Arbitration, Conciliation and Adr Systems

PALLAVI BHOGLE

ARBITRATION, CONCILIATION & ADR SYSTEMS 1

PALLAVI BHOGLE


INTRODUCTION

State the object and scope of Arbitration and Conciliation law in India. [16] May 08

Define Arbitration Agreement. Explain the nature, meaning and importance

of Arbitration Agreement. [16] Dec 06, 05, 03, Dec 02, 02, Dec 01

Introduction: To internationalise the Arbitration Law in India, it was felt that the

Arbitration Law, 1940 has become out dated in the present scenario of economic reforms

world wide. The Law Commission of India as well as the domestic and international

arbitration and conciliation bodies including several experts in the field of arbitration

relating to trade and industry have proposed amendments, modifications to the

Arbitration Act, 1940 to make the law more responsive and effective to suit most with the

law dealing with the settlement of disputes in respect of domestic and international

commercial matters. There was no law in India to provide the comprehensive enactment

to meet the present requirements to settle domestic and international commercial disputes

amicably by arbitration and conciliation machinery.

At the international level it was also felt that the increasing arbitration and conciliation

acceptance in trade and industry is the most important requirement of the present

commercial activities, and as such the United Nations Commission on International Trade

Law (UNCITRAL) have adopted the Model Law with focus on International Commercial

Arbitration in the year 1985. Subsequently, the General Assembly of the United Nations

affirmed and all member countries were directed to give recognition to the United

Nations Commission on International Trade's Model Law, which was introduced with the

object to make arbitration procedure and practice in the matter of international

commercial activities uniform and simple.

The United Nations Commission on International Trade also adopted a set of conciliation

rules in the year 1980 which were recommended by the General Assembly of the United

Nations to be followed by the member countries where the parties in international

commercial disputes intended to settle their dispute amicably without taking recourse of

strict legal system.

Although, aforesaid Model Law and Conciliation Rules provided international

commercial arbitration and conciliation, there was still a need to legislate law on

domestic arbitration and conciliation on the pattern of the Model Law and Conciliation

Rules. With this object and based on the UNCITRAL Model Law and New York

Convention and Conciliation Rules – the Arbitration and Conciliation Bill, 1995 was

introduced in both the Houses of Parliament on 8th May, 1995. This Bill contained the

reflection of the International Chamber of Commerce Arbitration Rules and in their 1993

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resolution - the Chief Ministers and Chief Justices emphasized the requirements of such

settlement of dispute. The resolution was on the pattern of the United Nations

Commission on International Trade's Model Law and New York Conventions and

Conciliation Rules after the recommendation. The General Assembly of the United

Nations in the matters relating to the International Commercial disputes, thus provided

the harmonious settlement of the dispute by adopting procedure and practice of the

arbitration and conciliation.

India formulated and enacted the new law ‘The Arbitration and Conciliation Law, 1996’

with effect from 16th August; 1996.

There are 86 Sections besides the Preamble and three Schedules in this Act. The Act has

been divided in four parts, in which Part I provides, general provision on arbitration, Part

II provides the enforcement of certain foreign awards, Part III deals with conciliation, and

Part IV deals with supplementary provisions. The Preamble contains the object of this

Act and three Schedules are modeled texts of the Geneva Convention on the execution of

Foreign Arbitral Award, 1927 the Geneva protocol on Arbitration Clauses, 1923 and the

New York Convention on the Recognition and Enforcement of Foreign Arbitral Award,

1993 respectively.

Salient Features of the Arbitration and, Conciliation Act, 1996

The Arbitration and Conciliation Act, 1996 contained the following salient features:

1. A Comprehensive Statute - The Arbitration and Conciliation Act, 1996, is fully

related to the domestic, international and inter-state arbitrations and understanding

point of view. This Act provides importance of enforcement of international

arbitral awards and also conciliation matters as well. The Comprehensive nature

of this Act is the result of the United Nations Commission on International

Commercial Arbitration, 1985 because the Geneva Assembly of the United

Nations had emphasized and also recommended uniform model law on arbitration

among the countries.

2. An Explanatory Code - The old Act of 1940 had no scope for international

arbitration whereas this Act of 1996 is an explanatory and a complete code in

itself, rather an exhaustive Code. For the first time a procedure for Arbitral

Tribunals is provided in this statute, it also gives status of tribunal to the

Arbitrators or Board of Arbitrations or statutory Arbitrations.

3. Curtailment of the Courts’ Powers - The Act has limited the powers of court

rather restricted the exercise of judicial power, in other words confined the extent

of judicial intervention as provided under Section 5 of the Act –‘Notwithstanding

anything contained in any other law for the time being in force, in matters

governed by this part; no judicial authority shall intervene except where so

provided in this part.’ Finality of arbitral awards under Section 35 is subject to

this part according to which an arbitral award shall be final and binding on the

parties and persons claiming under them respectively. Thus, the Act itself

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provides finality of arbitral awards and its enforcement (Section 36) without

intervention of the Court.

4. Procedure for Conduct of Arbitration and Awards in detail – Chapter V of the

Arbitration and Conciliation Act, 1996 from Section 18 to Section 27 provides

detailed procedure, practice whether in hearings or statements of claim and

defence. The Arbitral Tribunals are empowered to settle any objections raised in

respect of jurisdiction or scope of authority of the arbitrators.

5. Precised Powers of the Court - The Act of 1996 has précised the powers of the

court by taking assistance only in certain specific matters. The Court's assistance

can be sought in taking evidence only with the prior approval of the arbitral

tribunals, as under Section 27(1): ‘The arbitral tribunal or a party with the

approval of the arbitral tribunal, may apply to the court for assistance in taking

evidence.’ In the matter of jurisdiction Section 42 of the Act of 1996 states that:

‘Notwithstanding anything contained elsewhere in this part or in any other law for

the time being in force, where with respect to an. arbitration agreement any

application under this part has been made in a court, that court alone shall have

jurisdiction over the arbitral proceedings and all subsequent applications arising

out of that agreement and the arbitral proceedings shall be made in that court and

in no other court.’

6. Powers of the Arbitrators enhanced - In comparison with the old Act, the new Act

has enhanced the powers of the arbitrators in respect of jurisdiction of Arbitral

Tribunals and also improved the competency of the arbitrators to rule. Chapter IV,

Section 16 and Section 17 of the Act 1996 provide these measures.

7. A new form of Conciliation - Part III of the Act, 1996 deals with new

internationalized conciliation approach and explains the application and scope of

conciliation. The Act under Section 63 intends to prescribe number of conciliators

and in case of more than one conciliator, it should be by the agreement of the

parties. Section 63(2) States: ‘Where there is more than one conciliator, they

ought, as a general rule, to act jointly.’ Thus, the new Act contains object of

conciliation' more wide, and much emphasis has been provided on mutual rather

consented conciliation in every respect.

8. International applicability - Under the old Act of 1940, there was no provision for

applicability of any interim award made by the Foreign Arbitral Tribunal i.e., an

Arbitral Tribunal Constituted by the ICC Court Arbitration at London. But, the

new Act of 1996, has provisions for applicability of Foreign Arbitral Tribunal's

awards.

Scope of Arbitration Law in India

In the present time the globalization of trade and commerce and economic liberalization

created need for effective implementation of economic reforms. It was realized that the

old Indian Arbitration Law, 1940 is not effective enough to meet the present day

requirement. Since the multinational companies/enterprises are pouring into India in the

field of banking, insurance, building, construction, electricity, telecommunication etc.

and there is commercial interaction between India and foreign countries wherein such

parties who agree or have agreed for arbitration in case of dispute arising out of such

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commercial activities, it shall be determined and settled in accordance with the

Arbitration and Conciliation Act, 1996 and the rules framed thereunder.

However, it is to be noted that the expression ‘commercial’ in the context of the

Arbitration Law has been observed by the Apex Court in R.M. Investment and Trading

Co. Pvt. Ltd. v. Boeing Company, as follows: ‘While construing the expression

"commercial" in section 2 of the Act, it has to be borne in mind that the Act is calculated

and designed to subserve the cause of facilitating international trade and promotion

thereof by providing speedy settlement of disputes arising in such trade through

arbitration and any expression or phrase occurring therein should receive a.liberal

construction".

In the present case the Apex Court has held that consultancy rendered by R.M.

Investment and Trading Co. Pvt. Ltd. to Boeing Company for the purpose of developing

commercial activities of sale of Boeing aircrafts is purely "commercial" in nature, hence,

relationship between two companies with each other is commercial.

In another case, the Apex Court has held that activities such as exchange of commodities

for money or other commodities, carriage of persons and goods by road, rail, air or

waterways, contract, postal and telegraph services, banking, insurance and transactions in

stock exchange are considered to be commercial interaction within the ambit of Article

301 of the Constitution of India, 1950 which deals with freedom of trade, commerce and

intercourse – ‘Subject to the other provisions of this part, trade, commerce and

intercourse throughout the territory of India shall be free.’

Thus, all kinds of commercial activities may be arbitrable provided there is an agreement

in this regard between the parties. But in Kamini Engineering Corporation v. Re

Traction, the Apex Court has held that merely providing technical assistance in

electrification of railways which did not involve assistance or consultancy into active

business and therefore such an agreement cannot be interpreted to be commercial in

nature as it is outside the scope of term ‘commercial’ in the context of the Arbitration

Act.

Where there is an arbitration agreement within the meaning of Section 7 of the

Arbitration and Conciliation Act, 1996 in case of dispute the conflicting parties can be

referred for arbitration. S. 7(1) of the Arbitration and Conciliation Act, 1996 defines the

term ‘arbitration agreement’ as follows: ‘Arbitration agreement’ means an agreement by

the parties to submit to arbitration all or certain disputes which have may arise or which

may arise between them in respect of defined legal relationship, whether contractual or

not.’

S. 7(2) of the said Act provides that an arbitration agreement may be in the form of an

arbitration clause in a contract or in the form of a separate agreement Although Section

7(3) makes it compulsory that an arbitration agreement shall be in writing. According to

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S. 7(4) of the Arbitration and Conciliation Act, 1996 an arbitration agreement may

contain the following:

1. a document signed by the parties;

2. an exchange of letter, telex, telegram, or other means of telecommunication which

provides a record of the agreement; or

3. 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.

Therefore, it can, be said to come within the scope of the Arbitration Act, there are three

essentials:

• such an agreement must be in writing;

• there must have definite parties;

• parties must have intention to settle their disputes by way of arbitration.

Conclusion

Explain the statement of objects and reasons stated in the BILL on the law

of arbitration and conciliation. [16] May 08

Introduction: On 16th May, 1995 the Bill relating to law of arbitration and conciliation

was introduced in the Rajya Sabha by the then Minister of Law and Justice. On 17th May,

1995 the Chairman, of Rajya Sabha referred the Bill to the Parliamentary Committee. On

28th November, 1995 the said Committee submitted its report to the Parliament. The then

Central Government was compelled to promulgate an Ordinance on Arbitration and

Conciliation Act as the Winter Session of the Parliament in December, 1995 expired

without transacting any business. Only on 16th July, 1996 the Rajya Sabha passed the

Arbitration and Conciliation Bill, 1995 and on 2nd August, 1996 the Lok Sabha also

cleared the said Bill, thereafter it received the assent of the President of India on 16th

August, 1996 and it became an Act i.e., the Arbitration and Conciliation Act, 1996 came

into force on 25th January, 1996.

Statement of Objects and Reasons

The present Arbitration and Conciliation Act, 1996 is substantially based on the three

statutes, namely:

• The Foreign Awards (Recognition and Enforcement} Act, 1961;

• The Arbitration (Protocol and Convention) Act, 1937; and

• The Arbitration Act, 1940.

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It was realized from all quarters that the (Indian) Arbitration Act, 1940 has become

outdated as it contained the general law relating to arbitration and with a view to provide

more responsive arbitration law to contemporary requirements and also to provide

effective law dealing with settlement of both domestic and international disputes

regarding commercial intercourse such major reformative amendments in the (Indian)

Arbitration Act, 1940 have been incorporated by the Indian Parliament. Undoubtedly the

arbitration and conciliation in the commercial transactions are getting global recognition

as a machinery for settlement of disputes.

The Model Law on International Commercial Arbitration has been adopted by the United

Nations Commission on International Trade, Law (UNCTIRAL) in 1985. The United

Nation's General Assembly has recommended that all countries give due recognition to

said Model Law, in view of the desirability of uniformity of the Law of arbitral

procedures and specific needs of international commercial arbitration practice. Also, the

United Nations Commission on International Trade Law (UNCTIRAL) has adopted a set

of Conciliation Rules in 1980. It was intended by the General Assembly of the United

Nations that these Conciliation Rules are to be used in case of disputes arising in the

context of the international commercial relations and. conflicting parties can seek friendly

settlement of their disputes by taking recourse to conciliation. It is important to note that

the United Nations Commission on International Trade Law (UNCTIRAL), the Model

Law and Rules aimed to harmonise the concept of arbitration and conciliation of different

legal systems worldwide, therefore, these UNCITRAL Model Law have such provisions

which are designed for universal application.

It would be seen that the said UNCITRAL Model Law and Rules served as a model for

legislation on domestic arbitration and conciliation. The Arbitration and Conciliation Bill,

1995 seeks to consolidate and amend the law relating to domestic arbitration,

international commercial arbitration, enforcement of foreign arbitral awards and to define

the law relating to conciliation, taking into account the United Nations Commission on

International Trade Law (UNCITRAL), Model Law and Rules.

The Arbitration Act, 1940 has become outdated - Object of the Present Act

In Objects and Reasons appended to the Arbitration and Conciliation Bill, 1995 it has

been stated that the Arbitration Act, 1940 has become outdated and therefore, the present

Bill sought to consolidate and amend the law relating to domestic arbitration and

International commercial arbitration.

Prior to the promulgation of the Arbitration and Conciliation Act, 1996 the law on

arbitration in India was substantially contained in three enactments, namely the

Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the

Foreign Awards (Recognition and' Enforcement) Act, 1961. In the statement of Objects

and Reasons appended to the Bill it was stated that the Arbitration Act 1940, which

contained the general law on arbitration, had become outdated. The said objects and

reasons stated that the United Nations Commission on International Trade Law

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(UNCITRAL) adopted in 1985 the Model Law on International Commercial Arbitration.

The General Assembly had recommended that all countries give due consideration to the

said Model Law which along with the rules, was stated to have harmonized concepts on

arbitration and conciliation of different legal systems of the world and thus contained

provisions which were designed for universal application. The above said statement of

objects and reasons in para 3 states that ‘though the said UNCITRAL Model Law and

Rules are intended to deal with international commercial arbitration and conciliation they

could, with appropriate modifications serve as a model for legalization on domestic

arbitration and conciliation. The present Bill seeks to consolidate and amend the law

relating to domestic arbitration, international commercial arbitration, enforcement of

foreign awards and to define the law relating to conciliation, taking into account the said

UNCITRAL Model Law and Rules.

The main objectives of the said Bill are as follows:

1. to comprehensively cover international commercial arbitration and conciliation as

also domestic arbitration and conciliation;

2. to make provision for an arbitral procedure which is fair, efficient and capable of

meeting the needs of the specific arbitration;

3. to provide that the arbitral tribunal gives reasons for its arbitral award;

4. to ensure that the arbitral tribunal remains within the limits of its jurisdiction;

5. to minimize the supervisory role of courts in the arbitral process;

6. to permit an arbitral tribunal to use mediation, conciliation or other procedures

during the arbitral proceedings to encourage settlement of disputes;

7. to provide that every final arbitral award is enforced in the same manner as if it

were a decree of the court;

8. to provide that a settlement agreement reached by the parties as a result of

conciliation proceedings will have the same status and effect as an arbitral award

on agreed terms on the substance of the dispute rendered by an arbitral tribunal;

and

9. to provide that for the purpose of enforcement of foreign awards, every arbitral

award made in a country to which one of the two international conventions

relating to foreign arbitral awards to which India is a party applies, will be treated

as a foreign award.

It is to be noted that in this context the International Conventions mean the New York

Convention and the Geneva Convention relating to foreign arbitral awards, to which

India is a party, and which will be considered as a foreign award.

It would be relevant to be mentioned here that the expression ‘arbitration’ has been

included in Entry 13 of the Concurrent Lists of the 7th Schedule to the Constitution of

India, 1950. Thus, State Legislature can enact legislation relating to arbitration only with

obtaining the assent of the President of India. When the assent is obtained the enacted law

can become effective in the State concerned.

Conclusion

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ARBITRATION AGREEMENT

What is an arbitration agreement? Discuss the essential conditions of an

arbitration agreement under the Arbitration and Conciliation Act, 1996.

[16] May 05, 04, May 03, Dec 02, Dec 01

Define ‘Arbitration Agreement’ & State its essentials [10] May 07, Dec 06, 05, Dec 05, May 04, 03, Dec 02, 02, Dec 01

Arbitration Agreement [10] May 09, May 08, Dec 06, Dec 03

Explain the important features of an arbitration agreement. What are the

advantages of settling disputes through arbitration? [16] Dec 04

Introduction: Section 2(1)(b) of the Act of 1996 provides that the word ‘Arbitration

Agreement’ is to be interpreted and understood with reference to Chapter II, Section 7 of

the Arbitration and Conciliation Act, 1996.

Section 2(1)(b) of the Arbitration and Conciliation Act, 1996 while defining arbitration

agreement, refers to Section 7 which may be read as a part thereof. Section 7 states:

Arbitration agreement

(1) In this Part, "arbitration agreement" means an agreement by the parties to submit

to arbitration all or certain disputes which have arisen or which may arise

between, them in respect of a defined legal relationship, whether contractual or

not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract

or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in

• a document signed by the parties;

• an exchange of letter, telex, telegram or other means of telecommunication

which provide a record of the agreement; or

• 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.

(5) The reference in a contract to a document containing, an arbitration clause

constitutes an arbitration agreement if the contract is in writing and the reference

is such as to make that arbitration clause part of the contract.

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Inference of an Agreement

The term ‘agreement’ has been defined under the Indian Contract Act, 1872. The said Act

defines that every promise and every set of promises forming the consideration for each

other is an agreement.

It is voluntary agreement, it is willingness of either side to abide by arbitral award of the

arbitrator. Thus, agreement is a reciprocal promise from either side. Arbitration

agreement gives right to parties to initiate arbitration proceedings when rights of the

parties are violated or liabilities of the parties are not being discharged. The

determination whether a particular clause amounts to a valid submission is whether both,

parties are bound by the clause or not and whether a right has been expressly given to

both the parties to initiate proceedings.

Essential Ingredients of a Valid Arbitration Agreement

It is settled legal position that a valid agreement should have the following:

(1) it must be in writing;

(2) there must be agreement between the parties;

(3) the parties must be ad idem; and

(4) there should be intention of the parties to have their disputes or differences

referred and decided through arbitration.

Thus, the parties, disputes and finality of the decision are three essentials of an arbitration

agreement. However, the statutory essentials of an arbitration agreement may be listed as:

• an agreement;

• it must be in writing;

• it may be relating to either present or future differences or disputes;

• whether an arbitrator is named therein or not.

Validity of an arbitration agreement does not depend on the number of arbitrators

It is well settled legal position that the validity of an arbitration agreement does not

depend on the number of arbitrators specified therein. The present Arbitration and

Conciliation Act, 1996 does not suggest anywhere that a number of arbitrators is a part of

an arbitration agreement.

Factum of a contract - Submission to Arbitrator for decision

The parties are free to submit by an agreement even the factum of a contract for the

decision by the arbitrator. It is all a matter of interpretation of a contract from which th

arbitrators derive their authority.

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Parties should intend to settle their disputes by arbitration

It is one of the essential requirement of an arbitration agreement that the parties should

intend to make a reference to arbitration in case of any dispute relating to the terms of the

contract. There must be clear intention in this regard, because consent of the parties is

necessary before making a reference to arbitration. Where, there is express intention in

the agreement to resolve the disputes if it arises by way of arbitration and on arising of

dispute a reference to arbitration may be made by one party without the consent of the

other party.

Bilateral Rights of Reference to the Parties

Whether the arbitration agreement should show mutuality to confer the right to exercise

to initiate arbitration proceeding. On the point there is conflicting opinions expressed by

the High Courts.

The Calcutta High Court in New India Assurance Co. Ltd. v. Central Bank of India,

observed that - "where there is an arbitration agreement providing the option to the

parties, to elect the dispute being referred to the arbitration, it amounts to a valid

arbitration agreement and merely unilateral option as to refer the dispute to arbitration

does not negative the very existence of the arbitration agreement, it only restricts the

enforceability. The court opined though it lacks mutuality but it can not be treated as

invalid.

On the other hand the Delhi High Court in Union of India v. Bharat Engineering

Corporation, was of the opinion that an arbitration agreement should show bilateral

rights of reference to arbitration in a case of disputes or differences arising between the

parties.

Under the Act oral agreement cannot be recognized

It is one of the essential requirement that an arbitration agreement must be in writing.

Neither the Arbitration Act, 1940 nor the Arbitration and Conciliation Act, 1996

recognises oral agreement. It is a mandatory provision as provided under Section 7 of the

new Act, 1996 which must be complied with to make a valid arbitration agreement.

In Owal Chand, v. Madan Lal, the court has refused to recognize oral agreement,

regarding arbitration of dispute and, it was held that oral submission / agreement may be

the basis of a suit but it cannot be a basis of arbitration as it has no weight in the eyes of

law.

Signature of parties is necessary in arbitration agreement

Even the Arbitration and Conciliation Act, 1996 nowhere says that an arbitration

agreement should necessarily be signed by both the parties, though the Act makes it

mandatory that an arbitration agreement must be in writing. The Apex Court in Jugal

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Kishore Rameswardas v. Mrs. Goelbai Hormusji, has held that it is not necessary that

both the parties should sign the arbitration, agreement. Such agreement must be reduced

into writing and may be signed by one party showing terms of arbitration agreement and

the other party accepts the terms therein. It can be said that wherein one party signs a

written agreement/arbitration agreement and other party accepts the same, it amounts to a

legal arbitration agreement.

The Utility of Arbitration

1. Quick and Cheap – Compared to ordinary litigations, the arbitral proceedings are

much cheaper and quick.

2. Acquaintance with the arbitrator - The parties themselves mutually agree to

appoint the sole arbitrator or a panel of arbitrators. Generally such arbitrators are

related with the same field and technical qualities. Therefore, the parties have

personally acquaintance with such arbitrators. Before the arbitral tribunal, the

parties can freely express their opinions, which cannot be expressed before the

court of law. This helps the arbitral tribunal to come to a conclusion very easily

and speedily.

3. Only one arbitral proceeding - Before the court of the law, there would be many

cases pending. It is also not possible to a Judge to concentrate on all of them at

one time and to dispose them speedily. Hence adjournments frequently take place.

The result is that much time is taken in ordinary civil courts. There are examples

in India, some cases have been prolonged for two or three decades or more. This

prolongation and unnecessary adjournments do not occur in arbitral proceedings.

Moreover, the arbitral tribunal generally has only one arbitral proceeding before

it. Therefore, it can concentrate on it and can dispose it very easily and speedily.

4. Legal Practitioners - Legal Practitioners are also one of the causes for delaying

legal proceedings. As there is no involvement of legal practitioners in the arbitral

proceedings, and the parties themselves present before the arbitral tribunal, the

dispute is solved speedily.

5. Language and Procedure - In the Courts, English is commonly used, which may

not be known to several litigants. The legal procedures are also complicated in the

courts. The litigants cannot know all the legal procedures and language. This is

not the position before the arbitral tribunal. The parties can agree the terms

regarding the language and procedure, which are acquainted to them.

6. William H. Gal in his ‘The Law of Arbitration’ explains the concepts of

arbitration and litigation as follows - 'One of the principal advantages of

arbitration over litigation is commonly stated to be that, where the dispute

concerns a technical matter such as a building contract, the person chosen to

arbitrate will normally be an expert in the subject matter of the dispute, whereas a

judge will seldom have any practical experience of the technicalities of the trade

in question.’

7. In Northern Health Authority vs. Derek Crouch Ltd., the Court of Appeal

observed: ‘The court does not have the power which the arbitrator had to open up

and review the exercise of the architect a discretion since the court's jurisdiction

was limited to determining and enforcing the contractual rights of the parties. The

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arbitrator, on the other hand, because the parties’ agreement expressly gave him

such power, was entitled to modify the parties’ contractual rights by substituting

his own discretion for that of the architect if he disagreed with the architect’s

certificates and opinions. Accordingly, if the parties chose to litigate rather than

arbitrate the court would not have the same power.’

8. Complementary to C.P.C. - The Arbitration and Conciliation Act, 1996 is only

complementary and not contradictory to the Civil Procedure Code, 1908. It means

it works on the same principles, aims and objects of the Civil Procedure Code. An

award passed by the arbitral tribunal is equal to a ‘decree’ of a civil court. Even

though the arbitral tribunal is exempted from the adjective law, it has to follow

the principles of natural justice, which include the adjective laws inherently.

Further the arbitral tribunal should follow the substantive laws strictly.

Conclusion

Under what conditions judicial authority can refer parties to arbitration?

When can the parties seek interim order from the court for arbitration?

[16] Dec 06, May 01

Explain the powers of court to pass interim orders. [16] May 09, May 07, May 05, Dec 05, Dec 04, May 03, Dec 03

Explain the rules relating to interim measures, etc. by the courts with

decided cases. [16] May 08

Introduction: S. 8 and 9 of the Arbitration and Conciliation Act, 1996 refer to the

matters dealing with the provisions wherein the judicial authority can refer parties to

arbitration and the interim reliefs that can be asked for respectively.

Power to refer parties to arbitration where there is an arbitration agreement [S. 8]

Section 8 of the Act, 1996 is on the pattern of Article 8 of the Model Law. It states:

(1) A judicial authority before which an action is brought in a matter which is the

subject of an arbitration agreement shall, if a party so applies not later than when

submitting his first statement on the substance of the dispute, refer the parties to

arbitration.

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(2) The application referred to in sub-section (1) shall not be entertained unless it is

accompanied by the original arbitration agreement or a duly certified copy

thereof.

(3) Notwithstanding that an application has been made under sub-section (1) and that

the issue is pending before the judicial authority, an arbitration may be

commenced or continued and an arbitral award made.

Section 8(1) provides discretionary power to the judicial authority, and the parties to an

arbitration agreement make such request before a judicial authority but not later than

submitting his first statement, the judicial authority should refer the parties to arbitration.

It is necessary for application of this sub-section that a judicial authority can refer only

the subject-matter of an arbitration agreement but not otherwise.

Although, under Section 8(1) a court cannot adopt on its own motion to avail this

provision; the parties have to apply with request, however while considering such

request, the court cannot go into the merits of the dispute.

Section 8(2) provides mandatory provision for application of Section 8(1) which

specified that, "The application referred to in sub-section (1) shall not be entertained

unless it is accompanied by the original arbitration agreement or a duly certified copy

thereof.

Section 8(3) empowered the arbitral tribunal to start off arbitration and if already

commenced can continue arbitration and also can make award, it is not the point that an

application under Section 8(1) is pending before the court. Thus, the parties are not

deprived to initiate arbitral proceeding even if proceeding before a judicial authority have

already commenced. The main object of this sub-section is to discourage deserters

instead push them to their agreement to arbitration.

It is important to note that Section 8 of the 1996 Act postulates not only request by the

party for staying legal proceedings but also contemplates for referring the parties to

arbitration.

Expression ‘Party’ under Section 8

Although, Section 2(1)(h) of the Arbitration and Conciliation Act, 1996 defines the

expression ‘party’, it means a party to an arbitration agreement. Thus, the party to an

arbitration agreement, may be between two or more persons, it may also be between body

of persons or incorporated bodies. But, certainly they are disputed parties who submit

their dispute for settlement under the arbitration agreement.

It is to be noted that the ‘party’ referred to in Section 8(1) of the Arbitration and

Conciliation Act, 1996 is a party who is entitled to maintain the application thereunder.

The party to the arbitration agreement who has himself instituted the suit is clearly not

the ‘party’ envisaged. In Magma Leasing Ltd. v. NEPC Micon Ltd. wherein first

defendant however, a party to the arbitration agreement who has elected to institute the

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suit in question in enforcement of its rights and as such it cannot be said to be a ‘party’

within the meaning of that section 8(1) of the Act.

Judicial Authority under Obligation to Refer the Parties for Arbitration

Under Section 8 of the new Act the judicial authority is under obligation not only to make

an order for staying proceedings, but also under obligation to refer the parties for

arbitration.

The Delhi High Court in Gas Authority of India Ltd. v. Spie Capag observed that while

considering application whether to grant stay of proceedings and refer the parties to

arbitration, the judicial authority has to consider the following issues:

1. Dispute before the judicial authority is arbitrable.

2. There is a valid arbitration agreement between the parties.

3. One of the parties of the arbitration agreement has started legal proceedings.

4. The party has not submitted the first statement on the substance of dispute.

Mere defect in the form of arbitration agreement would not be proper to deny the right of

the parties to go into arbitration.

No Appointment of an Arbitration through Court

Under the new Arbitration and Conciliation Act 1996 there is no provision for

appointment of' arbitrator by seeking intervention of the court, though contrary to the old

Arbitration Act, 1940 namely S. 20 provided that a party could commence proceedings in

court by moving an application under said section of the old Act for appointment of an

arbitrator and simultaneously it could move an application for interim relief under the 2nd

Schedule r/w S. 41(b) of the Arbitration Act, 1940.

As said above the Arbitration and Conciliation Act, 1996 does not contain a provision

similar to Section 20 of the Arbitration Act, 1940, nor is Section 9 or Section 17 similar

to Section 41(c) and the Second Schedule to the Arbitration Act, 1940. It is to be

specifically noted that Section 8 of the new Act, 1996 is not in the pari materia with

Section 20 of the Arbitration Act, 1940. It is only if in an action which is pending before

the court that a party applies that the matter is the subject of an arbitration agreement

does the court get jurisdiction to refer the parties to arbitration.

Arbitration Proceedings and Legal Proceedings to be continued Concurrently

It is very special feature of the Arbitration and Conciliation Act, 1996 which makes

provision particularly Section 8(3) that arbitration proceedings and legal proceedings may

be continued concurrently. S. 8 nowhere prohibits starting or initiating or continuing

arbitration proceedings when an application for stay of legal proceeding is pending before

the judicial authority or the court. The Calcutta High Court in G.V.S Packing Co v. Vinod

Textiles, observed that the provision of S. 8 is equally applicable in winding up

proceedings of a company.

PALLAVI BHOGLE


It is to be noted that an order made by the court / judicial authority while exercising

power u/S 8 of the A&C Act, 1996 is not challengeable, thus such order is not appealable

u/S 37 of the said Act.

Non-existence of a valid arbitration agreement - High Court cannot pass a decree in

terms of award

In Tamil Nadu Electricity Board v. Sumathi, a writ petition was filed claiming

compensation on account of death due to tortuous act. However, the High Court held and

referred the matter to the arbitrator and made the award rule of the court and also passed

a decree in terms of award. The Supreme Court while considering the above mentioned

case observed that since disputed question of facts arose in the present appeals the High

Court should not have entertained writ petitions, under Article 226 of the Constitution of

India, 1950 and then referred the matter to arbitration in violation of the provisions of the

Act, 1996. There was no arbitration agreement within the meaning of Section 7 of the

Act, 1996 under the Arbitration and Conciliation Act, 1996. Award can be enforced as if

it is a decree of account and yet the High Court passed a decree in terms of the award

which is not warranted by the provisions of the new Act, 1996. Appellant also had raised

plea of bar of limitation as in many cases if suits had been filed those would have been

dismissed as having been filed beyond the period of limitation. The Supreme Court held

that exercise of jurisdiction by the High Court in entertaining the writ petition was not

proper and High Court in any case could not have proceeded to have the matter

adjudicated by an arbitrator in violation of the provisions of the new Arbitration and

Conciliation Act, 1996.

Submission of first statement not a bar on the court referring the parties to arbitration

The Supreme Court in P. Anand Gajapathi Raju v. P.V.G. Raju, while considering the

power of the court to refer the dispute to arbitration under Section 8 of the new Act, 1996

where during the pendency of the dispute before the Supreme Court, parties entered into

arbitration agreement and sought reference, it was held that the submission of first

statement on substance of dispute was not a bar on the court referring the parties to

arbitration provided other parties do not object. In the present case the court observed as

follows: ‘The conditions which are required to be satisfied under sub-sections (1) and (2)

of Section 8 before the court can exercise its powers are:

1. There is an arbitration agreement.

2. A party to the agreement brings an action in the court against the other party.

3. Subject-matter of the action is same as the subject-matter of the arbitration

agreement.

4. The other party moves the court for referring the parties to arbitration before it

submits his first statement on the substance of dispute.

The last provision creates a right in the person bringing the action to have the dispute

adjudicated by court, once the other party has submitted his first statement of defence.

PALLAVI BHOGLE


But, if the party, who wants the matter to be referred to arbitration applies to the court

after submission of his statement and the party who has brought the action does not

object, as is the case before the court, therefore, is no bar on the court referring the parties

to arbitration.

Grounds for which Stay of Legal Proceedings may be Refused

There are certain circumstances when judicial authority may refuse the stay of legal

proceeding, these are as under:

1. When it appears that the party has waived his right to seek stay of legal

proceedings before submission of first statement on the substance of dispute.

2. When the Judicial authority or court is of the view that no adequate relief would

be available to the party.

3. When the Court / Judicial authority is of the opinion that no contract has in fact

been concluded between the parties.

4. When the contract itself is vitiated by bias or fraud.

5. When the main contract is void ab initio or illegal or non-existent.

6. Where the suits or claim has foundation on Hundies or on Negotiable Instruments.

Interim Measures etc by Court [Section 9]

Section 9 empowers the courts to grant interim measures at their discretion, thus it is the

discretionary power of the court. The Court while considering an application made by a

party would consider the various aspects of the matter such as whether prima facie case

has been made out, whether the loss would be huge or beyond economic repair, if the

suitable interim measures not being granted. But, such measures can be granted in aid of

the arbitration proceedings and not to frustrate them.

An application to the court to grant interim measures can be made on specified purposes

under the Act,

1. for the appointment of a guardian for a minor or person of unsound mind for the

arbitral proceeding;

2. to obtain custody, preservation and sale of any goods provided such goods is the

subject-matter of an arbitration agreement;

3. to cause recovery of the amount as a result of an arbitral award;

4. to detain, preserve and inspect any property or thing which is subject-matter of an

arbitration agreement,

5. to obtain interim injunction,

6. to appoint a receiver.

The aforesaid purposes to grant interim measures contained in [clauses (a) to (e). Section

9 of the Act provide certain guidelines to a court and also provides the grounds to the

parties in an arbitration agreement.

To grant interim measures under Section 9, a court has discretionary power and this

section does not specify all the interim measures. The court has to take account of every

aspect of each case and also requirement of a case. This power of the courts to grant

PALLAVI BHOGLE


interim measures cannot be taken away by the parties by contest as it is the requirement

of the Act.

Interim Measures given by Court

Wherein the parties may feel the need for safeguarding interim custody preservation,

protection, storage, sale or disposal of the whole or part of the subject-matter of the

dispute or for its inspection or for samples to be taken, such matters had to be referred to

the court under Second Schedule to the old Indian Arbitration Act, 1940.

The new Arbitration and Conciliation Act, 1996 Under Section 9 and under Section 17

enables the court and arbitrator respectively to take interim measures. Section 31(6) also

empowers the arbitrator at any time during the arbitration proceedings to make an interim

arbitral award on any matter with respect to which the arbitrator may make a final award.

Thus, under the new Act, 1996 makes provision for exercising powers as to interim

measures and relating to the matter to which the arbitrator's final award may be based.

Granting of Interim Injunction / Interim Measure

Whether to grant interim injunction/interim measure is a discretionary power of the court.

It is to be noted that the powers conferred upon the court u/s 9 of the new Act, 1996 are

wider in scope than those powers conferred upon the Arbitral Tribunal u/s 17 of the new

Act.

While considering the grant of interim measures, the court may see, amongst other things,

as such:

1. whether the applicant has made out a prima facie case;

2. whether the balance of convenience is in his favour; and

3. whether he would suffer irreparable injury if such measures are not granted.

It is a settled position that interim injunction / interim measure can be granted in aiding

the arbitration proceedings and not to frustrate them. However, in guise of granting

interim measures / interim injunction, the court cannot adjudicate the subject – matter of

the dispute, because that task belongs to the arbitral Tribunal and not to the court.

Interim Order may be made even Before Commencement of Arbitration

Proceedings

The Apex Court in Ms. Sundaram Finance Ltd v. M/s N.E.P.C India Ltd., observed that

Section 9 of the new Act, 1996 does not contemplate, unlike Section 20 of the Arbitration

Act, 1940, a party applying to a court for appointing an arbitrator when no matter is

pending before the court. Under the new Act appointment of arbitrator is made as per the

provisions of Section 11 which does not require the court to pass a judicial order

appointing arbitrator/arbitrators. The High Court was, therefore wrong in referring to

these provisions of the Arbitration Act, 1940 while interpreting Section 9 of the new Act.

PALLAVI BHOGLE


Under the new Act, 1996 the court can pass interim orders when the request to refer the

dispute is received by the respondent as per S. 21 of the Act. The material words

occurring in Section 9 are ‘before or during the arbitral proceedings.’ This clearly

contemplates two stages when the court can pass interim orders i.e. during the arbitral

proceedings or before the arbitral proceedings. There is no reason as to why S. 9 of the

new Act should not be liberally construed.

Conclusion

PALLAVI BHOGLE


COMPOSITION OF ARBITRAL TRIBUNAL

Define an Arbitrator. Explain the provisions relating to appointment of

arbitrators under the Act. What are the grounds on which the appointment

can be challenged? [16] May 08, Dec 01

Explain the provisions relating to appointment and removal of arbitrators.

[16] May 07, Dec 06, May 04, May 03, Dec 03, May 01

On what grounds the appointment of an arbitrator can be challenged in

court? Discuss. [16] Dec 06, 06

Introduction: An ‘Arbitrator’ may be defined as ‘a private, neutral person chosen to

arbitrate a disagreement, as opposed to a court of law. An arbitrator could be used to

settle any non-criminal dispute, and many business contracts make provisions for an

arbitrator in the event of a disagreement. Generally, resolving a disagreement through an

arbitrator is substantially less expensive than resolving it through a court of law.’

The legal definition of an ‘arbitrator’ is the submission of a dispute to an unbiased third

person designated by the parties to the controversy, who agree in advance to comply with

the award—a decision to be issued after a hearing at which both parties have an

opportunity to be heard.

Appointment of Arbitrators [S. 11]

Section 11 of the Act, 1996 is the lengthiest section. There are 12 clauses under this

section which elaborate on the matter.

Section 11(1) - After internationalization of present Act, nationality of an arbitrator is

immaterial and so this Section 11(1) of the Act provides freedom to the parties to appoint

a person of any nationality as an arbitrator, however, the parties may restrict themselves

to certain nationalities of the states to be appointed as an arbitrator. There is no

discrimination in respect of nationality of an arbitrator. Therefore, a foreign national may

be appointed as an arbitrator.

Section 11(2) - This sub-section prescribes a procedure appointing the arbitrators and the

parties have been given the freedom to lay-down procedure under this sub-section (2)

PALLAVI BHOGLE


although this sub-section (2) is to be read with sub-section (6) and sub-section (8) and the

freedom of the parties provided in this sub-section is subject to certain restriction as to

follow mandatory provisions laid-down in sub-section (6).

Section 11(3) - This sub-section (3) would come into operation when the parties fail to

reach agreement on an appointment procedure. An arbitration agreement with three

arbitrators if failed, each party is given authority to appoint one arbitrator and these two

appointed arbitrators shall appoint the third arbitrator who shall be the presiding arbitrator

in the arbitration.

Section 11(4) - Further, this sub-section (4) deals with the circumstances when a party

fails to appoint an arbitrator within prescribed time limit i.e., 30 days, even after the

receipt of request relating to appointment of an arbitrator from the other party or

according to sub-section (4)(b). The two appointed arbitrators fail to agree on the

appointment of the third arbitrator within prescribed time limit i.e.. 30 days, from the date

of their appointment, in such situation this sub-section (4) provides that the Chief Justice

of India or the Chief Justice of a High Court is authorized to make an appointment upon

request of a party. Although, any institution designated by the Chief Justice of India or

Chief Justice of a High Court may appoint an arbitrator. It is expected that these

functionaries would act upon request of the parties expeditiously and these functionaries

are not required to consult the parties or the arbitrators while making such appointment.

Section 11(5) - Under sub-section (5) failing any agreement referred to in sub-section (2),

there would be a sole arbitrator. Where the parties could not arrive to an agreeable

position on arbitrator within 30 days time from the date of the receipt of a request by one

party from the other party to do so, in such circumstances the Chief Justice or any person

or institution designated by the Chief Justice should make an appointment under the

provision of sub-section (5) of Section 11 of the Act .

Failure to appoint arbitrator on new method empowers other party to seek remedy from

court for appointment of arbitrator.

Section 11(6) - Sub-section (6) contains a mandatory provision and it comes into play

when the parties had agreed on an appointment procedure i.e., when the parties or the two

appointed arbitrators failed to appoint a third arbitrators, a person including an institution

has failed to perform a function entrusted to him under that agreed procedure. That means

that when there is a complete failure on an agreed appointment procedure, this sub-

section would be operated to eliminate obstacles.

Section 11(7) - Sub-section (7) states that there is no appeal and a decision is final, on a

matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief

Justice or the person or an institution designated by the Chief Justice.

Section 11(8) - Sub-section (8) provides guidelines in the matter of appointment of an

arbitrator by the Chief Justice or the person or institution designated by him. It is

provided under this sub-section (8) that gives guidelines while making the appointment of

PALLAVI BHOGLE


an arbitrator. The functionaries mentioned in the sub-section, shall have due regard to

these guidelines:

(a) any qualifications required of the arbitrator by the agreement of the parties, and

(b) other considerations as are likely to secure the appointment of an independent and

impartial arbitrator.

Though, this sub-section (8) does not prescribe the qualification of an arbitrator but

specifies more particularly that an arbitrator should be an independent and impartial

person.

Section 11(9) - Sub-section (9) also provides guidelines to functionaries i.e., the Chief

Justice of India or the person or institution designated by him, in the matter of

appointment of sole arbitrator or third arbitrator in an international commercial

arbitration, that these functionaries should appoint an arbitrator of a nationality other than

the nationalities of the parties, in case the parties belong to different nationalities. Thus,

sub-section (9) aimed to eliminate scope of partiality by nationality of different countries

between the parties and arbitrator / arbitrators.

Section 11(10) - Sub-section (10) provides power to the Chief Justice to make an

appropriate scheme in respect of the matters entrusted to him, by sub-section (4) or sub-

section (5) or sub-section (6). The powers vested under this sub-section (10) is of

administrative nature therefore the scheme made by the Chief Justice would be of

administrative character which is essential for enforcement of the Act effectively.

Section 11(11) - Sub-section (11) provides solution to the problem when different parties

approach to different Chief Justices or their designates, under sub-section (4), or sub-

section (5) or sub-section (6). The Chief Justice or his designate to whom the request has

been first made under the relevant sub-section shall alone be competent to decide on the

request. That means the Chief Justice or his designate who first receives and accepts the

request shall have power to decide on the entrusted matter.

Section 11(12) - Sub-section (12) explains that in case of international commercial

arbitration reference is to be made to the Chief Justice of India and. in case of domestic

commercial arbitration reference is to be made to the Chief Justice of High Court within

whose local limit the principal court in clause (e) of sub-section 1(1) of Section 2 is

situate and where the High Court itself is the Court referred to in that clause, then the

Chief Justice of that High Court.

Grounds for Challenge [S. 12]

Section 12, is on the pattern of Article 12 of the Model Law which provides grounds for

challenge to an arbitrator and to enforce that justice, fair play, impartiality and

independency must be followed by an arbitrator.

PALLAVI BHOGLE


Section 12(1) contains an expectation of an honest, willful, disclosure from a prospective

arbitrator to make in writing such disclosures which is likely to cause question mark as to

his independence or impartiality as an arbitrator.

As per the subject of this Section 12(1) a prospective arbitrator is duty bound to disclose

his antecedent which is likely to affect his role as an arbitrator.

Section 12(2) lays down duty of an arbitrator since he has been appointed as an arbitrator

and throughout the arbitral proceeding if any circumstances mentioned in Section 12(1)

arise, to be disclosed in writing to the parties, unless the parties have already been

informed by an arbitrator. An arbitrator shall also be proceeded without delay in this

regards.

Section 12(3) provides ground for challenging the arbitrator, when:

i. the circumstances present to cause justifiable doubts to his independence or

impartiality, or

ii. found not qualified as per the agreement between the parties.

Thus, sub-section (3) averts the flimsy ground to challenge by providing good, reasonable

grounds to challenge the arbitrator.

In Jiwan Kumar Lohia v. Durga Dutt Lohia, the Supreme Court of India said, that

‘Reasonable apprehension of bias in the mind of a reasonable man, can be a good ground

for the termination of the mandate of an arbitrator.’

Section 12(4) provides estoppel against a party to challenge who had knowledge of any

ground mentioned in sub-section (3) before the appointment of an arbitrator, if this is not

so, a party may challenge an arbitrator appointed by him and it does not matter if he has

participated in appointment but he could know only after the appointment.

Duty to disclose is cast on the prospective arbitrator

Sub-sections (1) and (2) of Section 12 of the Arbitration and Conciliation Act, 1996 make

it mandatory for the prospective arbitrator i.e., before the appointment as an arbitrator to

disclose to the parties in dispute in writing any circumstances likely to give rise to

justifiable doubts as to his impartiality or independence. Undoubtedly, the use of

expression ‘shall’ connotes that these provisions are imperative. An arbitrator has to

discharge this duty ‘without delay’ i.e., before he takes over as an arbitrator. It is the

mandate of Section 12(1) and 12(2), of the Act, 1996.

It is submitted that an arbitrator has to follow the principle of natural justice and fair play

while conducting arbitration.

Conclusion

PALLAVI BHOGLE


State the powers of court to appoint an arbitrator. [10] Dec 05, Dec 04

Powers of the Chief Justice of High Court to appoint Arbitrators [10] Dec 02

Under what circumstances can court remove the arbitrators? Illustrate.

[16] May 09, May 06, Dec 05, Dec 05, Dec 05, Dec 03

Introduction: The expressions ‘without delay’ as occurring in Section 12(2) of the

Arbitration and Conciliation Act, 1996 means there should not be undue or unreasonable

delay on the part of arbitrator's duty to disclose when such person is first approached in

connection with his possible appointment as an arbitrator. Section 12(2) provides that this

duty of the arbitrator has to be discharged from the time person is appointed as an

arbitrator and maintain it throughout the arbitral proceedings. Hence, an arbitrator has to

discharge this duty ‘without delay.’ This provision is intended to commence speedy

arbitration and its adjudication.

The Delhi High Court in Union of India v. Somnath Chadha observed that ‘the main

object of referring a dispute to an arbitrator for adjudication is the speedy end of the

strife. This object in the court's view stands frustrated on account of unreasonable neglect

on the part of the appellant / claimant to promote the conduct of arbitration proceedings.

It was held that delay or negligence in appointment of arbitrator or commencement of

arbitration proceedings would defect the very purpose of the arbitration itself. It is to be

reiterated that the scope of arbitration is to avoid the prolong litigation in the courts. It is

an aid to speedy decision. In these circumstances the court may intervene and appoint an

arbitrator.

In Ved Prakash Mittal v. Union of India, the Full Bench of the Delhi High Court held that

an opportunity is given by the court to designated officer to exercise his power of

appointment of arbitrator within a stipulated period failing which the court would appoint

the arbitrator itself.

Where the office of the designated officer is abolished the court can appoint an arbitrator

under Section 8 of the Arbitration Act, 1940.

Similarly, in Sankar and Sankar v. State of West Bengal, it was held that if a person

permitted to appoint arbitrator under Arbitration clause neither appoints an arbitrator nor

enters on the reference himself and there is silence for more than one year it would be a

clear case of failure and neglect. In that event the court can appoint an arbitrator itself.

PALLAVI BHOGLE


Appointed arbitrator must possess qualifications agreed to by the parties

In Anuptech Equipment Pvt. Ltd. v. Ganpati Cooperative Housing Society Ltd., the

Bombay High Court has held that if the appointed arbitrator does not possess the

qualifications agreed to by the parties in the arbitration agreement, his very appointment

being void ab initio, the arbitration proceedings would be totally null and void and any

order passed by him, e.g., terminating arbitration proceedings for default of a party in

filing claim statement, would be a nullity.

Termination of mandate and Substitution of Arbitrator [S. 15]

Only S. 15(1) and (d) is modeled on Article 15 of the Model Law.

Section 15 (1) provides two more additional grounds for termination of arbitrator’s

authority. These grounds are:

(a) that the arbitrator has withdrawn himself from office for any reason;

(b) that the parties have consented each other to terminate arbitrator’s authority.

Under sub-section (1) the parties have freedom to remove an incompetent arbitrator who

is not able to perform by reasons whatsoever, by their consent. Thus, sub-section (1) too

recognizes the freedom of the parties to agree and prescribe conduct of their arbitration.

Section 15(2) provides answer to question that how a substitute arbitrator should be

appointed. This sub-section (2) would come into operation when the mandate of an

arbitrator has been terminated on whatsoever ground. The parties may abandon the

arbitral proceedings when a sole arbitrator, offers departure of originally appointed

arbitrator. Although a substitute arbitrator shall be appointed as per the rules applicable to

the case and any party not permitted to stop appointment of a substitute arbitrator, thus,

the consent of the parties is necessary in this regard.

Section 15(3) provides discretionary power to the substituted arbitrator who may begin

with the proceedings from the initial stage or from the stage where the former arbitrator

stopped the proceedings.

Section 15(4) provides despite change in composition of the arbitral tribunal the

proceedings held prior to appointment of another arbitrator shall not be invalid solely on

the ground that the composition of arbitral tribunal has been changed. Although, freedom

given to the parties under sub-section (4) that they may agree that the arbitral tribunal

may again commence proceedings from initial stage.

Termination of mandate of arbitrator

Wherein an appointed arbitrator on his withdrawal from the office ceases to be an

arbitrator his mandate terminates. As regards the termination of the mandate of the

arbitrator appointed in Government contract, situation may arise where the appointed

arbitrator, being a Government officer retires from his service. In such an event, it has

PALLAVI BHOGLE


been held that the mandate of the appointed Arbitrator on retirement/resignation from

employment itself terminates.

It is noteworthy that Section 15 is a complimentary Section to Sections 13 and 14 as

regards to the arbitrator withdrawing from his office which is also contemplated by

Section 13(3) which has been enunciated in Section 15(1)(a).

Section 15(1)(b) makes provision of withdrawing from office if the agreement between

the parties have been made to cancel appointment of arbitrator, who have appointed him

as an arbitrator. In other words – ‘The arbitrator withdrawing from office in accordance

with the agreement of the parties as the parties who appointed him by consent can cancel

the appointment.’

Substitution of arbitrator

Section 15(2) of the Act provides that where the mandate of an arbitrator terminates a

substitute arbitrator shall be appointed according to the rules that were applicable to the

appointment of the arbitrator being replaced. However, according to Section 15(3) unless

otherwise agreed by the parties, where an arbitrator is replaced under Section 15(2), any

hearing previously held may be repeated at the discretion of the arbitral tribunal.

Sections 15(1)(a) and (4) deal with procedural aspects regarding the action on the

appointment of the substitute arbitrator. It is settled law of arbitration if in the mid of

arbitration proceedings the arbitrator withdraws or retires and if any mandate made, it

would stand terminated.

In Punjab State v. Pritam Singh, wherein reference of dispute was made to

Superintending Engineer in Public Works Department as sole arbitrator as per arbitration

agreement. After his retirement, proceedings were being taken up by his successor, which

was never objected to, by the parties. It was held that the subsequent order by court on

application under Section 27 made by the party directing opposite party to produce

evidence before original arbitrator and directing original arbitrator to continue with the

proceedings, in spite of the fact that he has ceased to act as an arbitrator is not

sustainable.’

Conclusion

PALLAVI BHOGLE


State under what circumstances a sole arbitrator can be appointed [8] May 07, Dec 04, Dec 03

Introduction: S. 10 of the A&C Act, 1996 makes a provision for the number of

arbitrators that will be appointed, saying: ‘The parties are free to determine the number of

arbitrators, provided that such number shall not be an even number.’

Sole Arbitrator

If the parties want more than one arbitrator, they will have to expressly provide in the

agreement, otherwise the reference is to be to a sole arbitrator appointed with the consent

of the parties. Where the opposite party declined to give consent even after second notice,

the court would get the power on the application of the other party to appoint an

arbitrator. Under the Arbitration and Conciliation Act, 1996, the matter has to be referred

to the Chief Justice.

No need to mention specific dispute

A mere assertion of the claim covered by the arbitration clause to the notice of the other

party was held sufficient to invoke arbitration. There is no need for raising any specific

dispute. A tripartite agreement involved an international commercial arbitration. One

party (the applicant) was opposed by the other two. The application was under Section

11(5) before the Supreme Court. The respondents contended that no specific dispute was

raised by the applicant and, therefore, the arbitration clause could not be involved. It was

held that the existence of a dispute could be inferred from the facts and circumstance of

the case. The contract was a commercial document. An arbitration clause imports in itself

all disputes. It must be interpreted so as to give effect to the contract rather to invalidate

it. A narrow technical approach is not proper. The objectives of the 196 Act are to

provide less expensive and more efficacious remedy to the parties to settle their disputes.

On the partie's failure to determine the number of arbitrators the Supreme Court can

exercise the power under Section 10(2) to appoint a sole arbitrator. Appointing three

arbitrators would have been burdensome to the parties and therefore against the

objectives of the Act.

Case Laws

In Subhash Projects & Marketing Ltd. v. South Eastern Coal Fields Ltd., it was held that

recourse to court by one party for appointment of arbitrator under S. 8 of the Arbitration

and Conciliation Act, 1996 will not preclude the other party to appoint sole arbitrator

when procedure for appointment is stipulated in the arbitration agreement.

In another case it has been held that when procedure for appointment of arbitrator is

provided in arbitration agreement between the parties by the contractor which stipulates

that the Chief Engineer can appoint anyone as an arbitrator from the list of three

PALLAVI BHOGLE


candidates submitted by the contractor, is not availed of by the Chief Engineer, it would

amount to an implied consent given by the Chief Engineer for appointment of sole

arbitrator by contractor. Although, in certain circumstance, the substitution of sole

arbitrator may be justified and he is considered competent to arbitrate on the matter.

In State of Andhra Pradesh v. I. Chandrasekhara Reddy, wherein sole arbitrator provided

in the contract between the parties, was directly concerned with the contract work in

dispute, the court ordered substitution of arbitrator, and that the plea that award passed by

substituted arbitrator was nullity for want of reference is not tenable, since order of

substitution itself gave jurisdiction of arbitrator to enter upon reference, which order had

become final.

Conclusion

Explain what grounds amount to misconduct of arbitrators. State the

remedy available for the parties under such circumstances. [16] May 06

Introduction: Removal of arbitrators is discussed under Ss 12 & 13 of the Act. One of

the grounds for removal is that of Misconduct.

Misconduct

The Allahabad High Court held that where an arbitrator demanded his fee from one party

only and refused to proceed further until he was paid and allowed the statutory period to

expire without his doing anything, that was not considered misconduct so as to justify his

removal provided that the fee demanded by him was reasonable and not exorbitant

In the case of Pratt v. Swanmore Builders Ltd and Baker, the arbitrator was nominated by

the President of the Institute of Arbitrators. The dispute was about a building contract.

The challenge was on the ground of delay and misconduct. The facts raised were that the

arbitrator took no steps to ascertain what the scope of the arbitration agreement between

the parties was; he demanded £3000 from the builders as security for the final award,

which they were unable to pay; he then made further orders for payment by both parties,

£500 as security for the arbitrator's fee and expenses, and £500 as security for the costs of

reference; that he made various mistakes in sending to Miss Pratt a copy of an important

letter which he had received from the builders and which contained incorrect and

incomprehensible expressions and lastly, that he ordered the arbitration to proceed

without any security unmindful of the fact that it would make the proceedings a wasted

effort as the builders had already indicated to Miss Pratt that they would go into

liquidation if she won the award.

PALLAVI BHOGLE


She applied for removal of the arbitrator. The court had to consider whether the arbitrator

had misconducted himself or the proceedings. The court pointed out that the word

"misconduct" in this context did not have any moral significance but was used in a

technical sense as denoting irregularity. It is distinct from error which is not only normal

in human affairs but also a occupational hazard. The court thought that the right test to

apply was that indicated by Cozens – Hardy in Enoch and Zaretzky, Block & Co, Re,

namely, whether having regard to the arbitrators conduct, it would be fair to leave the

arbitration in his hands, or, in other words, by looking at the arbitrators mistakes,

whether, by reason of them, the proceedings have been reduced to such confusion that

there was no reasonable prospect of justice being done, if he were permitted to continue.

The court noted how unfair the arbitrator was towards Miss Pratt in going ahead with the

arbitration without any security, and decided that the arbitrator should be removed on

grounds of misconduct.

The court also ordered that the arbitration agreement should cease to have effect with

respect to the dispute referred.

Personal knowledge not to be used for ousting competent evidence

Though one of the principal advantages of arbitration is that it can be conducted by a

person who is an expert on the subject-matter of dispute, it would not permit him to use

his personal knowledge to supersede other competent evidence. That may amount to

misconduct justifying his removal.

Conclusion

Explain the powers and functions / duties of Arbitral Tribunal under the

Act. [16] May 08, 06, Dec 03, 02

State the powers of an arbitrator [6] May 09, May 05, Dec 05, May 03

Introduction: There are several provisions incorporating in the Arbitration and

Conciliation Act, 1996 explaining the provisions about the powers, duties and functions

of the arbitrator. Section 2(1)(d) defines ‘Arbitral Tribunal’: Arbitral Tribunal means a

sole arbitrator or a panel of arbitrators.

According to the provisions of the arbitration clause/agreement or by the order of the

Court, there may be a sole arbitrator or a panel of arbitrators. When there are more than

one arbitrator, the Arbitration Act, 1940 termed the title ‘Umpire’ to the head of the

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panel. The Arbitration and Conciliation Act, 1996 has given the title ‘President’ to the

head of the panel, who shall preside over the functions.

Whether there is only one arbitrator or a panel of arbitrators, it is called the ‘Arbitral

Tribunal.’ Therefore, the powers, duties and functions explained in the statute for Arbitral

Tribunal are also the powers, duties and functions of the Arbitrator.

The Powers of the Arbitrator/Arbitral Tribunal

1. No interference by judicial authority - Arbitration is one of the important means

to settle the disputes outside the court, that too with the consent of the parties. The

arbitrator/arbitral tribunal enjoys its extreme jurisdiction to entertain the arbitral

proceedings. The Courts have no authority or power to interfere with such arbitral

proceedings or the powers of the arbitral tribunal, except where so provided in the

Act.

2. Administrative Assistance – To conduct the arbitral proceedings, the arbitral

tribunal requires assistants. S. 6 empowers the arbitral tribunals to appoint such

number of administrative assistants for conducting the arbitral proceedings.

3. Jurisdiction – S. 16 explains the provisions about ‘competence of arbitral tribunal

to rule on its jurisdiction.’

4. Interim measures ordered by the arbitral tribunal - Section 9 of the 1996 Act

empowers the Court to pass interim measures. Section 17 empowers the arbitral

tribunal to pass interim measures under certain circumstances. If the arbitral

tribunal passes an order for the preservation or protection or custody of certain

property, which is the subject-matter of the arbitral proceedings, to a person, the

tribunal may ask such person to provide appropriate security for that property.

5. Determination of rules of procedure - The Civil Procedure Code, 1908 and the

Indian Evidence Act, 1872 do not apply to the arbitral proceedings. Section 19 of

1996 Act gives the power to the arbitrator/arbitral tribunal to determine the rules

of procedure itself.

6. Place of arbitration - Section 20 gives the opportunity to the parties to the

arbitration agreement to determine the place of arbitration. If there is no such

provision or agreement in the arbitration clause or agreement, the

arbitrator/arbitral tribunal is empowered to determine the place of arbitration.

7. Language - The parties may determine the language to be used in the arbitration

proceedings according to their convenient and usage in the trade, and incorporate

such a clause in the arbitration agreement. However, if the parties do not provide

such a clause, and do not come to an understanding, the tribunal has power to

determine which language is to be used in the arbitral proceedings. This is

explained in Section 22 of the 1996 Act.

8. Statements of claim and defence - The arbitral tribunal receives the statement of

claim from the party, who initiated the arbitral proceedings, and the statement of

defence from the opposite party. The arbitral tribunal is also empowered to

receive the evidence and record accordingly. Section 23 contains this provision.

9. Hearing and Written Proceedings – If the parties agree to conduct the arbitral

proceedings orally, the arbitral tribunal conducts the proceedings orally. If there is

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no such clause or agreement between the parties, the tribunal is empowered to

determine whether to hold the proceedings orally or written. S. 24 contains this

provision.

10. Default of a party - It is the duty of the parties to submit the necessary documents

and statements to the arbitral tribunal as and when necessary and directed by the

tribunal. If any one of the parties fails to submit the statement and evidence, the

tribunal is empowered to proceed with the arbitral proceedings, after giving

sufficient opportunity to such party. S. 25 contains this provision.

11. Expert appointment by arbitral tribunal - If the arbitral tribunal opines it necessary

to obtain the expert opinion, it is empowered to appoint one or more experts in the

concerned subject. Section 26 empowers the arbitrar/arbitral tribunal to do so.

12. Court assistance in taking evidence - According to Section 27, if necessary, the

arbitral tribunal may seek the assistance of the Court in taking evidence.

13. Award - After completing the arbitral proceedings, the arbitrator/arbitral tribunal

is empowered to pass an award. The arbitrator, if there is a sole arbitrator, or the

arbitrator, if there is a panel of arbitrators, should sign and date on the arbitral

award. This award is equal a Decree of a Court.

14. Settlement – While the arbitral proceedings are pending before him or it, the

arbitrator of arbitral tribunal may encourage the parties to settle the dispute. S. 30

contains this provision.

15. Termination of proceedings - The arbitral tribunal is empowered to terminate the

proceedings under the circumstances narrated in Section 32.

16. Suspension of the proceedings - The arbitral tribunal has the power to suspend the

arbitral proceedings, in the following circumstances:

a. if the parties claiming or counter-claiming do not deposit the necessary

expenses before the arbitral tribunal;

b. if both the parties do not come forward with clean hands;

c. if both the parties do not co-operate with the arbitral proceedings; etc.

17. Correction and interpretation of the award; additional award - Under Section 33,

the arbitral tribunal is empowered to correct, interpret the award issued by it. It is

also empowered to pass an additional award.

18. Interest - The arbitral tribunal may order for interest on the sum awarded.

19. Deposits - The arbitral tribunal is empowered to fix the amount of the deposit or

supplementary deposit, as the case may be under Section 38.

20. Remuneration: The arbitrator or the panel of arbitrators are entitled to receive

remuneration as per the terms of the arbitration agreement or as fixed by the

court.

21. Lien on arbitral award and deposits as to costs - According to S. 39, the arbitral

tribunal can exercise lien on arbitral award and deposits as to costs.

Duties of the Arbitrator/Arbitral Tribunal

1. Equal treatment of parties - The arbitrator/arbitral tribunal should conduct the

arbitration proceedings without any partiality to any person or party. The tribunal

PALLAVI BHOGLE


must treat both the parties equally. It must provide full opportunities to both the

parties to present their case. Section 1 further explains this provision.

2. Concerned with the dispute only - The arbitral tribunal must concentrate its

arbitral proceedings on the dispute. It should not exceed and go beyond the

dispute. An arbitral award may be set aside by the court, if the arbitral award

deals with a dispute not contemplated by or not falling within the terms of the

submission to arbitration, or it contains decisions or matters beyond the scope of

the submission to arbitration.

3. Duty to follow the provisions of the 1996 act - The arbitrator or arbitral tribunal

should follow the provisions of the Arbitration and Conciliation Act, 1996 and

other concerned statutes in force. The Court may set aside an arbitral award, if the

composition of the arbitral tribunal or the arbitral procedure was not in

accordance with the agreement of the parties unless such agreement was in

conflict with a provision of this Part from which the parties cannot derogate, or,

failing such agreement, was not in accordance with this part.

4. Public policy - The arbitral tribunal should follow the public policy. If its

proceedings or award is against the public policy, the Court may set aside the

award.

5. Time limitation - The arbitral tribunal should complete the arbitral proceedings

within the time limits prescribed by the court, in case if the arbitral tribunal is

appointed by the Court.

6. Remuneration - The arbitrator is entitled to receive remuneration as per the

arbitration agreement or as fixed by the Court or as per the agreement reached by

the parties. When once his fee or remuneration is fixed, he should not demand

more than that fixed remuneration or fee. It is against the principles of natural

justice and legal provisions, if he demands more than agreed.

7. Reasoned Award – It is the duty of the arbitral tribunal to give reasons for its

coming to the conclusions of such award.

8. Principles of Natural Justice – The arbitral tribunal should follow the principles of

natural justice i.e. audi alterum partem, notice, one cannot judge his own case,

etc.

9. Withdrawal from the arbitral proceedings – If the arbitrator has any personal

interest, either economic interest or a personal relationship with any of the parties,

he must not accept the arbitratorship. If he has noticed such interest during the

arbitral proceedings, he must express it to the parties concerned and withdraw

from the arbitratorship.

10. Notices to legal representatives - There are no provisions in the Arbitration and

Conciliation Act, 1996, regarding the notices to be sent or information to be given

or to implead the legal representatives on the record if one of the parties dies

during the pendency of the proceedings. Even though there are no such provisions

in the Act, it is the duty of the arbitral tribunal to send the notices or information

to the legal representatives to the deceased party, when it receives the information

about the death of such party. Until the legal representatives are impleaded on the

record, the arbitral tribunal must adjourn the proceedings.

11. Finality and reasonableness in the award - It is the duty of the arbitral tribunal to

see that the award must be complete and final, as well as reasonable. If there is

PALLAVI BHOGLE


any defect or gaps, certain award will not be considered valid. In the case of

Dresser v. Finnis, a dispute was referred to the arbitrators regarding the

merchantable quality of sleepers supplied by the respondent to the appellant. The

arbitrator gave the award stating that some of the sleepers were merchantable and

some not. The arbitrator also directed the buyer/appellant to sell all the sleepers at

the market rate, and selling broker to determine the difference of amount between

the merchantable sleepers and not merchantable sleepers. Aggrieved with the

award, the appellant approached the Court. The Court set aside the award opining

that there was no finality and reasonableness in the award.

12. Legal and possible – It is the duty of the arbitral tribunal to see that the award

must be legal and possible to implement it. Section 14 of the 1996 Act states that

the award must be set aside if it is impossible to implement the award.

13. Duty to render accounts - Where the party or parties deposit the amount before the

arbitral tribunal towards the costs and expenses of the arbitral proceedings, it is

the duty of the arbitral tribunal to render the account, and return the balance

amount to the concerned parties. [S. 38]

14. Ex aequo et bono - This Latin phrase means ‘according to what is just and good.’

It is the duty of the arbitral tribunal to decide the dispute ex aequo et bono

(according to what is just and good). If the parties in the dispute authorize him, he

may act friendly with both the parties to bring them together and settle the matter

in an amicable way. This is explained by Section 28(2).

15. Usages – In all cases, the arbitral tribunal shall decide in accordance with the

terms of the contract and shall take into account the usages of the trade applicable

to the transaction.

16. Settlement - It is also one of the duties of the arbitral tribunal to encourage

settlement between the parties.

Conclusion

Arbitral Tribunal 10] Dec 01

Introduction: Under S. 2(1)(d) of the Arbitration and Conciliation Act, 1996 the term

‘arbitral tribunal’ means a sole arbitrator or a panel of arbitrators. It is also to be noted

that composition of arbitral tribunal has been provided in Chapter II namely, in Section

10 of the said Act, wherein the parties are free to determine the number of arbitrators,

provided that such number shall not be even number. Failing the determination referred

to in Section 10(1) of the Act, arbitral tribunal shall consist of a sole arbitrator. A sole

arbitrator or a panel of arbitrators can be appointed by third designated party provided

there is an agreement in this regard.

Abolition of the umpire system under the new Act

PALLAVI BHOGLE


Where the number of arbitrators agreed upon is three and in, absence of procedure

regarding appointment of the umpire or Presiding Arbitrator, each party shall appoint one

arbitrator and the two arbitrators so appointed, shall appoint a third arbitrator as Presiding

Arbitrator. Under the old Arbitration Act, 1940 such Presiding Officer was referred to as

umpire, however the umpire system has been abolished under the new Arbitration and

Conciliation Act, 1996.

Arbitrators to have requisite qualifications agreed to by the parties

The old Arbitration Act, 1940 was silent on the subject of qualification of arbitrators.

Now the new Act emphasizes on appointment of arbitrator / arbitrators who have

specialization in the respective field relating to arbitrable dispute in hand. It has been

seen that most of the disputes are technical in nature requiring special knowledge of

technology, commerce, industries etc. and such disputes can be, adjudicated upon only by

persons having expertise in these fields. Thus, on the ground of non possessing of

requisite qualifications, the appointment of an arbitrator can be challenged.

Arbitrator to rule its own jurisdiction

Under the Arbitration Act, 1940 there was no provision on the issue and where the

authority of the arbitrator was disputed the parties were required to refer the dispute to

the court for proper adjudicati6n. But, the new Arbitration and Conciliation Act, 1996 has

conferred on the arbitrator / arbitral tribunal the power to rule upon its own jurisdiction

regarding the validity or existence of te arbitration agreement.

Arbitral tribunal is not a court

An arbitral tribunal though discharges the functions of quasi-judicial nature on principle

of natural justice and fair play, but an arbitral tribunal is not a court of law. The Apex

Court in Engineering Mazdoor Sabha v. Hind Cycles Ltd., has held that the arbitral

tribunal does not constitute a court in technical sense.

Arbitration proceedings to proceed expeditiously

Wherein the arbitrators are unable to perform expeditiously and fail to proceed

expeditiously, in such a case an aggrieved party can seek court's intervention. The Apex

Court in Government of Andhra Pradesh v. K.M. Rao, permitted the appointment of

person ex-officio to perform as' arbitrator in place of originally appointed Government

Engineers. In the present case three arbitrators were appointed who were Government

officers and Engineers and consequently the arbitration proceedings could not be

undertaken expeditiously. Therefore, the court was justified in directing the appointment

of persons ex- officio.

It is submitted that the very purpose of arbitration proceedings will be defeated if the

proceedings are not being held expeditiously.

PALLAVI BHOGLE


Impartiality in arbitration proceedings must be maintained

The mandate of the new Arbitration law makes mandatory provision that arbitrators are

required to disclose expressly any situations and circumstances which are likely to give

rise to reasonable doubt regarding their independence or impartiality in the proceedings.

Thus, the arbitrators are under a legal obligation to intimate the parties expressly i.e., in

writing about their interest, if any in the dispute.

Establishment of statutory arbitral tribunal

Several State Governments in India have established arbitral tribunals by incorporating

Special Act, these tribunals are given jurisdiction to deal with the disputes of differences

regarding claims exceeding certain value. Ordinarily, these statutory tribunals deal with

the arbitration wherein the Government is one of the arties. Members of such statutory

arbitral tribunals are appointed by the Government and these tribunals have their own

procedure. Undoubtedly statutory arbitral tribunals are not to be treated as arbitral

institutions, because statutory arbitral tribunals directly arbitrate being 'ex-officio'

arbitrators whereas arbitral institutions provide the list of arbitrators for the parties, to

make option regarding appointment of the arbitrator.

It was held that such arbitral tribunal exercises judicial power of State.

Conclusion

PALLAVI BHOGLE


JURISDICTION OF ARBITRAL TRIBUNALS

Discuss whether the arbitral tribunal is competent to rule on its own

jurisdiction. Explain the powers of arbitral tribunal in passing interim orders.

[16] Dec 02, May 01

Jurisdiction of Arbitral Tribunal [10] May 02

What do you mean by interim reliefs and when the arbitrators can pass the

interim award? [16] May 06

Explain under what circumstances an arbitrator can pass an interim order

and state the other powers of an arbitrator. [16] Dec 06

Introduction: Chapter IV of the Arbitration and Conciliation Act, 1996 discusses

provisions that fall under the heading of ‘Jurisdiction of Arbitral Tribunal’

As explained in the case of Ispat Engg & Foundry Works v. SAIL, ‘An arbitrator has no

authority or jurisdiction beyond that defined by the terms of the contract or what the

parties desire under the contract. He has no authority to abdicate the terms of the

contract.’

Competence of Arbitral Tribunal [S. 16]

Section 16 of the Act, 1996 is a key section of the Act and sub-sections (1) to (4) of

Section 16 are modeled on Article 16 [paragraphs (1) and (2)] of the Model Law. Section

16 is analogous to Section 13 of the Arbitration Act, 1940.

S. 16(1), empowers the arbitral tribunal to make rules on its own jurisdiction; including

any objections, in respect to the existence or validity of the arbitration agreement,

however over such matters ultimate control exercised by the courts as provided under

Section 34 of the Act, 1996.

This is an important element in modem arbitration law, referred to as ‘competence de law

competence’ meaning law is competent to rule in its own sphere.’

Sub-section (1) contained principle of ‘autonomy’ and distinguishes the arbitration clause

from other clauses in the agreement. Thus, an arbitration clause is independent of the

PALLAVI BHOGLE


other terms of contract and the arbitral tribunal cannot invalidate an arbitration clause

while invalidating the other clauses of an agreement.

Section 16(1) contained the expression ‘The Arbitral Tribunal may rule’. That means it is

the discretionary powers of an arbitral tribunal which it may exercise on its own motion

or at the request of a party. An arbitrator cannot be compelled to exercise those powers.

Section 16(2) provides plea to raise objections to jurisdiction but no time limit is

prescribed. The arbitral tribunal itself may move motion relating to the question of

jurisdiction, however the parties have also vested rights to raise objections to jurisdiction

but ‘not later than the submission of the statement of defence.’ A party shall not be

deprived of such right to raise objections to jurisdiction merely on the ground that he has

appointed or participated in the appointment of an arbitrator. Thus, an aggrieved party

has an opportunity to raise a jurisdictional plea before an arbitral tribunal even after

appointment of an arbitrator.

Section 16(3) states that as soon as an arbitral tribunal goes beyond the scope of his

authority objections to be raised while the arbitral proceedings are in progress and in this

context Section 16(4) waived off the time limit provided such delay is justified and

reasonable.

Section 16(5) and (6) are not modeled on the basis of the Model Law, although, these two

sub-sections are to be read together. Sub-section (5) states ‘The arbitral tribunal shall

decide on a plea referred to in Section 16(2) and (3), and where the arbitral tribunal takes

a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral

award.’ That means a plea of objections to jurisdiction made by a party before an arbitral

tribunal and an arbitral tribunal proceeds by rejecting such plea and also makes an arbitral

award, in such cases, an aggrieved party may approach to the court for setting aside such

an arbitral award according to Section 34 of the Act as this provision is available to an

aggrieved party under sub-section (6) of Section 16 of the Act.

To eradicate abuse of the constitutional remedy through ‘Writ’ expressly not provided in

Section 16(6) of the Act. Thus, the writ jurisdiction of the High Court under Article 226

of the Constitution may not be available in the face of Section 34 of the Act, with object

to prevent unscrupulous methods, no provision in respect of instant court control is

available, if it is not so, it would discourage the arbitral proceedings. Therefore, the

arbitral tribunal to commence or continue the arbitral proceedings and also empowered to

rule the jurisdiction while the objection to jurisdiction issue of an arbitral tribunal is

pending before the Court, such are not stayed under Section 16 of the Act, 1996.

However, before referring the matter for arbitration, arbitration agreement must be in

existence. Without there being any arbitration agreement in existence, the Court would

have no jurisdiction to refer the matter for arbitration prima facie. It is required to be

considered whether arbitration clause exists or not, in the view of fresh contract between

the parties.

PALLAVI BHOGLE


When objections to jurisdiction have to be raised

Section 16(2) of the Act deals with the question as to when objections to jurisdiction have

to be raised. No time limit as such has been prescribed within which the arbitral tribunal

itself can raise such objection suo motu. However, if the either party raising objections as

to jurisdiction, it must be raised ‘not later than the submission of the statement of

defence’ to the claim or counter claim, as the case may be. However, for construction of

term ‘defence’, the Section 2(9) of the Act, 1996 can be referred. In case arbitral tribunal

enters upon the consideration of a matter when it has no jurisdiction to do under the

arbitration clause or submission between the parties, then it cannot derive jurisdiction by

a mere appearance of a party under protest. It was held that in such circumstances, a party

is not estopped from challenging the eventual award of the tribunal under Section

34(2)(iv) or (v) as the case may be.

In Prasun Roy v. Calcutta Metropolitan Development Authority, the Apex Court has held

that where a party is aware from the very commencement that by reason of some

disability the matter is legally incapable of being submitted to arbitration, even though

took parts in arbitration proceedings without protest and fully avails of the entire

arbitration proceedings, but when he sees that the arbitral award has gone against him

comes forward to challenge the entire arbitration proceeding on the ground that it lacks

jurisdiction to arbitrate the disputed matter, if cannot be allowed to challenge as it is

known disability. This principle would be applied before or after making of the arbitral

award. It is well settled legal principle that a party will not be allowed to blow hot and

cold at the same time. In other words, it can be said that long participation in the

arbitration proceedings and acquiescence in the proceedings preclude such a party who

has taken part in the entire proceedings but raised the objection as to want of jurisdiction

only when the arbitral award goes against him, such a party is estopped from challenging

the jurisdiction of the arbitral award. Therefore, it cannot be allowed to be challenged on

such ground of ‘known disability.’

Where there is no arbitration agreement as defined under Section 2(a) of the Arbitration

Act, 1940, there is an initial want or jurisdiction which cannot be cured by acquiescence.

The Apex Court in Waverly Jute Mills Co. Ltd. v. Rayman & Co. (India) Pvt. Ltd/ held

that if a contract containing the arbitration clause is not legal and m fact void, the

arbitration clause which is one of the terms thereof must also perish along with it and the

dispute relating to the validity of a contract is, in such cases, for the court and not for the

arbitrator to decide. The court further held that a dispute as to the validity of a contract

could be subject-matter of an agreement of arbitration in the same manner as a dispute

relating to a claim made under the contract but such an agreement would be effective and

operative only when it is separate from the dependence of the contract which is impugned

as illegal. It is settled position that an agreement for arbitration is the very foundation on

which the jurisdiction of the arbitrator to act rests and where that is not in existence at the

time when he enters on his duties, such arbitration proceedings must be held to be

entirely without jurisdiction or absence of jurisdiction, mere consent of the parties cannot

confer jurisdiction. However, mere denial of existence of the arbitration agreement by

one of the parties does not denude the arbitrators of their jurisdiction.

PALLAVI BHOGLE


It is submitted that though the arbitral tribunal is competent to decide and determine its

jurisdiction under Section 16 of the new Act, 1996 but the tribunal has to work out within

the parameters laid down in the arbitration clause. While the arbitrator can decide the

question regarding the existence of a valid contract including the arbitration clause

therein. In case the Arbitral tribunal decides its jurisdiction wrongly the aggrieved party

can seek remedy before the court of law, because arbitral tribunal is not final authority

and cannot overlap the authority rather jurisdiction of the court of law, specifically where

question of law is involved. It is settled principle of jurisdiction.

Section 16 does not take away jurisdiction of the Chief Justice to decide the question of

existence of arbitration agreement

The Apex Court in Wellington Association Ltd v Kirit Mehta, has held that S. 16 of the

new Act, 1996 does not takeaway the jurisdiction of the Chief Justice of India or his

designate, if need be, to decide the question of the existence of the arbitration agreement.

The court observed that Section 16 does not declare that except the arbitral tribunal, none

else can determine such a question. Merely because the new Act, 1996 permits the

Arbitrator to decide this question, it does not necessarily follow that at the stage of

Section 11 the Chief Justice of India or his designate cannot decide a question as to the

existence of the arbitration clause. The interpretation put on section 16 by the petitioner is

that only the arbitral tribunal can decide about the existence of the arbitration clause is

not acceptable for other reasons also apart from the result flowing from the use of the

word ‘may’ in Section 16 of the new Act, 1996.

Interim Measures ordered by Arbitral Tribunal [S. 17]

Section 17 deals with the power of arbitrators to make an interim award. It is based on

Article 17 of the Model Law. Section 17 of the Act, 1996 is analogous to Section 27 of

the Arbitration Act, 1940.

Section 17 provides power to arbitrators to take such interim measures, which is

necessary and also reasonable at the request of a. party. An arbitral tribunal cannot order

interim measures as such on its own motion.

Under Section 17(1), such interim measures as an order may be issued by an arbitral

tribunal at the request of a party on the ground of protection as is necessary regarding the

subject-matter of the dispute, such order given to a party has to follow these interim

measures.

Ordinarily an interim award is intended to be effective during the pendency of the

arbitration, till the final award is given.

Section 17(2) provides that the arbitral tribunal may require a party to provide proper

security relating to the measures ordered by the arbitral tribunal. The arbitral tribunal

empowered to order interim measures of protection reflects modern trend in new

arbitration law.

PALLAVI BHOGLE


Thus, the arbitral tribunal is competent to order interim measures to the parties which

originates from an agreement i.e., between the parties, but the arbitral tribunal not

competent to order interim measures to affect right of a party who is not a party to such

agreement.

An interim award / measures must determine some part of the dispute referred to

arbitration. It cannot deal with another matter. The Allahabad High Court, held that an

award of stay or an injunction pending determination of dispute is foreign to concept of

interim award. The Co-operative Societies Act, 1912 does come within the purview of

the Arbitration Act.

Scope of Section 17

It can be seen that Section 17 of the Arbitration and Conciliation Act, 1996 deals with the

interim measures/relief etc. in respect of the subject-matter of dispute. When the request

is made by either party and tribunal considers it necessary for protection of subject-matter

of dispute referred, may order interim measures. Thus, the arbitral tribunal cannot order

as to interim measures ‘suo motu’

The expression ‘appropriate security’ referred to in Section 17 of the Act, 1996 may

include preservation, protection and safe custody of subject-matter of dispute. It is lo be

noted that the arbitral tribunal is competent only to order a party take interim measures

within the ambit of the arbitration agreement, therefore, tribunal cannot order interim

measures which are capable to affect the right of the third parties.

Under Section 17 of the Act the extent and scope of interim measures may include the

preservation, custody or sale of goods which are the subject-matter of the dispute. It also

includes recording of evidence which may not be available at a later stage 'of the arbitral

proceedings, protection of trade secrets and proprietary information; stabilization of the

relationship of the parties in a long term project which might include the use or

maintenance of machines or works on the continuation of a certain phase of a

construction if necessary to prevent irreparable harm.

Under Section 17 the interim measures ordered by the arbitral tribunal subject to the rules

stated therein to the arbitration agreement of the parties. However, Section 17 does not

confer power on the arbitral tribunal to enforce its orders. However, Section 37(2) of the

Act makes provision that an order of tribunal whether granting or refusing to grant

interim measures is appealable to a court, thus interim measures are subject to judicial

consideration. There is also no bar to seek judicial enforcement of the interim measures

under Section 9 of the Arbitration & Conciliation Act, 1996. It is submitted that the scope

of interim measures under S. 9 of the A&C Act, 1996. It is submitted that the scope of

interim measures which can be granted under Section 17 are very limited in comparison

with the interim measures which may be granted by the court.

Conclusion

PALLAVI BHOGLE


CONDUCT OF ARBITRAL PROCEEDINGS

State the composition of the Arbitral Tribunal and explain the rules relating

to conduct of arbitral proceedings as provided under the Act. [16] May 08, Dec 02

Discuss the procedure for conduct of proceedings before the arbitral

tribunals and state under what circumstances an expert can be appointed?

[16] May 04, May 01

Introduction: There is a certain code of conduct to be followed in arbitral proceedings.

S. 18 of the Act, 1996, deals with this matter. It contains mandatory provision that the

parties to an arbitration must be meted out equal treatment and also equal opportunity to

present his case before the arbitral tribunal.

Equal Treatment of Parties [S. 18]

In other words, Section 18 provides principle of natural justice, that an arbitral tribunal

should treat the parties with equality and provide equal opportunities for presentation,

prosecution, defence and interim application in' respect of the case. Under this Section

principle of justice and fair play must be applicable during entire process of arbitration.

On a number of occasions, the Supreme Court of India embodied the aforesaid principle

and said that “the arbitral tribunal should create confidence, not only by doing justice

between the parties, but also by creating a feeling that Justice appears to have been done.

It is well estabtished, universally recognised principle not only under the arbitration law

but also is the essence of any other laws.”

Expression ‘equal treatment of parties’

The expression ‘equal treatment of parties’ denotes that arbitral tribunal is required to

follow the principle of natural justice and fair play while conducting arbitration

proceedings. It is necessary that the parties must be given full and equal opportunity to

put up their contentions. According to Russell – “once the arbitrators enter into a

‘reference’ they virtually become judges in the ‘cause’ to act impartially - They must

observe in their proceedings the ordinary rules of administration of justice.”

The Apex Court is of the view that ‘once the arbitrator enters in arbitration, he must not

be guilty of any act which can be construed as an indicative of partiality or unfairness.

Arbitrators to render equal opportunity to the parties

In the absence of fairness and equal opportunity to the arbitrating parties and making of

arbitral award, it will not only defeat the very substratum of the arbitration but also make

PALLAVI BHOGLE


such arbitral award unsustainable in the eyes of law. Arbitrator occupies the position as a

Judge and he is bound to follow the principle of natural jurisprudence. During the course

of arbitration proceedings, the arbitrator must provide equal opportunity to both the

parties to present their ‘cause.’ No ex parte arbitration proceeding is desirable.

A party should not be examined in the absence of another

In the context of law of arbitration ordinarily, it is not permissible to examine one party

in the absence of another. Thus, there is no ex parte arbitration as such. It is the

fundamental principle of natural justice that no order should be passed without hearing

both the parties in arbitration. No one should be condemned unheard rather unilaterally.

Where it is found that the arbitration proceedings were arbitrary, unfair and were not

based on the principles of natural justice, the arbitral award is liable to be set aside.

Even, the arbitrator is expected to permit the parties to take the help of an advocate, if the

parties sought such expertise in legal assistance.

Determination of Rules of Procedure [S. 19]

Section 19 of the Act, 1996 is on the pattern of Article 19 of the Model Law except sub-

section (1) of Section 19. Section 19 provides for procedure to be adopted by the arbitral

tribunal.

Section 19(1) states that the arbitral tribunal shall not be bound by the Code of Civil

Procedure, 1908 or by the Indian Evidence Act, 1872. The principle existing in sub-

section (1) is to reduce wide scope of litigation by narrowing application of various

statutes. Thus, the procedure laid-down in these enactments mayor may not be adopted

by the arbitral tribunal.

Section 19(2) is the most liberal part in the context of modern arbitration law, which

provides freedom to the parties to determine the procedure to be followed by the

arbitration tribunal while conducting its proceedings, such procedure is to be prescribed

as per the agreement between the parties. Thus, sub-section (2) gives convenience to the

parties to adopt consented or mutually agreed procedure to be followed by the arbitral

tribunal in its proceedings, but subject to provisions of Part I of the Act. The freedom

provided in sub-section (2) is of continuing one, therefore, it is desirable to consult the

arbitral tribunal if the parties wish to make any changes in procedure after constitution of

an arbitral tribunal.

Section 19(3) provides measure in the event of the parties not reaching an agreement to

prescribe the rule of procedure to conduct arbitral proceedings, in such a case the arbitral

tribunal itself may conduct the proceedings ‘in the manner it considers appropriate’ as

provided in sub-section (3).

In other words; if the parties fail to prescribe mutually any procedure, in such a case the

arbitral tribunal shall be free to prescribe a procedure as it thinks just and proper.

PALLAVI BHOGLE


Section 19(4) provides specified powers to the arbitral tribunal to determine the

admissibility, relevancy, materiality and weight of any evidence produced before it. Thus,

the arbitral tribunal may not adopt procedure contained in the Indian Evidence Act, 1872

but may adopt the principles of equity, justice and fair play.

It is settled law of procedure that the civil courts have to follow the procedure laid down

in the Code of Civil Procedure, 1908 and in regard to evidence they have to follow the

provisions laid down in the Evidence Act, 1872 which is being a procedural law,

applicable to the Civil Courts and also to Criminal Courts. However, statutory Tribunals

may have their procedure laid-down by their governing statutes. In the context of an

arbitrator, private tribunal has its private procedure and for this purpose the arbitration

agreement may contain the rules of procedure prescribed by the parties. It is to be noted

that in the absence of rules of procedure in the arbitration agreement, under Section 19 of

the new Act, 1996, an arbitrator is at liberty to prescribe the procedure himself but such a

self governing procedure must be in conformity with the principle of natural justice and

fair play. It is for the arbitrator to ensure the compliance with the principle of natural

justice even if the arbitration agreement contained the rules of procedure, for arbitration,

an arbitrator cannot ignore the principle of natural justice.

Arbitration proceedings should be governed by the principle of natural justice

The Delhi High Court in Modi Industries Ltd. v. Union of India observed that an

arbitrator is not necessarily to be a person familiar with the laws of procedure, however,

he occupies the position as a Judge appointed by the parties in whose sense of justice they

have faith. Therefore, his procedure should be such as a reasonable man should follow in

deciding the disputes impartially.

Where there is no special procedure agreed or consented to by the parties or justified by

the peculiar circumstances of the case, as and when the arbitrntor is appointed on account

of his skill and knowledge of the subject, his procedure should be governed by the

principles of natural justice.

Concrete principles of natural justice must prevail

Though some of the High Courts are of opinion that in no way the principle of natural

justice can be overlooked in making of the rules of procedure regarding arbitration. For

instance, in Kesholal Ram Dayal v. LaxmanRao Ram Krishna the court observed that the

procedure adopted by the arbitrator should not be against the principle of natural justice.

It is clear that the arbitrator may not be strictly bound by the rules and procedure

observed in a court but it does not mean that his procedure should be opposed to natural

justice.

The court would be reluctant to interfere unless there is something radically wrong and

vicious in the proceedings.

There are two opinions in respect of complying with the principles of natural justice.

While one view is that the arbitrator has to regard the principle of natural justice, the

PALLAVI BHOGLE


other view is that the parties can prescribe their private procedure which may disregard

the principle of natural justice, while adopting the reasoning and concrete principle of

natural justice.

Expert Appointed by Arbitral Tribunal [S. 26]

Section 26 of the Act, 1996 is modeled on Article 26 of the Model Law, except sub-

section (3) of Section 26.

Section 26 lays down provision about appointment of expert by the arbitral tribunal for

the purpose to obtain expert evidence on the matters, mostly such practices prevail in

civilized countries.

Section 26(1) empowered the arbitral tribunal to appoint one or more experts to take their

reports on specific issues relating to the matter before it, however, report of experts do

decide the disputes, the reports are merely advisory in nature. Thus, the arbitral tribunal

has to decide the dispute, not the experts. The experts provide assistance to the arbitral

tribunal in which matters their reports to be sought to be determined by the arbitral

tribunal. Under sub-section (1), clause (b) the arbitral tribunal is vested with power to

order a party to give any, relevant information, to produce any documents or to provide

access to such documents, goods or other property for inspection/instruction of the

expert.

S. 26(1), [Clauses (a) and (b)] are intended to provide facilities to the experts whose

expert reports become necessary on specified issue as to arrive at a decision by the

arbitral tribunal.

Section 26(2) states that the expert may participate in an oral hearing when either party

makes such request or the arbitral tribunal considers it necessary. However, such

participation of expert can be allowed only after the expert has submitted his, written

report. Such participation of expert is permitted under sub - section (2) to give

opportunities to the parties to interrogate and testify expert witnesses on specified issues.

However, the parties may agree mutually not to have such participation of expert.

The provisions contained in Section 26(2) is an affirmative to principle embodied in

Section 18 of the Act.

Section 26(3) provides that, at a party's request, expert shall permit examination of any

documents, goods or other property, on which the expert report is relied. It is intended

that the expert will not prepare his report on material facts which are not disclosed to the

parties.

However, the parties may agree mutually, not to have such examination of documents,

goods or other property by the expert.

PALLAVI BHOGLE


Relevancy of Opinions of Expert

According to S. 45 of the Indian Evidence Act, 1872: ‘When the court has to form an

opinion upon a point of foreign law or of science or, or as to identify the handwriting or

finger impression, the opinion, upon that point, of persons specially skilled in such

foreign law, science or art, or in question as to identity of handwriting or finger

impressions, are relevant facts’

‘Such persons are called experts’

.

The courts have been accustomed to act on the opinion of experts. The purpose is very

clear. There are many matters which require professional or specialized knowledge which

the court may not possess. For example, when the court has to determine the cause of a

ship-wreck or an air crash, there may be many technical causes behind it and therefore,

the court will need the assistance of technicians, as they are better acquainted with such

cases.

The appointment of an expert by the tribunal is common and recognized in civilized

countries. It is to be noted that the arbitral tribunal is only empowered and not obliged to

appoint experts. Only with the prior consent of the parties may the arbitral tribunal seek

assistance of an expert. Whether expert opinion is relevant, is to be determined by the

tribunal.

An expert can testify as a witness

There is no prohibition to testify the expert as a witness, provided the arbitral tribunal

considers it necessary or if a party so requests.

The expert can take part in an oral hearing but only after he has delivered his written or

oral report so that the parties can cross – examine him.

Arbitral tribunal can seek assistance of legal expert

Under Section 26(1) of the new Act, 1996 if the arbitral tribunal considers it necessary or

on prior consent made by the party, it may seek assistance of a legal expert during the

arbitration proceedings. This section specifically empowers the arbitral tribunal to

appoint one or more experts i.e., legal experts, technical or financial experts and to report

to the arbitral tribunal on specific issues to be determined by the tribunal. The arbitral

tribunal may require a party to give the expert any relevant information to produce

relevant documents. It is clear from the above provision that the arbitral tribunal is not

empowered to seek the assistance of expert including legal expert or to appoint the expert

without first securing the consent of the parties.

Conclusion

PALLAVI BHOGLE


Explain the procedure for conduct of arbitral proceedings with reference to

taking of evidence and hearing of the case by the arbitral tribunal. [16] May 09, Dec 05, May 01

Court assistance in taking evidence [16] Dec 02

Introduction: There is a certain code of conduct to be followed in arbitral proceedings.

This code of conduct extends to taking of evidence and hearing of the case by the court.

Hearing and Written Proceedings [S. 24]

Section 24 of the Act, 1996 is on the pattern of Article 24 of the Model Law. Section 24

deals with healings and written proceedings before the arbitral tribunal.

Section 24(1) provides that if the parties could not have an agreement relating to mode of

arbitral proceedings, in such cases, the arbitral tribunal may itself determine whether it

would conduct the proceedings on oral hearing of the parties or allow oral arguments or

conduct the proceedings in writing relying upon the statement and documents or other

materials.

The oral hearings are not held if the parties have not agreed to it. The parties are

permitted to change their agreement a any stage of the proceedings relating to oral or

other hearings.

It is the discretionary power of the arbitral tribunal to administer oath to the parties or

witnesses or not. The Punjab and Haryana High Court in Balwant Singh v. Chief

Secretary to Gavernment of Punjab, said that if the arbitral tribunal does not administer

oath, it does not affect the admissibility of the statements of the witnesses.

Section 24(2) states that the parties shall be given sufficient advance notice of any

hearing and also of any meeting of the arbitral tribunal for the purposes of inspection of

documents, goods or other property. However Section 24(2) does not state who shall give

such notice but it is the arbitral tribunal’s accountability to serve and also confirm that

sufficient notice is given to the parties, regarding hearings and written proceedings. The

requirements of Section 18 in which the principles of equity and fairness are contained

are to be followed under this Section 24(2) of the Act. It is an essential requirement of the

Act; No one is permitted to derogate.

Section 24(3) provides measure relating to the parties to have equal and fair access to

written proceedings. It states that all statements, documents and application made to the

arbitral tribunal by one party shall be communicated to the other party, including any

expert report as such received by the arbitral tribunal or other evidentiary document on

which the arbitral tribunal is likely to rely while making its decision, these are to be

PALLAVI BHOGLE


communicated to all parties. Thus, whatever written proceedings are submitted by one

party, have to be communicated to the other party.

Admissibility of the statement of the witnesses without administering oath

It is a discretionary power of the arbitral tribunal whether or not to administer the oath to

the parties or witnesses. In Balwant Singh v. Chief Secretary to Government of Punjab, it

was held that if the arbitral tribunal / does not administer the oath, it does not affect the

admissibility of the statements of witnesses.

Both parties have full and equal access to written proceedings

It is well settled that whatever written proceedings are submitted by one party will have

to be communicated to the other party. Since, it is not specified as to the authority who

will communicate the written proceedings of one party to the other party, it seems that the

arbitral tribunal which is an administering institution is to ensure that such written

proceedings have been communicated to the other party. Thus, documents which are

evidentiary in nature are required to be communicated.

Court’s Assistance in Taking Evidence [S. 27]

Section 27 provides significant approach in nature of arbitration where an arbitral tribunal

may take a court's assistance to get evidences as such through that court, according to

court's process.

Section 27(1) provides that the arbitral tribunal or a party, with the permission of the

arbitral tribunal, may seek court's assistance, by an application, for taking evidence.

Under sub-section (1) the arbitral tribunal seeks a court's assistance to make arbitration

proceedings effective and efficient. However, under sub-section (1) it is clearly stated

that the party may only seek court's assistance with the approval of the arbitral tribunal,

this is to prevent abuse of process.

Section 27(2) provides requirements as such application, the names and addresses of the

parties, nature of the claim, relief sought and required evidence sought through court.

Section 27(3) states that under obligation as such the court may execute the request of the

arbitral tribunal in taking evidence according to rules and competence of the court and

such evidence is to be provided to the arbitral tribunal. Such evidence is to be provided

directly to the arbitral tribunal.

Section 27(4) provides that while making order, the court may issue the same ‘processes’

to witnesses as it may issue in suits tried before it.

Section 27(5) provides for disadvantages, penalties, and punishment to persons, who do

not comply according to the issued process. The courts have to adopt same procedure as

the Civil Courts.

PALLAVI BHOGLE


Section 27(6) explains 'processes' which includes summonses and commissions for

examination of witnesses and summonses to produce documents.

Award would be rendered invalid on non-consideration of material evidence

Under Section 27 of the Arbitration and Conciliation Act, 1996 the arbitral tribunal can

seek the courts assistance in taking evidence by applying suo moto or on request by a

party. The arbitral tribunal has no power to issue summons to persons except the

disputing parties in arbitration.

The Apex Court in K.P. Poulose v. State of Kerala, held that once it is decided that the

consideration of material evidence by the arbitral tribunal and making of arbitral award

amounts to unfair arbitration proceeding, the arbitral award would be rendered invalid

and liable to be set aside.

Award liable to be set aside if there is refusal to issue summons to the witness

The Delhi High Court in Lalit Mohan v. Building Committee has held that once the

arbitrator had permitted the witness to be examined, it is not proper on the part of the

arbitrator to decline to issue summons to the sole witness i.e., the building adviser and

instead ask the party to bring the sole witness before the arbitral tribunal, at its own

responsibility. In the present case the court observed that the arbitrator ought to have,

issued summon to the witness who is to be examined. The arbitral award was, therefore

liable to be set aside.

It is submitted that the provision to seek the court's assistance in taking evidence of a

witness is necessary because the arbitral tribunal has not been conferred power to

summon witness or to issue process as such.

Conclusion

PALLAVI BHOGLE


ARBITRAL AWARD AND TERMINATION OF

PROCEEDINGS

Define Award. Discuss the essential conditions of valid award [10] May 05, Dec 03

Define award and state the effects of award. [6] Dec 04

Introduction: Under Section 2(1)(c) the word ‘Arbitral Award'’ is not really defined, but

it does state that the ‘Arbitral award’ includes an interim award. Although Section 31(6)

submits explanation in this regard as under: ‘The Arbitral Tribunal may, at any time

during the arbitral proceedings, make an interim arbitral award on any matter with respect

to which it may make a final arbitral award. Thus, an interim award may be the Arbitral

Award. So, an interim award may be a final award.

According to H. Lexicon - It is an instrument which embodies a decision of an arbitrator

or arbitrators as regards matters referred to him or them.

Although; according to Russell – ‘An award in order to be valid, must be final, certain,

consistent and possible and must decide matters to be submitted and no more than the

matters submitted.’

An arbitral award is not a contract but the decision determined out of the contract

An award, whether it is arbitral or an interim award is a decision of the Arbitrator or

Arbitrators which is determined after contentions of the parties are considered and an

arbitrator or the arbitrators put his or their opinion in the form of decision. The consent of

the parties may not be present in a decision. An arbitral award decided by the Arbitral

Institution judicially will have binding effect in respect of the parties in dispute.

The contents of an arbitral award must be in writing, not oral. An arbitral award is like a

decree which comes into effect from the date on which it has been signed and right of the

related parties come into effect from that date onward.

Any agent on behalf of the parties to dispute if authorized by the parties may refer to

arbitration for settlement of matter.

In Kishan Lal v. Ram Swaroop the Allahabad High Court held that the Vakalatnama

submitted by the parties differ in respect of their contents. The Vakalatnama submitted by

the plaintiff authorized the counsel to compromise the suit or proceeding; in another

PALLAVI BHOGLE


aspect the Vakalatnama on record, authorizes the counsel to refer the matter to arbitration

which includes power to compromise in arbitration. Therefore, if an agent is authorized

to compromise the dispute it is deemed that he has power to refer the matter for

arbitration.

It is expected that the arbitrator has accepted all claims and counter-claims and

considered fully in quasi-judicial manner before it could arrive at the final award.

An arbitral award should have the following ingredients:

1. It must be written.

2. The parties to arbitration must be competent.

3. The Arbitration Agreement must be fit to assign dispute before any domestic

tribunals.

4. A decision of the domestic tribunal must be written.

5. The contents of an award must be subject-matter of the arbitration.

6. An award must be determined on principles of mutual justice.

7. The arbitrator must sign while giving award and also mention date therein.

Arbitral award operates as res judicata

In Shashi Sekhareswar v. Lali Mohan, the Privy Council, inter alia observed that a

decree passed on the foundation of arbitral award would have the same effect as an

ordinary judgment of a court and on the question which has already been decided by the,

arbitrators it operates as res judicata. But, where a claim in question has not been

included as a subject-matter of reference to arbitration, it was held that principle of res

judicata will not be applied in respect of the claim.

In the view of the Apex Court, an arbitral award is to be treated as a decree passed by the

Civil Court, and it is binding on the parties.

It is submitted that an arbitral award is not a contract but a decision given on the basis of

terms of a contract. An arbitral award must be in writing because it is like a decree of the

Civil Court Such award comes into operation from the date it has been signed, rights and

liabilities of the parties concerned come into force from the date onwards.

Essentials of Arbitral Award

It is well settled legal position that a valid, proper and enforceable arbitral award must

have the following essential ingredients:

1. An arbitral award must be in writing and signed.

2. The parties must be competent to initiate arbitration proceedings.

3. A sustainable arbitral award must be reasoned one - Section 31(3) of the

Arbitration and Conciliation Act, 1996.

4. There must be arbitration clause to assign disputes or differences before arbitral

tribunal.

PALLAVI BHOGLE


5. The content of an arbitral award must be connected with the subject-matter of the

dispute arbitrated;

6. An arbitral award must be founded on the principle of mutuality.

Where the arbitral award is based on mutual settlement of the dispute by the parties, no

reason need be given.

Arbitral award may be Final or Interim

An arbitral award may be a final award or an ‘interim award’ unless there is an agreement

to the contrary between the parties and depending upon the, nature of the dispute, the

arbitrator could make an interim award. An interim award has the same sanctity as final

award. However, if it is not complied with, it cannot be enforced through the court by the

same procedure as in the case of final award.

Time limit for making the arbitral award

The Arbitration and Conciliation Act, 1996 does not provide any time limit as such for

completing the arbitration. However, an arbitrator can be terminated if he fails to act

without undue delay.

Arbitral award by consent

The Arbitration and Conciliation Act, 1996 recognizes the liberty of the parties to come

to a settlement. The arbitrator, if satisfied about the genuineness and validity of the

settlement has to give an award in terms of the settlement. The Act further envisages that

the arbitrator may encourage efforts at settlement. It is to be noted that the Arbitration

Act, 1940 was silent on this point.

Contents of arbitral award

The requirements of the contents and form of arbitral award are as under:

1. An arbitral award shall be made in writing and shall be signed by the member of

the arbitral tribunal.

2. For the purpose of Section 31(1), in arbitral proceedings with more than one

arbitrator, the signatures of the majority of all the members of the arbitral tribunal

shall be sufficient so long as the reason for any omitted' signature is stated.

3. The arbitral award shall state its date and the place of arbitration as determined in

accordance with Section 20 and the award shall be deemed to have been made at

that place.

Arbitral award shall be final and binding on the parties

As provided under Section 35 of the Arbitration and Conciliation Act, 1996 an arbitral

award shall be final and binding on the parties and persons claiming under them. Where

the time for making the application to set aside an arbitral award has expired or where

PALLAVI BHOGLE


such application has been refused by the court, the award shall be enforced as if it were

the decree of the court.

An arbitral award treated as a decree of a court

The Apex court in Satish Kumar v. Surendra Kumar, has held that an arbitral award is

treated as a decree of a court and it does not matter whether it has passed into decree or

not hence it is binding upon the parties.

Conclusion

What do you mean by Domestic Award? Discuss the provisions relating to

form and contents of an Arbitral Award? [16] May 08, May 07, May 05, May 03, Dec 03

Explain the contents of an arbitral award. When can an additional award be

made? [16] Dec 02, Dec 01













Form and Content of Arbitral Award [S. 31]

Section 31 prescribes form and contents of interim award, interest to be paid and costs of

the parties borne as to the arbitral proceedings.

PALLAVI BHOGLE


Section 31(1) states that ‘an arbitral award shall be made in writing and shall be signed

by the members of the arbitral tribunal.’ The Supreme Court of India, in Hindustan

Construction Co. v. Union of India ,explained that the word ‘signing’ means writing

one's name on the award. However, no oral award is permitted under this sub-section

31(1) of the Act as observed by The Allahabad High Court in Satyapal v. Ved Prakash.

If, an, arbitral award is signed by the majority of the members of arbitration, it fulfills the

requirement of the Act.

Section 31(2) lays down that if there is a multi-members arbitration system the signature

of the majority of members will be sufficient to fulfill the requirements of the section.

Although the reasons should be mentioned in the award as to why the signatures of the

remaining members are not there. Thus, the members dissenting from an arbitral award

cannot stop the award.

Section 31(3) provides that if the arbitral award is in terms of the settlement of the parties

or if the parties have agreed that no reason need be given by the arbitrators then it is not

necessary to give the basis of an arbitral award; otherwise it is the requirement of this

section that the arbitrators have a statutory obligation to give in writing the facts on

which the arbitral award is based. This provides transparency and fairness in decision

making by an arbitral tribunal.

The arbitral tribunal is not required to give as detailed a judgment as Judges do. It simply

has to give the trend of its thought process.

Section 31(4) states that the arbitral award should bear its date and place of arbitration, as

determined in accordance with Section 20 of the Act. In an arbitral award, date and place

of arbitration must be mentioned mainly for two purposes:

• If case of the possibility of an appeal against the arbitral award, or

• For enforcement of the arbitral award.

Section 31(5) directs that a signed copy of the award is to be delivered to each party and

receipt of signed copy of the award is the requirement of the Act.

Section 31(6) provides that the arbitral tribunal may make an ‘interim’ arbitral award at

any stage of the arbitration proceedings before it makes the final arbitral award. Thus,

under Section 31(6) interim arbitral award and final arbitral award are not the same.

Therefore, an interim arbitral award would not terminate the arbitral proceedings.

Section 31(7) provides for interest, payable to the other party, at such rate as it deems

reasonable on the whole or any part of the money. Interest shall be included in the sum

awarded in the arbitral award. If, no rate of interest is mentioned then it shall be at the

rate of 18% per annum. It shall also be mentioned in the award as to whether the interest

shall be payable for the whole or any part of the period between the date on which the

cause of action arose and the date on which the award is made.

PALLAVI BHOGLE


Section 31(8) lays down provision about the costs to be awarded by the arbitral tribunal.

The arbitral tribunal has to specify the followings:

• which party is entitled to costs;

• which party shall pay the costs

• the amount of costs; and

• by which method the costs is determined.

An award shall be made in writing and signed by members of tribunal

Section 31(1) of the Arbitration and Conciliation.Act, 1996 states that an arbitral award

shall be made in writing and shall be signed by the members of the arbitral tribunal. It

seems that the legislative intended to give the award a definite nature by providing a

mandatory condition that the award must be reduced into writing and also signed by the

arbitrators, so that in case of difference in opinions the same can be found out prima

facie. Further sub-section (2) of Section 31 provides that wherein the arbitral proceedings

are conducted by more than one arbitrator, the signature of all the members of the arbitral

tribunal is not necessary so long as reason for any omitted signature is stated. In other

words if there is omission of signature of any of arbitrators in the award, the reason

for doing so should be stated.

The Apex Court in Dwarka Das v. India Engineering observed that an arbitral award

must not merely be in writing but it should also be duly signed by the arbitrators.

Arbitral award should state the reasons upon which it is based

The Apex Court in Tamil Nadu Electricity Board v. M/s Bridge Tunnel Constructions

and others observed that law on the arbitral award, as governed by the new Arbitration

and Conciliation Act, 1996, mandates that the award should state the reason upon which

it is based. In other words, unless:

• the parties have agreed that no reasons are to be given, or

• the award is an arbitral award on agreed terms under Section 30 of the new Act,

1996.

The arbitral award should state the reasons, in support of determination of the liability or

non-liability.

Wherein not mandatory to give reasons for the arbitral award

Although, an arbitrator being a judicial authority a substitute for the civil court, must give

reasons for his decision. Specifically, when the parties in the arbitration agreement

stipulate that the arbitrator must give reasons, he is bound by the agreement to which he

owes his existence. It is settled legal principle that when an arbitrator accepts the

appointment, he accepts all the terms of the agreement. But, where the arbitration

agreement under which the appointment of arbitrator is made, it does not stipulate

categorically that the arbitral award must contain reason upon which it is based, in such

PALLAVI BHOGLE


situations it is not a mandatory requirement that the arbitrator must give reasons for the

award.

While clarifying the position the Supreme Court in Raipur Development Authority v.

Chokhamol Contractors, has held that though it was not a mandatory requirement that the

arbitrator must give reasons for the arbitral award, he was bound to give reasons if the

arbitration agreement so stipulated or if the parties so require.

Conclusion

Define arbitral award. Discuss the provisions relating to correction,

interpretation and additional award. [16] May 09, Dec 05, May 02, Dec 01

Define Award. State the circumstances under which an award can be

modified and cancelled. [16] May 07, May 06, May 04, Dec 04













Correction and Interpretation of Award; Additional Award [S. 33]

Section 33 is modelled on Article 33 of the Model Law. It provides as to correction and

interpretation of award and additional award. Section 33 of the Act, 1996 entrusts three

functions mainly to an arbitral tribunal, when, the mandate of the arbitral tribunal is

terminated under section 32 of the Act. Chiefly, these functions are:

• corrections in the award, if any

PALLAVI BHOGLE


• interpretations of specific points of the award

• it may make an additional award.

Both sub-sections (1) and (3) of Section 33 are relating to corrections and interpretation

of an award. Clause (a) of Section 33(1), provides that a party with notice to other party

may apply for correction and computation of errors, it may be any clerical or

typographical errors or any other errors of a similar nature which have occurred in the

award. Thus, a party with notice to the other party may seek explanation of specified

point or decision in the arbitral tribunal. Under sub-section (3) the arbitral tribunal is

empowered to correct its own decision rather can remove errors as such within 30 days

prescribed period i.e., from the date of the arbitral award.

Under clause (b) of Section 33(1) if a party has agreed with other party, then with notice

to other party, may request to the arbitral tribunal to give an interpretation of a specific

point, so as to remove ambiguities in the award. However, there is no provision to seek

re-examination of the award.

Section 33(2) provides that on justifiable ground if a request is made to the arbitral

tribunal, may correct the mistake or give interpretation of the award within 30 days from

the receipt of the request. Such a request is made under sub-section (1).

Sub-section (4) of Section 33 provides that if something remained undecided or left in the

arbitral award, the aggrieved party with notice to the other party may request the arbitral

tribunal an additional award on claims submitted in the arbitral proceedings, but not

decided, however, such a request can only be made within 30 days from receipt of the

award. Thus, an additiorial award can be requested, when the claims presented before the

arbitral tribunal, but a part of claim incidentally omitted.

Sub-section (5) of Section 33 provides that an additional award can be made only on

justifiable request made to the arbitral tribunal by an aggrieved party.

Section 33(6) under an extraordinary circumstances to meet the end of fairness and

justice, the arbitral tribunal is empowered to extend the time-limit i.e., 30 days as

prescribed under sub-sections (2) and (5) of Section 33, for making correction or giving

interpretation of the arbitral award.

Section 33(7) follows the provision of the preceding sub-sections. It makes Section 31 of

the Act i.e., form and contents of arbitral award or to an additional award applicable to

such correction or interpretation of the arbitral award or make additional arbitral award as

the case may be.

After the arbitrator has made the award, he becomes functus officio, that is to say he

ceases to function thereafter with reference to the arbitration. However, if there is no

agreement to the contrary, he may correct that in an award, at any time after the award

has been made, any clerical mistake or error arising therein by an accidental slip or

omission.

PALLAVI BHOGLE


Arbitral award should be construed liberally

It is settled rule of interpretation that any arbitral award should be construed liberally and

wholly, but not in isolation, thus, to give effect to the real intention of the arbitral

tribunal. Thus wherein the arbitral award is silent and does not express clearly in respect

of some claims it should be presumed that the claim was not upheld.

However, the Delhi High Court in R. Murlidhar v. NPCC wherein an arbitral tribunal

made an arbitral award on the subject matter referred to it, the court would draw

presumption in favour of the validity of the arbitral award that the arbitrator has taken

into consideration all the subject matter of disputes referred to him. The court would also

presume that the arbitral award is final and complete.

Arbitral award can be modified

It can be said that the arbitral award can be modified wherein either of the party brings

into the notice of the arbitral tribunal that the certain issues have not been taken up, in

fact these were referred for arbitration or there is apparent error in the award or there is

omission or accidental slip in the award, the arbitral tribunal will consider these issues

and if it is justified the arbitral tribunal under its discretion would modify the award.

Conclusion

PALLAVI BHOGLE


RECOURSE AGAINST ARBITRAL AWARD

State the grounds and circumstances on which the court can set-aside the

arbitral award. [16] May 08, Dec 06, May 05, Dec 05, Dec 04, May 03, Dec 03, May 02, May 01

Explain the powers of the court in setting aside award. [16] Dec 03

State the exceptions to the rule that no judicial authority shall intervene in

arbitration proceedings. [16] Dec 02

Introduction: Section 34 of the Act is one of the most important sections of the present

Act, and deals with the issue of setting aside an arbitral award.

Section.34 provides for the ground and circumstances when an arbitral award may beset

aside. It empowers the courts to review the whole arbitration process followed in a

presented case and also to examine constitutionality of the arbitration process and the

parties are not permitted to lessen the dignity of it. No prescribed form of an application

for setting aside an award is necessary. Though the High Court may prescribe form of

such application.

Section 34(1) provides that an application for setting aside the arbitral award may be

made to a Court, in accordance with sub-section (2) and sub-section (3).

On a number of occasions, the Supreme Court had said that as a general rule, the Court

should approach the award with a desire to support it, if that is reasonably possible, rather

than to destroy it, by calling illegal. The court is not empowered to set-aside the award

suo moto.

Section 34(2) provides the list as ground for setting aside an arbitral award by the court

and the party who is seeking setting aside an arbitral award, makes. an application and

furnishes proof of the followings:

1. a party was under some incapacity, or

2. the arbitration agreement is not valid under the law to which the parties have

subjected to or, failing any indication thereon, under the law for the time being in

force, or

3. the party making the application was not given proper notice of the appointment

of an arbitrator or of the arbitral proceedings or was otherwise unable to present

his case.

PALLAVI BHOGLE


4. The arbitral award deals with a dispute not contemplated by or not falling within

the terms of the submission to arbitration, or it contains decision on matters

beyond the scope of the submission to arbitration. Sub-section (2)(a)(iv) is relied

on the principle that the arbitral tribunal, being a creature of the arbitration

agreement, is not competent to go beyond the scope of the submission to

arbitration. Thus, an arbitral tribunal being a creature of the agreement between

the parties it does not have its own jurisdiction as such, thereby it is not a judicial

body to exercise judicial power of the State. However, the reasonableness of the

reasons, given by the arbitral tribunal cannot be challenged.

The proviso to sub-section is based on the ‘principle of severability’, thus if the

reasonably good and reasonably bad parts of an arbitral award can be separated the whole

of the award should not be set aside. Therefore, if the unreasonable bad part of an arbitral

award is severable, only the bad portion may be set aside.

Section 34(2)(a)(v) provides that composition of the arbitral tribunal and the arbitral

procedure are not as per the agreement of the parties and also an arbitral award, in such

cases the parties are permitted to put an application to the court for setting aside the

arbitral award, it is necessary to apply this provision by the parties that the agreement of

the parties was not in conflict with the provision of Part I. Part I provides autonomy to the

parties.

Section 34(2)(b) (i) and (ii) provides the power to a court to set aside an arbitral award,

when an application by a party is presented before it. However, either condition should

exist-with proof:

• The subject-matter of the dispute is not capable of settlement by arbitration under

the law for the time being in force, or if the subject-matter is not arbitrable under

the prevailing law of the State, such an arbitral award if made on such

unarbitrable matter, would be set aside.

• an arbitral award is in conflict with the public policy of India.

That means, if the procedure adopted to make an arbitral award and an arbitral award

itself is opposed to public policy of India, it would be capable of being set-aside by the

court, on an application made to the Court by a party. For application of this provision it

is necessary that it must involve the public policy of India and not any international

public policy.

The New York Convention (UNCITRAL), and many international treaties also regarded

and used the term ‘public policy’ and it has been covered as fundamental principles of

law and justice which includes substantive and procedural aspects.

The explanation added to Section 34(2)(b)(ii) which states that an arbitral award given by

violation of Section 75 or Section 81 in Part III of the Act, 1996 or an arbitral award

induced and obtained by fraud or by unfair means or by corruption would be regarded as

against public policy of India. The Supreme Court of India had also upheld the

importance and application of the "Doctrine of Public Policy" in several. rulings.

PALLAVI BHOGLE


Section 34(3) prescribes the time-limit within which an application for setting aside an

arbitral-award should be presented before a competent court. However, for the purpose of

calculation, the prescribed period of three months as provided under sub-section (3) is the

period that commences from the date on which the applicant receives the award and

expires three months thereafter. It is a mandatory provision. In a case, if a request has

been made under Section 33, the time limit shall be calculated from the date on which

that request had been disposed of by the arbitral tribunal.

It is also provided under sub-section (3) that when the court is satisfied and is in opinion

that the party has been prevented from filing an application due to ‘sufficient cause’

within the statutory period of three months, in such cases the Court may entertain the

application within a further period of thirty days, but not thereafter.

Section 34(4) provides that on receipt of application under sub-section (1), the Court may

consider, it appropriate and if it is so requested by a party, adjourn the proceedings for a

fixed period of time with an object to give sufficient opportunity to the arbitral tribunal to

re-begin the proceedings after a pause or to take any other initiative for removal of the

ground for setting aside the arbitral award. This provision is included in the Act of 1996

which was not available in the Arbitration Act, 1940. Thus new form of the remission

procedure with better concept was introduced, it intends that the court should mark first

the remediable defects in the arbitral award and refer the same to the arbitral tribunal, so

that the arbitral tribunal can resume the proceeding. It is obvious that the object behind

this remission procedure is to encourage and give reasonable opportunity to the arbitral

tribunal to escalate rectified arbitration proceedings.

The Allahabad High Court in State v. Reshma Devi, ruled that the subsection (4) of

Section 34, does not contemplate that the court could confirm part of the award and remit

the rest to the arbitral tribunal.

The Court may direct the arbitral tribunal to resume the proceedings or to take certain

measures which is necessary for removal of the grounds for setting aside the arbitral

award.

Limitation of Power of the Court to Intervene

It is to be noted that Section 34 of the new Act, 1996 restricts grounds for setting aside

the arbitral award. In other words this section specify the ground on which the court may

order for setting aside of arbitral award. The implication of Section 34 has been

considered by the courts which are taken up by the Bombay High Court in United India

Insurance Co. Ltd. v. Kumar Texturiser. The court observed that the present Act, 1996

contains three Sections, namely Sections 34, 37(2) and 14(2) which inherently empowers

the court to intervene in the matter. However, Section 34 of the Act, 1996 is the main

section. The present case is for a declaration that there is no arbitral dispute. It was held

that considering the express language of Section 5 of the Act, 1996 i.e., extent of judicial

PALLAVI BHOGLE


intervention and the absence of present case falling under Section 14(2) or Section 34 or

Section 37(2), this court will have no jurisdiction to entertain petition.

It has been seen that Section 5 of the Act, 1996 specifically states that no judicial

authority shall intervene except where so provided in Part I i.e., general provisions,

arbitration agreement composition and jurisdiction of arbitral tribunal, conduct of

arbitration proceedings, making of arbitral award, termination of proceedings, recourse

against arbitral award and finality and enforcement of arbitral award etc. of the Act,

1996. In Union of India v. East Coast Boat Builders Engineers Ltd., the Delhi High Court

observed that on perusal of the provisions of Part I of the Act it is apparent that nowhere

it is provided that a court may intervene and entertain a petition challenging the order

passed by arbitral tribunal under Section 16(5) taking a decision that the arbitral tribunal

has jurisdiction to proceed with the arbitration case.

Scope of challenge to jurisdiction of arbitrator considered by the Rajasthan High Court in

Union of India v. Rattan Singh Gehlot, where it was held that in an unreasoned award

unless it is found by seeing at the arbitral award that an error has been committed by the

arbitrator, no interference can be made. The court observed that this is different from

saying that when a challenge is made to the arbitration award by saying that the arbitrator

has acted beyond his jurisdiction. It has to be determined that there is a distinction

between disputes as to the adjudication of the arbitrator and the dispute as to in what way

the jurisdiction should be exercised. In the later cases the court has no role to play but in

the former cases where there is a challenge to the jurisdiction of the arbitrator the courts

have reasons to interfere. The court further observed that this is within the domain of the

court to see whether the arbitrator has acted within its jurisdiction or out side jurisdiction.

To that extent the court is required to adjudicate.

It is well settled legal principle that the question regarding jurisdiction is to be raised at

the first instance, it cannot be allowed to be raised at a later point of time even under

Section 34 of the Act, 1996. Hence, it is a meagre ground for setting aside of arbitral

award.

The scheme of the Act, 1996 shows that the legislature did not provide appeal against the

order under Section 16(5) where arbitral tribunal takes a decision by rejecting the plea

that the arbitral tribunal has no jurisdiction. In such cases, the arbitral tribunal shall go

ahead with the arbitral proceedings and make an arbitral award without delay and without

being interfered in the arbitral process at that stage by any court in their supervisory role.

Which Court is Empowered to Set Aside an Arbitral Award

It is settled legal principle that the place wherein the parties entered into the arbitration

agreement, that court is competent to entertain the application under Section 34 of the

Act, 1996.

In case wherein the disputed properties situated within the jurisdiction of two courts

located at different places, either of the court would have jurisdiction to entertain

PALLAVI BHOGLE


application for setting aside of the arbitral award, however the court which first entertains

such application no such application can be entertained by any other court.

In case of an international commercial arbitration it will be governed by Article 3 of the

Geneva Convention or Article V, Para 1(a) of the New York Convention. These

provisions of the Convention provide that the country in which or under the law of which

the arbitral award was made, the court of that country only would have jurisdiction to set

aside the arbitral award.

Award found Not Unreasonable Cannot be Interfered by the Court

In T.P. George v. State of Kerala, the Supreme Court considered the reasonableness of

the award and the question whether the arbitrator can award interest for pre-reference

period. In this case the High Court has held that the interest could not be granted by the

arbitrator but the reasoning given by the High Court held to be not sustainable on appeal

the question arose before the Supreme Court that whether the High Court was right in

setting aside the award of interest from the date of the award. The Supreme Court

observed that the High Court has not at all considered the letter dated 6th October, 1983

and 24th November, 1983 nor dealt with the question as to whether or not the

supplemental Agreement was not executed. The High Court has not even considered the

effect of the Supplemental Agreement having been executed without prejudice to the

claims which had already been made. Even if the High Court had considered these

aspects it could not have been substituted its views for those of the arbitrator as it could

not be said that the view taken by the arbitrator is unreasonable or one which cannot be

arrived at by a reasonable person. The impugned judgment of the High Court is not

sustainable.

Effect of an Arbitral Award being Set Aside

Once the arbitral award is set aside by the court while exercising the power under Section

34, the effect of an award being set aside is that it becomes unenforceable by law. The

parties have to be reverted to their former position in respect of the subject-matter of

dispute.

It is settled legal position that as soon as the arbitral award is made, an arbitral tribunal is

functus officio, thus it ceases to function, on the authority of the court's order as provided

under Section 34(4) the arbitral tribunal may resume its power and may conduct fresh

arbitration proceedings, when the matter has been remitted back to the tribunal. While

clarifying this point, the Apex Court in Narain Das v. Narsingh Das, observed that the

court is empowered to order the tribunal to correct or modify an arbitral award where it is

imperfect in form, but the court cannot substitute its own order for the arbitrator's award.

Conclusion

PALLAVI BHOGLE


FINALITY AND ENFORCEMENT OF ARBITRAL AWARDS

Finality and Enforcement of Arbitral Awards [10] May 03

Introduction: Provisions relating to the finality and enforcement of Arbitral Awards are

dealt with under Ss 35 ad 36 of the Act

Finality of Arbitral Awards [S. 35]

Section 35 states that the final arbitral award is binding upon the parties and any other

persons claiming under them. To achieve finality, the arbitral award should not be

challenged within the period of time provided under Section 34(3). Such an arbitral

award has not only achieved finality, but also becomes a binding force on the parties, not

required to make the rules of the court.

This is a reformative provision in the Act of 1996. After the finality of an arbitral award,

rights and liabilities of the parties relating to the said claims etc. are to be decided in

accordance with the said arbitral award.

As stated in the case of Satish Kumar v. Surinder Kumar, an arbitral award may, in effect,

declare, distinguish, limit, title or interest, whether it is present or future, whether vested

or contingent, and if the value of the moveable property is one hundred rupees and more

to be mandatorily registered under the Registration Act, 1908 under Section 17(1)(b).

Thus, the finality of arbitral award should have some legal effects to the parties under the

claim. In Kedar Nath v. Ambika Prasad before the Allahabad High Court it was

contended that the award was not a mere waste of paper, but gives rise to some legal

effect.

Rights and liabilities of the parties to be determined only on basis of award

It is well settled rule that when the arbitral award becomes final, the rights and liabilities

of the parties are to be determined only on the basis of the said award. All claims which

are the subject-matter of a reference to arbitration are merged in a valid award.

Subsequently, no action can be commenced on the original claim which had been the

subject-matter of the arbitral proceedings.

Award is capable of being executed in its own right

The requirement under the old Arbitration Act, 1940 was that unless the arbitral award

becomes the rule of the court, it is not capable to be executed or enforced. Now, under the

PALLAVI BHOGLE


new Act, an arbitral award is capable of being executed in its own right. It is to be treated

like a decree under the CPC. However, before incorporation of the new Act, 1996 the

question of enforceability of the arbitral award was considered by the Apex Court in

Hanskumar Kishan Chand v. Union of India. The Court observed that the award of an

arbitrator is unenforceable by its own right, unless it has the ‘imprimatur’ of the court

stamped on it. When the court passes orders in respect of the award saying that it can be

filed and decree issued in terms thereof, then only does the award becomes enforceable.

Now the award no longer requires filing in the court of law and obtaining a decree in

terms thereof. Under the new Act, 1996 namely, under Section 35 which declares that an

arbitral award shall be final and binding on the parties and persons claiming under them

respectively. Thus, the award shall be enforced under the Civil Procedure Code, 1908 in

the same manner as if it were a decree of the court.

When the award is compulsorily registrable

Wherein the value of the arbitral award is one hundred rupees and upwards or relating to

immovable property, it is compulsorily registrable under Section 17 (1)(b) of the Indian

Registration Act, 1908. Where the award declares, assigns, limits or extinguishes,

whether in the future or the present, any title, right or interest vested or contingent and its

value in terms of money is one hundred rupees or more or is immovable property, in the

view of said section of Registration Act, 1908, it is required to be registered. Further,

Section 49 of the Registration Act, 1908 provides that the arbitral award which is

required to registered, if unregistered, will be considered inadmissible as evidence.

Enforcement [S. 36]

Section 36 provides condition for enforcement of an arbitral award and its procedure as to

how the award will be enforced. There ate two conditions to be fulfilled to become an

award enforceable. It is the mandatory provision.

The conditions are:

1. under Section 34, time limit for making an application for setting aside an arbitral

award has expired, or

2. such an application has been made but it has been refused;

If either condition is fulfilled the award shall be enforced under the Code of Civil

Procedure, 1908 in the same mariner as if it were a decree of the Court. In fact an arbitral

award is not a decree of the court but, mutatis mutandis shall apply to the enforcement of

an arbitral award. Section 36 contains the words ‘in the same manner as if it were a

decree of the court’ thus, an arbitral award must include essential ingredients of a decree

of the court, to become capable of being enforced.

An arbitral award made on oral submission is not enforceable.

PALLAVI BHOGLE


Under the new Act, 1996 the requirement as to stamping of the arbitral award and making

of the rule of the court and issuing of a decree in terms thereof have been taken away.

Now the arbitral award itself is executable without these formalities which were

necessary under the old Act, 1940.

Enforcement of award

Khaleel Ahmed Dakhami v. Hatti Gold Mines Ltd., the fact of the present case is as

follows: Award allowed some of the claim of the appellant. The respondent filed an

application under Section 34 for setting aside the award. Earlier caveat had been filed by

the appellant along with application under S.9 i.e., interim measures etc. by court, the

appellant also filed an application under Section 36 for execution of the award without

mentioning pendency of application under Section 34, i.e., for setting aside of arbitral

award. It was held that the application under Section 36 for enforcement of award could

not be entertained.

Conclusion

PALLAVI BHOGLE


APPEALS

Which orders are not appealable under the Act? [16] May 06

Discuss on what grounds appeal can be filed against an award passed by the

arbitrator. [16] Dec 06

Discuss the orders which are appealable and orders which are not appealable

under the Act. [16] May 09, May 05, Dec 04, May 03

Discuss the appealable orders under the Act. Does second appeal lie from an

order passed in appeal? [16] May 04, May 01

Against which orders appeal lies? Discuss to which court appeal lies against

orders. [16] Dec 01]

Introduction: Section 16(2) explains that a plea that the arbitral tribunal does not have

jurisdiction which 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 arbitrate.

Sub section (3) of Section 16 explains that a plea that the arbitral tribunal is exceeding

scope of its authority shall be raised as soon as the matter alleged to be beyond the scope

of authority is raised during the arbitral proceedings.

Objection relating to jurisdiction of the arbitral tribunal may be raised by anyone of the

parties to the proceedings as laid down in sub-section (2) or (3) of Section 16within the

time limit prescribed in those sub-sections before the arbitral tribunal. The arbitral

tribunal decides the objection. The aggrieved party may appeal on those orders.

Appealable Orders [S. 37] Section 37(1) provides for appeals against orders of court in two ways:

• To pass any interim measures under Section 9, or

• To set aside or refuse to set aside an arbitral award under Section 34.

PALLAVI BHOGLE


Further, this sub-section (1) provides that an appeal shall lie to the court authorised by

law to hear appeals from original decrees of the court passing the order. Thus, this sub-

section (1) provides for an appeal from court orders.

Section 37(2) provides that an appeal shall lie to a court from an order of the arbitral

tribunal, when either of the following conditions are fulfilled:

• under Section 16(2) or SeCtion 16(3) referred application has been accepted or,

• under Section 17, to grant interim measure or refusing to grant interim measure.

The orders of arbitral tribunal have been made apealable, this is a new stage of

development seen in the A&C Act, 1996. Now, the arbitral tribunal has freedom to act in

a judicial way.

Section 37(3) prohibits second appeals, from an order passed in appeal under this section,

but further states that any right to appeal to the Supreme Court is in no way prohibited.

Thus, second appeals can be made to the Supreme Court under the Constitution of India,

and also as provided in the SC Rules. It was held by the Allahabad High Court that the

jurisdiction conferred on the Supreme Court by the Constitution of India cannot be taken

away or abridged by any statute.

Section 37 of Act, 1996 barred a second appeal from an appellate order. A revisional

application against an appellate order under Section 37 is not maintainable, even before

the High Court.

Interim measures ordered by the arbitral tribunal

Section 17 empowers the arbitral tribunal to grant interim measures. Sub-section (1) of

Section 17 says that unless otherwise agreed by the parties, the arbitral tribunal may, at

the request of a party, order a party to take any interim measure of protection as the

arbitral tribunal may consider necessary in respect of the subject matter of the dispute.

S. 17(2) explains that the arbitral tribunal may require a party to provide appropriate

security in connection with a measure ordered under sub-section (1).

The party aggrieved by the interim orders granted by the arbitral tribunal has a right to

appeal against that order under clause (b) of sub-section (2) of Section 37.

Second Appeal

S. 37 (1) & (2) contain the provisions regarding ‘appealable orders’. The Appeal Court

decides the matters appealed before it. The orders of the Appeal Court are final. No

further appeal shall lie from the orders of the Appellate Court.

However, the right to appeal to the Supreme Court is still exists to the aggrieved party.

PALLAVI BHOGLE


Section 37(3) explains that no second appeal shall lie from an order passed in appeal

under this section, but nothing in this section shall affect or take away any right to appeal

to the Supreme Court.

Powers of the Appellate Court

The Appellate Court has to exercise the following rights and powers:

1. First of all, it must verify whether there has been a reference to arbitration.

2. Next to it, it has to see whether there is any award.

3. The next important thing to observe is that whether the ground sought by the

appellant flows from any of the four grounds named in Section 37.

4. The Appellate Court has no authority to take fresh evidence or to pursue new

documents and scrutinize them.

5. If the Appellate Court confirms the award given by the arbitral tribunal, it need

not give reasons for its decision for affirming it. However, if the Appellate Court

reverses the award given by the arbitral tribunal, then it should give reasons for its

decision.

6. The Appellate Court should not consider the appeals, which are time barred or

come within the purview of res judicata.

Conclusion

PALLAVI BHOGLE


MISCELLANEOUS

An arbitration agreement is not discharged by death of any party. Discuss.

[16] Dec 06, Dec 05, 04, Dec 03

Introduction: Chapter X of the A&C Act gives us the miscellaneous provisions under

the Act.

Arbitration Agreement not to be discharged by death of party thereto [S. 40]

Section 40 deals with the event of the death of any party in an arbitration agreement.

Section 40(1) provides that any party shall not be discharged by the death in an arbitral

agreement and in such cases an arbitral agreement shall be enforced against the legal

representative of the deceased. The expression ‘legal representative’ is defined in Section

2(1) of the Act, 1996.

In a Partnership agreement which contained an arbitration which contained an arbitration

clause due to the death of the partner, the partnership automatically dissolved, but under

the arbitration act, the right of legal representative would come into effect so to make an

application in this regard is provided in the arbitration clause.

It is clear that under Section 40(1) the death of any party will not discharge him in the

arbitration agreement; the arbitration agreement shall be enforceable by the deceased's

legal representative or against the legal representative of a deceased. However, if there is

an arbitration. agreement as such that the right of a party shall be extinguished on death

of that party, in this instance the arbitration agreement is not enforceable by the legal

representative of the deceased other party

Whether a legal representative is bound by such an agreement or not, would depend upon

the contents of the subject-matter of agreement. Whether the rights given are purely

personal or as survivor in respect of the legal representative.

When the hearing has concluded and one of the parties dies, all his legal representatives

are brought on the record and made parties to the reference. This can be done by giving

notice to them where the reference is not through court and where a proceeding for

substitution of legal representative is not necessary.

Section 40(2) provides that the death of any party, who has appointed an arbitrator, the

authority of that arbitrator shall not be revoked, due to death of the party who has

PALLAVI BHOGLE


appointed him. Thus, once an arbitrator is appointed, he becomes an independent

authority in any respect, even, on the death of the party who appointed him.

Section 40(3) provides that this sub-section (3) does not affect the operation of the

provisions contained in sub-sections (1) and (2) where the right of action to be

extinguished by the death of a person in an arbitration agreement. Some examples where

the right of action is extinguished by the death of a person are as follows:

1. Right of pre-emption

2. Right of office

3. Suit of damages for breach of betrothal

4. Right of damages for defamation

5. Suit for injunction

6. Right of damages for malicious prosecution

7. Suit of damages for malicious search

8. Suit of damages for wrongful arrest.

Reference would continue on the death of party

As provided under Section 40 of the Act, 1996, on the death of party arbitration

proceedings will survive according to the terms of the agreement. This provision is

equally applicable to all the parties in arbitration. In fact, their legal representatives will

be brought on record and arbitration proceedings will be continued as per the terms

contained in the arbitration agreement. In Tirath Lal Day v. Smt Bhuwan Moyee Dasi, the

then Federal Court observed that on the death of party, the arbitrator is under obligation

to serve notice upon the legal representative of the deceased party to appear in the

arbitration proceedings and reference will continue. If there is no service of notice upon

such legal representative, the arbitral award will not be binding on such legal

representative.

Wherein during the course of arbitral proceedings the death of a party takes place, all the

legal representatives who are bound by the arbitral award will be entitled to be given

opportunity to put up their case. Failure to serve such notice will not bind them by the

award.

It is submitted that on the death of party the serving of notice upon the legal

representative is a mandatory requirement and in case of non-compliance of the same,

award will not be binding on the legal representatives.

Conclusion

PALLAVI BHOGLE


Insolvency of party in arbitral proceedings [10] May 01

Introduction: Chapter X of the A&C Act gives us the miscellaneous provisions under

the Act.

Provision in case of insolvency [S. 41]

Section 41 has been enacted with the object to fix standard law for the arbitration

agreement and proceeding on insolvency.

Thus, to take standard law in this regard this section has no application to statutory

arbitration under any other law. Presently this section has no operation.

Section 41(1) deals with such an arbitration agreement which is executed by an insolvent,

it is immaterial for the purpose of this sub-section (1) that he became an insolvent before

or after the insolvency proceedings, but he must have become an insolvent before

declaration of it. If, any disputes arise during the contract or in order to make the

contract, it shall be submitted to arbitration on agreed terms. If the receiver adopts the

contract which includes the official assignee, it will be enforceable by or against him so

far as it relates to any such dispute.

Section 41(2) provides that where in the matters sub-section (1) is not to be applied, sub-

section (2) shall be applied. However to apply sub-section (2), the following conditions

may be present for consideration:

1. The matter does not come under Section 41(1).

2. An arbitration agreement should be in existence before the commencement of the

insolvency proceedings.

3. Any matter as such to be determined by the arbitration.

4. The Court should be of opinion after consideration of each and every aspect of the

matter that it should be determined by the arbitration.

5. A written request by the party or by the receiver should be made before the

Insolvency Court that the matter may be referred to the arbitration.

6. The matter, relating to an agreement which is to be determined in the context of

the insolvency proceedings.

Section 43(3) provides the expression ‘receiver’, shall include official assignee.

Thus, an official assignee is treated as a receiver in the view of sub-section (3) of section

41 of the new Act, 1996.

Scope of Section 41

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The mandate of Section 41 shows that with the insolvency of a party the arbitration

agreement does not itself become invalid, but it will be determined on the basis whether

the receiver adopts the arbitration agreement or not. In case receiver adopts the arbitration

agreement and seeks recourse from the Insolvency Court to refer the matter to the arbitral

tribunal, the Insolvency Court will decide whether the matter is to be referred to the

arbitral tribunal or not or whether the matter is to be tried by the Insolvency Court itself.

Although, in case the party becomes insolvent after the commencement of the arbitral

proceedings, the arbitral tribunal is under obligation to serve a notice on the receiver to

put up the case on behalf of the insolvent party as it is required in the event of death of

the party, notice to be served upon the legal representative of the deceased party.

Thus, it is discretionary power of the judicial authority i.e., Insolvency Court to refer such

matters to the Arbitral Tribunal or to decide the matter itself.

Conclusion

PALLAVI BHOGLE


NEW YORK CONVENTION AWARDS

What is meant by foreign awards? Explain the conditions for their

enforcement under New York Convention Awards. [16] Dec 06, May 02, Dec 01

What do you mean by International Commercial Arbitration? Discuss the

difference between arbitration and conciliation? [16] Dec 06, May 01

Define ‘International Commercial Arbitration’. Explain the legal provisions

relating to New York Convention Award. [16] May 05, May 03, Dec 01

International Commercial Arbitration [10] May 04

New York Convention Award [10] May 09, May 08, May 07, Dec 06, May 04, Dec 03

Introduction: ‘The essence of the theory of ‘transnational arbitration’ is that the institu-

tion of international commercial arbitration is an autonomous juristic entity which is

independent of all national courts and all national systems of law.’ ‘One of the primary

purposes of transnationalist movement is to break the links between the arbitral process

and the courts of the country in which the arbitration takes place.’

The Arbitration and Conciliation Act, 1996 provides for certain aspects of international

commercial arbitration.

Definitions

International Commercial Arbitration

The term ‘international commercial arbitration’ has been defined in Section (2)(1)(f) of

the Arbitration and Conciliation Act, 1996 as follows: ‘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. an individual who is a national of, or habitually resident in, any country other

than India; or

ii. a body corporate which is incorporated in any country other than India; or

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iii. a company or an association or a body of individuals whose central

management and control is exercised in any country other than India; or

iv. the Government of a foreign country,

or an arbitration to be considered as international arbitration within the meaning of this

definition it is necessary that;

(a) the dispute must arise out of a legal relationship which is commercial, irrespective of

the fact whether such relationship is contractual or not; and

(b) at least one of the parties to the dispute is a foreign national or a company registered

in a foreign country or a company, management and control of which is exercised

from a foreign country or the Government of a foreign country.

According to a quotation by the Supreme Court in R.M Investments Trading Co. Pvt. Ltd

v. Boeing Co, the term ‘commercial’ refers to any relationship which is of commercial

nature, not necessarily confined only to transactions. This is because the expression

‘commercial relationship’ is capable of including a large number of transactions, and as

such, making it difficult to be enumerated for the purpose of S. 44 of the A&C Act, 96.

Foreign Award

Section 44 of the A&C Act, 1996 is on the pattern of Article I of the New York

Convention and similar to Section 2 of the 1961 Act which defines a ‘Foreign Award’

under Chapter I, Part II. The Supreme Court said in the case of Ramji Dayawala & Sons

v. Invest Import that this Chapter would not be applied where the awards are made in

foreign countries which are not parties to the New York Convention.

According to S. 44 of the Act, 1996 the term ‘foreign award’ means an arbitral award on

differences between persons arising out of legal relationships, whether contractual or not,

considered as commercial under the law in force in India, made on or after the 11th day of

October, 1960

The term ‘foreign award’ means the award made as a result of foreign arbitration which It

becomes necessary to understand the term ‘foreign arbitration’. The Calcutta High Court

in the case of Serajuddin v. Micheal Golodetz laid down the necessary conditions relating

to the term foreign arbitration:

a. arbitration should have been held in foreign lands, by foreign arbitrator;

b. arbitration by applying foreign laws;

c. as a party foreign national is involved.

These are essential elements of a foreign arbitration resulting in a foreign award.

To explain the term ‘foreign award’ the Apex Court in N.T.P.C v. Singer Company,

observed that where in London an Interim award, was made which arose out of an

arbitration agreement governed by the Indian Laws. It was held that such an arbitral

award cannot be treated as a foreign award and it is purely a ‘domestic award’ which was

governed by the laws of India in respect of the agreement and arbitration.

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Power of judicial authority to refer parties to arbitration [S. 45]

Section 45 has been enacted in line with Article II (3) of the New York Convention. The

object of this section is to give an overriding effect, if any, to the provisions of Part I and

the provisions of the Code of Civil Procedure which are opposed to the provision

contained in the present Act.

It is the requirement of this section that the judicial authority make sure that the

arbitration agreement is valid, operative and capable of being performed before referring

the parties to arbitration in respect of disputes for which there is an arbitration agreement

in writing between the parties. Although, with the use of the word ‘shall’, it becomes a

discretionary power of the judicial authority, so unless specified conditions are not

fulfilled, this section cannot be invoked.

Further, the expression that a ‘judicial authority when seized of an action in a matter in

respect of which the parties have made an agreement referred to in S. 44’, means that the

judicial authority refers the parties to arbitration can compel a party who is not willing to

go to arbitration for unobvious reasons known best to that party.

Section 45 states that the judicial authority may refer the parties to arbitration at the

request of one of the parties or any person claiming through or under him. Thus, it is

necessary that any party should make a request before the judicial authority, when seeking

relief under an arbitration agreement. The judicial authority has to find out that the

arbitration agreement through which party is seeking reference of dispute to an arbitration

is not null and void, inoperative or incapable of being performed. It is necessary under

this section that the judicial authority has to record its findings whatsoever its directions

may be.

When foreign award is binding [S. 46]

Section 46 has been incorporated with a liberal object to recognize all the ‘Foreign

Awards’ under this Chapter which is enforceable in India, even for the purpose of

defence, set-off or in any legal proceedings in India. Thus, any foreign award under this

Chapter becomes enforceable and shall have binding force upon the parties between

whom it was made. These parties may rely on such a foreign award by way of claim,

defence, set-off and in any legal proceedings initiated in India.

Conditions for enforcement of foreign award [S. 48]

Section 48 has been enacted on the basis of Article V of the New York Convention and

Section 7 of the 1961 Act. Section 48 provides the conditions for enforcement of foreign

awards. In which there are three sub-sections.

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Sub-section (1)

Under sub-section (1) there are clauses (a) to (e):

Clause (a)

According to sub-section (1), enforcement of a foreign award may be refused provided

that the party makes such a request against whom it is applied. But that party is required

to submit certain proof regarding his revocation. Clause (a) provides that if the parties

made an arbitration agreement under Section 44 in compliance of law applied to the

parties, but due to some incapacity or when the arbitration agreement becomes invalid

under the law or contrary to law of the country, in such cases the court may refuse to

enforce a foreign award by order. The Scope of this clause (a) was specifically explained

by the Delhi High Court, in Gas Authority of India Ltd. v. SPIE CAPAG SA saying that

‘an arbitration agreement is not valid under the law to which the parties have subjected it

or, failing any indication thereon, under the law of the country where the award was

made.’

Further, when, an arbitration agreement is made, but it is induced by way of fraud, undue

influence or misrepresentation and contrary to law, by which the arbitration agreement is

to be governed, as a result of such an arbitration agreement a foreign award shall not be

enforceable provided the parties against whom it is invoked make an application with the

request before the court.

Clause (b)

Clause (b) of sub-section (1) of Section 48 provides the condition where the principle of

natural justice is not followed. When the party who has been aggrieved and against whom

the award is made, has not been given proper notice of the appointment of the arbitrator

or the arbitral proceedings or not been given proper opportunity for presentation of his

case in the arbitration, if he applies against the enforcement of such a foreign award and

the court is of opinion that in fact the principle of natural justice has not been adopted

during the arbitration proceedings to make such an award, may refuse to enforce such

award. Accordingly, a foreign award made in violation of this principle cannot be

enforced.

Clause (c)

Clause (c) provides the principle that to ensure a valid award it must deal only with

questions actually submitted to the arbitral tribunal by the parties. In other words if the

award has contemplated differences not referred to the arbitral tribunal it cannot be

enforced and is liable to be refused. Thus, an arbitral tribunal must confine its jurisdiction

to the terms of submission.

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Clause (d)

Clause (d) provides that the arbitral authority or the arbitral procedure is inconsistent with

the agreement of the parties and if the award is made, it cannot be enforced. Clause (d),

clearly states the grounds, when, enforcement of a foreign award is not to be acted upon.

These are:

1. When, the composition of the arbitral authority is not in compliance with the

agreement of the parties.

2. When, the arbitral procedure adopted, is contrary to the provisions in the

agreement of the parties.

3. When, the arbitration agreement itself is contrary to the law of the country, where

the arbitration took place.

Clause (e)

Clause (e) provides that, when the award has been set aside or suspended by a competent

authority of the concerned country or it has not become binding on the parties, it shall not

be enforced.

Thus, the jurisdiction and competence to set aside the award is vested with the courts of

the country in which or under the law of which the award is made.

The Supreme Court of India said that the award can be said to have become ‘binding’ on

the parties only when it has become enforceable and the enforceability must be

determined as per the law applicable to the award.

Sub-section (2)

Sub-section (2) of Section 48 provides additional grounds in turn vested powers to the

court to refuse enforcement of an arbitral award. Under this sub-section (2), the Court

may refuse to enforce a foreign award if it finds that:

• the subject-matter of the difference between the parties is not capable of

settlement by arbitration under the law of India, or

• if the enforcement of such a foreign award is opposed to the public policy of

India.

In such cases, the court may refuse the enforcement of such a foreign award. The

expression ‘public policy’ is subject to interpretation from time to time as also to

currently prevailing circumstances, the present Act having not defined it.

The Supreme Court of India held that the enforcement of a foreign award would be

refused on the ground that it is contrary to public policy if such enforcement would be

contrary to

1. fundamental policy of Indian law, or

2. the interests of India, or

3. Justice or morality.

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Sub-section (3)

Sub-section (3) of Section 48 provides that when, the party makes an application before

the court with the request to set-aside or suspend the enforcement of a foreign award, the

court is empowered to adjourn its decision on enforcement and may also order the other

party to give suitable security.

Enforcement of Foreign Awards [S. 49]

Section 49 has been incorporated on the basis of Article III of the New York Convention,

however, conditions for enforcement of a foreign award have been provided in Section 47

and Section 48 of the Act.

Section 49 provides that when the Court is not only of opinion but also satisfied that a

foreign award can be enforced by the Court, the award shall be deemed to be a decree of

the court. In this context, the Supreme Court of India had held that ‘The award must be

executed as it is and there is no scope for addition to, or substraction from, the award.’

Thus, enforcement of a foreign award is to be carried out in accordance with its contents

without any change in this respect.

Conclusion

PALLAVI BHOGLE


GENEVA CONVENTION AWARDS

Define foreign award and state the provisions regarding Geneva Convention

Award. [16] May 07, Dec 03

Under what conditions the foreign award can be enforced under Geneva

Convention Award? Discuss. [16] May 06, Dec 04, Dec 03, Dec 02, May 01

Discuss the powers of judicial authority to refer parties to arbitration

under the Geneva Convention and point out the defects in the Geneva

Convention. [16] May 02

Geneva Convention Award [10] Dec 05

Introduction: ‘The essence of the theory of ‘transnational arbitration’ is that the institu-

tion of international commercial arbitration is an autonomous juristic entity which is

independent of all national courts and all national systems of law.’ ‘One of the primary

purposes of transnationalist movement is to break the links between the arbitral process

and the courts of the country in which the arbitration takes place.’

The Arbitration and Conciliation Act, 1996 provides for certain aspects of international

commercial arbitration.

Interpretation [S. 53]

Section 53 has been enacted on the basis of Article 1 of the Geneva Protocol and Article

1(1) of the Geneva Convention and also Section 2 of the 1937 Act.

Section 53 provides meaning of ‘Foreign Award’, it means an arbitral award on

differences in respect of the matter which has been arbitrated as commercial matter under

the law in force presently in India after the 28th of July, 1924.

In this context, expression ‘differences’ contains disputes vice-versa.

Section 53 has limited application because it applies to the jurisdiction of different parties

to the Geneva Convention. The Central Government by notification in official Gazette

has to declare the territories to which the Geneva Convention would be applied. Thus, if

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the award is made in such territories which is not a party to the Geneva Convention

Chapter II does not apply. It is important to note that the Central Government under

Section 2 of the Arbitration (Protocol and Convention) Act, 1937 may make declaration

by notification in the official Gazette, list of parties to the Geneva Convention and

the territories to which the Geneva Convention applies, such a declaration is to be made

by the Central Government only when the Central Government is satisfied that reciprocal

provisions have been made.

Further, Section 53 provides that finality of a foreign award will not be recognized, if

there is any pending proceedings in respect of validity of such a foreign award under

consideration as such in the country in which it is made.

Power of judicial authority to refer parties to arbitration [S. 54]

Section 54 is enacted on the basis of Article 4 of the Geneva Protocol. Section 54

provides that any provisions given in Part I or in the Code of Civil Procedure, 1908 shall

not be applied if it is contrary to the provisions contained in Chapter II of the present Act.

It provides power to the judicial authority to refer the parties to the decision of the

arbitrators, if the following requirements of conditions are fulfilled:

1. there should be dispute regarding a contract made between persons to whom

Section 53 applies, and

2. the contract must include an arbitration agreement, in this respect it is immaterial

whether referring to present or future differences,

3. a party to the arbitration agreement must initiate legal proceedings opposed to

another party in such arbitration agreement,

4. the judicial authority must be of opinion that the agreement or the arbitration can

proceed and it is operative,

5. the judicial authority has to be satisfied that the arbitration is valid under Section

53 of the Act and capable of being carried into effect.

No time limit has been prescribed under Section 54 of the Act; however, it may be

determined in light of circumstances by the judicial authority.

Foreign awards when binding [S. 55.]

Section 55 is enacted on the basis of Article 1(1) of the Geneva Convention and Section

4(2) of the 1937 Act.

Section 55 provides that a foreign award which has enforceability under this Chapter II,

the Geneva Convention Award, will be acted as binding force upon the parties against

whom it was made and such a foreign award will become the basis to seek defence, set-

off or otherwise any. legal proceedings in India, by the parties. Thus, under this Chapter,

enforcement of such a foreign award with be explained with references trusted in that

award.

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Conditions for enforcement of foreign award [S. 57]

Section 57 is enacted on the basis of Article 1 and Article 2 of the Geneva Convention

and also Section 7 of the 1937 Act.

Section 57 provides the conditions essential for enforcement of foreign awards. Section

57(1) and Section 57(2) lays down specified conditions which are to be fulfilled before

the foreign award is enforced in India. The onus to produce these evidences lie on the

party who is seeking enforcement of the award.

Section 57(1) provides that a foreign award may be enforceable under this Chapter. Sub-

section (1), clauses (a) to (e) deal with the enforcement of foreign awards.

Clause (a)

It states one of the conditions for enforcement of a foreign award is that the award has

been made in pursuance of a submission to arbitration which is valid under the law

applicable thereto. Thus, if the terms submitted to arbitration are illegal or contrary to law

in force, the award given by the arbitral tribunal in pursuance of terms of arbitration

clause will not be enforceable.

The Madras High Court said that ‘if the contract is illegal, the award given by the arbitral

tribunal in pursuance of arbitration clause in the contract will not be enforceable.

Clause (b)

The subject-matter of the award is capable of settlement by arbitration under the law of

India. Thus, it is intended that the disputes should be arbitrable under the law of India.

Clause (b) is similar to clause (a) of Section 48(2) of the Act. .

Clause (c)

It is one of the pre-conditions before enforcement of a foreign award that the award made

by the arbitral tribunal which has been constituted as per the agreed terms between the

parties and also in accordance with law governing the arbitration proceedings;

Clause (d)

‘Finality’ of the award is to be proved by the party who is seeking enforcement of the

award. The award has become final in the country in which it has been made, however

finality of the award can be opposed or appealed on the ground, if for the purpose of

contesting the validity of the award, if it is proved that in respect of validity of the award

any proceedings are pending. However, where the time for setting aside of the award by

proceedings in a foreign court had long expired; the foreign award must be held to be

final.

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Clause (e)

It is also a necessary condition that the enforcement of a foreign award should not be

contrary to public policy of India. Thus, if any agreement between a foreign party and an

Indian party is contrary to the law of India, it will not be enforced. Similarly, if it is

opposed to the interest of public at large in India, a foreign award cannot be enforced.

However, ‘where a contract provided for payment of liquidated damages for breach of

contract and the arbitrators awarded maximum amount named in the contract, the foreign

award is not had on the face of it nor can it be said to be against the law of India as

contained in Section 73 and Section 74 of the Contract Act.

Section 57(2)

It provides that despite the conditions contained in sub-section (1) being fulfilled, the

Court may refuse the enforcement of a foreign award if any of the following conditions

existed:

(a) the award has been annulled in the country in which it was made,

(b) the party against whom the award is sought to be used, was not given notice of the

arbitration proceedings in sufficient time to enable him to present his case, or that,

being under a legal incapacity, he was not properly represented.

(c) the award does not deal with differences contemplated by or falling within the

terms of the submission to arbitration, as it contains decisions on matters beyond

the scope of the submission to arbitration.

However, under this Section 57(2) the Court is empowered to postpone the enforcement

of a foreign award or may order to provide guarantee in this regard if such a foreign

award is not the result of all the differences submitted to the arbitral tribunal.

Section 57(3)

It provides extra grounds to oppose the enforcement of a foreign award by the party

against whom the award is made. These grounds are in addition to the grounds provided

under clauses (a) and (c) of sub-section (1) of Section 57 and clauses (b) and (c) of sub-

section (2) of the same section. It is the right given to the party to oppose enforcement of

a foreign award based on said grounds, thus, the party can question the validity of the

award before the Court. But, the court is empowered to refuse enforcement of the award

or adjourn enforcement of the award after giving reasonable opportunity to the party

within reasonable time, against whom the award is made.

Enforcement of foreign award [S. 58]

Section 58 is enacted on the basis of Article 1(1) of the Geneva Convention. The

provisions contained in Section 58 are similar to the provisions of Section 49 of the

present Act.

Conclusion

PALLAVI BHOGLE


Explain ‘Protocol on Arbitration Clauses’. [16] Dec 01

Introduction: Under Section 53, the Second Schedule of the Arbitration and Conciliation

Act, 1996 contains the ‘Protocol on Arbitration Clauses.’ On it all the Contracting States,

including India, signed, it is binding on all the Contracting States.

The undersigned, being duly authorized, declared that they accept, on behalf of the

countries which they represent, the following provisions:

1. Each of the Contracting States recognizes the validity of an agreement whether

relating to existing or future differences between parties subject respectively to

the jurisdiction of different Contracting States by which the parties to a contract

agree to submit to arbitration all or differences that may arise in connection with

such contract relating to commercial matters any other matter capable of

settlement by arbitration, whether or not the arbitration is to take place in a

country to whose jurisdiction none of the parties is subject. Each Contracting

State reserves the right to limit the obligation mentioned above to contacts which

are considered, as commercial under its national law. Any Contracting State

which avails itself of this right will notify the Secretary-General of the League of

Nations in order that the other Contracting States may be so informed.

2. The arbitral procedure, including the constitution of the Arbitral Tribunal, shall be

governed by the will of the parties and by the law of the country in whose

territory the arbitration place. The Contracting States agree to facilitate all steps in

the procedure which require to be taken in their own territories, in accordance

with the provisions of their law governing arbitral procedure applicable to

existing differences.

3. Each Contracting State undertakes to ensure the execution by its authorities and in

accordance with the provisions of its national laws of arbitral awards made in its

own territory under the preceding articles.

4. The Tribunals of the Contracting Parties on being seized or a dispute regarding a

con made between persons to whom Article 1 applies and including an Arbitration

Agreement with referring to present or future differences which is valid in virtue

of the said article and capable of being carried into effect, shall refer the parties on

the application of either of them to the decision of the Arbitrators. Such reference

shall not prejudice the competence of the judicial tribunals in case the agreement

or the arbitration cannot proceed or becomes inoperative.

5. The present Protocol, which shall remain open for signature by all States, shall be

ratified. The ratification shall be deposited as soon as possible with the Secretary-

General of the League of Nations, who shall notify such deposit to all the

Signatory States.

6. The present Protocol will come into force as soon as two ratifications have been

deposited. Thereafter it will take effect, in the case of each Contracting State, one

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month after the notification by the Secretary-General of the deposit of its

ratification.

7. The present Protocol may be denounced by any Contracting State on giving one

year’s notice. Denunciation shall be effected by a notification addressed to the

Secretary-General of the League, who will immediately transmit copies of such

notification to all the other Signatory States and inform them of the date on which

it was received. The denunciation shall take e one year after the date on which it

was notified to the Secretary-General, and shall operate only in respect of the

notifying State.

8. The Contracting States may declare that their acceptance of the present Protocol

does include any or all of the under-mentioned territories; that is to say, their

colonies, overseas possessions or territories, protectorates or the territories over

which they exercise a mandate. The said States subsequently adhere separately on

behalf of any territory thus excluded. The Secretary – General of the League of

Nations shall be informed as soon as possible of such adhesions. He shall notify

such adhesions to all Signatory States. They will take effect one month after the

notification by the Secretary – General to all Signatory States. The Contracting

States may also denounce the Protocol separately on behalf of any of the

territories referred to above. Article 7 applies to such denunciation.

Conclusion

PALLAVI BHOGLE


CONCILIATION

What is meant by conciliation? Discuss the provisions relating to

appointment, functions and removal of conciliators under the Act. [16] May 09, May 03, Dec 02, 02, Dec 01

State the circumstances under which a conciliator is appointed. Explain the

powers and duties of a conciliator. [16] May 07, May 05, May 04, Dec 04

Explain the procedure to be followed in appointing conciliator. When can the

conciliation proceedings be terminated? [16] May 08, Dec 06, Dec 05, May 02, Dec 02, Dec 02, Dec 01

Conciliation [10] May 06

Introduction: Part III of the Arbitration and Conciliation Act, 1996 deals with

conciliation. Conciliation means ‘the settling of disputes without litigation’ Conciliation

is a process by which discussion between parties is kept going through the participation

of a conciliator. The main difference between arbitration and conciliation is that in

arbitration proceedings the award is the decision of the Arbitral Tribunal while in the case

of conciliation the decision is that of the parties arrived at with the assistance of the

conciliator.

The terms ‘arbitration’ and ‘conciliation’ have been distinguished in Halsbury’s Laws of

England as follows: ‘The term ‘arbitration’ is used in several senses. It may refer either to

a judicial process or to a non-judicial process. A judicial process is concerned with the

ascertainment, declaration and enforcement of rights and liabilities as they exist, in

accordance with some recognized system of law. An industrial arbitration may well have

for its function to ascertain and declare, but not to enforce, what in the arbitrator's opinion

ought to be the respective rights and liabilities of the parties, and such a function is non-

judicial. Conciliation is a process of persuading parties to reach agreement, and is plainly

not arbitration; nor is the chairman of conciliation boards an arbitrator.’

The law relating to conciliation has been codified for the first time in India on the pattern

of UNCITRAL Conciliation Rules.

Commencement of Conciliation Proceedings [S. 62]

Section 62 is enacted on the basis of Article 2 of the UNCITRAL Conciliation Rules.

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Section 62 provides that any party to dispute may commence conciliation without the

term ‘claimant’ or ‘plaintiff’ and such terms are not to be used in conciliation.

Section 62 provides that any party to dispute wishing to initiate conciliation has to fulfill

the following conditions:

1. The party initiating conciliation should send a written invitation to the other party.

Such a written invitation should mention the subject of dispute.

2. The party initiating conciliation should state that the invitation is under Part III.

3. The invitation must briefly identify the subject of the dispute.

Appointment of Conciliators [S. 64]


S. 64 provides the procedure for appointment of conciliators, there may be one

conciliator or two or three conciliators.

Section 64(1) provides that the parties have to decide one name of a sole conciliator,

where by on agreement one conciliator is appointed to conduct conciliation proceedings

[clause (a)]. However, according to clause (b) where two conciliators are appointed by

the parties to conduct conciliation proceedings, each party is authorized to appoint one

conciliator. But, under clause (c) of sub-section (1), where three conciliators are

appointed to conciliate each party is authorized to appoint one conciliator and the third

conciliator by name and by the agreement between the parties he will be appointed to act

as the presiding conciliator in conciliation proceedings.

Under the Act, the presiding conciliator is nt authorized to take a binding decision, in

case od differences of opinion between the conciliators. However, the parties by an

agreement may confer such power to the presiding conciliator. The obvious purpose

behind this is to have speedy and smooth conciliation.

Although, these above-mentioned provisions are subject to the provisions contained in

sub-section (2) of Section 64.

Section 64(2) provides freedom to the parties to make an approach with request to any

institution which has its known reputation for rendering conciliation services or any

eminent person in the field of conciliation to recommend suitable, individuals to conduct

conciliation. Under this sub-section (2), clause (b) the parties are permitted by an

agreement in this respect to to appoint one or more conciliators directly by such an

institution a person who is providing expertise services in the area of conciliation.

It is provided that each party may appoint a conciliator independently without taking the

opinion of the other party. It is a direct appointment by the party or the parties who

jointly agree that an institution or a person appoints conciliators [two or more], directly.

PALLAVI BHOGLE


Proviso to sub-section (2) of Section 64 provides guidelines to the institution or person,

who is requested by the parties to recommend or appoint conciliators. Such institution or

person is required to give due regards to consideration while recommending or

appointing conciliators in respect af their independent and impartial conciliation. Also,

while appointing a sole or third conciliator in connection with international commercial

conciliation it is advisable to take into account the nationality of a conciliator, vis-à-vis

the nationalities of the parties.

No time is laid down for appointment of conciliators under S. 64, however it is expected

that the parties to dispute would take the earliest initiative to settle their disputes by way

of taking services of the professional conciliators.

Submission of statements to conciliator [S. 65]


Section 65 deals with the conduct of conciliation upon appointment of conciliator or

conciliators.

Section 65(1) provides that when the conciliator has been appointed, he will make a

request to each party asking him to submit a written statement summarily describing the

nature of dispute and specified points of issue. Under sub-section (1) each party will send

a copy of such submission of statement to the other party. The parties are not required to

submit their statement of pleadings as such in details as required in the arbitral

proceedings under Section 23 of the Act, 1996.

Such submission of statement by the parties to the conciliator is intended to provide him

information about the general nature of dispute.

Section 65(2) provides that it is at the discretion of the conciliator to call upon any parties

to submit a further written statement to clarify his position and support his grounds of the

facts, which may be supplemented by any other documents or evidences, if the party

thinks appropriate. It is required under this sub-section (2) that anything submitted by the

party to the conciliator, a copy of the same documents must be sent to the other party.

Section 65(3) provides that the conciliator is further enabled to request for additional

information by the parties at any stage of the conciliation proceedings, if, the conciliator

is of opinion that it is necessary for the purpose to expedite the conciliation proceedings.

Administrative Assistance [S. 68]

Section 68 is enacted on the basis of Article 8 of the UNCITRAL Conciliation Rules;

Although, this section contained provision similar to those given in Section 6 of the Act

in respect of the arbitration.

Section 68 deals with provisions relating to administrative assistance to facilitate the

conduct of the conciliation proceedings. Such administrative assistance may be procured

PALLAVI BHOGLE


from a suitable institution or person, however such administrative assistance will be taken

only after mutual consent of the parties or the conciliator with the consent of the parties

has taken place in this matter. Mainly, the nature of such administrative assistance is to

provide lists of conciliator arrange meeting for conciliators, and to provide two way

commcations services, including translation and interpretation services.

Communication between Conciliator and Parties [S. 69]


Section 69 deals with procedural communication powers of the conciliator, which is to

take place between the conciliator and the parties all together or separately, with each

party in the conduct of the conciliation proceedings.

Section 69(1) provides power to communicate to the conciliator, thus the conciliator may

1. invite the parties to meet him, or

2. communicate with them orally or in writing.

3. meet or communicate with the parties together, or

4. meet or communicate with each of them separately.

So, it is required under sub-section (1) of Section 69 that the conciliator should provide

reversible communication or meeting to the parties jointly or each party separately but he

should not refuse meeting with the one party and meet or communicate with the other

party; He must be impartial in such communication or meeting.

Section 69(2) provides freedom to the parties to determine the place for meeting with

conciliator by mutual agreement, if there is no such agreement between the parties, the

conciliator is empowered to determine the place for such meeting only after the parties

have been consulted and given their consents. Sub-section (2) is intended to provide

common convenient place with consideration in respect of time of travel, costs of travel

to such places, however, this matter becomes important especially in case of international

conciliation.

Disclosure of Information [S. 70]


Section 70 provides privilege to the conciliator whether to disclose information made

known to him by one party to the other party. However the conciliator is not expected to

disclose such information except the substance of the factual information in connection

with the dispute, received from one party to the other party.

It is to be noted that in conciliation the conciliator is a person who should win the

confidence of the parties by keeping their confidences. However, the conciliator may

make disclosure of such factual information to the other party in order that the other party

PALLAVI BHOGLE


may have the opportunity to present any explanation, which the conciliator considers

appropriate.

Proviso to Section 70 of the Act, states that if the party gives any information to the

conciliator subject to a specific condition that it be kept confidential, in such cases the

conciliator is not allowed to disclose such information given on a ‘specified condition’ to

the other party.

It is to be further noted that Section 65(1) and Section 65(2) are not attracted by the

proviso to Section 70.

Termination of Conciliation Proceedings [S. 76]


This section is analogous to Section 32, Part I of the Act, 1996, however with one

contradiction that ‘A conciliation is wholly a voluntary process therefore it can come to

an end as and when desired to do so.’

S. 76 lays down 4 situations when the conciliation proceedings can be terminated.

Although other than these prescribed grounds, there are other grounds to terminate

proceedings as well, such as death of the party or conciliator.

Under S. 76, the following are the ways to terminate conciliation proceedings:

1. Clause (a) - by the signing of the settlement agreement by the parties, on the date

of the agreement, or

2. Clause (b) - by a written declaration of the conciliator, after consultation with the

parties, to the effect that further efforts of conciliation are no longer justified, on

the date of the declaration, or

3. Clause (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

4. Clause (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.

No time limit as such is provided u/s 76, that within what period the conciliation

proceedings can be terminated. Although, the date of such declaration is counted.

Because of a voluntary nature of the conciliation the parties are not required to state the

reasons for termination of the conciliation proceedings.

Conclusion

PALLAVI BHOGLE


State under what circumstances a sole arbitrator can be appointed. [8] Dec 04







conciliator.






















Number of Conciliators [S. 63]

Section 63 is based on Article 3 of the UNCITRAL Conciliation Rules.

Section 63 deals with numbers of conciliators.

PALLAVI BHOGLE


Section 63(1) states that ‘there shall be one conciliator unless the parties agree that there

shall be two or three conciliators. This sub-section (1) clearly indicates its preference for

a sole conciliator but also provides freedom to the parties in dispute to appoint 2 or more

conciliators, by mutual agreement.

Sole Conciliator

Under Section 63(1) a sole conciliator is preferred for the following reasons:

1. A sole conciliator will be more likely to win the faith of the parties.

2. Scope of conflicting opinions between the conciliators is reduced by appointment

of a sole conciliator.

3. Appointment of a sole conciliator will be less expensive comparatively.

4. A sole conciliator would provide speedy conciliation, because meeting of

conciliators within short intervals is likely to cause delay.

Section 63(2) states that ‘where there is more than one conciliator, they ought, as a

general rule, to act jointly.’ That means, sub-section (2) emphasizes on panel decision

making where there is more than one conciliator, as a general rule, all conciliators have to

conciliate jointly and should have their own strategic understanding, as to how, they have

to settle disputes.

Conclusion

What is conciliation? Who is a conciliator? Explain the role of conciliator in

conciliation proceedings. [16] Dec 06, May 05, May 02, Dec 02, May 01, Dec 01







conciliator.







PALLAVI BHOGLE

















Number of Conciliators [S. 63]

Section 63 is based on Article 3 of the UNCITRAL Conciliation Rules.

Section 63 deals with numbers of conciliators.

Section 63(1) states that ‘there shall be one conciliator unless the parties agree that there

shall be two or three conciliators. This sub-section (1) clearly indicates its preference for

a sole conciliator but also provides freedom to the parties in dispute to appoint 2 or more

conciliators, by mutual agreement.

Role of Conciliator [S. 67]

Section 67 is enacted on the basis of Article 7 of the UNCITRAL Conciliation Rules,

which prescribe role of the conciliator.

Section 67(1), provides basic role of the conciliator, he has to render assistance in an

independent and impartial manner to the parties who are putting their own efforts to settle

the disputes in very friendly process of conciliation. Thus, it becomes the duty of the

conciliator to exercise his skill of conciliation.

Section 67(2) provides fundamental principles of natural justice to the conciliator with

object of fairness and justice besides considerations for the rights and obligations of the

PALLAVI BHOGLE


parties. The conciliator also has to take into account of the present circumstances of the

given dispute by assessing other things like the usage of trade concerned and previous

business practice between the parties, if it so exists. The conciliator while making

settlement of the dispute is required to assess every such thing which relates to the

dispute. Although the conciliator is not bound by the Code of Civil Procedure, 1908 and

the Indian Evidence Act, 1872 u/s 66, but he cannot act arbitrarily in the conduct of

conciliation proceedings.

S. 67(3) provides discretionary method, which is appropriate in the view of conciliator,

may be adopted by him to conduct conciliation proceedings, however, the parties to

conciliation can express their wishes freely to the conciliator not only in respect of

conduct of conciliation proceedings but can also make a request to the conciliator to

record oral statement to speedup conciliation and early settlement of dispute.

If a party makes a request to the conciliator to hear witnesses, the expenses incurred on

calling such a witness would be borne by the party wh made such request and it is

necessary in respect of calling witnesses to be heard by the conciliator the other party

should have expressly agreed on this issue.

Section 67(4) provides that the conciliator is authorised at his discretion to make

proposals for a settlement of the dispute, at any stage of the conciliation proceedings and

such proposals are not required to be made in writing and the conciliator is not bound to

state reasons for such proposals. In the interest of justice, fair play and speedy settlement

of the disputes, such freedom is provided to the conciliator under sub-section (4) of

Section 67.

Conclusion

What is the effect of settlement agreement in conciliation proceedings?

How to enforce the settlement agreement? Explain. [16] May 01, Dec 01

Settlement [10] Dec 01






PALLAVI BHOGLE



conciliator.






















Suggestions by parties for settlement of dispute [S. 72]


Section 72 provides freedom to each party in respect of the conciliation to submit his own

suggestions to the conciliator for the settlement of the dispute. However, the parties are

not bound to submit, it is only an expectation from the parties to submit their suggestions

in the interest of settlement of dispute.

Settlement of Agreement [S. 73]


PALLAVI BHOGLE


S. 73 prescribes procedure for successful end of conciliation proceedings.

Section 73(1) provides that when the conciliator is able to formulate and is of the opinion

that acceptable elements of settlement to the parties exist, then the conciliator will

prepare the terms of possible settlement which shall be subjected to observation by the

parties. The conciliator on receipt of formula which has undergone observations process

by the parties, the conciliator may reformulate the terms of a possible settlement, with

keeping view on such observations.

Section 73(2) provides that in situation, the parties could come to a stage to accept the

settlement proposed by the conciliator, the parties may draw up and sign a written

settlement agreement. It is at the discretion of the parties to make such agreement in

writing or not, however, the parties may request the conciliator to draw up or assist in

drawing up the settlement agreement.

In this context, it is advisable to draw up such a settlement agreement in writing, so that

the contents are clear and relevant as to the settlement terms, although there is no

requirement as such that the settlement agreement must state reasons on which it has been

settled under sub-section (2).

Section 73(3) provides that at the moment the parties sign the settlement agreement, it,

attains finality and would be binding on the parties and persons claiming under them

respectively.

Section 73(4) provides that the conciliator is required to authenticate the settlement and

would furnish a copy to each of the parties. If, there is more than one conciliator, all

conciliators are required to authenticate the settlement agreement.

Status and Effect of Settlement Agreement [S. 74]

There is no provision in the UNCITRAL Conciliation Rules as contained in Section 74

which provides status and effect of settlement agreement similar to an arbitral award

given by an arbitral tribunal under Section 30. Thus, under Section 74, the settlement

agreement shall have the same status and 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.

As settlement agreement has been given similar status as to an arbitral award on agreed

terms on the substance of dispute and also same effects, although a settlement agreement

is the result of the parties choice by self determination, a party to such an agreement may

be estopped from invoking the grounds for setting aside under Section 34,Chapter VII,

however Section 61(2) read with Section 34(2)(b)(i) of the Act, which provides that ‘the

court is not barred from setting aside the agreement if it finds that the subject-matter of

the dispute is not capable of settlement by conciliation’ or if the settlement agreement is

opposed to public policy of India.

PALLAVI BHOGLE


A settlement agreement is treated like a decree of the court, but the executing court may

refuse to grant prayer if it is of opinion that the settlement agreement has been made in

contravention of Section 34(2)(b) and hence without jurisdiction.

Conclusion

Explain the confidentiality in conciliation proceedings [8] May 07, Dec 04, Dec 03, May 02







conciliator.




















PALLAVI BHOGLE




Disclosure of Information [S. 70]


Section 70 provides privilege to the conciliator whether to disclose information made

known to him by one party to the other party. However the conciliator is not expected to

disclose such information except the substance of the factual information in connection

with the dispute, received from one party to the other party.

It is to be noted that in conciliation the conciliator is a person who should win the

confidence of the parties by keeping their confidences. However, the conciliator may

make disclosure of such factual information to the other party in order that the other party

may have the opportunity to present any explanation, which the conciliator considers

appropriate.

Proviso to Section 70 of the Act, states that if the party gives any information to the

conciliator subject to a specific condition that it be kept confidential, in such cases the

conciliator is not allowed to disclose such information given on a ‘specified condition’ to

the other party.

It is to be further noted that Section 65(1) and Section 65(2) are not attracted by the

proviso to Section 70.

Confidentiality [S. 75]


S. 75 provides that the ‘principle of confidentiality’ and on the basis of it the conciliator

and the parties are required to keep all matters relating to the conciliation proceedings

‘close to their chest’. Section75 forbids disclosure to strangers on any matters relating to

the conciliation proceedings. However, such confidentiality is not restricted to matters

relating to the proceeding which also extends to the settlement agreement except where

its disclosure is necessary for purposes of implementation and enforcement.

It is obvious Section 75 has been designed to gain confidence between the parties and the

conciliator and in their commercial interests. The nature and character of the conciliation

proceedings have also been taken into consideration.

Conclusion

PALLAVI BHOGLE


ALTERNATIVE DISPUTES REDRESSAL

“The ADR is not an alternative to the formal judicial system but only a

supplement to it”. Comment. [16] May 08

Explain the role and importance of Alternate Dispute Resolution system in

modern times. [16] Dec 06

Introduction: The Supreme Court made the following observation in Guru Nanak

Foundation v Rattan Singh & Sons: Interminable, time consuming, complex and

expensive court procedures impelled jurists to search for an alternative forum, less

formal, more effective and speedy for resolution of disputes avoiding procedural claptrap

and this led them to the Arbitration Act, 1940. However, the way in which the

proceedings under the Act are conducted and without exception challenged in Courts, has

made lawyers laugh and legal philosophers weep. Experience shows and law reports bear

ample testimony that the proceedings under the Act have become highly technical,

accompanied by unending prolixity, at every stage providing a legal trap to the unwary.

Informal forum chosen by the parties for expeditious disposal of their disputes has by the

decisions of the courts, been clothed with ‘legalese’ of unforeseeable complexity.’

The movement towards ADR was endorsed by a resolution at a meeting of Chief

Ministers and Chief Justices. The meeting noted that the courts were not in a position to

undertake the entire burden of administration of justice and that a number of disputes

were capable of being disposed of by alternative methods such as arbitration,

conciliation, mediation and negotiations. The meeting emphasized that litigants should be

encouraged to adopt other methods because they provided procedural flexibility, saved

valuable time, and involved less expenditure and strain as compared with conventional

trials in civil courts.

Concept of ADR

ADR or ‘Alternative Dispute Resolution’ is an attempt to devise machinery which should

be capable of providing an alternative to the conventional methods of resolving disputes.

An alternative means the privilege of choosing one of two things or courses offered at

one's choice. It does not mean the choice of an alternative court but something which is

an alternative to court procedures or something which can operate as court annexed

procedure.

Human conflicts are inevitable. Disputes are equally inevitable. It is difficult to imagine a

human society without conflict of interests. Disputes must be resolved at minimum

PALLAVI BHOGLE


possible cost both in terms of money and time, so that more time and more resources are

spared for constructive pursuits.

For resolution of disputes there is a legal system in every human society. Every injured

person is supposed to go to courts for his redressal. All the legal systems are trying to

attain the legal ideal that wherever there is a wrong there must be a remedy so that

nobody shall have to take law into his own hand. Courts have become overcrowded with

litigants. Naturally, litigants have to face so much loss of time and money that at long last

when a relief is obtained; it may not be worth the cost.

Hence, began the search for alternatives to the conventional court system. A large

number of quasi-judicial and administrative tribunals have been created for quicker

reliefs. All these tribunals and forums are an alternative method of dispute redressal. But

even such tribunals and forums have become overcrowded with the result that they are

not able to provide relief within good time. Many tribunals in service matters have been

able to provide relief only when the aggrieved employee has already retired from his

position.

There thus remains the need of an alternative remedy which will not be bogged down by

costs and delays. Perhaps the search will culminate in a remedy in which there is the

minimum most role of official authorities and there is the maximum play of a wholly

private mechanism. As and when such a method of dispute resolution is discovered or

devised, or if it has already been discovered or devised, it will be entitled to be given the

name of ADR, Alternative Dispute Resolution.

Definition and Scope of ADR

‘Alternative Dispute Resolution’ (ADR) is supposed to provide an alternative not only to

civil litigation by adjudicatory procedures but includes also arbitration itself. The

institution of arbitration came into being as a very useful alternative to litigation. But it is

now being viewed as closer to litigation because it has to be in accordance with statutory

provisions and becomes virtually an adjudicatory process with all the formalities of the

functioning of a court. A method of dispute resolution would be considered as a real

alternative only if it can dispense with the adjudicatory process, even if it is not wholly a

consensual process. It may be worked by a neutral third person who may bridge the gap

between the parties by bringing them together through a process of conciliation,

mediation or negotiations.

Nevertheless, arbitration has also been considered as an alternative to litigation and is

generally included in the study of all other alternative. This is so because arbitration has

been the mother source of other alternatives, not only in substance but also in the

procedural working of the alternative methods. The principles and procedure of

arbitration have influenced the growth of many of the ancillary and hybrid processes used

in the alternative methods of dispute resolution.

PALLAVI BHOGLE


ADR can be defined as a technique of dispute resolution through the intervention of a

third party whose decision is not legally binding on the parties. It can also be described as

mediation though mediation is only one of the modes of ADR. The method is neither that

of litigation nor that of arbitration. ADR flourishes because it avoids rigidity and

inflexibility which is inevitable in the litigation process apart from high lawyer and court

fee and long delays. ADR aims to provide the parties with cheap, speedy and less

formalistic remedy to the aggrieved party. It aims at providing a remedy which is most

appropriate in the circumstances of the case. This makes ADR a viable substitution for

arbitration or litigation.

Advantage of Alternative means of Dispute Redressal

The advantages are as follows:

1. The alternative means of dispute redressal can be invoked at any time, even if the

matter is pending in the Court of Law. Similarly it can be terminated at any time

except in case of compulsory arbitration.

2. The disputes can be resolved comparatively more economically and speedily.

Disputes can be maintained as the personal subject-matter. Sometime disputes are

resolved within one or two days, time because the procedure adopted by the

mediator is controlled and consented by the parties. Thus, real solution of the

dispute can be arrived at by the system of alternative means of dispute redressal.

3. The system of alternative means of dispute redressal can be followed without

seeking legal assistance from the advocates / lawyer.

4. This system effectively reduces the work-load of the court.

5. Finally, this system provides flexible procedure; strict procedure of law is not

applicable to alternative means of dispute redressal.

Conclusion

PALLAVI BHOGLE


What is meant by Alternative Dispute Resolution system? What are the

alternative dispute resolution systems presently available in settling

disputes? [16] May 05, May 03




















Definition and Scope of ADR

‘Alternative Dispute Resolution’ (ADR) is supposed to provide an alternative not only to

civil litigation by adjudicatory procedures but includes also arbitration itself. The

institution of arbitration came into being as a very useful alternative to litigation. But it is

now being viewed as closer to litigation because it has to be in accordance with statutory

provisions and becomes virtually an adjudicatory process with all the formalities of the

functioning of a court. A method of dispute resolution would be considered as a real

alternative only if it can dispense with the adjudicatory process, even if it is not wholly a

consensual process. It may be worked by a neutral third person who may bridge the gap

between the parties by bringing them together through a process of conciliation,

mediation or negotiations.

Nevertheless, arbitration has also been considered as an alternative to litigation and is

generally included in the study of all other alternative. This is so because arbitration has

been the mother source of other alternatives, not only in substance but also in the

procedural working of the alternative methods. The principles and procedure of

arbitration have influenced the growth of many of the ancillary and hybrid processes used

in the alternative methods of dispute resolution.

PALLAVI BHOGLE


ADR can be defined as a technique of dispute resolution through the intervention of a

third party whose decision is not legally binding on the parties. It can also be described as

mediation though mediation is only one of the modes of ADR. The method is neither that

of litigation nor that of arbitration. ADR flourishes because it avoids rigidity and

inflexibility which is inevitable in the litigation process apart from high lawyer and court

fee and long delays. ADR aims to provide the parties with cheap, speedy and less

formalistic remedy to the aggrieved party. It aims at providing a remedy which is most

appropriate in the circumstances of the case. This makes ADR a viable substitution for

arbitration or litigation.

Alternative Dispute Resolution Systems

In the field of alternative means of dispute redressal, the important alternative means are

as follows:

Negotiation

It is the simplest means for redressal of disputes. In this mode the parties begin their talk

without interference of any third person. The aim of negotiation is the settlement of

disputes by exchange of views and issues concerning the parties. There is an ample

opportunity for presentation of case in this mode of redressal. If there is understanding

and element of patience between the parties this mode of redressal of dispute is the

simplest and most economical.

Conciliation and Mediation

Where the parties fail to arrive at any settlement of their dispute by negotiation, in such

circumstances the parties may take the assistance of some third person who is

independent in respect of the subject-matter of dispute. Such person induces the parties to

come to an amicable settlement of their dispute by means of conciliation and mediation.

In course of conciliation and mediation that independent person may use his goodwill and

impression in resolving disputes. He also induces the parties to exchange their disputed

points relating to the subject-matter of dispute.

Med-Arbitration

This mode is a link between the settlement and arbitration. In this mode the conflicting

parties may authorize the third independent person to adjudicate upon the subject-matter

of dispute. Wherein the settlement by negotiation is failed, the mode of med-arbitration

can be followed. This mode is not controlled by the Arbitration and Conciliation Act,

1996 or the Arbitration Act, 1940.

PALLAVI BHOGLE


Medola

This process begins when the parties fail to reach at any settlement of dispute by

mediation. In this mode that person who was doing mediation occupies the place of

arbitrator. This person impartially picks up the disputed points from the proposals taken

up between the parties during the negotiation. Disputed points so picked up by that third

person are binding upon the parties. That person keeps the agreed points aside and the

disputed points are taken up so as to settle the dispute by taking to a middle course to the

satisfaction of the parties in dispute.

Mini trial

It is different from a formal case trial. In this mode the parties have the freedom to select

an impartial and honest person of undisputed integrity and the parties can present their

case in a summarized form. That person on the basis of submission of the parties

considers the positive and negative points concerning the parties and thereafter he renders

advice to the parties and consequently the parties negotiate on such advice. In fact that

person acts as a catalyst in such mini trial.

Arbitration

According to Byrne's Law Dictionary, ‘Arbitration means the determination of disputes

by the decision of one or more persons called arbitrators. Practically, every question,

which might be determined by a civil action, may be referred to arbitration.

Under Section 1 of the Encyclopedia of the Laws of England, the term arbitration means

a settlement of a dispute by the decision of not a regular and ordinary court of law but of

one or more persons who are called arbitrators.

The essence of arbitration is that some dispute is referred to by the parties for settlement

to a tribunal of their own choice instead of to a court.

In the context of India arbitration is a reference to the decision of one or more persons,

either with or without an umpire, of some matter or matter in difference between the

parties.

In popular parlance arbitration may be defined as a private process set up by the parties as

a substitute for court litigation to obtain a decision on their dispute.

Fast Track Arbitration

It is a kind of arbitration in which arbitration proceedings are conducted in a less

expensive manner. In this mode a decision can be arrived at within one or two day’s time.

Ordinarily, this process is adopted for settlement of commercial or business disputes.

Conclusion

PALLAVI BHOGLE


In what way Lok-Adalat is an effective system in Alternative Dispute

Resolution system? Discuss. [16] May 09, May 06, Dec 2006, May 2004

Lok Adalat [10] Dec 04, May 03

State the concept/meaning of Alternative Resolution system. “Lok Adalat is

an effective alternative dispute resolving method”. Discuss. [16] May 07, Dec 05, May 04




















Concept of ADR

ADR or ‘Alternative Dispute Resolution’ is an attempt to devise machinery which should

be capable of providing an alternative to the conventional methods of resolving disputes.

An alternative means the privilege of choosing one of two things or courses offered at

one's choice. It does not mean the choice of an alternative court but something which is

an alternative to court procedures or something which can operate as court annexed

procedure.

Human conflicts are inevitable. Disputes are equally inevitable. It is difficult to imagine a

human society without conflict of interests. Disputes must be resolved at minimum

PALLAVI BHOGLE


possible cost both in terms of money and time, so that more time and more resources are

spared for constructive pursuits.

For resolution of disputes there is a legal system in every human society. Every injured

person is supposed to go to courts for his redressal. All the legal systems are trying to

attain the legal ideal that wherever there is a wrong there must be a remedy so that

nobody shall have to take law into his own hand. Courts have become overcrowded with

litigants. Naturally, litigants have to face so much loss of time and money that at long last

when a relief is obtained; it may not be worth the cost.

Hence, began the search for alternatives to the conventional court system. A large

number of quasi-judicial and administrative tribunals have been created for quicker

reliefs. All these tribunals and forums are an alternative method of dispute redressal. But

even such tribunals and forums have become overcrowded with the result that they are

not able to provide relief within good time. Many tribunals in service matters have been

able to provide relief only when the aggrieved employee has already retired from his

position.

There thus remains the need of an alternative remedy which will not be bogged down by

costs and delays. Perhaps the search will culminate in a remedy in which there is the

minimum most role of official authorities and there is the maximum play of a wholly

private mechanism. As and when such a method of dispute resolution is discovered or

devised, or if it has already been discovered or devised, it will be entitled to be given the

name of ADR, Alternative Dispute Resolution.

Lok Adalat

The establishment of Lok Adalats under the Legal Services Authority Act, 1987 is one of

the alternative means of dispute resolution or redressal. The preamble of the said Act

shows that the Lok Adalats constituted to provide expeditious, economical and competent

legal services to the weaker sections of the society to perform the constitutional

obligations on behalf of the State. Even the commercial disputes may be adjudicated by

the Lok Adalats.

Establishment of Lok Adalats

S. 19 of the LSA Act, 1987, provides that every State Authority or District Authority or

the Supreme Court Legal Services Committee or every High Court Legal Services

Committee, or, as the case may be, Taluk Legal Services Committee may organize Lok

Adalat at such intervals and places and for exercising such jurisdiction and for such areas

as it thinks fit.

Every Lok Adalat organized for an area shall consist of such number of:

a) serving or retired Judicial Officer, and

b) other persons,

PALLAVI BHOGLE


of the area as may be specified by the State Authority or the Supreme Court Legal

Services Committee, or the High Court Legal Services Committee or, as the case may be,

the Taluk Legal Services Committee, organizing such Lok Adalat.

Rule 13 of National Legal Services Authority Rules holds that a person shall not be

qualified to be included in the Lok Adalat unless he is:

1. a member of Legal profession; or

2. a person of repute who is especially interested in the implementation of the Legal

Services Schemes and Programmes, or

3. an eminent social worker who is engaged in the upliftment of the weaker section

of the people, including the Scheduled Castes, Scheduled Tribes, women,

children, rural and urban labour.

Section 19 of the Legal Services Authority Act, 1987 further provides the experience and

qualifications of other persons as mentioned earlier for Lok Adalats other than those who

are to be prescribed by the Central Government in consultation with the Chief Justice of

the Supreme Court, shall be such as may be prescribed by the State Government in

consultation with the Chief Justice of the High Court.

Jurisdiction of Lok Adalat

In accordance with S. 19 of the Legal Services Authority Act, 1987 a Lok Adalat shall

have jurisdiction to determine and to arrive at a compromise or settlement between the

parties to a dispute in respect of:

• any case pending before, or

• any matter which is falling within the jurisdiction of, and is not brought before,

any court for which the Lok Adalat is organized.

Provided that the Lok Adalat shall have no jurisdiction in respect of any case or matter

relating to an offence not compoundable under any law.

Cognizance of cases by Lok Adalats

S. 20(1) holds that where in any case pending before any court for which the Lok Adalat

is organized:

i.

(a) the parties thereof agree; or

(b) one of the parties thereof makes an application to the court, for referring the case

to the Lok Adalat for settlement and if such court is prima facie satisfied that

there are chances of such settlement; or

ii. the court is satisfied that the matter is an appropriate one to be taken cognizance of the

Lok Adalat,

the Court shall refer the case to the Lok Adalat, provided that no case shall be referred to

the Lok Adalat under sub-clause (i)(b) or (ii) by such court except after giving a

reasonable opportunity of being heard to the parties.

PALLAVI BHOGLE


Every Lok Adalat while determining any reference before it under the Act, act with

utmost expedition to arrive at a compromise or settlement between the parties and shall

be guided by the principles of justice, equity, fair play and other legal principles.

Where no award is made by the Lok Adalat on the ground that no compromise or

settlement could be arrived at between the parties, the record of the case shall be returned

by it to the court, from which the reference has been received under sub-section (1) for

disposal in accordance with law.

Where no award is made by the Lok Adalat on the ground that no compromise or

settlement could be arrived at between the parties in a matter referred to in sub-section

(2) that Lok Adalat shall advise the parties to seek remedy in a court.

Where the record of the case is returned under sub-section (5) to the court, such court

shall proceed to deal with such case from the stage which was reached before the

reference under sub-section (1).

Award of the Lok Adalat

Section 21 of the Legal Services Authorities Act provides that every award of the Lok

Adalat shall be deemed to be a decree of a civil court or, as the case may be, an order of

any other court and where a compromise or settlement has been arrived at, by a Lok

Adalat in a case referred to it under sub-section (1) of S. 20, the court fee paid in such

case shall be refunded in the manner provided under the Court Fees Act, 1870.

Every award made by a Lok Adalat shall be final and binding on all the parties to the

dispute, and no appeal shall lie to any court against the award.

Powers of the Lok Adalat

S. 22 makes provisions in relation to the powers of the Lok Adalat and it provides that the

Lok Adalat shall, for the purposes of holding any determination under this Act, have the

same powers as are vested in a civil court under the Code of Civil Procedure,1908 while

trying a suit in respect of the following matters namely:

a) the summoning and enforcing the attendance of any witness and examining

him on oath;

b) the discovery and production of any document;

c) the reception of evidence on affidavits;

d) the requisitioning of any public record or document or copy of such record or

document from any court or office; and

e) such other matters as may be prescribed.

Without prejudice to the generality of the powers mentioned above every Lok Adalat

shall have the requisite powers to specify its own procedure for the determination of any

dispute coming before it.

Conclusion: Thus, the Lok Adalat is an alternative means of dispute redressal system,

under which flexible, less expensive and expeditious settlement of dispute is sought. Lok

PALLAVI BHOGLE


Adalat is a non-judicial forum which is organized by the judicial authorities. It can be

said that the nature of procedure adopted by the Lok – Adalats are similar to arbitration,

conciliation and mediation procedure. Lok Adalats and National Legal Services are

required to adjudicate the subject-matter of disputes by adopting the technique of mutual

understanding and to induce exchange of view between the parties, so that the decision

can be determined by mutuality. Therefore, the alternative means of dispute redressal

emphasizes the conciliation and settlement in their procedure.

Constitution and Functions of National Legal Services Authority [10] May 09

State Legal Services Authority [10] Dec 06

Legal Services Authority [10] May 05, May 04

Introduction: Section 3(1) of Legal Services Authorities Act provides that the Central

Government shall constitute a body known as the National Legal Services Authority to

exercise the powers and perform the functions conferred on, or assigned to the Central

Authority under this Act. Central Authority according to Section 2(o)(a) of this Act

means the National Legal Services Authority constituted under Section 3:

S. 3(2) of this Act further provides that the Central Authority shall consist of:

a) The Chief Justice of India who shall be Patron-in-Chief.

b) A serving or retired Judge of the Supreme Court to be nominated by the President,

in consultation with the Chief Justice of India, who shall be the Executive

Chairman.

c) Such number of other members, possessing such experience and qualification, as

may be prescribed by the Central Government, to be nominated by that

Government in consultation with the Chief Justice of India.

According to Rule 3 of the National LSA Rules the Central Authority shall consist of not

more than 12 members and further it provides that the following shall be ex-officio

members of the Central Authority:

i. Secretary, Department of Legal Affairs, Ministry of Law, Justice and

Company Affairs, Government of India or any of his nominee;

ii. Secretary, Department of Expenditure in the Ministry of Finance, Government

of India or any of his nominee;

PALLAVI BHOGLE


iii. Two Chairman of the State Legal Services Authority as may be nominated by

the Central Government in consultation with the Chief Justice of India

A person shall not be qualified for nomination as a member of the Central Authority

unless he is:

• an eminent person in the field of law, or

• a person of repute who is especially interested in the implementation of the legal

services scheme, or

• an eminent social worker who is engaged in the upliftment of the weaker sections of

the people which includes the scheduled castes, scheduled tribes, women, children,

rural and urban labours.

The terms of office and other conditions related to the members and the Member-

Secretary of the Central Authority shall be such as may be prescribed by the Central

Government after consulting with the Chief Justice of India.

Powers and Functions

Rule 6 also states the powers and functions of the Member-Secretary of the National

Legal Services Authority. According to the rules, the following shall be the powers and

functions of the Member Secretary:

1. to work out modalities of the legal services, schemes and programmes approved

by the Central Authority and ensure their effective monitoring and

implementation throughout the country;

2. to exercise the powers related to administrative, finance and budget matters as

that of the Head of the Department in a Central Government;

3. to manage the funds, records and properties of the Central Authority;

4. to maintain true and proper accounts of the Central Authority including checking

and auditing in respect thereof periodically;

5. to draft and prepare Annual Income and Expenditure Accounts and balance-sheet

of the Central Authority;

6. to liaise with the social action groups and the State Legal Services Authority;

7. to prepare and maintain up to date and complete statistical information, including

process made in the implementation of various legal services programmes from

time to time;

8. to process project proposal for financial assistance and issue utilisation certificates

thereof;

9. to convene meetings/seminars and workshops connected with legal services

programmes and preparation of reports and follow up action thereon,

10. to produce video and documentary films and publish material, literature and

publications to inform general public about the various aspect of the legal services

programme, and

11. to perform such other functions as may be required for effective functioning of

the Central Authority.

PALLAVI BHOGLE


These rules further state the term of office and conditions related to the members and

Member-Secretary of the Central Authority. According to Rule 7, the members of the

Central Authority nominated by the Central Government under Rule 3, shall hold office

for a term of two years and a retiring member shall be eligible for re-nomination for not

more than one term. Any member appointed by the Central Government under Rule 3

may be removed by the Central Government if in the opinion of the Central Government

it is not desirable to continue him as a member.

Function of the Central Authority

Section 4 of the Legal Services Authorities Act, 1987 makes provisions related to

functions of the Central Authority. The Central Authority according to S. 4 shall perform

all or any of the functions as under:

1. it can formulate policies and principles to make legal services available under the

provisions of this Act;

2. it can frame the most effective and economical schemes for the purpose of

making legal services available under this Act;

3. it can utilise the funds at its disposal and make appropriate allocation of funds to

the State Authorities and District Authorities;

4. it can take steps required with regard to consumer protection, environmental

protection or any other matter of special concern to the weaker sections of the

society by way of social justice litigation and for this purpose, give training to

social workers in legal skills;

5. it can organise legal aid camps, especially in rural areas, slums or labour colonies

with the dual purpose of educating the weaker sections of the society as to their

rights as well as encouraging the settlement of disputes through Lok Adalats;

6. it can encourage the settlement of disputes by way of negotiations, arbitration and

conciliation;

7. it can undertake and promote research in the field of legal services with special

reference to the need for such services among the poor;

8. it can do all necessary things for the purpose of ensuring commitment to the

fundamental duties of the citizens under Part IV-A of the Constitution;

9. it can provide grants-in-aid for specific schemes, to various voluntary social

service institution and the State and District Authorities, from out of the amounts

placed at its disposal of the implementation of legal services schemes under the

provisions of this Act;

10. it can develop, in consultation with the Bar Council of India, programmes for

clinical legal education and promote guidance and supervise the establishment

and working. of legal services clinics in Universities, law colleges and other

institutions;

11. it can monitor and evaluate the implementation of the legal aid programmes at

periodic intervals and provide for independent evaluation of programmes and

schemes implemented in whole or in parts by funds provided under this Act;

12. it can take appropriate measures for spreading legal literacy and legal awareness

amongst the people and, in particular, to educate weaker sections of the society

PALLAVI BHOGLE


about the rights, benefits and privileges guaranteed by social weHare legislations

and other enactments as well as administrative programmes and measures;

13. it can make special efforts to enlist the support of voluntary social welfare

institutions working at the grass-root level particularly among the Schedule Castes

and Scheduled Tribes, women, children, rural and urban labour; and

14. it can co-ordinate and monitor the functioning of State Authorities, District

Authorities, Supreme Court Legal Services Committee, High Court Legal

Services Committee, Taluk Legal Services Committee, and voluntary social

service institutions and other legal services organisations and give general

directions for the proper implementation of the legal services programmes.

Thus these are the functions that the Central Authority can perform. Section 5 of this Act

provides that in the discharge of its functions under this Act, the Central Authority shall,

whenever appropriate, act in co-ordination with other governmental and non-

governmental agencies, universities and other engaged in the work of promoting the

cause of legal services to the poor.

Conclusion: Thus, the Lok Adalat and National Legal Services Authority are the

alternative means of dispute redressal system, under which flexible, less expensive and

expeditious settlement of dispute is sought. Lok Adalats and National Legal Services are

required to adjudicate the subject-matter of disputes by adopting the technique of mutual

understanding and to induce exchange of view between the parties, so that the decision

can be determined by mutuality. Therefore, the alternative means of dispute redressal

emphasizes the conciliation and settlement in their procedure.

Documents

Arbitration, Conciliation and Adr Systems