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LAW OF ARBITRATION

Dr. Sushila
Assistant-Professor (Law)
&
Director
Centre for Study of Consumer Law and Policy

National Law University Delhi


New Delhi

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OUTLINE

 Basic Aspects of Arbitration

 Commercial Courts

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Need of Arbitration

• Arbitration today is the default setting for commercial dispute resolution in India.

• Dissatisfaction caused by highly technical, time consuming, complex and expensive justice
dispensation by litigation through courts gave rise to the evolution of ADR (Alternative Dispute
Resolution) System which consists negotiation, mediation, arbitration and various other
procedures.

• The ADR system seeks to provide quick and accessible justice at a low cost by encouraging
disputant to arrive at a negotiated understanding with a minimum outside help.

• The Indian Government also recognised that increasing efficiencies in arbitration and the
enforcement process, was a mechanism to ratchet it up World Bank rankings for Doing Business.
In the ‘World Bank Report on Doing Business 2018’, India’s ranking for ‘Enforcing Contracts’,
improved several positions, i.e. from 172 in 2016, to 164 in 20171 , and 163 in 2019.
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The Arbitration & Conciliation Act of 1996

 The Arbitration & Conciliation Act of 1996, modelled on the UNCITRAL Model Law on
International Commercial Arbitration, consolidated the law of arbitration law in India,
repealing earlier statutes.

 The Act came into force at the time of India’s economic liberalisation and intended
globalisation and was expected to be a shot in the arm for a quick and cost effective form
of alternative dispute resolution through arbitration.

 It was touted as updating the law of arbitration in India to make it more responsive to
contemporary requirements and while restricting the intervention of courts.

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TYPES OF ARBITRATION PROCEDURE
AD-HOC ARBITRATION
 A procedure of arbitration where a tribunal will conduct arbitration between the parties, following the
rules which have been agreed by the parties beforehand or by following the rules which have been laid
down by the tribunal, in case the parties do not have any agreement between them.

INSTITUTIONAL ARBITRATION
 The disputing parties submit their issue to an institution that has been designated to administer the
arbitrational process. The institution then arbitrates the dispute according to the rules laid by them in
front of the parties. The institute selects a panel which administers the whole process.
 All the institutes do not provide the same type of services. Some institute just provide the rules on
which the procedure will be based (London Maritime Arbtration Association). Other provide a roster of
arbitrators to the parties but do not appoint the arbitrators themselves (Society of Maritime Arbitrators
in New York). Certain institutions administer the whole process of arbitration i.e. (International Court
of Arbitration of the International Chamber of Commerce).

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Process of Arbitration in India

Arbitration may be consensual or statutory

• Consensual Arbitration : Arbitration agreement

• Statutory Arbitration : Telegraph Act, Insolvency Act etc. In case of inconsistency


between the provisions of the special statue and the general law, special law shall
prevail.

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Process of Arbitration in India contd.
• For adopting the arbitration as a dispute resolution mechanism an agreement to that
effect should be signed between the disputing parties. The parties can either have a
separate arbitration agreement to be signed between them or include an arbitration
clause in the main contract between the parties. Arbitration agreement or the arbitration
clause should clearly state that the dispute will be resolved through arbitration only.

• It should also specify only the uneven/ odd number of arbitrators to be appointed and
the manner of their appointment. (unless statute provides otherwise).

• Arbitrator has to be an unbiased independent third party who resolves the disputes
between the conflict party in an impartial manner.

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Stages of Arbitration in India
• Arbitration Clause - An agreement or the clause specifically stating that if the dispute
arises between the parties they will resolve it through the process of arbitration.

• Arbitration notice - In case a dispute has arisen and the party has opted to follow the
procedure of arbitration then the party against whom the default has been committed will
send an arbitration notice for invoking arbitration process steps between the parties.

• Appointment of Arbitrator- After receiving the notice by other parties both the parties will
appoint the arbitrators in the manner as specified in the arbitration agreement or arbitration
clause.

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Stages of Arbitration in India contd.
• Statement of Claim- to draft a statement of claim. Statement of claim contains the dispute between the
parties, events which lead to the dispute and the compensation claimed from the defaulting party. The
other party can file a statement of counterclaim along with reply to the statement of claim.

• Hearing of Parties - Arbitral tribunal will hear both the parties and their evidence.

• Award - After hearing the parties, the arbitral tribunal will pass the decision. The decision of the tribunal
is known as ‘Award’ and is binding on the parties. However, an appeal against the arbitral award can be
filed before the High Court.

• Execution of Award - Once the award has been passed by the tribunal it has to be executed. The party
intending to enforce the award can file an execution petition before the Civil Court. The award is
enforced in the same manner as a decree of the court under the Code of Civil Procedure, which provides
the framework for the execution of arbitral awards.

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Powers of Arbitrator
Arbitration process in India does not follow the procedure of the Civil Procedure Code and the
arbitrator also the arbitration proceeding does not need to follow the procedures enlisted in the
Civil Procedure Code, 1908(1). Arbitrator in India, however, has the following powers:
• To make awards
• To take assistance
• To rule on its jurisdiction
• To pass interim relief
• To determine procedures
• To decide on the official language of the proceedings
• To appoint an expert
• To seek the court’s assistance for evidence
• To terminate proceedings

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Powers of Arbitrator contd.
• To impose interest and deposits
• Other than the above powers, the arbitrator has also given certain powers of civil court as
under the Civil Procedure Code:
• To administer the oath to parties and witnesses appearing before him;
• To state a special case for the opinion of the court on any question of law or state the award
in the form of a special case for the opinion of the court;
• To make the award conditional or in the alternative;
• To correct in an award any clerical mistake or error arising from any accidental slip or
omission;
• To administer any party interrogatories

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Other Features
• Any arbitration proceedings commenced after the limitation period (three years from the date on which
the cause of action arose) will be time-barred.
• Local courts can intervene in domestic arbitration proceedings. This includes the power to issue interim
orders and appoints arbitrators.

ENFORCEMENT:
• DOMESTIC AWARD: An arbitral award is enforceable after the time for making an application to set
aside such an award has expired (90 days). However, the court may grant a stay on the operation of the
arbitral award on a separate application made for that purpose.

• FOREIGN AWARD: A foreign arbitration award is enforceable in India under Part II of the Arbitration
Act, if it is passed in a jurisdiction/country governed by either the New York Convention or the Geneva
Convention. The process for enforcement of a foreign award is similar to that of a domestic award.  The
Arbitration Act does not provide any limitation for the enforcement of a foreign award.

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Features of the Arbitration and Conciliation (Amendment) Bill, 2019
 Aim: to make India a hub of domestic and international arbitration by bringing in changes in law
for faster resolution of commercial disputes.
 Appointment of arbitrators: Under the 1996 Act, parties were free to appoint arbitrators. In case
of disagreement on an appointment, the parties could request the Supreme Court, or the concerned
High Court, or any person or institution designated by such Court, to appoint an arbitrator.
 Under the Bill, the Supreme Court and High Courts may now designate arbitral institutions, which
parties can approach for the appointment of arbitrators.
 For international commercial arbitration: appointments will be made by the institution
designated by the Supreme Court.
 For domestic arbitration: appointments will be made by the institution designated by the
concerned High Court. In case there are no arbitral institutions available, the Chief Justice of the
concerned High Court may maintain a panel of arbitrators to perform the functions of the arbitral
institutions. An application for appointment of an arbitrator is required to be disposed of within 30
days.

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Basic Features of the Arbitration and Conciliation (Amendment) Bill, 2019
 Arbitration Council of India: The Bill seeks to establish an independent body called the Arbitration
Council of India (ACI) for the promotion of arbitration, mediation, conciliation and other alternative
dispute redressal mechanisms. Its functions include: (i) framing policies for grading arbitral
institutions and accrediting arbitrators, (ii) making policies for the establishment, operation and
maintenance of uniform professional standards for all alternate dispute redressal matters, and (iii)
maintaining a depository of arbitral awards (judgments) made in India and abroad.
 Composition of the ACI: The ACI will consist of a Chairperson who is either: (i) a Judge of the
Supreme Court; or (ii) a Judge of a High Court; or (iii) Chief Justice of a High Court; or (iv) an
eminent person with expert knowledge in conduct of arbitration. Other members will include an
eminent arbitration practitioner, an academician with experience in arbitration, and government
appointees.
 Relaxation of time limits: Under the Act, arbitral tribunals are required to make their award within a
period of 12 months for all arbitration proceedings. The Bill seeks to remove this time restriction for
international commercial arbitrations. It adds that tribunals must endeavour to dispose off international
arbitration matters within 12 months.

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Basic Features of the Arbitration and Conciliation (Amendment) Bill, 2019

 Completion of written submissions: Currently, there is no time limit to file written


submissions before an arbitral tribunal. The Bill requires that the written claim and the
defence to the claim in an arbitration proceeding, should be completed within six months
of the appointment of the arbitrators.
 Confidentiality of proceedings: The Bill provides that all details of arbitration
proceedings will be kept confidential except for the details of the arbitral award in certain
circumstances. Disclosure of the arbitral award will only be made where it is necessary for
implementing or enforcing the award.

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Commercial Courts 2015 & Amendment of 2018
 The Commercial Courts Act, 2015 provides for commercial courts and Commercial Divisions of High
Courts to adjudicate commercial disputes with a value of at least one crore rupees. In 2018, the value
was reduced to three lakh rupees.
 The definition of “commercial dispute” is very broad and includes all disputes arising out of
transactions between merchants, bankers, financiers, traders, etc., management consultancy agreements,
sale of goods, etc.
 The Law allows State Governments to establish commercial courts at the district level, even in
territories where High Courts have ordinary original civil jurisdiction.
 In areas where High Courts do not have original jurisdiction, state governments may set up commercial
appellate courts at the district level to consider appeals from commercial courts below the level of a
district judge.
 Was enacted to fast track the disposal of commercial disputes
 To improve ease of doing business in India
 As of December 2017, state governments had constituted a total of 247 commercial courts in various
districts across the country.
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THANK YOU

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