Arbitration in India

The Arbitration and Conciliation Act, 1996 applies to whole of India

  • Amend and consolidate the law for domestic arbitration, and also for international commercial arbitration.
  • Define the law relating to conciliation.
  • Enforce foreign arbitral awards.
  • To make provision for an arbitral procedure that is just and effective.
  • Aimed at minimizing the supervisory role of the courts in the arbitral process.
  • For settling disputes, it permits an Arbitral Tribunal to use mediation, conciliation, and other procedures during the arbitral proceedings. 
  • One of the objectives of the Act was to significantly cut down the grounds on which an arbitrator award could be challenged before the court.
  • The Government of India amended the Arbitration and Conciliation Act, 1996 in 2015 and again in 2019and again in 2020. The aim was to again make arbitration a chosen mode of settlement of commercial disputes, thus making India a hub of international commercial arbitration. 

Guru Nanak Foundation v. Rattan Singh & Sons (1981):- In this case, the Supreme Court stated that they saw the Arbitration Act, 1940 as an alternate medium to resolve disputes less formally, more effectively, and expeditiously.

Food Corporation of India v. Joginderpal (1989):-The Supreme Court observed in this case that the law of arbitration should be made simple, less technical, and more responsive to the actual reality of the situations and at the same time it should be responsive to the canons of justice and fair play. The arbitrator should adhere to those procedures and rules which create confidence, not only by doing justice between the parties but also create a sense that justice appears to have been done.

Is arbitration mandatory in India?

Only when both parties agree, it becomes mandatory.  

Which is the first law of arbitration in India?

The 1st Arbitration Act in India was introduced on 1st July 1899. Indian Arbitration Act, 1899 was applicable only to the presidency towns of Bombay, Calcutta, and Madras. 

Can arbitrators ask questions?

If a party presents a witness at the hearing, that party will have the opportunity to ask questions of the witness. The other party also gets the opportunity to cross-examine that witness and ask their own questions; the arbitrator may also ask questions of the witness. 

Who appoints an arbitrator?

A person of any nationality may be appointed as an arbitrator. If in case the parties fail to appoint three arbitrators, each party shall appoint one arbitrator and the 2 arbitrators shall appoint the third arbitrator. The third arbitrator is mandatory, who will be the presiding arbitrator. If they fail to agree on a third arbitrator, within 30 days, upon a request of a party, the chief justice of the high court designates him. The same happens in case of a sole arbitrator. The city civil court does not have the power to appoint the arbitrator.

In National Aluminium Co Ltd v Metalimpex Ltd., when a Bangladeshi Company failed to nominate its arbitrator, the chief Justice of India nominated an arbitrator to act on behalf of the company.

Appointment of the sole arbitrator.

When a Sole arbitrator is appointed, it must be notified to the other side, or else his appointment becomes invalid.  

The disagreement between arbitrators:

Any disagreements between the arbitrators, and there is no award, the jurisdiction of the presiding arbitrator is invoked. In the absence of any contrary provision in the arbitration agreement, the presiding arbitrator can adjudicate the whole case at any particular point if the arbitrators disagree.  

What are the procedures for appointing an arbitrator?

  1. where there is a valid arbitration agreement, for appointment of one or more arbitrators.
  2. the appointment of the arbitrator is to be made by mutual consent of all the parties to the dispute.
  3. differences have arisen between the parties to the arbitration agreement; or between the appointed arbitrators.
  4. the differences are on the appointment or appointments of arbitrators.

Can a party withdraw from arbitration?

An existing dispute can be referred to arbitration by means of a submission agreement between the parties. In contrast to mediation, a party cannot unilaterally withdraw from arbitration. 

Who can enter into arbitration agreement?

Every person(including a foreigner) who is competent to contract can enter into an arbitration agreement. He must have attained the age of majority according to the law to which he is subject and must be of sound mind and must not be disqualified from contracting by the law by which he is governed.

Who invented arbitration?

One of the earliest arbitrators was King Solomon in the Old Testament. In a book by Elkouri and Elkouri, How Arbitration Works (1960), the authors not only stated that Solomon was an arbitrator, but also noted that the procedure used by him was in many respects like that used by arbitrators today.

What rules of evidence apply in arbitration?

The arbitrator may receive any oral or documentary evidence, except that irrelevant, immaterial, unduly repetitious, or privileged evidence may be excluded by the arbitrator. The arbitrator shall interpret and apply relevant statutory and regulatory requirements, legal precedents, and policy directives.

Can an arbitration be appealed?

If arbitration is ineffective and non-binding, any party or parties are at liberty to appeal this award without requiring any reasonable ground to appeal. But if the Arbitration is binding, then the party or the parties need a concrete reason to challenge the award in court, just as in the case of jury award.

How arbitrator can be removed?

An arbitrator can be removed under section 24 of the Arbitration Act 1996 if, amongst other things, “circumstances exist that give rise to justifiable doubts as to his impartiality” and if the arbitrator has failed “properly to conduct the proceedings”. The cases show that dismissal is a rare event.

What matters Cannot be referred to arbitration?

Even in case of civil rights following matter cannot be referred to arbitration:

(a) Matrimonial matters and matters connected with conjugal rights.

(b) Industrial Disputes and Revenue matters (Income Tax & other Tax matters).

(c) Testamentary matters under Succession act.

Can a third party intervene in an arbitration India?

The right of a third party can never be interfered by the Courts while hearing a petition.

Although arbitration is a wholly independent dispute resolution system, the courts can intervene in the arbitration proceedings but in a very limited scope, as mentioned in Arbitration Act, 1996. However, the courts in India have jurisdiction to issue an anti-arbitration injunction to restrain arbitration proceedings seated outside India. The courts have indicated that this remedy will only be granted in extreme circumstances such as where no valid arbitration agreement exists or the arbitration agreement is void, inoperative or incapable of being performed. Recently, the courts have also pointed out that they retain the inherent jurisdiction to grant such an injunction if in their view the foreign arbitral proceedings are oppressive, vexatious, inequitable or constitute an abuse of process. However, the courts have emphasized that they will not readily make such a finding, particularly where the parties have consciously chosen a foreign forum to resolve their disputes. Although a separate application is not required a reference to arbitration under section 45,and a submission to this effect in the first substantive pleading in a suit should suffice, some High Courts have taken a different view under section 8 and require a separate application to be filed by parties seeking a reference to arbitration. The Delhi High Court also recently held that the application under section 8 must be in writing and a verbal submission to the court will not meet the requirements of the section (see Alok Kumar Lodha and Ors. v Asian Hotels (North) LtdMANU/DE/2338/2020). 

Arbitration in breach of a valid jurisdiction clause

Where an arbitration is in breach of a valid jurisdiction clause, the aggrieved party can raise a preliminary objection before the arbitral tribunal which is empowered to rule on its own jurisdiction. If the party does not succeed in his/her challenge before the arbitral tribunal, he/she can apply to the court to set aside the arbitral award (whether partial or final) on the basis of an arbitration in breach of a valid jurisdiction clause. 

Is arbitration a judicial proceeding?

Arbitration proceeding is not a judicial proceeding. On March11, 2021, the ordinance was repealed and replaced by the Arbitration Conciliation Act (Amendment) of 2021 (hereinafter called “2021 Amendment”). 

What are the four types of arbitration?

The following are the different types of arbitration as per the jurisdiction of the case:

  • Domestic arbitration. ... 
  • International arbitration. ... 
  • International commercial arbitration. ... 
  • Ad-hoc Arbitration. ... 
  • Fast track Arbitration. ... 
  • Institutional Arbitration.       

How arbitral award can be enforced?

The arbitral award is final and binding on the parties to the dispute and for the enforcement of such award the party must move to the court. Arbitration allows the parties to have a private dispute resolution procedure and avoid national courts.

Time limitation -

An application for setting aside award must be filed within a period of 90 days from the date of which award was passed by the tribunal. If it is not made within the stipulated time period, then the award shall be enforced without considering it under any ground for its setting aside. The Court may grant an extension period of 30 days apart from these 90 days on sufficient cause for considering the application to set aside the award.

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