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ARBITRAION AND CINCILATION ACT 1976
History
Arbitration has a long history in India. In ancient times, people often
voluntarily submitted their disputes to a group of wise men of a
community called the Panchayat for a binding resolution.
The first Arbitration law in India was the Arbitration Act 1899 which
was based on the English Arbitration Act 1899.
Thereafter, the Arbitration Act, 1940 was enacted in India to
consolidate and amend the law relating to arbitration effective from
1 July 1940.
The Arbitration and Conciliation Act was again modified in 1996.
Objectives of the Arbitration Act
To cover both international & domestic arbitration & conciliation
I. To make provisions for an arbitral procedure which is fair,
efficient and capable of meeting the needs of the arbitration
II. To permit an arbitral tribunal to use mediation & conciliation to
encourage settlement of disputes
III. To provide that a settlement reached by the parties as a result
of conciliation proceedings will have the same status and affect
as an arbitral award
IV. To provide that the arbitral tribunal gives reasons for its arbitral
award
V. To provide that every arbitral award is enforced in the same
manner as if it were a decree of the court.
VI. To ensure that the arbitral tribunal remains within the limits of
its jurisdiction.
VII. To minimize the supervisory role of courts in the arbitral
process.
The arbitration and conciliation act 1996 deals with no of terms like
i. Arbitrator
ii. Arbitral turbinal
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iii. Arbitration agreement
iv. Arbitral award
Arbitrator:
The person who is appointed to determine the disputes is called the
arbitrator. Arbitrator(s) can be appointed by any of the following
manners:
I. By the parties as per agreed procedure
II. Each party may appoint one arbitrator and then the third
arbitrator is appointed by the two arbitrators
III. Appointment by the court
If there are more than one arbitrator, they are known as joint
arbitrators, if there is only one arbitrator he is known as sole
arbitrator, Arbitral turbinal means sole arbitrator or a panel of
arbitrators (joint arbitrators) appointed by the parties.
Challenge to appointment of an Arbitrator
an appointment of the arbitrator can be challenged on the grounds
of:
• his independence or impartiality; or
• He does not possess the requisite qualifications The appointment of
the arbitrator can be challenged by submitting a written statement
before the arbitration tribunal
Order of Reference
The Order of Reference in arbitration is an Agreement drawn
between the disputing parties referring the matter for Adjudication
by an Arbitrator, after the actual dispute has arisen.
It contains the names of the Arbitrators, details of the specific
dispute & a time limit within which the Arbitrators should declare the
award
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The difference between an Agreement of Arbitration & an Order of
Reference is that, the former is executed before any dispute takes
place & does not contain any names of the Arbitrators and the latter
is actually the submission prepared after the disputes have arisen,
containing all the details about the same.
UMPIRE
While the proceedings are conducted, there is a likely hood of some
differences between the two arbitrators during the course of
proceedings or at the time of declaration of award (Judgment) and if
these differences are not resolved, the proceedings will never come
to an end. Hence both the Arbitrators appoint a third Arbitrator
known as an UMPIRE, and to whom all differences between the
arbitrators are referred for his decision.
SOLE ARBITRATOR
When the proceedings are required to be conducted with the
intervention of the court, The court with the arbitration agreement
to be filed and an order of reference to the arbitrators who may be
suggested by the parties are appointed by the Court.
Unless otherwise expressly provided in the arbitration agreement
about the appointment of two or more arbitrators, the court may
appoint ONE arbitrator for the complete proceedings & he is known
as SOLE ARBITRATOR.
The Courts:
for the purpose of administrative expediency, Different types of Legal
questions are dealt with in different courts. There is a wide variety of
specialist courts designed to provide an efficient means of disposing
off specific matters Other means available for the resolution of
disputes include 1. Arbitration & 2. Special Tribunal, These are less
formal than the courts & may be set up to reconcile the individuals
rights with statutory demands enacted ostensibly to protect him
GENERAL LAW
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Arbitration Agreement and its Essential Elements
Arbitration agreement is an agreement by the parties to submit
arbitration to all or certain disputes which have arisen or which may
arise between them in respect of a defined legal relationship and has
following essential elements:
It must be in writing
It must have all the essential elements of valid contract
It must be to refer a dispute, present or future, to arbitration
It may be in the form of an arbitration clause in a contract or in
the form of a separate agreement or in the form of a reference
in a written contract containing an arbitration clause.
Principal Characteristics
i. Arbitration is consensual
ii. The parties are free to choose the arbitrator(s)
iii. Arbitration is neutral
iv. Arbitration is a confidential procedure
v. The decision of the arbitral tribunal is final and easy to enforce.
Challenge to appointment of an Arbitrator
an appointment of the arbitrator can be challenged on the grounds
of:
his independence or impartiality or He does not possess the requisite
qualifications The appointment of the arbitrator can be challenged by
submitting a written statement before the arbitration tribunal.
Powers & Duties of Arbitrator
Duties:
a) Duty to give equal treatment to the parties
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Though the arbitral tribunal is not bound by strict rule
of procedure or strict rules of evidence, they are not
bound by principle of natural justice. The arbitral
tribunal must be impartial. it should not be interested
in either of the parties or in the subject matter either
directly or indirectly.
b) Duty to sign the Award
The arbitral award shall be made in writing and it shall be signed
by the members of arbitral tribunal. In a arbitral proceeding where
there are more than one arbitrator, the signatures of majority of all
the members of the arbitral tribunal shall be sufficient for any
omitted signature. After tribunal award is made, a signed copy shall
be delivered to each party.
c) Duty to act beyond his jurisdiction
Though arbitral tribunal may make rule on its own justice yet it
cannot go beyond its own jurisdiction. The party aggrieved by such
award may make an application for setting aside such an arbitral
award when-
The arbitration agreement entered into between the parties is
not valid under the law to which the parties have subjected it
or, failing any indication thereon , under the law of the time
being in force , or
The party making an application 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
falling within the terms of the submission to arbitration, or it
contains decisions on matters beyond the scope of the
submission to arbitration, or
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The composition of arbitral tribunal or the arbitral procedure
was not in accordance with the agreement of the parties.
d) Duty not to commit fraud or any misconduct
The mandate of arbitrator be terminated and he will be
substituted when he commits any fraud or misconduct.
e) Duty to act judicially and follow the rules of justice, equity
and good conscience –
When any dispute or reference is made to arbitrator or arbitral
tribunal then it has to act judicially. Though arbitral tribunal is not
bound by strict rules of procedure and evidence. It has to follow
principle of natural justice means it is the duty of arbitral tribunal to
apply principle of justice, equity and good conscience and to settle
the dispute.
f) Duty to decide the dispute according to arbitration
agreement and law –
it is duty of arbitral tribunal to decide the dispute in accordance with
the provision of law which is prevailing for the time being in force in
India. The arbitrator has to act in judicial manner without any bias.
In short It is a duty of arbitral tribunal to give equal treatment to the
parties to the disputes under reference. It embodies the principle
that justice should not only be done but should appear to have been
done. The arbitral tribunal cannot act beyond his jurisdiction. it is a
duty of a arbitral tribunal that arbitral award shall be made in writing
and it shall be signed by the members of arbitral tribunal to act
judicially and follow the rules of justice , equity and good conscience
and to decide the dispute according to arbitration agreement and
law .
POWER OF THE ARBITRAL TRIBUNAL
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1) Power to administer an oath to the parties and
witnesses
The arbitrator has the power to administer the oath to the parties
and witnesses. He also could issue interrogatories to the parties if he
thought it necessary to do so. There is no express provision relating
to that power being given under The Arbitration and Conciliation Act,
1966. However, it is implicitly applied to the fact that he acts like a
quasi-judicial authority in arbitration.
2) Power to take interim measures
when any party during the arbitration proceeding or at any time
after making of the arbitral award, may seek the interim measure
before the arbitration tribunal. The arbitration tribunal has the
power to take an interim measure relating to:
Appointment of guardian for minor or person of unsound mind;
For the protection of: -
Interim custody and sale of goods which are subjected to the
arbitration agreement;
Securing amount which is disputed in the arbitration;
Detention, prevention or inspection of any property or thing which is
subjected to arbitration;
Appointment of receiver;
Such other interim measure is necessary for the eyes of the Court.
3) Power to proceed to ex-parte
In any arbitration proceeding, the arbitrator has the power to
proceed to ex-parte i.e in the favor of one party if another party
contravenes any provision of this Act. here are three conditions
under which the court may pass an ex- parte award:
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When the claimant fails to communicate his statement of claim in
accordance with the Act.
When the respondent fails to communicate his statement of claim in
accordance with the Act.
When any party fails to appear at an oral hearing or to produce the
document or to produce documentary evidence.
The court, however, doesn’t proceed ex-parte against any party
without giving him the notice regarding the court’s intention to
proceed ex parte on a specific date, time and place.
4) Power to appoint an expert
the arbitrator has the power to appoint one or more experts to
report to him on a specific issue, if he finds it necessary in any case.
The arbitrator also has the power to give the expert any relevant
information or documents or property for the purpose of his
inspection. If necessary, the arbitrator also has the power to appoint
the expert as a participant in a hearing but in order to appoint an
expert, the expert must have to show the parties that he has
expertise in matters related to this case.
5) Power to make awards
Power to make awards is the most important power as well as the
duty of arbitrators which is given under The Arbitration and
Conciliation Act, 1996. However, the rules applicable in an
arbitration proceeding is:
In matters related to international commercial arbitration, the
arbitral dispute shall be decided according to the rules of proceeding
which is decided by the parties but if they fail to decide it, then the
arbitrator himself decides the rules which are applicable.
In other matters, the arbitral tribunal shall have to decide the rule
which is in accordance with the substantive law.
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However, with such aforesaid power, at the time of making such an
award, the arbitrator also has the duty to consider the following
necessary aspects:
The party who is entitled to costs;
The party who pays the cost;
The amount and method of determining those costs;
The manner in which the costs shall be payable;
The cost of the arbitration proceeding or any other expenses
fixed by the arbitration tribunal
If the number of arbitrators is more than one, then the decision must
be signed either by all the arbitrators or by the majority of them.
Arbitration Award
It is the decision given by the arbitral tribunal after careful
investigation of the case submitted to it for adjudication .it conveys
the findings and binding on both the parties.
The essential ingredients of the tribunal award are:
i. The award must be made without undue delay as otherwise
the arbitrator’s mandate can be terminated
ii. The award must be in writing and to be signed by the members
of the arbitral tribunal and signatures are to attested.
iii. The award must be self-explanatory without any ambiguity.
iv. The award to be made on stamp paper.
v. After the tribunal award is made, a signed copy to be given to
each if the party
vi. The arbitral award is to state its date and place of arbitration,
claim adjudication in term of money contents, interest on
amount awarded or apart thereof at such.
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Construction disputes
Owner desires the best value for the money spent, he wants
quality work in minimum time and cost. contractor strives hard for
reasonable rate of return on his investment.
Reasons for disputes:
1. Actual intent of the parties is not reflected in contract
documents due to vagueness, negligence or want of skill in
drafting
2. Delay in the fulfillment of either parties’ obligations under the
contract.
3. Scope variations and inadequate compensation for the same
4. One sided condition of contract far from equity and fair play in
some stipulations
Common disputes in construction contract
1. Compensations for delay caused by owners
i. Handing over full clear site
ii. Issue of stipulated materials
iii. Release of construction drawing and authorizing
payments for the work done
2. Scope variations and inadequate compensation for the same.
3. Levy of liquidated damages for delay in completion of work.
4. Claim for interest for delayed payments.
5. Compensation for delays caused by the contractor.
6. Delayed completion of work.
7. Substandard work.
Methods to settle disputes and differences
a. Arbitration
b. ARDM (alternative dispute resolution method) which will have
modes of Conciliation and Mediation.
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Arbitration
It is a method of settling disputes and differences between two or
more parties whereby they appoint one or more persons to
adjudicate upon the said disputes and differences, The Arbitration
and conciliation Act 1996 helps the parties to enforce the decision
besides laying down rules, regulations and procedures.
Mediation
Mediation is a process involving chosen intervention by a neutral
person appointed by both the parties to settle their disputes and
differences,
This person is called Mediator, who enjoys the confidences of both
the parties and possesses expertise in the subject.
Conciliation
Conciliation is process alternative to arbitration for settling disputes
It is somewhat resembling to arbitration yet it is not Arbitration.
Conciliator usually possessing relevant expertise, he can be sole
appointed by both the parties or can be joint, one appointed by each
party. even there may three conciliators in these processes. If there
are two or more conciliators, they meet and give the decision to
curtail the dispute.
Arbitration proceedings:
A tribunal is appointed
Preliminary meeting is called by the tribunal
Purpose of meeting
a) Statement of claims and facts supporting the claims.
b) Issues for adjudication
c) Relief or remedy sought
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d) Disclosure of the documents to be relied upon by the parties
and inspections of the same
Time place and date of actual hearing are fixed
The fees of tribunal are known to the parties and deposits on
account is called from each party.
The arbitral tribunal will decide the dispute based on the
written submissions and documents or otherwise tribunal will
give oral hearings to the parties for presentation of evidence
and oral arguments
If the tribunal desire to make inspection of the subject matter
of the dispute, it can be done in front of both the parties
On the completion of the proceedings the tribunal has to make,
declare and publish its award .
As soon as the award is published by the tribunal ,a copy of
award has to be given to each party .
QUESTIONS:
1) What is Arbitration? explain the objectives of Arbitration Act
1996. ……………………………. 10M
2) Describe in detail
a) Arbitration award
b) Arbitration agreement
c) Order of reference
d) Umpire
3) Discuss the scope of Arbitration for solving the 10M
Dispute.
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4) What are construction disputes? explain the methods of
resolving the disputes? 10M
5) Explain the duties and powers of arbitral tribunal. 10M
6) Discuss the arbitration proceedings. 10M