The Arbitration and Conciliation Act 1996, has been passed to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral award and also to define law relating to conciliation and for matters connected therewith or incidental thereto. The conciliation has been introduced for the first time in India for settlement of commercial disputes.
The 1996 Act is very different from the Arbitration Act, 1940. The provisions of this Act have therefore; to be interpreted and construed independently and in fact reference to 1940 Act may actually lead to misconstruction. In other words, the provisions of 1996 Act have to be interpreted being, uninfluenced by the principles underlying the 1940 Act. In order to get help in construing these provisions, it is more relevant to refer to Article 6 of the UNICTRAL Model Law rather than the 1940 Act.
Arbitration is the reference of a dispute or difference between not less than two parties for determination after hearing both sides in a judicial manner, by a person or persons, other than a Court of competent jurisdiction.
Thepersons to whom a reference is made are called arbitrators. An arbitrator is thus a person to whom, the matters in dispute are submitted by the parties, a judge of the parties own choice, whose functions are judicial and whose duties are of an impartial judge to dispense equal justice to all parties and to decide the law and facts involved in the matters submitted with a view to decide and finally end the controversy.
Arbitration agreement means an agreement by the parties to submit to arbitrators all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. An arbitration agreement shall be in writing. An arbitration agreement is in writing if it is contained in:
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.
The existence of a dispute is a condition precedent to arbitration and if there is no dispute, there cannot be any arbitration. If the agreement provides for reference of any dispute to arbitration, it is an arbitration clause and the dispute can be referred to arbitration, when the disputes and differences have actually arisen.
The parties are free to determine the number of arbitrators, provided that such numbers shall not be an even number. If the parties do not determine the number of arbitrators, the arbitral tribunal shall consist of sole arbitrator.
A judicial authority before which an action is brought in a matter that 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. The application for arbitration shall not be entertained unless the original arbitration agreement or a duly certified copy thereof accompanies it.
Notwithstanding that an application has been made and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award be made.
A party may, before or during arbitral proceedings or at any time after the making of an arbitral award, but before it is enforced apply to a court:
Such other interim measure of protection as may appear to the court to be just and convenient, and the court shall have the same power for making orders as a case for the purpose of, and in relation to, any proceedings before it.
A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. Subject to the provisions, the parties may agree on a procedure for appointing the arbitrator or arbitrators.
The law of arbitration is the same, as the proper law of contract is a commercial contract between parties of different countries. The parties have the freedom to choose the law, governing an international commercial arbitration agreement. They may choose the substantive law governing the arbitration agreement as well as the procedural law governing the conduct of the arbitration. Such choice is exercised either expressly or by implication. Where there is no express choice of the law governing the contract as a whole, or the arbitration agreement as such, a presumption may arise that the law of the country where the arbitration is agreed to be held is the proper law of the arbitration agreement. But that is only a rebut table presumption. However, the mere selection of a particular place for submission to the jurisdiction of the courts or for the conduct of arbitration will not in the absence of any other relevant connecting factor with that place be sufficient to draw an inference as to the intention of the parties to be governed by the system of law prevalent in that place. This is specially so in the case of arbitration, for the selection of the place of arbitration may have little significance where it is chosen, as is often the case, without regard to any relevant or significant link with the place. This is particularly true when the place of arbitration is not chosen by the parties themselves, but by the arbitrators or by an outside body and that too for reasons unconnected with the contract.
An arbitrator before his appointment and during the arbitral proceedings shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. The appointment of an arbitrator can be challenged only if:
The parties may agree on a procedure for challenging an arbitrator. If the parties do not agree on a procedure for challenging an arbitrator or arbitrators, the rules and the procedure contemplated under the Arbitration & Conciliation Act 1996 applies.
The mandate of an arbitrator shall terminate if:
If a controversy remains concerning any of the grounds referred to in clause (a) above, a party may unless otherwise agreed by the parties, apply to the court to decide on the termination of the mandate.
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. Unless otherwise agreed by the parties, where an arbitrator is replaced any hearings previously held may be repeated at the discretion of the arbitral tribunal. Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator shall not be invalid solely because there has been a change in the composition of the arbitral tribunal.
The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement. Any party to the arbitration may raise the plea that the arbitral tribunal does not have jurisdiction, not later than the submission of the statement of defence. However, a party may raise such a plea, even if he has appointed an arbitrator or participated in the appointment of an arbitrator.
Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measures of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute. The arbitral tribunal may require a party to provide appropriate security in connection with such measure ordered.
Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which the respondent receives a request for that dispute to be referred to arbitration. The parties shall be treated with equality and each party shall be given a full opportunity to present his case.
The parties may agree on the place of arbitration. If the parties do not agree on the place of arbitration, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
The parties may agree upon the language or languages to be used in the arbitral proceedings. If the parties fail to agree upon the language or languages, the arbitral tribunal shall determine the language or languages to be used in the arbitral proceedings.
An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal. unless otherwise agreed by the parties in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members. 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.
The arbitral award is final and binding on the parties, unless it is set aside by the court. There is no necessity of filing the award before a court and passing of decree by it.
Where the time for making an application to set aside the arbitral award has expired or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure in the same manner as if it were a decree of the court.
An arbitral award made by an arbitral tribunal may be set aside by the court on an application made by a party on the reasonable and accepted ground enumerated in the Act.
The application for setting aside of an arbitral award may be made within three months from the date on which the award has been received by the party or if a request had been made for correction or interpretation of the award, from the date on which that request had been disposed off by the arbitral tribunal.
The application for setting aside of an arbitral award may be made within three months from the date on which the award has been received by the party or if a request had been made for correction or interpretation of the award, from the date on which that request had been disposed off by the arbitral tribunal.
An appeal shall be made to the court authorized by law to hear appeals from original decrees of the court from the following orders:
No appeal shall lie to the higher court against the order passed in appeal. However, appeal shall lie to the Supreme Court of India under Article 133 of the Constitution of India, if appeal is allowed under the provisions of that article.
Enforcement of foreign award
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:
A judicial authority, when seized of an action in a matter with respect to which the parties have made an agreement, shall be at the request of one of the parties or any person claiming through or under him refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
Any foreign award which would be enforceable shall be treated as binding for all purposes on the person as between whom it was made, and may accordingly be relied on by any of those persons by way of defense, set-off or otherwise in any legal proceedings in India and any references to enforcing a foreign award shall be construed as including references to relying on an award.
The award will not be enforced by a court in India if it is satisfied that the subject-matter of the award is not capable of settlement by arbitration under Indian law or the enforcement of the award is contrary to the public policy.
The enforcement of a foreign award may be refused at the request of the party against whom it is invoked, only if that party furnishes to, the court proof that:
Where the court is satisfied that the foreign award is enforceable, the award shall be deemed to be a decree of the court.
A judicial authority, on being seized, of a dispute regarding a contract made between persons to whom the provisions of preceding section applies and including an arbitration agreement, whether referring to present or further differences, which is valid under that section and capable of being carried into effect, shall refer the parties on the application of either of them, or any person claiming through or under him to the decision of the arbitrator and such reference shall not prejudice the competence of the judicial authority in case the agreement or the arbitration cannot proceed or becomes inoperative.
Any foreign award, which would be enforceable, shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defense, set-off or otherwise in any legal proceedings in India and any references to enforce a foreign award shall be, construed as including references to relying on an award.
The Arbitration and Conciliation Act, 1996 has for the first time provided legal provisions relating to conciliation of commercial disputes. The part relating to conciliation applies to disputes arising out of legal relationship, whether contractual or not and to all proceedings relating thereto.
Unless the parties agree that there shall be two or three conciliators, there shall be one conciliator. Where there is more than one conciliator, they ought, as a general rule, to act jointly.
In conciliation proceedings with one conciliator, the parties may agree on the name of a sole conciliator. In conciliation proceedings with two conciliators, each party may appoint one conciliator. In conciliation proceedings with three conciliators, each party may appoint one conciliator and the party may agree on the name of the third conciliator, who shall act as the presiding conciliator.
The conciliation proceedings shall be terminated:
During the conciliation proceedings, the parties shall not initiate any arbitral or judicial proceedings in respect of a dispute that is the subject matter of the conciliation proceedings except that a party may initiate arbitral or judicial proceedings, where, in his opinion, such proceedings are necessary for preserving his rights.
The parties to conciliation proceedings shall not rely on or introduce any evidence in arbitral or judicial proceedings, whether, or not such proceedings relate to the dispute that is the subject of the conciliation proceedings:
High Court Rules Section 82 of Arbitration and Conciliation Act, 1996 may make rules consistent with this Act as to all proceedings before the court under this Act.
The stamp duty is payable on an agreement to refer dispute to arbitration under Article 5(c) of Schedule I to the Indian Stamp Act, 1899. The rates in different states on such agreements are different. The stamp duty is payable on an award in writing by an arbitrator or umpire under Article 12 of Schedule I to the Indian Stamp Act, 1899. The rates on the award are also different in different states. However, the awards given in references made by a court in a pending suit or directing a partition are exempt from the payment of any stamp duty.
The arbitration agreement to refer a dispute to arbitration is not required to be registered. The awards, which deal with immovable property of the value of Rs. 100 or above, are required to be registered, unless they are delivered in reference made by a court. The awards not creating or declaring any interest in any immovable property of the value of Rs. 100 or above do not require registration. The, award is presented for registration by the arbitrators or the umpire, and it should be presented for registration within four months of the date of its execution. If the award deals with movable as well as immovable property and is compulsorily to be registered and it is not registered, then effect can be given to the part of award, which deals with movables, if that part can be separated with reasonable clearness from the bad part. But if it cannot be separated, the award cannot be enforced and has to be rejected as a whole.
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