Arbitration and Conciliation Act, 1996 - Generally

8/16/2019 Arbitration and Conciliation Act, 1996 - Generally

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ARBITRATION AND CONCILIATION ACT, 1996

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31. Prior to the enforcement of the Act, the law of

arbitration in this country was substantially contained in

three enactments, namely, ( 1 ) the Arbitration Act, 1940,

(2 ) the Arbitration (Protocol and Convention) Act, 193 ,

and ( 3 ) the !orei"n Awards (#eco"nition and $nforcement)

Act, 19%1& A 'arty holdin" a forei"n award was re uired to

ta e recourse to these enactments& *he Preamble of the

Act ma es it abundantly clear that it aims at consolidatin"

and amendin" +ndian laws relatin" to domestic arbitration,

international commercial arbitration and enforcement of

forei"n arbitral awards& *he ob ect of the Act is to minimi-e

su'ervisory role of the court and to "ive s'eedy ustice& +n

this view, the sta"e of a''roachin" the court for ma in"

the award a rule of court as re uired in the Arbitration Act,

1940 is dis'ensed with in the 'resent Act& +f the ar"ument

of the res'ondent is acce'ted, one of the ob ects of the Act

will be frustrated and defeated& .nder the old Act, after

ma in" award and 'rior to e/ecution, there was a

'rocedure for lin" and ma in" an award a rule of court

i&e& a decree& ince the ob ect of the Act is to 'rovide

s'eedy and alternative solution to the dis'ute, the same

'rocedure cannot be insisted u'on under the new Act

when it is advisedly eliminated& +f se'arate 'roceedin"s

are to be ta en, one for decidin" the enforceability of a

forei"n award and the other thereafter for e/ecution, it

would only contribute to 'rotractin" the liti"ation and

addin" to the su2erin"s of a liti"ant in terms of money,

time and ener"y& Avoidin" such di culties is one of the

ob ects of the Act as can be "athered from the scheme of

the Act and 'articularly loo in" to the 'rovisions contained


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in ections 4% to 49 in relation to enforcement of a forei"n

award& +n 'ara 40 of Thyssen 1 ud"ment already e/tracted

above, it is stated that as a matter of fact, there is not

much di2erence between the 'rovisions of the 19%1 Act

and the Act in the matter of enforcement of forei"n award&

*he only di2erence as found is that while under the

!orei"n Awards Act a decree follows, under the new Act the

forei"n award is already stam'ed as the decree& *hus, in

our view, a 'arty holdin" a forei"n award can a''ly for

enforcement of it but the court before ta in" further

e2ective ste's for the e/ecution of the award has to

'roceed in accordance with ections 4 to 49& +n one

'roceedin" there may be di2erent sta"es& +n the rst sta"e

the court may have to decide about the enforceability of

the award havin" re"ard to the re uirement of the said

'rovisions& nce the court decides that the forei"n award

is enforceable, it can 'roceed to ta e further e2ective

ste's for e/ecution of the same& *here arises no uestion

of ma in" forei"n award a rule of court5decree a"ain& +f the

ob ect and 'ur'ose can be served in the same

'roceedin"s, in our view, there is no need to ta e two

se'arate 'roceedin"s resultin" in multi'licity of liti"ation&

+t is also clear from the ob ectives contained in 'ara 4 of

the tatement of b ects and #easons, ections 4 to 49

and the scheme of the Act that every nal arbitral award is

to be enforced as if it were a decree of the court& *he

submission that the e/ecution 'etition could not be

'ermitted to convert as an a''lication under ection 4 is

technical and is of no conse uence in the view we have

ta en& +n our o'inion, for enforcement of a forei"n award


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there is no need to ta e se'arate 'roceedin"s, one for

decidin" the enforceability of the award to ma e it a rule

of the court or decree and the other to ta e u' e/ecution

thereafter& +n one 'roceedin", as already stated above, the

court enforcin" a forei"n award can deal with the entire

matter& $ven otherwise, this 'rocedure does not 're udice

a 'arty in the li"ht of what is stated in 'ara 40 of Thyssen 1

ud"ment&

32. Part ++ of the Act relates to enforcement of certain

forei"n awards& Cha'ter 1 of this Part deals with 6ew 7or

Convention awards& ection 4% of the Act s'ea s as to

when a forei"n award is bindin"& ection 4 states as to

what evidence the 'arty a''lyin" for the enforcement of a

forei"n award should 'roduce before the court& ection 48

states as to the conditions for enforcement of forei"n

awards& As 'er ection 49, if the court is satis ed that a

forei"n award is enforceable under this Cha'ter, the award

shall be deemed to be a decree of that court and that

court has to 'roceed further to e/ecute the forei"n award

as a decree of that court&

Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2001)

6 S !"6. *he uestion bein" e/amined by this Court is in relation

to a consolidated le"islation which deals with domestic

arbitration, international commercial arbitration and

enforcement of forei"n arbitral awards& efore the

enactment of the Act there were se'arate statutes

"overnin" the international arbitration and domestic

arbitration, namely, the Arbitration (Protocol andConvention) Act, 193 (% of 193 ), the Arbitration Act,


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1940 (10 of 1940) and the !orei"n Awards (#eco"nition

and $nforcement) Act, 19%1 (4: of 19%1)& The!e !t"t#te!

h"$e %een re&e"le' "! &ro$('e' (n Sect(on )* o+ the

Act.

). *he 199% Act was enacted considerin" the international

scenario as is evident from its 'reamble, which reads;

$#$A the .nited 6ations Commission on

+nternational *rade ?aw (.6C+*#A?) has ado'ted the

.6C+*#A? @odel ?aw on +nternational Commercial

Arbitration in 198:

A6B =>$#$A the eneral Assembly of the .nited

6ations has recommended that all countries "ive due

consideration to the said @odel ?aw, in view of the

desirability of uniformity of the law of arbitral 'rocedures

and the s'eci c needs of international commercial

arbitration 'ractice

A6B =>$#$A the .6C+*#A? has ado'ted the .6C+*#A?

Conciliation #ules in 1980

A6B =>$#$A the eneral Assembly of the .nited

6ations has recommended the use of the said #ules in

cases where a dis'ute arises in the conte/t of international

commercial relations and the 'arties see an amicable

settlement of that dis'ute by recourse to conciliation

A6B =>$#$A the said @odel ?aw and #ules ma e

si"ni cant contribution to the establishment of a uni ed

le"al framewor for the fair and e cient settlement of

dis'utes arisin" in international commercial relations

A6B =>$#$A it is e/'edient to ma e law res'ectin"

arbitration and conciliation, ta in" into account the

aforesaid @odel ?aw and #ules D


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9. *he enforcement of forei"n awards has been dealt with

in Part ++ of the Act which has two cha'ters, Cha'ter +

dealin" with the 6ew 7or Convention Awards and Cha'ter

++ dealin" with the eneva Convention

Awards& &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& ectio

forei"n award& +t is not in dis'ute that the 'resent case

falls under the ambit of ection 44& ection 4: has already

been e/tracted above& *he conditions for enforcement of

forei"n awards are sti'ulated in ection 48 under which

enforcement may be refused at the re uest of the 'arty

a"ainst whom it is invo ed only if that 'arty furnishes to

the court 'roof as 'ostulated in clauses ( a ) and ( e )& +n

addition, the enforcement of the award may also be

refused on the "rounds sti'ulated in ection 48(E) of the

Act& ection 49 'rovides that where the court is satis ed

that the forei"n award is enforceable under Cha'ter +, the

award shall be deemed to be a decree of the court& ection

:0 'rovides as to a"ainst which orders an a''eal shall lie&

+t reads as under;


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the 'arties to arbitration under ection 4: of the Act is

a''ealable& *here is, however, no 'rovision for lin" an

a''eal if the udicial authority refers the 'arties to

arbitration&

S#in$Etsu #e%i&al o. Ltd. v. ' s# pti*+re Ltd.,

(200") S 2!-3. Arbitration in +ndia was earlier "overned by the +ndian

Arbitration Act, 18:9 with limited a''lication and theecond chedule to the Code of Civil Procedure, 1908&

*hen came the Arbitration Act, 1940& ection 8 of that Act

conferred 'ower on the court to a''oint an arbitrator on

an a''lication made in that behalf& ection E0 conferred a

wider urisdiction on the court for directin" the lin" of the

arbitration a"reement and the a''ointment of an

arbitrator& ection E1 conferred a 'ower on the court in a'endin" suit, on the a"reement of 'arties, to refer the

di2erences between them for arbitration in terms of the

Act& *he Act 'rovided for the lin" of the award in court,

for the ma in" of a motion by either of the 'arties to ma e

the award a rule of court, a ri"ht to have the award set

aside on the "rounds s'eci ed in the Act and for an a''eal

a"ainst the decision on such a motion& *his Act wasre'laced by the Arbitration and Conciliation Act, 199%

which, by virtue of ection 8:, re'ealed the earlier

enactment&

. *he Arbitration and Conciliation Act, 199% (hereinafter

referred to as


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'rocedure which is fair, e cient and ca'able of meetin"

the needs of the arbitration concerned and for other

matters set out in the b ects and #easons of the ill& *he

Act was intended to be one to consolidate and amend the

law relatin" to domestic arbitrations, international

commercial arbitrations and enforcement of forei"n

arbitral awards, as also to de ne the law relatin" to

conciliation and for matters connected therewith or

incidental thereto& *he 'reamble indicates that since the

.nited 6ations Commission on +nternational *rade ?aw

(.6C+*#A?) has ado'ted a @odel ?aw for +nternational

Commercial Arbitration and the eneral Assembly of the

.nited 6ations has recommended that all countries "ive

due consideration to the @odel ?aw and whereas the

@odel ?aw and the #ules ma e si"ni cant contribution to

the establishment of a uni ed le"al framewor for a fair

and e cient settlement of dis'utes arisin" in international

commercial relations and since it was e/'edient to ma e a

law res'ectin" arbitration and conciliation ta in" into

account the @odel ?aw and the #ules, the enactment was

bein" brou"ht forward& *he Act re'laces the 'rocedure laid

down in ections 8 and E0 of the Arbitration Act, 1940&

Part + of the Act deals with arbitration& +t contains ections

E to 43& Part ++ deals with enforcement of certain forei"n

awards, and Part +++ deals with conciliation and Part +G

contains su''lementary 'rovisions& +n this case, we are not

concerned with Part +++, and Parts ++ and +G have only

incidental relevance& =e are concerned with the 'rovisions

in Part + dealin" with arbitration&

*. ection of the Act read with ection E( b ) de nes an


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arbitration a"reement& ection E( h ) de nes


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6. *he mar"inal headin" of ection 11 is < Appointment of

arbitrators D& ubHsection (1) indicates that a 'erson of any

nationality may be an arbitrator, unless otherwise a"reed

to by the 'arties& .nder subHsection (E), sub ect to subH

section (%), the 'arties are free to a"ree on a 'rocedure for

a''ointin" the arbitrator or arbitrators& .nder subHsection

(3), failin" any a"reement in terms of subHsection (E), in an

arbitration with three arbitrators, each 'arty could a''oint

one arbitrator, and the two arbitrators so a''ointed could

a''oint the third arbitrator, who would act as the 'residin"

arbitrator& .nder subHsection (4), the Chief Iustice or any

'erson or institution desi"nated by him could ma e the

a''ointment, in a case where subHsection (3) has

a''lication and where either the 'arty or 'arties had failed

to nominate their arbitrator or arbitrators or the two

nominated arbitrators had failed to a"ree on the 'residin"

arbitrator& +n the case of a sole arbitrator, subHsection (:)

'rovides for the Chief Iustice or any 'erson or institution

desi"nated by him, a''ointin" an arbitrator on a re uest

bein" made by one of the 'arties, on ful lment of the

conditions laid down therein& *hen comes subHsection (%),

which may be uoted hereunder with advanta"e;


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a 'arty may re uest the Chief Iustice or any 'erson or

institution desi"nated by him to ta e the necessary

measure, unless the a"reement on the a''ointment

'rocedure 'rovides other means for securin" the

a''ointment&D

ubHsection ( ) "ives a nality to the decision rendered by

the Chief Iustice or the 'erson or institution desi"nated by

him when moved under subHsection (4), or subHsection (:),

or subHsection (%) of ection 11& ubHsection (8) en oins the

Chief Iustice or the 'erson or institution desi"nated by him

to ee' in mind the uali cations re uired for an arbitrator

by the a"reement of the 'arties, and other considerations

as are li ely to secure the a''ointment of an inde'endent

and im'artial arbitrator& ubHsection (9) deals with the

'ower of the Chief Iustice of +ndia or a 'erson or institution

desi"nated by him to a''oint the sole or the third

arbitrator in an international commercial arbitration& ubH

section (10) deals with the Chief IusticeJs 'ower to ma e a

scheme for dealin" with matters entrusted to him by subH

section (4) or subHsection (:) or subHsection (%) of ection

11& ubHsection (11) deals with the res'ective urisdiction

of the Chief Iustices of di2erent >i"h Courts who are

a''roached with re uests re"ardin" the same dis'ute and

s'eci es as to who should entertain such a re uest& ubH

section (1E) clause ( a ) clari es that in relation to

international arbitration, the reference in the relevant subH

sections to the


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whose local limits the Princi'al Court is situated&


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recourse a"ainst an arbitral award& ection 34

contem'lates the lin" of an a''lication for settin" aside

an arbitral award by ma in" an a''lication to the Court as

de ned in ection E( e ) of the Act& Cha'ter G+++ deals with

nality and enforcement of arbitral awards& ection 3:

ma es the award nal and ection 3% 'rovides for its

enforcement under the Code of Civil Procedure, 1908 in

the same manner as if it were a decree of court& Cha'ter +K

deals with a''eals and ection 3 enumerates the orders

that are o'en to a''eal& =e have already referred to the

ri"ht of a''eal available under ection 3 (E) of the Act, on

the *ribunal acce'tin" a 'lea that it does not have

urisdiction or when the Arbitral *ribunal acce'ts a 'lea

that it is e/ceedin" the sco'e of its authority& 6o second

a''eal is contem'lated, but the ri"ht to a''roach the

u'reme Court is saved& Cha'ter K deals with

miscellaneous matters& ection 43 ma es the ?imitation

Act, 19%3 a''licable to 'roceedin"s under the Act as it

a''lies to 'roceedin"s in the Court&

S / o. v. /atel En . Ltd., (200") S 61+n my view, ection EE of +CA does not debar the

arbitration 'roceedin"s under the Arbitration andConciliation Act, 199%&

San$' 3radu+ o. Ltd. v. 4. . 3extiles Ltd.,(2012)

S 1521*. +t is thus necessary to see whether the lan"ua"e of the

said Act is so 'lain and unambi"uous as to admit of only

the inter'retation su""ested by @r en& +t must be borne

in mind that the very ob ect of the Arbitration and

Conciliation Act of 199%, was to establish a uniform le"al


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framewor for the fair and e cient settlement of dis'utes

arisin" in international commercial arbitration& *he

conventional way of inter'retin" a statute is to see the

intention of its ma ers& +f a statutory 'rovision is o'en to

more than one inter'retation then the court has to choose

that inter'retation which re'resents the true intention of

the le"islature& *his tas often is not an easy one and

several di culties arise on account of variety of reasons,

but all the same, it must be borne in mind that it is

im'ossible even for the most ima"inative le"islature to

forestall e/haustively situations and circumstances that

may emer"e after enactin" a statute where its a''lication

may be called for& +t is in such a situation the courtJs duty

to e/'ound arises with a caution that the court should not

try to le"islate& =hile e/aminin" a 'articular 'rovision of a

statute to nd out whether the urisdiction of a court is

ousted or not, the 'rinci'le of universal a''lication is that

ordinarily the urisdiction may not be ousted unless the

very statutory 'rovision e/'licitly indicates or even by

inferential conclusion the court arrives at the same when

such a conclusion is the only conclusion& 6otwithstandin"

the conventional 'rinci'le that the duty of Iud"es is to

e/'ound and not to le"islate, the courts have ta en the

view that the udicial art of inter'retation and a''raisal is

imbued with creativity and realism and since inter'retation

always im'lied a de"ree of discretion and choice, the

courts would ado't, 'articularly in areas such as,

constitutional ad udication dealin" with social and defuse

(sic ) ri"hts& Courts are therefore, held as < nishers,

re ners and 'olishers of le"islation which comes to them


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in a state re uirin" varyin" de"rees of further 'rocessin"D

(see Corocraft Ltd. v& Pan American Airways 3, All $# at '&

10 1 B, =?# at '& 3E, State of Haryana v& Sampuran

Sin h 4, A+# at '& 19: )& +f a lan"ua"e used is ca'able of

bearin" more than one construction, in selectin" the true

meanin", re"ard must be had to the conse uences,

resultin" from ado'tin" the alternative constructions& A

construction that results in hardshi', serious

inconvenience, in ustice, absurdity or anomaly or which

leads to inconsistency or uncertainty and friction in the

system which the statute 'ur'orts to re"ulate has to be

re ected and 'reference should be "iven to that

construction which avoids such results& ( ee !ohnson v&

"oreton : and Stoc# v& $ran# !ones %Tipton& Ltd. %) +n

selectin" out of di2erent inter'retations, the court will

ado't that which is ust, reasonable and sensible rather

than that which is none of those thin"s, as it may be

'resumed that the le"islature should have used the word

in that inter'retation which least o2ends our sense of

ustice& +n Shannon 'ealities Ltd. v& (ille de St "ichel , AC

at ''& 19EH93, ?ord haw stated;


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construin" ection 193 of the ea Customs Act and in

comin" to the conclusion that the Chief of Customs

Authority was not an o cer of Customs& ( Collector of

Customs v&)i *i+aysinh+i Sp . , -* . "ills Ltd. 8)

16. A readin" of the 'rovisions shows that the said Act

a''lies to arbitrations which are held in +ndia between

+ndian nationals and to international commercial

arbitrations whether held in +ndia or out of +ndia& ection

E(1)( f ) de nes an international commercial arbitration& *he

de nition ma es no distinction between international

commercial arbitrations held in +ndia or outside +ndia& An

international commercial arbitration may be held in a

country which is a si"natory to either the 6ew 7or

Convention or the eneva Convention (hereinafter called


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would be held, in most cases, out of +ndia& ection E(1)( c )

'rovides that the term


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"rade inferior to such Princi'al Civil Court, or any Court of

mall Causes D

A court is one which would otherwise have urisdiction in

res'ect of the sub ectHmatter& *he de nition does not

'rovide that the courts in +ndia will not have urisdiction if

an international commercial arbitration ta es 'lace outside

+ndia& Courts in +ndia would have urisdiction even in

res'ect of an international commercial arbitration& As

stated above, an ouster of urisdiction cannot be im'lied&

An ouster of urisdiction has to be e/'ress&

#atia 4nternational v. ul 3radin S.'., (2002) -

S 10"12. o far as the issue relatin" to maintainability of the

a''lication itself is concerned, is no more res inte"ra& *his

Court in 0hatia nternational v& 0ul# Tradin S.A. %2 2& SCC 1 4 , held as under; ( CC '& 10 b Hd )

O notwithstandin" the 'rovisions of ection E(E) of the

Arbitration and Conciliation Act, 199%, indicatin" that Part +

of the said Act would a''ly where the 'lace of arbitration

is in +ndia, even in res'ect of international commercial

a"reements, which are to be "overned by the laws of

another country, the 'arties would be entitled to invo ethe 'rovisions of Part + of the aforesaid Act and

conse uently the a''lication made under ection 11

thereof would be maintainable& +t clearly lays down that

the 'rovisions of Part + of the Arbitration and Conciliation

Act, 199%, would be e ually a''licable to international

commercial arbitrations held outside +ndia, unless any of

the said 'rovisions are e/cluded by a"reement betweenthe 'arties e/'ressly or by im'lication, which is not so in


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the instant case&

ee also ndtel Technical Ser*ices %P& Ltd. v& -.S. At#ins

'ail Ltd. %2 5& 1 SCC 3 5 and Citation nfowares Ltd. v&

67uino/ Corpn. %2 8& 9 SCC 22 Q

13. +n (enture :lobal 6n . v& Satyam Computer Ser*ices

Ltd. %2 5& SCC 18 this Court considered a similar issue

and after considerin" various earlier ud"ments, came to

the conclusion that im'lied e/clusion of the 'rovision of

Part + cannot be inferred and therefore the 'rinci'les

re"ardin" the arbitral reference laid down in 0hatia

nternational 1 are a''licable&

1 . >onJble @r #&C& ?ahoti, I& (as >is ?ordshi' then was)

however, has ta en a contrary view as in Shree+ee Traco

% & %P& Ltd. v&Paperline nternational nc &%2 3& 8 SCC 98 it

was held; ( CC '& 8E, 'ara 8)


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1& (E004) E CC %%3 Chairman and @B, 6*PC ?td& Gs& #eshmi Constructions,

uilders R ContractorsQ

E& (E00%) 13 CC 4 :

@5s& Ambica Construction Gs& .nion of +ndiaQ

3& (E009) 1 CC E% 6ational +nsurance Co& ?td& Gs& o"hara Polyfab Pvt&

?td&Q

4& (E011) E CC 400

#&?& Lalathia R Co& vs& tate of u aratQ

:& (E011) 1E CC 349 .nion of +ndia R rs& Gs& @aster Construction

Com'anyQ


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LIST O /0DG ENTS

1& San ' 3radu+ o. Ltd. v. 4. . 3extiles Ltd. (2012) S152

E& S / o. v. /atel En . Ltd. (200") S61

3&

4&

:&

%&

&

8&

9&

1 0&11&1E&13&14&


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Documents

Arbitration and Conciliation Act, 1996 - Generally