Arbitration in India: A Comparative Study Of

Arbitration Act, 1940, Arbitration And

Conciliation Act, 1996 And The Recent
Amendments.

R U PA L G U P TA
VII SEM (REGULAR)
B.A. LL.B. (HONS.)
Outline of Report (I)
oIntroduction (What is ADR, Forms of ADR), Research Methodology.
oConcept of Arbitration – Arbitration Procedure – Advantages of
Arbitration over litigation – Differentiating Arbitration from other
modes of ADR (Mediation and Conciliation).
oEvolution of Arbitration in the international arena (traditional
societies to the current arbitration law) – Evolution of Arbitration in
India (Bengal Regulations to the current enactments).
Outline of Report (II)
oProvisions of the Arbitration Act, 1940 and the Arbitration and
Conciliation Act, 1966 and a comparative study of both the acts.
oChanges brought by the Amendments of 2015 and 2019.
oComparative study of the legislative intent of arbitration law and the
judicial interpretation of the same.
oConclusion and Suggestions.
Introduction
oADR was needed because of the complexities of litigation.
oJustice Katju in 2019 said that there are 33 million pending cases in Indian Courts.
oADR addresses the mindset of the parties.
oForms of ADR: Arbitration, Mediation, Conciliation, ODR, etc.
oArbitration is an important form and has led to exponential growth in Commercial Laws.
oSarvesh Chandra, the former chairman of the FERA Board, says: "In substance, the ADR
process aims at rendering justice in the form and content which not only resolves the
dispute but tends to resolve the conflict in the relationship of the parties which has given
rise to that dispute."
1.1 Concept of Arbitration
oSettlement of Disputes without the involvement of courts.
oIt was first used in the 15th century.
oBinding result
oThe procedural codes are not applicable.
oGeneral rules provided in arbitration agreement.
oImportant Arbitration Laws Internationally: UNCITRAL and ICSID.
India is not a party to ICSID.
1.2 Comparison of Arbitration with other
modes of Dispute Resolution
oArbitration vis-à-vis Litigation: Litigation for matters of public
importance - Arbitration for private disputes.
oArbitration vs. Mediation: Procedure is different - Decision in
Mediation is not binding unlike arbitration - Arbitration is formal
compared to mediation - Parties are more involved in mediation.
oArbitration vs. Conciliation: Conciliation can exist even without any
contract - Conciliation mostly used in existing disputes - Conciliation
proceeding is more mutual.
2.1 Evolution of Arbitration:
International Arena
oKing Solomon is said to be the first arbitrator.
oADR has been part of several traditional societies.
oJay Treaty 1794 - Hague Convention - Permanent Court of
Arbitration 1899 - Permanent Court of Justice 1922 - International
Court of Arbitration 1923.
oMain regulations: UNCITRAL and ICSID
2.2 Evolution of Arbitration: India
oArbitration in traditional societies - Panchayati system
oBengal Regulations (1772-1833)
oCode of Civil Procedure 1859, Code of Civil Procedure 1882
oArbitration Act 1899, Code of Civil Procedure 1908
oArbitration Act 1940, Arbitration Act 1996, Amendments of 2015
and 2019
3.1 The Arbitration Act, 1940
oRepealed the Act of 1899.
oBased on English Arbitration Act, 1934.
oForeign awards regulated by: Arbitration (Protocol and Convention)
Act, 1937 and Foreign Awards (Recognition and Enforcement) Act,
1961.
oContained 49 Sections divided into 7 chapters.
3.2 Criticism of the Act of 1940 (I)
oVery little discretion of arbitrator.
oCourts were very involved.
oSlow proceedings.
oNo finality of awards.
oOnly domestic disputes were regulated.
3.2 Criticism of the Act of 1940 (II)
oNo provision for resigning of arbitrator.
oPossibility of bias.
oConciliation not given a statutory recognition.
oIn case of death of an arbitrator, mid proceedings, there was no
provision for appointing a new arbitrator (Hindustan Flashlight Mfg.
Co. v. Great American Insurance Co., 1963).
4.1 The Arbitration and Conciliation Act,
1996
oRepealed the Arbitration Act, 1940.
oEnacted on lines of the Model Law of UNCITRAL.
oThe long title of the Act suggests: "It is an act to consolidate and amend the law
relating to domestic arbitration, international commercial arbitration and
enforcement of foreign arbitral awards as also to define the law relating to
conciliation and for matters connected therewith or incidental thereto."
oThis act was divided into four parts: Domestic and International Commercial
Arbitration, Enforcement of foreign awards, conciliation machinery,
supplementary provisions.
4.2. Salient Features of the 1996 Act
oSpecifications for arbitration agreement provided.

oA dispute even though not out of a contract but in close connection to the transaction under the
Contract would be arbitrable.

oA domestic arbitration is treated differently from international arbitration when the appointment of
arbitrator is made by court or when the law applicable to the dispute is being determined.

oCourts cannot intervene in arbitral proceedings except for some instances.

oSpecific provisions for appointment of arbitrators.

oStructure of proceedings decided by the Arbitrators on their own.

oProvisions for setting aside of arbitral award were provided along with the enforcement provisions.
4.3 Criticism of the Act of 1996
oProcedure can be misused (irrelevant use of judicial review, stay on
execution of awards, etc.)
oIn practicality judicial intervention is common (ONGC v. Saw Pipes –
Court expanded the scope of public policy).
oConfusion regarding automatic stay of award when an application
challenging the award was made.
5. Comparative Study of the 1940 and
1996 Enactment (I)
oThe old enactment was not comprehensive enough.
oAct of 1940 dealt only with domestic arbitrations while the 1996 Act
deals with domestic as well as international arbitration.
oConciliation was not a part of the 1940 enactment. This was
however embodied in the new Act.
oThe 1996 Act provides for provisions relating to enforcement of
foreign awards. This was not discussed in all the old enactment.
5. Comparative Study of the 1940 and
1996 Enactment (II)
oThe 1940 Act was based on the English Arbitration Act, 1937 while
the Act of 1996 was based on the UNCITRAL Model Law.
oThe procedure for arbitration was more unified in the new
enactment.
oThe binding force of conciliation proceedings have been discussed in
the 1996 Act however, the old enactment completely ignored this
aspect.
5. Comparative Study of the 1940 and
1996 Enactment (III)
oThe old act suffered huge criticism due to the provisions related to
judicial intervention. On the other hand, the new enactment adopts
a strict approach towards limiting judicial intervention.
oEarlier the arbitral award could be challenged on various grounds.
These grounds have been limited in the new Act.
oThe 1996 took a regressive approach about the automatic stay on
arbitral award when an application challenging the award is made.
This provision did not find place in the earlier legislation.
6. Comparative Study of 1996 Act and its
2015 Amendment (I)
oA new definition for the term 'court' was introduced through the Arbitration &
Conciliation (Amendment) Act (2015) which clarified the skepticism in relation
to district courts which was created by the earlier legislation.
oThe provision relating to interim measures was amended to introduce a time
limit for passing such measures.
oThe Amendment places the power on the Supreme Court and the High Court to
appoint arbitrators within 60 days from date of notice on the opposite party.
oProvisions relating to the challenge of appointment of an arbitrator were
introduced.
6. Comparative Study of 1996 Act and its
2015 Amendment (II)
oSchedule V was inserted which aims at providing disqualifications of
the arbitrator.
oSchedule VII was introduced which provides that any person falling
under categories mentioned in Schedule V would be ineligible.
oThe amendment provides that the interim measure passed would
has the same value as that of an order passed by a civil court.
oTime Limit for Arbitral Awards as well as a fast-track procedure has
been introduced.
6. Comparative Study of 1996 Act and its
2015 Amendment (III)
oDetailed guidelines regarding cost of arbitration have been
provided.
oThis amendment ended the confusion regarding the automatic stay
on award when an application challenging the award has been made.
Such a stay has been negated by the Amendment.
7. Comparative Study of 1996 Act and its
2019 Amendment (I)
oThe concept of arbitral institution has been introduced.
oSection 11 has been amended to provide for the appointment of arbitrators by
the Arbitral Institution.
oProcedure for appointing a sole-arbitrator has been amended to match the
appointment of arbitrators by the arbitral tribunal.
oThe time limit for the completion of statement of claim and defence has been
introduced under Section 23(4) as six months from the date the arbitrators
receive the notice regarding their appointment.
oThe provision relating to mandatory maintenance of confidentiality by the
arbitrators has been introduced.
7. Comparative Study of 1996 Act and its
2019 Amendment (II)
oSection 42B has been inserted to create provision for protection of arbitrators
from irrelevant suits.
oPart IA has been introduced to create the Arbitration Council of India.
oEarlier, there was some confusion relating to the applicability of Section 36
inserted by the 2015 Amendment. This has been clarified by the recent
amendment.
oThe Eight Schedule has been inserted to clarify the eligibility requirements for
an arbitrator.
oThe time limit for international commercial arbitration and the domestic
arbitration has been differentiated by this amendment.
8. Comparative Study of the Arbitration
Act and its Judicial Interpretation (I)
oRestrictive approach adopted while interpreting Section 31(4) and
Section 34 of the Indian Arbitration Act, 1940 (Union of India v. Surjit
Singh Atwal, 1969).
oJurisdictional Extent of the 1996 Act: Foreign Arbitrations would be
subjected to Indian Arbitration Laws only when the award has to be
enforced in the India (Bharat Aluminum Co. v. Kaiser Aluminum
Technical Services Inc., 2012).
8. Comparative Study of the Arbitration
Act and its Judicial Interpretation (II)
oWhether an old Act could be applicable after commencement of
new Act? (Purushottam s/o Tulsiram Badwaik v. Anil & Ors., 2018).
oAppointment of Sole Arbitrators (Perkins Eastman Architects v
HSCC, 2019).
oCan an arbitral award be set aside in case of an apprehension of
bias? (Vinod Bhaiyalal Jain & Others v. Wadhwani Parmeshwari Cold
Storage Pvt. Ltd., 2019).
8. Comparative Study of the Arbitration
Act and its Judicial Interpretation (III)
oClarity Regarding Limitation Period for seeking enforcement of
foreign arbitration awards (Imax Corporation v E-City Entertainment,
2019).
oScope of Section 11(6A) – Validity of non-stamped agreements
(Garware Wall Ropes v. Coastal Marine, 2019).
oEnforcement of Foreign Arbitral Awards (Government of India v.
Vedanta Ltd., 2020).
9. Conclusion and Suggestions
oThe first legislation on Arbitration was regressive.
oThe 2019 Amendment Act has had the most progressive approach
until now.
oIt is suggested that the Arbitrational Council of India should be
made free of governmental control to eliminate chances of bias.
oAnother suggestion would be to clarify the grounds for grading the
arbitral institutions.
THANK YOU!