Arbitration Law in India

Arbitration and Conciliation Act, 1996

Scope of the Presentation

• Introduction• Definition• Characteristics• Genesis• Features of the Act• Advantages• Arbitration Agreement• Disadvantages

Introduction

• Previously Arbitration was in the form of ‘Panchayat’ in rural India and is still prevalent today

• With the onset of the British regime, Panchayat’s took a back seat as a formalised British legal system was established

• With the backlog of cases mounting, there was a need to create a system of ADR and a formalised approach of Dispute Resolution was evolved.

Definition

• The term arbitration is evolved from the ‘arbiter’ i.e. to adjudicate/to decide.

• Wharton- “The Determination of a matter in dispute by the judgment of one or more persons called Arbitrators who in the case of difference usually call an umpire to decide between them.”

• Mozley & Wheiteley- “Arbitration is where two or more parties submit all matters in dispute to the judgment of Arbitrators to decide the controversy”

Characteristics of Arbitration• Judicial/Quasi-Judicial but Impartial• Independent decision of the Arbitrator • Non-adherence to strict rule of evidence/

procedure - More emphasis of substantive law than procedural law

• Not transgress beyond the record• Decision on the subject-matter as per evidence • Award enforceable in court of law• Equal hearing to both the parties• Objective to settle/resolve the dispute

Genesis

• Panchayats- Panch selected on basis of standing in the community

• British System (Pre-Independence)– Bengal Regulations of 1772 and 1778- dispute of

accounts between parties– Regulation XVI of 1793, 1795 and 1813-

Partnership, debts, contracts etc. – Regulation VI of 1813- rights in Land and Land

Disputes

Genesis (Contd..)

• Statutory Law– Indian Arbitration Act, 1889– Arbitration Act, 1940• Challenge difficult• Umpire system• Non-reasoned awards

– Arbitration and Conciliation Act, 1996• Based on UNCITRAL Law• Comprehensive for ADR • Covers execution of Foreign Awards

Genesis (…contd)

• Ordinance passed on January 25, 1996• Later made into law on August 16, 1996• Part I covers Domestic Arbitrations• Part II covers Enforcement of Foreign Awards• Part III Conciliation• Part IV Supplementary Provisions• Arbitral procedure and appointment of Arbitrator

“Fair”

Features of the Act

• Concilliation• Reduction of Court Intervention• Award enforceable as Decree• Reduction of grounds of challenge• Autonomy of choosing the forum and procedure• Interim award and Measures• Reasoned Award• Abolishment of Umpire System

Features (…Contd)

• Power to decide on its own jurisdiction• Duty of regular court to refer to Arbitration-

Section 8• Assistance of Experts• Authority to Award Interest• Institutional Arbitration• Qualification of Arbitrator

Advantages

• Choice of Forum• Expeditious• Complex matters• Finality of matters• Relaxation of Rules/Procedure• Cost-effective• Execution of Awards is possible• No multiplicity of proceedings

Arbitration Agreement • Sine-Qua Non for Arbitration• Section 7 of the Arbitration and Concilitaion Act, 1996• 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) a document signed by the parties; • (b) an exchange of letters, telex, telegrams or other means

of telecommunication which provide a record of the agreement; or

• (c) 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.

Arbitration Agreement• Scott V/s Avery Clause-Condition Precedent• 1856 British case from between Alexander Scott and

George Avery• It is a principle of law that parties cannot by contract

oust the courts of their jurisdiction; but any person may covenant that no right of action shall accrue till a third person has decided on any difference that may arise between himself and the other party to the covenant

• Some of the judges thought that such a clause would be against public policy; an attempt to avoid the courts of law and the rule of law.

Arbitration Agreement• All or certain disputes of a contractual

relationship• Present or future Disputes• Writing• Signed by both the parties• Independent/Co-existent Agreement• Reference to another contract containing

arbitration Clause• Severable

Exceptions

• Criminal Matters• Consumer Matters• Family Matters• Matters under the jurisdiction of Small Causes

Courts • Special Laws created

Disadvantages• Arbitrator has to be paid his fees by the

parties under dispute. • It can be often lengthy. • In some cases enforcement of an arbitral

award becomes a difficult task. • The arbitration proceedings are guided by

personal ideals and not by law. • Either of the parties concerned might try and

influence the arbitrator. • Challenge of award is Difficult.