ARBITRATION

BY UDAIVEER SINGH

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 CONCEPT OF ARBITRATION
 Arbitration is a means of securing an award on a conflict issue by reference to a
third party.
 It is a process in which a dispute is submitted to an impartial outsider who
makes a decision which is usually binding on both the parties.
 It is a process where there is hearing and determination of a cause between
parties in controversy by a person or persons chosen by them, or appointed
under a statutory provision.
 The parties submit their disputes/issues and are bound by the award of an
Arbitrator in relation to the matter which is in dispute between them.
 Arbitration is a judicial process. The arbitration award is binding and rests on
the principle of equity and justice.
 Arbitration is best suited for settlement of contractual rights, whereas
mediation is suited to the adjustment of disputes over interests.

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 Arbitration under Arbitration and
Conciliation Act, 1996
 Section 1
1. This Act may be called the Arbitration and Conciliation Act, 1996.
2. It extends to the whole of India: Provided that Parts I, III and IV shall extend to the State of Jammu
and Kashmir only in so far as they relate to international commercial arbitration or, as the case may
be, international commercial conciliation. Explanation.-In this sub-section, the expression
'international commercial conciliation" shall have the same meaning as the expression
"international commercial arbitration" in clause (f) of sub-section (1) of section 2, subject to the
modification that for the word 'arbitration" occurring therein, the word "conciliation" shall be
substituted.
3. It shall come into force on such date as the Central Government may, by notification in the Official
Gazette, appoint.
• Section 2(1)(a) : - “arbitration” means any arbitration whether or not administered by
permanent arbitral institution.
 Section 2(1) (f) :- “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 for 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
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 3.) A company or ail 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.
 Section 2(1)(c) :- “arbitral award” includes an interim award.
 Section 2(1)(d) :- “arbitral tribunal” means a sole arbitrator or a panel of arbitrators

Article 253 of the Constitution of India

• 253. Legislation for giving effect to international agreements.
 Notwithstanding anything in the foregoing provisions of this chapter,
 Parliament has power to make any law for the whole or any part of the territory of India for
implementing any treaty, agreement or convention with any other country or countries or any
decision made at any international conference, association or other body.
 Thus Part II is applicable in Jammu & Kashmir

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 Kinds Of Arbitration
 Ad-hoc : Proceeding that is not administered by others and requires parties to make arrangements
for selection of arbitrators.

 Institutional : Where there is prior agreement between the parties in case of commercial
transaction with the help of an institution.

 Contractual : Arbitration clause is there in the contract.

 Statutory : Consent of parties is not necessary, it is compulsory and binding.

 Domestic Arbitration : It occurs in India and is governed by Indian Law.

 International Commercial Arbitration : Where one of the parties is a foreigner. Explained in

2 (1) (f) of Arbitration and Conciliation Act, 1996.

 Foreign Arbitration : Proceedings are conducted outside India.

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 Malimath Committee Report
 Prior to formation of the Malimath Committee, Arbitration was governed by Indian
Arbitration Act, 1940.
 The Malimath Committee was formed and there were certain findings made by the
committee :-
1. There was unnecessary increased legislative activity.
2. The continuation of ordinary civil jurisdiction in some High Courts.
3. Lack of facilities to monitor and track cases for hearing.
4. Indiscriminate use of writ jurisdiction in High Courts.
5. Lack of strategies to Deal with new cases.
6. No provision in CPC for ADR.
 Recommendations :-
1. Introduction of conciliation procedure in writ matters.
2. Neighborhood justice centers with statutory status.
3. Provision in CPC for ADR.

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 Code Of Civil Procedure
Amendment Act, 1999
 Section 89 CPC :-
-> Settlement of disputes of outside the Court –
 Where it appears to the Court that
 there exist elements of a settlement
 Which may be acceptable to the parties
 The Court shall formulate the terms of settlement and give them to parties for
their observations and
 after receiving the observations of the parties, the Court may re-formulate
the terms of a possible settlement and refer the same for –
a) Arbitration
b) Conciliation
c) Judicial settlement through Lok Adalat
d) Mediation

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  Where a dispute has been referred –

a. For arbitration or conciliation, the provisions of the Arbitration and

Conciliation Act will apply.

b. Lok Adalat – 20(1) Legal Services Authorities Act 1987

c. Judicial settlement – Judge/Institution (Lok Adalat)

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 Arbitration and
Conciliation Act, 1996

Overview : -

 PART I : Arbitration

 PART II : Enforcement of Certain Foreign Awards

 PART III : Conciliation

 PART IV : Supplementary Provisions

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 PART I
 Chapters I to X (Sections 1-43)

 General Provisions
 Arbitration Agreement
 Composition of Arbitral Tribunal
 Jurisdiction of Arbitral Tribunals
 Conduct Of Arbitral Proceedings
 Making of Arbitral Award and termination of proceedings
 Recourse against Arbitral Award
 Finality and Enforcement of Arbitral Awards
 Appeals and Miscellaneous

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 PART II
 Enforcement of Certain Foreign Awards
[Chapters I-II (Sections 44 to 60)]

 New York Convention Awards

 Geneva Convention Awards

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 PART III
 CONCILIATION :-

 No chapter

 Sections 61-81

 Conciliation Mechanism

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 PART IV

 SUPPLEMENTARY PROVISIONS :-

 No chapter

 Sections 82-86

 Schedules (First to Third)

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 Difference b/w Arbitration Act,
1940 and Arbitration and
Conciliation Act, 1996
Arbitration & Conciliation Act,
Arbitration Act, 1940 1996

1. This Act was not so comprehensive. 1. The present Act of 1996 is more comprehensive.
2. It covered domestic arbitrations. 2. It covers domestic as well as international
arbitrations.

3. No conciliation provisions. 3. Contains Conciliation provisions.

4. No provisions for enforcement of foreign arbitral 4. Exclusive provision dealing with enforcement of
award. foreign arbitral award.

5. The Act of 1940 had given enormous powers to 5. Wherein the new Act, 1996 the Civil Court can
the civil courts, which resulted in interference by intervene only where it is so specifically provided
court, before, in between and the arbitration in the Act, 1996.
proceedings.

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 UNCITRAL
 According to UNCITRAL, Arbitration is the means by which the parties to a dispute
get the matter settled through the intervention of an agreed third party.
 The provisions of The Arbitration and Conciliation Act are to be interpreted without any
influence of The Indian Arbitration Act, 1940.
 UNCITRAL should be followed.
 UNCITRAL stands for United Nations Commission on International Trade
Law.
 Adopted Model Law of International Arbitration in 1985.
 General Assembly of UN has recommended that all countries give due consideration to
the said Model Law.
 Directed all the members to accept Model Law.
 Set of Conciliation Rules were accepted in 1980.
 Whereas it is expedient to make law respecting arbitration and conciliation, taking into
account the aforesaid Model Law and Rules.
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 AMENDMENT of 2015
 PRIOR TO AMENDMENT :-
 Principal Civil Court of Original Jurisdiction for both Domestic Arbitration and International
Commercial Arbitration.
• AFTER THE AMENDMENT : -
• Domestic Arbitration – same
 either District or
 High Court (ordinary original Civil Jurisdiction)
 International Commercial Arbitration – High court of competent jurisdiction.
 Why the definition of Court is Amended for ICA?
 Unfamiliar legal System
 Language barriers
 Clogged court dockets
 Different interpretation by different courts at the same time
 Unfamiliarity of lower courts with arbitration law

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 AMENDMENT of 2015 (contd.)

 SECTION 9 (interim relief )

 SECTION 27 (court assistance in taking evidence)
 SECTION 37 (appeal to section 9)

 These will apply to International Commercial Arbitration even if place of Arbitration is

outside India

 Subject to an agreement to the contrary

 High Court will act as court for relief.

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 Bhatia International vs Bulk Trading S.A. & Anr.
 FACTS : -
 The parties to an international contract had resorted to arbitration in accordance with the rules of ICC,
Paris to be conducted in Paris.
 As the foreign party wanted to ensure that in the event of a favourable award it would be able to recover
its claim from the Indian Party, it applied to an interim court for interim measures securing the property
of the Indian Party.
 The Indian party objected to the application on the ground that the arbitration in question was being held
in Paris, and under the New York Convention there is no provision for interim measure being granted by a
court other than one in which arbitration is being held.
 The High Court rejected the contention.
 The Indian party then approached the Supreme Court, which upheld the High Court’s judgment.
 MATTER OF CONTENTION :-
 Do Indian courts have exclusive jurisdiction even when the proper law of the contract is the law of another
country?
• JUDGMENT :-
 It was held by a three judge bench of the SC unanimously that Part 1 of the Arbitration and Conciliation
Act,1996, which gives effect to the UNCITRAL Model Law and which moreover bestows power on the
Court to grant interim measures apply even to International commercial arbitrations being held outside
18 India.
 Bharat Aluminium co. vs Kaiser Aluminium Technical Service
 This judgment by the Supreme Court of India has perceivably changed the arbitration regime in India.
 Before this judgment all matters were sought by the principles laid down in the Bhatia case.
 FACTS :-
 The parties had entered into an agreement in relation to the supply of equipment, modernization and
upgradation of production facilities.
 Certain disputes arose and were referred to arbitration seated in England and awards were made in favour
of the Respondent.
 RELEVANT CLAUSES OF AGREEMENT:-
 17.1 Any dispute or claim arising out of relating to this agreement shall be in the first instance endeavor to
be settled amicably by negotiation between the parties hereto and failing which the same will be settled by
arbitration pursuant to the English Arbitration Law and subsequent amendment thereto.
 17.2 The arbitration proceedings shall be carried by two arbitrators, one appointed by the Petitioner and
one by the Respondent chosen freely and without any bias. The Court of arbitration shall be wholly in
London, England and shall use the English language in the proceedings. The finding and award of the
Court of Arbitration shall be final and binding.
 17.3 Before entering upon the arbitration, the two Arbitrators shall appoint an Umpire. If the two
arbitrators are not able to reach an agreement on the selection of an Umpire, the Umpire shall be
nominated by the International Chamber of Paris.

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  ARTICLE 22 :- Governing Law
 This agreement will be governed by the prevailing law of India and in case of arbitration, the English Law
shall apply.
 MATTER OF CONTENTION :-
 Whether English Law or Indian Law would apply for the proceedings?
 JUDGMENT :-
 The court held that Article 22 is clear in providing that the proper law of the contract is Indian Law. They
further held that Article 17.1 provided for English Law to be the law applicable to the arbitration
agreement and therefore it would be impractical and not easy to interpret Article 22 to mean that Indian
Law would be the substantive law governing the contract but in case of arbitration, English law would
govern. Therefore, the court found that English law was the applicable law to the arbitration agreement.
In light of the same, the court upheld the decision of the High Court dismissing the applications of
Section 34.
 IMPLICATIONS :-
 Until the present judgment came into effect, the ratio of the Bhatia International undermined the rationale
that only the courts of the seat of the arbitration should be able to grant interim measure to parties
relating to that arbitration.
 The Court, through its judgment in Bharat Aluminium, overruled its earlier judgment in Bhatia
International and made the law declared in the present case applicable to all the arbitrations agreements
executed thereafter. In respect of arbitration agreements executed prior to the instant judgment, the
instant judgment will not apply and the law will be as it stood prior to the present judgment, i.e. Part I
will apply to international commercial arbitrations held outside India unless expressly and / or impliedly
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