Table of Contents
In the present time, the arbitration is governed by the law of arbitration which is provided under the Arbitration and Conciliation Act, 1996. Earlier to this Act, there were 3 Acts that governed the law of arbitration in India that are as follows:
- The Arbitration (Protocol and Convention) Act, 1937.
- The Arbitration Act, 1940.
- The Foreign Awards (Recognition and Enforcement) Act 1961.
These Acts were repealed by the Arbitration and Conciliation Act 1996. However, the Model Law also contributed in drafting and implementing the provisions of the Arbitration and Conciliation Act, 1996. the Model Law was adopted by the United Nations General Assembly on the recommendation of the United Nations Commission on International Trade Law (UNCITRAL).
Therefore, The Arbitration and Conciliation Act, 1996 came in order to consolidate and amend the already existing laws relating to domestic arbitration. The Act came into force on 25 January, 1996.
There are total 86 sections in this Act and it is divided into 4 parts, in which Part I deals with General provisions on arbitration, Part II deals with the Enforcement of certain foreign awards, Part III deals with conciliation and Part IV deals with the Supplementary provisions.
Main objective of Arbitration and Conciliation Act, 1996
The main objective of the Act are as follows –
- It aims to comprehensively(completely) cover international commercial arbitration and conciliation as well as domestic arbitration and conciliation.
- To make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration.
- It provides that the arbitral tribunal has to give reasons for its arbitral award.
- To ensure that the arbitral tribunal remains within the limits of its jurisdiction.
- To minimize the supervisory role of courts in the arbitral process.
- To permit an arbitral tribunal to use Mediation, Conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes.
- To provide that every final arbitral award is enforced in the same manner as if it were a decree of the court.
- To provide that a settlement agreement reached by the parties as a result of conciliation proceedings, it will have the same status and effect as an arbitral award.
- To provide that for the purpose of enforcement of foreign awards, every arbitral award made in a country which is one of the parties to the international conventions i.e. the New York Convention and the Geneva Convention will be treated as a foreign award.
Note: the foreign award should be made in another country except India.
Salient features of the Arbitration and Conciliation Act, 1996
Some of the important salient features of Act are as follows –
- A more comprehensive statute: The Arbitration and Conciliation Act, 1996 is more comprehensive than the earlier Act of 1940. It consists of 86 sections divided into 4 parts.
- Arbitral award treated at per with a decree: Another notable feature of the Act of 1996 is that the arbitral award and settlement arrived at during conciliation proceedings have at per with the decree of the court. In other words the arbitral award is enforceable in the same manner as a decree of a law court.
- Curtailment of the courts process: The power of the court under the Act of 1996 has been considerably curtailed as compared with the earlier Arbitration Act of 1940. The arbitrator has been endowed with absolute powers and he is completely immune from the court’s control during the arbitration proceedings.
- Abolition of the Umpire system: Another important feature of the Act of 1996 is the abolition of the umpire system. The earlier Act of 1940 provided that where an even number of arbitrators were appointed and such arbitrator failed to make an award within the specified time, or where there was difference of opinion between two arbitrators, the umpire should enter on the reference instead of the arbitrators.
But now under the new Act of 1996, the number of arbitrators to determine the dispute has been left to the parties, the only limitation being that an even number of arbitrators shall not be appointed. The arbitrators so appointed shall appoint a third arbitrator called the Presiding Arbitrator(umpire).
- Qualification of the arbitrator: There were no qualifications for appointment as an arbitrator as prescribed in the earlier Arbitration Act of 1940. But now the Act of 1996 provides for qualification of the arbitrator. Since nowadays a large number of disputes arising between the parties are of technical nature, therefore such disputes can properly be decided only by the arbitrators who are competent and well versed in such matters.
- Assistance of court in certain matters: the Act of 1996 provides for taking assistance from the court only in certain specific matters, the Arbitral tribunal or a party may seek assistance from the court in taking evidence. The court may therefore order the witness to provide evidence to the arbitral tribunal directly. But the act does not confer any power on the Arbitral tribunal to summon witnesses. Therefore, the Arbitral tribunal or a party with the approval of the arbitral tribunal may apply to the court for assistance in taking evidence.
- Empower to pass interim orders: another notable feature of the Act of 1996 is the provision relating to the interim measures, which empower the arbitrator or arbitral tribunal to pass interim orders in respect of the subject matter of the dispute at the request of the party.
- Arbitral award in conflict with public policy is void: the new Act of 1996 provides that an Arbitral award which is in conflict with the public policy in India shall not be valid in law being null and void and can be set aside by the court.
- International Commercial Arbitration defined: The Act of 1996 specifically defines the term “International Commercial Arbitration” under Section 2(1)(f), it means an arbitration relating to disputes arising out of legal relationship whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties whether an individual, body corporate or a company is having business or residing abroad and in case of Government, the government is of a foreign country.
Note: the other party to the dispute mentioned above should be a foreigner, foreign company, or foreign government.
- Scope of conciliation more wide: Part III of the Act of 1996 deals with a new international approach to conciliation and explains its application scope. Thus making the scope of conciliation more wide.
- Arbitrator to give reasons for the award: The Act 1996 under sub-section 3 of section 31 provides that an arbitral tribunal must state reasons for its award. However, where the parties themselves have agreed in writing that no reasons are to be given or where the award is in terms of a settlement reached between the parties, the requirement of a reasoned award may be waived off.
- Enforcement of foreign awards: The Act of 1996 provides for enforcement of certain foreign awards made under the New York Convention and Geneva Convention respectively as contained in Part II of the said Act as a decree of the court. The countries which have neither adopted the New York convention nor the Geneva convention are outside the scope of Part II of the Act and therefore their awards are not enforceable as foreign awards in India.
In the present, the arbitration and other Alternative Disputes Resolution mechanisms have gained more importance than the traditional judicial method because it takes less time and has a smooth process and the Arbitration and Conciliation Act,1966 has tried to simplify the procedures for dealing with the cases.