Arbitration & Conciliation Act, 1996

IntroductionAn Act covering:

domestic arbitration international commercial arbitration enforcement of foreign arbitral awardsconciliation

Modern concept of harmonious working partnership between the Court and Arbitration.

Has far reaching effect on reducing court litigation Gives more importance to Arbitration and

Conciliation by adding speed and economy to settlement of disputes.

Alternative Dispute Resolution (ADR)

Mechanism used across the world - effective, faster and less expensive.4 methods of ADR:Negotiation – unrecognizedMediation – unrecognizedConciliation – recognizedArbitration - recognized

Recognized by the Arbitration and Conciliation Act, 1996

Necessity of the Act

Shrinking Boundaries, Free trade & International Commerce have become global necessities.

Competition often leads to conflicts between entrepreneurs resulting in commercial disputes.

Growing strength and role of India in the global economy

Increasing FDI and other forms of collaboration -increasing disputes between Indian and foreign parties

Quick redressal to commercial disputes through private Arbitration.

Settlement of dispute in an expeditious, convenient, inexpensive and private manner so that they do not become the subject of future litigation between the parties.

Acts addressing ADR in IndiaThe law on arbitration in India was substantially

contained in three enactments, namely:

The Arbitration (Protocol & Convention) Act, 1937

The Arbitration Act, 1940 The Foreign Awards (Recognition and

Enforcement) Act, 1961.

The Arbitration & Conciliation Act, 1996An Act to consolidate and amend the law relating

to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto.

"Arbitration is the reference of dispute 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.”

Law Based on UNCITRAL Model Law The present Act is based on model law

drafted by United Nations Commission on International Trade Laws (UNCITRAL), both on domestic arbitration as well as international commercial arbitration, to provide uniformity and certainty to both categories of cases.

WHAT CAN BE REFERRED TO ARBITRATION

All disputes of a civil nature or quasi-civil nature which can be decided by a civil court can be referred to arbitration:

Relating to propertyRight to hold an office Compensation for non-fulfillment of a clause

in a contract Disputes in a partnership

Disputes excluded from the Arbitration ActThe law has given jurisdiction to determine certain matters to specified tribunal only; these cannot be referred to arbitration:

Matters involving questions about validity of a will.Relating to appointment of a guardian.Pertaining to criminal proceedingsRelating to Charitable TrustsWinding up of a companyMatters of divorce or restitution of conjugal rightsLunacy proceedingsDisputes arising from an illegal contractInsolvency matters, such as adjudication of a person as an

insolvent.Matters falling within the purview of the Competition Act.

Scheme of the ActThe Act is divided in to the following parts (a) Part I - Domestic arbitration. (b) Part II - Enforcement of foreign awards. (c) Part III - Conciliation procedures. (d) Part IV - Supplementary provisions.

Arbitration AgreementArbitration Agreement - an agreement by the

parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

Power to refer parties to arbitration when there is an arbitration agreement.

Arbitration Agreement Interim Measures by Court appointment of a guardian for a minor or person of

unsound mind for the purposes of arbitral proceedings

protection in respect of preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement

securing the amount in disputethe detention, preservation or inspection of any

property or thing which is the subject-matter of the dispute

interim injunction or the appointment of a receiver;Any other interim measure of protection as may

appear to the Court to be just and convenient

Appointment of ArbitratorAny person can be appointed as an arbitrator.Generally impartial and independent persons –C A’s, engineers, retired judges, advocates and

other professionals are preferred. Parties are free to determine the number of

arbitratorsNumber shall not be an even number. The arbitrator shall disclose in writing to the

parties anything that may give rise to justifiable doubts about his independence or impartiality.

Appointment of ArbitratorIf they are unable to agree- Each party will appoint one arbitrator and the

two appointed arbitrators will appoint the third arbitrator who will act as a presiding arbitrator.

If not appointed within 30 days, the party can request Chief Justice of High Court to appoint an arbitrator.

In case of international commercial dispute, the application for appointment of arbitrator has to be made to Chief Justice of India.

Termination of Arbitrator

Appointment of Arbitrator can be challenged only if

Circumstances exist that give rise to justifiable doubts as to his independence or impartiality

He does not possess the qualifications agreed to by the parties.

Termination of Arbitrator

The mandate 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.

where he withdraws from office for any reason; or by or pursuant to agreement of the parties.

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.

Conduct of Arbitral ProceedingsThe Arbitral Tribunal is not bound by Code of Civil

Procedure, 1908 or Indian Evidence Act, 1872. The parties to arbitration are free to agree on the

procedure to be followed by the Arbitral Tribunal.Law of limitation (1963) applicableFlexibility in respect of procedure, place & language.Submission of statement of claim & defense maybe

amended/ supplemented at any timeHearings & Written Proceedings – at the discretion of

the tribunal Can be oral at the request of either party

Settlements during Arbitration

Arbitral AwardThe decision of Arbitral Tribunal will be by majority

The arbitral award shall be in writing and signed by the members of the tribunal.

States the reasons for the award unless the parties have agreed that no reason for the award is to be given.

The award should be dated and place where it is made should be mentioned.

Copy of award given to each party.

Tribunal can make interim award also.

Arbitral Award - AppealAn arbitral award may be set aside by the Court only if;

The party furnishes proof of some incapacity the arbitration agreement is not valid under the law to which

the parties have subjected it the party 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

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

the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties

the arbitral award is in conflict with the public policy of India.

Cost of ArbitrationFees and expenses of arbitrators and witnesses, legal

fees and expenses, administration fees of the institution supervising the arbitration and other expenses.

Tribunal can decide the cost and share of each party. If parties refuse to pay the costs, the Arbitral

Tribunal may refuse to deliver its award; thus any party can approach Court.

The Court will ask for deposit from the parties and on such deposit, the award will be delivered by the Tribunal. Then Court will decide the costs of arbitration and shall pay the same to Arbitrators. Balance, if any, will be refunded to the party.

Intervention by CourtThe earlier arbitration law was that the party could

access court almost at any stage of arbitration. Now, approach to court has been drastically

curtailed.If an objection is raised by the party, the decision

on that objection can be given by Arbitral Tribunal itself & the arbitration proceedings are continued

The aggrieved party can approach Court only after Arbitral Award is made.

Appeal to court is now only on restricted grounds. Tribunal cannot be given unlimited and

uncontrolled powers and supervision of Courts cannot be totally eliminated.

ARBITRATION ACT HAS OVER-RIDING EFFECT 

ConciliationThe act makes provision for conciliation proceedings. In

conciliation proceedings:

There is no agreement for arbitration.

Conciliation can be done even if there is arbitration agreement.

The conciliator only brings parties together and tries to solve the dispute using his good offices.

The conciliator has no authority to give any award.

Helps parties in arriving at a mutually accepted settlement.

ConciliationIn such agreement they may draw and sign a

written settlement agreement. Duly signed by the conciliator

However after the settlement agreement is signed by both the parties and the conciliator, it has the same status and effect as if it is an arbitral award.

Conciliation is the amicable settlement of disputes between the parties, with the help of a conciliator.

Offer for ConciliationThe conciliation proceedings can start when one

of the parties makes a written request to other to conciliate, briefly identifying the dispute.

The conciliation can start only if other party accepts in writing the invitation to conciliate.

Unless there is written acceptance, conciliation cannot commence. If the other party does not reply within 30 days, the offer for conciliation can be treated as rejected

What Can Be Referred To ConciliationMatters of a –

Civil nature

Breach of contract

Disputes of movable or immovable property

What Cannot Be Referred To Conciliation

Matters of –

Criminal nature

Illegal transactions

Matrimonial matters like divorce suit etc.

Supplementary ProvisionsThe High Court has the power to make rules

under this act

Removal of difficulties by central Government through provisions made under the Act

Rules made by Central Government subject to approval by parliament

The present Act overrules the previous Acts

Supreme Court Judgment, Civil appeal under ‘Arbitration And Conciliation Act’ for setting aside of Foreign Award

Background CasesSatyam VGE

1) London Court of International Arbitration

2) United States District Court, Michigan

5) High Court of Andhra Pradesh

3) Cross Petition

4) 1st Addl. Chief Judge, Civil Court, Secunderabad

6) Appeal

International Commercial ArbitrationIt 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) a company or 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

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