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Project on Arbitration and Conciliation Act, 1996

Submitted by: Akansha Chaudhary

BBA LLB (2018-2023)
Jindal Global Law School
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Foreword

The following project provides detailed however, brief information regarding the Arbitration

and Conciliation Act, 1996. The purpose of the act was to prove an Alternative Dispute

Resolution and reduce the backlog and the pressure on the courts and to provide a process

that would give speedy justice. It spans form an introduction of arbitration and the history of

the above act to all the procedures and the articles related to it that are to be followed. One of

the most crucial part of the Act is understanding the concept of arbitral award and the

recourse of such an award. Doing the project which was new to me provided comprehensive

and better understanding and knowledge about arbitration and conciliation conducted during

domestic commercial dispute as well as international commercial dispute. I also read the

Delhi High Court judgement of Daiichi Sankyo Company Limited vs Malvinder Mohan Singh

And Ors on 31 January, 2018 to understand the implementation of the Act.

I would like to thank Mr. Ritesh Saxena and Mr. Gaurav Vutts for this opportunity and

further appreciation for their guidance and support throughout the project. This has been a

great learning experience which will benefit me in my future endeavours.

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The Arbitration and Conciliation Act, 1996

The law on arbitration was formerly contained in three enactments, the Arbitration

Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and Foreign (Recognition

and Enforcement) Act, 1961. However, the Arbitration Act, 1940 was considered outdated as

it could not keep up with the contemporary requirements of the domestic and international

commercial disputes. The United Nations Commission on International Trade Law adopted

the Model law on International Commercial Arbitration as well as a set of Conciliation Rules.

It urged all the nations to adopt the Model law 1 to provide conformity and clarity to all the

nations in cases of international commercial dispute resolution. To comply by the Model law

and the Conciliation Rules, the Geneva Convention and New York Convention and to amend

the domestic and international arbitration and the enforcement of foreign arbitral award, the

then President, passed the Arbitration and Conciliation Ordinance, 1996 as the Parliament

was not in session. It was after the third ordinance of 21 stJune, 1996 that the Arbitration and

Conciliation Bill was introduced in the Parliament.

Arbitration is a form of an Alternative Dispute Resolution 2 where the parties do not

approach the court but resolve the matter under the arbitral tribunal. The purpose of

arbitration and conciliation is to provide speedy resolution and to avoid burdening the courts

thereby reducing backlogs. The issue is decided by an impartial, independent and qualified

third party, Arbitrator who can be challenged under Section 12, Fifth Schedule and Sixth

Schedule of the Arbitration and Conciliation Act, 1996. Arbitration does not depend on an

issue being a commercial or a civil dispute but only on the existence of an arbitration
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It consisted of all the stages of the arbitral process from the arbitration agreement, the composition, jurisdiction
to the extent of court intervention and recognition and enforcement of the tribunal awards to provide uniformity
and clarity regarding international commercial disputes.
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Alternative Dispute Resolution refers to the settlement of the dispute without referring to litigation as taking
the course of arbitration, conciliation, mediation and so on. This process is considered less expensive and the
proceeding take place swiftly.
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agreement, [Link] Pai & Anr vs H.V. Pai (D) Thr. Lrs. & Ors on 9 July, 2010.3 The

validity of an arbitration agreement depends on the intention of the parties to enter into such

an agreement which shall be determined by the terms used in it. Although there is no specific

format of an Arbitration agreement however, the words incorporated must showcase the

determination and an obligation to refer to an arbitration tribunal in case of a dispute and not

merely “contemplate the possibility of going for arbitration”. It is not necessary that the

clause or the agreement must have words such as ‘arbitration’ or ‘arbitral tribunal’ if it

contains the elements of an arbitration agreement. They are:

a) The agreement must be in writing

b) The parties should have agreed to refer any dispute (present and future) between them

to the decision of a private tribunal

c) The private tribunal must be empowered to adjudicate upon the disputes in an

impartial manner, giving due opportunity to the parties to put forth their case

d) The parties should have agreed that the decision of the private tribunal in respect of

the dispute will be binding on them.

If the terms of the agreement showcase a possibility of referring to arbitration in the

future and not an obligation to refer to arbitration, then there is no valid and binding

arbitration agreement. Section 7 of the Arbitration and Conciliation Act, 1996 refers to an

arbitration agreement which means an agreement by the parties to submit to arbitration all or

certain disputes which have arisen or may arise between the parties in respect of a defined

legal relationship whether contractual or not. It may be in form of a clause or a separate

agreement, it should be in writing and will be considered so when it is signed by the parties,

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The Act applies to domestic arbitrations, international commercial arbitrations and conciliations. The
applicability of the Act does not depend upon the dispute being a commercial dispute. Reference to arbitration
and arbitrability depends upon the existence of an arbitration agreement, and not upon the question whether it is
a civil dispute or commercial dispute. There can be arbitration agreements in non-commercial civil disputes
also.
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an exchange of letters, telegram and other means of communication and a verbal agreement

between the claimant and the defence, where the statement regarding the existence of such an

agreement is made by one party and not denied by the other party. The respective parties can

also agree on the prospect of an appellate arbitration as there is no implied or defined

prohibition against it in the act.

Conduct of Arbitral Proceeding: (Section 18 to Section 27):

Equal treatment must be given to both the parties and each party must be given a

chance to present their case. The parties are free to decide the manner of the procedure to be

followed, if they fail to do so then the arbitral tribunal will conduct the proceedings at it

deems fit. The place of arbitration is to be decided by the parties, if they fail to do so then the

arbitral tribunal shall decide the location keeping in mind the convenience of both the parties.

Section 23 states the process of the statement made by the claimant and the defence.

First the claimant will state his or her facts supporting his or her claim with the relief and

remedy sought then, the respondent will state his or her facts supporting his or her claim and

the remedy to be sought. Both parties must provide the relevant documents. The parties can

also amend or supplement their claim during the proceeding unless otherwise agreed or if the

tribunal considers it inappropriate in regard to the delay in time. In case of evidence, the

arbitral tribunal or a party with the arbitral tribunal may approach the court for assistance in

taking the evidence.

Appointment of Arbitrators:

Section 11 of the Arbitration and Conciliation Act, 1996 refers to the Appointment of

arbitrators. The Parties are free to decide the number of arbitrators however, the number

cannot be even. The parties are free to decide the procedure for appointing the arbitrator and
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the arbitrator can be of any nationality unless otherwise decided by the parties. In case the

parties are unable to arrive on a decision for the appointment process, both parties shall elect

one arbitrator each. The two elected arbitrators will then elect one arbitrator who will act as

the presiding one. In case one party is unable to elect an arbitrator within thirty days of the

receipt of a request to do so or both parties are unable to elect an arbitrator within thirty days

of the date then the appointment shall be made by the Supreme Court or the High Court or

any other person designated by the court on the request of a party. The concerned authority

with ensure the existence of an arbitration agreement and will take into consideration all the

aspects as mentioned under the agreement for the qualifications required by the arbitrator

while appointing one.

In case of international commercial arbitration for a sole or third arbitrator, the

Supreme court or other designated person or institution by the court shall appoint the

arbitrator keeping in mind that the nationality of the arbitrator must be different from the

nationality of the two parties.

Under Section 13, the parties have the right to challenge the arbitrator. The parties are

free to agree on a procedure for challenging the arbitrator. Any party challenging shall do it

within fifteen days of becoming aware of the arbitral tribunal constitution and section 12,

send a written statement of the reasons for the challenge.

In case of a dispute arising in India, it will be decided in accordance with the Indian

laws in force at that time and in case of international commercial dispute, the parties have the

freedom to decide the jurisdiction that shall be followed. In case the parties fail to decide the

rules of law to be followed, the arbitral tribunal shall take the decision appropriate for both

the parties. It must be made in writing and must be signed by the members of the arbitral

tribunal. The award must state the reasons upon which it is based unless the parties have
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agreed to giving no reason or a settlement. If during the proceeding, both the parties decide to

settle then the settlement will be in form for an arbitral award if requested by the parties and

not objected by the arbitral tribunal.

Arbitral award:

An arbitral award is the award granted by the arbitrator on his or her decision. The

award may be monetary or non-monetary. It is made keeping in mind the terms of the

contract and trade usages which are applicable. It should be made within a period of twelve

months from the date of the arbitral tribunal enters which is the date from which the arbitrator

gets his or her letter of appointment. The parties may request the arbitral tribunal to provide

certain corrections in the award or interpretation of a point within thirty days from the receipt

of the award unless another period was decided by the parties as mentioned under Section 33.

The arbitral tribunal may also provide correction by themselves within thirty days from the

date of the arbitral award. There are certain scenarios where the application of the arbitration

will be set aside, such as a party was under some incapacity, the arbitration award is not valid

under the rules of law decided by the parties and so on mentioned under Section 34 sub-

section (2) and sub-section (3).

These challenges to award will be determined by the laws of the place of arbitration.

The arbitral award can also be set aside if the courts find that the award was not in conformity

of the laws in force or if it was against the public policy4. The request for recourse of arbitral

award will not be entertained after three months of which the party making the application

received the award. The concerned party can only make an application in the court after

giving a prior notice to the other party, State of Bihar v. Bihar Rajya Bhumi Vikas Bank

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Public Policy: Question of public policy arises when the making of the award was induced by fraud, corruption
or was in violation of Section 75 or Section 81; when it is against the fundamental policy of Indian law or it is in
conflict with the basic notions of morality and justice.
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Samiti, Civil Appeal No. 7314 of 2018, Decided on July 30, 2018. 5 For this application, there

is no need for additional evidence as the record of the arbitrator is sufficient. In case there is

something missing in the records provided, which is relevant to the case, then it can be

included via an affidavit filed by both parties, Emkay Global Financial Service Limited v.

Giridhar Sondhi, Civil Appeal No. 8367 of 2018, decided on August 20, 2018.6

The final award shall be enforced with the provisions of the Code of Civil Procedure

and as a decree of the court.

Under Section 32 the termination of the proceedings takes place by the final arbitral

award or by the order of the arbitral tribunal when the claimant withdraws his or her claim

unless the respondent objects to this and the tribunal recognises his or her interest in

obtaining the final settlement, both parties agree to the termination or the continuation of the

proceeding is considered unnecessary.

Role of courts in Arbitration Agreements:

In case a party refuses to go for arbitration in case of a subject of a dispute which

comes under arbitration, the other party under Section 8 of the Arbitration and Conciliation

Act, 1996 may refer to a judicial authority in matter which is the subject of arbitration not

later than the date of submitting his or her first statement on the dispute refer the parties on

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The Supreme Court inter alia held that to construe Section 34(5) as being mandatory would defeat the
advancement of justice as it would provide the consequence of dismissing an application filed without adhering
to the requirements of Section 34(5), thereby scuttling the process of justice by burying the element of fairness.
It was further held that the provision is procedural, the object behind which is to dispose of applications under
Section 34 expeditiously.
The Court however added that it shall be the endeavour of every Court in which a Section 34 application is filed,
to stick to the time limit of one year from the date of service of notice to the opposite party by the applicant, or
by the Court, as the case may be.
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In view of the above, the Supreme Court concluded that:
"An application for setting aside an arbitral award will not ordinarily require anything beyond the record that
was before the Arbitrator. However, if there are matters not contained in such record, and are relevant to the
determination of issues arising under Section 34(2)(a), they may be brought to the notice of the Court by way of
affidavits filed by both parties. Cross-examination of persons swearing to the affidavits should not be allowed
unless absolutely necessary, as the truth will emerge on a reading of the affidavits filed by both parties."
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the subject of the dispute to arbitration, then the respective authority notwithstanding any

order, decree or judgement of the Supreme Court or any other court refer the parties to

arbitration unless it finds prima facie that no valid arbitration agreement exists. To proceed

with this action, the application must contain the original arbitration agreement or a certified

copy of it. In case of an absence of the original copy due to its possession with the other

party, the respective party can file a petition to the court to call upon the other party to

produce the original arbitration agreement. Keeping in mind that an existence of arbitration

clause does not prevent the jurisdiction of a Civil Court automatically, Mahesh Kumar vs

Rajasthan State Road Transport, AIR 2006 Raj 56, 2006 (1) ARBLR 615 Raj, RLW 2005 (4)

Raj 2667, 2005 (4) WLC 3297.

Under Section 9 of the Arbitration and Conciliation Act, 1996 A party may before or

during arbitral proceeding or at any time after making of an arbitral award but before

enforcing it in accordance with Section 36 apply to the court for interim measures.

 Such as appointment of a guardian for a minor or a person with unsound mind for

arbitral proceedings or preservation,

 interim custody of the subject matter of the arbitration agreement

 securing the amount, property or land in dispute in the arbitration

 interim injunction or appointment of a receiver

This will only take place when the action of the other party is in terms of breach of an

agreement or harms equity, fair play or natural justice. These interim measures must appear

just and convenient. When the court passes an order for interim measures before the

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The judgment of Hon'ble Supreme Court delivered in Hindustan Petroleum Corporation Ltd. (supra) also
nowhere says that the civil court shall not have jurisdiction to entertain the suit only because that there is
contract for referring the dispute to arbitrator. It is not a case of total ouster of jurisdiction of the court in the
cases where the arbitration clause is there in the contract between the parties to the suit, but it depends upon
compliance of the conditions by the persons seeking for referring the matter to the arbitration.
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commencement of the arbitral proceedings then the proceedings shall start from a period of

ninety days from the date of such an order or further time as decided by the court. However,

once the arbitral tribunal has been constituted such measures will not be entertained by the

court. The court will only step in if it feels that Section 17 8 does not provide for the measure.

Pendency of any proceedings is not a condition for an exercise of the power by court.

Conciliation: (Section 61 to Section 81)

Conciliation is when the parties seek an amicable settlement for their dispute by

assistance of a third independent party to come to a negotiated settlement. There should be

one conciliator unless agreed by the parties for two or three conciliators who must act jointly.

As mentioned under Section 61, conciliation begins when one party sends a written invitation

to another party for conciliation and the other party accepts in writing. If the other party

refuses, then there will be no conciliation. If the party does not receive confirmation from

another party within thirty days or by the time specified in the invitation, then he or she may

treat this as a rejection and shall inform the other party in writing.

In case of appointment, if there is a sole conciliator, then both parties shall decide. In

case of two conciliators, each party will choose one and in case of three conciliators each

party with choose a conciliator who will then choose a third conciliator who will act as a

presiding conciliator. The conciliator may request both the parties to submit a brief written

statement regarding the issue and may request for further information if deemed necessary

and appropriate. Any information received by one party shall be disclosed to the other party

to provide them the fair chance to explain their point of view.

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17. 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).
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The conciliator will then give a written settlement on the points which can be altered

to the parties to consider. If the parties reach an agreement on the settlement, they may draw

a settlement, as requested by the party the conciliator may or assistance of the conciliator in

the process will take place. The conciliation proceeding will come to an end under the

provision provided in Section 76.9

Matters that cannot be referred to arbitration and conciliation:

 Matrimonial matters, like divorce or restitution of conjugal rights;

 matters relating to guardianship of a minor or other person under disability;

 testamentary matters, for example, questions about the validity of a will;

 insolvency matters, such as adjudication of a person as an insolvent;

 criminal proceedings;

 questions relating to charities or charitable trusts;

 matters falling within the purview of the Monopolies and Restrictive Trade

Practices Act;

 dissolution or winding up of a company.

Bill regarding the Act in 2019:

The Arbitration and Conciliation (Amendment) Bill, 2019 aims to provide a swift

settlement of disputes and to clearly state the accountability of the arbitrator. The bill aims to

set up an independent body for improving institutional disputes and to make the process more

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76. Termination of conciliation proceedings.—The conciliation proceedings shall be terminated—
(a) by the signing of the settlement agreement by the parties on the date of the agreement; or
(b) by a written declaration of the conciliator, after consultation with the parties, to the effect that further efforts
at conciliation are no longer justified, on the date of the declaration; or
(c) by a written declaration of the parties addressed to the conciliator to the effect that the conciliation
proceedings are terminated, on the date of the declaration; or
(d) by a written declaration of a party to the other party and the conciliator, if appointed, to the effect that the
conciliation proceedings are terminated, on the date of the declaration.
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time-bound, cost-effective and to conduct timely clearance of cases. The Arbitration Council

of India (ACI) will the frame rules on the basis of which the institutions will be judged and

will provide the guidelines for the norms, quality and the performance that must be presented

and considered while examining all the institutions. It also encourages the training of

arbitrators.