The Indian Arbitration and

UNIT 10 THE INDIAN ARBITRATION AND Conciliation Act, 1996

CONCILIATION ACT, 1996

Structure
10.1 Introduction
Objectives
10.2 General Provisions
10.3 Arbitration Agreement
10.4 Composition of Arbitral Tribunals
10.5 Jurisdiction of Arbitral Tribunals
10.6 Conduct of Arbitral Proceedings
10.7 Making of Arbitral Award and Termination of Proceedings
10.8 Recourse Against Arbitral Award
10.9 Appeals
10.10 Miscellaneous
10.11 Conciliation Proceedings
10.12 Role of Conciliator
10.13 Settlement Agreement
10.14 Costs and Deposits
10.15 Summary
10.16 Terminal Questions
10.17 Answers and Hints

10.1 INTRODUCTION
The Arbitration and Conciliation Act, 1996 contains four parts. The first part deals
with the arbitration procedure. The second part discusses the enforcement of certain
foreign awards. The third part explains the procedures of the conciliation and the
fourth part discusses the supplementary provisions. In this Unit, you will learn the
detail procedures of arbitration and conciliation.
Objectives
After studying this unit, you should be able to:

• discuss the general provisions of arbitration;

• draft the arbitration agreement;
• describe the composition of arbitral Tribunal;
• explain the Jurisdiction of arbitral Tribunal;
• discuss the procedure of conducting arbitral proceedings;
• describe the finality and enforcement of award and further appeals;
• discuss the proceedings of conciliation;
• explain the role of conciliator;
• describe the settlement agreement; and
• discuss the costs and deposits of conciliation.

10.2 GENERAL PROVISIONS

Arbitration refers to any arbitration whether or not administered by permanent arbitral
institution.
Receipt of written communication: Any written communication is deemed to have
been received if it is delivered to the addressee personally or at his place of business,
habitual residence or mailing address. If it is not found, a written communication is
41
IPR Litigation and deemed to have been received if it is sent to the addressee’s last known place of
Settlement of Disputes
business, habitual residence or mailing address by registered letter or by any other
means. The delivery day would be the receiving day.
Waiver of right to object: A Party who knows that any provision from which the
parties may derogate or any requirement under the arbitration agreement has not been
complied with. In such cases if the party proceeds with the arbitration without stating
his objection without undue delay, it shall be deemed to have waived his right to
object.
Extent of Judicial intervention: Notwithstanding anything contained in any other
law for the time being in force, no Judicial authority shall intervene except where so
provided.
Administrative assistance: The parties or the arbitral Tribunal with the consent of
the parties may arrange for administrative assistance by suitable person or institution.

10.3 ARBITRATION AGREEMENT

Arbitration agreement refers to an agreement by the parties to submit to arbitration all
or certain disputes which have arisen or which may arise between them. The disputes
arise out of the defined legal relationship, which may or may not be contractual. The
agreement may be in the form of an arbitration clause in a contract or in the form of a
separate agreement. The agreement shall be in writing and containing the following:

• a document signed by the parties;

• an exchange of letters, telex, telegrams or other means of telecommunications;
• an exchange of statements of claim and defence in which the existence of the
agreement is alleged by one party and not denied by other.
The reference in a contract to a document containing an arbitration clause constitutes
an agreement if the contract is in writing and the reference is such as to make that
arbitration clause part of the contract.
Power to refer parties to arbitration where there is an arbitration agreement.
A judicial authority before which an action is brought in a matter which is the subject
of an arbitration agreement shall refer the parties to arbitration. In this case the party
must apply for this purpose not later than submitting his first statement or the
substance of the dispute. The application must be accompanied by the original
arbitration agreement or duly certified copy. If the party applies to the Judicial
authority and the issue is pending with him, the arbitration may be commenced or
continued and an arbitral award be made.
Interim measures by court
A party may apply to the court before or during the arbitral proceedings or any time
after the making of this arbitral award but before its enforcement for the following:

• appointment of guardian for a minor or person of unsound mind for the

proceedings

• an interim measure of protection for:

− the preservation, interim custody or sale of any goods which are the part of
the arbitration;

− securing the amount in dispute;

− the detention, preservation or inspection of any property or thing which are
42 the part of the arbitration;
 The Indian Arbitration and
− interim injunction or the appointment of a receiver; Conciliation Act, 1996
− such other interim measure of protection as may appear to the court to be just
and convenience.
The court shall have the same power for making orders as it has for the purpose of any
other proceedings.

10.4 COMPOSITION OF ARBITRAL TRIBUNALS

Number of Arbitrators
The parties are free to determine the number of arbitrators. The numbers should not be
even. If they are not able to determine the number of arbitrators, the arbitral Tribunal
shall consist of a sole arbitrator.
Appointment of Arbitrators
A person of any nationality may be appointed as an arbitrator. The parties are free to
agree on the procedure for appointing the arbitrators. If they fail to agree, each party
shall appoint one arbitrator. The two appointed arbitrator shall appoint the presiding
arbitrator.
When a party fails to appoint an arbitrator within thirty days from the receipt of
request from the other party or the two appointed arbitrators fail to agree on third
arbitrator within thirty days from their appointment. In such cases, the appointment
shall be made by the Chief Justice or any person or institution designated by him,
upon the request of the party.
In case of appointment procedure, if a party fails to act as required under the
procedure or the parties or the two appointed arbitrators fail to reach an agreement or
a person fails to perform entrusted function. In such cases a party may request the
Chief Justice or any person or institution designated by him to take necessary
measures.
In the above circumstances, the decision of the Chief Justice or the person or
institution designated by him shall be final.
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.
Grounds for Challenge
An arbitrator will disclose in writing any circumstances likely to give rise to
justifiable doubts about his impartiality or independence. He may be challenged on the
following grounds:

• If circumstances exist that give rise to justifiable doubts for independence or

impartiality.

• He does not possess the qualification.

Challenge procedure: The parties are free to agree on a procedure for challenging an
arbitrator. For challenging the arbitrator, a party will send a written statement of the
reason for the challenge to the Arbitral Tribunal. He will send this statement within
fifteen days after becoming aware of the constitution of the Tribunal.
The Arbitral Tribunal shall decide on the challenge. If the challenge is not successful,
the Arbitral Tribunal shall continue the arbitral proceedings and make an arbitral
43
IPR Litigation and award. The party challenging the arbitrator may make an application for setting aside
Settlement of Disputes
such an arbitral award.
Failure or impossibility to act: The mandate of a arbitrator shall terminate if:

• He is unable to perform his functions or fails to act without delay, or

• He withdraws from his office or the parties agree to terminate his mandate.
In case of controversy, the party may apply to the court to decide on the termination of
the mandate.
Termination of mandate and substitution of arbitrator: The mandate of an
arbitrator shall be terminated where he withdraws from the office or by pursuant to
agreement of the parties.
Where the mandate of an arbitrator terminates, a substitute arbitrator shall be
appointed. In this case, the previous hearings may be repeated at the discretion of the
Tribunal. An order or ruling of the Tribunal prior to replacement of an arbitrator shall
not be invalid solely awe to this replacement.

SAQ 1
i) How can a party apply to the court for interim measures?
ii) How can an arbitrator be challenged?

10.5 JURISDICTION OF ARBITRAL TRIBUNALS

The arbitral Tribunal may rule on its own Jurisdiction. An arbitration clause which
forms part of a contract shall be treated as an agreement. A decision by the Tribunal
that the contract is null and void shall not entail this invalidity of the arbitration
clause. A plea that the Tribunal does not have jurisdiction shall be raised not later than
the submission of the defence. A plea that the Tribunal is exceeding the scope of its
authority shall be raised as soon as it happens during the arbitral proceedings. If the
Tribunal reflects the plea, it may continue with the arbitral proceedings and make
award. The aggrieved party may request for setting aside the award.
Interim measures ordered by Arbitral Tribunal
The Tribunal may order a party to take any interim measure of protection at the
request of the party. The Tribunal may require a party to provide adequate security.

10.6 CONDUCT OF ARBITRAL PROCEEDINGS

Equal treatment of parties: The parties shall be treated with equality and each party
shall be given opportunity to present his case.
Determination of rules of procedure: The parties are free to decide the procedure of
conducting proceedings by the Tribunal. If the parties fails to agree on the procedure,
the Tribunal may conduct the proceedings as it considers appropriate. The Tribunal
may determine the admissibility, relevance, materiality and weight of any evidence.
Place of arbitration: The parties are free to decide the place of arbitration. If they fail
to decide the place, the Tribunal may decide the place of arbitration considering the
convenience of the parties. The Tribunal may meet at any place for consulting
members, hearing witnesses, experts or the parties or for inspection of documents,
goods or other property.
Commencement of arbitral proceedings: The arbitral proceedings shall commence
on the date on which a request for arbitration is received by the respondent.

44
Language: The parties are free to decide the language of proceedings. If they fail to The Indian Arbitration and
Conciliation Act, 1996
decide the language, the Tribunal shall decide the language of the proceedings. The
Tribunal may order for the translation of documentary evidence.
Statement of claim and defence: The claimant shall state the following:

• facts supporting his claim

• the points at issue
• the relief or remedy sought
The respondent shall state his defence.
The parties may submit all relevant documents or they may provide reference for
documents or evidence to be submitted. Either party may amend or supplement his
claim or defence during the course of the proceedings as per agreement. The
amendment may not be allowed if Tribunal considers it inappropriate.
Hearings and written proceedings: Tribunal shall decide to hold proceedings on the
basis of oral hearings, oral argument or on the basis of documents and other materials
unless otherwise agreed by the parties. The parties shall be given sufficient advance
notice for holding hearings, meetings or inspection of documents, goods etc. All
statements, documents and information supplied to Tribunal by one party shall be
communicated to other party.
Default of a party: If the claimant fails to communicate his statement of claim, the
Tribunal shall terminate the proceedings. If the respondent fails to communicate his
statement of defence, the Tribunal shall continue the proceedings. If a party fails to
appear at oral hearing or to produce evidence, the Tribunal may continue the
proceedings and make the award.
Expert appointed by Arbitral Tribunal: The Tribunal may appoint experts to
report on specific issues. The Tribunal may require the party to give the expert access
to relevant information or provide access to documents, goods or property for
inspection. Tribunal may allow the expert for participation in oral hearings. The
expert will make available to the party all information, documents, goods etc. in the
possession of the expert.
Court assistance in taking evidence: The arbitral Tribunal or a party with the
approval of the arbitral Tribunal may apply to the court for assistance in taking
evidence. The court may order that the evidence be provided to the arbitral Tribunal.
The person making any default or refusing to give evidence or guilty of any contempt
to the arbitral Tribunal may be liable to punishment by the order of the court on the
representation of the Tribunal.

10.7 MAKING OF ARBITRAL AWARD AND

TERMINATION OF PROCEEDINGS
In arbitration other than an international commercial arbitration, the arbitral Tribunal
shall decide the dispute in accordance with the substantive law being in force in India.
In international commercial arbitration, the Tribunal shall decide the dispute in
accordance with the rules of law designated by the parties. In case of failure of
designation of law, the Tribunal shall apply the rules of law as it considers
appropriate.
Decision making by panel of arbitrators: Any decision of the arbitral Tribunal shall
be made by a majority. The procedure may be decided by the presiding arbitrator if
authorised by parties or all the members of Tribunal.

45
IPR Litigation and Settlement: The arbitral Tribunal may use mediation, conciliation or other procedures
Settlement of Disputes
to encourage settlement. If the parties settle the disputes, the arbitral Tribunal shall
terminate the proceedings.
Form and content of arbitral award: An award shall be made in writing and shall
be signed by the members of the arbitral Tribunal. The award shall state the reasons ,
the date and the place of arbitration. The duly signed award copy shall be delivered to
each party. The Tribunal may also make an interim award. In case of payment of
money, the Tribunal may include the sum of money and the applicable interest.
The interest may be carried at the rate of eighteen per cent per annum from the date of
the award to the date of the payment. The cost of an arbitration shall be fixed by the
Tribunal if it has not been agreed by parties.
Termination of proceedings: The arbitral proceedings shall be terminated by the
final arbitral award or by an order of the Tribunal. The Tribunal shall issue an order
for termination where:

• the claimant withdraws his claims,

• the parties agree on termination,
• the Tribunal finds that the continuation of proceedings has become unnecessary or
impossible.
Correction and interpretation of award and additional award
A party may request the Tribunal to correct any computation errors, any clerical or
typographical errors or any other errors within thirty days from the receipt of the
award. The party must give notice to other party for this purpose. The same procedure
may be followed by a party for seeking any interpretation of a specific point or part of
the award.
If the Tribunal considers the request, shall make correction or give interpretation
within thirty days from the date of the request. The party may adopt the same
procedure for making additional award or claims. If the Tribunal considers request,
shall make additional award within sixty days from the receipt of request. The
Tribunal may extend the time period for correction, interpretation or additional award.

10.8 RECOURSE AGAINST ARBITRAL AWARD

Application for setting aside arbitral award: Recourse to a court against an arbitral
award may be made only by an application for setting aside such award.
An arbitral award may be set aside by the court only if:

• a party was under some incapacity; or

• the arbitration agreement is not valid under the law;

• party was not given proper notice regarding, appointment or proceedings or

arbitration or was unable to present his case;

• the award deals with dispute not contemplated or falling within the terms of
arbitration;

• the composition of Tribunal or arbitral procedure was not in accordance with the
agreement;

• the court finds that the subject matter is not capable of settlement by arbitration;

• the award conflicts with the public policy of India.

46
An application for setting aside award may not be made after three months of the The Indian Arbitration and
Conciliation Act, 1996
receiving of award.
If the court finds appropriate, it may adjourn the proceedings. The Tribunal may be
given an opportunity to resume the proceedings.
Finality of arbitral awards: The arbitral award shall be final and binding on the
parties.
Enforcement: The award shall be enforced under the code of civil procedure like a
decree of the court.

10.9 APPEALS
An appeal shall lie from the following orders to the court authorised by law to hear
appeals from original decrees of the court passing the order namely:

• granting or refusing to grant any interim measure;

• setting aside or refusing to set aside an arbitral award.
An appeal shall also lie to a court from order of the arbitral Tribunal:

• accepting the plea related to competence of Tribunal; or

• granting or refusing to grant an interim measure.
No second appeal shall lie from an order passed in above appeal.

SAQ 2 Spend "

3 min.
i) What are the impacts of default of a party?
ii) How can the arbitral proceedings be terminated?
iii) How can an arbitral award may be set aside by the court?

10.10 MISCELLANEOUS
Deposits: The arbitral Tribunal may fix the amount of the deposit or supplementary
deposit. The deposit shall be payable in equal shares by the parties.
Lien on arbitral award and deposits as to costs: In case of contrary in the
arbitration agreement, the arbitral Tribunal shall have a lien on the arbitral award for
any unpaid costs of the arbitration. In such case, the court may order the arbitral
Tribunal to deliver the arbitral award on payment into the court by the applicant.
Arbitration agreement not to be discharged by death of party thereto: An
arbitration agreement shall not be discharged by the death of any party. It may be
enforceable by or against the legal representative of the deceased. The mandate of an
arbitrator shall not be terminated by the death of any party.
The other miscellaneous clauses are: the provisions in case of insolvency, the
Jurisdiction of the court where the arbitration related application has been made and
the admissibility of Limitation Act 1963.

10.11 CONCILIATION PROCEEDINGS

This act applies to conciliation of disputes arising out of legal relationship, whether
contractual or not.

47
IPR Litigation and Commencement of Conciliation proceedings
Settlement of Disputes
The party shall send the other party a written invitation to conciliate identifying the
subject of the dispute. The proceedings commence when the other party accepts the
invitation in writing. If the initiating party does not receive a reply within thirty days
from the date of sending the invitation or within the specified period in the invitation,
he may treat it as a rejection. He will inform the other party in writing.
Number of Conciliators: There shall be one conciliator unless the parties agree for
more conciliators. In case of more than one conciliators, they will act jointly.
Appointment of conciliators: In case of one conciliator, the parties may agree the
name of the conciliator. In case of two conciliators, each party may appoint one
conciliator. In case of three conciliators, each party may appoint one conciliator. The
parties may agree on the name of the third conciliator. The third conciliator may act as
the presiding conciliator.
Party may enlist the assistance of a suitable institution or person for the appointment
of conciliators. A party may request such an institution or person to recommend the
names of conciliators. The parties may agree that the appointment of one or more
conciliators be made directly by such an institution or person.
Submission of statement to conciliator: The conciliator may request each party to
submit written statement of dispute and the points at the issue. Each party shall send a
copy of such statement to other party. The conciliator may request each party to
submit further written statement and facts supporting the disputes, the supplementary
documents or evidence. The party shall send a copy of such statement, documents and
evidence to other party.
Conciliator not bound by certain enactments: The conciliator is not bound by the
code of civil procedure, 1908 or the Indian Evidence Act 1972.

10.12 ROLE OF CONCILIATOR

• The conciliator shall assist the parties in an independent and impartial manner for
amicable settlement of dispute.

• The conciliator shall be guided by principles of objectivity, fairness and justice.

• The conciliator will give following considerations:

− rights and obligations of the parties;

− usage of concerned trade;
− circumstances of disputes;
− previous business practices.

• The conciliator may conduct the conciliation proceeding in such a manner as he

considers appropriate. He will take into account following facts:

− circumstances of the case;

− request of parties;
− way of hearing the statements;
− speedy settlement of dispute.

• The conciliator may make proposal for a settlement of dispute at any stage of
proceedings. Such proposals need not be in writing and need not be reasoned.
Administrative Assistance: The parties or the conciliator with the consent of parties
may arrange for administrative assistance by a suitable institution or person for
48 facilitating the proceedings.
Communication between conciliator and parties: The conciliator may invite the The Indian Arbitration and
Conciliation Act, 1996
parties to meet him or may communicate with them orally or in writing. He may meet
or communicate with the parties together or with each of them separately. The place
of proceedings will be determined by the conciliator with the consultation of the
parties.
Disclosure of information: When the conciliator receives factual information
regarding the dispute from a party, he will disclose the information to other party.
This may enable the other party to present appropriate explanation. If the party
instructs that the information is confidential, the conciliator will not disclose such
information.
Cooperation of parties with conciliator: Parties shall cooperate with the conciliator
in good faith. Parties will comply the request of conciliator for submitting written
materials, providing evidence and attending the meetings.
Suggestions by parties for settlement of dispute: Each party may submit
suggestions to the conciliator for the settlement of dispute. He may do so by his own
initiative or at the request of the conciliator.

10.13 SETTLEMENT AGREEMENT

The conciliator will formulate the terms of possible settlement and submit them to
parties for their observation. In the light of these observations, the conciliator may
reformulate the terms of possible settlement.
If parties agree to settle dispute, they may draw up and sign a written settlement
agreement. If parties request the conciliator, he may draw up or assist the parties in
drawing up the settlement agreement. When the parties sign the settlement agreement,
it shall be final and binding on the parties. The conciliator shall authenticate the
settlement agreement and furnish a copy to each parties.
Status and effect of settlement agreement: The settlement agreement shall have the
same status and effect as an arbitral award.
Confidentiality: The conciliator and the parties shall keep the proceedings
confidential. The settlement agreement shall also be kept confidential, except where
its disclosure is necessary for the purposes of implementation and enforcement.
Termination of conciliation proceedings
The conciliation proceedings shall be terminated by:

• the signing of the settlement agreement by the parties; or

• a written declaration of the conciliator after consultation with the parties that the
conciliation is not justified; or
• a written declaration of the parties addressed to the conciliator that the
conciliation proceedings are terminated; or
• a written declaration of a party to other party and the conciliator that the
conciliation proceedings are terminated.
Resort to arbitral or Judicial Proceedings
The parties shall not initiate any arbitral or judicial proceedings for the dispute during
the conciliation proceedings. A party may initiate arbitral or judicial proceedings if
they are necessary for preserving his rights.

49
IPR Litigation and
Settlement of Disputes
10.14 COSTS AND DEPOSITS
Costs
When conciliation proceedings are terminated, the conciliator shall fix the costs of the
conciliation and give written notice to the parties.
The costs refer to reasonable costs relating to following:

• the fee and expenses of the conciliator and witnesses;

• fee for the expert advice requested by conciliator with the consent of parties;
• any other expenses incurred during the conciliation proceedings and the
settlement agreement.
The costs shall be borne equally by the parties unless the settlement agreement
provides for a different distribution of costs.
Deposits
The conciliator may direct each party to deposit an equal amount as an advance for the
costs to be incurred. The conciliator may also direct for supplementary deposits in an
equal amount from each party.
If a required deposits are not paid in full by both parties within thirty days, the
conciliator may suspend the proceedings. He may make a written declaration of
termination of the proceedings to the parties. When the conciliator terminates the
proceedings, he will provide an accounting of the deposits to the parties.
Role of conciliator in other proceedings: Unless agreed by the parties, the
conciliator shall not act as an arbitrator or as a representative or counsel of a party in
any arbitral or judicial proceeding regarding the dispute of the conciliation
proceedings. The conciliator shall not be presented as a witness in any arbitral or
judicial proceedings.
Admissibility of evidence in other proceedings
The parties shall not rely on or introduce as evidence in arbitral or judicial
proceedings related or not related to dispute of conciliation proceedings.

" Spend SAQ 3

3 min.
i) What are the roles of a conciliator?
ii) How can conciliation proceedings be terminated?

10.15 SUMMARY
• There are four parts in the Arbitration and conciliation Act 1996. The first part
discusses the arbitration procedure. The second part explains the enforcement of
certain foreign awards. The third part deals with the procedures of conciliation
and the fourth part explains the supplementary provisions.

• Arbitration agreement refers to an agreement by the parties to submit to

arbitration all or certain disputes which have arisen or which may arise between
them. The disputes arise out of the defined legal relationship, which may or may
not be contractual.

• The parties are free to determine the number of arbitrators. The numbers should
not be even. If they are not able to determine the number of arbitrators, the arbitral
50 Tribunal shall consist of a sole arbitrator.
 The Indian Arbitration and
• The arbitral Tribunal may rule on its own Jurisdiction.
Conciliation Act, 1996

• Conduct of arbitral proceedings deals with equal treatment of parties,

determination of rules of procedures, place of arbitration, commencement of
arbitral proceedings, language, statement of claim and defence, hearing and
written proceedings, default of a party, expert appointed by Arbitral Tribunal and
court assistance in taking evidence.

• In arbitration other than an international commercial arbitration, the arbitral

Tribunal shall decide the dispute in accordance with the substantive law being in
force in India.

• The arbitral proceedings shall be terminated by the final arbitral award or by an

order of the Tribunal.

• An arbitral award may be set aside by the court under certain conditions.

• In conciliation the party shall send the other party a written invitation to conciliate
identifying the subject of the dispute.

• The conciliator shall assist the parties in an independent and impartial manner for
amicable settlement of dispute.

• The conciliator shall be guided by principles of objectivity, fairness and justice.

• The conciliator may conduct the conciliation proceeding in such a manner as he

considers appropriate.

• The conciliator may make proposal for a settlement of dispute at any stage of
proceedings. Such proposals need not be in writing and need not be reasoned.

• The conciliation proceedings shall be terminated by:

− the signing of the settlement agreement by the parties; or

− a written declaration of the conciliator after consultation with the parties that
the conciliation is not justified; or

− a written declaration of the parties addressed to the conciliator that the

conciliation proceedings are terminated; or

− a written declaration of a party to other party and the conciliator that the
conciliation proceedings are terminated.

10.16 TERMINAL QUESTIONS Spend 20 min.

1. What do you mean by arbitration agreement? Discuss the composition of arbitral

tribunal.

2. Describe the procedure of conduct of arbitral proceedings.

3. Discuss the procedures of arbitral award and termination of arbitral proceedings.

4. Discuss the procedure of recourse against arbitral award.

51
IPR Litigation and
Settlement of Disputes 10.17 ANSWERS AND HINTS
Self Assessment Questions
1. i) Refer to Sec. 10.3.
ii) Refer to Sec. 10.4.
2. i) Refer to Sec. 10.6.
ii) Refer to Sec. 10.7.
iii) Refer to Sec. 10.8.
3. i) Refer to Sec. 10.12.
ii) Refer to Sec. 10.13.

ADDITIONAL READING
Bare Act, The Indian Arbitration and Conciliation Act, 1996.

52