Module II: Arbitration - 12 Hours

a) Introduction, definition, advantages and disadvantages of Arbitration,

Conciliation Act 1996, difference between Arbitration and Conciliation.
b) Arbitrator, umpire, order of reference, selection of arbitrator, powers and
duties of arbitrators.
c) Conduct of Arbitration proceedings, Arbitration award and its implementation.
 ARBITRATION--------------INTODUCTION:
• It is an old mode of settling the disputes between the parties without referring to court which was and
even now in practice in villages. Many communities in our country do have some forum to settle the
disputes between the members named as conciliation and arbitration boards. (Modified version of
PANCHAS and PANCHAYATS).

• Though arbitration is a law oriented field, still an architect can play an important role since he is an
expert in the field of design, construction and valuation of buildings and other immovable properties.
Even I.I.A. in its contract format has included both construction contract and arbitration agreement in
one.(He shall be a Fellow of IIA). Hence, architects are advised to study 1.The Arbitration Act ,1940
2. The Contract Act, 1872 so that he can discharge his duties as an arbitrator.

• Arbitration is the mechanism to settle disputes between parties in a contract, determined in a quasi-
judicial(not bound by law) manner.—mutual understanding.

• The Arbitration and Conciliation Act 1996 provides legal frame work for settlement of disputes by
mutual settlement outside the court.
 ARBITRATION
• DEFINITION

• It is a method of settling the disputes between two or more parties by a third party without going to a
court of law. It is cheaper, quicker and relations between parties are not strained, whereby they
appoint one or more persons to adjudicate upon and agree to abide by the decision and arbitration Act
of 1940 helps to enforce the decision besides laying down rules, regulations and procedures.

• ADVANTAGES

• Arbitration can be a simpler, faster, more peaceful, and less expensive option than court.

• Persons usually expert in the field are appointed and as such decisions will be quite fair.

• Legal formalities are cut short and decisions are taken faster than the in the court.

• Privacy is maintained as hearing is not public.

• Meetings can be arranged so as to suit the convenience of all the parties concerned.
• DISADVANTAGES
• It is common experience that disputes are not solved within 4 months as stipulated in the act.
• Some times Arbitration hearings are invariably prolonged over a longer period.
• Arbitration matters drag for years for lack of evidences thus defeating the purpose of Arbitration---i.e. quicker
and cheaper method of resolution.
• If one of the parties takes matter to the court during the process it remains pending till court can decide on
the matter.

• However, the process is not subject to the same rules of evidence as in a court case. This can
raise questions of fairness and transparency and enforcement procedure.
 CL-9--ARBITRATION AND CONCILIATION ACT 1996

• There are various legal methods to resolving disputes that parties can access before resorting to
arbitration. Two effective alternative dispute resolution processes are arbitration and conciliation.

• Arbitration and conciliation can be utilised for both private and commercial disputes and both employ
an impartial person to assist the disputing parties in resolving the issues between them.

• What is arbitration?
• Arbitration is a dispute settlement process in which a third party is appointed to review the facts and
merits of a dispute and reach a binding decision on the parties. In order for arbitration to be used, all
parties to the dispute must consent to the process.
• When the arbitration is being conducted, both parties have the ability to present evidence and argue
their case. This process is quicker than using courts and tribunals and the arbitrator, like a judge,
has the power to create a binding decision on the parties and enforce the decision called an ‘award’.
• Arbitration is commonly used in employment, building construction and family law disputes. Each
party pays their own costs respectively to the arbitrators.
 CONCILIATION ACT, 1996.----INTRODUCTION.

• It is a process alternative to arbitration for settling the disputes. Conciliator possessing relevant
expertise can be a sole or they can be joint appointed by the parties. Sometimes conciliation
committee comprising of THREE persons is formed.
• They meet together with an open mind to ascertain the fields of agreement or disagreement
whereby the disputes get curtailed automatically.
• Conciliation process has its own rules laid down by the International Chamber of Commerce, London.
Conciliation process is to resolve the disputes without the arbitration since Conciliators are expert
from the relevant field whose opinion will definitely have an impact on the parties.
• Conciliation is to have a fresh look on alternative resolution process, cheaper and quicker and
with justice to all.
• Arbitration is a dispute settlement process in which a impartial third party is appointed to study the
dispute and hear both the party to arrive at a decision binding on both the parties. Conciliation is a
method of resolving dispute, wherein an independent person helps the parties to arrive at negotiated
settlement. This method is now sought to be given a legal form through a new Act which has come
into force on 16th Aug, 1996 which is called the Arbitration and Conciliation Act,1996.It replaces the
earlier Arbitration Act of 1940.
• Conciliation similar to old system of panchayats had to be readopted in the light of changing socio-economic
conditions. Conciliator, as the word itself suggests is a person who brings about conciliation between the parties
to a dispute. A conciliator has no other power except that of persuasion. He may meet the parties separately or
together to understand their view points and to find a common ground. He may also persuade them to reach an
agreement. It is essential that he is open and transparent in his conduct.
• Arbitration Act of 1940 has become outdated. The law commission proposed amendments to make it
responsive to contemporary requirements. Conciliation is getting worldwide recognition as an instrument of
settling domestic and international disputes.
• Independence and impartiality are the two attributes which every conciliator should possess, regardless of
other qualifications. The conciliator assists the parties in an independent and impartial manner in their
attempt to reach an amicable settlement of their dispute. ... The conciliator may, at any stage of
the conciliation proceedings, make proposals for a settlement of the dispute.
• Conciliation would be advantageous where the parties wish to keep their physical distance on account of
strained relations.
• Disadvantages of conciliation:
• The process is not binding upon the parties to the dispute.
• There is no avenue for appeal.
• The parties may not achieve a settlement to their conflict.
 ARBITRATION AND CONCILIATION (DIFFERENCE)
• Conciliation is a method of resolving dispute, wherein an independent person helps the parties to arrive
at negotiated settlement.

• An arbitrator has the power to enforce his decision. A conciliator does not have the power to enforce his
decision. In arbitration prior agreement is required not in conciliation

• In arbitration legal position is a must but not in conciliation. Conciliation is only for existing disputes
Arbitration is for Existing and future disputes.
• Arbitration is primarily a method used to resolve disputes where both parties present their case to a
neutral third party who reaches a decision and then enforces that decision. Conciliation, on the other
hand, involves an independent third party assisting the parties involved in the dispute to arrive at a
mutually agreeable outcome.
• Arbitration is a formal process and can follow similar procedures to court proceedings where witnesses
can be called and evidence can be presented to argue the parties’ respective cases. Conciliation is an
informal process and normally involves a ‘round table’ discussion.
• Arbitrators are not permitted to discuss the issues directly with the parties or generate options for terms
of settlement or negotiation. A conciliator is allowed to discuss issues in dispute, develop options and
consider alternatives to help the parties achieve a mutually agreeable outcome.
Conclusion

• The choice of dispute resolution method is entirely up to the

parties in dispute. If there is a possibility that both parties may
agree to a mutually agreeable outcome by independent third
party then conciliation could be considered. If both parties
would like neutral third party to set a binding and enforceable
determination then arbitration may be preferred.
 ARBITRATOR
• He is the person to whom the disputes are referred for adjudication. It is necessary for every
professional Architect to know and understand certain basic features involved in arbitration which
will help him to take care of disputes in his own projects apart from solving other disputes as a
“quasi-arbitrator”.
• An arbitrator is an independent decision maker who makes a decision, known as an 'award', that
is in line with the parties' rights. Before arbitration starts, an arbitrator confirms the extent of the
confidentiality and how the arbitration will proceed.
• An arbitrator is a nominated independent third party who should be experienced in handling
the arbitration process. His role is similar to that of a judge, in that they will listen to both sides
and come to a decision. arbitrator's decision may be binding or nonbinding.
• Arbitrators must possess the qualities, knowledge, and skills to deliver the benefits
of arbitration—speed, economy, and justice—A good arbitrator displays effective communication
skills by being patient, understanding, flexible and a good listener.
• QUALIFICATION
• The Indian law does not lay down any specific qualifications for arbitrators, but Arbitral
institutions include in their panel a wide range of experts drawn from various professions, trade
and business. However,
1. He should be expert in particular branch to which the dispute relates.
2. He should be honest and not biased and without ill feelings against any of the parties.
3. He cannot be a witness and an arbitrator in the same dispute.
APPOINTMENT
Disputes are usually referred to one arbitrator if agreed by both the parties known as "Sole Arbitrator"
or in special circumstances each party appoints his own arbitrator known as "Joint Arbitrators".
If the parties seeking appointment of an arbitration can approach R.I.B.A. or COA, the President or
Registrar who will suggest the names of a senior Architect as arbitrator.
• The court can remove Arbitrator on the following grounds,
1. Arbitrator exceeds his jurisdiction or goes beyond the terms of contract.
2. Arbitrator misconducts himself or does not apply his mind to the disputes.
3. Charges of fraud or favoritism to any one party.
4. Arbitrator is guilty of misconduct---bribery, corruption, irregularity of action, breach of duty and
neglect.
 UMPIRE
He is the person appointed by the joint arbitrators to decide the disputes in case of differences of
opinion between the joint arbitrators.
• Both the parties in the arbitration proceedings usually appoint their own arbitrator. It is likely that
some differences may arise between the two arbitrators either during the course of proceedings
or at the time of declaration of award and if these are not resolved proceedings will never
come to an end. Hence, both the arbitrators appoint a third person known as umpire to whom
the differences are referred to for decision and the same is final &binding on both the parties.
• TIME LIMITS OF UMPIRE----------------------
1. Umpire should be appointed with in one month from the date of entering upon the
reference.(date of agreement)
2. He should declare his award with in two months from the date of entering up on the reference
or within extended time limit.
3. If the arbitrators have failed to make an award within the prescribed time limit the umpire has
the right to enter upon the reference.
4. Umpire should mention the cost of arbitration, his fees etc. while declaring the award.
CL-11--ORDER OF REFERENCE

• It is an agreement between the two contesting parties referring

the matter for adjudication(decision) of the arbitrators over the
dispute. It contains date of agreement, the names of the
arbitrators, details of dispute and time limit for declaration of
award.
 SELECTION OF ARBITRATORS
• Arbitrator has to be selected and appointed within 30 days of request by any party.
• In case of failure to comply the above, the Chief Justice of the High Court shall appoint
suitable arbitrator as per the request of the party.
• If the appointed arbitrator fails to perform, the court may replace him by a suitable
arbitrator as per the request of the party.
• The selected arbitrator shall disclose any circumstances likely to occur to give doubt
about his impartiality.
• The mandate of an arbitrator ends without proceedings starts or in the course of
proceedings when –
• He is not able to perform
• He withdraws
• Parties agrees to terminate him
When all the concerned parties agree Sole Arbitrator is appointed or else each party will appoint
one from his side known as joint arbitrators.
 CL.--12 POWERS AND DUTIES ARBITRATORS

• To accept the appointment in writing.

• To study legal rights and scope of parties to arbitration and to seek the court’s assistance
for evidence
• To decide on the place jurisdiction, procedures and official language of the proceedings.
• To act reasonably with other arbitrator when more than one arbitrator is appointed.
• To give proper notice for meeting.
• To pass interim relief---interim award.
• Correct in an award any clerical mistake or error arising from accidental slip or omission.
 To examine the witnesses and hear the parties and seek the opinion of the court on law
points.
 To administer and take evidences under oath.
 POWERS AND DUTIES ARBITRATORS (COND).

 To avoid communicating in private with any party or any of their witnesses.

 To extend the time limit on request by the parties.(enlargement of time)
 To decide on the cost of reference and award.
 To check the measurements and valuation of work.
 To decide upon the termination of the proceedings.
• The arbitrators to appoint an umpire or expert with in one month from the date of
entering upon the reference.
 They should declare the award with in four months from the date of entering upon the
reference or within extended time limit.

• The powers of the arbitrators come to an end immediately after the award has
been filed.
ARCHITECT’S DUTY TO CONDUCT ARBITRATION PROCEEDINGS

• Arbitrators usually call a preliminary meeting before the actual hearing. An arbitrator is said to have
entered upon the reference the day he gives notices to the parties for fixing preliminary meeting and
commences his work. The parties shall be treated equally and shall be given full opportunity to present
their case. The procedure, place of hearing, time limit for production of documents / evidence etc. can
be agreed upon by the parties or otherwise decided by the arbitrator.

• The arbitration procedure need not follow the Civil court procedures or evidence act, but shall
ensure the principles of natural justice.(equity)

• It decides cost payable by each party and also decides the cost payable to one party by the other.

PURPOSE
1. To discuss the subject matter.

2. To explain the procedure to the concerned parties, study the documents , statement of claims and
counter claims etc.

3. The name of the umpire is agreed upon and necessary letter is sent for his acceptance.

4. Arbitrators fees, time, place and date of actual hearing is fixed.

 ARBITRATION PROCESS STEP BY STEP:

 Arbitration Clause - An agreement or the clause specifically stating that if the dispute arises
between the parties they will resolve it through the process of arbitration. Parties are free to agree
on the arbitration proceedings.

 Arbitration notice - In case a dispute has arisen and the party has opted to follow the procedure
of arbitration then the party against whom the default has been committed will send an arbitration
notice for invoking arbitration process steps between the parties.

 Appointment of Arbitrator- After receiving the notice by other parties both the parties will appoint
the arbitrators in the manner as specified in the arbitration agreement.

 Arbitration proceedings start from the date of request for arbitration.

 Statement of Claim- Next step in an arbitration proceeding in India is to draft a statement of claim.
Statement of claim contains the dispute between the parties, events which lead to the dispute and
the compensation claimed from the defaulting party. The other party can file a statement of
counterclaim along with reply to the statement of claim.
 AFTER COLLECTION OF FACTS AND EVIDENCES OF MATERIALS HEARING TAKES PLACE.

 Hearing of Parties - Arbitral tribunal will hear both the parties and their evidence. Fair hearing
demands that an opportunity should be given to both the parties to be heard and cross examined.

 Award - After hearing the parties, the arbitral tribunal will pass the decision. Principle of natural
justice shall be done. (equity) Award shall be in writing and signed by all members, as ‘Award’
which is binding on the parties.

 It is to be reasoned award unless otherwise agreed to by the parties.

 However, an appeal against the arbitral award can be filed before the High Court.

 Execution of Award - Once the award has been passed by the tribunal(arbitrators)it has to be
executed. The party in whose favour the award has been passed has to file for execution or
enforcement of award with the help of a good arbitration lawyer.

 Enforcing the Award as DECREE of the court.

 If not paid in time it carries an interest of 18% from the date of award to date of payment.
CL.--13. ARBITRATION AWARD & IMPLEMENTATION OF AWARD.

• ARBITRATION AWARD.
• It is the decision given by the arbitrators or by an umpire after careful investigation
and hearing of the dispute for adjudication. It contains the findings of the arbitrators
and is binding on both the parties. The is issued under the signature of all or majority
of arbitrators and signed copy shall be delivered to all parties.

1. It must be made within FOUR months from the date of reference (TWO months for an
umpire ) or within extended time limit.

2. Due notice to be given to the parties about the declaration of award.

3. The award as a rule must be in writing and self- explanatory duly signed and attested.

4. It can be a non reasoned or reasoned award

 ARBITRATION AWARD

• REASONED AWARD --- It is the award showing how an arbitrator has arrived at such decision with facts ,
evidence depicting the trend of his thought process.
• The award is like a judgment though it is not a judgment since it requires certain legal formalities before it
becomes effective. i.e. one has to obtain decree in terms of award from the court in order to enforce the
award or to recover the money.
• INTERIM AWARD---------- It is an award pending making of a final award. Before the parties agree
arbitrator may have to make many interim awards to satisfy both the parties.
• ENLARGEMENT OF TIME : Extension of time for declaring the award by arbitrator(s) or umpire is known as
enlargement of time. If provision is made in the arbitration agreement arbitrator(s) or umpire can extend the
time limit without court order. Also if parties apply or request for enlargement of time to the arbitrator(s) or
umpire.
• -------------------------------------------------------------------------------------------------------------------------------------------
• Award must be precise and definite that is it must be clear, unambiguous and without any
vagueness and in any way should not be misinterpreted or misunderstood.
• It should be capable of being enforced or implemented.
• It should contain a date or a specific period for implementation.
• Award should contain sufficient justification or reasons for the settlement arrived at by the
arbitrator.
TIME LIMITS FOR IMPLEMENTING THE AWARD

• TIME LIMITS

• 1. Arbitrators to declare the award Within FOUR months from the date of entering
upon the reference or extended time limit.

• 2. Umpire to declare the award --do-- within TWO months.

• 3. Application to the court by parties NINETY days from the date of making an
award

• 4. Time for setting aside the award Within THIRTY days after filing the award in
court.

• 5. Application for judgment of award After the expiry of THIRTY days of filing of the
award.
 Due notice to be given to the parties about the declaration of award.
 The award as a rule must be in writing and self- explanatory duly signed and attested.
 It can be a non reasoned or reasoned award
 IMPLEMENTATION AND EXECUTION
• Execution of decree means Enforcement or implementation of result of arbitration.
• Execution is the final stage of any arbitration process in civil suit. Basically, there are three stages in
whole process of arbitration:
1.Initiation of arbitration.
2.Adjudication and hearing of arbitration by the judicial court of law.
3.After the adjudication is complete, the result of arbitration which is known as decree is enforced.
Implementation or execution will only be done when the parties has filed application in that regard. It is
on the parties to approach the court of law for the execution of a decree. Only the court which has
passed the judgment after the adjudication of arbitration will execute the decree.
The technique of execution of decree helps the decree holder to enjoy the fruits and result of any
arbitration process. The whole process of execution of decree will be completed only after the decree
holder has got the awards.
The court executing the decree also has the power to attach his immovable property and other assets
or even arrest the debtor in case he is trying to abscond from satisfying the decree passed against him.
CL—14--DISCUSSION ON CASES OF ARBITRATION.
• CASE - 1.
Many alterations and revised drawings were prepared by Architect and
submitted on piece-meal basis during construction process. Naturally contractor demanded an
extension of time which was not given by Architect and he defended his action by justifying that
alterations were the requirements of client. Even if contractor does not specifically asked for
extension, it was Architects duty to sanction since ultimately it affects liquidated damages.
Arbitrator's award declared that it was a fault of an Architect as he was duty bound to grant an
extension and contractor is not at fault.
• CASE - 2
In many cases Architect failed to issue penultimate certificate clearly mentioning the date of
“virtual completion”. In such cases it is very difficult to establish the date of completion of the
“defects liability "period. Architect did not mention the date of virtual completion and contractor
demanded 50% of retention amount which was granted and awarded by arbitration proceedings.
• CASE—3.
• Every contract document stipulates a time limit for issuing a “final certificate” by the Architect to the
contractor. IIA contract form stipulated 3 to 4 months for the purpose. Many Architects not even care
to issue “final certificate” in time but took nearly 2 years. Architect defended the delay stating that
the contractor did not produce vouchers, rate analysis as demanded by Architect. IIA form of
contract provides that if the contractor fails to produce requisite information within allotted time, the
Architect can finalise the bill on the basis of available information. The contractor in such cases can
not raise any objection but can go for arbitration against Architect for non-issue of final certificate
and in all probabilities Architect will loose the case.
• CASE- 4.
• SITE MEETINGS: for satisfactory and timely completion of any project it is essential that all
connected with the construction project meet at least once a week. Minutes of the meetings must
be recorded stating the decisions taken, revised dead lines for completion of the project, dates of
promises made for revised drawings, various instructions etc. not only recorded by Architect’s office
but it is obligatory to follow up these decisions and promises. If not, then it amounts to “deficiency”
in Architects professional service and if owner or contractor approaches arbitrator for damages it is
very much likely that Architect will loose the case.
• CASE - 5
• CONSULTANTS’ FEES :
• usually various consultants are appointed on the recommendation of the Architect. Their
consultation fees are paid directly either by owner on agreed basis or by the Architect on
reimburse basis. (most of the time Architect finalizes his professional fees including consultants
charges). When the owner agrees to pay the consultant Architect need not worry unless there is a
complaint from consultants regarding non-payment of their fees. If there is a complaint then
Architect can make use of his good offices to ensure payment. But if Architect has agreed to pay
consultants and does not comply, COA will take serious note of such lapse and will advise the
Architect to pay the consultants. In one particular case where the Architect had agreed to pay the
consultants and get it reimbursed, but the Architect did not ask the consultants to raise the bills
and make due payments. Only when there was a dispute with the owner and after the arbitration
proceedings had begun the Architect obtained the bills and claimed payment. Arbitration tribunal
did not accept this claim stating that Architect should have made the payments before the dispute
arose and should have requested owner for reimbursement.
• CASE - 6
• Owner must give all the documents regarding his site including contours. architect to assist the
owner for survey of site, expenses to be paid by the owner. Even before schematic drawings are
prepared this should be completed but in one of the cases Architect asked the contractor to take
levels after the excavation was done for fixing plinth height. This consumed lot of time and
contractor was not given extension time but Architect recommended for liquidated damages. But
arbitration decision was to compensate contractor by the owner and to recover the same from
Architect by the owner either through arbitration or consumer court.