Arbitration & Conciliation Act, 1996

Since the inception of trade practices, it could be observed that when two people decided to trade or enter into a transaction with each other, there would always be a possibility that some form of misunderstanding would creep in.

With evolved times and with an evolved legal system, the legal mechanisms were viewed as a medium through which conflicts could be resolved. However, litigation was seen as one of the only means of settling out disputes arising out of complex backgrounds.

Nonetheless, other resolution mechanisms have been arising to effectively resolve disputes. Arbitration is even viewed as the most common forms of alternatives to litigation. It has time and again been hailed as more effective and less time consuming than the formal litigation. Arbitration seems to have opened the door for alternatives to judicial system.

Arbitration is also less rigid as opposed to the traditional litigation system. With the increasing prominence of this form of dispute resolution, it would only be apt to look into some of the provisions of Arbitration and Conciliation Act of 1996, which primarily governs the functioning of arbitration in India.

Salient features of the Act

  • The Arbitration and Conciliation Act was passed in the year 1996 by the Indian Parliament. This Act is applicable throughout India. The Act could be applicable even to Jammu and Kashmir, provided it relates to some provision in relation to international arbitration.
  • The Act even looks into the issue of International Arbitration. That is, the Act has defined International Arbitration in Section 2 (f) of the Act wherein, it was mentioned that international commercial arbitration was a form of arbitration that resolved a conflict between an Indian citizen or a body with a foreign citizen or any organization overseas.
  • Section 7 of the aforementioned Act mandates the parties to the arbitration to show a form of agreement that all conflicts arising out of their contractual relationship would be resolved through the mechanism of arbitration. This, according to the Act, must be done through an arbitration clause in the contract or in the form of a separate contract. This section also mentions that parties to an ongoing dispute in a court can also choose to sign an agreement for arbitration.
  • Moreover, section 10 of the Arbitration and Conciliation Act of 1996 gives the leeway to parties in conflict to choose the number of arbitrators during their arbitration, provided the number of arbitrators is not even in number. If the parties fail to do this, only a sole arbitrator would be appointed.
  • Sections 12 and 13 of the Arbitration and Conciliation Act permits parties to challenge the appointment of the arbitral tribunal. In case the appointment challenge is rejected, the tribunal can go ahead with the pronouncement of the award, which can be subjected to challenge by either party.
  • Section 14 of the act delves into the dissolution of any award that was pronounced by an arbitrator. The termination of the arbitrator’s award, for instance, could occur if the arbitrator is not able to perform his/her duties adequately or if the arbitrator inadvertently delays the proceedings. The termination of the arbitrator’s mandate could also occur if both the parties had unanimously agreed to do so.
  • Section 18 of the Act mandates the arbitral tribunal to treat each party to the conflict equally. That is, the Act attempts to ensure that each party’s argument is heard in a fair and adequate manner so that no party is put in an unjust position. This shows that the Act is working in furtherance of the fulfillment of the principles of natural justice. It is interesting to note that the Act mentions that various arbitral tribunals are not limited by various provisions of the Indian Evidence Act of 1872 or the Code of Civil Procedure of 1908. That is, these Arbitral tribunals are free to admit evidence that they deem fit.
  • The Act further mandates this agreement to be in written form. It is interesting to note that Section 22 of the Act allows the parties in the conflict to disclose their preferred language in which they would like their proceedings to take place. Further, if the parties fail to disclose their preferred language in the contract, the Arbitration tribunal would establish the language of the proceedings arbitrarily.
  • Under section 23, the Act mentions that the petitioners are required to present the statement of facts, the issue and the remedy that they seek to obtain within a specified and agreed upon frame of time. Conversely, the respondents are also required to present their side of the case and submit their defense. The section provides the scope to even amend or edit the claims during the proceedings.
  • It is necessary to note that the Act, under Section 26 enables the parties to the arbitration to appoint some experts for a more intense and close scrutiny of certain minutiae of details of the evidence.
  • Section 29 of the Act specifies that when an arbitral tribunal has more than one arbitrator, the majority decision of the members of the tribunal would be the final decision.
  • According to section 31 of the aforementioned Act, it is mandatory for the award provided by the tribunal to be in writing. Additionally, concrete reasons for the said award must be given in the write-up.
  • Section 32 of the said Act delves into the termination of the proceedings of the arbitration. For instance, the termination could occur if the petitioner withdraws the case. The termination could also occur if both parties agree to unanimously dissolve the proceedings. Furthermore, another ground for termination of proceedings could be if the arbitral tribunal sees no point in the continuance of the proceedings.
  • Section 34 of the Arbitration and Conciliation Act enables parties to apply for the setting aside of an arbitral award on various grounds. It is interesting to note that Section 40 of the said Act suggests that the arbitration agreement between two parties is not frustrated merely on the ground of the death of a party. Instead, the agreement would be carried by the deceased’s legal representative.
  • Section 46 of the Act mentions that all foreign awards pronounced would be binding on the parties of the arbitration. Additionally, the section mentions that these awards could be relied upon as defense in Indian proceedings.
  • Section 58 of the Act provides various conditions for the implementation of a foreign award. Furthermore, it could be observed that if a court is sufficiently approving of the foreign award, it would be viewed with equal importance as that of a court’s decree.
  • The Act, under Section 62, mentions how the process of conciliation begins.. That is, the Act requires the party to pass on a written invitation to discuss the issues of dispute that arose.
  • The Act further discusses the process of the appointment of conciliators under Section 63 and Section 64 of the Arbitration and Conciliator Act of 1996.
  • Section 67 delves into the role of a conciliator. For instance, one of the biggest roles of a conciliator is to placate the situation of conflict and facilitate in reaching a peaceful resolution. Additionally, the Act mandates the conciliator to imbibe the principles of natural justice and ensure that no party is wronged. It is interesting to note that the Act gives conciliators space to conduct proceedings according to their discretion depending on the situation.
  • Section 70 of the Act imposes the duty on the conciliator to disclose the information provided to him by one party to another. That is, the conciliator must ensure that all parties have an equal opportunity to present their case.

Case laws

This section looks into various judgements which pertain to the Arbitration and Conciliation Act of 1996. The aim is to discern the interpretation of various provisions of the Act. For instance, in the case M/s Ravechee and Co v. Union of India , it could be observed that the court had held that the arbitrator had the power to impose interest on the payable amount. This judgement was passed after having relied on the case of Union of India v.Ambica Construction . To elucidate, it was held that the arbitrator had the power to impose interest unless barred from doing so. The court held that the scope of barring must be explicitly mentioned. Additionally, it was held that the mere imposition of interest does not make it unpayable as a whole.

Furthermore, in the case of M/s ARSS Infrastructure Projects Ltd v. Calcutta Haldia Port Road Company Ltd, it was held by the court that the court had no power to modify or make any amendments to the already pronounced awards. The court had iterated that the courts merely had the power to implement and execute the orders pronounced by the arbitral tribunals and that it was not in the court’s jurisdiction to make any unwarranted alterations.

Conclusion

Despite the effectiveness of the framework of rules established by the Arbitration and Conciliation Act of 1996, it has been observed that there are many shortcomings in the Act. For instance, it can be observed that this piece of legislation was applicable to both domestic and international forms of arbitration. However, it was iterated by many that a separate legislation for the governance of international arbitration would be more meticulous and help promote the objectives of this mechanism.

Another major drawback of the said legislation pertains to the fact that the term ‘arbitration’ has not been defined anywhere in the Act, which seems like a callous fallacy. Additionally, the term ‘conciliation’ is also not defined anywhere in the Act. The Act has been subjected to various amendments to improve the framework for better governance of this form of dispute resolution. However, there is still a long way to go for it to deliver the desired results.

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