and Conciliation Act, 1996 is the prime legislation relating to domestic
arbitration, international commercial arbitration and enforcement of foreign
arbitral awards and also to define the law relating to conciliation and
for matters connected therewith or incidental thereto. It repealed the
three statutory provisions for arbitration:- (i) the
Arbitration Act, 1940; (ii) the
Arbitration (Protocol and Convention) Act, 1937; and (iii) the
Foreign Awards (Recognition and Enforcement) Act, 1961.
Domestic Arbitration is defined as an
alternative dispute resolution mechanism in which the parties get their
disputes settled through the intervention of a third person and without
having recourse to the court of law. It is a mode in which the dispute
is referred to a nominated person who decides the issue in a quasi-judicial
manner after hearing both sides. Generally, the disputing parties refer
their case to an arbitral tribunal and the decision arrived at by the
tribunal is known as an 'award'.
While, the term 'international commercial
arbitration' means "an arbitration relating to disputes arising out
of legal relationships, whether contractual or not, considered as commercial
under the law in India and where at least one of the parties is:- (i)
an individual who is a national of, or habitually resident in, any country
other than India; or (ii) a body corporate which is incorporated in any
country other than India; or (iii) a company or an association or a body
of individuals whose central management and control is exercised in any
country other than India; or (iv) the Government of a foreign country".
The major provisions relating to Arbitration in the Act
Arbitration and Conciliation Act
- The parties to a present dispute may make an agreement
called as the 'arbitration agreement' that instead of going to the court,
they shall refer the dispute to arbitration. The parties to the agreement
may refer to arbitration, a dispute:-
Thus, all matters of civil nature whether they relate
to present or future disputes may form the subject matter of reference.
Even disputes such as infringement of intellectual property rights shall
also be covered.
- Which has arisen or which may
arise between them,
- In respect of a defined legal
relationship, whether contractual or not.
- Although no formal document is prescribed,
an arbitration agreement/clause must be in writing. If the arbitration
agreement/clause is contained in a document, the document must be signed
by the concerned parties. Besides, the agreement may be established
by:- (i) an exchange of letters, telex, telegram or other means of telecommunications;
or (ii) an exchange of statements of claims and defence in which the
agreement is alleged by one party and is not denied by the other.
- The disputes that cannot be referred to arbitration
- Insolvency proceedings.
- Lunancy proceedings.
- Proceedings for appointment of
a guardian to a minor.
- Question of genuineness or otherwise
of a will or matter relating to issue of a probate.
- Matter of criminal nature.
- Matters concerning public charitable
- Disputes arising from and founded
on an illegal contract.
- The agreement mandatorily requires
the appointment of an arbitrator. An arbitrator is a person appointed,
with or without mutual consent of the contending parties, for the purpose
of investigation and settlement of a difference or dispute referred
to him. The arbitral tribunal may be constituted by one or more arbitrators.
The parties are free to fix the number of arbitrators by agreement.
Accordingly, the reference may be made either to a single arbitrator
or a panel of odd number (i.e. 3,5,7 etc) of arbitrators. If there is
no agreement, the reference shall be made to a sole arbitrator.
- Unless otherwise agreed by the parties,
an arbitrator may be of any nationality. In case of an international
commercial arbitration, where the parties belong to different nationalities,
the Chief Justice of India may appoint an arbitrator of a nationality
other than that of the parties.
- The parties are free to agree on
a procedure for appointing the arbitrator or arbitrators. If there is
such an agreement, the appointment has to be made in accordance with
it. The agreement may provide for the number of arbitrators, qualifications
of arbitrator, procedure of appointment, procedure of challenging the
appointment, termination of appointment, procedure to be followed by
arbitrators, place of arbitration, language, etc.
- The duties of the Arbitral Tribunal
are:- (i) to act independently and impartially and treat the parties
equally; (ii) to give each party full opportunity to present his case.
- The parties may agree on the procedure
to be followed by the arbitral tribunal in conducting its proceedings.
In the absence of such agreement, the arbitral tribunal may conduct
the proceedings in the manner it considers appropriate and shall be
empowered to determine the admissibility, relevance, materiality and
weight of any evidence. The tribunal shall decide whether to hold oral
hearings for presentation of evidence or for oral argument, or whether
to conduct the proceedings on the basis of documents and other materials.
- An arbitral award shall be made in
writing and shall be signed by the members of the arbitral tribunal.
The award shall state its date and place of arbitration. The arbitral
award shall state the reasons upon which it is based, unless the parties
have agreed that no reasons are to be given or in case of award on a
settlement between the parties. A signed copy of the award shall be
delivered to each party.
- An arbitral award is itself enforceable
as a decree of the court, normally after three months from the date
on which it was received by the parties, provided no application for
setting aside the award is made or if it is made the same has been rejected.
The arbitral award shall be final and binding on the parties and persons
claiming under them respectively.
- The arbitral proceedings shall be terminated when:-
- The final arbitral award is made,
- The claimant withdraws his claim,
and the respondent does not object to it,
- The parties agree on the termination,
- The continuation of proceedings
has for any other reason become unnecessary or impossible.
provides statutory recognition to
conciliation as a distinct mode of dispute settlement. Conciliation is
defined as the process of amicable settlement of disputes by the parties
with the assistance of a conciliator. It differs from arbitration in the
sense that in arbitration the award is the decision of the third party
or the arbitral tribunal, while in the case of conciliation the decision
is of the parties which is arrived at with the mediation of the conciliator.
The major provisions relating to Conciliation
in the Act are:-
- A party initiating the conciliation
shall send a written notice to the other party, briefly identifying
the subject of the dispute and inviting it for conciliation. The conciliation
proceedings shall commence on acceptance of invitation by the other
party. If the party initiating conciliation does not receive a reply
within 30 days from the date the invitation was sent or within the specified
period, it may opt to treat this as a rejection and inform the same
to the other party. If it rejects the invitation, there can be no conciliation
- Unless otherwise agreed there shall
be one conciliator. The parties may however, agree that there shall
be two or three conciliators, who shall act jointly. The sole conciliator
shall be appointed by mutual consent of the parties. In case of two
conciliators, each party may appoint one conciliator. In case of three
conciliators, each party may appoint one conciliator and the third conciliator
may be appointed by mutual agreement of the parties who shall act as
the presiding conciliator. However, the parties may agree that a conciliator
shall be appointed or recommended by an institution or a person.
- Each party shall submit to the conciliator
a brief written statement describing the general nature of the dispute
and the points at issue. A copy of the same shall be sent to the other
party. The conciliator may require of each party to send a detailed
statement supported by documents and other evidence, a copy whereof
shall be sent to the other party also. Any factual information concerning
the dispute received by the conciliator from a party, shall be disclosed
to the other party to allow it an opportunity to present any explanation,
except however, when a party gives any information subject to a condition
that should be kept confidential.
- The parties involved shall co-operate
with the conciliator in good faith, comply with requests for submitting
written materials, providing evidence and attending meetings. A party
may submit to the conciliator suggestions for the settlement of the
- The functions of a Conciliator are:-
- To assist the parties in an independent
and impartial manner, to reach an amicable settlement of their dispute.
- To be guided by principles of
objectivity, fairness and justice.
- To give consideration to rights
and obligations of the parties, trade usages, circumstances surrounding
the dispute and any previous business practice between the parties.
- To conduct the conciliation
proceedings in an appropriate manner, taking into account the circumstances
of the case and wishes of the parties.
- To make proposals for a settlement
of the dispute.
- Not to act as an arbitrator
or as a representative of a party in any arbitral or judicial proceeding
in respect of the same dispute, unless otherwise agreed by the parties.
- Not to act as a witness in any
arbitral or judicial proceedings.
- If it appears to the conciliator
that a settlement is possible, he shall formulate the terms of a possible
settlement and submit them to the parties for their observations. The
conciliator shall then reformulate the possible settlement in the light
of observations received from the parties. If the parties reach on a
settlement, they may draw up and sign a written settlement agreement
with the assistance of the conciliator. The conciliator shall authenticate
the settlement agreement and furnish a copy thereof to each of the parties.
The settlement agreement shall be final and binding on the parties and
shall have the same effect as of an arbitral award.
- The conciliation proceedings shall be terminated
- A settlement agreement is signed
by the parties,
- A written declaration is made
by the conciliators after consultation with the parties, that further
efforts at conciliation are no longer justified,
- A written declaration is made
by the conciliator, after the deposits required in relation to costs
of the proceedings are not received from the parties, that the proceedings
- A written declaration is made
by the parties to the conciliator, that the conciliation proceedings
- A written declaration is sent
by a party to the other party and the conciliator, that the conciliation
proceedings are terminated.
'Foreign Award' has been defined to
mean "an award on differences between persons arising out of legal
relationships, whether contractual or not and considered as commercial
under the law in force in India, and made in pursuance of an agreement
in writing for arbitration to be governed either by the New York Convention
or by the Geneva Convention, in the territory of a notified foreign State".
Some of the provisions of the Act relating to foreign award are:-
- Where a commercial dispute covered
by an arbitration agreement to which either of the Convention apply,
arises before a judicial authority in India, it shall at the request
of the party be referred to arbitration.
- The party applying for the enforcement
of a foreign award shall produce the original award or a duly authenticated
copy thereof, the original arbitration agreement or a certified copy
thereof, and evidence to prove that the award is a foreign award.
- If the court is satisfied that the
foreign award is enforceable, the award shall be deemed to be a decree
of the court. An appeal shall lie against the order of the court refusing
to refer the parties to arbitration or refusing to enforce a foreign
- Any foreign award which is enforceable
under the Act, shall be binding and may be relied upon by the parties
by way of defence, set off or otherwise in any legal proceedings in