Jagran Lakecity University, Bhopal

School of Law

Teaching Notes

Course: ARBITRATION AND ALTERNATE DISPUTE RESOLUTION

Programme: B.B.A.LL.B.(Hons.)-B.Com.LL.B.(Hons.)

Semester: VII

Compiled and Edited by: Ms. APOORVA DIXIT

Unit I: Introduction – Alternative Dispute Resolution (ADR):
INTRODUCTION

ADR is not immune from criticism. Some have seen in it a waste of time; others recognize the
risk that it be only initiated to check what is the minimum offer that the other party would accept
the delay in disposal of cases in Law Courts, for whatever reason it may be, has really defeated
the purpose for which the people approach the Courts for their redressal. In many parts of India,
rapid development has meant increased caseloads for already overburdened courts, further
leading to notoriously slow adjudication. As a result, alternative dispute resolution mechanisms
have become more crucial for businesses operating in India as well as those doing businesses
with Indian firms. So Alternate Dispute Resolution (herein after as ADR) is necessary as a
substitute to existing methods of dispute resolution such as litigation, conflict, violence and
physical fights or rough handling of situations. It is a movement with a drive from evolving
positive approach and attitude towards resolving a dispute.

HISTORY

In India, the law and practice of private and transactional commercial disputes without court
intervention can be dated back to ancient times. Arbitration or mediation as an alternative to
dispute resolution by municipal courts has been prevalent in India from Vedic times. The earliest
known treatise is the Bhradarnayaka Upanishad, in which various types of arbitral bodies viz (i)
the Puga (ii) the Sreni (iii) the Kula are referred to. These arbitral bodies, known as Panchayats,
dealt with variety of disputes, such as disputes of contractual, matrimonial and even of a criminal
nature. The disputants would ordinarily accept the decision of the panchayat and hence a
settlement arrived consequent to conciliation by the panchayat would be as binding as the
decision that was on clear legal obligations.

The Muslim rule in India saw the incorporation of the principles of Muslim law in the Indian
culture. Those laws were systematically compiled in the form of a commentary and came to be
known as Hedaya. During Muslim rule, all Muslims in India were governed by Islamic laws-
the Shari’ah as contained in the Hedaya. The Hedaya contains provisions for arbitration as well.
The Arabic word for arbitration is Tahkeem, while the word for an arbitrator is Hakam. An
arbitrator was required to posses the qualities essential for a Kazee– an official Judge presiding
over a court of law, whose decision was binding on the parties subject to legality and validity of
the award. The court has the jurisdiction to enforce such awards given under Shari’ah though it is
not entitled to review the merits of the dispute or the reasoning of the arbitrator.

ADR picked up pace in the country, with the coming of the East India Company. The British
government gave legislative form to the law of arbitration by promulgating regulations in the
three presidency towns: Calcutta, Bombay and Madras. Bengal Resolution Act, 1772 and Bengal
Regulation Act, 1781 provided parties to submit the dispute to the arbitrator, appointed after
mutual agreement and whose verdict shall be binding on both the parties.]These remained in
force till the Civil Procedure Code 1859, and were extended in 1862 to the Presidency towns.

MODES AND PRACTICES OF ADR IN INDIA

ADR can be broadly classified into two categories: court-annexed options (Mediation,
Conciliation) and community based dispute resolution mechanism (Lok-Adalat).

The following are the modes of ADR practiced in India:

1. Arbitration

2. Mediation

3. Conciliation

4. Negotiation

5. Lok Adalat

1. Arbitration:

The definition of ‘arbitration’ in section 2(1) (a) verbatim reproduces the text of article 2(a) of
the Model Law-‘arbitration means any arbitration whether or not administered by a permanent
arbitral institution’.It is a procedure in which the dispute is submitted to an arbitral tribunal
which makes a decision (an “award”) on the dispute that is binding on the parties. It is a private,
generally informal and non-judicial trial procedure for adjudicating disputes. There are four
requirements of the concept of arbitration: an arbitration agreement; a dispute; a reference to a
third party for its determination; and an award by the third party.

The essence lies in the point that it is a forum chosen by the parties with an intention that it must
act judicially after taking into account relevant evidence before it and the submission of the
parties. Hence it follows that if the forum chosen is not required to act judicially, the process it is
not arbitration.

Types of arbitration are:

Ad Hoc Arbitration

An ad hoc arbitration is one which is not administered by an institution and therefore, the parties
are required to determine all aspects of the arbitration like the number of arbitrators, manner of
their appointment, etc. Provided the parties approach the arbitration in a spirit of cooperation, ad
hoc proceedings can be more flexible, cheaper and faster than an administered proceeding. The
advantage is that, it is agreed to and arranged by the parties themselves. However, the ground
realities show that arbitration in India, particularly ad hoc arbitration, is becoming quite
expensive vis-à-vis traditional litigation.

Institutional Arbitration

An institutional arbitration is one in which a specialized institution with a permanent character

intervenes and assumes the functions of aiding and administering the arbitral process, as
according to the rules of that institution. It is important to note that these institutions do not
arbitrate the dispute, it is the arbitrators who arbitrate, and so the term arbitration institution is
inapt and only the rules of the institution apply. Incorporation of book of rules in the “arbitration
agreement” is one of the principle advantages of institutional arbitration. Institutional
Arbitration, throughout the world, is recognized as the primary mode of resolution of
international commercial disputes. It is an arbitration administered by an arbitral institution.

Further, in many arbitral institutions such as the International Chamber of Commerce (ICC),
before the award is finalized and given, an experienced panel scrutinizes it. As a result, the
possibilities of the court setting aside the award is minimal.

Statutory Arbitration

When a law specifies that if a dispute arises in a particular case it has to be referred to arbitration,
the arbitration proceedings are called “statutory arbitration”. Section 2(4) of the Arbitration and
Conciliation Act 1996 provides, with the exception of section 40(1), section 41 and section 43,
that the provisions of Part I shall apply to every arbitration under any other act for the time being
in force in India.

Fast track arbitration

Fast track arbitration is a time-bound arbitration, with stricter rules of procedure, which do not
allow any laxity for extensions of time, and the resultant delays, and the reduced span of time
makes it more cost effective. Sections 11(2) and 13(2) of the 1996 Act provides that the parties
are free to agree on a procedure for appointing an arbitrator and choose the fastest way to
challenge an arbitral award respectively. The Indian Council of Arbitration (ICA) has pioneered
the concept of fast track arbitration in India and under its rules, parties may request the arbitral
tribunal to settle disputes within a fixed timeframe.

2. Mediation:

Mediation is a process in which the mediator, an external person, neutral to the dispute, works
with the parties to find a solution which is acceptable to all of them. The basic motive of
mediation is to provide the parties with an opportunity to negotiate, converse and explore options
aided by a neutral third party, to exhaustively determine if a settlement is possible.
Mediation is negotiation carried out with the assistance of a third party. The mediator, in contrast
to the arbitrator or judge, has no power to impose an outcome on disputing parties.
Despite the lack of ‘teeth’ in the mediation process, the involvement of a mediator alters the
dynamics of negotiations. The concept of mediation is not foreign to Indian legal system, as
there existed, different aspects of mediation. The Village Panchayats and the Nyaya Panchayats
are good examples for this. A brief perusal of the laws pertaining to mediation highlights that it
has been largely confined to commercial transactions. The Arbitration and Conciliation Act,
1996 is framed in such a manner that it is concerned mainly with commercial transactions that
involves the common man rather than the common man’s interest.

In India, mediation has not yet been very popular. One of the reasons for this is that mediation is
not a formal proceeding and it cannot be enforced by courts of law. There is a lack of initiative
on the part of the government or any other institutions to take up the cause of encouraging and
spreading awareness to the people at large.

3. Conciliation:

Conciliation is “a process in which a neutral person meets with the parties to a dispute which
might be resolved; a relatively unstructured method of dispute resolution in which a third party
facilitates communication between parties in an attempt to help them settle their differences”.

This consists in an attempt by a third party, designated by the litigants, to reconcile them either
before they resort to litigation (whether to court or arbitration), or after. The attempt to conciliate
is generally based on showing each side the contrary aspects of the dispute, in order to bring each
side together and to reach a solution.

Section 61 of the 1996 Act provides for conciliation of disputes arising out of legal relationship,
whether contractual or not and to all proceedings relating thereto. After its enactment, there can
be no objection, for not permitting the parties to enter into a conciliation agreement regarding the
settlement of even future disputes.

There is a subtle difference between mediation and conciliation. While in meditation, the third
party, neutral intermediary, termed as mediator plays more active role by giving independent
compromise formulas after hearing both the parties; in conciliation, the third neutral
intermediary’s role, is to bring the parties together in a frame of mind to forget their animosities
and be prepared for an acceptable compromise on terms midway between the stands taken before
the commencement of conciliation proceedings.

4. Negotiation:

Negotiation-communication for the purpose of persuasion-is the pre-eminent mode of dispute

resolution. Compared to processes using mutual third parties, it has the advantage of allowing the
parties themselves to control the process and the solution.
Essentials of Negotiation are:

1. It is a communication process;

2. It resolves conflicts;

3. It is a voluntary exercise;

4. It is a non-binding process;

5. Parties retain control over outcome and procedure;

6. There is a possibility of achieving wide ranging solutions, and of maximizing joint gains.

In India, Negotiation doesn’t have any statutory recognition. Negotiation is self counseling
between the parties to resolve their dispute. Negotiation is a process that has no fixed rules but
follows a predictable pattern.

5. Lok Adalats:

Lok Adalat was a historic necessity in a country like India where illiteracy dominated other
aspects of governance. It was introduced in 1982 and the first Lok Adalat was initiated in
Gujarat. The evolution of this movement was a part of the strategy to relieve heavy burden on
courts with pending cases. It was the conglomeration of concepts of social justice, speedy justice,
conciliated result and negotiating efforts. They cater the need of weaker sections of society. It is
a suitable alternative mechanism to resolve disputes in place of litigation. Lok Adalats have
assumed statutory recognition under the Legal Services Authorities Act, 1987. These are being
regularly organized primarily by the State Legal Aid and the Advice Boards with the help of
District Legal Aid and Advice Committees.

Legal Services Authorities Act, 1987:

The Legal Services Authorities Act, 1987 was brought into force on 19 November 1995. The
object of the Act was to provide free and competent legal services to the weaker sections of the
society to ensure that opportunities for securing justice are not denied to any citizen. The concept
of legal services which includes Lok Adalat is a revolutionary evolution of resolution of
disputes. Though settlements were affected by conducting Lok Nyayalayas prior to this Act, the
same has not been given any statutory recognition. But under the new Act, a settlement arrived at
in the Lok Adalats has been given the force of a decree which can be executed through Court as
if it is passed by it. Sections 19, 20, 21 and 22 of the Act deal with Lok Adalat. Section 20
provides for different situations where cases can be referred for consideration of Lok Adalat.

Honorable Delhi High court has given a landmark decision highlighting the significance of Lok
Adalat movement in the case of Abdul Hasan and National Legal Services Authority v. Delhi
Vidyut Board and Others. The court passed the order giving directions for setting up of
permanent Lok Adalats.

INTERNATIONAL ARBITRATION COURTS

International arbitration courts are institutions that were created to resolve disputes irrespective
of the parties’ locations or systems of law. Arbitration courts administer and supervise the
arbitration process, while individual disputes are decided by arbitrators. Many arbitration courts
have their own arbitration rules to govern and help direct the arbitration process.

INTERNATIONAL COURT OF ARBITRATION, INTERNATIONAL

CHAMBER OF COMMERCE (ICC)

The ICC administers and supervises arbitration proceedings for international disputes. Because
the ICC is a business organization, its arbitration proceedings tend to involve commercial
business disputes. ICC arbitration gives substantial freedom to the parties and the arbitration
tribunal to decide on the procedures and rules governing the arbitration.

LONDON COURT OF INTERNATIONAL ARBITRATION (LCIA)

The LCIA provides a variety of alternative dispute resolution (ADR) services, including
arbitration and mediation. The LCIA also acts as an appointing authority and arbitration
administrator under the UNCITRAL arbitration rules. The LCIA is widely recognized as one of
the most popular international arbitration courts in the world.
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT
DISPUTES (ICSID)

The ICSID was established by the Washington Convention is 1965. It is widely considered to be
the leading international arbitration institution devoted to resolving investment disputes,
particularly investment investor-State disputes or “BIT arbitrations.” The ICSID itself does not
arbitrate disputes, but instead provides the framework for independent arbitration panels to
resolve disputes.

INTERNATIONAL CENTRE FOR DISPUTE RESOLUTION (ICDR)

The ICDR is the international division of the American Arbitration Association (AAA). The
ICDR provides international arbitration and dispute resolution services. The ICDR is
headquartered in New York City (U.S.), and has offices in Ireland, Mexico, Singapore and
Bahrain.

ORGANIZATION FOR THE HARMONIZATION OF BUSINESS LAW IN

AFRICA (OHADA)

OHADA is a system of business laws and institutions currently adopted by sixteen West and
Central African nations. Under OHADA, the Common Court of Justice and Arbitration (CCJA)
was established in Côte d’Ivoire (Ivory Coast). The CCJA is both a judicial court and an
arbitration institution which supervises the administration of arbitration proceedings in OHADA
member states.
Arbitration and Conciliation Act, 1996

SOME OF THE RELEVANT PROVISIONS OF THE ARBITRATION & CONCILIATION

ACT, 1996 AND IMPORTANT CASE LAWS
1. An arbitral award may be set aside on an application by a party defined under section 2 (h) of
the Arbitration and Conciliation Act, 1996 which provides that 'party' means a party to an
arbitration agreement.
2. Application for setting aside an arbitral award can be filed only in the court defined under
section 2(e) of the Act which provides as under :-
(e) "Court" means the principal Civil Court of original jurisdiction in a district, and includes the
High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the
questions forming the subject- matter of the arbitration if the same had been the subjectmatter of
a suit, but does not- include any civil court of a grade inferior to such principal Civil Court, or
any Court of Small Causes;
3. Section 4 of the Arbitration Act provides that a party who knows that any provision of Part-I
from which parties may derogate or any requirement under the arbitration agreement has not
been complied but still proceeds with the arbitration without stating his objection to such non-
compliance without undue delay or if a time limit is provided for stating that objection, within
that period of time, shall be deemed to have waived his right to so object.

4. Section 5 of the Arbitration Act provides that notwithstanding contained in any other law for
the time being in force, in matters governed by Part-I, no judicial authority shall intervene except
where so provided in Part-I. Part-I provides for judicial intervention by the Court in the
proceedings under sections 8, 9, 11, 14, 27, 34, 36 and 37.

5. Section 7 provides as to what the arbitration agreement means. The arbitration agreement shall
be in writing. The arbitration agreement is in writing if it is contained in the documents signed by
the parties, exchange of letters, telex, telegrams, or other means of telecommunication which
provide a record of the agreement or an exchange of statement of claim and defence wherein the
existence of the agreement is alleged by one party and not denied by the other. If there is a
reference in a contract to a document containing an arbitration clause constitutes an arbitration
agreement if the contract is in writing and reference is such as to make that arbitration clause part
of the contract. Unless there is arbitration agreement between the parties, dispute cannot be
referred to arbitration. An arbitration agreement however can be arrived at even in the pending
court proceedings. If the parties have arrived at the arbitration agreement under Part-I, all rights
and obligations of the parties would be governed by the provisions of the Part-I of the Arbitration
& Conciliation Act, 1996.

6. Under section 8, a judicial authority before which an action is brought in a matter which is
subject matter of an arbitration agreement shall if a party applies not later than when submitting
his first statement on the substance of dispute, refer the parties to arbitration. If parties are
referred to arbitration, suit is disposed off.

7. Section 9 provides for powers of Court to grant interim measures.

8. Section 10 provides that the parties are free to determine the number of arbitrators, provided
that such number shall not be an even number, failing which the arbitral tribunal shall consist of
a sole arbitrator.

9. Section 11 provides that if a party does not appoint an arbitrator within 30 days from the date
of receipt of a request to do so, the other party may apply for appointment of an arbitrator by
filing an application under section 11(6). Even if two arbitrators nominated by the parties do not
appoint a presiding officer, an application can be made to the Hon'ble Chief Justice for
appointment of the presiding arbitrator.

10. Under sections 12 and 13 a party can challenge the appointment of the arbitral tribunal on
various grounds by filing an application before such tribunal. If such application is rejected, the
arbitral tribunal has to proceed with the matter and its award can be challenged under section 34
if the said party does not succeed in the arbitral proceedings.

11. Section 14 provides for termination of the mandate of the arbitral tribunal. Section 15
provides for substitution of the arbitral tribunal in various circumstances.

12. Under section 16 , the arbitral tribunal is empowered to rule on its own jurisdiction including
ruling on any objection with respect to the existence or validity of arbitration agreement. Such
plea shall be raised not later than the submission of the statement of defence. If such plea is
rejected by the arbitral tribunal, it has to proceed with the arbitral proceedings and declare an
award. If plea of jurisdiction is accepted by the arbitral tribunal, the respondent may file an
appeal under section 37. If plea of jurisdiction is not accepted, the respondent may challenge
such ruling along with award under section 34.
13. Section 17 provides for interim measures which can be ordered by the arbitral tribunal.
14. Under section 18, the arbitral tribunal has to treat both parties equally.

15. Section 19 provides that the arbitral tribunal shall not be bound by the Code of Civil
Procedure, 1908 or Indian Evidence Act, 1872. The arbitral tribunal has power to determine the
admissibility, relevance, materiality and weight of any evidence subject to section 19(3).

16. Under section 21, the arbitral proceedings commence in respect of a particular dispute on the
date on which a request for that dispute to be referred to arbitration is received by the respondent,
unless otherwise agreed by the parties. When such notice is received by the respondent,
limitation in respect of such dispute stops.

17. Under sections 23 and 24, the claimant and the respondent has to file the statement of claim
and defence respectively and are to be heard by the arbitral tribunal.

18. Section 27 provides that the arbitral tribunal or a party can take an assistance of the Court for
taking evidence.

19. Section 28 (1) of the Act provides that the where the place of arbitration is situate in India, in
an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide
the dispute submitted to arbitration in accordance with the substantive law for the time being in
force in India. Section 28(3) provides that in all cases the arbitral tribunal shall decide in
accordance with the terms of the contract and shall take into account the usages of the trade
applicable to the transaction. Section 31 provides for form and contents of an arbitral award.
Section 32 provides for termination of arbitral proceedings.

20. An arbitral award can be set aside on the grounds set-out in section 34 (2) (a) and (b) and if
an application for setting aside such award is made by a party not later than three months from
the date from which the party making such application had received the arbitral award or if a
request had been made under section 33, from the date on which that request had been disposed
of by the arbitral tribunal. If the court is satisfied that the applicant was prevented by sufficient
cause from making the application within the said period of three months, it may entertain the
application within a further period of 30 days but not thereafter.

21. Section 34 of the Act reads as under :- 34. Application for setting aside arbitral award. (1)
Recourse to a Court against an arbitral award may be made only by an application for setting
aside such award in accordance with sub- section (2) and subsection (3). (2) An arbitral award
may be set aside by the Court only if- (a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law
to which the parties have subjected it or, failing any indication thereon, under the law for the
time being in force; or (iii) the party making the application was not given proper notice of the
appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his
case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the
terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the
submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can
be separated from those not so submitted, only that part of the arbitral award which contains
decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the
arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties,
unless such agreement was in conflict with a provision of this Part from which the parties cannot
derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds
that- (i) the subject- matter of the dispute is not capable of settlement by arbitration under the law
for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India.
Explanation.- Without prejudice to the generality of sub- clause (ii), it is hereby declared, for the
avoidance of any doubt, that an award is in conflict with the public policy of India if the making
of the award was induced or affected by fraud or corruption or was in violation of section 75 or
section 81. (3) An application for setting aside may not be made after three months have elapsed
from the date on which die party making that application had received the arbitral award or, if a
request had been made under section 33, from the date on which that request had bow disposed
of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented
by sufficient cause from making the application within the said period of three months it may
entertain the application within a further period of thirty days, but not thereafter. (4) On receipt
of an application under sub- section (1), the Court may, where it is appropriate and it is so
requested by a party, adjourn the proceedings for a period of time determined by it in order to
give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other
action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral
award.

22. Under section 36, when the time for making an application under section 34 for setting aside
an arbitral award has expired or such application has been refused, the award shall be enforced
under the provisions of the Code of Civil Procedure, 1908 in the same manner as if it were a
decree of the court. Section 37 provides a list of appealable orders. Only those orders mentioned
therein are appealable and no other orders.
23. Under section 40, arbitration agreement is not discharged by death of any party thereto, shall
be enforceable by or against the legal representative of the deceased.

24. Under section 42, if any application is made with respect to any arbitration agreement under
Part-I in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all
subsequent proceedings arising out of that agreement and the arbital proceedings shall be made
in that Court and no other Court.

25. Section 43 provides that the Limitation Act, 1963 shall apply to arbitrations as it applies to
proceedings in Court. An arbitration shall be deemed to have commenced on the date referred to
in section 21. If an arbitral award is set aside, the period between the commencement of the
arbitration and date of order of the Court shall be excluded in computing the time prescribed by
the Limitation Act, 1963 for commencement of proceedings including arbitration with respect to
the dispute so submitted. Important Case Laws - Section 2 (e) :

26. The Full Bench of the Bombay High Court in case of Fountain Head Developers vs.
Mrs.Maria Archangela Sequeira, 2007 (3) Bom.C.R. 393, has held that the District Judge in a
district alone is the principle Court of the original civil jurisdiction and does not include any
other judge sub-ordinate to him for the purpose of the petition under section 34 and section 9.
SECTION 9
27. Bombay High Court in case of Tata Capital Financial Services Limited vs. Deccan
Chronicles Holdings Ltd. 2013 (3) Bom.C.R. 205, has held that the Court can grant interim
measures under section 9 (2) (b), (d) and (e) even if the properties or things are not the subject
matter of the dispute in arbitration. It is held under Order XXXIV Rule 14 of the Code of Civil
Procedure, 1908 that there is no bar in filing a money claim even by the mortgagee
notwithstanding contained under Order II Rule 2 of the Code of Civil Procedure. It is for the
claimant to decide whether to file a money claim before the Arbitral Tribunal and file a separate
suit for enforcement of the mortgage after complying with the provisions of Order II Rule 2 of
the Code of Civil Procedure. Proceedings under section 9 for interim measures cannot be equated
with the proceedings filed in a pending suit for referring the parties to arbitration under section 8
of the Arbitration & Conciliation Act, 1996.

28. The Court should be satisfied while granting interim measures under section 9 read with
Order XXXVIII Rule 5 that there are reasonable chances of decree in favour of the petitioner and
grant of just or valid claim is not sufficient – Ratnam Ayer vs. Jacki K. Shroff 2013 (5)
Bom.C.R. 144.
29. The Court is bound to decide the existence of the arbitration agreement before proceeding
with the application under section 9 on merits – Goldstar Metal Solutions vs. Dattaram Gajanan
Kavtankar, (2013) 3 AIR Bombay R-529.

30. The parties not parties to the arbitration agreement can still be impleaded in an application
under section 9 if they are likely to be affected by the reliefs claimed in the application under
section 9 – Welspun Infrateck Ltd. vs. Ashok Khurana, 2014 (3) Bom.C.R. 624.

31. The application for stay of the arbitration proceedings not maintainable under section 9 of the
Arbitration Act read with section 151 of the Code of Civil Procedure – Rameshkumar N.
Chordiya vs. Principal District Judge, AIR 2014, Bombay 1.

32. If the place of arbitration is in India, Part-I of the Arbitration Act, including section 9 would
be applicable – Konkola Copper Mines (PLC) vs. Stewarts and Lloyds of India Ltd, 2013 (5)
Bom.C.R. 29.

33. There is no provision for stay of the arbitration proceeding. Mere allegation of fraud and/or
misappropriation of amount not supported by material particulars not sufficient – Rajesh M.
Mahtani vs. R.M. Khan, 2013 (6) Bom.C.R. 607.

34. The steps taken to enforce the consent order passed under section 9 are not barred under
section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. The proceedings
under section 9 cannot be equated with a suit contemplated under section 22 of the said Act –
Tata Capital Services Ltd. vs. Ramasarup Industries Limited, 2013 (6) Bom.C.R. 230.

35. The parties agree to have seat of arbitration at Singapore and governed by SIAC Rules -
Section 9 cannot be resorted to. Bombay High Court has no jurisdiction to entertain the petition
under section 9 in this circumstances – Rockwood Hotels Resort Ltd. vs. Starwood Asia Pacific
Hotels & Resort Ltd. (2013) 4 LJ SOFT 48.

36. No injunction can be granted under section 9 if the specific relief cannot be granted in terms
of section 41(e) of the Specific Relief Act. The contract which is determinable cannot be
specifically enforced - Spice Digital Ltd. vs. Vistaas Digital Media Pvt. Ltd., (2012) 114,
Bombay Law Report 3696.
37. When an application under section 9 is filed before the commencement of the arbitral
proceedings, there has to be manifest intention on the part of the applicant to take recourse to
arbitral proceedings. In case of Firm Ashok Traders vs. Gurumukh Das Saluja, (2004) 3 SCC
155, the Supreme Court held that a party invoking section 9 may not have actually commenced
the arbitral proceedings but must be able to satisfy the Court that the arbitral proceedings are
actually contemplated or manifestly intended and/or positively going to commence within a
reasonable time.

38. Bombay High Court in Minochar A. Irani vs. Deenyar S. Jehani, 2014 (6) Bom.C.R. 504, has
held that a party who has no intention to ultimately refer the dispute to arbitration and seek final
relief cannot be permitted to seek interim relief. Interim relief is in aid of final relief.

39. The Supreme Court in case of S.B.P. & Co. vs. Patel Engineering, AIR 2006 SC 450, has
held that when a party raises a plea that the dispute involved was not covered by the arbitration
clause or that the Court which was approached had no jurisdiction to pass any order under
section 9 of the Arbitration Act that Court has necessarily to decide whether it has jurisdiction,
whether there is an arbitration agreement which is valid in law and whether the dispute sought to
be raised is covered by that agreement. It is also held that when an application under section 8 is
made before the judicial authority or Court that the subject matter of the claim is not covered by
an agreement or existence of the valid arbitration agreement is disputed, the Court or the judicial
authority has to decide the said issue before referring the parties to arbitration.

40. The Division Bench of the Bombay High Court in case of Deccan Chronicle Holdings Ltd.
vs. L & T Finance Limited in Appeal (Lodging) No.130 of 2013, delivered on 8th August, 2013,
has held that when the Court decides the petition under section 9, the principles which have been
laid down in the Code of Civil Procedure, 1908 for grant of interlocutory reliefs furnish a guide
to the Court. Similarly in an application for attachment, underlined basis of order XXXVIII Rule
5 would have to be kept in mind. Whether the Court can grant interim measures under section 9
though the claim is rejected by the Arbitral Tribunal :

41. The Division Bench of the Bombay High Court in case of Dirk India Private Limited vs.
Maharashtra State Electricity Generation Company Limited. , delivered on 18th / 19th March,
2013, has held that the interim measures or protection within the meaning of section 9 (ii) is
intended to protect through measure, fruits of the successful conclusion of the arbitral
proceedings and the party whose claim has been rejected in the courts of the arbitral proceedings
cannot obviously have an arbitral award enforced in accordance with section 36. Whether interim
measure under section 9 can be granted if a document required to be stamped, is not stamped :

42. The Bombay High Court in case of Jairaj Devidas & Ors. vs. Nilesh Shantilal Tank & Anr.
2014 (6) Bom.C.R. 92, has after adverting to the judgment of the Division Bench in case of
Lakadawala Developers Pvt. Ltd. vs. Badal Mittal in Appeal (Lodging) No.272 of 2013
delivered on 25th June, 2013 and the judgment of the Supreme Court in case of SMS Tea
Estates Pvt. Ltd. vs. Chandmari Tea Company Pvt. Ltd., 2011 (4) Arb.L.R. 265, has held that
insufficiently paid instrument cannot be acted upon before the Court including arbitration
agreement and till such time such document is properly stamped, no relief under section 9 can be
granted. Such document can be impounded and can be sent to the Collector of Stamps for
adjudication under the provisions of the Maharashtra Stamp Act.

43. In case of SBP vs. Patel Engineering Ltd. (2005) 8 SCC 618, it is held by the Supreme Court
that order passed by the Chief Justice or his designate is a judicial order and not an
administrative order. Chief Justice or his designate has to decide whether conditions under
section 11(6) are satisfied or not. Under Sections 14 and 32 :

44. The Bombay High Court in case of Wanbury Ltd. vs. Candid Drug Distributors, delivered on
18th July, 2015 in Arbitration Petition No.1461 of 2014, has held that the power of the arbitral
tribunal to issue directions to file pleadings and documents, includes the power to grant
extension of time. Such orders passed by the arbitral tribunal are procedural and can be recalled
if sufficient case is made out. Power of the arbitral tribunal to award interest :

45. The Supreme Court in case of Hyder Consulting (UK) Ltd. vs. Governor, State of Orissa,
decided on 25th November, 2014 in Civil Appeal No.3147 of 2012, has held that under section
31(7)(a) of the Arbitration Act, the arbitral tribunal has power to award interest for pre-award
period, interest pendente lite and interest post award on whole or part of the money and for the
whole or any part of the period between the date on which the cause of action arose and the date
on which the award is made however, subject to the contract to the contrary.

46. The Bombay High Court in case of Haresh Advani vs. Suraj Jagtiani, decided on 24th April,
2015 in Arbitration Petition No.846 of 2014, has held that the power of the arbitrator under
section 31(7) is not restricted to award interest on principal only and has also power to award
interest on damages prior to the date of the award even if no notice under section 3(b) of the
Interest Act, 1978 is issued by the claimant. Limitation in filing petition under section 34 –
Power of condonation of delay – Applicability of section 14 of the Limitation Act, 1963 :

47. Supreme Court in case of Union of India vs. Popular Constructions, AIR 2001 SC 4010 and
in case of Consolidated Engineering Pvt. Ltd. vs. Irrigation Department (2008) 7 SCC 169 has
held that section 5 of the Limitation Act is not applicable to section 34 (3) of the Arbitration and
Conciliation Act, 1996 in view of express inclusion within the meaning of section 29(2) of the
Limitation Act, 1963. It is held that court cannot condone delay beyond a period of 30 days and
that also only if sufficient cause is shown as to how the applicant was prevented from making
application within the period of three months and not thereafter.

48. Supreme Court in case of Coal India Ltd. vs. Ujjal Transport Agency (2011) 1 SCC 117 and
in case of State of Goa vs. M/s.Western Builders, AIR 2006 SC 2525 has held that section 14 of
Limitation Act is applicable while considering application under section 34 and if time taken in
prosecuting the matter before a wrong court having no jurisdiction bonafide and with due
diligence, such time taken can be excluded while computing limitation under section 34(3).

49. Supreme Court in case of Voltas Limited vs. Rolta India Limited., (2011) 4 SCC 516, has
held that the notice under section 21 saves limitation for filing a counter claim if a respondent
against whom a claim has been made satisfies the test that he had made a claim against the
claimant and sought arbitration by serving a notice to the claimant.

50. Supreme Court in case of State of Goa vs. Praveen Enterprises (2012) 12 SCC 581, has held
that the arbitral proceedings in respect of those disputes commenced on the date on which the
request for the said disputes to be referred to arbitration was received by the respondent and only
such disputes which were referred to in the said notice invoking arbitration agreement with a
request to refer the same to arbitration, the arbitral proceedings commences and it would not
apply to the counter claim.

51. Bombay High Court in case of E-square Leisure Pvt. Ltd. vs. K.K. Jani Consultants and
Engineering Company (2013) 2 Bom.C.R. 689, has held that the limitation for making an
application under section 34(3) for setting aside an arbitral award would commence only after
the signed copy of the award is received by a party from the arbitral tribunal under section 31(5)
of the Arbitration Act.
52. Supreme Court in case of State of Maharashtra vs. M/s.Ark Builders Pvt. Ltd., AIR 2011 SC
1374, has held that the period of limitation prescribed under section 34(3) would start running
only from the date of a signed copy of the award is delivered to / received by a party making the
application for setting aside the award under section 34(1).

53. In case of Booz Allen Hamilton vs. SBI Home Finance (2011) 5 Scale 147, it is held by
Supreme Court that if the subject matter of dispute is not capable of settlement by arbitration
under the law for the time being in force, such award is liable to be set aside. Supreme Court has
enumerated some of such non arbitrable disputes and has held that such action would be an
action in rem and not in personam and are thus not arbitrable even if parties agreed to refer such
dispute by consent. (1) Disputes relating to criminal offence (2) Matrimonial disputes (3)
Guardianship matters (4) Insolvency and winding up matters (5) Testamentary matters (6)
Eviction or tenancy matters (7) Suit for enforcement of mortgage by sale of property. SECTION
34

54. The award if contrary to the terms of the contract, in violation of the statutory provisions and
ignoring the material piece of evidence can be set aside – Siddhivinayak Realty Pvt. Ltd. vs. V.
Hotels Ltd. (2013) 7 LJ SOFT 22.

55. Principles of natural justice applies to arbitration. Disputed documents not proved cannot be
considered by the Arbitrator as a piece of evidence – Pradyuman Kumar Sharma vs. Jaysagar
M.Sancheti, (2013) 5 Mh.LJ 86.

56. The Supreme Court in case of O.N.G.C. vs. Western Geco International Ltd. (2014) 9 SCC
263, has held that in every determination whether by a Court or other authority that affects the
rights of a citizen or leads to any civil consequences, the Court or the authority concerned is
bound to adopt what is in legal parlance “judicial approach” in the matter. The duty to adopt a
judicial approach arises from the very nature of power exercised by the Court or the authority
does not have to be separately or additionally enjoined upon the fora concerned. The Court,
Tribunal or Authority exercising such powers cannot act in an arbitrary, capricious or whimsical
manner. The Courts or quasi judicial authority while determining the rights and application of
the parties before it has to act in accordance with the principles of natural justice. It is held that a
decision which is perverse or so irrational that no reasonable person would have arrived at the
same, will not be sustainable in Court of law.
57. In case of P.R. Shah, Shares and Stock Brokers Pvt. Ltd. vs. B.H.H. Securities Pvt. Ltd. &
Ors. 2012 (3) Mh.L.J. 737, it is held by the Supreme Court that the Court does not sit in appeal
over the award of an arbitral tribunal by reassessing or re-appreciating the evidence and the
award can be challenged only under the grounds mentioned in section 34(2) of the Arbitration &
Conciliation Act, 1996 and in the absence of any grounds under the said provision, it is not
possible to re-examine the facts to find out whether a different decision can be arrived at. It is
held that the arbitral tribunal cannot make use of their personal knowledge of the facts of the
dispute which is not part of the record, to decide the issue but can use their expert or technical
knowledge or general knowledge about the particular trade in deciding the matter.

58. In case of Rashtriya Ispat Nigam Limited vs. Dewan Chand Ram Saran (2012) 5 SCC 306, it
is held by the Supreme Court that if the view taken by the arbitrator is clearly possible, if not
plausible, and it is not possible to say that the arbitrator had travelled outside his jurisdiction, the
Court cannot substitute its views in place of the interpretation accepted by the arbitrator.

59. In case of Oil & Natural Gas Limited vs. Garware Shipping Corporation Limited, AIR 2008
SC 456, it is held by the Supreme Court that there is no proposition that the courts could be slow
to interfere with the arbitrator's award even if the conclusions are perverse and even when the
very basis of the arbitrator's award is wrong.

60. The Supreme Court in case of Mcdermott International Inc. vs. Burn Standard Co. Ltd. and
others, (2006) 11 SCC 181, has held that the intervention of the Court under the provisions of the
Arbitration Act, 1996 is envisaged in few circumstances, like in case of fraud or bias by the
arbitrator, violation of natural justice etc. The Court cannot correct the errors of the arbitrators. It
can only quash the award leaving the parties free to begin arbitration again if it is desired. It is
held that “patent illegality” must go to the root of the matter. Public policy violation indisputably
should be so unfair and unreasonable as to shock conscience of the Court. If the arbitrator has
gone contrary to or beyond express law of contract or granted relief in the matter not in dispute
would come within the purview of section 34 of the Act.

61. The Bombay High Court in case of Mukesh Nanji Gala vs. Heritage Enterprises, (2015) 2
Bom.C.R. 123, has held that the arbitral tribunal is a private forum and gets jurisdiction to
adjudicate upon the disputes between the parties to arbitration agreement and not the persons
who are not the parties to the arbitration agreement. Only a party to the arbitration agreement
defined under section 2(1)(h) of the Arbitration & Conciliation Act, 1996 can challenge the
arbitral award under section 34 and not by a person who is not a party to the arbitration
agreement unless covered by sections 40 and 41. It is held that if a person is wrongly impleaded
as a party to the arbitration proceedings and is aggrieved by the arbitral tribunal, he can
challenge the arbitral award.

62. The Supreme Court in case of Associate Builders vs. Delhi Development Authority, (2015) 3
SCC 49, has held that the interference with an arbitral award is permissible only when the
findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is
shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is
found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called
for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while
drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of
trivial nature.

63. In case of Ravindra And Associates vs. Union of India (2010) 1 SCC 80, it is held that court
cannot interfere with findings of fact rendered by the arbitrator. It is held that if a clause in the
contract or any issue is outside the purview of arbitration, it is necessary to comply with such
restriction strictly. An arbitrator cannot decide contrary to the terms of the contract.

64. In case of Fiza Developers and Inter-Trade Private Limited vs. AMCI (India) Private Limited
and another (2009) 17 SCC 796, Supreme Court has held that applications under section 34 are
summary proceedings. The scope of enquiry in a proceeding under section 34 is restricted to
consideration whether any one of the grounds mentioned in section 34 (2) exists for setting aside
the award which grounds are specific. It is held that issues under order 14 and order 18 need not
be framed in applications under section 34 of the Act. An application under section 34 of the Act
is a single issue proceeding. Provisions of Civil Procedure Code will be applicable only to the
extent considered necessary or appropriate by the court. There is no wholesale or automatic
import of all the provisions of the Code of Civil Procedure into proceedings under section 34 of
the Act as that would defeat the very purpose and object of the Act.

65. In case of Sachin Gupta vs. K.S.Forge Matel (Pvt.) Ltd. (2013) 10 SCC 540, it is held that an
award rendered without notice and without hearing the party is illegal and liable to be set aside.

66. In case of M.Anasuya Devi and another vs. M.Manik Reddy and others (2003) 8 SCC 565, it
is held by the Supreme Court that an award cannot be set aside under section 34 for want of
stamping and registration. Question as to whether there was any deficiency in stamping or
registration are not within the purview of section 34 and such question falls within the ambit of
section 47 of CPC and such questions can be agitated only at the stage of enforcement of award
under section 36.

67. In case of Leela Hotels Pvt. Ltd. vs. Urban Development Corporation Ltd. (2012) 1 SCC 302
it is held that an arbitral award has to be enforced under CPC in the same manner as if it were a
decree of the court.

68. In case of Satyanarayan Construction Co. vs. Union of India (2011) 15 SCC 101, it is held
that an arbitrator cannot rewrite the contract and if rate higher than agreed in the contract is
awarded, it would be beyond his competency and authority and such award is liable to be set
aside.

69. In case of Numaligarh Refinery Ltd. vs. Daelim Industrial Co. Ltd. (2007) 8 SCC 466, it is
held that in case it is found that the arbitrator has acted without jurisdiction and has put an
interpretation on the clause of the agreement which is wholly contrary to law, then in that case
there is no prohibition for the court to set things right.

70. In case of Oil and Natural Gas Corporation Ltd. vs. Saw Pipes Ltd. (2003) 5 SCC 705, it is
held that award has to be in accordance with the terms of the contract. Phrase 'public policy of
India' referred in section 34(2) (b) (ii) should be given a wider and not a narrower meaning.
Court can set aside the award if it is (1) contrary to (a) fundamental policy of Indian law or (b)
the interest of India or (c) justice or morality or (ii) is patently illegal or (iii) is so unfair and
unreasonable that it shocks the conscience of the court. Supreme Court has interpreted section 34
and has enumerated various grounds of challenge to an arbitral award.

71. Supreme Court in case of Venture Global Engineering vs. Satyam Computer Services Ltd. &
Anr., AIR 2010 SC 3371 has held that when an award is induced or affected by fraud or
corruption, the same would fall within the ground of excess of jurisdiction and a lack of due
process and can be set aside. It is held that concealment of relevant and material facts which
should have been disclosed before the arbitrator is an act of fraud and if the concealed facts
disclosed after the passing of the award have a causative link with the facts constituting or
inducing the award, such facts are relevant in a setting aside proceeding and award may be set
aside as affected or induced by fraud. Whether the Court under section 34 can allow the claim
rejected by the arbitrator :
72. The Supreme Court in case of Mcdermott Inc. vs. Burn Standard Co. Ltd. and others, (2006)
11 SCC 181, has held that the Court cannot correct the errors of the arbitrator. It can only quash
the award leaving the parties free to begin the arbitration again if it is desired.

73. The Bombay High Court in BMA Commodities Pvt. Ltd. vs. Kaberi Mondal & Anr., (2015)
2 Bom.C.R. 457 has held that the Court cannot correct the errors of the arbitral tribunal under
section 34 of the Act. It can set aside the award wholly or partly and cannot make an award
under section 34. Whether the allegations of fraud, fabrication, malpractice etc. can be referred to
arbitration :

74. The Supreme Court in case of N. Radhakrishnan vs. Maestro Engineers, (2010) 1 SCC 72,
has held that the allegations of fraud and serious malpractice on the part of the respondent can be
settled in a Court through furtherance of detailed evidence by either parties and such a situation
cannot be properly gone into by the arbitrator. It is held that in the facts of that case such
allegations should be tried in a Court of law which would be more competent and have means to
decide such applicable matter involving various questions and issues raised in the said petition.

75. The Division Bench of the Bombay High Curt in case of Maharashtra Stage and Cultural
Development Corporation Limited vs. Multi Screen Media Pvt. Ltd., (2013) 11 LJSOFT 101,
after adverting to the judgment of the Supreme Court in the case of N. Radhakrishnan vs.
Maestro Engineers, (2010) 1 SCC 72, has held that mere allegations of fraud or malpractice
would not be sufficient to divest the arbitral tribunal of jurisdiction nor does the judgment of the
Supreme Court in the case of N. Radharksihanan supports such a proposition. It is held that if a
mere allegation of fraud however vague and bereft of material particulars were to oust the
jurisdiction of the arbitral tribunal, the efficacy of arbitration as an alternate dispute resolution
mechanism would be eroded and undermined.

76. The Bombay High Court in case of HSBC PI Holdings (Mauritius) Ltd. vs. Avitel Post
Studioz Ltd. & Ors. delivered on 22nd January, 2014 in Arbitration Petition No.1062 of 2012, by
learned single Judge has held that it is at the discretion of the Court to refer the matter to
arbitration or whether the same can be decided by the Court appropriately when there are
allegations of fraud, fabrication or malpractice. It is held that there is no bar provided under the
Arbitration & Conciliation Act, 1996 against the arbitrator from entertaining and/or deciding the
issue of fraud, forgery, malpractice etc.
 77. The Division Bench of the Bombay High Court in case of Avitel Post Studioz Ltd. & Ors.
vs. HSBC PI Holdings (Maurities) Ltd. delivered on 31st July, 2014 in Appeal No.196 of 2014,
has upheld the judgment of the learned single Judge in case of HSBC PI Holdings (Mauritius)
Ltd. vs. Avitel Post Studioz Ltd. & Ors. d elivered on 22nd January, 2014.

78. The Bombay High Court in Rekha Agarwal vs. Anil Agarwal delivered on 3rd April, 2014 in
Arbitration Petition No.257 of 2013 has taken a view similar to the view taken in case of HSBC
PI Holdings (Mauritius) Ltd. vs. Avitel Post Studioz Ltd. & Ors. Whether the Court has power to
remand the proceedings back to the Arbitral Tribunal once the award is set-aside under section
34:

79. The Division Bench of the Bombay High Court in case of Geojit Financial Services Ltd. vs.
Kritika Nagpal in Appeal No.35 of 2013 delivered on 25th June, 2013, has held that section
34(4) does not contemplate or vest power in Court to remand the proceedings back to the arbitral
tribunal once the Court has set-aside the award.

80. The Full Bench of the Bombay High Court in R.S. Jiwani vs. Ircon International Ltd. 2010
(1) Bom.C.R. 529, has held that the Court has discretion under section 34 of the Arbitration Act
which takes within its ambit power to set-aside the award partially or wholly depending upon the
facts and circumstances of each case. Section 34(2) do not admit of interpretation which will
divest the Court of the competent jurisdiction to apply the principle of severability to the award
by the arbitral tribunal, legality of which is questioned before the Court. It is held that the Court
vests powers under section 34 to set-aside the award and even to adjourn the matter and to do
such act and deeds by the arbitral tribunal at the instance of the party which would help in
removing the grounds of attack for setting aside the arbitral award.

81. The Supreme Court in case of Som Datt Builders Ltd. vs. State of Kerala, (2009) 10 SCC
259, has held that if the arbitral tribunal does not give reasons under section 31(3), the Court can
pass an order under section 34(4) and can give an opportunity to the arbitral tribunal to give
reasons. It is held that by remitting the award to the arbitral tribunal for recording of reasons in
support of its award would be fair and reasonable. Whether the Court can pass an order for
deposit of the awarded sum under section 34 of the Arbitration & Conciliation Act, 1996 :

82. The Bombay High Court in case of AFCONS Infrastructure Ltd. vs. Board of Trustees of
Port of Mumbai, 2014 (1) Bom.C.R. 794, has held that the Court cannot pass an order for deposit
of the arbitral award since the award remains un-executable and not enforceable during the
pendency of the arbitration petition under section 34.
83. The Supreme Court in National Aluminium Co. Ltd. vs. Pressteel & Infrastructure (P) Ltd.
(2004) 1 SCC 540, has held that there is automatic stay of the award during the period of
pendency of the arbitration petition under section 34 and the award becomes unexecutable until
the challenge under section 34 is refused.

84. The Supreme Court in case of State of Maharashtra vs. Hindustan Construction Co. Ltd., AIR
2010 SC, 1299, held that incorporation of additional grounds by way of amendment in the
application under section 34 does not tantamount to filing of fresh application in all situations
and circumstances. If an application under section 34 has been made within prescribed time, to
grant leave to amend such application if the very peculiar circumstances of the case so warrant
and it is so required in the interests of justice, amendment to the petition can be allowed.

85. The Supreme Court in case of State of West Bengal & Ors. vs. Associated Contractors,
(2015) 1 SCC 32, has held that section 42 of the Arbitration Act is not applicable to the
applications made before the judicial authority under section 8, applications filed before the
Chief Justice for his delegate under section 11, applications filed before the Court inferior to the
Principal Civil Court or to High Court having no original jurisdiction and the applications filed
in a Court that has no subject matter jurisdiction. It is held that the applications filed under
section 9 and also under section 34 fall within purview of section 42 since they are to be filed
before the Court.

86. The Supreme Court in case of West Bengal & Ors. vs. Associated Contractors, has also held
that the applications under section 11 is not to be moved before the Court as defined but before
the Chief Justice either of the High Court or Supreme Court or their delegates as the case may
be. Though the Chief Justice or his delegate decides judicially and not administratively, section
42 would not apply to the applications made before the Chief Justice or his delegate since the
Chief Justice or his delegate is not Court as defined by section 2(1)(e). It is held that the decision
of the Chief Justice or his delegate not being the decision of the Supreme Court or High Court, as
the case may be, has no precedential value being a decision of the judicial authority, which is not
a Court of record.
UNIT – II‐ COMPOSITION OF ARBITRATION TRIBUNAL

THE PROVISIONS RELATING TO THE APPOINTMENT OF ARBITRATORS UNDER

THE ARBITRATION AND CONCILIATION ACT

APPOINTMENT OF ARBITRATOR

The term arbitrator has been defined in Sec 10 of the Act.

No.Of Arbitrator

Under the provisions of the Arbitration and Conciliation Act, 1996 the arbitral tribunal can
consist of either a sole arbitrator or an odd number of arbitrators.
If the arbitral tribunal is to consist of more than one arbitrator, then the 1996 Act provides that
either party can appoint their nominee arbitrator and the appointed nominee would further
appoint a third arbitrator who would be the presiding arbitrator.
This is different from the 1940 Act, wherein it was permissible to appoint an even number of
arbitrators and an umpire to whom the disputes were to be referred to in the event of a deadlock.
Section 10 of the 1996 Act provides that the number of arbitrators cannot be an even number.

Appointment Of Arbitrator
A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
The parties can agree on a procedure for appointing the arbitrator or arbitrators.

Failure Of Party/Parties to appoint

If they are unable to agree on a single arbitrator then, each party will appoint one arbitrator and
the two appointed arbitrators will appoint the third arbitrator who will act as a presiding
arbitrator
If one of the parties does not appoint an arbitrator within 30 days, or if two appointed arbitrators
do not appoint third arbitrator within 30 days, the party can request Chief Justice to appoint an
arbitrator. If the opposite party makes an appointment even after 30 days of the demand, but
before the first party has moved the Court under section 11, that would be valid and only then the
right of the opposite party ceases .

Failure Of Parties to agree on Procedure: If either of the parties fails to make an appointment
under the agreed appointment procedure then, the other party may make a request to the Chief
Justice or a person or institution designated by him to take the necessary measure. The Chief
Justice can authorize any person or institution to appoint an arbitrator. In case of international
commercial dispute, the application for appointment of arbitrator has to be made to Chief Justice
of India. In case of other domestic disputes, application has to be made to Chief Justice of High
Court within whose jurisdiction the parties are situated.

The arbitration agreement entered into by the parties can provide for other means of securing the
appointment, for example by delegating the appointing function to an institution.
The major difference between an international commercial arbitration with it seat in India and a
domestic arbitration is that, in an international commercial arbitration there exist provisions for
expedited appointment of arbitrators by directly approaching the Supreme Court. The other
difference is that unlike in a domestic arbitration, in an international commercial arbitration, the
parties are free to choose the law applicable to the substance of the dispute for governing
the Arbitral proceedings. The decision of the Chief Justice on the issue of appointment in
an international commercial arbitration is final and is not appealable

Thirty‐day Notice : Before asking the Chief Justice to act in the matter, a thirty clear days’
notice should be given to the other party to concur in the appointment and if he fails to do so then
an application can be made to the court. The court will also give an opportunity to the other party
to explain his position. The Chief Justice must have due regard to the qualifications f the
arbitrators required by the parties under their agreement and also independence and impartiality
of the person in question. An application for appointment of arbitrator made before giving any
notice to the other party or raising a demand against him was held to be incompetent.

Case 1: The Supreme Court of India in Datar Switchgears Ltd Vs Tata Finance Ltd held that,
under Section 11(6),if one of the party demands the opposite party to appointment an arbitrator
and the opposite party does not make an appointment within 30 days of the demand,the right to
appointment does not get automatically forfeited after expiry of 30 days . If the opposite party
makes an appointment even after 30 days of the demand, but before the first party has moved the
Court under Section11 that would be sufficient. Only then, the right of the opposite party ceases.

Case 2: The Supreme Court of India in Ador Samia (P) Ltd Vs Peekay Holding Ltd191 case
categorically held that the powers of the Chief Justice under Sec11 are administrative powers
and therefore, the Chief Justice while exercising powers under Section 11 does not act as a
“Court”. The Supreme Court in the SBP & Co Vs.Patel Engineering case ultimately resolved
this controversy bench consisting of seven judges held that the power conferred by section 11 of
the 1996 Act was a ‘judicial power’ and the Chief Justice had to act in his judicial capacity and
not in an ‘administrative capacity’. The Chief Justice has the power to decide certain preliminary
issues such as existence of a valid arbitration agreement, existence of a live claim, existence of
conditions for the exercise of power and the qualifications of the arbitrator or arbitrators.

Case 3: The Supreme Court of India in Malaysia Airlines system BHD (II)Vs Stic Travels (P)Ltd
held that while nationality of the arbitrator is a matter to be kept in view while appointing the
arbitrator but, it does not follow from Sec 11(9) that the proposed arbitrator is necessarily
disqualified because he belongs to the nationality of one of the parties. The provision is not
mandatory. In cases, the party who belongs to a nationality other than that of the proposed
arbitrator, has no objection, the Chief justice of India can appoint an arbitrator belonging to a
nationality of one of the parties.

Composition Of Tribunal as give in the ACT ‐

Section 10 ‐ Arbitration and Conciliation Act,1996

The qualification and procedure for the Appointment of Arbitrators are :

1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

2) Subject to sub‐section (6), the parties are free to agree on a procedure for appointing the
arbitrator or arbitrators.
3) Failing any agreement referred to in sub‐section (2), in an arbitration with three arbitrators
each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third
arbitrator who shall act as the presiding arbitrator.

4) Where, under an appointment procedure agreed upon by the parties –

a. a party fails to act as required under that procedure; or

b. the parties, or the two appointed arbitrators, fail to reach an agreement expected of them
under that procedure; or

c. a person, including an institution, fails to perform any function entrusted to him or if under
that procedure, a party may request the Chief Justice or any person or institution designated by
him to take the necessary measure, unless the agreement on the appointment procedure provides
other means for securing the appointment.

5) A decision on a matter entrusted by sub‐section (4) of sub‐section (5) on sub‐ section (6) to
the Chief Justice or the person or institution designated by him is final.

6) The Chief Justice or the person or institution designated by him, in appointing an arbitrator,
shall have due regard to – a. any qualifications required of the arbitrator by the agreement of the
parties; and b. other considerations as are likely to secure the appointment of an independent and
impartial arbitrator.

7) In the case of appointment of sole or third arbitrator in an international commercial arbitration,

the Chief Justice of India or the person or institution designated by him may appoint an arbitrator
of a nationality other than the 6 nationalities of the parties where the parties belong to different
nationalities.

8) The Chief Justice may make such scheme as he may deem appropriate for dealing with
matters entrusted by sub‐section (4) or sub‐section (5) or sub‐ section (6) to him.

9) Where more than one request has been made under to the Chief Justices of different High
Courts or their designates, the Chief Justice or his designate to whom the request has been first
made under the relevant sub‐section shall alone be competent to decide on the request.

10) a. Where the matters referred to in sub‐sections (arise in an international commercial

arbitration, the reference to “Chief Justice” in those sub‐sections shall be construed as a
reference to the “Chief Justice of India”. b. Where the matters referred to in sub‐ arise in any
other arbitration, the reference to “Chief Justice” in those sub‐sections shall be construed as a
reference to the Chief Justice of the High Court within whose local limits the Principal Civil
Court referred to in clause (e) of sub‐section (1) of Section 2 is situate and, where the High Court
itself is the Court referred to in that clause, to the Chief Justice of that High Court.

Appointment by Chief Justice (Section 11) : The expression Chief Justice in this connection
virtually means the court because in most cases the Chief Justices have authorised Civil Judges.
In the three cases mentioned in the section the Chief Justice gets the power to appoint an
arbitrator. They are : 1) Where he parties fall to appoint or concur in the appointment of an
arbitrator or arbitrators;

2) Where the two appointed arbitrators fail to appoint or concur in the appointment of the
presiding arbitrator.

3) Where the person or institution designated by the parties for appointment fails to act.

Removal of arbitrator (Sections 12 and 13) :

The provisions of the Arbitration and Conciliation Act, 1996 about removal of arbitrators are
somewhat different. They do not confer a straight power on the court. Grounds for Challenge :

1) An arbitrator may be challenged only if – a. circumstances exist that give rise to jusificable
doubts as to his independence or impartiality, or b. he does not possess the qualifications agreed
to by the parties.

2) Party’s Challenge to his own arbitrator : An arbitrator can be challenged by the party who
appointed him or in whose appointment he participated only for reasons of which the party
became aware after the appointment has been made.

3) The mandate of an arbitrator also becomes terminated under Section 14 if he becomes unable
to perform his functions de facto or de jure or if he withdraws or agrees to the termination of his
mandate or fails to act without under delay.

Doubt as to Independence or Impartiality at initial stage : An arbitrator ought to be an

indifferent and impartial person between the disputants. When the parties entrust their facts into
the hands of an arbitrator, it is essential that there must be abundant good faith. The arbitrator
must be absolutely disinterested and impartial. An interested person is disqualified from acting as
an arbitrator. The interest disqualifies the arbitrator if it is calculated to produce a bias in his
mind. One of the grounds for challenge is the existence of a doubt about the arbitrator’s
independence or impartiality. Section 12 (1) says that when a person is approached in connection
with his possible appointment as an arbitrator, he is under a duty to disclose in writing any
circumstances likely to give rise to justifiable doubts as to his independence or impartiality. If the
challenge is successful the mandate of the arbitrator would be terminated. The arbitrator must
be, and must be seen to be, disinterested and unbiased. None of the Parties should adjudicate in
proceedings in the outcome of which the Arbitator has a direct pecuniary interest. unless both
parties, with full knowledge of the facts expressly agree to his acting, For example, no one
should accept appointment in a dispute if he holds shares in one of the parties, or if he would
benefit in some other way from a decision in favour of one of the parties. And the arbitrator in a
valuation dispute should not be remunerated on a scale such that the higher the amount of his
award, the higher his fee. The arbitrator should have no connection, direct or indirect, with a
party such that it creates an appearance of partiality. Actual bias is irrelevant for this purpose.
The test is whether he is likely to be biased. Actual bias need not be proved. Thus, personal
friendship or hostility; an employment relationship; a previous professional relationship either
direct or through other members of a firm in which the arbitrator is a partner; these are
examples of a relationship which might create in a responsible outsider a reasonable suspicion of
bias. If there is any real doubt about the matter, the arbitrator should disclose the facts to the
parties and should ask if they object to his accepting the appointment. If the facts become known
to him after appointment, he should disclose them and ask if they object to his continuing.

Doubts Developing Afterwards : Disclosure after appointment : Sub‐section (2) casts a duty
on the arbitrator after his appointment and throughout the arbitral proceedings to make to the
parties the disclosures, mentioned in sub‐section (1), relating to matter which may have arisen
after the appointment began. He may not do so if he has already made the disclosure before the
appointment. Section 12(2) takes care of doubts which develop after the appointment. It requires
the arbitrator to disclose to the parties in writing and without any delay any circumstances
developing after the time of his appointment and during the course of the arbitral proceedings
which give rise to a justifiable doubt about his independence or impartiality. Thus an arbitrator
can be challenged, whether he discloses his disqualification or not if there are justifiable doubts
about his independence or impartiality. The sub section (4) and (5) of section 13 is designed to
prevent dilatory tactics by not allowing the unsuccessful party to challenge the appointment of
the arbitrator immediately when the challenge had been unsuccessful before the arbitrator, and
requires such party to wait and challenge the same only after the arbitral award has been made. If
the Court agrees to the challenge, the arbitral award can be set aside. Thus, even if the arbitrator
does not accept the challenge to his appointment, the other party cannot stall further the
arbitration proceedings by rushing to Court. The arbitration can continue and challenge can be
made in Court only after arbitral award is made.

Case 1:In the case of Shivnath Rai Harnarain (India) Ltd. Vs.Abdul Ghaffar Abdul Rehman
(Dead) by L.Rs199, the Supreme Court of India held that, having mutually agreed 11 to have the
dispute referred to an arbitrator at Singapore, the applicant is not permitted to turn around and
say that this Court be appointed an arbitrator.

Case 2: In the case of Aurohill Global Commodities Ltd. Vs. M.S.T.C. Ltd200 the Supreme
Court of India held that, the Court has the power to appoint an arbitrator in case of international
transaction in accordance with terms of contract.

Challenge Procedure

Subject to sub‐section (4), the parties are free to agree on a procedure for challenging an
arbitrator.

1) Failing any agreement referred to in sub‐section (1), a party who intends to challenge an
arbitrator shall, within fifteen days after becoming aware of the constitution of the
arbitral tribunal or after becoming aware of any circumstances referred to in sub‐section
(3) of Section 12, send a written statement of the reasons for the challenge to the
arbitral tribunal.
2) Unless the arbitrator challenged under sub‐section(2) withdraws from his office or the
other party agrees to the challenge, the arbitral tribunal shall decide on the
challenge.
3) If a challenge under any procedure agreed upon by the parties or under the procedure
under sub‐section (2) is not successful, the arbitral tribunal shall continue the
arbitral proceedings and make an arbitral award.
4) Where an arbitral award is made under sub‐section (4), the party challenging the
arbitrator may make an application for setting aside such an arbitral award in accordance
with Section 34.
 6) Where an arbitral award is set aside on an application made under sub‐ section (5), the
Court may decide as to whether the arbitrator who is challenged is entitled to any
fees.

On this point also the Act gives freedom to the parties to settle by agreement the procedure by
which the arbitrator in question would be challenged.

If there is no agreement on the point or the parties have failed to agree, then the procedure to be
followed is that the party wishing to challenge the person has to inform the Arbitral Tribunal of
the matter. This should be done within fifteen days.

If the other party agrees to the challenge and the arbitrator does not voluntarily withdraw, the
Tribunal shall decide the matter. If the challenge is not successful, the Tribunal shall continue
with the proceeding and make an award. The party who challenged the arbitrator may challenge
the award also and make an application for setting aside in accordance with Section 34. If the
award is set aside, the court can consider whether the arbitrator shuld be entitled to his
remuneration or not.

The grounds on which leave to revoke could be given were put under five heads :

1. Excess or refusal of jurisdiction by the arbitrator.

2. Misconduct of arbitrator.

3. Disqualification of arbitrator

4. Charges of fraud.

5. Exceptional cases.

Termination of authority of arbitration:

“The court may, on the application of any party to a reference, remove an arbitrator or umpire
who fails to use all reasonable despatch in entering on the proceeding with the reference and
making an award.”

Sub‐section (1) of Section 14 sets out the following grounds on which the mandate or authority
of an arbitrator can be terminated :

1) a. the arbitrator either in law or factually becomes unable to perform his functions, or

b. for some reasons he fails to act without undue delay, and

2) a. he withdraws from his office, or

b. the parties agree to the termination.

There was no provision corresponding to Section 14 in the repealed Arbitration Act, 1940 .

Retirement or Change of Posting of Ex‐officio Arbitrator : An arbitration agreement

provided for reference to an engineer officer to be appointed by a third party. The arbitrator so
appointed retired during the pendency of the proceedings. The Supreme Court held that the
retirement resulted in the termination of the authority of the arbitrator. A new arbitrator would be
appointed and the proceedings would be deemed to have continued before the new arbitrator.

Court’s Assistance : If there is a dispute between the parties as to the existence of the grounds
mentioned in clause (a) of sub‐section (1) of Section 14, any party may apply to the Court for
resolution of the dispute. Such grounds are de jure or de facto 1inability to act or failure to act
without undue delay.
But the section does not contemplate a dispute as regards the grounds mentioned in Section 14
(1) (b) and there is no provision for a reference to the Court in this regard. These grounds are
withdrawing from office or termination of authority under parties’ agreement. There can hardly
be any doubt about the operation of these grounds.

Effect of withdrawal : Where – (a) an arbitrator withdraws from his office, or (b) a party agrees
to the termination of his mandate, it will not be inferred that any of the grounds referred to in
Section 14 (1) or in Section 12 (3) have been established. Withdrawal from office by the
arbitrator is not on account of any decision on the merits of grounds for termination of his
mandate. Likewise the agreement of the parties to the termination of the mandate does not entail
any decision on merits. The mandate of an office‐holder arbitrator comes to an end on his
withdrawal from office. The court cannot provide an extension except perhaps, where he was
appointed by the court.

Additional Grounds for Termination : Section 15 (1) purports to set out an additional ground
for terminating the mandate of an arbitrator namely, where he withdraws from office for any
reason. But the provisions being of overlapping nature, it seems that the ground mentioned is
already covered by Section 14(1) (b).

Removal of arbitrator (Sections 12 and 13) :

The provisions of the Arbitration and Conciliation Act, 1996 about removal of arbitrators are
somewhat different. They do not confer a straight power on the court. Section 12 casts a duty
upon a would be arbitrator to disclose in writing if there is anything which gives rise to a
justifiable doubt as to his independence and impartiality. An arbitrator’s appointment can be
challenged on that ground and also on the ground of his being not in possession of requisite
qualifications as agreed to between the parties. A party can challenge his own appointee only on
the basis of a ground which he discovered afterwards. If the arbitrator does not withdraw after
the challenge, the Tribunal would decide the question. If the challenge is successful the mandate
of the arbitrator would be terminated. The mandate of an arbitrator also becomes terminated
under Section 14 if he becomes unable to perform his functions de facto or de jure or if he
withdraws or agrees to the termination of his mandate or fails to act without under delay.

Sec 15 ‐Substitution OF Arbitrator‐

The Supreme Court stated that under Section 15(2) of the Arbitration and Conciliation Act, when
the mandate of an arbitrator terminates, a substitute arbitrator "shall" be appointed. Arbitration
must go on.

If an arbitrator nominated by the contesting parties withdraws from the proceedings, the court
can select a substitute arbitrator of its own choice

CASE 1:For example, in a family dispute, the warring members might name the grand uncle as
the only arbitrator as they repose faith in him. If he is not available, quits or dies, arbitration does
not end; the court can nominate another person of its choice. If the parties specifically prohibit a
substitute arbitrator, a new person cannot enter. Otherwise, the court has the power to name a
new arbitrator, the judgment emphasised.

In another case, the parties selected a retired judge of the Supreme Court from a panel of names
but she resigned midway.

The parties could not agree on a new name and the matter went back to the Bombay high court.
It substituted one of its retireds judges in her place. This was opposed by one of the parties,
which argued that once the arbitrator withdraws, the agreement ended and the court could not
name another. Rejecting this argument, the Supreme Court stated that under Section 15(2) of the
Arbitration and Conciliation Act, when the mandate of an arbitrator terminates, a substitute
arbitrator "shall" be appointed. Arbitration must go on.

Jurisdiction of Arbitral Tribunal:

1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections
with respect to the existence or validity of the arbitration agreement, and for that purpose :
a. an arbitration clause which forms part of a contract shall be treated as an
agreement independent of the other terms of the contract; and
b. a decision by the arbitral tribunal that the contract is null and void shall not entail
ipso jure the invalidity of the arbitration clause.
2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later
than the submission of the statement of defence; however, a party shall not be
 precluded from raising such a plea merely because that he has appointed, or participated
in the appointment of, an arbitrator.
3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be
raised as soon as the matter alleged to be beyond the scope of its authority is raised
during the arbitral proceedings.
4) The arbitral tribunal may, in either of the cases referred to in sub‐section (2) or
sub‐section (3), admit a later plea if it considers the delay justified.
5) The arbitral tribunal shall decide on a plea referred to in sub‐section (2) or sub‐section
93) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the
arbitral proceedings and make an arbitral award.
6) A party aggrieved by such an arbitral award may make an application for setting aside
such an arbitral award in accordance with Section 34.
Challenge to Jurisdiction : Section 16(1) empowers an Arbitral Tribunal to decide:
a) The question as to its jurisdiction, and
b) The objection as to the existence or validity of the arbitration agreement.
For this purpose an arbitration clause in a contract shall be treated as an arbitration
agreement independent of the contract.
If the Arbitral Tribunal holds that the contract is null and void it will not result in the
automatic invalidity of the arbitration clause.
Though there was no similar provision in the erstwhile 1940 Act, the position in law was
more or less the same.

CHALLENGING THE AWARD

When an award has been made after rejection of the objections as to lack of or excess of
jurisdiction the aggrieved party may make an application under Section 34 to set aside the award.
In these proceedings the award can be challenged, inter alia, on the ground that the objections
were wrongly rejected.

This provision [Section 16(5)] has been held to be constitutionally valid. The fact that the court
can consider the question of jurisdiction of arbitrator only after passing of the award was held to
be not a ground for contending that the award is not subject to any judicial scrutiny.

Arbitration Clause is Collateral or Ancillary Contract : The arbitration agreement contained

in the arbitration clause in a contract is often referred to as a collateral or ancillary contract in
relation to the main contract of which it forms a part in the sense that it survives even after the
parties have broken or repudiated the rest of the contract and will remain applicable for the
settlement of the resulting dispute.

The repudiation or breach of the main contract does not put an end to the arbitration clause. The
failure of the main contract constitutes the occasion for the application of the arbitration clause.
The main contract does not become irrelevant. That still provides the framework within which
the rights and liabilities of the parties would be determined. The arbitration would, therefore,
proceed According to the proper or applicable law of contract. Section 7(2) of theArbitration
and Conciliation Act,1996 provides that an arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a separate agreement. Section 16 (1) (b) further
provides that a decision by the Arbitral Tribunal that the contract is null and void shall not entail
ipso jure the invalidity of the arbitration clause.

Interim Measures by Tribunal

According to Section 17 of Arbitration and Conciliation Act, 1996

Interim Measures Ordered by Arbitral Tribunal

1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a
party order a party to take any interim measure of protection as the arbitral
tribunal may consider necessary in respect of the subject‐ matter of the dispute.

2) The arbitral tribunal may require a party to provide appropriate security in

connection with a measure ordered under sub‐section (1).

While Section 9 provides for the taking of interim measures by the Court in certain matters,
Section 17 provides for the taking of interim measures in respect of the subject‐matter of the
dispute by the Arbitral Tribunal. The opening words of Section 17(1) indicate that the parties
may be agreement exclude the exercise of such a power by the arbitral Tribunal.

Sub‐section (2) empowers the tribunal to order the furnishing of adequate security by a party for
carrying out an interim measure ordered under the section.

Powers of Arbitrators: Under Section 13 of the erstwhile 1940 Act the powers of the arbitrator
included the following:

1) The powers to administer oath to parties and witnesses appearing before him.

2) In reference to questions of law, he had the power to refer the matter for the opinion of
the court or he could write his award his award in terms of a reference to the court on a
point of law so that the court’s opinion would finally decide the matter. (Not applicable
under 1996 Act)

3) He had the power to make the award conditional or in terms of alternatives.

4) He had the power to rectify any clerical error or mistake arising from any accidental slip
or omission.

5) He had the power to administer such interrogatories to the parties as may in his opinion
be necessary.
Unit-III Recourse against Arbitral Award

Setting Aside an Arbitral Award

Like other ways of dispute settlement, the process of arbitration, to work effectively needs the
support of the system of law. Earlier, the provisions on arbitration were laid down in three
different enactments, namely, The Arbitration Act, 1940, which dealt with the domestic awards,
The Arbitration (Protocol And Convention) Act, 1937 and The Foreign Awards (Recognition
and Enforcement) Act, 1961, which basically dealt with foreign awards.

The Arbitration Act, 1940 and also the Acts of 1937 and 1961 were then repealed by The
Arbitration and Conciliation Act, 1996. This modern law seeks to provide for an effective mode
of settlement of disputes between the parties, both for domestic and also for international
commercial arbitration.

It is clear an evident that an arbitral award will be binding on the parties. However under section
34 read with section 37 of the Act it is provided that an arbitral award can be appealed against on
limited question of fact and law. Section 34 lays down the grounds on which an award passed by
the arbitral tribunal can be set aside, and at the same time section 37 enumerates when an award
can be appealed against. These include capacity of a party, invalidity of arbitration agreement,
violation of principles of natural justice and the exceeding of terms of reference by arbitrator.
The only residuary ground on which the Court can go into the merits of the award is the public
policy, which is always subject to circumstances and interpretation.

During the course of this paper, the researcher intends to delve into the provisions of the
Arbitration and Conciliation Act, 1996 so as to discover the grounds for setting aside and appeal
against an arbitral award and whether it is sufficient to provide recourse to the aggrieved party.

Award Amount

An award, according to The Arbitration Act, 1996 will be considered valid if it satisfies two
conditions, which are: it must be certain, and it must contain the decision.

The award should not leave any matters to be discussed subsequently and it should clearly
mention and define the duties and liabilities imposed on the parties. It must be clear and
unambiguous and final in relation to the issues and claims with which it deals.

In Union of India Vs Punjab Communications Ltd, the amount which was payable by the
objector to the respondent was not specified in the award and the claim for the amount which has
been denied by it was incomplete, ambiguous and incapable of being implemented or enforced,
therefore the award was liable to be set aside.

Interference of the Court

The grounds for objecting an award under section34 and section 37 are now made common to
purely domestic awards as well as international arbitration awards. The principle of least court
interference seems fine when it is applied to international arbitration awards. The same, though,
cannot be said with respect to domestic awards as many a times the awards passed in India are
passed by lay men who are not very well acquainted with law. Thus, unlike with international
awards, interference with awards given in domestic matter should not be restricted.

“Amongst states which have a developed arbitration law, it is generally recognized that more
freedom may be allowed in an international arbitration than is commonly allowed in a domestic
arbitration. The reason is evident. Domestic arbitration usually takes place between the citizens
or residents of the same state, as an alternative to proceedings before the courts of law of that
state…it is natural that a State should wish (and even need) to exercise firmer control over such
arbitrations, involving its own residents or citizens than it would wish (or need) to exercise in
relation to international arbitrations which may only take place within the state’s territory
because of geographical convenience."

The above passage supports the view that in the matter of purely domestic arbitrations between
Indian nationals, the State can desire that its courts should have greater or firmer control on the
arbitrations.

Setting Aside An Arbitral Award

In every arbitral proceeding, an arbitrator has to be appointed who finally makes an award which
is called the arbitral award. The contents of the award have to be written and signed by the
arbitrator and the reasons for the award have to be stated unless stated otherwise.

As mentioned above, section 34 provides for provision on the basis of which an arbitral award
can be set aside, and if an award is declared to be void then the whole purpose and object of the
act gets nullified. Thus, the arbitrator has to take extra care while making an award, but how
much care should be taken is the question without the answer.

An appeal to set aside an award has to be strictly made by the aggrieved party within 3 months
from the date the award was received by it. A request can also be made under section 33,
provided that the court is satisfied that there was a sufficient cause for the delay, thereby
allowing the appeal to set aside an award to be made within 30 days after the 3 month period.
Hence the award should be challenged timely as per the provision of section 34(3) of the Act.

According to section 34(2), an award maybe set aside on the application of an aggrieved party.
Under certain circumstances, the court can set aside the award made by the arbitral tribunal even
without an application made by the party.

The grounds, mentioned in section 34(2) under which a party can make an application to the
court to set aside an award are as follows:
When the party making the application was incapacitated to enter the agreement.

The arbitration agreement, to which the parties are subjected, is not valid under the law.

A proper notice of appointment of arbitrators, or of the arbitral tribunal was not given to the
party making the application.

Arbitral award deals with a dispute not contemplated by the parties or beyond the term of
submission.

Composition of the Arbitral Award was not in accordance with the agreement of the parties.

Subject-matter of dispute is not capable of settlement by arbitration under the law for the time
being in force.

The arbitral award is in conflict with the public policy of the country.

Once an application of setting aside the arbitral award is preferred under section 34, the
executing court has no jurisdiction to enforce the award, until and unless the application under
section 34 is dismissed or refused. This is a marked departure from even the normal rule under
the Code of Civil Procedure, 1908 where an executing court can execute the decree if there exists
no stay by the appellate court. In the opinion of the author, this ought not to have been the
position under the new Act. Enforcement of the award should be permitted unless there is a stay
by the court hearing an application under section 34.

Constitutional Validity of Section 34

In TPI Ltd Vs Union of India , in a writ petition, it was contended by the petitioner that a right to
challenge an arbitral award on merits should be present, and in the absence of the same, section
34 would be unconstitutional. The court dismissed the write petition and stated that the matter in
question was not related to judicial review of a tribunal decision created under any statute or any
administrative action. The arbitration is an alternate forum for redressal of disputes, and is
selected by the parties of their own free will and they agree to the arbitrator's decision by means
of a mutual agreement or contract, which gives a go by to the normal judicial forum otherwise
available to the parties. There is no compulsion or imposition by any statute compelling the
parties to resort to arbitration if a dispute arises.

When the parties have chosen the forum of arbitration and the arbitrator of their choice, it is not
necessary to make a provision for appeal against the award rendered by the arbitrator. The
legislature has the power to specify the grounds on which an award can be challenged and it
would be permissible for the party to challenge the award only on those grounds. If it were
permissible for the court to re-examine the correctness of the award, the entire proceedings
would amount to a futile exercise.
Interpretation Of The Term ‘Public Policy’

It is not possible to precisely define “Public Policy’. Keeping that in mind, the term “Public
Policy" has been interpreted quite liberally by the Indian Courts. Whatever tends to injustice of
operation, restraint of liberty, commerce, natural or legal rights, whatever tends to the
obstruction of justice or to the violation of a statute and whatever is against good moral when
made the object of contract is against ‘public policy’, and, therefore, void and not susceptible to
enforcement.

The researcher would like to further elaborate the same point with the help of a few Indian cases
where the courts have had an opportunity to interpret public policy. In Renusagar Power Co. v.
General Electric Co. the hon’ble Supreme Court held that “the expression ‘public policy’ refers
to the public policy India and the recognition and enforcement of the award of the arbitral
tribunal in India cannot be questioned on the ground that it is contrary to the public policy of any
other country".

It has been held in various cases that it is against public policy if the arbitrator is partial or biased
towards a party. Thus the arbitrator is bound:

by the contract between the parties and decide the case in the light of the contractual provision,
and to give proper opportunity to the parties; to pass the award in accordance with the law so as
not to be guilty of misconduct and to apply mind to crucial questions as non-application amounts
to legal misconduct.

The judgment given by the Supreme Court in Oil and Natural Gas Corpn. Ltd. V. Saw Pipes
ltd, further interprets public policy. The court stated that if any award given by the arbitral
tribunal violates any provision of The Arbitration Act, 1996 or is “patently illegal", then in that
case the award could be set aside under section 34 of the said Act. Thus the court has expressly
stated that “an award which is, on the face of it, patently in violation of any statutory provisions
cannot be said to be in public interest".

Challenge To Awards Or Grounds For Setting Aside Awards.

Domestic arbitral award
Part I of the 1996 Act is modelled on the UNCITRAL Model Law and the UNCITRAL
Arbitration Rules with few departures. The relevant provisions are briefly outlined below.
Section 13 of the 1996 Act, corresponding to Art 13 of the Model Law, provides for challenge to
an arbitrator on the ground of lack of independence or impartiality or lack of qualification. In the
first instance, a challenge is to be made before the arbitral tribunal itself. If the challenge is
rejected, the tribunal shall continue with the arbitral proceedings and make an award. Section
13(5) of the 1996 Act provides that where the tribunal overrules a challenge and proceeds with
the arbitration, the party challenging the arbitrator may make an application for setting aside the
arbitral award under s 34 of the 1996 Act (corresponding to Art 34 of the Model Law). Hence,
approach to a court is only at the post-award stage. This is a departure from the Model Law
which provides for an approach to the court within 30 days of the arbitral tribunal rejecting the
challenge. The second departure from the Model Law (relevant to enforcement) is to be found in
S. 16 of the 1996 Act (corresponding to Art 16 of the Model Law). Section 16 incorporates the
competence-competence principle and enables the arbitral tribunal to rule on its jurisdiction,
including with respect to the existence or validity of the arbitration agreement. If the arbitral
tribunal rejects any objection to its jurisdiction, or to the existence or validity of the arbitration
agreement, it shall continue with the arbitral proceedings and make an award.[11] Section 16(6)
of the 1996 Act provides that a party aggrieved by such award may make an application for
setting aside the same in accordance with S.34. Article 16 of the Model Law, in contrast,
provides that where the arbitral tribunal overrules any objection to its jurisdiction, the party
aggrieved with such decision may approach the court for resolution within 30 days. The Indian
Act permits approach to the court only at the award stage (and not during the pendency of the
arbitration proceedings). Hence, Section 13(5) and 16(6) of the 1996 Act furnish two additional
grounds for challenge of an arbitral award (over and above the ones stipulated in s 34 of the 1996
Act referred to below). Section 34 of the 1996 Act contains the main grounds for setting aside
the award. It is based on Art 34 of the Model Law and, like Art 34, states that the grounds
contained therein are the ‘only’ grounds on which an award may be set aside. However, in the
Indian context the word ‘only’ prefixing the grounds is a bit of a misnomer as two additional
grounds have been created by the Act itself as mentioned above. Besides, another ground is to be
found in an ‘Explanation’ to the public policy ground in s 34. The same reads as follows:

It is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public
policy of India if the making of the award is induced or affected by fraud or corruption or was in
violation of Section 75 or Section 81.

Section 75 referred to above is part of the conciliation scheme under the Act and states that the
conciliator and parties shall keep confidential all matters relating to the conciliation proceedings.
Section 81 prohibits any reference in arbitral or judicial proceedings to views, suggestions,
admissions or proposals, etc. made by parties during conciliation proceedings.

Save for the exception, referred to above, s 34 of the 1996 Act is a faithful reproduction of Art
34 of the Model Law.

Public policy

It is clear that, The Arbitration and Conciliation Act, 1996 was conceived by the compulsions of
globalisation leading to adoption of the United Nations Commission on International Trade Law
(UNCITRAL) Model Law. This Act is by and large an integrated version of the 1940 Act which
governed the domestic arbitration, the Arbitration (Protocol and Convention) Act, 1937 and the
Foreign Award (Recognition and Enforcement) Act, 1961, which governed international arbitral
awards. Apparently, Chapter I to VIII of the UNCITRAL are replicas of Chapters I to VII of the
Part-I of the 1996 Act, with the difference that in the UNCITRAL the provisions are called
‘Article’ whereas under the Act they are called ‘Section’.[12] The main objectives set out in the
Statement of Objects and Reasons of the 1996 Act are “to minimise the supervisory role of
courts in the arbitral process” and “to provide that every final arbitral award is enforced in the
same manner as if it were a decree of the Court”. [13]
Public policy is that principle of law which holds that no subject can lawfully do, which has a
tendency to be injurious to the public or against the public good, which may be termed, as it
sometimes has been, the policy of the law or public policy in relation to the administration of the
law. Public policy connotes some matter which concerns public good and public interest. The
concept of public policy varies from time to time.

The UNCITRAL Model Law Commission stated in its report that the term “public policy”
comprises “fundamental principles of justice”. It was understood that the term public policy
which was used in the 1958 New York Convention and many other treaties, covered fundamental
principles of law and justice in substantive as well as procedural respects. Thus, instances such
as corruption, bribery, or fraud and similar serious cases would constitute a ground for setting
aside an award.

In the case of Renusagar Power Plant Co. Ltd. Vs. General Electric Co., the court in view of the
absence of a workable definition of “international public policy” found it difficult to construe the
expression “public policy” in Article V(2)(b) of the New York Convention to mean international
public policy as it could be, construed both in narrow or wide sense. In the Renusagar case, it has
been observed: “It is obvious that since the Act is calculated and designed to subserve the cause
of facilitating international trade and promotion thereof by providing for speedy settlement of
disputes arising in such trade through arbitration, any expression or phrase occurring therein
should receive, consisting with its literal and grammatical sense, a liberal construction.”

The Supreme Court, while construing the term ‘public policy’ in Section 7(1)(b)(ii) of Foreign
Awards (Recognition and Enforcement) Act, applied the principles of private international law
and held that an award would be contrary to public policy if such enforcement would be contrary
to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality.

The trend in India is similar to that in England i.e. public policy could be interpreted in a narrow
sense and a broad sense.

ONGC Vs. Saw Pipes case

The limited grounds of challenge provided under Section 34 are universally recognised. It is well
accepted that the courts have no power to get into the merits of the dispute. However, this basic
proposition was put to test and suffered a setback in the case of ONGC Vs. Saw Pipes Ltd. In
this case, an award was challenged on the ground that the arbitral tribunal had incorrectly applied
the law of the land in rejecting a claim for liquidated damages.
Two errors of great magnitude that have been committed in this case are:
· While reviewing the merits of the ONGC case, the court failed to consider the labour strike in
entire European continent, something which was neither under the control nor could be predicted
by SAW Pipes. This particular aspect has been completely overlooked by the court.

· The decision of the two judges Bench in ONGC has bypassed the ruling of the three judges
Bench of Supreme Court in the Renusagar case.

That shows both judicial indiscipline and violation of the binding precedent of a larger Bench.
While the Bench in Renusagar case held that the term ‘public policy of India’ was to be
interpreted in a narrow sense, the Division Bench went ahead unmindful of the prior precedent
and expanded the same to such an extent that arbitral awards could now be reviewed on their
merits. This is a huge step backwards in laws relating to alternate dispute resolution in the era of
globalisation. This is a reason that ONGC case is considered to be a villain in this regard giving
an open opportunity other than the limited grounds of challenge provided under Section 34

The Supreme Court’s judgment in this case expanded the concept of public policy to add that the
award would be contrary to public policy if it was “patently illegal”. The Supreme Court
distinguished SAW Pipes case from that of Renusagar on the ground that the Renusagar
judgment was in context of a foreign award, while the ratio of SAW Pipes would be confined to
domestic awards only. And in the name of public policy, the court went on to re-appreciate the
question of facts, mixed question of fact and law and pure question of law, which is most
undesirable in international commercial arbitration, as it would lead to uncertainty, a factor
which no businessman in international business transaction would like to have.

It may be correctly stated that the ratio set in ONGC Vs. Saw Pipes makes a significant dent in
the jurisprudence of arbitration in India and has come in for some sharp nonetheless deserving
criticism. Mr. Fali S. Nariman, one of the greatest lawyers of our generation, remarks on the
judgment as having “virtually set at naught the entire Arbitration and Conciliation Act of
1996…To have introduced—by judicial innovation—a fresh ground of challenge and placed it
under the head of ‘public policy’ was first contrary to the established doctrine of precedent—the
decision of three judges being binding on a bench of two judges. It was also contrary to the plain
intent of the new 1996 law, namely the need of finality in alternative methods of dispute
resolution without court interference.

If courts continue to hold that they have the last word on facts and on law—notwithstanding
consensual agreements to refer matters necessarily involving facts and law to adjudication by
arbitration—the 1996 Act might as well be scrapped.

The Division Bench of two judges of the court has altered the entire road-map of arbitration law
and put the clock back to where we started under the old 1940 Act.”
Foreign arbitral awards
Post ONGC approach :
The Act of 1996 does not provide for challenge for foreign arbitral award specifically. Although
Section 48 and more particularly Section 48(1)(e) read with other substantive provisions makes it
abundantly clear that although it is not permissible to challenge a foreign award, it could be
resisted in its enforcement on the same grounds as are available while challenging a domestic
award. While a bare reading of Section 48(1)(e) would demonstrate that a foreign award can be
challenged in a country in which it was made or the country under law of which it was made.

The most recent decision of the Supreme Court on the subject of setting aside an award on the
ground of public policy under Section 34 is Venture Global Engineering Vs. Satyam Computer
Services Ltd.[25] Based on the earlier judgment in Bhatia International,[26] the Supreme Court
held that it is open to the parties to exclude the application of the provisions of part I by express
and implied agreement, failing which the whole of part I would apply. Further, it held that to
apply Section 34 to a foreign award would not be inconsistent with Section 48 of the 1996 Act,
or any other provision of part II and that the judgment-debtor cannot be deprived of his right
under Section 34 to evoke the public policy of India, to set aside the award. Thus, the extended
definition of public policy cannot be bypassed by taking the award to foreign country for
enforcement.

On 10-1-2008 the Supreme Court rendered its decision in Satyam Computer Services Ltd.
case[27] and held that even a foreign award can be challenged in India on the ground of public
policy. The decision was passed basically relying on the decision of the Court in Bhatia
International v. Bulk Trading S.A[28]in which it was held that Part I of the 1996 Act will also
apply to Part II unless expressly or impliedly excluded by the parties through agreement. The
Supreme Court upheld a challenge in India to a foreign arbitration award on the grounds that the
relief contained in the award violated certain Indian statutes and was therefore contrary to Indian
public policy pursuant to Part I of the Indian Arbitration and Conciliation Act, 1996.

The case arose from a challenge in India by a US company, Venture Global Engineering (VGE),
to set aside an award rendered against it in an arbitration proceeding in London under the rules of
the LCIA. The relief in the award implicated VGE’s interests in India and called for the transfer
of certain shares that VGE owned in an Indian joint venture. VGE’s challenge asserted that the
relief in the award violated certain Indian corporate and foreign investment statutes, specifically
the Foreign Exchange Management Act, 1999, and therefore constituted a "conflict with the
public policy of India" pursuant to the general provisions contained in Section 34 of Part I of the
Arbitration Act. The court held that:

“The provisions of Part I of the Act (Arbitration and Conciliation Act, 1996) would apply to all
arbitrations including international commercial arbitrations and to all proceedings relating
thereto. We further hold that where such arbitration is held in India, the provisions of Part-I
would compulsorily apply and parties are free to deviate to the extent permitted by the provisions
of Part-I. It is also clear that even in the case of international commercial arbitrations held out of
India provisions of Part-I would apply unless the parties by agreement, express or implied,
exclude all or any of its provisions.”

The decision has important implications both for companies doing business involving India and
for companies with substantial assets located in India and for companies required to enforce
foreign arbitration awards in India. This decision has made the foreign awards open to challenge
under the grounds listed in section 34 of Part I of the Act, which includes the ground that the
award is against Indian public policy. Public policy in this sense is stated to encompass the
illegality and fundamental policy, interests, justice and morality of India. If an arbitration
agreement does not specifically exclude the application of this part of the Act, the award is open
to a challenge under the Act.

Although, scope of Part I can be avoided by the parties by accepting to the same under their
contract. However, this shall not help to as the grounds for opposing enforcement are found in
Part II of the Act. These grounds are, for the most part, the same as the grounds for challenging
the award set out in Part I. The Part II grounds are set out in section 48 of the Act and, as in
section 34, cover an award which is considered to be against Indian public policy. There is no
case law on the point, but it is generally accepted that any attempt to exclude the effect of Part II
of the Act would fail.

Following the judgment in Venture Global Engineering, if the arbitration agreement does not
specifically exclude the application of Part I of the Act, foreign awards are open to challenge by
the losing party under the grounds listed in section 34 of Part I. However, the grounds for
opposing enforcement under Part II of the Act mirror those in Part I. Therefore an exclusion of
Part I will be ineffective where Part II applies. Part II of the Act will always apply to foreign
awards when they are enforced in India.

Therefore, although technically the judgment has not made any material changes to the status
quo in relation to enforcing foreign awards in India, it appears to have had significant practical
effects:
· The decision is likely to result in an increase in challenges to foreign arbitral awards in India;
and

· It has set alarm bells ringing over the extent to which India is willing to comply with its New
York Convention obligations.
This judgment of the Supreme Court is contrary to the object and scheme of the New York
Convention and also in violation of Article III of the Convention, in as much as it introduces an
additional ground for challenging a foreign award. The decision is contrary to the intention of the
Indian legislature, since it:

· Exposes a foreign award to an additional ground of challenge, (introduced by way of judicial

legislation) meant for domestic awards only.

· Makes provision of Section 48 of 1996 Act of enforcement of foreign award redundant, as

every time an enforcement application is filed before Indian courts under Section 48, the
opposite party would file objection under Section 34, availing the benefit of challenging the
foreign award on merits.

· Seeks to introduce a procedure to challenge a foreign award through judicial legislation in the
absence of such a procedure under the 1996 Act.

The decision is also contrary to the precedent laid in ONGC Vs. Saw Pipes,[29] wherein the
court had accepted that the scope of Section.34 and Section.48 are not identical and hence the
assumption of the court that the effort of the respondent was to avoid enforcement of the award
under Section 48 of 1996 Act, thereby depriving the appellant the benefit of the rule of public
policy of India, is not correct.

The Supreme Court’s intervention in the Satyam case[30] on grounds of public policy is most
unfortunate, as it does not take into account the decision of the three judges Bench in Renusagar
case.[31] The present decision, thus exposes foreign awards to challenge on merits on the ground
that it is “patently illegal”, notwithstanding the enforcement proceedings in any other
jurisdiction. In effect, the decision treats a foreign award as a domestic award, if the execution of
the award is to be done as per the laws of India.

Thus, it is easily inferred that the direction these decisions have taken the law on the subject and
in all such cases, the judgments depart from the spirit through judicial lawmaking and they
disclose a lack of trust in the arbitral process.

Steps For Enforcement Of Arbitral Award.

Domestic
One of the declared objectives of the 1996 Act is that every final award: ‘is enforced in the same
manner as if it were a decree of the Court’[32]. Hence, the scheme of the Act is that it is up to the
losing party to object to the award and petition the court for setting it aside. The winning party
has to make no procedural move. If the objections to the award are not sustained (or if there are
no objections within the time allowed) the award itself becomes enforceable as if it were a decree
of the court[33]. It would be noticed that the Indian law has thus fundamentally departed from
the Model Law in this regard. The Model Law requires an application for enforcement (Art 35)
and the grounds on which enforcement of an award may be refused are as set forth in Art 36
thereof. This has been departed from under the Indian regime as stated above with the result, that
in so far as domestic awards are concerned, if there is no application to set aside an award under
s 34 (or if the objections if made have been rejected), the award can straightaway be executed as
a decree of the court. Thus, when the period for filing objections has expired or objections have
been rejected, the award can be enforced under the Civil Procedure Code (CPC) in the same
manner as if it were a decree passed by a court of law. Section 36 declares that an arbitral award
has the force of the decree, though in fact it is not a decree. An ex parte Award passed by an
Arbitral Tribunal under Section 28 of the Act is also enforceable under Sec. 36. Even a
settlement reached by the parties under Section 30 of the Act can be enforceable under Sec. 36 of
the Act as if it is a Decree of the Court.

Foreign arbitral award

India's Arbitration and Conciliation Act, 1996 provides a statutory framework for the
enforcement of foreign arbitral awards given in countries which are signatories to either the 1927
Convention on the Execution of Foreign Arbitral Awards (Geneva Convention) or the 1958
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York
Convention).

One of the prerequisites for the enforcement of a foreign arbitral award in India's courts is that it
should be a foreign award under the Geneva Convention or the New York Convention.

In the case of Bhatia International vs Bulk Trading, AIR 2002 SC 1432, the Supreme Court held
that an arbitration award not made in a convention country will not be considered a foreign
award and, as such, a separate action will have to be filed on the basis of the award.

Enforceable awards
There are several requirements for a foreign arbitral award to be enforceable under the AC Act.

(i) Commercial transaction: The award must be given in a convention country to resolve
commercial disputes arising out of a legal relationship. In the case of RM Investment & Trading
vs Boeing, AIR 1994 SC 1136, the Supreme Court observed that the term "commercial" should
be liberally construed as having regard to manifold activities which are an integral part of
international trade.

(ii) Written agreement: The Geneva Convention and the New York Convention provide that a
foreign arbitral agreement must be made in writing, although it need not be worded formally or
be in accordance with a particular format.
(iii) Agreement must be valid: The foreign award must be valid and arise from an enforceable
commercial agreement. In the case of Khardah Company vs Raymon & Co (India), AIR 1962 SC
1810, the Supreme Court held that an arbitration clause cannot be enforceable when the
agreement of which it forms an integral part is declared illegal.

(iv) Award must be unambiguous: In the case of Koch Navigation vs Hindustan Petroleum Corp,
AIR 1989 SC 2198, the Supreme Court held that courts must give effect to an award that is clear,
unambiguous and capable of resolution under Indian law.

Unenforceable awards
Under sections 48 and 57 of the AC Act, an Indian court can refuse to enforce a foreign arbitral
award if it falls within the scope of the following statutory defenses:
(i) the parties to the agreement are under some incapacity;

(ii) the agreement is void;

(iii) the award contains decisions on matters beyond the scope of the arbitration agreement;

(iv) the composition of the arbitral authority or the arbitral procedure was not in accordance with
the arbitration agreement;

(v) the award has been set aside or suspended by a competent authority of the country in which it
was made;

(vi) the subject matter of dispute cannot be settled by arbitration under Indian law, or

(vii) the enforcement of the award would be contrary to Indian public policy.

Enforcement and execution

The party seeking enforcement of a foreign award under the provisions of the Act must make an
application to the court of competent jurisdiction with the following documents:

(i) the original/duly authenticated copy of the award;

(ii) the original/duly authenticated copy of the agreement, and

(iii) such evidence as may be necessary to prove that the award is a foreign award.

In the case of Fuerst Day Lawson vs Jindal Exports[34], the Supreme Court held that a single
application will hold good to decide the question of the execution of the foreign arbitral award as
well as the decree of the award.

A binding agreement
On fulfilling the statutory conditions mentioned above, a foreign award will be deemed a decree
of the Indian court enforcing the award and thereafter will be binding for all purposes on the
parties subject to the award.

Difficulties Experienced In Enforcement

Main difficulties which a party experiences while seeking enforcement of an Arbitral Award
are :
· An Arbitral Award under the 1996 Act cannot be enforced as a Decree till the period of
challenge under Sec.34 (3) is over or the objections filed have been dismissed. It is a common
practice that whenever an Arbitral Award is made, the party adversely affected by it files a
petition u/s 34 of the Act in the Court and the Court issues notice. Then, till the time this
objection petition is dismissed the said award cannot be enforced. Given the delays in our
judicial system, it almost takes years for the Objection Petition to be disposed off and till such
time the party having the arbitral award in its favour remains in limbo. Thus, the laudable
objective behind doing away of legal proceedings to make the arbitral award a Rule of Court
under the 1940 Act by introducing Sec.36 in the 1996 Act has been diluted to a great extent.

It is proposed to provide for, inter alia, that mere filing objection petition under Sec.34 will not
operate as stay of the award and the court may grant stay of the operation of the award subject to
imposition of such conditions as it may deem fit to impose and the power to impose conditions
include the power to grant interim measures not only against the parties to the award but also
against the third parties in order to protect the interest of the party in whose favour the award is
passed.

· The Execution procedure laid down in Order XXI of CPC is lengthy, complex and time
consuming and almost a never ending story.

· By the time the stage of filing execution comes, the party against whom the award had come,
cleverly disposes off its assets so as to defeat the execution proceedings. Unless a party has taken
interim orders u/s 9 of the Act against disposal of assets etc. there are good chances that by the
time execution application is filed, the judgment debtor would have practically spirited away all
its assets.

Conclusion
Presently, section 34 and 37 provide for recourse against an arbitral award which may be set
aside by a court on certain specified grounds. The grounds mentioned in section 34(2)(a) entitles
the court to set aside an award only if the parties seeking such relief furnishes proof as regards
the existence of the grounds mentioned therein. These grounds include incapacity of a party,
validity of arbitration agreement, the party making the application not being given proper notice
of appointment of arbitrator or of the proceedings or otherwise unable to present his case, subject
matter not falling within the terms of submission to arbitration. Section 34(2)(b) mentions two
grounds which are, however, left to be found out by the court itself. The grounds are:

the subject matter of the dispute not capable of settlement by arbitration that is to say, the
disputes are not arbitral; and that the award is in conflict with the public policy of India.

While on the other hand, s.34 contains the provision where an appeal may lie against an arbitral
award.

All these grounds are common to both domestic as well as international arbitral awards.
However, in so far as the ground regarding the award being in conflict with the public policy of
India is concerned, that ambit thereof is quite distinct and different and depends upon the nature
of the award i.e., domestic or international. The Supreme Court in Renu Sagar case has clarified
that enforcement of foreign award being governed by the principles of private international law,
the doctrine of public policy, as applied in the field of international law alone would be attracted.
The court further clarified that a mere infraction of a domestic law per se would not amount to a
conflict with the public policy of India.

Furthermore, the verdict given in Oil and Natural Gas Corpn. Ltd. V. Saw Pipes ltd can be
misinterpreted by the courts in their own rights and gives them an opportunity to interfere in
almost every arbitral award which is brought to its notice.

The researcher submits that the term ‘public policy’ should be used in its narrow sense. It should
be used in such a way that the threshold for the court to consider setting aside or allowing an
appeal against an arbitral award is more than just a mere violation of the law in India. Thus
‘public policy’ should be only so interpreted as far as it aims to broaden the public interest of
honesty and fair-dealing, of not violating a basic notion of Indian law.
ARBITRATION
Arbitration flows from Arbitration
Agreement
At the time of entering into contract
itself, the parties agree arbitral tribunal parties may agree to conciliate.
to settle any dispute which will arise
in future.
A Sole Arbitrator may be appointed in
the Arbitration Agreement.
CONCILIATION
Conciliation flows from any agreement
After the dispute come into existence, the
There is no such opportunity in conciliation
after the dispute comes into existence. The
parties agree a conciliation and appoint one
Conciliator from each side or more

An Arbitrator enjoys more power than
Conciliator.
An Arbitrator uses more discretionary
powers and judicial powers than a
Conciliator.
In arbitration proceeding, three
Arbitrators each party may appoint
one Arbitrator and if necessary the
Arbitrators so appointed shall appoint
a third Arbitrator who shall act as a
Presiding Arbitrator.
The duties of Arbitral Tribunal are
judicial.
The object of Arbitration is to
determine the dispute whether friendly
or ex-aequo et bono (according to
what is just and good).
There is no restriction upon the
Arbitrator even though the Arbitrator
is exempted from strict procedural
laws it has to adopt the principles of
natural justice.
The finality of Arbitration Proceeding
depends upon the arbitral tribunal.
Confidentiality is strictly followed in
arbitral proceeding.
An arbitrator can pass the award in
Arbitral Proceeding which is equal to
decree of Civil Court it may not be
according to the wishes of both the
parties, to pass an award the Arbitrator
need not obtain the consent of both the
parties.
The Court is empowered to constitute
Conciliators.
A Conciliator exercises less powers than
the Arbitrator.
A Conciliator has no such discretionary
powers.
In conciliation proceeding with three
Conciliators each party may appoint one
and the parties may agree on the name of
third Conciliator who shall act as a
Presiding Conciliator.
The duties of Conciliator are purely
Administrator.
The object of Conciliator is to reach
amicable settlement between the parties.
A conciliator is not bound by the Code of
Civil Procedure, 1908 or the Indian
Evidence Act, 1872.
The finality of conciliating proceedings
depend upon the parties.
Confidentiality is not so strictly followed in
conciliation proceeding.
Conciliator is not the final decision maker.
He has to take the consent of parties and
the settlement is according to the
agreement of both the parties.
The Court cannot compel for the
 the Arbitral Tribunal. conciliation process.

That the last topic with which I am now going to deal with is the case laws which have ruled
various precedence under Arbitration Act. That the leading cases are as under:-

1. Agio Countertrade Pvt. Ltd. v/s Punjab Iron & Steel Co. Pvt. Ltd.

(1999 5 SCC 734) This ruling held that proceeding of appointment of Arbitrator are not covered
under Section 22 of SICA and the proceedings can be continued in accordance with Law.

2. Construction India v/s Secretary, Works Deptt. Govt. of Orissa

(1998 2 SCC page 89). This ruling held that once an arbitrator is named in the arbitration
agreement, then any circumstantial changes subsequent to such selection will not affect the
legality of such person to be appointed as Arbitrator.

3. Ador Samla Pvt. Ltd. v/s Peekay Holdings Ltd.,

(1999 8 SCC page 572). The ruling held that Order under Section 11 as may be passed by the
Chief Justice appointing an Arbitrator is an order passed in his administrative capacity and
therefore Special Leave Petition under Article 136 of Constitution cannot be filed before
Supreme Court challenging an order appointing an Arbitrator.

4. Konkan Railway Corpn. Ltd. v/s Mehul Construction Co.

(AIR SC 2000 Page No. 2821). This ruling has held that the order refusing to appoint an
Arbitrator cannot be challenged under Article 136. However, it being a refusal, i.e. non
performance of duty, the Writ of Mandamus can lie before Supreme Court.

5. Konkan Railway Corpn. Ltd. v/s. Rani Construction Pvt. Ltd.

(AIR 2000 SCW Page 3908) This is another landmark judgment on important issues, such as
appointment of Arbitrator and the details related to this process prior to appointment and its
governance within the ambit of Section 11 of the Act.

6. Oil & Natural Gas Corporation v/s Saw Pipes.

AIR 2003 – Supreme Court – Page No.2629)

This judgment is one of the landmark judgments having deliberated comprehensively the matter
and scope of Section 34 and jurisdiction of the Court as regard challenge to Arbitration award
under the Act.

Let me sum up with a note of warm wishes to you all and request that constraint of time which
we had today together should not become cause of constraint as regard coordination and
communication between us in the times to come. Therefore, I have given my communication
details which I hope will serve the cause of justice for which we all have gathered today and are
striving for the same.