This article is written by Shalu Gothi, B.A.LLB(Hons.) from FIMT, School of Law, New Delhi. This article talks about the law governing arbitration in India i.e., The Arbitration and Conciliation Act, 1996.
In India, at present, the arbitration is governed by the law of arbitration which is mainly provided under the Arbitration and Conciliation Act, 1996. Before this Act, there were 3 Acts that governed the law of arbitration such as:
- The Arbitration (Protocol and Convention) Act, 1937.
- The Arbitration Act, 1940.
- The Foreign Awards (Recognition and Enforcement) Act 1961.
These aforesaid Acts were repealed by the Arbitration and Conciliation Act in 1996, in order to exercise the duty provided under the Constitution of India in its Article 51. However, the Model Law which was adopted on 21 June 1985 by the United Nations General Assembly on the recommendation of the United Nations Commission on International Trade Law (UNCITRAL). It also contributed in drafting and implementing the provisions of the Arbitration and Conciliation Act, 1996.
The Arbitration and Conciliation Act, 1996
The Arbitration and Conciliation Act of 1996 is the main governing law for arbitration in India. This was enacted with the objective of “to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of the foreign award, and also to define the law relating to the conciliation”.
This Act is divided into 4 parts:
- Part-1 (Section 2 to 43) This part sets out general provisions of both types of arbitration, domestic as well as international commercial arbitration in India;
- Part-2 (Section 44 to 60) This part sets out rules regarding the enforcement of foreign awards;
- Part-3 (Section 61 to 81) This part sets out rules regarding conciliation; and
- Part-4 (Section 82 to 86) This part sets out certain supplementary provisions.
This Act is a composite piece of the legislature, Parts I and Part II are the most significant parts that govern both domestic and international arbitration in India.
Part 1 (Section 2 to Section 43)
Part 1 of this Act deals with any arbitration (domestic as well as international) which was majorly based on UNCITRAL Model law. This part describes the following provision.
In this Act, arbitration includes any form of arbitration whether it is administered by permanent arbitration or not.
An arbitration agreement means the agreement between the parties under which they agree to submit their dispute to the arbitration.
The arbitration tribunal may consist of a sole arbitrator as well as the panel of arbitrators.
In this Act, the word ‘Court’ means:
- The District Courts and High Courts; In the cases of arbitration other than international commercial arbitration, and
- The High Courts and the Supreme Court, in the cases of international commercial arbitration.
International Commercial Arbitration
International commercial arbitration is an arbitration agreement under which the parties constitute a legal relationship between them which is commercial in nature where at least one party is:
- Either an individual who is the national or habitual residence of any country other than India;
- A body corporate incorporated in a foreign country other than India;
- An association of person or a body of individuals who are controlled and managed by another country other than India; or
- The authority is managed by the government of any foreign country.
In this Act, an arbitration award is defined inclusively which says that it includes interim awards however what exactly is an award is not fined. Generally, it is considered as adjudication and final decision of arbitrator which is based on the contention of the disputing parties.
Receipt of written communication
According to this Act, any receipt of written communication is deemed to have been received when it is delivered to the residential or business place of the person concerned. And if in any case his place is not described under the agreement then the receipt is sent to the addressee’s last known place of work and habitual residence.
An arbitration agreement is a written document upheld by the parties of arbitration in order to settle their dispute outside the Court by the process of arbitration. There is no specified form given under which such agreement is required to be drawn, however, in order to constitute a valid arbitration agreement, the following attributes are necessary:
- The agreement must contemplate that the decision of the tribunal will be binding on the parties;
- The agreement must contemplate that the jurisdiction of the tribunal or rights of the parties must derive either from the consent or from the order of the Court;
- The agreement must contemplate that parties substantive rights must be determined by the agreed tribunal;
- The agreement must contemplate that the tribunal will impartially and in judicial manner determine the rights of parties;
- The agreement must contemplate that the arbitration agreement of the parties must be intended to be enforceable in law; and
- The agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.
Number of arbitrators
This Act leaves at parties to decide the number of the arbitrator with a condition that such number shall be an odd number. In case parties fail to determine the number the arbitrator shall consist of a sole arbitrator.
Appointment of the arbitrator
According to this Act, there are two ways to appoint an arbitrator. First, if the parties have agreed upon any specific procedure for the appointment then the dispute between them is decided in accordance with that and recourse to the Chief Justice or his designate cannot be taken straightway, however, if they fail to decide the said procedure, then the Chief Justice or any person or institution designated by him shall have to appoint an independent and impartial arbitrator.
Grounds for challenging the appointment
This Act requires a prospective arbitrator to disclose any circumstances likely to give rise to justifiable doubts in the minds of the parties about his independence and impartiality. It seems to be an obligation upon the appointed arbitrator to make such disclosure even during the arbitral proceeding proclaim the unambiguous legislative disapproval of the appointment or continuance of a person against whom circumstances exist giving rights to justifiable doubts as to his independence and impartiality.
Equal treatment of parties
This Act imposes a dual-duty on the arbitral tribunal, firstly it will act in an impartial manner and should give equal treatment to each party. Secondly, the arbitral tribunal should give each party a full opportunity to present its case.
Determination of rule of procedure
This Act expressly excludes the applicability of the Code of Civil Procedure, 1908 in an arbitration proceeding that is required to be concluded and resolved by the arbitration tribunal and, if it fails to do so, the arbitration tribunal will conduct its proceeding in the manner in which it considers appropriate. However, in the case of Municipal Corporation of Delhi v. International Security and Intelligence Agency Ltd 2003, the Apex Court said that “the applicability of the Code of Civil Procedure to the arbitral proceeding under the Arbitration and Conciliation Act 1996 shall be subjected to effecting any rights of the party under a special law or local law in force which relates to the arbitration proceedings”.
Place of arbitration
In this Act, the parties are free to agree to a place of arbitration, however, in case of failure of the parties to agree to a place of arbitration, the arbitral tribunal after considering the circumstances of the case and convenience of the parties will determine the place for holding the arbitral proceedings.
Language of arbitration
In this Act, the parties have the freedom to decide the language or language to be used in arbitral proceedings by agreement. In case of no agreement on it. then power to determine the language has been vested in the arbitral tribunal.
Rules applicable to the arbitration proceeding
In this Act, excepting arbitration other than international commercial arbitration, an arbitral tribunal shall decide the dispute submitted to it for arbitration in accordance with the substantive law for the time being in force in India. However, in case of international commercial arbitration, the arbitral tribunal shall decide the dispute according to the law or legal system specified by the parties unless otherwise agreed, as referring directly to the substantive law of the specified country and not to its conflicts of laws, rules. If no law is specified by the parties, the arbitral tribunal shall apply the rules considered to be appropriate according to the overall circumstances of the dispute.
In this Act, it is the duty of the arbitral tribunal to encourage the party to settle their dispute by using conciliation, mediation or any other procedure at any time during the arbitration proceeding. And if the parties agree for settlement, the arbitral tribunal shall terminate the proceedings and record such settlement in the form of an award made in accordance with Section 31 of this Act. This award will have the same status and force as an award on merit i.e. an award made after completion of arbitration proceedings.
Form and content of the arbitral award
In this Act, an arbitral award is considered as the determination of arbitrator in the arbitral proceeding. It must be written and signed by parties. It also contains the following attributes:
- The reason for passing the award;
- The date and place of arbitration;
- The amount of money if imposing on any party;
- The parties who bear or who entitled for such amount of money; and
- Any other information considered necessary by the arbitrator.
Termination of proceedings
In this Act, the arbitral tribunal is empowered to terminate the proceeding of arbitration through passing the final arbitral award or any other order. The termination shall be made in the following cases:
- When the claimant withdraws his claim;
- When the parties agreed on the termination of proceedings; or
- When the arbitral tribunal finds that continuation of proceeding has become unnecessary and impossible.
Correction and interpretation of awards
This Act gives the following powers to the arbitration tribunal with respect to the award made by itself:
- To correct any computation errors, clerical errors, typographical errors or any other similar errors of similar nature accruing in the award;
- To interpret any specific or part of the award; and
- To make any additional arbitral award in respect of claims already presented to the tribunal in the arbitral proceeding but omitted by the arbitral tribunal.
These powers are exercised either on request present by parties or on its own initiative within 30 days from the date of the award.
Part -2 (Section 44 to Section 60)
This part specifically deals with enforcement of foreign awards. The provisions of this part are based on the New York Convention and the Geneva Convention respectively. This part describes the following important provisions:
Meaning of Foreign award
In this Act, the foreign award is defined as an award of dispute which arises due to the legal relationship between the parties whether contractual or not but commercial in nature. In order to apply the provision of an arbitration agreement for enforcement of foreign award, it is necessary that:
- It should be made on or after 11 October 1960 in pursuance of an agreement in writing for arbitration to which the convention set forth in the first schedule applies, and
- It should be made on one of such territories as the central government may, by intimation in the official gazette, declare to be territories to which the said Convention applies.
Enforcement of foreign award
This Act merely empowers the Court to declare that the foreign award is enforceable under the provisions of its chapter 2. At the moment such declaration is granted, an award shall be deemed to be a decree of the Court, it is open to the parties to seek its execution in accordance with the provisions of the code of civil procedure, 1908.
Condition for enforcement
For the enforcement of the foreign award made under this Act, the following conditions shall be necessary:
- The award has been made in accordance with the submission made by the party for arbitration;
- The award must be settled on such subject matter applicable for arbitration in India;
- The award must be made according to the submission declared in the manner and governing laws;
- The award will become final in the country in which it is made in this sense it will not be on appeal;
- The enforcement of such awards is not contrary to any law or public policy of India.
In recent years, the arbitration and other ADR mechanisms have gained more importance than the traditional judicial method due to low risk and time factors and the Arbitration and Conciliation Act,1966 has not left any stone untouched to simplify the procedure for it. However, time to time amendment is necessary for its effective implementation.
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