Q.1. What is Arbitration ?

A. People have various conceptions about Arbitration. The very old concept about Arbitration was Panchaiti. It was a sort of undefined conception of people to settle their disputes, by referring to a person of their choice who would contact the parties and try to settle their disputes. This was an attempt to settle civil disputes by and through a private party or parties of their choice.

 

Q.2. What is the modern concept of Arbitration ?

A. The modern concept about Arbitration has greatly changed. On the one hand the parties are given the liberty to enter into an Arbitration agreement of their choice, they also have the liberty to agree to an arbitrator or arbitrators of their choice mutually acceptable to them and also have the liberty to agree to the procedure as to how the arbitrator or arbitrator are to be selected or appointed in case of any existing or any future disputes, but once they agree to go to an Arbitration, the said agreement becomes binding on both the parties and the arbitrators get the Jurisdiction to decide finally all the disputes which the parties have agreed to refer to them for settlement. Thus where as ordinarily the disputes between the parties are decided by a court of law, whose Jurisdiction and power to decide is governed by the law of the land and not by the volition of the parties, the parties by the law of Arbitration have been given the choice to get their disputes and or particular disputes, the nature whereof is defined within the mutual agreement, to be decided by the person or persons or a body of their own choice.

 

The whole intent behind accepting Arbitration as a mode of settlement of disputes is to make it easy, convenient and expeditious remedy to be available to the parties instead of going to a court of law and the long drawn procedures and formalities applicable in case of settlement of disputes which apply to the courts.

 

In India we had our own Arbitration Act 1940, which was mostly following the British Law on the subject. Similarly most of the countries had their own laws of Arbitration, which varied largely and created lots of problems with the increase of international trade and commerce and the agreements relating there to usually provided for Arbitration to solve the Disputes.

 

The United Nations commission on International Trade Law (UNCITRAL) had adopted the UNCITRAL model law on International commercial Arbitration in 1985. The general assembly of United Nation also recommended that all countries should give due consideration to the said model Law in view of the desirability of uniformity of the law of Arbitral procedures and the specific needs of the international commercial Arbitration practice. India was a signatory party to the said UNCITRAL. Furthermore we in India did not have any legislation with regard to conciliation proceedings and there was a recommendation by the general assembly of the United Nations for use of the rules as recommended by them in context of international commercial disputes and where the parties sought amicable settlement of the disputes by recourse to conciliation proceedings.

 

In the context aforesaid a bill was introduced in the parliament to consolidate and amend the law relating to domestic Arbitration, International commercial Arbitration and enforcement of foreign arbitral award; as also to define the law relating to conciliation and for matters connected there with or incidental there to.

 

At first an ordinance was issued, since the parliament was not in session and thereafter the act was passed.

 

Q.3. How to enter into an Arbitration agreement ?

A. An Arbitration agreement may be in the form of Arbitration clause in a contract or in the form of a separate agreement.

 

An Arbitration agreement has to be in writing.

The requirement as to Arbitration agreement being in writing is fulfilled ;-

a) If the document is signed by the parties

b) If the Arbitration is entered into by exchange of letters, telex, telegrams or other means of communication which provide as a record of the agreement; or

 

c) An exchange of statements of claim and defense in which the existence of the agreement is alleged by one party and not denied by the other.

 

The reference in a contract to a document containing an Arbitration clause constitutes an Arbitration agreement if the contract is in writing and the reference is such as to make that Arbitration clause part of the contract. The example of such an Arbitration agreement may be given when the parties simply agree “Arbitration; Bengal Chamber of Commerce and Industry”. Similarly “Arbitration; London Chamber of Commerce and Industries”. This agreement will import the entire rules of the concerned chambers which are in writing in the contract itself and the requirement of Law that the Arbitration agreement has to be in writing will be fulfilled by incorporation of the concerned rules of the concerned chambers. Of course an Arbitration agreement should specify the nature of disputes which are intended to be referred to Arbitration. It should be noted that an oral Arbitration agreement is not permissible in Law.

 

Q.4. How to get Interim Reliefs in a case where there is an Arbitration agreement ?

A. Under the 1940 Act an interim relief could be sought for after commencement of the Arbitration reference. This situation has been basically altered and now as provided in section 9 of The Arbitration and Conciliation Act, 1996. Interim relief may be sought by a party before or during arbitral proceeding or anytime after the making of the award.

 

The nature of the Interim Relief that may be asked for are enumerated as hereunder.

For the appointment of a guardian for a minor or a person of unsound mind for the purposes of Arbitral proceedings; or

 

For an Interim measure of protection in respect of any of the following matters, namely:-

the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement ;

Securing the amount in dispute in the Arbitration;

The detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

 

interim injunction or the appointment of a receiver;

such other interim measure of protection as may appear to the court to be just and convenient.

This interim relief has to be asked from the court, which has the same power for making interim orders as it has for the purpose of and in relation to any proceedings before it. The “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 of or any court of small causes.

 

Under section 17 of the present Act the arbitral tribunal may also at the request of the party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute. The Arbitral tribunal may also require a party to provide appropriate security in connection with a measure ordered under sub-section 1 of Section 17 of the present Act. This is a change in Law as under the old Act “ that is the 1940 Act “ the arbitrator could make an interim award but there was no provision equivalent to Section 17 of the present Act.

 

Q.5. What can a party to an Arbitration agreement do if the other party to the Arbitration agreement institutes a suit in a Court of Law praying for decision on matters, which are covered by the Arbitration agreement ?

 

A. This situation very often used to arise and the other party had no option but to make an application for the stay of the suit under Section 34 of the old Act. If a party commenced a suit and gave notice there of to the other side all further proceedings in Arbitration would become void and ineffective and the award made after such notice would have been void.

 

The 1996 Act has ameliorated the situation to a great extent. It has been provided under Section 8(3) that not with his tending the issue is pending before the Judicial Authority, an Arbitration may be commenced or continue an Arbitral award made.

 

The further step that is required is to make an application before the Judicial Authority before which an action is brought in a matter which is the subject of an Arbitration agreement and the court shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the party to a Arbitration. This application as aforesaid shall not be entertained unless it is accompanied by the original Arbitration agreement or a duly certified copy thereof. Notwithstanding that an application has been made under sub-section 8(1) before the Judicial Authority and that the issue is pending before the Judicial Authority, an arbitration may be commenced or continue and an arbitral award made.

Q.6. How and what number of Arbitrators are to be appointed ?

A. The parties are free to determine the number of arbitrators, provided that such numbers shall not be an even number. Feeling the determination referred to by the parties, the Arbitral Tribunal shall consist of a sole Arbitrator. If the procedure for appointment of Arbitrator or Arbitrators is not agreed, in an Arbitration with three arbitrators each party shall appoint an arbitrator and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding Arbitrator.

 

In case a party fails to appoint his Arbitrator within 30 days from the receipt of the request to do so from the other party or the two appointed Arbitrators fail to agree on the third Arbitrator within 30 days from the date of their appointment, the appointment shall be made upon request of a party, by the Chief Justice or any person or institution designated by him.

 

In an Arbitration with a sole Arbitrator if the party fail to agree on the Arbitrator within 30 days from receipt of request by one party from the other party to so agree, the appointment shall be made upon request of the party by the Chief Justice or any person or institution designated by him. This applies in cases where the agreement on the appointment procedure does not provide other means for securing their appointments. The appointment made by the Chief Justice is final.

 

Q.7. What about the appointment of sole or third Arbitrator in an International Commercial Arbitration ?

A. In case of an International Commercial Arbitration the Chief Justice of India or the person or institution designated by him may appoint an Arbitrator of a nationality other than the nationality of the parties where the parties belong to different nationalities. The Chief Justice may make such scheme as he may deal appropriate for dealing with matters entrusted to him under Section 11 of the 1996 Act. Where the matters referred to in Section 11and the sub-sections their under regarding appointment of an Arbitrator or the third Arbitrator arise in an International Commercial Arbitration, the reference to Chief Justice in the relevant sub-sections under Section 11 shall be construed as a reference to the “Chief Justice of India”. In any other Arbitration the reference to “Chief Justice” shall be construed as a reference to the Chief Justice of the High Court within whose limits the principal civil court which has Jurisdiction is situate and where the High Court itself is the Court referred to the Chief Justice of that High Court.

 

 

Q.8. Can a party challenge the appointment of an Arbitrator?

A. Yes, if circumstances exist that give rise to justifiable doubts as to the Arbitrators independent or impartiality, or if he does not possess the qualification agreed to by the parties. A party may challenge an Arbitrator appointed by him, or in whose appointment he has participated only for reasons, of which he becomes aware, after the appointment has been made.

 

Q.9. What is the procedure for challenging the appointment of an Arbitrator ?

A. The parties are free to agree on a procedure for challenging the appointment of an Arbitrator. Failing any agreement as aforesaid a party who intends to challenge an Arbitrator shall, within 15 days after becoming aware of the constitution of the Arbitral Tribunal or after becoming aware of any circumstances for challenging the appointment of any Arbitrator, send a return statement of the reasons for the challenge to the Arbitral Tribunal. Unless the Arbitrator so challenged withdraws from his office or the other party agrees to the challenge, the Arbitral Tribunal shall decide on the challenge. If the challenge is not successful, the Arbitral Tribunal shall continue the Arbitral proceedings and make an Arbitral award.

 

Where an Arbitral award is made in a case where there was unsuccessful challenge to the appointment of the Arbitrator, the party challenging the Arbitrator make an application for setting aside such an Arbitral award in accordance with Section 34 of the Act of 1996. Where an Arbitral award is set aside on an application made in case of challenge for appointment of an Arbitrator, the Court may decide as to weather the Arbitrator who is challenged is entitled to any fees.

 

Q.10. What is to be done in case of failure or impossibility to act on the part of the Arbitrator or any of the Arbitrators ?

A. The power and authority of an Arbitrator shall terminate if he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay and he withdraws from his office or the parties agree to the termination of his mandate.

 

If a controversy remains concerning inability of the Arbitrator to perform his functions or his failure to act without undue delay, a party may, unless otherwise agreed by the parties, apply to the court to decide on the termination on the mandate.

 

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. Section 12 to 15 of the Act of 1996 deal with the matters relating to grounds of challenge the procedures of challenge of Arbitrator, failure or impossibility to act by the Arbitrator, substitution of the Arbitrator and the procedure to be followed in case of substituted Arbitrator in the further conduct.

 

 

Q.11. What is the extent of Jurisdiction of an Arbitrator or the Arbitral Tribunal and who is to decide about same?

A. The Arbitral Tribunal may rule on its on Jurisdiction, including ruling on any objections with respect to the existence of the validity of the Arbitration agreement and for that purpose an Arbitration clause shall be treated as an agreement independent of the other terms of the contract and a decision by the Arbitral Tribunal that the contract is null and void shall not entail if so jure the invalidity of the Arbitration clause. A plea with regard to Jurisdiction shall be raised not later than the submission of the statement of defense. However, a party shall not be precluded from raising such a plea merely because he has appointed or participated in the appointment of an Arbitrator. A plea that the Arbitral Tribunal is exceeding the scope of its authority shall be raised as soon as practicable during the Arbitral proceeding. The Arbitral Tribunal shall decide on a plea as to Jurisdiction and in case the plea is rejected by the Tribunal, they will continue with the Arbitral proceeding and make an Arbitral award. The party aggrieved by such an Arbitral award may make an application foe setting aside such an Arbitral award in accordance with Section 34.

 

Q.12. What is the procedure for conduct of Arbitral proceedings ?

A. The Law provides that the parties shall be treated with equality and each party shall be given full opportunity to present his case. The Arbitral Tribunal shall not be bound by the court civil procedure 1908 or the Indian evidence Act, 1872. Subject to the above rules the parties are free to agree on the procedure by the Arbitral Tribunal in conducting its proceedings. In absence of any agreement as to the procedure to be followed, the Tribunal may subject to the rules led down above conduct the proceedings in the manner it considers appropriate. The power of the Arbitral Tribunal includes the power to determine the admissibility relevance, materiality and weight of any evidence.

 

Q.13. What would be the place of Arbitration ?

A. The parties are free to agree on the place of Arbitration. Failing any agreement between the parties the place of Arbitration shall be determined by the Arbitral Tribunal having regard to the circumstance of the case, including the convenience of the party.

 

Notwithstanding with the above rules the Tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, or goods or other property.

 

Q.14. When does the Arbitration commence ?

A. Unless otherwise agreed by the parties the Arbitration proceedings commence on the date on which a request for the dispute to be referred to Arbitration is received by the respondent.

 

Q.15. What is the procedure generally to be followed in an Arbitration proceeding ?

A. First of all the claimant is to file within the period of time agreed upon by the parties or determined by the arbitrator a statement of facts supporting his claim, the points at issue and the relief or remedy sought and the respondent thereafter shall state his defense in respect of and in answer to the statement of claim, unless the parties have otherwise agreed.

 

The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit.

Unless otherwise agreed by the parties, either party may amend or supplement his claim or defense during the course of the arbitral proceedings, unless the arbitrator considers it inappropriate to allow the amendment or supplement having regard to the delay in making it.

 

Unless otherwise agreed by the parties the Arbitrator shall decide whether to hold oral hearings for the presentation of evidence or for oral argument or whether the proceedings shall be conducted on the basis of documents and other materials. However it has been provided that the Arbitrator shall hold oral hearings at an appropriate stage of the proceedings on a request by a party, unless the parties have agreed that no oral hearing shall be held.

 

The parties shall be given sufficient advance notice of any hearing and of any meeting of the Arbitrator for the purposes of inspection of documents, goods or other property.

 

All statement documents or other information supplied to or application mate to the Arbitrator by one party shall be communicated to the other party and any expert report or evidentiary document on which the Arbitrator may rely in making his decision shall be communicated to the parties.

What happens if either of the parties commits default in course of the conduct of the Arbitration ?

A. If the claimant fails to communicate his statement of claim the Arbitrator shall terminate the proceedings unless otherwise agreed by the parties and without showing sufficient cause.

 

If the respondent fails to communicate his statement of defense in time without showing sufficient cause and unless otherwise agreed the Arbitrator shall continue the proceeding without treating the failure in itself as an admission of the allegations by the claimant.

 

If a party fails to appear at an oral hearing or to produce documentary evidence than the Arbitrator may continue the proceedings and make the award on the evidence before it.

 

Q.17. Can the Arbitrator appoint an expert ?

A. Yes, unless otherwise agreed by the parties the Arbitrator may appoint one or more experts to report to him on specific issues to be determined by the Arbitrator and require a party to give the expert any relevant information or to produce or to provide access to, any relevant document, goods or other property for his inspection.

 

Unless otherwise agreed by the parties, if a party so requests or if the Arbitrator considers it necessary, the expert shall after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue.

 

Unless otherwise agreed by the parties the expert shall on the request of a party make available to that party for examination all documents, goods or other property in the possession of the expert with which he was provided in order to prepare his report.

 

Q.18. How Court assistance may be taken in taking evidence ?

A. The Arbitrator being a private Tribunal cannot or does not have the authority or power to issue summons to witnesses or to require anyone to produce documents. The Law however as provided in Section 27 of the Act of 1996 gives the Arbitral Tribunal, or a party with a approval of the Arbitral Tribunal the power to apply to the court for assistance in taking evidence. The application has to be made giving the particulars as mentioned in Section 27 of the Act of 1996 and the manner in which the Courts assistance is required mainly for calling witness or expert witnesses or a statement of the subject matter of the testimony required or the description of any document to be produced or property to be inspected.

 

The Court may, within its competence and according to its rules on taking evidence, execute the request by ordering that the evidence be provided directly to the Arbitrator.

 

The Court may issue the same processes to the witnesses as it may issue in suits tried before it.

 

Persons failing to attend in accordance with such process, or making any other default or refusing to give their evidence or guilty of any contempt to the Arbitrator during the conduct of Arbitration proceedings, shall be subject to the like disadvantages, penalties and punishments by the order of the court on the representation of the Arbitrator as they would incur for the like offences in suits tried before the court. The expression processes include summonses and commissions for the examination of witnesses and summonses to produce the documents.

 

Q.19. What is the Law applicable in case of Arbitrations within India and in case on International Commercial Arbitration ?

 

A. In an Arbitration other than an International Commercial Arbitration, the Arbitral Tribunal (Arbitrator/Arbitrators) shall decide the disputes in accordance with the substantive Law for the time being in force in India;

 

In International Commercial Arbitration :-

(i) the dispute is to be decided in accordance with the Law as agreed by the parties to be applicable to the dispute.

 

(ii) Such agreed Law or legal system as agreed to be applicable 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 agreement as to the Law applicable by the parties, the Arbitrator shall apply the rules of Law it considers to be appropriate, given all the circumstances surrounding the disputes.

 

In all cases the Arbitrator shall decide in accordance with the terms of the contract and shall take in to account the usages of the trade applicable to the transaction.

 

Q.20. How would a panel of Arbitrators decide the case ?

A. Unless otherwise agreed by the parties any decision of the Arbitrators shall be made by a majority of all its members.

 

If authorized by the parties or all the members of the panel of Arbitrators, questions of procedure may be decided by the presiding Arbitrator. (Sec.29)

 

Q.21. Can the Arbitrator encourage settlement of the disputes or may use mediation, conciliation or other procedures during the proceedings of Arbitration ?

 

A. Yes, he can do so and it is not incompatible with an Arbitration agreement. If the matter is settled and if requested by the parties and not objected to by the Arbitral Tribunal, record the settlement in the form of an award on agreed terms. An award on agreed terms shall be made in accordance with Section 31 and shall state that it is an award. An award on agreed terms shall have the same status and effects as any other award on the substance of the dispute (Section 30).

 

 

Q.22. What should be the form of an award?

A. An award has to be in writing and the same has to be signed by the Arbitrator or Arbitrators. However if there are more than one Arbitrator, the signatures of the majority of all the members of the Tribunal shall be sufficient so long as the reason for any omitted signature is stated (Section 31).

 

Q.23. What should be the contents of the award ?

A. The former Law on the point did not require the Arbitrators to give any reasons for their award unless of course the Arbitration agreement itself required reasons to be given by the Arbitrator.

 

With the coming into force of the 1996 Act an Arbitrator has to give the reasons in the award for his decision unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under Section 30.

 

The award shall state its date and the place of Arbitration as determined in accordance with Section 20 of the 1996 Act and the award shall be deemed to have been made at that place. [Section 31(3) and(4)].

 

Q.24. What are the duties of the Arbitrator after the award is made ?

A. The Arbitrator has to supply as signed copy to each party and deliver the same to them [Section 31(5)].

 

Q.25. Does the Arbitrator have power to make an Interim award with respect to any matter which the Arbitrator may make a final award ?

 

A. Yes, the Arbitrator may at any time during the Arbitration proceedings make an interim award on any matter with respect to which it may make a final award- Section 31(6).

 

Q.26. What is the power of an Arbitrator to award interest ?

A. The Law on this point has been clarified by the Section 31(7). The Law says that unless otherwise agreed by the parties where in and so far an award where an award is foe payment of money the Arbitrator may include in the sun for which the award is made interests, at such rate as it deems reasonable, for the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the day on which the award is made.

 

Section 31(7)(a) gives the Arbitrator the full power to award interest right from the date of accrual of the cause of action until the date of the award at such reasonable rate as the Arbitrator thinks fit and proper.

 

The other salutary provision in sub-section B is that the some directed to be paid by an award shall, unless the award otherwise directs, carry interests at the rate of a eighteen per centum per annum from the date of the award to the date of payment. This provision applies whether there is any provision in the award or not for future interest from the date of the award to the date of payment.

 

 

Q.27. What about the costs of Arbitration; who has to pay and to what extent ?

A. Unless otherwise agreed by the parties, the cost of Arbitration shall be fixed by the arbitrator. The Arbitrator shall specify the party entitled to cost, the party who shall pay the cost the amount of cost or method of determining that amount and the manner in which the cost shall be paid. Cost means reasonable costs relating to the fees and expenses of the Arbitrators and witnesses, legal fees and expenses, any administration fees of the institution supervising the Arbitration and any other expenses incurred in connection with the proceedings and the award-Section 31(8).

 

 

Q.28. When does the Arbitration proceeding terminate ?

A. By the final award or when the claimant withdraws his claim, or when the parties agree on the termination of the proceedings or when the Arbitrator finds that the continuation of the proceedings has for any other reason become unnecessary or impossible.(Section 32).

 

Q.29. Can the Arbitrator correct or interpret the award or make an additional award ?

A. Yes, within 30days from the receipt of the award a party with notice to the other party may request the Arbitrator to correct any computation errors any clerical or hypographical errors or any other errors of a similar nature occurring in the award.

 

If so agreed by the parties, a party with notice to the other party, may request the Arbitrator to give an interpretation of a specific point or part of the award.

 

If the Arbitrator considers a request made by any party to be justified, it shall make the correction or give the interpretation within 30 days from the receipt of the request and the interpretation shall form part of the award. The Arbitrator may correct any error as specified in Section 33 on his own motive, within 30 days from the date of the award.

 

Unless otherwise agreed by the parties, a party with notice to the other party, may request within 30 days from the receipt of the award, to make an additional award as to claims presented in the arbitration proceedings but omitted from the award.

 

If the Arbitrator considers the request made for additional award to be justified, it shall make the additional award within 60 days from the receipt of such request.

 

The Arbitrator may extent if necessary, the period of time within which he shall make a correction give an interpretation or make an additional award. The correction and/or the interpretation and/or the additional award shall form part of the award (Section 33).

 

 

Q.30. What is the legal consequences which follow the making of the award ?

A. The award shall be final and binding on the parties and person claming under them and where the time for making a application to set aside the award under Section 34 has expired or such application having been made, it has been refused, the award shall be in forced under the Court of civil procedure, 1908 in the same manner as if it were a decree of the Court.

This is a significant departure from the old Law of Arbitration. Under the old Law the procedure was that the Arbitrator shall file the award and then the same will come for judgement upon award and if an application for setting aside the award has been made or disposed of and dismissed a judgement and decree terms of the award will follow. This procedure has given a go by and the present Law is that upon the expiry of the time for making an application to set aside the award or upon dismissal of such application is made the award itself shall be enforced as a decree of Court. (Section 35 and 36).

 

Q.31. Can the party aggrieved make an application for setting aside an award .

A. Yes, but the grounds are extremely limited. The party making the application if it furnishes prove that a party was under some incapacity, or that the arbitration agreement is not valid under the Law or that the party making the application was not given proper notice of the appointment of the Arbitrator or of the Arbitration proceedings or was otherwise enable to present his case. The award may be set aside.

 

The other grounds for setting aside the awards are that the award deals with a dispute not contemplated while or not falling within the terms of the submission to Arbitration, or it content decisions on matters beyond the scope of the submission to Arbitration.

 

Provided always that if the decisions on matters submitted to Arbitration can be separated from those not so submitted, only that part of the award which content decisions on matters not submitted to Arbitration may be set aside.

 

If the composition of the Arbitration Tribunal or the procedure follow was not in accordance with the agreement of the parties.

 

Apart from the above grounds for setting aside the awards, the award can be set aside if the subject matter of the dispute is not capable of settlement by Arbitration under the Law for the time being inforce or if the award is in conflict with the public policy on India. If the award was procure by fraud or corruption or was in violation of Section 75 or Section 81 the award will be treated as in conflict with the public policy in India-Section 34(1)and (2).

 

 

Q.32. Is there any limitation for making an application for setting aside the award ?

A. An application for setting aside may not be made after 3 months have elapsed from the date on which the party making that application, had received the Arbitral award or if a request have been made for correction, interpretation or for additional award, than from the date on which that request had been disposed of by the Arbitrator.

 

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the set period of three months, it may entertain the application within a further period of 30 days but not there after Section 34(3). This shows that the outer limit even for the Court to entertain an application for setting aside an award is 60 days even after extension of time.

Is there any other alternative to uphold the award, after the making of the application for setting aside the same and before decision thereon by the Court ?

 

A. Yes, on receipt on an application for setting aside the award the Court may where it is appropriate and it is so requested by a party, adjourned the proceeding for a period of time determine by it, in order to give the Arbitrator an opportunity to resume the proceedings or to take such other action as in the opinion of the Arbitrator will eliminate the grounds for setting aside the award. [Section 34(4)].

 

This is a new concept in the Law of Arbitration. Incases where it is appropriate and it is so requested by a party the Court may give an opportunity to the Arbitrator to resume the proceedings and to take such other action as in the opinion of the Arbitrator will illuminate the grounds for setting aside the Arbitral award. This could not be done under the old Law.

 

Q.34. In what cases a party can go in appeal from an order of the Court?

A. An appeal shall lie from the following orders (and from no others) to the Court authorized by Law to hear appeals from original decrease of the Court passing the order namely:-

 

(a) Granting or refusing to grant any measure under Section 9.

(b) Setting aside or refusing to set aside an award under Section 34.

An appeal shall also lie from an order granting or refusing to grant an interim measure under Section 17 to a Court. (It is to be remembered that Section 17 relates to interim measures to be granted by an Arbitrator).

 

No second appeal shall lie from an order passed in appeal under this section that is Section 37, but nothing in this section shall effect or take away any right to appeal to the Supreme Court. (Section 37).

 

Q.35. Can the Arbitrator Tribunal ask for deposit on account of cost ?

A. Yes, it can do so and fix the amount of the deposit or supplementary deposit as the case may be, as an advanced for the cost and in a case where there is a counter claim it may fix separate amount of deposit for the counter claim.

 

The deposit shall be payable in equal share by the parties. Provided where one party fails to pay his share of the deposit, the other party may pay that share. Provided further that where the other party also does not pay the aforesaid share in respect of the claim or the counter claim, the Arbitrator may suspend or terminate the proceedings in respect of such claim or counter claim, as the case may be.

 

Upon termination of the proceedings, the Arbitrator share render an accounting to the parties of the deposits received and shall return any unexpended balance to the party or parties as the case may be. (section 38)

 

 

Q.36. Does the Arbitrator have lien on the award and deposit as to costs ?

A. Unless otherwise agreed the Arbitrator shall have a lien on the award for any unpaid costs of the Arbitration.

If in any case the Arbitrator refuses to deliver its award except on payment of the costs, demand by it, the Court may, on an application in this behalf, order that the Arbitrator shall deliver the award to the applicant on payment into Court by the applicant of the costs demanded, and shall after such inquiry, if any, as it thinks fit, further order that out of the money so paid into Court there shall be paid to the Arbitrator by way of costs such some as the court may consider reasonable and that the balance of the money if any, shall be refunded to the applicant. (Section 39)

 

Q.37. Does an Arbitration agreement stand discharge by death of party there to ?

A. No, and in case of death of the party the same is enforceable by or against the legal representative of the deceased. Similarly the mandate of an Arbitrator shall not be terminated by the death of any party by whom he was appointed.

 

Nothing is this Section shall affect the operation of any Law by Virtue of which any right of action is extinguished by death of a person. (Section 40).

 

Q.38. What is the position in case of insolvency of a party ?

A. Where the contract so provides and where the receiver in insolvency adopts the contract, the Arbitration agreement shall be enforceable by or against him so far as it relates to any such disputes.

 

Where a person who has been adjudged an insolvent had, before the commencement of the insolvency proceedings, became a party to an Arbitration agreement, and any matter to which the agreement applies, is required to be determined in connection with, or for the purposes of, the insolvency proceedings, than, any other party or the receiver may apply to the judicial authority having Jurisdiction in the insolvency proceedings, for an order directing that the mattering question shall be submitted to Arbitration and the judicial authority may make an order accordingly. (Section 41) .

 

Q.39. Which Court will have Jurisdiction in a case where an application has already been made with respect to an Arbitration agreement?

 

A. 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 the 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. (Section 42)

 

Q.40. Does the limitation Act apply to an Arbitration?

A. Yes, the limitation Act 1963 applies to Arbitration as it applies to proceedings to court. For the purposes of limitation Act 1963 the Arbitration shall be dimmed to have commenced on the date on which a request for that dispute to be referred to Arbitration is made and received by the respondent.

 

Where an Arbitration agreement to submit future dispute to Arbitration provides that any claim to which agreement applies shall be bar unless some step to commence Arbitration is taken within a time fixed by the agreement and a dispute arises to which the agreement applies, the court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and not withstanding that the times of fixed has expired, may on such terms if any as the justice of the case may require, extend the time for such period as it thinks proper.

 

Where the court orders that the 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, for the commencement of the proceedings (including Arbitration) with respect to the dispute so submitted.

What is a foreign award under the New York Convention Awards ?

A. Part II of The Arbitration and Conciliation Act, 1996, Chapter 1 deals with New York Convention Awards. Unless the context otherwise requires, ‘foreign award’ means an award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law enforced in India, made on or after 11th October, 1960 –

 

(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and

 

(b) 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 the territories to which the said Convention applies. (Section 44).

 

The term ‘First Schedule’ refers to the New York Convention on the recognition and enforcement of foreign arbitral awards.

 

Q.42. Is a foreign award within the meaning of New York Convention, binding ?

 

A. Any foreign award which would be enforceable under Chapter 1 of Part II shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in Chapter 1 Part II of the said Act of 1996, to enforcing a foreign award shall be construed as including references to relying on an award. (Section 46)

 

Q.43. What evidence has to be produced at the time of applying for the enforcement of a foreign award ?

 

A. The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court–

 

(a) the original award or a copy thereof, duly authenticated in the manner required the law of the country in which it was made;

 

(b) the original agreement for arbitration or a duly certified copy thereof; and

(c) such evidence as may be necessary to prove that the award is a foreign award.

If the award or agreement to be produced under sub-section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India. (Section 47)

 

Q.44. What are the grounds on which the enforcement of a foreign award may be refused ?

A. Enforcement of a foreign award may be refused at the request of the party against whom it is invoked, only if that party furnishes to the court proof that –

 

(a) the parties to the agreement referred to in Section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

 

(b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

 

(c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

 

However it has been provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or

 

(d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where arbitration took place; or

 

(e) 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.

 

Enforcement of an arbitral award may also be refused if the court finds that –

(a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public policy of India.

Explanation – Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption.

 

If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security. (Section 48)

 

Q.45. What is the position of a foreign award, after the court is satisfied that the award is enforceable ?

A. Where the court is satisfied that the foreign award is enforceable under chapter 1 of part II, the award shall be deemed to be a decree of that court. (Section 49)

 

Q.46. From which orders made under chapter 1 of Part II an appeal lies ?

A. An appeal shall lie from the order refusing to –

(a) refer the parties to arbitration under section 45

(b) enforce a foreign award under section 48,

No second appeal shall lie from an order passed in appeal, but nothing shall affect or take away any right to appeal to the Supreme Court. (Section 50)

 

Q.47. What happens if a party institutes an action in a matter in respect of which the parties have made an agreement referred to in Section 44, that is, the chapter relating to the enforcement of certain foreign awards under the New York Convention ?

 

A. In such cases the court shall at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. (Section 45)

 

Q.48. What happens if Chapter 1 of Part II relating to New York Convention Awards applies? Does Chapter 2 relating to Geneva Convention Awards also apply ?

 

A. It may be noted that there are two chapters in part II relating to foreign awards and the enforcement thereof. Chapter 1 relates to New York Convention Awards. And Chapter 2 relates to Geneva Convention Awards. Chapter 2 relating to Geneva Convention Awards shall not apply in relation to foreign awards to which Chapter 1 relating to New York Convention Awards applies. (Section 52). Both these conventions cover mutually exclusive areas relating to foreign awards. 

The Geneva Convention ( covered in Sections 53 to 60 of the 1996 Act) contains practically similar provisions as those relating to New York Convention Award (Sections 44 to 52 of the said Act). Hence no further questions need be framed relating to Geneva Convention Awards.

INTRODUCTION TO LAW RELATING TO CONCILIATIONS

 

Conciliation: Mutual Conciliation of Civil Disputes has always been permissible in law. But it has been given a statutory form for the first time by the said Act, that is, the Arbitration and Conciliation Act, 1996 (Sections 61 to 85).

 

Q.49. How a conciliation proceeding is commenced ?

 

A. (a) The party initiating conciliation shall send to the other party a written invitation to conciliate under Part III of the said Act, briefly identifying the subject of the dispute.

 

(b) The conciliation proceedings shall commence when the other party accepts in writing the invitation to conciliate.

 

(c) If the other party rejects the invitation, there will be no conciliation proceedings.

 

(d) If the party initiating conciliation does not receive a reply within 30 days from the date on which he sends the invitation, or within such other period of time as specified in the invitation, he may elect to treat this as a rejection of the invitation to conciliate and if he so elects, he shall inform in writing the other party accordingly. (Section 62)

 

Q.50. What would be the number of conciliators and how they are to be appointed ? What would be the number of conciliators and how they are to be appointed ?

 

A. There will one conciliator unless the parties agree that there shall be two or three conciliators. Where there is more than one conciliator, they ought, as a general rule, to act jointly.

 

In conciliation proceeding with one conciliator, the parties may agree on the name of a sole conciliator. In conciliation proceedings with two conciliator each party may appoint one conciliator. In conciliation proceedings with three conciliators, each party may appoint one conciliator and the parties may agree on the name of the third conciliator who shall act as the presiding conciliator.

Alternatively the parties may enlist the assistance of a suitable institution or person in connection with the appointment of conciliators, and in particular,

(a) A party may request such an institution or person to recommend the names of suitable individuals to act as conciliator or

(b) the parties may agree that the appointment of one or more conciliators be made directly by such an institution or person.

This is subject to the provision that in recommending or appointing individuals to act as conciliator, the institution or person shall have regard to such considerations as are likely to secure the appointment of an independent and impartial conciliator and, with respect to sole or third conciliator, shall take into account the advisability of appointing a conciliator of a nationality other than the nationalities of the parties. (Sections 63 & 64).

 

Q.51. What is the procedure to be followed before the conciliator ?

A. (a) The conciliator upon his appointment may 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.

 

(b) The conciliator may request to each party to submit to him further written statement of his position and the facts and grounds in support thereof, supplemented by any documents and other evidence that such party deems appropriate. The party shall send a copy of such statement, document and other evidence, to the other party.

 

(c) At any stage of the conciliation proceedings, the conciliator may request a party to submit to him such additional information as he thinks appropriate.

 

Any reference to conciliator in this part includes reference to a sole conciliator, two or three conciliators as the case may be. (Section 65)

 

Q.52. What about the law applicable to the proceedings before the conciliator ?

 

A. As in the case of an arbitrator, the conciliator also is not bound by the code of Civil Procedure, or the Indian Evidence Act. (Section 66)

 

Q.53. What is the role of the conciliator ?

(a) The conciliator shall assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement of their dispute.

(b) The conciliator shall be guided by principles of objectivity, fairness and justice, giving consideration to , among other things, the rights and obligations of the parties, the usages of trade concern and the circumstances surrounding the dispute including any previous business practices between the parties.

(c) The conciliator may conduct the conciliation proceedings in such a manner as he considers appropriate, taking into account the circumstances of the case, the wishes the parties may express, including any request by a party that the conciliator hear oral statements, and the need for a speedy settlement of the dispute. (Section 67)

 

Q.54. Can the conciliator take administrative assistance from other institutions or person ?

A. Yes, in order to facilitate the conduct of the conciliation proceedings, the parties, or the conciliator with the consent of the parties, may arrange for administrative assistance by a suitable institution or person. (Section 68)

 

Q.55. What about the communication between conciliator and parties ?

A. The conciliator may invite the parties to meet him or may communicate with them orally or in writing. He may meet or communicate with the parties together or with each of them separately.

Unless the parties have agreed upon the place where meetings with the conciliator are to be held, such place shall be determined by the conciliator, after consultation with the parties, having regard to the circumstances of the conciliation proceedings. (Section 69)

 

Q.56. Is the conciliator bound to disclose the informations that he receives to the other side ?

 

A. When the conciliator receives factual information concerning the dispute from a party, he shall disclose the substance of that information to the other party in order that the other party may have the opportunity to present any explanation which he considers appropriate. This is subject to the Proviso that when a party gives any information to the conciliator subject to a specific condition that it be kept confidential, that conciliator shall not disclose that information to the other party. (Section 70)

 

Q.57. What are the other duties of the parties in a conciliation proceeding to facilitate a conciliation ?

 

A. The parties shall in good faith cooperate with the conciliator and in particular, shall endeavour to comply with request by the conciliator to submit written materials, provide evidence and attend meetings.

The parties may on their own initiative or at the invitation of the conciliator, submit to the conciliator suggestions for the settlement of the dispute. (Sections 71 & 72)

 

Q.58. How and in what manner a settlement is to be or may be arrived at ?

A. When it appears to the conciliator that there exists elements of settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit the same to the parties for their observations. After receiving the observations of the parties the conciliator may reformulate the terms of a possible settlement in the light of such observations.

If the parties reach agreement on a settlement of a dispute, they may drop and sign a written settlement agreement. If requested by the parties, the conciliator may drop or assist the parties in drawing up, the settlement agreement.

When the parties sign the settlement agreement, it shall be final and binding on the parties and persons claiming under them respectively.

The conciliator shall authenticate the settlement agreement and furnish a copy thereof to each of the parties. (Section 73)

 

Q.59. What is the status and effect of settlement agreement ?

A. The settlement agreement shall have the same status and effect as if it is an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under Section 30. (Section 74)

 

Q.60. Is there any duty cast upon the parties and the conciliator to keep the matters relating to conciliations as confidential ?

A. Yes, that is so. The confidentiality also extends to the settlement agreement except where its disclosure is necessary for purposes of implementation and enforcement. (Section 75)

 

Q.61. When do the conciliation proceedings terminate ?

A. The conciliation proceedings shall be terminated in the manner as follows :-

a) By the signing of the settlement agreement by the parties on the date of the agreement; or

b) By a written declaration of the conciliator, after consultation with the parties to the effect that further efforts at conciliation are no longer justified, on the date of the declaration; or

c) By a written declaration of the parties addressed to the conciliator to the effect that the conciliation proceedings are terminated on the date of the declaration; or

d) By a written declaration by a party to the other party and the conciliator, if appointed, to the effect that the conciliation proceedings are terminated, on the date of the declaration. (Section 76)

 

Q.62. Can a party or parties resort to arbitration or judicial proceedings during the course of the conciliation proceedings ?

A. The parties shall not initiate, during the conciliation proceedings, any arbitration or judicial proceedings in respect of a dispute that is the subject matter of the conciliation proceedings except that a party may initiate arbitration or judicial proceedings where, in his opinion such proceedings are necessary for preserving his rights. (Section 77)

 

Q.63. What about the costs regarding conciliation proceedings ?

A. Upon termination of the conciliation proceedings, the conciliator shall fix the cost of the conciliation and give written notice thereof to the parties. The word ‘costs’ here means reasonable costs relating to :

1) the fees and expenses of the conciliator and witnesses requested by the conciliator with the consent of the parties;

2) any expert advice requested by the conciliator with the consent of the parties;

3) any assistance provided to the conciliator in the manner as provided in sections 64 and 68; for any other expenses incurred in connection with the conciliation proceedings and the settlement agreement.

The costs shall be borne equally by the parties, unless the settlement agreement provides for a different apportionment. All other expenses incurred by a party shall be borne by that party.

Regarding costs the conciliator may direct each party to deposit an equal amount as an advance for the costs which he expects will be incurred.

During the course of the conciliating proceedings the conciliator may direct supplementary deposits in an equal amount from each party.

If the required deposits are not paid in full by both parties within 30 days, the conciliator may suspend the proceedings or may make a written declaration of termination of the proceedings to the parties effective on the date of that declaration.

Upon termination of the proceedings, the conciliator shall render an accounting to the parties of the deposits received and shall return any unexpended balance to the parties. (Section 78 & 79).

 

Q.64. What is the role if any that the conciliator can discharge in other proceedings ?

A. Unless otherwise agreed by the parties, the conciliator shall not act as an arbitrator or as a representative or counsel of a party in any arbitral or judicial proceeding in respect of a dispute that is the subject of the conciliation proceedings.

The conciliator shall not be presented by the parties as a witness in any arbitration or judicial proceedings. (Section 80)

 

Q.65. How far and to what extent the parties can use the evidence given in conciliation proceedins, in other proceedings ?

A. The parties shall not rely on or introduce as evidence in arbitration or judicial proceedings, whether or not such proceedings relate to the dispute that is the subject of the conciliation proceedings to the extent as follow :-

i) Views expressed or suggestions made by the other parties in respect of a possible settlement of the dispute;

ii) admissions made by the other party in the course of the conciliation proceedings;

iii) proposals made by the conciliator;

iv) the fact that the other party had indicated his willingness to accept a proposal for settlement made by a conciliator. (Section 81)

Notes for general information :-

1) The High Court may make rules consistent with the said Act as to all proceedings before the Court under the said Act. (Section 82)

2) The Central Government has been given the power to make such provisions by order, published in Official Gazette not inconsistent with the provisions of the said Act as appear to it, to be necessary to expedient for removing the difficulty if any within a period of two years from the period of commencement of the said Act. (Section 83)

3) The Central Government may by notification in the Official Gazette, make rules for carrying out the provisions of the said Act. (Section 84)

4) The arbitration (Protocol and Convention) Act 1937, the Arbitration Act 1940 and the foreign awards (recognition and enforcement), 1961 are repealed with the commencement of the said Act. However, it may be noted that not withstanding such repeal the provisions of the old enactments which have been repealed shall apply in relation to arbitration proceedings which commenced before the said Act came into force, unless otherwise agreed by the parties, but the said Act shall apply in relation to arbitration proceedings which commenced on or after the said Act came into force.

Furthermore all rules and notifications published, under the said enactments shall to the extent to which they are not repugnant to the said Act, be deemed respectively to have been made or issued under the said Act.

 

 

SCHEME FOR APPOINTMENT OF ARBITRATORS, 1996

 

Q.66. Has the Chief Justice of the High Court at Calcutta framed any scheme for the purposes of appointment of arbitrators as per the provisions of the said Act of 1996 ?

A. Yes, by Notification number R.353-A-21st January, 1997 the Chief Justice of the High Court at Calcutta notified the scheme framed in exercise of powers conferred by subsection 10 of Section 11 of the Arbitration and Conciliation Act, 1996.

 

Q.67. What is the procedure, if any,for submission of request to the Chief Justice under subsection 4 or subsection 5 or subsection 6 of Section 11 of the Act ?

A. Such request shall be made in writing to the Chief Justice and shall be accompanied by :

(a) the original arbitration agreement or a duly certified copy thereof;

(b) the names and addresses of the parties to the arbitration agreement;

(c) the names and addresses of the arbitrators, if any, already appointed ;

(d) the name and address of the person or institution, if any, to whom or which any function has been entrusted by the parties to the arbitration agreement under the appointment procedure agreed upon by them;

 

(e) the qualifications required, if any, of the arbitrators by the agreement of the parties;

(f) a brief written statement describing the general nature of the dispute and the points at issue;

(g) the relief or remedy sought; and

(h) an affidavit, supported by the relevant documents, to the effect that the condition to be satisfied under sub-section (4) or sub-section (5) or sub-section (6) of section 11, as the case may be, before making the request to the Chief Justice has been satisfied.

 

Q.68. What are the other salient features of the Scheme ?

A. The Scheme Inter-alia makes provisions as to the manner of selection of arbitrators, the authority to deal with the request for appointment of arbitrator, circumstances when the request is to be forwarded to designated persons or institutions, circumstances in which the request may be rejected, when notices are to be issued to affected persons, the manner and circumstances in which the authority given to the person or institution may be withdrawn by the Chief Justice, the persons or parties to whom intimation is to be given of action taken on request, costs of processing request etc. A copy of the Scheme may be referred to if and when so required. A copy of the Arbitration and Conciliation Act, 1996 as also the said Scheme for appointment of arbitrators, 1996 are made available herein for the information of the parties.