Arbitration

"Arbitration is the reference of dispute 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.
Introduction
An Act covering:
domestic arbitration
international commercial arbitration
enforcement of foreign arbitral awards
conciliation
Modern concept of harmonious working partnership between the Court and
Arbitration.
Has far reaching effect on reducing court litigation
Gives more importance to Arbitration and Conciliation by adding speed and
economy to settlement of disputes.
Alternative Dispute Resolution (ADR)
Mechanism used across the world - effective, faster and less expensive.
4 methods of ADR:
Negotiation unrecognized
Mediation unrecognized
Conciliation recognized
Arbitration - recognized
Recognized by the Arbitration and Conciliation Act, 1996
Necessity of the Act
Shrinking Boundaries, Free trade & International Commerce have become
global necessities.
Competition often leads to conflicts between entrepreneurs resulting in
commercial disputes.
Growing strength and role of India in the global economy
Increasing FDI and other forms of collaboration -increasing disputes between
Indian and foreign parties
Quick redressal to commercial disputes through private Arbitration.
Settlement of dispute in an expeditious, convenient, inexpensive and private
manner so that they do not become the subject of future litigation between
the parties.
Acts addressing ADR in India
The law on arbitration in India was substantially contained in three
enactments, namely:
The Arbitration (Protocol & Convention) Act, 1937
The Arbitration Act, 1940
The Foreign Awards (Recognition and Enforcement) Act, 1961.

The Arbitration & Conciliation Act, 1996

An Act to consolidate and amend the law relating to domestic arbitration,
international commercial arbitration and enforcement of foreign arbitral
awards as also to define the law relating to conciliation and for matters
connected therewith or incidental thereto.

 "Arbitration is the reference of dispute 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.
Law Based on UNCITRAL Model Law
The present Act is based on model law drafted by United Nations Commission on
International Trade Laws (UNCITRAL), both on domestic arbitration as well as
international commercial arbitration, to provide uniformity and certainty to both
categories of cases.
WHAT CAN BE REFERRED TO ARBITRATION
All disputes of a civil nature or quasi-civil nature which can be decided by a civil
court can be referred to arbitration:
Relating to property
Right to hold an office
Compensation for non-fulfillment of a clause in a contract
Disputes in a partnership
Disputes excluded from the Arbitration Act
The law has given jurisdiction to determine certain matters to specified tribunal
only; these cannot be referred to arbitration:
Matters involving questions about validity of a will.
Relating to appointment of a guardian.
Pertaining to criminal proceedings
Relating to Charitable Trusts
Winding up of a company
Matters of divorce or restitution of conjugal rights
Lunacy proceedings
Disputes arising from an illegal contract
Insolvency matters, such as adjudication of a person as an insolvent.
Matters falling within the purview of the Competition Act.
Scheme of the Act
The Act is divided in to the following parts
(a) Part I - Domestic arbitration.
(b) Part II - Enforcement of foreign awards.
(c) Part III - Conciliation procedures.
(d) Part IV - Supplementary provisions.
Part I - Domestic arbitration
Arbitration Agreement
Arbitration Agreement - 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.
Power to refer parties to arbitration when there is an arbitration agreement.
Arbitration Agreement
Interim Measures by Court
appointment of a guardian for a minor or person of unsound mind for the
purposes of arbitral proceedings

 protection in respect of preservation, interim custody or sale of any goods

which are the subject-matter of the arbitration agreement
securing the amount in dispute
the detention, preservation or inspection of any property or thing which is the
subject-matter of the dispute
interim injunction or the appointment of a receiver;
Any other interim measure of protection as may appear to the Court to be
just and convenient
Appointment of Arbitrator
Any person can be appointed as an arbitrator.
Generally impartial and independent persons
C As, engineers, retired judges, advocates and other professionals are
preferred.
Parties are free to determine the number of arbitrators
Number shall not be an even number.
The arbitrator shall disclose in writing to the parties anything that may give
rise to justifiable doubts about his independence or impartiality.
Appointment of Arbitrator
If they are unable to agreeEach party will appoint one arbitrator and the two appointed arbitrators will
appoint the third arbitrator who will act as a presiding arbitrator.
If not appointed within 30 days, the party can request Chief Justice of High
Court to appoint an arbitrator.
In case of international commercial dispute, the application for appointment
of arbitrator has to be made to Chief Justice of India.
Termination of Arbitrator
Appointment of Arbitrator can be challenged only if
Circumstances exist that give rise to justifiable doubts as to his independence
or impartiality
He does not possess the qualifications agreed to by the parties.

Termination of Arbitrator
The mandate of an arbitrator shall terminate if-- he becomes de jure or de facto unable to perform his functions or for
other reasons fails to act without undue delay; and
he withdraws from his office or the parties agree to the termination of
his mandate.

 where he withdraws from office for any reason; or by or pursuant to

agreement of the parties.
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.
Conduct of Arbitral Proceedings
The Arbitral Tribunal is not bound by Code of Civil Procedure, 1908 or Indian
Evidence Act, 1872.
The parties to arbitration are free to agree on the procedure to be followed by
the Arbitral Tribunal.
Law of limitation (1963) applicable
Flexibility in respect of procedure, place & language.
Submission of statement of claim & defense maybe amended/ supplemented
at any time
Hearings & Written Proceedings at the discretion of the tribunal
Can be oral at the request of either party
Settlements during Arbitration
Arbitral Award
The decision of Arbitral Tribunal will be by majority
The arbitral award shall be in writing and signed by the members of the
tribunal.
States the reasons for the award unless the parties have agreed that no
reason for the award is to be given.
The award should be dated and place where it is made should be mentioned.
Copy of award given to each party.
Tribunal can make interim award also.
Arbitral Award - Appeal
An arbitral award may be set aside by the Court only if;
The party furnishes proof of some incapacity
the arbitration agreement is not valid under the law to which the
parties have subjected it
the party was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was otherwise unable to
present his case; or
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 on matter beyond the scope of the submission to arbitration
the composition of the arbitral tribunal or the arbitral procedure was
not in accordance with the agreement of the parties
the arbitral award is in conflict with the public policy of India.
Cost of Arbitration
Fees and expenses of arbitrators and witnesses, legal fees and expenses,
administration fees of the institution supervising the arbitration and other
expenses.
Tribunal can decide the cost and share of each party.
If parties refuse to pay the costs, the Arbitral Tribunal may refuse to deliver
its award; thus any party can approach Court.

 The Court will ask for deposit from the parties and on such deposit, the award
will be delivered by the Tribunal. Then Court will decide the costs of
arbitration and shall pay the same to Arbitrators. Balance, if any, will be
refunded to the party.
Intervention by Court
The earlier arbitration law was that the party could access court almost at
any stage of arbitration.
Now, approach to court has been drastically curtailed.
If an objection is raised by the party, the decision on that objection can be
given by Arbitral Tribunal itself & the arbitration proceedings are continued
The aggrieved party can approach Court only after Arbitral Award is made.
Appeal to court is now only on restricted grounds.
Tribunal cannot be given unlimited and uncontrolled powers and supervision
of Courts cannot be totally eliminated.
ARBITRATION ACT HAS OVER-RIDING EFFECT
Part II Enforcement of Foreign Awards
Enforcement of Foreign Awards
Foreign award" means an arbitral award on differences relating to matters
considered as commercial under the law in force in India. The foreign awards
which can be enforced in India are as follows : New York convention award - made after 11th October, 1960
New York convention awards are enforceable in India.
New York convention was drafted and kept in United Nations for
signature of member countries on 21st December, 1958.
Geneva convention award - made after 28th July, 1924.
Enforcement of Foreign Awards
To enforce a foreign award party has to
produce arbitral award, agreement of arbitration to the district court
having jurisdiction over the subject matter of the award.
The enforcement of award can be refused by court only in cases specified in
law.
Otherwise, the foreign award is enforceable through court as if it is a decree
of the court.
If the court declines to enforce the arbitral award, appeal can be made to the
court where appeal normally lies from the district court.
No further appeal can be made (except appeal to Supreme Court) .
Indian courts can be approached only at the time of implementation of
award.
The courts can refuse to implement the award only on limited grounds.
Part III-Conciliation Procedure
Conciliation is an alternative dispute resolution (ADR) process whereby the
parties to a dispute use a conciliator, who meets with the parties separately
in an attempt to resolve their differences. They do this by lowering tensions,
improving communications, interpreting issues, providing technical
assistance, exploring potential solutions and bringing about a negotiated
settlement.
Conciliation differs from arbitration in that the conciliation process, in and of
itself, has no legal standing, and the conciliator usually has no authority to

seek evidence or call witnesses, usually writes no decision, and makes no

award.
Conciliation differs from mediation in that the main goal is to conciliate, most
of the time by seeking concessions. In mediation, the mediator tries to guide
the discussion in a way that optimizes parties needs, takes feelings into
account and reframes representations.
In conciliation the parties seldom, if ever, actually face each other across the
table in the presence of the conciliator.
Conciliation
The act makes provision for conciliation proceedings. In conciliation proceedings:
There is no agreement for arbitration.
Conciliation can be done even if there is arbitration agreement.
The conciliator only brings parties together and tries to solve the
dispute using his good offices.
The conciliator has no authority to give any award.
Helps parties in arriving at a mutually accepted settlement.
Conciliation
In such agreement they may draw and sign a written settlement agreement.
Duly signed by the conciliator
However after the settlement agreement is signed by both the parties and
the conciliator, it has the same status and effect as if it is an arbitral award.
Conciliation is the amicable settlement of disputes between the parties, with
the help of a conciliator.

Offer for Conciliation

The conciliation proceedings can start when one of the parties makes a
written request to other to conciliate, briefly identifying the dispute.
The conciliation can start only if other party accepts in writing the invitation
to conciliate.
Unless there is written acceptance, conciliation cannot commence. If the
other party does not reply within 30 days, the offer for conciliation can be
treated as rejected

What Can Be Referred To Conciliation

Matters of a
Civil nature
Breach of contract
Disputes of movable or immovable property

What Cannot Be Referred To Conciliation

Matters of
Criminal nature
Illegal transactions
Matrimonial matters like divorce suit etc.
Part IV- Supplementary Provisions
Supplementary Provisions
The High Court has the power to make rules under this act

 Removal of difficulties by central Government through provisions made under

the Act
Rules made by Central Government subject to approval by parliament
The present Act overrules the previous Acts
Case Studies
Case Study
Bhatia International V Bulk Trading & Others
CASE NO.:
Appeal (civil) 6527 of 2001

Facts of Case
Petitioner : Bhatia International
Respondents : Bulk Trading & others
Date of Judgement : 13.2.2002
Bench : G B Pattanik & S N Variava
Appeal : Against the Judgement Dated 10.10.2000: Madras High Court
Petitioner Counsel : Mr.S. Sen
Respondent Counsel : Mr. Sundaram
Brief History
Bhatia International contract with Bulk trading in 1997 - arbitration clause
Governed by as per rules of International Chambers of Commerce (ICC)
Bulk trading filed a request with ICC for arbitration with parties agreed
process to be held in Paris and appointment of Sole Arbitrator
Respondents filed an application u/s 9 of Arbitration & concilation Act 1996 is
district courts of Indore & Orissa against Bhatia International
Interim relief was sought injunction restraining the parties from
transferring/creating any third party right & dealing or selling their business
assests or properties
Bhatia international raised plea of maintainability of such an applicaton