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1. INTRODUCTION: Alternative Dispute Resolution (ADR) has now been propagated and successfully implemented in the offline non-virtual world. It refers to the use of methods like arbitration, mediation,
negotiation, med-arb, etc. to solve disputes rather than the traditional litigation way. Arbitration has been especially popular in international commercial transactions where the parties are able to decide on their choice of law by which they want to be governed and jurisdiction in which they want to take up the dispute. Since the jurisdiction has been a critical issue in resolution of online disputes, many online ADR agencies have sprung up in recent times providing such facilities to parties for quick and efficient dispute resolution. The general pattern is that of the grieving party to approach the ADR agency, which in turn will contact the defendant. Then, under the aegis of the agency, both the parties solve their disputes online through emails and video conferencing without the necessity of being physically present as in litigation or off-line ADR. Further, being able to decide online, they are not confronted with jurisdictional issues at all. Such a method is being characterized as both cost efficient and time-efficient and of course, the process being very much within the control of the parties.
Arbitration Act 1996 Alternate dispute resolution is better known as Arbitration. The Arbitration and Conciliation Act 1996 is much more
comprehensive than the repealed 1940 Act. It consists of 86 Section divided into 4 Parts. Part 1 relates to Domestic as well as International Arbitration, Part 2 relates to Enforcement of Foreign Awards under the New York and Geneva Conventions, Part 3 relates to Conciliation and Part 4 contains supplementary provisions. The act has 3 schedules. The 1st schedule reproduces the provisions of the New York convention on recognition of enforcement of Foreign Arbitral Awards, the 2nd schedule consist Provisions of the Geneva Protocol of Arbitration Clauses of 1923 and the 3rd schedule contains Provisions of Geneva Convention on execution of Foreign Arbitral Awards. Part 2 is virtual reproduction of the provision of the repealed 1937 Act and The 1961 Act excepting the deletion of section 9(1) (b) of both the Acts. The Act seeks to make the Arbitration and Conciliation law on the line of the recommendations of United Nations and the Modern Law adopted by the United Nation Commission on International Trade Law (UNCITRAL). It has provided a unified formula for both international commercial arbitration and
domestic arbitration and has consolidated the entire law of arbitration in one single Act.
Arbitration Act 1996 1.1 Special features of Arbitration Act, 1996
The Arbitration and Conciliation Act, 1996 is much more comprehensive that the repealed 1940 Act. It consists of 86 sections divided into four parts. Part I relates to domestic as well as international arbitrations, Part II relates to enforcement of foreign awards under the New York and Geneva Conventions, Part III relates to conciliation and Part IV contains
Supplementary Provisions. Some of the recognized provisions are as follows:-
(1) Reduction of court intervention:
The 1940 act had given considerable powers to the court to intervene before, in-between, and after the arbitral proceedings.
Section 8, 9,10,12,20 read with section 4 of the 1940 act dealt with the circumstances in which court could interfere before the arbitral proceedings.
Section 5 of the new act is its most important feature. It provides that judicial authority can intervene only where it is so specially provided in Part I... The court‟s powers to intervene are contained in Section 9 for making interim measures, Section 11 for appointment of arbitrator, Section 14 for taking decision on 3
(3) Reduction of grounds of challenge: Section 34 deals with grounds of challenge to award .section 11(2) permits the parties to agree on the procedure for appointing the arbitrator. Section 17 for rendering assistance in taking evidence in arbitration proceedings. Parties are free to determine the number of arbitrators.As compared with the grounds under section 1940 act they are not considerably reduced but also are qualitatively different. Section 34 for setting aside the award. Section 37 in deciding Appeals and Section 39 in issuing directions to the arbitral tribunal to deliver the award in the circumstances envisaged therein. There is party autonomy also in fixing the place of arbitration (section 20) and the language to be used in the proceedings (section22). (2) Party Autonomy: The new act recognizes maxim um possible party autonomy in matters relating to arbitration. with only one restriction that the number should not be even number as per section 10.Arbitration Act 1996 termination of man date of the arbitrator. Autonomy starts from the formation of arbitral tribunal and appointment of arbitrators. “Error apparent on the face of the award was the most misused ground 4 .
The 1940 act gave no power to the Tribunal to pass interim orders of injunction etc. The new act not only preserves that power of the court but provides for the exercise of power even before the start of the arbitral proceedings.Arbitration Act 1996 for settling aside award under the 1940 Act. The Arbitral Tribunals have been endowed with the power to pass interim award which is enforceable like a final award. Section 34(4) contains a salutary provision empowering the court to adjourn its proceedings in order to give an opportunity to the arbitrators themselves to take such action as may be necessary to eliminate the ground of challenge against the award. and the parties had to resort to the courts under section 41(b) of the 1940 act for that purpose. (5) Interim measures: Section 9 of the new act relates to interim measures taken by the court and Section 17 relates to interim measures taken by the Tribunal. 5 . Sub-section (6) of Section 31 empowers the arbitral tribunal with the power to make an interim award on any matter with respect to which it could make a final award. (4) Interim award: Section 2(1) (c) defines arbitral award as including an interim award.
the Umpire should enter on the reference in lieu of Arbitrators.(Para three &four of First Schedule: Section 3 ). The Arbitrators so appointed shall now appoint a third Arbitrator called the Presiding Arbitrator. the parties are free to agree in the procedure to be 6 . within the specified time. four months for the Arbitrator and two months for the Umpire. The time has limit has now been abolished. (10) Code of Civil Procedure and Evidence Act: Section 19 of the new act in terms states that the tribunal shall not be bound either by the Code of Civil Procedure or evidence Act.Arbitration Act 1996 (6) No time limit for making the award: Under 1940 Act specific time limit was fixed for the Arbitrators and Umpires to make award. The number of arbitrators has now been left to the parties. but with one limitation and that pertains to appointment of not only even number of Arbitrators. (9) Umpire system Abolished: The 1940 Act provided that where even number of Arbitrators was appointed and such Arbitrators failed to make an award.The limit were generally never adhered to and there have been extensions after extensions. Umpire system is now abolished. However.
It may b e mentioned that Limitation Act 1963 however. and accommodate the difference in that manner which appears most just and equitable” 7 . “make a difference between arbiter and arbitrator . is made applicable. 1.2(a) Definition of arbitrator according to Wharton‟s Law Lexicon “the civilians” “says Wharton” . though both found their power in the compromise of the parties. the former being obliged to judge according to the customs of law.Arbitration Act 1996 followed by the arbitral tribunal in the conduct of proceedings. whereas the latter is at liberty to use his own decision . The freedom given to the parties to agree on the procedure under the rules of arbitration of established arbitral institutions.
Arbitration Act 1996 (b) Definition of Arbitrator according to Indian Law. the first essential requisite in persons occupying that post is judicial impartially and freedom from bias” 8 . If a dispute and in deciding tat dispute he holds a judicial inquiry and comes to a judicial decision.an arbitrator is an quasijudicial position. Therefore. The distinguishing feature is that if the matter is referred to a person and he is not called upon either to hold a judicial inquiry or to give a judicial decision but it is permissible to him to rely on his own skill or experience in order to arrive at a particular decision. to dispense equal justice to all parties. his decision is an award. then that person is not an arbitrator . whose functions are judicial and whose duties are not those of mere partisan agent. but of an impartial judge. and to decide the law and facts involved in the matters submitted with a view to determining and finally ending the controversy” “Where the parties agree to refer their dispute to a third person for decision and where that person has to some judicial or quasijudicial work. “An arbitrator is the person to whose attention the matters in dispute are submitted by the parties. a judge of the parties‟ own choosing. then the person is called an arbitrator.
which can be challenged only on the restricted grounds listed in section 30 of the arbitration cat i. Joseph. complex and expensive court procedures impelled jurists to search for an alternative forum. Ms Rattan Sigh and Sons: “interminable. Despite the supervisory powers of the court. State of Kerala v. Supreme Court has observed in AIR 1981 SC 2075. Ms Gurunank Foundation v. less formal. independent and impartial and decide according to the law the land otherwise court can intervene to set him right. Civil Procedure Code and Evidence Act but there is limit to his liberties. time consuming. the way in which the proceedings under the act are conducted and without an exception challenged in courts . more effective and speedy for resolution of disputes avoiding procedural claptrap and this led them to the Arbitration Act…However .Arbitration Act 1996 1.3 Ground Realities of Arbitration Arbitration Agreement is a bargain between the parties to abide by the decision of the appointed arbitrator. misconduct etc. The parties rely on his expertise in the special field of controversy in question which is expected to enable him to comprehend the rival contentions better and resolve them expeditiously and satisfactorily untrammeled by the procedural laws. He is required to be honest.e. abuse of the process of arbitration is rampant says Kerala High Court in AIR 1990 Kelara 101 at 107. has made lawyers laugh and 9 .
acquire a certain degree of notoriety by the manner in which in many cases the financial interest of the government has come to suffer by award which has raised eyebrows by doubts as to their rectitude and propriety . at every stage providing a legal trap to the unwary. the requirement of speaking awards is expressly stipulated and ensured. Experience shows and law reports bear ample testimony that the proceedings under the act have become highly technical accompanied by an unending prolixity.” Further the Supreme Court goes so far as to say that – “…the system of dispute resolution has .Arbitration Act 1996 legal philosophers weep. It is for governments and their instrumentalities to ensure in future this requirement as a matter of policy in large public interest. Government and their instrumentalities should . It will not be justifiable for governments or their instrumentalities to enter into arbitration agreement which do not expressly stipulate the rendering of recent and asking awards. Informal forum chosen by the parties for expeditious disposal disputes has by the decision of the courts being clothed with „legalese‟ of an unenforceable complexity. Any lapse in that behalf might tend itself to and perhaps justify. the legitimate criticism that government failed to provide against possible prejudice to public interest” 10 . as a matter of policy and public interest – if not as a compulsion of law-ensure that wherever they enter into agreements for resolution of disputes by resort to private arbitrations . of late .
considered as commercial under the law in force in India where at least one of the parties is: 1. or habitually resident in any country other than India. a body corporate which is incorporated in any country other than India. a company or an association or a body of individuals whose central management and control is exercised in any country other than India. or 3. or 2. whether contractual or not. 11 .Arbitration Act 1996 The Types of Arbitrations The Indian Arbitration and Conciliation Act. 1996 applies to both domestic arbitration in India and to international arbitration. or 4. The Government of a foreign country. an individual who is a national of. Section 2(1)(f) of the Act defines "International Commercial Arbitration" as arbitration relating to disputes arising out of legal relationships.
Under the new Act this power in the case of domestic arbitrationis vested with the Chief Justice of the concerned High Court or any person or Institution designated by him and in case of International Commercial Arbitration such power is given to the Chief Justice of India or any person or Institution designated by him. Section 10(2) provides that in the absence of agreement about the number. Section 10(1) of the new Act deals with the number of Arbitrators and mandates that the number shall not be even. The Model Law provides that the number shall be three.4 DEVIATION FROM THE UNCITRAL MODEL LAW UNCITRAL Model Law was the basic ideal before the law makers while making the new Act. the number of Arbitrators will be one. Where the parties fail to determine the number of Arbitrators. On certain aspects the provisions of the new Act differ and some of the major differences can be stated thus :(a) The Model Law does not contain any limitation on the number of Arbitrators. But the provisions are not Just copies of the provisions of the Model Law. (b) Model Law permits the parties to approach a Court or Authority for appointment of a third Arbitrator or Sole Arbitrator as the case may be.Arbitration Act 1996 1. 12 . in cases where the parties fail to reach an agreement.
Under Section 37. (d) The new provisions which are alien to the Model Law are: (i) Award of interest by the Tribunal in a detailed manner. under Section 38. Same is the position regarding challenge to the jurisdiction of arbitrator. (v) Fixing the amount of deposit or supplementary deposit as an advance for the cost of arbitration. (vi) Lien of arbitral award and disputes as to costs of arbitral Award. 13 . under Section 31(7). (iii) Enforceability of an award in the same manner as if it were a decree of a Court under Section 36 in situations where award is not challenged within the prescribed period or the challenge has been unsuccessful. The stage to challenge that order of arbitrator is after the award. under Section 39.Arbitration Act 1996 (c) The Model Law empowers the tribunal to decide on the challenge to an Arbitrator and if the challenge fails the party can approach the Court at that stage against the order. (ii) Cost of arbitration. under Section 31. (iv) Appeals in respect of certain matters. under Section 34. Section 13 of the new Acts does not permit the party to approach the Court at that stage.
1963 to arbitrations as it applies to proceedings in court and fixing the date of commencement of arbitration and other matters.discharge of arbitration agreement by death of a party. (x) Applicability of the Limitation Act.Arbitration Act 1996 (vii) Non. 14 . (ix) Identification of Court having exclusive jurisdiction over the arbitral proceedings. Under Section 40. (viii) Rights of a party for arbitration agreement in relation to insolvency proceedings against the party thereto. under Section 41. under Section 42.
if the court appoints an arbitrator. In absence of such a consensual prescription of period. 1940m prescribing 4 months as the period will come into play.Arbitration Act 1996 1. the court can fix the time within which the proceedings have to be completed. statutory provision contained in rule 3 of First Schedule of Indian Arbitration act.5 Time Limit Arbitration being an expeditious process enjoins on the arbitrator to conclude the proceeding with all possible dispatch . parties may set the time for completion of arbitration proceedings in the agreement itself or subsequently by a separate agreement. Consideration of rule 3 of first schedule of arbitration act Rule 3 of the first schedule of the Indian arbitration act 1940 reads as “The arbitrators shall make their award within four months after entering on the reference or after having been called upon to act by notice in writing from any party to arbitration agreement or within such extended time as the court may allow” 15 . If the arbitrator has been appointed or is to be appointed outside the court.
Arbitration Act 1996 However. Rule 3 of the first schedule of the Indian act contemplates two alternatives: (a) “after entering on reference” and (b) “after having been called upon to act by notice in writing from any party to the arbitration agreement”. it is not clear why the Indian arbitration act of 1940 . While in England the idea of having defined period. This rule corresponds to rule 3 of the first schedule to clause (c) of the first schedule of the arbitration act of 1899 which in its turn corresponded to clause (c) of first schedule of the English arbitration act of 1899. If there is any provision regarding the time-limit that provision will be given effect to. both English act of1899 and the Indian act of 1899 prescribed the period of three months . Was given up in arbitration act 1934 .perhaps this was found to be short and the Indian act of 1940 enlarged it to four months . it must be noted that the period of four months prescribed by Rule 3 of the first schedule comes into play only when there is no provision in the arbitration agreement as regards the time-limit within which the award is to be made. which follows in essential particulars the English act of 1934 . still adhered to the old idea old defined period. 16 .
even although the arbitrators m ay be called reference they have three months from that moment for making their award…To hold otherwise would seem to strike out from clause (3) the words „within three months 17 . and having been called upon to act by notice in writing. Lord Lindley. are alternatives in this sense that where no reference Is entered upon at all. was “… the provisions „entering on the reference. but as soon as he enters on the reference the limitation will be computed from the date when he enters on the reference. In Baring Gould v. But the question arises: if the arbitrator actually enters on the reference after service of such notice. four months would start running from the date he has actually entered on the reference . If the arbitrator has entered on the reference. But. then the time runs from the notice calling upon the arbitrators to act. Four months would start running from the date of service of that notice on him. on the other hand. from the date is the period of four months to be computed? The limitation would start running from the date of service of that notice.Arbitration Act 1996 The limitation of four months would start running from the point in time covered by either of the alternatives. Sharpengton Combined Pick and Shorat Syndicate the view taken by the Master of the Rolls.But. if he has not entered on the reference a party to the arbitration agreement may call upon him by notice in writing to do so.
Normally the principle of limitation is that once the limitation starts running from specified co terminus.” This ruling has been followed by the Allahabad High Court in Sardarmal Hardat Rai v. that is. in a case where one of the parties happened to call upon the arbitrators to act before they began the reference. this principle would not apply to the present case b e cause of the specific language used in Rule 3 of the first schedule. the first date is to be excluded an d the last date has to be included. But. The period of four months has to be computed according to the principles of the Limitation Act. 18 . It cannot be shifted to another co terminus.Arbitration Act 1996 after entering on the reference. for which provision is made in Section 28 of the Act. Rule 3 of the First Schedule contemplates that the period of four months may be extended by court. Sheo Baksh Rai Sri Narain. as to hold otherwise would seem to strike out from that clause the words “ within four months after entering on reference.
provision was made in Bengal regulation of 1772 that “in all cases of disputes accounts. etc. in their ascending order of the importance. The pantheist was composed of the chief of then community and some selected or elected residents of the village. but the.it shall be recommended to the parties to submit the decisions of their cause to arbitration .”. an appeal lay finally to the sovereign. the panchayati system of arbitration was not abrogated. With the advent of British rule in India. The regulations of 1781 provided that “no award of any arbitrator be set aside except upon full proof made by oath of two credible witness that the arbitrators have been guilty of the gross corruption or partiality in the cause in the course they have made their award” 19 . The decision of the Kula or kinsmen was subject to revision by the Sreni . Further facilities for arbitration were given by regulations of 1780 and 1781. which in turn could be revised by Puga. long before the courts of law were established.6 Development of arbitration in India In ancient India. The pantheist can be catalogued. From the decision of the Puga.Arbitration Act 1996 1. the award of which shall become decree of the court. as (1) Kula (2) Sreni and Puga.. the decisions of the village panchayat were accepted as binding on the parties.
It is hoped that the institution of arbitration will go from strength to strength. It is being institutionalized.Arbitration Act 1996 1. amicably arrive at is required to be handed down to the parties. it was termed as ad-hoc (2) Construction inbuilt arbitration-as business transactions increased in number and complexities with concomitants increased in clashes between the parties. in order to sustain smooth business relations.it is carving for itself a sphere of activities where a speedy inexpensive informal decision. As the occasion required arbitration . It is developing its own procedure. occasions requiring arbitration became frequent and the increase number called for regular machinery in the shape of inbuilt arbitration clause. Its popularity is growing. which could not be settled by negotiations in the shape of conciliation or mediation. an integral part of the contract covering 20 . Varieties of Arbitrations: (1) Ad-hoc arbitration-at first arbitration resorted to as and when a dispute arose between the parties to a business transaction. It is being systematized .7 Varieties of Arbitrations Arbitration has its own ethos.
(3) Institutional arbitration-another an perhaps more suitable for some was institutional arbitration .existing or potential-and the machinery devised was reference to a named arbitrator or an arbitrator to. The institute where governed by pre-published rules known to the parties stipulating appointment of arbitrators form among the panelists of specialists listed by the institute. they will be settled by arbitration by the named institute of which one or more of then\m where members. statutory arbitration is despite their consent. the statute making lit binding on the parties as the law of the land. the parties cannot opt out of it but have to abide by it. (4) Statutory arbitration-statutory arbitration was imposed on the parties by the statute governing them. While (1). (2) & (3) are based on consent of the parties.Arbitration Act 1996 present or future dispute. be appointed by a designated authority. 21 . where the parties agree in advance in the event of future dispute . While first three are voluntary the fourth is compulsory.
It is necessary that either there should be an arbitration agreement or at least an arbitration clause in any commercial agreement made between the contracting parties.Arbitration Act 1996 1. many and varied. One of the most important questions which strike at the very root of this process is the selection of the arbitral panel itself? Parties face right at the outset the question of choice of arbitrator(s). When it should be decided? Who should decide? Who should be the arbitrator(s)? How many arbitrators? What should be the qualification of the arbitrator(s)? Where would one find the arbitrator(s)? Are they neutral? Are they impartial? Are they independent? their What area should of be their the rights limit of and their responsibilities. Question. functioning? These queries linger at the background as we try to develop our arbitration clauses. arise. Ad Hoc Arbitration and Institutional Arbitration: For the purpose of constituting an arbitral panel. One can go for ad hoc arbitration whereby the parties themselves constitute an arbitral panel and 22 . working.8 The Foremost Challenge in the Arbitration Process Among various problems arising. one can pursue one of the two paths available. it is imperative that there should exist an arbitration agreement. at the threshold.
London Court of International Arbitration (LCIA) in United Kingdom. We witnessed the birth of various online ADR websites. mention can be made of American Arbitration Association (AAA) in USA. there is the option of institutional arbitration. the ADR was re-born both in terms of cost-efficiency and speed.Arbitration Act 1996 make their own rules for arbitration. However. Opting for institutional arbitration gives the benefit of not only making use of the welltested arbitration rules and procedures of the institution but also being assured of the presence of well-experienced and qualified arbitrators from the panel maintained by the institution. On the other hand. remained off-line arbitration and conciliation centers. The only difference being is that they do not have any restrictions as 23 . similar International Centre ADR. Further. we find institutions like the for Indian Council are of Arbitration. In India. With the advent of the Internet as a globally recognized vehicle for information travel and exchange. the professional staff is available to guide disputants through the arbitration process. which offering arbitration and mediation facilities. all. but few. in an institution. Stockholm Chamber of Commerce (SCC) in Sweden and Arbitral Center of the Federal Economic Chamber in Vienna. These websites function the same way as the arbitral institutions and provide similar services. Among the prominent foreign arbitral institutions.
He should also find out whether the submission (together with the agreement . consider whether he is authorized to deal effectively with it. if any . he should have it put in order before he proceeds with the arbitration.In addition. he should. and if it dose . and in case it is not.Arbitration Act 1996 to physical space and are available at any moment of time at any given place where one might have Internet facilities available. under which it is made ) requires him to possess any special qualification . as soon as he knows what the real nature of the dispute is. that ought to be dealt with at 24 . 1. The arbitrator should also satisfy himself that the submission is wide enough to cover the disputes with which he is to deal. or authority to deal with some related dispute.9 Duties of the arbitrator As per the English law. for instance . or whether some thing further is neededsome special power to give directions. In this connection he should go beyond a mere formal examination to make sure that he has the authority to decide the dispute put before him. the first duty of the arbitrator on the receipt of his appointment is to see that his appointment is in order. he should make sure either that he complies with the requirement or that his failure to comply is known to both then parties and acquiesced in by them.
if it is not to lead to multiplicity of proceedings between the parties. 25 . for if they are left until a later stage of arbitration it will often be found that one side or the other refuses to agree to amendment of the submission in the hope of thereby securing some tactical advantage: Whereas at the in inception of the arbitration it is less likely that the giving of additional powers to the arbitrator will seem to favour one side or the other.Arbitration Act 1996 the same time. Such matters are best settled at the earliest possible moment. In case where the arbitrator has at that stage sufficient under standing of the dispute.. points of this sort can with advantage b e dealt with at the preliminary meeting.
Arbitration Act 1996
1.10 Arbitral Disputes
The first point that usually arises in interpreting that scope and content of the arbitration agreement is as to what matters are covered by that agreement which have to be referred to the arbitrator contemplated by it . The allied question which comes up for consideration is bas to what matters are accepted from the scope of the arbitration agreement?
The test, whether a particular matter is covered or not, is laid down by the supreme court in AIR1969 SC 488.. “Is reliance placed on a term of contract for seeking relief? If so, it is covered by the arbitration clause. If not, it is so covered.
A question arose whether there has been full and final settlement of the claims under the contract is a dispute covered by the arbitration agreements. supreme court has held in AIR 1974 SC 158, Damodar Valley Corporation v K. K Kar that the question whether there has been full and final settlement of a claim under the contract was itself a dispute arising „upon‟ or „ in relation to‟ or „in connection with‟ the contract and , therefore , reference to the arbitrator was not beard . it was further held in that ruling that the question whether the termination was valid or not and
Arbitration Act 1996 whether damages where recoverable for some wonderful for such wrong full termination, did not effect the arbitration clause or the right of the party to invoke it for appointment of an arbitrator reliance was placed on 1942 AC356 = (1942)1 AVER 337 and AIR 1959 SC 1362 for the purpose.
Arbitration Act 1996 2. Arbitration Agreement – Section 7 “Arbitration Agreement” 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. 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 – 1. A document signed by the parties; 2. An exchange of letters, telex, telegrams, or other means of telecommunication agreement; or 3. An exchange of statements of claim and defense in which the existence of the agreement is alleged by one party and not denied by the other. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in willing and the reference is such as to make that arbitration clause part of the contract. which provide a record of the
Sec.7 – Definition and form of arbitration agreement “Arbitration agreement” is an agreement by the parties to submit to arbitration, whether or not administered by a permanent 28
2. Arbitration must be confined to disputes which were subject-matter of arbitration before the first arbitrator. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Where order of reference entitled the arbitrator “to consider such other points raised in the pleadings before the court at 29 . 3. telegrams or other means of telecommunication which provide a record of the agreement.Arbitration Act 1996 arbitral institution. The arbitration agreement shall be in writing.” Scope of Arbitration: 1. An agreement is in writing if it is contained in a document signed by the parties or in an exchange of letters. Disputes specifically excluded from the purview of the arbitration clause are not referable to arbitration. Appointment of new Arbitrator does not enlarge the scope of the reference. 4. whether contractual or not. In principle the arbitrator has no jurisdiction to enlarge the scope of reference and to do so is misconduct. all or certain disputes which have legal arisen or which may arise between them in respect of a defined legal relationship. telex. The reference in a contact to be document containing an arbitration clause constitutes an arbitration agreement provided that the entire entire contract is in writing and the reference is such as to make that clause part of the contract.
Suit stage” claim rose by the party not in the suit stage. Supreme Court upheld the award even relating to additional seven claims on the basis that they also pertained to the same disputes and there was intention to refer all disputes to arbitration. Seven more claims pertaining to the same dispute were added. An award passed by arbitrator in a reference for deciding 30 claims was set aside by the court on the ground of want of jurisdiction in that arbitrator.Arbitration Act 1996 5. Appointment of new arbitrator was ordered and the dispute between the parties was referred to second Arbitrator. On considerations of equity the Supreme Court directed the arbitrator even to consider counter-claim together with the claim even though technically it can be stated that the counter-claim was not referred. 7. Essentials of an Arbitration Agreement: Essentials of an Arbitration Agreement providing for arbitration are that there must be an agreement between the parties and the parties must be ad idem. was held to be beyond reference and hence not maintainable by the Supreme Court. 6. Objection was raised that the new seven claims were not maintainable before the arbitrator. such an agreement should be in writing and that there is intention of the parties to have their disputes or differences referred and decided through arbitration . but in another suit. 30 .
Finality of the decision. Disputes and 3.. after 90 days of his presenting his final claim on disputed matters. The statutory essentials may be listed as: 1. An agreement 2. Parties 2. Agriculture and Rural Development. Bhubaneswar whose decision on the issue shall be final and binding on both the parties. Bharat Engineering Corporation case In this case. 4. This is what the ruling states: “The clause of arbitration in the instant case was worded as under: “In case of any dispute or differences of opinion arising out of the agreement. Government of Orissa. In writing 3. Relating to either present or future differences. the clause under the agreement read as follows: “In the event of any dispute or differences between the parties…. Whether an arbitrator is named therein or not. such demand for 31 . the Contractor.Arbitration Act 1996 The essentials of an arbitration agreement as judicially aatated in AIR 1992 Orissa 35 & 3 in number1. may demand in writing that the dispute or differences be referred to arbitration. the matter shall be referred for orders of the Commissioner.
it is as if 2 contacts are rolled into one. An agreement to agree or a contingent agreement was not permissible under section 2 (a) of arbitration act. Must be expressed to be made by the president or the governor 2. Government arbitration agreement: Arbitration agreement in writing and signed. if it relates to government requirement contract of will have of to the satisfy the mandatory Normally Article 299 constitutions. only one party having right to exercise the option to commence the arbitration proceedings would not qualify as an arbitration agreement.Arbitration Act 1996 arbitration shall specify the matters which are in question. and only such dispute or difference of which the demand has been made and no other. shall be referred to arbitration. It is only when the option was exercised that it resulted in an arbitration agreement with mutual rights to make the reference. arbitration agreement forms a part of the government contract. It must of course be executed in writing 32 .” It was held that this arbitration clause did not amount to an arbitration agreement. As the arbitration agreement is required to be mutual. Such an agreement 1. dispute or difference.
The execution must be such person and in such manner as the government might direct or authorize. 33 . If the agreements have not been executed in accordance with requirements of Article 299. it cannot be enforced by or against the government (AIR 1967 SC 203) If agreements involving valuation of Rs. even though the negotiations may have been entered into by the Superintending Engineer himself. any agreement signed by the executive engineer would be non-est.50000 and above are to be signed by the Superintending Engineer.Arbitration Act 1996 3. in law.
Arbitration Act 1996 2. However.1 How to Draft an Arbitration Agreement? A good arbitration agreement is one which minimizes complications when disputes arise.. many a time‟s people neglect to pay attention while drafting an arbitration agreement. Before finalizing an arbitration agreement. Arbitration lawyers from all applicable jurisdictions must be consulted before finalizing any arbitration agreement. Before signing an Arbitration Agreement the following must be properly addressed: Applicable law to arbitration Location of Arbitration Number of Arbitrators Language of Arbitration Discovery procedure Limitation to arbitration powers Interim measures/Provisional Remedies Privacy Rules Applicable Appeal & Enforcement 34 . the terms should be thoroughly discussed and negotiated to avoid any misunderstanding at a later stage..
Arbitration Act 1996 Be aware of local peculiarities Survival after Termination of the main agreement. The place of arbitration shall be _____. The arbitration shall be conducted in ______ language. One brush should not paint all the painting. The arbitration award shall be final and binding. The arbitration shall be governed under the laws of ______. Model Arbitration Agreement "All and any disputes arising out of or in connection with the present agreement shall be finally settled under the UNCITRAL Model Rules of Arbitration (or another arbitration rules of your choice) by sole (or three) arbitrator (s) appointed by _________ (an arbitration institute of your choice) in accordance with the said Rules. " 35 . The arbitration agreement should be modified as applicable under different circumstances.
(1) The parties are free to determine the number of arbitrators. Composition of Arbitral Tribunal 3. No optimum limit of number is prescribed under this provision as is done in the case of Conciliators where optimum limit is prescribed as three (Section 63). Article 10 as per UNCITRAL MODEL LAW. provided that such number shall not be an even number. (2) Failing the determination referred to in sub-section (1) . (1) The parties are free to determine the number of arbitrators.1 Number of Arbitrators – Section 10. the arbitral tribunal shall consists of a sole arbitrator. Failing such determination of number by the parties.Arbitration Act 1996 3. The only condition is that the number shall not be even.Number of arbitrators. (2) Failing such determination the number of arbitrators shall be three. 36 . the arbitral tribunal shall consist of a sole arbitrator as against number three prescribed under the Model Law. IN BRIEF:Under this section full liberties are given to the parties to determine the number of arbitrators.
3 Grounds for Challenge – Section 12 (1) When a person is approached in connection with his possible appointment as an arbitrator. (2) An arbitrator. shall. without delay. (4) A party may challenge an arbitrator appointed by him. or in whose appointment he has participated. 37 . only for reasons of which he becomes aware after the appointment has been made. he shall disclose in writing any circumstances likely to give arise to justifiable doubts as to his independence or impartiality. or (b) he does not possess the qualifications agreed to by the parties. from the time of his appointment and throughout the arbitral proceedings. disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.Arbitration Act 1996 3. (3) An arbitrator may be challenged only if :- (a) circumstances exist that give to justifiable doubts as to his independence or impartiality.
Arbitration Act 1996 Article 12 .UNCITRAL Model Law (1) When a person is approached in connection with his possible appointment as an arbitrator. or if he does not possess the qualifications agreed to by the parties. shall. or in whose appointment he has participated. disclose any circumstances to the parties unless they have already been informed of them by him. An arbitrator. A party may challenge an arbitrator appointed by him. (2) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his independence or impartiality. only for reasons of which he becomes aware after the appointment has been made. 38 . without delay. In BREIF:Sub-section(1) provides that a prospective arbitrator is obliged to disclose to the parties in writing any circumstances likely to give rise to justifiable doubts as to his independent or impartiality . he shall disclose any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. from the time of his appointment and throughout the arbitral proceedings. His duty of disclosure arises when a person has just approached him in connection with his possible appointment as an arbitrator and the duty is to be discharged prior to his appointment.
Section 16 of the arbitration act confers powers on the court to remit the award.Arbitration Act 1996 But a person may be appointed without first approaching him. The use of the word „only‟ is significant to indicate exclusion of any other grounds. An arbitrator is to discharge his duty without delay. It postulates as under:- 39 . Removal of an arbitrator on the ground of delay in conducting the arbitral proceedings cannot be sought in the face of indolent conduct of the party seeking arbitration (2). In other words. duty continues throughout. The grounds are restricted only to two factors which are (i) existence of a circumstance that give rise to justifiable doubts as to his independence or impartiality . or (ii) not possessing the qualification agreed to by the parties . Sub-section (3) enumerates grounds for challenging an arbitrator. Sub-section (2) speaks about his duty of disclosure of circumstances from time he is appointed till termination of arbitration proceedings. Duty also relates to matters that may have risen after the appointment (1).
(a) Where the award has left undetermined any of the matter referred to arbitration .or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred. Remitting the Award (1) The court may from time to time remit the award or any matter referred to arbitration to the arbitrators for reconsideration upon such terms as it thinks fit. 40 . or (b) Where the award is so indefinite as execution.Arbitration Act 1996 4.1 Section 16. to be incapable of (2) Where an award is remitted under sub-section (1) the court shall fix the time within which the arbitrator shall submit his decision to the court: Provided that any time so fixed may be extended by subsequent order of the court when to modify the award. or (c) Where an objection to the legality of the award is apparent upon the face of it.
” The power conferred under this section is discretionary 41 . 1899. Arbitration act 1940 empowers the court to modify an award under section 15 of the act which postulates as under:- Section 15: “the court may by order modify or correct an award – (a) Where it appears that a part of the award is upon a matter not referred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred. (2) Para 14 of the Second Schedule of the Civil Procedure Code. or (c) Where the award contains a clerical mistake or an error arising from an accidental slip or omission.” The procedures of the section 16 of 1940 Act are: (1) Section 13 of the Arbitration Act.Arbitration Act 1996 (3) An award remitted under sub-section (1) shall become void on the failure of the arbitrator to reconsider it and submit his decision within the fixed time. or (b) Where the award is imperfect in form . or contains any obvious error which can be amended without affecting such decision.
the court has two courses left open. Union of India v Himat Singka Timber. the court cannot correct an award pronounced against the President of India.Arbitration Act 1996 The grounds listed in clauses (a). Severable award. “When the award is modified under this clause by court the decree that should be passed under section 17 must be on the modified award. inherent powers of the court cannot be exercised to correct or modify the award in any other circumstances. “Where the award determines a matter not referred to arbitration and such matter can be separated from the other part of the award without affecting the rest of the award. (b) and (c) in this section are exhaustive and therefore. 42 .“If a part of the award is set aside (as contrary to law) and the part set aside is severable from the rest. which should be against” the Union of India. “According to the Calcutta high court. the award need not be remitted. (a) to modify or correct the award itself under this clause or (b) to remit the award to the arbitrator or umpire for reconsideration under section 16(1) (a). But the same of The High Court has later changed its opinion in.
at the request of a party.2 Interim measures ordered by Arbitral Tribunal Section 17-Interim measures ordered by arbitral tribunal (1) Unless otherwise agreed by the parties. the arbitral tribunal may. 4. 43 . “In contrast. the whole has to be set aside. if the good part of the award is not severable from the bad part.Arbitration Act 1996 “If the award contains a determination of all the points referred. the valid portion can be maintained and the remainder set aside. (2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1). order a party to take any interim measures of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute.
maintenance of machineries . custody. order any party to take such interim measures of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute. the arbitral tribunal may. This power is only legislatively recognized in this provision. In can include several things like presentations. The list o interim measures covered under section 17 cannot by its very nature be exhaustive. Scope The arbitral tribunal has inherent power to order a party to take interim measures of protection unless such power is excluded by an agreement between the parties. sale. continuation 44 .Arbitration Act 1996 Article 17 of UNICTRAL Model Law Power of arbitral tribunal to order interim measures: Unless otherwise agreed by the parties. protection of trade secrets. protection of goods . at the request of a party. works. As the per the subsection (2) power includes ordering security in connection with interim measures. The arbitral tribunal may require any party to provide appropriate security in connection with such measures.
the court being the appellate forum.They all must . under section 37 (2) if a court upholds the order in appeal. Section 17. Any practical or legal problem is not likely to arise if both the tribunal and the Court are located in India. be in the respect of subject-matter of dispute. Undoubtedly . interim measures grantable by the arbitral tribunal under section 17 are different than those which are grantable by the court under section 9. However. orders of the court would prevail. however.but overlapping of such powers in certain cases cannot be wholly ruled out. 45 .Arbitration Act 1996 of certain works etc . however. There is no bar against a party seeking enforcement of such orders through the court under section 19. n either empower the arbitral tribunal to enforce its neither order nor does it provide for judicial enforcement of such order. Section 37 (2) provides for an appeal against an order granting or refusing interim measures. judicial enforcement of such order will be ensured. In the unlikely event of contradictory order.
Arbitration Act 1996 5 CONDUCT OF ARBITRAL PROCEEDINGS. 46 . Principles of natural justice are not capable of precise definition but concept is well known and has been crystallized by judicial pronouncements made from time to time and is being increasingly widened with the fast development of the society.Equal treatment of parties. 5. ”The party shall be treated with equality and each party shall be given a full opportunity to present his case. “The party shall be treated with equality and each party shall be given a full opportunity of presenting his case.1 Section 18.” As per UNCITRAL LAW.” In BRIEF:- This section retaliates the well-established principles of natural justice which are expected of any judicial.Equal treatment of parties. quasi judicial or even administrative decisions affecting the rights of the parties.Article 18.
Its observance is the pragmatic requirement of fair play in action. 47 . An arbitrator is not supposed to identify the interest of a party merely because of the reason that that party has appointed him. Arbitrator should not examine one party or the witness in the absence of the others. An arbitrator must not be guilty of any act which can be construed as indicated of partiality or unfairness.Arbitration Act 1996 The arbitrators are expected to perform their functions honestly and impartially and are expected to provide equal opportunity to the parties to present their case by adhering to the principles of natural justice. The doctrine of natural justice pervades all through the procedural law of arbitration. who appointed should not be relevant for them. Unfairness and unreasonableness make the decision and the award questionable. Ones they are appointed. It is established principle of natural justice that no person should be condemned unheard. Hearing of one party in the absence of the other amounts to misconduct. Parties should be given proper notice of hearing and each party must be given a chance of putting up his case.
in the decision of the dispute would violate the award. Indeed the existence of that knowledge is the basis of his appointment. Use of personal knowledge where the agreement does not empower the arbitrators specifically or by necessary implication. the award is vitiated. The matter would be different where the parties employ and arbitrator as an expert and authorize him to make use of his knowledge and expertise. 48 . Where the arbitrators received fresh evidence after the conclusion of the hearing and also acted upon it without giving the other party an opportunity to be heard a fresh. In such cases he is expected to use his personal knowledge.Arbitration Act 1996 The arbitral tribunal should not act on the personal knowledge and must derive its conclusion and findings on the material submitted before it. Notice to parties about closure of arbitral proceeding is a part of fair play action in view of judicial pronouncements and hence such a notice should be given so as to enable the parties to lead any additional evidence if they so desire.
the arbitral tribunal may subject to this Part. conduct the proceeding in the manner it considers appropriate. The power of arbitral tribunal under sub-section (3) includes the power to determine admissibility.Arbitration Act 1996 5. 1908(5 of 1908) or the Indian evidence act 1872(1 of 1872). Subject to this part the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. 49 . Failing any agreement referred to in sub-section (2). relevance materiality and weight of evidence.Determination of rules of procedure The arbitral tribunal shall not be bound by the code of civil procedure.2 Section 19.
including the convenience of the parties.Place of Arbitration (1) The parties are free to agree on the place of arbitration. experts or the parties. (2) Not withstanding the provisions of paragraph 1 of this article. goods or other property. unless otherwise agreed by the parties.3 Section 20. including the convenience of the parties. (3) Not withstanding sub-section(1) or sub-section(2) . (2) Failing any agreement referred to in sub-section (1). the arbitral tribunal may. meet at any place it considers appropriate for consultation among its members. meet at any place it considers appropriate for consultation 50 . the place of arbitration shall be determined by the arbitral tribunal having regards to the circumstances of the case. Failing such agreement. the arbitral tribunal may unless otherwise agreed by the parties . Article 20_UNCITRAL Model Law (1)The parties are free to agree on the place of arbitration. for hearing witnesses. the place of arbitration shall be determined by the arbitral tribunal having regards to the circumstances of the case.Arbitration Act 1996 5. or for inspection of documents .
Arbitration Act 1996 among its members. the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. or for inspection of goods. the proceedings will be deemed to have commenced on the date of receipt of the notice requesting reference to arbitration. Article 21-UNCITRAL model law Unless otherwise agreed by the parties. by the respondent 51 . the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. for hearing witnesses. IN BRIEF:- This section provides that where the arbitration agreement is silent about the date of commencement of the arbitration proceedings. other property or documents. Section-21-Commencement of arbitral proceedings Unless otherwise agreed by the parties. experts or the parties.
52 . shall apply to any written statement by a party. unless otherwise specified therein. (4) The arbitral tribunal may order that any documentary evidence shall be accompanied by a transaction into the language or languages agreed upon by the parties or determined by the arbitral tribunal. any hearing and any arbitral award. shall apply to any written statement by a party. Article 22-UNCITRAL Model Law (1) The parties are free to agree on the language or languages to be used in the arbitral proceedings. (3) The agreement or determination. the arbitral tribunal shall determine the language or languages to be used in the proceedings. unless otherwise specified. (2) Failing any agreement referred to in sub-section (1).5 Section 22-Language (1) The parties are free to agree upon the language or languages to be used in the arbitral proceedings. This agreement or determination. Failing such agreement. any hearing and any award decision or other communication by the arbitral tribunal. the arbitral tribunal shall determine the language or languages to be used in the arbitral proceedings.Arbitration Act 1996 5. decision or other communication by the arbitral tribunal.
hearing . In the absence of agreement. the arbitral tribunal will determine the language or languages to be used. award . decision or any other communication by arbitral tribunal.Arbitration Act 1996 (2) The arbitral tribunal may order that any documentary evidence shall be accompanied by a transaction into the language or languages agreed upon by the parties or determined by the arbitral tribunal. IN BRIEF:- This section deals with the subject of language to be used in arbitral proceedings. shall apply to a written statement by a party. Language aspect assumes importance in view of ever widening horizons of trade and commerce-national as well as international. The parties are left free to agree upon the language or languages to be used in the arbitral proceedings. The agreements of the parties or the determination by the arbitral tribunal on the point unless otherwise specified. Sub-section (4) empowers the arbitral tribunal to order that any documentary evidence shall be accompanied by transaction into 53 .
Arbitration Act 1996 the language or languages agreed upon by the parties or determined by the tribunal. (2) Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this act. 5. Section 31 of the arbitration act is relevant for that purpose. It reads as under: (1) Subject to the provision of this act. or maybe. or by no other court.6 Where is the Award to be filed –Section 31 of Arbitration Act This would require consideration as to which court would have jurisdiction in the matter. an award may be filed in any court having jurisdiction in the matter to which the reference relates. (3) All application regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings shall 54 . effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the court in which the award under the agreement has been. filed. all questions regarding the validity.
(4) Notwithstanding anything contained else where in this act or in any other law for the time being in force. 55 . where in any reference any other application under this act has been made in a court competent to entertain it. filed. This section was added on the recommendation of Civil Justice Committee (1924-1925) which said that” what seems to be most required is that in the case of every arbitration one court and one only should be the forum in which all questions relating to the validity of the award should be finally determined” This section is not an enabling provision but one which defines jurisdictions for applications under the Act. In this regard it is relevant to bear in mind that. that court alone shall have jurisdiction over the arbitration proceedings and all subsequent application arising out of that reference and the arbitration proceedings shall be made in that court and in no other court.Arbitration Act 1996 be made to the court where the award has been or maybe. (a) the award maybe filed in any court having jurisdiction to entertain a suit with respect to the subject matter of the reference . and to no other court.
effect . 56 . or existence of an award or an arbitration agreement as between the (c) parties or their privies are to be decided by the court in which the award has been filed. and (e) once an application has been filed in a court of competent jurisdiction to entertain all subsequent applications with respect to the same arbitration throughout. (d) all applications relating to the conduct of arbitration proceedings or arising out of the same are also to be filed in the court as in (b) .Arbitration Act 1996 (b) all questions relating to the validity .
N.1 .Phukan Parties: Olympus Superstructures Pvt. Meena Vijay Khetan (Challenge to jurisdiction of arbitrator under Section 16) Case Reference: Civil Appeals Nos. Meena Vijay Khetan and others(Respondents). 57 . Judges: Justice M.Jagannadha Rao and Justice S.2912-2914 of 1999. (ii) Whether disputes relating to specific performance of contract can be referred to arbitration. decided on May 11. 1999.Ltd. whether they can be raised subsequently at the stage of challenge to the award under Section 34 of the Act of 1996.(Appellant)Vs.Arbitration Act 1996 6 CASES 6. Question of Law: (i) When questions regarding jurisdiction of Arbitrator and scope of reference to Arbitrator are not raised under Section 16 of the Act of 1996.Ltd. vs. Olympus Superstructures Pvt.
disputes and differences arose between them in respect of these agreements. 58 . Later. The Respondents filed their claim before the Arbitrator but the Appellants took several adjournments. As the Appellant failed to reply agreeing for arbitration. The Respondents issued a notice to the Appellant for referring their disputes for arbitration to one out of three retried Judges suggested by them. It is against these Judgements the present appeals have been field. The Appellant challenged the three awards under Section 34 of the Act of 1996 by filing three applications which were dismissed by a single Judge and later by a Division Bench of the Bombay High Court. the Respondents moved the Court for interim protection before filing a regular petition under Section 11 of the Act of 1996 for appointment of an Arbitrator. The Arbitrator took up the matter for evidence and thereafter passed the award granting relief of specific performance in respect of the three main Agreements and also in respect of the three Interior Design Agreements.Arbitration Act 1996 Gist of the Case: The Appellant executed three main agreements for sale of flats and also three other separate Agreements (hereinafter called the Interior Design Agreements) with the Respondents. A retired Chief Justice of Bombay High Court was appointed as Sole Arbitrator to adjudicate the dispute.
for the first time the objection was raised 59 . it was permissible to refer to the arbitrator not only disputes and differences under the main agreement but also in respect of “connected matters”. the Appellant never raised any objection relating to jurisdiction under Section 16 of the Act of 1996 that the Arbitrator could not decide the dispute concerning the Interior Design Agreements and that objection was not raised even before the learned Single Judge of the Bombay High Court. an Arbitrator could not grant specific performance of an agreement and hence Section 34 (2) (b) (i) of the Act of 1996 was attracted.Arbitration Act 1996 The Appellant contended that reference to arbitration was based on the three main agreements and therefore the Arbitrator could not have decided the disputes regarding the other three Interior Design Agreements. the Respondents committed default in payment of the agreed amounts in respect of the three main agreements and therefore termination of the contract was valid and the Respondents should be directed to pay interest on the balance amount at a rate of 21% . the arbitration clauses in the main agreements could not supersede the separate arbitration clauses under the Interior Design Agreements which provided for named Arbitrators. The Respondents contended that under the arbitration clause in the main agreement.
an Arbitrator could grant specific performance of an agreement of sale. In the objections to the award filed in the Court under Section 34 60 . were void inasmuch as no amount was paid at the time of the agreements. it was prayed that the appeals be dismissed. The Arbitrator referred in his award to the sole contention of the Appellant before him was that the Interior Design Agreements. No dispute as to the power of the Arbitrator to deal with the disputes under the Interior Design Agreements was raised. though Rs10 lakhs each was agreed to be paid. The Supreme Court observed that the Appellants filed their written statement but no objection was raised that the disputes and differences contained in the three Interior Design Agreements were not intended to be referred to the arbitrator or that the same could not be decided by the Arbitrator appointed under the main agreements. these objections could not be raised after the passing of the award. which meant that the Appellant accepted that the disputes under the Interior Design Agreements were also covered by the reference.Arbitration Act 1996 before the Division Bench of the Bombay High Court. The Appellants counsel had crossexamined the Respondents‟ witnesses upto a stage and even then no such objection as to scope of reference was raised.
For the first time. Even before the Single Judge the above mentioned objections were not raised by the Appellant. the point relating to the scope of reference was raised before the Division Bench and the same was rejected.Arbitration Act 1996 of the Act of 1996 no such point was raised except a general ground that entire proceedings of arbitration were illegal. The party aggrieved by such an arbitral award may make an application to set aside the arbitral award under Section 34 of the Act of 1996. Sub-Section (5) of Section 16 requires the Arbitral Tribunal to decide on the plea referred to in Sub-Section (2) or (3) at that stage itself and if the pleas are rejected by the Arbitral Tribunal. The learned Judges observed that clause 39 of the main agreement permits reference to arbitration not only of issues 61 . it will continue with the arbitral proceedings and make the arbitral award. The Supreme Court observed that it agreed with the Respondent‟s contention that if the parties before the arbitrator had any objection to the Arbitrator‟s jurisdiction the same should have been raised before the Arbitrator as provided in SubSections (2) and (3) of Section 16 of the Act of 1996. bad in law and that the award was liable to be set aside.
under clause 39 of the main agreement arbitration can take place to cover the disputes of the main agreement as well as the Interior Design Agreement.Arbitration Act 1996 arising under the main agreement but also those disputes or differences which are “connected” with the disputes under the main agreement. Whereas. There were several items in Schedule E of the main agreement which overlapped with items in schedule A of the Interior Design Agreement. 62 . in the present case. designing and installation shall commence from the execution thereof” which means that the execution of the Interior Design Agreement and the main agreement is to be simultaneous. Hence. only then the arbitration clause 5 of the Interior Design Agreement comes into play. If there is a situation where there are no disputes arising from the main agreement but there are disputes arising from the Interior Design Agreement. The date of main agreement and Interior Design Agreement is the same and clause 3 of the Interior Design Agreement states specifically that “the work of the said renovation. there are disputes in respect of the main agreement as well as the Interior Design Agreement.
the Supreme Court observed that the right to specific performance deals with contractual rights and it is certainly open to the parties to agree with a view to shorten litigation in regular courts – to refer the issues relating to specific performance to arbitration. 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. or (ii) the arbitral amount is in conflict with the public policy in India. (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force. Konkan Railway vs. For the aforesaid reasons.Arbitration Act 1996 On the point.e. the appeals were dismissed without costs 2. The factual points in the present case do not fall under Section 34 (2) (b) of the Act of 1996. i. Nor is there such a prohibition in the Act of 1996. whether disputes relating to specific performance of a contract can be referred to arbitration. There is no prohibition in the Specific Relief Act. Rani Construction (A Constitutional Bench has decided that the order of the Chief Justice or his designate in appointing an arbitrator under Section 11 of the Act of 1996 is administrative in nature) 63 .
“Act of 1996”) nominating an arbitrator is a judicial order or an administrative order and whether such an order can be appealed against under Article 136 of the Constitution. Rani Construction P.A. Judges: Justice S.P. C. Nos. and 4 other Judges Parties: Konkan Railway Corpn. 4356. 4311-4312.713-716.Arbitration Act 1996 Case Reference: Civil Appeals Nos. 2037-2044.Bharucha. (Respondent).Ltd. Gist of the Case: Section 11 of the Act of 1996 deals with the appointment of arbitrators. 1996 (for short.J. D/-30-1-2002.I. It provides that the parties are free to agree on a procedure for appointing an arbitrator or arbitrators. 5880-5889 of 1997 with C. and another (Appellants) Vs. Question of Law: Whether the order of the Chief Justice or his designate under section 11 of the Arbitration and Conciliation Act. Ltd. 4324. 7304 and 7306-7309 of 1999. In the event 64 . .
fail to reach the agreement expected of them under that procedure or a person or institution fails to perform the function entrusted to him or it under that procedure. or the two arbitrators appointed by them. The decision of the Chief Justice or his designate is final. If the parties have not agreed on a procedure for appointing an arbitration in an arbitration with a sole arbitrator and the parties fail to agree on an arbitrator within thirty days from receipt of a request to one party by the other party. in an arbitration by three arbitrators each party is required to appoint one arbitrator and the two arbitrators so appointed must appoint the third arbitrator. In nominating an arbitrator the 65 . a party may request the Chief Justice to nominate an arbitrator and the nomination shall be made by the Chief Justice or any person or institution designated by him.Arbitration Act 1996 of there being no agreement in regard to such procedure. a party may request the Chief Justice or his designate to nominate an arbitrator. Where an appointment procedure has been agreed upon by the parties but a party fails to act as required by that procedure or the parties. If a party fails to appoint an arbitrator within thirty days from the request to do so by the other party or the two arbitrators appointed by the parties fail to agree on a third arbitrator within thirty days of their appointment. unless the appointment procedure provides other means in this behalf. the nomination shall be made on the request of a party by the Chief Justice or his designate.
The Supreme Court observed that there is nothing in Section 11 that requires the party other than the party making the request to be noticed.Even in a case where the Chief Justice or his designate has appointed an arbitrator before the expiry of the prescribed period of 30 days. It does not contemplate a decision by the Chief Justice or his designate on any controversy that the other party may raise. it 66 . In a given case. adopting the procedure laid down in section 13. even in regard to its failure to appoint an arbitrator within the period of thirty days. It does not contemplate a response from that other party. if a party has justifiable doubts about the independence and impartiality of the arbitrator appointed by the Chief Justice or his designate. That the Chief Justice or his designate has to make the nomination of an arbitrator only if the period of thirty days is over does not lead to the conclusion that the decision to nominate is adjudicatory.Arbitration Act 1996 Chief Justice or his designate of the must have in regard the to the qualifications required arbitrator agreement between the parties and to other considerations that will secure the nomination of an independent and impartial arbitrator. it is open to such party to challenge the arbitrator under Section 12 of the Act of 1996.
they are not identical and hence the UNCITRAL Model Law and Judgements and literature are not a guide to the interpretation of the Act of 1996 and especially of Section 11 thereof. in Clause 7. To the extent that the Chief Justice of India scheme. 1996 goes beyond Section 11 by requiring.Arbitration Act 1996 is open to the aggrieved party to challenge the jurisdiction of the arbitrator and such a challenge may be decided by arbitral tribunal itself under Section 16. as requested. decree. should not be made. it is bad in law and must be amended. the service of notice upon the other party to the arbitration agreement to show cause why the nomination of an arbitrator. Article 136 of the Constitution of India empowers the Supreme Court to grant special leave to appeal any judgement. The Supreme Court observed that the schemes made by the Chief Justices under section 11 cannot govern the interpretation of Section 11. sentence or order in any cause or matter passed or made by any 67 . The Supreme Court also observed that although the UNCITRAL Model Law and Rules of Arbitration have been taken into account for drafting the Act of 1996.
decided on 20/2/2002.1382 of 2002. such an order cannot properly be made the subject of the Petition for special leave to appeal under Article 136 of the Constitution of India.N.Pattanaik.Arbitration Act 1996 court or tribunal in the territory of India. 3. The Supreme Court held that since the order of the Chief Justice or his designate acting under Section 11 nominating an arbitrator is not an adjudicatory order and the Chief Justice or his designate is not a tribunal. Is the award delivered by the two arbitrators valid in law ) Case Reference: Civil Appeal No. Justice S.Phukan and Justice S. Judges: Justice G.Variava Parties: Narayan Prasad Lohia (Appellant) Vs Nikunj Kumar Lohia and others (Respondents) Question of Law: 68 .N. Nikunj Kumar Lohia and others ( In terms of Section 10 the number of arbitrators “shall not be an even number”.B. The parties to a dispute appoint two arbitrators and participate in the arbitral proceedings. Narayan Prasad Lohia vs.
Is the award passed by the two Arbitrators valid in law? Gist of the Case: The Appellant and the Respondents are family members who had disputes and differences in respect of family business and properties.Arbitration Act 1996 The parties to a dispute appoint two Arbitrators to adjudicate their dispute and participate in the arbitration proceedings. The two Arbitrators pass an award thereafter. Hence this appeal to the Supreme Court. The appeal filed in the High Court was also dismissed. They agreed on 29/9/1996 to have their disputes and differences resolved through two persons. All parties participated in the proceedings. The parties made their respective claims before these two persons. The 1st and 2nd Respondents challenged the award on the ground that the arbitration was by two arbitrators whereas under the Act of 1996 there cannot be an even number of arbitrators. In terms of Section 10 of the Act of 1996 there cannot be even number of Arbitrators in arbitration.6/10/1996. 69 . A Single Judge of the Kolkata High Court set aside the award dt. On 6/10/1996 an award was passed by the said two persons.
However.Ltd. a party cannot challenge the composition of the Arbitral Tribunal before the Arbitral Tribunal itself. If a party chooses 70 . Section 16(2) makes it clear that such a challenge can be taken even though the party may have participated in the appointment of the arbitrator and/or may have himself appointed the arbitrator. not to raise such a challenge. vs. Needless to state that a party would be free. such a challenge under Section 16(2) must be taken not later the submission of the statement of defence. that the authority of the Arbitral Tribunal under Section 16 is not confined to the width of its jurisdiction but also goes to the root of its jurisdiction. It is no longer open to contend that. if it so chooses. Thus a conjoint reading of Sections 10 and 16 shows that an objection to the composition of the Arbitral Tribunal is a matter which is derogable. the Arbitral Tribunal can rule on any objection with respect to existence or validity of the arbitration agreement. under Section 16.Arbitration Act 1996 In terms of Section 16 of the Act of 1996. Rani Construction Pvt. It is derogable because a party is free not to object within the time prescribed in Section 16(2).Ltd. It has been held by a Constitution Bench of the Supreme Court in the case of Konkan Raily Corpn.
there is no reason why the two arbitrators cannot appoint a third arbitrator at a later stage.e. a derogable provision. the procedure in Section 11 will apply mutatis mutandis apply for appointment of 5 or 7 arbitrators. therefore. Thus Section 10 has to be read along with Section 16 and is. The Supreme Court held that arbitration being a creature of agreement between the parties. that does not mean that the agreement becomes invalid. if and when they differ.Arbitration Act 1996 not to so object there will be a deemed waiver under Section 4. But if the two arbitrators agree and give a common award there is no 71 . Can this be taken to mean that the agreement of the parties is invalid? The answer obviously has to be in the negative. By agreement parties may provide for 5 or 7 arbitrators. even if parties provide for appointment of only two arbitrators. it would be impossible for the legislature to cover all aspects. Undoubtedly. Under Section 11(3) the two arbitrators should then appoint a third arbitrator who shall act as the presiding arbitrator. Similarly. However. A reading of Section 11 would show that it only provides for appointment of arbitrators in case where there is only one arbitrator or three arbitrators. then Section 11 does not contain any provision for such a contingency. If they do not provide for a procedure for their appointment or there is failure of the agreed procedure. i. This would ensure that on a difference of opinion the arbitration proceedings are not frustrated.
Arbitration Act 1996 frustration of the proceedings. Thus if the composition of the Arbitral Tribunal or the arbitral procedure is in accordance with agreement of the parties. An arbitral award can be challenged on limited grounds provided under Section 34 of the act of 1996. 72 . there can be no challenge under the provision. Section 34 does not permit challenge to an award merely on the ground that the composition of the Arbitral Tribunal was in conflict with the provisions of Part I. Section 34(2) (a)(v) only applies if “the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties”. with open eyes. The challenge can only be provided when the agreement of the parties is in conflict with a provision of Part I of the Act of 1996 from which the parties cannot derogate. Even in a case where the composition of the Arbitral Tribunal or the arbitral procedure is not in accordance with the agreement of the parties the right to challenge the award is restricted. This also indicates that Section 10 is a derogable provision. agrees to go to arbitration of two persons and then participates in the proceedings. Thus there is no waste of time. money and expense if a party. The judgements of the learned Single Judge and the Division Bench of Kolkata High Court were set aside.
Arbitration Act 1996 73 .
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