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GENESIS OF AN ARBITRATION
An agreement or contract is the basis of an arbitration;
An arbitration arises out of an agreement between parties to submit their dispute to an out of Court procedure;
This ―procedure‖ has been recognized and codified into Arbitration Legislation around the World;
The Indian Legislation is the Arbitration and Conciliation Act 1996,
which follows the earlier Arbitration Act 1940;
Arbitration is therefore a creature of contract.
1996 – It 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. Page 3 .Arbitration Agreement ► As per Section 7 of the Arbitration and Conciliation Act.
(b) an exchange of letters. Page 4 .Arbitration Agreement ► ► ► ► An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. An arbitration agreement shall be in writing. An arbitration agreement is in writing if it is contained in(a) a document signed by the parties. telegrams or other means of telecommunication which provide a record of the agreement. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. telex.
IMPORTANT INGREDIENTS OF AN ARBITRATION CLAUSE ► What Disputes and Differences under the Contract will be referable to Arbitration. ► Arbitration to be held under what procedural law – Indian Arbitration Act 1996 or ICC Rules or ICA Rules. ► Arbitration Page 5 . ► Is there a prior period proposed for amicable settlement before the right to refer to Arbitration commences. What Court may have jurisdiction in the event of an issue arising. ► Arbitration to be conducted by how many arbitrators – sole or some odd number. to be conducted in what language. ► ► What is the appointing procedure for Arbitrators.
Subject to the above. out of or in connection with this Agreement. disputes. controversy or claims arising from. differences. The arbitration shall be conducted in the English language. to be held at New Delhi under the provisions of the Indian Arbitration and Conciliation Act 1996. the Courts at New Delhi shall have sole and exclusive jurisdiction in respect of this Agreement‖ Page 6 . or in the interpretation thereof shall be first settled through negotiation between the parties.SAMPLE ARBITRATION CLAUSE ―All doubts. If such negotiations do not lead to an amicable settlement within 15 days of the dispute arising. it shall be finally resolved by arbitration under a sole Arbitrator.
and arbitration may be commenced or continued and an arbitral award made. ► (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority. if a party so applies not later than when submitting his first statement on the substance of the dispute.Power to refer parties to arbitration where there is an arbitration agreement. – Section 8 ► (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall. ► (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. refer the parties to arbitration. Page 7 .
Interim measures.Section 9 ► A party may. before. apply to a Court— (i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings. or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36.. etc. or ► Page 8 . by Court..
. any proceedings before it. and the Court shall have the same power for making orders as it has for the purpose of. namely:— ► (a) the preservation. ► Page 9 . or authorising any samples to be taken or any observation to be made. ► (b) securing the amount in dispute in the arbitration. preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration. and in relation to. ► (e) such other interim measure of protection as may appear to the Court to be just and convenient. or experiment to be tried.Interim measures. 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. ► (d) interim injunction or the appointment of a receiver.Section 9 ► (ii) for an interim measure of protection in respect of any of the following matters. interim custody or sale of any goods which are the subject-matter of the arbitration agreement. which may be necessary or expedient for the purpose of obtaining full information or evidence. ► (c) the detention. etc. by Court..
before passing the interim order the court must be satisfied about existence of arbitration agreement and the applicant’s ―manifest intention‖ to take the matter to arbitration. In regard to section 9 and 21 interim orders can be sought from the court even before commencement of arbitration proceedings.(1999) 2 SCC 479 ► ► ► ► Provision of the Arbitration Act 1996 have to be interpreted and construed differently from the Arbitration Act 1940 as the both are different. High Court should make rules consistent with the Arbitration Act regarding the matter of filing and dealing with the application under section 9 and the documents to be attached with the applications Page 10 .LEADING CASES Sundaram Finance v NEPC India Ltd . Court must pass a conditional order to ensure the effective steps are taken by the applicant for commencing the arbitration proceedings. However. Issuance of notice invoking arbitration clause to the opposite party is not a pre condition to filing application under section 9 for interim orders.
the court should make sure that arbitral proceedings are actually contemplated or manifestly intended and positively going to commence within a reasonable time.(2004) 3 SCC 155 ► ► ► The arbitration clause in an agreement constitutes a agreement in itself. The time gap between the filing of the section 9 application and the commencement of arbitral proceedings should not be such as to destroy the proximity of relationship between the two events. the relationship between the Section 9 order and the arbitral proceedings stands snapped Page 11 .LEADING CASES Firm Ashok Traders v Gurmukh Das Saluja . The party cannot sleep over its rights under section 9 and not commence arbitral proceedings If not commended within a reasonable time. Under section 9 of the Arbitration Act.
ROUTES TO STARTING ARBITRATION Route 1 ► Section 21 notice to other side followed by either consensual appointment or a Section 11 appointment Route 2 ► Section 9 petition for interim relief in Court followed by either consensual appointment or a Section 11 appointment Route 3 ► Section 8 referral from Court Page 12 .
INTERVENTION OF COURT IN ARBITRATION Before Arbitration ► ► Section 9 Section 11 During Arbitration ► ► ► Section 9 Section 27 Section 37 (2) After Arbitration ► ► ► Section 9 Section 34 Section 36 Page 13 .
the arbitral Tribunal shall consist of a sole arbitrator. ► Page 14 . provided that such number shall not be an even number. (2) Failing the determination referred to in sub-section (1).Number of arbitrators – Section 10 ► (1) The parties are free to determine the number of arbitrators.
(3) Failing any agreement referred to in sub-section (2). upon request of a party. the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (2) Subject to sub-section (6).Appointment of Arbitrators – Section 11 ► ► ► ► (1) A person of any nationality may be an arbitrator. the appointment shall be made. by the Chief Justice or any person or institution designated by him. unless otherwise agreed by the parties. Page 15 . or ► (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment. (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. in an arbitration with three arbitrators. each party shall appoint one arbitrator.
Page 16 . or ► (b) the parties. including an institution. fails to perform any function entrusted to him or it under that procedure.Appointment of arbitrators – Section 11 (continued) ► ► (5) Failing any agreement referred to in sub-section (2). or the two appointed arbitrators.— ► (a) a party fails to act as required under that procedure. 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. in an arbitration with a sole arbitrator. upon request of a party. by the Chief Justice or any person or institution designated by him. or ► (c) a person. under an appointment procedure agreed upon by the parties. ► a party may request the Chief Justice or any person or institution designated by him to take the necessary measure. (6) Where. fail to reach an agreement expected of them under that procedure. unless the agreement on the appointment procedure provides other means for securing the appointment.
Page 17 . – Section 11 (continued) ► ► ► ► (7) A decision on a matter entrusted by sub-section (4) or subsection (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final. 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. in appointing an arbitrator.Appointment of arbitrators. (8) The Chief Justice or the person or institution designated by him.
Appointment of arbitrators – Section 11 (continued) ► ► (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. Page 18 .
Appointment of Arbitrator under section 11 of the Arbitration Act by Chief Justice or his designate is not a judicial function resulting in an adjudicatory order and thus is not open to challenge under Article 136. Chief Justice’s Scheme overruled Page 19 . Only function of Chief Justice or his designate is to appoint the arbitrator and not go into the controversy in hand.(2002) 2 SCC 388 ► ► ► Model Law on International Commercial Arbitration 1985 cannot be taken as a guide to interpretation of the provision of Arbitration and Conciliation Act 1996. Schemes made by the Chief Justice under section 11 cannot govern the interpretation of section 11. Appointment of Arbitrator is purely an administrative function and not judicial. Issuance of notice by Chief Justice to opposite party is not within the purview of scope of section 11.LEADING CASES Konkan Railways Corporation Ltd v Rani Construction (P) Ltd .
v Patel Engg Ltd . Chief Justice or his designate while functioning under section 11 (6) is bound to decide on issues in regard to (a) jurisdiction (b) valid arbitration agreement (c) parties to arbitration agreement are same (e) whether there is a dispute / live claim. and makes its decision final on matters to be decided by it. High Court cannot interfere with orders passed by arbitrator/ arbitral tribunal during course of arbitration proceedings and parties can approach only in terms of section 34 and 37 of the Arbitration Act. appeal will lie against that order under Article 136. Once a statute creates an authority. such decision cannot be purely administrative decision.Chief Justice or his designates power to appoint arbitrator under section 11 of the Arbitration Act is not purely administrative function.LEADING CASES SBP CO. Since the order passed by Chief Justice of the High Court or his designated Judge of that court is a judicial order.(2005) 8 SCC 618 ► ► ► Overruling Konkan Railways . No appeal against order of Chief Justice of India or his designated Judge of Supreme Court under section 11 (6). confers on it power to adjudicate. Page 20 .
Overruling Konkan Railways – There is an obligation on the Chief Justice to issue notice to the opposite party when a application under section 11 is moved for providing the other party an opportunity of being heard is consonance with doctrine of ―acting fairly‖ Page 21 .(2005) 8 SCC 618 (contd.) ► ► ► For determination of questions under section 11 (6) Chief Justice can either proceed on basis of affidavits and documents which are produced or take such evidence or get such evidence recorded as may be necessary. v Patel Engg Ltd . Designation of a District Judge as the authority under section 11 (6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act.LEADING CASES SBP CO.
he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. shall. without delay. ► ► (4) A party may challenge an arbitrator appointed by him. ► (2) An arbitrator. or in whose appointment he has participated. from the time of his appointment and throughout the arbitral proceedings. or (b) he does not possess the qualifications agreed to by the parties. only for reasons of which he becomes aware after the appointment has been made. disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.Grounds for challenge – Section 12 (1) When a person is approached in connection with his possible appointment as an arbitrator. Page 22 . (3) An arbitrator may be challenged only if— ► ► (a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality.
send a written statement of the reasons for the challenge to the arbitral tribunal. (2) Failing any agreement referred to in sub-section (1). within fifteen days becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in subsection (3) of section 12. Page 23 . (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 the challenge. a party who intends to challenge an arbitrator shall.Challenge procedure – Section 13 ► ► ► (1) Subject to sub-section (4). the parties are free to agree on a procedure for challenging an arbitrator.
the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.Challenge procedure – Section 13 ► ► ► (4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful. the party challenging the arbitrator 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 (5). Page 24 . (5) Where an arbitral award is made under sub-section (4). the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.
apply to the Court to decide on the termination of the mandate. Page 25 .(1) The mandate of an arbitrator shall terminate if.. an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator. ► ► ► ► (a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay. (2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1). (3) If.Failure or impossibility to act --. it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12. unless otherwise agreed by the parties.Section 14 . a party may. under this section or sub-section (3) of section 13. and (b) he withdraws from his office or the parties agree to the termination of his mandate.
Page 26 . (4) Unless otherwise agreed by the parties. a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not b invalid solely because there has been a change in the composition of the arbitral tribunal. or (b) by or pursuant to agreement of the parties. (2) Where the mandate of an artibrator terminates. where an arbitrator is replaced under sub-section (2) . (3) Unless otherwise agreed by the parties. any hearings previously held may be repeated at the discretion of the arbitral tribunal.Termination of mandate and substitution of arbitrator – Section 15 ► ► ► ► ► ► (1) In addition to the circumstances referred to in section 13 or section 14. the mandate of an arbitrator shall terminate---(a) where he withdraws from office for any reason.
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