The arbitration and conciliation act 1996 (Act 26 of 1996) is an act to consolidate and amend India’s laws relating to domestic and international commercial arbitration. This act is based on the 1985 UNCITRAL Model law and was enacted to consolidate, define and amend the law in relation to domestic arbitration, International commercial arbitration and enforcement of foreign awards in India.
The Main objectives and aim of the arbitration and conciliation act,1996 is to
a) Reduce the supervisory role of the court.
b) Ensure the speedy disposal of the case(especially commercial in nature)
WHAT ARE ARBITRAL?
The arbitration and conciliation act didn’t specify what matters are arbitral and what are non arbitral. The Hon’ble supreme court of India in A. Ayyasamy vs A. Paramasivam & Ors on 4 October, 2016: AIR 2016 SUPREME COURT 4675, 2016 (10) SCC 386, 2016 held that certain kinds of disputes may not be capable of adjudication through the means of arbitration. The courts have held that certain kinds of disputes may not be capable of adjudication through arbitration.
Para 9 of the Judgment
the Courts have held that certain kinds of disputes may not be capable of adjudication through the means of arbitration. The Courts have held that certain disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, cannot be referred to arbitration. Following categories of disputes are generally treated as non-arbitrable[4]:
(i) patent, trademarks and copyright;
(ii) anti-trust/competition laws;
(iii insolvency/winding up;
(iv) bribery/corruption;
(v) fraud;
(vi) criminal matters.
The matters which fall exclusively within the domain of public for a then that disputes are non-arbitrable and cannot be referred and adjudicated by the arbitral tribunal.
In the Booz-Allen & Hamilton Inc vs Sbi Home Finance Ltd. & Ors on 15 April, 2011: AIR 2011 SUPREME COURT 2507, 2011 (5) SCC 532 Hon’ble Supreme Court gave an very good understanding of arbitral and non arbitral, The para 21 of the Judgement explains arbitrability and its three facets of arbitrability
i) whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the arbitral tribunal) or whether they would exclusively fall within the domain of public fora (courts).
(ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the `excepted matters’ excluded from the purview of the arbitration agreement.
(iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the arbitral tribunal, or whether they do not arise out of the statement of claim and the counter claim filed before the arbitral tribunal. A dispute, even if it is capable of being decided by arbitration and falling within the scope of arbitration agreement, will not be `arbitrable’ if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such joint list of disputes, does not form part of the disputes raised in the pleadings before the arbitral tribunal.(PARA 21)
Now The Hon’ble Supreme court in the subsequent para 22 explains the joint list of disputes, which cannot be referred to arbitration.
The well recognized examples of non-arbitrable disputes are : (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences;
(ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody;
(iii) guardianship matters;
(iv) insolvency and winding up matters;
(v) testamentary matters (grant of probate, letters of administration and succession certificate); and
(vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction (PARA 22).
In the BOOZ ALLAN the Hon’ble Supreme court laid down, which matters are non-arbitrable.
Russell [23rd Edition, page 470, para 8.043] merely observes that English law does recognize that there are matters which cannot be decided by means of arbitration.
“In practice therefore, the question has not been whether a particular dispute is capable of settlement by arbitration, but whether it ought to be referred to arbitration or whether it has given rise to an enforceable award. No doubt for this reason, English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not.
This law is also an inheritance of English law.
COMMENCEMENT OF ARBITRAL PROCEEDING AND COMPOSITION OF ARBITRAL TRIBUNAL
The arbitral proceedings is commenced when there is an arbitration agreement or arbitration clause in the agreement, which is stipulated under section 7 of Arbitration and Conciliation act.
7. Arbitration agreement.—
(1) In this Part, “arbitration agreement” means 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.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in—
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication 1 [including communication through electronic means] which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
The two ways the composition of arbitral tribunal happens,
A) By giving notice under section 21 of the Arbitration and Conciliation act.
21. Commencement of arbitral proceedings.—Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
B) By filing application before the Hon’ble High Court under section 11 of the said act, if the notice given by any one of the party is not obeyed by either party whom the notice was given, then for appointment of arbitrator, in case of any failure, either party can approach Hon’ble High court under section 11(5) of the act.
DOCTRINE OF KOMPETENZ KOMPETENZ( Competence de la Competence)
Before 2015 Amendment in the Arbitration and Conciliation act, the provision of section 8(1) stipulates about the existence of arbitration agreement, if court finds that prima facie valid arbitration agreement exist, then only the court can refer the parties to the arbitration tribunal. This was substituted by Act 3 of 2016 the prima facie valid agreement is not required to be examined by the court. This Amendment is brought by the recommendation of law commission and Hon’ble Supreme court in various judgements, due to gross violation of the section by the subordinate district judiciary. The courts prior work is to refer the parties to arbitration. The arbitral tribunal has the jurisdiction over the matter concerning whether there is valid agreement or not. (application under section 8 of the act is filed to referring the matter to arbitration tribunal , when a suit is filed and pending in civil or commercial court then if, either party may approach for arbitration tribunal, if only arbitration agreement or clause exists, for better understanding refer section 8 of arbitration and conciliation act.)
The doctrine was first arisen in the UNCITRAL model law on International Commercial Arbitration. The Article 16(1) of the model and Article 23(1) of the arbitration rules both dictate that the arbitral tribunal shall have the power to rule on its own. Then, it evolved in India by the recommendation of Law Commission 246th report and which was referred by many supreme court judgments. The doctrine is intended to minimize judicial intervention, so the arbitral process is not thwarted.
Therefore, Indian Arbitration and Conciliation act is based on the doctrine of Kompetence- Kompetence, the arbitrators are empowered to make a final ruling as to their jurisdiction with no subsequent review of the decision by any court. According to section 16 of the Arbitration and Conciliation act stipulates that the arbitral tribunal has competence to rule on its jurisdiction without any interference from the judicial authority.
SETTING ASIDE OF ARBITRAL AWARD , APPEALS AND ENFORCEMENT OF ARBITRAL AWARD
The arbitral award can be set aside by the court by filing petition under section 34 of the act.The agrived party can approach court and the court can set aside the arbitral award by the following grounds.
1) The arbitration agreement is not valid under the law.
2) The notice under section 21 is not properly given to the party (ie. Not given proper notice)
3) The matter is not arbitral in nature and so.
Appeal is stipulated under Chapter 9 of the act and section 37 of the act, normally appeal from the award lies to the superior court of nature of order passed in the subordinate court, it is same like hierarchy of civil court.
37. Appealable orders.—(1) 2 [Notwithstanding anything contained in any other law for the time being in force, an appeal] shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:— 3 [(a) refusing to refer the parties to arbitration under section 8; (b) granting or refusing to grant any measure under section 9; (c) setting aside or refusing to set aside an arbitral award under section 34.]
(2) Appeal shall also lie to a court from an order of the arbitral tribunal— (a) accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or (b) granting or refusing to grant an interim measure under section 17. (3)
No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or takeaway any right to appeal to the Supreme Court.
The Enforcement of the award happens by filing an Execution petition under Order 21 of Civil Procedure Code read with 36 of the Arbitration and Conciliation act.
The above discussion provides a concise gist and summary of the law. This overview has endeavoured to encapsulate the fundamental principles, concepts that underpin this complex and multifaceted area of arbitration and conciliation act. However, it is essential to note that the practical application and enforcement of these act are equally crucial aspects that warrant further examination. In the next part of this discussion, we will delve into the nuances of enforcement, jurisdiction etc.
(AUTHOR – Adv Santhosh. A, is an Advocate Practicing before District and sessions Courts in Coimbatore, Madurai and Debt Recovery Tribunals, Tax Tribunals and can be contacted at san24jot@gmail.com)REFERENCE
1. Booz-Allen & Hamilton Inc vs Sbi Home Finance Ltd. & Ors on 15 April, 2011: AIR 2011 SUPREME COURT 2507, 2011 (5) SCC 532 .
2. A. Ayyasamy vs A. Paramasivam & Ors on 4 October, 2016: AIR 2016 SUPREME COURT 4675, 2016 (10) SCC 386, 2016.
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