CLINICAL II

Essay: 3x15=45
Q1. What do you mean by arbitration? What are the various
reasons for internationalization of Arbitration Act? Write the salient
features of Arbitration Act 1996.
Section 2(a) of the Arbitration and Conciliation Act, 1996 defines
arbitration as any arbitration whether or not administered by permanent
arbitral institutions. It is a procedure in which a dispute is submitted, by
agreement of the parties, to one or more arbitrators who make a binding
decision on the dispute. The principal characteristics of arbitration are as
follows:
i) It is consensual
ii) It is neutral
iii) It is confidential
iv) The decision of the arbitral tribunal is final and easy to enforce

Some main reasons for internationalization of Arbitration Act are as

follows:
a) It was felt that the Arbitration Act, 1940 had become outdated in the
present scenario of economic reforms worldwide. The Law Commission
of India along with several experts proposed amendments and
modification to make the law more responsive and effective to deal with
the settlement of disputes of domestic and international commercial
matter.
b) It was felt that the increasing arbitration and conciliation acceptance in
trade and industry was the most important requirement of the present
commercial activities. And the United Nations Commission on
International Trade Law (UNCITRAL) adopted the Model Law on
International Commercial Arbitration in 1985 and a set of Conciliation
Rules in 1980. The General Assembly of the United Nations had
recommended that all countries give due considerations to the said
Model Law. The Model was said to have harmonized concepts on
arbitration and conciliation of different legal systems of the world and
thus contained provisions which were designed for universal
applications.
The Arbitration and Conciliation Act, 1996 contains the following salient
features:
1. A Comprehensive Statute – The act is fully related to the domestic,
international and inter-state arbitrations and understanding point of view,
it provides importance of international arbitral awards and conciliation
matters.
2. An Explanatory code – The old Act of 1940 had no scope for
international arbitration whereas this Act of 1996 is an explanatory and a
complete code in itself. It is rather an exhaustive code.
3. Curtailment of the Courts’ Power – The Act has limited the powers of
court or restricted the exercise of judicial power.
4. Procedure for the Conduct of Arbitration and Awards in detail –
Section 18 to Section 27 of Chapter V of the Act provides detailed
procedure, practice whether in hearings or statements of claim and
defence.
5. Powers of the Court – The Act has précised the powers of Court by
taking assistance only in certain specific matters.
6. Powers of the arbitrators enhanced – The Act has enhanced the
powers of the powers of the arbitrators in jurisdiction of Arbitral Tribunals
and improved the competency of the arbitrators to rule. Section 16 and
17 of Chapter IV of the Act provide these measures,
7. A new form of Conciliation – The Act contains objects of conciliation in
a wide manner and much emphasis has been provided on mutual
conciliation.
8. International Applicability – The Act has provisions for applicability of
interim awards by Foreign Arbitral Tribunal awards
Q2. Write the scope of Arbitration law in India with reference to the
UNICTRAL Model Law.
In present time the globalization of trade and commerce and economic
liberalisation created need for effective implementation of economic
reforms. It was realized that the old Indian Arbitration Law, 1940 was not
effective enough to meet the present-day requirement.
Since the multinational companies are pouring into India in the field of
banking, insurance, building, construction, telecommunication etc. and
there is commercial interaction between India and foreign countries
wherein such parties who agree or have agreed for arbitration incase of
dispute arising out of such commercial activities shall be dealt according
to the provisions provided in Arbitration and Conciliation Act, 1996.

Prior to the Arbitration and Conciliation Act, 1996, the law of arbitration in
India was substantially based on three statues namely:
a) The Foreign Awards (Recognition and Enforcement) Act, 1961
b) The Arbitration (Protocol and Convention) Act,1937
c) The Arbitration Act, 1940

Objects and Reasons appended to the Arbitration and Conciliation Bill,

1995 stated that the Arbitration Act,1940 which contained the general
laws on arbitration had become outdated. Therefore, it sought to
consolidate and amend the law relating to domestic arbitration and
International commercial arbitration.

It was also stated in the Bill that the United Nations Commission on
International Trade Law (UNCITRAL) adopted the Model Law on
International Commercial Arbitration in 1985 and a set of Conciliation
Rules in 1980. The General Assembly had recommended that all
countries give due considerations to the said Model Law. The Model was
said to have harmonized concepts on arbitration and conciliation of
different legal systems of the world and thus contained provisions which
were designed for universal applications.
The main objective of the Bill are as follows:
1. to comprehensively cover international commercial arbitration and
domestic arbitration and conciliation
2. To make provisions for an arbitral procedure which is fair, efficient and
capable of meeting the needs of specific arbitration.
3. Arbitral tribunal gives reasons for its arbitral awards.
4. Arbitral tribunal remains within the limits of its jurisdiction.
5. To minimize supervisory role of courts in the arbitral process
6. To permit the use of mediation, conciliation or other procedures in a
proceeding for the settlement of disputes.
7. To provide that every final arbitral award is enforced as a decree of
the court.
8. Settlement agreement reached on conciliation proceedings will have
same status and effect as an arbitral award on agreed terms.

The Bill was introduced in the Rajya Sabha by the then Minister of Law
and Justice on 16th May,1995 and after passing the Lok Sabha and the
approval of the President of India on 16th August,1996, became an Act
known as the Arbitration and Conciliation Act, 1996.

The Arbitration and Conciliation Act, 1996 modelled after the UNCITRAL
Model Law and Rules facilitated settlement of commercial disputed by
international and domestic arbitration and thus promoted commercial
transaction worldwide. Other countries such as Australia, Singapore,
Hongkong, Sri Lanka etc. have also enacted arbitration law based on
UNICTRAL Model Law.
Q3. Write on the grounds for challenging an Arbitration Award by
discussing case laws.
Section 34 of the Arbitration Act, 1996 provides the manner and grounds
for challenge of the arbitral award. It empowers the court to review the
whole arbitration process in a presented case. Section 34(2) of the
Arbitration Act provides the list of grounds on which an arbitral award
may be set aside. They are as follows:

a) the party was under some incapacity

b) the arbitration agreement is not valid under the law chosen by the
parties or, in its absence not valid under the law in force at the relevant
time.
c) the applicant was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings, or was otherwise unable to
present his or her case.
d) the arbitral award deals with a dispute not falling within the terms of
the submission to arbitration, or it contains decisions on matters beyond
the scope of the submission to arbitration.
e) the composition of the arbitral tribunal and procedure are not as per
the agreements of the parties.
f) the enforcement of the award would be contrary to Indian public policy.

In the explanation, public policy of India has been clarified to mean only
if:
i) the making of the award was affected by fraud or corruption or was in
violation of Section 75 or 81; or
ii) it is in contravention with the fundamental policy of Indian law; or
iii) it is in contravention with the most basic notions of the morality or
justice.
In Madan Lal v Sundar Lal, (AIR 1967 SC1233), it was held that no
prescribed form of application is necessary for setting aside an
arbitration award. Though the High Court may prescribe form of such
application.
Section 34(3) provides the time limit within which an application for
setting aside an arbitral award should be presented before a competent
court. The time period is before the expiry of 3 months from the date of
receipt of the arbitral award. It is a mandatory provision.

Section 34(4) provides for the applicant to satisfy the court that there
exist grounds to set aside the arbitral award. Once satisfied, the court
will issue a notice in the matter and direct the other party to file its
response to the application, and may permit the applicant to file a
rejoinder to the response filed by the applicant thereafter, if required.

Mandate of Section 34 also shows that an arbitral award may be set

aside by the court on the proven misconduct on the part of the arbitrator
or while conducting arbitration proceedings.
The Supreme Court in Olympus Superstructures Pvt. v Meena Vijay
Khetan & Others (AIR 1999 SC2102) observed that Section 34 of the
Arbitration and Conciliation Act, 1996 is based on Section 34 of the
UNCITRAL Model Law and is based on the same provisions of setting
aside an arbitral award under Section 30 of the Arbitration Act, 1940.

In addition to section 34, there are some additional grounds for setting
aside awards:
1) Section 13 of the 1996 Act provides for a challenge to an arbitrator on
the ground of lack of independence or lack of qualification or neutrality.
An application for the challenge is to be made before the arbitral tribunal
itself.
2) Section 13(5) of the 1996 Act provides that where the tribunal
overrules proceeds and challenge with the arbitration, the party
demanding the arbitrator may create an application for setting aside the
arbitral award under section 34 of the Act.