POST GRADUATE PROGRAMME IN

MANAGEMENT (PGPM)
1

LEGAL ASPECTS OF BUSINESS

(LAB)

Dr Parul V Gupta
PhD (Law), LL.M., PGDBM

Dr. Parul Gupta

 Session 9 & 10
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The Arbitration and Conciliation Act, 1996 &

The Arbitration and Conciliation
(Amendment) Act, 2015
 Meaning and Definition Of Arbitration
 Arbitral Agreement
 Effect of Arbitration
 Law of Arbitration
 Appointment of Arbitrator
 Conduct of Arbitral Proceedings
 Arbitral Award
 Arbitration on Fast Track

Reminder
Quiz Three – Session 7 & 8
Dr. Parul Gupta
The Arbitration and Conciliation Act, 1996
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The Arbitration and Conciliation Act, 1996 -

the prime legislation in India relating to

 The Arbitration Act, 1940

 Conciliation was introduced
 domestic arbitration,
 international commercial arbitration and
 enforcement of foreign arbitral awards

Dr. Parul Gupta

The Arbitration and Conciliation Act, 1996
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Objectives
 Provide settlement of International
commercial disputes
 Provide justification of award
 Limiting the jurisdiction of the tribunal
 Limiting the supervisory role of courts
 Ensure the enforcement of final arbitral
award
 Provide for different modes of settlement

Dr. Parul Gupta

Meaning and Definition Of Arbitration
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Definition (sub-section (1) (a) )

“Any arbitration whether or not administered by

permanent arbitral institution.”

Romilly M R in the well-known case of Collins v Collins

defined “Arbitration” as follows:

“An Arbitration is a reference to the decision of one or

more persons, either with or, without an umpire of a
particular matter in difference between the parties.”
Arbitrator v Arbitral Tribunal

Dr. Parul Gupta

 Types of Arbitration
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1. Ad-hoc arbitration
 Agreed to and arranged by the parties themselves
without seeking the help of any arbitral institution.
 The procedure is either agreed upon by the parties
the procedure is laid down by the arbitral tribunal.

If the parties are not able to nominate

arbitrator/arbitrators by consent,
 The appointment of arbitrator is made by the High
Court (in case of domestic arbitration) and by the
Supreme Court(in case of international commercial
arbitration).
 In India, still most of the arbitrations are Ad-Hoc
Arbitrations.
Dr. Parul Gupta
 Types of Arbitration
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2. Institutional Arbitration
 The arbitration agreement may stipulate that in case of dispute
or differences arising between the parties, they will be referred
to a particular institution.
 Indian Council of Arbitration(ICA)
 International Chamber of Commerce(ICC)
 Federation of Indian Chamber of Commerce &
Industry(FICCI)
 World Intellectual Property Organisation(WIPO)
 The International Centre for Alternative Dispute
Resolution(ICADR)
 London Court of International Arbitration(LCIA)

 have framed their own rules of arbitration which would be

applicable to arbitral proceedings conducted by these
institutions.
 have fixed arbitrator’s fees, administrative expenses, qualified
arbitration panel, rules governing the arbitration proceedings
etc.,
Dr. Parul Gupta
Meaning and Definition Of Arbitration
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Domestic Arbitration
an alternative dispute resolution mechanism in
which the parties get their disputes settled
through the intervention of a third person and
without having any role of the court of law.

 Contractual matters, consumer issues and

employment issues

Voluntary and Mandatory Arbitration

Binding V Non Binding Arbitration
Dr. Parul Gupta
 Major Provisions Under The Act, Relating
To Arbitration
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 Subject matter of reference for arbitration

 a dispute which has arisen or which may arise between them,
in respect of a defined legal relationship, whether contractual
or not.
 All civil matters & IPR disputes

 Evidence of arbitration agreement

 Although no formal document is prescribed by the Act, an
arbitration agreement/clause must be in writing.

 Besides, the agreement may be established by;

(i) an exchange of letters, telex, telegram or other means
of telecommunications; or
(ii) an exchange of statements of claims and defence in
which the agreement is alleged by one party and is not
denied by the other.

Dr. Parul Gupta

Disputes Beyond The Scope Of Arbitration
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Case 1: Dilip Construction Company v

Hindustan Steel Ltd

Discussion Point
Whether the contention of the respondent to
set aside the award made by the Umpire
during the arbitration proceedings
between the two parties, justified?

Dr. Parul Gupta

Disputes Beyond The Scope Of Arbitration
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Judgment and Explanation

It was held that the award of the umpire was to be set
aside as it is well settled by clause 16 of the Act that
an inherent lack of jurisdiction or want of
jurisdiction renders the ultimate decision a nullity
so that it can be challenged at any subsequent stage
and even in collateral proceedings. Such a defect
cannot be cured even by waiver or acquiescence of
the party entitled to raise the objection.

Take Away
It is to be noted that to constitute a proper
submission for arbitration, there must be a
difference or dispute between the parties.
Dr. Parul Gupta
 Disputes Beyond The Scope Of Arbitration
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 Proceedings for insolvency.

 Lunancy proceedings.
 Proceedings for appointment of a guardian to
a minor.
 Question of genuineness or otherwise of a
will or matter relating to issue of a probate.
 Matters of criminal nature.
 Matter concerning public charitable trust.
 Disputes arising from and founded on an
illegal contract.

Dr. Parul Gupta

 Agreement
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Arbitration Agreement (Section 7)

An arbitration clause or a separate
agreement

“An arbitration agreement as an agreement

by 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.”

Dr. Parul Gupta

 Essentials Elements of An Arbitration
Agreement
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1) A written agreement
2) Present or future dispute
3) Essentials of a valid contract
4) May be in the form of an
arbitration clause – future disputes
5) Reference in a contract to a
document – present dispute
Must be a definite legal relationship
Dr. Parul Gupta
 Settlement of Dispute By Contractual
Terms And Trade Usage (Section 27)
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The Amended Act allows the tribunal to take

into account the terms of contract and trade
usages applicable to the transaction. In the
earlier law, the arbitral tribunal was
mandated to decide disputes in accordance
with the terms of the contract. However, the
arbitrator can still not ignore the terms of the
contract. Therefore, the new amendment
seems to bring in an element of discretion in
favour of the arbitrators while making of an
award.

Dr. Parul Gupta

 Essentials Elements of An Arbitration
Agreement
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Case 2: Bharat Bhushan Bansal v U.P.

Small Industries

Discussion Point
Whether there was any clause in the contract
could be treated as arbitration clause and
could be applied in case of disputes between
the parties?

Dr. Parul Gupta

 Essentials Elements of An Arbitration
Agreement
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Judgment & Explanation

It was held that this clause was not an arbitration
clause and that the duties of the engineer were
administrative and not judicial. It was further
stated that the Managing Director was more in
the category of an expert who was to decide
claims, rights, on matters in any way
pertaining to the contract. The intention of the
parties appeared to be more to avoid disputes
than to decide formulated disputes in a quasi-
judicial manner.

Dr. Parul Gupta

 Law applicable to Arbitration
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Parties free to choose the substantive

law and procedural law

 Domestic arbitration
 International commercial disputes
 Express choice
 Implied Choice

Dr. Parul Gupta

 Who is An Arbitrator
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An arbitrator is a person selected by mutual

consent of the contending parties for the
purpose of investigation and settlement of a
difference or dispute referred to him.

 Must stand indifferent between the parties to

dispute.
 Must not have any vested interest, direct or
remote in the subject-matter of the dispute or in
any of the contending parties
 Must not possess any legal disability by virtue of
statutory provision or by reason of public policy

Dr. Parul Gupta

 Procedure for the Appointment of
Arbitrator and Composition of Tribunal
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Number of Arbitrators (Section 10)

 parties are free to fix the number of

arbitrators in the arbitral tribunal by
agreement
 the reference may be made either to a single
arbitrator or a panel of odd number of
arbitrators
 If no agreement between the parties - the
reference is made to a sole arbitrator
Dr. Parul Gupta
 Procedure for the Appointment of
Arbitrator and Composition of Tribunal
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Appointment of Arbitrator (Section 11)

Parties are free to agree on a procedure to appoint the
arbitrator. If there is such an agreement, the appointment
of the arbitrator has to be made in accordance with the
agreement.
 a person of any nationality
 Presiding arbitrator – 3 arbitrators

 Failure to appoint
 a party fails to appoint an arbitrator within thirty days
from the receipt of a request to do so from the other party;
or
 the two appointed arbitrators fail to agree on the third
arbitrator within thirty days from the date their
appointment,
the appointment shall be made, upon request of a party, by
the high court or Supreme Court or any person or
Dr. Parul Gupta institution designated by him.
 Procedure for the Appointment of
Arbitrator and Composition of Tribunal
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Appointment of Arbitrator in International

Commercial Arbitration [Section 11(9)]

 For the appointment of sole or third

arbitrator in an international commercial
arbitration
 the Supreme Court or the person or
institution designated by him is competent to
appoint an arbitrator of a nationality other
than the nationalities of the parties where the
parties belong to different nationalities.
Dr. Parul Gupta
 Appointment of Arbitrators (Section 11)
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The Amended Act mandates the Supreme Court or

the High Court or person designated by them to
dispute of the application for appointment of
arbitrators within 60 days from the date of
service of notice on the opposite party.

The expression 'Chief Justice of India' and 'Chief

Justice of High Court' used in earlier provision
have been replaced with Supreme Court or as the
case may be, High Court, respectively.

Dr. Parul Gupta

 Appointment of Arbitrator
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Case 3: Nucon India (P) Ltd. v. Delhi

Vidyut Board (Desu)

Discussion Point
Under the above stated circumstances, was the
claim of the petitioner maintainable and
appointment of an arbitrator still required?

Dr. Parul Gupta

 Appointment of Arbitrator
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Judgment and Explanation

It was held that the claim of the petitioner for

the appointment of the arbitrator was still
maintainable as if the other party failed to
appoint an arbitrator within 30 days after
the receipt of notice to do so then the chief
Justice is obligated to do so without going
into the any other questions of jurisdiction.

Dr. Parul Gupta

 Challenging the Appointment of
Arbitrator (Section 12)
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Arbitrator must disclose in writing any circumstances
likely to give rise to justifiable doubts as to his
independence or impartiality.
Grounds for Challenges
i. Circumstances exist that give rise to justifiable doubts as to his
independence or impartiality, or
ii. He does not possess the qualifications agreed to by the parties.
Procedure to challenge the appointment of arbitrator
(Section 13)
 a written application within fifteen days after becoming aware of the
constitution of the arbitral tribunal or after becoming aware of any
circumstances referred above
 parties are free to agree on a procedure for challenging an
arbitrator
 If the party challenging the appointment of arbitrator fails in his
challenge the arbitral tribunal must continue the arbitral proceedings
Dr. Parul Gupta
 Arbitrator’s Independence (Section 12)
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 Fifth schedule
 Lists the grounds that would give rise to justifiable doubt
to independence and impartiality of arbitrator
 Seventh schedule
 Provides that notwithstanding any prior agreement of the
parties, if the arbitrator's relationship with the parties or
the counsel or the subject matter of dispute falls in any of
the categories mentioned in the seventh schedule, it would
act as an ineligibility to act as an arbitrator.
Parties may by expressly entering into a
written agreement waive the applicability
of this provision.
Dr. Parul Gupta
 Conduct of Arbitral Proceedings And
Arbitral Award
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Arbitral Proceedings
 Determination of rules of procedures (Section 19)
 Place of arbitration (Section 20)
 Commencement of arbitral proceedings (Section 21)
 Language (Section 22)
 Statement of claim and defence (Section 23)
 Hearing and written proceedings (Section 24)
 Notice of hearing [Section 24(2)]
 Communication to the other party [Section 24(3)]
 Appointment of experts by arbitral tribunal (Section 26)
 Assistance of court in taking evidences (Section 27)
 Order of the court [Section 27(3)]
 Rules for substance of dispute (section 28) – Rule of Law
 Domestic v international disputes
 Decision making by arbitral tribunal (Section 29) – by
majority
Dr. Parul Gupta
 No Adjournment (Section 24)
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The Amended Act requires the arbitral

tribunal to hold the hearing for presentation
of evidence or oral arguments on day to day
basis, and mandates the tribunal not to grant
any adjournments unless sufficient causes
shown.

It further empowers the tribunal the tribunal

to impose exemplary cost where
adjournment.

Dr. Parul Gupta

 Arbitral Award
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Forms and contents of arbitral award [Section 31(1)]

 In writing and has to be signed by the members of the arbitral

tribunal.
 In arbitral proceedings with more than one arbitrator, the
signatures of the majority of all the members of the arbitral
tribunal
 Recording of reasons in the arbitral award upon which it is
based, unless -
 the parties have agreed that no reasons are to be given, or
 the award is an arbitral award on agreed terms under
section 30.
 Bears the date and the place of arbitration
 Empowered to make an interim award, at any time during the
arbitral proceedings, on any matter with respect to which it
may make a final arbitral award
Time of enforcement – Usually three m0nths
Dr. Parul Gupta
 31

Case 4: Rukmanibai Gupta v Collector

Discussion Point
Did Clause 15 of the agreement between
the parties spell out an arbitration
agreement and the decision of the lessor
could be treated final and binding?

Dr. Parul Gupta

 32

Judgment and Explanation

It was held that on its true construction, clause 15
of the agreement spelled out an arbitration
agreement and the appeal of Mr. Gupta could
not be admitted. It was further stated that
Arbitration agreement is not required to be in
any particular form and what is required to be
ascertained is whether the parties have agreed
that if disputes arise between the parties in
respect of the subject-matter of contract such
dispute shall be referred to arbitration, and
then such an arrangement would spell out an
arbitration agreement.
Dr. Parul Gupta
 Application for setting aside of an award
(Section 34)
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 The Amended Act provides that an

application for setting aside of an award can
be filed
 only after issuing prior notice to the other
party.
 A time limit of one year from the date of
service of the advance notice on the other
parties has been fixed for disposal of the
application under Section 34.

Dr. Parul Gupta

 Setting Aside of Arbitral Award
(Section 34)
34
On an application made by a party within three months
1. a party was under some incapacity; or
2. the arbitration agreement was not valid under the governing
law; or
3. a party was not given proper notice of the appointment of the
arbitrator or on the arbitral proceedings; or
4. the award deals with a dispute not contemplated by or not
falling within the terms of submissions to arbitration or it
contains decisions beyond the scope of the submissions; or
5. the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties; or
6. the subject matter of the dispute is not capable of settlement by
arbitration; or
7. the arbitral award is in conflict with the public policy of India.
Dr. Parul Gupta
 Insertions of Provisions For Time Limit For Arbitral
Award And Fast Track Procedure (Section 29A and
35
29B)

Time Limit For Arbitral Award (Section 29A )

 An award shall be made by the arbitral tribunal
within 12 months from the date it enters upon
reference.
 This period can be extended to a further period of
maximum 6 months by the consent of the parties,
after which the mandate of the arbitrator shall
terminate, unless the Court extends it for sufficient
cause or on such other terms it may deem fit.
 Also, while extending the said period, the Court may
order reduction of fees of arbitrator by upto 5% for
each month such delay for reasons attributable to the
arbitrator.
 Also, the application for extension of time shall be
disposed of by Court within 60 days from the date of
notice to the opposite party.
Dr. Parul Gupta
 Insertions of Provisions For Time Limit For Arbitral
Award And Fast Track Procedure (Section 29A and
36
29B)

Fast Track Procedure (Section 29 B)

 The parties at any stage of arbitral
proceeding may opt for a fast track
procedure for settlement of dispute, where
the tribunal shall have to make an award
within a period of 6 months.
 Where the tribunal decides the dispute
within 6 months, provided additional fees
can be paid to the arbitrator with the consent
of the parties.

Dr. Parul Gupta

 37

QUIZ TEST THREE

SESSION 7 & 8

Dr. Parul Gupta

 GOOD LUCK FOR MID TERM
EXAMINATION

38

Dr. Parul Gupta