to Section 19 (4) the power
of arbitral tribunal u/s 19(3) includes the power to determine the admissibility, relevance,
materiality, and weight of any evidence.

A contract for the construction of two office blocks contained an arbitration clause. Disputes arose
as to 81 separate roofs in the two blocks. They were referred to arbitration. The roofs involved
being too many, attempts were made by the parties to limit the issues. The parties failed to agree.
One of them asked the arbitrator to do so by

33
an order. He accordingly ordered that the issue of liability be determined by reference toa maximum
of 25 roofs and then suspended it to enable the parties to test its validity ina court. He indicated by
his letter that the parties were still free to raise any matter requiring special consideration.

It was held that in general the court should be slow to interfere with an arbitrator’s procedural
orders. In this case, the particular question of law was one which thearbitrator ought not to have
been asked to state. There was no requirement that an arbitrator must allow each party to call the
evidence which he wishes to call. In all the circumstances of the case the arbitrator was not acting
unfairly or refusing to decide the case submitted to him.

An arbitrator may order for filing of pleadings, or for discovery or inspection of documents. Under
the preceding 1940 Act, the arbitrator could call upon a party to provide security for costs unless
such power was granted to him by the parties. But now by virtue of the provisions in Section 38 of
the Arbitration and Conciliation Act, 1996, theArbitral Tribunal can call upon the parties to deposit
a sum of money for covering costs.

The arbitrator has to follow the ordinary rules of evidence. The owner engaged abuilding
contractor. Disputes arose as to adjustments to be made for certain sums and were referred to
arbitration.

Closure of Hearings : There is no provision in the 1996 Act requiring the arbitrator to give
notice of closure of hearing to the parties. But judicial pronouncements and fair play require that
the parties should be informed of the closure of the proceedings. The Courts have held that such a
notice should be given so as to enable the parties to lead any additional evidence if they so desire.

Settlement
1) It is not incompatible with an arbitration agreement for an arbitral tribunal to encourage
settlement of the dispute and, with the agreement of the parties, the arbitral tribunal may
use mediation, conciliation or other procedures at any time during the arbitral proceedings
to encourage settlement.
2) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall
terminate the proceedings and, if requested by the parties and not objected

34
 to by the arbitral tribunal, record the settlement in the form of an arbitral awardon agreed
terms.
3) An arbitral award on agreed terms shall be made in accordance with Section 31and shall
state that it is an arbitral award.
4) An arbitral award on agreed terms shall have the same status and effect as anyother arbitral
award on the substance of the dispute.

Settlement Through Alternative Dispute Resolution (ADR) : Though there was no

specific provision corresponding to this section in the repealed Arbitration Act, 1940,
the law was the same. An award which merely embodied a compromise of the parties themselves
was a valid award. Accepting a compromise is an adjudication of the case as is a decree of the
court founded on a compromise. An award remains an award even though it is an approved
arrangement put forward by the parties and was inaccordance with their wishes. The rule that all
award is not open to objection on the sole basis that it merely reproduced an agreement come to
between the parties, appliesonly where the consent of the parties is regarded by the arbitrator as
evidence of the fact that the settlement proposed is fair to all. If the existence of the compromise
is disputed, the arbitrator can go into that question and if he finds the compromise to be valid, he
can given his award in terms of the same.

This section gives this position to the arbitral tribunal that to the extent possible it should encourage
the parties to come to a voluntary settlement and for this purpose to use mediation, conciliation and
other procedures.

Sub-section (2) provides that if the parties settle the dispute the Tribunal may terminate the
proceedings and if the parties so desire record the settlement in the form of an award on agreed
terms. Sub-section (3) requires that an award on settled terms shouldstate that it is an award and it
has to be made in accordance with the requirements of Section 31. Sub-section (4) gives to an
agreed award the same status and force as if it were an arbitral award.

Form and Contents of Award

Form and Contents of Arbitral Award
1) An arbitral award shall be made in writing and shall be signed by the members ofthe arbitral
tribunal.

35
2) For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator,
the signatures of the majority of all the members of the arbitral tribunal shall be sufficient
so long as the reason for any omittee signature is stated.
3) The arbitral award shall state the reasons upon which it is based, unless :
a) the parties have agreed that no reasons are to be given, or
b) the award is an arbitral award on agreed terms under Section 30.
4) The arbitral award shall state its date and the place of arbitration as determined in
accordance with Section 20 and the award shall be deemed to have been made at that place.
5) After the arbitral award is made, a signed copy shall be delivered to each party.
6) The arbitral tribunal may, at any time during the arbitral proceedings, make an interim
arbitral award on any matter with respect to which it may make a final arbitral award.
7) a) Unless otherwise agreed by the parties, where and in so far as an arbitral award
is for the payment of money, the arbitral tribunal mayinclude in the sum for which
the award is made interest, at such rate as it deems reasonable, on the whole or any
part of the money, for the whole orany part of the period between the date on which
the cause of action arose and the date on which the award is made.
b) A sum directed to be paid by an arbitral award shall, unless the award
otherwise directs, carry interest at the rate of eighteen per centum per annum from
the date of the award to the date of payment.
8) Unless otherwise agreed by the parties –
a) the costs of an arbitration shall be fixed by the arbitral tribunal;
b) the arbitral tribunal shall specify –
i) the party entitled to costs,
ii) the party who shall pay the costs,
iii) the amount of costs or method of determining that amount, and
iv) the manner in which the costs shall be paid.
Explanation : For the purpose of clause (a), “costs” means the reasonable costs relatingto :
a) the fees and expenses of the arbitrators and witnesses.
b) legal fees and expenses.
c) any administration fees of the institution supervising the arbitration, and

36
d) any other expenses incurred in connection with the arbitral proceedings and thearbitral
award.

Requirements of Valid Award : At the conclusion of the hearing, the Tribunal passes its
judgment and it is known as the award. There is no presumption that merely because anaward had
been made, it is a valid award. It has to be proved by the party who sues upon it that it was made
by the arbitrators within the terms of the authority. A valid award has to satisfy the following
requirements :
1) Must Conform to Submission : The arbitrator should conform to the terms of the
agreement under which he is appointed and is supposed to function. He has no authority to
arbitrate that which is not submitted to him. One of the grounds of setting aside in Section
34(2) (iv) says :
Section 34(iv) the arbitral award deals with a dispute not contemplated by or not falling
within the terms of the submission to arbitration, or it contains decisions on matters beyond
the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can beseparated from
those not so submitted, only that part of the arbitral award whichcontains decisions on
matters not submitted to arbitration may be set aside; Hence an award which is outside
the submission is void. If an arbitrator hasawarded something beyond authority the
award is pro tanto void and if the voidpart is so mixed up with the rest that it cannot be
separated, the award is voidaltogether and such an award is liable to be set aside. For
example, where thearbitrator awarded damages in lump sum and in reckoning the
amount he hadtaken into account matters which he had no jurisdiction to consider, the
awardwas held to be bad. But where the excess part can be separated from the rest,the
part which is within the reference remains valid.

2) Must be Certain : The award must be certain in its operative particulars. For example,
there must be certainty as to the party who has to perform, who has to receive the payment,
the time and mode of payment, the amount payable for example. An award which says that
A or B shall do a certain act, or that the money shall be paid by some or one of the several
named persons on demand, has been held to be bad for uncertainty.
An award allowed the supplier of electricity to recover the amount only as shownby the
meter or according to the report of the inspector. Under Section 26(6) of

37
the Electricity Act, 1910, the inspector’s report superseded the award. The Supreme Court
held that the award was not uncertain. The supplier claimed that the meter was slow. The
Supreme Court referred the matter to arbitration. The arbitrator decided in the above
manner.
Where the arbitrator passed an award stating that “the claimant will be paid 10% more than
the measured quantity of the embankment for conveyance charges after deducting the
quantity of cut earth”, it was held that the language of the award was highly vague even to
a technically equipped engineer. The court agreed with the following remark of the trial
judge :
Apart from the language, the determination calls for a further calculation based upon
several records such as the measurement books, a matter on which there may still be scope
for controversy. Why the arbitrator should not at least take thetrouble of doing this work
rather than leaving it to the parties to fight out later. The courts are not obliged to pass a
decree based on awards unless the awards are self-contained; if an award calls for other
records or evidence so as to be thebasis for an executable decree, the award is incomplete.
The court agreed with the judge and said that the award was too vague and in determinative
of the main points in controversy. It was difficult to confirm the decree which was passed
in terms of such an award.
An award may be referred back to an arbitrator where it is so indefinite as to be incapable
of execution. An uncertain award is not capable of being executed withany certainty and,
therefore, it may be referred back to the arbitrator to remove the elements of uncertainty
from it. Where the setting aside of an award is demanded on the ground of wrong
application of law, it may be sent back to the arbitrator with a guidance note as to the state
of the law.
A vessel was chartered for a period of 24 months. Its engine suffered a major breakdown.
The charterer purported to treat the contract as terminated on this ground. The ship owner,
however, elected to continue the contract, he carried outextensive repairs and re-tendered
the ship. The charterer refused to take it sayingthat by failing to make the vessel seaworthy
at the inception the ship owner had committed repudiatory breach of the contract. The
arbitrator held that the ship owner had committed the alleged breach, but it did not go to
the roof of the contract. The charterer’s repudiation was wrong, but even so the ship owner
wasbound to accept it.
The ship owner brought the matter before the court. The court felt that there was

38
 a strong prima facie case that the arbitrator’s decision that the ship owner was bound to
accept the repudiation was wrong. The case thus involved a question orimportance in the
development of the law of contract as to whether a party is bound to accept a
repudiation. The ship owner’s appeal for a consideration ofthis question was allowed.
The court also held that the award would be remitted to the arbitrator in order that he should
summarise the facts upon which he had concluded that the ship owner had no legitimate
interest in keeping the contractalive and was, therefore, bound to accept the repudiation.
3) Must be Consistent and Not Vague : An award may be set in terms of alternatives.
An award directed the party to do one of two things. One of the alternatives was certain
and impossible, but the other was certain and possible. The award was held to be valid and
binding. The award should be consistent in all its terms. At inconsistent award is as bad as
an uncertain one.
4) Must be Complete and Final : the arbitrator should finally dispose of the matter before
him and not leave it a part of the way The award found that some sleepers were merchantable
and some not and directed that the buyer should dispose of them and the sleeping broker
should certify the difference in amount realised by the unmerchantable and merchantable
sleepers and that amount the seller should pay.
The award was held to be bad for want of finality.
Similarly, where an arbitrator made his award subject to the opinion of a third person, it
was held to be a substituted judgment and the award was not final.
Where the award finally decides the facts involved in the submission but is statedin the form
of a special case for the opinion of the court over a matter of law, it will not be void for
want of finality. The power of the arbitrator to state a special case for the opinion of the
court has not been included in the Arbitration and Conciliation Act, 1996. Now under the
new Act, it is the duty of the arbitrator to record his finding of facts on the basis of evidence
adduced before him and apply the substantive law to the facts so found. Facts must be
recorded in the award itself. A mere reference to the evidence is not enough.

GROUNDS OF CHALLENGE RESULTING INTO TERMINATION

According to Section 32
(1) the arbitral proceedings shall be terminated by the final arbitral award or by an order of the
arbitral tribunal under sub-section (2) of Article 32.

39
(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings
where :
(a) the claimant withdraws his claim, unless the respondent objects to the order
and the arbitral tribunal recognises a legitimate interest on his part in obtaining a
final settlement of the dispute,
(b) the parties agree on the termination of the proceedings, or
(c) the arbitral tribunal finds that the continuation of the proceedings has for
any other reason become unnecessary or impossible.
(3) Subject to Section 33 and sub-section (4) of Section 34, the mandate of the arbitral tribunal
shall terminate with the termination of the arbitral proceedings.

Automatic Termination : The arbitration proceedings stand automatically terminated when the
final arbitral award is made.
Where the contract under which an arbitration arose is assigned to another person on an assignment
takes place by reason of take over of the concern, it becomes the duty ofthe assignee to give notice
to the arbitrator, within a reasonable period, that he has succeeded to the rights of the previous
party to the arbitration. His failure to do so would bring the arbitration agreement to an end.

Termination by Tribunal : An order for the termination of arbitral proceedings has to be

passed by the Arbitral Tribunal in the following cases :
1) when proceedings under section 33 have been initiated :
a. for correction of errors,
b. for interpretation of the award, or
c. for making an additional award, or
2) when proceedings for setting aside an award under Section 34(1) have been adjourned by
the court to enable the Arbitral Tribunal to take action to eliminate the grounds for setting
aside the award. [Section 34(4)].

Powers of Arbitrators : Under Section 13 of the erstwhile 1940 Act the powers of the arbitrator
included the following :
1) The powers to administer oath to parties and witnesses appearing before him.
2) In reference to questions of law, he had the power to refer the matter for the opinion of the
court or he could write his award his award in terms of a referenceto the court on a point
of law so that the court’s opinion would finally decide the

40
 matter. (Not applicable under 1996 Act)
3) He had the power to make the award conditional or in terms of alternatives.
4) He had the power to rectify any clerical error or mistake arising from anyaccidental slip
or omission.
5) He had the power to administer such interrogatories to the parties as may in hisopinion be
necessary.

UNIT - III

FINALITY AND ENFORCEMENT OF ARBITRAL AWARDS

Chapter VIII of the Act (Section 35-36) deals with the finality and enforcement of ArbitralAwards.
Section 35 – Finality of Arbitral Awards : Subject to this Part an arbitral award shall be final
and binding on the parties and person claiming under them respectively.

This provision makes the award binding on the parties and those claiming under them. The award
is final in the sense that there can neither be a further award on the same subject, nor an appeal
against the finality of the award. The aggrieved party may apply to the court, if there is a ground,
for setting aside the award, but the court cannot be called upon to decide the matter.

Must be Legal : The award must be in accordance with the principles of the relevant law,
otherwise it will be illegal, being against the law. Thus, where an arbitrator awarded ownership in
perpetuity, it was held to be void as offending the rule against perpetuity.

Must be Reasonable and Possible : An award requiring a party to do an act which is unreasonable
or not possible, is bad. An award that one of the parties should do a thingwhich is out of his power
to do, or to deliver up a thing which is in the custody of another person, is void, as it requires the
party to do an impossible act.

Must Dispose of Matter : An award should be a complete decision on matters requiring

determination. An award which leaves some of the questions undecided cannot be enforced.

Finality, Effect and Enforcement of Award : The arbitrator’s power over the matter submitted
to him is complete and final. He has the power to do what the court could have done if the matter
had been before the court. His award puts an end to the proceedings. The court will not interfere
with the findings of the arbitrator even if the court feels on merits that the arbitrator should have
come to a different conclusion. “Hisaward on both fact and law is final. There is no appeal from
his verdict. The court cannot review his award and correct any mistake in his adjudication unless
an objectionto the validity of the award is apparent on the face of it.”
41
The law has for many years been settled, and remains so at this day, that where a causeor matters
in difference are referred to an arbitrator, whether a lawyer or layman, he is constituted the sole
and final judge of all questions, both of law and of fact The only
exceptions to that rule are, cases where the award is the result of corruption or fraud.

UNIT - IV

CONCILIATION
Part III of the Arbitration and Conciliation Act, 1996 (‘Act’ for short) deals withconciliation.
The term ‘conciliation’ used interchangeably with mediation, is aprocedure
in which a neutral individual, the conciliator or mediator, is appointed inorder to assist the
parties in reaching a mutually satisfactory resolution of disputes. Conciliation or mediation is
usually a voluntary process that results in signedagreement which defines the future
behavior of the parties. The conciliator uses a
variety of skills and techniques to help the parties to reach a settlement but he is not
empowered to render a decision.

Conciliation is optional as per the provisions of the Act. In case the parties to the dispute agree
to resolve the disputes through conciliation, they have to follow the mandatory provisions
contained in Sections 61 to 81 of the Act. These sections provide application and scope,
commencement of conciliation procedures, number of conciliators and their appointment,
procedure for conducting the conciliationproceedings, role of conciliator etc.

Part III (Section 61-81) of the Act deals with the conciliation, Conciliation is an importantand very
effective alternative dispute resolution system.

Meaning : Conciliation means “the settling of disputes without litigation.” Conciliation is a

process by which discussion between parties is kept going through the participation of a
conciliator. The main difference between arbitration and conciliation is that in arbitration
proceedings the award is the decision of the Arbitral Tribunal while in the case of conciliation the
decision is that of the parties arrived at with the assistance of the conciliator.

The main ADR alternatives to civil litigation are negotiation, arbitration, conciliation and
mediation. Disputing parties use these ADR methods because they are expeditious, private, and
generally much less expensive than a trial. While each of these ADRprocesses may be effective in
various circumstances, mediation in the India has proven to offer superior advantages for the
resolution of disputes that resist resolution.
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 Arbitration
Arbitration is an ADR (alternative dispute resolution) method where the disputing partiesinvolved
present their disagreement to one arbitrator or a panel of private, independent and qualified third
party “arbitrators.” The arbitrator(s) determine the outcome of the case. While it may be less
expensive and more accessible than trial, the arbitration process has well-defined disadvantages.
Some of disadvantages include the risk losing, formal or semi-formal rules of procedure and
evidence, as well as the potential loss of control over the decision after transfer by the parties of
decision-making authority to thearbitrator. By employing arbitration, the parties lose their ability
to participate directly inthe process. In addition, parties in arbitration are confined by traditional
legal remedies that do not encompass creative, innovative, or forward-looking solutions to business
disputes.

Negotiation
Negotiation is a method of solving dispute without assistance of a mediator. The parties come
together and talk on some terms and conditions. If the parties agreed, the dispute comes to an end.
This means in negotiation the parties require no one to play his role. The parties to the dispute
meet together and amicably resolve the dispute by mutual understanding operation and their
wishes. Both the parties come to suchconclusion i.e., acceptable to both the sides.

Mediation
A mediator assists the parties in identifying and articulating their own interests, priorities, needs
and wishes to each other. Mediation is a “peaceful” dispute resolution tool that is complementary
to the existing court system and the practice of arbitration.
Arbitration and mediation both promote the same ideals, such as access to justice, a prompt
hearing, fair outcomes and reduced congestion in the courts. Mediation, however, is a voluntary
and non-binding process - it is a creative alternative to the court system. Mediation often is
successful because it offers parties the rare opportunity to directly express their own interests and
anxieties relevant to the dispute. In addition, mediation provides parties with the opportunity to
develop a mutually satisfying outcome by creating solutions that are uniquely tailored to meet the
needs of the particular parties. A mediator is a neutral and impartial person; mediators do not decide
or judge, but instead becomes an active driver during the negotiation between the parties. A
mediator uses specialized communication techniques and negotiation techniques to assist the
parties in reaching optimal solutions.
In addition to economic and legal skills, mediators are professionals who possess specialized
technical training in the resolution of disputes. A mediator plays a dual role during the mediation
process- as a facilitator of the parties’ positive relationship, and asan evaluator adept at examining

43
the different aspects of the dispute. After analyzing a dispute, a mediator can help parties to
articulate a final agreement and resolve their dispute. The agreement at the end of the mediation
process is product of the parties’ discussions and decisions. The aim of mediation is to find a
mutually satisfactory agreement that all parties believe is beneficial. Their agreement serves as a
landmark and reminds parties of their historical, confrontational period, and ultimately helps them
anticipate the potential for future disputes.
The mediation process is both informal and confidential. In contrast to arbitration and its relatively
formal rules of evidence and procedure, mediation is flexible in terms of evidence, procedure, and
formality.
Conciliation
Conciliation is another dispute resolution process that involves building a positive relationship
between the parties of dispute, however, it is fundamentally different than mediation and
arbitration in several respects. Conciliation is a more common concept than is mediation. While
conciliation is typically employed in labour and consumer disputes, Italian judges encourage
conciliation in every type of dispute . The “conciliator”is an impartial person that assists the parties
by driving their negotiations and directing them towards a satisfactory agreement. It is unlike
arbitration in that conciliation is a much less adversarial proceeding; it seeks to identify a right that
has been violated and searches to find the optimal solution.

Conciliation is a process in which a third party assists the parties to resolve their dispute by
agreement. A Conciliator may do this by expressing an opinion about the merits of the dispute to
help the parties to reach settlement. Conciliation is a compromise settlement with the assistance of
a Conciliator.

Conciliation is a voluntary and non-binding process in comparison to Arbitration and litigation.

Any party may terminate Conciliation proceedings at any time even without giving any reason.
The other important difference is that the parties control the processand outcome of the dispute,
which is not the case in Arbitration as well as litigation. Conciliation is a consensual process
whereas litigation and Arbitration solemnly urge the parties for an amicable reconciliation and
have no control on the outcome of the dispute or the process.

A number of disputes are settled even before the adjudication in the Courts by the parties, with the
efforts of the judges or ADR experts and compromise decisions are recorded which bind the
parties.

APPLICATION, SCOPE AND COMMENCEMENT OF PROCEEDING

Application and Scope : Section 61 of the Act deals with the application and scope of the

44
conciliation. According to this section :
1) Save as otherwise provided by any law for the time being in force and unless the parties
have otherwise agreed, this Part shall apply to conciliation of disputes arising out of legal
relationship,

2) This Part shall not apply where by virtue of any law for the time being in force certain
disputes may not be submitted to conciliation.
Section 61 points out that the process of conciliation extends, in the first place, to disputes whether
contractual or not. But the disputes must arise out of legal relationship. It means that the dispute
must be such as to give one party the right to sueand other party the liability to be sued. The process
of conciliation extends, in the second place, to all proceedings relating to it. But Part III of the Act
does not apply to such disputes as cannot be submitted to conciliation by virtue of any law for the
time being in force.
The dispute should arise within the legal relationship whether contractual or not and to all
proceedings relating thereto, e.g., issues arising under contracts, commercial or corporate
disputes, torts and breach of duty including negligence, consumer disputes, disagreement in
partnership etc., but excludes all those disputes which are not required to be submitted to
conciliation by virtue of any other law for the time being in force. Industrial disputes, family
disputes including issues arising on separation and divorce, social conflict etc., may also be
taken for conciliation.

Application and Scope of Part III Sec. 61

Part III of the Act which deals with conciliation shall apply to conciliation of disputes arising out
of legal relationship whether contractual or not and to all proceedings relating thereto. However,
there are two exceptions to this –
(1) Save as is otherwise provided by any law for the time being in force. Two such examples
can be found in this Act itself. The first is in sec. 1(2) Explanations which restricts the
applicator of Part III as regards the state of Jammu and Kashmir to international
commercial conciliation. The second example is in sec.
30 (1) which permits the arbitral tribunal to use conciliation during arbitralproceedings
with the agreement of the parties to encourage settlement of the dispute; and
(2) Where the parties have otherwise agreed to expressly exclude conciliation proceedings.
This part shall not apply where the submission of certain disputes to conciliation is specifically
prohibited by any other law for the time being in force

Commencement of Conciliation Proceedings : Section 62 of the Act deals with the

45
commencement of Conciliation Proceedings. This section has the provision how theconciliation
proceedings start.
Section 62 – Commencement of Conciliation Proceedings :
1) The party initiating conciliation shall send to the other party a written invitation to
conciliatioin under this Part, briefly identifying the subject of the dispute.
2) Conciliation proceedings shall commence when the other party accepts in writing the
invitation to conciliation.
3) If the other party rejects the invitation, there will be no conciliation proceedings.
4) If the party initiating conciliation does not receive a reply within thirty days from the date
on which he sends the invitation, or within such other period of time as specified in the
invitation, he may elect to treat this as a rejection of the invitationto conciliate and if he so
elects, he shall inform in writing the other party accordingly.
It is a procedure mutually agreed to by the parties to the dispute. The agreement can be entered
into either before a dispute has arisen or after the actual dispute arises. This can be an
independent agreement or in the form of a clause in the main contract. Even whether there is no
agreement between the parties to seek settlement to disputeby conciliation, it can be done.

Commencement of Conciliation Proceedings Sec. 62

Conciliating proceedings can be commenced by a party to the dispute by sending a written
invitation to the other party to conciliate under the provisions of this Part, brieflyidentifying the
subject of the dispute and a written acceptance of the invitation by the other within a period of
thirty days or within such other period of time as specified in theinvitation. Conciliation generally
relates to existing disputes and no prior agreement is necessary for initiation of conciliation
proceedings. If the proposal for conciliation is notaccepted within the specified time the proposer
may elect to treat this as rejection of invitation and if he so elects he shall inform the other party in
writing accordingly.

Number and qualifications of conciliators (Section 63) : Section 63 fixes the number of
conciliators. There shall be one conciliator. But the parties may by their agreement provide for two
or three conciliators. Where the number of conciliators is more than one,they should, as a general
rule, act jointly.

Section 63- Number of conciliators. –

46
(1) There shall be one conciliator unless the parties agree that there shall be two or three
conciliators.
(2) Where there is more than one conciliator, they ought, as a general rule, to act jointly.

Appointment of conciliators (Section

64) Section 64- Appointment of
conciliators. –
(1) Subject to sub-section (2), -
(a) In conciliation proceedings with one conciliator, the parties may agree on the name of a sole
conciliator;
(b) In conciliation proceedings with two conciliators, each party may appoint oneconciliator;
(c) In conciliation proceedings with three conciliators, each party may appoint one conciliator and
the parties may agree on the name of the third conciliator who shall act as the presiding conciliator.
(2) Parties may enlist the assistance of a suitable institution or person in connection with the
appointment of conciliators, and in particular, -
(a) A party may request such an institution or person to recommend the names of suitable
individuals to act as conciliator; or
(b) The parties may agree that the appointment of one or more conciliators be made directly by
such an institution or person:
Provided that in recommending or appointing individuals to act as conciliator, the institution or
person shall have regard to such considerations as are likely to secure the appointment of an
independent and impartial conciliator and, with respect to sole or third conciliator, shall take into
account the advisability of appointing conciliators of a nationality other than the nationalities of
the parties.
Sub-section (1) of Section 64 provides three rules for the appointment of conciliators :
1) If there is one conciliator in a conciliation proceedings, the parties may agree on the name
of a sole conciliator.
2) If there are two conciliators in a conciliation proceedings, each party may appoint one
conciliator.
3) If there are three conciliators in a conciliation proceedings, each party may appoint one
conciliator and the parties may agree on the name of the third conciliator who shall act as
the presiding conciliator.
Sub-section (2) of Section 64 provides for the assistance of a suitable institution or person in the
appointment of conciliators. Either a party may request such institution or

47
person to recommend the names of suitable individuals to act as conciliator, or the parties may
agree that the appointment of one or more conciliators be made directly by such an institution or
person.
The proviso to Section 64 requires that in recommending or appointing individuals to act as
conciliators, the institution or person shall have regard to and, such considerations as are likely to
secure the appointment of an independent and impartial conciliator with respect to a sole or third
conciliator the advisability of appointing a conciliator of a nationality other than the nationalities
of the parties should be taken intoaccount.
Since the conciliator acts as catalyst for problem solving he is expected to have the fundamental
abilities. The most important ability required for a conciliator is to earn the trust of the parties.
The openness and honesty which require trust which depends upon the conciliator’s ability,
competence, consistency, integrity and neutrality at everystage of conciliation process. Impartiality
and neutrality denote that the conciliator is able to separate his personal views about the dispute
and its outcome from the view points of each party and is able to concentrate exclusively upon
assisting the parties towards settlement without overtly favoring one party over the other party.

Submission of statements to conciliator

According to Section 65-
(1) The conciliator, upon his appointment, may request each party to submit to him a brief written
statement describing the general nature of the dispute and the points at issue. Each party shall send
a copy of such statement to the other party.
(2) The conciliator may request each party to submit to him a further written statement of his
position and the facts and grounds in support thereof, supplemented by any documents and other
evidence that such party deems appropriate. The party shall send a copy of such statement,
documents and other evidence to the other party.
(3) At any stage of the conciliation proceedings, the conciliator may request a party to submit to
him such additional information, as he deems appropriate.
Explanation. -In this section and all the following sections of this Part, the term “conciliator”
applies to a sole conciliator, two or three conciliators as the case may be.

Conciliator not bound by certain enactments. – According to section 66 -The

conciliator is not bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence
Act,1872 (1 of 1872).

48
Rules of Procedure (Section 66) : The conciliator is not bound by the rules contained in the
Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. Though the conciliator is not
bound by the technical rules of procedure, but he, it seems, should not ignore the principles of
natural justice. Thread of natural justice should run through the entire conciliation proceedings. The
principles of natural justice require that both partiesmust be heard in the presence of the other.

SETTLEMENT THROUGH CONCILIATION

Section 73- Settlement agreements, -

(1) When it appears to the conciliator that there exist elements of a settlement, which may be
acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to
the parties for their observations. After receiving the observations of the parties, the conciliator
may reformulate the terms of a possible settlement in the light of such observations.
(2) If the parties reach agreement on a settlement of the dispute, they may draw up and sign a
written settlement agreement. If requested by the parties, the conciliator may draw up, or assist the
parties in drawing up, the settlement agreement.
(3) When the parties sign the settlement agreement, it shall be final and binding on the parties and
persons claiming under them respectively.
(4) The conciliator shall authenticate the settlement agreement and furnish a copy thereof to each
of the parties.

Restrictions on role of conciliators [Section 80] : Section 80 places two restrictions on the
role of the conciliator in the conduct of conciliator in conciliation proceedings :
1) Clause (a) of Section 80 prohibits the conciliator to act as an arbitrator or as a representative
or counsel of a party in any arbitral or judicial proceeding in respect of a dispute which is
subject of the conciliation proceedings.
2) Clause (b) of Section 80 prohibits the parties to produce the conciliator as a witness in any
arbitral or judicial proceedings.

Admissibility of Evidence in other proceedings (Section 81) : The parties shall not rely
on or introduce as evidence in arbitral or judicial proceedings in respect of the followingmatters :
1) Views expressed or suggestions made by the other party in respect of a possiblesettlement
of the dispute;

49
2) Admissionns made by the other party in the course of the conciliationproceedings;
3) Proposals made by the conciliator, and
4) The fact that the other party had indicated his willingness to accept a proposal for
settlement made by the conciliator.
It is immaterial whether or not the arbitral or judicial proceedings are related to thedispute
that is the subject of the conciliation proceedings.
DUTY AND ROLE OF THE PARTIES
1. It is the duty of each party to co-operate with the conciliator in good faith in everysphere of
the conciliation proceedings and in particular they should endeavour to comply with
requests made by conciliator to submit written materials. Provide evidence and attend
meetings. [sec. 71].
2. Each party may on his own initiative or at the invitation of the conciliator, submit
suggestions for settlement of the dispute to the conciliator. [sec.72].
3. The conciliator and the parties shall keep confidential all matters relating to the conciliation
proceedings. Confidentiality also extends to the settlement agreement, except where its
disclosure is necessary for purposes of implementation and enforcement. [sec. 75].
4. The parties shall not during the conciliation proceedings initiate any arbitral or judicial
proceedings in respect of a dispute that is the subject-matter of the conciliation proceedings
except where the resort to such proceedings is necessary for preserving his rights [sec. 77].
5. The parties shall not rely on or introduce the evidence adduced in conciliation proceedings
in any arbitral or judicial proceedings. Whether or not such proceedings relate to the
dispute that was the subject of the conciliation proceedings. Besides, views expressed or
suggestions made in respect of a possible settlement, or admissions made during the course
of conciliation proceedings, or proposals made by the conciliator, or willingness expressed
by aparty to accept a proposal in the conciliation proceedings shall not be referred toor
relied on by a party in any arbitral or judicial proceedings. [sec. 81].

Procedure of Conciliation
The procedure of conciliation can be divided into following steps :
1) Commencement of conciliation proceedings [Section 62] : The conciliation
proceedings are initiated by one party sending a written invitation to the other

50
 party to conciliate. The invitation should identify the subject of the dispute. Conciliation
proceedings are commenced when the other party accepts theinvitation to conciliate in
writing. If the other party inviting conciliation does not receive a reply within thirty days
from the date he sends the invitation or within such period of time as is specified in the
invitation, he may elect to treat this as rejection of the invitation to conciliate. If he so elects
he should inform the other party in writing accordingly.
2) Submission of Statements to Conciliator [Section 65] : The conciliator may request
each party to submit to him a brief written statement. The statement should describe the
general nature of the dispute and the points at issue. Each party should send a copy of such
statement to the other party. The conciliator may require each party to submit to him a
further written statement of his position and the facts and grounds in its support. It may be
supplemented by appropriate documents and evidence. The party should send a copy of
such statements, documents and evidence to the other party. At any stage of the conciliation
proceedings, the conciliator may request a party to submit to him any additional
information which he may deem appropriate.
3) Conduct of Conciliation Proceedings [Section 69 (1), 67 (3)] : The conciliator may
invite the parties to meet him. He may communicate with the parties orally or in writing.
He may meet or communicate with the parties together or separately.
In the conduct of conciliation proceedings, the conciliator has some freedom. He may
conduct them in such manner as he may consider appropriate. But he should take into
account the circumstances of the case, the express wishes of the parties, a party’s request
to be heard orally and the need of speedy settlement of the dispute.
4) Administrative Assistance [Section 68] : Section 68 facilitates administrative assistance
for the conduct of conciliation proceedings. Accordingly, the parties or the conciliator with
the consent of the parties may seek administrative assistance by a suitable institution or the
person.

POWER OF HIGH COURT AND CENTRAL

GOVERNMENT TO MAKE RULES (SECTION
82 AND 84)
Section 82 confers on the High Court the rule making power. Accordingly, the High Court may
make rules consistent with the Act as to all proceedings before the court under this Act.

51
“Section 82 of the 1996 Act gives the High Court power to make rules consistent with the Act. All
the High Courts have not so far made rules. Whereas Section 84 gives the Central Government
power to make rules to carry out the provisions of the Act, the HighCourt should also, wherever
necessary, make rules. It would be helpful if such rules dealwith the procedure to be followed by
the courts while exercising jurisdiction under S. 9 (Interim relief) of the Act. The rules may provide
for the manner in which the applicationshould be filed, the documents which should accompany
the same and the manner in which such applications will be dealt with by the courts. The High
Courts are, therefore, requested to frame appropriate rules as expeditiously as possible so as to
facilitate quick and satisfactory disposal of arbitration cases.”

Removal of Difficulties (Section

83) Section 83- Removal of
difficulties. –
(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government
may, by order published in the Official Gazette, make such provisions, not inconsistent with the
provisions of this Act as appear to it to be necessary or expedientfor removing the difficulty:
Provided that no such order shall be made after the expiry of a period of two years fromthe date of
commencement of this Act.
(2) Every order made under this section shall, as soon as may be after it is made, be laidbefore each
House of Parliament.
Section 83 empowers the Central Government to make provisions for removing any difficulty
arising in giving effect to the provisions of the Act. Such provisions may be made by orders
published in the Official Gazette. But such orders must not be inconsistent with the provisions of
the Act. Every order made under this section is required to be laid before each House of Parliament.
This section will remain effective only for a period of two years from the date of the
commencement of this Act, i.e., 25th January, 1996.

Power of Central Government to make Rules

(Section 84) Section 84- Power to make rules. –
(1) The Central Government may, by notification in the Official Gazette, make rules forcarrying
out the provisions of this Act.
(2) Every rule made by the Central Government under this Act shall be laid, as soon asmay be,
after it is made before each House of Parliament while it is in session, for a

52
total period of thirty days which may be comprised in one session or in two or more successive
sessions, and if, before the expiry of the session immediately following the session or the
successive sessions
aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the
rule should not be made, the rule shall thereafter have effect only in such modified form or be of
no effect, as the case may be; so, however, that any such modification or annulment shall be
without prejudice to the validity of anything previously done under that rule.
Section 84 empowers the Central Government to make rules for carrying out the provisions of the
Act. Accordingly, the Central Government may, by notification in the Official Gazette, make rules
for carrying out the provisions of the Act.

UNIT - V

LEGAL SERVICES AUTHORITY ACT, 1987

Article 39-A of the Constitution which was inserted by the Constitution (Forty second)
Amendment Act, 1976 casts an obligation on the State to secure that the operation of the legal
system promotes justice on a basis of equal opportunity, and in particular, provide free legal aid
by suitable legislation or schemes or in any other way, to ensure that the opportunities for securing
justice are not denied to any citizen by reason of economic or other disabilities. Besides, the right
to free legal aid has now been includedas part of right to life and personal liberty guaranteed under
Article 21 of the Constitution.

With a view to accomplishing this objective, the Government of India appointed, a committee for
implementing the legal aid schemes in 1980. This committee was headed by Mr. Justice P.N.
Bhagwati. The committee prepared a draft-legal aid programme which could be applicable
throughout India. It is on the basis of the recommendations and the draft outlined by this
Committee that the Legal Services Authorities Act, 1987, was passed to establish Statutory Legal
Services Authorities. It also contained provisions relating to Lok Adalats.

Objects of the Act : The main object of the Legal Services Authorities Act, 1987 is to provide
free and competent legal services to the poor and weaker sections of the society so as to ensure
that they are not denied the opportunities for securing justice by reason of economic or other
disabilities and to organise Lok Adalats to secure that the operation of the legal system promotes
justice on the basis of equal opportunity.

Section 12 of the Act enumerates the categories of persons who are entitled to legal services. These
are as follows –
53
a) A person who is a member of Scheduled Caste or Scheduled Tribe;
b) A victim of trafficking in human beings or beggar as referred to in Article 23 ofthe
Constitution of India;
c) A woman or a child;
d) A person who is disabled as defined in Section 2(i) of the Persons with Disabilities (Equal
Opportunities, Protection of Rights and Full Participation) Act, 1995;
e) A victim of a mass disaster, ethnic violence, caste atrocity, flood, drought, earthquake or
industrial disaster;
f) An industrial workman;
g) a person who is in custody in a protective home under the Immoral Traffic (Prevention)
Act, 1956 in a Juvenile home under Juvenile Justice (Care and Protection of Children) Act,
2000 or in a Psychiatric hospital or PsychiatricNursing Home under Mental Health Act,
1987;
h) A person whose annual income is less than Rs.9,000/- or a higher amount as may be
prescribed by the State Government, and less than Rs.12,000/- when thecase is before the
Supreme Court.

In addition to the above, legal services may also be granted in cases of great publicimportance
and in special cases which are considered deserving of legal services.

Cases for which legal aid is not available : The cases coming under any of the following
category shall not entitle a person to receive legal aid from the State :
1) Cases involving the offence of defamation, malicious prosecution, contempt ofCourt,
perjury etc.
2) Proceedings relating to elections;
3) Cases in which the fine imposed is not more than Rupees fifty;
4) Economic offences and offences against social laws;
5) Cases where the person seeking legal aid is not directly concerned with theproceedings
and whose interests will not be affected, if not represented properly.

Withdrawal of Legal Aid/Services : The Legal Aid Committee has the power to withdraw the
legal aid/services granted to a person under the following circumstances :
1) Where the aid is obtained through misrepresentation or fraud;
2) Any material change occurs in the circumstances of the person to whom such

54
 legal aid was granted;
3) In case of misconduct, misbehaviour or negligence on the part of the aidedperson;
4) Where the aided person does not co-operate with the allotted lawyer or counsel;
5) If the aided person appoints another legal practitioner;
6) In case of death except in civil cases;
7) Where the proceedings amount to misuse of the process of law or of legalservices :

Where the legal services are withdrawn, the Legal Aid Committee may recover the cost of legal
services granted. However, the person aggrieved has a right to appeal before the Chairman of the
Legal Aid Committee.

Organisation of Lok Adalats : Lok Adalats are judicial bodies set up for the purpose of
facilitating peaceful resolution of disputes between the litigating parties. They have the powers of
an ordinary Civil Court such as summoning, examining, taking evidence etc. These Adalats can
resolve matters except criminal cases that are non compoundable.
Special status has been assigned to the Lok Adalats under the Legal Services Authorities Act,
1987, which has come into force with effect from 9th November, 1995. The said Act provides the
statutory base to the Lok Adalats. The Lok Adalat shall now have :
1) The same powers as are vested in a civil court under the Code of Civil Procedure,1908;
2) All proceedings before a Lok Adalat shall be deemed to be judicial proceedings within the
meaning of sections 193, 219 and 228 of the Indian Penal Code;
3) Every Lok Adalat shall be deemed to be civil court for the purpose of section 195 and
chapter XXVI of the Code of Criminal Procedure, 1973;
4) The members of the Lok Adalats, in terms of the provisions of Section 23 of the Act, shall
be deemed to be public servants within the meaning of section 21 of the Indian Penal Code
1860; and
5) Every award made by a Lok Adalat shall be final, binding and non-appeable.

Jurisdiction of Lok Adalat : According to Section 19(5) of the Act, a lok adalat shall have
jurisdiction to determine and to arrive at a compromise or settlement between the parties to a
dispute in respect of :

55
i) Any case pending before or
ii) Any, matter which is falling within the jurisdiction of, and is not brought beforeany court
for which the Lok Adalat is organized.

The Lok Adalat shall, however, have no jurisdiction in respect of any case or matter relating to an
offense not compoundable under any law.
A dispute can now be referred to Lok Adalats by (a) Mutual consent; or (b) at the request of one
of the parties; or (c) by the Court suo motu. So, even private cases can be referred to be decided
by Lok Adalats.

There are many legal services authorities under the Act that are described below : National
Legal Services Authority : The National Legal Services Authority consists of Chief Justice of
India as Patron-in-Chief; a sitting or retired judge of the Supreme Court as Executive Chairman
and a Committee constituted by Chief Justice of India. Equally, in each state, Chief Justice of
the High Court is patron-in-Chief; a sitting or retired High Court Judge is Executive Chairman
and a committee constituted in that behalf. In eachdistrict there is a District Authority presided
over by the Principal District Judge and aCommittee. At Taluka or Mandal level for each Taluka
or Mandal or a group of Taluka orMandals, a committee would be constituted with a Principal
Subordinate Officer as Chairman. Thus, the Lok Adalat system is now a uniform and court-
oriented programme.Both types of cases, that is, pre-litigative cases as well as post-litigative
cases now be brought before the Lok Adalats for determination. The Lok Adalats, it would be
seen, are court-oriented programme as supplement ADR to the regular trial procedure.
The Act provides incentive with regard to refund of court fee initially paid at the time of
the institution of the case, if the case is eventually settled through the Lok Adalats.
The success of the Lok Adalat as a social institution is the massive literacy programmein advance.
The empowerment of people, awareness of rights and general consciousness are basic
requirements for successful resolution of disputes without resorting to extensive expenditure and
delay.
The programme, though widespread and widely appreciated, is not continuously successful
because of several reasons. They are :
a. it is not institutionalized
b. concepts are not clarified
c. infra-structure was not properly developed
d. no training for personnel

56
e. no minimum standards prescribed
It should appear fair and just in all aspects as Lok Adalat is supposed to be a substituteto judicial
process. The Lok Adalat is a para judicial institution.
The Legal Services Authority Act 1987 was brought into force in 1995 after an amendment in
1994. When Jodhpur experiment could not be continued because of 40 days strike by ministerial
staff and subordinate judicial officers, which ended in settlement which led to stoppage of Lok
Adalat experiment till 1991, the need for institutionalizing the Lok Adalat and providing for legal
sanctity and authority to continue the movement was felt and the Act of 1987 was passed. This
Act was long overdue as justice has been merely an illusion for the poor and needy. It is strange,
thatthe Act was brought into force eight years after it was made.

The Object : The object of the Act is to create authorities to provide free and competent legal
services to the weaker sections of the society to ensure that opportunities for securing justice are
not denied to any citizen for reason of economic or other disabilities and to organise Lok Adalats
to secure that the operation of the legal systempromotes justice on the basis of equal opportunity.

The Authorities under the Law : It created National (under Section 3), State (S-7)and District
(S-9) Legal Service Authorities with the power to organize Lok Adalats. Each LokAdalat has to be
presided over by Judicial and Non-Judicial member. The award of Lok Adalat is deemed to be a
Decree of Civil Court and without provision for Appeal. For the purpose of determination, the Lok
Adalat will have powers of Civil Court and its proceedings are deemed to be judicial proceedings
with the jurisdiction of civil and criminal court, revenue courts or any tribunal. At the national
level National Legal Services Authority decides policy for the nation, while at state level, there is
State LegalServices Authority. The Supreme Court Legal Services Committee and High Court
LegalServices Committee promote the Lok Adalat. At District and Taluk level also Legal Services
Committees are constituted. (The Taluk level Committee (S 11A) was envisaged by 1994
amendment) All these authorities are empowered to organize Lok Adalat to determine and arrive
at a compromise or settlement between the parties to a dispute in respect of cases pending before
or falling within jurisdiction of the respectivecourts.

Entitlement to Legal Services

57
Section 12 entitled every person who has to file or defend a case to legal services, if that person
belongs to Scheduled Caste or tribe, a victim of Trafficking in human being or beggar, a woman
or child, a person with disability, a person under circumstances of undeserved want such as being
a victim of a mass disaster, ethnic violence, caste atrocity, flood, drought, earthquake or industrial
disaster; or, an industrial workman, in custody, including custody in a protective home, juvenile
home, psychiatric hospital or psychiatric nursing home, or a person who has in receipt of annual
income less than rupees nine thousand if the case is before Supreme Court, and if the case is before
a court other than the Supreme Court and less than Rupees twelve thousand rupees or such other
higher amount as prescribed by the Government. In cases before Supreme Court, the Central and
in cases before other courts the state government may prescribe a higher amount as eligibility
criterion to receive services under this Act. One of the main eligibility criteria is that the person
mentioned under Section 12 should have a prima facie case to prosecute or to defend and the
Authority should be satisfied about that factor (according to S 13). The income criteria can be
satisfied by an affidavit froma person seeking legal service.
The National Legal Aid Fund is created under Section 15. Similarly the State fund under
Section 16 and District Fund under Section 17 is created.

LOK ADALAT
Constitution and Jurisdiction of Lok Adalat : Section 19 says that every authority is empowered
to organize Lok Adalats at such intervals and places and for exercising such jurisdiction and for
such areas as it thinks fit. The Lok Adalat consists of a servingor retired judicial officer and other
persons on its bench. The Lok Adalat shall have jurisdiction to determine and to arrive at a
compromise or settlement between the parties to a dispute in respect of, (i) any case pending before
or any matter which is falling within the jurisdiction of and is not brought before any court for
which the Lok Adalat is organized. It has no jurisdiction in respect to an offence which is not
compoundable under any law (S 19).
The Lok Adalat takes cognizance of a case referred if the parties agree, or one of the parties thereof
makes an application to the court for referring the case to Lok Adalat and if such court is prima
facie satisfied that there are chances of such settlement; or the court is satisfied that the matter is
an appropriate one to be taken cognizance by the Lok Adalat (Section 20). The reference of any
case to Lok Adalat by the court has to be done only after a due opportunity is given to the
party which has not applied for

58
reference. After such reference is made, the Lok Adalat has to proceed to arrive at a compromise
or settlement between the parties, with utmost expedition. It has to be guided by the principles of
justice equity, fair play and other legal principles. If the compromise or settlement could not be
arrived at, the case will return to the Court.
The Section 21 is a significant one as it provides status of decree to the award of Lok Adalat, and
legal sanctity for the proceedings before it. Every award of the Lok Adalat is deemed to be a decree
of a civil court, and the court fee paid shall be refunded in the manner provided under Court-fees
Act. Every such award shall be binding on all the parties to the dispute and no appeal shall lie to
any court (S 21). Refund of court fee is an incentive for parties to negotiate for settlement. The
Lok Adalat is vested with powers of civil court, with powers to summon and enforce the attendance
of any witnesses, for discovery and production of any document, the reception of evidence in
affidavits, to requisition of any public record from any court or office, etc. It can specify its own
procedure for determination of any dispute coming before it. All the proceedings before it shall be
deemed to be judicial proceedings, and Lok Adalat shall be deemed to be a civil court (S 22). All
the officers and persons concerning the Lok Adalat and Authorities are regarded as public servants
as per Section 23 which was substituted by 1994 amendment.
Almost in all districts and moffusil courts, the Lok Adalats were constituted and
functioning at regular intervals, yet the Lok Adalat is not a permanent seat of settlement.It has to be
constituted by authority whenever it feels it necessary to constitute.

The Permanent Lok Adalat : The Lok Adalat is a very useful experiment that succeeded in
clearing the long pending cases. That success is one of the main reasons for transforming
occasional, specific or special Lok Adalat into a permanent institution. If itretains the character of
court annexed Alternative Dispute Resolution center, and provides for consensus dispute
resolution process, there is nothing wrong in creating Permanent Lok Adalats (PLA). National
Legal Services Authority Act was recently amended in July 2002 and Supreme Court found its
earliest opportunity to hold it constitutionally valid, and now there is no hitch in launching the
PLAs. Bar Council of India opposed the change and the structure of the PLA. The NALSA Act
was passed in 1987 to provide free legal services to weaker sections of society and to ensure that
theyare not denied justice by reason of economic or other disabilities. Under Section 19 to 22 of
the NALSA Act, any matter pending before any court or tribunal may, if the parties make a joint
application indicating their intention to compromise, be transferred to a

59
Lok Adalat.
To tackle the baffling figures of pending cases the Judiciary and Legislature are makingall possible
efforts and reforming the law. The Civil Procedure Code was drastically amended despite the
fundamental objections raised by the lawyering community. The State is promoting Alternative
Dispute Resolution mechanisms by all means. The changed CPC makes it an obligation of the
Courts to refer to ADR methods before it finally decided to adjudicate upon (Section 89 of CPC).

Amendment of 2002 : Chapter VIA of the Legal Service Authorities (Amendment) Act 2002
provided for establishment of Permanent Lok Adalat in the name of providing for ‘pre-litigation
conciliation and settlement’ Permanent Lok Adalat is headed by either former or sitting district
judge or additional district judge or officer of rank higher than district judge. It will have two
members with ‘adequate experience in Public Utility Service”. The PLA would decide by majority.
Public Utility Service means any transport service, postal, telegraph, or telephone, power supply,
Public conservancy or sanitation,hospital or insurance service agency. Thus any former employees
of the above public utility service can be appointed as the members of the PLA and if they can
form unity they can decide any case in any manner ignoring the chairman who is a judicial member.
These PLAs can take up any matter where the value of the property in dispute is up to Rs.10 lakhs.
The PLA has to conduct conciliation proceedings or decide a dispute on merit and in doing so it
has to be guided by the principles of natural justice, objectivity, fair play, equity and other
principles of justice and shall not be bound under the Code of Civil Procedure, 1908 and the Indian
Evidence Act, 1872. Two non-judicial members of the PLA must have never had any opportunity
either to learn or practice natural principles of justice. The Chairman of PLA being the judicial
person could be expected and experienced to have practiced the natural principles of justice. He
could be of greathelp to the other two non-judicial members provided they agree with him. If they
disagree and they constitute majority they will have entire power to decide the case.

Scope for Consensual Process : Before this Amendment the two disputants have to make a
joint application seeking resolution of dispute before Lok Adalat. If one party alone makes an
application to the court to refer the case to Lok Adalat, the Court can doso if it is satisfied that there
are chances of settlement. Before such reference, the court is obliged to give a reasonable
opportunity to the party which did not agree to refer the dispute to Lok Adalat. Though the
conciliation or mediation is consensual process, the

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court can still impose the process based on its satisfaction that there is an element of settlement in
the dispute.

Under the amendment the permanent Lok Adalat can take up the case even if one of thedisputants
applies for settlement before it. Another major change brought in is that theresolution process need
not be consensual. It can be imposed by the PLA. If the disputant could resolve the dispute by
conciliation process, there is no problem. But when they fail to resolve in consensual process, the
PLA has the authority to decide case on merits without applying CPC and Evidence Act, and
impose it on them. The parties have no authority to take it in appeal, which means, one of disputants
can seek resolution by PLA, even if they fail to arrive at, he may have to accept the decision even
when it was decided by majority of non-judiciary members and be satisfied with its decision which
has the legal value of decree without having any scope for appeal. If injustice is hurried, the
disputant must be happy that he got it for it was achieved in remarkable time with remarkable
speed.

Institutions and Individuals : As all the disputes worth Rs.10 lakhs concerning a public utility
dispute have to be resolved, undoubtedly, either by ADR or ad judicatory processes in reasonable
speed, if the public utility service like RTC seeks a dispute, which is worth of Rs.10 lakhs, PLA
decides to initiate conciliation proceedings. If that person and RTC fail to conciliate, the PLA’s
both non-judicial members decide the case for RTC 2-1 majority (even if judicial member who is
also a chairman decides in favour of individual against RTC, the individual has to shut his claim
as that would be a final settlement as he could not go in appeal. Section 22 (E) (1) makes the award
of these PLAs final and no appeal lies.

ALTERNATIVE DISPUTE RESOLUTION SYSTEMS

Introduction : In a society, the conflict of interest among the individuals or difference of opinion
resulting in differences regarding the interest, rights and liabilities is an essential evil which may
result in a dispute. Every dispute was to be resolved at earliestlevel from growing into a very serious
problem. As the disputes are on rise, there is needto develop a dispute resolution technology to
meet the demands of increased litigation and to protect the relationships. To resolve such disputes
we have structured judicial system which incorporates rule of law (as explained by “Le Principe
Legalite i.e., governance not by persons but by principles or a system or by the developed
constitution) and principles of natural justice i.e., fairness, equity, equality and reasonableness in
the process to administer justice. We have formal and rigid court system. Courts are empowered
to decide the cases in accordance with justice, equity and good conscience. In the present scenario
due to the rapid economic growth and development in the society, the traditional judicial process
has turned out to be overburdened. To help or assist the judiciary in the administration of justice,
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there mustbe an alternative mechanism.

What is ADR?
An alternative to traditional litigation or administrative agency complaint process is ADR.It includes
consensual, voluntary processes where there is no judge or decision makers (such as negotiation,
meditation and facilitation), as well as adjudicative process where the parties hire a private judge
or decision maker. ADR techniques are extra-judicial in character. They have been employed with
very encouraging results in several categories of disputes, especially civil, commercial, industrial
and family disputes. In particular, these techniques have been shown to work across the full range
of business disputes: banking, contract, contractual performance and interpretation, construction
contracts, intellectual property rights, joint ventures, insurance liability, partnership differences,
personal injury, product liability, real estate and securities.
ADR is not intended to supplant altogether the traditional means of resolving disputes by means
of litigation. It offers only alternative options to litigation. There are still a large number of
important areas, including constitutional law and criminal law, in respect of which there is no
substitute for court decisions, ADR may not be appropriate for every dispute even in other areas;
even if appropriate, it can not be invoked unless both parties to a dispute are genuinely interested
in a settlement.
History of ADR in India : In India the origin of ADR could be traced to the origin of political
institutions on the one hand and trade and commerce on the other hand. In rural India Panchayats
(assembly of elders and respected inhabitants of a village) decided almost all disputes between the
inhabitants of the village, while dispute between the members of a clan continued to be decided by
the elders of clan.
Duties of the Board of Conciliators
Section 13 prescribed certain duties for the Board. When a dispute is referred to the Board it has
to try to achieve settlement and investigate the same. It has to induce the parties to reach an
agreement. If settlement is arrived at, it has to send a report to the appropriate government with
memorandum of settlement. If not, failure report has to be sent. It has to submit the report within
two months. The report shall be in writing and signed by all members of the board.

Powers of Conciliation Officer

The conciliation officer is empowered to do all things as he thinks fit for the purpose of indicating
to the parties to come to a fair and amicable settlement of the dispute. Section 11 enunciates certain
powers and functions of a conciliation officer.
(1) A conciliation officer may for the purpose of inquiry into any existing or apprehended
industrial dispute, after giving reasonable notice, enter the premises occupied by any
establishment to which the dispute relates;
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(2) A conciliation officer shall be deemed to be a public servant within the meaning of s 21 of
Indian Penal Code 1860;
(3) A conciliation officer is not a labor court or tribunal. He has no powers of court. But he has
certain powers of civil court under CPC for the following purposes:
(i) He may enforce the attendance of any person for the purpose of examination of such person,
(ii) He may call for and inspect any documents which he has ground for considering tobe relevant
to the industrial dispute;
(4) While the conciliation proceedings are pending before a conciliation officer, pertaining to a
dispute between the employers and the employees, the conditions of service, etc, shall remain
unchanged. Section 33 of this Act provides this important right to the workers and power to
conciliation officer;
(5) Section 33A empowers the conciliation officer to make a complaint in writing, in prescribed
manner, to arbitrator labour court, tribunal or national tribunals, as the case may be against
an employer, who contravenes the provisions of s 33;
Duties of Conciliation Officer
(1) The duties of a conciliation officer are not judicial, but are purely administrative. Where any
dispute exists, the conciliation officer after giving reasonable notice under s 22, shall hold
conciliation proceedings in the prescribed manner;
(2) It is the duty of the conciliation officer to induce the parties (employees and employers) to
come to a fair and amicable settlement of the dispute. For achieving this object he must take
all precautionary steps without any delay;
(3) The conciliation officer fixes a date and place, and sends the notice of the same toboth the
parties. If the parties participate in the conciliation, and arrive at a settlement, then it is called
‘settlement of the dispute’. The conciliation officer shall send a report of the ‘conciliation
proceedings’, which includes ‘settlement of the dispute’ and memorandum of the settlement
signed by the parties to the dispute’ to the appropriate government;
(4) If no settlement is reached between the parties, the conciliation officer shall, as soon as
practicable, after the close of the investigation, send a full report setting forth the steps taken
by him, facts, circumstances, his opinions etc. to the appropriate government;

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