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Blog Ipleaders in Arbitration and Conciliation Act 1996
Home Arbitration and Conciliation Act 1996 Arbitration and Conciliation Act, 1996
Arbitration and Conciliation Act 1996
This article is written by Monesh Mehndiratta, a student of BA LLB, Graphic Era Hill
University, Dehradun. This article talks about arbitration and conciliation as
alternate forms of dispute resolutions and gives an overview of Arbitration and
Conciliation Act, 1996.
Table of Contents
1. Introduction
2. Applicability of the Arbitration and Conciliation Act, 1996
2.1. Objectives of the Arbitration and Conciliation Act, 1996
3. Scheme of the Arbitration and Conciliation Act, 1996
3.1. Definitions under the Arbitration and Conciliation Act, 1996
4. Legal analysis of the Arbitration and Conciliation Act, 1996
4.1. Arbitration (Part I)
4.1.1. Types of Arbitration
4.1.2. Advantages of arbitration
4.1.3. Disadvantages of arbitration
4.1.4. Cases not referred to arbitration
4.2. Arbitral tribunals
4.2.1. Composition of tribunals
4.2.2. Procedure for appointment of arbitrators
4.2.3. Termination of arbitrator
4.2.4. Jurisdiction
4.3. Arbitral award
4.3.1. Types of arbitral awards
4.3.2. Recourse against arbitral awards
4.4. Foreign awards (Part II)
4.5. Conciliation (Part III)
4.5.1. Features of conciliation
4.5.2. Proceedings of Conciliation under the Act
4.5.3. Role of conciliator
4.6. Supplementary provisions (Part IV)
5. Landmark case laws
5.1. Haryana Space Application Centre (HARSAC) v. Pan India Consultants Pvt. Ltd.
(2021)
5.1.1. Facts of the case
5.1.2. Issue involved in the case
5.1.3. Judgement of the Court
5.2. Indus Biotech Pvt. Ltd. v. Kotak India Venture Fund (2021)
5.2.1. Facts of the case
5.2.2. Issue involved in the case
5.2.3. Judgement of the Court
5.3. Oriental Structural Engineers Pvt. Ltd. v. State of Kerala (2021)
5.3.1. Facts of the case
5.3.2. Issue involved in the case
5.3.3. Judgement of the Court
6. Conclusion
7. Frequently asked questions
8. References
Introduction
ADR means Alternative Dispute Resolution which includes various methods of
settling a dispute without getting into the intricacies of the court. It is a method
where parties try to resolve their disputes privately in front of a third-person expert.
The decision is binding on the parties like the decision of the court. It includes
methods like arbitration, mediation, conciliation and negotiation. These work on the
principles of justice, legal aid and speedy trial as given under Article 39A of the
Indian Constitution. Even Section 89 of the Code of Civil Procedure, 1908 provides
settling disputes by way of ADR. The proceedings are flexible and creative. It
provides satisfying solutions with reduced cost and time and thus, is an emerging
field in Law. The Parliament felt the need and passed an act regarding this matter.
The article deals with an act on arbitration and conciliation known as Arbitration and
Conciliation Act, 1996. It lays out the object, extent and applicability and discusses
the important provisions under the Act.
Ensure that the tribunal does not exercise its jurisdiction beyond the limits.
Minimise the role of courts and reduce the burden on the judiciary.
It makes sure that every award is enforced in the same manner as the decree of
the court.
It provides that the conciliation agreement reached by the parties has the same
effect as the award granted by an arbitral tribunal.
Part I (Sections 2-43) – Applies to the place of arbitration in India. The award
granted is treated as a domestic award.
2. Arbitration agreement – Section 2(1)(b) of the Act says that for arbitration
agreement Section 7 of the Act must be referred.
3. Arbitral award – this has not been defined clearly in Section 2(1)(c) but mentions
that it includes interim award.
5. Courts – Section 2(1)(e) defines courts. It includes civil courts having original
jurisdiction in a district and the High Court having jurisdiction to decide issues
related to the subject matter of the arbitration.
Arbitration (Part I)
It is defined under Section 2 (1)(a) of the Act. It is an alternative to litigation in
courts and is advantageous as it provides flexibility and confidentiality. According to
Black Law Dictionary, it means a method of resolving disputes which includes two
parties and a neutral third party whose decision is binding on both parties.
Section 8 of the Act talks about the powers of any judicial authority to refer a case
to arbitration. It must be followed by an arbitration agreement. The Hon’ble
Supreme Court in the case of P. Anand Gajapati Raju v. P.V.G Raju (2000) gave
certain requirements necessary for referring parties to arbitration:
In another case of Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. (2011), it
was held that there is no time limit to file an application but it should be filed before
submission of the first statement related to the dispute. Further, Section 9 provides
that the parties to arbitration may at any time refer to the court for interim
measures.
Types of Arbitration
1. Domestic arbitration – It means that the proceedings of arbitration will take
place as per Indian laws and be subject to Indian jurisdiction.
Advantages of arbitration
A person appointed as arbitrator is based on the whims of the parties.
The arbitral award is enforced in the same way a decree of the court is enforced.
Disadvantages of arbitration
Generally, cases of civil rights where the remedy is the damages are referred to
arbitration but Section 2(3) of the Act gives the list of such cases which cannot be
submitted to arbitration. These are:
Disputes that have to be determined by any particular tribunal as the law may
provide;
Probate proceedings;
Guardianship matters;
Succession disputes;
Arbitral tribunals
Composition of tribunals
It is the creation of an agreement which conforms with the law. Section 10 of the
Act enables the parties to determine freely the number of arbitrators to settle their
dispute. The only restriction is that the number of such arbitrators must not be
even. If the parties are not able to decide then there will be only 1 arbitrator. But if
there are even number of arbitrators then the agreement cannot be held invalid
merely on this ground. (Narayan Prasad Lohia v. Nikunj Kumar Lohia, 2002)
Further, Section 11 of the Act provides the procedure for the appointment of
arbitrators. The valid requirements for any such appointment are:
Party must give proper notice of appointment to the other party. If it does not do
so, the appointment is held invalid.
A person appointed as an arbitrator must be duly informed and his consent must
be taken.
Termination of arbitrator
The grounds for termination are given under Section 14 and Section 15 of the Act.
These are:
If he is not able to perform his functions without undue delay (whether de jure or
de facto),
Jurisdiction
Section 16 of the Act provides that the tribunal will act in its jurisdiction. If the
arbitral tribunal has no jurisdiction then a plea will be raised but not later than when
the statement of defence is submitted. It also provides that in case a party is not
satisfied with the arbitral award, it can make an application to set it aside according
to Section 34 of the Act. The Supreme Court in the case of Centrotrade Minerals
and Metals v. Hindustan Copper Ltd. (2006), held that any issue related to the
jurisdiction can be raised by people in the proceedings or anyone from outside. But
if it is made by the party then it must be done during the proceedings or at the
initial stage.
Arbitral award
It is a final determination of a claim or a part of it or a counter-claim awarded by
the arbitral tribunal. It must be written and duly signed by the members of the
arbitral tribunal as given under Section 31 of the Act. The Section further gives the
power to the tribunal to make interim awards for any matter. In case of payment of
money, it can award the interest which seems reasonable, just and fair to the
tribunal.
Section 32 of the Act empowers the arbitral tribunal to terminate the proceedings
by making a final arbitral award. The procedure for any correction in the award or
its interpretation is given under Section 33 of the Act. It also gives the power to the
tribunal or the arbitrator to amend, correct or remove any errors of any kind within
30 days but is silent on judicial review. The tribunals cannot exercise their
jurisdiction beyond whatever has been mentioned in this section.
1. Interim award – It is the determination of any issue arising out of the main
dispute. It is a temporary arrangement to satisfy a party and is subject to the
final award.
2. Additional award – According to Section 33 of the Act, if the parties find that
certain claims have been missed out by the arbitral tribunal and they were
present in the proceedings then it can after notifying other parties, make a
request to the arbitral tribunal to make an additional award and cover the claims
which have been left.
4. Final award – It is an award which finally determines all the issues in a dispute.
It is conclusive unless set aside by courts and binding on the parties.
Under Section 34 of the Act, a party if not satisfied can make an application to set
aside the award granted by an arbitral tribunal. The time limit to make such an
application is not more than 3 months from the date the arbitral award was made.
The grounds are:
Incapacity of parties.
Fraud or corruption.
Section 37 of the Act provides that if a person is not satisfied with the order passed
by the tribunal, he/she can appeal to the court. However, there are no provisions
for a second appeal once an appeal has been made. In the case of Pandey and Co.
Builders Pvt. Ltd. v. State of Bihar (2007), it was held that the appellate authority in
any case which is referred to arbitration must be decided from the definition of
court given under Section 2 of the Act.
The foreign award related to the New York Convention is given under Section 44 of
the Act and that related to the Geneva Convention under Section 53 of the Act. The
conditions to enforce these awards in the country are given under Section 48 and
Section 57 of the Act respectively.
Features of conciliation
It is a non-binding process.
It is a consensual party and the desired outcome is the final settlement between
the parties based on their wishes, terms and conditions.
The settlement agreement will have the same importance and status as the
arbitration award. (Section 74)
The appointment of the conciliator like an arbitrator will be done by the parties
themselves under Section 64 of the Act.
The proceeding can be terminated following any of the procedures given under
Section 78 of the Act.
Role of conciliator
He is not bound by the procedure given under the Code of Civil Procedure, 1908.
The Central Government has the power to remove any kind of difficulties and
make rules in the Act as per Section 83 and Section 84 respectively.
There were 3 Acts dealing with the arbitration in India which have now been
repealed by the Act of 1996. These were:
The Indian Arbitration Act, 1940
In this case, an application was filed under Section 29 A(4) of the Act wherein it
was stated that the decision of the arbitral tribunal was ready to be pronounced by
the authorities. Also, the required cost was paid to the tribunal. On this, the other
party argued that the application must be denied on the ground that it lacks
reasons for extension under the Section. However, the argument was rejected and
an extension of 3-months was granted. HARSAC in a response filed a revision in the
High Court. But it again granted a four-month extension. To this, a special writ
application was filed to the Supreme Court.
Judgement of the Court
It was ruled by the court that the clause given in Section 12 is obligatory when it is
dealt together with the Schedule of the Act. It was also held that the Principal
Secretary is not qualified to be an arbitrator. If been the one, he would probably
influence HARSAC. The court also directed to appoint another arbitrator who will
continue the proceedings and help them come to an agreement within 6 months.
Indus Biotech issued some preference shares which are convertible at the option to
funds of Kotak India. A clause was added in the agreement of shareholders but they
could not agree on how to convert these shares into paid-up equity shares. As a
result, Kotak India filed an application when the other party failed to redeem those
shares.
Whether the subject matter of the dispute falls in those that could be referred to
arbitration if the case is pending in NCLT?
The Supreme Court opined that the case cannot be referred to arbitration if the
process is in rem. It further stated that if any proceedings are pending before NCLT
under Section 7 of IBC, then any application under the Arbitration and Conciliation
Act, 1996 will not be entertained. In the instant case, the Supreme Court held that
the decision of NCLT was reasonable and the case (Indus Biotech Pvt. Ltd. v. Kotak
India Venture Fund, 2021) was successfully referred to an arbitral tribunal.
In this case, there was a contract to upgrade the segments of roads. The contractor
demanded extra interest for any late payment. But in the letter, there was no such
provision of any interest on late payments.
Whether the contractor must get such interest even when it is not mentioned in the
letter?
The Supreme Court held that if the tribunal wishes, it can grant interest as a
compensatory award to the contractor. It also referred to the case of G.C. Roy v.
Secretary Irrigation Department (1991). The fact that the payment of interest in
such cases was not excluded particularly in the agreement was taken into
consideration. But the rate on such payment was missing and not agreed upon by
the parties. The High Court in this same asked the parties to fill up the blank details
that they left in the appendix. The Supreme Court held that this decision was
incorrect and impermissible. It ruled that the tribunal was right in providing
compensation as there was no clause in the contract which mentioned exclusion of
payment of interest if the payment was delayed.
Conclusion
The Act deals with alternate dispute resolution methods which are effective, cost-
friendly, and time-saving. Due to the pendency of cases and rigid procedural laws of
the courts and to prevent litigation, people nowadays generally prefer settling a
dispute outside the courts with the help of ADRs like arbitration, conciliation,
mediation etc. The Act provides the procedure to be followed in arbitration
proceedings, arbitral tribunal, the conduct of the tribunal along with the arbitral
awards to be made in a dispute. The decision is binding on the parties and given in
the form of an arbitral award in an arbitration agreement. It also prescribes the
procedure of appeal to courts in case of discrepancies.
However, these Acts have been consolidated into one and repealed by The
Arbitration and Conciliation Act of 1996.
Unlike in conciliation, the mediator in mediation does not give his opinion regarding
the dispute. Neither he is given the power to impose a settlement but a conciliator
has this power. His only function is to resolve the deadlock and encourage parties to
reach a reasonable settlement.
In how many parts and schedules has the Act been divided?
Part I (Section 2-43) – Applies to the place of arbitration in India. The award
granted is treated as a domestic award.
Foreign awards are granted in foreign countries for any dispute referred to
arbitration in international cases and are enforceable in India under the Act. It is
divided into two chapters under the Act:
References
Ashwinie Kumar Bansal & Rahul Kaushik “Arbitration & ADR”, Universal Law
Series.
https://www.indiacode.nic.in/handle/123456789/1978?
sam_handle=123456789/1362
https://www.mondaq.com/india/trials-appeals-compensation/978888/significant-
judgments-on-arbitration-and-conciliation-act-
https://www.advocatekhoj.com/library/bareacts/
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