Arbitration & Conciliation

Act, 1996
 An Introduction
• Arbitration means the settlement of a dispute
by referring the same to a third party and
abiding by his decision.
• Conciliation is a process of persuading the
parties to reach an agreement. In legal
terminology, it means, a dispute settlement
procedure which uses a neutral third party to
clarify the issue in a dispute so that the parties
concerned may themselves arrive at a
mutually acceptable agreement.
 An Introduction
• Our judicial system is heavily overburdened
with huge arrears and backlog of pending
litigations. Further, the court proceedings are
time consuming, complex and very expensive
and most of the time are bitter in taste….even
a successful litigant feels frustrated.
• In such a situation arbitration is probably ‘the
only’ solution providing quick, speedy and
inexpensive justice .
• Reference to ‘panchas’ or ‘panchayat’ is
traditional and widely used method of
disputes settlement in India.
 An Introduction
• The law relating to arbitration was contained
in the Arbitration Act, 1940. However, the Act
was subject to several defects and all most all
the decisions of the arbitration proceedings
used to be challenged in the court of law.
• Hence there was a need to make the law of
arbitration more relevant and responsive to
the changing time and several bodies,
including the Law Commission of India
proposed several amendments to the then
existing law.
 An Introduction
• On the other hand, in view of the huge
increase in the global trade and commerce
and with the advent of globalisation,
liberalisation and with the introduction of
economic reforms all over the world, a need
was felt for some model law and rules
designed for universal application and which
could harmonize the concepts on arbitration
and conciliation of different legal systems of
the world and which serve as a model for
legislation on domestic arbitration and
conciliation.
 An Introduction
• General Assembly of the United Nations
recommended the Model Law on
International Commercial Arbitration and
Conciliation Rules, known as
UNCITRAL Model Law.
• The Arbitration and Conciliation Act, 1996 has
been enacted on the lines of UNCITRAL Model
Law and the UNCITRAL Conciliation Rules.
• UNCITRAL stands for United Nations
Commission on International Trade Laws.
• The commission is a specialized body created
by the UN in December, 1966.
 An Introduction
• The UNCITRAL Model Law and Conciliation rules
have been adopted by India by promulgation of
the Arbitration and Conciliation Ordinance
which become operative from 25th January,
1996.
• The ordinance was re-promulgated twice, on
26th March and 21st June, 1996 before its
enactment in the Arbitration and Conciliation
Act, 1996.
• The Act came into force with effect from 22nd
August, 1996.
 Arbitration & Conciliation Act, 1996
• The Act aims at facilitating quick resolutions of
commercial disputes. Following are the salient
features:
1) The Act is a response to need for change: The
process of globalization and liberalization and
integration of the Indian economy with the
world economy, which resulted in
multinational business units and foreign
investments entering Indian markets in a big
way…need for a suitable law was felt.
This Act is in response to a need for change in
the existing law.
 Arbitration & Conciliation Act, 1996
2) The Act is in line with international practices:
The Act has been enacted taking into
consideration UNCITRAL Model Law and
Conciliation Rules thereby bringing
harmonization of international trade laws.
3) The Act introduces law on conciliation for the
first time in India, thereby recognizing
conciliation also as an alternative means of
resolving disputes in international trade
matters.
4) The Act makes many far reaching changes in
the arbitration law.
 Arbitration & Conciliation Act, 1996 - Preamble
• An Act to consolidate and amend the law relating to
(a) domestic arbitration, (b) international
commercial arbitration and (c) enforcement of
foreign arbitral awards, as also (d) to define the law
relating to conciliation and (e) for matters
connected therewith or incidental thereto.
• The Act is enacted on the lines of UNCITRAL Model
Law and Rules which are designed for universal
application.
• It consolidates and amends the law relating to
arbitration, the enforcement of foreign arbitral
awards under the Geneva and New York
Conventions of the UN and enacts law on
conciliation in India, for the first time.
 Arbitration & Conciliation Act, 1996
• Under the Act, the parties may submit all or
certain, present or future disputes arising in
respect of defined legal relationship whether
contractual or not, to arbitration.
• However, to this general rule, there is an
important exception as laid down under Sec.
2(3).
• If, by virtue of any other law for the time being in
force, certain disputes are prohibited for being
referred to an arbitral tribunal than in that case
that law shall prevail, e.g. industrial disputes,
criminal proceedings, insolvency matters,
appointment of guardians, Rent Act matters etc.
 Arbitration & Conciliation Act, 1996
• The Act is divided into 4 parts and has 86
sections and 3 schedules.
a) Part I – Sections 2 to 43 – law relating to
arbitration.
b) Part II – Sections 44 to 60 – provisions
relating to enforcement of certain foreign
awards, namely the New York Convention
and the Geneva Convention Awards. The
three schedules also relate to this part.
c) Part III – Sections 61 to 81 deals with
conciliation.
d) Part IV – Sections 81 to 86 – supplementary
provisions.
 Arbitration & Conciliation Act, 1996
• Arbitration may be by consent – by consensus or
it may even be statutory. Statutory means under
some statute or the rules framed thereunder
providing for arbitration.
• Part I applies to all arbitrations and all
proceedings relating to arbitration.
• The Provisions of the Arbitration Act which are
consistent and are in harmony with the statute
shall be applicable to such arbitration.
• However, in case of inconsistency, provisions of
special statute will prevail. Therefore, statutory
arbitration are exempt from the application of the
provisions of Part I, if they are inconsistent with
the Arbitration act.
 Arbitration & Conciliation Act, 1996
What matters may be referred to Arbitration?
• All matters of controversy or litigation, unless they are
forbidden by a statute, may be submitted to arbitration.
a) All matters of civil nature.
b) Disputes which are not of a civil nature provided
they are not the disputes of criminal nature.
c) Allahabad HC held that even the disputes as regards
a pure question of law or jurisdiction may be
referred to arbitration.
d) Madras HC held in 1945 that a matrimonial dispute
may be referred to arbitration. However, the Lahore
HC held in 1930 that the fact of marriage may be
referred to arbitration but the question of
restitution of conjugal rights, cannot be referred to
arbitration.
 Arbitration & Conciliation Act, 1996
Following kinds of matters cannot be referred to
Arbitration:
i. Criminal disputes and proceedings
ii. Illegal transactions
iii. Matrimonial Disputes – Suit for divorce
iv. Testamentary matters – A question of genuineness
or otherwise of a will.
v. Insolvency proceedings
vi. Lunacy proceedings.
Under Sec. 2(6), the parties have a right to authorise any
third party whether an individual or an institution, to
determine all issues which they are free to determine
between themselves…e.g. number of arbitrators, fixing
the place of arbitration, the language to be used etc.
 Arbitration & Conciliation Act, 1996
• Where in any arbitration agreement between
the parties, a reference is made to arbitration
rules of any Association, Industry or Institution,
those rules shall be deemed to be included in
that agreement.
• International Commercial Arbitration: The
provisions of the Act shall apply to all
arbitrations irrespective of whether they be
non-international or international commercial
arbitration, where the place of arbitration is in
India.
 Arbitration & Conciliation Act, 1996
• One of the objects of the Act is to minimise the
supervisory role of the courts in the arbitral
proceedings.
• Sec. 5 lays down that – notwithstanding any
thing contained in any other law for the time
being in force, the intervention of all judicial
authorities in the arbitral process is barred.
• It is to be noted that the power of the judicial
authority is not discretionary but it is mandatory
duty of the court to refer the matter to the
arbitration.
 Arbitration & Conciliation Act, 1996
• Sec. 40: The death of a party to an arbitration
shall not operate to discharge it but it shall be
enforceable by or against the legal
representatives of the deceased.
• However, where the right of action is
extinguished by the death of a person by the
operation of any law, the arbitration agreement
will be discharged or the mandate of an
arbitrator will stand terminated, if the reference
has already been made.
• The rule is: “actio personalis moritur cum
persona.” It means: a personal right of action
dies with the person.
 Arbitration & Conciliation Act, 1996
• Under Sec. 9 – a party to an arbitration agreement
may apply to a court for the following interim
measures by the court:
a) The appointment of a guardian for a minor or a
person of unsound mind for the purpose of
arbitral proceedings.
b) An interim measure of protection in respect of the
following matters:
i. The preservation, interim custody or sale of any
goods which are subject matter of arbitration
ii. Securing the amount in dispute
iii. Interim injunction or appointment of a
‘Receiver’.
 Arbitration Agreement
Sec. 7: It means a written agreement between the
parties to submit to arbitration, all or certain
existing or future disputes arising between them
in respect of a defined legal relationship whether
contractual or not.
• Arbitration agreement must be in writing...may
be in the form of:
a) A document signed by the parties;
b) An exchange of correspondence;
c) An arbitration clause in an agreement; or
d) In the form of the existence of an agreement
alleged by one party and not denied by the
other.
 Arbitration Agreement
• So, under Sec. 7, the requirements are:
i. Written agreement
ii. Intention to submit to arbitration
iii.Dispute – present of future
iv. Dispute concerning legal relationship whether
contractual or not.
• However the arbitration agreement must be
legally valid under the law of contract…
competency of the parties, free consent of the
parties, lawful object and lawful consideration
etc.
 Arbitration Agreement
Scope and Effect of Arbitration Agreement:
• Where parties have by mutual agreement
chosen arbitration as the mode of resolution of
their disputes, the court or the judicial authority
before whom an action is brought, is bound to
refer the parties to arbitration before any other
remedy.
• An arbitration agreement is an agreement to
refrain from initiating legal proceedings in a
court of law, in case disputes which are the
subject-matter of contract, arise and have them
referred to arbitration.
 Arbitration Agreement
• Where there is an arbitration agreement
between the parties, and one of the parties try
to bring a legal action before a judicial
authority, the judicial authority shall refer the
parties to arbitration.
• The appropriate remedy for breach of a
contract is only in damages but for breach of a
contract to arbitrate, the remedy is not
damages, but its specific enforcement by the
machinery in the arbitration Act.
 Arbitral Tribunal
Composition: Arbitral tribunal means a sole
arbitrator or a panel of odd number of
arbitrators appointed in accordance with the
provisions of Sec. 10 to 15.
• Sec. 10: the parties to an arbitration agreement
are given the option to determine the number of
arbitrators to decide their disputes, but this
freedom is subject to a restriction imposed by
Sec. 10(1) which forbids the number of
arbitrators being even in number.
• Where the parties do not determine the number,
Sec. 10(2) presumes that the arbitral tribunal
shall consist of a sole arbitrator.
 Arbitral Tribunal
• The new Act has done away with the concept of
‘umpire’.
• Now in a reference to three arbitrator, the third
acts as a presiding arbitrator.
• The third arbitrator is appointed by the two
arbitrators to function as the presiding arbitrator.
• He has to participate in the arbitration
proceedings and award-making in the same
manner as the other two arbitrators and be a
party to making and signing the award.
 Arbitral Tribunal
Appointment of Arbitrators: A person of any nationality
may be appointed as an arbitrator. However:
a) Parties may by agreement provide for appointment
of a person of a particular nationality or prohibit
the appointment of a person of a particular
nationality.
b) The discretionary power of the Chief justice of India
or person or institution designated by him… he
may, in an international commercial arbitration,
while making the appointment of a sole or a third
arbitrator, appoint an arbitrator of a nationality
other than the nationalities of the parties, where
the parties belong to different nationalities.
• This is a discretionary power and not mandatory.
 Arbitral Tribunal
The appointment of an arbitrator may be challenged, if:
a) Circumstance exist that give rise to justifiable
doubts as to his independence or impartiality; or
b) He does not posses the qualifications agreed to by
the parties.
Jurisdiction of Arbitral Tribunal: Jurisdiction… the power
to decide. The arbitral tribunal is empowered to:
1) rule on its own jurisdiction; and
2) pass orders for interim measure of protection.
It is to be noted that earlier, courts alone had the power
to grant interim measures of protection. Under the
new law, the arbitral tribunal now also has these
powers.
 Arbitral Tribunal : Powers
Powers of the Arbitral Tribunal:
1) To determine any issue relating to procedural
aspects of arbitration – place, procedure,
language etc.
2) To rule on its own jurisdiction and to decide
objections raised by a party regarding the
competence of an arbitrator or the tribunal.
3) To order a party to take interim measures of
protection and also to order a party to provide
security for carrying out the interim measures.
4) To encourage parties to settle disputes at any
time.
 Arbitral Tribunal : Powers
5) To appoint one or more experts to report to it
on specific issues and to require a party to give
to the experts any and all the relevant
information etc.
6) Not to follow the technical rules of procedure
and evidence prescribed by the law.
7) To seek court assistance in taking evidence.
8) To order the parties to make deposits as
advance for meeting the cost of arbitration.
 Arbitral Tribunal : Powers
9) To exercise lien on arbitral award for its
unpaid costs.
10) To take administrative assistance.
11) To decide on limitation.
12) To award interest.
13) To make interim, ex-parte, partial,
consolidated and/or additional award and to
to correct or interpret its own award.
14) To order termination of arbitral proceedings.
 Arbitral Tribunal : Duties & Obligations

1) To treat the parties with equality and give each

party a full opportunity to present its case.
2) To adhere strictly to the terms of submission to
arbitration.
3) To comply with the procedure laid down in the
arbitration agreement.
4) To act jointly where the tribunal consists of
more than one arbitrator.
5) To act judicially, to act fairly, and the arbitral
tribunal must be disinterested and unbiased.
 Arbitral Tribunal : Duties & Obligations
6) To keep parties informed of communications
received and give proper and adequate notice of
hearing.
7) To give reasonable award and to make the
award in the form prescribed in Sec. 31.
8) To ensure that they confirm to the principles of
natural justice and shall act in accordance with
the law.
9) To deliver to the parties a signed copy of the
award.
 Arbitral Award
• It has been described as a result of an agreement for
contractual justice between the parties. The instrument
embodying the decision given by the arbitral tribunal
after adjudicating upon the disputes referred, in a quasi-
judicial manner, is known as an arbitral award.
• The Act contemplates interim award, final award,
additional award and an award on agreed terms. There
is provision also for correction and interpretation of an
award.
• The arbitral tribunal shall decide the dispute in
accordance with the substantive law for the time being
in force in India.
• The arbitral tribunal shall decide in accordance with the
terms of the contract and shall take into account the
usage of the trade applicable in a given situation.
 Arbitral Award
Form and Content: Sec. 31:
1) It shall be in writing.
2) It shall be signed – by the sole arbitrator and
when more than one arbitrator, the signature of
the majority shall suffice so long as the reason
for any omitted signature is stated.
3) Date and place of making.
4) Reasoned award – except in case of mutual
settlement.
 Recourse against Arbitral Award
• Recourse means resort to a court of law with the
object of actively attacking the arbitral award for
having it set aside.
• Sec. 34: an arbitral award may be set aside by
court only if:
a) the party making the application furnishes
proof that –
i. a party was under some incapacity; or
ii. the arbitration agreement is not valid under
the law; or
iii.the applicant was not given proper notice of
the appointment of an arbitrator or of the
proceedings or was otherwise unable to
present his case; or
 Recourse against Arbitral Award
iv. the award deals with a dispute not
contemplated by or not falling within the
terms of the submission, or it contains
decisions on matters beyond the scope of
the submission to arbitration; or
v. the composition of the arbitral tribunal or
the procedure was not in accordance with
the agreement of the parties.
b) the court finds that:
i. the subject matter of the dispute is not
capable of settlement by arbitration under
the existing law; or
ii. the award is in conflict with the public policy
of India.
 Recourse against Arbitral Award

• An application for setting aside an arbitral

award must be made within three months from
the date of receipt of the arbitral award by the
party making such application.
• The court is empowered to extend this time
limit by a further maximum period of 30 days
on being satisfied that there exists a sufficient
reason for not filing the application within the
specified time.
 Recourse against Arbitral Award

Finality and Enforcement of Arbitral Award:

• An arbitral award is final and binding when the
time limit prescribed therein for correction,
interpretation or additional award and setting it
aside, as the case may be, has expired.
• An award may be said to become final when it
is no longer open to objection or opposition by
way of an application for setting aside or appeal.
 Appeals – Sec. 37
• An appeal shall lie from the following orders and
from no other orders.
1) Granting or refusing to grant any measures under
sec. 9 – Interim measures for (a) the appointment
of a guardian; or (b) the protection in respect of
preservation, custody or sale of any goods etc. (c)
the interim injunction, appointment of a Receiver.
2) Setting aside or refusing to set aside an arbitral
order u/s. 34.
3) An appeal shall also lie to a court from an order of
the arbitral tribunal –
i. As regards its order or rule on its jurisdiction.
ii. Granting or refusing to grant an interim
measure.
 Appeals – Sec. 37
• Where the appeal lies to a High Court, the
limitation will be 90 days and where appeal lies
to any other court, it would be 30 days from the
date of the receipt of the order.
• No second appeal shall lie from an order passed
in appeal under sec. 37.
• However, nothing in this section shall affect or
take away any right to appeal to the Supreme
Court.
Thank You