CHAPTER I :

INTRODUCTION
Parties determine to settle their disputes finally in accordance with the provisions of the
Act in case of failure to arrive at amicable settlement. Once the parties agree for resolution of
dispute in accordance with the Arbitration and Conciliation Act 1996, the said Act will take care
of the entire processes and procedure. A clear intention of the parties to submit themselves before
the arbitration proceedings for settlement of disputes is sufficient.
Arbitration was originally frowned upon as expelling the purview of the court. This
scenario came to be changed by the dictum of law laid down by the House of Lords in Scott V.
Avery1, in which it was held that till an award has been made, no right of action shall arise. This
clause makes an award a condition precedent to any right of action for commencing the
arbitration proceedings. It was decided in that case that though it is a principle of law that parties
cannot oust the jurisdiction of the Court, any person may agree that no right of action shall
accrue to him till the arbitrator have decided on any difference, that may arise between the
parties to the agreement.
DEFINITIONS
Article 2(a) of the Model Law defines arbitration to mean any arbitration whether or not
administered by a permanent arbitral institution. Therefore, it pertains to pure ad hoc arbitration
and to any type of administered or institutional arbitration. The definition of Arbitration in
Section 2 (1) (a) of the Arbitration and Conciliation Act 19962 is merely a clarification that the
Act covers both adhoc and institutional arbitration. This definition corresponds to the definition

1 (1856) 25 L.J. Ex. 308

2 Section 2 in the Arbitration and Conciliation Act 1996 Definitions.- (1) In this Part,
unless the context otherwise requires,- (a) "arbitration" means any arbitration whether
or not administered by permanent arbitral institution;
1

as mentioned in clause (a) of Article 2 of UNCITRAL Model Law on International Commercial

Arbitration.

DISPUTES THAT CAN BE SETTLED BY ARBITRATION

Basically all disputes of Civil or Quasi Civil nature involving Civil Rights fall within the

jurisdiction of Arbitration.
Almost all disputes commercial, civil, labour and family disputes in respect of which

the parties are entitled to conclude a settlement can be settled by A.D.A. procedures.
Disputes involving joint ventures, construction projects, partnership differences,
intellectual property rights, personal injury, product liabilities, professional liability, real
estate securities, contract interpretation and performance, insurance claim and Banking &

non-Banking transaction disputes fall within the jurisdiction of Arbitration.

It is expanding to the areas or construction health care, telecommunication, entertainment
and technology based industries.

CHAPTER II :
KINDS OF ARBITRATION
AD-HOC ARBITRATION
When a dispute or difference arises between the parties in course of commercial
transaction and the same could not be settled friendly by negotiation inform to conciliation or
mediation, in such case ad-hoc arbitration may be sought by the conflicting parties. This
arbitration is agreed to get justice for the balance of the un-settled part of the dispute only.
Without resorting to an Institution, if the parties themselves agree and arrange for
arbitration, it is termed as Adhoc Arbitration. It may be domestic, international or foreign
arbitration.
The expression Ad Hoc, as in Ad Hoc Arbitration or Ad Hoc Submission is used in
two quite different senses: an agreement to refer an existing dispute, and/or an agreement to refer
2

either future or existing disputes to arbitration without an arbitration institution being specified to
supervise the proceedings, or atleast to supply the procedural rules for the arbitration.
Ad Hoc Arbitration means that the arbitration is not conducted pursuant to the rules of an
arbitral institution. Since, parties are not obliged to submit their arbitration to the rules of an
arbitral institution; they may largely stipulate their own rules of procedure.
In other words, Ad Hoc Arbitration is a do it yourself arbitration. The geographical
location of Adhoc Arbitration will be of great importance, because most of the difficulties
concerning the arbitration will be resolved in accordance with the national law of the seat of
arbitration.
If the parties have arranged to Ad Hoc Arbitration before one or three arbitrators and that
one of the parties does not participate in the proceedings at all. How many arbitrators will be
appointed? Who will decide that? And who will appoint the arbitrator(s)? The answer largely
depends on and generally is bound by the arbitration and procedural rules of the nation which is
the seat of arbitration. If the seat of arbitration is in India, for example, according to The
Arbitration and Conciliation Act 1996, failing a determination by the parties of the number of
arbitrators, the arbitral tribunal shall consist of one arbitrator. That arbitrator shall be appointed
by the Chief Justice of the Supreme Court of India or the Chief Justice of a High Court of India.
If the place of arbitration is to be Cairo, according to the Eygyptian Arbitration Law 1994, failing
a determination by the parties of the number of arbitrators, the number of arbitrators shall be
three, and the court of appeals of Cairo shall appoint the co arbitrator of the failing party. The
two co arbitrators will then have 30 days to agree on the third arbitrator, if they cannot, then the
court of appeals of Cairo shall appoint the third arbitrator.
Ad Hoc Arbitration is, therefore, arbitration agreed to and arranged by the parties
themselves, without recourse to an arbitral institution. It is; however, open to the parties to agree
to adopt the Rules framed by a particular arbitral institution without submitting its disputes to
such institution. Ad Hoc Arbitration may be domestic or international commercial arbitration.
Section 6 of the Arbitration and Conciliation Act 1996 provides that in order to facilitate the
conduct of the arbitral proceedings, the parties or the arbitral tribunal, with the consent of the
parties may arrange for such administrative assistance by a suitable institution or persons.
3

INSTITUTIONAL ARBITRATION
When arbitration is conducted by an arbitral Institution, it is called Institutional
Arbitration. The parties may specify, in the arbitration agreement, to refer the dispute or
differences to be determined in conformity with the rules of a particular arbitral Institution. One
or more arbitrators are appointed in such arbitration from a pre-selected panel by the governing
body of the institution or even by selection by the disputants themselves but restricted to the
limited panel.
This kind of arbitration there is prior agreement between the parties that in case of future
differences or disputes arising between the parties during their commercial transactions, such
differences or disputes will be settled by arbitrations per clause provide in the agreement.
Institutional Arbitration is arbitration conducted under the rules laid down by an
established arbitral organization. Section 2(6) of the Arbitration and Conciliation Act 1996
provides that where Part I except section 28, leaves the parties free to determine a certain issue,
that freedom shall include the right of the parties to authorize any person including an institution,
to determine that issue. Section 2(8) of the Act expressly provides that where Part I refers to
the fact that the parties have agreed or that they may agree, or in any other way refers to an
agreement of the parties, that agreement shall include any arbitration rules referred to in that
agreement.
Some of the leading Indian institutions are The Indian Council of Arbitration (ICA), New
Delhi, Federation of Indian Chambers of Commerce and Industry (FICCI), New Delhi,
International Centre for Alternative Dispute Resolution (ICADR), New Delhi, Bengal Chamber
of Commerce and Industry, Indian Chamber of Commerce, the East India Cotton Association
Ltd., and the Cotton Textiles Export Promotion Council. There are a large number of such
institutions in the other metropolitan cities.
Some of the leading international institutions are, International Chamber of Commerce
(ICC), Paris, London Court of International Arbitration (LCIA), London, London Maritime
4

Arbitration Association (LMAA), International Centre for Settlement of Investments Disputes

(ICSID), London, Grain and Feed Trade Association (GAFTA), London, and American
Arbitration Association (AAA), New York. World Intellectual Property Organization (WIPO), an
agency of the United Nations, offering services for intellectual property disputes. By and large,
basically the rules of these institutions follow a similar pattern, although they are expressly
formulated for arbitrations that are to be administered by the institution concerned; the clause
recommended by the ICC, for instance, states: All disputes arising in connection with the
present contract shall be finally settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by one or more arbitrators appointed in accordance with the
said Rules. Such a clause is evidently advantageous, because even if at some future stage, one
party starts dragging its feet to proceed further with arbitration proceedings, it will nevertheless
be possible to arbitrate effectively, because a set of rules exists to regulate the way in which the
arbitral tribunal is to be appointed and the arbitration is to be administered and conducted.
Parties will be well advised to verify in advance whether the arbitral institution to which
they wish to refer their disputes has some experience in the particular commercial sector
concerned. An institution with the relevant experience will typically have a list, or panel of
potential arbitrators with expertise in the field, from which it may appoint one or more in a case
where the parties themselves will not appoint the arbitrators.
Some arbitral institutions do not grant to the parties the liberty of designating an
arbitrator or a co arbitrator. They may, in accordance with their rules, recognize parties to choose
an arbitrator from a list, which the institution provides. Some arbitral institutions may restrict the
arbitrators appearing on this list to nations of their own country, or to persons, with a specialist
background. Other arbitral institutions may not use a list system at all and give the parties
complete freedom to select the arbitrator or arbitration at their choice.
STATUTORY ARBITRATION
It is mandatory arbitration which is imposed on the parties by operation of law. In such a
case the parties have no option as such but to abide by the law of land. It is apparent that
statutory arbitration differs from the above 2 types of arbitration because
(i)

The consent of parties is not necessary;

5

(ii)
(iii)

It is compulsory Arbitration;
It is binding on the Parties as the law of land; For Example: Section 31of the
North Eastern Hill University Act, 1973, Section 24, 31 and 32 of the
Defence of India Act, 1971 and Section 43(c) of The Indian Trusts Act, 1882 are
the statutory provision, which deal with statutory arbitration. Therefore, all
disputes referred to "Disputes-Settlement-Trust", shall be decided through
"Arbitral Tribunals" under Statutory Arbitration.

When arbitration is conducted in accordance with the provisions of a special enactment,

which specifically provides for arbitration in respect of disputes arising on matters covered by
that enactment, it is called Statutory Arbitration. Statutory Arbitration is such a proceeding where
the parties are referred to the arbitrator in terms of the provision made in a particular statute.
There are a number of Central and State Acts, which provide for such arbitrations.
The provisions of Part I of The Arbitration and Conciliation Act 1996 in general apply to
Statutory Arbitrations, except sub sec. (1) of Sec.40 of this Act providing that arbitration
agreement shall not be discharged by the death of any party thereto; Sec. 41 of 1996 Act
providing for the enforceability or otherwise of arbitration agreement to which insolvent is a
party or is adjudged insolvent afterwards and Sec. 43 of 1996 Act providing for the applicability
of the Limitation Act to arbitrations. But such of the provisions of Part I, which are inconsistent
with the enactment or the rules of any particular statutory arbitration, shall not apply to that kind
of Statutory Arbitration.
DOMESTIC OR INTERNATIONAL ARBITRATION
Arbitration which occurs in India and have all the parties within India is termed as
Domestic Arbitration. An Arbitration in which any party belongs to other than India and the
dispute is to be settled in India is termed as International Arbitration. Foreign Arbitration: When
arbitration proceedings are conducted in a place outside India and the Award is required to be
enforced in India, it is termed as Foreign Arbitration.
International Arbitration is commercial if it relates to disputes arising out of a legal
relationships, whether contractual or not, considered as commercial under the law in force in
India and where at least one of the parties is6

(1) an individual who is a national of, or habitually resident in, any country other than India or
(2) a body corporate which is incorporated in any country other than India, or
(3) a company or an association or a body of individuals whose central management and control
is exercised in any country other than India or
(4) the government of a foreign country. In International Commercial Arbitration the arbitral
tribunal shall decide the dispute in accordance with the rules of law designated by the parties as
applicable to the substance of the dispute; any designation by the parties of the law or legal
system of a given country shall be construed, unless otherwise expressed, as directly referring to
the substantive law of that country and not to its conflict of laws rules3.
FLIP-FLOP ARBITRATION
In this arbitration, the parties prepare their own cases, and then request the arbitrator to
decide one of the two. On the proof adduced by the parties, the arbitrator decides upon the
correctness of either submissions and passes an award finally in favour of that party. This system
has travelled from the USA to the United Kingdom, Department of the Environment, Transport
have produced a glossary of commercial property terms.
Flip-flop Arbitration is defined as being A form of arbitration under which the arbitrator
bases his award on the submission he considers most reasonable. It is claimed that this
encourages parties to be more reasonable in their submissions and reduces polarization. Flip
Flop Arbitration is also called as Pendulum Arbitration. However, the use of pendulum
arbitration has been endorsed in employment arbitrations and encourages both employers and
employees to start negotiations from a realistic starting point. This method is adopted on the
basis that the parties being businessmen, will take a pragmatic approach and should be
encouraged to be reasonable in the formulation of their cases.
FAST TRACK ARBITRATION
Fast Track Arbitration also called as documents only arbitration is time bound arbitration,
with stricter rules of a procedure, which do not allow for any laxity or scope for extensions of
3 Sec. 28 (b) (i) (ii) of the Arbitration and Conciliation Act
7

time and delays. Fast Track Arbitrations are best suited in those cases, which can be resolved on
the foundation of documents, and that oral hearings and witnesses are not necessary. The reduced
span of time makes it cost effective.
As the arbitral process became more and more complex, the ultimate users, i.e. The major
arbitral institutions all over the world, notably the ICC court became 55 more critical about the
usual arbitral process and started looking for more time as well as cost effective ways for
resolving the disputes by arbitration albeit getting through the surrounding foliage in order to
reach to the essential issues as soon as possible by adopting an accelerated procedure. This
generated the notion of Fast Track Arbitration or Documents only arbitration. This precisely
means that in the absence of an agreement by the parties that there shall not be oral hearings, the
arbitral tribunal may upon request, and put forth by a party shall permit oral hearing during the
appropriate phase of the proceedings.
Awards in fast track arbitrations are final and binding, are like decrees of the court, and
are most effective when immediate dispute redressal is required, and there is no need to go into
minute details of facts, and intricate questions of law. Pleadings are filed within the stipulated
time frame, failing which, the arbitration does not proceed or proceeds exparte, and arbitrators
make the arbitration does not proceed or proceeds exparte, and arbitrators make the award in the
least possible time.
It is relevant to note that Fast Track Arbitration, as its name suggest, is still an arbitral
process seeking to resolve the dispute between the parties by arbitration and it is not an ADR
technique like mediation or conciliation. The resulting award is binding on the parties and
enforceable as a decree of the court. Sec. 35 of The Arbitration and Conciliation Act 1996
Sec.36 of The Arbitration and Conciliation Act 1996 Further, such arbitrations are common
place in certain categories of domestic arbitrations, notably in relation to small claims cases
involving, for example, complaints by holiday makers against tour operators and climes under
insurance policies.
In the international context, the main examples of documents only arbitrations are those
conducted under the Rules of the London Maritime Arbitrators Association, in connection with
disputes arising out of charter parties and related documents. Documents only arbitration is not
8

oral and is based only on the claim statement and statement of defence, and a written reply by the
claimant, if any. It also includes the documents submitted by the parties with their statements
along with a list of reference to the documents or other evidence submitted by them. The written
submissions may simply take the form of a letter to the tribunal from the party or his
representative, or may be a more formal document produced by lawyers. The parties may agree
upon, or, in default, the tribunal may adopt the procedure to resolve the dispute only on the basis
of the documents submitted to the tribunal and without any oral hearing or cross-examination of
the witnesses.
In a situation where the parties have agreed that no oral hearing shall be held, the
normal assumption would be that the tribunal is bound by this agreement. Documents only
arbitrations are appropriate in simple disputes, or where the parties are situated far from one
another, and they consider a hearing inconvenient and unnecessary, or if the dispute revolves
around a point of law, an interpretation of a document or a technical term. Documents only
arbitration is also appropriate where written arguments can be submitted and there is no need to
examine witnesses. However, where the credibility of witnesses is in issue, it will not be
appropriate. The main advantages of the documents only arbitration are in cost, speed and
convenience.
The Arbitration and Conciliation Act 1996, emphasize the autonomy of the parties by
encouraging them to decide their own procedures, provides default procedures, which the parties
can include, exclude or modify, which would better, suits their requirements. The Act is fast track
friendly. Parties are free to make the arbitration time bound and rapid, without the risk of
derogating from the provisions of the Act, which empower the parties to mould the arbitration
according to the degree of haste required. Thus, the Act has provisions that allow for fast track
arbitrations. All that remains then is the will of the parties, the conduct of the proceedings by the
arbitral tribunals, and judicial determination not to interfere.
CHAPTER III :
SUBJECT MATTER OF ARBITRATION
Any commercial matter including an action in tort if it arises out of or relates to a
contract can be referred to arbitration. However, public policy would not permit matrimonial
9

matters, criminal proceedings, insolvency matters anti-competition matters or commercial court

matters to be referred to arbitration. Employment contracts also cannot be referred to arbitration
but director - company disputes are arbitrable (as there is no master servant relationship here) 4 .
Generally, matters covered by statutory reliefs through statutory tribunals would be nonarbitrable.
ROLE OF THE COURT
One of the fundamental features of the Act is that the role of the court has been
minimized. Accordingly, it is provided that any matter before a judicial authority containing an
arbitration agreement shall be referred to arbitration (Section 8 provided the non - applicant
objects no later than submitting its statement of defense on merits). Further, no judicial authority
shall interfere, except as provided for under the Act (Section 5).
In relation to arbitration proceedings, parties can approach the Court only for two
purposes: (a) for any interim measure of protection or injunction or for any appointment of
receiver etc5 ; or (b) for the appointment of an arbitrator in the event a party fails to appoint an
arbitrator or if two appointed arbitrators fail to agree upon the third arbitrator. In such an event,
in the case of domestic arbitration, the Chief Justice of a High Court may appoint an arbitrator,
and in the case of international commercial arbitration, the Chief Justice of the Supreme Court of
India may carry out the appointment6. A court of law can also be approached if there is any
controversy as to whether an arbitrator has been unable to perform his functions or has failed to
act without undue delay or there is a dispute on the same. In such an event, the court may decide
to terminate the mandate of the arbitrator and appoint a substitute arbitrator.
JURISDICTION OF THE ARBITRATOR

4 Comed Chemicals Ltd. v. C.N. Ramchand 2008 (13) SCALE 17

5 This can be even prior to the institution of arbitration proceedings, provided that it
is clear that the applicant intends to take the dispute to arbitration.
6 Section 11 of the Act.
10

The Act provides that the arbitral tribunal may rule on its own jurisdiction, including any
objections with respect to the existence or validity of the arbitration agreement. The arbitration
agreement shall be deemed to be independent of the contract containing the arbitration clause,
and invalidity of the contract shall not render the arbitration agreement void. Hence, the
arbitrators shall have jurisdiction even if the contract in which the arbitration agreement is
contained is vitiated by fraud and/or any other legal infirmity. Further, any objection as to
jurisdiction of the arbitrators should be raised by as party at the first instance, i.e., either prior to
or along with the filing of the statement of defence. If the plea of jurisdiction is rejected, the
arbitrators can proceed with the arbitration and make the arbitral award. Any party aggrieved by
such an award may apply for having it set aside under Section 34 of the Act. Hence, the scheme
is that, in the first instance, the objections are to be taken up by the arbitral tribunal and in the
event of an adverse order, it is open to the aggrieved party to challenge the award.
In SBP & Co. v. Patel Engg Ltd.7 the Supreme Court of India (in a decision rendered by
a Bench of Seven Judges) held that the nature of power conferred on the Court under Section 11
of the Act is judicial (and not administrative) in nature. Accordingly, if parties approach the
Court for appointment of arbitral tribunal (under Section 11) and the Chief Justice pronounces
that he has jurisdiction to appoint an arbitrator or that there is an arbitration agreement between
the parties or that there is a live and subsisting dispute to be referred to arbitration and the Court
constitutes the Tribunal as envisaged, this would be binding and cannot be re-agitated by the
parties before the arbitral tribunal.
In S.B.P & Co. case the Supreme Court has defined what exactly the Chief Justice,
approached with an application under Section 11 of the Act, is to decide at that stage. The Chief
Justice has the power to decide his own jurisdiction in the sense whether the party making the
motion has approached the right court. He has to decide whether there is an arbitration
agreement, as defined in the Act and whether the person who has made the request before him, is
a party to such an agreement. He can also decide the question whether the claim was a dead one;
or a long-barred claim that was sought to be resurrected and whether the parties have concluded

7 (2005) 8 SCC 618

11

the transaction by recording satisfaction of their mutual rights and obligations or by receiving the
final payment without objection.
The Court in SBP & Co case, inter alia, concluded as follows:
(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of
India under Section 11(6) of the Act is not an administrative power. It is a judicial power.
(ii) The power under Section 11(6) of the Act, in its entirety, could be delegated, by the
Chief Justice of the High Court only to another Judge of that Court and by the Chief
Justice of India to another Judge of the Supreme Court.
(iii) In case of designation of a Judge of the High Court or of the Supreme Court, the
power that is exercised by the designated Judge would be that of the Chief Justice as
conferred by the statute.
(iv)

The Chief Justice or the designated Judge will have the right to decide the

preliminary aspects as indicated in the judgment. These will be, his own jurisdiction to
entertain the request, the existence of a valid arbitration agreement, the existence or
otherwise of a live claim, the existence of the condition for the exercise of his power and
on the qualifications of the arbitrator or arbitrators. The Chief Justice or the designated
Judge would be entitled to seek the opinion of an institution in the matter of nominating
an arbitrator qualified in terms of

Section 11(8) of the Act if the need arises but the

order appointing the arbitrator could only be that of the Chief Justice or the designated
Judge.
(v) The District Judge does not have the authority under Section 11(6) of the Act to make
appointment of an arbitrator.
(vi) The High Court cannot interfere with the orders passed by the arbitrator or the
Arbitral Tribunal during the course of the arbitration proceedings and the parties could
approach the Court only in terms of Section 37 of the Act (appealable orders) or in terms
of Section 34 of the Act (setting aside or arbitral award).

12

(vii) Since it is a judicial order, an appeal will lie against the order passed by the Chief
Justice of the High Court or by the designated Judge of that Court only under Article 136
of the Constitution to the Supreme Court.
(viii) No appeal shall lie against an order of the Chief Justice of India or a Judge of the
Supreme Court designated by him while entertaining an application under Section 11(6)
of the Act.
(ix) Where an Arbitral Tribunal has been constituted by the parties without having
recourse to Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to
decide all matters as contemplated by Section 16 of the Act.
CHALLENGE TO ARBITRATOR
An arbitrator may be challenged only in two situations. First, if circumstances exists that
give rise to justifiable grounds as to his independence or impartiality; second, if he does not
possess the qualifications agreed to by the parties. A challenge is required to be made within 15
days of the petitioner becoming aware of the constitution of the arbitral tribunal or of the
circumstances furnishing grounds for challenge. Further, subject to the parties agreement, it is
the arbitral tribunal (and not the court - unlike under the old Act of 1940) which shall decide on
the challenge. If the challenge is not successful the tribunal shall continue with the arbitral
proceedings and render the award, which can be challenged by an aggrieved party at that stage.
This is another significant departure from the Model Law, which envisages recourse to a court of
law in the event the arbitral tribunal rejects the challenge8.
The Indian courts have held that the apprehension of bias must be judged from a healthy,
reasonable and average point of view and not on mere apprehension of any whimsical person.
Vague suspicions of whimsical, capricious and unreasonable people are not our standard to
regulate our vision.9
CONDUCT OF ARBITRATION PROCEEDINGS
8 Article 13 of Model Law
9 International Airports Authority of India v. K.D. Bali & Anr; (1988) 2 SCC 360
13

The arbitrators are masters of their own procedure and subject to parties agreement, may
conduct the proceedings in the manner they consider appropriate. This power includes- the
power to determine the admissibility, relevance, materiality and weight of any evidence 10. The
only restrain on them is that they shall treat the parties with equality and each party shall be
given a full opportunity to present his case11, which includes sufficient advance notice of any
hearing or meeting12. Neither the Code of Civil Procedure nor the Indian Evidence Act applies to
arbitrations13. Unless the parties agree otherwise, the tribunal shall decide whether to hold oral
hearings for the presentation of evidence or for arguments or whether the proceedings shall be
conducted on the basis of documents or other material alone. However the arbitral tribunal shall
hold oral hearings if a party so requests (unless the parties have agreed that no oral hearing shall
be held)14.
Arbitrators have power to proceed exparte where the respondent, without sufficient cause,
fails to communicate his statement of defence or appear for an oral hearing or produce evidence.
However, in such situation the tribunal shall not treat the failure as an admission of the
allegations by the respondent and shall decide the matter on the evidence, if any, before it. If the
claimant fails to communicate his statement of the claim, the arbitral tribunal shall be entitled to
terminate the proceedings15.
TAKING OF EVIDENCE IN ARBITRAL PROCEEDINGS

10 Section 19 (3) and (4)

11 Section 18
12 Section 24 (2)
13 Section 19 of Act and Section 1 of the Evidence Act.
14 Section 24
15 Section 25
14

The Indian Oaths Act 1969 extends to persons who may be authorized by consent of
parties to receive evidence. This Act thus, encompasses arbitral proceedings as well 16. Section 8
of the said Act states that every person giving evidence before any person authorized to
administer oath shall be bound to state the truth on such subject. Thus, witnesses appearing
before an arbitral tribunal can be duly sworn by the tribunal and be required to state the truth on
oath and upon failure to do so, commit offences punishable under the Indian Penal Code17.
However, the arbitrators cannot force unwilling witnesses to appear before them and for
this courts assistance is provided for vide Section 27 of the Act. Under this provision the arbitral
tribunal or a party with the approval of the tribunal may apply to the court seeking its assistance
in taking evidence (this is also provided for in the Model Law). However, Section 27 of the
Indian Act goes beyond the Model Law as it states that any person failing to attend in accordance
with any order of the court or making any other default or refusing to give evidence or guilty of
any contempt of the arbitral tribunal, shall be subject to like penalties and punishment as he may
incur for like offences in suits tried before the court.
Further, the court may either appoint a commissioner for taking evidence or order that the
evidence be provided directly to the arbitral tribunal. These provisions extend to any documents
to be produced or property to be inspected. Section 26 provides for appointment of experts by the
arbitral tribunal for any specific issue. In such situation a party may be required to give the
expert any relevant information or produce any relevant document, goods or property for
inspection as may be required. It will be open to a party (or to the arbitral tribunal) to require the
expert after delivery of his report, to participate in an oral hearing where the parties would have
an opportunity to put questions to him.
GOVERNING LAW
In an international commercial arbitration, parties are free to designate the governing law
for the substance of the dispute. If the governing law is not specified, the arbitral tribunal shall
apply the rules of law it considers appropriate in view of the surrounding circumstances. For
16 Raipur Development Authority v. Chokhamal Contractors, (1989) 2 SCC 721.
17 Section 191 and 193 of the Indian Penal Code.
15

domestic arbitration, however, (i.e., between Indian parties), the tribunal is required to decide the
dispute in accordance with the substantive laws of India.
The Supreme Court in TDM Infrastructure (P) Ltd. v. UE Development India (P)
Ltd.18 held that irrespective of where the central management and control is exercised by a
company, companies incorporated in India, cannot choose foreign law as the governing law of
their arbitration. The nationality of companies incorporated in India being Indian, the intention of
the legislature is that Indian nationals should not be permitted to derogate from Indian law as it
would be against public policy. The Court was of the view that "international commercial
arbitration" meant an arbitration between parties where at least one of it is a body corporate
incorporated in a country other than India. Where both companies are incorporated in India (and
thereby had Indian nationalities), then the arbitration between them cannot be said to be an
international commercial arbitration (even though the central management and control of the
company may be exercised from a country other than India).
FORM AND CONTENT OF AWARDS
The arbitrators are required to set out the reasons on which their award is based, unless
the parties agree that no reasons are to be given or if it arises out of agreed terms of settlement.
The tribunal may make an interim award on matters on which it can also make a final award.
Indian law provides for a very healthy 18% interest rate on sums due under an award. Thus,
unless the arbitral tribunal directs otherwise, the award will carry interest at 18% per annum from
the date of the award till the date of payment. The tribunal is free to award costs, including the
cost of any institution supervising the arbitration or any other expense incurred in connection
with the arbitration proceedings.
SETTING ASIDE OF AWARDS
The grounds for setting aside an award rendered in India (in a domestic or international
arbitration) are provided for under Section 34 of the Act. These are materially the same as in
Article 34 of the Model Law for challenging an enforcement application.
An award can be set aside if:
18 2008 (2) Arb LR 439 (SC) 12
16

a) a party was under some incapacity; or

b) the arbitration agreement was not valid under the governing law; or
c) a party was not given proper notice of the appointment of the arbitrator or on the
arbitral proceedings; or
d) the award deals with a dispute not contemplated by or not falling within the terms of
submissions to arbitration or it contains decisions beyond the scope of the submissions;
or
e) the composition of the arbitral tribunal or the arbitral procedure was not in accordance
with the agreement of the parties; or
f) the subject matter of the dispute is not capable of settlement by arbitration; or
g) the arbitral award is in conflict with the public policy of India.
A challenge to an award is to be made within three months from the date of receipt of the
same. The courts may, however, condone a delay of maximum 30 days on evidence of sufficient
cause. Subject to any challenge to an award, the same is final and binding on the parties and
enforceable as a decree of the Court.
Considerable controversy has been generated as to whether an award is liable to be
challenged under Section 34 on merits. The earlier view, as expounded by the Supreme Court in
Renu Sagar Power Co. Ltd. v. General Electric Co19. was that an award could be set aside if it
is contrary to the public policy of India or the interests of India or to justice or morality but not
on the grounds that it is based on an error of law or fact. The Supreme Court in that case was
faced with the issue to determine the scope of public policy in relation to proceedings for
enforcement of a foreign award under the Foreign Awards (Recognition and Enforcement) Act,
1961. The Court also held that in proceedings for enforcement of a foreign award the scope of
enquiry before the court in which the award is sought to be enforced would not entitle a party to
the said proceedings to impeach the award on merits.
19 (1994) Supp (1) SCC 644
17

However, in a later Supreme Court of India decision in Oil and Natural Gas
Corporation vs. Saw Pipes20 the Court added an additional ground of patent illegality, thereby
considerably widening the scope of judicial review on the merits of the decision. In Saw Pipes
case the court accepted that the scheme of Section 34 which dealt with setting aside the domestic
arbitral award and Section 48 which dealt with enforcement of foreign award were not identical.
The court also accepted that in foreign arbitration, the award would be subject to being set aside
or suspended by the competent authority under the relevant law of that country whereas in
domestic arbitration the only recourse is to Section 34.
The Supreme Court observed:
But in a case where the judgment and decree is challenged before the Appellate Court
or the Court exercising revisional jurisdiction, the jurisdiction of such Court would be wider.
Therefore, in a case where the validity of award is challenged there is no necessity of giving a
narrower meaning to the term 'public policy of India'. On the contrary, wider meaning is
required to be given so that the 'patently illegal award' passed by the arbitral tribunal could be
set aside.
Similarly, if the award is patently against the statutory provisions of substantive law
which is in force in India or is passed without giving an opportunity of hearing to the parties as
provided under Section 24 or without giving any reason in a case where parties have not agreed
that no reasons are to be recorded, it would be against the statutory provisions. In all such cases,
the award is required to be set aside on the ground of 'patent illegality'.
The court in Saw Pipes case although adopted the wider meaning to the term public
policy but limited its application to domestic awards alone. The Saw Pipes case has generated
some controversy, and it remains to be seen if it will stand the test of time.
The position of a foreign award has also undergone some recent controversy. A foreign
award is enforceable under Part II of the Act if it is rendered in a country that is a signatory to the
New York Convention or Geneva Convention and that territory is notified by the Central
Government of India. Once an award is held to be enforceable it is deemed to be a decree of the
20 (2003) 5 SCC 705
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court and can be executed as such. Under the Act there is no procedure for setting aside a foreign
award. A foreign award can only be enforced or refused to be enforced but it cannot be set aside.
This fundamental distinction between a foreign and a domestic award has been altered by
the Supreme Court in the recent case of Venture Global Engineering v. Satyam Computer
Services Ltd.21 (Venture Global). Here the Supreme Court was concerned with a situation where
a foreign award rendered in London under the Rules of the LCIA was sought to be enforced by
the successful party (an Indian company) in the District Court, Michigan, USA. The dispute
arose out of a joint venture agreement between the parties. The respondent alleged that the
appellant had committed an event of default under the shareholders agreement and as per the
said agreement exercised its option to purchase the appellants shares in the joint venture
company at book value. The sole arbitrator appointed by the LCIA passed an award directing the
appellant to transfer its shares to the respondent. The respondent sought to enforce this award in
the USA. The appellant filed a civil suit in an Indian District Court seeking to set aside the
award. The District Court, followed by the High Court, in appeal, dismissed the suit holding that
there was no such procedure envisaged under Indian law.
However, the Supreme Court in appeal, following its earlier decision in the case of
Bhatia International v. Bulk Trading 22 held that even though there was no provision in Part II
of the Act providing for challenge to a foreign award, a petition to set aside the same would lie
under Section 34 Part I of the Act (i.e. it applied the domestic award provisions to foreign
awards). The Court held that the property in question (shares in an Indian company) are situated
in India and necessarily Indian law would need to be followed to execute the award. In such a
situation the award must be validated on the touchstone of public policy of India and the Indian
public policy cannot be given a go by through the device of the award being enforced on foreign
shores. Going further the Court held that a challenge to a foreign award in India would have to
meet the expanded scope of public policy as laid down in Saw Pipes (supra) (i.e. meet a
challenge on merits contending that the award is patently illegal).

21 (2008) 4 SCC 190

22 (2002) 4 SCC 105
19

The Venture Global case is far reaching for it creates a new procedure and a new ground
for challenge to a foreign award (not envisaged under the Act). The new procedure is that a
person seeking to enforce a foreign award has not only to file an application for enforcement
under Section 48 of the Act, it has to meet an application under Section 34 of the Act seeking to
set aside the award. The new ground is that not only must the award pass the New York
Convention grounds incorporated in Section 48 it must pass the expanded public policy ground
created under Section 34 of the Act.
In practice, the statutorily enacted procedure for enforcement of a foreign award would
be rendered superfluous till the application for setting aside the same (under Section 34) is
decided. The statutorily envisaged grounds for challenge to the award would also be rendered
superfluous as notwithstanding the success of the applicant on the New York Convention
grounds, the award would still have to meet the expanded public policy ground (and virtually
have to meet a challenge to the award on merits). The Venture Global case thus largely renders
superfluous the statutorily envisaged mechanism for enforcement of foreign awards and
substitutes it with a judge made law. The Judgement thus is erroneous. Moreover, in so far as the
Judgment permits a challenge to a foreign award on the expanded interpretation of public policy
it is per incuriam as a larger, three Bench decision in the case of Renu Sagar (supra) holds to the
contrary.
Further Saw Pipes (on which Venture Global relies for this proposition) had clearly
confined its expanded interpretation of public policy to domestic awards alone (lest it fall foul of
the Renu Sagar case which had interpreted the expression narrowly). The Supreme Court in
Venture Global did not notice this self-created limitation in Saw Pipes nor did it notice the
narrower interpretation of public policy in Renu Sagar and therefore application of the expanded
interpretation of public policy to foreign awards is clearly per incuriam.

CONCLUSION :
Thus to conclude, the different kinds of arbitration and the proceedings of arbitration has
been discussed in detail in the light of decided case laws. India has in place a modern, an
efficient Arbitration Act. It has put in place a progressive piece of legislation which is essentially
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based on the Model Law and the UNCITRAL Arbitration Rules. Any departure therefrom is
essentially aimed at keeping court intervention at bay.
BIBLIOGRAPHY :
BOOKS REFERRED :
1. LAW OF ARBITRATION & CONCILIATION by Avtar Singh, Tenth Edition
2. ARBITRATION AND CONCILIATION ACT,1996, by Dr.S.C.Tripathi, Fifth Edition
3. ARBITRATION, CONCILIATION AND ALTERNATIVE DIPUTE RESOLUTION
SYSTEMS, by Dr.S.R.myneni,

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