Arbitration &

Conciliation Act,
1996
Rohit Naulakha Shivam Agarwal Ashish Suman Saurabh Saxena Tejaswi Rao

Prayag Kaushik Sudhir Singh Rishabh Varma Akash Mittal Prem Gaur
Alternative Dispute
Resolution (ADR)
 “
Alternative dispute resolution
includes dispute resolution
processes and techniques that act
as a means for disagreeing parties
to come to an agreement short
of litigation.
It is a collective term for the ways
that parties can settle disputes,
with (or without) the help of a third
party.
METHODS OF ADR

NegotiatioN ARBITRATION

Unrecognized Recognized

MEDIATION CONCILIATION
Acts addressing ADR in India

The Arbitration &

Conciliation Act, 1996

Conciliation
proceedings have The Arbitration
been given legal (Protocol &
recognition for the Convention) Act, 1937
first time.

Repealed previous
enactments and
The Arbitration Act,
introduced Arbitration
1940
and Conciliation Act
1996.

The Foreign Awards

(Recognition and
Enforcement) Act,
1961.
 ABOUT THE ACT
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.
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.
 ARBITRATION

An independent, neutral third person ("arbitrator") is

appointed to hear and consider the merits of the dispute and
renders a final and binding decision called an award.

The process is similar The parties choose

to the litigation their arbitrator and
process as it involves the manner in which
adjudication the arbitration will
proceed.
OBJECTIVES OF THE ACT

Domestic
Arbitration

Consolidate
Conciliation
and amend International
Commercial
the law Arbitration

relating to

Enforcement
of Foreign
Arbitral
Awards
NECESSITY OF THE ACT
Increasing FDI
and other
forms of
collaboration
-increasing
disputes
between Indian
and foreign
Shrinking parties
Boundaries,
Free trade & Settlement of
International Competition dispute in an
Commerce have often leads to expeditious,
become global conflicts convenient,
necessities. between inexpensive
Growing entrepreneur and private
strength and s resulting in manner so that
role of India in commercial they do not
the global disputes. become the
economy subject of
future litigation
between the
parties.
disputes which can be referred to arbitration
Disputes
Disputes
related to
related to
property
property or
or
money
money Banking
Banking &
&
Disputes
Disputes non-
involving
involving Banking
Banking
insurance
insurance transaction
transaction
claim
claim disputes

Disputes
Disputes
Disputes Disputes
Disputes related
related to to
related to which fall product
intellectual
intellectual within
within the
the liabilities
liabilities
property
property jurisdiction
jurisdiction and
and
rights
rights of
of Arbitration
Arbitration professiona
professiona
ll liability
liability

non-
non-
Disputes
Disputes fulfillment
fulfillment
related to
of
of a
a clause
clause
constructio
constructio
Disputes in a
n
n projects
projects Disputes in
in contract
a
a contract
partnership
partnership
and
and joint
joint
ventures
ventures
Disputes excluded from the Arbitration Act

Matters involving questions about validity of a will.

Relating to appointment of a guardian.

Relating to Charitable Trusts

Winding up of a company

Matters of divorce or restitution of conjugal rights

Lunacy proceedings

Insolvency matters, such as adjudication of a person as an insolvent.

 SCHEME OF THE ACT

Act is divided in to the following parts

1 2 3 4

Domestic Enforcement of Conciliation Supplementary

arbitration foreign awards procedures provisions
 Part-I
Domestic Arbitration
 “
"arbitration agreement" means 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
 Arbitration Agreement
▣ An arbitration agreement
may be in the form of an
arbitration clause in a
contract or in the form of a
separate agreement
a document signed by the parties
▣ An arbitration agreement
shall be in writing
▣ An arbitration agreement is
in writing if it is contained
in-
an exchange of letters, telex,
telegrams or other means of
telecommunication which provide a
record of the agreement
▣ The reference in a contract
to a document containing
an arbitration clause
constitutes an arbitration
agreement if the contract is
in writing and the reference
is such as to make that
arbitration clause part of
the contract
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.
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
 Interim measures by Court

ф for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral
proceedings
ф the preservation, interim custody or sale of any goods which are the subject-matter of the
arbitration agreement
ф securing the amount in dispute in the arbitration
ф the detention, preservation or inspection of any property or thing which is the subject-matter of the
dispute
ф interim injunction or the appointment of a receiver
ф any other interim measure of protection as may appear to the Court to be just and convenient
APPOINTMENT OF ARBITRATORS

the parties are

free to agree on
a procedure for
appointing the
arbitrator or
arbitrators

The parties are free If they are If not appointed

to determine the unable to within 30 days, the
number of agree, party can request
arbitrators, provided arbitrator, and Chief Justice of High
that such number the two Court to appoint an
shall not be an even A person of
any appointed arbitrator
number arbitrators shall In case of
nationality
may be an appoint the international
arbitrator, third arbitrator commercial dispute,
unless who shall act as the application for
otherwise the presiding appointment of
agreed by the arbitrator arbitrator has to be
parties made to Chief Justice
of India
 Termination of arbitrator

Appointment of Arbitrator can be challenged only if

Circumstances exist that give He does not possess the

rise to justifiable doubts as to qualifications agreed to by
his independence or the parties
impartiality
 Termination of arbitrator

The mandate of an arbitrator shall terminate if---

he becomes de jure or he withdraws from his where he withdraws

de facto unable to office or the parties from office for any
perform his functions or agree to the termination reason; or by or
for other reasons fails to of his mandate pursuant to agreement
act without undue delay 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

ф The Arbitral Tribunal is not bound by Code of Civil Procedure, 1908 or Indian Evidence Act, 1872
ф The parties to arbitration are free to agree on the procedure to be followed by the Arbitral Tribunal
ф Law of limitation (1963) applicable
ф Flexibility in respect of procedure, place & language
ф Submission of statement of claim & defense maybe amended/ supplemented at any time
ф Hearings & Written Proceedings – at the discretion of the tribunal
 Can be oral at the request of either party
ф Settlements during Arbitration
 Arbitral Award

Criterion
• The decision of Arbitral Tribunal will be by majority

Content
•States the reasons for the award unless the parties have agreed
that no reason for the award is to be given,Copy of award given
to each party
•The arbitral award shall be in writing and signed by the members
of the tribunal
•The award should be dated and place where it is made should
be mentioned
Tribunal can make interim award also

Slide No. 23
 Arbitral Award

Reasons why the award can be appealed against

• 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
• 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

Slide No. 24
 Cost of Arbitration

▣ Fees and expenses of ▣ Tribunal can decide ▣ The Court will ask for
arbitrators and the cost and share of deposit from the
witnesses, legal fees each party. parties and on such
and expenses, ▣ If parties refuse to deposit, the award
administration fees pay the costs, the will be delivered by
of the institution Arbitral Tribunal may the Tribunal. Then
supervising the refuse to deliver its Court will decide the
arbitration and other award; thus any costs of arbitration
expenses. party can approach and shall pay the
Court. same to Arbitrators.
Balance, if any, will
be refunded to the
party.
 Intervention by Court

▣ The earlier arbitration ▣ If an objection is raised ▣ The aggrieved

law was that the party by the party, the party can
could access court decision on that
almost at any stage of objection can be given
approach Court
arbitration by Arbitral Tribunal only after Arbitral
▣ Now, approach to court itself & the arbitration Award is made.
has been drastically proceedings are
curtailed. continued

▣ Appeal to court is ▣ Tribunal cannot be

now only on given unlimited
restricted ARBITRATION ACT and uncontrolled
grounds. HAS OVER-RIDING powers and
EFFECT  supervision of
Courts cannot be
totally eliminated
 Part-II
Enforcement of Foreign Awards
 “
“Foreign award" means an arbitral
award on differences between persons
arising out of legal relationships,
whether contractual or not, considered
as commercial under the law in force
in India, made on or after the 11th day
of October, 1960.
Foreign awards enforcible in india

New York convention Geneva convention

award award

 Made after 11th October,  Made after 28th July,

1960 1924.
 New York convention was
drafted and kept in United
Nations for signature of
member countries on 21st
December, 1958.
 Guidelines to enforce a foreign award
Documents:
Produce original
arbitral award
If the court declines to
Agreement of Otherwise, the foreign enforce the arbitral
arbitration to the The enforcement of
award is enforceable award, appeal can be
district court having award can be refused
through court as if it is made to the court
jurisdiction over the by court only in cases
a decree of the court. where appeal normally
subject matter of the specified in section 48
[section 49] lies from the district
award. court.
Proof that the award is
a foreign award.
[section 47]

The courts can refuse Indian courts can be No further appeal can
to implement the approached only at the be made (except
award only on limited time of implementation appeal to Supreme
grounds of award Court)
 Part-III
Conciliation Procedure
conciliation

Conciliation is the amicable settlement of disputes between the

parties, with the help of a conciliator.
 Conciliation explained

▣ There is no □ Conciliation can ▣ The conciliator only

agreement for be done even if brings parties
arbitration there is together and tries to
arbitration solve the dispute
agreement using his good
offices

□ The conciliator ▣ In such agreement ▣ However after the

has no authority they may draw and settlement
to give any sign a written agreement is signed
award settlement by both the parties
agreement. Duly and the conciliator, it
signed by the has the same status
conciliator and effect as if it is
an arbitral award
 Commencement of conciliation proceedings

1 2 3

The party initiating Conciliation proceedings Unless there is written

conciliation shall send to the
other party a written
invitation to conciliate under
this Part, briefly identifying
the subject of the dispute
shall commence when the acceptance, conciliation
other party accepts in cannot commence. If the
writing the invitation to other party does not reply
conciliate. within 30 days, the offer for
conciliation can be treated
as rejected
 Appointment of conciliators

▣ In conciliation ▣ In conciliation ▣ In conciliation

proceedings with proceedings with proceedings with
one conciliator, the two conciliators, three conciliators,
parties may agree on each party may each party may
the name of a sole appoint one appoint one
conciliator conciliator conciliator and the
parties may agree on
the name of the third
conciliator who shall
act as the presiding
conciliator
 Role of a conciliator

The conciliator shall assist the parties in an independent and impartial manner in their attempt to reach an
amicable settlement of their dispute.

The conciliator shall be guided by principles of objectivity, fairness and justice

The conciliator may conduct the conciliation proceedings in such a manner as he considers appropriate, taking
into account the circumstances of the case, the wishes the parties may express, including any request by a
party that the conciliator hear oral statements, and the need for a speedy settlement of the dispute

The conciliator-may, at any stage of the conciliation proceedings, make proposals for a settlement of the dispute.
Such proposals need not be writing and need not be accompanied by a statement of the reasons therefor
 Part-IV
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

 Power to make rules: Rules made by Central

Government subject to approval by parliament

 Repeal and savings: The present act overrules the

previous acts
Case Studies
 Bhatia Internatioal V Bulk
Trading
Appeal (Civil) 6527 of 2001
 “
In most countries, the possibility to bring before a
court an action for annulment of an arbitral award
rendered abroad is excluded. On the other hand,
the Supreme Court of India has over the years
adopted a very aggressive nationalistic posture in
deciding international arbitration disputes, and is
an outlier in this arena. In cases involving foreign
arbitral disputes, the Supreme Court has
consistently revealed an alarming propensity to
exercise authority in a manner contrary to the
expectations of the business community.
▣ 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
The underlying principle behind the Indian
Arbitration and Conciliation Act, 1996 (“1996 Act”)
was to “minimise the supervisory role of the courts
in the arbitral process.” However, Bhatia
International, decided by the Supreme Court in
2002, laid the foundation for an excessively
interventionist role of the judiciary in international
arbitrations, thereby negating the intent of the 1996
Act..
Part I “shall apply where the place of arbitration is in
India.”

However, in Bhatia International, the Supreme

Court held that Indian courts had good jurisdiction
even in the case of international arbitrations held
outside of India. In reaching this decision, the
Supreme Court construed the language in Section
2(2) and emphasised that the formulation omits the
word “only” (as in “shall only apply”), so that
the 1996 Act does not prohibit the application of
Part I to an award made outside India. 
In April 2010, the Ministry of Law and Justice, with
the intention of reinforcing the ‘minimum judicial
intervention' standard, had proposed an
amendment to correct the error made and followed
since the decision in Bhatia International. The
proposed amendment to Section 2(2) of the 1996
Act seeks to insert the word “only” with a view to
explicitly limit the operation of Part I of the Act to
domestic arbitration
Haryana Telecom v Sterlite Industries
Brief History
 What Happened
The court held that : Judicial
authorities will refer the
matter to the Arbitration
only when in their opinion
the matter or dispute which
the arbitrator is competent
or empowered to decide
In this case, the The company has become
courts held a view commercially insolvent with
that the Claim in the petition filed under the
petition for winding Companies Act, hence
up is not for money should wound up
 “
The Outcome

An arbitrator has no jurisdiction to order the winding up of the

company.
Notwithstanding any agreements between the parties
Therefore the matter pending before the high court could not be
referred to the A and C the High Court was right in rejecting the
petition.
Hence the petition for the reasons stated above have been
dismissed in Limein
 Case Study
Supreme Court Judgment, Civil appeal under ‘Arbitration
And Conciliation Act’ for setting aside of Foreign Award
Introduction

The parties:
 Venture Global Engineering (VGE)
 Satyam Computer Services Ltd.

 50:50 Joint Venture

 SHA signed:
 Disputes have to be resolved amicably
 If not resolved, refer to arbitration
 Background

Satyam alleged that the Several venture Satyam exercised its

VGE had committed a companies became option to purchase the
default insolvent VGE shares in the JV at
its book value

A series of petitions & Finally, the case came

cross-petitions to Supreme Court of
happened India
 Series of petitions & Cross Petitions

Satyam Satyam VGE

1) London Court of 2) United States District 3) Cross Petition

International Arbitration Court, Michigan

Satyam VGE VGE

4) 1st Addl. Chief Judge, Civil 5) High Court, Andhra 6) Appeal

Court, Secunderabad Pradesh
Case Details

I. JV was situated in India

II. Satyam enforced the award in USA

III. VGE challenged it saying the award should have been

enforced in India

IV. SC had to decide if enforcement of a foreign award can

be challenged in India
Reference Case:
Bulk Trading vs. Bhatia International

I. Similar case in which arbitration was held by ICC, Paris.

II. Bulk Trading filed an application in District Court which it

won.

III. Bhatia International approached SC.

IV. SC dismissed the petition in favour of Bulk Trading

 Contentions
VGE
▣ Foreign award can be
challenged based on reference
case
▣ Satyam cannot enforce in US
▣ SHA did not provide for
approaching US Court
▣ Satyam was motivated by the
intention of evading the legal
and regulatory scrutiny
Satyam
▣ No suit can be filed against
enforcement of foreign award
▣ No compulsion in seeking award in
India as per agreement
▣ SHA does not have any objection
related to foreign award
▣ VGE riding two horses at the same
time
▣ All previous cases except Bhatia held
view that foreign award can’t be
challenged
judgment

▣ Referred Bhatia International case.

▣ Even in international arbitrations, unless specifically

mentioned in contract, enforcement can be challenged

▣ This case has close link with India and its laws

▣ If foreign award can’t be challenged in India, it leaves a

party remediless

▣ Satyam had fraudulent intentions

judgment

▣ SC not expressing anything about either party.

▣ SC judgment only related to challenging foreign award.

▣ Arbitration proceedings to decide further.

▣ 6 months notice to dispose of case.

Criticism

▣ Widely criticized in international law community

▣ Erroneous interpretation of act

▣ Party Autonomy rendered useless

▣ The enforcement mechanism has been rendered

inefficient, clumsy, and uncertain

▣ Little use of arbitration

International Commercial Arbitration

▣ It means an arbitration relating to disputes arising out of

legal relationships, whether contractual or not,
considered as commercial under the law in force in India
and where at least one of the parties is:

1. an individual who is a national of, or habitually resident

in, any country other than India; or

2. a body corporate which is incorporated in any country

other than India; or

3. a company or an association or a body of individuals

whose central management and control is exercised in
any country other than India; or

4. the Government of a foreign country

 Case Study
Appellants: Respondent:

TDM UE
Infrastructure Development
Private Limited India Pvt
Limited
 Background
Determination of applicability
of Section 2(1)(f) of the Indian
Arbitration and Conciliation
Act, 1996 questioned
Parties into contractual terms
resorted to arbitration clause
contained therein pursuant to
disputes arose amongst them
Companies registered and
incorporated under the
Companies Act, 1956,
But Directors and share
holders of the Petitioner
residents of Malaysia
Neither the proposal nor the
nominees proposed by parties
accepted and hence the
application for appointment of
Sole Arbitrator was filed
Reference
Sec 2 (1). "international
commercial arbitration" means an
arbitration relating to disputes arising
out of legal relationships, whether
contractual or not, considered as
commercial under the law in force in
India and where at least 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) a company or an
association or a body of
individuals whose central
management and control is
exercised in any country other
than India; or
(iv) the Government of a
foreign country;
 Background

Company incorporated in India Where both parties have

can only have Indian
nationality for the purpose of
the Act
Indian nationalities, the
arbitration between such
parties cannot be said to be
an international commercial Reference
arbitration Sec 11: Appointment of
arbitrators

In a matter involving determination of jurisdiction of a Court,

certainty must prevail which cannot be determined by entering into
a disputed question of fact-

All the board meetings in the instant case took place in Malaysia
The Outcome

Arbitration - International commercial arbitration

“When both the companies are incorporated in India, and have been
domiciled in India, the arbitration agreement entered into by and
between them would not be an international commercial arbitration
agreement.”

Arbitration - Appointment of Arbitrator- Jurisdiction of

Court to appoint

Hence the present Court has no jurisdiction to nominate an Arbitrator

and hence the application dismissed
 Case Study
Appellants: Respondent:

National Gains Trading

Agricultural Co- Ltd.
op. Marketing
Federation
India Ltd.
 Background

Dispute arose between the Respondent alleged of non-

parties performance of the contract
— Invoking the arbitration Reference
clause of the agreement, Sec 11: Appointment of
notice sent by the Petitioner arbitrators

Sec 16.Competence
Respondent replied with refusal of arbitral tribunal to
Whether an arbitration clause rule on its jurisdiction
to comply with — Applicability
comes to an end if contract
of section 11 questioned
abrogated
The Outcome
Arbitration – Jurisdiction of arbitral tribunals

Section 16(1) of the Act clarifies that an arbitration clause forming

part of the contract to be treated as an agreement independent of the
other terms of the contract

Contract null and void would not entail ipso jure the invalidity of the
arbitration clause

Even if the performance of the contract comes to an end on account of

repudiation, frustration or breach of contract, the arbitration
agreement would survive for the purpose of resolution of disputes
arising under or in connection with the contract
 Case Study
Malaysian Airlines Systems BHD (II)
vs.
Stic Travels (P) Ltd(Arbitration Petition No. 18 of 2000),
Supreme Court’s ruling on arbitrator’s nationality
Decided by Justice M. Jagannadha Rao, the nominee of the Chief Justice of India.
 About the Case

The agreements
Malaysian Two agreement dated were terminated by
Airlines(Foreign Co.) September 15, 1986 the foreign company
appointed Stic Travels and January 11, 1989
by notice dated
Pvt. Ltd(Indian Co.) as were entered into for this
the General Sales purpose. The originals of March 1, 1999
Agent(Passenger) for these agreements were delivered to the
various countries. with the Indian company. Indian company on
the same date.
▣ The foreign company claimed that the Indian Company had, in its
letter dated June 15, 1999 admitted liability up to Rs 83,54,655.79
and failed to pay the same and had fraudulently attempted to
arbitrarily and illegally' adjust the same against false claims with a
view to defraud it.
▣ The application under Section 11 (5) for appointment of arbitrator by
the Chief Justice of India or his nominee is by the Malaysian Airlines
company.

▣ The claim of the foreign company is that the Indian company is liable
to pay it a sum of Rs 96,21,137 with interest at 24 per cent with
quarterly rests with effect from May 1, 1999 besides other amounts.
▣ The Indian company contended that the agreements in question
had ceased to exist and, hence, there was no arbitration clause.
The notice by the foreign company was bad in law.
▣ The foreign company had not produced the original
agreements. They are not with the Indian company. The foreign
company cannot file attested copies of the two agreements
▣ After hearing the parties, the designated judge identified two
points for consideration
▣ On second point He observed that while the nationality of the
Arbitration is a matter to be kept in view, it does not follow from
Section 11(9) that the proposed arbitrator is necessarily disqualified
because he belongs to the nationality of one of the parties.
▣ In case the party who belongs to a nationality other than that of the
proposed arbitrator, has no objection, the Chief Justice of India (or his
nominee) can appoint an arbitrator belonging to a nationality of one of
the parties.
▣ In case, there is objection by the one party to the appointment of an
arbitrator belonging to the nationality of the opposite party, the Chief
Justice of India (or his nominee) can certainly consider the objection,
and see if an arbitrator not belonging to the nationality of either parties
can be appointed.
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