THE ARBITRATION & CONCILIATION ACT, 1996 & ADR

By V R K Murty

Arbitration And Conciliation Act, 1996 & ADR

Contents: Part I Arbitration (16th Aug 1996) Chapter I-General Provisions (Sec 1-6) Chapter II-Arbitration Agreement (Sec 7-9) Chapter III- Composition of Arbitral Tribunal (Sec 10-15) Chapter IV- Jurisdiction of Arbitral Tribunals (Sec 16-17) Chapter V- Conduct of Arbitral Proceedings (Sec 18-27) Chapter VI- Making of Arbitral Award and termination of proceedings Chapter VII- Recourse Against Arbitral Award (Sec 34) Chapter VIII- Finality and Enforcement of Award (Sec 35-36) Chapter IX- Appeals (Sec 37) Chapter X- Miscellaneous (Sec 38-43)

Arbitration And Conciliation Act, 1996 & ADR

Contents: Part II Enforcement of Foreign Awards: Chapter I New York Convention Awards (Sec 44-52) Chapter II Geneva Convention Awards (Sec 53-60) Contents: Part III Conciliation: (Sec 61- 81)

Contents: Part IV- Supplementary Provisions: (Sec 82-86)

Arbitration And Conciliation Act, 1996 & ADR

Contents: Part II Enforcement of Foreign Awards: Chapter I New York Convention Awards (Sec 44-52) Chapter II Geneva Convention Awards (Sec 53-60) Contents: Part III Conciliation: (Sec 61- 81)

Contents: Part IV- Supplementary Provisions: (Sec 82-86)

Arbitration And Conciliation Act, 1996 & ADR

Chapter I - Sec 1: The Arbitration and Conciliation Act, 1996 (Act No. 26 of 1996) was enacted in India on 16th August ,1996 and came into force on 22nd August 1996. This Act was on the lines of UNICITRAL (United Nations Commission on International Trade Law) Model Law adopted by the United Nations in 1985. It extends to whole of India Parts I, II, III and IV shall extend to State of Jammu and Kashmir in so far as they relate to International Commercial Arbitration. The word Arbitration shall be substituted by the word conciliation.

Arbitration And Conciliation Act, 1996 & ADR

Chapter I - Sec 2 Definitions:: Arbitration means any arbitration whether or not administered by permanent arbitral institution Arbitration Agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise Arbitral Award includes an interim award Arbitral Tribunal means a sole arbitrator or panel of Arbitrators Court means the Principal Civil Court of original jurisdiction in a district, but does not include any civil Court of a grade inferior to such Principal Civil Court, or any Court of small causes

Arbitration And Conciliation Act, 1996 & ADR

Chapter I - Sec 2 Definitions: International commercial Arbitration means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, and at least one of the parties is not a national of India. Legal representative means a person who in law represents the estate of a deceased person or acts in representative character

Arbitration And Conciliation Act, 1996 & ADR

Chapter I - Section 3: Written communications: Any written communication is deemed to have been received if it is delivered to the addressee personally or by registered post at the last known address Chapter I- Section 4: Waiver of right to object: A party knows that any provision of this part which the parties may derogate or any requirements under the arbitration agreement and still proceed with the arbitration without stating his objection within the period of time, if any such time limit is specified, shall be deemed to have waived his right to object.

Arbitration And Conciliation Act, 1996 & ADR

Chapter I Section 5: Extent of Judicial intervention: Notwithstanding anything contained in any law for the time being in force, in matters covered by this part, no judicial authority shall intervene except where so provided in this part. Chapter I Section 6: Administrative assistance: For conduct of arbitral proceedings, the parties, or the arbitral tribunal with the consent of the parties, may arrange for administrative assistance.

Arbitration And Conciliation Act, 1996 & ADR

Chapter II Section 7 - Arbitration Agreement: An agreement by the parties to submit all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or a separate agreement Arbitration agreement shall be in writing An arbitration agreement is in writing if it contained in : - A document signed by both the parties - An exchange of letters, telex, telegrams or other means of communication - An exchange of statement of claims and defence

Arbitration And Conciliation Act, 1996 & ADR

Chapter II Section 7 - Arbitration Agreement: - An exchange of statement of claims and defence in which the existence of the agreement is alleged by one party and not denied by the other party - The reference to in a contract to a document containing an arbitration clause Case law: Where arbitral proceedings commence after the present Act coming into force, the present Act is applicable. (AIR 1997 SC 605) All disputes and reference to chief Engineer Such clause can be construed impliedly as arbitration clause. (AIR 1998. Kar 405)

Arbitration And Conciliation Act, 1996 & ADR

Chapter II Section 8. Power of parties to Arbitration where there is an Arbitration agreement: A judicial Authority before which an action is brought in a matter which is the subject matter of arbitration agreement, if a party so applies not latter than when submitting his first statement, refer the disputes to arbitration. Copy of arbitration agreement must be attached with the application The arbitration may be continued and arbitral award made, notwithstanding that the application has been made and is pending before the judicial authority

Arbitration And Conciliation Act, 1996 & ADR

Chapter II Section 9 Interim measures etc. by Court: A party, may before or during arbitral proceedings or at any time after making arbitral award but before enforcement in accordance with section 36, may apply to a court: For appointment of a guardian for a minor or person of unsound mind For preservation and interim custody of sale of any goods Securing the amount in arbitration The detention, preservation or inspection of any property in the nature of land/ buildings Interim injunction or the appointment of a receiver Case law: Interim orders can be granted by court even before commencement of arbitral proceedings (AIR 1999 SC 565)

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Chapter III Sections 10,11. Composition of arbitral tribunal: 10. Number of arbitrators: The parties are free to decide the number of arbitrators provided that such number is not even. Failing the determination the arbitral tribunal shall consist of sole arbitrator Case law: a) Arbitration agreement is not invalid because of even number of arbitrators. (AIR 1998. Bom.210: AIR 1997 SC 605) b) Though plea of jurisdiction is not raised before the tribunal, even then award is liable to be set aside. (AIR 1999 Bom.67)

Arbitration And Conciliation Act, 1996 & ADR

Chapter III Sections 10,11. Composition of arbitral tribunal: 11. Appointment of arbitrators: A person of any nationality may be arbitrator unless otherwise agreed by the parties The parties are free to agree on a procedure for appointing the arbitrator/ arbitrators Failing any agreement, in an arbitration with 3 arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third who shall act as the presiding arbitrator Chief Justice or any Institution designated by him shall appoint in the following cases: a) If a party fails to appoint an arbitrator within 30 days of request by the other party

Arbitration And Conciliation Act, 1996 & ADR

Chapter III Sections 10,11. Composition of arbitral tribunal: 11. Appointment of arbitrators: Chief Justice or any Institution designated by him shall appoint in the following cases with due regard to qualification, independence and impartiality: b) The two appointed arbitrators fail to appoint the third arbitrator within 30 days of their appointment c) In an arbitration of sole arbitrator, if the parties fail to agree on the arbitrator within 30 days d) A person, including an institution, fails to perform any function entrusted to him or it. e) The decision of the chief justice or the Institution shall be final and binding

Arbitration And Conciliation Act, 1996 & ADR

Chapter III Sections 10,11. Composition of arbitral tribunal: 11. Appointment of arbitrators: Chief Justice or any Institution designated by him shall appoint in the following cases with due regard to qualification, independence and impartiality: f) In case of International commercial Arbitration, Chief justice of India or the person or Institution designated may appoint sole or third Arbitrator of nationality other than the nationality to which the parties belong

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Chapter III Sections 12,13. Grounds for challenge and challenge procedure: Section 12: When a person is approached for possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. Grounds of challenge are: Circumstances exist that give rise to justifiable doubts as to his independence or impartiality He does not possess the qualifications agreed by both the parties

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Chapter III Sections 12,13. Grounds for challenge and challenge procedure: Section 13: The parties are free to agree on a procedure for challenging an arbitrator A party who intends to challenge, shall within 15 days of after becoming aware of constitution of arbitral tribunal, send a written statement along with reasons for challenge as per section 12.3 The arbitral tribunal shall decide on the challenge unless it withdraws from his office If the challenge is unsuccessful, the arbitral tribunal shall continue and make the arbitral award. The party challenging the arbitrator may make an application for setting aside the award under section 34. Court may decide admissibility of fee tom the arbitrator.

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Chapter III Section 14, 15: Failure or impossibility to act, Termination of mandate of arbitrator: Section 14. The arbitrator becomes dejure, defacto unable to perform his functions or for other reasons fails to act without undue delay. In case of controversy a party may apply to court to decide on the termination of mandate He withdraws from office or the parties agree to termination Section 15: Where the arbitrator withdraws from the office or mandate terminated by the parties, a new arbitrator is appointed. The hearings may be repeated. An order or ruling of the arbitral tribunal prior to replacement shall not be invalid.

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Chapter IV Sections 16: Jurisdiction of arbitral tribunal to rule on its jurisdiction: The arbitral tribunal may rule on its jurisdiction, including ruling on any objections with respect to existence or validity of arbitration agreement. Decision by arbitral tribunal that the contract is null and void does not make arbitration clause invalid. Plea on jurisdiction of arbitral tribunal shall be raised not later than submission of statement of defence Plea that arbitral tribunal is exceeding its jurisdiction shall be made as soon as the scope is exceeded during arbitral proceedings The arbitral tribunal may continue with the proceedings after rejection of plea. A party aggrieved by such an arbitral award may make an application for setting aside the award

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Chapter IV Sections 17: Interim measures ordered by arbitral tribunal: Unless otherwise agreed by the parties, the arbitral tribunal may order a party to take an interim measure of protection, appropriate security measure. Chapter V Conduct of arbitral proceedings: Section 18. Equal treatment of parties: The parties shall be treated with equality and each party shall be given equal opportunity to present his case. Section 19- 22. Determination of rules of procedure, place of arbitration, commencement, Language: 19. The arbitral tribunal is not bound by rules of CPC,1908 or the Indian evidence act. The parties are free to agree the procedure. Failing to agree to a procedure, the tribunal may adopt an appropriate procedure. The tribunal has the power to determine the admissibility, relevance, materiality and weight of any evidence.

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Chapter V. Section 19- 22. Determination of rules of procedure, place of arbitration, commencement, Language: 20. The parties are free to agree on place of arbitration. Failing agreement the tribunal may decide the place keeping in view convenience of parties, for hearing witnesses, experts, for inspection of documents or property. 21. Unless otherwise agreed by the parties, the arbitral proceeding commence on the date on which request for arbitration is received by the respondent. 22. The parties may agree to any language/ languages to be used in the arbitral proceedings failing which the tribunal may decide.

Arbitration And Conciliation Act, 1996 & ADR

Chapter V. Section 23. Statement of claim and defence: Within period agreed upon by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue, relief sought and the respondent shall state his defence in respect of these particulars, submit documents, evidence. The parties may amend or supplement their claims/defence. The parties simultaneously mark all correspondence to the arbitral tribunal and the other party. Chapter V. Section 24. Hearings and written pleadings: Either oral hearings or based on documents and other materials as decided by the parties or the tribunal. Expert reports or evidentiary documents relied upon by the tribunal shall be communicated to both the parties.

Arbitration And Conciliation Act, 1996 & ADR

Chapter V. Section 25. Default of party: Without showing sufficient cause if the claimant fails to submit his statement of claim, the arbitral tribunal shall terminate the proceedings If the respondent fails to communicate his statement of defence, the tribunal shall proceed with the proceedings. If a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceeding and make the arbitral award Chapter V. Section 26, 27: Expert appointed by arbitral tribunal, Court assistance in taking evidence.

Arbitration And Conciliation Act, 1996 & ADR

Chapter VI. Section 28.Making arbitral award and termination of proceedings: In an arbitration, The arbitral tribunal shall decide the dispute in accordance with substantive law in force in India. In an international arbitration, the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties and substantive law of that country as applicable to the substance of the dispute. Failing any designation of law, the tribunal shall apply rules it considers to be appropriate. In all cases the arbitral tribunal shall take into account with the terms of contract and shall take into account usages of the trade applicable and expressly authorized by the parties.

Arbitration And Conciliation Act, 1996 & ADR

Chapter VI. Section 29. Decision making by the panel of arbitrators: By majority decision where more than one arbitrator appointed. Questions of procedure may be decided by the presiding arbitrator. Chapter VI. Section 30.Settlement: The arbitral tribunal may encourage settlement of disputes during arbitral proceedings by mediation, conciliation or other procedures. If the parties settle the dispute shall terminate the proceedings and if requested by the parties and objected by the tribunal, record the settlement in the form of an award on agreed terms.

Arbitration And Conciliation Act, 1996 & ADR

Chapter VI. Section 31. Form and contents of arbitration award: An arbitral award shall be in writing and signed by majority of members of the arbitral tribunal, so long as the reason for omitted signature is stated. Arbitration award shall state the reasons upon which it is based unless the parties have agreed that no reasons are to be given The arbitral award shall state the date and place of arbitration After the award is made a signed copy shall be given to each party The tribunal may make an interim award on any matter The arbitral tribunal may include in the sum for which the award is made and interest at such rate it deems reasonable for whole or part of the period between the date the cause of action took place and the date of award.

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Chapter VI. Section 31. Form and contents of arbitration award: Unless otherwise stated the award shall carry interest of 18% per annum from the date of award to date of payment The cost of arbitration shall be fixed The arbitral tribunal shall specify the party entitled to costs, party who shall pay, the amount of costs or method of payment Chapter VI. Section 32. Termination of proceedings: Proceeding shall be terminated by the final award or by an order of the tribunal The parties agree to termination of the proceedings The tribunal considers that the continuation of proceedings impossible or unnecessary

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Chapter VI. Section 33. Correction and interpretation of award: Within 30 days from receipt of award, a party requests for correction of errors, request for interpretation of specific point with notice to the other party The arbitral tribunal shall make the correction within 30 days of receipt of request from a party if it considers necessary A party may request to make additional award within 30 days of receipt of award, as to the claims presented but omitted, and the arbitral tribunal may consider and make additional award within 60 days from date of receipt of request. The tribunal may extend time for making correction, interpretation or additional award

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Chapter VII. Section 34.recourse against arbitral award: Recourse to a court against an arbitration award may be made by an application for setting aside under following cases. Produce proof that the party was under some incapacity That the arbitration agreement is invalid under law The party was not given proper notice of the appointment of arbitrator or was otherwise unable to present his case The arbitral award deals with disputes not contemplated or not falling within the terms of submission or it contains decisions beyond the scope of submission( decisions on matters not submitted may be set aside) Composition of arbitral tribunal was not in accordance with the agreement The court finds that the dispute is not capable of settlement by arbitration

Arbitration And Conciliation Act, 1996 & ADR

Chapter VII. Section 34.recourse against arbitral award: Recourse to a court against an arbitration award may be made by an application for setting aside under following cases. The arbitration award was against public policy (corruption, secrecy) The application may not be made after 3 months after receipt of arbitral award (court if satisfied, may grant 30 days additional time and not beyond) Chapter VIII. Finality and enforcement of arbitral awards: Section 35: An arbitral award is final and binding on the parties Section 36. Enforcement: Where the time for making application to set aside has expired, or it has been rejected by the court, the award shall be enforced in the same manner as if it was a decree of the court

Arbitration And Conciliation Act, 1996 & ADR

Chapter IX. Appealable orders. Section 37: No second appeal shall lie. An appeal shall lie from the following orders. -Court granting or refusing to grant on any interim measures -Court setting aside or refusing to set aside an arbitral award - However right to appeal to Supreme court still exists. Chapter X. Miscellaneous. Section 38: The arbitral tribunal may fix the amount of the deposit as an advance. The tribunal may fix separate deposit for claim and counter claim. The deposit shall be payable in equal shares by the parties. Section 39. Lien on arbitral award and deposits as to costs: The arbitral tribunal shall have lien on the arbitral award for any unpaid costs.

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Chapter X. Miscellaneous. Section 40. Arbitration agreement not o be discharged by death of party thereto: In the event of death of the party the arbitration agreement is enforceable against the legal representative of the deceased. Section 41. Provisions in case of insolvency: The arbitration agreement is enforceable against receiver , if appointed. Section 42. Jurisdiction: The court in which the application is made shall only have the jurisdiction in all further applications. Section 43. Limitations: The limitation Act, 1963 shall apply to arbitrations.

Arbitration And Conciliation Act, 1996 & ADR

Part II. Enforcement of certain foreign awards. Chapter I. New York Convention awards: Section 44. Definition: Foreign award means an arbitral award on differences between persons arising out of legal relationship, whether contractual or not, considered as commercial under law in force in India, made on or after the 11th October 1960. in pursuance of an agreement in writing for arbitration to which the convention set forth in the First schedule applies in one such territory as the central Govt., being satisfied that reciprocal provisions have been made may, by notification in the official gazette, declare to be territories to which the said convention applies Section 45.Power of judicial authority to refer parties to arbitration: At the request of one of the parties, shall refer the parties to arbitration unless the said agreement is null and void, inoperative or incapable of being performed.

Arbitration And Conciliation Act, 1996 & ADR

Part II. Enforcement of certain foreign awards. Chapter I. New York Convention awards: Section 46. When foreign award binding: Any foreign award which is enforceable is binding on all the parties. Section 47. Evidence. The party applying for the enforcement of foreign award shall produce before the court (Principal civil court/ High court): The original award or a copy thereof, duly authenticated The original agreement for arbitration Such other evidence to prove that the award is a foreign award.

Arbitration And Conciliation Act, 1996 & ADR

Part II. Enforcement of certain foreign awards. Chapter I. New York Convention awards: Section 48. Conditions of enforcement of foreign award: The enforcement of foreign award may be refused only: The parties referred to the agreement were under some incapacity, or the agreement is not valid The party against whom the award is invoked was not given proper notice of the appointment of arbitrator The award deals not contemplated or beyond scope Composition of arbitral tribunal was not in accordance with the procedure laid down in the agreement The award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which the award was made The dispute is not capable of settlement by arbitration and

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Part II. Enforcement of certain foreign awards. Chapter I. New York Convention awards: Section 49. Enforcement of foreign award: Where the court is satisfied that the foreign award is enforceable , the award shall be deemed to be a decree. Section 50. Appealable orders: For refusing to refer parties to arbitration Refuse to enforce a foreign award. Chapter II: Geneva convention awards: Foreign award relating to matters considered as commercial under the law in force in India after 28th July 1924. Similar to that of New York Convention

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Part III. Conciliation: Section 61. Application and scope: Unless the parties have otherwise agreed, for the disputes arising out of legal relationship, the conciliation shall apply Section 62. Commencement of conciliation proceedings: The party initiating conciliation shall send to the other party a written invitation, to conciliate, with a briefly identifying the subject of the dispute. Conciliation shall commence when the other party accepts in writing the invitation to conciliate. If the other party rejects the invitation there will be no conciliation If the initiating party does not receive a reply within 30 days, he may elect to treat this as rejection of the invitation to conciliate.

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Part III. Conciliation: Section 63. Number of conciliators: There shall be one conciliator unless the parties agree for two or three conciliators. They ought to act jointly as a general rule. Section 64. Appointment of conciliators: The parties may agree the name of a sole conciliator, if one conciliator is specified In case two are specified, each party may appoint one conciliator each In case three are specified, each party shall appoint one and the parties may name the third conciliator The parties may approach an Institution or person to recommend suitable individuals as conciliators/ request the institution for appointing conciliators. In terms of impartiality, the institution/ person shall appoint persons of other nationality

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Part III. Conciliation: Section 65. Submission of statements to conciliator: Upon appointment , the conciliator shall request each party to submit to him a brief written statement describing disputes and the points at issue, with copy to other party The conciliator may ask further supplementary statements, evidences, or information at any stage with copy to other party Section 66. Conciliator not bound by certain enactments: The conciliator is not bound by the civil procedure code, 1908 or Indian evidence act, 1872. Section 67. Role of conciliator: Conciliator shall assist parties in an independent and impartial manner to reach an amicable settlement of the dispute

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Part III. Conciliation: Sections 67 - 72. Role of conciliator and communications: He is guided by principles of objectivity, fairness and justice, giving consideration to, the rights and obligations of parties, the usages of trade concerned, including business practices between parties. He may conduct proceedings in such a manner as he considers appropriate with due consideration to wishes of parties and the need to speedy settlement He may at any stage make proposals for settlement of disputes. Such proposals need not be in writing or with reasons. He may disclose any information given by one party to the other party or he may keep it confidential as desired by a party The parties shall co-operate with the conciliator in good faith and give suggestions for speedy settlement

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Part III. Conciliation: Sections 73-75. Settlement agreement and status: When it appears, that there exists element of a settlement which may be acceptable to parties, he shall formulate terms of possible settlement and submit them to the parties for their comments. After receiving observations he may draw up the settlement agreement and sign a written settlement agreement and assist the parties in drawing up the settlement agreement. When the parties sign the settlement agreement, it shall be final and binding. The conciliator shall authenticate the settlement agreement and furnish copy to the parties. The settlement agreement has the same status and effect of arbitral award on agreed terms. The conciliator and parties shall keep confidentiality

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Part III. Conciliation: Sections 76. Termination of conciliation proceedings: By signing settlement agreement by the parties. By written declaration by the conciliator, after consultation with the parties By written declaration by the parties addressed to the conciliator By a written declaration of a party to the other party and the conciliator Section 77. Resort to arbitral or judicial proceedings: During conciliation proceedings, the parties shall not initiate any arbitral or judicial proceedings except that a party may initiate such proceedings to preserve his rights

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Part III. Conciliation: Section 78-79. Cost: Upon termination, the conciliator shall fix the costs and gives written notice to the parties. The cost shall be borne equally by the parties. The conciliator shall work out cost for witnesses, expert advice, conciliatory proceedings etc. he may also ask the parties to deposit the amount in advance. Sections 80-81. Role of conciliator in other proceedings, and admissibility of evidence: The conciliator shall not act as arbitrator on the same disputes The conciliator shall not be presented by the parties as a witness. The parties shall not rely on or introduce evidence of conciliation proceedings, views expressed by parties, proposals made by conciliator and any partys willingness to accept proposal in arbitral or judicial proceedings

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Part IV. Supplementary provisions: Sections 82-85. High court may make rules to all proceeding before the court The central Govt. may make such provisions to remove difficulties or make rules for carrying out or provisions of the act by Gazette notification The arbitration (Protocol and Convention) Act, 1937, The Arbitration Act, 1940 and Foreign Awards Act,1961 are repealed.