Introduction

The Arbitration and Conciliation Act, 1996 ("Arbitration Act") has been enacted in order 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. The legislative intent and essence of the Arbitration Act is to bring domestic as well as international commercial arbitration in consonance with the UNCITRAL Model Rules, the New York Convention and the Geneva Convention. The main objective of the Arbitration Act is to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration and to minimize the supervisory role of the courts in the arbitral process and to permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings in settlement of the disputes. In furtherance of the aforesaid objective, the Arbitration Act underwent two major amendments in the year 2015 and 2019, respectively, in order to bring forth pertinent changes in the arbitration landscape of the country with the sole motive of making India an arbitration friendly nation.

The Arbitration & Conciliation Act, 1996 which came into force on 25th day of January, 1996.The act is of consolidating and amending in nature and not exhaustive. It is much beyond the scope of the 1940 Act. It provides for domestic Arbitration and enforcement of foreign arbitral awards. It continues on the source of the UN Model Law to make our law agreement with the law adopted by the United Nations Commission on International Trade Law (UNICITRAL).

Definitions

 Arbitration

In this Act, arbitration includes any form of arbitration whether it is administered by permanent arbitration or not.

 Arbitration agreements

An arbitration agreement means the agreement between the parties under which they agree to submit their dispute to the arbitration.

 Arbitration tribunal

The arbitration tribunal may consist of a sole arbitrator as well as the panel of arbitrators.

 Court

In this Act, the word ‘Court’ means:

The District Courts and High Courts; In the cases of arbitration other than international commercial arbitration, and
The High Courts and the Supreme Court, in the cases of international commercial arbitration.
 

International Commercial Arbitration

International commercial arbitration is an arbitration agreement under which the parties constitute a legal relationship between them which is commercial in nature where at least one party is:  

Either an individual who is the national or habitual residence of any country other than India; 
A body corporate incorporated in a foreign country other than India; 
An association of person or a body of individuals who are controlled and managed by another country other than India; or 
The authority is managed by the government of any foreign country. 

Arbitration award

In this Act, an arbitration award is defined inclusively which says that it includes interim awards however what exactly is an award is not fined. Generally, it is considered as adjudication and final decision of arbitrator which is based on the contention of the disputing parties.

Arbitration agreement

An arbitration agreement is a written document upheld by the parties of arbitration in order to settle their dispute outside the Court by the process of arbitration. There is no specified form  given under which such agreement is required to be drawn, however, in order to constitute a valid arbitration agreement, the following attributes are necessary:

The agreement must contemplate that the decision of the tribunal will be binding on the parties;
The agreement must contemplate that the jurisdiction of the tribunal or rights of the parties must derive either from the consent or from the order of the Court;
The agreement must contemplate that  parties substantive rights must be determined by the agreed tribunal;
The agreement must contemplate that the tribunal will impartially and in judicial manner determine the rights of parties;
The agreement must contemplate that the arbitration agreement of the parties must be intended to be enforceable in law; and
The agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.

Number of arbitrators

This Act leaves at parties to decide the number of the arbitrator with a condition that such number shall be an odd number. In case parties fail to determine the number the arbitrator shall consist of a sole arbitrator.

Appointment of the arbitrator 

According to this Act, there are two ways to appoint an arbitrator. First, if the parties have agreed upon any specific procedure for the appointment then the dispute between them is decided in accordance with that and recourse to the Chief Justice or his designate cannot be taken straightway, however, if they fail to decide the said procedure, then the Chief Justice or any person or institution designated by him shall have to appoint an independent and impartial arbitrator.

Grounds for challenging the appointment

This Act requires a prospective arbitrator to disclose any circumstances likely to give rise to justifiable doubts in the minds of the parties about his independence and impartiality. It seems to be an obligation upon the appointed arbitrator to make such disclosure even during the arbitral proceeding proclaim the unambiguous legislative disapproval of the appointment or continuance of a person against whom circumstances exist giving rights to justifiable doubts as to his independence and impartiality.

The key provision are as follows:

• The arbitration agreement can be in the form of communication by electronic means and treated as the valid arbitration agreement in writing.
• Appointment of Arbitrators might be made by the Supreme Court or High Courts, as the case might be rather than the Chief Justice of India or Chief Justice of High Court.
• If there should be an occurrence of international arbitration, the significant court would just be the High Court having original jurisdiction.
• To guarantee lack of bias of arbitrators, the person should have possible connection with the appointment of the arbitrator and must disclose in writing that there is existence of any kind of relationship or interest.
• Presently the tribunal should have capacity to grant a wide range of interim measures which the court is engaged to give.
• The amendment introduces a provision that the arbitral tribunal to make its award within 12 months and may be extended by a 6 months but with certain reasonable restriction (Section 29A).
• The amendment also allows to complete the arbitration proceedings within 6 months with the desire of the parties in a fast track manner (Section 29B).

The arbitral can be set aside if it is contrary to ‘public policy’

Section 34 of the Act gives that an arbitral award might be put aside on the off chance that it is contrary to 'public policy'. There must be an application given by the aggrieved party within 3 months from the date of award made by the tribunal and received by it. If sufficient cause is given for the delay of making application, then a further period of 30 days after the expiry of 3 months will be granted by the tribunal as given under the proviso of section 34(3).

There are some conditions under which the award can be set aside, as follows:

• If the party is not competent enough to look after his interests and also not represented properly, then the award will not have any binding effect on the parties and may be set aside. For example, minor or an unsound person.
• If the clause mentioned in the contract is invalid in nature, then the arbitration clause will be invalid automatically.
• Notice should be given to the parties, if any ex-parte award given by the arbitrator will be considered as invalid and to be set aside.
• The arbitrator must pass the award within the jurisdiction, if he exceeds the limit the award stands invalid and the extra part need to be set aside.
• Section 34(2) (a) (v) also provides that the composition of the tribunal can be challenged and award can be set aside. If the composition is not accordance with the agreement, then the procedure followed in the proceedings cannot be valid.

Correction and interpretation of awards

This Act gives the following powers to the arbitration tribunal with respect to the award made by itself:

To correct any computation errors, clerical errors, typographical errors or any other similar errors of similar nature accruing in the award;
To interpret any specific or part of the award; and
To make any additional arbitral award in respect of claims already presented to the tribunal in the arbitral proceeding but omitted by the arbitral tribunal.
These powers are exercised either on request present by parties or on its own initiative within 30 days from the date of the award.

Part -2 (Section 44 to Section 60)

This part specifically deals with enforcement of foreign awards. The provisions of this part are based on the New York Convention and the Geneva Convention respectively. This part describes the following important provisions:

Meaning of Foreign award 

In this Act, the foreign award is defined as an award of dispute which arises due to the legal relationship between the parties whether contractual or not but commercial in nature. In order to apply the provision of an arbitration agreement for enforcement of foreign award, it is necessary that:

It should be made on or after 11 October 1960 in pursuance of an agreement in writing for arbitration to which the convention set forth in the first schedule applies, and It should be made on one of such territories as the central government may, by intimation in the official gazette, declare to be territories to which the said Convention applies.

Enforcement of foreign award

This Act merely empowers the Court to declare that the foreign award is enforceable under the provisions of its chapter 2. At the moment such declaration is granted, an award shall be deemed to be a decree of the Court, it is open to the parties to seek its execution in accordance with the provisions of the code of civil procedure, 1908.   

Condition for enforcement

For the enforcement of the foreign award made under this Act, the following conditions shall be necessary:

• The award has been made in accordance with the submission made by the party for arbitration; 
• The award must be settled on such subject matter applicable for arbitration in India;
• The award must be made according to the submission declared in the manner and governing laws;
• The award will become final in the country in which it is made in this sense it will not be on appeal;
• The enforcement of such awards is not contrary to any law or public policy of India.

By: SHIKHA PURI