Arbitration Proceedings in India

The Arbitration and Conciliation Act, 1996 (Arbitration Act) applies to arbitrations in India.
The version of the Act that will apply in any case will depend on the date on which:

(i) The arbitration was commenced.

(ii) Court proceedings relating to the arbitration (if any) were commenced.
(iii) The arbitration agreement was executed.

The Arbitration Act contains a number of mandatory provisions, including in relation to:

(i) Requirements for the form of the arbitration agreement.

(ii) Mandatory reference to arbitration by courts.
(iii) Grounds of ineligibility, presumed impartiality and lack of independence of
arbitrators.
(iv) Time limits for completing arbitration proceedings.
(v) Grounds for setting aside an arbitral award and challenging enforcement of an
arbitral award.

A violation of these conditions can either preclude reference to arbitration, render

proceedings invalid or result in an award being set aside by courts. However, a breach of the
conditions of independence and impartiality can be addressed by the court's powers to
substitute one or all members of the tribunal (section 29A(6), Arbitration Act).

Disputes that law prohibits from being resolved through arbitration

Under Indian law, the types of disputes that cannot be resolved by arbitration include:

(i) Criminal offences.

(ii) Matrimonial disputes.
(iii) Guardianship matters.
(iv) Insolvency petitions.
(v) Testamentary suits.
(vi) Trust disputes.
(vii) Labour and industrial disputes.
(viii) Tenancy and eviction matters governed by rent control statutes.
While there is no authoritative decision on the issue, existing jurisprudence suggests that
disputes involving issues of competition law are also not arbitrable. Generally, disputes in
rem (regarding a thing/property) cannot be resolved through arbitration, while disputes in
personam (regarding a specific person) can be.

Application of Law of Limitation

The law of limitation that applies to a civil suit also applies to an arbitration. The period of
limitation varies from one to three years for civil/commercial disputes, depending on the
nature of the dispute and the relief sought. The limitation period is calculated from the date
the cause of action arose to the date the arbitral proceedings start which is statutorily
defined as the date of receipt by the counterparty of an invocation of the arbitration
agreement by the other party (section 21, Arbitration Act).

Remedies available when one party denies that the tribunal has jurisdiction to determine
the disputes – Recognition of the concept of kompetenz-kompetenz

India recognises the principle of kompetenz-kompetenz. The arbitral tribunal is empowered

to decide on its own jurisdiction (section 16, Arbitration Act). However, objections to the
jurisdiction of the tribunal must be raised within the time prescribed in section 16(2), that is
before filing the statement of defence. A party will lose its right to object to the tribunal's
jurisdiction if it does not raise objections within the prescribed time. If the arbitral tribunal
rules that it does not have jurisdiction, the ruling can be challenged before a court.
However, if the arbitral tribunal rules that it has jurisdiction, no immediate appeal or
challenge is available and the only option is to challenge the final award passed by the
arbitral tribunal on the ground of lack of jurisdiction.

There is however a narrow exception to this rule. Under Indian law, if a court is asked to
refer a matter to arbitration and the court decides any issue pertaining to the jurisdiction of
the tribunal or the validity of the arbitration agreement, the decision of the court is only a
prima facie enquiry, which is subject to a proper consideration by any arbitral tribunal which
may eventually be constituted. In recent times, courts have significantly narrowed the scope
of their interference.

Requirements for an arbitration agreement to be enforceable

  Substantive/formal requirements: The substantive and formal requirements of an
arbitration agreement are contained in Section 7 of the Arbitration Act. An
arbitration agreement must be in writing, and must be contained in one of the
following:
(i) A document signed by the parties.
(ii) An exchange of correspondence which provides a record of the agreement.
(iii) An exchange of statements of claim and defence containing an undisputed
acknowledgment of the agreement.

The law also recognises an arbitration agreement entered into after a dispute has arisen
between the parties.

Separate arbitration agreement

The law does not mandate a separate arbitration agreement. An arbitration agreement can
either be by way of a separate agreement, in the form of a clause in a larger agreement or
can be incorporated by way of reference to a document containing a compatible arbitration
clause or agreement.

Court proceedings in breach of an arbitration agreement

If court proceedings are initiated in breach of an arbitration agreement, the aggrieved party
can make an application under section 8 (domestic) or section 45 (foreign) of the Arbitration
Act, requesting that the court refer the parties to arbitration and decline to entertain the
proceedings. The aggrieved party however must make his/her objection no later than filing
his/her first statement on the substance of the dispute in the court proceedings. Failure to
do so would be construed as a waiver of the arbitration agreement, especially in domestic
arbitrations.

Arbitrators

The parties are free to agree on the number of arbitrators, although there must be an odd
number. However, arbitration agreements that provide for an even number of arbitrators
are not automatically invalid. In that case, the appointed arbitrators can choose a presiding
arbitrator bringing the tribunal up to an uneven number of arbitrators, either at the start of
proceedings or when there is a difference of opinion between them. If the even number of
arbitrators agree and give a common award, there is no frustration of proceedings and their
common opinion will prevail. If the parties do not specify the number of arbitrators, the
arbitral tribunal will consist of a sole arbitrator.

Appointment of arbitrators

The parties are free to agree the procedure for the appointment of arbitrators. If the parties
fail to agree on the appointment of arbitrators where the agreement provides for
arbitration with three arbitrators, each party must appoint one arbitrator and the two
appointed arbitrators must jointly appoint the third arbitrator, who will act as a presiding
arbitrator.

Where the parties fail to agree on the nomination of a sole arbitrator or fail to act in
accordance with the procedure in the arbitration agreement, or the two appointed
arbitrators fail to appoint a third presiding arbitrator, either party can approach the High
Court (domestic arbitration) or the Supreme Court (international arbitration) to have the
arbitrator(s) appointed by court.

Removal of arbitrators

Parties can challenge the appointment of an arbitrator and seek his/her removal on the
following grounds:

(i) Existence of circumstances and facts that gives raise to doubts as to the arbitrators'
impartiality and independence.
(ii) Lack of the qualifications agreed between the parties.

The challenge to the appointment of an arbitrator must be made in accordance with the
procedure agreed between the parties. If no procedure has been agreed, the party who
wishes to challenge an arbitrator must submit a written statement of the reasons for the
challenge to the arbitral tribunal within 15 days from the date when the party learns the
facts and circumstances on which the challenge is based.

Commencement of arbitral proceedings

Unless the parties agree otherwise, an arbitral proceeding of a dispute commences on the
date on which a request for that dispute to be referred to arbitration is received by the
respondent (section 21, Arbitration Act).

Applicable procedural rules

Section 19 of the Arbitration Act recognises the right of the parties to agree on the
procedural rules applicable to the arbitral proceedings. Parties can adopt procedural rules or
agree to have their arbitration administered by an institution with its own rules in exercise
of this choice.

Courts and arbitration

The local courts have the power to intervene to assist arbitration proceedings seated in its
jurisdiction. The assistance can be in one of the following ways:

(i) Reference of disputes to arbitration (section 8, Arbitration Act).

(ii) Granting interim measures in aid of arbitration (section 9, Arbitration Act).
(iii) Appointing arbitrators (section 11, Arbitration Act).
(iv) Deciding any controversy regarding an arbitrator's mandate (section 14, Arbitration
Act).
(v) Hearing challenges to an arbitral award in a setting-aside application (section 34,
Arbitration Act).
(vi) Extension of time periods fixed by the parties for the initiation of arbitration (section
43(3), Arbitration Act).

Section 23 of the Arbitration Act prescribes a period of six months from the date on which
all arbitrators receive notice of their appointment for the filing of the statement of claim
and statement of defence. An arbitration proceeding must be completed within 12 months
(and an additional six months if mutually agreed by the parties) from the date on which the
statement of claim and the statement of defence are filed in an arbitration.

The courts can also set aside arbitral awards (section 34, Arbitration Act). In these
proceedings, the courts can evaluate the:

(i) Capacity of the parties.

(ii) Validity of the arbitration agreement.
 (iii) Appointment and jurisdiction of the tribunal.
(iv) Procedure for conduct of proceedings.
(v) Arbitrability of disputes.
(vi) Conflict with the public policy of India.

Interim Reliefs

According to the Act, interim measures can be applied for by a party to the arbitral
proceedings either to a Court or the Arbitral Tribunal under Sections 9 and 17 respectively.1
It is of importance in understanding this judgment that the scope of the Arbitral Tribunal in
ordering interim measures has been significantly expanded to bring it in tandem with that of
Courts.

A disputing party is in a position to apply to the Court for interim remedy at any point
before the arbitral proceedings up until the arbitral award is enforced in accordance with
Section 36 of the Act.

Section 9 of India’s Arbitration and Conciliation Act, 1996 (“the Act”) entitles the parties to
arbitration proceedings to obtain interim relief from courts. It allows parties to obtain
interim relief from the courts at two stages, i.e.

(i) before the commencement of arbitration proceedings and

(ii) during the course of arbitration proceedings.

In addition to the two stages mentioned above, Section 9 of the Act also entitles parties to
obtain interim relief from Indian courts after the arbitral award is made but prior to its
enforcement. Section 9 of the Act itself does not bar any party from approaching the court
to seek interim measures under any given situation. However, recent court judgments have
consistently held that after the arbitral award is made, only the winning party in the
arbitration proceedings (“successful party”) is entitled to obtain interim reliefs from the
courts, whereas, the losing party in the arbitration proceedings (“unsuccessful party”) is not
entitled to seek any remedy under Section 9. This approach of the courts gives rise to a
debatable issue which is currently pending for the consideration of the Supreme Court of
India in Home Cares Retail Marts Pvt. Ltd. v. Haresh N. Sanghavi (SLP (C) No. 29972 of 2015).
Section 9 of the 1996 Act provides the legal framework for a party to seek interim or urgent
relief through the court’s intervention 'before or during arbitral proceedings or at any time
after the making of the arbitral award but before it is enforced', while Section 17 of the Act
provides a competing provision that in an ongoing arbitration case, interim relief should be
sought before the arbitral tribunal.

However, sub-section 3 of Section 9 of the 1996 Act specifies that if the interim relief that is
sought to be granted by a party is beyond the jurisdiction of the arbitral tribunal or where
such circumstances have arisen which can not be remedied efficaciously by the arbitral
tribunal while acting within its powers under Section 17, the courts are empowered to
intervene in such a case, even during the pendency of the arbitration process. This is
admittedly a broad provision and leaves much to the discretion of the court which can, on a
case-to-case basis, decide whether the tribunal has the ability to pass an effective remedy. If
in its opinion, this is not the case, the court is allowed to intervene, and courts have done so
regularly, given that an arbitral tribunal’s order cannot bind third parties (i.e. parties which
are not signatories to the arbitration agreement) and, therefore, directions passed by an
arbitral tribunal cannot be enforced against them. By contrast, a civil court has judicial
powers over all parties within its territorial jurisdiction, and its orders can be enforced upon
any party within the territory of India.

PROCESS

The parties are free to decide on the number of arbitrators, as long as this is not an even
number. Appointment of the arbitrator is the most important step in the arbitration
process. If the parties fail to specify the number of arbitrators, the tribunal will consist of
one arbitrator. When the parties fail to agree on a procedure for appointing a three-
member tribunal, each party will nominate one arbitrator and the two party-appointed
arbitrators will then appoint the presiding arbitrator. If a party fails to appoint an arbitrator
within the stipulated period, the other party can apply to the Supreme Court or the High
Court seeking the appointment of the arbitrator.

Following are the stages of arbitration or arbitration process step by step:

(i) Arbitration Clause - An agreement or the clause specifically stating that if the dispute
arises between the parties they will resolve it through the process of arbitration.
 (ii) Arbitration notice - In case a dispute has arisen and the party has opted to follow the
procedure of arbitration then the party against whom the default has been
committed will send an arbitration notice for invoking arbitration process steps
between the parties.
(iii) Appointment of Arbitrator- After receiving the notice by other parties both the
parties will appoint the arbitrators in the manner as specified in the arbitration
agreement or arbitration clause.
(iv) Statement of Claim- Next step in an arbitration proceeding in India is to draft a
statement of claim. Statement of claim contains the dispute between the parties,
events which lead to the dispute and the compensation claimed from the defaulting
party. The other party can file a statement of counterclaim along with reply to the
statement of claim. Get your statement of claim, reply to the statement of claim or
counterclaim through top arbitration lawyers.
(v) Hearing of Parties - Arbitral tribunal will hear both the parties and their evidence.
(vi) Award - After hearing the parties, the arbitral tribunal will pass the decision. The
decision of the tribunal is known as ‘Award’ and is binding on the parties. However,
an appeal against the arbitral award can be filed before the High Court.
(vii) Execution of Award - Once the award has been passed by the tribunal it has
to be executed. The party in whose favour the award has been passed has to file for
execution or enforcement of award with the help of a good arbitration lawyer.

Arbitration process in India does not follow the procedure of the Civil Procedure Code and
the arbitrator also the arbitration proceeding does not need to follow the procedures
enlisted in the Civil Procedure Code, 1908(1). Arbitrator in India, however, has the following
powers:

(i) To make awards

(ii) To take assistance
(iii) To rule on its jurisdiction
(iv) To pass interim relief
(v) To determine procedures
(vi) To decide on the official language of the proceedings
(vii) To appoint an expert
 (viii) To seek the court’s assistance for evidence
(ix) To terminate proceedings
(x) To impose interest and deposits

Other than the above powers, the arbitrator has also given certain powers of civil court as
under the Civil Procedure Code:

(i) To administer the oath to parties and witnesses appearing before him;
(ii) To state a special case for the opinion of the court on any question of law or state
the award in the form of a special case for the opinion of the court;
(iii) To make the award conditional or in the alternative;
(iv) To correct in an award any clerical mistake or error arising from any accidental slip or
omission;
(v) To administer any party interrogatories

The Limitation Act 1963(2) applies to all proceedings under the Arbitration and Conciliation
Act, just as it applies to proceedings in the Indian courts, except to the extent expressly
excluded by the Arbitration and Conciliation Act. Any arbitration proceedings commenced
after the limitation period (three years from the date on which the cause of action arose)
will be time-barred.

Local courts can intervene in domestic arbitration proceedings. This includes the power to
issue interim orders and appoints arbitrators.

Stages of Arbitral Process in Detail

Elements which are required to make the arbitration agreement or arbitration clause
effective are as follows:

Number of Arbitrators

Section 10 of Arbitration and Conciliation Act, 1996 states that:

Parties are free to appoint as many arbitrators as they can but the number of arbitrators
shall not be in even number.
If the parties did not decide the number of the arbitrator within 30 days of sending the
request, in such a case, they can reach the arbitration tribunal which will appoint a sole
arbitrator.

Arbitration Notice

Section 21 of the Arbitration and Conciliation Act, 1996 states the commencement of the
arbitration. The dispute begins from the date on which a request for the dispute as referred
to arbitration is received by the respondent. From the date of receiving the legal notice to
the respondent till the completion of the fixed period given in the notice, parties have to
give the reply of the notice.

Appointment of Arbitrators

Appointment of the arbitrator is mutually decided and appointed by the parties. The parties
in the arbitration agreement or clause mutually decide and mention the name of the
concerned arbitrator who will resolve the dispute. If the parties fail to mutually decide or
appoint the arbitrator then in such case, Section 11 of the Arbitration and Conciliation Act,
1996 states that the parties shall move to the Court and request to appoint an arbitrator.

Statement of Claim

Section 23 of the Arbitration and Conciliation Act, 1996 states that with the period of time
fixed by the parties, the claimant shall state the facts for supporting his claim, point of issue
and relief.

The parties are required to submit their statement of claim by providing all documents
supporting the relevant facts of the issues of the arbitration.

Hearing of Parties

Steps involved in the process of hearing of the parties:

Preliminary hearing and information exchange stage

After the appointment and confirmation of the arbitrator, the preliminary hearing of the
arbitration begins when the parties call their arbitrator to fix the schedule. In the
preliminary meeting, issues are addressed, the exchange of information is done between
the parties and the next hearing date is scheduled.
Hearing Stage

During the stages, the parties present their case to the arbitrator. This process can take
place in person, over the telephone, or by submitting written documents or arbitration
agreements and applicable rules that govern the case. Parties are required to submit written
arguments after hearing, at the direction of the arbitrator.

Arbitral Award

An arbitration award is a final order given by the arbitrator. This award can be in terms of
monetary relief to one party by other parties. It can also be a non-financial award such as
adding employment incentives or stopping such business practices.

There are two types of the arbitration award:

Interim award

This is a temporary award given by the tribunal during the course of the proceedings. An
Interim award can only be made by the tribunal which has the power to grant a final award.
Interim orders are often given for the payment of money or the disposition of property
between the parties and an order to make an interim payment is on account of the costs of
the arbitration.

Final award

The final award is the order or judgement given by the arbitrator after the due process of
arbitration. An arbitrator shall state the reason upon the decisions made in the award. After
the pronouncing of the final award. it shall be signed by all the arbitrators and the parties.
Till the completion of 90 days, other parties have the right to challenge the award in the
Court till the party in whose favour the award is given cannot enforce the award

Challenge in Court

The party in whose favour award is given by the arbitrator an award holder will need to wait
for a period of 90 days and during this intervening period, other parties have the right to
challenge awards.

PRECEDENTS SET IN BOMBAY HIGH COURT ON ARBITRATION

A. Section 11 cannot be invoked twice (Fedbank Financial Services Ltd v. Narendra H
Shelar and Others)

The High Court dismissed the application holding, inter alia, that an arbitration clause
cannot be constantly revived and brought back to life again and again.

B. Review against an order appointing arbitrators under Section 11 is not maintainable

(Antikeros Shipping Corporation v. Adani Enterprises Limited)

In this case, the respondent, having failed to raise a jurisdictional objection on time, filed a
review petition before the Bombay High Court, challenging the appointment of arbitrators,
eight years after the order was passed. The Single Judge allowed the review petition which
was later overturned by Division bench.

C. Delay of more than 120 days in filing an appeal under Section 37 of the Arbitration Act
cannot be condoned (Government of Maharashtra and Others v. M/s Borse Brothers
Engineers and Others)

The petitioner in this case sought condonation of delay in filing an appeal under Section 37
of the Arbitration on the ground that unlike Section 34, there is no limitation prescribed for
filing an appeal under Section 37. The Court would not have the powers to condone any
delay that is beyond the outer-limit of 120 days.

SUMMARY OF ARBITRAL PROCESS

(i) Arbitration Clause - An agreement or the clause specifically stating that if the dispute
arises between the parties they will resolve it through the process of arbitration.
(ii) Arbitration notice - In case a dispute has arisen and the party has opted to follow the
procedure of arbitration then the party against whom the default has been
committed will send an arbitration notice for invoking arbitration process steps
between the parties.
(iii) Appointment of Arbitrator- After receiving the notice by other parties both the
parties will appoint the arbitrators in the manner as specified in the arbitration
agreement or arbitration clause.
(iv) Statement of Claim- Next step in an arbitration proceeding in India is to draft a
statement of claim. Statement of claim contains the dispute between the parties,
 events which lead to the dispute and the compensation claimed from the defaulting
party. The other party can file a statement of counterclaim along with reply to the
statement of claim. Get your statement of claim, reply to the statement of claim or
counterclaim through top arbitration lawyers.
(v) Hearing of Parties - Arbitral tribunal will hear both the parties and their evidence.
(vi) Award - After hearing the parties, the arbitral tribunal will pass the decision. The
decision of the tribunal is known as ‘Award’ and is binding on the parties. However,
an appeal against the arbitral award can be filed before the High Court.
(vii) Execution of Award - Once the award has been passed by the tribunal it has
to be executed. The party in whose favour the award has been passed has to file for
execution or enforcement of award with the help of a good arbitration lawyer.

Arbitration process in India does not follow the procedure of the Civil Procedure Code and
there is also limited interference by the courts.

References

1. https://uk.practicallaw.thomsonreuters.com/9-502-0625?
transitionType=Default&contextData=(sc.Default)&firstPage=true#co_anchor_a3821
08
2. https://viamediationcentre.org/readnews/NDI=/A-Brief-Look-at-the-Arbitration-
Process-in-India
3. https://www.myadvo.in/blog/steps-of-arbitration-in-india/
4. https://blog.ipleaders.in/arbitral-process/
5. https://www.barandbench.com/columns/notable-judgments-on-arbitration-passed-
by-the-bombay-high-court-in-2020
6. https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/
Interim_Reliefs_in_Arbitral_Proceedings.pdf

Relevant Questions

1. Who can apply for interim measures?

Any party to the arbitration agreement can make an application for interim measures in the
course of the arbitral proceedings. However, after making of the arbitral award, only a
successful party which is entitled to seek the enforcement of the award can apply to the
court under Section 9 for protection in terms of Section 9 (ii) of the Act. This emanates from
the understanding that the scheme of Section 9 postulates an application for the grant of an
interim measure of protection after the making of an arbitral award and before it is
enforced for securing the property for the benefit of the party which seeks enforcement of
the award. As was observed by the Bombay High Court (Dirk India Private Limited v.
Maharashtra State Electricity Generation Company Limited) that an unsuccessful party
would not be, in any event, entitled to enforcement for the simple reason that there is no
award in its favour to be enforced.

Consequently, even on the award being set aside, the party whose claim has been rejected
vide the said award, cannot apply for interim measures under Section 9 of the Act. This is
premised on the understanding that the court, under Section 34 of the Act does not act as a
court of appeal, and does not review the merits of the dispute.