IMPLICATIONS ON POWER OF ARBITRATOR POST ARBITRATION AND

CONCILIATION (AMENDMENT) ACT, 2015:

I.

BARE TEXTS:

1. Section 8 in THE ARBITRATION AND CONCILIATION ACT,

1996
Power to refer parties to arbitration where there is an arbitration agreement.
(1) A judicial authority before which an action is brought in a matter which 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.
(2) The application referred to in sub-section (1) shall not be entertained unless it
is accompanied by the original arbitration agreement or a duly certified copy
thereof.
(3) Notwithstanding that an application has been made under sub-section (1) and
that the issue is pending before the judicial authority, an arbitration may be
commenced or continued and an arbitral award made.
2.

Section 8 in THE ARBITRATION AND CONCILIATION

(AMENDMENT) ACT, 2015

In section 8 of the principal Act,
(i)

for sub-section (1), the following sub-section shall be substituted,

namely:

(1) A judicial authority, before which an action is brought in a matter which is

the subject of an arbitration agreement shall, if a party to the arbitration
agreement or any person claiming through or under him, so applies not later than
the date of submitting his first statement on the substance of the dispute, then,
notwithstanding any judgment, decree or order of the Supreme Court or any
Court, refer the parties to arbitration unless it finds that prima facie no valid
arbitration agreement exists.;

(ii)

in sub-section (2), the following proviso shall be inserted, namely:

Provided that where the original arbitration agreement or a certified copy thereof
is not available with the party applying for reference to arbitration under subsection (1), and the said agreement or certified copy is retained by the other party
to that agreement, then, the party so applying shall file such application along
with a copy of the arbitration agreement and a petition praying the Court to call
upon the other party to produce the original arbitration agreement or its duly
certified copy before that Court..
3. Section 17 in THE ARBITRATION AND CONCILIATION ACT, 1996
Interim measures ordered by arbitral tribunal.
(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the
request of a party, order a party to take any interim measure of protection as the
arbitral tribunal may consider necessary in respect of the subject-matter of the
dispute.

(2) The arbitral tribunal may require a party to provide appropriate security in
connection with a measure ordered under sub-section (1).

4. Section 17 in THE ARBITRATION AND CONCILIATION

ACT(AMENDMENT), 2015:
17. (1) A party may, during the arbitral proceedings or at any time after the
making of the arbitral award but before it is enforced in accordance with section
36, apply to the arbitral tribunal
(i)

for the appointment of a guardian for a minor or person of

unsound mind for the purposes of arbitral proceedings; or

(ii)

(ii) for an interim measure of protection in respect of any of

the following matters, namely:

(a) the preservation, interim custody or sale of any goods which are
the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) 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 purpose of obtaining full information or
evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the
arbitral tribunal to be just and convenient,
and the arbitral tribunal shall have the same power for making orders, as the
court has for the purpose of, and in relation to, any proceedings before it.
(2)Subject to any orders passed in an appeal under section 37, any order issued
by the arbitral tribunal under this section shall be deemed to be an order of the
Court for all purposes and shall be enforceable under the Code of Civil Procedure,
1908, in the same manner as if it were an order of the Court..
5. Section 23 in THE ARBITRATION AND CONCILIATION ACT, 1996
Statement of claim and defence.
(1) Within the period of time agreed upon 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 of these particulars, unless the parties have otherwise
agreed as to the required elements of those statements.
(2) The parties may submit with their statements all documents they consider to
be relevant or may add a reference to the documents or other evidence they will
submit.
(3) Unless otherwise agreed by the parties, either party may amend or
supplement his claim or defence during the course of the arbitral proceedings,
unless the arbitral tribunal considers it inappropriate to allow the amendment or
supplement having regard to the delay in making it.

6. Section 23 in THE ARBITRATION AND CONCILIATION (AMENDMENT)

ACT, 2015
In section 23 of the principal Act, after sub-section (2), the following subsection shall be inserted, namely:
(2A) The respondent, in support of his case, may also submit a counterclaim or
plead a set-off, which shall be adjudicated upon by the arbitral tribunal, if such
counterclaim or set-off falls within the scope of the arbitration agreement.
7. Section 28 in THE ARBITRATION AND CONCILIATION ACT, 1996
Rules applicable to substance of dispute.
(1) Where the place of arbitration is situate in India,
(a) in an arbitration other than an international commercial arbitration, the
arbitral tribunal shall decide the dispute submitted to arbitration in accordance
with the substantive law for the time being in force in India;
(b) in international commercial arbitration,
(i) 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;
(ii) any designation by the parties of the law or legal system of a given country
shall be construed, unless otherwise expressed, as directly referring to the
substantive law of that country and not to its conflict of laws rules;
(iii) failing any designation of the law under clause (a) by the parties, the arbitral
tribunal shall apply the rules of law it considers to be appropriate given all the
circumstances surrounding the dispute.
(2) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur
only if the parties have expressly authorised it to do so.

(3) In all cases, the arbitral tribunal shall decide in accordance with the terms of
the contract and shall take into account the usages of the trade applicable to the
transaction.
8. Section 28 in THE ARBITRATION AND CONCILIATION (AMENDMENT)
ACT, 2015
In section 28 of the principal Act, for sub-section (3), the following sub-section
shall be substituted, namely:
(3) While deciding and making an award, the arbitral tribunal shall, in all
cases, take into account the terms of the contract and trade usages applicable
to the transaction.

Power of Arbitrator under the Amended Arbitration Act:

II.

Introduction

Indian Arbitration and Conciliation Act, 1996 (herein referred to as Act"or

1996 Act) with a view to generally restrict the courts from challenging an
arbitration award and magnify the scope of the Act in accordance to the
UNCITRAL model law of arbitration.The main purpose of the The Arbitration
And Conciliation (Amendment) Act, 2015(herein referred to as 2015 Act) was
to end the excessive judicial intervention in arbitration proceedings and
proceed to settlement without resorting to the cumbersome procedures of the
Courts.
The following changes have been brought forward w.r.t arbitration proceedings
India:

1.More user-friendly
2. Cost effective
3. Expeditious process (Speedy disposal) with minimum judicial intervention
4. Transparency in the proceedings
5. Proceedings to be in conformity with international principles
The 2015 Act provides a wider scope and mandate to the Arbitrators to expedite
the process of arbitration and act independently and in conformity with the
object of the Act.
III.

Entrusting certain power of Court that Court used to exercise under

Section 8 of the Act before amendment

Section 8 of the amended 2015 Act entrusts the judicial authority to refer the
parties to arbitration when there is an arbitration agreement and it should not
act in contrary to it unless it finds prima facie that there exists no valid
arbitration agreement. The scope under Sec.8 of 2015 Act includes the judicial
authoritys power to investigate the issue of existence of an arbitration
agreement on the basis of prima facie principle as well as its authority to
examine the validity of the arbitration clause. However, the scope has been
limited by the inclusion of the word Court in Sec.8(2) instead of judicial
authority which may act contrary to the basic scope of the 2015 Act which is
to expedite the arbitration process.
With reference to International Courts taking cognizance of the UNCITRAL
Model law on arbitration, I would like to state that the Hong Kong courts seized
of referral applications have in most cases adopted the prima facie approach

and applied the principle1, but they have also occasionally assumed that they
were empowered to deal fully with issues of validity, operativeness,
performability and applicability2. The prima facie approach was also adopted by
the Supreme Court of India.3
Further, in P. Anand Gajapathi Raju & Ors. v. P.V.G. Raju (Died) & Ors.4,
while iterating periphery of Section 8 of the 1996 Act, the Supreme Court said
that The conditions which are required to be satisfied under Sub-sections (1)
and (2) of Section 8 before the Court can exercise its powers are :
(1) there is an arbitration agreement;
(2) a party to the agreement brings an action in the Court against the other party;
(3) subject matter of the action is the same as the subject matter of the arbitration
agreement;
(4) the other party moves the Court for referring the parties to arbitration before it
submits his first statement on the substance of the dispute. . The language of
Section 8 is per-emptory.
The amended 2015 Act categorizes the issues particularly on questions of fraud
along with serious questions of fact and law to be expressly arbitrable.
Previously, this view was negated in judgements like in the case of
1 Fai Tak Engineering Co. Ltd. v. Sui Chong Construction & Engineering Co. Ltd., District Court, Hong
Kong Special Administrative Region of China, 22 June 2009, [2009] HKDC 141, available on the Internet
at http://www.hklii.hk/eng/hk/cases/ hkdc/2009/141.htm

2 Rondabosh International Ltd. v. China Ping an Insurance (Hong Kong) Co. Ltd., High CourtCourt of
First Instance, Hong Kong Special Administrative Region of China, 29 December 2009, [2009] HKCFI
1198, available on the Internet at http://www.hklii.hk/eng/ hk/cases/hkcfi/2009/1198.html

3 Shin-Etsu Chemical Co. Ltd. v. M/S. Aksh Optifibre Ltd. & Anr, Supreme Court, India, 12 August
2005, available on the Internet at http://www.indiankanoon.org/doc/847271/

4 (2000) 4 SCC 539

Radhakrisnan V. Maestro Engineers5, where the Court held that an issue of

fraud is not arbitrable. Subsequently, this view evolved in the case of Swiss
Timing Ltd V. Organising Committee6, where the Apex Court exercising
jurisdiction u/S.11 of the 1996 Act held the abovementioned judgement as per
incuriam and referred the matter to arbitration.
Further, the Act of 2015 enables the party applying for reference to arbitration
who does not possess the original or certified copy of arbitration agreement
but the said copy is retained by other party then such party can make
application to the Court to call upon other party to produce original or certified
true of the arbitration agreement before that court.

IV.

Change in the power and authority of the arbitrator referring to

Section 17.
With the 2015 Act coming into force, the tribunal shall now have the same
powers to make orders for interim measures as the Court. This has been a
boon for the parties to arbitration since interim measures are meant to be in
aid in with the process of arbitration. Moreover, the amended Act of 2015
resolves the shortcomings of the 1996 Act where the interim orders of the
tribunal were not enforceable.
The jurisdiction of the Arbitrator is bound by the terms of the Contract when
disputes w.r.t the rights and obligation under the Contract are raised. The
5 2010 1 SCC 72
6 Arbitration. Pet. No. 34/2013 dated May 28,2014

Supreme Court in the case of Bharat Coking Coal Ltd. Vs. M/s.L.K.Ahuja &
Co.7 rightly pointed out that that the Arbitral Tribunal is a Tribunal of limited
jurisdiction circumscribed by the terms of reference and the Arbitrator cannot
be equated with a court of law. Thereafter this view of the Apex Court was
opposed to with the amendment of 2015 whereby it is clearly stated that once
an arbitral tribunal has been constituted, no court will have jurisdiction to
ordinarily entertain an application under Sec.98. In order to establish a nexus
between Sec.17 and Sec.9 of the Act before the amendment, the Delhi High
Court in National Highways Authority of India (Nhai) vs China Coal
Construction Group Corporation9, held that
the existence of an application before an arbitral tribunal for interim measure
does not denude the court of its powers to make an order for interim measures
under article 9. That court took the view that being a superior judicial forum, the
courts power has primacy over those of an arbitral tribunal
These inconsistent approaches have been dealt with through the introduction
of the Amendment Act 2015 wherein it has been mandated that any order
issued by the arbitral tribunal to grant interim measures shall be deemed to be
an order of the Court for all purposes and shall be enforceable under the Code
of Civil Procedure of 1908 with the same authority as if it were an order of the
Court. This amendment addresses the main object of the Arbitration Act by
empowering the arbitration panel and minimizing Court interferences
simultaneously.
7 (2001) 4 SCC 86
8 Avalable at http://barandbench.com/when-good-intentions-are-not-good-enough-the-arbitrationordinance-in-india/

9 AIR 2006 Delhi 134

In furtherance of the 2015 Act which is constructed in parallel connection to

the UNCITRAL Model law on International Commercial Arbitration, the
amended Sec.17 allows a party to approach an arbitral tribunal for interim
measures of protection not only during the arbitration proceedings but also
after the making of the award but before it is enforced. Therefore, this provides
power to the arbitral tribunal to retain jurisdiction to order interim measures
even after it has made a final award. The amended Sec.17 gives a greater
mandate to arbitrators, specifically removing the need for interim measures to
relate to the subject matter of the dispute.
Here I would like to point out an inconsistency of the above mentioned power of
the arbitral tribunal under Sec. 17 w.r.t Sec.32 of the 2015 Act which provides
that the mandate of an arbitral tribunal shall be terminated after making of the
final award. Moreover, if the arbitral tribunal ceases to have jurisdiction after
passing the final award, it is inconceivable as to how it would have the power to
order interim measures after the making of the final award. This anomaly
ought to have been rectified by appropriate amendments to Sec.32.10
According to Russell (Arbitration, 20th Edition, p. 104) as mentioned in the
case of Dharma Prathishthanam vs M/S. Madhok Construction Pvt. Ltd 11
An arbitrator is neither more or less than a private judge of a private court
(called an arbitral tribunal) who gives a private judgment (called an award). He
is a judge in that a dispute is submitted to him: he is not a mere investigator but
10 Article on Critical Analysis of the Arbitration and Conciliation (Amendment) Act, 2015 available at
http://www.mondaq.com/india/x/494184/Arbitration+Dispute+Resolution/Critical+Analysis+Of+The+Ar
bitration+And+Conciliation+Amendment+Act+2015

11 Decided on 2 November, 2004 Special Leave Petition (C) No. 7835 of 2003

a person before whom material is placed by the parties, being either or both of
evidence and submissions: he gives a decision in accordance with his duty to
hold the scales fairly between the disputants in accordance with some
recognized system of law and rules of natural justice. He is private in so far as
(1) he is chosen and paid by the disputants
(2) he does not sit in public
(3) he acts in accordance with privately chosen procedure so far as that is not
repugnant to public policy
(4) so far as the law allows he is set up to the exclusion of the State Courts
(5) his authority and powers are only whatsoever he is given by the disputants
agreement
(6) the effectiveness of his powers derives wholly from the private law of contract
and accordingly the nature and exercise of those powers must not be contrary to
the proper law of the contract or the public policy of England bearing in mind that
the paramount public policy is that freedom of contract is not lightly to be inferred
with. Whatever has been mentioned by Russell in this paragraph is equally true
for Indian Arbitrators.

V. Enforceability of interim orders passed by arbitrator.

Interim reliefs are provided under Sections 9 and 17 of the 1996 Act. Both
these provisions are complimentary in nature to each other since Sec.9
contains the power of a Court to grant interim measures whereas Sec.17 is a
similar power conferred upon an arbitral tribunal. The main object for
implementing these provisions was to protect the status of a property in

dispute or to prevent prejudice to any party before the commencement or

during the pendency of the arbitration proceedings.
The landmark judgement of the Supreme Court of Bharat Aluminium and Co. v.
Kaiser Aluminium and Co.12("BALCO") held that the Indian Courts had no
jurisdiction to intervene foreign seated arbitration in which an Indian party is
present.
Further, in the case before the Bombay High Court where the parties had
previously referred the dispute to an emergency arbitrator under the SIACs
Rules, HSBC PI Holdings (Mauritius) Limited v. Avitel Post Studioz Limited
and others

13

, the High Court granted interim relief under Section 9 of the

1996 Act.This case concerned an arbitration agreement entered into before the
BALCO judgement and therefore, the parties had preserved the right to seek
interim relief before the Indian Courts even though the arbitration was seated
outside India. One of the parties had obtained interim relief from the
emergency arbitrator in Singapore restraining the other party from withdrawing
any amounts retained in a bank account pending the outcome of the
arbitration. The Bombay High Court, further to a Section 9 application under
the Indian Arbitration Act, passed reliefs in terms similar to those in the
emergency arbitrator award.
Therefore, although the court in the abovementioned HSBC case did not
directly enforce the emergency arbitrator award, this case could be of
strategic importance ,especially in contracts before the BALCO judgement
12 AIR 2005 Chh 21
13 Arbitration Petition No.1062 Of 2012 decided on 31 July 2014

where the rights under Section 9 of the Indian Arbitration Act have been
preserved. This case could provide an avenue for parties to obtain interim
relief before the Indian Courts faster than they normally would, although in
foreign-seated arbitrations such a route would only be available based on
arbitration agreements that were pre-BALCO judgement.
Section 17 under the 1996 Act lacked the force of law and effectiveness due
to absence of any statutory mechanism for the enforcement of interim orders
of the arbitral tribunal14. In furtherance of this lacunae, the Supreme Court
in Sundaram Finance Ltd v. NEPC India Ltd. 15 and M.D. Army Welfare
Housing Organisation v. Sumangal Services Pvt. Ltd.16 held that under
Section.17 of the Act, no power is conferred on the arbitral tribunal to enforce
its order nor does it provide for its judicial enforcement.
Further a question arose as to a petitioner can approach the Court for an
interim relief when it has already approached the Arbitral Tribunal in any
Foreign Country and also obtained a judgement from the High Court thereof.
To clear the abovementioned ambiguity, the Court in the case of Raffles
Design International India Private Limited and Ors. Vs. Educomp
Professional Education Limited and Ors17. held :
It is relevant to mention that Article 17H of the UNCITRAL Model Law contains
express provisions for enforcement of interim measures. However the Act does
14 Article on Interim Reliefs available at http://blog.ipleaders.in/interim-reliefs-arbitration-conciliationamendment-ordinance-2015/

15 (1999) 2 SCC 479

16 (2004) 9 SCC 619
17 O.M.P.(I) (Comm.) 23/2015, Decided On: 07.10.2016

not contain any provision pari materia to Article 17H for enforcement of interim
orders granted by an Arbitral Tribunal outside the India. Section 17of the Act is
clearly not applicable in respect of arbitral proceedings held outside India.
In the circumstances, the emergency award passed by the Arbitral Tribunal
cannot be enforced under the Act and the only method for enforcing the same
would be for the petitioner to file a suit.
Further in the case of Indiabulls Financial Services Ltd. & Ors. v.
Jubilee Plots and Housing Private Ltd.18, it was held that if a person
disobeys the orders passed under Sec.17 of the Act would be guilty of
contempt as provided under Sec.27(5) of the Act but in the case of Raffles
Design International India Private Limited and Ors. Vs. Educomp
Professional Education Limited and Ors19, a new principle was laid down
which could be deduced from the simple reading of the provision that a
person if gulilty of not following the interim orders of the arbitral tribunal in a
Foreign Country cannot be proceeded against for contempt under Section.27
of the Act.
Thereafter, the Delhi High Court in the case of Sri Krishan v. Anand20
attempted to resolve the lacuna of Sec.17 as mentioned above by laying down
the principle that any person failing to comply with the order of the arbitral
tribunal under Sec.17 would be deemed to be making any other default or
guilty of any contempt to the arbitral tribunal during the conduct of the
18 MANU/DE/1829/2009
19 OMP(I) (COMM.) 23/2015 Decided on 07.10.2016
20 (2009) 3 Arb LR 447 (Del)

proceedings under section 27 (5) of Act. The remedy of the aggrieved party
would then be to apply to the arbitral tribunal for making a representation to
the Court to mete out appropriate punishment. Once such a representation
is received by the Court from the arbitral tribunal, the Court would be
competent to deal with such party in default as if it is in contempt of an order
of the Court, i.e., either under the provisions of the Contempt of Courts Act
or under the provisions of Order 39 Rule 2A Code of Civil Procedure, 1908.
Thereafter, the 246th Law Commission report (herein referred to as LCR) in
order to provide a prudent solution, recommended the amendments to
Section 17 of the 1996 Act which allowed the orders of Arbitral Tribunal to be
applied with the same force of law as the Orders of a Court.
Section 17 amendment gives a wider scope and mandate to the interim
measures by the arbitral tribunals because any order passed by the tribunal
will be deemed to be an order of the Court for all purposes and be enforceable
under the Civil Procedure Code of India. Previously, the interim orders by the
arbitral tribunals could not be implemented with proper force of law since
they were not treated at par with a decree or order of Court.
VI. Power of arbitrator referring to Section 23 and 28 of the Act
The amended Sec.23 of 2015 Act enables the Respondent to file its
counterclaim against the Claimant, if any, in the same arbitration
proceedings, and need not initiate another arbitral proceeding.
The amended provision of the 2016 Act functions in contrary to the prevalent
practice in many ad hoc domestic disputes where tribunals consider the

counterclaim as a separate reference and often additional fees is charged in

connection thereto.21
The 246th LCR report provides a note while explaining the respective
abovementioned amendment and states that it is in order to ensure that
counter claims and set off can be adjudicated upon by an arbitrator without
seeking a separate/new reference by the respondent so long as it falls within
the scope of the arbitration agreement, in order to ensure final settlement of
disputes between parties and prevent multiplicity of litigation.
The new law empowers the Respondent in the proceedings to submit counter
claim or plead a set-off and hence falling within the scope of arbitration
agreement.22
With reference to the powers of the Arbitrator provided under Section.28 of
the 1996 Act, an arbitrator could not decide and act as an amiable
compositeur or give any decision in accordance to wat he thinks as prudent
and reasonable whereas Section 28(3) of the new Act recognises such power
and authorises the arbitrator to act as an amiable composituer.
The amendment of 2015 is constructed in consonance with the UNCITRAL
model law of arbitration which in its Article 28(3) recognizes that the parties
may authorize the arbitral tribunal to decide the dispute ex aequo et bono or
as amiable compositeur where the arbitral tribunal may decide the dispute
on the basis of principles it believes to be just, without having to refer to any
21 Available at http://www.moneycontrol.com/news_html_files/news_attachment/2015/ELP
%20Analysis%20-%20Amendments%20to%20Arbitration%20&%20Conciliation%20Act%201996.pdf

22 Available at

http://www.mondaq.com/india/x/448666/Arbitration+Dispute+Resolution/Highlights+Of+Amendment+
To+The+Arbitration+And+Conciliation+Act+1996+Via+Arbitration+Ordinance+2015

particular body of law. In furtherance of the same issue, a Canadian court of

appeal ruled that the arbitrator acting as amiable compositeur should find a
way to reconcile the terms of a contract with good faith in its performance. It
may mitigate the strict enforcement of the rights flowing from the contract
but not substantially rewrite the contract or strike clauses therefrom 23.
The amendment in Section.28 was made to negate the effect of the ratio laid
down by Supreme Court in the judgement of ONGC Ltd Vs. Saw Pipes Ltd24,
where the Supreme Court after taking into consideration the words in
accordance with the contract

used

in

Section.28(3),

held

that

any

contravention of the terms of the contract renders the award violative of

Section.28(3) of the 1996 Act and is therefore subject to the Courts
interference under Section.34.
The Section 28(3) of the 2016 Act perfectly adopts the relevant provision
(Article 28) UNCITRAL model law of arbitration and gives effect to the award
by an arbitrator which is not strictly in accordance with the terms of the
contract . Such award would not be made ipso facto patently illegal and is
not liable to be set aside under Section.34.

VII. Conclusion
The Indian Judiciary has been criticised for its narrow approach to
arbitration which is further supplemented by the unreasonable delays, high
costs and delay in enforcement of the award. The abovementioned
amendments to the 1996 Act tries to curb all such inconsistencies by
23 Coderre v. Coderre, Montreal Court of Appeal, Canada, 13 May 2008, [2008] QCCA 888 (CanLII),
available on the Internet at http://canlii.ca/t/1wx0p

24 (2003) 5 SCC 705

providing the arbitrators and the arbitrational tribunals to act independently

with much wider scope of power so as to achieve the ultimate aim of the
Arbitration Act which is to make India a global forum for commercial
arbitration which inturn will make our country more investor friendly and
therefore help in the developing economy. Finally, I would also like to state
that the Law Commission via its 246th report along with its supplementary
report clarified the provisions of the Act and attempted to rectify the lacunas
regarding the powers of the arbitrator in consonance with the original scope
and object of the Arbitration Act in order to function as an effective ADR
(alternate dispute resolution) mechanism.