The Arbitration and Conciliation Act, 1996 is a significant legislative enactment that governs the resolution of disputes through arbitration and conciliation in India. It provides a comprehensive framework for the conduct of arbitration proceedings, recognition, and enforcement of arbitral awards, and promotes the amicable settlement of disputes through conciliation.
The Act was enacted with the aim of modernizing and streamlining the arbitration process in India, aligning it with international standards, and promoting alternative methods of dispute resolution. It replaced the outdated and cumbersome provisions of the Indian Arbitration Act, 1940, and brought India’s arbitration regime in line with the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration.
Arbitration, as provided under the Act, is a mechanism where parties in a dispute agree to refer their differences to a neutral third party or a panel of arbitrators. The Act provides a legal framework for conducting arbitration proceedings, including the appointment of arbitrators, the conduct of hearings, the submission of evidence, and the rendering of awards. It also ensures that the arbitral process is fair, efficient, and impartial.
The Act also recognizes the importance of conciliation as an alternative means of resolving disputes. Conciliation involves the appointment of a conciliator who assists the parties in reaching a mutually acceptable settlement. The Act sets out the process for initiating and conducting conciliation proceedings, ensuring confidentiality and allowing the parties to actively participate in finding a solution to their dispute.
One of the key features of the Arbitration and Reconciliation Act, 1996 is its pro-arbitration approach, which emphasizes minimal judicial intervention in the arbitral process. The Act limits the court’s interference in arbitration proceedings, except in cases where it is necessary to ensure fairness, integrity, or public policy. This approach is intended to promote the autonomy of parties in choosing arbitration as a dispute resolution method and expedite the resolution of disputes.
Furthermore, the Act also provides for the recognition and enforcement of both domestic and international arbitral awards. It establishes a clear framework for enforcing arbitral awards, ensuring that they are treated as binding and enforceable judgments of the court.
Key Objectives of the Arbitration and Reconciliation Act, 1996
The key objectives of the Arbitration and Reconciliation Act, 1996 are as follows:
- The international commercial arbitration and conciliation as well as domestic arbitration and conciliation is covered comprehensively in the Act.
- The final award is enforceable in the same manner as the decree of the Court.
- The supervision of courts is minimized in the arbitral proceedings.
- To make the procedure of arbitration fair, transparent and efficient so that justice may be provided to the parties in dispute.
- To ensure that the arbitral tribunal gives justification of the award.
- To allow the arbitration tribunal to use mediation, conciliation or other procedures to encourage the settlement of the dispute.
- To provide that for the purpose of enforcement of foreign awards, every arbitral award made in a country which is one of the parties to the international conventions i.e. the New York Convention and the Geneva Convention will be treated as a foreign award.
Salient Features of the Arbitration and Reconciliation Act, 1996
The salient features of the Arbitration and Reconciliation Act, 1996 are as follows:
Scope and application
The Act applies to both domestic and international arbitration proceedings. It covers all arbitrations, including those arising out of legal disputes, commercial transactions, and civil matters.
The Act recognizes the principle of party autonomy, allowing parties to determine the procedure for appointing arbitrators and conducting arbitration. It recognizes both written and oral arbitration agreements, provided that they are in writing, electronic form, or contained in an exchange of letters, telegrams, or other means of communication.
Appointment of arbitrators
The Act provides for the appointment of arbitrators. Parties are free to choose the number of arbitrators, but if they fail to agree, the default rule is to have a sole arbitrator. The Act also provides for the procedure to challenge the appointment of an arbitrator in case of justifiable doubts regarding impartiality or independence.
Conduct of arbitration proceedings
The Act ensures that arbitration proceedings are conducted in an impartial and fair manner. It allows parties to present their case, produce evidence, and cross-examine witnesses. The Act also provides for interim measures by the arbitrator, such as granting injunctions and preserving assets.
Enforcement of arbitral awards
The Act recognizes the enforceability of arbitral awards. An arbitral award, whether domestic or international, is considered as binding and can be enforced in accordance with the provisions of the Act. The Act also provides grounds for challenging and setting aside an arbitral award in limited circumstances.
Conciliation and mediation
The Act recognizes and encourages the use of conciliation and mediation as alternative dispute resolution methods. It provides a legal framework for the appointment of conciliators and mediators and outlines the procedure for conducting conciliation and mediation proceedings.
The Act restricts the interference of courts in arbitration proceedings. Courts can intervene only in specific circumstances, such as appointment of arbitrators, setting aside an arbitral award, and enforcement of arbitral awards.
Qualification of the Arbitrator
The arbitration act provides for the qualification of the arbitrator. As most of the disputes coming now a day are technical in nature, therefore such disputes can properly be decided only by the arbitrators who are competent and well versed in such matters.
Abolition of the Umpire System
The earlier act of 1940, prior to Arbitration and Reconciliation Act, 1996 had a provision that where an even number of arbitrators were appointed and such arbitrator failed to make an award within the specified time, or where there was difference of opinion between two arbitrators, the umpire should enter on the reference instead of the arbitrators.
But in the act of 1996, the number of Arbitrators to be appointed is decided by the parties with the limitation that even number of Arbitrators will not be appointed. The arbitrators so appointed shall appoint a third arbitrator called the Presiding Arbitrator(umpire).
Empower to Pass Interim Orders
In the Act of 1996, the Arbitrators have the power to pass interim orders in respect to the matters related to the dispute.
International arbitration: The Act incorporates the principles of the UNCITRAL Model Law on International Commercial Arbitration, facilitating and promoting international arbitration in line with international standards. This provision is defined under Section 2(1)(f), it means an arbitration relating to disputes arising out of legal relationship whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties whether an individual, body corporate or a company is having business or residing abroad and in case of Government, the government is of a foreign country.
The Arbitrators Has to Give Reason for Award
The sub section 3 of section 31 of the Act has provision that the Arbitral Tribunal must give the reason for awards. This requirement is relaxed in the case when both parties are agreed for a particular award and give this in writing.
Enforcement of Foreign Awards
One of the features of this act is that it provides for the enforcement of certain foreign awards made under the New York Convention and Geneva Convention respectively as contained in Part II of the said Act as a decree of the court. The countries which have neither adopted the New York convention nor the Geneva convention are outside the scope of Part II of the Act and therefore their awards are not enforceable as foreign awards in India.
The Award is Void if it is in Conflict with the Public Policy
If an arbitral award is in conflict with the public policy in India, then it is null and void and can be set aside by the Court.
Assistance of Court in Certain Matters
One of the features of the act is that the Arbitral Tribunal may seek assistance of the Court in taking evidence. In this case, the Court may order the witness to provide the evidence to the arbitral tribunal directly. But the Arbitral Tribunal do not have power to summon witnesses. Therefore, the Arbitral tribunal or a party with the approval of the arbitral tribunal may apply to the court for assistance in taking evidence.
The Arbitration and Reconciliation Act, 1996 plays a crucial role in promoting arbitration as an effective means of resolving disputes in India. By providing a modern and robust legal framework, it encourages parties to opt for arbitration and conciliation, offering them a flexible and efficient alternative to traditional court litigation.