ARBITRATION LAW IN INDIA

Arbitration proceedings in India are conducted under the Arbitration and Conciliation 1996 as amended by the Arbitration and Conciliation (Amendment) Act, 2015 (the Act). The Act is based on the UNCITRAL Model Law. This ensures that there is a certain level of uniformity in the Law.
For international commercial arbitration, India is a party to the New York Convention. It has exercised both the reciprocity and commerciality reservations. However, notification is required in the Official Gazette in relation to each specific country. Not all countries that have ratified the New York Convention have been notified in the Official Gazette of the Government of India. The Act distinguishes between purely domestic arbitration involving Indian parties (“Domestic Arbitration”), arbitrations having an international element but seated in India (“International Arbitration”), and arbitrations seated outside of India (“Foreign Arbitration”). The provisions of the Act (other than Part II of the Act dealing with enforcement of certain foreign awards) are normally not applicable to foreign arbitrations, except where specifically provided.
1. TYPES OF ARBITRATION:

There are two main types of arbitration procedures namely (a) ad- hoc arbitration; and (b) institutional arbitration
A. Ad-Hoc Arbitration: In ad-hoc arbitration the tribunal conducts the arbitration between the parties, following the rules which have been agreed by the parties by prior agreement or by following the rules which have been laid down by the tribunal, in case the parties do not have any agreement between them.
B. Institutional Arbitration: In the case of institutional arbitration, the disputing parties submit their issue to an institution that has been designated to administer the arbitrational process. The institution then arbitrates the dispute according to the rules laid by them in front of the parties. The institute selects a panel which administers the whole process.
2. EXISTENCE OF THE ARBITRATION AGREEMENT
Section 7 of the Act provides that an arbitration agreement may be in form of an arbitration clause in a contract or in the form of separate agreement. It also provides that where there is a reference in a contract to a document containing an arbitration clause, such reference constitutes an arbitration agreement, if the reference is such as to make that arbitration clause as a part of the contract. An agreement must be in writing. An agreement can said to be in writing if it is contained in –
 A document signed by the parties.
 An exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement.
 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. Section 8 of the Act provides power to refer parties to arbitration proceedings where there is an arbitration agreement. The Act also requires the courts to refer parties to arbitration if, prima facie, an arbitration agreement is found to exist.

3. INTERIM MEASURES Section 9 and 17 of the Act empowers the court and arbitral tribunal respectively to make interim orders and proceedings. A party may apply to the court or arbitral tribunal, (a) before, (b) during arbitral proceedings, or (c) after the making of the final award, but before it is enforced in accordance with the Act. A party may apply to a court or arbitral tribunal for an interim measure of protection in respect of any of the following matters, namely –

 The preservation, interim custody or sale of any good which is the subject-matter of the arbitration proceeding.

 Securing the amount in dispute in the arbitration.

 The detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purposes of obtaining full information or evidence.

 Interim injunction or the appointment of a receiver. Section 9 of the Act envisages that if the court passes an interim measure of protection under this section before commencement of arbitral proceedings, then the arbitral proceedings shall have to commence within a period of 90 days from the date of such order or within such time as the court may determine.

Under Section 9 of the Act the court shall not entertain any application unless it finds that circumstances exist which may not render the remedy under Section 17 (interim measures ordered by arbitral tribunal) efficacious.
4. COMPOSITION OF ARBITRAL TRIBUNAL
 Number of Arbitrators: Section 10 of the Act provides that the parties are free to determine the number of arbitrators but it shall not be an even number.

 Section 11 of the Act provides that a person of any nationality may be an arbitrator unless otherwise agreed by the parties and also clarifies that the power to appoint arbitrators is not a judicial function. The Act also clarifies that the power to appoint arbitrators can be delegated by the Supreme Court or the High Court to any person or institution. This is an important statutory recognition of the role of institutions in arbitral proceedings. The Act requires the courts to aim to dispose of an application for appointment of arbitrators within 60 days from the date of service of notice to the other party.

 Grounds for challenge: Section 12 of the Act clarifies the grounds available to challenge appointment of arbitrators on grounds that the appointment raises justifiable doubts as to his/her impartiality or independence and he does not possess the qualification agreed to by the parties. The Act contains two schedules that list various grounds for challenge –

(A) Fifth Schedule which lists the grounds that would give rise to justifiable doubt to independence and impartiality of arbitrator and the circumstances given in Fifth Schedule are very exhaustive. Any person not falling under any of the grounds mentioned in the Fifth Schedule is likely to be independent and impartial in all respects.

(B) Seventh Schedule which lists the grounds that notwithstanding any prior agreement of the parties, if the arbitrator’s relationship with the parties or the counsel or the subject matter of dispute falls in any of the categories mentioned in the Seventh Schedule, it would act as an ineligibility to act as an arbitrator. However, subsequent to disputes having arisen, parties may by expressly entering into a written agreement waive the applicability of these provisions.

 Challenge Procedure: Section 13 of the Act provides that the parties have the liberty to agree on a procedure to challenge the appointment of an arbitrator.
5. CONDUCT OF ARBITRAL PROCEEDINGS
 Section 20 of the Act talks about the place of the arbitration. The parties are free to agree on the place of arbitration. Failing this it can be determine by the arbitral tribunal as per the convenience of the parties.
 Section 21 of the Act provides that the arbitral proceedings in respect of a particular dispute commences on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
 Section 23 of the Act provides that within the period of time agreed by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought and the respondent shall state his defence in respect to these particulars unless the parties have agreed otherwise. The respondent, in support of his case, may also submit a counterclaim or a set-off, if such counterclaim or set-off falls within the scope of the arbitration agreement. The parties may amend or supplement his claim or defence during the course of the arbitral proceeding unless the arbitral tribunal considers it inappropriate.
 Section 24 of the Act provides that unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearing for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials.
It is provided that the arbitral tribunal shall hold oral hearing for the presentation of evidence or oral arguments on a day-to-day basis and shall not grant any adjournments without any sufficient cause.
 Section 25 of the Act provides that the right of the respondent to file the statement of defense has been forfeited, if the respondent fails to communicate such statement in accordance with the time line agreed by the parties or the arbitral tribunal without reasonable cause.
6. RULES APPLICABLE TO SUBSTANCE OF DISPUTE

Section 28 of the Act provides that the arbitral tribunal shall decide the dispute in accordance with the substantive law for the time being in force in India in arbitration other than an international commercial arbitration. The arbitral tribunal while deciding and making an award, shall take into account the terms of the contract and trade usages applicable to the transaction. In international commercial arbitration, the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute unless not in conflict with the rule of law.
7. TIME LIMIT FOR ARBITRAL AWARD Section 29A of the Act provides:

 Every award must be made within twelve (12) months from the date the arbitrator receives a written notice of appointment.

 The parties may mutually decide to extend the time limit by not more than six (6) months.

 If the award is not made within eighteen (18) months, only a court can extend the period as it may deem fit, upon an application filed by any of the parties and showing sufficient cause.

 Further if, the court, while extending the time for making the award, finds that the delay was attributable to the tribunal, it may order a reduction in the arbitrator’s fee by an amount not exceeding 5 per cent for each month of such delay.

 The court while extending a time limit, also has the right to change arbitrators as it may deem fit and can also impose certain conditions on the parties and the arbitrators.

 An application to the court should be disposed off by the court within sixty (60) days from the date the opposite party receives the notice.

 If an award is made within six (6) months, the arbitrators shall be entitled to receive such additional fees as the parties may agree.
8. FAST TRACK PROCEDURE Section 29B of the Act provides for a fast track mechanism. The following are the salient features of the said mechanism:

 The parties can agree in writing to a fast track procedure at any stage before, or at the time of appointment of the arbitral tribunal and while agreeing to the fast track procedure, the parties can also agree to a sole arbitrator.

 The award shall be made within a period of six (6) months from the date the arbitral tribunal enters upon the reference or the Arbitral tribunal is constituted.

 The dispute shall be decided based upon written pleadings, documents and submissions filed by the parties without any oral hearing.

 Oral hearing can be held only if all parties request or the arbitral tribunal considers it necessary for clarifying certain issues.

 The arbitral tribunal shall have the power to call for any further information that it may deem fit.

9. SETTLEMENT
Section 30 of the Act recognises the freedom of the parties to arrive at a settlement. In fact in terms of this section the arbitral tribunal has been enjoined to encourage settlement of dispute and for facilitating such settlement the arbitral tribunal can resort to mediation, conciliation and other procedures at any time during the arbitral proceedings. In case parties coming to a settlement at any time during the proceedings the arbitral tribunal may terminate the proceedings and an arbitral award on the basis of agreed settlement will have the same status and force as an arbitral award on merits i.e. an award rendered after the completion of arbitral proceedings.
10. INTEREST AND REGIME FOR COST
Section 31 of the Act gives power to the arbitrators to order interest. It prescribes a default rule of awarding interest post-award at market rate (as periodically determined by the Reserve Bank of India) plus 2% unless agreed otherwise by the parties.
Section 31A of the Act gives wide powers to the arbitral tribunal to impose costs and the general rule of making the unsuccessful party pay costs to the successful party has been introduced. The costs may include fees and expenses of the arbitrators, courts and witnesses, legal fees and expenses, administrative costs of the institution and any other costs incurred in relation to the arbitral or court proceedings and the arbitral award.
While awarding costs, the arbitral tribunal shall have regard to the circumstances including the conduct of parties, whether a party refused a reasonable offer to settle by the other party and if a party has made a frivolous claim.
11. TERMINATION OF PROCEEDINGS
Section 32 of the Act provides that the arbitral tribunal shall terminate the arbitral proceedings by an order if a claimant withdraws his claim or if the parties agree to it unless the respondent objects and the arbitral tribunal feels that the respondent has legitimate interest for continuance of the proceedings and obtaining and final settlement of the dispute or if the arbitral tribunal comes to a conclusion that the continuance of the proceedings has for any reason become unnecessary or it is not possible to continue the proceedings. The proceeding is automatically terminated with the delivery of the final award by the arbitrator.
12. CORRECTION AND INTERPRETATION OF AWARD
Section 33 of the Act indicates that unless another period of time has been agreed by the parties, an application for correction of any computational errors or typographical errors and to give an interpretation of a specific point or part of the award, with notice to the other party, has to be made to the arbitral tribunal within the 30 days from the receipt of the arbitral award. Any delay cannot be condoned.
13. APPLICATION FOR SETTING ASIDE AN ARBITRAL AWARD
Section 34 of the Act provides that an application for setting aside an award can be made by a party only after issuing a prior notice to the other party if,
 a party was under some incapacity; or
 the arbitration agreement was not valid under the governing law; or
 a party was not given proper notice of the appointment of the arbitrator or on the arbitral proceedings; or
 the award deals with a dispute not contemplated by or not falling within the terms of submissions to arbitration or it contains decisions beyond the scope of the submissions; or
 the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties; or
 If the court finds that: (a) that the subject matter of the dispute is not capable of settlement by arbitration; or (b) the arbitral award is in conflict with the public policy of India.
The term “public policy” includes:
a) If the making of the award was affected by fraud or corruption.
b) If it is in conflict with the fundamental policy of India.
c) If it is in contravention to basic notions of morality or justice.
The application made under this section shall be disposed of within a period of one year from the date on which the notice is served upon the other party.
Limitation of Time: Section 34(3) of the Act provides that an application for setting aside an award shall not be entertained by the court if it is made after three months have elapsed from the date on which the applicant had received the arbitral award. A further period of 30 days can be provided if the court satisfied that the applicant shows sufficient cause for the delay.
14. FINALITY AND ENFORCEMENT OF ARBITRAL AWARDS Section 35 of the Act provides an arbitral award shall be final and binding on the parties and persons claiming under them. Section 36 of the Act provides a mere filing of an appeal challenging the arbitral award does not amount to a stay of the award. A separate application for stay would have to be filed by the losing party and the court will have to record its reasons in writing for granting a stay of the award and while doing so, the court has the power to direct the losing party to deposit amounts or provide reasonable security as a pre-condition for the grant of stay of the arbitral award. The arbitral award becomes enforceable when the time for making an application to set-aside an arbitral award under Section 34 of this Act has expired, or when such application is made, but refused by court on merits.
15. CONFIDENTIALITY
There is no provision for confidentiality in arbitrations under Indian law but an agreement or a clause on confidentiality may be included in the arbitration agreements.