Alternative Dispute Resolution

Unit- III
By Suprabha Sheoran
Arbitration
Arbitration is outside the court settlement of a dispute by one or more (odd number) persons who
are appointed as arbitrators by both the parties. According to Section 2(1)(a) of the Arbitration
and Conciliation Act, 1996 “Arbitration means any arbitration whether or not administered by
permanent arbitral institution”.
In other words, any form of arbitration irrespective of its nature has been recognized statutorily
in India by bringing such arbitration under the ambit of the Arbitration and Conciliation Act,
1996. It consists of a simplified trial, with simplified rules of evidence and with no discovery.
Arbitration hearings are usually not a matter of public record. The arbitral award is binding on
the parties just like a court decree or order.

Arbitration Agreement
An arbitration agreement is the raison d’être of an arbitration proceeding. It is only through an
arbitration agreement that parties can submit their issues to be adjudicated by the arbitral tribunal.
An arbitration agreement not only engenders an arbitral tribunal but also gives shape to it.
Therefore, it is crucial to understand the position of the arbitration agreement under the statute.
In the 1940 Act, the Arbitration Agreement was defined under Section 2(a) as- “A written
agreement to submit present or future differences to arbitration, whether an arbitrator is named
therein or not.”
The vague definition was replaced in the 1996 Act by Section 7 which stated –
“Arbitration agreement. —
(1) In this Part, “arbitration agreement” means an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which may arise between them in
respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in
the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in—
a. a document signed by the parties;
b. an exchange of letters, telex, telegrams or other means of telecommunication which
provide a record of the agreement; or
c. an exchange of statements of claim and defence in which the existence of the agreement
is alleged by one party and not denied by the other.
 (5) The reference in a contract to a document containing an arbitration clause constitutes an
arbitration agreement if the contract is in writing and the reference is such as to make
that arbitration clause part of the contract.”

Essentials of Arbitration Agreement

The presence of a dispute is an important condition for arbitration. In cases where parties have
successfully settled their disputes, they cannot oppose the settlement and invoke an arbitration
clause.
 Written Agreement
It is very essential that an arbitration agreement should be in writing. As per Section 7 (4) of the
Arbitration Act, a separate agreement or clause in commercial agreement is considered to be in
writing, if it is contained in:
i. A document duly signed by both the parties;
ii. An exchange of letters, telex, telegrams or other mediums which can provide a record
of the agreement; or
iii. An interchange of statements of claim and defence in which the availability of the
agreement is alleged by one party and left undefined by another.
 Intention
Intention to form agreement of the parties is of prime importance. No such form has been
provided for an arbitration agreement and nowhere has it been defined that terms like arbitration,
arbitrator are essential requirements in an arbitration agreement.
 Signature
An arbitration agreement is not completed until and unless it is signed by the parties. The
agreement may be in the form of a signed document by both the parties which contains all the
terms and conditions or it may also be a signed document by one party which will contain the
terms and conditions and an acceptance which is signed by the other party. It will also make
agreement valid if one party puts his signature in the written agreement and the other party
agrees to it.

Pros of Arbitration Agreement

 Saves precious time of the parties.
 Usually more cost effective than court litigation.
 Flexible for the parties.
 Less complicated than litigaiton.
 Provides confiecntiality and privacy as the proceedings are not open to public.
Cons of Arbitration Agreement
 Sometimes it becomes expensive than litigation when the dispute is complicated.
 Closes the door for all the other forms of dispute mechanisms.
 Parties often unknowingly sign and becomes bound by the arbitration clause.
 Generally, it is binding and hence the parties have no option but to accept the decision.

Arbitral Tribunal
According to section 2(1) (d), an ‘Arbitral Tribunal’ means a sole arbitrator or a panel of
arbitrators.
The Amendment Act enables the Supreme Court (on account of international commercial
arbitration) and the High Court (in cases other than international commercial arbitration) to
assign arbitral establishments with the end goal of arrangement of arbitrators. Such arbitral
establishments will be evaluated by the Arbitration Council of India.
Composition of arbitral tribunal,
The composition of the arbitral tribunal is described in Chapter III of the Arbitration and
Conciliation Act, 1996.
Section 11 of the Act talks about with respect to the nationality of the arbitrator the person may
be of any nationality or may as the party may decide the same. The process of appointing a
arbitrator may be the decided by the parties according to Sub- Section 6.
“Section 10. Number of arbitrators.—
(1) The parties are free to determine the number of arbitrators, provided that such number shall
not be an even number.
(2) Failing the determination referred to in sub-section (1), the arbitral tribunal shall consist of a
sole arbitrator.”
It shall compose of:
1. A chairperson who is either judge of Supreme Court; or a judge of a High Court; or a Chief
Justice of High Court; or an eminent person with expert knowledge in conduct of arbitration
proceeding. Therefore other members consist of an eminent arbitration practitioner, an
academician with experience in arbitration, and government appointees.
2. The ex-officio Members of the Council will remember the Secretary to the Government of
India for the Department of Legal Affairs, Ministry of Law and Justice and Secretary to the
Government of India in the Department of Expenditure, Ministry of Finance or their
individual agents not underneath the position of Joint Secretary.
3. One representative of a recognised body of commerce and industry will be a part time
member.
The provisions mentioned in this chapter are discussed below:
 The number of arbitrators
 Their appointment
 Power of the Central Government to amend the schedule
 Grounds on which the appointment of the arbitrator can be challenged
 Procedure to challenge the appointment
 Failure or impossibility on the part of the arbitrator to act
 Termination of the mandate and substitution of the arbitrator
Also, the number of arbitrators should be odd and not even, and it helps determine the majority
of the tribunal and avoids any discrepancy.
Arbitral tribunals are usually constituted in two types of proceedings:
 Ad hoc proceedings: The arbitrators are appointed by the parties without a supervising
institution. This relies on the rules that have been agreed upon by the parties and or
procedural law and courts to resolve any differences
 Institutional arbitration proceedings: The arbitrators are appointed under the
supervision of professional bodies providing arbitration services, such as the American
Arbitration Association, the ICDR in New York, the Australian Fair Work Commission,
the LCIA in London or the ICC in Paris.

Duties of an arbitral tribunal under the Arbitration Act 1996

Section 33(1) of the Arbitration Act 1996 states an arbitral tribunal must:
 Act fairly and impartially as between the parties, giving each party a reasonable
opportunity of putting his case and dealing with that of his opponent
 Adopt procedures suitable to the circumstances of the particular case. Avoid unnecessary
delay or expense to provide a fair means for the resolution of the matters falling to be
determined

Powers of the Arbitral Tribunal

 The arbitrator has the power to administer an oath to the parties. The arbitrator must act
as a quasi-judicial authority
  Power to take interim measures
 According to section 25, an arbitrator has the power to proceed to ex-parte
 Power to appoint an expert
 Power to make awards

Jurisdiction of Arbitral Tribunal

In the Arbitration and Conciliation Act there is no such specific provision which deals with the
power of the Arbitral Tribunal to rule on its own jurisdiction the power was mainly rested to the
court. Section 16 of the said act has provided the power to the tribunal to rule on its own
jurisdiction.

Section 16(1) states that the Tribunal may rule on its own jurisdiction which includes raising of
any objection with respect to the validity of the arbitration agreement. The concept can be
understood on two terms. First been the tribunal may decide without been interference from the
court and secondly the courts have been excluded in a way to determine the jurisdiction. ( The
concept of Doctrine of Competence Competence)

With regard to the jurisdiction of the arbitral tribunal Section 16 of the act remains the point of
focus the section provides the concept of competence competence. The arbitral tribunal may rule
on its own jurisdiction, including with respect to the existence or validity of the arbitration
agreement. Further, the arbitration clause shall be treated as independent of the underlying
contract and a decision that the contract is null and void shall not entail ipso jure the invalidity of
the arbitration clause. Where the arbitral tribunal rejects an objection to its jurisdiction, it shall
continue with the arbitral proceedings and make the award. Any challenge to the award would be
available at that stage. If, on the other hand, the arbitral tribunal accepts the plea as to its lack of
jurisdiction, an appeal shall lie to a Court of law.

Pharmaceutical Products of India Ltd vs. Tata Finance Ltd

It was held that in case where the Arbitral Tribunal does not takes the issue with regard to its
jurisdiction under sub section 5 of the act provides for the tribunal to continue the arbitral
proceedings and pass the award as deem fit. Sub-section (5) provides for the manner in which
such an arbitral award may be challenged. Section 34 provides that such an award can only be
challenged.

Konkan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd.

Section 16 enables the arbitral tribunal to rule on its own jurisdiction. In the instant case, it was
held that the arbitral tribunal’s authority under Section 16 is not confined to the width of its
jurisdiction but goes also to the root of its jurisdiction. The Jurisdiction of the Arbitral Tribunal
When the Contract Governing the Arbitration Clause is void.
Waverly Jute Mills Co. Ltd vs Raymon

It was held that the agreement with regard to the arbitral tribunal must be separate, different and
independent from the contract in order to avoid itself from been declared as insolvent. Whatever
part which remains with conformity with the contract will be declared as the void and non-
operative.

Jawaharlal Burman vs Union of India

The court said that there are many situations and condition which may arise. The contract may
come to an end and the arbitration contract may not. It is also possible that the agreement may be
void but the contact still is valid. therefore, there is a clear difference between the agreement and
the contract itself. But challenging the contract in itself means challenging the agreement.

Arbitral Award
The Act does not give a concrete definition of the term 'arbitral award'. Section 2(1)(c) merely
states that for Part I of the Act, the term includes an interim award within its meaning.
Interim award: It is an award that affects the rights of the parties but is not a final award. An
arbitral tribunal may at any time during the arbitral proceedings make an interim arbitral award
on any matter concerning which it may make a final arbitral award.
The arbitral award or arbitration award refers to an arbitration hearing decision made by an
arbitration tribunal. An arbitral award is equal to a court judgment. An arbitral award may be
non-monetary in nature where the claims of the entire claimant fail and there is no need for any
party to pay any money.
Essentials Of An Arbitral Award
For an arbitral award to be valid it must contain the following essential elements:
 The award shall be in writing.
 The award shall be signed by all the members of the arbitral tribunal.
 The award shall state the reasoning on which it is based.
 Date and place of arbitration should be mentioned on the award.
 The award must be complete and must not leave anything behind.
 The award must be consistent and should not be contradictory
 The award must be certain and should not be any uncertainty.
 The award should not be impossible to perform.
General Principles
 Who can challenge: Only a party to the arbitration agreement can challenge an arbitral
award. A person who is not a party to the arbitration cannot raise a challenge against an
arbitral award.
 Authority: An award can only be challenged before a court, which would include a
District Court and a High Court exercising original jurisdiction (for awards from
domestic arbitration) and High Court (for awards from international commercial
arbitration).
 Timeline: Timeline refers to by when a challenge against an arbitral award can be raised.
The law notes an initial period of three months from when the award is received by the
party with a maximum extension of thirty more days by the court.

Types Of Arbitral Award

1. Final Award: An award that is made by the requirements of the law (including signature,
reason and delivery), and finally adjudicates on the issues submitted to arbitration, would
be a final award.
2. Domestic award: An arbitral award made within the territory of the state.
3. Foreign award: An arbitral award made or deemed to be made in the territory of another
state.
4. Settlement Award: During the arbitration process, the parties may choose to settle the
matter instead of having it adjudicated by the arbitrator. In such a situation, the arbitrator
could assist the parties in arriving at a settlement. If a settlement is arrived at, and the
arbitrator has no objection to it, then terms of the settlement could be made part of an
award. This is referred to as a settlement award. (Section 30).
5. Additional Award: When a final award has been rendered, but it is later found out that
certain claims that had been submitted to the arbitral tribunal were not
resolved/adjudicated, the parties can request the arbitral tribunal to make an additional
award covering the issues that had been left out. Such a request must be made within 30
days from the date of receipt of the final award.

Domestic Arbitral Award

The domestic awards are covered in part 1 of the arbitration and conciliation act, 1996. The
domestic award is distinguishable from international award or foreign award. A foreign award
may be regarded as a domestic award in which country it is made.
Part 1 of the act applies to such arbitration when the seat of the arbitration for the international
arbitration is India and all the domestic arbitration. In the case of a domestic award a challenge to
the award can be made under section 34 of the act where as no “challenge” proceeding is
contemplated as foreign award. There is an exception that is, domestic award also includes
international arbitration award, where one party is other than India or any citizen, govt. or
institution other than India, but award made in territory of India.
Enforcement of domestic award

An order passed by the Arbitral Tribunal on formal arbitration in India will be regarded as a
court order and will be enforceable under the provisions of the arbitration and conciliation act, as
if it were a court order, specifying its application.
Once the arbitral award has been finalized and operational, the prize holder shall apply for the
award to the debtor before a commercial court or High Court, subject to jurisdiction. In the
interim, if possible, the arbitral award is challenged, the court has the power to provide
protection assistance and grant residency when the arbitral award is made. It is worth noting that
in terms of the Amendment Act of 2015, the party challenging the arbitral award will have to
apply for a separate application in order to claim the residency. It may be noted that if the court
finds that the award is valid, in the execution phase, there will be no challenge to the validity of
the mediation award.
Conditions in which an arbitral award can be set aside
There are several grounds on account of which the Court can set aside the arbitral award, which
is as follows:
1. Incapacity of the party: If any of the parties is under the age of majority or is a minor,
they are not obligated to follow any agreement in place. As a result, the agreement
becomes void, and any award made in such a case may be revoked by the court.
2. Agreement is not valid: For a contract to be enforceable, all of its essential elements
must be met. If the contract is illegal, the arbitration agreement will be declared void as
well, and the arbitral award can be revoked.
3. Another party was not notified: Arbitral award shall be revoked if the party applying
was not provided with advance notice of the arbitrator's appointment or the arbitral
procedures or was otherwise unable to submit his case.
4. Subject matter beyond the arbitration clause: The arbitral award will be challenged if
it deals with an issue that is not addressed by the arbitration agreement or contains
decisions on subjects that are outside the scope of the arbitration agreement.
 Recourse against arbitral awards

Under Section 34 of the Act, a party if not satisfied can make an application to set aside the
award granted by an arbitral tribunal. The time limit to make such an application is not more than
3 months from the date the arbitral award was made. The grounds are:

 Incapacity of parties.
 Non-existence of the agreement of arbitration.
 Did not follow the due process.
 Error on the part of the arbitral tribunal to exercise its jurisdiction.
 Improper composition of the arbitral tribunal.
 The subject matter is not capable of being referred to arbitration.
 It is against public policy.
 Fraud or corruption.

Section 37 of the Act provides that if a person is not satisfied with the order passed by the
tribunal, he/she can appeal to the court. However, there are no provisions for a second appeal
once an appeal has been made. In the case of Pandey and Co. Builders Pvt. Ltd. v. State of Bihar
(2007), it was held that the appellate authority in any case which is referred to arbitration must be
decided from the definition of court given under Section 2 of the Act.

1. Cheran Properties Limited Vs Kasturi And Sons Limited

Facts: An agreement was entered between Sporting Pastime India Limited (SPIL), Kasturi Sons
and Limited (KSL), KC Palanisamy (KCP) and Hindcorp Resorts Private Limited (Hindcorp).
Under the agreement, SPIL was to allot 240 lakhs equity shares to KSL against the book debts.
KSL offered to sell 243 lakhs equity shares to KCP. KCP agreed to take over the business, shares
and liabilities of SPIL as per the Agreement. KCP failed to comply with its obligations under the
Agreement. KSL and Hindcorp initiated Arbitration proceedings against KCP and SPIL. The
Arbitral Tribunal made its award directing KCP and SPIL to return the share certificates of SPIL
to KSL and Hindcorp. KCP challenged this Judgement under Section 34 of the Arbitration and
Conciliation Act. The challenge was dismissed by the High Court of Madras. KSL held
proceedings against Cheran, a nominee of KCP to execute the award which directed the
transmission of shares. KSL approached the National Company Law Tribunal, where it was held
that Cheran is a nominee of KCP and holds shares on its behalf.
Issue: Whether an Arbitral award is binding on a third party?
Judgement:
As per the above reasons, Court contended that the appeals are lacking in merit. The Appeals
shall stand dismissed.
2. Associate Builders V. Delhi Development Authority
Facts: Delhi Development Authority (DDA), the defendant, awarded a construction work
contract to the appellant. The latter had to build 168 Middle Income Group houses and 56 Lower
Income Group houses, as per the contract. The tendered amount for the same was Rs.87,66,678.
The appellant had to finish it within nine months. However, the work came to an end only within
thirty-four months and was not fully complete. The appellant asserted the delay in the
construction of the houses as a result of the defendant's defaults. The appellant made around
fifteen claims regarding these defaults. The High Court of Delhi then appointed a sole arbitrator
to arbitrate upon the matter. After going through all the claims, the arbitrator came down to the
four specific ones that were the most relevant. Allowing these four claims and upholding that the
resulting delay was indeed the respondent's (defendant) fault, the arbitrator stated that the
respondent failed to fulfil its obligations, causing a delay in the work. It also led to the claimants
(appellant) incurring heavy monetary losses to deal with the same. Subsequently, the defendant
appealed to the Delhi High Court. It raised its objections to the arbitral award before the Single
Judge. However, the learned Single Judge dismissed the same and sustained the arbitrator's
decision.
The defendant then appealed to the Division Bench of the same Court under section 37 of the
Arbitration and Conciliation Act, 1996, challenging the single judge's judgment. The two-judge
bench overruled the single judge's decision, nullifying those four claims. The judges then came
down to another two claims, setting aside the award given by the arbitrator. The appellant
appealed to the Supreme Court by Special Leave Petition against the decision of the Division
Bench.

Issue: Whether the Division Bench surpassed its jurisdiction in setting aside the arbitral award so
challenged by the defendant or not.
Judgement: The arbitrator evaluated all the claims and made a reasonable verdict on the dispute.
Even if there were any errors of fact, it was different from that of law. Hence, there was no
ground for the judges to interfere. The Single Judge was correct in his judgment of upholding the
arbitral award and dismissing the defendant's objections. Therefore, the Supreme Court allowed
the appeal made by the appellant. It set aside the Division Bench's judgement, upholding the one
given by the Single Judge. It also sustained the arbitral award as a whole.
3. Jagdish Kishinchand Valecha V. Srei Equipment Finance Ltd
Facts: In this case, the award has been challenged on the grounds of a breach of principles of
natural justice. The petitioner contended that there have been certain procedural lapses in the
conduct of arbitration by the sole arbitrator and a proper opportunity of being heard was not
given to him, which violates Section 18 of the Arbitration and Conciliation Act,1996 (the Act) and,
thus, qualifying as a valid ground u/s 34(2)(a)(iii) of the Act. The Respondent, though contested
and argued that the petitioner was presented with sufficient opportunity to represent himself
before the arbitrator, expressed its dissatisfaction with the Award and offered to consent to the
appointment of an arbitrator for fresh appreciation and adjudication of the case.
Issue: The issue which arose before the Calcutta High Court was "Whether a court is entitled to
appoint a new arbitrator for deciding the dispute between the parties after the arbitral award has
been set aside u/s 34 of the Arbitration and Conciliation Act, 1996?"
Judgement: The Calcutta High Court observed that the Arbitration Act, 1996 ensures party
autonomy at all levels and the freedom of the parties to decide on the next course of action must
therefore be preserved. Accordingly, after setting aside the award, the Court appointed a new
arbitrator with the consent of the parties to decide the disputes afresh.
4. Chintels India Ltd V. Bhayana Builders Pvt Ltd
Facts: This case was brought as an appeal before the High Court of Delhi under Articles and
134A of the Indian Constitution which dealt with the main issue of whether the order passed by
the single judge of the Delhi High Court refusing the condonation of delay beyond the prescribed
time limit of the applicant concerning an arbitral award was within his power and correct and
whether this order could be appealed against in the Supreme Court under Section 37(1)(c) of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act.).
Issue: Whether the single Judge's order refusing to condone the delay in filling an application
under Section 34 of the Arbitration Act, 1996 an appealable order under Section 37(1)(c) of the
said Act?
Judgement: The Supreme Court analyzed Section 37(1)(c) of the Arbitration Act, 1996 and held
that the expression "setting aside or refusing to set aside arbitral award" must be read with the
expression that follows" under Section 34. The Supreme Court explained the dichotomy between
Section 34 and Section 37 of the Arbitration Act, 1996 and held that under Section 37(1)(a), where
a party is referred to arbitration under Section 8, then, at that point no appeal lies. The reason
being, the impact of such an order is that the parties should go to arbitration, and it is left to the
learned Arbitrator to decide points under segment 16 of the Act, which then, at that point become
the subject of an appeal under Section 37(2)(a).

Appointment of Arbitrators: Sec. 11

Section 11 of the Arbitration and Conciliation Act, 1996 deals with the appointment of arbitrators.
A person of any nationality may be appointed arbitrator unless the contrary intention is expressed
by the parties.
In Sub Section 3 of Section 11 states the circumstances where the parties fail to choose a
arbitrator under Sub Section 3 the automatic appointment of three arbitrator would be done and
those three be selecting a fourth presiding arbitrator.
The parties are free to agree on a procedure for appointment of arbitrator or arbitrators. Where
parties fail to appoint three arbitrators, each party shall appoint one arbitrator and the two
arbitrators shall appoint the third arbitrator. Hence, appointing three arbitrators is mandatory,
with the third one being the presiding arbitrator.
Where a party fails to appoint an arbitrator in accordance with the third arbitrator with the within
thirty days from the date of receipts of a request to do so from the other party or two appointed
arbitrators fail to agree on the third arbitrator within 30 days from the date of their appointment,
the appointment shall be made, upon a request of a party, by the Chief Justice of the High Court
or any person or institution designated by him.
Procedure for the appointment:
Section 11 only confers power on the High Court to appoint an arbitrator or presiding arbitrator
only when the following conditions are fulfilled:
a. where there is a valid arbitration agreement;
b. the agreement contains for the appointment of one or more arbitrators;
c. the appointment of the arbitrator is to be made by mutual consent of all the parties to the
dispute.
d. differences have arisen between the parties to the arbitration agreement; or between the
appointed arbitrators;
e. the differences are on the appointment or appointments of arbitrators.

Section 12 of the Act talks about the grounds of challenging the arbitrators. There lie two
basis grounds on which a arbitrator can be challenged.
 doubts of been impartial or the independence of the arbitrator. If the parties or party feels
that the arbitrator is impartial or has connection to one of the parties then the challenge
can be raised.
 if the there is a incapacity on the grounds of his Qualification then on that ground too
disqualification process can be initiated. It is also the duty of the party to fully disclose
any contact with the arbitrator if any which will prejudice the hearing at any moment.

Indian Drugs & Pharmaceuticals Ltd. v. Indo Swiss S. Gem Mfg. Co. Ltd.,
It has been held that no retired High Court Judge can be appointed as an arbitrator by the court
when the arbitration clause states categorically that the difference/dispute shall be referred to an
arbitrator by the Chairman and Managing Director of IPDL who is the appellant in this case.
National Aluminium Co.Ltd v. Metalimpex Ltd.,
A Bangladeshi company failed to nominate its arbitrator in terms of the arbitration agreement on
an application under S.11 of the Arbitration and Conciliation Act, 1996, the Chief Justice of India
nominated an arbitrator to act on behalf of the Bangladeshi company.
ICICI Ltd. v. East Coast Boat Builders & Engineers Ltd.,
Two arbitrators were appointed by respective parties, but they did not agree on the name of the
third arbitrator. The petitioner made an application for appointment of the third arbitrator by the
court under s.11 of the Act. The court accepted the prayer and appointed the third arbitrator.
Kanagarani Durairaj v. Dwaragan,
It was held that in absence of a delegation of power by the Chief Justice of High Court under s.11
of the Act, the City Civil Court has no jurisdiction to appoint an arbitrator under s.11 of the court.

Arbitration and Exclusivity of Jurisdiction

According to the Indian Council of Arbitration, all disputes which can be decided by a civil court,
involving private rights, can be referred to arbitration. However, it also states that there are
certain matters which, as a general practice, are not referred for arbitration. The matters which
are generally not referred for arbitration include:
i. Matrimonial matters, like divorce or restitution of conjugal rights
ii. matters relating to guardianship of a minor or other person under disability
iii. testamentary matters, for example, questions about the validity of a will
iv. insolvency matters, such as adjudication of a person as an insolvent
v. criminal proceedings
vi. questions relating to charities or charitable trusts
vii. matters falling within the purview of the Monopolies and Restrictive Trade Practices
Act
viii. Dissolution or winding up of a company.
Even though the above listed matters are not usually referred for arbitration, it is to be noted that
these are not expressly barred under any statute and this is merely a matter of general practice.
All matters, other than the above listed, are frequently referred for arbitration rather than the
cumbersome process of the courts.

Jurisdiction of Arbitral Tribunals, Section 16

Section 16 of the Arbitration and Conciliation Act, 1966 lays down the Doctrine of Competence
wherein the arbitral tribunals have competency to rule on its own jurisdiction. It means that in
case any of the parties is dissatisfied by the ruling of the tribunal, the tribunal will still have the
power to review its ruling before the party can go to a court.
During an arbitral proceeding, a plea by one of the parties claiming that the tribunal does not
have jurisdiction has to be submitted before the submission of statement of defense, and a plea
claiming that the arbitral tribunal is exceeding the scope of its authority has to be raised as soon
as the matter alleged to be beyond the scope of its authority is raised during the arbitral
proceedings. Sub-section (5) empowers the arbitral tribunal to decide upon such pleas and either
admit or reject it.

Ad hoc or institutional arbitration

In an arbitration agreement, the parties must select either ad hoc or institutional arbitration. In ad
hoc arbitration, the proceedings are carried out as per the procedure and modalities agreed to by
the parties. In institutional arbitration, a specialised institution is appointed to administer the
proceedings and appoint the arbitrator. Some of the arbitration institutes in India are Delhi
International Arbitration Centre (DIAC), Nani Palkhivala International Arbitration Centre,, and
Mumbai Centre for International Arbitration (MCIA). The ad hoc system grants more autonomy
and is cost-effective. On the other hand, the institutional arbitration model offers pre-established
fine-tuned procedure, administrative assistance and qualified empanelled arbitrators.
In India, ad hoc arbitration is more prevalent as compared to institutional arbitration. Through
the Arbitration and Conciliation Amendment Act, 2019, through the Arbitration and Conciliation
Amendment Act, 2019, the government has tried to push the arbitral institutions to develop into
cost-effective centres for domestic and international arbitration.

Arbitration and Interim Measures

Section 9 of Arbitration and Conciliation Act, 1996 covered the provisions for interim measures
which has now been amended. It stated that a party could apply for interim measures at any time
during the arbitral process except when the award is to be enforced.
The amended act has made two changes to the section. Firstly, an application of interim
measures for protection could only be entertained by the court only if situations arise under
which relevant provisions under Section 17 have not been effective. Secondly, if an order of
interim measures for protection is passed before the commencement of arbitral proceedings, the
same should begin within 90 days of the order being passed or within the time stipulated by the
Court.

Interim Measures under Arbitration and Conciliation

Interim measures/orders are temporary measures/orders passed by the court during or in the
course of pendency of litigation proceedings. The question we seek an answer to is – Since
arbitration tribunal is not a regular court, and cannot enforce its order, can a party to an
arbitration proceeding apply to a regular court seeking an interim order. The answer is YES, it
can.
Civil Procedure Code, 1908 has ample provisions to facilitate interim measures. For a court to
grant an interim order for protection, for instance an injunction, it has to follow three basic
principles.
N V Choudhary v Hindustan Steelworks Constructions ltd
1. A prima facie case should be established by the applicant
2. It should be verified if the balance of convenience tilts in applicant’s favour
3. Also, whether the refusal of an interim order will result in irreparable loss for the
applicant.
Since the court has powers to enforce its orders unlike an Arbitration tribunal, the applicant is
protected if the respondent is at fault. Under Arbitration and Conciliation Act, 1996, a party can
apply for the order “…before or during arbitral proceedings or at any time after the making of
the arbitral award but before it is enforced in accordance with section 36, apply to a court”
The provisions of section 9 were restated in the case of Sundaram Finance Ltd. v NEPC India
Ltd. It also added that a court will not be debarred from considering the application simply
because a notice had not been issued under Section 21 of the said Act.

Different Interim Measures

One can apply for As specified in the Section 9 of the Arbitration and Conciliation Act, 1996,
following are the interim measures one can apply for –
1. Appointment of a guardian for a minor or a person of an unsound mind for the
purpose of arbitral proceedings
2. 2. An interim measure for protection can be sought for the following-
i – preservation, interim custody or sale of any goods that are subject matter of the
ii- securing an amount in dispute
iii- the detention, preservation or inspection of any property or thing which is the
subject-matter of the dispute in arbitration, or as to which any question may arise
therein and authorising for any of the aforesaid purposes any person to enter upon
any land or building in the possession of any party, or authorising any samples to
be taken or any observation to be made, or experiment to be tried, which may be
necessary or expedient for the purpose of obtaining full information or evidence
iv – an interim injunction
v – an interim appointment of a receiver
vi- an interim measure of protection that may appear to the court to be just and
convenient
If an application is made for any of these interim measures, the court has the vested powers to
make an order for the purpose of and/or in relation to civil proceedings before it.
Ion Exchange Ltd. v Paramount Ltd
The court held that an application filed under section 9 without informing the opposite party shall
not be considered bona-fide, with a view of denying a legal remedy to the applicant party.

Different factors under which one can seek interim measures

There is no statutory principle guiding interim applications and no single test will provide a
common solution – yet, there is enough jurisprudence to guide the courts in most interim
applications. Acknowledging that interim orders can be granted at any step during the
proceedings, even after the judgement has been passed – being orders of freezing injunctions
which are passed for the enforcement of the passed judgements. Let us take a closer look at what
they are – 1.
 1. The Inescapable Dilemma Originating from the principle of equity, interim injunctions
have been codified as a statutory right. Pursuing to the latin maxin of audi alteram
partem – both/all parties have a right to a fair court hearing before their rights are
subjected to restrictions.
2. Status Quo – the fallacy The principle of status quo requires the arbitrating parties to
keep things the way they are until the final judgement is made. This principle is said to
have been fatally flawed since the order of interim relief concerns itself with
preservation of rights and not physical objects. The idea to be considered is if the order
would provide a just outcome at the end of the litigation.
3. Governing Principles As is one of the principles(established in N V Choudhary v
Hindustan Steelworks Constructions ltd) an interim measure order is granted if the
applicant can show a prima facie case based on merits. Thus, if the judge is convinced
that the applicant had a good chance of succeeding in the final judgement then usually an
injunction is granted.
4. Restraint on Publication The leading authority of restraint on publication has been
established under Cream Holdings Limited v Banerjee. Under this test the applicant is
supposed to show that he will succeed at trial. The dilemma in these cases is regarding
balancing freedom of right to expression and right to protection against defamation.
5. Freezing Injunctions Established in the case Naviera SA v International Bulkcarriers SA ,
also known as Mareva Injunction – protects the claimant’s rights against defendant from
dissipating his assets, consequently turning the litigation into a futile exercise.

Conciliation
Conciliation is the procedure through which the conciliator informally tries to settle the dispute
between the parties and brings them to an agreement. The success of these proceedings depends
upon the ability of the conciliator.
Application and Scope- Sec. 61
Section 61 of the Arbitration and Conciliation Act of 1996 provides for the Application and Scope
of Conciliation. Section 61 points out that the process of conciliation extends, in the first place, to
disputes, whether contractual or not. But the disputes must arise out of the legal relationship. It
means that the dispute must be such as to give one party the right to sue and to the other party the
liability to be sued.
The conciliator does the following:-
 Lowers tensions.
 Improves communications.
 Interprets the issues.
 Provides technical issues.
 Explores potential solutions.

Procedure of Conciliation
1) Commencement of the conciliation proceedings [Section 62]-
The conciliation proceeding are initiated by one party sending a written invitation to the other
party to conciliate. The invitation should identify the subject of the dispute. Conciliation
proceedings are commenced when the other party accepts the invitation to conciliate in writing.
If the other party rejects the invitation, there will be no conciliation proceedings. If the party
inviting conciliation does not receive a reply within thirty days of the date he sends the invitation
or within such period of time as is specified in the invitation, he may elect to treat this as
rejection of the invitation to conciliate. If he so elects he should inform the other party in writing
accordingly
2) Submission of Statement to Conciliator [Section 65] –
The conciliator may request each party to submit to him a brief written statement. The statement
should describe the general nature of the dispute and the points at issue. Each party should send a
copy of such statement to the other party. The conciliator may require each party to submit to
hima further written statement of his position and the facts and grounds in its support. It may be
supplemented by appropriate documents and evidence. The party should send the copy of such
statements , documents and evidence to the other party. At any stage of the conciliation
proceedings , the conciliator may request a party to submit to him any additional information
which he may deem appropriate.
3) Conduct of Conciliation Proceedings[Section 69(1),67(3)]-
The conciliator may invite the parties to meet him. He may communicate with the parties orally
or in writing. He may meet or communicate with the parties together or separately. In the
conduct of the conciliation proceedings, the conciliator has some freedom. He may conduct them
in such manner as he may consider appropriate. But he should take in account the circumstances
of the case, the express wishes of the parties, a party’s request to beheard orally and the need of
speedy settlement of the dispute.
4) Administrative assistance [S. 68]-
Section 68 facilitates administrative assistance for the conduct of conciliation proceedings.
Accordingly , the parties and the conciliator may seek administrative assistance by a suitable
institution or the person with the consent of the parties.

Principles of Procedure
1) Independence and impartiality [Section 67(1)]-
The conciliator should be independent and impartial. He should assist the parties in an
independent and impartial manner while he is attempting to reach an amicable settlement of their
dispute.
2) Fairness and justice[Section 67(2)]-
The conciliator should be guided by the principles of fairness and justice. He should take into
consideration ,among other things , the rights and obligations of the parties, the usages of the
trade concerned ,and the circumstances surrounding the dispute ,including any previous business
practices between the parties.
3) Confidentiality [Section 70]-
The conciliator and the parties are duly bound to keep confidential all matters relating to
conciliation proceedings. Similarly when a party gives a information to the conciliator on the
condition that it be kept confidential , the conciliator should not disclose that information to the
other party.
4) Disclosure of the information[Section 70]-
When the conciliator receives a information about any fact relating to the dispute from a party ,
he should disclose the substance of that information to the other party.The purpose of this
provision is to enable the other party to present an explaination which he might consider
appropriate.
5) Co-operation of the parties with Conciliator [S. 71]-
The parties should in good faith cooperate with the conciliator. They should submit the written
materials , provide evidence and attend meetings when the conciliator requests them for this
purpose.

Settlement of Disputes (Section 73)

According to section 73 of the Arbitration and Conciliation Act, 1996, settlement of disputes
takes place through certain steps mentioned below:-
1. Formulate the terms of a possible settlement.
2. The conciliator may reformulate the conditions of a prospective settlement after receiving the
parties’ observations.
3. When the parties reach an agreement on a settlement, they may draw up and sign a written
statement.
4. The settlement agreement shall be final and binding on the parties.
5. The conciliator shall authenticate the settlement agreement. The settlement agreement shall
have the same effect as of arbitral award. (Section 74)
6. Confidentiality shall be maintained by the conciliator and parties whenever necessary. (Section
75)

Conciliator
Section 64 deals with the appointment of the conciliators. When the invitation to the conciliation
is accepted by the other party, the parties have to agree on the composition of the conciliation
tribunal. In the absence of any agreement to the contrary ,there shall be only one conciliator. The
conciliation proceeding may be conducted by a sole conciliator to be appointed with the concent
of both the parties, failing to which the same may be conducted by two conciliators (maximum
limit is three), then each party appoints own conciliator ,and the third conciliator is appointed
unanimously by both the parties.
Role of Conciliator-
Section 67 of the act describes the role of the conciliator as-
(1) The conciliator shall assist the parties in an independent and impartial manner in their attempt
to reach an amicable settlement of their dispute.
(2) The conciliator shall be guided by principles of objectivity, fairness and justice, giving
consideration to, among other things, the rights and obligations of the parties, the usages of the
trade concerned and the circumstances surrounding the dispute, including any previous business
practices between the parties.
(3) The conciliator may conduct the conciliation proceedings in such a manner as he considers
appropriate, taking into account the circumstances of the case, the wishes the parties may express,
including any request by a party that the conciliator hear oral statements, and the need for a
speedy settlement of the dispute.
(4) The conciliator may, at any stage of the conciliation proceedings, make proposals for a
settlement of the dispute. Such proposals need not be writing and need not be accompanied by a
statement of the reasons therefore.
A conciliator is also expected to review relevant documents and information to help reach
conclusions. Meet with witnesses and other persons related to the parties to obtain statements
and additional information about the dispute in question and practice confidentiality regarding
the personal information of the parties and of the dispute. A brief written statement of all the
issues faced by the parties is to be submitted to the conciliator before the process of conciliation.
Restrictions on Role of Conciliator – Section 80
Section 80 places two restrictions on the role of the conciliator in the conduct of conciliation
proceedings:
1. Clause (a) prohibits the conciliator to act as an arbitrator or as a representative or counsel
of a party in any arbitral or judicial proceeding in respect of a dispute which is subject of
the conciliation proceedings.
2. Clause (b) of prohibits the parties to produce the conciliator as a witness in any arbitral or
judicial proceedings.

Principle of Confidentiality

In a conciliation proceeding, two parties resolve the matter and confidentiality is something
which is guaranteed by the statute itself which makes it one of the highlighting features of
alternative dispute resolution. In conciliation, both the parties and the conciliator are obligatory
to keep the facts and all the material relating to the proceedings very confidential.

Details and opinions/views of other parties is not to be discussed by the parties in respect of the
possible settlement of their dispute. They should also refrain from making admission of other
parties and other conciliators in the course of the proceedings. Matters regarding the dispute is
required not to speak about any information or not to bring out any e subject matter regarding the
dispute to other party or conciliators during the cancellation process. During the proceedings, a
conciliator can never play the role of a witness.

Section 75 describes Confidentiality as –

Notwithstanding anything contained in any other law for the time being in force, the conciliator
and the parties shall keep confidential all matters relating to the conciliation proceedings.
Confidentiality shall extend also to the settlement agreement, except where its disclosure is
necessary for purposes of implementation and enforcement.

Termination of Conciliation Proceedings (Section 76)

According to section 76 of the Arbitration and Conciliation Act, 1996, the conciliation
proceedings shall be terminated in the following ways-
1. By signing the settlement agreement by the parties on the date of the agreement; or
2. After the written declaration of the conciliator on consultation with the parties on the date of
the declaration of result, the result becomes final, and further efforts at conciliation are no longer
justifiable.
3. By a party’s written declaration to another party.

Haresh Dayaram Thakur v. State of Maharashtra and Ors.

the Supreme Court examined the provisions of Sections 73 and 74 of the Arbitration and
Conciliation Act 1996. In paragraph 19 of the judgment, the court made the following
observations:
According to the statutory provisions mentioned above, it is evident that a conciliator’s role is to
assist the parties in settling their disputes amicably. The conciliator is granted broad powers to
determine the procedure to be followed without being bound by procedural laws such as the
Code of Civil Procedure or the Indian Evidence Act 1872.
When the parties are able to reach a mutual agreement, and the conciliator believes that there is a
potential settlement acceptable to the parties, the conciliator should follow the procedure
outlined in Section 73. This involves formulating the settlement terms and presenting it to the
parties for their observations. The final step for the conciliator is to draft the settlement based on
the parties’ observations.
The settlement becomes legally binding only when the parties themselves draw up the settlement
agreement or request the conciliator to prepare it and affix their signatures. As per Sub-section (3)
of Section 73, once the parties sign the settlement agreement is considered final and binding on
them and any individuals claiming under them.
Mysore Cements Ltd. v. Svedala Barmac Ltd.
The court made the following observations:
Section 73(1) states that when the conciliator believes that there are elements of a possible
settlement that may be acceptable to the parties, they should formulate the terms of the potential
settlement and present them to the parties for their observations. Upon receiving the parties’
observations, the conciliator may reformulate the settlement terms accordingly.
However, in the present case, the court did not find any such formulation and reformulation by
the conciliator, as required under Sub-section (1). Sub-section (2) states that if the parties reach a
settlement agreement based on the possible terms of settlement formulated, they may draft and
sign a written settlement agreement. Sub-section (3) clarifies that when the parties sign the
settlement agreement, it becomes final and binding on them and any individuals claiming under
them. Furthermore, Sub-section (4) requires the conciliator to authenticate the settlement
agreement and provide each party with a copy.

Difference Between Arbitration and Conciliation

Section 5 – extent of judicial intervention
Section 5 of the Act, 1996 provides for the extent of judicial intervention which says that
“notwithstanding anything contained in any other law for the time being in force, in matters
governed by this Part, no judicial authority shall intervene except where so provided in this Part”.
The word “Part” referred to in this Section is Part I of the Act, 1996 which shall apply were the
place of arbitration is in India6 and shall not affect any other law for the time being in force by
virtue of which certain disputes may not be submitted to arbitration.7 Therefore, the judicial
intervention has been restricted and minimized. Under Section 5, the words used are “Judicial
Authority” which is a wider term than the word “Court” and judicial authority includes all such
authorities/agencies conferred with the judicial powers of the Government. The judicial
authority’s intervention under the Act, 1996 is limited to the purposes as prescribed by the Act,
itself. The Act, 1996 provides for intervention or assistance of the judicial authority in respect of
several matters.

Section 8 of the Arbitration and Conciliation Act, 1996

deals with the power of the judicial authority to refer the parties to arbitration. The crux of the
provision is that if there is an arbitration agreement between the parties and a dispute arises
between the parties which is a subject matter of arbitration, then the judicial authority before
whom either of the parties has brought the case is obligated under Section 8 of the Arbitration
and Conciliation Act, 1996 to direct the parties to resolve their dispute through arbitration. To
amplify the scope of arbitration, the 2015 Amendment to Section 8of the said Act mandates the
judicial authority to refer the parties to arbitration irrespective of any decree/court
order/judgment. This section is based on Section 34 of the erstwhile Arbitration Act,of 1940.

It provides that the party to arbitration merely needs to insinuate the judicial authority about the
arbitration clause before the filing of the first statement. Thereafter, the judicial authority has to
compulsorily refer the parties to the arbitration. For invoking the arbitration clause, Section
8 provides a time limit and within that limit, the parties need to intimate the judicial authority
about the arbitration clause, the said limitation is described in the provision as “not later than the
date of submitting his first statement on the substance of the dispute.”

In the case of RashtriyaIspat Nigam Ltd vs. Verma Transport Company

[MANU/SC/3491/2006](AIR 2006 SC 2800) (( 2006 ) 7 SCC 275) ([ 2006 ]Supp( 4 )SCR 332)The
Hon’ble Supreme Court of India held that indeduced that the ‘First statement’ with respect to
section 8 should be different from the expression ‘written statement’. Further, the court goes on
to say that it is the duty of the judicial authority to find whether the party has waived its right to
invoke arbitration by filing the first statement.

Essential ingredients of section 8

The following are the essential ingredients of it-

1. There should be a valid arbitration agreement between the parties.

 2. Action should be brought before the judicial authority and that action should be a subject
matter of the arbitration.
3. Either of the parties or any person related to the dispute should invoke the arbitration
clause or agreement before the date of submitting their first statement on the substance of
the dispute before the judicial authority.
4. The application of the party to refer the case to arbitration should be filed with the
original arbitration agreement or its duly certified copy.

In the case of P.AnandGajapathi Raju and Ors vs. P.V.G Raju and Ors[MANU/SC/028/2000]
(AIR 2000 SC 1886) (( 2000 ) 4 SCC 539) ([ 2000 ] 2 SCR 684)

the Supreme court held that

 There must be an arbitration agreement or an arbitration clause between the parties;

 A party to the arbitration agreement files a case against the other party before the judicial
authority;
 The subject matter of the case so filed must be the same as the subject matter of the
arbitration agreement;
 The defendant or any other party related to the case moves the Court seeking a reference
of the parties to arbitration before the submission of first statement on the substance of
the dispute.

Grounds for Rejection of Application under Section 8 of the Act

The judicial authority can reject the application on the following grounds:

 When it appears that the party has waived his right to invoke the arbitration clause before
submission of the first statement on the substance of the dispute.
 When the Judicial authority is of the view that no adequate relief would be available to
the party.
 When the Court or the Judicial authority is satisfied that no contract has been concluded
between the parties.
 When the contract itself is fraudulent in nature. When the main contract is void abinitio
or illegal or non-existent.
 Where the suits or claim is based on Negotiable Instruments.

Conduct of arbitral proceedings

Section 18-27 (including sec-20)

https://blog.ipleaders.in/arbitral-proceedings-conducted/
Difference between ‘seat’ and ‘venue’

Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552:

“……..the hearing of the arbitration will be conducted at the venue fixed by the parties, but it
would not have the effect of changing the seat of arbitration which would remain in India. The
legal position in this regard is summed up by Redfern and Hunter, The Law and Practice of
International Commercial Arbitration (1986) at p. 69 in the following passage under the heading
“The Place of Arbitration”:

“The preceding discussion has been on the basis that there is only one ‘place’ of arbitration.
This will be the place chosen by or on behalf of the parties; and it will be designated in the
arbitration agreement or the terms of the reference or the minutes of proceedings or in some
other way as the place or ‘seat’ of the arbitration. This does not mean, however, that the Arbitral
Tribunal must hold all its meetings or hearings at the place of arbitration. International
commercial arbitration often involves people of many different nationalities, from many different
countries. In these circumstances, it is by no means unusual for an Arbitral Tribunal to hold
meetings—or even hearings—in a place other than the designated place of arbitration, either for
its own convenience or for the convenience of the parties or their witnesses…. It may be more
convenient for an Arbitral Tribunal sitting in one country to conduct a hearing in another
country—for instance, for the purpose of taking evidence…. In such circumstances, each move of
the Arbitral Tribunal does not of itself mean that the seat of arbitration changes. The seat of the
arbitration remains the place initially agreed by or on behalf of the parties.”

This, in our view, is the correct depiction of the practical considerations and the distinction
between “seat” [Sections 20(1) and 20(2)] and “venue” [Section 20(3)]. We may point out here
that the distinction between “seat” and “venue” would be quite crucial in the event, the
arbitration agreement designates a foreign country as the “seat”/“place” of the arbitration and
also selects the Arbitration Act, 1996 as the curial law/law governing the arbitration
proceedings.“

2. Arbitral Tribunal can seek court’s assistance in taking evidence

Delta Distilleries Ltd. v. United Spirits Ltd., (2014) 1 SCC 113: “……………The term “any
person” appearing under Section 27(2)(c) is wide enough to cover not merely the witnesses, but
also the parties to the proceeding. It is undoubtedly clear that if a party fails to appear before
the Arbitral Tribunal, the Tribunal can proceed ex parte, as provided under Section 25(c). At the
same time, it cannot be ignored that the Tribunal is required to make an award on the merits of
the claim placed before it. For that purpose, if any evidence becomes necessary, the Tribunal
ought to have the power to get the evidence, and it is for this purpose only that this enabling
section has been provided.”
Enforcement of arbitral award sec.36

Section 36 of the Arbitration and Conciliation (Amendment) Act, 2015 deals with the
enforcement of domestic awards. It provides that an award shall be enforced once the time for
making an application to set aside the award under Section 34 of the Act has expired. Such award
shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the
same manner as if it were a decree of the court. The Amendment Act, by way of adding sub-
clause (2) to Section 36 provides that the filing of an application to set aside the arbitral award
under Section 34 shall not act as an automatic stay on the enforcement of the said award. Such an
award shall be stayed only if the Court grants an order of stay, on a separate application made for
that purpose. If on such an application being filed, the Court grants an order of stay of the arbitral
award, it shall record its reasons in writing. This provision would act as a deterrent against
frivolous applications seeking to set aside arbitral awards and it will also permit the courts to
impose terms on the party challenging the award including the power to order deposit of amounts,
prior to admission of the stay application.

It is pertinent to note that under the Arbitration and Conciliation Act, 1996(Old Act), the award
could only be enforced once the time for making an application to set aside the arbitral award
under Section 34 had expired, or such application having been made, it had been refused. It is
further significant to note that the issuance of notice by the Court on the application under
Section 34 used to operate as an automatic stay on the enforcement of the said award. There was
no specific provision stating that a separate application before the Court needs to be filed to
obtain an order of stay of the operation of the award.
Conditions for enforcement of Arbitral Awards
A party may use the following grounds to contest an award. If the other party shows this, such an
award would be made unenforceable.

1. According to the statute, the parties to the settlement were under any disability.
2. The agreement in question did not comply with the law to which the parties are subject or
with the law of the country in which the award was made.
3. The party did not receive a proper notice of appointment from the arbitrator or the arbitral
proceedings or was otherwise unable to bring his case before the arbitral tribunal.
4. The reward deals with a distinction that does not fall within the terms of the agreement.
5. Award contains decisions on matters beyond the scope of being referred arbitration.
6. The arbitral proceedings did not comply with the agreement.
7. The composition of the arbitral body or the arbitral proceedings does not comply with the
law of the country in which the arbitration took place.
8. The award (precisely a foreign award) was not made binding on the parties or was set
aside or revoked by the competent authority of the state in which the award was made or
by the statute of which it was made.
9. Under Indian law, the subject matter of the dispute cannot be resolved by arbitration.
Enforcing the award would be contradictory to India’s public policy.

Limitation Period for Enforcement of Arbitral Award

In the case of domestic arbitral awards, the 1963 limitation law applies to arbitrations because,
according to section 21, the arbitral proceedings in respect of a specific dispute start on the date
on which the respondent receives a petition to refer the dispute to arbitration.[31] Arbitral awards
are deemed to be a decree.[32] The Arbitration Act does not place any restriction on the
execution of a foreign award, and the usual limitation period (12 years) is likely to apply.[33]

Different high courts have given different definitions of the limitation period within which a
party can impose an award in the case of foreign awards. The Bombay High Court observed a
foreign award in ‘Noy Vallesina v Jindal Drugs Limited’ not to be a judgment, rendering it non-
binding on parties unless it was reported as enforceable by a competent court.[34] In the
‘Compania Naviera ‘ Sodnoc ‘ v. Bharat Refineries Ltd.,’ on the other hand, the Madras High
Court referred to international awards as considered decrees.[35]

In M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd, the Supreme Court ruled that there could
be different stages in a single proceeding. A court can agree on the enforceability of the award in
the first proceeding. Once the enforceability has been determined, more successful steps can be
taken to implement the same.[36]

CASE REALTING TO SEC.34

ONGC v. SAW PIPES

In Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. 17 the primary question considered by
the Supreme Court was the scope and ambit of the courts powers visa-vis Section 34 of the
Arbitration and Conciliation Act. The court considered whether the power to set aside as award
that was patently illegal reposed with the court as per Section 34. It was argued that the
Parliament has not made much change while adopting Article 34 of UNCITRAL Model law. By
not providing error of law as a ground of challenge to the arbitral award under Section 34 of the
Act the Act did not intend to give a wider jurisdiction to the courts. The Supreme Court
considered Section 28(1)(a) which states that the arbitral tribunal is required to make the award
in keeping with the substantive law for the time being in force in India. This is inclusive of the
provisions of the Arbitration and Conciliation Act as well. The Supreme Court stated that the
legislative intent could not be that an award, despite being in contravention of the Act should be
allowed to stand. If the arbitral tribunal has not followed the mandatory procedure prescribed
under the Act, it would mean that it has acted beyond its jurisdiction and thereby the award
would be patently illegal which could be set aside under Section 34. The court held: ” …the
jurisdiction or the power of the arbitral tribunal is prescribed under the Act and if the award is de
hors the said provisions, it would be, on the face of it, illegal. The decision of the Tribunal must
be within the bounds to its jurisdiction conferred under the Act or the contract. In exercising
jurisdiction, the arbitral tribunal cannot act in breach of some provision of substantive law or the
provisions of the Act.” This statement necessarily has grave implications on the interpretation of
Section 34(2)(a)(v). The Supreme Court also acknowledged that Section 34(2)(a)(v) dealt with
the setting aside of an award if the arbitral procedure or the composition of the tribunal was not
in accordance with the parties agreement or in the absence of an agreement, Part I of the Act
comprising of Sections 2 to 43. Interestingly, the court observed that the parties’ agreement must
not be in contravention of the provision of Part I. This was in stark contrast to the Apex court’s
observations in Narayan Prasad Lohia v. Nikunj Kumar Lohia18 wherein it was held that if an
award was in accordance with the agreement of the parties, it may not be set aside by the court.
But as per the ONGC case, it award must be in accordance with the agreement of the parties
and the agreement of the parties must lie within the parameters prescribed by the non-
derogable provisions of Part I. If the award does not meet the said criteria, it may be set aside,
via Section 34(2)(a)(v) read with Section 28(1)(a).

TERMINATION OF PROCEEDINGS SEC. 32

How an arbitration proceeding comes to an end?

Section 32(1) of the Arbitration and Conciliation Act, 1996 provides that the arbitral
proceedings shall be terminated by the final arbitral award or by an order of arbitral
tribunal under section 32(2)

When an arbitral tribunal issues an order for termination of the arbitral

proceedings?

Section 32(2) of Act lays down that the arbitral tribunal shall issue an order for the
termination of the arbitral proceedings where-

(a) the claimant withdraws his claim, unless the respondent objects to the
order and the arbitral tribunal recognises a legitimate interest on his part in
obtaining final settlement of the dispute.

(b) the parties agree on the termination of the proceedings, or

(c) the arbitral tribunal finds that the continuation of the proceedings has for
any other reason become unnecessary or impossible.

Section 32(3) provides that subject to section 33 and sub-section (4) of section 34,
the mandate of the arbitral tribunal shall terminate with the termination of the
arbitral proceedings.

Section 32 of the Act deals with the termination of the arbitral proceedings. But the
provisions of section 32 are not exhaustive of the situations in which arbitral
proceedings may terminate. Besides the termination of an arbitral proceedings under
section 32(1) by making of final award by an arbitral tribunal or by an order of the
arbitral tribunal terminating the arbitral proceedings on any of the grounds
mentioned in section 32(2) of the Act, an arbitral proceeding may terminate-(a)
under section 25(a) on default of the claimant to communicate his statement of claim,
(b) under section 30(2) when the parties arrive at a settlement of their dispute, and
(c) under section 38(2), when the parties fail to pay the amount of deposit fixed by
the arbitral tribunal

Under the provisions of section 32(2), an arbitration proceeding come to an end with
the making of the final arbitral award and no formal order is necessary for
terminating the arbitration proceedings. The award itself constitutes the order of
termination of the proceedings. With the making of the final award the authority of
the arbitral tribunal ceases to operate and the reference terminates.

Under the provisions of section 32(2), an arbitral tribunal shall issue an order for the
termination of the arbitral proceedings if-(i) the claimant withdraws his claim; (ii) the
parties agree on the termination of the proceedings; or (iii) continuation of
proceedings becomes unnecessary or impossible.

A claimant is free to withdraw his claim at any time, but if such withdrawal adversely
affects the rights of the respondent, he may object to such withdrawal and
termination of proceedings due to such withdrawal. Sometimes, the parties may
agree to terminate the arbitral proceedings. Further, the arbitral tribunal may issue
an order terminating the proceedings if it finds that the continuation of proceedings
has become unnecessary or impossible.