5.

CLINICAL COURSE - II
THE ARBITRATION AND CONCILIATION ACT, 1996
HISTORY OF ARBITRATION
Arbitration has a long history in India. In ancient times, people often voluntarily submitted their
disputes to a group of wise men of a community-called the panchayat - for a binding resolution.

rule. The Bengal Regulations provided for reference by a court to arbitration, with the consent of the
parties, in lawsuits for accounts, partnership deeds, and breach of contract, amongst others.

(i) Arbitration (Protocol and Convention) Act, 1937

(ii) Indian Arbitration Act, 1940
(iii) Foreign Awards (Recognition and Enforcement) Act, 1961.
General law governing arbitration in India along the lines of the English Arbitration Act of1934,
and both the 1937 and the 1961 Acts were designed to enforce foreign arbitral awards (the 1961 Act
implemented the New York Convention of 1958).
The government enacted the Arbitration and Conciliation Act, 1996 (the 1996 Act) in an effort to
modernize the outdated 1940 Act. The 1996 Act is a comprehensive piece of legislation modeled on

the 1961 Act and the 1940 Act). Its primary purpose was to encourage arbitration as a cost-effective
and quick mechanism for the settlement of commercial disputes. The 1996 Act covers both domestic
arbitration and international commercial arbitration.
The Arbitration Act, 1940

the court was required in all the three stages of arbitration, i.e. Prior to the reference of the dispute to the
arbitral tribunal, in the duration of the proceedings before the arbitral tribunal, and after the award was
passed by the arbitral tribunal. Before an arbitral tribunal took cognizance of a dispute, court intervention
was required to set the arbitration proceedings in motion. The existence of an agreement and of a dispute
was required to be proved. During the course of the proceedings, the intervention of the court was
necessary for the extension of time for making an award. Finally, before the award could be enforced, it
was required to be made the rule of the court.
While the 1940 Act was perceived to be a good piece of legislation in its actual operation and
implementation by all concerned - the parties, arbitrators, lawyers and the courts, it proved.
THE ARBITRATION AND CONCILIATION ACT, 1996
PRELIMINARY
The Arbitration and Conciliation Act, 1996 was enacted with a view to consolidate and amend
the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign

incidental thereto.
The Act is in four parts. Part I relates to arbitration, Part II deals with enforcement of certain foreign
awards namely the New York and Geneva Convention awards, Part III provides for conciliation as an

46 CLINICAL COURSE - II
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.
Arbitration is an alternative means of dispute resolution by a domestic tribunal who is chosen by the
parties themselves or appointed with their consent.
It is a popular means of settling disputes in international, national and commercial spheres and an
arbitration clause is usually incorporated in almost all business transactions and employment contracts.
The Indian equivalent for arbitration is ‘panchayat.’
Arbitration is the means by which parties to a dispute get the same settled through the intervention
of a third person (who is called an arbitrator), so that the actual decision of the dispute rests with the
arbitrator, who is considered to be the ultimate judge of the law and facts involved in the dispute.
The underlying principle of this branch of law is to encourage parties to settle their disputes amicably
through a tribunal of their own choice instead of carrying it to the established courts of justice.
Salient Features of the Arbitration and Conciliation Act, 1996
1) In addition to arbitration, conciliation has also been recognized as a means of settling
commercial disputes.
2) The arbitration award and the settlement arrived at during conciliating proceedings have
been treated at par with the decree of the Court.
3) Powers of the Court have been considerably curtailed.
4) The Act contains a salutary provision making it mandatory for the arbitrator to give reasons
for the award.
5) The Act no longer requires the parties to make an application to the Court to make the award
and this provision helps in saving considerable time of the litigants in execution of arbitral
award.
6) The Act contains the provision relating to the interim measures which empower the arbitrator
or arbitral tribunal to pass interim orders in respect of the subject-matter of the dispute at the
request of the party.
7) The Act is more exhaustive and it deals with arbitration, conciliation, enforcement of foreign

Awards.

relating to disputes arising out of legal relationship whether contractual or not, considered as
commercial under the law in force in India and where at least one of the parties whether an
individual, body corporate or a company is having business or residing abroad and in case of
Government, the Government is of a foreign country.

in such matters.

India shall not be valid in law being null and void.

12) The Act provides for enforcement of certain foreign awards made under the New York
Convention and the Geneva Convention respectively.
13) There is a standard arbitration clause in the Act which is more useful for the parties entering
into international commercial transactions.
14) The Act is a comprehensive legislation on domestic as well as international or inter-State
Arbitrations.
47 CLINICAL COURSE - II
 15) The Act provides detailed procedure for conduct of Arbitrations and awards.
16) Arbitrators have been given more powers and the arbitral tribunals have been assigned better
competence to rule on their jurisdiction.
17) As the Act has provisions for applicability of Foreign Arbitral Tribunal’s awards, it has
international applicability.
18) The role of institutions in promoting and organizing arbitration has been recognized.
19) The power to nominate arbitrators has been give (failing agreement between the parties) to
the Chief Justice or to an institution or person designated by him.
20) The time limit for making awards has been deleted. The Act after amendment provides Fast
Track Arbitration for quick disposal of disputes.
21) The Provisions relating to arbitration through intervention of Court when there is no suit
pending or by order of the Court where there is a suit pending, have been removed.
22) The importance of transnational commercial arbitration has been recognized and it has been

would be free to designate the law applicable to the substance of the dispute.
Permanent arbitral institution
The parties may themselves directly appoint arbitrators and arrange for the necessary facilities for
conduct of the arbitration (whether it be commercial or non-commercial arbitration) in such cases there
is no intermediary. However, it is a common practice in commercial arbitration to entrust arbitration to
institutions which administer arbitrations but do not arbitrate on disputes. By use of the words ‘whether or

to arbitrations administrated by an institution thus removing the risk of administered arbitrations being
declared unlawful.

legal permanency by way of registration under some Act or by incorporation under a statute.

assistance to facilitate the conduct of arbitration proceedings.

All matters of controversy or litigation, unless they are forbidden by a statute or public policy can
be submitted to arbitration. It is generally held that the following matters can be referred to arbitration:
i. All matters of civil nature, which may form the subject of civil litigation affecting private rights,
may be referred to arbitration. Sec. 9 of the Civil Procedure Code refers to matters of civil
nature.
ii. Even disputes which are not of a civil nature may be referred to arbitration provided they are
not disputes of criminal nature .
iii. It is open to the parties to refer a pure question of law or facts or questions of territorial
jurisdiction involving questions of law and fact to arbitration.
Matters which cannot be referred to arbitration:
i. Criminal proceedings – If the criminal proceedings involve a dispute which is purely criminal
and which cannot be the subject of a civil action, such matter cannot be referred to arbitration.
ii. Illegal transactions – Where the subject matter of a reference is illegal, no award can be
binding.

iv. Testamentary matters – The question of genuineness or otherwise of a will cannot be referred
to arbitration as the Probate Court is the only Court to determine whether a Probate of an
alleged will shall be issued.
48 CLINICAL COURSE - II
 v. Insolvency Proceedings- Insolvency proceedings cannot be referred to arbitration.
vi. Lunacy proceedings – Lunacy proceedings are not the subjects of arbitration as it is the
prerogative of Government to protect lunatics.
Difference between arbitration and judicial adjudication
1. Nature of the tribunal – In case of arbitration the private tribunal or arbitrators are generally
chosen by the parties themselves. The arbitral tribunal is a quasi-judicial body in whom the

exceptional circumstances. Whereas, in litigation the tribunal is a Court of compulsory and

competent jurisdiction, a judicial body. The judgement of the Court is subject to correction by
way of appeal, revision or review.
2. Procedure and evidence – An arbitrator is not bound by the technical and strict rules of
evidence and procedure but he must conform to the rules of natural justice. The proceedings

issues raised before him. All that he is required to do is to give an intelligent decision which
determines the rights of the parties. The courts are bound by the technical and strict rules of
procedure and evidence contained in the Code of Civil procedure and The Indian Evidence
Act.
3. Basis of decision – An arbitrator is generally expected to determine a dispute according to
law, but he may depart from the rules of law and decide equitably. But the Courts of law
cannot depart from the mandatory provision of law when the law is clear and rules of law
exist. The major advantages of arbitration are there is no publicity as it maintains privacy. It

have to bear the cost of arbitration which may at times be substantially heavy and be more
expensive than litigation.
Secs. 2-43

Part I shall apply to all arbitrations and all proceedings relating thereto subject to the following. It
shall –
1. apply where the place of arbitration is in India;
2. not affect any other law which prohibits submission of certain disputes to arbitration;
3. except for the provisions relating to non-discharge of arbitration agreement upon death of any
party thereto [sec. 40(1)], provisions in case of insolvency [sec. 41], and limitations [sec. 43],
Part I of the Act shall apply to statutory arbitrations to the extent it is not inconsistent with that
other enactment or rules made the reunder;
4. apply to statutory arbitration and arbitrations under an international agreement only in so far
as here is nothing otherwise provided in that particular statute, law or agreement;
5. apply to the state of Jammu and Kashmir only in so far as it relates to international commercial
arbitration.
DEFINITIONS Sec. 2(1), sec. 2(7) and sec. 7
Sec. 2(1) In this part unless the context otherwise requires-
a) “arbitration” means any arbitration whether or not administered by permanent arbitral institution.
b) “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain

relationship whether contractual or not.

The arbitration agreement is required to be in writing, it may be in the form of an arbitration clause
in a contract or in the form of a separate agreement or may arise where parties by reference
import the arbitration clause contained in an earlier document into a subsequent contract so as to
incorporate it.
49 CLINICAL COURSE - II
 The arbitration agreement shall be deemed to be in writing if it is contained in –
i. a document signed by the parties;
ii. an exchange of leteres, telex, telegrams or other means of telecommunication which provide
a record thereof; or
iii. 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. Sec. 2(1) (b) read with sec. 7;
c) “arbitral award” includes an interim award;
d) “arbitral tribunal” means a sole arbitrator or a panel of arbitrators.
e) “court” means a District Court and a High Court exercising original Jurisdiction but does not include
any court inferior to the District Court or any Court of Small Causes
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 force in India
and where at least one of the parties is –
i. if an individual, a national of, or habitually resident in any country other than India; or
ii. if a body corporate, is incorporated in any country other than India; or
iii. if a company or an association or a body of individuals, the central management and control
thereof is exercised in any country other than India, or
iv. the Government of a foreign country,
“international commercial conciliation’ shall have the same meaning as assigned to the
expression “international commercial arbitration” subject to substitution of word conciliation in
place of arbitration. Sec. 1(2) Expln.;
g) “Legal representative” means a person who in law represents the estate of the deceased, and
includes any person who intermeddles with the estate person on whom the estate devolves on the
death of the party so acting;
h) “party” means a party to an arbitration agreement.
Sec. 2 (7) “Domestic award” an arbitral award made under this Part shall be considered as domestic
award.
ESSENTIAL INGREDIENTS OF ARBITRATION AGREEMENT
In order that an arbitration agreement be regarded as valid in law it must comply with the special
statute on Arbitration and like all contracts it must be legally valid under the law of contract.
The essentials of a valid contract under the provisions of Chapter II of the Indian Contract Act

1. Contractual capacity – Parties must be legally competent to enter into a contract under secs. 11
and 12
2. Free mutual consent – Free consent not tainted by coercion, fraud etc., as provided by secs. 13
to 22. The parties to the agreement must be ad idem. There should be consensus between the
parties they must agree upon the same thing in the same sense.
3. Lawful object and consideration – The subject or class of subjects to which the dispute relates must
be lawful under secs. 23 to 27 and 30.
4. Certainty – There should be no uncertainly in the agreement. The meaning of the agreement must
be certain or capable of being made certain as required by sec. 29. The rule is id certum est quod
certum redid potest meaning that what is capable of being ascertained is certain, not uncertain.

50 CLINICAL COURSE - II
 The essential ingredients of an arbitration agreement as provided by sec. 2 (b) read with sec. 7
are –
1. Written agreement.
2. Intention to submit to arbitration.

whether contractual or not.

4. Parties.
CONSTRUCTION OF REFERENCES Sec. 2(6) – 2(9)
Freedom of parties to determine a certain issue conferred by Part I, except in relation to rules
applicable to substance of dispute under sec. 28 shall include the right of parties to delegate the
determination of that issue to any person or institution. [Sec. 2(6)].
Where in any agreement a reference is made to any arbitration rules those rules shall be deemed
to be incorporated in the agreement and the parties shall be deemed to have agreed to the contents of
those rules. [Sec. 2(8)].
The expression claim shall also apply to a counter-claim and defence shall apply or include
defence to claim and counter-claim except for the purposes of sec . 25(a) and 32(2) (a) where reference
to claim means claim by claimant only. [Sec. 2(9)].
An arbitral award made under Part I of the Act shall be considered as a domestic award. [Sec.
2(7)].
RECEIPT OF WRITTEN COMMUNICATIONS Sec. 3.

received –
a) if it is delivered to the addressee personally, or at his place of business, habitual residence or
mailing address; and
b) where none of the places referred to above can be found after making a reasonable inquiry,
if it is sent to the addressee’s last known place of business, habitual residence or mailing
address by registered letter or by any other means which provides a record of the attempt to
deliver it.
The communication is deemed to have been received on the day it is so delivered. The deeming
provisions of this section apply to arbitral tribunal and not to written communication in respect of
proceedings of any judicial authority.
WAIVER OF RIGHT TO OBJECT Sec. 4.
A party who knowingly fails to object the non-compliance of any non-mandatory provisions of
Part I or any requirement under the arbitration agreement by the other party without undue delay or

EXTENT OF JUDICIAL INTERVENTION. Sec. 5.

Irrespective of anything contained in any other law, in matters governed by this Part, no judicial
authority shall intervene except where so provided in this Part.
ADMINISTRATIVE ASSISTANCE Sec. 6.
To facilitate the conduct of arbitral proceedings administrative assistance by a suitable institution
or person may be arranged by the parties or by the arbitral tribunal with the consent of the parties.
POWER TO REFER PARTIES TO ARBITRATION. Sec. 8.
A judicial authority before which an action is brought in respect of a matter which is the subject
of an arbitration agreement shall refer the parties to arbitration if a party makes an application for this

Inspite of the fact, that an application as above has been made and the issue is pending before a
judicial authority an arbitration may be commenced or continued and an arbitral award made.

51 CLINICAL COURSE - II
POWER OF COURT TO GRANT INTERIM MEASURES. Sec. 9.
A party to the arbitration agreement may either before commencement of, or during arbitration
proceedings or at any time after the making but before enforcement of the arbitral award apply to a court
for-
i. the appointment of a guardian for a minor or a person of unsound mind for the purposes of
arbitral proceedings; or
ii. an interim measure of protection in respect of any of the following matters, namely –
a) the preservation, interim custody or sale of any goods forming the subject-matter of the
arbitration agreement;
b) securing the amount in dispute;
c) the detention, preservation or inspection of any property or thing and authorizing the
taking of all necessary steps which are expedient for the purpose of obtaining full
information or evidence in this behalf;
d) interim injunction or the appointment of a receiver;
e) such other interim measure of protection as appears just and convenient to the court.
While dealing with an application for and granting interim measures of protection the court shall
have the same powers as it has for the purpose of or in relation to any proceedings before it.
COMPOSITION OF ARBITRAL TRIBUNAL Secs. 10-15
Number of arbitrators. –The parties are free to determine the number of arbitrators but such
number shall not be an even number. Where they do not so determine, the arbitral tribunal shall consist
of a sole arbitrator. [Sec. 10].
Appointment of arbitrators – may be made by the parties themselves or upon request of the parties
by the Chief Justice or any person or institution designated by him. In case of international commercial
arbitration the reference to Chief Justice shall be construed as a reference to the Chief Justice of India
and in case of any other arbitration it shall be construed as a reference to the Chief Justice of High
Court. The High Court which would have had jurisdiction if the questions forming the subject matter of
arbitration had arisen in a suit.
A person of any nationality may be appointed as an arbitrator, unless otherwise agreed by the
parties. However, in case the parties in an international commercial arbitration belong to different
nationalities, the Chief Justice of India or the person or institution designated by him may appoint the
sole or third arbitrator of a nationality other than the nationalities of the parties.
The parties are at liberty to mutually agree upon a procedure for appointment of arbitrators. If a
procedure has been agreed upon appointment shall be made in accordance therewith.
Where the parties have agreed that the number of arbitrators shall be three but no procedure is
laid down or agreed upon, the procedure laid down in sec.11(3) shall apply. Accordingly, each party shall
appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act
as the presiding arbitrator.
Power of Chief Justice or person or institution designated by him to appoint arbitrators-In an
arbitration with three arbitrators when the procedure prescribed by Sec. 11(3) fails –
i. either because one of the parties fails to appoint an arbitrator; or
ii. because the two arbitrators appointed by the parties –
a) fail to appoint, or

appointment shall be made, upon request of a party, by the Chief Justice or any person
or institution designated by him.

52 CLINICAL COURSE - II
 In an arbitration with a sole arbitrator, where there is a failure to agree on procedure or where the
parties fail to agree on appointment of the sole arbitrator within thirty days of receipt of a request by one
party from the other party to so agree, the appointment shall be made, upon request of a party, by the
Chief Justice or any person or institution designated by him.
Where despite there being an agreement on procedure to appoint there is failure in acting upon it
on the part of either, a party or the parties or the two appointed arbitrators or a person or the institution
to whom the Chief Justice delegated his power, unless the agreement on the appointment procedure
provides other means for securing the appointment, a party may request the Chief Justice or any person
or institution designated by him to take the necessary measures.
While appointing an arbitrator in exercise of powers vested under this section, the Chief Justice or
the person or institution designated by him shall have due regard to the following considerations –

b) other considerations as are likely to secure the appointment of an independent and impartial
arbitrator.
Where more than one request has been made under this section to the Chief Justices of different

made shall alone be competent to decide on the request.

A decision on a matter entrusted to the Chief Justice or the person or institution designated by him

The Chief Justice may make such Scheme as he may deem appropriate for dealing with matters
entrusted to him by his section. [Sec. 11].

A duty is cast upon a prospective arbitrator (i.e., a person approached in connection with
his possible appointment as an arbitrator) when approached and an arbitrator, from the time of his
appointment and throughout the arbitral proceedings, to disclose, without delay to parties in writing any

parties have already been informed of them by him.

The appointment of a person as an arbitrator can be challenged by a party who has appointed him

parties and only for reasons of which the party becomes aware after the appointment has been made.
[Sec. 12].

The parties are free to agree on a procedure for challenging the arbitrator. However, if no procedure
has been agreed the following procedure shall apply. The party intending to challenge an arbitrator shall

becoming aware of the constitution of the arbitral tribunal or of the existence of any circumstances

The arbitral tribunal shall decide on the challenge on merits except where the challenged arbitrator

If the challenge is unsuccessful the arbitral tribunal shall continue the proceedings and make an
arbitral award. However, the party who challenged the appointment of the arbitrator may apply for setting
aside of the award under sec. 34. In case the award is set aside for wrongful rejection of the challenge
the court may decide as to whether the arbitrator whose appointment was challenged is entitled to any
fees. sec. 13.
53 CLINICAL COURSE - II
Termination of mandate of arbitrator sec 13, 14 and 15.
Termination of mandate or authority of an arbitrator takes place in the following circumstances-

[sec. 13(3)], or
2) upon failure or impossibility to act, that is if-
a) the arbitrator becomes de jure or de facto unable to perform his functions; or
b) for some other reasons fails to act without undue delay; or

d) the parties agree to the termination of his mandate.

If there is any dispute between the parties as to whether either in law or factually the arbitrator
is incapacitated from performing his functions or has for other reasons failed to act without
undue delay a party may apply to the court to decide on the termination of the mandate,
unless the parties have agreed otherwise.

terminate his mandate shall not ipso facto imply acceptance of the validity of any of the
grounds referred to in this sec. or sec. 12(3). [Sec. 14].

terminate his mandate. [Sec 15(1)].

Substitution of arbitrator.

who shall appointed by following the same procedure as was applicable to the appointment of the
arbitrator being replaced.

a) any hearings previously held may be repeated at the discretion of the arbitral tribunal;
b) the change in composition of arbitral tribunal shall not render invalid any order or ruling of the
arbitral tribunal made prior to the replacement of an arbitrator under sec. 15. [Sec. 15]
JURISDICTION OF ARBITRAL TRIBUNAL secs. 16-17.
Competence of arbitral tribunal to rule on its own jurisdiction.
The arbitral tribunal is competent to rule on its own jurisdiction. It can also decide ay objections
with respect to the existence or validity of the arbitration agreement. While deciding these questions it
shall take into account the following factors –
a) an arbitration clause shall be treated as an agreement independent of the other terms of the
contract; and
b) a decision by the arbitral tribunal that the contract is null and void shall not ipso jure (by the mere
operation of law) result in the automatic invalidity of the arbitration clause.
The plea of lack of jurisdiction of the arbitral tribunal shall be raised not later than the submission
of the statement of defence. However, a party shall not be precluded from raising such a plea merely
because he has appointed or participated in the appointment of an arbitrator.
Similarly, a plea that the arbitral tribunal is exceeding the scope of its authority may be raised
during the course of arbitral proceedings.
The arbitral tribunal shall decide on any such plea and where it takes a decision rejecting the plea,
it shall continue with the arbitral proceedings and make an arbitral award.
A party aggrieved by such an arbitral award may apply for having it set aside under sec. 34. [sec.
16].
Interim measures ordered by arbitral tribunal

54 CLINICAL COURSE - II
 In the absence of any agreement to the contrary the arbitral tribunal may, at the request of a party,
order a party to take any interim measure of protection in respect of the subject-matter of the dispute. It
may also require a party to provide appropriate security for carrying out the interim measures ordered by
it. [sec. 17].
CONDUCT OF ARBITRAL PROCEEDINGS secs. 18-27.
Commencement of arbitral proceedings
In the absence of any agreement between the parties providing otherwise, the arbitral proceedings
in respect of a particular dispute commence on the date on which the respondent receives a request for
reference of the dispute to arbitration. [Sec. 21].
Place of arbitration
The parties are free to agree on the place of arbitration. If they fail to do so the arbitral tribunal shall
determine the place of arbitration having regard to the circumstances of the case and the convenience
of the parties.
Notwithstanding the above provisions, if there is no agreement to the contrary, the arbitral tribunal
may meet at any place it considers appropriate for consultation among its members, hearing witnesses,
experts or the parties, or inspection of documents, goods or other property. [Sec. 20].
Language to be used in arbitral proceedings
The parties are given the liberty to decide by mutual agreement what language or languages
are to be used in the arbitral proceedings. In the event of there being no such agreement the arbitral
tribunal shall determine the language or languages to be used. The language agreed or determined

other communication by the arbitral tribunal, and the arbitral tribunal may order that any documentary
evidence shall be accompanied by the translation into such language. [Sec. 22].
Determination of rules of procedure
The arbitral tribunal shall not be bound by the code of Civil Procedure, 1908 or the Indian Evidence
Act, 1872.
Subject to the provisions contained in Part I of this Act the parties are free to agree on the
procedure to be followed in the conduct of arbitral proceedings, and in the absence of any such agreement
the arbitral tribunal may follow the procedure it considers appropriate. This power of arbitral tribunal to
determine the procedure includes the power to determine the admissibility, relevance, materiality and
weight of any evidence. [Sec. 19].
Equal treatment of parties
The arbitral tribunal must mete out equal treatment to the parties and it must give each party a full
opportunity to present his case. [Sec. 18].
Statements of claim and defence
Statements of claim and defence are required to be made within the period of time as agreed upon
by the parties or determined by the arbitral tribunal. All documents considered relevant or a reference to
the documents or other evidence they will submit should accompany such statements.
The claimant shall state the facts supporting his claim, the points at issue and the relief and
remedy sought, and the respondent shall state his defence in respect of these particulars, unless the
parties have otherwise agreed as to the required elements of these statements.

or defence and the arbitral tribunal has power at his discretion to allow amendment of pleadings and may
refuse it on grounds of delay. [Sec. 23].
Hearings and written proceedings

55 CLINICAL COURSE - II
hearings for the presentation of evidence or for oral argument, or conduct the proceedings on the basis
of documents or other materials. He shall hold oral hearings on request of a party except where the
parties have agreed against it.

the purposes of inspection of documents, goods or other property. All statements, documents or other
information supplied to or applications made and any expert report or evidentiary documents which the
arbitral tribunal may rely on in making its decision shall be communicated to the parties. [Sec. 24].

terminate the proceedings;

b) however, where the respondent fails to submit his statement of defence as per sec. 23(1), the
arbitral tribunal shall continue the proceedings ex parte without treating that failure as admission of
claimant’s allegations;

any documentary evidence in support of his statement, the arbitral tribunal may continue the
proceedings ex parte and make the award on the evidence before it. [Sec. 25].

In the absence of any agreement to the contrary between the parties –

party to give the expert any relevant information or to produce, or to provide access to any relevant
documents, goods or other property for his inspection;
b) if a party requests and the arbitral tribunal considers it necessary the expert shall participate in an
oral hearing where he may be examined and cross examined;
c) upon request of a party the expert shall make available to him for examination all relevant documents,
goods or property in possession of the expert on the basis of which he prepared his report. [Sec.
26].
Court assistance in taking evidence
An application may be made by the arbitral tribunal or by a party with the approval of the arbitral

application –
a) the names and addresses of the parties and the arbitrators;
b) the general nature of the claim and the reliefs sought;
c) the evidence to be obtained in particular –
i. the name and address of any person to be heard as witness or expert witness and statement
of the subject-matter of the testimony required;
ii. the description of any document to be produced or property to be inspected.
The court on hearing the application may execute the request by ordering that the evidence be
provided directly to the arbitral tribunal. While passing the necessary order the court may issue process
or summons to witness as in suits tried before it. Where a witness fails to comply with the order and,
or process, t will amount to contempt of arbitral tribunal and he will be subject to and incur the same
disadvantages, penalties and punishments by order of the court on the request of the arbitral tribunal as
he would incur for like offences in suits tried before the Court.
The expression processes used in this section includes summonses and commissions for the
examination of witnesses and summonses to produce documents. [Sec. 27].

56 CLINICAL COURSE - II
MAKING OF ARBITRAL AWARD & TERMINATION OF PROCEEDINGS
Rules applicable to substance of dispute Where the place of arbitration is situated in India –
a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall
decide the dispute in accordance with the substantive law of India.
b) in international commercial arbitration –
i. the arbitral tribunal shall decide the dispute in accordance with the rules of law designated
by the parties. Any such designated law of a country shall, unless otherwise expressed,
be construed as directly referring to the substantive law of that country and not to its

ii. failing any designation of the law by the parties the arbitral tribunal shall apply the rules
of law it considers appropriate under the circumstances surrounding the dispute.
The arbitral tribunal shall decide ex aequo et bona or as amiable compositeur only if expressly
authorized by the parties to do so.
In all cases the arbitral tribunal shall decide in accordance with the terms of the contract and by
taking into account the usages of the trade applicable to the transaction. [Sec. 28].
Decision making by panel of arbitrators
In the absence of any agreement providing otherwise, where there is more than one arbitrator,
any decision of the arbitral tribunal shall be made by a majority of all its members. However, questions
of procedure may be decided by the presiding arbitrator where the parties or all the members authorises
him to do so. [Sec. 29].
Encouraging settlement not incompatible with arbitration agreement
It is not incompatible for an arbitral tribunal to encourage settlement of the dispute, and with the
agreement of the parties he may use mediation, conciliation or other procedures at any time during
arbitral proceedings to encourage settlement.
If parties settle the dispute during arbitral proceedings the arbitral tribunal shall terminate the
proceedings and record the settlement in the form of an arbitral award on agreed terms made in
accordance with sec. 31 and stating that it is an arbitral award. Such an award has the same status and
effect as any other arbitral award on the merits of the dispute. [Sec. 30].
Form and contents of arbitral award
The requirements as to form and contents of an arbitral award are –
1. An arbitral award shall be made in writing and shall be signed by the members of the arbitral

reasons for any omitted signature is stated.

2. Reasons upon which the award is based must be stated except where parties agree otherwise or
it is an award on agreed terms under sec. 30.
3. The arbitral award shall state the date and place of arbitration.
4. A signed copy of the award shall be delivered to each party.
5. The arbitral tribunal may make an interim arbitral award.

reasonable rate (on whole or part of the money for the whole or any part of the period between the
date of arising of the cause of action and the date of making of the award) may be included in the
sum for which the award is made.
Interest at the rate of eighteen per centum per annum from the date of the award till date of payment
is payable on the sum directed to be paid by an arbitral award unless the award otherwise directs.

costs or method for determining that amount, the manner of paying the costs, the party entitled to
and the party who shall pay the costs.
57 CLINICAL COURSE - II
 The term costs for this purpose means reasonable costs relating to the fees and expenses of
the arbitrators and witnesses, legal fees and expenses, any administration fees of supervising
institution, any other expenses incurred in connection with the arbitral proceedings and the arbitral
award. [Sec. 31].
Termination of Proceedings
The arbitral proceedings shall be terminated –

2. by an order of the arbitral tribunal for termination of arbitral proceedings. Such an order can be
passed in the following circumstances –
a) where the claimant withdraws his claim, however, no order for termination of arbitral
proceedings shall be passed where the respondent objects to such withdrawal and the arbitral

of the dispute;
b) where the parties agree on the termination of the proceedings; or

reason become either unnecessary or impossible.

The mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings
except, where proceedings for correction or interpretation of the award or making of arbitral award have
been initiated under sec. 33 or where an application under sec. 34(1) for setting aside an arbitral award
is adjourned by the court to enable the arbitral tribunal to resume the arbitral proceedings or to take any
other action for eliminating the grounds for setting aside the award. [Sec. 32].

Although an award has been made it may require correction, interpretation or additional award.
Correction of any computation, clerical or typographical or any other errors of a similar nature
occurring in the arbitral award.

Additional award as to claims presented in arbitral proceedings but omitted from the award.
The provisions of sec. 31. relating to form and contents apply also to correction, interpretation and
additional award.
Correction may be made suo motu by arbitral tribunal within thirty days from the date of the award
but not thereafter.
A request may be made by a party with notice to the other party within thirty days from receipt of
arbitral award unless other period is agreed upon in this regard –

b) for interpretation as stated above, where there is an agreement between the parties for so
doing;
c) for additional award if there is no contrary agreement between the parties.

correction, give interpretation within thirty days from the receipt of such notice and in case of a request
for additional award it is to be made within sixty days from receipt of such notice unless the time if felt
necessary is extended by the arbitral tribunal himself. [Sec. 33].
RECOURSE AGAINST ARBITRAL AWARD
Application for setting aside arbitral award
Recourse against an arbitral award may be had only by an application to a Court for setting it
aside on the following grounds –
1) The party making an application for having it set aside furnishes proof that –
i. a party was under some incapacity; or
ii. the arbitration agreement is not valid under the law to which the parties have subjected it or,
failing any indication thereon, under the law for the time being in force; or
58 CLINICAL COURSE - II
 iii. no proper notice of the appointment of an arbitrator or of the arbitral proceedings was served
on the applicant, or he was otherwise unable to present his case; or
iv. the arbitral ward deals with a dispute not contemplated by or not falling within the terms of
the submission, or it contains decisions on matters beyond the scope of the submission to
arbitration, provided that if the good part is severable from the bad part of the arbitral award
only the bad part of the decision may be set aside; or
v. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with
the agreement of the parties; or

a) the subject-matter of the dispute is not capable of settlement by arbitration under the law for
the time being in force, or

if it was induced or affected by fraud or corruption or it was in violation of ther obligations of

admissibility of evidence of conciliation proceedings placed under sec. 81 of the Act.

The time limit prescribed for making an application for setting aside an arbitral award is three
months from the date of receipt of arbitral award or from the date of the disposal of the request for
correction, interpretation or additional award under sec. 33. where such a request had been made. The
Court is empowered to extend this time limit by a further maximum period of thirty days, but not thereafter

the prescribed time.

On receipt of an application for setting aside of an arbitral award the Court may, where it is
appropriate and is so requested by a party, instead of adjudicating on the grounds raised, adjourn the
proceedings for a period of time to be determined by the Court to enable the arbitral tribunal to deal with
the grounds and to eliminate them to the extent possible either by resuming the arbitral proceedings or
taking other suitable action. [Sec. 34].
FINALITY AND ENFORCEMENT OF ARBITRAL AWARDS
Finality of arbitral awards

binding until the time limit prescribed therein for correction, interpretation, or additional award and setting
aside, as the case may be, has expired.
Enforcement of award
Where no application for setting aside an arbitral award is made or it has been refused, or the
period of limitation prescribed, for appealing against an order refusing to set it aside has expired, it can
be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 as if it were a decree
of the Court. [Sec. 36].
APPEALS AND MISCELLANEOUS
Appealable orders :An appeal shall lie from the following orders ( and from no others) to the Court
authorized by law to hear appeals from original decrees of the Court passing the order, namely –
a) an order of a Court granting or refusing to grant an interim measure of protection under sec. 9;
b) an order of a Court setting aside or refusing to set aside an arbitral award under sec. 34;
c) an order of the arbitral tribunal accepting the plea that the arbitral tribunal does not have jurisdiction
[sec. 16(2)], or that it is exceeding the scope of its authority. [sec. 16(3)];
d) an order of the arbitral tribunal granting or refusing to grant an interim measure of protection under
sec. 17.
59 CLINICAL COURSE - II
 No second appeal shall lie from an order passed in appeal under this section, but this bar against
second appeals shall not affect or take away any right to appeal to the Supreme Court. [Sec. 37].
The miscellaneous provisions relate to
1) Deposits [Sec. 38].
2) Lien on arbitral award and deposits as to costs [Sec. 39].
3) Arbitration agreement not discharged by death of party thereto [Sec. 40].
4) Provisions in case of insolvency [Sec. 41].
5) Jurisdiction [Sec. 42].
6) Limitations [Sec. 43].

be, as an advance for the costs likely to be incurred in arbitral proceedings in terms of sec. 31(8) in respect
of the claim submitted to it and order a separate amount of deposit for the counter-claim submitted by the
respondent. The parties are required to deposit this amount of advance in equal shares. Where a party
fails to pay his share the other party may pay that share, where the other also does not pay the share of
the defaulting party, the arbitral tribunal may suspend or terminate the arbitral proceedings in respect of
the claim or counter-claim of the defaulting party.

deposits received to the parties and return the unexpended balance, if any, to the party or parties, as the
case may be. [Sec. 38].
Lien on arbitral award
The arbitral tribunal shall have a lien on the arbitral ward for any unpaid costs of the arbitration,
this is, however, subject to any contrary provision in the arbitration agreement and the power of Court to
release the lien under this section.
Where an arbitral tribunal refuses to deliver its award except on payment of the costs demanded
by it, a party may make an application to the Court. The Court may order the arbitral tribunal to deliver
the arbitral award to the applicant on payment into court of the costs demanded and after an inquiry
pass further order as to a reasonable sum of costs to be paid to the arbitral tribunal out of the amount
deposited in court and refund of balance to the applicant.
The arbitral tribunal is entitled to appear and be heard on any such application. No such application

arbitral tribunal.
The Court may make orders regarding costs of arbitration where any question relating to it arises

Effect of death
Arbitration agreement not to be discharged by death of party thereto – An arbitration agreement
shall not be discharged nor shall the mandate of an arbitrator be terminated by the death of any party
thereto, but shall in such event be enforceable by or against the legal representative of the deceased
provided the right of action survives.
Where under any law any right of action is extinguished by the death of a person the operation of
that law will remain unaffected by the provisions of this section. [Sec. 40].

60 CLINICAL COURSE - II
Provisions in case of insolvency
Where a party to a contract containing an arbitration clause later became insolvent and the receiver
adopts the contract, the arbitration clause will be enforceable by or against the receiver in respect of all
such matters as are covered by the contract. In case of contracts, not adopted by the receiver any other
party or the receiver may apply to the judicial authority having jurisdiction in the insolvency proceedings
requesting for an order that any matter to which the arbitration agreement applies which is required
to be determined in connection with or for the purposes of the insolvency proceedings be referred to
arbitration. The judicial authority will exercise its discretion, and if having regard to all the circumstances
of the case it is of the opinion that the matter ought to be determined by arbitration, it may make an order

Jurisdiction
Effective and exclusive jurisdiction of single Court over arbitral proceedings – where with respect
to an arbitration agreement any application is made in a Court competent to entertain it, that Court alone
shall have jurisdiction over the arbitral proceedings and all subsequent applications arising in that matter
shall be made in that Court and in no other Court. The provisions of this section override and shall prevail
over Part I and any other law. [Sec. 42].
Limitations
Limitation Act, 1963 is applicable to arbitration – Provisions of the limitation Act shall apply to
arbitrations. For the purposes of reckoning the prescribed period of limitation an arbitration shall be
deemed to have commenced on the date referred to in sec. 21.
Where an arbitration agreement for submission of future disputes to arbitration contains a time
bar clause providing that any claim would be barred unless some step is taken to commence arbitration

thinks proper where just cause exists if undue hardship would otherwise be caused.
Where an award is eventually set aside by the Court, the period between the commencement
of the arbitration proceedings and the date of the setting aside order of the Court shall be excluded
in computing the period of limitation prescribed under the Limitation Act for commencement of any
proceedings with respect to the disputes so submitted. [Sec. 43].
Enforcement of Foreign Awards
The foreign awards which can be enforced in India are as follows: - (a) New York convention
award (made after 11 the October, 1960) (b) Geneva convention award - made after 28th July, 1924, but
before the concerned Government signed the New York convention. Since most of the countries have
signed New York convention, normally, New York convention awards are enforceable in India. New York

1958. Each country became party to the convention on the date on which it signed the convention.
Foreign award” means an arbitral award on differences 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: -

61 CLINICAL COURSE - II
Conciliation Procedure
Part III of the Act makes provision for conciliation proceedings. In conciliation proceedings, there
is no agreement for arbitration. In fact, conciliation can be done even if there is arbitration agreement.

conciliator has no authority to give any award. He only helps parties in arriving at a mutually accepted
settlement. After such agreement they may draw and sign a written settlement agreement. It will be
signed by the conciliator. However after the settlement agreement is signed by both the parties and
the conciliator, it has the same status and effect as if it is an arbitral award. Conciliation is the amicable
settlement of disputes between the parties, with the help of a conciliator.
The act makes provision for conciliation proceedings. In conciliation proceedings:

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.
Conciliation is the amicable settlement of disputes between the parties, with the help of a conciliator
Offer for Conciliation
The conciliation proceedings can start when one of the parties makes a written request to other to

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 Conciliator: There shall be one conciliator unless the parties agree that there shall
be two or three conciliators. Where there is more than one conciliator, they ought, as a general rule, to
act jointly.

conciliator;

and the parties may agree on the name of the third conciliator who shall act as the presiding
conciliator.
Conciliation Proceedings
Submission of statements to conciliator - The conciliator, upon his appointment, may request
each party to submit to him a brief written statement of his position and the facts and grounds in support
thereof, supplement by any documents and other evidence that such party deems appropriate. The party
shall send a copy of such statement, documents and other evidence to the other party.
The conciliator may request each party to submit to him a further written statement of his position
and the facts and grounds in support thereof, supplemented by any documents and other evidence that
such party deems appropriate. The party shall send a copy of such statement, documents and other
evidence to the other party.
The conciliator may request a party to submit to him such additional information as he deems
appropriate.
The conciliator is not bound by the Code of Civil Procedure, 1908 (5 of 1908)or the Indian Evidence
Act, 1872.
62 CLINICAL COURSE - II
 Role of 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, giving consideration to, among other things, the rights
and obligations of the parties, the usages of the trade concerned and the circumstances surrounding the
dispute, including any previous business practices between the parties.
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 to hear oral statements, and the need for a speedy settlement of the
dispute.
The conciliator may, at any stage make proposals for a settlement of the dispute. Such proposals
need not be writing or need not be accompanied by a statement of the reasons therefor.
Administrative assistance
In order to facilitate the conduct of the conciliation proceedings, the parties, or the conciliator, may
arrange for administrative assistance by a suitable institution or person.

The conciliator may invite the parties to meet him or may communicate with them orally or in
writing. He may meet or communicate with the parties together or with each of them separately.

such place shall be determined by the conciliator, after consultation with the parties, having regard to the
circumstances of the conciliation proceedings.
Disclosure of information
When the conciliator receives factual information concerning the dispute from a party, he shall
disclose the substance of that information to the other party in order that the other party may have the
opportunity to present any explanation which he considers appropriate:

party.

The parties shall in good faith co-operate with the conciliator and, in particular, shall endeavour to
comply with requests by the conciliator to submit written materials, provide evidence and attend meetings.

Each party may, on his own initiative or at the invitation of the conciliator, submit to the conciliator
suggestions for the settlement of the dispute.
Settlement agreement-
(1) When it appears to the conciliator that there exist elements of a settlement which may be
acceptable to the parties, he shall formulate the terms of a possible settlement and submit
them to the parties for their observations. After receiving the observations of the parties, the
conciliator may reformulate the terms of a possible settlement in the light of such observations.
(2) If the parties reach agreement on a settlement of the dispute, they may draw up and sign
a written settlement agreement. If requested by the parties, the conciliator may draw up, or
assist the parties in drawing up, the settlement agreement.

and persons claiming under them respectively.

(4) The conciliator shall authenticate the settlement agreement and furnish a copy thereof to
each of the parties.
63 CLINICAL COURSE - II
Status and effect of settlement agreement -
The settlement agreement shall have the effect as if it is an arbitral award on agreed terms on the
substance of the dispute rendered by an arbitral tribunal under section 30.

is necessary for purposes of implementation and enforcement.

The conciliation proceedings shall be terminated

(a) by the signing of the settlement agreement by the parties; on the date of the agreement;
(b) by a written declaration of the conciliator, after consultation with the parties, in the effect that

(c) by a written declaration of the parties addressed to the conciliator to the effect that the
conciliation proceedings are terminated, on the date of the declaration; or
(d) by a written declaration of a party to the other party and the conciliator, if appointed, to the
effect that the conciliation proceedings are terminated, on the date of the declaration.

The parties shall not initiate, during the conciliation proceedings, any arbitral or judicial proceedings
in respect of a dispute that is the subject- matter of the conciliation proceedings except that a party
may initiate arbitral or judicial proceedings, where, in his opinion, such proceedings are necessary for
preserving his rights.
Costs-

and given written notice thereof to the parties. “costs” means reasonable costs relating to-
(a) the fee and expenses of the conciliator and witnesses requested by the conciliator, with the
consent of the parties;
(b) any expert advice requested by the conciliator with the consent of the parties;
(c) any other expenses incurred in connection with the conciliation proceedings and the settlement
agreement.
The costs shall be borne equally by the parties unless the settlement agreement provides for a
different appointment. All other expenses incurred by a party shall be borne by that party.

Act.

**********

64 CLINICAL COURSE - II