Arbitration and conciliation act 1996

Arbitration is governed by the law of arbitration which is provided under the Arbitration and Conciliation
Act, 1996. Earlier to this Act, 3 Acts that governed th law of arbitration in India that follows:

1. The Arbitration (Protocol and Convention) Act, 1937.

2. The Arbitration Act, 1940

3. Foreign Awards (Recognition and Enforcement) Act 1961.

These Acts were repealed by the Arbitration and Conciliation Act 1996.

The Act came into force on 25 January, 1996.

There are total 86 sections in this Act and it is divided into 4 parts, in which Part deals with General
provisions on arbitration, Part II deals with the Enforcement of certain foreign awards, Part III deals with
conciliation and Part IV deals with the Supplementary provisions.

Main objective of Arbitration and Conciliation Act, 1996

The main objective of the Act are as follows

1. It aims to comprehensively(completely) cover international commercial arbitration and conciliation as

well as domestic arbitration and conciliation.

2. To make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of
the specific arbitration.

3. It provides that the arbitral tribunal has to give reasons for its arbitral award.

4. To ensure that the arbitral tribunal remains within the limits of its jurisdiction.

5. To minimize the supervisory role of courts in the arbitral process

6. To permit an arhitral tribunal to use Mediation, Conciliation or other procedures during the arbitral
proceedings to encourage settlement of disputes

7. To provide that every final arbitral award is enforced in the same manner It it were a decree of the
court. 8. To provide that a settlement agreement reached by the parties as a result of conciliation
proceedings, it will have the same status and effect as an arbitral award

9. To provide that for the purpose of enforcement of foreign awards, every arbitral award made in a
country which is one of the parties to the international conventions will be treated as a foreign award.
Salient features of the Arbitration and Conciliation Act, 1996

1. A more comprehensive statute: The Arbitration and Conciliation Act, 1996 is more comprehensive
than the earlier Act of 1940. It consists of 86 sections divided into 4 parts.

2. Arbitral award treated at per with a decree: Another notable feature of the Act of 1996 is that the
arbitral award and settlement arrived at during conciliation proceedings have at per with the decree of
the court. In other words the arbitral award is enforceable in the same manner as a decree of a law
court.

3. Curtailment of the courts process: The power of the court under the Act of 1996 has been
considerably curtailed as compared with the earlier Arbitration Act of 1940. The arbitrator has been
endowed with absolute powers and he is completely immune from the court’s control during the
arbitration proceedings.

4. Abolition of the Umpire system: Another important feature of the Act of 1996 is the abolition of the
umpire system. The earlier Act of 1940 provided that where an even number of arbitrators were
appointed and such arbitrator failed to make an award within the specified time, or where there was
difference of opinion between two arbitrators, the umpire should enter on the reference instead of the
arbitrators.

5. Qualification of the arbitrator: There were no qualifications for appointment as an arbitrator as

prescribed in the earlier Arbitration Act of 1940. But now the Act of 1996 provides for qualification of the
arbitrator. Since nowadays a large number of disputes arising between the parties are of technical
nature, therefore such disputes can properly be decided only by the arbitrators who are competent and
well versed in such matters.

6. Assistance of court in certain matters: the Act of 1996 provides for taking assistance from the court
only in certain specific matters, the Arbitral tribunal or a party may seek assistance from the court in
taking evidence. The court may therefore order the witness to provide evidence to the arbitral tribunal
directly. But the act does not confer any power on the Arbitral tribunal to summon witnesses. Therefore,
the Arbitral tribunal or a party with the approval of the arbitral tribunal may apply to the court for
assistance in taking evidence.

7. Empower to pass interim orders: another notable feature of the Act of 1996 is the provision relating to
the interim measures, which empower the arbitrator or arbitral tribunal to pass interim orders in respect
of the subject matter of the dispute at the request of the party.

8. Arbitral award in conflict with public policy is void: the new Act of 1996 provides that an Arbitral
award which is in conflict with the public policy in India shall not be valid in law being null and void and
can be set aside by the court. .

9. International Commercial Arbitration defined: The Act of 1996 specifically defines the term
“International Commercial Arbitration” under Section 2(1)(f), it means an arbitration relating to disputes
arising out of legal relationship whether contractual or not, considered as commercial under the law in
force in India and where at least one of the parties whether an individual, body corporate or a company
is having business or residing abroad and in case of Government, the government is of a foreign country.
10. Scope of conciliation more wide: Part III of the Act of 1996 deals with a new international approach
to conciliation and explains its application scope. Thus making the scope of conciliation more wide.

11. Arbitrator to give reasons for the award: The Act 1996 under sub-section 3 of section 31 provides
that an arbitral tribunal must state reasons for its award. However, where the parties themselves have
agreed in writing that no reasons are to be given or where the award is in terms of a settlement reached
between the parties, the requirement of a reasoned award may be waived off.

12. Enforcement of foreign awards: The Act of 1996 provides for enforcement of certain foreign awards
made under the New York Convention and Geneva Convention respectively as contained in Part II of the
said Act as a decree of the court. The countries which have neither adopted the New York convention
nor the Geneva convention are outside the scope of Part II of the Act and therefore their awards are not
enforceable as foreign awards in India.

2.How Are Conciliation, Mediation And Arbitration Different?

Although mediation, conciliation and arbitration have the same purpose, the process differs in the level
of formality, responsibility and improvisation. In each case, a third party is involved in the dispute
resolution process between the parties.

Mediation is focused on dispute resolution regardless of the outcome of the relationship between
parties, whether they will conciliate or not. During conciliation both parties are often motivated to
improve the relationship between the parties whereas for mediation and arbitration the most important
focus is geared towards resolving a dispute.

In many situations it is compulsory to take part in dispute resolution, it is not voluntary. Depending on
the level of dispute, you will have to participate in one of these dispute resolution processes. If you want
to get informed and prepare yourself, learn the difference between conciliation, mediation and
arbitration.

What is arbitration?

Arbitration is a formal process and may seem like you are in a courtroom where the process of
arbitration replaces a trial. The arbitration parties don’t have much control over the outcome, and the
arbitrator is the one to decide the outcome of the dispute. Arbitration is more binding than mediation. In
some cases,each party can choose one arbitrator and then those two arbitrators will collectively select a
suitable arbitrator. Parties may need to testify and give evidence but the process is not formal as in
court. Arbitration is more formal than mediation and conciliation.

There are different forms of arbitration depending on the area of law. For instance, in employment law,
interest arbitration and rights arbitration are the main forms of arbitration.

Interest arbitration is focused on the terms of the collective agreement, and rights arbitration interprets
the collective agreement. Rights arbitration also includes the interpretation of disputes with regards to
an employee dismissal.

Difference between conciliation and arbitration

The main difference between conciliation and arbitration is that a conciliator doesn’t have the authority
to ask for evidence or witnesses, and as such, conciliation as a process doesn’t have legal standing. On
the other hand, the arbitrator needs to make a decision based on evidence and his final verdict is legally
binding.

An arbitrator Is usually a legal professional or a retired judge, or even an accountant or engineer. Both
parties present their cases in front of the arbitrator and they don’t negotiate out of the arbitration
session.

The conciliation process is the least formal and there is much space for improvisation. Unlike most
arbitrations, this process can be done privately. Conciliation is more amicable and open to bargaining
and it doesn’t involve a suit.

In the conciliation procedure an intermediary person will try to determine what are the goals of each
party, and then suggest possible solutions. An intermediary person (a conciliator) needs to discuss with
each side separately during the whole negotiation process. The goal of conciliation is to find an outcome
that is mutually acceptable to both parties. A conciliator has a role to improve communication and lower
tensions between two parties.

How is mediation different?

Whereas in arbitration parties cannot make a final resolution, in mediation parties have the power to
agree or not agree. The resolution is not reached unless both sides agree. Often, mediation is a required
step during a process of litigation.

Mediators have less power than arbitrators, they cannot issue orders, find fault, or make decisions.
Instead, mediators can help parties get a settlement by guiding them through communications,
collecting necessary information, and developing solutions.

The mediation process is more flexible than arbitration, less formal and both parties can take part in
dispute resolution. It is more likely that the disputing parties will be more satisfied with the result of
mediation then arbitration because they can impact the end result.

Conciliation and mediation can be highly similar, although the focus of the former is more on the
relationship, and the latter on result. Also, because mediation is often a required step in a litigation
process, the attempt at mediation, and the recorded result, even if failed, is a more formal process than
conciliation.

For less complex dispute resolutions, mediation is a better choice than arbitration whereas arbitration is
the smart choice for serious disputes when parties are no longer on good terms.
3.When can Legal Aid be Denied or Withdrawn?

Legal Aid can be denied at the initial stage before the application for legal aid is accepted. It can also be
withdrawn at the later stage after the application has been accepted and legal aid has been provided.
Legal aid can be denied or withdrawn in the following circumstances:

Legal aid can be denied if a person is found ineligible under Section 12 of the Legal Services Authorities
Act, 1987

Legal aid can be withdrawn if the aided person who applied under the income category is found to
possess sufficient means;

Legal aid can be withdrawn where the aided person obtained legal services by misrepresentation or
fraud;

Legal aid can be withdrawn where the aided person does not cooperate with the Legal Services
Authority/Committee or with the legal services advocate;

Legal aid can be withdrawn where the person engages a legal practitioner other than the one assigned
by the Legal Services Authority/Committee;

Legal aid can be withdrawn in the event of death of the aided person except in the case of civil
proceedings where the right or liability survives;

Legal aid can be withdrawn where the application for legal service or the matter in question is found to
be an abuse of the process of law or of legal services.

3. Arbitration agreement does not include appointment of a particular arbitrator Explain with essential
conditions of valid arbitration agreement.

Definition of Arbitration Agreement

As per Section 7 of The Arbitration and Conciliation Act, 1996, an “arbitration agreement” means a
promise by parties to settle any disputes between them about a specific legal relationship using
arbitration. This applies whether the disputes are mentioned in a contract or not. This type of agreement
is also called a submission agreement.

An arbitration agreement Is a legal contract made by two or more parties. It states that if any
disagreements or conflicts arise between them, they will use arbitration to solve the issues instead of
going to court. This is an agreement where all parties decide to present their disagreements to an
arbitrator or an arbitration panel. These arbiters will make a final and binding decision based on the facts
and arguments from both sides.

The essentials of such Arbitration Agreements are as follows;

Existence of an arbitrable dispute

Only when there has been a dispute, can the arbitration agreement be considered valid. They cannot
invoke the arbitration clause and oppose the settlement if they have resolved their dispute and reached
an agreement.

Arbitration agreement shall be in writing

Sec 7 (3) of the Arbitration & Conciliation Act, 1996 provides that an arbitration agreement shall be in
writing. Further Sec 7(4) recognizes varied forms in which arbitration agreement may exist. The written
agreement could be contained in a;

(a) “a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication [including

communication through electronic means] which provide a record of the agreement; or

© an exchange of statements of claim and defense in which the existence of the agreement is alleged by
one party and not denied by the other.”

Composition of Arbitral tribunal

The parties’ intention with respect to the composition of the arbitral tribunal shall be precisely defined.
The number of arbitrators and the procedure for appointment shall be clearly agreed. Section 10 of the
Act,1996 states that the number of arbitrators shall not be even. According to Section 11 of the said act
the parties can appoint a person of any nationality as arbitrator. .

Language of Arbitration

It is vital to specify the language of arbitration in the agreement itself. In the absence of any provision a
dispute may arise related to this clause.

Governing Law

The parties to agreement should expressly mention the law according to which the arbitration
proceedings between them shall be governed.

Seat of Arbitration

The Parties are required to mutually decide the seat of arbitration which shall be a part of arbitration
agreement.

Intent to submit the dispute to arbitration

An arbitral award is the decision of the arbitrator in relation to the dispute. It is important to mention
the award passed by the arbitrator would be final and binding on the parties to the agreement.

The Arbitration Agreement in substance implies the acceptance of arbitration as a mode of dispute
resolution, therefore the acceptance of the parties shall be clear. Such acceptance may be in the form of
a signature of both the parties or it can take the form of a document signed by only one party to the
contract that contains the terms and acceptance by the other party. Moreover, it will also be enough if
one side signs the agreement and the other acknowledges it.

4. On what grounds the appointment of arbitration can be challenged under arbitration and conciliation
act

Section 12 of the Act states the grounds on which and arbitrator can be challenged. Additionally, the
2015 amendment to the Act has added a schedule to this section which lays down additional criteria that
may give rise to a challenge of an arbitrator.

Grounds for Challenge (Section 12 of the Arbitration and Conciliation Act, 1996)

When a person has been approached for possible appointment as an arbitrator, he shall disclose in
writing any circumstances which are likely to give rise to justifiable doubts about his independence or
impartiality.

From the time of an arbitrator’s appointment and throughout the arbitral proceedings, he shall without
delay willingly disclose to the parties in writing any circumstances referred to in sub-section (1) unless it
has already been informed to them by him.

An arbitrator may be challenged only if

Circumstances exist that give rise to justifiable doubts about his independence or impartiality, or

He does not possess the qualifications agreed to by the parties.

A party may challenge an arbitrator who has been appointed by the party himself or in whose
appointment he has participated, only for reasons of which the party becomes aware after the
appointment has been made.
DISPUTES WHICH AND CANNOT BE SETTLED BY ALTERNATIVE DISPUTE RESOLUTION (ADR)

ADR techniques are extra-judicial in nature. They can be used in almost all the matters which are capable
of being resolved, under law, by agreement between the parties. They have been employed with very
encouraging results with a high rate of resolution in several areas of disputes, especially civil,
commercial, industrial and family disputes. These techniques have been very effective across the full
range of business disputes. Banking; contract performance and interpretation; contracts of construction;
IPR (Intellectual Property Rights); insurance covers-Joint ventures; differences or disputes in partnership;
personal injury; liability of product; professional liability; real estates; and securities.

Disputes which can be settled through ADR Process

In Alcons Infrastructure Ltd. V. Cherian Varkey Construction Co. (P) Ltd., (2010) 8 SCC 24, the Supreme
Court held that the following categories of cases can be settled through ADR process:--

( I) All cases relating to Business, trade, commerce and contracts, including—

Disagreements arising out of provisions of contracts (including all money claims);

Disputes relating to performance of specific acts;

Clashes between customers and supplier of goods;

Disputes arising between the bank and its account holders

Disputes relating to real estate.

Disputes between landlords and tenants

Disputes relating to providing of insurance

(2) All cases arising from soured relationships, including—

Disputes relating to marriages, maintenance, custody of children

Disputes as to partition of property among the family , coparceners etc.

Disputes among partners relating to partnership

(3) Cases where there is a need for a resolution without altering the previous relation.
Disputes between neighbours (relating to parking, nuisance, noise complaint etc.)

Clashes between employers and employees

Disputes among people living together societies.

4) All disputes relating to tort and its liability, including—

Claims for accidents or negligence.

(6) All offences which are referred to as compoundable as per the Code of Criminal Procedure 1973

Disputes which cannot be settled through ADR Process

ADR may not be suitable for every situation; even if appropriate, it cannot be invoked unless both parties
to a dispute are genuinely interested in a settlement.

In Afcons Infrastructure Ltd. V. Cherian Varkey Construction Co. (P) Ltd. & Ors., (2010) 8 SCC 24, Supreme
Court enumerated the following categories of cases not suitable for ADR having regard to their nature:

Suits mentioned under Order I, Rule 8 CPC which involve interest of public or interest of several persons
who are not parties before the court.

Election disputes as to public offices.

Cases which are related to serious and specific allegations of fraud, fabrication of documents, forgery,
impersonation, coercion under the Indian Penal Code.

Special cases which involve protection of courts, for instance, claims against minors, deities and mentally
challenged and suits for declaration of title against government.

Proceedings which involve prosecution for criminal offences.

Disputes that cannot be resolved through arbitration

The Arbitral Tribunal may be a private forum exclusively chosen by the parties to the dispute to urge
their civil or commercial disputes to get adjudicated. Every civil and commercial dispute can be
adjudicated by arbitration unless the jurisdiction of the Arbitral Tribunal is barred from doing so. The
Arbitration and Conciliation Act, 1996 does not explicitly exclude the category of civil or commercial
disputes from arbitrability.
Section 8 of the Act casts an obligation on the Judicial Authority to ask for arbitration in terms of the
Arbitration Agreement. The Act doesn’t exclude the category of disputes which are to be treated as non-
arbitrable. However, the courts in certain disputes refuse to refer the parties to arbitration under Section
8 of the Act. Under Indian law, the kinds of disputes that can’t be resolved by arbitration include:

Criminal offences.

Matrimonial disputes.

Guardianship matters.

Insolvency petitions.

Testamentary suits.

Trust disputes.

Labour and industrial disputes.

Tenancy and eviction matters governed by rent control statutes.

While there’s no definitive decision on the problem, existing jurisprudence suggests that disputes
involving competition law problems are also not arbitrable. Generally, disputes in rem which are
regarding a thing or property can’t be resolved through arbitration, while disputes in personam
regarding a selected person are often. The law also prohibits regard to arbitration where a specialist
forum has been found out to resolve specific sorts of disputes, like consumer disputes.

The Supreme Court recently clarified that allegation of fraud alone isn’t sufficient grounds for courts to
refuse to refer parties to the arbitration. This was reiterated in the case of Vidya Drolia v Durga Trading
Corporation[1]. It held that allegations of fraud would only be a ground to refuse relation to arbitration:

Where the article or agreement itself can’t be said to exist.

If the allegations are made against the state or state institutions, thereby requiring public enquiry.

The Supreme Court recently held within the same case during a broad-reaching statement that “intra-
company” disputes aren’t arbitrable. This is often likely to incorporate disputes involving oppression and
mismanagement claims in shareholder disputes, on which some courts had taken an inconsistent view.
However, this area of law is predicted to evolve within the coming months since the court’s findings
were supported little analysis. The implications are pretty vast, and therefore, the outcome is discrepant
with previous jurisprudence.
6. Comparison between arbitration and Concillation

Difference between Mediation and Arbitration

1. In the process of mediation there is a act of third party relating to settling of disputes between
two contending parties. Whereas an arbitration is governed by the arbitration agreement
wherein an arbitrator is nominated by the parties.

2. Arbitral award made in conclusion of the arbitral proceedings is binding on the parties to the
arbitration, whereas settlement arrived at the end of mediation does not have such binding
effect on the parties
3. The decision of an arbitrator is known as “award”. Whereas the decision of a mediator is known
as a “settlement”
4. The procedure of arbitration is based on the ordinary rule i.e., relevant arbitration law and
procedure laid down in the arbitration agreement. Applicability of any such rule is minimal in
case of mediation.

5. An arbitration award is treated as a ‘decree’ and can be enforced legally but the settlement arrived
at as a result of mediation is not legally enforceable. Thus, the terms of settlement may be accepted
or rejected by the contending parties.