Arbitration Act, 1996

Introduction:

 It is an alternative mode of resolving disputes. Alternative to judiciary.

 Conciliation added in 1996.
 It was preceded the following Acts- 1) Arbitration Act, 1899 based on English Arbitration Act,
1899; 2) Arbitration Act, 1940 based on English Arbitration Act, 1934.
 The 1996 Act is based on UNCITRAL (UN Commission on International Trade Law) Model law
which was adopted by General Assembly. India, being a member State, adopted it on the
recommendation of 76th Law Commission Report.
 Objective of this Act- 1) the 1940 Act did not provide for foreign arbitration i.e. arbitration
between citizen of India and foreigner and only dealt with domestic arbitration. Foreign
Arbitration was governed by Arbitration Protocol and Convention Act, 1937 based on Geneva
Convention held in 1927 and Foreign Awards Recognition and Enforcement Act, 1961 based on
New York Convention, 1958. 2) The 1940 Act did not provide for enforcement of foreign awards
and they were earlier governed by the above 2 enactments. The 1996 Act repealed these 2 Acts
as stated in Section 85(1) and overcame the lack of provisions related to foreign awards and
foreign arbitration.
 All arbitral proceedings commenced before the commencement of this Act shall be governed by
the 1940 Act and the 2 enactments unless the parties agree among themselves via contract to
be governed by the 1996 Act. On or after the commencement of the Act, 1996, it will be
governed by the 1996 Act even if the parties contract to the contrary- 85(2)
 The 1996 law was promulgated on 25 th Jan 1996 by ordinance because Parliament was not in
session and later it was passed by the Parliament and it came into force on 22 nd Aug, 1996.
Therefore, 85(2) applies from 25th Jan, 1996.
 Arbitration was brought about to reduce the burden of the court and to provide an alternative
mechanism for dispute resolution.
 This act was widely accepted by the people because it was totally based on their free will and
there was no compulsion. Further, it was also felt that since the Arbitrators are experts in law
and the subject matter of the disputes their judgements are usually better than the real judges
as they may not be experts in the subject matter of the dispute as evident from S.45 of IEA.
Therefore, it is often said that the arbitrators impart real justice whereas judges impart legal
justice. real justice means both the parties are satisfied.
 Referring to arbitration does not mean that Arbitration Tribunal can decide the cases on their
whims and caprices. Rather they have to decide the case on the basis of law. Section 28
provides that in the place of arbitration is situated in India, the arbitral tribunal shall decide as
per the substantive law prevailing in India except in case of international commercial arbitration.
 No appeal on arbitral award. As per 2015 Act, the proceedings before the Arbitral Tribunal has
to be completed within 90 days.
 The Arbitration tribunal shall not be governed by the CPC or the IEA. The parties shall decide the
procedure to be followed. If the parties do not decide, the tribunal can follow the procedure
which it considers appropriate. They can decide the admissibility, relevancy, materiality and
weight of any evidence. – Section 19
 Limitation act will apply upon this Act as provided under 43 and hence 12(1) will apply.
What is Arbitration?

 Article 2(a): it means any arbitration whether or not administered by permanent arbitral
institutions. This definition is not propr.
 Amar Chand v Ambika Jute Mills SC; it means judging the disputes between the parties by
someone not involved in the dispute whose decision both parties agree to accept.
 Russell: the essence of Arbitration is that parties refer their disputes settlement to Tribunal of
their own.
 When arbitrator(s) is appointed they/it constitute the Arbitrator Tribunal. The judgement is
delivered by the Arbitral tribunal. There is no limitation on the number of arbitrators that are to
be appointed and it can be either decided by the party or if it is not decided by them, then a solo
arbitrator shall be appointed. The number of arbitrators that are appointed shall be odd-
Section 10. This provision was enacted in 1996. This provision did away with the umpire system.
Earlier in the 1940 Act, the chairman used to act as the umpire in case of tie.
 Reference to arbitral tribunal is done on the basis of arbitration agreement.
 Earlier the 1940 Act did not provide that the arbitration agreement has to be in writing in clear
terms. Then the SC required that it has to be in writing. This position was fortified by the 1996
Act which provided that it has to be in writing under 7(3). Under 7(2), it was provided that
arbitration agreement can be in the form of an arbitration clause or in the form of a separate
agreement. An arbitration is considered to be in writing if it is contained in a) a document signed
by the parties; b) an exchange of letters, telegram, telex or other means of telecommunication
which provide a record of the agreement. By 2015 Amendment, communication via electronic
means was also included; c) an exchange of statement of claim and defence in which the
existence of the agreement is claimed by ne party and not denied by the other- Section 7(4).
 As per Section 7(1), arbitration agreement means an agreement to refer past or future disputes
to arbitration which may arise between them in respect of defined legal relationship whether
contractual or not. Example: Arbitration can be used to provide damages for torts.
 ICICI Ltd v EC Builders and Engineers Ltd SC; the court held that it should be governed by the
spirt of the Act in order to determine whether reference to arbitration should be done and it
should not confine itself to defined legal relationship. Defined legal relationship is not
exhaustive and the court may extend it if it wants. All matters in dispute between the parties
which the civil courts can take cognizance under 9 can be referred to arbitration unless
forbidden by law or opposed to public policy. Forbidden by law: for certain proceedings specific
laws have been provided and they are not to come within the purview of Arbitration. Eg:
charitable trust, lunacy, insolvency, guardianship, execution, industrial disputes etc.

Conciliation:

 It was not provided for in the 1940 Act and was introduced in the 1996 Act.
 Conciliation is different from arbitration in the sense that conciliation held in settling the
disputes the on amicable terms arrived at by the parties and doesn’t actually resolve the
dispute as seen in case of arbitrator. The conciliator merely provides an opportunity for
meeting, place of meeting materials necessary etc for the parties to arrive at amicable solution.
 The work is done by an expertized person known as conciliator or conciliatory institution.
 It is a means to keep the parties negotiating.
  Section 73: when it appears to the conciliator that there are certain terms of agreement
between the parties, he shall formulate a settlement agreement and send it for the observation
of the parties. The conciliator may after receiving the observations reformulate the terms of
possible settlement in the light of observations. After the parties reach an agreement, they may
draw up the agreement or require the conciliator to formulate it or require the assistance of
conciliator in formulating it and it shall be signed by the parties. When the parties sign the
settlement agreement, it shall be binding upon the parties and the persons claiming through
them. The conciliator shall authenticate the settlement agreement and give a copy to the
parties.
 Section 74: it shall have the same status and effect as if it is arbitral award on agreed terms
rendered by an arbitral tribunal under section 30 on agreed terms.
 There are two kinds of arbitral awards. Sometimes while the arbitral proceedings are going on
then the parties may agree to settle and the arbitrator does not have a role anymore and he
records an arbitral award on agreed terms. If the parties are not able to agree upon a
settlement then the arbitrator resolves the dispute and his judgement is known as arbitral
award.
 Section 30- it is not incompatible with arbitration agreement for arbitral tribunal to encourage
the parties to settle their disputes and may make use of conciliation, mediation o other
procedures while the arbitration proceeding is going on. If the parties settle their disputes on
agreed terms then the arbitral tribunal will terminate the arbitral proceedings and if requested
by the parties and not objected by the AT, will record an arbitral award on agreed terms. It shall
be recorded in accordance with Section 31 and state that it is arbitral award. It shall have the
same status and effect as if it is an arbitral award.
 Section 36(1): if the time for setting aside the arbitral award has expired then it shall be
enforced in the same manner as if it is a decree under CPC.
 Before 1996, after the award is formulated, the court will again draw up a decree. But now it
automatically results in decree.
 This implies that settlement agreement, arbitral award and arbitral award on agreed terms are
all decree.
 Foreign award under the Geneva Convention is also a decree by virtue of Section 49 and foreign
award under New York convention is also a decree by virtue of Section 58.
 Under Section 29A, it was provided that the award shall be made within 12 months from the
date of reference to Arbitral Tribunal. Explanation provides that date of reference means in
case of solo arbitrator when he receives the notice in writing about his appointment and when
there are more than 1, whenever the last one receives it.
 Section 29B Fast track Procedure.
 Section 27 Arbitral Tribunal may take the help of Civil Court for calling evidence.

Advantages of Arbitration:

 It is a form of ADR and reduces the burden of court.

 Speedy justice- 19, 29A and 29B
 Awards by experts- Section 11
 Secrecy
  Real justice: 1) Appointment of Arbitral Tribunal by the Parties- 11; 2) procedure by parties-
19;3) place of arbitration decided by the parties 20; 4) language decided by the parties- 22;
5) Settlement under 30.
 Abolition of umpire system.
 Reasoned award- earlier this requirement was not there.
 Assistance of court in taking evidence.

Interim measure- 9.