Arbitration & Conciliation Act, 1996

1. a Arbitration & Conciliation Act, 1996

2. Group members 04 Scarlet Almeida 05 Mihir Bhammar 09 Sumitra Cardoz 10 Anshul Chadha 29 Fazeel Kazi 31 Prashant Kokare 50 Sandip Saha

3. Introduction • An Act covering: • domestic arbitration • international commercial arbitration • enforcement of foreign arbitral awards • conciliation • Modern concept of harmonious working partnership between the Court and Arbitration. • Has far reaching effect on reducing court litigation • Gives more importance to Arbitration and Conciliation by adding speed and economy to settlement of disputes.

4. Alternative Dispute Resolution (ADR) Mechanism used across the world - effective, faster and less expensive. 4 methods of ADR: • Negotiation – unrecognized • Mediation – unrecognized • Conciliation – recognized • Arbitration - recognized Recognized by the Arbitration and Conciliation Act, 1996

5. Necessity of the Act • Shrinking Boundaries, Free trade & International Commerce have become global necessities. • Competition often leads to conflicts between entrepreneurs resulting in commercial disputes. • Growing strength and role of India in the global economy • Increasing FDI and other forms of collaboration -increasing disputes between Indian and foreign parties • Quick redressal to commercial disputes through private Arbitration. • Settlement of dispute in an expeditious, convenient, inexpensive and private manner so that they do not become the subject of future litigation between the parties.

6. Acts addressing ADR in India • The law on arbitration in India was substantially contained in three enactments, namely: • The Arbitration (Protocol & Convention) Act, 1937 • The Arbitration Act, 1940 • The Foreign Awards (Recognition and Enforcement) Act, 1961.

7. The Arbitration & Conciliation Act, 1996 • An Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto. • "Arbitration is the reference of dispute between not less than two parties, for determination, after hearing both sides in a judicial manner, by a person or persons other than a court of competent jurisdiction.”

8. Law Based on UNCITRAL Model Law The present Act is based on model law drafted by United Nations Commission on International Trade Laws (UNCITRAL), both on domestic arbitration as well as international commercial arbitration, to provide uniformity and certainty to both categories of cases.

9. WHAT CAN BE REFERRED TO ARBITRATION All disputes of a civil nature or quasi-civil nature which can be decided by a civil court can be referred to arbitration: • Relating to property • Right to hold an office • Compensation for non-fulfillment of a clause in a contract • Disputes in a partnership

10. Disputes excluded from the Arbitration Act The law has given jurisdiction to determine certain matters to specified tribunal only; these cannot be referred to arbitration: • Matters involving questions about validity of a will. • Relating to appointment of a guardian. • Pertaining to criminal proceedings • Relating to Charitable Trusts • Winding up of a company • Matters of divorce or restitution of conjugal rights • Lunacy proceedings • Disputes arising from an illegal contract • Insolvency matters, such as adjudication of a person as an insolvent. • Matters falling within the purview of the Competition Act.

11. Scheme of the Act The Act is divided in to the following parts (a) Part I - Domestic arbitration. (b) Part II - Enforcement of foreign awards. (c) Part III - Conciliation procedures. (d) Part IV - Supplementary provisions.

12. Part I - Domestic arbitration

13. Arbitration Agreement • Arbitration Agreement - an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. • Power to refer parties to arbitration when there is an arbitration agreement.

14. Arbitration Agreement Interim Measures by Court • appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings • protection in respect of preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement • securing the amount in dispute • the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute • interim injunction or the appointment of a receiver; • Any other interim measure of protection as may appear to the Court to be just and convenient

15. Appointment of Arbitrator • Any person can be appointed as an arbitrator. • Generally impartial and independent persons – • C A’s, engineers, retired judges, advocates and other professionals are preferred. • Parties are free to determine the number of arbitrators • Number shall not be an even number. • The arbitrator shall disclose in writing to the parties anything that may give rise to justifiable doubts about his independence or impartiality.

16. Appointment of Arbitrator • If they are unable to agree- Each party will appoint one arbitrator and the two appointed arbitrators will appoint the third arbitrator who will act as a presiding arbitrator. • If not appointed within 30 days, the party can request Chief Justice of High Court 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.

17. Termination of Arbitrator Appointment of Arbitrator can be challenged only if • Circumstances exist that give rise to justifiable doubts as to his independence or impartiality • He does not possess the qualifications agreed to by the parties.

18. Termination of Arbitrator The mandate of an arbitrator shall terminate if--- • he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and • he withdraws from his office or the parties agree to the termination of his mandate. • where he withdraws from office for any reason; or by or pursuant to agreement of the parties. • Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

19. Conduct of Arbitral Proceedings • The Arbitral Tribunal is not bound by Code of Civil Procedure, 1908 or Indian Evidence Act, 1872. • The parties to arbitration are free to agree on the procedure to be followed by the Arbitral Tribunal. • Law of limitation (1963) applicable • Flexibility in respect of procedure, place & language. • Submission of statement of claim & defense maybe amended/ supplemented at any time • Hearings & Written Proceedings – at the discretion of the tribunal • Can be oral at the request of either party • Settlements during Arbitration

20. Arbitral Award • The decision of Arbitral Tribunal will be by majority • The arbitral award shall be in writing and signed by the members of the tribunal. • States the reasons for the award unless the parties have agreed that no reason for the award is to be given. • The award should be dated and place where it is made should be mentioned. • Copy of award given to each party. • Tribunal can make interim award also.

21. Arbitral Award - Appeal An arbitral award may be set aside by the Court only if; • The party furnishes proof of some incapacity • the arbitration agreement is not valid under the law to which the parties have subjected it • the party 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 • 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 matter beyond the scope of the submission to arbitration • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties • the arbitral award is in conflict with the public policy of India.

22. Cost of Arbitration • Fees and expenses of arbitrators and witnesses, legal fees and expenses, administration fees of the institution supervising the arbitration and other expenses. • Tribunal can decide the cost and share of each party. • If parties refuse to pay the costs, the Arbitral Tribunal may refuse to deliver its award; thus any party can approach Court. • The Court will ask for deposit from the parties and on such deposit, the award will be delivered by the Tribunal. Then Court will decide the costs of arbitration and shall pay the same to Arbitrators. Balance, if any, will be refunded to the party.

23. Intervention by Court • The earlier arbitration law was that the party could access court almost at any stage of arbitration. • Now, approach to court has been drastically curtailed. • If an objection is raised by the party, the decision on that objection can be given by Arbitral Tribunal itself & the arbitration proceedings are continued • The aggrieved party can approach Court only after Arbitral Award is made. • Appeal to court is now only on restricted grounds. • Tribunal cannot be given unlimited and uncontrolled powers and supervision of Courts cannot be totally eliminated. • ARBITRATION ACT HAS OVER-RIDING EFFECT

24. Part II – Enforcement of Foreign Awards

25. Enforcement of Foreign Awards • Foreign award" means an arbitral award on differences relating to matters considered as commercial under the law in force in India. The foreign awards which can be enforced in India are as follows : - • New York convention award - made after 11th October, 1960 • New York convention awards are enforceable in India. • New York convention was drafted and kept in United Nations for signature of member countries on 21st December, 1958. • Geneva convention award - made after 28th July, 1924.

26. Enforcement of Foreign Awards • To enforce a foreign award party has to • produce arbitral award, agreement of arbitration to the district court having jurisdiction over the subject matter of the award. • The enforcement of award can be refused by court only in cases specified in law. • Otherwise, the foreign award is enforceable through court as if it is a decree of the court. • If the court declines to enforce the arbitral award, appeal can be made to the court where appeal normally lies from the district court. • No further appeal can be made (except appeal to Supreme Court) . • Indian courts can be approached only at the time of implementation of award. • The courts can refuse to implement the award only on limited grounds.

27. Part III-Conciliation Procedure

28. Conciliation The act makes provision for conciliation proceedings. In conciliation proceedings: • There is no agreement for arbitration. • Conciliation can be done even if there is arbitration agreement. • The conciliator only brings parties together and tries to solve the dispute using his good offices. • The conciliator has no authority to give any award. • Helps parties in arriving at a mutually accepted settlement.

29. Conciliation • In such agreement they may draw and sign a written settlement agreement. Duly signed by the conciliator • However after the settlement agreement is signed by both the parties and the conciliator, it has the same status and effect as if it is an arbitral award. • Conciliation is the amicable settlement of disputes between the parties, with the help of a conciliator.

30. Offer for Conciliation • The conciliation proceedings can start when one of the parties makes a written request to other to conciliate, briefly identifying the dispute. • The conciliation can start only if other party accepts in writing the invitation to conciliate. • Unless there is written acceptance, conciliation cannot commence. If the other party does not reply within 30 days, the offer for conciliation can be treated as rejected

31. What Can Be Referred To Conciliation Matters of a – • Civil nature • Breach of contract • Disputes of movable or immovable property

32. What Cannot Be Referred To Conciliation Matters of – • Criminal nature • Illegal transactions • Matrimonial matters like divorce suit etc.

33. Part IV- Supplementary Provisions

34. Supplementary Provisions • The High Court has the power to make rules under this act • Removal of difficulties by central Government through provisions made under the Act • Rules made by Central Government subject to approval by parliament • The present Act overrules the previous Acts

35. Case Studies

36. Case Study Bhatia International V Bulk Trading & Others CASE NO.: Appeal (civil) 6527 of 2001

37. Facts of Case Petitioner : Bhatia International Respondents : Bulk Trading & others Date of Judgement : 13.2.2002 Bench : G B Pattanik & S N Variava Appeal : Against the Judgement Dated 10.10.2000: Madras High Court Petitioner Counsel : Mr.S. Sen Respondent Counsel : Mr. Sundaram

38. Brief History Bhatia International contract with Bulk trading in 1997 - arbitration clause Governed by as per rules of International Chambers of Commerce (ICC) Bulk trading filed a request with ICC for arbitration with parties agreed process to be held in Paris and appointment of Sole Arbitrator Respondents filed an application u/s 9 of Arbitration & concilation Act 1996 is district courts of Indore & Orissa against Bhatia International Interim relief was sought – injunction restraining the parties from transferring/creating any third party right & dealing or selling their business assests or properties Bhatia international – raised plea of maintainability of such an applicaton

39. Case History Mr. Sen on behalf of the petitioner Bhatia International stated that Part – I of the act wouldnot apply to arbitrations where the place of arbitrations is not in India The application was dismissed by the IIIrd Additional District Judge on 1st Feb 2000 A writ petition was filed before the High Court of Madhya Pradesh, Indore Bench & same was dismissed on 10th Oct 2000

40. Case is Supreme Court Counsel Sen – Part –I of the Act applies to arbitration where the place of arbitration is in India other wise it will be Part –II of the Act would apply Section 2 (2) states that provisions of the Part –I of the Act do not apply where the place of arbitration is not in India Section 2 (8) of the Act defines international arbitration can take place in India or outside India, if outside India then Part –I doesn’t apply Arbitration outside India – Part I does not apply hence section 9 & section 17 would not apply. Part –II of the Act deals with the enforcement of the foreign Awards. Section 2 & Section 17 have been purposely omitted – reason for this is arbitration take places outside India Jurisdiction – of courts of that particular country where it is held. Section 9 – an application for interim measure must be made before the award is enforced also section 36 deals with enforcement of domestic award only

41. Section 5 of the Act – Judicial authority should not interfere except as provided in the said Act. “reason” M.P. High court of Indore Bench were wrong in entertaining the application u/s 9 of the Act based on which rejected the appilcation of the Appellant Inspite of the fact that – A number of high courts Orissa,Madras, & Delhi have held that Part – I of the act would not apply to arbitrations which take place outside India Judgments – Mariott International V Ansal Hotels Ltd – Delhi Court- accepted the same canvassing as the that of learned counsel Sen The Respondents – Counselor Advocate Sundaram provided with the argument that if parties by their agreement exclude its provisions of Part I then only will not be part otherwise would apply to all international commercial arbitrations including those that take place outside India

42. Court Views If Sen agruments are taken into account – there would be a lacunae as neither Part I nor Part II would apply to arbitration held in a non-conventional country It would mean that there is no law in India governing such arbitrations International Commercial Arbitration which takes place outside India – no protection to its citizens Object of the Act was to establish a uniform legal frame work for fair & efficient settlement of disputes arising in international commercial arbitration Always to look at the intension of the legislative makers Not possible for most imaginative legislature to forecast exhaustively situations – courts duty to expound arises with a caution that courts should not try to legislate

43. Section 1 of the Act – implies to the whole of India, inclduing the state of Jammu & Kashmir. Section 2 (a) – defines arbitration - arbitration could be under a body like the ICC Section 2 (f) International Commercial Arbitration makes no difference between International Arb. Takes places in India or internal Arb. which takes place outside India Section 2 (2) – provides that part I would apply to cases where Arb. Takes place in India – to emphasis that the word “ only” not used hence legislature did not mean that the Part I would not apply to Arb. Outside India Section 2 (4) & (5) – defines every arbitration - hence the word every arbitration includes all types Section (5) – judicial intervention not except in Part I, Section (8) allows parties to approach Judicial but only to court is u/s 2 (e) Legistalure has kept in mind that even international arb. Part I implies Section 28 – does not provide to rules where Arb. Outside India

44. Seimilar to u/s 9 & u/s 17 – no section foreign Awards – indicating that legislature that no injunction can be brought – Stated by Sen Said Act - Consolidated & Integratd Act – General provisons appilcable to all arbitrations would not be repeated in all chapters Article 23 of the ICC rules permits parties to apply to a competent judicial authority for interim and conservatory measures Therefore, in such cases an application can be made under Section 9 of the said Act. Act does not appear to be a well drafted legislation Therefore the High Courts of Orissa, Bombay,Madras, Delhi and Calcutta cannot be faulted for interpreting it in the manner indicated above In this view of the matter we see no reason to interfere with the impugned judgment. The Appeal stands dismissed. There will be no Order as to costs throughout

45. Case Study Supreme Court Judgment, Civil appeal under ‘Arbitration And Conciliation Act’ for setting aside of Foreign Award

46. Introduction • The parties: • Venture Global Engineering (VGE) • Satyam Computer Services Ltd. • made a 50:50 JV. • An SHA was also signed: • Disputes have to be resolved amicably. • If not resolved, refer to arbitration.

47. Background • Satyam alleged that the VGE had committed a default. • Several venture companies became insolvent. • Satyam exercised its option to purchase the VGE shares in the JV at its book value. • A series of petitions & cross-petitions happened. • Finally the case came to Supreme Court.

48. Background Cases Satyam VGE

49. Current Case • JV was situated in India. • Satyam enforced the award in USA. • VGE challenged it saying the award should have been enforced in India. • SC had to decide if enforcement of a foreign award can be challenged in India.

50. Reference Case - Bulk Trading vs. Bhatia International • Similar case in which arbitration was held by ICC, Paris. • Bulk Trading filed an application in District Court which it won. • Bhatia International approached SC. • SC dismissed the petition in favour of Bulk Trading.