Arbitration and Conciliation Act 1996 Explained

Legal Aspects of Business Unit 7
Sikkim Manipal University Page No. 151

Unit 7 Arbitration and Concil iation Act 1996
Structure:
7.1 Introduction
Objectives
7.2 Scheme of the Act
7.3 Objectives of the Act
7.4 Power of J udicial Authority to Refer Parties to Arbitration
7.5 Composition of Arbitral Tribunal
7.6 J urisdiction of Arbitral Tribunals
Self Assessment Questions I
7.7 Conduct of Arbitral Proceedings
7.8 Award
7.9 Conciliation
7.10 Mediation
7.11 Negotiation
Self Assessment Questions II
7.12 Summary
7.13 Terminal Questions
7.14 Answers to SAQs and TQs
7.1 Introduction
Purpose of Arbitration Act is to provide quick redressal to commercial
disputes by private Arbitration. Quick decision of any commercial dispute is
necessary for smooth functioning of business and industry. Internationally, it
is accepted that normally commercial disputes should be solved through
arbitration and not through normal judicial system. Hence, there is a need of
Alternate Dispute Resolution (ADR). There are four methods of ADR -
negotiation, mediation, conciliation and arbitration. 'Negotiation' is cheapest
and simplest method. If it does not work, mediation through a mediator can
be tried. If it does not work, conciliation and arbitration will be useful.
Arbitration Act makes provision for conciliation and arbitration as ADR
mechanisms. An arbitrator is basically a private judge appointed with
consent of both the parties. Object of arbitration is 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.
Objectives:
After studying this unit, you will be able to:
Explain the objectives of the Arbitration Act.
Explain the composition of Arbitral Tribunal.
Explain the conduct of Arbitral Proceedings.
7.2 Scheme of the Act:
The Act is divided into 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
(e) First Schedule - Convention on recognition and enforcement of foreign
arbitral award as per New York Convention
(f) Second Schedule - Protocol on Arbitration Clauses
(g) Third Schedule - Convention on the execution of foreign arbitral
awards as per Geneva Convention.
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.
Matters not referable to arbitration:
Certain matters which are not arbitrable are:
Suits for divorce or restitution of conjugal rights
Taxation
Non-payment of admitted liability
Criminal matters.
Arbitration- (The Arbitrator decides):
Arbitration is a dispute resolution process where the opposing parties select
or appoint an individual called an Arbitrator. Upon appointment, the
Arbitrator will arrange the process to hear and consider the evidence, review
arguments and afterwards will publish an award in which the items of
dispute are decided.
In some cases the Arbitrator can conduct the arbitration on documents
evidence only. When published the Arbitrator's decisions are final and
binding on the parties. It is rare for an arbitration to be appealed to the
courts. Arbitration may comprise a sole Arbitrator, or may be a panel of
Arbitrators.
Costs of the arbitration are disposed of in the Arbitrator's award, unless the
parties have some agreement to the contrary.
Arbitration is a settlement of dispute by the decision of one or more persons
called arbitrators. It is an arrangement for investigation and settlement of a
dispute between opposing parties by one or more unofficial persons chosen
by the parties. In arbitration some dispute is referred by the parties for
settlement to a tribunal of their own choosing. The dispute is not submitted
for decision to the ordinary courts but a domestic tribunal. It is thus a
method of settling the disputes in a quasi-judicial manner. The essence of
arbitration is that the arbitrator decides the case and his award is in the
nature of a judgement. Arbitration is a speedy and inexpensive method of
settling the disputes between the parties.
In lines with the international trend, the Government of India has also
enacted the Arbitration and Conciliation Act, 1996 and repealed the three
earlier enactments namely, the Arbitration (Protocol and Convention) Act,
1937; the Arbitration Act, 1940; and the Foreign Award (Recognition and
Enforcement) Act, 1961.
7.3 Objectives of the Act
The main objectives of the Act are as under:
i) To comprehensively cover international commercial arbitration and
conciliation as also domestic arbitration and conciliation.
ii) To make provision for an arbitral procedure which is fair, efficient and
capable of meeting the needs of the specific arbitration.
iii) To provide that the arbitral tribunal gives reasons for its arbitral award.
iv) To ensure that the arbitral tribunal remains with in the limit of
jurisdiction.
v) To minimize the supervisory role of courts in the arbitral process.
vi) To permit an arbitral tribunal to use mediation, conciliation or other
procedures during the arbitral proceedings to encourage settlement of
disputes.
vii) To provide that every final arbitral award is enforced in the same
manner as if it were a decree of the court.
viii) To provide that a settlement agreement reached by the parties as a
result of conciliation proceedings will have the same status and effect
as an arbitral award on agreed terms on the substance of the dispute
rendered by an arbitral tribunal.
ix) To provide that, for purposes of enforcement of foreign awards, every
arbitral award made in the country to which one of the two international
Conventions relating to foreign arbitral awards to which India is a party
applies, will be treated as a foreign award.
Arbitration Agreement: The foundation of arbitration is the arbitration
agreement between the parties to submit to arbitration all or certain disputes
which have arisen or which may arise between them. Thus, the provision of
arbitration can be made at the time of entering the contract itself, so that if
any dispute arises in future, the dispute can be referred to arbitrator as per
the agreement. It is also possible to refer a dispute to arbitration after the
dispute has arisen. Arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a separate agreement. The
agreement must be in writing and must be signed by both parties. The
arbitration agreement can be by exchange of letters, document, telex,
telegram etc [section 7].
Court must refer the matter to arbitration in some cases: If a party
approaches court despite the arbitration agreement, the other party can
raise objection. However, such objection must be raised before submitting
his first statement on the substance of dispute. Such objection must be
accompanied by the original arbitration agreement or its certified copy. On
such application the judicial authority shall refer the parties to arbitration.
Since the word used is shall, it is mandatory for judicial authority to refer
the matter to arbitration [Section 8]. However, once first statement to court is
already made by the opposite party, the matter has to continue in the court.
Once an application is made by other party for referring the matter to
arbitration, the arbitrator can continue with arbitration and even make an
arbitral award.
Essentials of Arbitration Agreement
1. It must be in writing [Section 7(3)]: Like the old law, the new law also
requires the arbitration agreement to be in writing. It also provides in
section 7(4) that an exchange of letters, telex, telegrams, or other
means of telecommunications can also provide a record of such an
agreement. Further, it is also provided that an exchange of claim and
defence in which the existence of an arbitration agreement is alleged by
one party and not denied by the other, will also amount to be an
arbitration agreement.
It is not necessary that such written agreement should be signed by the
parties. All that is necessary is that the parties should accept the terms
of an agreement reduced in writing. The naming of the arbitrator in the
arbitration agreement is not necessary. No particular form or formal
document is necessary.
2. It must have all the essential elements of a valid contract: An
arbitration agreement stands on the same footing as any other
agreement. Every person capable of entering into a contract may be a
party to an arbitration agreement. The terms of the agreement must be
definite and certain; if the terms are vague it is bad for indefiniteness.
3. The agreement must be to refer a dispute, present or future,
between the parties to arbitration: If there is no dispute, there can be
no right to demand arbitration. A dispute means an assertion of a right
by one party and repudiation thereof by another. A point as to which
there is no dispute cannot be referred to arbitration. The dispute may
relate to an act of commission or omission, for example, with holding a
certificate to which a person is entitled or refusal to register a transfer of
shares.
Under the present law, certain disputes such as matrimonial disputes,
criminal prosecution, questions relating to guardianship, questions about
validity of a will etc. or treated as not suitable for arbitration. Section
2(3) of the new Act maintains this position. Subject to this qualification
Section 7(1) of the new Act makes it permissible to enter into an
arbitration agreement in respect of a defined legal relationship whether
contractual or not.
4. An arbitration agreement may be in the form of an arbitration
clause in a contract or in the form of a separate agreement
[Section 7(2)].
Appointment of Arbitrator: The parties can agree on a procedure for
appointing the arbitrator or arbitrators. If 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 [Section 11(3)]. If
one of the parties does not appoint an arbitrator within 30 days, or if two
appointed arbitrators do not appoint third arbitrator within 30 days, the party
can request Chief J ustice to appoint an arbitrator [Section 11(4)]. The Chief
J ustice can authorize any person or institution to appoint an arbitrator.
[Some High Courts have authorized District J udge to appoint an arbitrator].
In case of international commercial dispute, the application for appointment
of arbitrator has to be made to Chief J ustice of India. In case of other
domestic disputes, application has to be made to Chief J ustice of High Court
within whose jurisdiction the parties are situated [Section 11(12)]
Challenge to Appointment of arbitrator: An arbitrator is expected to be
independent and impartial. If there are some circumstances due to which his
independence or impartiality can be challenged, he must disclose the
circumstances before his appointment [Section 12(1)]. Appointment of
Arbitrator can be challenged only if (a) Circumstances exist that give rise to
justifiable doubts as to his independence or impartiality (b) He does not
possess the qualifications agreed to by the parties [Section 12(3)].
Appointment of arbitrator cannot be challenged on any other ground. The
challenge to appointment has to be decided by the arbitrator himself. If he
does not accept the challenge, the proceedings can continue and the
arbitrator can make the arbitral award. However, in such case, application
for setting aside arbitral award can be made to Court. If the court agrees to
the challenge, the arbitral award can be set aside [Section 13(6)]. Thus,
even if the arbitrator does not accept the challenge to his appointment, the
other party cannot stall further arbitration proceedings by rushing to court.
The arbitration can continue and challenge can be made in Court only after
arbitral award is made.
Conduct of Arbitral Proceedings: The Arbitral Tribunal should treat the
parties equally and each party should be given full opportunity to present his
case [Section 18]. The Arbitral Tribunal is not bound by Code of Civil
Procedure, 1908 or Indian Evidence Act, 1872 [Section 19(1)]. The parties
to arbitration are free to agree on the procedure to be followed by the
Arbitral Tribunal. If the parties do not agree to the procedure, the procedure
will be as determined by the arbitral tribunal.
Law of Limitation Applicable: 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. If on that date, the claim is barred
under Limitation Act, the arbitration cannot continue [Section 43(2)]. If
Arbitration award is set aside by Court, time spent in arbitration will be
excluded for purpose of Limitation Act. So that case in court or fresh
arbitration can start.
Flexibility in respect of procedure, place and language: Arbitral Tribunal
has full powers to decide the procedure to be followed, unless parties agree
on the procedure to be followed [Section 19(3)]. The Tribunal also has
powers to determine the admissibility, relevance, materiality and weight of
any evidence [Section 19(4)]. Place of arbitration will be decided by mutual
agreement. However, if the parties do not agree to the place, the same will
be decided by tribunal [Section 20]. Similarly, language to be used in arbitral
proceedings can be mutually agreed. Otherwise, Arbitral Tribunal can
decide [Section 22].
Submission of statement of claim and defence: The claimant should
submit statement of claims, points of issue and relief or remedy sought. The
respondent shall state his defense in respect of these particulars. All
relevant documents must be submitted. Such claim or defense can be
amended or supplemented any time [section 23].
Hearings and Written Proceedings: After submission of documents and
defense, unless the parties agree otherwise, the Arbitral Tribunal can decide
whether there will be oral hearing or proceedings can be conducted on the
basis of documents and other materials. However, if one of the parties
requests the hearing shall be oral. Sufficient advance notice of hearing
should be given to both the parties [Section 24]. [Thus, unless one party
requests, oral hearing is not compulsory].
Settlement during Arbitration: It is permissible for parties to arrive at
mutual settlement even when arbitration is proceeding. In fact, even the
Tribunal can make efforts to encourage mutual settlement. If parties settle
the dispute by mutual agreement, the arbitration shall be terminated.
However, if both parties and the Arbitral Tribunal agree, the settlement can
be recorded in the form of an arbitral award on agreed terms. Such Arbitral
Award shall have the same force as any other Arbitral Award [Section 30].
Arbitral Award: Decision of Arbitral Tribunal is termed as 'Arbitral Award'.
Arbitrator can decide the dispute ex aequo et bono (In justice and in good
faith) if both the parties expressly authorize him to do so [Section 28(2)].
The decision of Arbitral Tribunal will be by majority. The arbitral award shall
be in writing and signed by the members of the tribunal [Section 29]. The
award must be in writing and signed by the members of Arbitral Tribunal
[Section 31(1)]. It must state the reasons for the award unless the parties
have agreed that no reason for the award is to be given [Section 31(3)]. The
award should be dated and place where it is made should be mentioned.
Copy of award should be given to each party. Tribunal can make interim
award also [Section 31(6)].
Cost of Arbitration: Cost of arbitration means reasonable cost relating to
fees and expenses of arbitrators and witnesses, legal fees and expenses,
administration fees of the institution supervising the arbitration and other
expenses in connection with arbitral proceedings. The tribunal can decide
the cost and share of each party [Section 31(8)]. If the parties refuse to pay
the costs, the Arbitral Tribunal may refuse to deliver its award. In such case,
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 [Section 39].
Intervention by Court - One of the major defects of earlier arbitration law
was that the party could access court almost at every stage of arbitration -
right from appointment of arbitrator to implementation of final award. Thus,
the defending party could approach court at various stages and stall the
proceedings. Now, approach to court has been drastically curtailed. In some
cases, if an objection is raised by the party, the decision on that objection
can be given by Arbitral Tribunal itself. After the decision, the arbitration
proceedings are continued and the aggrieved party can approach Court only
after Arbitral Award is made. Appeal to court is now only on restricted
grounds. Of course, Tribunal cannot be given unlimited and uncontrolled
powers and supervision of Courts cannot be totally eliminated.
Arbitration Act has Over-Riding Effect: Section 5 of Act clarifies that
notwithstanding anything contained in any other law for the time being in
force, in matters governed by the Act, the judicial authority can intervene
only as provided in this Act and not under any other Act.
Modes of Arbitration
(a) Arbitration without the intervention of the court. [Sec.3 to 19]
(b) Arbitration with the intervention of the court when there is no suit
pending [Sec.20]
(c) Arbitration with the intervention of the court where a suit is pending.
[Sec.21 to 25]
7.4 Power of Judicial Authority to Refer Parties to Arbitration
A judicial authority before which an action is brought in a matter which is the
subject of an arbitration agreement shall refer the parties to arbitration if a
party so applies. The party must, however, apply before submitting his first
statement on the substance of the dispute [Sec.8(1)1].
Further, the application shall not be entertained unless it is accompanied by
the original arbitration agreement or a duly certified copy there of. [Sec. 8(2)]
Notwithstanding that an application has been made and that the issue is
pending before the judicial authority, an arbitration may be commenced or
continued and in arbitral award made, [Sec.8(3)].
In order that the judicial authority may refer the parties to arbitration under
section 8(1), the following conditions must be satisfied.
1. There must be a valid and subsisting agreement between the parties.
2. The matter about which a suit has been filed should be within the scope
of the arbitration agreement.
3. The party asking for the stay must have applied at the earliest
opportunity, i.e., before submitting his first statement on the substance
of the dispute.
4. The application must be made to the judicial authority before which the
proceedings are pending.
5. The application must be accompanied by the original arbitration
agreement or by a duly certified copy thereof.
6. The judicial authority must be satisfied that there is no sufficient reason
why the matter should not be referred.
This is a very important provision inasmuch as if any party to the Arbitration
Agreement brings an action before the Court ignoring the Arbitration
Agreement, the other party can move an application before the court along
with original arbitration Agreement or a duly certified copy of agreement but
before submitting his first statement on the substance of the dispute
otherwise the party will lost its right of objecting the matter to be tried before
the Court. Above all, the most important provision is that the arbitration
proceedings can continue or proceed further despite the fact that one of the
parties has moved a petition before the court.
Under the previous old Act, there was no such specific provision and
consequently, in the past, the arbitration proceedings remained in
abeyance.
Who may refer to Arbitration?
Capacity to make reference is co-extensive with capacity to contract. Every
person capable of entering into the contract may be a party to a submission.
Therefore, he who cannot contract cannot make a submission. In the case
of a person whose capacity to contract is restricted, his power of making
submission is in the same manner also limited. The capacity of various
persons to submit disputes to arbitration is discussed below:
1. Minor: As a minor is not competent to enter into a contract there cannot
be a valid submission to arbitration by him. Where a minor joins a reference
to arbitration the award is not void, it is voidable at the option of the minor
but the major parties are bound by it. A guardian can refer a dispute to
arbitration only with the permission of the court for the benefit of a minor in
good faith.
2. Manager of a Joint Hindu Family: The manager of a J oint Hindu Family
can refer disputes to arbitration and the award, in the absence of a fraud,
will bind the other members of the family including the minors. Thus, a
manager in a J oint Hindu Family has power to refer to arbitration disputes
relating to family property provided the reference is for the benefit of the
family.
3. Agent: An agent who is duly authorized may enter into an arbitration
agreement. Such an agent on reference may bind his principal.
4. Official assignee (in case of bankrupts estate): The Official Assignee or
Receiver is given the power to refer any dispute to arbitration and
compromise all debts, claims and liabilities on such terms as may be agreed
upon.
5. Partner: A partner cannot bind his co-partners by a reference to
arbitration. The implied authority of a partner does not, in the absence of
any usage or custom of trade, empower him to submit dispute relating to the
business of the firm to arbitration.
Subject-matter of Reference
All matters which form the subject of civil litigation affecting private rights
may be referred to arbitration. In other words, all disputes between the
parties relating to private rights of which the civil court may take cognizance
of, may be referred to arbitration. Thus, matters which are purely criminal
and give rise to no civil remedy cannot be referred to arbitration. Similarly,
matters of public right cannot be decided by arbitration.
What can be referred?
1) Disputes concerning movable property;
2) Disputes arising out of breaches of contract;
3) Disputes relating to breach of promise of marriage;
4) Questions of title to immovable property;
5) Questions of law or fact;
6) Disputes regarding, compliment, dignity, trespass, etc.
7) Time barred claims;
8) Questions as to whether judgement has been properly obtained or not.
9) Questions relating to the past or future maintenance of a widow.
What cannot be referred?
1. A claim for custody of wife, petition for restitution of conjugal rights,
divorce, etc;
2. Insolvency proceedings;
3. Claims arising out of illegal transactions;
4. Questions relating to public charities and charitable trusts;
5. Cases relating to public nuisance;
6. Execution proceedings;
7. Proceedings relating to the appointment of a guardian to a minor;
8. Questions relating to offences affecting public at large;
9. Lunacy proceedings;
10. Questions relating to the genuineness of a will;
11. Matters of a criminal nature.
7.5 Composition of Arbitral Tribunal
An arbitrator is a person selected by mutual consent of the parties to settle
the matters in controversy between them. A person appointed to adjudicate
the difference between two or more parties is called an arbitrator. An
arbitrator is a tribunal chosen by the consent of the parties. The person who
is so appointed must also give his consent to act as an arbitrator.
Number of Arbitrators (Section 10)
The parties are free to determine the number of arbitrators provided that
such number shall not be an even number. If the parties fail to make the
determination the arbitral tribunal shall consist of a sole arbitrator.
Under the old and new law, the mode of appointment of arbitrators and their
number is left to the agreement by the parties. But unlike old law, the new
law envisages only odd number of arbitrators. This will do away with the
system of having two arbitrators and one umpire prevalent under the old
law. Section 10 of the new Act provides that there shall be only a sole
arbitrator, where the parties do not specify the number of arbitrators.
Appointment of Arbitrators (Section 11)
A person of any nationality may be an arbitrator, unless otherwise agreed by
the parties. The parties are free to agree on a procedure for appointing the
arbitrator or arbitrators.
Presiding arbitrator. Failing any agreement on a procedure, 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(3)].
If the appointment procedure agreed on by the parties applies and:-
(a) A party fails to appoint an arbitrator within thirty days from the receipt
of a request to do so from the other party; or
(b) The two appointed arbitrators fail to agree on the third arbitrator within
thirty days from the date of their appointment,
the appointment shall be made, upon request of a party, by the Chief J ustice
or any person or institution designated by him. [Sec.11(4)].
Failure of Parties to agree on procedure: It may so happen that the parties
may fail to agree on the procedure for the appointment of the arbitrator or
arbitrators. In such a case, 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, upon request of
a party, by the Chief J ustice or any person or institution designated by him
[Sec.11(5)].
Sometimes, 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.
In such a case, a party may request the Chief J ustice or any person or
institution designated by him to take the necessary measure, unless the
agreement on the appointment procedure provides other means for securing
the appointment. [Sec. 11(6)].
A decision on a matter entrusted to the Chief J ustice or the person or
institution designated by him is final. [Sec.11(7)].
Qualification for the appointment of arbitrator
The Chief J ustice or the person or institution designated by him, in
appointing an arbitrator, shall have due regard to
a) Any qualifications required of the arbitrator by the agreement of the
parties; and
b) Other considerations as the likely to secure the appointment of an
independent and impartial arbitrator. [Sec. 11(8)]
In the case of appointment of sole or third arbitrator in an international
commercial arbitration, the Chief J ustice of India or Inc. person or institution
designated by him may appoint an arbitrator of a nationality other than the
nationalities of the parties where the parties belong to different nationalities.
[Sec. 11(9)]
The Chief J ustice may make such scheme as he may deem appropriate for
dealing with above matters [Sec. 11(10)].
7.6 Jurisdiction of Arbitral Tribunals
Competence of arbitral tribunal to rule on its jurisdiction (Section 16)
The arbitral tribunal may rule on its own jurisdiction, including ruling on any
objections with respect to the existence or validity of the arbitration
agreement for this purpose:-
a) An arbitration clause which forms part of a 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 by the law it self the invalidity of the arbitration clause
[Sec. 16(1)].
Thus, the New Act confers competence on the arbitral tribunal to decide on
its own jurisdiction and to consider objections with respect to the existence
or validity of the arbitration agreement.
A plea that the arbitral tribunal does not have 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 pica merely because that he has
appointed, or participated in the appointment of, an arbitrator [Sec. 16(2)].
A plea that the arbitral tribunal is exceeding the scope of its authority shall
be raised as soon as the matter alleged to be beyond the scope of its
authority is raised during the arbitral proceedings [Sec, 16(3)].
The arbitral tribunal may, in these cases admit a later plea if it considers the
delay justified [Sec16(4)].
The arbitral tribunal shall decide on a plea referred to above and, where the
arbitral tribunal takes a decision rejection the plea, continue with the arbitral
proceedings and make an arbitral award [Sec. 16(5)].
A party aggrieved by such an arbitral award my make an application for
setting aside such an arbitral award in accordance with Section 34 [Sec.
16(6)].
Interim measures ordered by arbitral tribunal (Section 17)
Unless otherwise agreed by the parties, the arbitral tribunal may, at the
request of a 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. Further, the arbitral tribunal may require a party to provide
appropriate security in connection with a measure so ordered.
Section 17 provides for the taking of interim measures in respect of the
subject-matter of the dispute by the arbitral tribunal. However, the parties
may by agreement exclude the exercise of such a power by the arbitral
tribunal.
The Arbitration Act, 1940, did not confer any specific powers on arbitrators
to take interim measures. It was, however, open on the parties to confer
such powers on the arbitrator.
Self Assessment Questions I
1. Arbitration is a process where the opposing parties select or
appoint an individual called an .
2. Costs of the arbitration are disposed of in the ..
3. Arbitration is a speedy and inexpensive method of settling..
4. The foundation of arbitration is the ..between the parties to
submit to arbitration all or certain disputes which have arisen or which
may arise between them.
5. A .means an assertion of a right by one party and repudiation
thereof by another.
7.7 Conduct of Arbitral Proceedings
Equal treatment of Parties (Section 18)
The parties shall be treated with equality and each party shall be given a full
opportunity to present his case. Thus, section 18 laws down two obligations
on the arbitral tribunal i.e. to treat the party with equality and to give full
opportunity to each party to present his case. It constitutes a fundamental
principle which is applicable to entire proceedings. The principle of equality
and full opportunity to present the case should be observed by the parties
also, when laying down any rules of procedure. An agreed procedure which
violates the fundamental principle of equality and grant of opportunity to be
heard, is null and void and an award passed in violation of this principle can
be set aside.
Determination of rules of Procedure (Section 19)
The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908
or the Indian Evidence Act, 1872.
The arbitral tribunal is not bound to follow the procedure as followed by a
Court. However, the arbitral tribunal is to observe fundamental principles
underlying the Code of Civil Procedure and the Evidence Act. The
procedure adopted by arbitral tribunal should be according to the principles
of natural justice.
Section 19(2) provides that subject to provisions of the Part-I, the parties are
free to agree on a procedure to be followed by the arbitral tribunal in
conducting its proceedings. Parties generally incorporate arbitration rules of
a particular institution by reference to the same in the agreement. The
arbitral tribunal does not have any discretion where any such rule has been
provided for in the agreement.
The arbitral tribunal may conduct the proceeding in the manner it considers
appropriate, but such power is subject to two exceptions mentioned below:-
1) The arbitral tribunal cannot conduct the proceedings in a manner which
is in violation of a mandatory provision of the law.
2) The arbitral-tribunal cannot conduct proceedings in a manner which is in
violation of the procedure agreed by the parties if any.
However, if there were no agreed rules by the parties, the arbitral tribunal
has power to determine the admissibility, relevance, materiality and weight
of any evidence and make decision in the manner it considers appropriate
[Sec. 19(4)].
Place of Arbitration (Section 20)
Section 20(1) provides that parties are free to agree on the place of
arbitration. Where parties have not agreed on the place of arbitration the
arbitral tribunal has to determine the place of arbitration having regard to the
circumstances of the case, including the convenience of the parties. Section
31(4) provides, A mandatory requirement and obligation on the arbitral
tribunal to state the place of arbitration as determined in accordance with
section 20 in the award and award is then deemed to have been made at
that place.
The arbitral 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,
goods or other property. [Sec.20(1)].
Place of arbitration in arbitration other than international commercial
arbitration i.e., in domestic arbitration does not pose any problem. Parties
may agree on the place of arbitration anywhere in India. But in international
commercial arbitrations, place of arbitration has legal implications in terms
of law applicable to arbitration.
Commencement of Arbitral Proceedings (Section 21)
Section 21 gives freedom to the parties to agree on the date of
commencement of arbitral proceedings. The arbitral proceedings, subject to
agreement of party, in respect of a particular dispute, commence on the
date, on which a request for the dispute to be referred to arbitration is
received by the respondent. A request for reference of disputes to
arbitration is different from request for the appointment of arbitrator of
constitution or arbitral tribunal.
Language (Section 22)
Section 22 gives freedom to parties to agree upon the language or
languages to be used in the arbitral proceedings. The arbitral tribunal,
subject to an agreement of parties, has power to determine the language or
languages to be used in the arbitral proceedings. The arbitral tribunal may
ask for translation of documentary evidence into the agreed language.
Statement of claim and defence (Section 23)
Section 23 is a mandatory provision. The claimant should state the facts
supporting his claim, the points at issue and the relief or remedies sought
and the respondent should state his defence in respect of these particulars.
However, the parties have been given freedom to agree on required
elements of those statements. The parties have also been given freedom to
agree upon the period of time for submission of those statements. The
arbitral tribunal has power to determine the period of time for submission of
these statements where parties have not agreed on the same [Section
23(1)].
The statement Contemplated by section 23 need not be in writing.
The parties may submit with their statements all documents they consider to
be relevant or may add a reference to documents or other evidence they will
submit [Sec. 23(2)].
The parties may agree to amend or supplement their statements during the
course of arbitral proceedings. The arbitral tribunal has exclusive discretion
to restrict supplementary claim and defences having regard to the delay in
making it [Sec. 23(3)].
Hearings and written proceedings (Section 24)
Unless otherwise agreed by the parties, the arbitral tribunal 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, the arbitral tribunal 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.
[Sec. 24(1)].
Notice. The parties shall be given sufficient advance notice of any hearing
and of any meeting of the arbitral tribunal for the purposes of inspection of
documents, goods or other property. [Sec. 24(2)].
Communication. All statements, documents or other information supplied
to, or applications made to the arbitral tribunal by one party shall be
communicated to the other party and any expert report or evidentiary
document, on which the arbitral tribunal may rely in making its decision shall
be communicated to the parties [Sec. 24(3)].
Receipt of written Communications (Section 3). Unless otherwise agreed
by the parties:-
(a) Any written communication is deemed to have been received if it is
delivered to the addressee personally or at his place of business,
habitual residence or mailing address; and
(b) If none of the places referred to in clause (a) can be found after
making a reasonable inquiry, a written communication is deemed to
have been received if it is sent to the addresses last known place of
the business, habitual residence or mailing address by registered letter
or by any other means which provides a record of the attempt to
deliver it. [Sec.3(1)].
The communication is deemed to have been received on the day it is so
delivered [Sec.3(2)].
Default of a party (Section 25)
Section 25 of the Act provides that subject to an agreement between the
parties, where, without showing sufficient cause, the claimant falls to
communicate his statement of claim within the agreed period, the arbitration
proceedings shall be terminated by the arbitrator. Similarly where the
respondent falls to communicate his statement of defence within the
predetermined period, the arbitrator shall continue the proceedings without
treating such failure, in itself, as an admission of the claimants allegations.
Further, when a party fails to appear at an oral hearing or to produce
documentary evidence the arbitrator can proceed and pronounce the award
on the basis of evidence otherwise available.
Expert appointed by arbitral tribunal (Section 26)
Section 26(1) of the Act provides for appointment of experts subject to
agreement between parties. It also provides for submission of relevant
information to experts by the parties. The expert should also make himself
available for cross-examination by parties, if necessary.
Court assistance in taking evidence (Section 27)
Application:
The arbitral tribunal, or a party with the approval of the arbitral tribunal, may
apply to the Court for assistance in taking evidence. [Sec. 27(1)].
Particulars of application: The application shall specify
a) The names and addresses of the parties and the arbitrators;
b) The general nature of the claim and the relief sought;
c) The evidence to be obtained, in particular
i) The name and address of any person to be heard as witness or
expert witness and a statement of the subject-matter of the
testimony required;
ii) The description of any document to be produced or property to be
inspected. [Sec.27(2)].
Order of Court. 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 arbitral tribunal. Further, the Court may, while
making an order issue the same processes to 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 arbitral tribunal during the conduct of arbitral proceedings, shall be
subject to the like disadvantages, penalties and punishments by order the
Court on the representation of the arbitral tribunal as they would incur for the
like offences in suits tried before the Court.
In this Section the expression Processes includes summonses and
commissions for the examination of witnesses and summonses to produce
documents.
It may be noted that the arbitral tribunal does not have coercive power to
issue processes to witnesses and other production of documents in the
possession of a third party.
Rules applicable to substance of dispute (Section 28)
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.
Further, the arbitral tribunal shall decide exaeguo et bono (according to
equity and conscience) or as amiable compositeur) (authorized to abate
something of the strictness of the law in favour of natural equity) only if the
parties have expressed authorized it to do so.
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 transactions.
Decisions making by Panel of Arbitrators (Section 29)
Unless otherwise agreed by the parties, in arbitral proceedings with more
than one arbitrator, any decision of the arbitral natural shall be made by a
majority of all its members.
However, if authorisd by the parties or all the members of the arbitral
tribunal, questions of procedure may be decided by the presiding arbitrator.
Settlement (Section 30)
An arbitral tribunal may encourage settlement of the dispute, in spite of an
arbitration agreement. It may also, with the agreement of the parties, use
mediation, conciliation or other procedures at any time during the arbitral
proceedings to encourage settlement. [Sec.30(1)].
If, during arbitral proceedings, the parties settle the dispute, the arbitral
tribunal shall terminate the proceedings and, if requested by the parties and
not objected to by the arbitral tribunal, record the settlement in the form of
an arbitral award on agreed terms. [Sec.30(2)].
An arbitral award on agreed terms shall be made in accordance with Section
31 and shall state that it is an arbitral award. [Sec. 30(3)].
An arbitral award on agreed terms shall have the same status and effect as
any other arbitral award on the substance of the dispute. [Sec. 30(4)].
Section 30 of the Act allows arbitral tribunal to resort to mediation,
conciliation or other procedures for settlement of the disputes, during the
arbitration proceedings. The conciliation as envisaged in this section is
different from the conciliation that has been provided under sections 61-81
of the Act. The conciliation under Part III (Sections 61-81) is separate and
independent proceedings as against informed and flexible proceedings
under this section.
Termination of Proceedings (Section 32)
The arbitral proceedings shall be terminated by the final arbitral award. [Sec.
32(1)]. It shall also be terminated by an order of the arbitral tribunal where
a) The claimant withdraws his claim, unless the respondent objects to the
order and the arbitral tribunal recognizes a legitimate interest on his part
in obtaining a final settlement of the dispute.
b) The parties agree on the termination of the proceedings, or
c) The arbitral tribunal finds that the continuation of the proceedings has for
any other reason become unnecessary or impossible. [Sec. 32(2)]
The mandate of the arbitral tribunal shall terminate the termination of the
arbitral proceedings [Sec.32(3)].
7.8 Award
Award means an arbitral award. It is a final decision or judgement of the
arbitral tribunal on all matters referred to it. An award in order to be valid
must be final, certain and must decide all the matters referred to. An award
by the arbitrator is as binding in its nature as the judgement of a court.
Arbitral award includes an interim award
There are two types of decisions to be made by the arbitral tribunal i.e.
decision on the merits of the dispute and decision on questions of
procedure. Decision on merits of dispute is to be made by the, majority of
members of the arbitral tribunal but question of procedure can be decided
by the presiding arbitrator, if authorised by the parties or all members of the
arbitral tribunal. In the absence of such authorisation by the parties or other
members of the tribunal, the decision on question of procedure is also to be
made by majority of members of the arbitral tribunal. In the absence of such
authorisation by the parties or other members of the tribunal, the decision on
question of procedure is also to be made by majority of members of the
arbitral tribunal. The presiding arbitrator has not been given any special
power and he acts like any other arbitrator. All arbitrators have been given
equal power irrespective of mode of appointment.
Essentials of an Arbitral Award
Section 31 deals with the form and contents of the arbitral award. The
provisions of Section 31 are discussed in the form of essentials which are as
under:
1. An arbitration agreement is required to be in writing. Similarly, a
reference to arbitration and award is also required to be made in writing.
The arbitral award is required to be made on stamp paper of prescribed
value. An oral decision is not an award under the law.
2. The award is to be signed by the members of the arbitral tribunal.
However, the signatures of majority of all the members of the tribunal
are sufficient if the reason for any omitted signature is stated.
3. Unless the agreement provides otherwise, the arbitrator must give
reasons for the award. Thus, the making of an award is a rational
process which is accentuated by recording the reasons. However, there
are two exceptions where award without reasons is valid i.e.
(a) Where the arbitration agreement expressly provides that no
reasons are to be given, or
(b) Where the award has been under section 30 of the new Act i.e.
where the parties settled the dispute and the arbitral tribunal has
recorded the settlement in the form of an arbitral award on agreed
terms.
4. The award should be dated i.e. the date of the making of the award
should be mentioned in the award.
5. The arbitral tribunal shall state the place of arbitration in the award.
6. The arbitral tribunal may include in the sum for which award is made,
interest up to the date of award and also a direction regarding future
interest. The rate of interest shall be eighteen per cent.
7. The award may also include decisions and directions of the arbitrator
regarding the cost of the arbitration.
8. After the award is made, a signed copy should be delivered to each
party for appropriate action.
9. 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.
Finality of Arbitral Awards (Section 35)
An arbitral award shall be final and binding on the parties and persons
claiming under them respectively. Now, under the new Act, by virtue of
section 35 of the Act, the award made by the Arbitrator shall be final and
binding on the parties itself and shall be decree without being made a
decree by the court.
7.9 Conciliation (Section 61 to 81)
In conciliation proceedings, there is no agreement for arbitration. In fact,
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. He only
helps parties in arriving at a mutually accepted settlement. After such
agreement they may draw and sign a written settlement agreement. It will be
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.
Conciliation is a less frequently used form of ADR, and can be described as
similar to mediation. The Conciliator's role is to guide the parties to a
settlement.
The parties must decide in advance whether they will be bound by the
Conciliator's recommendations for settlement.
The parties generally share equally in the cost of the conciliation.
Offer for Conciliation: The 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 [Section 62]. All matters of a civil
nature or breach of contract or disputes of movable or immovable property
can be referred to conciliation. However, matters of criminal nature, illegal
transactions, matrimonial matters like divorce suit etc. cannot be referred to
conciliation.
The new Act has added new Chapter containing sections from 61 to 81
which deal with Conciliation proceedings to resolve the disputes. The New
Act provides a detailed statutory framework for the conduct of independent
conciliation proceedings outside the court. It also encourages the arbitral
tribunals to use mediation, conciliation or other Alternative Dispute
Resolution (ADR) procedure during the arbitral proceedings to encourage
settlement of disputes. It is based on the Conciliation Rules adopted by the
UNCITRAL in 1980, which were conceived primarily in the context of dispute
resolution in international commercial relations.
Conciliation is an informal process in which the conciliator (the third party)
tries to bring the disputants to agreement. He does this by lowering
tensions, improving communications, exploring potential solutions and
bringing about a negotiated settlement.
Conciliation is a philanthropic concept of resolving disputes through
mediation and cannot be reduced to any specific definition. The dispute
should arise within legal relationship whether contractual or not and to all
proceedings relating thereto, but excludes all those disputes which are not
required to be submitted to conciliation by virtue of any other law for the time
being in enforce.
The difference between conciliation and arbitration is that in conciliation the
attitude is win-win as against the attitude of win-lose in case of
arbitration.
Conciliator tries to bring the parties together so that they can discuss their
disputes and resolve and hence there is no award as such from the
conciliator, whereas in the case of arbitrator, parties are required to give
their own logic and arguments and after hearing both the parties the
arbitrator gives the award.
Role of the conciliator is difficult than that of arbitrators and hence the
conciliator should be a man of integrity, trust, confidence and above board
so that parties should have total confidence in his impartiality.
Conciliation is optional at present in the Act. But incase parties have agreed
to resolve the disputes through Conciliation, they have to follow the
mandatory provisions contained in sections 61 to 81. These sections
provide application and scope, commencement of conciliation proceedings,
number of conciliators and their appointment, procedures for conducting the
conciliation proceedings, roles of the conciliators, etc.
Commencement of Conciliation proceedings (Section 62)
The party initiating conciliation shall send to the other party a written
invitation to conciliate under this Part, briefly identifying the subject of the
dispute. [Sec. 62(1)].
Conciliation proceedings shall commence when the other party accepts in
writing the invitation to conciliate. [Sec. 62(2)].
If the other party rejects the invitation, there will be no conciliation
proceedings. [Sec. 62(3)]
Where the party initiating conciliation does not receive a reply within thirty
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. [Sec. 62(4)].
Number of Conciliators (Section 63)
There shall be 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.
Appointment of Conciliators (Section 64)
In conciliation proceedings with one conciliators, the parties may agree on
the name of a sole conciliator. In conciliation proceedings with two
conciliators, 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. [Sec.64(1)].
(2) 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 conciliators; or
(b) The parties may agree that the appointment of one or more
conciliators be made directly by such an institution or person.
However, 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 a sole or
third conciliator, shall take into account the advisability of
appointing a conciliator of a nationality other than the nationalities
of the parties. [Sec. 64(2)].
The conciliator is not bound by the Code of Civil Procedure, 1908,
or the Indian Evidence Act, 1872. (Section 66).
Submission of statement to Conciliator (Section 65)
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. [Sec.65(1)].
The conciliator may request each party to submit to him a 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, documents and
other evidence to the other party. [Sec. 65(2)].
At any stage of the conciliation proceedings the conciliator may request a
party to submit to him such additional information as he deems appropriate.
[Sec. 65(3)].
Role of Conciliator (Section 67)
The conciliator shall assist the parties in an independent and impartial
manner in their attempt to reach an amicable settlement of their dispute.
[Sec. 67(1)].
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 the trade concerned and the
circumstances surrounding the dispute, including any previous business
practices between the parties. [Sec. 67(2)].
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
statement of the dispute. [Sec. 67(3)].
The conciliator may, at any stage of the conciliation proceedings, make
proposals for a settlement of the dispute. Such proposals need not be in
Writing and need not be accompanied by a statement of the reasons
therefore. [Sec. 67(4)].
Administrative assistance: 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)
Communication between Conciliator and parties (Section 69)
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.
Disclosure of information (Section 70)
When the conciliator receives factual information concerning the dispute
from a party, he shall disclose the substance of that to present any
explanation which he considers appropriate. However, when a party gives
any information to the conciliator subject to a specific condition that it be
kept confidential, the conciliator shall not disclose that information to the
other party.
Co-operation of the Parties with Conciliator (Section 71)
The parties shall in good faith co-operate with the conciliator, and in
particular, shall endeavour to comply with requests by the conciliator to
submit written materials, provide evidence and attend meetings.
Suggestion by parties for settlement of dispute (Section 72)
Each party may, on his own initiative or at the invitation of the conciliator,
submit to the conciliator suggestions for the settlement of the dispute.
Confidentiality (Section 75)
The confidentiality principle applies to all persons who have access to
matters relating to the conciliation proceedings. The conciliator and the
parties are under obligation to keep all matters relating to conciliation
proceedings confidential, whether it has resulted in a settlement agreement
or not. The law provides that notwithstanding anything contained in any
other law, the principle of confidentiality shall be maintained by the parties
as well as the conciliator except where its disclosure is necessary for parties
for the implementation and enforcement of the settlement agreement.
Settlement Agreement (Section 73)
When it appears to the conciliator that there exists an element of a
settlement which may be acceptable to the parties, he shall formulate the
terms of a possible settlement and submit them to the parties for their
observations. After receiving the observation of the parties, the conciliator
may reformulate the terms of a possible settlement in the light of such
observations [Sec. 73(1)].
If the parties reach agreement on a settlement of the dispute, they may draw
up and sign a written settlement agreement [Sec. 73(2)].
When the parties sign the settlement agreement, it shall be final and binding
on the parties and persons claiming under them respectively [Sec. 73(3)].
The conciliator shall authenticate the settlement agreement and furnish a
copy thereof to each of the parties [Sec. 73(4)].
Status and effect of settlement agreement (Section 74)
A settlement agreement will have the same status and effect as if it is an
arbitral award on agreed terms. A settlement reached after the conclusion
of the conciliation proceedings will also be enforceable like a decree of
court.
Termination of Conciliation Proceedings:
The conciliation proceedings shall be terminated
(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 of 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.
Since conciliation is a consensual proceeding, it is entirely dependent on the
continued goodwill of the parties and could be terminated by the parties at
any time before the signing of the settlement agreement.
However, parties cannot initiate any arbitral or judicial proceedings, pending
conciliation proceedings, unless it is necessary to protect the rights of the
parties. (Section 77)
Costs (Section 78)
Upon termination of the conciliation proceedings, the conciliator shall fix the
costs of the conciliation and give written notice thereof to the parties.
Costs means reasonable costs relating to
(a) The fee and expenses of the conciliator and witnesses requested by
the conciliator with the consent of the parties;
(b) Any expert advice requested by the conciliator with the consent of the
parties;
(c) Any assistance provided pursuant to clause (b) of sub-section (2) of
Section 64 and Section 68;
(d) 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.
Deposits (Section 79)
According to Section 79, before initiating the proceedings the conciliator
may ask the parties to deposit a particular amount as he think fit as cost of
proceeding. He may, during the proceedings also ask the parties to deposit
supplement amount. This section empowers the conciliator to suspend
proceedings, if the amount is not deposited by the parties within 30 days.
Similarly, conciliator is under obligation to render accounts at the termination
of proceedings and return unspent amount to the parties.
Role of Conciliator in Other Proceedings (Section 80)
Unless otherwise agreed by the parties:
(a) 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;
(b) The conciliator shall not be presented by the parties as a witness in
any arbitral or judicial proceedings.
However, the parties by agreement can do so.
Admissibility or evidence in other proceedings (Section 81)
The parties shall not rely on or introduce as evidence in arbitral or judicial
proceedings, whether or not such proceedings relate to the dispute that is
the subject of the conciliation proceedings:-
(a) View expressed or suggestions made by the other party in respect of a
possible settlement of the dispute.
(b) Admissions made by the other party in the course of the conciliation
proceedings;
(c) Proposals made by the conciliator;
(d) The fact that other party had indicated his willingness to accept a
proposal for settlement made by the conciliator.
7.10 Mediation - (The Parties decide):
A dispute resolution process in which the parties freely choose to participate
and any agreements reached to settle disputes is done solely by the parties,
without interference. The Mediator is selected by the parties and once
selected, the Mediator will arrange the mediation process. The Mediator
makes no decisions, instead he/she acts as a facilitator only to assist the
parties to understand the dispute, provide structured discussion and to help
the parties reach a dispute settlement agreement.
If the parties can't reach a settlement agreement, they are free to pursue
other options. The parties generally decide in advance how they will
contribute to the cost of the mediation. Mediation is a very important form of
ADR, particularly if the parties wish to preserve their relationship.
7.11 Negotiation
Negotiation is a less structured form of ADR. The facilitator's role is to keep
the parties talking and bargaining. The parties may be individuals or teams.
The facilitator keeps record of party positions, and points of agreement they
reach as discussions proceed.
The process can be lengthy, as in labour or sports negotiation. The
facilitator will prepare a memorandum of agreement containing all of the
points agreed.
The parties can formalize the memorandum of agreement by inserting a
condition that will be binding. The parties generally share equally in the cost.
On any matters unresolved, the parties are free to pursue other options.
Self Assessment Questions II
State whether the following statements are True or False:
1. The arbitral tribunal is bound to follow the procedure as followed by a
Court.
2. The arbitral tribunal has coercive power to issue processes to witnesses
and other production of documents in the possession of a third party.
3. An arbitral tribunal may encourage settlement of the dispute, in spite of
an arbitration agreement.
4. The arbitral proceedings shall be terminated by the final arbitral award.
5. An arbitration agreement is required to be in writing.
6. Conciliation cannot be done if there is arbitration agreement.
7.12 Summary
Arbitration is a dispute resolution process where the opposing parties
select or appoint an individual called an Arbitrator.
Arbitration is a settlement of dispute by the decision of one or more
persons called arbitrators.
Arbitration may comprise a sole Arbitrator, or may be a panel of
Arbitrators.
In lines with the international trend, the Government of India has also
enacted the Arbitration and Conciliation Act, 1996.
The foundation of arbitration is the arbitration agreement between the
parties to submit to arbitration all or certain disputes which have arisen
or which may arise between them.
The arbitration agreement must be in writing.
A point as to which there is no dispute cannot be referred to arbitration.
Decision of Arbitral Tribunal is termed as 'Arbitral Award'.
The arbitral award shall be in writing and signed by the members of the
tribunal.
An arbitrator is a person selected by mutual consent of the parties to
settle the matters in controversy between them.
An arbitral tribunal may encourage settlement of the dispute, in spite of
an arbitration agreement.
7.13 Terminal Questions
1. What are the objectives of the Arbitration and Conciliation Act, 1996?
2. Explain the essentials of an arbitration agreement.
3. What matters can and cannot be referred to arbitration?
4. Describe the procedure for the appointment of arbitrators.
5. What are the essentials of an Arbitral Award?
6. Who is a conciliator? What can be the number of conciliators?
7. What is a settlement agreement? Discuss the status and effect of such
an agreement.
7.14 Answers to SAQs and TQs
SAQs I
1. Dispute resolution; Arbitrator
2. Arbitrator's award
3. Disputes between the parties.
4. Arbitration agreement
5. Dispute
SAQs II
1- False
2- False
3- True
4- True
5- True
6- False
Answers to TQs:
1. Refer to 7.3
2. Refer to 7.3
3. Refer to 7.4
4. Refer to 7.5
5. Refer to 7.8
6. Refer to 7.9
7. Refer to 7.9

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Legal Aspects of Business Unit 7

Sikkim Manipal University Page No. 151

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