Legal Aspects of Management

Arbitration & Conciliation Act

1996
5th SESSION
SEMINAR 3
04.10.2019
Course Code – GM 201

©Amitava Banerjee
JAIPURIA INSTITUTE OF MANAGEMENT STUDIES - NOIDA 04-10-2019
 COPYRIGHT ©
The presentation has been specifically made for students of
MBA course – GM 201 (Batch 2019-21) - Trimester-II
section A, B & C of the institution.

The presentation does not substitute any literature on the

subject but is intended to clarify the basic fundamentals.

No part of this presentation should be copied, reproduced

or distributed in any manner without my explicit prior
permission.

JAIPURIA INSTITUTE OF MANAGEMENT STUDIES - NOIDA 04-10-2019

Why this act ?
The ICA 1872 allows Arbitration
Court cases are time taking
Foreigners don’t understand Indian Judiciary
Matters of trade are too complex
The Supreme Court in Hindustan Petroleum Corporation Ltd. v. M/s Pink City Midway
Petroleum, AIR 2003 SC 2881 has held that the jurisdiction of Civil Court is barred after an
application under Section 8 of the Act is made for arbitration
What does it relate to ?
Domestic arbitration –PART I
International commercial arbitration – PART II
Enforcement of foreign arbitral awards
Define the law relating to conciliation
For matters connected therewith
What is arbitration / ADR?
Disputes are settled through the intervention of a third person.
The third person (or more persons) are called Arbitrators.
Section 2(1) (a) of the Act, defines the term “arbitration” as to mean any arbitration whether
or not administered by a permanent arbitral institution.

JAIPURIA INSTITUTE OF MANAGEMENT STUDIES - NOIDA 04-10-2019

Other important definitions
[Section 2(1)(c)] "arbitral award" includes an interim award.
- There must be an written arbitration agreement.
- The arbitral award is required to be made on stamp paper
- Signed by the members of the arbitral tribunal.
- Reasons for award must be stated other than settlement or waiver
- The award should be dated
- Place of arbitration is important for the determination.

[Section 2(1)(f)] “International commercial arbitration”

disputes arising out of legal relationships, contractual or not, but commercial under
Indian laws and at least one of the parties is:
- an individual who is a national of, or habitual resident in, any country other than
India; or
- a body corporate which is incorporated in any country other than India; or
- a company or an association or a body of individuals whose central management
and control is exercised in any country other than India; or
- The Government of a foreign country.
JAIPURIA INSTITUTE OF MANAGEMENT STUDIES - NOIDA 04-10-2019
Arbitrators
Number of arbitrators
- Section 10 - the parties are free to determine the number of arbitrators, which
shall not be an even number.
- If they fail to determine the number of arbitrators, the arbitral tribunal shall
consist of a sole arbitrator
Procedure for appointment of arbitrators
- The parties may agree to a procedure
- Arbitrator could be of any nationality.
- In case of an arbitration with 3 arbitrators, each party shall appoint its own
arbitrator, and the two appointed arbitrators shall appoint a third arbitrator, as
the presiding arbitrator
- If, within 30 days, the parties fail to appoint their arbitrators, or the two
appointed arbitrators fail to agree on the third arbitrator, the arbitrator shall be
appointed by the Chief Justice or any person or institution designated by him
at the request of a party.
- Decision of the Chief Justice is final

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Grounds for challenge to appointment
Section 12 - Non disclosure in writing any circumstances likely to give rise to
justifiable doubts as to his independence or impartiality.
Circumstances exist that give rise to justifiable doubts
He does not possess the qualifications agreed to by the parties.
The party who intends to challenge an arbitrator shall, within 15 days after
becoming aware send a written statement of the reasons for the challenge to the
arbitral tribunal.
A substitute arbitrator shall be appointed according to the rules that were
applicable to such appointment being replaced.
Any hearings previously held may be repeated at the discretion of the arbitral
tribunal.
However, unless otherwise agreed by the parties, an order made prior to the
replacement of an arbitrator under this Section shall not be invalid

JAIPURIA INSTITUTE OF MANAGEMENT STUDIES - NOIDA 04-10-2019

Arbitral proceedings
Section 20 - the parties are free to agree on the place of arbitration and if they fail to
reach an agreement, the place of arbitration is determined by the arbitral tribunal.
Unless otherwise agreed by the parties, the arbitral tribunal may meet at any place
it considers appropriate for consultation among its members, for hearing witnesses,
experts or the parties, or for inspection of documents, goods or other property.
In international commercial arbitration, place of arbitration has legal implications in
terms of law applicable to arbitration
Section 21 states that the arbitral proceedings commence on the date on which a
request for that dispute to be referred to arbitration is received by the respondent
Section 22 gives freedom to parties to agree upon the language or languages to be
used in the arbitral proceedings.
Section 25 of the Act provides that subject to agreement between the parties, where,
without showing sufficient cause, the claimant fails to communicate his statement
of claim within the agreed period, the arbitration proceedings shall be terminated by
the arbitrator.
Section 29 of the Act provides for decision by majority where there is more than one
arbitrator.

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Arbitral award….
An award must be a speaking order i.e. it must state the reasons
The legislature has not accepted the ratio of Constitution Bench in the Chokhamal
Contractor’s case (AIR 1990 SC 1426), that the award, being in the private law
field, need not be a speaking award.
Date and Place are to be mentioned in the award in accordance with Section 20 of
the Act and the award should be deemed to have been made at that place.
The arbitral tribunal can make an interim award on any matter with respect to
which it may make a final award
Where an arbitral award is for the payment of money, the arbitral tribunal may
include in the sum for which the award is made, interest at such rate as it deems
reasonable
Unless the award otherwise directs, an interest of 18% per annum has to be paid
from the date of the award to the date of payment.
Section 33 allows correction within 30 days (typographical , computation )and
interpretation of an award, or additional award ( when something is omitted)
Section 35 provides that the award shall be final and binding on the parties and
persons claiming under it.

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Setting aside an Arbitral award
The parties can approach the Court for setting aside the Award
(i) incapacity of a party;
(ii) invalidity of the arbitration agreement;
(iii) party applying was not given proper notice of the appointment of the
arbitrator or of the arbitral proceedings or was otherwise unable to present his
case;
(iv) award not in accordance with the terms of submission to arbitration in
regard to the dispute;
(v) arbitral tribunal not properly constituted or the arbitral procedure was not
in accordance with the agreement of the parties;
(vi) subject matter of the dispute not capable of settlement by arbitration
under the law for the time being in force;
(vii) award being in conflict with ‘the public policy of India’.

JAIPURIA INSTITUTE OF MANAGEMENT STUDIES - NOIDA 04-10-2019

Foreign awards
- Chapters I and II of Part II of the Arbitration and Conciliation Act, 1996
- Foreign awards made under the New York Convention and the Geneva Convention
- But In a foreign seated international commercial arbitration, no application for
interim relief would be maintainable under Section 9 or any other provision, as
applicability of Part I of the Arbitration Act, 1996 is limited to all arbitrations which
take place in India [Bharat Aluminium Co. VS. Kaiser Aluminium Technical Service,
Inc]
- The original award or a duly authenticated copy thereof must be produced before
the court and
- the original agreement for arbitration or a duly-certified copy thereof; and
- such evidence as may be necessary to prove that the award is a foreign award.
Refusal of enforcement of the foreign awards can be made on following additional
grounds:
- The award deals with a difference not falling within the terms of submission to
arbitration. However, if the award can be separated, the decision on the matters beyond
the scope of the arbitration agreement shall not be enforced; or
- The award has not yet become binding, or has been set aside or suspended by a
competent authority of the country in which or under the law of which, the award was
made.

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CONCILIATION……
Arbitration Conciliation
The decision is known as arbitral The decision is known as settlement
award
Award is signed by arbitral tribunal signed by the parties concerned
members
parties cannot appoint even number the number of conciliators can be even
of arbitrators
Arbitrators can be appointed even A conciliator is appointed only after the
before the dispute arises dispute has arisen.

The party initiating conciliation shall send to the other party a written invitation
to conciliate
Proceedings shall commence when the other party accepts in writing the
invitation
If the party initiating conciliation does not receive a reply within 30 days or
within such other period he may elect to treat this invitation rejected.
JAIPURIA INSTITUTE OF MANAGEMENT STUDIES - NOIDA 04-10-2019
Role of conciliator…
Assist the parties in an independent and impartial manner in their attempt to
reach an amicable settlement of their dispute.
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.
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.
The conciliator may, at any stage of the conciliation proceedings, make proposals
for a settlement of the dispute.

Such proposals need not be in writing and need

not be accompanied by a statement of the reasons

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Settlement agreement…..
(1) When it appears to the conciliator that there exists elements of a settlement
which may be acceptable to the parties, he shall formulate the terms of a
possible settlement and submit them to the parties for their observations.
After receiving the observations of the parties, the conciliator may reformulate
the terms of a possible settlement in the light of such observations.
(2) If the parties reach agreement on a settlement of the dispute, they may draw
up and sign a written settlement agreement. If requested by the parties, the
conciliator may draw up, and assist in drawing up, the settlement agreement.
(3) When the parties sign the settlement agreement, it shall be final and binding
on the parties and persons claiming under them respectively.
(4) The conciliator shall authenticate the settlement agreement and furnish a
copy thereof to each of the parties. (Section 73)

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Mediation ….

If the role of the ‘conciliator’ in India is pro-active and interventionist

The role of the ‘mediator’ must necessarily be restricted to that of a ‘facilitator’

The mediator has no authority to make any decisions that are binding on them,
but uses certain procedures, techniques and skills to help them to negotiate an
agreed resolution of their dispute without adjudication.

JAIPURIA INSTITUTE OF MANAGEMENT STUDIES - NOIDA 04-10-2019

But at the end of the day ……..

JAIPURIA INSTITUTE OF MANAGEMENT STUDIES - NOIDA 04-10-2019