ALTERNATIVE

DISPUTE
RESOLUTION
(ADR)
 `

• US President Abraham Lincoln –

• “Discourage litigation persuade your neighbors to

compromise, whenever you can point out to them
how the nominal winner is often a real loser, in
fees, expenses, waste of time…..”

• So, what was he advocating ?

 In simple terms he was advocating ADR for
resolving disputes.
Soo what is ADR – It is nothing but Alternative
Dispute Resolution.
Concept of ADR
lies in resolving the dispute outside the
standard court procedures.
Encourages communicative capacity of the
disputants.
• So, Why ADR ? Because -
Statistics of legal cases are
alarming in India.
 National Judicial Data Grid –2019
PENDING CASES AS ON 2019
Particulars Civil Criminal Total
0 to 1 Years 4125029(46.17%) 9840204(43.28%) 13965173(44.1%)
1 to 3 Years 2072027(23.19%) 5248132(23.08%) 7320118(23.11%)
3 to 5 Years 1145056(12.82%) 2659677(11.7%) 3804719(12.01%)
5 to 10 Years 1052857(11.79%) 3153237(13.87%) 4206092(13.28%)
10 to 20 Years 413678(4.63%) 1522520(6.7%) 1936198(6.11%)
20 to 30 Years 94941(1.15%) 269883(1.15%) 364824(1.15%)
Above 30 Years 30180 (0.34%) 41649(0.18%) 71829(0.23%)
Total 8933768 22735302 31668953
 National Judicial Data Grid – PENDING CASES AS ON 31
December 2020
Particulars Civil Criminal Total
 
Pending Cases
0 to 1 Years 2844130(25.94%) 8100265(25.12%) 10944311(25.33%)

1 to 3 Years 2898051(26.43%) 8292069(25.72%) 11190102(25.9%)

3 to 5 Years 2266569(20.67%) 6352719(19.7%) 8619287(19.95%)

5 to 10 Years 2085512(19.02%) 6165176(19.12%) 8250695(19.1%)

10 to 20
714330(6.52%) 2810074(8.71%) 3524401(8.16%)
Years
20 to 30
118576(1.3%) 444985(1.3%) 563561(1.3%)
Years
Above 30
36273 (0.33%) 79765(0.25%) 116038(0.27%)
Years
 National Judicial Data Grid –2019
PENDING CASES AS ON 2019
Case Type Wise

Original 6527037 20523499 27050536

Appeal 487394 390038 877432

Application 562222 1464988 2027210

Execution 1302259 58207 1360466

National Judicial Data Grid – PENDING
CASES AS ON 31 December 2020
Case Type Wise
Original 8100786 28874597 36975478

Appeal 470712 382415 853127

Application 656484 2407826 3064311

Execution 1518767 66621 1585383

National Judicial Data Grid –2020
Reasons for the increase in litigation – Niti Ayog
Commission’s Working Group report --12th Five Year
Plan (2012 – 2017)
•Poor judge-population ratio
•Vacancies in courts
•Plethora of laws
•Prolonged and costly litigation caused by procedures and
lawyers’ interests
•Poor infrastructure; and
•Weak alternate dispute redressal mechanisms
So, Why ADR ? Because - Statistics of legal cases are
alarming in India.
 Thus :-
 Judicial Manpower needs to increase by more than
seven times to overcome the issue on hand
 Shortage of Judges in subordinate courts is one of
the key reasons for pending litigation
 State is obligated to carry out the decisions of the
Apex Court and increase the judge population ratio to
50 per million as held in the - All
India Judges association case.
• Hence need was felt by people for an ADR.

• To sum up the primary object of ADR,

• ----- According to P.C Rao, Secretary General, of
the International Centre for ADR,
• is avoidance of vexation, expenses and delay and
• promotion of the ideal of ‘access to justice’ for all.
• So, is ADR is a modern phenomena.
• No. The history of Informal dispute resolution goes
back to 12th century in China, England and America.

• Position in India? –
• According to Dr. Priyanath Sen author of the
‘The General Principles of Hindu Jurisprudence -
the ADR mechanism dates back to the period of
Dharmashastra’s.
• ADR was used for - resolution of disputes between
members of particular clan and locality by Kulas
(family or clan assemblies),

• Srenis(guilds of men following same profession), and

Parishads (assemblies of learned men who knew law).

• More specifically in rural areas Nyaya panchayat’s

decided almost all the disputes between the
inhabitants of the village.
• Most importantly they were recognized as the
systems of the administration of justice and not
merely as ‘alternatives’.

• Further, procedure and nature of proceedings of

the above institutions - was similar to ADR
being simple informal inexpensive quick.
Reasons behind the phenomenal growth of ADR :

1. Expeditious disposal of cases

2. Inexpensive litigation
3. Informal method of resolution
4. Growth of Commercial transactions
5 LPG–Liberalization, Privatization, Globalization
 ADR has advantages
The same is explained by the following diagram developed by
Pepperdine University for Dispute resolution

• Consensual Processes Adjudicatory Process

•
•
Negotiation
A communication
Pepperidine
Mediation University model
Arbitration
Facilitated Informal third
Litigation
Formal
• process utilized to Negotiation party decision third party
• put deals together making decision making
or resolve conflicts

Parties retain control of

the outcome and the process
High
Parties look to future in light of past
Parties retain control of the outcome but Parties give up control of the
Yield to assistance in the management of outcome and the conducting Parties give up control of
the process. of the process the outcome and the process
Control of outcome
Control of process
Low
Processes look to the past to determine its resolution and set the stage for a better future
• Model explains the different ADR’s in a continuum
explaining the advantages and unique features.
• Drawing the line from Negotiation upto Adjudication
and Legislation, the line of formality increases from
left to right.

• While the consensual process is totally informal and

by Agreement,

• the Adjudication process, which is controlled by state

and conducted in accordance with law is totally
formal and by imposition.
• At the bottom the control levels are explained.

• While in negotiation the control over the initiation,

procedure and outcome is greater,

• it gets diminished in other processes and

• it is totally absent in adjudication and legislation

process.
• Advantages –
• 1) can be used any time even when a case is pending
before a court

• 2) can be used to reduce a number of contentious

issues

• 3) can provide a better solution to the disputes more

expeditiously and at less cost than litigation.
• 4) dispute remains a private matter and has a chance
of getting resolved soon.

• 5) procedures per se are flexible and not controlled

by rigorous rules of procedures. - CPC ?
• 6) There need not be a professional advocate or
counsel present in the proceedings ?

• 7) helps reduce the workload of courts thereby

allowing it to focus on cases which have to be
resolved by courts. ?
• Prime example of the effective working of
Conciliation, a form of ADR

• The model of pre-trial In-trial and post-trial

Conciliation Project in subordinate courts evolved
by Himachal Pradesh High Court

• - commended by the Law Commission in its 77th -

Delay and Arrears in Trial Courts and 131th
report -.
• However inspite of its obvious advantages for the ADR
procedure to be more successful, it is necessary that

• i) there should be good law,

• ii) good infrastructure facilities for holding ADR

proceedings &

• iii) professionally trained ADR practitioners.

• So, whether ADR is all advantage, No. -- there are
obvious flaws and disadvantages

• 1) biggest disadvantage -- unfamiliarity of the process

itself.

• 2) ADR is difficult in the sense that there is unequal

bargaining power of one of the parties.
• 3) settlement is reached between the parties the same
is not binding on the parties.

• 4) A party may sabotage the success of the dispute

resolution process leading to trial denovo thus
leading to protracted litigation and

• which can further give rise to later litigation

defeating the whole purpose of ADR mechanism.
• 4) legal profession also attracted by the popularity
and volume of arbitration --- making the arbitral
process more formalized

• thus making more judicial in nature thereby losing

the distinction between it and the courts.

• 5) The courts intervention before during and after

arbitration, made arbitration as dilatory as the court
system.–to some extent reduced by the Arbitration
and Conciliation Act, 1996 and the amendments.
 • COURT IMPETUS TO ADR MECHANISM:
• The Supreme Court in F.C.I. v. Joginderpal
Mohinderpal, (1989) 2 SCC 347, observed:-
• “We should make the law of arbitration simple, less
technical and more responsible to the actual
realities of the situation, but must be responsive to
the canons of justice and fair play and make the
arbitrator adhere to such process and norms
which will create confidence, not only by doing
justice between the parties, but by creating a sense
that justice appears to have been done.”
• Historical Perspective:

• Object and the forms of ADR was in existence in

ancient India.

• This panchayat form existed till the medieval India and

by and large the system worked well though it was
found to be deficient

• where disputes related to caste matters and particularly

complexities arising out of and economic changes.
• The first traces of change in the earlier ADR system
was made –

• in the year 1772 in the form of ‘Regulations’ and

thereby attempt was made to introduce of system
of Arbitration in India in consonance with British
Jurisprudence.
Regulation Salient provision

1781 ‘the judge to recommend as far as he can with out

compulsion and prevail upon the parties submit to
Arbitration by one person to be mutually agreed upon
by the parties.’

1787 Empowered a Court to promote Arbitration in cases

where the value of the debt or property did not exceed
Rs 200/- Arbitration was permitted in cases of breach of
contract.
1833 Agreement of Arbitration shall be in writing.

1857 Civil Procedure Code Promulgated – First time

Arbitration thru’ two channels, namely with and
without the intervention of Court.
 Regulation Salient provision
1882 – Arbitration was defined as a written agreement to submit
(1857 Act present and future differences to Arbitration. The Arbitrator
revised) may be named in the Agreement.
1889 Earlier the ‘subject of Arbitration’ was made a part of civil
procedure. Now an independent Act governing Arbitration
was passed mentioning the same details which were in the
earlier regulations.
1940 New Arbitration Act came to be enacted.
1996 Because of the lacunas in the 1940 Act, Court’s interference
became as a matter of routine and therefore the Arbitration
and Conciliation Act 1996 came to be enacted.
• Now what are the types of Arbitration:
• 1) Adhoc Arbitration :
• Here in pursuance of Agreement the parties
themselves appoint their own Arbitrator/ Arbitrators.

• They proceed with the Arbitration till the

culmination of award.
• All rules prescribed in the Act must be strictly
followed by the parties and the Arbitral Tribunal.

• The award obtain is a final award and where there is

an arbitration agreement, the suit is barred.
• 2) Institutional Arbitration:

• Here the parties get conducted the Arbitration

proceedings through an institution speciliasing in
conducting Arbitration such as Chamber of
Commerce in each state, and thru’ the
Inter Governmental agencies.
• These institutions provide all facilities for conduct of
Arbitration proceedings including appointment of
Arbitrators from the panel of Arbitrators maintained
by them.

• They conduct Arbitration in accordance with the rules

framed by them.
• 3) International Commercial Arbitration:

• Subject to the Law of Arbitration, International

Commercial Arbitration means

• an arbitration on disputes arising on International

Trade limited to what are as known as Commercial
transactions between and among the parties residing
in different Countries.
• 4) Statutory Arbitration:

• Where an Act provides compulsory Arbitration, the

parties resort to arbitration only as provided in the
Statute.

• Here the statute itself names the Arbitrator and parties

aggrieved by any action taken or orders issued by any
authority under the Act, they have to compulsorily
approach the named Arbitrator for a decision on the
dispute.
• Recourse to a Court without seeking Arbitration is
barred?
• Eg :- Co-operative societies Act, Electricity Act,
Land Acquisition Act, Railways Act, Telegraphic
Act, Industrial disputes Act
• are some of the legislations which provide for
compulsory arbitration, which is nothing but
Statutory Arbitration.
• WHAT DISPUTES CAN BE REFERRED TO
ARBITRATION

• Generally speaking, all disputes of a civil nature or

quasi-civil nature which can be decided by a civil court
can be referred to arbitration.

• Thus, disputes relating to property, right to hold an

office, compensation for non-fulfillment of a clause in a
contract, disputes in a partnership etc. can be referred to
arbitration.
• Even the disputes between an insolvent and his
creditors can be referred to arbitration by the official
receiver/liquidator with the leave of the court.

• Thus disputes arising in respect of defined legal

relationship, whether contractual or not, can be
referred to Arbitration.
• Therefore, the relationship may not be a
contractual one.

• A dispute may arise out of quasi contracts e.g. the

division of family property. The same may be
validly referred to Arbitration.
• Now to what sort of disputes is ADR suitable.
• Both Procedural law & Substantive law.
An illustrative list of such matters :—
CPC,
Family Disputes,
Industrial Disputes Act,
Hindu Marriage Act,
Motor Vehicle claims,
Negotiable Instruments Act.
• DISPUTES EXCLUDED FROM ARBITRATION
• An illustrative list of such matters :—

• Testamentary matters involving questions about

validity of a will.

• Disputes relating to appointment of a guardian.

• Disputes pertaining to criminal proceedings

• Disputes relating to Charitable Trusts

• Matters of divorce or restitution of conjugal rights

• Lunacy proceedings

• Disputes arising from an illegal contract

• Insolvency matters, such as adjudication of a

person as an insolvent.
However, certain disputes where the law has given
jurisdiction to determine certain matters to specified
by tribunal only, cannot be referred to arbitration.
Natraj Studio Pvt Ltd v Navrang Studios – AIR 1981
SC 537
•Question before the Supreme Court was which of
the two forums would have jurisdiction -
•the arbitrator in accordance with the arbitration
agreement or
•the Court of small causes which is conferred with
exclusive jurisdiction in respect of matters covered by
Bombay Rent Act, 1947.
•ARBITRATION &
CONCILIATION
ACT, 1996
• ARBITRATION & CONCILIATION ACT,
1996
• Sec 2 (a) of Arbitration and Conciliation Act 1996
defines Arbitration:

• The term Arbitration means -

• any Arbitration whether or not administered by a
permanent Arbitral Institution.
• It also means an alternative means of resolving the
disputes
• provided the parties have previously agreed
to do so instead of going to court.
• Some authors have meant Arbitration to
mean
• ‘a Private Court’ without certain powers of court
like the power of execution of award, - taking out
contempt proceedings.
• The term Arbitration has been derived from the
nomenclature of Roman Law –
• Arbitari (to examine or judge )

• In Halsbury’s laws of England, arbitration has

been defined as –
• “the reference of dispute or difference between not
less than two parties, for determination, after
hearing both sides in a judicial manner, by a
person or persons other than a court of competent
jurisdiction”
• Therefore we can conclude that,

• where a dispute is sought to be resolved by a

intervention of third party is called ‘Arbitration’.
• However, for an Arbitration to take place there
should be an Arbitration Agreement.

• So what is an Arbitration agreement?

•Arbitration Agreement is defined in Sec 2 1(b) of
the Arbitration and Conciliation Act, 1996.

•Sec 2 (b) defines An Arbitration Agreement as ‘an

agreement referred to in Sec 7 of the Act’.
• Further Sec 7 (1) provides that an Arbitration
Agreement means -
• ‘an agreement by the parties to submit to
arbitration of certain disputes which have arisen
or which may arise between them in respect of a
defined legal relationship whether contractual or
not.
• So, then whether an Arbitration Agreement should be
in writing.
• (2) An arbitration agreement may be in the form of
an arbitration clause in a contract or in the form of
separate agreement.

• (3) An arbitration agreement shall be in writing

• (4) An arbitration agreement is in writing if it is

contained in
a) a document is signed by the parties

b)an exchange of letters, telex other means of

communication through electronic means which
provides a record of the agreement or

c) there is an exchange of statements of claim and

defense in which the existence of agreement is
alleged by one party and not denied by the other
• So if the Arbitration Agreement should be in writing, -
whether an Oral Agreement is valid. i.e whether it has
any legal validity?

• i) Whether such an oral Agreement is itself enforceable in

law

• & Ii) whether an award made as a result of such an oral

Agreement is enforceable in law.

• The oral Agreement cannot be legally enforceable.

• So what constitutes an arbitration agreement _
Judiciary has laid down well settled principles in
this regard. Jagdish Chander v Ramesh Chander
(2007) 5 SCC 719.
• (i) If the terms of the agreement clearly indicate an
intention on the part of the parties to the agreement
to refer their disputes to a private tribunal for
adjudication and an willingness to be bound by the
decision of such tribunal on such disputes,
• it is an arbitration agreement.
• While there is no specific form of an arbitration
agreement, the words used should disclose a
determination and obligation to go to
arbitration and not merely contemplate the
possibility of going for arbitration.
• Where there is merely a possibility of the parties
agreeing to arbitration in future,
• as contrasted from an obligation to refer
disputes to arbitration, there is no valid and
binding arbitration agreement.
• (ii) Even if the words ‘arbitration’ and
‘arbitral tribunal (or arbitrator)’ are not used
with reference to the tribunal which has to adjudicate
upon the disputes, in a clause relating to settlement of
disputes,
• it does not diminish the clause being an
arbitration agreement if it has attributes or
elements of an arbitration agreement.
• (iii) Where the clause provides that in the event of
disputes arising between the parties, the disputes
shall be referred to Arbitration, it is an arbitration
agreement.
• Where there is a specific and direct expression of
intent to have the disputes settled by arbitration, it
is not necessary to set out the attributes to make it
an arbitration agreement.
• But where the clause relating to settlement of
disputes, contains words which specifically excludes
any of the attributes of an arbitration agreement -
it will not be an arbitration agreement.
• For example, where an agreement
• requires or permits an authority to decide a claim or
dispute without hearing,
• or requires the authority to act in the interests of only
one of the parties, or provides that the decision of the
Authority will not be final and binding on the parties,

• or that if either party is not satisfied with the decision

of the Authority, he may file a civil suit seeking relief,

• it cannot be termed as an arbitration agreement.

• (iv) But mere use of the word ‘arbitration’ or
‘arbitrator’ in a clause will not make it an
arbitration agreement, if it requires or
contemplates a further or fresh consent of the
parties for reference to arbitration.
• For example, use of words such as
• “parties can, if they so desire, refer their disputes to
arbitration” or in the event of any dispute, the parties
may also agree to refer the same to arbitration
• or if any disputes arise between the parties, they
should consider settlement by arbitration indicate
that the clause is not intended to be an arbitration
agreement.

• Similarly, a clause which states that if the parties so

decide, the disputes shall be referred to arbitration or
is not an arbitration agreement.
• Such clauses merely indicate a desire or hope to
have the disputes settled by arbitration, or a
tentative arrangement to explore arbitration as a
mode of settlement if and when a dispute arises.
• Attributes of Arbitration :
• The question as to what constitutes an Arbitration
have been explained in the matter of -
• K.K Modi vs K.N Modi by the Supreme Court of
India - AIR 1998 SC 1297.
• Among the attributes which must be present for
an agreement to be considered as an arbitration
agreement are:
• i) The arbitration agreement must contemplate that
the decision of the tribunal will be binding on the
parties of the Agreement.
• Ii) The jurisdiction of the tribunal to decide the rights
of the parties must flow from the consent of the
parties,
• or from the order of the Court or from a statute, so
that it is clear that what is sought to be conducted is a
process of Arbitration.

• Iii) The agreement must contemplate that substantive

rights of the parties will be determined by the agreed
tribunal.
• Iv) The tribunal will determine the rights of the
parties in an impartial and judicial manner with the
tribunal owing an equal obligation of fairness towards
both sides.

• v) That the agreement of the parties to refer their

disputes to the decision of the tribunal must be
intended to be enforceable by law.
• Vi) The agreement must contemplate that the tribunal
will make a decision upon a dispute which is already
formulated at a time when a reference is made to the
tribunal.
• Thus, an Arbitration Agreement is the very
foundation on which the jurisdiction of the arbitrators
to act rests. It defines the scope of authority of the
Arbitrators.

• i) There should be an existence of an clause as to

dispute/s being referred to Arbitration. Is this
enough?
• No. Though, per se it is enough, there should be a
mention that no Court shall have jurisdiction in
respect of disputes or differences arising between
the parties.

• Ii) The next question whether the Agreement should

mention any procedure for appointment of Arbitrator.
According to N.K Acharya, author of Arbitration and
ADR, it is not strictly necessary as even if the parties
• fail to mention any procedure for appointment of
Arbitrator, the Chief Justice can be requested to do
so.

• iii) The next aspect is the choosing an arbitrator.

• It can be a ‘sole arbitrator’ or a panel consisting of
Arbitrators.
• It may also be mentioned such each party shall
appoint an Arbitrator, and the two arbitrators shall
appoint the Presiding Arbitrator.

• This is done to prevent a deadlock in case of the

opinion being not unanimous.

• The third Arbitrator can be styled as ‘Presiding

Arbitrator’ - earlier styled as ‘Umpire’ under the
Arbitration Act, 1940.
• A Domestic Arbitration clause can be as follows:
• All disputes arising out of this contract or
arising in relation thereto or in connection with
the terms of contract shall be referred to arbitration
by an arbitral tribunal consisting of sole arbitrator / one
arbitrator to be named by each party and the two
arbitrators so appointed shall appoint the presiding
arbitrator. The Arbitration proceedings shall be held at
Visakhapatnam.
The Arbitration shall be in accordance with the Arbitration and
Conciliation Act, 1996 and relevant amendments. The award
passed by the arbitral tribunal shall be final and binding on the
parties.
• Constitutional Validity of Arbitration and
Conciliation Act, 1996 upheld in
• Babar Ali v UOI and Others (2000) 2 SCC
178
 • RATIO LAID DOWN :
• 1. “We find that there is no question of the
Arbitration and Conciliation Act, 1996 being
unconstitutional or in any way offending the basic
structure of the Constitution of India, as the High
Court has rightly observed that judicial review is
available for challenging the award in accordance
with the procedure laid down therein.
• Only because the question of jurisdiction of the
Arbitrator is required to be considered after the award
is passed and not at any penultimate stage by the
appropriate court, it cannot be a ground for submitting
that such an order is not subject to any judicial
scrutiny.
• The time and manner of judicial scrutiny can
legitimately be laid down by the Act passed by
Parliament.
• The challenge to the vires of the Act was rightly
rejected by the High Court. We fully endorse that
view.”
• The test as to whether a dispute fell within the
scope of Arbitration clause is -

• whether recourse to the Arbitration Agreement

was necessary for the purpose of determining of
the disputes between the parties.
• One important aspect is the party executing the
Arbitration Agreement must be in existence on the
date of execution of Agreement.
• When a person claiming to be Managing Director of
a proposed company, yet to be incorporated enters
into an agreement with another party which contains
an arbitration clause. What is the status of the same?
• Such company not being in existence, is not bound by
the Arbitration clause. – APTDC v Pampa Hotels
Ltd. AIR 2010 SC 1806.
 • CASE –STUDY METHOD

1.History of case
2.Facts
3.Issues
4.Argument of Plaintiff (Petitioner) &
Defendant(Respondent)
5.Decision with reasons (if any)
6.Analysis/Critical Analysis of the case.
7.Reference of Landmark Judgments
8.Cases Referred
 • APTDC v Pampa Hotels Ltd AIR 2010 SC 1806.
• Facts:
• In March 2002, Andhra Pradesh Tourism Development
Corpn. (APTDC) and Pampa Hotels Ltd (Pampa)
allegedly entered into two agreements, - Lease
Agreement (LA) and Development & Management
Agreement (DMA).
• According to the respondent -clause 17 of the
lease agreement and Article 18 of the
management agreement contained arbitration clause
 providing that in the event of disputes, best efforts
shall be made to resolve them by
mutual discussions, amicably; and in the event of the
parties not finding an acceptable solution to the
disputes within 30 days (60 days in the case of
management agreement), the same shall be referred to
arbitration in accordance with the procedure specified
in the Act.

• On April 9, 2003 Pampa was incorporated in terms

of the Companies Act, 1956.
• On 21.4.2004 APTDC terminated the said
agreements on 21.4.2004. Thus, disputes arose
between the parties.
• In March 2005: Respondent, filed an application
for appointment of arbitrator before the Andhra
Pradesh High Court under section 11 of the
Arbitration and Conciliation Act, 1996 and sought
appointment of a sole arbitrator.
• Arguments of the Petitioner
• APTDC resisted the application. One of the
contentions being there was no arbitration
Agreement between them (March 2002) and
therefore the question of appointing an Arbitrator
under section 11 of the Act did not arise.
• Admittedly the respondent was not in existence on
that date, as it was incorporated only more than a
year thereafter on 9.4.2003;
• and obviously there was no contract much less
any arbitration agreement between the parties.
• Arguments of Respondent
• However, according to the respondent, the
arbitration agreement came into existence
on 30.3.2002, when parties executed the
Lease Agreement and Management
Agreement on 30.3.2002 containing the
arbitration clause;
• On 16.08.2005 - Designate of the Chief Justice
allowed the application and appointed an
arbitrator in terms of Section 11 of the Act. 
• He held that having regard to the decisions
• in Konkan Railway Corporation Ltd. v.
Mehul Construction Co. [2000 (7) SCC
201] and
• Konkan Railway Corporation Ltd. v. Rani
Construction Pvt. Ltd. [2002 (2) SCC 388],
• he had only a limited administrative role under
section 11 of the Act, that is, to appoint the
arbitrator as per the agreed procedure, leaving
all contentious issues including whether
there was any arbitration agreement or not,
to be decided by the Arbitrator.

• On 26.10.2005, a 7 judge Bench of the

Supreme Court, in case of SBP & Co. v.
Patel Engineering (2005) 8 SCC 618,
overruling the law as it stood then, held
inter alia,
• that issues regarding the validity of arbitration
agreements raised in applications for appointment of
arbitrator under Section 11 ought to be decided
finally by the Chief Justice or his designate
under Section 11 and
• such a decision will be binding on the
parties and the arbitral tribunal. (Konkan
Railway Corpn. Ltd v. Rani Construction
Pvt. Ltd AIR 2002 2 SCC 388 decision
overruled )
• 22.11.2005: A SLP was filed by APTDC
challenging the decision of the said designate. (A.P
High Court)
• Identification of the relevant issues:
• (i) where the party seeking arbitration is a
company which was not in existence on the date of
the signing of the contract containing the
arbitration agreement -
• whether it can be said that there is an arbitration
agreement between the Parties and whether it is
binding on the company?
• (ii) whether the question as to the existence or
validity of the. arbitration agreement, has to be
decided by the Chief Justice/Designate when
considering the petition under Section 11 of the
Act or by the Arbitrator ?
• It is not disputed that both the
agreements contain a provision for arbitration.
It is also not disputed that both of them were
signed by Chairman of APTDC and MD of
•
Pampa Hotels Ltd.
 
• Explaining the relevant legal Principle and the
law/Section involved
• Section 11 of the Arbitration and Conciliation Act,
1996-
• Section 15 of the Specific Relief Act, 1963-
• Section34(2) & Section 149(3) - of the Companies
Act, 1956
• Article 136 of the Constitution of India.
• The certificate of registration issued by the
Registrar of Companies shows the date of its
incorporation as 9.4.2003.

• Section 34(2) of the Companies Act, provides - that

from the date of incorporation – it shall be capable
forthwith of exercising all the functions of an
incorporated company

• A certificate under section 149(3) of the Act

was issued by the Registrar of Companies
only on 6.6.2003, certifying that respondent is
entitled to commence business.
• Applying the law to the issues with logical
conclusions :
• It is thus clear that the applicant in application under
section 11 of the Act was non-existent on
30.3.2002 when the arbitration agreement
was entered into.
• The two agreements dated 30.3.2002 categorically
refer to Pampa Hotels Ltd. as an existing company
(promoted for the purpose of implementing the
project by Sudalagunta Hotels Ltd.) incorporated
under the provisions of the Companies Act.
• The agreements are not entered by the
promoters of the company, but by the
company itself, represented by its Managing
Director. Admittedly on 30.3.2002 there
was no such company in existence.

Admittedly, S. Jayarama Chowdary was not the

Managing Director of any company of that
name on above date.
 The position would have been different,
had the agreement been entered by the
promoters of the respondent company before
its incorporation for the purposes of the company
and such contract was warranted by the terms of
incorporation. – Under Section 15 of the
Specific Relief Act, 1963.

• The agreement would have been valid; and the

term regarding arbitration therein could
have been enforced.

 
• “But for reasons best known to themselves, the
agreement was entered not by the promoters of
Pampa Hotels Ltd., on behalf of a company proposed
to be incorporated by them, but by a
non- existing company claiming to be an existing
company”
• Relevant precedents – Applicability of the Ratio to
the given case. - S.B.P & Co. v Patel Engineering
Ltd. (2005) 8 SCC 618

• This question is no longer res integra. (A case or a

question that has not been examined or passed
upon)
• Judgement
• i) There is no arbitration agreement between the
respondent and APTDC against whom such agreement
is sought to be enforced.
• Ii) that the question whether there is an arbitration
agreement and whether the party who has applied
under section 11 of the Act, is a party to such an
agreement, is an issue which is to be decided by
the Chief Justice or his Designate under
section 11 of the Act before appointing an
arbitrator.
• Critical Appraisal and Implication
• Based on SBP case there is no doubt that the issue
ought to have been decided by the Chief Justice
and could not have been left to
the arbitrator.

However the judge in APDTC case followed the

decision was rendered in the two Konkan Railway
cases.
• It was later in SBP case a seven-Judge Bench of
this Court overruled the two decisions in Konkan
Railway.

• Having regard to the fact that several decisions

rendered under section 11 of the Act had followed the
decisions in Konkan Railway, --- the decision in
SBP case was made prospective in application.
• On account of the prospective overruling direction in
SBP,

• any appointment of an arbitrator under Section 11

of the Act made prior to 26.10.2005 has to be
treated as valid and all objections including the
existence or validity of the arbitration
agreement, have to be decided by the
arbitrator under section 16 of the Act.
• The legal position enunciated in the judgment in SBP

• will govern the applications to be filed under Section

11 of the Act from 26.10.2005, as also the
applications under section 11 of the Act pending
as on 26.10.2005 (where the Arbitrator was not yet
appointed).
• The law on this aspect prior to SBP was

• that questions regarding the validity of arbitration

agreement could only be taken before the arbitral
tribunal and not before the appointing court under
Section 11 of the Act.
• Thus, the appeal is disposed off without interfering
with the appointment but with a direction to the
Arbitrator

• to decide the issue in regard to the

existence/validity of the arbitration agreement
as a preliminary issue relating to jurisdiction.
• Arbitration clause incorporated in Agreements
entered in to with Government. - Essentials

• i) Agreement containing an arbitration clause must

conform to the mandatory requirements of Art 299 of
the Constitution of India.
• Ii) the contract must be expressed in the name of the
President of India or Governor of the State and
executed on behalf of the President or the Governor.
• Iii) It should be naturally in writing and must be
executed by a person authorized to execute it on
behalf of the President or the Governor. –

• Iv) One of the most significant aspects of an

arbitration agreement is that whether there can be
Arbitration Agreement on behalf of a minor.
• As a minor is not competent to enter into contract he
cannot agree to submit to Arbitration.
• However, an arbitration agreement may be made on
behalf of the minor by his natural or legal guardian
if it is made in good faith and for the
benefit of the minor.
• However if the minor is not properly represented and
the guardian fails in his duty the award is not binding
on the minor. - Mohiri Bibi v Dharmodas Ghosh
• The main thrust of amendments in the Arbitration
and Conciliation (Amendment) Act 2015 :
• i) The main thrust of amendments is to minimize the
delays in arbitration process and courts’ intervention
by
• ii) Empowering arbitral Tribunal with the same
powers of a court for the purpose of granting
interim measures/relief
• iii)Suggesting indicative model fee structure for
Arbitral Tribunal

• iv)Fixing time limits for passing of arbitral award

and disposal of applications by courts

• v) Mandating detailed disclosures/ guidelines for

disqualification for ensuring impartiality,
independence of arbitrators
• Sec 2 ----- -----
• Sec 7 (4) (b) -
• an exchange of letters, telex, telegrams or other
means of telecommunication which provide a record
of the agreement; -
• After the words - or other means of
telecommunication, the words - including
communication through electronic means
-Amendment Act 2015
• Sec 8 - Power to refer parties to arbitration where
there is an arbitration agreement - Effect of the
Arbitration clause.

• (1) The effect is that judicial authority before

whom the action is brought in a matter which is
the subject of an arbitration agreement shall, if a
party to the arbitration agreement or any person
claiming through or under him,
• so applies not later than the date of submitting his
first statement on the substance of the dispute,
then,
• notwithstanding any judgment, decree or order of
the Supreme Court or any Court, is bound to
refer the parties to Arbitration, and
(Unless it find that prima facie no valid arbitration
agreement exists)- Amendment Act 2015.
• (2) The application is accompanied by the original
agreement or a duly certified copy thereof.
• (where the party making an application does not
have the agreement and is retained by the other
party – it shall request the court to direct the other
party to produce the original or a certified copy) -
Amendment Act, 2015
• Though it is mandatory for court to refer the
parties to arbitration, however certain conditions
are required to be satisfied…..
• i) There is an existence of a legally valid agreement
which is operative and capable of being
performed.
• Ii) One of the parties start legal proceedings.

• Iii) The legal action is brought in manner which is

the subject of an arbitration agreement.
• Iv) The dispute in the legal proceedings is covered by
and is arbitrable under the Agreement
• V) An application is made by a party to the
judicial authority before whom an action is
brought requesting that the parties be referred to
Arbitration.
• Vi) Such application is made by a party before
submitting his first statement on the substance of
dispute.
• P. Anand Gajapathi Raju and Others v P. V. G.
Raju (Dead) and Others (2000) 4 SCC 539
• P. Anand Gajapathi Raju and Others v P. V. G.
Raju (Dead) and Others (2000) 4 SCC 539
• “During the pendency of this appeal all the parties
have entered into an arbitration agreement. The
question that arises for consideration is whether
this Court in appeal can refer the parties to
arbitration under the new Act” .
• “This last provision creates a right in the person
bringing the action to have the dispute adjudicated by
Court, once the other party has submitted his first
statement of defense. But if the party, who wants
the matter to be referred to arbitration applies to
the Court after submission of his statement and
the party who has brought the action does not
object, as is the case before us, there is no bar on
the Court referring the parties to arbitration”.
• “The language of Section 8 is peremptory. It is,
therefore, obligatory for the Court to refer the
parties to arbitration in terms of their arbitration
agreement. Nothing remains to be decided in the
original action or the appeal arising there from”.
 • PROCEDURE -ARBITRATION ACT, 1996
• Appointment of Arbitrator and composition of the
Arbitral Tribunal.

• The obvious question is what is an arbitral

tribunal?

• An Arbitral Tribunal means a sole arbitrator or a

panel of odd arbitrators appointed in accordance
with the provisions of -----------
 Provisions in relation to the composition of an
Arbitral Tribunal. - Sec 10 to Sec 15 of the Act.
• Sec 10 – relates to the number of Arbitrators.

• Sec 11 – relates to mode of appointment

• Sec 12 – relates to the grounds for challenging the

appointment of Arbitrator.
• Sec 13 lays down the procedure for challenge.

• Sec 14 stipulates that the mandate of an arbitrator

shall terminate in case of failure or impossibility to
Act.

• Sec 15 lays down additional grounds for termination

of Mandate and appointment of substitute arbitrator.
• Sec 10 gives the option to the parties for
appointing the number of Arbitrators -
• however this is subject to restriction imposed under
section 10(1) which restricts the arbitrators being
even in number.
• (2) Where, however the parties do not determine
as stipulated above - the arbitrator shall be an sole
Arbitrator.
• Mode of appointment of Arbitrators ?
• Sec 11 – Mode of appointment of Arbitrators
• According to Russell, the term appoint means to
“concur in appointing”.
• How does the appointment take place –
• The proposed person must be approached and
told that it is desired to appoint him as arbitrator
in a particular matter
• and he must indicate his willingness to act as such.

• This should also be communicated in writing to

the other party by him in clear and unequivocal
language.

• The expression ‘appointment’ connotes effective

appointment. A mere nomination unknown to the
appointee would not be enough to constitute an
appointment.
• Sec 11 -In Section 11 (instead of (Chief Justice)
Supreme Court and (Chief Justice) High Court.)
“The arbitral institution referred to shall be
substituted; (2019 Amendment)

• Sec 11 (1) also stipulates that a person of any

nationality may be appointed as an arbitrator.
However the parties are free to decide otherwise
• Sec 11 (2) speaks about procedure for
appointment of Arbitrator. The parties are free to
decide on the procedure of appointment of the
Arbitrator/s. However this is subject to
sub-section 6.
• (3)Failing any agreement referred to in
sub-section(2), in an arbitration with three
arbitrators,
• each party shall appoint one arbitrator, and the two
appointed arbitrators shall appoint the third arbitrator
who shall act as the presiding arbitrator.
• Sec 11(2) and Sec 11(3) speak about appointment
of Arbitrator by the parties.

• Another mode of appointment of Arbitrator is by the

Chief Justice of a High Court /Chief Justice of India.-
However the Chief Justice (High Court/Supreme
Court) can only exercise powers only upon the
request of a party.
• In section 11 of the principal Act,—after sub-section
(3), the following sub-section shall be inserted,
namely:—
• (3A) The Supreme Court and the High Court shall
have the power to designate, arbitral institutions,
from time to time, which have been graded by the
Council under section 43-I, for the purposes of this
Act:
• Provided that in respect of those High Court
jurisdictions, where no graded arbitral institution are
available, then,

• the Chief Justice of the concerned High Court may

maintain a panel of arbitrators for discharging the
functions and duties of arbitral institution and
• any reference to the arbitrator shall be deemed to
be an arbitral institution for the purposes of this
section and the arbitrator appointed by a party
shall be entitled to such fee at the rate as specified
in the Fourth Schedule:

• Provided further that the Chief Justice of the concerned

High Court may, from time to time, review the panel
of arbitrators.; (2019 Amendment)
• So - what are the circumstances in which a party may request
the Chief Justice or the person delegated by him to appoint
the Arbitrators.

• The same is governed under Sections 11 (4) (5) and (6).-

The Circumstances under which the Chief Justice (High
court) can make the appointment are : [Sec 11(4)]

• In case of an arbitration with three arbitrators, when the

procedure prescribed under Sec 11 (3) applies –and
• a) either because one of the parties fails to appoint an
arbitrator within thirty days from the receipt of the request
to do so from the other party, or
 Ii) because the two arbitrators appointed by the parties
fail to agree upon the third arbitrator within thirty days
from the date of their appointment the “the appointment
shall be made, on an application of the party, by the
arbitral institution designated by the Supreme Court,
in case of international commercial arbitration, or by
the High Court, in case of arbitrations other than
international commercial arbitration, as the case may
be”; (2019 Amendment)

• 5) Failing any agreement referred to in sub-section (2),

in an arbitration with a sole arbitrator, if the parties fail
to agree on the arbitrator within thirty days from receipt of
a request by one party from the other party to so agree
• “the appointment shall be made on an application of the
party in accordance with the provisions contained in sub-
section (4)”;. (2019 amendment)
• (6) Where, under an appointment procedure agreed upon by the
parties,-
• (a) a party fails to act as required under that procedure; or
• (b) the parties, or the two appointed arbitrators, fail to reach an
agreement expected of them under that procedure; or
• (c) a person, including an institution, fails to perform any
function entrusted to him or it under that procedure, --- then
• .
• “the appointment shall be made, on an application
of the party, by the arbitral institution designated
by the Supreme Court, in case of international
commercial arbitration, or by the High Court, in
case of arbitrations other than international
commercial arbitration, as the case may be”;.

• (7) Omitted (2019 amendment)

• Qualities and qualifications of the Arbitrator.
• The Act does not lay down any specific qualification
for the appointment of the Arbitrator.

• However Sec 11 (8) of the Arbitration and Conciliation

Act, 1996 says that it will be proper that the
appointment by the Court would be of
• a person qualified to adjudicate the dispute
considering the technicalities thereof and that he
would be independent and impartial.
• After the Seventh Schedule to the principal Act,
the following Schedule shall be inserted, namely:
––
• ‘‘THE EIGHTH SCHEDULE
• (See section 43J) (2019 Amendment)
 .
• (8) The arbitral institution; (2019 Amendment)
(before appointing an arbitrator shall seek a
disclosure in writing from the prospective
arbitrator in terms of sub-section (1) of section 12,
and have due regard to --) – Amendment Act,
2015
• (a) any qualifications required of the arbitrator by
the agreement of the parties and
• (b) (the contents of disclosure and) - Amendment
Act, 2015 other considerations as are likely to
secure the appointment of an independent and
impartial arbitrator.
• (9) In the case of appointment of sole or third
arbitrator in an international commercial
arbitration, “the arbitral institution designated by
the Supreme Court” (2019 Amendment)

• may appoint an arbitrator of a nationality other

than the nationalities of the parties, where the
parties belong to different nationalities.
• (10) Omitted
• For sections (11) to (14), the following sub-sections -
substituted (2019 Amendment)
• (11) Where more than one request has been made under sub-
section (4) or sub-section (5) or sub-section (6) to different
arbitral institutions, the arbitral institution to which
the request has been first made under the relevant
sub-section shall be competent to appoint.
• (12) Where the matter referred to in sub-sections (4), (5), (6)
and (8) arise in an international commercial arbitration or
any other arbitration, the reference to the arbitral institution
in those sub-sections shall be construed as a reference to the
arbitral institution designated under sub-section
(3A).
• One question which arises for consideration is after
the Court appoints the Arbitrator, does it have
jurisdiction to make an order of reference of the
disputes to the arbitrator.

• It does not have jurisdiction and if it does so, the

award would be rendered invalid.
• (13) An application made under this section for
appointment of an arbitrator or arbitrators shall
be disposed of by the arbitral institution within a
period of thirty days from the date of service of
notice on the opposite party.

• (14) The arbitral institution shall determine the

fees of the arbitral tribunal and the manner of its
payment to the arbitral tribunal subject to the
rates specified in the Fourth Schedule.
• Explanation.—For the removal of doubts, it is
hereby clarified that this sub-section shall not
apply to international commercial arbitration and
in arbitrations (other than international
commercial arbitration) where parties have
agreed for determination of fees as per the rules of
an arbitral institution.
• Datar Switch Gears Ltd. v Tata Finance Ltd
(2000) 8 SCC 151 – (Time period for appointment
of Arbitrator u/s 11)
• Facts
The appellant had entered into a lease agreement with
the 1st respondent in respect of certain machineries.

Subsequently, dispute arose between the parties.

• The 1st respondent sent a notice to the appellant
on 5.8.1999 demanding payment of Rs. 2,84,58,701
within fourteen days and in the notice it was
specifically stated that

• in case of failure to pay the amount, the notice

be treated as one issued under Clause 20.9
(Arbitration clause) of the Lease Agreement.
• The appellant did not pay the amount as demanded
by the 1st respondent and also did not appoint an
Arbitrator even after the lapse of thirty days.

• On 25.11.99, the 1st respondent appointed the 2nd

respondent as the sole Arbitrator by invoking
clause 20.9 of the Lease Agreement

• and the Arbitrator in turn issued a notice to the

appellant asking them to make their appearance
before him on 13th March, 2000.
• Thereafter, the appellant filed Arbitration Application
No. 2/2000 before the Chief Justice of Bombay and
prayed for appointment of another Arbitrator and
the 1st respondent opposed this application.

• This petition was rejected by the Chief Justice

holding that as the Arbitrator had already been
appointed by the first respondent, and as such the
petition was not maintainable.
• The order of the Bombay High Court was challenged
in the Supreme Court.
• Issues.
• The core issue was regarding the 1st respondent
appointing an Arbitrator after the lapse of the
notice period of 30 days
• Appointment of the arbitrator vis-a-vis Sec 11 (6).
• According to the appellant, the power of
appointment should have been exercised within a
reasonable time.
•Section 11 of the Act deals with the procedure for
appointment of Arbitrator. Section 11(2) says that the
parties are free to agree to any procedure for appointing
the Arbitrator.

•If only there is any failure of that procedure, the

aggrieved party can invoke sub-clause (4), (5) or (6) of
Section 11, as the case may be.
• 20.9 “It is agreed by and between the parties that in
case of any dispute under this Lease the same shall
be referred to an Arbitrator to be nominated by
the Lessor and the award of the Arbitrator shall be
final and binding on all the parties concerned. The
venue of such arbitration shall be in Bombay.
• Save as aforesaid, the Courts at Bombay alone and no
other Courts whatsoever will have jurisdiction to try
suit in respect of any claim or dispute arising out of
or under this Lease or in any way relating to the
same.”
• In the instant case, the Arbitration clause in the Lease
Agreement contemplates appointment of a sole
Arbitrator.
• If the parties fail to reach any agreement as referred
to in Sub-Section (2), or if they fail to agree on the
Arbitrator within thirty days from receipt of the
request by one party,
• the Chief Justice can be moved for appointing an
Arbitrator either under sub-clause (5) or sub-clause
(6) of Section 11 of the Act.
• Sub-clause (5) of Section 11 can be invoked by a
party who has requested the other party to
appoint an Arbitrator and the latter fails to make
any appointment within thirty days from the
receipt of the notice.

• Admittedly, in the instant case, the

appellant has not issued any notice to the 1st
respondent seeking appointment of an Arbitrator.
• An application under sub-clause (6) of Section 11
can be filed when there is a failure of the procedure
for appointment of Arbitrator.
• The appellant does not mention under which
sub- section of Section 11 the application was
filed.
• Evidently it must be under Sub-section (6) (a) of
Section 11, as it is not the appellant’s case that a
notice was issued, but an Arbitrator was not
appointed.
• The above clause gives an unfettered discretion to
the 1st respondent lessor to appoint an Arbitrator.

• The 1st respondent gave notice to the appellant and

later appointed the 2nd respondent as the Arbitrator.
• The question then arises whether for purposes of
Section 11(6) the party to whom a demand for
appointment is made, forfeits his right to do so if
he does not appoint an arbitrator within 30 days.
• Arguments of Appellant
• Learned Senior counsel for the appellant contends that
even though Section 11(6) does not prescribe a
period of 30 days, it must be implied that 30 days is
a reasonable time for purposes of Section 11(6) and
thereafter, the right to appoint is forfeited.
Arguments of Respondent
• Learned Senior counsel for the respondents submits
that under Section 11(6) no period of time is
prescribed and hence the opposite party can make
an appointment even after 30 days, provided it is
made before the application is filed under Section
11.
• Judgment
• This is not a case where the appellant requested and
gave a notice period for appointment of arbitrator and the
latter failed to comply with that request.

• The 1st respondent asked the appellant to make payment

within a stipulated period and indicated that in the event
of non-payment of the amount within fourteen days, the
said notice itself was to be treated as the notice under the
Arbitration clause in the Agreement.
• In the present case, the respondent made the
appointment before the appellant filed the
application under Section 11 but the said
appointment was made beyond 30 days.

• Question is whether in a case falling under Section

11(6), the opposite party cannot appoint an
arbitrator after the expiry of 30 days from the date
of demand?
• So far as cases falling under Section 11(6) are
concerned -- such as the one before us – no time
limit has been prescribed under the Act,

• whereas a period of 30 days has been prescribed

under Section 11(4) and Section 11(5) of the Act.
• Analysis
• In our view, therefore, so far as Section 11(6) is
concerned, if one party demands the opposite party to
appoint an arbitrator and the opposite party does not
make an appointment within 30 days of the demand,

• the right to appointment does not get automatically

forfeited after expiry of 30 days, and
• If the opposite party makes an appointment even after
30 days of the demand, but before the first party
has moved the Court under Section 11, that
would be sufficient.
• In other words, in cases arising under
Section 11(6), if the opposite party has not made an
appointment within 30 days of demand,

• the right to make appointment is not forfeited but

continues, but an appointment has to be made
before the former files application under Section
11 seeking appointment of an arbitrator.
• Only then the right of the opposite party ceases.
• In the present case the respondent made the
appointment before the appellant filed the application
under Section 11(6) though it was beyond 30 days
from the date of demand.

• In our view, the appointment of the arbitrator by the

respondent is valid and it cannot be said that the
right was forfeited after expiry of 30 days from the
date of demand.
• Therefore, we do not think that the first
respondent, in appointing the second respondent
as the Arbitrator, failed to follow the procedure
contemplated under the Agreement or acted in
contravention of the Arbitration clause.
• Referred Case
• Bhupinder Singh Bindra Vs. Union of India and
Another (1995) 5 SCC 329
• Hence, the appellant, while filing the application
under Section 11 of the Act had no cause of action
to sustain the same.

• The application was rightly rejected and

dismissed
• Sec 12 –
• is widely worded and explanation added. Grounds are
given in the Fifth Schedule which shall guide
in determining whether circumstances exist
which give rise to justifiable doubts as to the
independence or impartiality of an
arbitrator. - Amendment Act, 2015

• After 12 (4) - Sec 12 (5) inserted Amendment Act,

2015 – significance and import
 • Challenge to the appointment of Arbitrator. –
- Sec 12 and Sec 13
• 12.(1) Grounds for challenge:-
• (1) when a person is approached in connection
with possible appointment of arbitrator a
obligation is cast upon him to

• disclose without delay to the parties in writing, any

circumstances likely to give justifiable doubts as to
his independence or impartiality. ---
• Amendment Act, 2015- (a) such as the existence
either direct or indirect, of any past or present
relationship with
• or interest in any of the parties or
• in relation to the subject-matter in dispute,
whether financial, business, professional or
other kind,
• which is likely to give rise to justifiable doubts as
to his independence or impartiality;
• and (b) which are likely to affect his ability to
devote sufficient time
• to the arbitration and in particular his ability to
complete the entire arbitration within a period of
twelve months.
• (2)This is applicable throughout the Arbitral
proceedings.
• (3) The Section stipulates only two grounds on which
the appointment of the Arbitrator may be challenged:
• i) circumstances exist that give rise to justifiable
doubts as to his independence or impartiality.
• Ii) he does not posses the qualifications agreed to by
the parties.
• (4)A party may challenge an arbitrator appointed by
him also. But-only for those reasons of which he
becomes aware after the appointment has been made.
• Amendment Act, 2015 -(5) Notwithstanding any
prior agreement to the contrary, any person whose
relationship, with the parties or counsel or the
subject-matter of the dispute, falls under any of
the categories specified in the Seventh
Schedule shall be ineligible to be appointed
as an arbitrator:
• Provided that parties may, subsequent to disputes
having arisen between them, waive the
applicability of this sub-section by an express
agreement in writing.
• Assignia-Vil Jv vs Rail Vikas Nigam Limited Arbitration
Petition No. 677/ 2015 (Decided on April 29, 2016).
• Facts
• The law was earlier governed inter alia by the
Supreme Court judgement in Indian Oil Corporation
Ltd. v Raja Transport (P) Ltd (2009) 8 SCC 520, in
which it was held that
• while appointment of employees of private parties
is not suitable, there is no bar for an employee of a
government/statutory corporation/PSU acting as
arbitrator
• with the proviso that he should not have a nexus
with the contract in respect of which the specific
dispute may have arisen. 
• Assignia and the Respondent, Rail Vikas Nigam Ltd
entered into an agreement for the Construction of
‘roadbed’ and other related works in the Lucknow
Division of Northern Railways.
• The Contract contained a procedure for
appointment of arbitrators (Clause 20.3) whereby
the Respondent was to forward a panel of 5 names
to Assignia and Assignia would then have to give
its consent for any one name out of the panel to be
nominated as arbitrator.
• The Respondent was to nominate the second arbitrator
from the said panel and the third arbitrator was to be
chosen by the two arbitrators appointed by the parties.
• The arbitration clause further specified that the
arbitrator candidates should meet various criteria,
including age and specific qualifications,
• and also stated that they should be serving or
retired officers of RVNL or the Indian Railways
Accounts Service, with the presiding officer
necessarily a serving railway officer.
• Subsequently, three distinct claims were referred to
arbitration, and a tribunal was constituted of members
who met the above criteria.

• However, the disputes escalated and RVNL purported

to terminate the Contract. Assignia sought to refer the
termination dispute to arbitration,
• but on this occasion, given that the
amendments to the Arbitration Act had by
now taken effect, Assignia requested that an
independent tribunal be appointed.
• RVNL did not produce a list of arbitrator candidates
for the termination dispute, contending that the
matter could be referred to the existing tribunal
hearing the three pre-existing claims.

• Assignia then approached the Delhi High Court for

appointing a tribunal to adjudicate over the
termination dispute.
• Core Issue
• The core issue before the court was whether the
tribunal can be constituted in accordance with
Clause 20.3 above or in accordance with the
amended Act.

• Section 12(5) of the amended Act states that

“notwithstanding any prior agreement to the contrary,
any person whose relationship, with the parties or
counsel or the subject-matter of the dispute, falls
under any of the categories specified in the Seventh
Schedule shall be ineligible to be appointed as an
arbitrator”.
• ARGUMENTS
• Contentions of the Petitioner
• The Petitioner based their arguments on the following
main contentions:-
• Issue of termination of Contract constitutes a distinct
and complicated issue;
• First Tribunal had been constituted to adjudicate
specific issues and only to deal with the three original
claims;
• Nomination of arbitrators who are serving or retired
employees would not constitute an independent and
unbiased tribunal;

• Arbitration with respect to the Second Dispute was

invoked post October 23, 2016, making provisions of
the Amendment Act applicable. The Second Dispute,
therefore cannot be referred to First Tribunal.
• Contentions of the Respondent
• The Respondent argued that there was already an existing
tribunal and new claims could be added to the pending
arbitration.
• The Respondent had given its consent to add/modify claims
subsequent to the termination of contract, to be considered
by First Tribunal itself.
• The Respondent argued that additional claims could be
raised before the First Tribunal and that there was no legal
justification in restricting the scope of arbitration, as the aim
of the procedure was to settle all disputes between the
parties and avoid future litigation.
• No objections were raised on the independence or
impartiality of the First Tribunal by the Petitioner till
date and therefore the Second Dispute may also be
dealt with by the same tribunal.

• The Respondent contended that the Petitioner could

not demand constitution of a new Tribunal and take
benefit of its own mistake, after failing to participate
in the proceedings before the First Tribunal
• The Seventh Schedule of the Arbitration Act
mandates that an arbitrator should not be an
employee, consultant, advisor or have any other past
or present business relationship with a party.

• Therefore, Assignia argued, an arbitral tribunal

consisting of present or past employees of RVNL
would was violative of this section.
• Judgment

• The High Court relied upon Sec 12(5) of the

amended Act which states that notwithstanding any
prior agreement to the contrary,
• a person, whose relationship with the
parties/counsel/subject-matter of the dispute falls
under the categories specified in the Seventh
Schedule, will be ineligible to be appointed as an
arbitrator. 
• The Seventh Schedule of the amended Act contains
various categories relating to the arbitrator's
relationship with the parties or counsel, which make
him ineligible to be appointed as an arbitrator.

• The first category is “an employee, consultant,

advisor” or a person having any other past or
present business relationship with a party.
• Based on the language of the newly inserted
provisions, the court held that “the arbitrator being
an employee of one of the parties would definitely
give rise to justifiable doubt as to his independence
and impartiality” and would defeat the very
purpose of amending the Act.
• The Delhi High Court held that the amendments to
the Arbitration Act would apply to the termination
dispute as the request for arbitration of that
dispute was made after the amended Act had come
into force.
• The Court ruled that there was no obligation to refer
to a pre-existing tribunal such disputes as had arisen
after the initial arbitral proceedings had commenced.

• Accordingly, Assignia was entitled to seek a new

tribunal for the termination dispute.
• The Court also held that it was “duty bound to
secure the appointment of an independent and
impartial” tribunal, and that appointing an RVNL
employee in a matter to which RVNL was a party
“would definitely give rise to justifiable doubt as to
his independence and impartiality”.

• The Court thus proceeded to appoint three

independent arbitrators and the petition was
disposed of no costs.   
• Referred Cases
• State of Orissa v Asis Ranjan (1999) 9 SCC 249
• HL Batra & Co. v State of Haryana (1999) 9 SCC 188
• Shyam Charan Agarwal & Sons (2002) 6 SCC 201
• Dolphin Drilling Limited v Oil and Natural Gas Corporation
Limited
• Deep Trading Company v. Indian Oil Corporation and Ors.
(2013) 4 SCC 35 and North Eastern Railway v. Tripple
Engineering Works. (2014) 9 SCC 288
•
• Analysis and Implication :
• The decision is an instance where the courts have
taken a proactive step in implementing the scheme
of the Amendment Act in appointing an
independent and impartial tribunal.
• This decision is significant as it shows the
willingness of the courts to implement the new
amendments to the Arbitration Act even to older
contracts, where the dispute arises after the
amendments came into force.
• The Court clearly held that under the new regime,
clauses requiring arbitrators to be employees of a
party would not be upheld, but that the
arbitration agreement more generally would still
be effective.

• It also ensured that the new rules would not be

circumvented by pre-existing arbitrations –

• by affirming that newly arising disputes did not

have to be brought into the scope of existing
arbitral proceedings.
• This decision is of special significance to
government entities and PSU’s who often had,
current and past employees as arbitrators in
ongoing disputes - since similar clauses are likely
to be struck down by courts under the amended
Act.

• It also reflects positively the constant endeavor of

the legislature and judiciary who are working in
consonance, in bringing the Indian law in line
with the International law and practice.
• By way of this judgment, the Court has further made
it their goal to provide for neutral arbitrators.

But, question is what repercussions enacting

multifarious tribunals for different claims in a single
Contract may have on the expeditious disposal of
cases.

• It has upheld the impartiality and independence of the

Arbitration Tribunal and has definitely put an end to
the favoured practice of appointing ‘in-house’
arbitrators.
• GMBH v Delhi Metro Rail Corporation Arbitration
Petition (Civil) No. 50 of 2016 decided on 10.2.2017
• Facts
• The Petitioner is an Austrian company engaged in the
inter alia in manufacture, production and supply of
steel rails and related products.
• The Respondent (‘Purchaser’), is a government
owned corporation which floated tenders supply of
steel rails.
• This contract was awarded to the Petitioner and the two
parties entered into an agreement dated August 12,
2013.
• Disputes arose under the Agreement when the
Respondent

• (i) withheld amount on the Petitioner’s invoices;

(ii)encashed performance bank
guarantees; (iii) imposed liquidated
damages.

• On June 14, 2016, after attempts to amicably

resolve the disputes were not successful, ----
• Petitioner invoked arbitration under the Agreement which
was as follows :
• ARBITRATION & RESOLUTION OF DISPUTES.
• The Arbitration & Conciliation Act, 1996 of India shall be
applicable.
• Purchaser and the supplier shall make necessary effort to
resolve amicably by direct and informal negotiation any
disagreement or dispute arising between them under or in
connection with contract.
• If the efforts to resolve all or any of the disputes through
negotiation fails, then such disputes or differences
whatsoever arising between the parties, shall be referred to
Arbitration in accordance with the following provisions:
• 1. Matters to be arbitrated upon shall be referred
to a sole Arbitrator where the total value of claims
does not exceed Rs. 1.5 million. Beyond the claim
limit of Rs. 1.5 million, there shall be three
Arbitrators.

• For this purpose the Purchaser will make out a

panel of engineers with the requisite qualifications
and professional experience. This panel will be of
serving or retired engineers of Government
Departments or of Public Sector Undertakings;
• 2. For the disputes to be decided by a sole
Arbitrator, a list of three engineers taken from the
aforesaid panel will be sent to the supplier by the
Purchaser from which the supplier will choose one;
• 3. For the disputes to be decided by three
Arbitrators, the Purchaser will make out a list of
five engineers from the aforesaid panel. The
supplier and Purchaser shall choose one Arbitrator
each, and the two so chosen shall choose the third
Arbitrator from the said list, who shall act as the
presiding Arbitrator. …………”
• However, the Petitioner took the stand that
appointment of the arbitral tribunal under the
procedure specified in the Agreement would lead
to the appointment of “ineligible persons” as
arbitrators, in light of the requirements imposed
by Section 12(5) read with Schedule 7 of the
amended Arbitration & Conciliation Act, 1996.

• The Petitioner therefore nominated a retired

Supreme Court judge as sole arbitrator and
sought the consent of the Respondent.
• The Respondent stated that the procedure in the
arbitration agreement has to be followed and
circulated a list of five potential arbitrators from
the panel.

• The Respondent nominated a retired officer of the

Indian Railway Services as its nominee arbitrator
and called upon the Petitioner to appoint its nominee
from the remaining four options.
• However, the Petitioner proceeded to file a petition
before the Court under Section 11 of the Act, for
appointment of an independent and impartial
tribunal.
• The Petitioner argued that any arbitrator that it
nominates from within a list circulated by the
Respondent
• would not qualify as an independent or impartial
arbitrator in accordance with recently amended
Section 12 of the Act read with Schedule 7 of the
Act.
• The Respondent is a public sector undertaking and as
such is Government oriented. Therefore appointing
an any person who was a serving or retired engineer
of Government departments or public sector
undertaking
• would defy the neutrality aspect as they had direct
or indirect nexus/privity with the Respondent and
the Petitioner had reasonable apprehension of bias
against such persons.
• The Respondent argued that the persons on the
proposed list were neither serving nor
ex-employees of the Respondent. They were
ex-officers of other public bodies.

• Further, the Respondent had also sent a fresh list

containing thirty one names for the Petitioner to
consider and appoint its nominee.
• The other names on the list were retired officers
from the Indian Railways who retired from high
positions and had a high degree of technical
qualifications and experience.

• Merely because these persons may have served in

railways or other government departments would
not, by itself, have effect on their impartiality.
• Judgment:
• The court held that this was not a fit case for them to
exercise jurisdiction and constitute the arbitral
tribunal.
• The Court stated that the focus of Section 12 read
with Schedule 7 lay in determining the
neutrality of arbitrators viz. their
independence and impartiality, which was
critical to the entire process.
•TEST LAID DOWN

•The Law Commission had in its 246th report

reiterated that the test in question was not whether
there was any actual bias but, in fact, whether the
circumstances in question give rise to any justifiable
apprehension of bias.
• The Court went on to hold that merely because the
persons proposed were ex-government employees
(and in no way connected to the Respondent), that
by itself would not make them ineligible to act as
arbitrators.

• Had it been the intention of legislature to

cover such persons, it would have been
provided for in the Seventh Schedule.
• The Court also stated that bias or even real
likelihood of bias cannot be attributed to such highly
qualified and experienced persons, simply on the
ground that they served the Central government or
public sector undertakings, where they had no
connection with the Respondent.

• Interpretation :
• Pursuant to the amendment, there is an embargo on
a person to act as an arbitrator if he has been either
an employee or consultant or advisor or had any past
or present business relations with the parties, which
was not the case.
• The Court also directed the Respondent to amend
and expand its panel in a time bound manner to
include (i) engineers of prominence and high
repute from the private sector; (ii) persons with a
legal background i.e. judges and lawyers; and (iii)
persons having expertise in accountancy.

• The Court also stated that it was time to send

positive signals to the international business
community in order to create a healthy arbitration
environment and conducive culture in India.
• There should be no misapprehension, that the
principle of impartiality and independence, would be
discarded at any stage of the proceedings.

• This duty was only more onerous in contracts

where the state was party.
• Analysis and Implication :
• This above steps will enable parties to appoint a
tribunal to having necessary expertise to deal with
the subject matter of the dispute.
• On the controversial practice of government
employees being appointed as arbitrators, the
Court chose to uphold the practice (subject to the
checks and balances built into the Act)
• and also appreciate that the reasons for
empanelling such highly qualified and experienced
persons was to ensure the technical aspects
of the dispute are suitably resolved.
• However, the Court may have lost an
opportunity to once and for all strike down
this practice in so far as it related to public
sector undertakings.
• It permitted access of parties to the entire,
broad-based panel of potential arbitrators, to be
setup in due course.

• The Supreme Court acknowledges that retired

government employees may be appointed as
arbitrators;.
 Thus, the Supreme Court upheld an arbitration
agreement which required the Petitioner to choose from
a panel of arbitrators maintained by the Respondent, -

consisting of retired engineers either of the

Government Department or Public Sector
Undertakings.
• Sec 13 – Challenge Procedure :
• (2). A party who intends to challenge an arbitrator
shall,
• within fifteen days becoming aware of the
constitution of the arbitral tribunal
or
• after becoming aware of any circumstances
referred to in sub-section (3) of section 12,
• send a written statement of the reasons for the
challenge to the arbitral tribunal.
 • Consequence & Implication
• (3) Unless the arbitrator challenged under
sub-section (2) withdraws from his office -or the
other party agrees to the challenge, arbitral
tribunal shall decide on the challenge.

• (4) If a challenge under sub-section (2) is not

successful,
• the arbitral tribunal shall continue the arbitral
proceedings and make an arbitral award.
• (5) Where an arbitral award is made under
sub-section (4), the party challenging the
arbitrator may make an application for setting
aside such an arbitral award in accordance with
section 34.

• (6) Where an arbitral award is set aside on an

application made under sub-section (5), the Court
may decide as to whether the arbitrator who is
challenged is entitled to any fees.
• 14. Failure or impossibility to act. -
• (1) (The mandate of an arbitrator shall terminate
and he shall be substituted by another arbitrator,
if -) Amendment Act, 2015
• (a) he becomes de jure or de facto unable to perform
his functions or
• for other reasons fails to act without undue delay;
and

• (b) he withdraws from his office or the parties agree

to the termination of his mandate.
• (2) If a controversy remains concerning any of the
grounds referred to in clause (a) of sub-section (1),
• unless otherwise agreed by the parties,
• - a party may, apply to the Court to decide on the
termination of the mandate. ----
• (3) If, under this section or sub-section (3) of section
13, - an arbitrator withdraws from his office or a
party agrees to the termination of the mandate of
an arbitrator,

• it shall not imply acceptance of the validity of any

ground referred to in this section or
sub-section (3) of section 12. –
• ( A voluntary withdrawal by arbitrator)
• 15. Termination of mandate and substitution of
arbitrator - (1) In addition to the circumstances
referred to in section 13 or section 14, the mandate
of an arbitrator shall terminate----

• (a) where he withdraws from office for any reason; or

(b) by or pursuant to agreement of the parties.
• (2) Where the mandate of an arbitrator terminates, a
substitute arbitrator shall be appointed according
to the rules that were applicable to the appointment
of the arbitrator being replaced.

• (3) Unless otherwise agreed by the parties, where an

arbitrator is replaced under sub-section (2), any
hearings previously held may be repeated
at the discretion of the arbitral tribunal.
• (4) Unless otherwise agreed by the parties,

• an order or ruling of the arbitral tribunal made

prior to the replacement of an arbitrator under
this section shall not be invalid
• solely because there has been a change in
the composition of the arbitral tribunal.
(Sub-sec (3) & (4) proviso enables the parties to
proceed with the matter without delay)
• Termination of the mandate of Arbitrator –
Whether - termination of proceedings :

• Termination of mandate means that the arbitrator

who was granted the mandate to conduct the
arbitration ceases to hold office.

• The question arises whether arbitration is

terminated. - No
 • Conduct of Arbitral Proceedings -
• Steps of Arbitration
• Prior to hearing of the matter-
• preliminary steps
• i) Modes of appointment of the arbitrator
• - Agreement between the parties,
• - by an order of the court,
• - by an statutory bodies or
• - by rules of an institution.
• complete by the arbitrator/s acceptance of the
appointment.

• ii) Fees, Fixing date and venue of Arbitration for

the first/preliminary meeting of the parties with the
Arbitral Tribunal.
 • Steps of Arbitration-
• During the hearing of the matter
First Procedural Order
1) Preliminary hearing
2) Interim application –
3) Further dates and fixation of Venue
4) Language
5) Institutional
6) SOC -SOD/WS
• 6) Counter claim
• 7) Affidavit
• 8) Discovery of Documents for evidentiary value.
• 9) Draft Issues
• 10) witnesses
• 11) Further Hearing dates for evidence arguments &
12) Declaration of award
• LAW OF LIMITATION - Limitation Act, 1963 is
applicable. –

• For this purpose, date on which the aggrieved party

requests other party to refer the matter to
arbitration shall be considered.

• Total claim –
• Part claim
Illustration:
• Sec 16–Jurisdiction of Arbitral Tribunal.
• Competence of the Arbitral Tribunal to rule on its
own Jurisdiction
• 1) The Arbitral Tribunal may rule on its own
jurisdiction,
• including ruling on any objections on
existence or validity of the agreement.
 For the purpose of ruling on any objections on
existence or validity of the agreement –
(a) an arbitration clause which forms part of the
contract shall be treated as an agreement
independent of the other terms of the
contract and
(b) a decision by the arbitral tribunal that the
contract is null and void shall not entail ipso
jure the invalidity of the arbitration clause.
• Conditions for taking recourse to the provision:

• 2) plea of lack of jurisdiction shall not be raised

later than the submission of the statement of
defense.

- Appointing an Arbitrator or participating

in it will not bar the party from raising the
plea.
• 3)plea the Arbitral Tribunal is exceeding the scope
of its authority shall be raised
• as soon as the matter alleged to be to be beyond
the scope of its authority
• is raised in course of Arbitral proceedings.
• 4) Discretion of Tribunal to admit plea
• 5) In the event that the Tribunal rejects the plea ----it can
continue with the proceedings and make an arbitral award
• 6) party aggrieved - can only appeal after an award
is made under section 34 of the Act.
• Significance of the provision --- Spirit of ADR
mechanism is upheld.
 • Principles of Kompetenz Kompetenz
• 1) The principles requires that the arbitral
tribunal must exercise jurisdiction over the
dispute under the Arbitration Agreement.

• 2) Challenge to the existence or validity of the

arbitration agreement
• will not prevent the arbitral tribunal from
proceeding with the hearing and ruling upon
its jurisdiction
• 3) If it retains jurisdiction, making an award on the
substance of dispute would be permissible without
waiting for the outcome of any court action
aimed at deciding the issue of the jurisdiction.

• 4) Where the dispute is not before an arbitral

tribunal, the court must also decline
jurisdiction unless the arbitration
agreement is patently void, inoperative or
incapable of being performed.
• 5) The Kompetenz Kompetenz principle is that
the arbitrators are entitled to be the first to
determine their jurisdiction which is later
reviewable by the court, where there is
action to enforce or set aside the arbitral
award.
• Sec 9 - Interim measures etc. by Court.-
• 1) A party may, before, or during arbitral
proceedings or at any time after the making of the
arbitral award -

• but before it is enforced in accordance with section

36, apply to a court for -
• i) appointment of a guardian for a minor or person
of unsound mind for the purposes of arbitral
proceedings or

• ii)for an interim or protection in respect of

• a) preservation,
• interim custody or
• sale of any goods which are the subject-matter of
the arbitration agreement
• b)securing the amount in dispute in the arbitration
• c) detention,
• preservation or
• inspection of any property or thing which is the
subject-matter of the dispute in
arbitration----------------

• d) interim injunction or appointment of receiver

• e) such other interim measure of protection as may

appear to the Court to be just and convenient and
• Sub-sections (2) and (3) added to Sec 9. -
Amendment Act, 2015
• Earlier, scope under Section 9 was wide enough to
allow applications for relief before or during
arbitral proceedings or after award but before it is
enforced u/s 36.

• Now amendment made in Section 9 and section 17

certainly limit the scope for extending litigation
through court
• Sub-Sec (2) - is a very significant amendment
• Where before the commencement of the Arbitral
Proceedings, a court passes an order for any
interim measures protection under sub-section (1)
• the arbitral proceedings shall be
commenced within a period of 90 days
from the date of such order or within such
further time as court may determine.
 • Consequence & Implication
• 1)Courts will now entertain applications for grant of
relief under Section 9 (interim measures) - only
before formation of Arbitral Tribunal.
• 2)Arbitral Tribunal has to be constituted within
90 days from the date of order or
• within such time as the court may specify in its
order granting interim relief.
• (3) Once the arbitral tribunal has been
constituted, the court shall not entertain any
application under section 9. –

• ------unless it find that circumstances exist

which may not render the remedy provided
under section 17 efficacious ???
• Sec 17–Interim measures ordered by Arbitral Tribunal–(1)
A party may during, the arbitral proceedings or at any time
after making an arbitral award but before it is enforced in
accordance with section 36, (Now Omitted) apply to the
Arbitral Tribunal
• (i) --------------------------
(ii) -------------------------
(a) -------------------------
(b) -------------------------
(c) -------------------------
(d) -------------------------
(e)--------------------------
• - and the arbitral tribunal shall have the
same power for making orders, as the court
has for the purpose of, and in relation to, any
proceedings before it

• - to grant all kinds of interim measures

which the Court is empowered to grant,
under Section 9 and such orders of Tribunal
are now enforceable as if they are orders of
court. –
• Thus, power of court u/s 9 is also given to Arbitral
Tribunal u/s 17 -
• Implication :
• Thus intention is further strengthened by amending
Section 17 - (ADR mechanism)
• (However power to be exercised before
commencement of the arbitral proceeding – some
discretion also left to court)
• Sec 19- Determination of rules of Procedure.

• (1) Arbitral Tribunal is not bound by

• Code of Civil Procedure, 1908 or

• Indian Evidence Act, 1872.
• (2) Subject to this part, -
• the parties to arbitration are free to agree on the
procedure to be followed by the Arbitral Tribunal.
• (3) Failing an agreement referred to in sub-section
(2), the arbitral tribunal may, subject to this part,
conduct the proceedings in the manner it considers
appropriate.

• (4) The power of the arbitral tribunal under

sub-section (3) includes power to determine
the admissibility, relevance, materiality and
weight of any evidence.
• 20. Place of arbitration.-
• (1) The parties are free to agree on the place of
arbitration.
• (2) Failing any agreement referred to in
sub-section (1), the place of arbitration
• shall be determined by the arbitral tribunal
having regard to the circumstances of the
case, including the convenience of the
parties.
• (3) Notwithstanding sub-section (1) or sub-section
(2), the arbitral tribunal may,
• unless otherwise agreed by the parties, - meet at
any place it considers appropriate
• for consultation among its members,
• for hearing experts or the parties, or
• for inspection of documents, goods or other property.
• Sec 21-Commencement of arbitral proceedings
• An Agreement was executed between A and B on
4th February 2000, having an Arbitration clause.
• Subsequently, disputes arose. So, A appointed its
arbitrator and addressed a letter to B, requesting him also
appoint an arbitrator and to refer the matter to arbitration
which was received by B on 24th April 2000. Thereafter,
B appointed his arbitrator on 9th May 2000.
• The two arbitrators appointed Z as the presiding arbitrator
and the date of the first Arbitration proceedings was fixed
on 10th June 2000 and accordingly the proceedings
began….
• 21-Commencement of arbitral proceedings
• Unless otherwise agreed by the parties,
• 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.
• (whether notice is mandatory under Sec 21)
• Alupro Building Systems Pvt Ltd vs Ozone
Overseas Pvt Ltd. 2017 SCC OnLine Del 7228
(Decided on 28/2/2017)
• The petitioner, a company based in Bangalore, had
placed four separate purchase orders the last one
being on 22nd February 2011 for the supply of
material specifically described therein.
• The full payments in respect of each of the purchase
orders were made
• in advance by the Petitioner to the respondent.
• In February 2013, the petitioner received a notice
from one Mohd. Arif describing himself as a sole
Arbitrator having been appointed as such by the
Respondent.
• The Petitioner was called upon to appear before the
Arbitrator in respect of a claim that was filed before
the Arbitrator by the Respondent for the alleged
recovery of price of goods sold to the Petitioner.
• Upon making enquiries from the Arbitrator, the
Petitioner learnt that the

• arbitration proceedings had been initiated by the

Respondent in December 2012 by filing a statement
of claim before the Arbitrator. The Arbitrator on
29th January 2013 – ex parte order.
• The case of the Petitioner, inter alia, is that the
unilateral appointment of the Arbitrator by the
Respondent is bad in law.
• It is further contended that without issuing notice
under Section 21 of the Arbitration and
Conciliation Act, 1996
invoking the arbitration clause, the Respondent
could not have proceeded to arbitration.
• Before the Arbitrator, the Petitioner appeared on
3rd April 2013 and raised a preliminary
objection inter alia

• that there was no arbitration agreement between

the parties; and the unilateral appointment of the
arbitrator was contrary to the Act, and the
arbitral proceedings were without jurisdiction.
• By an order dated 7th May 2013, the Arbitrator
rejected the above preliminary objection.

• Thereafter, the Petitioner continued to participate

in the arbitral proceeding and denied the claim of
the Respondent.
• By an Award dated 14th November 2014, the claims
of the Respondent were allowed in the aggregate
amount of Rs. 7,95,173.83 together with Rs. 33,000
towards Arbitrator’s fees

• and pendente lite and future interest @ 12% per

annum from 26th December, 2012 till its realization.
• The counsel for the petitioner contended that
(i) There was no arbitration agreement between the
parties as contemplated under Section 7 of the Act. It is
pointed out that none of the purchase orders issued
by the Petitioner contained any arbitration clause.
• They merely stated that “disputes, if any, will be subject
to jurisdiction of the Courts in Bangalore, India.”
• (ii) The invoices raised by the Respondent,
pursuant to the purchase order, and which
purportedly contained an arbitration
clause, did not constitute themselves constitute an
agreement a sale.

• (iii) The Respondent straightway filed its claim

before the Arbitrator on 26th December 2012 and the
Arbitrator promptly issued notice to the Petitioner.
• The letter dated 13th December 2012 claimed by the
Respondent to have been sent to the Petitioner seeking
reference of disputes to the arbitration was never
received by the Petitioner.

• Therefore, the arbitration proceedings did not

commence as contemplated in Section 21 of the Act
- Consequently, the proceedings held by the
Arbitrator were a nullity and the Award itself was
void.
• It is submitted that the legislative intent was that
arbitration proceedings commence only when a
request for arbitration is sent by one party to the
other.

• The filing of statement of claim was only a

subsequent step in terms of Section 23 of the Act.
• Judgment :
• Object of Section 21 of The Arbitration and
Conciliation Act 1996
• The provisions under Section 21 of the Act are
mandatory in nature and cannot be dispensed with.
• It was further held that under the provisions of Section 21
a party cannot straight away file a claim before the
Arbitrator without issuing the notice under
Section 21 of the Arbitration and
Conciliation Act.
• Section 21 was held to be a paramount procedure for
the initiation of the arbitration process between the
parties
• and dispensing with same could be one of the grounds
for challenge of the award under Section 34 of the Act.
• The Court held that in the absence of an agreement to
the contrary, notice under Section 21 of the Act by the
Claimant invoking the arbitration clause,
preceding the reference of disputes to
arbitration is mandatory.
• The Court further clarified that mere acceptance
of supplies by a party on the basis of

• invoices mentioning an arbitration clause would

not amount to acceptance by the party of
such arbitration clause.
• The Court clarified that there could not be an
arbitration agreement by implication and

• a mere endorsement of receipt of goods on such

invoices cannot lead to an inference that a party
agreed to the arbitration agreement which could
be validly invoked.
• The present case raised objections under Section 34
of the Act to an award rendered by an arbitrator,
unilaterally appointed by the Respondent, without
invoking arbitration under the terms of Section 21
of the Act.
• The non-compliance of Section 21 of the Act
rendered the arbitration proceedings
unsustainable in law, vitiating the award as null
and void and without any jurisdiction.
• Interpretation:
• A plain reading of the above provision indicates -
that except where the parties have agreed to the
contrary,
• the date of commencement of the arbitration
proceedings would be the date on which the
recipient of the notice receives from the
Claimant, a request for referring the
disputes to arbitration.
• Reasons why notice under Section 21 of the Act is
mandatory in nature :
• i) The parties to the Arbitration Agreement
against whom a claim is made should know
what the claims are.

• It is possible that in response to the notice, the

recipient of the notice may accept some of the
claims either wholly or in part, and the dispute
between the parties may thus be narrowed down
and spirit of ADR mechanism is upheld
• Ii) Such a notice provides an opportunity to the
recipient of the notice to identify if the claims are
time barred or is barred by law of estoppel or is
untenable in view of the factual matrix of the
dispute between the parties.

• Iii) Unless, there is such a notice invoking the

arbitration clause, it will not be possible to
know whether the procedure for the
appointment of an arbitrator, other
procedures as envisaged in the arbitration
clause have been followed.
• Invariably, arbitration clauses do not
contemplate the unilateral appointment of
an arbitrator by one of the parties; there has to
be consensus between the parties.

• The notice under Section 21 serves an important

purpose of facilitating a consensus on the
appointment of an arbitrator.
• Iv) Even if the notice under Section 21 of the act
permits one of the parties to choose the arbitrator,
even then

• it is necessary for the party making such

appointment to let the other party know in
advance the name of the person it proposes
to appoint.
• It is quite possible that such person may be
‘disqualified’ to act as an arbitrator for
various reasons.
• On receiving such notice, the recipient of the
notice may be able to point out this defect
and the Claimant may be persuaded to
appoint a qualified person.
• v) As per Section 11(6) of the Act, without the
notice under Section 21 of the Act, a party seeking
reference of disputes to arbitration will be unable
to demonstrate
• that there was a failure by one party to
adhere to procedure and accede to the
request for the appointment of an
arbitrator.
• The trigger for the court’s jurisdiction
under Section 11 of the Act is such failure
by one party to respond.
• Thus, the inescapable conclusion on a
proper interpretation of Section 21 of the
Act is that in the absence of an agreement to the
contrary,
• the notice under Section 21 of the Act by the
Claimant invoking the arbitration,
preceding the reference of the disputes to
arbitration, is mandatory
• and without such notice, the arbitration
proceedings which are commenced would be
unsustainable in law. 
• Sec 23 - Statements of claim and defence
• 1) the claimant shall state the facts supporting his claim,
the points of issue and the relief of remedy sought
• and the respondent shall state statement of defense in
respect of these particulars – unless the parties have
otherwise agreed.
• 2) along with the xerox set of documents they consider
relevant
• All documents will be made available to other party
and the Arbitral Tribunal.
• Sec (2 A) added – Amendment Act, 2015
• Respondent in support of his case may also submit a
counter-claim in support of his case or plead a
set-off –

• which shall be adjudicated by the Arbitral Tribunal -

if they fall within the scope of the Arbitration
Agreement
• (3) Unless otherwise agreed by the parties –
• The claim or the defense statement can be
amended/supplement with the leave of the
Tribunal.

• Only care to be taken is that –

• no injustice is caused to the other party and
• it does not materially alter the original case made
out by the parties. - Illustration:
• In section 23 of the principal Act, after sub-section
(3), the following sub-section shall be inserted,
namely:––
• (4) The statement of claim and defense under this
section shall be completed within a period of six
months from the date the arbitrator or all the
arbitrators, as the case may be, received notice, in
writing, of their appointment.(2019 Amendment)
• Section 24 (1) is amended - new sub-section
incorporated - Amendment Act, 2015

• to ensure that Tribunal (as far as possible) shall hold

oral hearings for presentation of evidence or
arguments on day to day basis and

• does not grant adjournments unless sufficient

cause is shown.
• Power is given to Tribunal to impose costs
including exemplary costs on party seeking
adjournment without valid reason
• (3) All statements, documents or other information
supplied to or applications made to arbitral tribunal
by one party shall be communicated to the other party
and
• any export report or evidentiary document on which
arbitral tribunal may rely in making its decision shall
be communicated to the parties.
• 25. Default of a party.-

• One interesting question is what happens – where

without showing sufficient cause

• (a) If claimant defaults in communicating his

statement of claim in accordance with sub-section (1)
of section 23,
 The arbitral tribunal shall terminate the proceedings
and - consequently the reference shall stand
dismissed.

(b) The respondent fails to communicate his statement

of defence in accordance with sub-section (1) of
section 23,
 the arbitral tribunal shall continue the proceedings
without treating that failure in itself as an
admission of allegations by the claimant –

and shall have the discretion to treat the right of

the respondent to file such statement of defence as
having being forfeited (amendment)
• (c) a party fails to appear at an oral hearing or to
produce documentary evidence,

• the arbitral tribunal tribunal may continue the

proceedings and make the arbitral award on the
evidence before it.
• However the same is subject to an agreement to
the contract to the contrary between the parties
and

• Why is this proviso there?

• The consequence of default can be avoided by
contrary agreement or showing sufficient cause.
• It thereby allows Arbitral Tribunal
• to resolve dispute by continuing with the Arbitral
proceedings and make an award
• Even
• if one of the parties adopts a delaying tactics to
drag on the proceedings.
• Likewise the non submission of the statement of
defense, shall itself will not be taken as a
admission of allegations by claimant. –
• (Difference in not submitting written statement in
a suit and an arbitration)
• In the non-event of the situation described in
Sec 25 , then ---
Inspection and discovery of documents by the
Arbitral Tribunal – Involves 2 aspects :
• i)Verification of the authencity of the documents
per se
• The document sought to be relied upon the parties
has to be an ‘original document’ –
• However, it is not sufficient that the document
per se is an original document.
• ii) Contents and the evidentiary value thereof:
• Further, for the document to have an evidentiary
value – it is necessary to examine the contents of the
same and it has to be affirmed by the author
of the document on oath. Then only the
document attains an evidentiary value and can be
admitted and read in evidence. (marked as
‘C’,‘C-1’…‘R’,‘R-1’)
• and is useful only where an author of a
particular document is available for
adducing an evidence.
 Certain necessity - may arise subsequently, not
contemplated at the time of entering into
agreement between the parties :
• i) Imagine, a situation where the author of a
particular document is no longer available for
adducing evidence. -
• The parties can, with the leave of the Arbitral
Tribunal call the concerned person.
• However if it is not feasible then---can opt for
adducing of secondary evidence with the leave of
the Arbitral Tribunal.
• Ii) Secondly, a situation may arise where the party
has to rely on a document of a third party to
substantiate its statement of claim or defense or a
court order in the proceedings.

procedure regarding the same.

• After notice issued a party does not appear before the

Arbitral Tribunal --- intention has to be ascertained
in not appearing before proceeding ex-parte.
• The next step is preparing the issues or the points
of determination –
• Usually the ‘draft issues’ are prepared first by the
Arbitrator/s in consultation with the parties and their
advocate’s and then the issues are finalized.

• The idea is to narrow down the disputes between

the parties - keeping in view the spirit of the ADR
mechanism.
 Evidence by Affidavit
Claimant
•Opening of the statement of claim with brief details about
the claim, by the claimant’s witness --

•a) Examination in chief – (advocate of the claimant)

•b) Cross examination --- (advocate of the respondent)
then
•c) re-examination . (if any new points are canvassed
during cross examination and they have to be rebutted.
• Respondent
• Opening of the statement of defense with brief details
about the defense, by the respondent’s witness --
• i) Examination in chief --- (advocate of the respondent)
followed by
• ii) Cross examination (advocate of the claimant) ---
then
• iii) re-examination by the respondent. (if any new
points appear during cross examination and they
have to be rebutted.
• Evidence has to be conducted by the
advocate of the claimant and respondent –
on the basis of claim filed by way of affidavit by
the claimant and the written statement filed by
way of an affidavit by the respondent respectively.
• Lastly, arguments by the Advocate of claimant
followed by arguments of the respondent.
Re-arguments if any, by the advocate of the
claimant.

• Finally an Award is made. Due notice given to the

parties.
• Lord Simon says - This is implicit in the very office
accepted by the Arbitrator/s who “are in much the
same position as judges, ----- they carry out more or
less the same functions”
• In the context - connotation of Natural Justice :
• 1) that the arbitrator/s must act impartially and
must not be judge in his own cause and
• Ii) he/they must act fairly and give the parties a
reasonable opportunity of being heard.
• Illustration : Evidence cannot be recorded ----
• Sec 26. (Omitted - 2019 Amendment)
• Sec 28 - Rules applicable to the substance of
dispute.
• (1) Where the place of arbitration is situated in India,
—
• (a) in an arbitration other than an international
commercial arbitration, the arbitral tribunal shall
decide the dispute submitted to arbitration in
accordance with the substantive law for the time
being in force in India;
• (b) in international commercial arbitration,— (i) the
arbitral tribunal shall decide the dispute in
accordance with the rules of law designated by the
parties as applicable to the substance of the
dispute;

• (ii) any designation by the parties of the law or legal

system of a given country shall be construed, unless
otherwise expressed, as directly referring to the
substantive law of that country and not to its conflict
of laws rules;
• (iii) failing any designation of the law under clause
(a) by the parties, the arbitral tribunal shall apply
the rules of law it considers to be appropriate
given all the circumstances surrounding the
dispute.

• (2) The arbitral tribunal shall decide ex aequo et

bono or as amiable compositeur only if the parties
have expressly authorized it to do so.
• (3) The unamended Section 28(3) of the Arbitration
and Conciliation Act, 1996, was as follows:

• “In all cases, the arbitral tribunal shall decide in

accordance with the terms of the contract and shall
take into account the usages of the trade applicable
to the transaction.”
• Under the unamended Section 28(3), the Tribunal
was bound to decide the dispute in accordance
with the terms of contract and also take into
account the trade usage applicable to the transaction.

• Therefore, under the unamended Section 28(3), the

scope for the Tribunal to make liberal interpretation of
the Contract was unavailable. Resultantly, the scope
of the Tribunal to interpret a term of the Contract, was
also limited.
• The Tribunal could at best, interpret the terms of the
Contract taking into consideration the intent of the
parties and the trade usage applicable to the
transaction.
• In ONGC vs. SAW Pipes, [(2003)5 SCC 705], the
Hon’ble Supreme Court held that any Award passed
by the Tribunal which goes against the terms of the
Contract are violative of Section 28(3) of the
Arbitration and Conciliation Act, 1996, and was a
ground to set aside the Award under section 34.
• This narrow or strict interpretation of Section 28(3)
of the Arbitration and Conciliation Act, 1996, caused
a problem in rendering justice. The problem lay in the
root of the issue…..

• While entering into the Contract with Government /

PSUs / big Corporates, the scope of other party to
negotiate on the terms of the Contracts is very limited
or not available.
• This results in one party exploiting the situation,
coercing the other party to sign on such terms, which
practically goes against the basic nature of fair
opportunity or equal bargain power of both the
parties.

• For example, in various contracts related to

infrastructure, the employer puts a clause that the
land will be provided on ‘as is where is’ basis.
• Now, while executing the work, if the Contractor
encounters hindrances beneath the land, the
Employers always try to take shelter of this Clause
and deny any extension of time or escalation of
price, as the Contractor has signed the ‘as is where
is’ clause.

• Sometimes, the Employer also puts restrictions on

the claims /create exceptions to raise
dispute/restrict the time line to raise claims.
• Also, in arbitration, the Tribunal’s scope to expand
the scope of contract was very limited and in view of
the judgment of the Hon’ble Supreme Court in
ONGC (supra) any attempt of the Tribunal to go
beyond the terms of the Contract could be a ground to
set aside an Award, which otherwise could be
very reasonable.
• To overcome this anomaly, the Law Commission, in
its 246th Report, observed as follows:
• "The amendment to section 28(3) has similarly been
proposed solely in order to remove the basis for the
decision of the Supreme Court in ONGC vs. Saw
Pipes Ltd, (2003) 5 SCC 705 – and in order that any
contravention of a term of the contract by the
tribunal should not ipso jure result in rendering the
award becoming capable of being set aside."
• Similarly, the Note attached to the proposed
amendment to Section 28(3) of the 246th Report of
the Law Commission, reads as under:
• "Note: This amendment is intended to overrule the
effect of ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC
705, where the Hon’ble Supreme Court held that
any contravention of the terms of the contract would
result in the award falling foul of Section 28 and
consequently being against public policy."
• In 2015, the said sub-section (3) has been amended
to the following effect:
Pre-amendment  Post-amendment 
In all cases, the arbitral While deciding and
tribunal shall decide in making an award, the
accordance with the arbitral tribunal shall, in
all cases, take into account
terms of the
the terms of the
contract and shall take
contract and trade usages
into account the usages of
applicable to the
the trade applicable to the
transaction.
transaction.
• Now after the amendment to the section, the Tribunal
while deciding and making an award will take into
account the terms of the contract and trade usage
applicable to the transaction.
• Therefore, now the power of the Tribunal to interpret
the terms of the Contract are widened and the
Tribunal can interpret the terms not only taking
into consideration the intention of the parties but
also looking into the trade usage and construe the
same in a prudent and reasonable manner.
• The shift from ‘in accordance with’ to ‘take into
account’ has provided certain flexibility to the
Tribunal.

• The only restriction is that such interpretation

should not be an implausible one, which no
prudent person can arrive at.
• The amendment to Section 28(3) of the Arbitration
and Conciliation Act, 1996, has empowered the
Tribunals to further be the master of the cause and at
the same time has further limited the ground of
Court’s interference, which is required for speedy
justice delivery system.
• Sec 29 - Decision making by panel of
arbitrators.-
• (1) The award in matters other than
international commercial arbitration
• shall be made by the arbitral tribunal within a
period of twelve months from the date of
completion of pleadings under sub-section
(4) of section 23:
• Provided that the award in the matter of international
commercial arbitration may be made as expeditiously
as possible and endeavour may be made to dispose
of the matter within a period of twelve months
from the date of completion of pleadings under
sub-section (4) of section 23.’’(2019 Amendment)
• (2) Notwithstanding sub-section (1), if authorised by
the parties or all the members of the arbitral
tribunal, questions of procedure may be decided
by the presiding arbitrator.
• Sec 29-A and Sec 29-B have been added. -
Amendment Act, 2015
• Section 29–A (1) Time limit for arbitral award - has
been added to provide time limit for making award
within 12 months from the time Arbitrator/s enters into
reference. ?
Explanation.—For the purpose of this sub-section, an
arbitral tribunal shall be deemed to have entered
upon the reference on the date on which the arbitrator
or all the arbitrators, as the case may be, have
received notice, in writing, of their appointment.
• 2) It provides that Arbitral Tribunal shall be
entitled to such additional fee as may be agreed by
parties, if an award is made within a period of six
months from the date the arbitral tribunal enters
upon reference. ?

• 3) The parties may, by consent can extend the time

only up to 6 months.
• 4)After that the mandate of the arbitrators shall
terminate. - Thereafter Court may extend the time –
provided that while extending the period

• if the delay is attributable to the arbitral tribunal,

then, it may order reduction of fees of the
arbitrator(s) their fees will be reduced by the
court not exceeding 5% for each month of delay?
• "Provided further that where an application under
sub-section (5) is pending, the mandate of the
arbitrator shall continue till the disposal of the said
application:

• Provided also that the arbitrator shall be given an

opportunity of being heard before the fees is
reduced.". (2019 Amendment)
• 5) extension of period may be on application of
any of the parties and may be granted only on
sufficient cause on such terms and conditions as
court may impose.

• 6) While extending the period – discretion is given to

the court to substitute the arbitrator/s –
• In the event of arbitrator(s) being substituted
under this section, the arbitral proceedings shall
continue from stage already reached and on basis
of evidence and material already on record –

• --- the proviso allows the proceedings to continue

from the stage already reached on the basis of
material and evidence on record …. ?
• 7) In the event of arbitrators being appointed
arbitral tribunal thus reconstituted shall be
deemed to be in continuation of the previously
appointed arbitral tribunal.

• 8) It shall be open to court to impose actual or

exemplary costs on the parties
• 9) The application made by the party to the court for
extension of time – shall be disposed by the court
as expeditiously as possible and

• endeavour shall be made to dispose of the matter

within a period of sixty days from the date of
service of the notice on the opposite party
• Sec 29 B - Fast Track Procedure-Section 29 B has
been inserted to provide for resolution of dispute by Fast
track procedure.
• (1) Parties to arbitration may either before or at the time
of appointment of Appointment of Arbitral Tribunal
agree in writing to adopt fast track procedure to
resolve their dispute.
• (2) The Parties to the Arbitration Agreement, while
agreeing to the resolution of dispute by fast track
procedure, may agree that the arbitral tribunal shall
consist of a sole arbitrator who shall be chosen by the
parties.
• (3) Procedure to be followed while conducting the
Arbitral proceedings under sub-section (1)

• (a)The dispute shall be decided by Tribunal on the basis

of written pleadings, documents and submissions and
without oral hearings.
• (b) The arbitral tribunal shall have power to call for any
further information or clarification from the parties in
addition to the pleadings and documents filed by
them... ?
• (c) An oral hearing may be held only, if, all the parties
make a request or if the arbitral tribunal considers it
necessary to have oral hearings for clarifying certain
issues.

• (d) The Arbitral Tribunal may dispense with any

technical formalities, if an oral hearing is held, and
adopt such procedure as deemed appropriate for the
expeditious disposal of the case.
•
• (4) The award shall be made within six months
from the date the Arbitral Tribunal enters upon
reference.
• (5) If the award is not made within the period
mention in Sub-sec (4) the provisions of Sec 29 A
Sub-sec (3) to (9) will apply.
• 6) The fees payable to the arbitrator and the manner
of payment shall be such as maybe agreed between
the arbitrator and the parties.
•  Sec 30 – SETTLEMENT

• Permissible for parties to arrive at mutual

settlement - even during an arbitration
proceeding itself.

• Scheme of Arbitration Act allows the Arbitral

Tribunal to make efforts to encourage mutual
settlement.
• Consequence and Implication
• i) If parties settle the dispute by mutual agreement,
the arbitration shall be terminated.

• Ii) and if both parties and the Arbitral Tribunal agree,

the settlement can be recorded in the form of an
arbitral award on agreed terms.
Iii) Such arbitral award shall be made in accordance
with section 31 and shall state that it is an arbitral
award.
• Iv) Shall have the same status and effect as
any other arbitral award on the substance
of the dispute.

• Practical Implication for the Party

 • Making of an Arbitral Award :

• What is an Award. –

• Award is not defined under the Arbitration

Act.
• However, Sec 2 (c) defines Arbitral Award as –
"arbitral award includes an interim award"
• According to Wharton’s Law Lexicon
• An Award is an instrument
• embodying the decision given by the Arbitral
Tribunal
• after adjudicating upon the disputes referred in a
quasi-judicial manner.

• Award means an final award declared by a

Sole Arbitrator or by an Arbitral Tribunal.
• Apart from ‘final award’
• the Act also contemplates
• an interim award,
• additional award and
• an award on agreed terms i.e arrived at by a
settlement between the parties during the course of
the Arbitral proceedings.
• Interim Award – Final Award – An interim award is
final as to the matter dealt with therein. –
Illustration----
• Interim Award - It is not tentative in the sense that
it may be changed, but it is tentative in the sense that
more would follow.
• One significant question which arises for
consideration is that whether an final award is final in
the sense that it is no longer possible to modify it.
• No, not an final award, in the sense –
• that it can be corrected and interpreted by taking
recourse to the provisions in the Arbitration Act.

• Final means complete in all respects leaving

nothing more to be done by the Arbitral Tribunal.
• According to Russell an award to be called as an award
and valid

• must be final,
• certain,
• consistent,
• possible and
• must decide matters submitted and no more submitted.
• Sec 31- Form and contents of arbitral award.-
• (1) An arbitral award shall be made in writing
• and shall be signed by the members of the arbitral
tribunal.

(2)Signatures of the majority of all the

members of the arbitral tribunal shall be
sufficient --- so long as the reason for any
omitted signature is stated.
• 3) The award shall be a reasoned award.
• unless
• a)the parties have agreed no reasons are to be
given, or
• b) the award is an arbitral award on agreed terms
under section 30.
• 4) The arbitral award shall state its date and place of
arbitration as determined in accordance with
section 20 and the award shall be deemed to have
been made at that place
•
• (5) After the arbitral award is made, a signed copy
shall be delivered to each party.

• Significance of the provision.... The date of the

delivery of the award to the party is critical –
Significance & Implication ?

• Can a party to the Arbitration, say that since the

award is delivered to his advocate and not to him
it has caused prejudice to him?
• Banarasi Krishan Committee v Karmayogi
Shelters pvt Ltd (2012) 9 SCC 496.
The Petitioner comprised of a committee of managing
landlords that co-owned an estate. The Respondents
were estate developers. The parties entered into an
agreement for developing the said estate.

Subsequently, disputes arose over certain payment

issues. The Respondent filed a Section 11 application
for the appointment of an arbitrator and accordingly
an arbitrator was appointed and subsequently, an
Award was passed in favour of the Petitioners
• Copies of the Award, passed on 12th May 2004
and duly signed by the learned Arbitrator, were
received by the counsel for the respective
parties.
• As far as the Respondent is concerned, the
endorsement shows that the copy of the Award was
received by its counsel on 13th May, 2004.
• However, Respondent received the copy of the
signed award only in December 2004.
• On 3rd February, 2005, the Respondent filed a
Petition, under Section 34 of the 1996 Act, to set
aside the Award of the Arbitrator.
• According to the Petitioner, the said petition was filed
after a delay of almost 9 months from the date of the
receipt of the Award.
• The Single Judge of High Court referred to Section
34(3) of 1996 Act which provides that,
• An application to set aside the award is to be
made within 3 months from the date on which
party making the application had received the
arbitral award.

• Hence, on the ground that petition was filed

after a delay of more than 9 months from the
date of receipt of the award, the Judge
dismissed the respondents application by
holding that it was time barred.
• Further, the Judge referring to Section 31(5) of 1996
Act which provides that a signed copy of the arbitral
award shall be delivered to each party, held that the
expression "party" as used in the section
would also include the agent of the party.
• In the appeal, Division bench of Delhi High Court
reversed the order of the Single Judge and held that
for compliance with Section 31(5) of 1996 Act,
a copy of the award had to be delivered to the
party itself.
• The Bench also observed that Section 2 (1)(h) of
1996 Act clearly defines that a "party" means a
party to the arbitration agreement. 

• Aggrieved the Petitioner filed an SLP against the said

order of the division bench. The Hon’ble Supreme
Court examined the meaning of the expression
"party" as it appears in Section 34 (3), 2 (1) (h)
and Section 31(5) of the Act.
• Issue
• Whether the service of an Arbitral Award on the
agent of a party amounts to service on the party
itself - having regard to the provisions of

• Section 31(5),
• Section 34(3) and
• Section 2 (1) (h) of the Arbitration and Conciliation
Act, 1996.
• Section 31(5) provides that after an Award has been
made a signed copy will be delivered to each party.
The question before the Hon’ble court was as to
whether the word "party" would mean to include
an advocate of the party.  

• Contentions: Counsel for the petitioner reiterated

that after the Award had been passed on 12th May,
2004, a copy of the same, duly signed by the
Arbitrator, was received by counsel for the
Respondent on 13th May, 2004,
• While the Petition under Section 34 was filed only
on 3rd February, 2005, well beyond the period of
3 months prescribed in Section 34(3) of the 1996 Act.

• Counsel further urged that service of the Award on

the Advocate for the party was sufficient
compliance of the provisions of Section 34(3) of the
1996 Act and thus amounted to service of the
notice on the parties about the filing of the
Award.
• Counsel contended that on the strength of
the vakalatnama executed by the party in
favour of his Advocate/agent, service of notice
effected on the Advocate holding such
Vakalatnama, amounted to service of the notice on
the party himself.

• He submitted that once a vakalatnama had been

executed by a party in favour of his Advocate, the
said Advocate was competent to do such
acts as could be done by the party himself.
• However, counsel for the respondent argued that once
hearing before the Arbitrator had been concluded and
an Award had been passed by him,
• the power given to an Advocate by the
vakalatnama executed in his favour, came to an
end and the learned Advocate was no longer
entitled to act on the strength thereof.
• Thus, he contended that service on the Advocate
of the party cannot be treated as service of the
Award on the party itself.
• Counsel submitted that the "service on a party" as
defined in Section 2 (1)(h) read with Section 34(3)
of the 1996 Act, had to be construed

• to be a person directly connected with and

involved in the proceedings and who is in control
of the proceedings before the Arbitrator,
• as he would be the best person to understand and
appreciate the Arbitral Award and to take a
decision as to whether an application under
Section 34 was required to be moved.
• Judgment
• The Hon’ble Supreme Court held that the
meaning of "party to an arbitration agreement as
provided in Section 2 (1)(h) and Section 34 (3)
would mean

• "party" and has to be construed to be a person

directly connected with and involved in the
proceedings and who is in control of the
proceedings before the Arbitrator.
• The Court had also held that delivery of the award
to a party was not a mere formality

• but a substantive right since it set in motion

several limitation periods such as
application for correction, making an
additional award or setting aside an award
under Section 34(3) of the Act. 
• Thus Court held that, "It is one thing for an
Advocate to act and plead on behalf of a party in a
proceeding and it is another for an Advocate to act as
the party himself".

• The expression "party", as defined in Section 2 (1)(h)

of the 1996 Act, clearly indicates a person who is a
party to an arbitration agreement.

• The said definition is not qualified in any way so as to

include the agent of the party to such agreement.
• Any reference, therefore, made in Section 31(5) and
Section 34(2) of the 1996 Act can only mean the
party himself and not his or her agent, or Advocate
empowered to act on the basis of a Vakalatnama.
• In such circumstances, proper compliance with
Section 31(5) would mean delivery of a signed
copy of the Arbitral Award on the party himself
and not on his Advocate, which gives the party,
concerned the right to proceed under Section 34(3)
of the aforesaid Act.
• Accordingly, when a copy of the signed Award is
not delivered to the party himself, it would not
amount to compliance with the provisions of
Section 31(5) of the Act.

• In the instant case, since a signed copy of the

Award had not been delivered to the party itself
and the party obtained the same on
15th December, 2004, and the Petition under
Section 34 of the Act was filed on 3rd February,
2005,
• it has to be held that the said petition was filed
within the stipulated period of three months as
contemplated under Section 34(3) of the aforesaid
Act.

• Consequently, the objection taken on behalf of the

Petitioner herein cannot be sustained, hence the
Special Leave Petition is dismissed.
• (6) The arbitral tribunal may, at any time during the
arbitral proceedings, make an interim arbitral award
on

• any matter with respect to which it may make a

final arbitral award.
• (7) (a) Unless otherwise agreed by the parties,

• where and in so far as an arbitral award is for the

payment of money, the arbitral tribunal may

• include in the sum for which the award is made

interest, at such rate as it deems reasonable,
• on the whole or any part of the money,
• for the whole or any part of the period
• between the date on which cause of action
arose and the date on which award is made -
• (b) A sum directed to be paid by an arbitral award
shall, unless otherwise the award directs, carry
interest at the rate of 2 percent higher than the
current rate of interest prevalent on the date of the
award to the date of payment. - Amendment Act,
2015 – Current rate of interest as per clause 2 (b)
of Interest Act, 1978.
• One of the very contentious issues is :
whether interest can be granted on the award.
• Yes – T.P George v State of Kerala and another
AIR 2001 SC 816. - Interest can be awarded at
four stages, viz :

• (1) from the stage of accrual of cause of action till

filing of the arbitration proceedings, - known as
the pre-reference during the Arbitration
proceedings
• Interest here is calculated at the as prescribed under
the Interest Act, 1971.
• (2) Secondly, for the period between the arbitrator
entering upon reference till the date of making
award, - popularly known as as Pendente lite
period and
• (3) future interest arising between date of award
and date of the decree and
• (4) interest arising from date of decree till
realisation of award.
 So long as the arbitration agreement does not
prohibit interest ---- the Arbitrator is justified in
using his discretion and grant interest for all
periods, where circumstances so require.

However, if the contract expressly bars the grant

of interest Arbitrator will not have the power to
award of Interest.
• Apart from interest the Arbitrator has also got power
to award damages. Therefore the sum awarded by the
Arbitrator includes damages.

• Basic object of damages for breach of contract is to

compensate for the loss suffered on account of the
breach and

• put the party who has so suffered, back in a position as he

would have been – if the contract had been performed
so far as the money could do it.
• Arbitrator W. Willard Witz says
• arbitrators have authority to award damages for -
even though the contract does not provide for remedy.

• However the damages are not awarded as of right.

The claimant has to show that he has made efforts
for mitigating the loss he has suffered.

• Illustration : Issuing of Advertisement for restarting

the contract
• (8) the costs of an arbitration shall be fixed by the
arbitral tribunal in accordance with Sec 31 A –
Amendment Act, 2015
• Sec 31A (1) to 31 A (5) inserted: Amendment Act,
2015
• (1) In relation to any arbitral proceeding or a
proceeding under any of the provisions of this Act
pertaining to arbitration - the Court or Arbitral
Tribunal shall have discretion to determine
• a)Whether costs are payable by one party to another
• b)The amount of such costs
• c)And when such costs are to be paid
• Explanation.---For the purpose of clause (a), "costs"
means reasonable costs relating to-
• (i) the fees and expenses of the arbitrators and
witnesses,
• (ii) legal fees and expenses,
• (iii) any administration fees of the institution
supervising the arbitration, and
• (iv) any other expenses incurred in connection with
the arbitral proceedings and the arbitral award.
• (2) If the court or arbitral tribunal decides to
make an order as to payment of costs, -

• (a) the general rule is that the unsuccessful party

will be ordered to pay the costs of the successful
party or
• (b) the court or arbitral tribunal may make a
different order for reasons to be recorded in writing.
• (3) In determining the costs, the court or the arbitral
tribunal shall have regard to all the circumstances
including –
• (a) conduct of the parties
• (b) whether a party has succeeded partly in the case
• (c) whether the party has made a frivolous
counter-claim leading to delay in disposal of
Arbitration proceedings and
• (d) whether any reasonable offer to settle the dispute
is made by a party and refused by the other party.
• (4) The court or the arbitral tribunal may make any
order under this section including an order that
the party shall pay
• (a) a proportion of another party’s costs
• (b) a stated amount in respect of another party’s
costs
• (c ) costs from or until a certain date only
• (d) costs incurred before proceedings have begun
• (e) costs relating to particular steps taken in the
proceedings, and

• (f) costs relating to only a distinct part of the

proceedings
• (g) Interest on costs from or until a certain date
only
• (5) An agreement which has the effect that a party
is to pay the whole or part of the costs of the
arbitration in any event
• shall only be valid if such an agreement is made
after the disputes in question have arisen –
• Thus the possibility of a litigant who
obstruct/delays arbitration process is likely to pay
more costs.
• Sec 32 – Termination of proceedings
• (1) The Arbitral proceedings shall be terminated by
the final award
• or by an order of the Arbitral Tribunal under
sub-sec (2)
• (2) The arbitral tribunal shall issue an order for
termination of arbitral proceedings where -

• (a) Claimant withdraws his claim,

• unless the respondent objects to the order and the
arbitral tribunal recognizes a legitimate interest on
his part in obtaining the final settlement of dispute,
• (b) the parties agree on termination of proceedings
• (c) Arbitral tribunal finds that the continuance of the
proceedings has for any other reason become
unnecessary or impossible.
• (3) Subject to section 33 and sub-section (4) of
section 34, the mandate of the arbitral tribunal
shall terminate with the termination of the
arbitral proceedings.
• Sec 33. Correction and interpretation of award;
additional award.- (1) Within thirty days from the
receipt of the arbitral award, unless another period of
time has been agreed upon by the parties--- -
• (a) a party, with notice to the other party, may request
the arbitral tribunal
• to correct any computation errors,
• any clerical
• or typographical errors
• or any other errors of a similar nature occurring in
the award;
• (b) if so agreed by the parties, a party, with notice to
the other party, may request the arbitral tribunal to
give an interpretation of a specific point or part of
the award.

• (2) If the arbitral tribunal considers the request made

under sub-section (1) to be justified, it shall make
the correction or give the interpretation within
thirty days from the receipt of the request and the
interpretation shall form part of the arbitral
award.
• (3) The arbitral tribunal may correct and error of
the type referred to in clause (a) of sub-section (1),
on its own initiative, within thirty days from the
date of the arbitral award.

• (4) Unless otherwise agreed by the parties, a party

with notice to the other party, may request, within
thirty days from the receipt of the arbitral award,
• the arbitral tribunal to make an additional
arbitral award as so claims presented in the
arbitral proceedings but omitted from the arbitral
award.

• (5) If the arbitral tribunal considers the request made

under sub-section (4) to be justified, it shall make
the additional arbitral award within sixty days
from the receipt of such request.
• (6) The arbitral tribunal may extend, if necessary,
the period of time within which it shall make a
correction, give an interpretation or make an
additional arbitral award under sub-section (2) or
sub-section (5).
• (7) Section 31 shall apply
• to a correction
• or interpretation of the arbitral award
• or to an additional arbitral award made under
this section
• What is the difference between an appeal and
recourse to Arbitration award.
• In an appeal from a lower court to higher court,
the higher court
• can vary modify,
• set aside and
• substitute the orders of the lower court.
• However a recourse against the award is not the
same thing as an appeal.
• The application made in the court against the award
• is an independent proceeding and
• not an appeal. - is not an appellate court.

• The court examining the award examines it

• only to the extent it is challenged and shall confine
it to the grounds urged.
• It cannot traverse beyond the award.

• It means - The Court hearing the application for

setting the award
• cannot include a thing which is not subject matter
of Arbitration or
• exclude a thing which is within the arbitration.
 • Recourse Against Arbitral Award.
• Sec 34. Application for setting aside arbitral
award.-

• (1) Recourse to a Court against an arbitral award

may be made
• only by an application for setting aside such
award in accordance with sub-section (2) and sub-
section (3).
• (2) An arbitral award may be set aside by the
Court only if---
• (a) establishes on the basis of the record of the
arbitral tribunal that
• (i) a party was under some incapacity, or
• (ii) the arbitration agreement is not valid under
the law to which the parties have subjected it
• or, failing any indication thereon, under the law
for the time being in force; or
• (iii) the party making the application was not
given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
• (iv) the arbitral award deals with a
• dispute not contemplated by
• or not falling within the terms of the submission
to arbitration, or
• it contains decisions on matter beyond the scope
of the submission to arbitration:
• Provided that, if the decisions on matters
submitted to arbitration can be separated from
those not so submitted,

• only that part of the arbitral award which contains

decisions on matters not submitted to arbitration
may be set aside; or

• (v) the composition of the arbitral tribunal or the

arbitral procedure was not in accordance with the
agreement of the parties,
• unless such agreement was in conflict with a
provision of this Part from which the parties
cannot derogate, or failing such agreement, was
not in accordance with this part, or
• (b) the Court finds that------
• (i) the subject-matter of the dispute is not capable
of settlement by arbitration under the law for the
time being in force, or
• (ii) the arbitral award is in conflict with the public
policy of India.
• Explanation 1 --- For the avoidance of any doubt, it is
clarified that an award is in conflict with the public
policy of India (only if) –
i) the making of the award was induced of affected by
fraud or corruption or was in violation of section 75 or
section 81 or
ii)it is in contravention with the fundamental policy of
Indian law, or
iii)it is in conflict with most basic notions of morality or
justice (Amendment)
• Explanation 2: For avoidance of any doubt, the test
as to whether there is any contravention with the
fundamental policy of Indian law shall not entail a
review on the merits of the dispute. (Amendment)
• ONGC v. Saw Pipes Ltd.(2003) 5 SCC 705. – wide
interpretation
ONGC v. Western Geco International Ltd. (2014) 9
SCC 263 – wide interpretation
• The ground that arbitral award is in conflict with
public policy of India has turned out to be one of
the best defence available for losing party to
challenge the award.
 • Interpretation of the word public policy
• Renusagar Power Co ltd v General Electrical Co
1994 Supp (1) SCC 644 – narrow interpretation as
defined in the the proviso.

• ONGC v. Saw Pipes Ltd.(2003) 5 SCC 705. – wide

interpretation of the term public policy to include
patent illlegality in addition to the attributes
mentioned by Supreme Court in Renusagar case.
• Further thecourt clarified that illlegality as
referred must go to the root of the matter
thereby increasing judicial intervention in an
arbitration matter.

• Inspite of the restricted meaning given to the word

public policy in the Act and the emphasis on less
judicial intervention in the 2015 Amendment Act the
courts have continued to give wider meaning to the
word public policy.
 Again in the case of ONGC v. Western Geco
International Ltd. (2014) 9 SCC 263 – wide
interpretation was given by the judiciary.

The court referred to three distinct and

fundametal juristic principles to be a part of the
fundamental policy of Indian Law.

(i) Adoption of judicial approach in a fair and

reasonable and non-arbitrary manner in
determination of rights is an essential part of
fundamental policy of India.
(ii) Determining the rights and obligations in accordance with
principles of natural justice and by recording reasons for
the decision.

The Wednesbury principle

(iii) decision should pass the test of Wednesbury principle of
reasonableness, meaning that the decision should not be so
perverse or so irrational that no reasonable person would
have arrived at the same.
• Implications :
• (i) Such an extensive interpretation of the term
‘Fundamental Policy of India’ distorts the objective of
the Arbitration and Conciliation Act, 1996 and
especially the Amendment 2015 make it non effective.

• Ii) Decisions subsequent to Renusagar case -

Per Incuriam ??
• Per incuriam - refers to a judgment of a court which
has been decided without reference to a statutory
provision or earlier judgment which would have been
relevant.
• The Hon’ble Supreme Court in HRD Corpn. v. GAIL
(India) Ltd., (2018) 12 SCC 471 held as follows:
• The judgment in ONGC Ltd. v. Saw Pipes Ltd. and
ONGC Ltd. v. Western Geco International Ltd. has
been expressly done away with.
• Both Sections 34 and 48 have been brought back to the
position of law contained in Renusagar Power Co.
Ltd. v. General Electric Co. where "public policy"
will now include only two of the three things set out
therein viz.
• "fundamental policy of Indian law" and "justice or
morality". The ground relating to "the interest of
India" no longer obtains. "Fundamental policy of
Indian law’ is now to be understood as laid down in
Renusagar.
• "Justice or morality" has been tightened and is now to
be understood as meaning only basic notions of
justice and morality i.e. such notions as would shock
the conscience of the Court as understood in
Associate Builders v. DDA. [2014 (4) ARBLR
307(SC)]
• Section 28(3) has also been amended to bring it in
line with the judgment of this Court in Associate
Builders, making it clear that the construction of the
terms of the contract is primarily for the arbitrator to
decide unless it is found that such a construction is
not a possible one."
2 A. An arbitral award arising out of Arbitrations other
than international commercial arbitrations, may
also be set aside by the court if the court finds that
the award is vitiated by patent illegality appearing
on the face of the award.

• Provided that an award shall not be set aside

merely on the ground of an erroneous application
of the law or by reappreciation of evidence.
(Amendment)
• (3) An application for setting aside may not be made
after three months have elapsed from the date on
which the party making that application had
received the arbitral award,

• or, if a request had been made under section 33,

from the date on which that request had been
disposed of by the arbitral tribunal:
• Provided that if the Court is satisfied that the
applicant was prevented by sufficient cause from
making the application within the

• said period of three months if may entertain the

application within a further period of thirty days,
but not thereafter.
• (4) On receipt of an application under sub-section (1),
• the Court may, where it is appropriate and it is so
requested by a party, adjourn the proceedings for
a period of time determined by it
• in order to give the arbitral tribunal an
opportunity to resume the arbitral proceedings or
to take such other action
• as in the opinion of arbitral tribunal will eliminate
the grounds for setting aside the arbitral award.
(5) An application under this section shall be filed by a
party only after issuing a prior notice to the
other party

and such application shall be accompanied by

an affidavit by the applicant endorsing
compliance with the said requirement.
(Amendment)
• (6) An application under this section shall be
disposed of expeditiously,

• in any event, within a period of one year from the

date on which the notice referred to in
sub-section (5) is served upon the other
party. (Amendment)
• Sec 36 – Enforcement.
• (1) Where the time for making an application to set
aside an arbitral award under Sec 34 has expired,
then,

• subject to the provisions of sub-sections (2), such

award shall be enforced ......as if it were a decree
of the court.
• (2) Where an application to set aside the arbitral
award has been filed in the Court under section 34,
the filing of such an application shall not by itself
render that award unenforceable,

• unless the court grants an order of stay of the

operation of the said arbitral award in accordance
with the provisions of sub-section (3) on a separate
application made for that purpose.
• Sec 37. Appealable orders.- (1) "Notwithstanding
anything contained in any other law for the time
being in force, an appeal" (2019 Amendment) shall
lie from the following orders (and from no others)
to the Court authorised by law to hear appeals from
original decree of the Court passing the order,
namely:---

• a) refusing to refer the parties to arbitration under

section 8 (Amendment)
• b) granting or refusing to grant any measure under
sec. 9.

• c) setting aside or refusing to set aside an arbitral

award under sec 34.
• (2) An appeal shall also lie to a court from an
order of the arbitral tribunal ---

• (a) accepting the plea referred to in sub-section (2) or

subsection (3) of section 16; or
• b) granting or refusing to grant an interim measure
under section 17
• (3) No second appeal shall lie from a order passed in
appeal under this section,

• but nothing in this section shall effect or take away

any right of appeal to Supreme Court.
• Now which court has jurisdiction to decide about
setting aside the award.

• - Sec 2(1) (e) read with Sec 42.

• Sec 2 (1) (e) "Court" means the principal Civil
Court of original jurisdiction in a district, and
includes the High Court in exercise of its ordinary
original civil jurisdiction,
• having jurisdiction to decide the questions forming
the subject-matter of the arbitration if the same
had been the subject-matter of a suit,
• but does not include any civil court of a grade
inferior to such principal Civil Court, or any Court
of Small Causes;
• Sec 42. Notwithstanding anything contained
elsewhere in this Part or in any other law for the
time being in force,
• where with respect to an arbitration agreement
any application under this Part has been made in
a Court, that Court alone shall have
jurisdiction over the arbitral proceedings
• and all subsequent applications arising out of that
agreement and the arbitral proceedings shall be
made in that Court and in no other Court.
• 42A. Notwithstanding anything contained in any other
law for the time being in force, the arbitrator, the arbitral
institution and the parties to the arbitration agreement
shall maintain confidentiality of all arbitral proceedings
except award where its disclosure is necessary for the
purpose of implementation and enforcement of award.
(2019 Amendment)
• 42B. "No suit or other legal proceedings shall lie against
the arbitrator for anything which is in good faith done or
intended to be done under this Act or the rules or
regulations made thereunder.".(2019 Amendment)
• Sec 43 –Limitations.- (1) The Limitation Act, 1963
shall, apply to arbitrations as it applies to proceedings
in court.

• (2) For the purposes of this section and the Limitation

Act, 1963

• an arbitration shall be deemed to have commenced

on the date referred in section 21.
• (4) Where the Court orders that an arbitral award be
set aside, the period between the
commencement of the arbitration and the
date of the order of the Court

• shall be excluded in computing the time

prescribed by the Limitation Act, 1963 for the
commencement of the proceedings (including
arbitration) with respect to the dispute so submitted.
The question which arises for determination in
this case is whether the provisions of Section
5 of the Limitation Act, 1963 are applicable
to an application challenging an award,
under Section 34 of the Arbitration and
Conciliation Act, 1996.
• Union of India v M/s Popular Construction
Co AIR 2001 SC 4010, (Limitation u/s 34)
• The award in this case was made by the
Arbitrator on 29th August, 1998.

• The appellant filed an application challenging the

Award on 19th April, 1999.
• The application was dismissed by the learned
Single Judge on 26th October, 1999 on the ground
that it was barred by limitation under Section 34
of the 1996 Act.

• The Division Bench rejected the appeal and

upheld the findings of the learned Single Judge.
• Before us, the appellant has not disputed the
position

• that if the Limitation Act, 1963 and in particular

Section 5, did not apply to the 1996 Act, -

• then its objection in the appeal [- that the Award

was time barred would have to be dismissed.
• The submission however is that Section 29(2) of the
Limitation Act makes the provisions of Section 5
of the Limitation Act applicable to special laws
like the 1996 Act,

• since the 1996 Act itself did not expressly exclude

its applicability and

• that there was sufficient cause for the delay in

filing the application under Section 34.
• Counsel for the respondent, on the other hand, has
submitted that the language of Section 34 when –
plainly read, expressly excluded the operation of
Section 5 of the Limitation Act and

• that as such - no scope was there for assessing the

sufficiency of the cause for the delay beyond the
period prescribed in the proviso to Section 34.
• Judgment
• The issue will have to be resolved with reference
• to Sections 29(2) of the Limitation Act, 1963
• and Section 34 of the 1996 Act.

• Section 29(2) provides that :

• "Where any special or local law prescribes for any
suit, appeal or application a period of limitation
different from the period prescribed by the
Schedule, - the provisions of Section 5 shall apply
• and the provisions contained in Sections 4 to 24
(inclusive)

• shall apply only in so far as, and to the extent to

which, they are not expressly excluded by such
special or local law."
• On an analysis of the section, it is clear that the
provisions of Section 4 to 24 of Limitation Act, 1963
will apply when :

• (1) there is a special or local law which prescribes a

different period of limitation for any suit, appeal or
application; and
• (ii) the special or local law does not expressly
exclude those Sections.
• There is no dispute that the 1996 Act is a Special law
and that Section 34 provides for a period of limitation
different from the prescribed under the Limitation
Act.

• The question then is - is such exclusion

expressed in Section 34 of the 1996 Act?
• The relevant extract of Section 34 reads : 34
• Application for setting aside arbitral award –

• (3) An application for setting aside may not be made

after three months have elapsed from the date on
which the party making that application had received
the arbitral Award -----
• Provided that if the Court is satisfied
• that the applicant was prevented by sufficient cause
from making the application within the said period of
three months
• it may entertain the application within a further
period of thirty days, but not thereafter".
• Had the proviso to Section 34 merely provided for
a period within which the Court could exercise its
discretion, that would not have been
sufficient to exclude of the Limitation Act
because
• "mere provision of a period of limitation in
howsoever peremptory or imperative
language is not sufficient to displace the
applicability of Section 5"
• As for as the language of Section 34 of the 1996 Act
is concerned, the crucial words are ‘but not
thereafter’ used in the proviso to sub-section (3).

• In our opinion, this phrase would amount to

an express exclusion within the meaning of
Section 29(2) of the Limitation Act, and
would therefore bar the application of
Section 5 of that Act.
• To hold that the Court could entertain an
application to set aside the Award beyond
the extended period under the proviso,
would render the phrase

• ‘but not thereafter’ wholly otiose.

 Sec 5 of Arbitration Act, 1996

• Extent of judicial intervention. - Notwithstanding

anything contained in any other law for the time
being in force, in matter governed by this Part, no
judicial authority shall intervene except where so
provided in this Part."
• If there were any residual doubt on the interpretation of the
language used in Section 34,

• the scheme of the 1996 Act would resolve the issue in

favour of curtailment of the Court’s powers by the
exclusion of the operation of Section 5 of the Limitation
Act.

• In the circumstances and for the reasons earlier stated we

answer the question posed at the outset in the negative.
The appeal is accordingly dismissed without any order as
to costs.
•  
• INTERNATIONAL COMMERCIAL
ARBITRATION
• Defined in Section 2(1) (f) of the Arbitration and
Conciliation Act, 1996 –
• "international commercial arbitration" means
• an arbitration relating to disputes
• arising out of legal relationships,
• whether contractual or not,
• considered as commercial under the law in force
in India
• and where at least one of the parties is-

• (i) an individual who is a national of, or habitually

resident
• in, any country other than India; or
• (ii) a body corporate which is incorporated
• in any country other than India; or
• (iii) an association or a body of individuals whose
central management and control is exercised in any
country other than India; or
• (iv) the Government of a foreign country;
• (2) This Part shall apply where the place of
arbitration is in India.
• International Arbitration
• "Any dispute arising out of or in connection with this
contract, including any question regarding its
existence validity or termination shall be referred to
and finally resolved by arbitration in accordance with
the Arbitration rules of Mumbai Centre of
International Arbitration which rules are deemed to
be incorporated by reference in this clause.
• The seat of Arbitration shall be Singapore.
The tribunal shall consist of one arbitrator to be
named by each party and the two arbitrators so
appointed shall appoint the presiding arbitrator.
The language of the Arbitration shall be in English.
The law governing the Arbitration shall be India".
• Prior to amendment
• It is interpreted that Part-1 of the Act is
applicable to both domestic and
international commercial arbitrations
having a seat of arbitration in India.
• Bharat Aluminium Co. v. Kaiser Technical
Services Inc., (2012) 9 SCC 552
• Facts
• 1. An agreement dated 22 April, 1993 was executed
between Balco and Kaiser Tech services

• under which Kaiser was to supply and install a

computer based system at Balco’s premises.
 
• 2. As per the arbitration clause in the Agreement,
any dispute under the Agreement would be settled
in accordance with
• the English Arbitration Law and
• the venue of the proceedings would be London.

• The Agreement further stated that

• the governing law with respect to the Agreement
was Indian law;
• however, arbitration proceedings were to be
conducted in accordance with English Law.
• Disputes arose and were duly referred to arbitration in
England.

• The arbitral tribunal passed award in England which

were sought to be challenged in India u/s 34 of the
Act in the district court at Bilaspur.
• Successive orders of the district court and the High Court
of Chhattisgarh rejected the appeals. Therefore, Balco
appealed to the Supreme Court.

•
• Identification of the relevant problem, sections
and principle involved.

• A significant issue to be adjudged, in the case of

Bharti Shipyard Ltd. v/s Ferrostaal AG & Anr.
(clubbed together with the BALCO petition for
hearing),
• was applicability of Sec 9 of the Act. - interim
award
• During the pendency of arbitration proceedings in
London, an injunction application was made by
appellants, Bharti Shipyard Ltd.,
• before the District Judge at Mangalore, against
the encashment of refund bank guarantees issued
under the contract (u/s 9 of the Act).
• The applications were allowed and were consequently
challenged in High Court of Bangalore.
• The Bangalore High Court set aside the
application so allowed on the grounds that the
appellants had an alternative remedy --- in the
courts of London and
• further since the substantive law governing the
contract, as well as the arbitration agreement, is
English law, the English courts should be
approached.
• This was challenged in this petition to the
Supreme Court.
• The appeal filed by Bharat Aluminum Co. before the
Division Bench of the Supreme Court was placed for
hearing before a three Judge Bench,

• as one of the judges in the Division Bench found that

judgment in Bhatia International and
• Venture Global was unsound and the other judge
disagreed with that observation:
• It was observed that the object of section 2(7) of the
Act is
• to distinguish the domestic award (Part I of the
Act) from the ‘foreign award’ (Part II of the Act);
and
• not to distinguish the ‘domestic award’ from an
‘international award’ rendered in India.
• The term ‘domestic award’ means
• an award made in India whether in a purely domestic
context, (i.e., domestically rendered award in a
domestic arbitration or in the international arbitration

• which awards are liable to be challenged u/s 34 and

are enforceable u/s 36 of the Act).
• Judgement
• It was held that

• there is a clear distinction between Part I and

Part II

• as being applicable in completely different fields

and with no overlapping provisions.
• The Court has also drawn a distinction between a
‘seat’ and ‘venue’

• which would be quite crucial in the event, the

arbitration agreement designates a foreign country
as the ‘seat’/ ‘place’ of the arbitration

• and also select law governing the arbitration

proceedings.
 
• The Court further clarified that the choice of another
country as the seat of arbitration
• inevitably imports an acceptance
• that the law of that country relating to the
conduct and supervision of arbitrations
• will apply to the proceedings.
  It would, therefore, follow
• that if the arbitration agreement is found or held to
provide for a seat / place of arbitration outside India,
• Then, even if the contract specifies that the Act
shall govern the arbitration proceedings,

• Part I of the Act

• would not be applicable or shall not enable Indian

courts to exercise supervisory jurisdiction over the
arbitration or the award.
• It would only mean that the parties have
contractually imported from the Act, those
provisions which are concerned with the internal
conduct of their arbitration and
• which are not inconsistent with the mandatory
provisions of the English procedural law or curial
law.
• Therefore, it can be inferred that Part I applies
only to arbitrations having their seat / place in
India.
• The Court dissented with the observations made
in Bhatia International case and further observed
on a logical construction of the Act,

• that the Indian Courts do not have the power to

grant interim measures when the seat of
arbitration is outside India
• A bare perusal of Section 9 of the Act would clearly
show that

• it relates to interim measures before or during

arbitral proceedings or at any time after the
making of the arbitral award, but before it is
enforced in accordance with Section 36
(enforcement of domestic awards).
• Therefore, the arbitral proceedings prior to the
award contemplated u/s 36 can only relate to
arbitrations which take place in India.

The Court further held that in foreign related

commercial arbitration, no application for interim
relief will be maintainable in India, either by
arbitration or by filing a suit.
• Further, the Judgment goes on to state that the
court should adopt a "territorial approach" and
that the seat of arbitration is the
"centre of gravity" with respect to
arbitration and its ancillary proceedings.

• The "territoriality principle" means that law of

the seat or place where the arbitration is held, is
normally the law to govern that arbitration
proceedings.
• The Judgment further stated that in a Foreign
Arbitration, no application for interim relief would
be maintainable under Section 9 or any other
provision of the Act,

• as applicability of Part I of the Act is limited to

all arbitrations which take place in India.

• Similarly, no suit for interim injunction would be

maintainable in India, on the basis of an
international commercial arbitration with a seat
outside India.
• Implications
•  
• 1. This judgment shall be applicable prospectively
(i.e. to all the arbitration agreements executed
after September 6, 2012).

• 2. As a result of this judgment, the seat of

arbitration has now gained paramount
importance for determining the applicability of Part I
of the Act.
• 3. The judgment also draws a distinction
between the seat of arbitration and the place
of arbitration.
• It therefore contemplates a situation where even
though the parties have provided for a particular place
for arbitration,

• that some of the proceedings themselves may be

conducted in other territories as may be convenient to
all.
• This judgment also ensures that foreign award
(i.e. an award passed outside India) can no
longer be challenged by an Indian entity u/s 34
of the Act and
• No interim relief u/s 9 of the Act would be available
where the seat of arbitration is outside India.

• As interim orders from foreign courts and

arbitration tribunals are not enforceable in
India such a situation would leave the
parties remediless.
 • POST – BALCO- SCENARIO

• Certain amendments were made in the

definition in Section 2(2) of 1996 Act....
• to remove the anomaly created by interpretation of
definitions in part-1 by Supreme Court in Bharat
Aluminium Co. vs. Kaiser Aluminium Technical
Services Inc. [(2012) 9 SCC 552, & Bhatia
International and ventural Global Engineering.
• Thus the issue that a party in a foreign seated arbitration
could not apply to the court for interim measures under
Section 9 to secure the assets or for assistance in taking
evidence
• has now been redressed as the parties may make express
agreement to incorporate the relevant sections to avail of
the benefits.
• A proviso has been added in Section 2 (2) -

• By adding a proviso to section 2(2), it is now made

clear that specified sections namely section 9(interim
measures), 27(courts assistance for taking evidence)
and 37(1)(a) and (3) (appeal against orders of courts)
• are applicable to International Commercial
Arbitrations,

• even if the seat of arbitration is outside India and

award made or to be made shall be enforceable
and recognized under Part-II.
• Sec 2 (2) - This Part shall apply where the place of
arbitration is in India.
• "provided that subject to an agreement to the
contrary,
• the provisions of of Sec 9 and Sec 27 and
clause (a) of Sub-sec (1) and Sub-sec (3) of Section
37 shall also apply to International Commercial
Arbitration,
• even if the place of Arbitration is outside India, and
• an arbitral award made or to be made in such a place
is enforceable and recognized under the provisions of
Part II of this Act" (Amendment Act)

• .
• AMENDMENT - 2(2)
• In Section 2(2) "Provided agreement to contrary"
it means that unless parties have specified some
other courts Jurisdiction, Indian courts will also
have jurisdiction for Section 9, 27, and 37.

• So therefore parties need not make an agreement

for Indian Courts to have jurisdiction under this
sections
• Therefore the inference is that parties can exclude
applicability. So if the Indian parties decide to
exclude Indian Courts Jurisdiction they can do it.
• Thus going by the plain reading of Sec 2(2) it
appears it can be done. ……
• However, practically whether one wants to
exclude Indian Courts Jurisdiction has to be seen.
• Thus only if there is no contrary agreement Indian
Courts will have jurisdiction for these sections
• Sec 44-Enforcement of Certain Foreign awards
• New York Convention Awards
• - Definition – In this Chapter, unless the context
otherwise requires, "Foreign award" means

• an arbitral award on differences

• between persons arising out of –relationships, whether

contractual or not, considered as

• commercial under the law in force in India, made on

or after the 11th day of October 1960 --
 i) in pursuance of an agreement in writing for
arbitration to which the convention set forth
applies and
• Ii) in one of such territories as the Central
Government, being satisfied that reciprocal provisions
have been made, may by notification in the official
gazette declare
• to be territories to which the said convention
applies.
 Circumstances under which a foreign award is
binding ?
• Sec 46 -Any foreign award which would be
enforceable under this chapter shall be treated as
binding for all purpose
• on the persons as between whom it is made by
way of a defense, set off or in any legal
proceedings in India.
• Sec 49. Enforcement of foreign awards.- Where the
Court is satisfied that the foreign award is enforceable
under this Chapter, the award shall be deemed to be
a decree.
• Sec 50 Appealable orders.- (1) Notwithstanding
anything contained in any other law for the time
being in force, an appeal (2019 Amendment) shall
lie from the order refusing to---
• (a) refer the parties to arbitration under section 45;
• (b) enforce a foreign award under section 48, to the court
authorised by law to hear appeals from such order.

• (2) No second appeal shall lie from an order passed in

appeal under this section, but nothing in this section shall
affect or take away any right to appeal to the Supreme
Court.
• PROPOSITION :
• TWO INDIAN PARTIES OPTING FOR FOREIGN-
SEATED ARBITRATION: NO BAR?
• Madhya Pradesh High Court upholds arbitration
agreement mandating two Indian Parties to take recourse
to a foreign-seated arbitration with foreign substantive
law;
• Holds that the resultant award would be a ‘foreign
award’, as envisaged under Part II of the Arbitration
& Conciliation Act, 1996;
• This is a step forward in the longstanding debate on
whether arbitration proceedings between two Indian
entities can be seated in a foreign country.
• Sasan Power Ltd v North American Coal Corporation
Pvt. Ltd. AIR 2016 SC 3974.
• BACKGROUND
• The Madhya Pradesh High Court in its recent
decision in has held that two Indian parties may
conduct arbitration in a foreign seat under
English law.
• Whilst this judgment provides certain answers in the
longstanding and yet inconclusive debate on the issue
of whether two Indian parties can seat their
arbitration abroad, it also throws up larger
questions.
• FACTS
• Sasan Power entered into an association agreement
with North American Coal Corporation-US (NACC-
US) in 2007.

• The Agreement, inter alia, provided for resolution

of disputes by way of arbitration to be
administered by ICC in London, England, under
laws of the United Kingdom.
• In 2011, NACC-US assigned its rights, liabilities
and obligations under the Agreement to the
Respondent - North America Coal Corporation
India Pvt Ltd. (NACC-India) by way of an
Assignment Agreement.

• Interestingly, whilst an assignment to NACC-India

was conducted, it appears that the obligations and
liabilities of NACC-US under the Agreement
continued.
• In 2014, NACC-India terminated the Agreement and
filed a request for arbitration claiming compensation
of INR 1,82,59,301.
• Sasan Power objected to this request for arbitration by
filing a suit before the District Court and sought an anti-
arbitration injunction. The injunction was granted by the
District Court.
• A second request for arbitration was filed by NACC-US
before the ICC. Sasan Power filed a second suit
challenging the request for arbitration filed by NACC-
US.
• NACC-India filed applications for rejection of
plaint under Order VII Rule 11 of the Code of
Civil Procedure, 1908 read with Section 45 of the
Arbitration & Conciliation Act, 1996 and vacation
of the anti-arbitration injunction granted by
District Court.
• The District Court allowed the Applications
moved by NACC-India and dismissed the suit filed
by Sasan Power. Consequently, Sasan Power filed
this appeal under Section 96 of the Code.
• In this appeal under Section 96 of the Code of Civil
Procedure, challenge is made to a judgment and
decree dated 19.3.2015 passed by the learned District
Judge, Singrauli,
• whereby a Suit filed by the appellant has been
dismissed, upholding an objection raised by the
respondents under Section 45 of the Arbitration
and Conciliation Act, 1996
• It has been held by the learned Court that parties have
entered into an arbitration agreement and as the
dispute is covered under Part II of the Arbitration
and Conciliation Act, 1996 the bar under Section
45 is attracted and therefore, the suit is not
maintainable.
• However, it is the case of the appellants that the
arbitration agreement in question is null, void and
inoperative as contemplated under Section 45, of the
Act of 1996 and therefore, the suit was
maintainable.
• It was said that two Indian Companies cannot
agree for arbitration in a foreign country,
according to law of that country.

• This according to the appellant is violative

of Section 23 of the Indian Contract Act and the
law laid down by the Supreme Court in the case of
TDM Infrastructure (P) Ltd. Vs. UE Development
India (P) Limited, (2008)14 SCC 271.
• Whereas, it is a case of the respondents that as the
order passed was under Section 45 of the Act of
1996 and against such an order as no appeal is
provided under Section 50, this appeal is not
maintainable.
• It is also submitted that by allowing the objection,
learned Court below has only held that the suit in
question is barred by law in view of the provisions
of Section 45 of the Act of 1996,
• the agreement in question is not hit by Section 23 of the
Contract Act, the law laid down in the case of TDM
Infrastructure is not applicable, as a Division Bench of
the Supreme Court in the case of Atlas Exports
Industries Vs. Kotak & Company€“ (1999)7 SCC 61
• has laid down the principle to the effect that two
Indian companies can enter into an agreement by
having the seat of arbitration in a foreign country and
in view of the above, the arbitration clause in question
is neither null, void and inoperative.
• ISSUES
• The Court, amongst other things, considered:
• 1. Whether the appeal filed by Sasan Power was
maintainable in light of Section 50 of the Act?

• 2. Whether two Indian parties could choose to seat

their arbitration in a foreign country?
• JUDGMENT
• The Court saw no reason to interfere with the
impugned judgment which referred the parties to
arbitration under Section 45 of the Act and dismissed
the appeal, while providing the following reasons:

• The Court observed that only orders refusing to

refer parties to arbitration could be appealed as
per Section 50 of the Act.
• The Court, while, placing reliance on the judgment
in Atlas Exports, observed that Section 28 of the
Indian Contract Act, 1872 read with the Exception 1
would not be a bar to a foreign seated arbitration.

• Further, it was observed that when two Indian parties

had willingly entered into an agreement in relation to
arbitration, the contention that a foreign seated
arbitration would be opposed to Indian public policy
was untenable.
• The Court stated that the principle laid down
in Atlas Exports (that was by a larger bench
than TDM Infrastructure) and would, in light of the
decision in Fuerst Day Lawson Ltd v. Jindal Exports,

• wherein it was observed by the Supreme Court that

there was not much difference between provisions of
the Act and 1940 Act; be binding precedent in
relation to the issue at hand.
• The Court noted that in TDM Infrastructure the
Supreme Court had clarified by way of an Official
Corrigendum that:
• "It is, however, made clear that any
findings/observations made hereinbefore were only
for the purpose of determining the jurisdiction of
this Court as envisaged under Section 11 of the
1996 Act and not for any other purpose."
• The Court observed that the scheme of the Act
indicated that the classification of an
arbitration as an international commercial
arbitration depended

• only on the nationality of the parties, which is

only relevant for the appointment arbitrators
as contemplated under Section 11 of the Act.
• The Court opined that the nationality of the
parties would not influence the applicability of
Part II of the Act, the applicability of which would
flow depending on the seat of arbitration.

• The Court, relying upon Enercon (India) Private

Limited v. Enercon GMBH and Chatterjee
Petroleum v. Haldia Petro Chemicals, was of the
opinion that
• where the parties had agreed to resolve their
disputes through arbitration, the courts were to
give effect to the intention of the parties and
interfere only when the agreement was null or
void or inoperative.

• The Court observed that once parties by mutual

agreement had agreed to resolve their disputes by
a foreign-seated arbitration, Part I of the Act
would not apply.
• Further where the agreement fulfilled the
requirements of Section 44, provisions of Part II of
the Act would apply.
• It was held that a court, under Section 45, would
have to refer parties to arbitration where it was
found that the agreement was not null or void or
inoperative.
• ANALYSIS
• This judgment interprets the scheme of the Act,
whereby it clarifies that applicability of Part II of the
Act is not based on the nationality of the parties
but on the basis of where the arbitration is
"seated".

• If arbitration is seated outside India, irrespective

of the nationality of the parties involved, it will be
considered to be a "foreign award".
• The issue before the court was whether two Indian
parties could seat an arbitration in a foreign country
with foreign law as the substantive law governing the
dispute.

• The concern with allowing the same has been the

permissibility for Indian parties to be governed by
laws other than the laws of India.
• The consequence of such an act, allowing Indian
parties to expressly contract out of Indian law, being
arguably against Indian public policy; is a matter of
concern since it would impact the enforceability of
the award.
• ONGC v Western Co. N. America– AIR 1987 SC
674
• A drilling contract was entered into by the appellant
and the respondent which stipulated an arbitration
clause that the arbitration proceedings shall be held
in accordance with the provisions of the Indian
Arbitration Act, 1940, and that the validity and
interpretation thereof shall be governed by the
laws of India.
• The agreed venue for hearing was London
• A dispute arose between the parties and it was
referred to Arbitration.
• Consequent upon the inability of the two Arbitrators
to agree on the matters outstanding in the
reference, the Umpire entered upon the arbitration
and straight away rendered his interim award,
• without affording any hearing to the parties and
the same was filed in the High Court at the
instance of the respondent.
• Subsequently, the Umpire rendered a final award
relating to costs.
• About a month after the lodging of the award in the
High Court, the respondent filed a plaint in the
U.S. District Court
• seeking an order confirming the interim and final
awards and a payment of a sum of $ 2,56,815.45 by
way of interest until the date of judgment and costs
etc.
• The appellant, however, instituted a Petition
under Sections 30 and 33 of the Arbitration Act for
setting aside the aforesaid awards and for an
interim order restraining the respondent from
proceeding further with the action instituted in
the U.S. Court.
• A Single Judge of the High Court granted ex parte
interim restraint order but vacated the same after
hearing the parties.
The High Court held that the action to enforce the
award as a foreign award in the U.S. Court was
quite in order and that

the mere fact that a petition to set aside the

award had already been instituted in the
Indian Court and was pending at the time of
the institution of the action in the U.S. Court
• was a matter of no consequence for the purposes
of consideration of the question
• as to whether or not the respondent should be
restrained from proceeding further with the action
in the U.S. Court and
• that it was open to the respondent to enforce the
award in the U.S. Court and, therefore, it would
not be appropriate to grant the injunction
restraining enforcement, and
• - and that it was open to the appellant to contend
before the U.S. Court that the petition for setting
aside the award cannot be said to be vexatious or
oppressive

• The appellant went in appeal to the Supreme Court.

• it was submitted on behalf of the appellant that
the award sought to be enforced in the U.S. Court
may itself be set aside by the Indian Court
• and in that event, that since the validity of the
award in question and its enforceability have to be
determined by an Indian Court which alone has
jurisdiction under the Indian Arbitration Act of
1940,
• the American Court would have no
jurisdiction in this behalf, that the
enforceability of the award must be
determined in the context of the Indian Law
• as the Arbitration proceedings are subject to the
Indian Law and are governed by the Indian
Arbitration Act of 1940, and that

• if the award in question is permitted to be enforced in

U.S. Court without its being confirmed by a court in
India, it would not be in conformity with law, justice
or equity.

•
• On behalf of the respondent it was contended
that the action in the U.S.A. Court could not be
considered as being oppressive to the appellant
• and that even if it is so, the High Court has no
jurisdiction to grant such a restraint order,
• and further that the appellant had suppressed the
fact that
• it had appeared in the USA Court and succeed in
persuading the USA Court to vacate the seizure
order obtained by the respondent and thereby
disentitled itself to seek any equitable order.
• Allowing the appeal, the Supreme Court, held :
• Under the Indian law, an arbitral award is
unenforceable until it is made a rule of the Court,
and a judgment and consequential decree are
passed in terms of the award.

• Till an award is transformed into a judgment and

decree under Section 17 of the Indian Arbitration
Act, it is altogether lifeless, from the point of
enforceability.
• In the instant case, the arbitration proceedings are
governed by the Indian Arbitration Act of 1940
and

• a proceeding under the Act for affirming

the award and making it a rule of the
Court or for setting it aside can be
instituted only in an Indian Court.
• The expression "Court" as defined by Section 2(e)
of the Act leaves no room for doubt on this score
that - the Indian Court alone has the
jurisdiction to pronounce on the validity or
enforceability of the award.

• Article V(1)(e) of the New York Convention

provides that recognition and enforcement
of the award will be refused
• if the award "has not yet become binding on the
parties or
• has been set aside or
• suspended by a competent authority of the
country in which or under the law of which that
award was made.
• The significance of the expression "not yet
become Binding on the parties" employed in
Article V(1)(e) cannot be lost sight of.
• The expression postulates that the Convention has
visualised a time later than the making of the award.

• The award which is sought to be enforced as

foreign award will have to be tested with
reference to the key words contained in
Article V(1)(e) of the Convention and
• the question will have to be answered whether
the award has become binding on the parties or
has not yet become binding on the parties.
• GUIDELINES
• The test has to be applied in the context of
the law of the country governing the
arbitration proceedings or the country under
the law of which the award has been made.
• The enforceability must be determined as per the
law applicable to the award.

• French, German and Italian Courts have taken the

view that the enforceability as per the law of
the country which governs the award is the
essential pre-condition for asserting that it
has become binding under Article V(1)(e).
• Indian Position :
• India has acceded to the New York Convention.

• One of the Objects of the New York Convention was

to evolve consensus amongst the covenanting nations
in regard to the execution of foreign
arbitral awards in the concerned Nations.
• Necessity for consensus was felt with a view to
facilitate international trade and commerce

• by removing technical and legal bottle necks which

directly or indirectly impede the smooth flow of
international commerce.
• The Court dealing with the matters arising out of
arbitration agreements of the nature envisioned by
the New York Convention must, therefore

• adopt an approach informed by the spirit underlying

the Convention.----
 Judgment
• There cannot be any doubt that the respondent can
institute an action in the U.S. Court for the
enforcement of the award in question –

• notwithstanding the fact that the application for

setting aside the award had already been
instituted and was already pending before the
Indian Court
• The appellant can approach the U.S. Court for
seeking a stay of the proceedings initiated by the
respondent for procuring a judgment in terms of the
award in question.

• As per the contract, while the parties are

governed by the Indian Arbitration Act,
1940 and the Indian Courts have the
exclusive jurisdiction
• to affirm or set aside the award under the said act,
the respondent is seeking to violate the very
arbitration clause on the basis of which the award
has been obtained by seeking confirmation of
the award in the New York Court under the
American Law.

• The stipulation to be governed by the Indian law

which by necessary implication means a
stipulation to exclude the USA Court
• and to seek an affirmation and to seek it only
under the Indian Arbitration Act from an Indian
Court.

• If the restraint order is not granted, serious

prejudice would be occasioned - a party violating
the very arbitration clause on the basis of which
the award has come into existence
• will have secured an order enforcing the order
from a foreign court in violation of the very
clause.

• The respondent has prayed for confirmation of award.

• If the American court grants the prayer- not only the

matter will be decided by a court other than the
court agreed upon between the parties but it
will be decided by a court under a law
other than the law agreed upon.
• The American Court has no jurisdiction to
confirm the award in view of the New York
Convention, in the event of the award rendered
by the Umpire –

• In the event of the award rendered by the Umpire

being confirmed by the U.S Court- an extremely
anomalous situation would arise in as much as
• that the respondent will be able to recover from
the assets of the losing party in the USA after
procuring a judgment in terms of the award from
the USA Court,

• which would result in an irreversible the

damage being done to the appellant -
• because the Court in USA would have
enforced a non-existing award under
which nothing could have been recovered.

• and thus the Court would have acted on and

enforced an award which did not exist in
the eye of law.
The losing party in that event would be obliged to
initiate fresh proceedings in the USA Court for the
amount already recovered from it,

pursuant to the judgment rendered by the USA

Court in enforcing the award which is set aside
by the Indian Court.
• All this would happen if the restraint order as
prayed by the losing party is not granted and this
can be avoided if it is granted

• the American Court would have enforced an

award which is a lifeless award under the law of
the country of its origin which law governs the
award by choice and consent
• It would neither be just nor fair on the part of
the Indian Court to deny relief to the appellant
when it is likely to be placed in such an awkward
situation if the relief is refused.

• No doubt, this Court sparingly exercises the

jurisdiction to restrain a party from proceeding
further with an action in a foreign court
• However, the question is whether on the facts and
circumstances of this case

• it would not be unjust and unreasonable not to

restrain the respondent from proceeding further with
the action in the American Court.

• This is one of those rare cases where the Court

would be failing in its duty if it hesitated in
granting the restraint order,
• for, to oblige the appellant to face the aforesaid
proceedings in the American Court would be
oppressive in the facts and circumstances of the
case

• and in such a situation the courts have undoubted

jurisdiction to grant such a restraint order,
whenever the circumstances of the case make it
necessary or expedient to do so or the ends of
justice so require
• There was no deliberate suppression by the
appellant, and it would, therefore, not be proper to
refuse relief to the appellant on this account.

• While this Court is inclined to grant the restraint

order, fairness demands that it should not be
unconditional.
• There are good and valid reasons for making the
restraint order conditional in the sense that the
appellant should be required to pay the charges
payable
• in respect of the user of rig belonging to the
respondent Company at the undisputed rate
• regardless of the outcome of the petition instituted by
it in the High Court for setting aside the award
rendered by the Umpire
• It is no doubt true that if the arbitral award is set
aside by the Indian Court no amount would be
recoverable under the said award.
• That, however, does not mean that the liability to
pay the undisputed amount which has already
been incurred by the respondent disappears.
• It would not be fair on the part of the appellant
to withhold the amount which in any case is
admittedly due and payable

• No prejudice will he occasioned to the appellant

by making the payment of the admitted amount
regardless of the fact that the respondent is claiming a
larger amount.
• In any case the appellant which seeks an equitable
relief cannot be heard to say that it is not
prepared to act in a manner just and equitable
regardless of the niceties and nuances of legal
arguments.

• The order passed by the High Court on April 3, 1986

is set aside, and the earlier order passed by it on
January 20, 1986 restored subject to certain
conditions imposed by the Court.
• Eitzen Bulk A/s v Ashapura Minechem Ltd (2016) 11 SCC
508
• The dispute in these appeals, arises out of the Contract Eitzen
Bulk A/S of Denmark entered into with Ashapura Minechem
Limited of Mumbai as charterers for shipment of bauxite from
India to China. The Charter party contains an Arbitration
Clause as follows:-Clause No. 28 – Any dispute arising under
this C.O.A. is to be settled and referred to Arbitration in
London. One Arbitrator to be employed by the Charterers
and one by the Owners and in case they shall not agree then
shall appoint an Umpire whose decision shall be final and
binding, the Arbitrators and Umpire to be Commercial
Shipping Men. English Law to apply".
The matter was referred to Arbitration by a sole
Arbitrator to be held in London according to English
Law. Ashapura Minechem was held liable and directed
to pay a sum of 36,306,104 US$ together with
compound interest at the rate of 3.75 % per annum vide
Award of the Sole Arbitrator dated 26.5.2009.
Perusal of the above clause clarifies the intention of the
parties. If and when arbitration was to be initiated, it
was to be conducted in London. The clause also
expressly states that the "English law is to apply"
ruling out any questions in that regard.
• Before Eitzen could enforce the award in India, Ashapura
Minechem filed an application for injunction in a District
Judge’s Court in Gujarat. The matter came before the High
Court of Gujarat. The issue at hand was, Ashapura had
challenged the foreign award under Section 34 of Arbitration
Act.
• Eitzen contended that the foreign award couldn’t be
challenged in India because Section. 34, falling under Part-I of
the Arbitration Act would not have any effect in cases where
the seat of arbitration was outside India. The Hon’ble
Gujarat High Court held that Ashapura was entitled to
challenge the award.
• Subsequently, Eitzen had filed for enforcement of the
foreign award before the Bombay High Court, within
whose jurisdiction Ashapura carries on business and
has a registered office.
• Ashapura responded by citing Section 42 of
Arbitration Act, whereby Bombay High Court
would have no jurisdiction as proceedings had
already been initiated before the Gujarat High
Court.
• The Bombay High Court ruled that Part-I was
excluded by the parties by having decided that the
seat of arbitration be set in London.

• Thereby the question of Section 42 would not

arise, and further allowed for the enforcement of
the award. This contradictory stand of the High
Courts brought the matter before the Supreme Court.
• The Supreme Court decided that the main question to
be addressed was whether Part-I of Arbitration Act
is excluded from its operation in case of a foreign
award where the arbitration is not held in India
and is governed by foreign law.
• Referring to the Clause 28 (arbitration clause) in the
Contract of Affreightment, the Supreme Court was of
the view that since there was express mention that
English Law would apply, there was no question of
the applicability of the Indian law on arbitration.
• Thus, there was an express exclusion to the
applicability of Part-I to the current arbitration,
as per the contract entered into by the parties.
• The Supreme Court further went on to say that,
"it has been settled law for quite some time that
Part-I is excluded where parties choose that the seat
of arbitration is outside India and the arbitration
should be governed by the law of that foreign
country".
• The Supreme Court further clarified that, "mere
choosing of the juridical seat of Arbitration
attracts the law applicable to such location."
• This inference can be appreciated by considering a
simple illustration. If a citizen of India were to go
to Italy and drive a car there, the traffic rules of
Italy would apply automatically. There will be no
question of choice in such a scenario.

• Similarly, if London were to be chosen as the seat

for Arbitration, it would necessarily imply that
English Law would be applicable, ipso jure.
• Redfern and Hunter on International Arbitration
which contains the following explication of the issue:

• "It is also sometimes said that parties have selected

the procedural law that will govern their arbitration,
by providing for arbitration in a particular
country".
• This is too elliptical and, as an English court itself
held more recently in Breas of Doune Wind Farm it
does not always hold true.

• What the parties have done is to choose a place of

arbitration in a particular country. That choice
brings with it submission to the laws of that country,
including any mandatory provisions of its law on
arbitration. 
• To say that the parties have ‘chosen’ that particular
law to govern the arbitration is rather like saying that
• an English woman who takes her car to France has
‘chosen’ French traffic law, which will oblige her to
drive on the right-hand side of the road, to give priority
to vehicles approaching from the right, and generally to
obey traffic laws to which she may not be accustomed.

• .
• But it would be an odd use of language to say this
notional motorist had opted for ‘French traffic law’.
What she has done is to choose to go to France
• Nevertheless, once a place of arbitration has been
chosen, it brings with it its own law. If that law
contains provisions that are mandatory so far as
arbitration are concerned, those provisions must be
obeyed.
It is not a matter of choice any more than the
notional motorist is free to choose which local
traffic laws to obey and which to disregard."
• Accordingly, Ashapura’s petition was set aside and
the decision to enforce the foreign award by the
Bombay High Court was upheld by the apex court.
• Thus the Supreme Court has put to rest the
dispute over applicability of Part-I of the
Arbitration Act over foreign awards – if the seat
of arbitration was any place but India, laws of that
chosen place would apply.
• It can very well be interpreted that when parties agree
to a particular location as seat of arbitration, whether
within or outside India, then necessary inference must
be drawn that all other courts and applicability of
arbitration laws of all other locations is ex juris. 

• Though this judgment has reiterated the earlier position of

law relating to international arbitration awards, it will
have an implication on arbitration proceedings under the
Arbitration Act, more specifically, the proceedings under
S.9 and Sec.11 of the Act.
• Thus, irrespective of where the registered office or
place of business of parties is located or the
occurrence of cause of action,
• the proceeding for interim measures under Sec.9
of the Arbitration Act will lay only before the
court where the juridical seat of arbitration is
agreed to between the parties.
• IMPLICATIONS :
• The judgment’s ramifications in India’s international
arbitration are enormous as this would help resolve
long pending cases and clear the arbitration backlog
that India is suffering from, which is indeed
monumental.

• Any further cases which are being entertained

could simply be dismissed on the grounds of
choice of foreign arbitral seat while review would
only be allowed in enforcement proceedings.
• This decision comes as at an opportune time for the
current Government which has been struggling to
garner foreign investment.
• Under this new regime and the Courts judgement
finally bringing some clarity; India can perhaps begin
its journey to rival the arbitration elite (the UK, US,
Singapore, Stockholm, Paris, Hong Kong) and set up
an arbitration institution.
• This would, at best, resolve the remaining few
shortcomings and bring a sense of stability which
is an admirable trait in any arbitration regime,

• and at worst, end the much dreaded multiplicity of

proceedings and the unnecessary frivolous
appeals to arbitral awards.
 • MEDIATION
• It is a recorded fact that the complicated cases were
resolved not in the kings court but by kings
mediator. Even during the Mughal rule Emperor
Akbar depended upon his mediator minister Birbal.

• The most famous case was when two women claimed

motherhood of a child, the Mediator suggested
cutting the child into two and dividing its body and
giving one-half to each woman.
• The real mother gave up her claim to save the child’s
life whereas the fake mother agreed to the division.
The child was then given to the real mother.

• Though this was not a fully-developed example of

modern mediation, it is an example of
interest-based mediation where the neutral third
party seeks to identify the underlying needs and
concerns of the parties.
 Thus, Mediation is a voluntary, party-centered and
structured negotiation process

• where a neutral third party assists the parties in

amicably resolving their dispute by using specialized
communication techniques,
• In mediation, the parties retain the right to decide
for themselves whether to settle a dispute and the
terms of any settlement.
• Even though the mediator facilitates their
communications and negotiations, the parties always
retain control over the outcome of the dispute.
• This right of self-determination is an essential
element of the mediation process
• It results in a settlement created by the parties
themselves and is therefore acceptable to them. The
parties have ultimate control over the outcome of
mediation.

• Mediation is a party-centred negotiation process.

The parties, and not the neutral mediator are
the focal point of the mediation process.
• Mediation encourages the active and direct
participation of the parties in the resolution of
their dispute.

• Though the mediator, advocates, and other

participants also have active roles in mediation, the
parties play the key role in the mediation process.
• They are actively encouraged to explain the
factual background of the dispute, identify issues
and underlying interests, generate options for
agreement and make a final decision regarding
settlement.
• The goal of mediation is to find a mutually
acceptable solution that adequately and
legitimately satisfies the needs, desires and
interests of the parties.
• The mediators personal preferences or
perceptions do not have any bearing on the
dispute resolution process.- he has no authority to
make any binding decisions, - however
• helps the parties to resolve their dispute by negotiated
agreement without adjudication.

• Mediation can apply in a variety of disputes -

• commercial, legal, diplomatic, workplace,
community and divorce or other family matters.
• Mediation is a party-centered negotiation process.-The
parties and not the neutral mediator are the focal point of
the mediation process.

• Thus, mediation encourages the active and direct

participation of the parties in the resolution of their
dispute.

In Mediation the mediator works together with parties to

facilitate the dispute resolution process and does not
adjudicate a dispute by imposing a decision upon the
parties.
• A mediator’s role is both facilitative and
evaluative. A mediator facilitates when he manages
the interaction between the parties, encourages and
promotes communication between them and manages
interruptions and outbursts by them and motivates
them to arrive at an amicable settlement.

• A mediator evaluates when he assists each party to

analyze the merits of a claim/defence, and to assess
the possible outcome at trial.
 • A ROLE PLAY "THE FAMILY PORTRAIT"
• Their father died recently, leaving the family property
to the two sons. Their mother died earlier, so both
parties are the sole surviving heirs.
• Their father’s will is clear regarding the family home
and his other personal property - everything has been
divided fifty-fifty.
• However, the will mentions that the family
portrait, an original painting by
• a famous Indian Painter, M.F Hussain of their parents
and grandparents, and which is a cherished family
possession is to go to the father’s "favourite child".

• The will does not name his favourite child.

• The two brothers cannot agree on who the father’s

favourite child is.
• Here, the mediator facilitates the negotiation of the
same issue.

• The parties will try and work out a solution between

themselves, rather than relinquishing control over the
resolution of the dispute to the mediator.

• The parties are free to choose creative

compromises - there is no right and wrong, and
consequently, there need not be only one winner.
Stages of Mediation
 Stages of Mediation
• Stage I
– Pre-Mediation & Opening the Session
• Stage II
– Identification of Issues
• Stage III
– Generating Options and Problem-Solving
• Stage IV
– Agreement Writing and Post-Mediation
 Stage I
Pre-Mediation & Opening the Session
"Setting the Tone"
This is the most important phase in the mediation
process. It provides you with the opportunity to
make a good "first impression".

How the mediator(s) performs during this phase

will impact either positively or negatively on the
remaining mediation process.
• Objectives
• Establish neutrality
• Create an awareness and understanding of the
process
• Develop rapport with the parties
• Gain confidence and trust of the parties
Establish an environment that is conducive to
constructive negotiations
• Motivate the parties for an amicable settlement of
the dispute
• Establish control over the process
• To begin with, the mediator introduces himself.
• Then he furnishes information about his appointment
as mediator, the assignment of the case to him for
mediation and his experience if any in successfully
mediating similar cases in the past.
• Then the mediator declares that he has no connection with
either of the parties and he has no interest in the dispute.
• He also expresses hope that the dispute would be amicably
resolved. This will create confidence in the parties
about the mediator's competence and impartiality.
• Thereafter, the mediator requests each party to
introduce himself.
• He may elicit more information about the parties’ and
may freely interact with them to put them at ease.
• The mediator will then request the counsel to introduce
themselves.
• The mediator will then confirm that the necessary
parties are present with authority to negotiate and make
settlement decisions
• The mediator will discuss with the parties and their
counsel any time constraints or scheduling issues
• Mediator’s Opening Statement
• Concept and process of mediation
• Stages of mediation
• Role of the mediator
• Role of advocates
• Role of parties
• Advantages of mediation
• Ground rules of mediation
 Stage II
Identification of Issues
With mediator’s assistance, parties will:

 Identify issues in their disputes

 Express their views and perspectives
 Identify areas of agreement and
disagreement on the issues
 Identify common ground

Note: this stage does not include reaching

agreement or selecting options to resolve
disputes.
 Elements of Stage II
Joint Session

In opening statement mediator will:

 Explain what will happen at Stage II
Remind parties they will have time to
present their perspectives
 Mediation Ground Rules
• Established by mediator
– Whoever is speaking has floor, no interruptions
– Take notes and bring point up later
– Any party can stop process for break at any time or
request a caucus
– Negotiate in good faith; our common goal is to
resolve dispute
– Listen
– Follow ground rules and direction of mediator
• Other ground rules requested by parties
• Ask parties to commit to ground rules
 Elements of Stage II
Joint Session (continued)

• Complainant presents views

• Mediator paraphrases what s/he heard complainant
say
• Respondent/Agency presents views
• Mediator paraphrases what s/he heard
Respondent/Agency say
• Mediator asks parties to "add or clarify, not respond"
• Continue back and forth until parties feel they have
expressed their views
• Mediator summarizes common ground
 Elements of Stage II
Individual/Separate Sessions
• Objectives
• • Understand the dispute at a deeper level
• • Provide a forum for parties to further vent their emotions
• • Provide a forum for parties to disclose confidential
information which they do not wish to share with other
parties
• • Understand the underlying interests of the parties
• • Help parties to realistically understand the case
• • Shift parties to a solution-finding mood
• • Encourage parties to generate options and find terms
that are mutually acceptable
 Caucuse/s
• Used by mediator to:
– Gain control of mediation
– Allow party to vent or share information
– Ensure party heard/understood what was said
– Move beyond deadlock
– Provide an opportunity for each party to
explore strengths/weaknesses of case
 Caucuses
(continued)
• Used by mediator to:
– Provide an opportunity for party to explore
strengths/weaknesses of other party’s case
– Find out more on party’s interests
– Reinforce confidentiality
– Encourage information sharing
– Set agenda for next joint session
– Identify information that can be shared in joint
sessions
 Validation

• Mediator acknowledges party’s views and

feelings on the issue, while remaining
neutral.
– "I understand you feel hurt and upset about…"
– "I understand your feelings in this matter."
– "I can sympathize with your concerns about what
happened."
 Open-Ended Questions
• To further facilitate discussion, the mediator asks
open-ended questions.
– "Help me understand what you meant by…"
– "Can you be more specific?"
– "What do you mean by that?"
– "What’s important to you?"
– "Why is that important to you?"
 Paraphrasing
• Paraphrasing is critical to the mediation process.
– Mediator re-states what was said in his/her own
words
– Not verbatim, instead provide a shorthand
summary which includes all-points made
– Ensures everyone heard what party intended to
convey
– Parties may correct mediator’s
paraphrasing
 Paraphrasing
(continued)

– Builds trust, demonstrates mediator was listening

and understood what was said
– Coming from neutral mediator, facilitates
understanding by other party
– Provides "breather" as parties go back and
forth expressing views
• ASKING EFFECTIVE QUESTIONS
• Mediator may ask parties more questions that can
gather information to clarify facts or alter perceptions
of the parties with regard to their understanding and
assessment of the case and their expectations.
• Examples of effective questions: -
• ‘Tell me more about the circumstances leading up to the
signing of the contract’.
• ‘Help me understand your relationship with the other party
at the time you entered the business’.
• ‘What were your reasons for including that term in the
contract?’
• • CLOSED QUESTIONS: which are specific, concrete
and which bring out specific information.
• For example, ‘it is my understanding that the other driver
was going at 60 kilometers per hour at the time of the
accident, is that right?’
• ‘On which date the contract was signed?’
• ‘Who are the contractors who built this building?’
• • QUESTIONS THAT BRING OUT FACTS:
• ‘Tell me about the background of this matter’.
• ‘What happened next?’ •
• QUESTIONS THAT BRING OUT POSITIONS:
• ‘What are your legal claims?’
• ‘What are the damages?’
• ‘What are their defences?’
• • QUESTIONS THAT BRING OUT INTERESTS:
• ‘What are your concerns under the circumstances?’ ‘What
really matters to you?’
• ‘From a business / personal / family perspective, what is most
important to you?’
• ‘Why do you want divorce?’ ‘What is this case really
about?’‘What do you hope to accomplish?’‘What is really
driving this case?’
 Stage III
Generating Options
&
Problem-Solving
 Generating Options

• In individual sessions clarify what are the parties’

bottom line.
• Mediator may offer a solution not as an answer, but
as an idea to think about.
• Ask parties "what if" questions.
• DISCUSSING THE STRENGTHS AND WEAKNESSES
OF THE RESPECTIVE CASES OF THE PARTIES :
• The mediator may ask the parties and/or counsel for their
views about the strengths and weaknesses of their case and the
other side’s case. The mediator may ask questions such as,
• ‘How do you think your conduct will be viewed by a Judge?’
or ‘Is it possible that a judge may see the situation
differently?’ or ‘I understand the strengths of your case, what
do you think are the weak points in terms of evidence?’
• or ‘How much time will this case take to get a final decision
in court?’ Or ‘How much money will it take in legal fees
and expenses in court?
• CONSIDERING THE CONSEQUENCES OF
ANY FAILURE TO REACH AN AGREEMENT
(BATNA/WATNA /MLATNA ANALYSIS).
• BATNA - Best Alternative to Negotiated Agreement
WATNA - Worst Alternative to Negotiated
Agreement MLATNA - Most Likely Alternative to
Negotiated Agreement
 Generating Options
• Brain Storming Techniques
• Brain Storming is a technique used to generate
options for agreement. There are 2 stages to the brain
storming process: 1. Creating options 2. Evaluating
options
• 1. Creating options:- Parties are encouraged to
freely create possible options for agreement.
• Options that appear to be unworkable and
impractical are also included.
• The mediator reserves judgment on any option
that is generated and this allows the parties to
break free from a fixed mind set.
• It encourages creativity in the parties. Mediator
refrains from evaluating each option and instead
attempts to develop as many ideas for settlement
as possible.

• All ideas are written down so that they can be

systematically examined later.
• Evaluating options:- After inventing options the next
stage is to evaluate each of the options generated. The
objective in this stage is not to criticize any idea but
to understand what the parties find acceptable and
not acceptable about each option.
• In this process of examining each option with the
parties, more information about the underlying
interests of the parties is obtained. This information
further helps to find terms that are mutually
acceptable to both parties.
• Brainstorming requires lateral thinking more than
linear thinking.
• Lateral thinking: Lateral thinking is creative,
innovative and intuitive. It is non-linear and
non-traditional. Mediators use lateral thinking to
generate options for agreement.
• Linear thinking: Linear thinking is logical,
traditional, rational and fact based. Mediators use
linear thinking to analyse facts, to do reality
testing and to understand the position of parties.
 Generating Options
• SUB- SESSIONS :
• The separate session is normally held with all the
members of one side to the dispute, including their
advocates and other members who come with the
party.

• However, it is open to the mediator to meet them

individually or in groups by holding sub- sessions
with only the advocate (s) or the party or any
member(s) of the party. Mediator may also hold
sub-session(s) only with the advocates of both
sides, with the consent of parties..
• During such sub-session, the advocates can be more
open and forthcoming regarding the positions and
expectations of the parties.
• If there is a divergence of interest among the parties
on the same side, it may be advantageous for the
mediator to hold sub- session(s) with parties having
common interest, to facilitate negotiations.
• This type of sub-session may facilitate the
identification of interests and also prevent the
possibility of the parties with divergent interests,
joining together to resist the settlement
• EXCHANGE OF OFFERS :
• The mediator carries the options/offers generated by
the parties from one side to the other. The parties
negotiate through the mediator for a mutually
acceptable settlement.

• However, if negotiations fail and settlement cannot

be reached the case is sent back to the referral
Court.
• STAGE 4: CLOSING and Agreement Writing
• (A) Where there is a settlement •
• Once the parties have agreed upon the terms of
settlement, the parties and their advocates
re-assemble and the mediator ensures that the
following steps are taken:
• 1. Mediator orally confirms the terms of settlement;
• 2. Such terms of settlement are reduced to writing;
• 3. The agreement is signed by all parties to the
agreement and the counsel if any representing the
parties;
• 4. Mediator also may affix his signature on the signed
agreement, certifying that the agreement was signed
in his/her presence;
• 5. A copy of the signed agreement is furnished to the
parties;
• 6. The original signed agreement sent to the
referral Court for passing appropriate order in
accordance with the agreement;
• 7. As far as practicable the parties agree upon a date
for appearance in court and such date is intimated to
the court by the mediator;
• 8. The mediator thanks the parties for their
participation in the mediation and, congratulates all
parties for reaching a settlement
• THE WRITTEN AGREEMENT :
• Clearly specify all material terms agreed to;
• be drafted in plain, precise and unambiguous
language;
• be concise;
• use active voice, as far as possible.
• Should state clearly WHO WILL DO, WHAT,
WHEN, WHERE and HOW (passive voice does not
clearly identify who has an obligation to perform a
task pursuant to the agreement);
• use language and expression which ensure that
neither of the parties feels that he or she has ‘lost’;
• ensure that the terms of the agreement are executable
in accordance with law;
• be complete in its recitation of the terms;
• avoid legal jargon, as far as possible use the words
and expressions used by the parties;
• as far as possible state in positive language what each
parties agrees to do;
• as far as possible, avoid ambiguous words like
reasonable, soon, co-operative, frequent etc;
 • Where there is no settlement
• If a settlement between the parties could not be reached, the
case would be returned to the referral Court merely reporting
"not settled".
• The report will not assign any reason for non settlement or
fix responsibility on any one for the non-settlement.
• The statements made during the mediation will remain
confidential and should not be disclosed by any party or
advocate or mediator to the Court or to anybody else.
• The mediator should, in a closing statement, thank the
parties and their counsel for their participation and efforts
for settlement.
• MEDIATION – BINDING FORCE ?

• Afcon’s Infrastructure Ltd. & Anr. v

Cherian Varkey Construction Co. (P) Ltd.
& Ors. (2010) 8 SCC 24.
 • MEDIATION – BINDING FORCE ?
• The Law Commission-124th Report on the
High Court Arrears - A Fresh Look
and
• the 129th Report–Urban Litigation-Mediation as
Alternative to Adjudication
• emphasised the desirability of the Courts being
empowered to compel parties to a private
litigation to resort to arbitration or
mediation.
• The Malimath Committee on Alternative Modes
and Forums of Dispute Resolution endorsed the
recommendations made in the 124th and the 129th
Report of the Law Commission -----
that the lacuna in the law as it stands today,
arising out of the want of power in the
Courts to compel the parties to a private
litigation to resort to arbitration or
mediation, requires to be filled up by necessary
amendment.
• Following the recommendations, made by Malimath
Committee, the Law commission and
the Committee on Subordinate Legislations
(11th Lok Sabha),

• the Code of Civil Procedure (Amendment) Bill, 1997

was introduced in the Parliament keeping in view,
among others, that every effort should be
made to expedite the proceedings so that
justice might not be delayed.
• The Code of Civil Procedure (Amendment)
Act, 1999 inserted a new section 89
providing for settlement of Disputes outside
the Court and also inserted Rule 1 A, Rule
1 of Order 10.

• The amendment has been from 1/7/2002 – made

applicable to different ADR including
Conciliation.
 • Settlement of Disputes Outside the Court
 Section 89 which deals with settlement of
disputes outside the court introduces the
concept of what is known as ‘judicial
mediation’, as opposed to ‘voluntary
mediation’.
A court can now identify cases where an amicable
settlement is possible, formulate the terms of
such a settlement and invite the observations
thereon of the parties to resolve the dispute.
• The 1996 Arbitration and Conciliation Act does
not contain any provision for reference by courts
to arbitration, mediation and conciliation in the
absence of the agreement between the
parties to that effect.
• Thus it is purely consensual and not
compulsory.
• The legal position and the general scope of Section
89 of the Code of Civil Procedure came up for
consideration in the case of - Afcon’s Infrastructure
Ltd. & Anr. v Cherian Varkey Construction Co.
(P) Ltd. & Ors. (2010) 8 SCC 24.
 Afcon’s Infrastructure Ltd. & Anr. v
Cherian Varkey Construction Co. (P) Ltd. & Ors. (2010)
8 SCC 24.
• FACTS:
• The second respondent (SR), Cochin Port Trust
entrusted the work of construction to the appellants under
an agreement between them.
• The appellants (AP) sub-contracted a part of the said
work to the first respondent (FR) under an agreement
between them.
• The agreement between the AP and the FR did not
contain any provision for reference of the
disputes to arbitration. Disputes arose.
• FR filed a suit against the AP for recovery with interest at
18% per annum.

• An order of attachment was made in favour of FR in

September 2004 with regard to a sum of Rs. 2.25 crores.

• In March 2005, the FR filed an application under

section 89 of the CPC before the trial court praying
that the court may formulate the terms of settlement
and refer the matter to arbitration.
• The AP filed a counter - that they were not
agreeable for referring the matter to arbitration
or any of the other ADR processes under section
89 of the Code.
• In the meanwhile, the HC of Kerala by order
dated September 2005, allowed the appeal filed by
the AP against the order of attachment granted by
the trial court subject to certain conditions,
interalia
• and directed the trial court to consider and dispose of
the application filed by the FR under section 89 of the
CPC.
• The trial court allowed the said application under
section 89 filed by the FR and held it was
appropriate that the dispute should be
settled by arbitration.
• The AP filed a revision against the order of the trial court.
The High Court dismissed it holding that the apparent
tenor of section 89 of the CPC permitted the court, in
appropriate cases, to refer even unwilling
parties to arbitration.
• It also held that the concept of pre-existing
arbitration agreement necessary for reference
to arbitration under the provisions of the
Arbitration & Conciliation Act, 1996 was
inapplicable to references under section 89
of the Code.
• Hence AP went in appeal -

• Identification of the relevant issues.

• i) Whether consent of all parties to the suit is
necessary for reference to arbitration under
section 89 of the Code?
• ii) What is the procedure to be followed by a court
in implementing section 89 and Order 10 Rule 1A
of the Code?
• Explaining the relevant legal principle and the
law/Section involved.
• Object, purpose, scope and tenor of the said
provisions.
• Sec 89. Settlement of disputes outside the court. -
(1) Where it appears to the Court that there exist
elements of a settlement which may be acceptable
to the parties,
• the Court shall formulate the terms of settlement and
give them to the parties for their observations and
after receiving the observations of the parties,
the Court may reformulate the terms of a
possible settlement and refer the same for –
• (a) -------
• (b) -------
(c) -------
• (d) mediation.
 
(2) where a dispute has been referred –for
a) -------
b) -------
c) -------
d) for mediation, the Court shall effect a compromise
between the parties and shall follow such
procedure as may be prescribed.’’

•  
Order 10 Rule 1 A. CPC -Direction of the Court to
opt for any one mode of alternative dispute
resolution.—

After recording the admissions and denials, -

the Court shall direct the parties to the suit to opt
either mode of the settlement outside the Court as
specified in sub-section (1) of section 89 CPC.
 Applying the law to the issues with logical conclusions-
Implication of Sec 89 –
"There is a anomaly that sub-section (1) of section 89 imports
the final stage of conciliation referred into the
pre-ADR reference stage under section 89 of the Code".
Sub-section (1) of section 89 requires the court to formulate
the terms of settlement and give them to the parties for their
observation and then reformulate the terms of a possible
settlement and then refer the same for any one of the
ADR processes. (Same as Sec 73 of A& C Act)
 If sub-section (1) of Section 89 is to be literally
followed, every Trial Judge before framing issues, has
to ----------which is only possible by having detailed
discussions-before referring it to one of the ADR
mechanisms and thereby virtually acts as a mediator.

If all these have to be done by the trial court before

referring the parties to ADR processes, then nothing
more is required to be done by the ADR forum.
 Drawing up the terms of the settlement or
reformulating them is the job of the mediator after
going through the entire process of mediation as
otherwise the entire ADR process would be
rendered futile.
 • INTERPRETATION
• The principles of statutory interpretation are well
settled. Fundamental rule of interpretation -

• Where the words of the statute are clear and

unambiguous, the provision should be given its plain
and normal meaning, without adding or rejecting
any words therein.
• Departure from the literal rule of plain reading can
however be only in exceptional cases,
• where the anomalies make the literal compliance
of a provision impossible, or absurd or so
impractical as to defeat the very object of the
provision.
• Purposive interpretation may be adopted to avoid
absurdity and irrationality is more easily employed
in relation to procedural provisions than with
reference to substantive provisions.
• Section 89 has to be read with Rule 1-A of
Order 10 which requires the court to direct the
parties to opt for any of the five modes of alternative
dispute resolution processes and on their option refer
the matter.

• The said rule does not require the court to either

formulate or reformulate the terms of settlement
arrived at between the parties.
Such recourse requires the court to only consider and
record the nature of the dispute, and inform the parties
about the five options available

and take note of their preferences and then refer them to

one of the alternative dispute resolution processes.
• Relevant precedent/s – Applicability of the Ratio
to the given case.

• Salem Advocate Bar Association, Tamil Nadu v

UOI AIR 2005 SC 3353
• Whether the reference to ADR Process is
mandatory?
• Section 89 starts with the words "where it appears
to the court that there exist elements of a
settlement" - This clearly shows that cases which
are not suited for ADR process should not be
referred under section 89 of the Code.
• The court has to form an opinion that a case is one
that is capable of being referred to and settled through
ADR process
 Mediation will be governed by the Legal Services
Authorities Act.

There is of course no inconsistency.

• Section 89 of the Code gives the jurisdiction to refer to

ADR process and Rules 1A to IC of Order 10 lay
down the manner in which the said jurisdiction is to be
exercised.
• The scheme is that the court explains the choices
available regarding ADR process to the parties,
permits them to opt for a process by consensus,
and if there is no consensus, proceeds to choose the
process.
• Which of the ADR processes require mutual
consent of the parties and which of them do not
require the consent of parties

• The said Act makes it clear that there can be

reference to arbitration only if there is an
‘arbitration agreement’ between the parties
• If there is no agreement between the parties for
reference to arbitration, the court cannot refer the
matter to arbitration under section 89 of the Code.

• Even if there was no pre-existing arbitration

agreement, the parties to the suit can agree for
arbitration when the choice of ADR processes is
offered to them by the court under section 89 of
the Code.
• If both parties do not agree for conciliation, there can
be no ‘conciliation’.

• As a consequence, as in the case of arbitration, the

court cannot refer the parties to conciliation under
section 89, in the absence of consent by all parties.
• Whether the settlement in an ADR process is
binding in itself ?

• Where the reference is to a neutral third party – i.e

‘mediation’ on a court reference, - it will be deemed
to be reference to Lok Adalat,
• as court retains its control and jurisdiction over the
matter,

• the mediation settlement will have to be placed

before the court for recording the settlement and
disposal court will make a decree in terms of it.
• Whenever such settlements reached are placed
before the court, the court should apply the
principles of Order 23 Rule 3 of the Code and
make a decree/order in terms of the settlement

• In regard to matters/disputes which are not the subject

matter of the suit/proceedings, the court will have to
direct that the settlement shall be governed by
Section 21 of the Legal Services Authorities Act,
1987 (in respect of settlements by a Mediator).
• Having regard to the provisions of Section 89 and
Rule 1-A of Order 10, the stage at which the court
should explore whether the matter should be
referred to ADR processes, is after the pleadings
are complete, and before framing the issues,

• when the matter is taken up for preliminary hearing

for examination of parties under Order 10 of the
Code.
• However, if for any reason, the court had missed the
opportunity to refer the matter to ADR processes
under Section 89 before framing issues, nothing

• prevents the court from resorting to Section 89 even

after framing issues.

• But once evidence is commenced, the court will be

reluctant to refer the matter to the ADR processes
least it becomes a tool for protracting the trial.
• Thus, in civil suits the appropriate stage for
considering reference to ADR processes is after the
completion of pleadings,

• as far as Family Courts are concerned, the ideal

stage for mediation will be immediately after
service of respondent and before the respondent
files objections/written statements.
• Before the afcons case, in the Salem Bar Association
case, the supreme court had tried to reduce the
anomaly by equating the words "terms of settlement"
to "summary of disputes".

• So then the question before the supreme court was

how to interpret sec 89? - This was precisely what
was addressed in the Afcon’s case.
• Thus the supreme court said the section requires the
court to merely direct the parties to opt for the five
modes of ADR’s and on their option refer the matter.

• Thus, consequently it is not necessary for the court

to formulate or reformulate the terms of
settlement.
• Judgement :-

• (i) The trial court did not adopt the proper procedure
while enforcing Section 89 of the Code. Failure to
invoke Section 89 suo moto after completion of
pleadings and considering it only after an application
under Section 89 was filed, is erroneous.

• (ii) A civil court exercising power under Section 89

of the Code cannot refer a suit to arbitration
unless all the parties to the suit agree for such
reference.
 CONCILIATION
• The Law Commission - 129th Report examined at
and highlighted the staggering pendency of cases in
various Courts in the Country.

• In respect of suits involving disputes as to

inheritance, succession, partition, maintenance and
those concerning wills, which are generally blood
relations,
• the Law Commission recommended that
Conciliation must be made compulsory by an
effective amendment to the Code of Civil Procedure
on the lines of Rule 5B, order XXVII.
• In respect of all other kinds of suits, it was
recommended that an attempt should be made at the
pre-trial stage to settle the issue

• and that in case the dispute is not resolved, the

matter should be referred to the Conciliation and

• if such Court finds that its persuasion to the parties to

go in for a amicable settlement has failed, the party
who was recalcitrant and unjust in approach must
be fined with heavy costs.
 • Conciliation is a –
• binding procedure in which a neutral third party
assists the disputed parties in mutually reaching an
agreed settlement of the dispute.
• Conciliation is a term used interchangeably with
mediation, involving a more pro-active role, and the
other involving a more facilitative mediator role
• The concept of conciliation got impetus in India in
1984 in Himachal Pradesh where a concept of pre-
conciliation was started.
 • SCOPE OF CONCILIATION:-
• The settlement of disputes through conciliation
covers a wide range of issues. Among others they
include commercial and civil disputes and claims for
breach of obligations.

• These may be factual, legal or technical disputes that

can range from simple disagreement to complex and
substantial technical or commercial disputes.
 They may arise in relation to virtually any kind of
disputes
• e.g. issues arising under contracts;
• commercial or corporate disputes;
• torts and breach of duty
• insurance claims;
• consumer disputes; disagreements relationships such
as partnership, principal and agent, franchiser/
franchisee and many others.
• Industrial and Labour disputes,
• family disputes including
• issues arising on separation and divorce,

• There are many other fields in which conciliation

is being used for settlement of disputes –
• in academia, hospitals and health care systems
• for consumer disputes, to
• deal with farmer/ lender debt issues
• The second impetus came from statutory
recognition accorded to conciliation in the
Arbitration and Conciliation Act, 1996 which lays
down a well structural law of conciliation.

• Now - what is the difference between a normal

conciliation and the Himachal model of conciliation.
 In a normal conciliation - disputing parties willingly
come together with the aim of mutually agreeable
settlement of their dispute with the assistance of the
neutral third party, mutually chosen.

• Whereas the HP model is court-induced conciliation

a making it mandatory for the parties to attempt a
conciliation for settlement of their dispute.
 • Role of the Conciliator
• The conciliator assists the parties in an independent
and impartial manner in their attempt to reach an
amicable settlement of their dispute.
• He is guided by the principles of objectivity,
fairness and justice, giving consideration to,
among other things,
• the rights and obligations of the parties,
• usages of the trade concerned and
• the circumstances surrounding the dispute,
including any previous business practices between
the parties.
• When the matter is settled through conciliation
the settlement shall have the same effect and status
as if it is an arbitral award. –

• Sec 73 (3) and 74 Arbitration and conciliation Act,

1996. - Therefore it is also enforceable as a decree of
the Court
• Haresh Dayaram Thakur vs State of Maharashtra
And ors. AIR 2000 SC 2281
• Appellant Haresh Dayaram Thakur and respondent
No. 3 Pitambar Dayaram Thakur are brothers. Raj
Kumari Pitambar Thakur Respondent No. 4 is wife of
respondent no. 3.
• The dispute in the case centres round the flat
belonging to the Maharashtra Housing and Area
Development Authority, Mumbai (‘MHADA’).
• The MHADA had granted lease of the said flat to one
Mr. Krishanan,

• who later transferred his right, title and interest there

under to one Mr. Chadha under an agreement of
transfer dated 7th April, 1986.

• By the agreement for transfer dated 21.11.1989 the

right, title and interest of the flat was purchased by the
appellant for a consideration of Rs. 3,45,000.
• The appellant also became a member of the society of flat
owners of the building called Melody Cooperative Housing
Society of which the flat in question is a part. The appellant
had applied to MHADA for regularisation of allotment of
the flat in his name
• In December 1992 on a routine inspection of the premises
the Estate Manager of MHADA reported that the property
was in occupation of the appellant and his family members
including respondent No. 3,
• though it stood in the name of Krishnan, and therefore,
they were unauthorised occupants of the flat.
• On receipt of the report a proceeding was initiated
under section 66(1) of the Maharashtra Housing and
Development Act, 1966

• In pursuance of the order dated 23.4.1997

MHADA evicted all the unauthorised occupants
from the flat and sealed the same.
• In the said order leave was given to the present
appellant to establish his claim in respect of the
property in light of the deed of transfer dated
21.11.1989 and other documents executed by the
allottee in his favour.

• Subsequently, after examining the relevant documents

MHADA regularised the allotment of the flat in
favour of the appellant by an order under the Act.
• On 19.9.1998 respondent no. 3 filed Writ Petition No.
5072/98 before the Bombay High Court challenging
the order of eviction passed by MHADA under
section 66(1) of the Act against him.

• It was the case of the respondent no. 3 that he had

also contributed a sum of Rs. 1,25,000 for the
purpose of purchase of the flat along with his
brother, the appellant herein, though the
documents stood in the name of the latter.
• A Division Bench of the High Court disposed of the
Writ Petition by the order dated 7.10.1998 directing,
inter alia that the competent authority of MHADA
would re-examine the claims of the respondent No. 3
as well as the appellant herein and pass a speaking
order in accordance with the law.
• In compliance with the directions of the High Court the
competent authority of MHADA passed the order
dated 18.12.1998 rejecting the claim of respondent
no. 3 and confirming the allotment/regularisation of
the flat in the name of the appellant.
• The respondent Nos. 3 & 4 challenged the order
dated 18.12.1998 of MHADA by filing a writ
petition under Articles 226 and 227 of the
Constitution, Writ Petition No. 510/99, asserting
their title to the property.

• They prayed for a direction or order under Article 226

quashing the order of the Appellate Authority dated
23.4.1997 and the eviction order dated 18.12.1998;
• and directing MHADA and its Estate Manager and the
appellant herein, to restore to them possession
of the flat and direction to MHADA to
regularise allotment of the said flat in
favour of the writ petitioners

• and for an interim direction restoring possession of the

flat to them after obtaining possession thereof from
respondent No. 7 (appellant herein).
• The High Court by the order dated 6.3.1999
• appointed a Conciliator with regard to the dispute
between the parties including the issue of title,
regularisation, possession and compensation, if any.
• And requested the conciliator to give his report/award,
and preferably within six months.
• The parties agree and undertake to this Court that
the decision of the Conciliator will be final and
binding on both the parties.
• The Conciliator appointed by the High Court, Justice
H. Suresh (Retd.) held meetings with the parties.

• After hearing the submissions of both the parties, the

Conciliator submitted his report to the High Court
and gave his proposal for settlement of the dispute
• but the proposal submitted by the Conciliator was not
signed by the parties nor were its terms disclosed to
the parties by the Conciliator.
• Further, the Conciliator sent his report in a sealed
cover to the High Court directly.

• The appellant filed an objection against the report

of the Conciliator setting out various grounds of
challenge.
• A Division Bench of the High Court summarily
rejected the objections raised against the Conciliator’s
report -

• stating that the parties had agreed to undertake to

the court that the decision of the Conciliator
would be final and binding on them.

• The matter went to the Supreme Court

• Scheme of the the - Arbitration and Conciliation
Act, 1996 :
• As the name itself suggests, deals with two types of
proceeding: arbitration proceedings and conciliation
proceedings.

• While provisions relating to arbitration proceedings

are contained in part-I in which are included Chapters
1 to X, the conciliation proceedings are dealt with
in part-Ill which includes sections 61 to 81.
• Section 61 which deals with Application and Scope of the
provisions, in part-Ill provides, inter alia, that save
otherwise provided by any law for the time being in force
and
• unless the parties have otherwise agreed, this Part shall
apply to conciliation of disputes arising out of legal
relationship, whether contractual or not and to all
proceedings relating thereto.
• In section 65 it is provided, interalia,
• that on being appointed the conciliator shall request
each party to submit to him a brief written statement
describing the general nature of the dispute and the
points at issue.

• Each party shall send a copy of such statement to the

other party.
• Section 73 in which provision is made regarding
settlement agreement reads as follows :
• (2) If the parties reach agreement on a settlement of
the dispute, they may draw up and sign a written
settlement agreement.
• (3) When the parties sign the settlement
agreement, it shall be final and binding on the
parties and persons claiming under them
respectively.
• (4) The conciliator shall authenticate the settlement
and furnish a copy thereof to each of the parties.

• It follows therefore that a successful conciliation

proceeding comes to an end only when the
settlement agreement signed by the parties comes
into existence.

• It is such an agreement which has the status and effect

of legal sanctity of an arbitral award under section 74.
• In the case in hand, as appears from the materials on
record, procedure as prescribed in Section 73 under
part-Ill of the Act has been followed by the
conciliator.
• The conciliator appears to have held some meetings
with the parties in which there was discussion
• and thereafter drew up the so called settlement
agreement by himself in secrecy and sent the same
to the court in a sealed cover.
• Naturally the so called settlement agreement
drawn up by the conciliator does not bear the
signatures of the parties.

• The conciliator who is a former judge of the High

Court and the learned Judge who passed the
impugned order
• failed to take note of the provisions of the Act and
the clear distinction between an arbitration
proceeding and a conciliation proceeding.
• The position is well settled that if the statute
prescribes a procedure for doing a thing, a thing
has to be done according to that procedure.

• Thus the order passed by the High Court

confirming the settlement agreement received
from the conciliator is wholly unsupportable.
• Accordingly, the appeal is allowed. The order dated
6.10.1999 passed by the High Court of Bombay in Civil
Application No. 7117 of 1999 is set aside.

• The settlement agreement dated 31.8.1999 filed by

Justice H. Suresh before the High Court is also set
aside.

• The High Court is directed to dispose of the Writ

Petition afresh on merit in accordance with law.
•  
• (2019 Amendment)
• "87. Unless the parties otherwise agree, the
amendments made to this Act by the Arbitration and
Conciliation (Amendment) Act, 2015 shall—
• not apply to––
– arbitral proceedings commenced before the
commencement of the Arbitration and
Conciliation (Amendment) Act, 2015;
 court proceedings arising out of or in relation to
such arbitral proceedings irrespective of whether
such court proceedings are commenced prior to
or after the commencement of the Arbitration
and Conciliation (Amendment) Act, 2015;
• apply only to arbitral proceedings commenced on or
after the commencement of the Arbitration and
Conciliation (Amendment) Act, 2015 and to court
proceedings arising out of or in relation to such
arbitral proceedings.".
 • Lok Adalats
• Background:
• When courts are there, what is the necessity and the
need for the Lok Adalat.
• It was a historic necessity in a country like India in the
backdrop of ever increasing litigation,

• inordinate delay in dispensation of justice,

• the illiterate and the poor is losing interest in their
rights and belief in the adjudicatory mechanism.
• The word ‘Lok Adalat’ means ‘People’s Court’ albeit

• it is strictly not a court in the conventional sense in as

much as the Lok Adalat does not adjudicate on
facts by application of law.

• It is a forum where disputes between the parties are

resolved by conciliation and participation
• The concept of Lok Adalat is an innovative Indian
contribution to the world jurisprudence.

• The introduction of Lok Adalats added a new chapter

to the justice dispensation system of this country and
succeeded in providing a supplementary forum to
the victims for satisfactory settlement of their
disputes.

• It is one of the components of ADR systems

• In 1980 the Government of India appointed a
Committee on Implementation of Legal Aid
Schemes (CILAS) to co-ordinate the implementation
of legal aid programmes, which inter alia
recommended the establishment of Lok Adalats.
• The evolution of contemporary system of Lok
Adalats is, however, traceable to the Lok Adalat run
by a noted Gandhian social worker Harivallabh
Parikh in a tribal area of Rangpur in Gujarat.
•  
• During the 1980’s Lok Adalats were generally regarded
as a species of legal aid programme meant specially to
cater to the needs of poor and weaker sections of
society and not as a viable substitute for courts.

• The institution of Lok Adalats had been functioning as

a voluntary and conciliatory agency without any
statutory backing for its decisions and had become
very popular in providing for a speedier system of
administration of justice
• The demand for affording statutory recognition to Lok
Adalats and to transform into reality the salutary objective
and mandate of Article 39A of the Constitution of India
culminated in to the enactment of the Legal Services
Authorities Act, 1987.

• One of the objectives of the Legal Services Authorities

Act, 1987 is to provide for organization of Lok Adalats
to secure that the operation of the legal system promotes
justice on the basis of equal opportunity.
• Thus Lok Adalats have thus attained statutory
recognition under the Legal Services Authorities Act,
1987.
• CASES SUITABLE FOR LOK ADALAT
•  Lok Adalats have competence to deal with a number of
cases like:
• Compoundable civil, revenue and criminal cases.----
• Motor accident compensation claims cases
• Negotiable Instruments Act -
• Matrimonial and family disputes
Bank’s unpaid loan cases
Arrears of retirement benefits cases
Family Court cases

Cases which are not sub-judice

Mutation of lands case
Land Pattas cases

•  

•  
• NEED FOR LOK ADALATS

As Justice Ramaswamy said

"Resolving disputes through Lok Adalat not only
minimizes litigation expenditure, it saves valuable
time of the parties and their witnesses and also
facilitates inexpensive and prompt remedy
appropriately to the satisfaction of both the parties"
 • JURISDICTION OF LOK ADALAT :
A Lok Adalat shall have jurisdiction to determine and
to arrive at a compromise or settlement between the
parties to a dispute in respect of any case
pending before; or any matter which is falling
within the jurisdiction of, and is not brought
before, any court for which the Lok Adalat is
organised.
The Lok Adalat can compromise and settle even
criminal cases, which are compoundable under the
relevant laws.-
• Where the matter is settled before the Lok Adalat
an award is passed by the Lok Adalat on the basis
of the settlement.
• However, the award of the Lok Adalat cannot
travel beyond the compromise or settlement
arrived at between the parties.
• Further every award of the Lok Adalat is final
and binding on all the parties to the dispute and
no appeal lies to any court against the award.
• This is a very valuable and vital provision which is
meant to give finality to the decision of the Lok Adalat.

• Even review by the court which referred the case to

the Lok Adalat is not permissible.

• If any party wants to challenge such an award based on

settlement, it can be done only by filing a petition
under Article 226 and/or Article 227 of the Constitution
of India and that too on very limited grounds.
• The award of a Lok Adalat is deemed to be a decree
of a civil court and is per se executable.
• A Lok Adalat has the same powers as are vested in a
civil court under the Code of Civil Procedure, 1908 for
summoning and enforcing the attendance of witnesses
and examining them on oath, the discovery and
production of any document, requisitioning of any
public record, reception of evidence on affidavits, etc.
• All proceedings before a Lok Adalat are deemed to
be judicial proceedings.
• POWERS OF LOK ADALAT
• Every Lok Adalat shall have the power to specify its
own procedure for the determination of any dispute
coming before it.

• All proceedings before a Lok Adalat shall be deemed to

be judicial proceedings within the meaning of Sections
193, 219 and 228 of IPC.

• Every Lok Adalat shall be deemed to be a Civil Court

for the purpose of Sec 195 and Chapter XXVI of Cr.P.C.
• Relevant sections in the Legal Services Authority Act,
1987.
• Sec 20 - Reference of cases.
• of Lok Adalat as follows:Cases can be referred for
consideration
• 1. By consent of both parties to the dispute.
• 2. One of the parties makes an application for reference
• Where the court is satisfied that the matter is an
appropriate one to be taken cogniznce of by the Lok
Adalat
• 3. Compromise settlement shall be guided by the
principles of justice, equity fair play and other legal
principles.

• 4. Where no compromise has been arrived at

through conciliation, the matter shall be returned
to the concerned court for disposal in accordance
with Law.
• Sec 21
• After the Agreement is arrived at by consent of the
parties the award is passed. The matter need not be
referred to the concerned court for consent decree.
• 1. Every award of the Lok Adalat shall be deemed
to be decree of the Civil Court.
• 2. Every award made by the Lok Adalt shall be
final and binding and on the parties to the dispute.
• 3. No appeal shall lie from the Award of the Lok
Adalat.
• Sec 22
• Every proceedings of the Lok Adalat shall be deemed
to be judicial proceedings for the purpose of
• 1. Summoning witnesses
• 2. Discovery of documents
• 3. Hearing of evidences
• 4. Requisition of Public record
 • PERMANENT LOK ADALAT:
• In 2002, Parliament brought about certain amendments to
the Legal Services Authorities Act, 1987.
• The said amendment introduced Chapter VI-A with the caption
PRE LITIGATION CONCILIATION AND SETTLEMENT.
Section 22-B envisages establishment of "PERMANENT LOK
ADALATS (PLA)" at different places for considering the cases
in respect of Public Utility Services (PUS).
• The Central or State Authorities may establish by notification,
Permanent Lok Adalats at any Permanent Lok Adalats, for
determining issues in connection to Public Utility Services.
•  
• Public Utility Services include:
•   Transport service,
•  Postal, telegraph or telephone services,
•  Supply of power, light and water to public,
•  System of public conservancy or sanitation,
•  Insurance services and such other services as notified by
the Central or State Governments.
• PERMANENT LOK ADALAT’s have the same
powers that are vested on the Lok-Adalats, mentioned
under Section 22(1) of the Act.
•  
 • JUDICIAL APPROACH
• The judiciary has positively contributed to the Lok Adalat
system of resolution.
• The High Court of Andhra Pradesh held that, in Board of
Trustees of the Port of Visakhapatnam vs. Presiding
Officer,-cum-Secretary, DLSA, Visakhapatnam and
anr. 2000(5) ALT 577,
• The award is enforceable as a decree and it is final. In all
four corners, the endeavour is only to see that the disputes
are narrowed down and make the final settlement so that
the parties are not again driven to further litigation or
any dispute.
• Though the award of a Lok Adalat is not a result
of a contest on merits just as a regular suit by a
Court in a regular trial, however,

• it is as equal and on par with a decree on

compromise and will have the same binding effect
and conclusive just as the decree passed and
cannot be challenged in a regular appeal.
• In the case of K.N. Govindan Kutty Menon Vs.
C.D. Shaji reported in AIR 2012 SC 719, the
Hon’ble Supreme Court has held :

• Section 21 of the Act, contemplates a deeming

provision, hence, it is a legal fiction that the "award"
of the Lok Adalat is a decree of a civil court. In the
case on hand, the question posed for consideration
before the High Court was that
• "when a criminal case referred to by the Magistrate to
a Lok Adalat is settled by the parties and award is
passed recording the settlement, can it be considered
as a decree of civil court and thus executable by
that court?"
• On basis of Section 21 of the Act, it was contended
before the High Court that every award passed by the
Lok Adalat has to be deemed to be a decree of a
civil court and criminal court and as such executable
by that court.
• Unfortunately, the said argument was not acceptable by
the High Court.
• Supreme Court
• On going through the Statement of Objects and
Reasons, definition of ‘Court’, ‘legal service’
• as well as Section 21 of the Act, we are of the view
that the interpretation adopted by the Kerala High
Court in the impugned order is erroneous.
• 1) In view of the unambiguous language of Section
21 of the Act, every award of the Lok Adalat shall
be deemed to be a decree of a civil court and as
such it is executable by that Court.

2)The Act also does not make out any such

distinction between the reference made by a civil
court and criminal court.
• CONCLUSION
• The special conditions prevailing in the Indian society
require a highly sensitized legal service which is
efficacious for the poor and the down-trodden.
• The Lok Adalat mechanism is no more an experiment
in the country, it is in fact, a full-proven success that
needs to increase its domain and bring under its realm
the several aspects that have been excluded till date.
• Lok Adalats can be viewed as an instrument to social
change as well.
• As said by (Late) Prof. Madhav Menon,

• "Lok Adalat has the potential for social

reconstruction and legal mobilization for social
change. It can influence the style of administration of
justice and the role of the lawyer and judge in it. It
can take law closer to the life of the people and
reduce disparity between law in books and law in
action."
 Negotiation
• J. Paul Getty
• My father said: "You must never try to
make all the money that’s in a deal. Let the
other fellow make some money too,
because – if you have a reputation for
always making all the money, ----------you
won’t have many deals".
• Marty Latz founder of Latz Negotiation Institute, a and
Expert Negotiator says,

• "Two elements critical here : One,

• all worthwhile deals must satisfy ---
• all the parties’ interests – financial and otherwise - to
get done...
You also need to make sure the other side does okay for
you to get your interests satisfied too
• And two,
• the long-term view and an appreciation of the
value of reputation
• reflect a very strategic focus ----
• It’s often easy to get caught up in the moment and
let your ego push you to get that extra dollar.
• But taking a step back and focusing on reputation
and the long-term will always stand you in
good stead".
Prelude to Negotiation
Is Conflict Bad
or Good ? –
in Human Life

– Human life

– i) Happy without Conflict

– Ii) Conflict stimulate Growth

N
 Why Negotiate?
Gavin Kennedy in his book The New Negotiating Edge says..

‘Animals do not negotiate. They use violence or the threat of

violence to get what they want, whether it be food, a mate or
territory.’

Have you ever seen 2 dogs negotiate over a bone?

‘ Trade is the human foundation of human civilisation. It is what

makes humans different from animals.’

‘ Negotiation is anathema to tyrants, who usually want

something for nothing and do not recognise a need for another
person’s voluntary consent before they get what they want’
People differ -
They use negotiation to handle their
differences.

What is the best way to deal with

differences?

How to get yes without giving in?

 Negotiation – What is it?
‘Negotiation is an
explicit voluntary
traded exchange
‘The process by
which we search for between people who
the terms to obtain want something from
what we want from each other’
somebody who wants
something from us’ Gavin Kennedy
To negotiate is
Gavin Kennedy
to trade
something we
have for
something we
want.

Anon
Confer with others to
reach a compromise or
agreement.

Concise Oxford Dictionary

• Leigh Thompson: "An interpersonal
decision-making process --- necessary
-----
• whenever we cannot achieve our objectives
single-handedly"

Ex. Buying a car; buying a house; things at work

• So --- We can conclude that Simply stated, ----

• Negotiation is a way to resolve disputes and

conflicts that arise when people and groups
interact with one another.
 Some facts on Negotiation

 Every one is a Negotiator.

 Every one negotiates something every day.
 Negotiation is a basic means of getting what you want
from others.
 It is back-and-forth communication designed to reach
an agreement when you and the other side have some
interests that are shared and others that are opposed.
 Every one wants to participate in decisions that affect
them.

737
  Purpose of Negotiation
 Purpose of negotiation is to produce a wise agreement
 It should be efficient.
 And it should improve or at least not damage the
relationship between parties

738
 When do we Negotiate?

When we need someone’s consent

When the time and effort of negotiating are
justified
When the outcome is uncertain
Advantages of Negotiation
Anyone can Negotiate Faster Remedy

Win – Win situation No Institutional Barrier

Grater Participation Protect Interest

Control over out come Prevent litigation

Problem solving Low cost

740
 7

Negotiating Behaviour
Gavin Kennedy (The New Negotiating
Edge) describes 3 types of behaviour that
we can display and encounter when in a
negotiating situation
RED BLUE PURPLE
 RED Behaviour
• Manipulation

• Aggressive
• Intimidation
• Exploitation
• Always seeking the best for you
• No concern for person you are negotiating with

To the red behaviourist the message is loud and clear, ‘You will get nothing
from me unless and until I get something from you’.
People behave in this manner when they fear exploitation by the other
party, but by behaving this way to protect themselves, they provoke the
behaviour they are trying to avoid.
 BLUE Behaviour

• Win win approach

• Cooperation
• Trusting
• Pacifying
• Relational
• Giving
 PURPLE Behaviour

• Deal with people, as they are not how you think

they are
• Good intentions
• Two way exchange
• Purple behaviour incites purple behaviour
• People know where they stand
• Determination to solve problems by both sets of
criteria of the merits of the case and/or the terms
of a negotiated exchange
• Kennedy talks of a ‘behavioural dilemma’, do you
cooperate (blue) or defect (red)?
• Can you trust the other person?
• And to what extent?
• Trusting someone involves risk, on the one hand being
too trusting is naive and
• on the other, not trusting at all can create deceitful
behaviour.
• The answer is to merge blue and red
behaviour into purple.
 Conflicting Stories

Conflict is three dimensional

 Your Story
 My Story
 True Story
 Conflicting Stories
Every Conflict has two sides
 Your View

 My view
Ex: (Employee Dilemma)
Two ways to Negotiate

Hard Negotiation.

Soft Negotiation
 Two Negotiations
Soft Negotiation
 Participants are friends
 The goal is agreement
 Make concessions to
improve relationship
 Be soft on the people and
the problem
 Trust others
 Change our position easily
Hard Negotiation
 Participants are
adversaries
 The goal is victory
 Demand concessions as a
condition of the
relationship
 Be hard on the problem and
the people
 Distrust others.
 Dig in to you position
easily
 Two Negotiations
Soft Negotiation Hard Negotiation
 Make offers.  Make threats
 Disclose your bottom line  Mislead as to your bottom
 Accept one-sided losses to line
reach agreement.  Demand one-sided gains as
 Search for the single the price of agreement.
answer. The one they will
accept  Search for the single
 Insist on agreement answer: the one you will
 accept.
Try to avoid a contest of
will.  Insist on your position.
 Yield to pressure  Try to win a contest of will.
 Apply pressure.
 What Should we Use?

Soft or Hard ?
Answer: None

Use Principled Negotiation or

Negotiation on the merits
• Principled Negotiation…
• To sum up, in contrast to positional
bargaining, the principled negotiation
method of focusing on basic interests,
mutually satisfying options, and fair
standards typically results in a wise
agreement.
 Seven Principles Of NEGOTIATION
1. Interests
2. Options
3. Alternatives
4. Legitimacy
5. Relationship
6. Communication
7. Commitment

753
 Keep in Mind
• Humans are not computers
• Creatures with strong emotions
• Deeply held values
• Different backgrounds and view points
• unpredictable
• Often egos gets identified with positions
• Most importantly so are you

754
 Every dispute has common interests?

Tenant & Landlord

Common interest Conflicting Interest

755
 The Method…
Ex: Tenant and Landlord
 Both want stability
 Both would like to maintain the apartment well
maintained
 Interested in good relationship
Interests that conflict or differ?
 Amount of Rent
 Advance
 Painting
 Vacating the premises
756
 ENTIRE PHILOSOPHY OF NEGOTIATION
Win As Much As You Can

757
 NEGOTIATION GOALS
 Negotiation goals encompass a wide range of
both tangible and intangible desires.

 Categories of goals which in turn affect the

negotiator’s choice of strategy and tactics.
 Categories of
Negotiation Goals

 Aggressive goals
 Competitive goals
 Cooperative goals
 Self-centered goals
 Defensive goals
 Combinations of goals
 AGGRESSIVE GOALS
 Seeks to undermine, deprive, damage or
otherwise injure a rival or opponent.
Example: Taking a customer or supplier
away from a competitor in order to hurt
the competitor.
 AGGRESSIVE GOALS

Aggressive goals seek to damage an

opponent.
 COMPETITIVE GOALS
 One side seeks to gain more from the negotiation
than the other side.
 In fact the negotiator hopes to obtain as large a
comparative advantage as possible.
Example:
Receiving the highest possible price.
Paying the lowest possible price.
 COMPETITIVE GOALS
 A competitive goal means getting more than
the other party.
 COOPERATIVE GOALS

 Cooperative goals are achieved through an

agreement that leads to mutual gain for all
negotiators and their respective sides.
 This achievement is also referred to as win-win
negotiating.
Example: Forming a joint venture, partnership, or
corporation to engage in business opportunities to
achieve a mutual profit.
764
 COOPERATIVE GOALS
 With cooperative goals, agreement leads to
mutual gain.
 SELF-CENTERED GOALS
 Self-centered goals are those that depend solely on
what one’s own side achieves.
 Scenario: Two large accounting firms merge. The
tremendous size of the new firm raises a self centered
goal to find sufficient prestigious space in a single
location.
 The goal is reached when the new firm negotiates a
lease for 15 floors in a major midtown New Delhi
office building.

766
 SELF-CENTERED GOALS
 Self-centered goals seek a particular result
regardless of what the other side receives.

767
 DEFENSIVE GOALS
 One seeks to avoid a particular outcome.
 Examples:
• Avoiding a loss of respect.
• Preventing a strike.
• Avoiding the loss of a customer or supplier.
 DEFENSIVE GOALS
 Defensive goals seek to avoid a particular
result.
 COMBINATION OF NEGOTIATION
GOALS
 Thus, each negotiation usually has multiple goals.
– Case: In a collective bargaining negotiation, a
transportation firm seeks to have its employees make
prompt deliveries in order to maintain its business
volume. This is a self-centered goal.
– A defensive goal is suggested if the maintenance of
volume is intended to avoid a loss of customers.
– The goal is also aggressive to the extent that the same
activity lures new customers away from competitors,
a result which is likely to weaken the latter.
 PRACTICAL MOCK EXERCISES
• Negotiation by Creative Response
• There are two people in a kitchen.

• There is only one orange left and both of them

want it.

• What would you expect as the solution?

• Compromise is one option. They might cut
it in half and each gets half.

• Let’s assume that’s what they do.

 Creative Responses

• One person now goes to the juicer and starts

making a small glass of orange juice.

• The other, with some difficulty, begins to

grate the rind of the orange to flavor a cake.
• What does it indicate?

• Going back to underlying needs

• Recognizing individual differences

• Adapting positions in light of shared information

and attitudes

• Attacking the problem, not the people

Drafting Settlement Agreement

1. All issues of interest to the parties

addressed
2. Does the agreement in total make sense
(avoid agreements to agree)
3. All parties concerned or affected been
consulted
4. Do all parties agree
5. Parties have authority
6. All details like time when and how are
answered
7. Clause on honouring the settlement
8. Any confidentiality condition
9. Realistic and enforceable settlement.
 Check List
• Organize the agreement in logical manner like
using numbers for paragraphs, use of short
paragraphs
• If necessary include a definition section
• Use the same words and phrases throughout the
agreement.
• Use simple, short and direct language
• Be clear concise and plain.
• Verify all conditions of valid agreement under
the law fulfilled.
 Yes But

What if they are powerful?

What if they don’t play?

What if they use dirty tricks?

 Yes But…
What if they are powerful?
• Protect Yourself.
– Protect against making an agreement you
should reject.
• Making the most of your assets
– Make the most of your assets to produce better
agreement (BATNA)
 Yes But…
What if they don’t play ?
• They use three strategies
1. Asserting their position forcefully,
2. Attacking your ideas
3. Attacking you
• Don’t react/attack look behind it.
• Don’t defend, invite criticism
• Ask questions instead of making statements
• Use different language:
– Please correct me if I am wrong, We appreciate what you
said, Our concern is fairness
 PRACTICAL MOCK EXERCISES

• Illustrations :
• 1) A father wants his young daughter to eat her
carrots at dinner as her Doctor has advised due to
Vitamin A deficiency. The daughter wants to toss
the vegetable out and eat chocolate cake.
• 2) An office receptionist wants to be paid Rs 3000
more per month. Her boss doesn’t want to increase
her salary, but needs someone to handle the
accounting for the small but expanding business.
• They negotiate and agree to Rs 1500 raise per
month if the receptionist takes on the added
duties of tracking accounts receivable and
payable.
• 3) A school principal wants to implement a
uniform dress code for students. Some parents,
worried about the costs of new outfits, protest the
change.
• They negotiate and agree to a dress code,
but the parents pick the outfit, thus making
it possible to use inexpensive clothing that
most of the children already own.
• 4) You are negotiating terms with a supplier of a critical
component in your manufacturing process. You receive
100 units monthly. You project needs 150 units for the
next 6 months and perhaps as many as 200 units after
that.
• You’ve been satisfied with the supplier’s quality,
however there have been two occasions where late
deliveries have forced overtime to meet customer
commitments.
• An out of state vendor has offered you a
20% discount for the 200 units per month
for a one year contract. But being a new
vendor you are unsure of hi credentials
• Set up your negotiation strategy.
• Purchase in a foreign currency
• 5) You are trying to buy a leather jacket from
a street trader in a foreign country whose local
currency is valued at 50,000 to 1 of yours. You
really like the jacket, which is a good fit, well
made and style. But you think the trader is
asking too much. Can you negotiate an
acceptable price for both of you?
• Buyer: You have a maximum of 750,000 units of
local currency and 100 units of your own. You also
have your credit cards. Decide what you want to pay
and the tactics you will employ making concessions.
A similar jacket in your country will cost about 130
units of your currency.
• Trader: You have sold seven of these jackets to
foreigners in the last few days. The lowest price you
received was 300,000 units, the best prices 800,000
units. Most foreigners did not even haggle with you.
• The jacket cost you 200,000 units. You know
that you can buy them more cheaply with
foreign currency than your own, which is
shaky on the exchange market.

• In fact, 30 units of the Buyer’s currency would

buy you another jacket. You are determined
however to make a good profit on this deal.
6) Recruitment
• You are a Sole Proprietor of your firm. You have
interviewed a prospective new employee who could
be a key member of your team. The new person’s
required salary would compromise the integrity of
your salary structure, because it is 20% higher than
your most senior performer who has been with the
company for over 10 years.
• Finances are tight, yet you believe this person could
make a significant impact on future profits. If you
paid the required salary for the new person, it would
eliminate bonuses for all your staff that you feel
they’ve earned this year. You’ve been searching for
an individual with this skill level for three months.
• Analyze the power factors, set up your negotiation
strategy
 BATNA - WATNA
• Best Alternative to a Negotiated Agreement –
(BATNA) – Worst Alternative to Negotiated
Agreement (WATNA) ----was coined

• by Roger Fisher and William Ury in their

1981 bestseller, "Getting to say Yes:
Negotiating Without Giving In".
• Regardless of your answer,

• going through the exercise will better

prepare you to evaluate resolution
alternatives and negotiate more effectively
• Your BATNA is your preferred course of action in
the absence of a deal.

• Knowing your BATNA means knowing what

you’ll do or what will happen if you do not reach
agreement.

Therefore, it is critical to know your BATNA

before entering into any negotiation.
When to Negotiate
• BATNAs are critical to negotiation

• because you cannot make a wise decision about

whether to accept a negotiated agreement unless
you know what your alternatives are.
• Illustration:
• When a family is deciding on the minimum price for
their house, the question to ask is not what they
"ought" to be able to get,
• but the right to ask is - what they will do if by a
certain time they have not sold the house.
• Will they keep it on the market indefinitely?
• Will they rent it,
• let someone else live in it rent-free on certain terms
and conditions ?
• Which of those alternatives (BATNA) is most
attractive, all things considered ?

• And how does that alternative compare with the best

offer received for the house? (Agreement)
• It may be that one of those alternatives is more attractive
than selling the house for Rs 36,00,000. (Agreement)

• On the other hand, selling the house for as little as

Rs 24,00,000 may be better than holding on to it
indefinitely ?

• It is most unlikely that any arbitrarily selected

bottom line truly reflects the family’s interests.
• The reason you negotiate is to produce something
better than the results you can obtain
without negotiating.

• What are those results? What is that alternative?

• What is your BATNA — your Best Alternative To a

Negotiated Agreement?
• That is the standard against which any
proposed agreement should be measured.

• That is the only standard which can protect you

• both from accepting terms that are too
unfavorable
• and from rejecting terms it would be in
your interest to accept.
• Instead of ruling out any solution which
does not meet your bottom line,

• you can compare a proposal with your

BATNA to see whether it better satisfies
your interests.
• The better your BATNA, the greater your
power.

• People think of negotiating power as being determined

by resources like wealth, political connections, physical
strength, friends, and military might.

• In fact, the relative negotiating power of two parties

depends primarily upon how attractive to each is the
option of not reaching agreement.
• Illustration :
• Consider a wealthy tourist who wants to buy a small
brass pot for a modest price from a vendor at the
Mumbai railroad station.

• The vendor may be poor, but he is likely to

know the market. If he does not sell the pot
to this tourist, he can sell it to another at a
better price.
• From his experience he can estimate when
and for how much he could sell it to
someone else.
• The tourist may be wealthy and "powerful," –
• but in this negotiation he will be weak
• unless he knows approximately how much it
would cost and how difficult it would be to find a
comparable pot elsewhere.
• He is almost certain either to miss his chance to
buy such a pot or to pay too high a price. The
tourist’s wealth in no way strengthens his
negotiating power.
• Apparently, it weakens his ability to buy the pot at a
low price. In order to convert that wealth into
negotiating power,
• the tourist would have to apply it to learn about the
price at which he could buy an equally or more
attractive brass pot somewhere else
 • "BATNA/WANTA’’ Analysis
• Assume that you recently purchased a home and,
after moving in, discover that the home is infested
by termites.

• You believe that the Seller had some degree of

knowledge and, therefore, made a potential material
misrepresentation in the contract for purchase.
• You are the new homeowner (Plaintiff).
• Before you file a lawsuit you want to attempt
to reach a resolution in an negotiation.
During the negotiation, you develop the
following "BATNA/WATNA":

• BATNA
• 70% probability of proving that the Seller was
aware of the termites and that they are liable for
paying the cost of renegotiation (Rs 30,000).
• To take this case to court will cost an estimated
Rs 10,000.
• Thus, there is a 70% probability of netting Rs
20,000 if no negotiated agreement is reached.
• WATNA
• 30% probability of proving no liability by Seller.
Thus, no recovery.
• To take this case to court will cost an estimated
Rs 10,000.
• Thus, there is a 30% chance of spending Rs 10,000
with no recovery.
• Let’s consider the "BATNA/WATNA" now in
terms of a proposed settlement by the Seller. If
they offer Rs 15,000 to settle the matter by negotiated
agreement, would you accept?
• Here’s how your analysis might go:
• 100% probability of receiving Rs 15,000 today
• 70% probability of netting Rs 20,000
• 30% probability of losing Rs 10,000
• IBA Rules on the Taking of Evidence in
International Arbitration:
• Original Purpose of the Rules 
• The Rules since their original inception in 1983 give
guidance to arbitrators on questions involving
Document production- how many and when?
• Evidence of party witnesses- who when and how?
• Evidence of expert witnesses- Lack of any guidance
on evidence and procedure in rules of major arbitral
bodies (ICC, LCIA etc simply give arbitrators
discretion in matters of evidence)

• Difficult for arbitrators to resolve questions of

evidence Conflicting expectations of parties
• Conflicting Expectations:
• Common law- Anglo / US parties/arbitrators Extensive
production of documents as a matter of course- discovery
procedures- parties required to disclose all relevant
documents
• Emphasis on oral testimony and extensive cross
examination by advocates Civil law tradition Minimal
document production-
• lack of formal or extensive discovery procedures More
proactive role for decision maker (judge/arbitrator)
• Lawyers Exploit Uncertainty- The "Dark Arts" 
• As well as bona fide differences in expectations..
Lack of clarity in the procedure leads
to......tactical behaviour on the part of
parties.....and lawyers.
• Once a dispute has arisen parties will use every
means necessary to gain the desired effect.
• For example disclosure is often used as a method
of bullying an opponent into settlement (because
of its expense) or to delay matters.
• Parties also may seek to set traps and ambushes
for their opponent or to bombard them with
irrelevant evidence.
• IBA Rules Aim to give guidance to arbitrators- a
simple body of rules Aim to preserve not stifle
arbitrators flexibility, they operate often as default,
rather than prescriptive rules Drafted by eminent IBA
committee of arbitral practitioners reflect accepted
practice in arbitration
• (eg that witnesses meet lawyers to discuss their
evidence, that parties will wish to cross examine
witnesses and that parties may request further
documents from the opposing party which are
relevant to the case)
• When do the Rules apply? If the parties provide for
their application in their contract- unlikely
• If the parties agree to their application after a
dispute has arisen- quite common
• If the Tribunal decides to apply the rules- very
common The rules therefore equate to soft law or best
practice- they can be adopted in whole or in part or
not at all by the parties (Preamble para 2).
• It is very unusual that the Rules will not be
considered (if not adopted) in an international
arbitration Sometimes seen as part of the
harmonisation of international procedural law-
widely used.
• Structure of the Rules Very simple structure of only
9 Articles.
• The main ones being Preamble, which contains
general principles of fairness, efficiency and
economy- and the principle of good faith
• Article 2 which provides for early consultation
between Tribunal and parties on matters of evidence
• Article 3 which relates to the production of
documents and provides a procedure for
production of relevant documents, requests for
production, objections to production and the
resolution of disputes on documents by the
Tribunal-

• this is effectively a disclosure procedure- albeit a very

limited one and not called disclosure. Always called
"production"
• Article 4 which provides basic rules for the taking of
evidence of party witnesses, which allows for
examination in chief and cross examination of
witnesses, as well as the examination of witnesses
by the Tribunal.
•
• Articles 5 and 6 which provide for the taking of
evidence from expert witnesses (whether party
appointed or Tribunal Appointed)
• Article 8 which provides guidelines for the structure
of the evidence at a hearing- although preserving the
Tribunal’s ultimate discretion as to the order of
witnesses
• Article 9 provides rules for the admissibility and
assessment of evidence •
• Article 9(2) sets out the grounds on which a party can
object to producing a document (lack of relevant,
privilege, confidentiality, sensitivity, document
destroyed, production burdensome) •
• Articles 9(3) (a)-(e) give guidance as to how
Tribunal’s should address questions of privilege.
These provide express reference to legal advice
privilege/settlement privilege for the first time.
Privilege is an issue which has caused great problems
in arbitral procedure.
• 2010 revision? Many of the technical aspects of the
rules have not changed greatly The reform of the rules
is part of a general overhaul of arbitration provisions
including New UNCITRAL Rules 2010 New ICC
Rules 2011
• Why is this A general perception that arbitration has
become too expensive and inefficient? An attempt to
cement best practice into the procedure

• Good Faith Very interesting inclusion in the rules

Preamble para 3 States "The taking of evidence shall
be conducted on the principles that each Party shall
act in good faith and be entitled to know, reasonably
in advance...the evidence on which the other Parties
rely."
• Neither the Model Law nor most arbitral rules (save
Swiss Arbitration Rules) make express mention of
good faith. This appears to be a first- is there an
obligation to arbitrate in good faith?
• Article 9.7 of the Rules provides that the Tribunal
may impose sanctions if the parties do not act in good
faith in the taking of evidence "If the Arbitral
Tribunal determines that a Party has failed to conduct
itself in good faith in the taking of evidence,
• the Arbitral Tribunal may, in addition to any other
measures available under these Rules, take such
failure into account in its assignment of the costs of
the arbitration, including costs arising out of or in
connection with the taking of evidence
• Good faith- Problems What does it mean? Perennial
question, difficult enough in national law. How
serious does bad behaviour have to be before being
punished in costs Wont different Tribunal’s have
different views on this? Examples of Bad Faith may
illustrate the problem
• Good Faith/ Bad Faith in the Taking of
Evidence "Sandbagging" Witholding documents,
evidence to" ambush" the other party. Preamble para
3 of the Rules states that parties should be aware of
the evidence to be used against them.
• Article 3.1 of the Rules states that parties should
produce all the documents on which they wish to rely
within the time set by the Tribunal - Is this acting in
bad faith? How common is it? What should the
sanction be?
• Bad Faith in the Taking of evidence 
• Submitting overly long and burdensome document
requests Article 3.3 of the Rules allows parties to
submit requests for "narrow and specific categories of
documents"
• explaining how these are relevant and why they are
required. It is not uncommon for parties to submit
lengthy and argumentative requests for documents.
• Bad Faith in the Taking of Evidence Objecting to
valid requests for documents Article 9 (2) of the rules
provides the grounds for objection to a request to
produce namely Lack of relevance Privilege,
confidentiality or sensitivity Unreasonable burden/
procedural economy.

• Yet parties often object to the production of

documents on spurious grounds- leading to delay and
expense Is this bad faith? How common is it?
• Bad Faith in the Taking of Evidence Burying relevant
documents amongst irrelevant documents Tampering
with documents/falsification of documents/cutting
and pasting and presenting misleading documents
(Breaching Art 3.12 as to the form of documents)
• Examples :
• Presentation of translations without the originals
or without indication that the documents are
translations (3.12 (d) Disclosing confidential
documents
• in order to damage the opposing party or to pressurise
the other party (Art 3.13 states that documents are to
be used for the purposes of the arbitration only).
Destroying documents- there is no obligation to
maintain documents- but could this be a breach of
good faith?
• Good Faith- a Mixed Blessing From the examples
above it is clear that the good faith obligation will be
used a lot in the future. Parties will use it to justify
applications for costs based on the alleged
unreasonable conduct of the other party in the course
of proceedings.
• This uncertainty can be solved by the Tribunal at
the outset by means of early consultation. Early
consultation is provided for in Article 2 of the
Rules and is becoming a prominent feature of
arbitration.

• The Tribunal should state at the outset its views on

matters of evidence and how it will apply the good
faith duty. Parties should be able to know where they
stand.
• The Role of Counsel- Examples Pleading the case- what
if case inconsistent with documents not disclosed to
other party? Meeting with witnesses to Discuss the
evidence?(Art 4(3)) "not improper to meet and discuss
evidence" Drafting the statements?- no rule though the
reality is that the statements are lawyer written, is this
a good thing?
• Practising cross examination with the witness? Common
in the US- increasing in the UK- Hungarian code? What
do we do when we know our opponents are doing this?
Preparing answers for the witness in cross examination?