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Introduction
An Act covering:
domestic arbitration international commercial arbitration enforcement of foreign arbitral awards conciliation
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.
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.
Act, 1961.
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.
Winding up of a company
Matters of divorce or restitution of conjugal rights Lunacy proceedings Disputes arising from an illegal contract
Arbitration Agreement
Arbitration 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.
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 dispute the 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 Arbitrator
Any person can be appointed as an arbitrator. Generally impartial and independent persons C As, engineers, retired judges, advocates and other
professionals are preferred. Parties are free to determine the number of arbitrators Number 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 Arbitrator
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. 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
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
of his mandate.
where he withdraws from office for any reason; or by or pursuant to
substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.
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) applicable Flexibility in respect of procedure, place & language. Submission of statement of claim & defense maybe amended/ supplemented at any time Hearings & Written Proceedings at the discretion of the tribunal
Can be oral at the request of either party
Arbitral Award
The decision of Arbitral Tribunal will be by majority The arbitral award shall be in writing and signed by the
States the reasons for the award unless the parties have agreed
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 Arbitration
Fees 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 Court
The 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
relating to matters considered as commercial under the law in force in India. The foreign awards which can be enforced in India are as follows : New York convention award - made after 11th October, 1960
New York convention awards are enforceable in India. New York convention was drafted and kept in United Nations for
specified in law. Otherwise, the foreign award is enforceable through court as if it is a decree of the court. If the court declines to enforce the arbitral award, appeal can be made to the court where appeal normally lies from the district court. No further appeal can be made (except appeal to Supreme Court) . Indian courts can be approached only at the time of implementation of award. The courts can refuse to implement the award only on limited grounds.
Conciliation
The 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
Conciliation
In such agreement they may draw and sign a written
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
parties makes a written request to other to conciliate, briefly identifying the dispute.
The conciliation can start only if other party accepts in
commence. If the other party does not reply within 30 days, the offer for conciliation can be treated as rejected
Supplementary Provisions
The High Court has the power to make rules under this act
Removal of difficulties by central Government through
parliament
The present Act overrules the previous Acts
Facts of Case
Petitioner : Bhatia International
Brief History
Bhatia International contract with Bulk trading in 1997
arbitration clause Governed by as per rules of International Chambers of Commerce (ICC) Bulk trading filed a request with ICC for arbitration with parties agreed process to be held in Paris and appointment of Sole Arbitrator Respondents filed an application u/s 9 of Arbitration & concilation Act 1996 is district courts of Indore & Orissa against Bhatia International Interim relief was sought injunction restraining the parties from transferring/creating any third party right & dealing or selling their business assests or properties Bhatia international raised plea of maintainability of such an applicaton
Case History
Mr. Sen on behalf of the petitioner Bhatia International
stated that Part I of the act wouldnot apply to arbitrations where the place of arbitrations is not in India
The application was dismissed by the IIIrd Additional
Pradesh, Indore Bench & same was dismissed on 10th Oct 2000
apply.
Part II of the Act deals with the enforcement of the foreign Awards. Section 2 & Section 17 have been purposely omitted reason for this is arbitration take places outside India Jurisdiction of courts of that particular country where it is held. Section 9 an application for interim measure must be made before the award is enforced also section 36 deals with enforcement of domestic award only
Section 5 of the Act Judicial authority should not interfere except as provided
M.P. High court of Indore Bench were wrong in entertaining the application u/s
Inspite of the fact that A number of high courts Orissa,Madras, & Delhi have
held that Part I of the act would not apply to arbitrations which take place outside India the same canvassing as the that of learned counsel Sen
Judgments Mariott International V Ansal Hotels Ltd Delhi Court- accepted The Respondents Counselor Advocate Sundaram provided with the argument
that if parties by their agreement exclude its provisions of Part I then only will not be part otherwise would apply to all international commercial arbitrations including those that take place outside India
Court Views
If Sen agruments are taken into account there would be a lacunae as
neither Part I nor Part II would apply to arbitration held in a nonconventional country It would mean that there is no law in India governing such arbitrations
International Commercial Arbitration which takes place outside India
efficient settlement of disputes arising in international commercial arbitration Always to look at the intension of the legislative makers Not possible for most imaginative legislature to forecast exhaustively situations courts duty to expound arises with a caution that courts should not try to legislate
Section 1 of the Act implies to the whole of India, inclduing the state of
Jammu & Kashmir. Section 2 (a) defines arbitration - arbitration could be under a body like the ICC Section 2 (f) International Commercial Arbitration makes no difference between International Arb. Takes places in India or internal Arb. which takes place outside India Section 2 (2) provides that part I would apply to cases where Arb. Takes place in India to emphasis that the word only not used hence legislature did not mean that the Part I would not apply to Arb. Outside India Section 2 (4) & (5) defines every arbitration - hence the word every arbitration includes all types Section (5) judicial intervention not except in Part I, Section (8) allows parties to approach Judicial but only to court is u/s 2 (e) Legistalure has kept in mind that even international arb. Part I implies Section 28 does not provide to rules where Arb. Outside India
judicial authority for interim and conservatory measures Therefore, in such cases an application can be made under Section 9 of the said Act. Act does not appear to be a well drafted legislation Therefore the High Courts of Orissa, Bombay,Madras, Delhi and Calcutta cannot be faulted for interpreting it in the manner indicated above
In this view of the matter we see no reason to interfere with the
impugned judgment. The Appeal stands dismissed. There will be no Order as to costs throughout
Supreme Court Judgment, Civil appeal under Arbitration And Conciliation Act for setting aside of Foreign Award
Introduction
The parties: Venture Global Engineering (VGE) Satyam Computer Services Ltd. made a 50:50 JV.
An SHA was also signed: Disputes have to be resolved amicably. If not resolved, refer to arbitration.
Background
Satyam alleged that the VGE had committed a default.
Several venture companies became insolvent. Satyam exercised its option to purchase the VGE shares in the JV at its book value. A series of petitions & cross-petitions happened. Finally the case came to Supreme Court.
Background Cases
Satyam
1) London Court of International Arbitration 2) United States District Court, Michigan 3) Cross Petition
VGE
Current Case
JV was situated in India.
Satyam enforced the award in USA. VGE challenged it saying the award should have been
enforced in India. SC had to decide if enforcement of a foreign award can be challenged in India.
Paris. Bulk Trading filed an application in District Court which it won. Bhatia International approached SC. SC dismissed the petition in favour of Bulk Trading.
Contentions of VGE
Foreign award can be challenged based on reference
case. Satyam cannot enforce in US. SHA did not provide for approaching US Court. Satyam was motivated by the intention of evading the legal and regulatory scrutiny.
Judgment
party remediless.
Satyam had fraudulent intentions.
Judgment
SC not expressing anything about either party.
SC judgment only related to challenging foreign
award.
Arbitration proceedings to decide further. 6 months notice to dispose of case.
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
Appellants: TDM Infrastructure Private Limited Vs. Respondent: UE Development India Private Limited
The problem
Determination of applicability of Section 2(1)(f) of the
Indian Arbitration and Conciliation Act, 1996 questioned Companies registered and incorporated under the Companies Act, 1956, Directors and shareholders of the Petitioner residents of Malaysia Parties into contractual terms resorted to arbitration clause contained therein pursuant to disputes arose amongst them Neither the proposal nor the nominees proposed by parties accepted and hence the application for appointment of Sole Arbitrator was filed
The problem
Despite the Company being incorporated and registered in
India, since its central management and control being exercised in Malaysia, it would come within the purview of Clause (iii) of Section 2(1)(f ) of the 1996 Act
Company incorporated in India can only have Indian
The Outcome
When both the companies are incorporated in India, and have been domiciled in India, the arbitration agreement entered into by and between them would not be an international commercial arbitration agreement.
The Outcome
For the purposes of taxation, test of residence may not be registration but where the company does its real business and where the central management and control exists
All the board meetings in the instant case took place in Malaysia Hence the present Court has no jurisdiction to nominate an Arbitrator and hence the application dismissed
Case
Appellants: National Agricultural Co-op. Marketing
Case Study
Dispute arose between the parties
Respondent alleged of non-performance of the
contract Invoking the arbitration clause of the agreement, notice sent by the Petitioner Respondent replied with refusal to comply with Applicability of section 11 questioned
Case Study
Whether an arbitration clause comes to an end if
contract abrogated Held, even if the performance of the contract comes to an end on account of repudiation, frustration or breach of contract, the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract
Case Study
Section 16(1) of the Act clarifies that an arbitration
clause forming part of the contract to be treated as an agreement independent of the other terms of the contract Contract null and void would not entail ipso jure the invalidity of the arbitration clause
Case
Appellants: India Household and Healthcare Ltd.
Arbitrator to decide the dispute Respondent contended that arbitration proceedings under MoU and agreement would be null and void as both were vitiated by fraud On appeal Madras High Court granted interim injunction restricting Petitioner from taking any action in terms of the agreement
Cont
to arbitration where arbitration agreement exists But when instance of fraud is proved, it goes on to vitiate the entire agreement. Arbitration agreement is rendered null and incapable of being performed due to the effect of fraud Hence, in cases of fraud, no judicial authority can enforce arbitration clause as the same ceases to operate Application for appointment of Arbitrator, not maintainable unless the procedure and mechanism agreed to by and between the parties complied with Application dismissed
Case Study
Malaysian Airlines Systems BHD (II) vs. Stic Travels (P) Ltd(Arbitration Petition No. 18 of 2000), Supreme Courts ruling on arbitrators nationality Decided by Justice M. Jagannadha Rao, the nominee of the Chief Justice of India.
Pvt. Ltd(Indian Co.) as the General Sales Agent(Passenger) for various countries. Two agreement dated September 15, 1986 and January 11, 1989 were entered into for this purpose. The former agreement related to passenger, and latter related to cargo. The originals of these agreements were with the Indian company.
foreign company by notice dated March 1, 1999 delivered to the Indian company on the same date. This was done on the ground that the Indian company failed to remit and pay to the foreign company all the sums and money received by it in the course of agency on account of sale of passenger tickets and airway bills.
Company had, in its letter dated June 15, 1999 admitted liability up to Rs 83,54,655.79 and failed to pay the same and had fraudulently attempted to `arbitrarily and illegally' adjust the same against false claims with a view to defraud it.
Case Study
The application under Section 11 (5) for appointment
of arbitrator by the Chief Justice of India or his nominee is by the Malaysian Airlines company. The claim of the foreign company is that the Indian company is liable to pay it a sum of Rs 96,21,137 with interest at 24 per cent with quarterly rests with effect from May 1, 1999 besides other amounts.
Case Study
The Indian company contended that the agreements
in question had ceased to exist and, hence, there was no arbitration clause. The notice by the foreign company was bad in law. The foreign company had not produced the original agreements. They are not with the Indian company. The foreign company cannot file attested copies of the two agreements.
Case Study
After hearing the parties, the designated judge
identified two points for consideration: (1) Whether the preliminary issues raised by the Indian company can be decided at this stage or be referred to the arbitrator; (2) Whether, in the case of an international arbitration agreement, where one of the parties is an Indian national, it is not permissible to appoint an arbitrator of Indian nationality
Case Study
On the first point he declined to decide the
preliminary issues and directed that the matter be straight away referred to an arbitrator. On second point He observed that while the nationality of the Arbitration is a matter to be kept in view, it does not follow from Section 11(9) that the proposed arbitrator is necessarily disqualified because he belongs to the nationality of one of the parties. In case the party who belongs to a nationality other than that of the proposed arbitrator, has no objection, the Chief Justice of India (or his nominee) can appoint an arbitrator belonging to a nationality of one of the parties.
Case Study
In case, there is objection by the one party to the
appointment of an arbitrator belonging to the nationality of the opposite party, the Chief Justice of India (or his nominee) can certainly consider the objection, and see if an arbitrator not belonging to the nationality of either parties can be appointed.
Arbitration and Concilation Act 1996 Petitioner represented by Learned Counsel Mr. Arun Jaitely
Brief History
Haryana Telecom Ltd, a State PSU entered into
agreement with the Sterlite Industries for laying of cables a 150 crore order. Due to business recession the venture could not be completed by Sterlite Industries and had to go for winding up of its business A petition was filed in the session court by the respondent Sterlite Industries under the Companies Act for insolvency The Government has raised objection and filed an application in the High Court for referring the matter to Arbitration High court rejected its plea and petition was filed in the Supreme Court
What Happened
Petitioner moved against the court contending that the
The Single Judge Dismissed the Application Same was upheld by the Division bench
under the provisions of Arbitration Act 1940- the question regarding the winding up of the company could not be referred to an arbitrator
What Happened
Learned counsel Mr. Jaitely contested that the Section 8
(1) of the Act Judicial Authority is bound to refer the matter to arbitration when the arbitration agreement exist between the parties Section 8 important points
A judicial authority before which an action is brought in a
matteris the subject matter of an arbitration agreement shall, refer the parties to arbitration
process may be initiated inspite of the application made & pending before the judicial authority
What Happened
The court held that : Judicial authorities will refer the
matter to the Arbitration only when in their opinion the matter or dispute which the arbitrator is competent or empowered to decide
In this case, the courts held a view that the Claim in
the petition filed under the Companies Act, hence should wound up
The Outcome
An arbitrator has no jurisdiction to order the winding
up of the company. Notwithstanding any agreements between the parties Therefore the matter pending before the high court could not be referred to the A and the High Court was right in rejecting the petition. Hence the petition for the reasons stated above have been dismissed in Limein