Arbitration &

Conciliation Act,
1996

Rohit Naulakha

Shivam Agarwal

Ashish Suman

Saurabh Saxena

Tejaswi Rao

Prayag Kaushik

Sudhir Singh

Rishabh Varma

Akash Mittal

Prem Gaur

Alternative Dispute
Resolution (ADR)

Alternative dispute resolution

includesdispute resolution
processes and techniques that act
as a means for disagreeing parties
to come to an agreement short
oflitigation.
It is a collective term for the ways
that parties can settle disputes,
with (or without) the help of a third
party.

METHODS OF ADR
NegotiatioN

Unrecognized

MEDIATION

ARBITRATION

Recognized

CONCILIATION

Acts addressing ADR in India

The Arbitration &
Conciliation Act, 1996

Conciliation
proceedings have
been given legal
recognition for the
first time.

The Arbitration
(Protocol &
Convention) Act, 1937

Repealed previous
enactments and
introduced Arbitration
and Conciliation Act
1996.

The Arbitration Act,

1940

The Foreign Awards

(Recognition and
Enforcement) Act,
1961.

ABOUT THE ACT

An Act to consolidate and amend

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

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.

ARBITRATION
An independent, neutral third person ("arbitrator") is
appointed to hear and consider the merits of the dispute and
renders a final and binding decision called an award.

The process is similar

to the litigation
process as it involves
adjudication

The parties choose

their arbitrator and
the manner in which
the arbitration will
proceed.

OBJECTIVES OF THE ACT

Domestic
Arbitration

Conciliation

Consolidate
and amend
the law
relating to
Enforcement
of Foreign
Arbitral
Awards

International
Commercial
Arbitration

NECESSITY OF THE ACT

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

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

Growing
strength and
role of India in
the global
economy

Competition
often leads to
conflicts
between
entrepreneur
s resulting in
commercial
disputes.

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.

disputes which can be referred to arbitration

Disputes
Disputes
involving
involving
insurance
insurance
claim
claim

Disputes
Disputes
related to
intellectual
intellectual
property
property
rights
rights

Disputes
Disputes
related to
constructio
constructio
n
n projects
projects

Disputes
Disputes
related to
related
to
property
property or
or
money
money

Disputes
Disputes
which fall
within
within the
the
jurisdiction
jurisdiction
of
of Arbitration
Arbitration

Disputes
Disputes in
in
a
a
partnership
partnership
and
and joint
joint
ventures
ventures

Banking
Banking &
&
nonBanking
Banking
transaction
transaction
disputes
Disputes
related
related to
to
product
liabilities
liabilities
and
and
professiona
professiona
ll liability
liability
nonnonfulfillment
fulfillment
of
of a
a clause
clause
in a
contract
contract

Disputes excluded from the Arbitration Act

Matters involving questions about validity of a will.
Relating to appointment of a guardian.
Relating to Charitable Trusts
Winding up of a company
Matters of divorce or restitution of conjugal rights
Lunacy proceedings
Insolvency matters, such as adjudication of a person as an insolvent.

SCHEME OF THE ACT

Act is divided in to the following parts

Domestic
arbitration

Enforcement of
foreign awards

3
Conciliation
procedures

4
Supplementary
provisions

Part-I
Domestic Arbitration


"arbitration agreement" means 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
An arbitration agreement
may be in the form of an
arbitration clause in a
contract or in the form of a
separate agreement

An arbitration agreement
shall be in writing

a document signed by the parties

an exchange of letters, telex,

telegrams or other means of
telecommunication which provide a
record of the agreement

An arbitration agreement is
in writing if it is contained
in-

The reference in a contract

to a document containing
an arbitration clause
constitutes an arbitration
agreement if the contract is
in writing and the reference
is such as to make that
arbitration clause part of
the contract

an exchange of statements of claim

and defence in which the existence
of the agreement is alleged by one
party and not denied
by the other

Section 8.
Power to refer parties to arbitration where there is an
arbitration agreement
1.

2.

3.

A judicial authority before

which an action is brought in
a matter which is the
subject of an arbitration
agreement shall, if a party
so applies not later than
when submitting his first
statement on the substance
of the dispute, refer the
parties to arbitration

The application referred to in

sub-section (1) shall not be
entertained unless it is
accompanied by the original
arbitration
agreement or a duly
certified copy thereof

Notwithstanding that an
application has been made
under sub-section (1) and
that the issue is pending
before the judicial
authority, an arbitration may
be commenced or continued
and an arbitral award made

Interim measures by Court

for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral
proceedings
the preservation, interim custody or sale of any goods which are the subject-matter of the
arbitration agreement
securing the amount in dispute in the arbitration
the detention, preservation or inspection of any property or thing which is the subject-matter of the
dispute
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 ARBITRATORS

the parties are

free to agree on
a procedure for
appointing the
arbitrator or
arbitrators

The parties are free

to determine the
number of
arbitrators, provided
that such number
shall not be an even
number

A person of
any
nationality
may be an
arbitrator,
unless
otherwise
agreed by the
parties

If they are
unable to
agree,
arbitrator, and
the two
appointed
arbitrators shall
appoint the
third arbitrator
who shall act as
the presiding
arbitrator

If not appointed
within 30 days, the
party can request
Chief Justice of High
Court to appoint an
arbitrator
In case of
international
commercial dispute,
the application for
appointment of
arbitrator has to be
made to Chief Justice
of India

Termination of arbitrator
Appointment of Arbitrator can be challenged only if
Circumstances exist that give
rise to justifiable doubts as to
his independence or
impartiality

He does not possess the

qualifications agreed to by
the parties

Termination of arbitrator
The mandate of an arbitrator shall terminate if--he becomes de jure or
de facto unable to
perform his functions or
for other reasons fails to
act without undue delay

he withdraws from his

office or the parties
agree to the termination
of his mandate

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

Where the mandate of an arbitrator terminates, a substitute

arbitrator shall be appointed according to the rules that were
applicable to the appointment of the arbitrator being replaced

Conduct of Arbitral Proceedings

The Arbitral Tribunal is not bound by Code of Civil Procedure, 1908 or Indian Evidence Act, 1872
The parties to arbitration are free to agree on the procedure to be followed by the Arbitral Tribunal
Law of limitation (1963) 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
Settlements during Arbitration

Arbitral Award

Criterion
The decision of Arbitral Tribunal will be by majority

Content
States the reasons for the award unless the parties have agreed
that no reason for the award is to be given,Copy of award given
to each party
The arbitral award shall be in writing and signed by the members
of the tribunal
The award should be dated and place where it is made should
be mentioned

Tribunal can make interim award also

Slide No.

23

Arbitral Award

Reasons why the award can be appealed against

The party furnishes proof of some incapacity
the arbitration agreement is not valid under the law to which the parties
have subjected it
the party was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was otherwise unable to
present his case
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

Slide No.

24

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.

Appeal to court is
now only on
restricted
grounds.

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

ARBITRATION ACT
HAS OVER-RIDING
EFFECT

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

Tribunal cannot be
given unlimited
and uncontrolled
powers and
supervision of
Courts cannot be
totally eliminated

Part-II
Enforcement of Foreign Awards


Foreign award" means an arbitral
award on differences between persons
arising out of legal relationships,
whether contractual or not, considered
as commercial under the law in force
in India, made on or after the 11th day
of October, 1960.

Foreign awards enforcible in india

New York convention

award

Geneva convention
award

Made after 11th October,

1960
New York convention was
drafted and kept in United
Nations for signature of
member countries on 21st
December, 1958.

Made after 28th July,

1924.

Guidelines to enforce a foreign award

Documents:
Produce original
arbitral award
Agreement of
arbitration to the
district court having
jurisdiction over the
subject matter of the
award.
Proof that the award is
a foreign award.
[section 47]

The enforcement of
award can be refused
by court only in cases
specified in section 48

Otherwise, the foreign

award is enforceable
through court as if it is
a decree of the court.
[section 49]

If the court declines to

enforce the arbitral
award, appeal can be
made to the court
where appeal normally
lies from the district
court.

The courts can refuse

to implement the
award only on limited
grounds

Indian courts can be

approached only at the
time of implementation
of award

No further appeal can

be made (except
appeal to Supreme
Court)

Part-III
Conciliation Procedure

conciliation

Conciliation is the amicable settlement of disputes between the

parties, with the help of a conciliator.

Conciliation explained
There is no
agreement for
arbitration

Conciliation can
be done even if
there is
arbitration
agreement

The conciliator only

brings parties
together and tries to
solve the dispute
using his good
offices

The conciliator
has no authority
to give any
award

In such agreement
they may draw and
sign a written
settlement
agreement. Duly
signed by the
conciliator

However after the

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

Commencement of conciliation proceedings

1
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

2
Conciliation proceedings
shall commence when the
other party accepts in
writing the invitation to
conciliate.

3
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

Appointment of conciliators

In conciliation
proceedings with
one conciliator, 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

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

The conciliator shall be guided by principles of objectivity, fairness and justice

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

The conciliator-may, at any stage of the conciliation proceedings, make proposals for a settlement of the dispute.
Such proposals need not be writing and need not be accompanied by a statement of the reasons therefor

Part-IV
Supplementary Provisions

 The High Court has the power to make rules under this act

Removal of difficulties by central Government through

provisions made under the Act

Power to make rules: Rules made by Central

Government subject to approval by parliament
Repeal and savings: The present act overrules the
previous acts

Case Studies

Bhatia Internatioal V Bulk

Trading
Appeal (Civil) 6527 of 2001

In most countries, the possibility to bring before a

court an action for annulment of an arbitral award
rendered abroad is excluded. On the other hand,
the Supreme Court of India has over the years
adopted a very aggressive nationalistic posture in
deciding international arbitration disputes, and is
an outlier in this arena. In cases involving foreign
arbitral disputes, the Supreme Court has
consistently revealed an alarming propensity to
exercise authority in a manner contrary to the
expectations of the business community.

 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

The underlying principle behind the Indian

Arbitration and Conciliation Act, 1996 (1996 Act)
was to minimise the supervisory role of the courts
in the arbitral process. However, Bhatia
International, decided by the Supreme Court in
2002, laid the foundation for an excessively
interventionist role of the judiciary in international
arbitrations, thereby negating the intent of the 1996
Act..

Part I shall apply where the place of arbitration is in

India.
However, inBhatia International, the Supreme
Court held that Indian courts had good jurisdiction
even in the case of international arbitrations held
outside of India. In reaching this decision, the
Supreme Court construed the language in Section
2(2) and emphasised that the formulation omits the

only

word
(as in shall only apply), so that
the 1996 Act does not prohibit the application of
Part I to an award made outside India.

In April 2010, the Ministry of Law and Justice, with

the intention of reinforcing the minimum judicial
intervention' standard, had proposed an
amendment to correct the error made and followed
since the decision inBhatia International. The
proposed amendment to Section 2(2) of the 1996
Act seeks to insert the word only with a view to
explicitly limit the operation of Part I of the Act to
domestic arbitration

Haryana Telecom v Sterlite Industries

Brief History

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
petition for winding
up is not for money

The company has become

commercially insolvent with
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 C the High Court was right in rejecting the
petition.
Hence the petition for the reasons stated above have been
dismissed in Limein

Case Study
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.

50:50 Joint Venture

SHA 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

A series of petitions &

cross-petitions
happened

Finally, the case came

to Supreme Court of
India

Satyam exercised its

option to purchase the
VGE shares in the JV at
its book value

Series of petitions & Cross Petitions

Satyam

Satyam

VGE

1) London Court of
International Arbitration

2) United States District

Court, Michigan

3) Cross Petition

Satyam

VGE

VGE

4) 1st Addl. Chief Judge, Civil

Court, Secunderabad

5) High Court, Andhra

Pradesh

6) Appeal

Case Details
I.

JV was situated in India

II.

Satyam enforced the award in USA

III. VGE challenged it saying the award should have been

enforced in India
IV. SC had to decide if enforcement of a foreign award can
be challenged in India

Reference Case:
Bulk Trading vs. Bhatia International
I.

Similar case in which arbitration was held by ICC, Paris.

II.

Bulk Trading filed an application in District Court which it

won.

III. Bhatia International approached SC.

IV. SC dismissed the petition in favour of Bulk Trading

Contentions
VGE

Satyam
Foreign award can be
challenged based on reference
case

No suit can be filed against

enforcement of foreign award

No compulsion in seeking award in

India as per agreement

Satyam cannot enforce in US

SHA did not provide for

approaching US Court

SHA does not have any objection

related to foreign award

Satyam was motivated by the

intention of evading the legal
and regulatory scrutiny

VGE riding two horses at the same

time

All previous cases except Bhatia held

view that foreign award cant be
challenged

judgment
Referred Bhatia International case.
Even in international arbitrations, unless specifically
mentioned in contract, enforcement can be challenged
This case has close link with India and its laws
If foreign award cant be challenged in India, it leaves a
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.

Criticism
Widely criticized in international law community
Erroneousinterpretation of act
Party Autonomy rendered useless
The enforcement mechanism has beenrendered
inefficient, clumsy, and uncertain
Little use of arbitration

International Commercial Arbitration

It means an arbitration relating to disputes arising out of
legal relationships, whether contractual or not,
considered as commercial under the law in force in India
and where at least one of the parties is:
1. an individual who is a national of, or habitually resident
in, any country other than India; or
2. a body corporate which is incorporated in any country
other than India; or
3. a company or an association or a body of individuals
whose central management and control is exercised in
any country other than India; or
4. the Government of a foreign country

Case Study

Appellants:

Respondent:

TDM
Infrastructure
Private Limited

UE
Development
India Pvt
Limited

Reference
Sec 2 (1). "international

Background
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,
ButDirectors and share
holders 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

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 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;

Background
Company incorporated in India
can only have Indian
nationality for the purpose of
the Act

Where both parties have

Indian nationalities, the
arbitration between such
parties cannot be said to be
an international commercial
arbitration

In a matter involving determination of jurisdiction of a Court,

certainty must prevail which cannot be determined by entering into
a disputed question of factAll the board meetings in the instant case took place in Malaysia

Reference
Sec 11: Appointment of
arbitrators

The Outcome
Arbitration - International commercial arbitration
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.

Arbitration - Appointment of Arbitrator- Jurisdiction of

Court to appoint
Hence the present Court has no jurisdiction to nominate an Arbitrator
and hence the application dismissed

Case Study

Appellants:

Respondent:

National
Agricultural Coop. Marketing
Federation
India Ltd.

Gains Trading
Ltd.

Background
Dispute arose between the
parties

Respondent replied with refusal

to comply with Applicability
of section 11 questioned

Respondent alleged of nonperformance of the contract

Invoking the arbitration
clause of the agreement,
notice sent by the Petitioner

Whether an arbitration clause

comes to an end if contract
abrogated

Reference
Sec 11: Appointment of
arbitrators
Sec 16.Competence
of arbitral tribunal to
rule on its jurisdiction

The Outcome
Arbitration Jurisdiction of arbitral tribunals
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
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
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.

About the Case

Malaysian
Airlines(Foreign Co.)
appointed Stic Travels
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 originals of
these agreements were
with the Indian company.

The agreements
were terminated by
the foreign company
by notice dated
March 1, 1999
delivered to the
Indian company on
the same date.

 The foreign company claimed that the Indian 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.
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.

 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
After hearing the parties, the designated judge identified two
points for consideration

 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.
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.

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