ARBITRATION AND CONCILIATION ACT, 1996 INCLUDING A.D.R. SYSTEMS
Q. 1 (a). Discuss the salient features of Arbitration and Conciliation Act, 1996.
Ans. Salient features of Arbitration and Conciliation Act.- Before the enactment of Arbitration and Conciliation Act, 1996, the Indian Arbitration Act, 1940, was enforced in the country. The provisions of Arbitration Act, 1940, were very tardy and cumbersome, and were not able to meet the requirements of the time. So with a view to making arbitration less technical and more useful and effective, the Parliament enacted the Arbitration and Conciliation Act, 1996 which has not only removed many serious defects of the earlier arbitration law but has also incorporated modern concepts of arbitration which are internationally recognised and has consolidated the law relating to domestic arbitrations and international commercial arbitration. The new Act is obviously aimed at introducing basic and qualitative change in the arbitration practice in India. Some of the important salient features of the Arbitration and Conciliation Act, 1996 are described as follows:
(1) In this Act, in addition to arbitration, conciliation has also been recognised as a means of settling commercial disputes. Prior to the enactment of this Act, conciliation was not recognised as an instrument of settlement of commercial disputes. Now both, domestic as well as international commercial disputes can be resolved through the provisions of this Act. The basic difference between conciliation and arbitration lies in the fact that the role of conciliator is to assist the parties in their attempt to reach an amicable settlement of their dispute whereas an arbitrator does not merely assist in resolution of a dispute but also arbitrates by making an award.
(2) The present Arbitration and Conciliation Act, 1996 is more extensive and comprehensive than the earlier Act of 1940. It consists of 86 sections spread over four parts. Part I relates to arbitration in India. As inserted by the Arbitration and Conciliation (Amendment) Act, 2019 in the Arbitration and Conciliation Act, 1996, Part I-A deals with the Arbitration Council of India. Part II relates to enforcement of foreign awards under the New York and Geneva Convention. Part III of the Act contains provisions relating to Conciliation and Part IV is devoted to Supplementary Provisions empowering the High Court to make rules regarding arbitration which are consistent with the Act. Besides, the Act also contains as per amendment of the Act by the Arbitration and Conciliation (Amendment) Act, 2019, an (Act of 33 of 2019) have eight Schedules. But now 8th Schedule is omitted by Act No. 3 of 2021, so, there are only 7, in the Arbitrarion and Conciliation Act, 1996.
The First Schedule deals with the convention on the recognition and enforcement of foreign national awards, the Second Schedule contains the Geneva Protocol on Arbitration clauses; the Third Schedule embodies the provisions relating to convention on the execution of Foreign Arbitral Awards.
The Fourth Schedule deals with the modest fee according to the sum involved in the arbitration as per Section 11(14) amended by the Amendment Act of 2015.
The Fifth Schedule deals with Arbitrators relationships as per Section 12(1) (b).
The Sixth Schedule deals with the contact details of the arbitrators entailing their experience and contacts with other arbitrations in hand and entailing circumstances which may affect the ability and capacity of the arbitrator to finish the assigned arbitration within 12 months. [Section 12(1) (b)]
The Seventh Schedule contains as per [Section 12 (5)], the detailed description of arbitrators relationship with the parties, counsel, dispute etc. The Eighth Schedule which was inserted in the principal Act by the Arbitration and Conciliation (Amendment) Act, 2019 2019 was dealing with qualifications and experience of Arbitrator. But now 8th Schedule has been omitted by Act No. 3 of 2021, so there are only 7 Schedule in the Act and therefore, provisions of 8th Schedule have been also omitted.
(3) This Act is an explanatory legislation. The Act specifically defines the term ‘International Commercial Arbitration’, to mean an arbitration relating to disputes arising out of legal relationship whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties whether an individual, body corporate or a company is having business or residing abroad and in case of Government, the Government is of a foreign country.
(4) Other salient features of the new Act is regarding the qualification of the arbitrator. No qualifications for appointment as an arbitrator were prescribed in the earlier Arbitration Act of 1940. It has now been realised that quite a large number of disputes arising between the parties are of a technical nature whether relating to science, technology, mining, industry or other similar special fields of knowledge etc. Therefore, detailed norms of qualification and experience of Arbitrator have been laid down in Eighth Schedule of the Act which has been inserted by the Arbitration and Conciliation (Amendment) Act, 2019. But now 8th Schedule has been omitted by Act No. 3 of 2021, so there are only 7 Schedule in the Act and therefore, provisions of 8th Schedule have been also omitted.
(5) Yet another important feature of the new Act of 1996 is the abolition of the Umpire system. tem. The earlier Act provided that where even number of arbitrators was appointed and such arbitrators failed to make an award within the specified time, the umpire should enter on the reference in lieu of arbitrators. The number of arbitrators to determine the dispute has now been left to the parties, the only limitation being that an even number of arbitrators shall not be appointed. The arbitrators so appointed shall appoint a third arbitrator called the Presiding Arbitrator, who was referred to as Umpire under the Arbitration Act, 1940. Where the parties fail to appoint the arbitrator, the Chief Justice of the concerned High Court shall have the power to appoint an arbitrator or Presiding Arbitrator, as the case may be. and in disputes involving international commercial arbitration, the Chief Justice of India shall have such power to appoint arbitrators.
(6) One of the other salient features of the Act of 1996 is that the arbitral award and the settlement arrived at during conciliation proceedings have been treated at par with the decree of the court. That is to say, the arbitral award is enforceable in the same manner as a decree of a civil court. The procedure prescribed in the Act has reduced a large number of disputes coming to the Courts.
(7) With the passing of the Act of 1996, the powers of the court have been considerably curtailed as compared with the earlier Arbitration Act of 1940. Under the new Act (1996), the arbitrator has been endowed with unfettered and plenary powers and he is completely immune from the court’s control during the arbitration proceedings. He can even decide his own jurisdiction. Perhaps the mitigation of court’s interference in arbitrator’s power is intended to confer him greater autonomy as also to enable him to work more independently and impartially with added sense of responsibility.
(8) The present Arbitration and Conciliation Act, 1996 contains a salutary provision making it mandatory for the arbitrator to give reasons for the award. However, where the parties themselves have agreed in writing that no reasons are to be given or where the award is in terms of a settlement arrived at between the parties, the requirement of reasoned award may be waived of. Under Arbitration Act, 1940, the arbitrator was under no obligation to give reasons for decision.
There is no provision for appeal against an arbitral award and it is final and binding between the parties. However, an aggrieved party may take recourse to a court of law for setting aside the arbitral award on certain grounds specified in Section 34 of the Arbitration and Conciliation Act, 1996.
(9) Under the present Act, the parties are not required to make an application to the court to make the award a rule of the court enforceable by issuance of a decree under the Code of Civil Procedure, 1908. This legal formality has been done away with, thus saving considerable time of the litigants in execution of arbitral award. However, usual procedure as prescribed by the Code of Civil Procedure has to be followed in respect of the claims and counter-claims submitted by the parties.
Section 19 (1) of the Act of 1996 specifically lays down that Arbitral Tribunals shall not be bound by the Civil Procedure Code, 1908 or the Evidence Act, 1872 but the provisions of the Limitation Act, 1963 shall, however, apply to arbitration proceedings and it has itself provided the time limit enforceable as per provisions contained in the Act of 1996.
(10) Yet another significant feature of the 1996 Act is the provision relating to the interim measures which empower the arbitrator or Arbitral Tribunal to pass interim orders in respect of the subject-matter of the dispute at the request of the party The earlier Arbitration Act, 1940 had no such provision except that it could only make an interim award.
(11) Under the Arbitration and Conciliation Act, 1996 there is a specific provision that the arbitral award which is in conflict with the public policy in India shall not be valid in law being null and void. It may therefore be set aside by the court. What is ‘public policy’ is undoubtedly a most controversial issue. It is a variable concept changing according to time and place. The doctrine of public policy is invariably invoked in determining the enforceability of contracts and commercial transactions. Now by adding explanation 1 in Section 34(2)(b), the public policy in context to arbitrators has been explained clearly.
(12) The Arbitration and Conciliation Act, 1996 provides for enforcement of certain foreign awards made under the New York Convention and the Geneva Convention respectively. No such provisions existed in the proceeding Arbitration Act, 1940. India being a party to the New York Convention, 1958, the award given in the foreign country can be enforced by the Indian Courts having jurisdiction upon that specific matter. The enforcement of a foreign award may however, be refused if the applicant furnishes evidence before the court that the agreement which was entered into between the parties was suffering from some incapacity or some legal infirmity regarding the non-receipt of proper notice of appointment of arbitrator or party was unable to present its case properly. The other provisions relating to enforcement of foreign award are similar to that of the domestic award and there is no difference as to enforcement of such awards.
To sum up, it may be reiterated that the Arbitration and Conciliation Act, 1996 has sought to remove many serious defects with which the earlier arbitration law contained in Arbitration Act, 1940 suffered and at the same time, has also incorporated many modern concepts of arbitration and conciliation which are universally accepted by most countries of the world. The present arbitration law has laid great emphasis on institutional arbitration set-up under the well defined rules of procedure rather than the use of ad hoc arbitration which caused potential delay in disposal of arbitration cases. That apart, ad hoc arbitration required parties to rush to law Courts repeatedly for seeking order even on ordinary procedural matters For example, in case of any dispute between the parties and the arbitrators regarding the later’s fees, the matter had to be taken to court for settlement as there was no provision relating to scale of fees payable to the arbitrators in the Act.
Q. 1 (b). What are the main characteristics of the Arbitration and Conciliation Act, 1996? Explain.
Ans. Main Characteristics of Arbitration and Conciliation Act.- Arbitration and Conciliation Act, 1996, contains 86 Sections, the Preamble and eight Schedules. The Act has been divided into four parts. Part I of the Act has been divided into ten chapters, Part I-A deals with Arbitration Council of India and Part II contains (wo chapters. However. Part III deals with Conciliation. Part IV of the Arbitration and Conciliation Act, 1996 provides for the supplementary provisions besides the three Schedules.
The following are the main characteristics of the present Act:-
(1) An Extensive Act. The present Arbitration and Conciliation Act. 1996, is a comprehensive and extensive statute to deal with domestic, inter- state and international arbitrations. It makes the provisions for enforcement of international award of arbitration besides provisions for conciliation in Part III of the Arbitration and Conciliation Act, 1996. This Act provides a uniform model law on international arbitration
(2) A self-Explanatory Statute.-Arbitration and Conciliation Act, 1996, is a self-explanatory statute. However, the old Arbitration Act, 1940 did not provide exhaustive notes on its various provisions. The present Act specifically provides the procedure for Arbitral Tribunal and also provides for statutes of tribunal to Board of Arbitrations. It includes statutory arbitrations. This Act includes domestic as well as international arbitration law.
(3) Restriction on Judicial Powers. The present Arbitration and Conciliation Act, 1996 has restricted the exercise of court’s power. It has limited the judicial intervention in the context of arbitration law. Section 5 of the Act states that “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” (ie., Part I of the Act). Thus, the scope of judicial intervention in the arbitration has been restricted and reduced.
Thus an arbitral award can be challenged within the period of time prescribed under sub-section (3) of Section 34, e. 3 months time. In case within this period an arbitral award is not challenged before the competent court having jurisdiction to entertain such matter, then such an arbitral award is final and enforceable. The court has no vested power to entertain any appeal or revision thereafter.
(4) Detailed Procedure for Conduct of Arbitration.-From Sections 18 to 27 of the Arbitration and Conciliation Act, 1996, detailed procedure for conduct of arbitration proceedings has been provided under the Act
(5) Summary Powers of the Court. Section 27 (1) of the Arbitration and Conciliation Act, 1996, states that the court’s assistance can be prayed for taking evidence only with the prior permission of the Arbitral Tribunals. Thus the Court’s assistance can be taken only in certain specific matters and cases. A party aggrived by an arbitral award may make an application for setting aside such an arbitral award in accordance with the provisions of Section 34 of the Act.
(5-A) For speedy decision, the provision of Section 29-B by which the procedure of fast track Court has been inserted. By this concept a time bound result of the arbitration agreement has been sought through the consent of the parties whereby the parties either before or during the arbitral proceedings may agree in writing to adopt the Fast Track procedure of settlement of disputes.
(6) Enhancing the Power of Arbitrators. The new Arbitration and Conciliation Act, 1996, has enhanced the powers of the arbitrators and jurisdiction of Arbitral Tribunals, which has been provided under Sections 16 and 17 of the Act
(7) Specific Conciliatory Provisions. The present Act provides specific provisions for conciliation under Part III. The Act incorporates international form of conciliation system. Thus it has enhanced the scope and application of conciliation. The conciliator is not bound by the Code of Civil Procedure, 1908, or the Evidence Act, 1872. The conciliator can adopt his own process for helping in deciding the matter.
(8) Internationalisation of Arbitration Law. In comparison to the old Arbitration Act, 1940, the new Arbitration and Conciliation Act, 1996 contains provisions for enforcement of the Foreign Arbitral Tribunal’s Awards. The present Act is based on the United Nations Commission on International Trade Law and on the Model Law on International Commercial Arbitration. Now the present Act has made provisions for deciding the disputes relating to international trade
Q. 1 (c). Describe the needs for which the Arbitration and Conciliation Act, 1996 was enacted, giving its brief history, point out how it fulfils the needs and objectives sought for?
Ans. Reasons for enactment of Arbitration and Conciliation Act. Needs and reasons for enacting the present Arbitration and Conciliation Act, 1996, are in brief as follows-
(a) The Government of India from 1992 adopted the policy of liberalisation and globalisation to boost the economy and this required quick, cheap and effective solutions of commercial disputes, domestic as well as international.
(2) The UNCITRAL- The United Nations Commission on International Trade Law had already adopted in 1985 the model law on International Commercial Arbitration, as such India also needed a new law on Arbitration keeping the trends adopted by other countries of the world so that India may not remain isolated.
(3) The mechanism of conciliation as adopted by UNCITRAL and the International Model Law motivated India to switch on new means of arbitration and conciliation, which may be upto the standard and norms of International dealings.
(4) There was a need to evolve norms for the appointment of Arbitrator to deal with domestic and International commercial disputes.
(5) The provisions of 1940 Act which had become obsolete and irrelevant, needed their ouster
(6) The excessive interference of the Courts and their tardy and full of delay working also needed reforms.
(7) To attract foreign investments in India, the disputes among the transactions required a modus of quick, easy and cheap solution through the means of arbitration and its cognate mechanism.
(8) The need for such a system which develops co-operation and friendly atmosphere among the parties after the solution of the dispute and which is necessary in the system of arbitration and conciliation together with other alternative dispute resolution mechanism, is the theme of the present Act.
(9) In the adversary system prevalent in the Court system of dispute resolution, the stunt of enmity also comes in which is not conducive in the commercial transactions.
A brief history.- Arbitration system in India may be said to commence from the inception of Panchayat System in the village society of primitive India and it still continues. The English System of Law, it is supposed, was introduced in India from 1726, though English people came to India in 1603 after the incorporation of East India Company in 1600.
The Bengal Regulations, introduced by English men in India by the years 1772, 1781 and 1787, provided for and supported the system of arbitration for dispute resolution among the people and businessmen. Regulation of 1793 prescribed that Courts should send disputed matters of less than Rs. 200/- to the arbitration system. The mechanism of arbitration got an impetus by the Regulations of 1802, 1814, 1822 and 1883 also.
The Presidency of Madras in 1816 and Presidency of Bombay in 1827 introduced the system of Arbitration by their respective regulations. The first fully planned, organised and covering whole of the British India Act on Arbitration was enacted in 1840 and Civil Procedure Code was passed in 1859, having provisions for arbitration. The Civil Procedure Code was amended many a times and was re-enacted in 1908. The mechanism of Arbitration was supported by Contract Act, 1872, Specific Relief Act, 1877 also. In 1899, the Indian Arbitration Act was passed which together with Civil Procedure Code, 1908 passed the system of arbitration in the Indian Society. In 1940, by the name of Indian Arbitration Act, it endeavoured to enact a complete and comprehensive legislation on arbitration which has been repealed by the present Arbitration and Conciliation Act of 1996 giving more impetus to arbitration and other alternative dispute resolution systems and mechanisms containing the spirit of Model Law introduced by the United Nations Commission on International Trade Law (UNCITRAL) covering the International commercial dispute resolution mechanism
Objectives of Act of 1996. The objectives for the enactment of the Arbitration and Conciliation Act, 1996, are as follows:
(i) to comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation;
(ii) to make provisions for an arbitral procedure which is fair, efficient and capable of meeting the needs of specific arbitration;
(iii) to provide that the Arbitral Tribunals give reasons for arbitral awards,
(iv) to ensure that the Arbitral Tribunals remain within the limits of their jurisdiction;
(v) to minimise the supervisory role of courts in the arbitral process; but to have a time bound decision of the arbitral tribunal the procedure of Fast Track Courts by inserting Section 29-B by the (Amendment) Act of 2015, has also been sought for.
(vi) to permit an Arbitral Tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes:
(vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court;
(viii) 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 substances of the dispute rendered by an Arbitral Tribunal, and
(ix) to provide that, for purpose of enforcement of foreign awards, every arbitral award made in a countr 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.
Evaluation of the Arbitration System. It needs an evaluation as to how far the objectives sought by the new Arbitration and Conciliation Act of 1996 as mentioned above have succeeded.
The influx of 24 years to assess the working of a particular Act which compasses Domestic and International Commercial relations and disputes seems too early. The Courts’ interference in arbitral working system is nominal, and they provide cooperation and assistance in the continuance of arbitration and its cognate alternative dispute resolution mechanism. They (the Courts) are playing a praiseworthy role so that arbitration system is coming up as an independent, indep trustworthy, speedy and less expensive means of dispute resolution with an added benefit of friendly end of disputes between the parties.
Domestic mechanism of Alternative Dispute Resolution Systems covering conciliation, a new mechanism and Lok Adalats are becoming more and more popular to get the early and cheap disposal of the disputes avoiding the full of technicalities, delay oriented over burdened Court system as prevalent in India. More and more people are resorting to arbitration system which is in itself a sign of its success story.
Q. 2 (a). What do you inean by the terms “arbitration- agreement”. Discuss the essentials of an arbitration agreement.
Ans. Arbitration Agreement. Sub-section (1) of Section 7 of Arbitration and Conciliation Act, 1996 defines “arbitration agreement” as an agreement between 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.
Essentials of Arbitration Agreement.-1. According to sub-section (2) of Section 7, an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
2. Sub-section (3) of Section 7 provides that an arbitration agreement shall be in writing. Sub-section (4) provides that an arbitration agreement is in writing if it is contained in a document signed by the parties. It may be transacted through exchange of letter, telex, telegrams, or other means of telecommunication including communications through electronic means which provide a record of the agreement, or, it is 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.
3. Further, sub-section (5) of Section 7 provides that 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 is part of the contract.
In Prem Laxmi and Co. v. Trafalgar House Construction India Ltd. 1999 (2) Arb. LR 103 (Bombay), it has been held that where the agreement between the parties clearly provided that all the terms and conditions of the company’s tender document will be applicable except those specified therein, the arbitration clause not having been excepted, will be applicable.
A mere claim by the petitioner that there was an understanding between the parties to enter into an arbitration agreement, without anything more, cannot bring into existence an arbitration agreement layant N. Sheth v. Gyaneshwar Apartment Co-operative Housing Society Ltd., 1999 (2) Arb LR 115 (Bombay).
In K.K. Modi v. K.N. Modi, AIR 1998 SC 1297, the Supreme Court has held that where due to differences in the family in the matter of family concern, a memorandum of settlement was arrived at between the two groups of the family which provided that implementation of such settlement would be done by the Chairman of the Financial Corporation which has lent money to the family concern and in case of dispute regarding implementation, the matter would be referred to the Chairman, such a clause of the memorandum was not an arbitration-agreement nor the decision of the Chairman in such reference was an arbitral award.
In Bharat Bhushan Bansal v. U.P. Small Industries Corporation Ltd., AIR 1999 SC 899, the Supreme Court has held that where clause of agreement mentioning that decision of the managing director shall be final, conclusive and binding on both the parties to the contract upon all questions relating to any claim, right, matter or thing in any way arising out of or relating to the contract, but clause not mentioning that any dispute could be referred to arbitration of managing director nor imposing any duty on him to record evidence, it can be said that such clause did not contemplate any arbitration.
4. There must be a dispute or difference. The existence of a dispute or difference is an essential pre-requisite for arbitration. The term ‘dispute’ must be given a general meaning, Agri-Gold Exims Ltd. v. Sri Lakshmi Knits and Woven and others, (2007) 3 SCC 685]
In Jammu Forest Co. v. The State, AIR 1968 J&K 86, it has been held that if one party asserts a right and the other repudiates the same, that is a dispute within the meaning of Arbitration Act.
In Nand Ram v. Raghunath, AIR 1954 Cal. 245, it has been held that the existence of disputes or differences contemplated by the arbitration clause is an essential condition and pre-requisite to the exercise of the jurisdiction by the Arbitrator. A dispute implies an assertion of a right by one party and a repudiation thereof by another. The repudiation may be by words or by conduct.
In nutshell, it may be said that for a valid arbitration agreement there should be certainty about the following points :-
(i) There should be certainty about the scope and points of disputes in the matter on which the parties have different views and it must be certain so that it may be resolved.
(ii) Certainty about the parties should be certain. There must be certainty as to the parties between whom the dispute is existing or likely to come into existence. If the parties are not certain, the result of dispute resolution may not be utilised.
(iii) Certainty about the formation of Arbitral Tribunal which may consist of a Sole Arbitrator or more arbitrators in odd numbers. Where both the parties appoint one arbitrator each, the third arbitrator is appointed with the consent of these two arbitrators. This third arbitrator is termed as Presiding Arbitrator. The ‘Umpire’ arbitrator is no more in prevalence as the 1940 Act on Arbitration has been repealed which contained this provision of umpire arbitrator.
Q. 2(b). How does arbitration differ from reference?
Ans. Differences between arbitration and reference.- Pointing out the difference between arbitration and reference, the Supreme Court in Food Corporation of India v. Shreekanth Transport, AIR 1999 SC 2184, observed, “Arbitration agreement is to be distinguished from agreement for reference by an engineer or expert. Contracts may contain a clause that on certain questions the decision of an engineer, architect or an expert shall be final. The decision given by the experts in such cases is not an award. Therefore, such an expert is under no obligation to receive evidence or submissions and is entitled to arrive at his decision solely upon the basis of his own expertise. The procedure involved is not an arbitration as he only gives his opinion on the reference made to him.
Where a clause in the agreement provided for settlement of questions relating to specifications, design, quality and workmanship and other technical aspects by an expert officer of one of the parties. It was held that it was not an arbitration clause but only an agreement for reference. (State of Rajasthan v. Nav Bharat Construction Co., AIR 2005 SC 2795]
Similarly, in the case of Registrar. Agricultural Science v. G. G. Hosamath, (2004) 13 SCC 542, the contract provided that the decision of the Estate Officer shall be final and binding on all the parties, upon all the matters, held that the clause did not contemplate arbitration but only a reference.
However, it must be stated that existence of a dispute is sine qua non for both arbitration as well as reference but the difference between the two lies in the fact that in the case of the former an arbitrator settles the dispute whereas in case of the later, the matter is referred to an expert as agreed to between the parties under the agreement. It involves no arbitration and the decision of the expert is final and binding on both the parties.
Although the term ‘reference’ has not been defined anywhere in the Act but by reading Section 2(1)(b) and Section 7 together it may be gathered that it means submission of the dispute to the arbitral Tribunal by the parties. Thus, at first, there would be an arbitration agreement in existence and next there should be some dispute between the parties so that a reference may be made to the arbitral Tribunal.
A dispute cannot be entertained by the Arbitral Tribunal without a reference being made for its resolution.
Q. 2 (c). Define the term “arbitral award” and discuss how the award is enforced?
Ans. Arbitral Award. According to Section 2 (1) (c) of the Arbitration and Conciliation Act, 1996-“an arbitration award includes an interim award”. In ordinary sense an arbitral award is a judgment delivered by an Arbitral Tribunal relating to disputes/differences referred to the Arbitral Tribunal for the purpose of arbitration. The Supreme Court in Satish Kumar v. Surendra Kumar, AIR 1970 SC 833, has said that an arbitral award is whether passed into a decree or not by the Civil Court, it is binding on the parties. An arbitral award shall be final and binding on the parties and persons claiming under him.
The arbitral award is now equal to a decree and does not require an order of the Court for its enforcement Section 36 of the Arbitration and Conciliation Act, 1996 provides that “an award shall be enforced as if it were a decree of a Court”. The award as a decree can be enforced directly by the Arbitral Tribunal.
In Sashi Sekhareswar v. Lalit Mohan, AIR 1925 PC 34. the Privy Council had observed that a decree passed on the basis of an arbitral award in arbitration proceedings has to be like a judgment of the Civil Court which is binding on the parties.
A valid, proper and enforceable arbitral award must have the following essential ingredients, which are as under-
(1) An arbitral award must be in writing and also signed,
(2) The parties in arbitration must be competent to initiate arbitration proceedings,
(3) There must be arbitration clause in a dispute to assign disputes/differences before Arbitral Tribunals,
(4) The arbitral award must be reasoned.
(5) The content of an arbitral award must be related with the subject- matter of dispute arbitrated.
(6) An arbitral award must be based on the principle of natural justice.
Q. 2 (d). Write short notes on-
(1) Arbitral Tribunal.
(2) International Commercial Arbitration.
(3) Legal Representative.
(4) Fast Track Courts.
Ans. (1) Arbitral Tribunal. According to Section 2 (1) (d) of the Act “Arbitral Tribunal” means a sole arbitrator or a panel of arbitrators. There can be only one arbitrator or a more than one arbitrator. Section 10 (1) of the Act provides that the parties are free to determine the number of arbitrators provided that such number shall not be an even number. In case the parties could not determine the number of arbitrators, Section 10 (2) of the Act provides that in case the parties do not determine the number of Arbitrators, the Arbitral Tribunal shall consist of a sole arbitrator. To ensure speedy arbitration the parties are free to adopt multi-arbitrator system, although, there is the only limitation that an even number of arbitrators shall not be appointed. This provision would be applicable in domestic arbitration and also in International Commercial Arbitration. In Engineering Mazdoor Sabha v Hind Cycles Ltd., AIR 1963 SC 874, the Apex Court has held that in technical sense an Arbitral Tribunal does not constitute a court. In fact, an Arbitral Tribunal functions as a quasi judicial court on the basis of principles of natural justice and fair play. Thus, an Arbitral Tribunal is not a court of law under the Act.
In M.M.T.C. Lad. v. Sterlite Industries (India) Ltd.. AIR 1997 SC 605. the Supreme Court has held that an arbitration agreement specifying even number of arbitrators, cannot be a sole ground to render arbitration agreement invalid. The Court further held that there is nothing in the Act to suggest that requirements of the number of arbitrators is a part of the arbitration agreement
(2) International Commercial Arbitration. Section 2 (1) (f) of the Arbitration and Conciliation Act, 1996 provides that an international commercial arbitration means an arbitration relating to disputes arising out of legal relationship, whether contractual or not, considered as commercial under the law in force in India and where atleast 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
(iii) an association or a body of individuals whose central management is exercised in any country other than India, or
(iv) the Government of a foreign country.
The above definition is based on the model Arbitration Law-Article 1. It is clear from the above provision that the nationality of the parties are the only criteria to constitute an international commercial arbitration, not the subject-matter of arbitration. Therefore, if the parties to particular international commercial transaction are Indian nationals, it will be unqualified for international commercial arbitration.
Thus, to qualify the international character of the commercial arbitration, there should be three main elements, namely:
(i) the parties to commercial transaction,
(ii) the subject-matter of the commercial transaction,
(iii) the location of arbitration.
However, Section 2 of the Foreign Awards (Recognition and Enforcement) Act, 1961, defines the expression “commercial”-which provides that it should be construed broadly having regard to a number of activities which are essential elements of modern international trade. In R.M. Investment Trading Co. v. Boeing Co., AIR 1994 SC 1136, the Apex Court has held that consultancy services are of a commercial nature. Where consultancy services including managerial assistance and relevant Information are being provided with the purpose to promote sales of Boeing aircraft, those services shall be commercial in nature.
The Arbitration and Conciliation Act, 1996, has not provided such a wide interpretation of the term, “commercial” in the definition of “International Commercial Arbitration.”
(3) Legal Representative. According to Section 2 (g) of the Arbitration and Conciliation Act, 1996, legal representative means and Includes a person who in law represents the estate of a deceased person, or a person who intermeddles with the estate of the deceased, or the person in whom the estate devolves on the death of the party so acting.
In this way, following persons include the definition of legal representatives:-
(a) The representative of the estate of a deceased person, and
(b) Any person who intermeddles with the estate of the deceased person,
(c) Any person who represents the legal representative of the deceased person.
(4) Fast Track Courts. Under the Amendment of 2015 to the principal Arbitration and Conciliation Act, 1996, for dealing with speedy results to be obtained from the arbitral proceeding a new Section 29-B has been inserted for Fast Track Courts. Section 29-B (1) lays down, “Notwithstanding anything contained in this Act, the parties to an arbitration agreement may at any stage either before or at the time of appointment of the arbitral tribunal agree in writing to have their dispute resolved by Fast Track procedure specified in sub-section (3).
(2) The parties to the arbitration agreement while agreeing for resolution of their dispute by Fast Track procedure may agree that the arbitral tribunal shall consist of sole arbitrator who shall be chosen by the parties.
(3) The arbitral tribunal shall follow the following procedure while conducting arbitration proceedings under sub-section (1):-
(a) The arbitral tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing.
(b) The arbitral tribunal shall have power to call for any further information or clarification from the parties in addition to the pleadings and documents filed by them.
(c) An oral hearing may be held only if all the parties make a request or if the arbitral tribunal considers it necessary to have oral hearing for clarifying certain issues.
(d) The arbitral tribunal may dispense with any Technical formalities, if any oral hearing is held and adopt such procedure as deemed appropriate for expeditious disposal of the case.
(4) The award under this section shall be made within a period of six months from the date the arbitral tribunal enters upon the reference.
(5) If the award is not made within the period specified in sub-section (4), then the provisions of sub sections (3) to (9) of Section 29-A shall apply to the proceedings.
(6) The fees payable to the arbitrators and the manner of payment of the fees shall be such as may be agreed between the parties and the arbitrator.