Arbitration And Conciliation Act Of 1996:
Introduction:
Alternative Dispute Resolution, or ADR, refers to a number of ways to resolve a dispute outside of the complicated legal system. It is a technique where parties attempt to settle their differences secretly in front of a neutral expert. Like a court's ruling, the judgment is binding on the parties. It encompasses techniques including negotiation, conciliation, mediation, and arbitration. These adhere to the rights to justice, access to counsel, and a prompt trial guaranteed by Article 39A of the Indian Constitution.
Even Section 89 of the Code of Civil Procedure, 1908 calls for using ADR to resolve conflicts. The process is versatile and original. It is a developing area of law because it offers satisfactory answers at a lower cost and in less time. The Parliament decided that an act was necessary and passed it. The Arbitration and Conciliation Act, 1996, which governs arbitration and conciliation, is the subject of this article. It explains the purpose, scope, and application of the Act and goes through its key clauses.
Applicability of The 1996 Arbitration And Conciliation Act:
The Act is applicable to all of India, but only Parts I, II, III, and IV that pertain to international commercial arbitration or conciliation will also apply to Jammu & Kashmir. Although the President issued the decree on January 16, 1996, the Act went into effect on August 22, 1996. The other two ordinances, which dealt with arbitration and conciliation, were adopted on March 26 and June 21, 1996, respectively.
Goals of The 1996 Act on Arbitration And Conciliation:
Previously, the legislation governing arbitration was governed by three acts, which gradually became out of date. As a consequence, organizations representing business and industry as well as arbitrators urged and recommended changes to the Act in order to make it more receptive to societal demands. According to some, the country's economic changes can only be handled if internal and international business conflicts and their resolution are included in such reforms. In 1985, the United Nations established the Model Law on International Arbitration and Conciliation and requested that all nations give it the respect it deserves. This led to the stated Act being put into effect. The Act's numerous goals include the following:
• Cover completely both local and international commercial arbitration and conciliation.
• Create an arbitration and conciliation process that is fair, effective, and able to satisfy the demands of the society.
• Gives the tribunal's reasons for making any arbitral judgment.
• Make sure the tribunal doesn't go overboard while using its authority.
• Minimize the function of the judiciary and its workload.
• It gives the tribunal the option to choose arbitration and conciliation as a means of resolving disputes.
• It guarantees that each award is upheld in accordance with the court's ruling.
• It stipulates that the parties' conciliation agreement has the same legal weight as any award made by an arbitral tribunal.
• Additionally, it seeks to enforce international awards.
Scheme of The 1996 Arbitration And Conciliation Act:
The Act is broken up into four sections:
Part I (Sections 2-43) -
Applies to India as the location of the arbitration. The given award is considered to be a domestic award.
Part II (Sections 44–60) -
of deal with the enforcement of foreign awards.
Part III (Sections 61–81) -
Conciliation
Part IV (Sections 82- 86) -
supplemental provisions.
There are three schedules in it:
Schedule I -
Convention on the recognition of foreign arbitral awards.
Schedule II -
Guidelines for arbitration provisions.
Schedule III -
Foreign Arbitral Award Execution Convention
Definitions:
Several definitions of some key words used in the Act are provided in Section 2 of the Act. Which are:
Arbitration
is defined as any arbitration, which is either administered or not by a permanent arbitral institution under Section 2(1) (a) of the Act.
Arbitration agreement:
According to Section 2(1)(b) of the Act, an arbitration agreement must be submitted to Section 7 of the Act.
Arbitral award -
Section 2(1) (c) indicates that this term includes interim award but does not define it specifically.
A single arbitrator or panel of arbitrators who assist in arbitration is referred to as an "arbitral tribunal." (Article 2(1) (d))
Courts are defined under Section 2(1) (e). It includes civil courts with original jurisdiction in a district and the High Court with authority to rule on matters pertaining to the arbitration's subject matter.
Section 2(1) (f), defines international commercial arbitration which refers to arbitration in cases when one party is a native of another country, a corporation incorporated in another country, a firm under the authority of another country, or the government of a foreign country, and the dispute arises out of a legal connection, whether contractual or not.
Law Review of The 1996 Arbitration And Conciliation Act:
Arbitration (Part I)
According to the Act's Section 2(1)(a), it is defined. It is helpful because it offers flexibility and anonymity as an alternative to courtroom litigation. Black Law Dictionary defines it as a process for settling disputes that involves two parties and an impartial third party whose judgment is binding on both sides.
Any court authority has the authority to send a matter to arbitration, according to Section 8 of the Act. There must be an arbitration agreement after it. In the case of P. Anand Gajapati Raju v. P.V.G. Raju (2000), the Hon. Supreme Court established the following standards that must be met before sending parties to arbitration:
• There must be an arbitration agreement.
• A party must file a lawsuit in court against the opposing party.
• The topic must be the same as it was for arbitration.
• One side requests court-ordered arbitration.
A different example, Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. (2011), established that although there is no deadline for filing an application, it should be done so before the first statement pertaining to the dispute is submitted. Additionally, Section 9 states that the parties to the arbitration may ask the court for temporary relief at any moment.
Arbitration Processes:
Domestic arbitration - Indicates that the arbitration will be conducted in accordance with Indian law and fall under Indian jurisdiction.
International and commercial arbitration is used when one of the parties is a foreign citizen, a firm or organization that is controlled by another country, or the government of a foreign country, and the dispute arises out of a legal connection.
Institutional arbitration: This kind of arbitration is handled by organizations like the International Centre for Alternative Dispute Resolution (ICADR) and the Indian Council of Arbitration.
Arbitration is allowed by law in particular situations, and this is known as statutory arbitration. Part I of the Arbitration Act's provisions must take precedence over any other Act in the event of a conflict.
Ad hoc arbitration refers to a proceeding in which the parties reach a decision independently of the arbitral tribunal.
Documentary arbitration is another name for fast track arbitration. The arbitration process moves quickly and efficiently. It is entirely supported by one party's claim statement and another's written response.
Look-sniff arbitration combines an arbitral procedure with an expert's judgment. Under this, there aren't any official hearings or submissions.
Arbitration on the flip-flop is also known as pendulum arbitration. In this style of arbitration, the parties prepare the cases in advance and then ask the arbitrator to choose between the two possibilities.
The benefits of arbitration:
• The parties' whims determine who is chosen to serve as the arbiter.
• Only when both parties agree will the issue be submitted to an arbitral tribunal.
• Both money and time are saved.
• This guarantees a fair trial.
• Permits the parties to be free from judicial interference.
• The arbitration site is selected by the parties independently (Section 20).
• Confidentiality and privacy are upheld throughout the processes.
• The enforcement of the arbitral judgment resembles that of a court order.
Negative aspects of arbitration:
• It does not necessarily ensure a quick conclusion.
• The process might be unpredictable at times.
• It is unable to provide legal remedies like fines, incarceration, injunctions, etc.
• It is ineffectual because of its flexibility.
• When there are many parties involved in a disagreement, the procedure is difficult to apply.
Cases That Weren't Arbitrated:
Most civil rights disputes with damages as the remedy are sent to arbitration, however Section 2(3) of the Act provides a list of such situations that cannot be. Which are:
• the company's winding-up procedures (Haryana Telecom Ltd. v. Sterlite Industries (1999)
• Disputes that must be resolved by a specific tribunal in accordance with the law
• Insolvency proceedings, probate proceedings, will and validity problems, guardianship issues, succession disputes, conflicts involving real estate, and cases involving illegal transactions
• Proceeding in accordance with Section 145 of the Code of Criminal Procedure and Arbitration cannot be used in a criminal case
Arbitral Tribunal:
Composition
It involves drafting a contract that complies with the law. The parties may freely choose the number of arbitrators to resolve their disagreement under Section 10 of the Act. The sole constraint is that there cannot be an equal number of these arbitrators. There will be just one arbitrator if the parties are unable to agree. However, if there are an even number of arbitrators, then this alone cannot be used to declare the agreement unlawful (Nikunj Kumar Lohia v. Narayan Prasad Lohia, 2002).
The steps for selecting arbitrators:
Additionally, the Act's Section 11 outlines the process for choosing arbitrators. The following criteria are acceptable for any such appointment:
• The appointed party must provide the opposing party the required notice. If it doesn't, the appointment is considered void.
• An arbitrator must be adequately informed and given his assent before being chosen.
• Before confirming his appointment, the permission must be requested.
It further states that the appointment will be made by the Chief Justice or any individual on his behalf authorized by him, but with the previous request of the parties, if the parties fail to name an arbitrator within 30 days of the request or if two arbitrators are appointed but not the third one.
Arbitrator's resignation:
Sections 14 and 15 of the Act provide the reasons for termination. Which are:
• He shall be terminated when he withdraws himself or by agreement of the parties
• if he is unable to discharge his duties without excessive delay (whether de jure or de facto),
• Upon his dismissal, a replacement arbitrator will be chosen in accordance with Section 15.
Jurisdiction:
The tribunal will operate within its jurisdiction, according to Section 16 of the Act. When the statement of defense is presented, but no later, a plea will be made if the arbitral tribunal lacks jurisdiction. Additionally, it stipulates that if a party disagrees with the arbitral decision, it may apply to have it overturned in accordance with Section 34 of the Act.
In Centrotrade Minerals and Metals v. Hindustan Copper Ltd. (2006), the Supreme Court ruled that anybody from the outside or anyone involved in the proceedings might raise any question about the jurisdiction. However, if the request is made by the party, it must be made at the beginning or during the course of the proceedings.
Arbitral Award:
It is the arbitral tribunal's ultimate decision on a claim, a portion of a claim, or a counterclaim. It must be in writing and properly signed by the arbitral tribunal's members in accordance with Section 31 of the Act. The Section also grants the tribunal the authority to issue interim judgments on any dispute. If money is paid, it may provide interest if the tribunal deems it to be reasonable, just, and fair.
The arbitral tribunal has the authority to end the proceedings by issuing a binding arbitration award under Section 32 of the Act. Section 33 of the Act specifies the process for any modifications to the award or its interpretation. Although it is silent on judicial review, it also grants the tribunal or arbitrator the authority to alter, repair, or delete any mistakes of any type within 30 days. Beyond what has been covered in this section, the tribunals are not permitted to exercise their authority.
Arbitral awards of various types:
Interim award-
Any matter emerging from the main dispute is decided by an interim award. It is a short-term solution to appease a side and is subject to the ultimate judgment.
Additional award -
In accordance with Section 33 of the Act, if the parties discover that certain claims, for which they were present during the proceedings, were overlooked by the arbitral tribunal, they may, after notifying the other parties, ask the arbitral tribunal to make an additional award to cover the claims that were overlooked.
Awarded settlements -
If both parties agree on certain settlement conditions, it is made. According to Section 30 of the Act, the arbitral tribunal may resolve the disagreement between the parties by mediation, conciliation, or negotiation.
Final Award- It is an award that ultimately resolves all of the disputes' concerns. Unless overturned by a court, it is final and binds the parties.
Appeals of arbitral decisions:
A party may request the annulment of an arbitral tribunal's award under Section 34 of the Act if they are not satisfied. The application must be submitted within three months of the day the arbitral award was rendered. The reasons are:
• Parties' lack of ability.
• Absence of the arbitration agreement.
• Ignored the proper procedure.
• The arbitral panel erred in exercising its jurisdiction.
• Incorrect arrangement of the arbitral tribunal's members.
• It is not possible to submit the dispute to arbitration.
• It's against the rules.
• Corruption or deception.
If a person is not happy with the decision made by the tribunal, he or she may appeal to the court, according to Section 37 of the Act. However, once an appeal has been filed, there are no options for a further appeal. The appellate authority in any dispute that is sent to arbitration must be determined from the definition of court supplied under Section 2 of the Act, it was ruled in the case of Pandey and Co. Builders Pvt. Ltd. v. State of Bihar (2007).
Foreign Award (Part II)
Foreign awards are made in disputes resulting from legal ties, whether contractual or not, that are taken into account under any domestic business law. In plain English, it refers to judgments rendered in international commercial arbitration. Foreign awards are made in other nations and, according to the Act, are enforceable in India. There are two chapters in it:
• The New York Convention (1958)
• The Geneva Convention (1927)
Under Section 44 of the Act and Section 53 of the Act, respectively, international awards connected to the New York Convention and the Geneva Convention are granted. Sections 48 and 57 of the Act, respectively, set forth the requirements for enforcing these awards throughout the nation.
Conciliation (Part III)
It is a procedure where a neutral third party assists the parties to a dispute in reaching an amicable resolution. A Conciliator is the individual designated with this authority. He may assist in reaching a resolution by expressing his viewpoint on the conflict. In other words, the agreement represents a compromise between the parties.
Features of conciliation:
• A conciliator is a person who helps the parties reach a compromise.
• Conciliators provide their assessment on the conflict.
• Conciliation is a voluntary procedure.
• It is an informal method.
• The major distinction between conciliation and arbitration is that in conciliation, the parties have complete control over both the process and the result.
• The ultimate settlement between the parties based on their preferences, terms, and conditions is the intended conclusion since it is a consensual party.
• If a solution could not be achieved via the conciliation procedure, the conciliator may, at the request of the parties, become an arbitrator. The term "Hybrid Conciliation" refers to this.
• The arbitration award's weight and standing will be equivalent to those of the settlement agreement (Section74).
Conciliation proceedings under the Act:
• According to Section 62 of the Act, one party to the disagreement must send a written invitation to the other party for conciliation in order to begin the conciliation procedures. However, there won't be any legal action taken if the recipient of the notification or invitation rejects it or doesn't respond.
• The Act's Section 63 requires that if there are many conciliators present in addition to the one required by rule, they work collaboratively to resolve disputes.
• As with an arbitrator, the parties themselves shall designate the conciliator in accordance with Section 64 of the Act.
• A party is required by Section 65 of the Act to provide the conciliator with written notice of the nature of the dispute and any relevant facts.
• Any of the processes outlined in Section 78 of the Act may be used to end the proceeding.
Conciliation role:
• It is specified in the Act's Section 67
• He has to be neutral and autonomous
• He must aid the parties in reaching an agreement
• The Code of Civil Process, 1908's procedure is not applicable to him
• He must follow the laws of justice and fairness
Additional provisions (Part IV):
The High Court is given the authority to issue regulations pertaining to any Act provision under Section 82.
According to Sections 83 and 84 of the Act, the Central Government has the authority to resolve any issues and establish regulations.
The Act of 1996 has replaced the three Acts that were in place in India and dealt with arbitration. Which were:
1940's Indian Arbitration Act
The 1937 Act Concerning Arbitration (Protocol and Convention)
1961 Act Recognizing and Enforcing Foreign Awards
Landmark Decisions:
Pan India Consultants Pvt. Ltd. v. the Haryana Space Application Centre (HARSAC) (2021)
A case's facts
In this instance, a request was made according to Section 29A (4) of the Act, which indicated that the arbitral tribunal's ruling was prepared for official pronouncement. Additionally, the tribunal received the necessary payment. In response, the opposing party contended that the application must be rejected because it does not provide sufficient justification for an extension under the Section. An extension of three months was granted despite the argument being rejected. In rebuttal, HARSAC submitted a modification to the High Court. Yet another four-month extension was granted. A special writ application was made to the Supreme Court in response to this.
Problem with the case:
Whether the party will get the extension or not?
Decision of the Court
The court found that when used in conjunction with the Act's Schedule, the phrase stated in Section 12 is required. The Principal Secretary was also ruled to be unable to serve as an arbitrator. He probably would have an impact on HARSAC if he were the one. The court also ordered the appointment of a second arbitrator to carry on the arbitration and assist the parties in reaching a settlement within six months.
Kotak India Venture Fund Vs Indus Biotech Pvt (2021):
A case's facts
Preference shares from Indus Biotech were offered with the opportunity to convert them into funds from Kotak India. The shareholders' agreement was amended to include a provision, but they were unable to come to an agreement on how to convert these shares into paid-up equity shares. As a consequence of the other party's failure to redeem such shares, Kotak India submitted an application.
Problem with the case:
Whether the dispute's subject matter qualifies for referral to arbitration while the NCLT case is still pending?
Decision of the Court:
According to the Supreme Court, if the proceeding is in rem, the matter cannot be submitted to arbitration. It also ruled that any application under the Arbitration and Conciliation Act, 1996 would not be accepted if any proceedings are ongoing before NCLT under Section 7 of the IBC. The case (Indus Biotech Pvt. Ltd. v. Kotak India Venture Fund, 2021) was successfully referred to an arbitral tribunal because the Supreme Court found that the NCLT's ruling in the present instance was justified.
Kerala State v. Oriental Structural Engineers Pvt. Ltd. (2021)
A case's facts
In this instance, there was a contract for upgrading the road sections. For any late payments, the contractor sought additional interest. However, there was no mention of any interest being charged on late payments in the letter.
Problem with the case
Do the contractor's interests have to be disclosed even if they aren't in the letter?
Decision of the Court
The Supreme Court ruled that the tribunal may award interest to the contractor as compensation if it so chooses. Additionally, the G.C. Roy v. Secretary Irrigation Department case was mentioned (1991). It was taken into account that the payment of interest in these situations was not expressly forbidden in the agreement. But the parties could not agree on the rate of such payment, which was lacking. In the same case, the High Court requested that the parties provide the information that was missing from the appendix.
The Supreme Court ruled that this choice was wrong and illegal. As there was no condition in the contract that indicated exclusion of payment of interest in the event that the payment was delayed, it was decided that the tribunal was correct in awarding compensation.
Conclusion
The Act deals with efficient, affordable, and time-efficient alternative dispute settlement procedures. People currently tend to prefer resolving a disagreement outside of the courts with the use of ADRs like arbitration, conciliation, mediation, etc. due to the backlog of cases, strict procedural rules of the courts, and to avoid litigation. The Act specifies the arbitration process to be followed, the arbitration tribunal's behavior, and the arbitral awards to be rendered in a dispute. In an arbitration agreement, the decision is provided in the form of an arbitral award and is binding on the parties. Additionally, it specifies the process for judicial appeals in cases of disagreements.
Some frequently asked questions:
What is arbitration?
Black Law Dictionary defines it as a process for settling disputes that involves two parties and an impartial third party whose judgment is binding on both sides.
What prior actions occurred in the nation involving arbitration?
With regard to the arbitration in India, there were three acts:
• 1940's Indian Arbitration Act
• The 1937 Act Concerning Arbitration (Protocol and Convention)
• 1961 Act Recognizing and Enforcing Foreign Awards
However, The Arbitration and Conciliation Act of 1996 combined several Acts into one and abolished them.
The Act of 1996 is based on what legal framework?
The Model Law on International Commercial Arbitration established by UNCITRAL in 1985 served as its foundation.
What distinguishes conciliation from mediation?
In contrast to conciliation, the mediator in mediation does not express a view on the matter at hand. S/He is not granted the authority to enforce a solution; instead, this authority belongs to a conciliator. His only responsibility is to break the impasse and persuade the parties to come to a fair agreement.
How many sections and schedules make up the Act?
The Act is broken up into four sections:
Part I (Sections 2-43) -
Applies to India as the location of the arbitration. The given award is considered to be a domestic award.
Part II (Sections 44–60)-
Enforcement of foreign awards is covered in.
Part III: (Section 61–81) -
Conciliation
Part IV (Section 82-86) –
supplementary provisions
There are three schedules in it:
• Convention on the recognition of foreign arbitral awards is described in Schedule I.
• Schedule II - Guidelines for arbitration provisions.
• Schedule III - Foreign Arbitral Award Execution Convention
By a foreign prize, what do you mean?
In international disputes, foreign awards are made for any issue brought to arbitration and are enforceable in India under the Act. The Act divides it into two chapters:
• The New York Convention
• The Geneva Convention