Arbitration In India: An Introduction
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Background to arbitrationlegislation: The Indian law of arbitration is contained in theArbitration and Conciliation Act 1996 (Act).1The Act is based on the 1985 UNICITRAL Model Law on InternationalCommercial Arbitration and the UNCITRAL Arbitration Rules 1976. TheStatement of Objects and Reasons of the Act recognises thatIndia's economic reforms will become effective only if thenation's dispute resolution provisions are in tune withinternational regime. The Statement of Objects and Reasons setforth the main objectives of the Act as follows: " to comprehensively cover international and commercialarbitration and conciliation as also domestic arbitration andconciliation; to make provision for an arbitral procedure which is fair,efficient and capable of meeting the needs of the specificarbitration; to provide that the arbitral tribunal gives reasons for itsarbitral award; to ensure that the arbitral tribunal remains within the limitsof its jurisdiction; to minimise the supervisory role of courts in the arbitralprocess; to permit an arbitral tribunal to use mediation, conciliationor other procedures during the arbitral proceedings to encouragesettlement of disputes; to provide that every final arbitral award is enforced in thesame manner as if it were a decree of the court; to provide that a settlement agreement reached by the partiesas a result of conciliation proceedings will have the same statusand effect as an arbitral award on agreed terms on the substance ofthe dispute rendered by an arbitral tribunal; and to provide that, for purposes of enforcement of foreign awards,every arbitral award made in a country to which one of the twoInternational Conventions relating to foreign arbitral awards towhich India is a party applies, will be treated as a foreignaward." Scheme of the Act: The Act is a composite piece of legislation. It provides fordomestic arbitration; international commercial arbitration;enforcement of foreign award and conciliation (the latter beingbased on the UNCITRAL Conciliation Rules of 1980). The more significant provisions of the Act are to be found inPart I and Part II thereof. Part I contains the provisions fordomestic and international commercial arbitration in India. Allarbitration conducted in India would be governed by Part I,irrespective of the nationalities of the parties. Part II providesfor enforcement of foreign awards. Part I is more comprehensive and contains extensive provisionsbased on the Model Law. It provides inter alia for arbitrability ofdisputes; non-intervention by courts; composition of the arbitraltribunal; jurisdiction of arbitral tribunal; conduct of thearbitration proceedings; recourse against arbitral awards andenforcement. Part II on the other hand, is largely restricted toenforcement of foreign awards governed by the New York Conventionor the Geneva Convention. Part II is thus, (by its very nature) nota complete code. This led to judicial innovation by the SupremeCourt in the case of Bhatia International v. Bulk Trading2. Here the Indian courts jurisdiction was invokedby a party seeking interim measures of protection in relation to anarbitration under the ICC Rules to be conducted in Paris. Theprovision for interim measure (section 9) was to be found in Part Ialone (which applies only to domestic arbitration). Hence the Courtwas faced with a situation that there was no propriovigore legal provision under which it could grant interimmeasure of protection. Creatively interpreting the Act, the SupremeCourt held that the "general provisions" of Part I wouldapply also to offshore arbitrations, unless the parties expresslyor impliedly exclude applicability of the same. Hence by judicialinnovation, the Supreme Court extended applicability of the generalprovisions of Part I to off-shore arbitrations as well. It may be stated that this was premised on the assumption thatthe Indian Court would otherwise have jurisdiction in relation tothe matter (in the international sense). This became clear in asubsequent decision of the Supreme Court in Shreejee Traco (I)Pvt. Ltd. v. Paperline International Inc.3 Here theCourt's assistance was sought for appointing an arbitrator inan off-shore arbitration. The power of appointment by court existsunder Section 11 of Part I of the Act. The Court declined toexercise jurisdiction. It found that the arbitration was to beconducted in New York and that the law governing the arbitrationproceedings would be the law of seat of the arbitration. Hence, theextension of Part I provisions to foreign arbitrations sanctifiedby Bhatia4 could not be resorted to in everycase. The Indian Courts would have to first determine if it hasjurisdiction, in the international sense. Subject matter of arbitration: Any commercial matter including an action in tort if it arisesout of or relates to a contract can be referred to arbitration.However, public policy would not permit matrimonial matters,criminal proceedings, insolvency matters anti-competition mattersor commercial court matters to be referred to arbitration.Employment contracts also cannot be referred to arbitration butdirector - company disputes are arbitrable (as there is no masterservant relationship here)5. Generally, matters coveredby statutory reliefs through statutory tribunals would benon-arbitrable. Role of the court: One of the fundamental features of the Act is that the role ofthe court has been minimised. Accordingly, it is provided that anymatter before a judicial authority containing an arbitrationagreement shall be referred to arbitration (Section 8 provided thenon - applicant objects no later than submitting its statement ofdefense on merits). Further, no judicial authority shall interfere,except as provided for under the Act (Section 5). In relation to arbitration proceedings, parties can approach theCourt only for two purposes: (a) for any interim measure ofprotection or injunction or for any appointment of receiveretc.6; or (b) for the appointment of an arbitrator inthe event a party fails to appoint an arbitrator or if twoappointed arbitrators fail to agree upon the third arbitrator. Insuch an event, in the case of domestic arbitration, the ChiefJustice of a High Court may appoint an arbitrator, and in the caseof international commercial arbitration, the Chief Justice of theSupreme Court of India may carry out the appointment7. Acourt of law can also be approached if there is any controversy asto whether an arbitrator has been unable to perform his functionsor has failed to act without undue delay or there is a dispute onthe same. In such an event, the court may decide to terminate themandate of the arbitrator and appoint a substitute arbitrator. Jurisdiction of the arbitrator: The Act provides that the arbitral...
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