UNIT I

Arbitration
Arbitration is defined in the law as an alternative dispute
resolution method in which parties choose a neutral third-
party who will hear the dispute, review the evidence, and
render a ruling. If appropriate, the arbiter may award
damages. Arbitration proceedings settle legal disputes
without litigation in a court.

Arbitration in India:
In recent years, arbitration has grown leaps and bounds
worldwide. Due to the underlying principles of party
autonomy and confidentiality, it has flourished as a
standalone dispute resolution mechanism. The arbitration
agreement forms a binding procedure to be followed by
the parties as well as the arbitral tribunal in its decision
making. The underlying principles of arbitration such as
party autonomy and confidentiality have made it an
attractive choice of dispute resolution among the parties,
however, the technicalities involved in arbitration can
make it seem a tad bit daunting.

One must understand that unlike the traditional dispute

resolution methods, the arbitral process does not begin
from the date the dispute arises. Regardless of the dispute,
the arbitration process starts when the parties enter into an
arbitration agreement. At the time of dispute, it is the
arbitration agreement that mandates, guides and
establishes the arbitration proceedings. In other words, the
facts decide and guide the law, not the other way round.
The arbitration agreement, therefore, becomes a vital
aspect of any agreement where the parties choose to take
their issues to arbitrate. and requires considerable
brainstorming and foresight.

History of Arbitration in India

The codified practice of arbitration in India dates back to
the 19th century when the government enacted the Indian
Arbitration Act, 1899. The Act, however, was confined
to the three princely states, i.e., Bombay, Madras and
Calcutta. Later, however, arbitration found mention in the
Code of Civil Procedure, 1902 under Section 89. But
due to lack of robust procedural modalities, it merited an
independent statute. In turn, the Arbitration Act, 1940
(hereinafter 1940 Act) came into force which applied to
the whole of India. The 1940 Act, although an
improvement to the prior Act, proved inefficient,
cumbersome and lacking in the various domains. The Act
also faced criticism from the apex court; Justice D.A.
Desai stated in Guru Nanak Foundation v Rattan
Singh – “Interminable, time-consuming, complex and
expensive Court procedures impelled jurists to search for
an alternative forum, less formal, more effective and
speedy for resolution of disputes, avoiding procedural
claptrap and this led them to Arbitration Act, 1940.
However, the way in which the proceedings under the Act
are conducted and without exception challenged in
Courts has made Lawyers laugh and legal philosophers
weep.”

Hence, the Arbitration and Conciliation Act, 1996

(hereinafter 1996 Act or the Act) was enacted, based on
the UNCITRAL Model Law on International
Commercial Arbitration, 1985. The new Act came into
force with a breath of fresh air of an expedited and
improved procedure. It also attracted cross border trade
and investment after the remarkable shift of global policy
in 1991. The Arbitration and Conciliation Act, 1996
consolidated and amended the existing Arbitration Act,
1940, Arbitration (Protocol & Convention) Act, 1937
and the Foreign Awards Act, 1961. Part 1 of the Act
dealt with domestic arbitration and enforcement of the
domestic award while Part 2 dealt with the enforcement
of foreign awards arising from the Geneva Convention
and the New York Convention.

Despite the far-reaching improvements made in the

statute, arbitration failed to emerge as a sound and reliable
resolution mechanism due to a multitude of reasons.

Due to the lack of a fee matrix, the arbitrators bombarded

the parties by charging exorbitant fees. The application to
the High Court seeking an award to be set aside under
Section 34 automatically stayed the enforcement of the
award, thereby prolonging the remedy to the award
holding party. Furthermore, there was no time limit to
ensure that the promise of the expedite procedure is
actually fulfilled.

After facing serious challenges with the 1996 Act, the

government invited suggestions from several eminent
jurists and amended the Act in 2015. The Arbitration and
Conciliation (Amendment) Act, 2015 brought sweeping
changes to the procedure and entailed a series of strong
judicial interpretations. The amendment was essentially
founded on the principles to strengthen the arbitral
tribunal and minimize the scope of intervention by the
court.

Despite these improvements, the lack of institutional

arbitration culture was felt strongly as most of the
arbitrations were ad hoc. A High-Level Committee to
Review the Institutionalization of Arbitration
Mechanism in India was constituted on 13th January
2017 and headed by Justice B.N. Srikrishna. In line with
the committee’s recommendations, the Arbitration and
Conciliation (Amendment) Act, 2019 was passed. The
highlight of the amendment was the introduction of the
Arbitration Council of India (ACI) to promote
arbitration and grade arbitration institutions.
Key Elements of Arbitration:

1. Arbitration Agreement:
Arbitration proceedings begin with a well-defined
agreement between the parties. This written contract
delineates the scope of disputes subject to arbitration, the
manner of appointing arbitrators, and the procedural
framework.

2. Arbitrators:
A fundamental aspect of arbitration is the autonomy
granted to parties in selecting arbitrators. This ensures
that the arbitral tribunal possesses the expertise necessary
to adjudicate the specific nature of the dispute. The Act
allows for a sole arbitrator or a panel, depending on the
complexity and magnitude of the issues involved.

3. Arbitral Proceedings:
In contrast to the often-formal court proceedings,
arbitration adopts a more flexible and informal approach.
Parties present evidence and arguments, and arbitrators
render decisions. This streamlined process typically
results in quicker resolutions compared to the traditional
litigation route.

4. Enforcement of Awards:
Arbitral awards, once rendered, are considered final and
binding on the parties involved. This finality is crucial in
achieving the overarching goal of arbitration – providing
a definitive resolution to disputes. The successful party
can seek enforcement in civil courts, emphasizing the
enforceability of arbitral awards.

5. Role of Courts:
Courts play a limited yet vital role in the arbitration
process. While upholding the sanctity of the arbitration
agreement, they can intervene to appoint arbitrators,
enforce awards, or set aside an award under specified
circumstances. This delicate balance ensures that the
arbitration process retains its autonomy while benefiting
from judicial support when needed.

Advantages of Arbitration:

1. Flexibility:
One of the primary advantages of arbitration is its
inherent flexibility. Parties have the freedom to tailor the
procedural aspects of arbitration to suit their unique needs
and preferences. This adaptability enhances the efficiency
and effectiveness of the dispute resolution process.

2. Confidentiality:
Arbitration proceedings, unlike court litigation, are
generally conducted in private. This confidentiality
provides a level of privacy to the parties involved,
encouraging open communication and negotiation without
the fear of public scrutiny.

3. Neutrality:
The selection of arbitrators based on their expertise
ensures a neutral and informed decision-making process.
This is particularly advantageous when dealing with
complex or industry-specific disputes, where specialized
knowledge is essential for a fair adjudication.

4. Global Recognition:
Arbitral awards in India hold international credibility,
facilitating the resolution of cross-border disputes. The
recognition and enforcement of awards under the New
York Convention contribute to India's position in the
global arbitration arena.

Challenges and Criticisms:

1. Limited Appellate Mechanism:
While arbitration thrives on its autonomy, some critics
argue that the limited grounds for challenging awards may
hinder the pursuit of justice. The absence of a robust
appellate mechanism could be perceived as a drawback,
especially in cases where a more in-depth review is
warranted.

2. Costs:
While generally considered a cost-effective alternative
to litigation, the costs associated with arbitration can
escalate, particularly in complex cases. The fees for
arbitrators, legal representation, and administrative
expenses may pose challenges, especially for parties with
limited financial resources.

3. Enforcement Delays:
Despite the finality of arbitral awards, delays in the
enforcement process can occur when parties seek recourse
in the courts. This potential delay raises questions about
the efficacy of the enforcement mechanism and the need
for expeditious resolution.

Types of Arbitration

Arbitration, as a versatile alternative dispute resolution

mechanism, manifests in various forms to accommodate
the diverse needs and preferences of disputing parties.
This comprehensive study delves into the intricacies of
different types of arbitration, shedding light on the
nuances and applications of each.

1. Ad Hoc Arbitration:
Ad hoc arbitration embodies the essence of party
autonomy. In this form, disputing parties design and
control the arbitration process without reliance on
established institutional rules. While providing the
advantage of flexibility, ad hoc arbitration demands
careful drafting of arbitration clauses and active
management. Parties opting for this approach appreciate
the freedom to tailor procedures to suit the unique aspects
of their dispute.

2. Institutional Arbitration:
Contrasting with ad hoc arbitration, institutional
arbitration involves disputes resolved under the auspices
of established arbitration institutions. Examples include
the International Chamber of Commerce (ICC), the
London Court of International Arbitration (LCIA), or
domestic entities like the Indian Council of Arbitration
(ICA). Institutional arbitration provides a structured
framework, with institutions facilitating the appointment
of arbitrators and administering procedural aspects. This
brings a degree of procedural certainty and administrative
support to the process.

3. Domestic Arbitration:
Within the confines of a single country, domestic
arbitration unfolds. Governed by the Arbitration and
Conciliation Act, 1996, in India, this form of arbitration
relies on familiarity with local laws and procedures.
Domestic arbitration is chosen for its efficiency and the
ability to navigate disputes within a known legal
framework.

4. International Arbitration:
Stepping beyond national borders, international
arbitration comes into play. This type of arbitration
involves disputes with a cross-border element, whether
parties hail from different countries or the contractual
context has international dimensions. Institutions such as
ICC or the International Centre for Dispute Resolution
(ICDR) often administer these proceedings, providing a
neutral ground for parties facing diverse legal systems.

5. Adjudicatory Arbitration:
In adjudicatory arbitration, arbitrators function akin to
judges, rendering decisions based on legal principles and
presented evidence. This form of arbitration carries a
more formal demeanor, resembling traditional litigation.
Adjudicatory arbitration is suitable for complex disputes
that demand a meticulous legal analysis.

6. Med-Arb:
Blending mediation and arbitration, the Med-Arb
approach introduces a dual-phase process. Initially, a
neutral third party attempts mediation to facilitate a
consensual resolution. If mediation fails, the same
individual transitions into an arbitrator, providing a
binding decision. This hybrid model accommodates
parties' preferences for an attempt at amicable resolution
before resorting to adjudication.

7. Construction Arbitration:
Tailored to the construction industry, this type of
arbitration addresses disputes arising from construction
contracts. With technical complexities inherent in
construction projects, arbitrators often possess expertise
in construction law and engineering. This ensures an
informed adjudication process capable of navigating
intricate technical aspects.

8. Investor-State Arbitration:
Investor-State arbitration arises from disputes between a
foreign investor and a host state. Typically governed by
bilateral investment treaties (BITs) or international
investment agreements, this form of arbitration provides
investors with a mechanism to seek redress for perceived
breaches of treaty obligations by the host state.

9. Online Arbitration:
Embracing technological advancements, online arbitration
leverages electronic means for dispute resolution. Video
conferencing, email, and online platforms facilitate the
proceedings, offering convenience and accessibility,
particularly for parties located in different geographical
regions.

10. Family Law Arbitration:

Within the realm of family disputes, family law
arbitration provides a specialized and private forum.
Covering matters such as divorce, child custody, and
spousal support, arbitrators in family law cases often
possess expertise in family law. This specialization allows
for tailored solutions that consider the unique dynamics
and sensitivities of family-related issues.

Arbitration Law in India: Evolution Before and After

1996

Before 1996: The Legal Landscape

Prior to the enactment of the Arbitration and Conciliation
Act in 1996, arbitration law in India was primarily
governed by the Arbitration Act of 1940. This earlier
legislation, inherited from British colonial rule, had its
limitations and was considered inadequate to address the
complexities of modern arbitration.

Characteristics of the Arbitration Act, 1940:

1. Procedural Rigidity:
The 1940 Act had a rigid procedural framework,
mirroring the court-centric approach of the time.
Arbitration proceedings were often bogged down by
formalities, leading to delays and increased costs.

2. Limited Judicial Support:

Judicial intervention in arbitration matters was
extensive, and the courts played a substantial role in the
arbitration process. This resulted in a lack of autonomy
for the parties and prolonged resolution timelines.

3. Enforcement Challenges:
The enforcement of arbitral awards faced challenges, as
the legal framework lacked clarity and efficiency. Parties
often encountered obstacles when seeking the
enforcement of awards through the court system.

4. Inadequate to Modern Commercial Needs:

With the evolving nature of commerce and trade, the
1940 Act struggled to meet the demands of modern
business. The legal framework was ill-equipped to handle
the intricacies of international arbitration and complex
commercial disputes.

After 1996
The Arbitration and Conciliation Act, 1996, heralded a
significant shift in India's arbitration landscape. This
legislative overhaul aimed to align the country's
arbitration laws with international best practices,
promoting efficiency, flexibility, and party autonomy.

Key Changes Introduced by the Arbitration and

Conciliation Act, 1996:

1. Party Autonomy:
The 1996 Act emphasized party autonomy, allowing
parties to choose their arbitrators, determine the arbitral
procedure, and define the scope of the arbitration
agreement. This shift empowered parties to tailor the
arbitration process to suit their specific needs.

2. Reduced Judicial Intervention:

Unlike its predecessor, the 1996 Act sought to limit
judicial intervention. Courts were directed to adopt a
supportive role, stepping in only when necessary, such as
appointing arbitrators or enforcing awards. This approach
aimed to streamline the arbitration process and reduce
delays.

3. Recognition of International Standards:

The Act incorporated principles from the UNCITRAL
Model Law on International Commercial Arbitration,
aligning India with international standards. This
recognition facilitated smoother cross-border arbitrations
and enhanced the enforceability of awards.

4. Efficient Enforcement Mechanism:

The 1996 Act introduced a more efficient mechanism
for the enforcement of arbitral awards. The grounds for
challenging awards were specified, providing clarity and
reducing the scope for frivolous litigation.

5. Institutional Arbitration:
The Act acknowledged the importance of institutional
arbitration by allowing parties to refer their disputes to
recognized arbitration institutions. This brought a level of
structure and procedural certainty to the arbitration
process.

6. Definition of Arbitral Tribunal's Powers:

The Act expressly defined the powers of the arbitral
tribunal, including its authority to rule on its jurisdiction.
This clarification aimed to minimize court interference on
jurisdictional matters and expedite the arbitration process.

Impact and Significance:

The Arbitration and Conciliation Act, 1996, marked a

watershed moment in India's arbitration history. Its
provisions facilitated a more conducive environment for
arbitration, transforming it into a preferred method for
resolving disputes. The Act's recognition of party
autonomy, reduced judicial interference, and alignment
with international standards contributed to the growth of
arbitration in India, both domestically and on the global
stage.

Definition of Arbitration Agreement:

In the context of the Arbitration and Conciliation Act,

1996, an arbitration agreement is a legally binding
contract between parties to resolve disputes through
arbitration rather than traditional court litigation. Section
7 of the Act elucidates the essential characteristics and
requirements that constitute a valid arbitration agreement.

Requirements of a Valid Arbitration Agreement:

1. In Writing or Electronic Form (Section 7):

- The Act mandates that the arbitration agreement must
be in writing or take the form of an electronic record.
- This requirement underscores the importance of a
clear and tangible expression of the parties' intent to
submit disputes to arbitration.

2. Clear Intention to Arbitrate (Section 7):

- The agreement must reflect a clear intention to resolve
disputes through arbitration.
- Ambiguities regarding the parties' commitment to
arbitration may lead to challenges, emphasizing the need
for clarity and precision in drafting.

3. Incorporation by Reference (Section 7):

- The Act allows for the incorporation of an arbitration
clause by reference. This means that the main contract
may refer to another document containing the arbitration
agreement.
- The reference must be clear and specific, ensuring that
parties are aware of and consent to the arbitration clause.

4. Consent of the Parties (Section 7):

- Essential to the validity of an arbitration agreement is
the mutual consent of the parties.
- Parties must willingly agree to submit their disputes to
arbitration, and any element of coercion or lack of
genuine consent may render the agreement invalid.

5. Clarity in Designating Arbitral Tribunal (Section 7):

- The arbitration agreement must designate a specific
arbitral tribunal or provide a method for appointing
arbitrators.
- This ensures that the arbitration process has a defined
structure, contributing to the efficient resolution of
disputes.

6. Arbitrability of the Dispute (Section 8):

- The Act requires that the subject matter of the dispute
is capable of being resolved by arbitration.
- Certain matters, such as criminal offenses or disputes
involving rights in rem, may not be arbitrable, and an
arbitration agreement attempting to cover such matters
may be deemed invalid.

● disputes relating to rights and liabilities which give

rise to or arise out of criminal offences;
● matrimonial disputes relating to divorce, judicial
separation, restitution of conjugal rights, child
custody;
● guardianship matters;
● insolvency and winding-up matters;
● testamentary matters (grant of probate, letters of
administration and succession certificate);
● eviction or tenancy matters governed by special
statutes where the tenant enjoys statutory protection
against eviction and only the specified courts are
conferred jurisdiction to grant eviction or decide
the disputes.

7. Separability (Doctrine of Severability) (Section 16):

- The doctrine of separability recognizes the autonomy
of the arbitration agreement. Even if the main contract is
found to be void, the arbitration clause may still be
enforceable.
- This principle ensures that the fate of the main
contract does not automatically determine the
enforceability of the arbitration agreement.

8. No Contravention of Public Policy (Section 34):

- An arbitration agreement should not contravene public
policy.
- If an agreement or its enforcement is against the
principles of public policy, the courts may refuse to
uphold the arbitration clause.

The Significance of a Well-Crafted Arbitration

Agreement

Arbitration, as a preferred alternative dispute resolution

mechanism, derives its efficacy and enforceability from
the significance of the underlying arbitration agreement.
The agreement, serving as the foundation of the entire
arbitral process, holds paramount importance in shaping
the course and outcome of dispute resolution under the
Arbitration and Conciliation Act, 1996.

1. Autonomy and Party Intent:

- The arbitration agreement is a manifestation of party
autonomy, reflecting the intent of the disputing parties to
resolve their conflicts outside traditional court litigation.
- It grants parties the freedom to tailor the arbitration
process to suit their specific needs, promoting a
consensual and customized approach to dispute
resolution.

2. Clarity and Avoidance of Ambiguity:

- A well-crafted arbitration agreement is marked by
clarity and precision, leaving no room for ambiguity
regarding the parties' commitment to arbitration.
- Ambiguities may lead to disputes about the validity or
scope of the agreement, underscoring the importance of
meticulous drafting and explicit terms.

3. Scope and Subject Matter:

- The agreement delineates the scope of disputes subject
to arbitration, defining the boundaries of the arbitral
process.
- By specifying the subject matter, parties ensure that
the arbitration agreement is tailored to the specific issues
at hand, avoiding uncertainty about the arbitrability of
certain disputes.

4. Enforcement Mechanism:
- The arbitration agreement establishes the mechanism
for enforcing the decision of the arbitral tribunal.
- Parties voluntarily commit to abide by the arbitral
award, and the agreement sets the stage for a more
efficient enforcement process compared to traditional
litigation.

5. Designation of Arbitral Tribunal:

- The agreement designates the arbitral tribunal or
outlines a method for appointing arbitrators.
- This provision ensures that the arbitration process has
a clear and defined structure, contributing to the
expeditious resolution of disputes.

6. Flexibility and Expediency:

- Arbitration agreements, when well-constructed,
provide flexibility in procedural matters, allowing parties
to adopt a process that suits their preferences.
- This flexibility contributes to the expedient resolution
of disputes, as parties can tailor the proceedings to fit the
specific needs of their case.

7. Doctrine of Separability:
- The doctrine of separability, recognized by the
Arbitration and Conciliation Act, upholds the autonomy
of the arbitration agreement.
- Even if the main contract is found void, the arbitration
agreement remains enforceable, ensuring that the arbitral
process is not automatically compromised by issues
affecting the primary contract.

8. Consent and Voluntariness:

- Perhaps most crucially, the arbitration agreement
underscores the element of consent and voluntariness.
- Disputing parties willingly commit to arbitration,
fostering a cooperative and participatory approach to
conflict resolution that is absent in compulsory court
litigation.

Forms of Arbitration Agreement

A fundamental requirement under Section 7 of the 1997

Act is that an arbitration agreement shall be in writing.
Besides that, Section 7 grants liberty to the parties to form
an arbitration agreement in multiple ways as enumerated
below:
● A standalone separate Arbitration Agreement

A separate arbitration agreement can be formed in

addition and reference to the operative agreement
between the parties.

● An Arbitration Clause

An arbitration clause can be formed in the operative

agreement as to the section of the agreement that deals
with the rights and options of the parties in the event of a
legal dispute arising out of the contract. An arbitration
clause is construed as an arbitration agreement.

● Incorporation by reference

An arbitration clause contained in a separate contract can

also be incorporated in a contract being drafted. As per
Section 7(5), any reference to a document containing an
arbitration clause shall also be construed as an arbitration
agreement provided that the referred contract is in writing
and the reference is made with the intention to make that
arbitration clause the part of the contract.

In M/s Elite Engineering and Construction (HYD.)

Private Ltd. v. M/s Techtrans Construction India Private
Ltd., the Supreme Court held that a general reference to
the incorporation of a separate arbitration clause will not
be tenable in law. The reference shall be clear and must
indicate the intention of the parties to incorporate.

● By communication

According to Section 7(b) of the 1996 Act, an arbitration

agreement can also be inferred from the exchange of
letters, telex, telegrams, or other means of
telecommunication, which provide a record of the
agreement between the parties. In short, an agreement can
be construed from the correspondence of the parties
where there is a clear and unequivocal intention to refer
the disputes to arbitration.
Recently, in Galaxy Infra and Engineering Pvt. Ltd v.
Pravin Electricals Pvt. Ltd the Delhi High Court held that
the draft agreement exchanged by email between the
parties can be construed as a valid arbitration agreement.

In Pravinchandra Murarji Savla v. Meghji Murji Shah, it

was held that it is the substance of the agreement and not
the form which is of importance.

Also, as per Section Section 7(c) of the 1996 Act and S.N.
Prasad v. Monnet Finance Ltd., where a statement of
claims or allegations is made and is met with ‘non-denial’
by the other party, the presence of an arbitration
agreement can be construed. Therefore in the

Even though the 1996 Act has left the field open with a
plethora of ways to form an arbitration agreement, it is
always recommended as a standard practice to choose to
have an arbitration clause in a contract itself.
Drafting an Effective Arbitration Agreement

Supreme Court, in the cases Jagdish Chander v. Ramesh

Chander and K. K. Modi v. K. N. Modi directly tackled
the question of what constitutes a valid arbitration
agreement. The Hon’ble Court arrived at a list of
principles that should be incorporated in an arbitration
agreement. The principles are as follows:

1. The arbitration agreement must be in writing.

2. The parties shall agree to refer any dispute (present
or future) arising out of a contract to a private
tribunal.
3. The private tribunal should be empowered to
adjudicate upon the disputes in an impartial
manner, giving due opportunity to the parties to put
forth their case before it.
4. The parties must agree to be bound by the decision
of the arbitral tribunal.
5. The intention of the parties to refer the dispute to a
private tribunal must be unequivocally reflected.
6. There must be ‘consensus ad idem’ between the
parties i.e. they should agree to the same thing in
the same sense.
7. The words shall contemplate an obligation and
determination on the part of the parties to invoke
arbitration and not merely a possibility. For
example, use of the words such as “parties can if
they so desire, refer their dispute to arbitration” or “
in the event of any dispute, the parties may also
agree to refer the same to arbitration” shall not be
construed as submission to arbitration.
8. The agreement clauses shall not in any way
specifically exclude any of the aforementioned
essentials. For example, a clause permitting the
tribunal to decide a claim without hearing the other
side.
Although it is always preferable to draft clear and
unambiguous clauses, an arbitration agreement not
mentioning the words “arbitration”, “arbitration tribunal”
and/or “the arbitrator” may still be considered a valid
arbitration agreement if the basic attributes of a valid
arbitration agreement (as aforementioned) are present
therein.

It is to be noted that the aforementioned list is not

comprehensive. To draft effective arbitration agreements,
contemplating some additional mechanisms can help the
parties overcome complications that may arise in the
arbitral process. The following are such mechanism:

● Number of arbitrators

Deciding the composition of the arbitrator tribunal is

crucial. At times, the subject matter of the contract may
be so intricate and convoluted that it would require the
expertise of multiple arbitrators. Furthermore, in some
cases, both the parties may want to exercise the right of
appointing a nominee arbitrator.

The 1940 Act allowed the parties to appoint any number

of arbitrators. Oftentimes in tribunals where even-
numbered arbitrators were appointed, the award faced
inordinate delay due to conflicting opinions between the
arbitrators. Therefore, the 1996 Act, under Section 10,
brought a welcomed change allowing the parties to
appoint as many arbitrators as they wished, as long as the
number of arbitrators is odd

Since appointing multiple arbitrators adds to the cost

burden of the parties and causes difficulties in scheduling
dates, the general practice is to appoint either a sole
arbitrator or three arbitrators.

● Procedure for appointment

Under the 1996 Act, Section 11, empowers the parties to
formulate and agree upon an appointment procedure by
themselves. If the parties fail to agree upon a procedure,
in an arbitration with a sole arbitrator, the court shall
make the appointment and in an arbitration with three
arbitrators, each party must appoint one arbitrator and
then the two appointed arbitrators choose a presiding
arbitrator.

Since the 1940 Act, a standard drafting practice being

followed in India was to give unilateral powers to one
party to appoint the sole arbitrator. However, since the
246th Report of the Law Commission of India and the
subsequent amendments of 2015 and 2019, more and
more cases cropped up where the unilateral appointment
was struck down by the courts to uphold the principle of
party autonomy. The dispute finally came to rest in
Perkins Eastman Architects DPC & Anr v. HSCC (India)
Ltd, where the Supreme Court held that unilateral
appointment of the sole arbitrator would no longer be
valid. Therefore, while drafting the arbitration clause one
must eschew giving appointment rights to a single party.

● Language of the proceedings

Many a time, the parties (domestic or international) may

suffer communication difficulties during the dispute
resolution process due to different language proficiencies.
In such situations, the translation fee may skyrocket and
bring further distress to the parties. Therefore, choosing
the language of the arbitration proceedings beforehand is
always a wise decision.

● Ad hoc or institutional arbitration

In an arbitration agreement, the parties must select either

ad hoc or institutional arbitration. In ad hoc arbitration,
the proceedings are carried out as per the procedure and
modalities agreed to by the parties. In institutional
arbitration, a specialised institution is appointed to
administer the proceedings and appoint the arbitrator.
Some of the arbitration institutes in India are Delhi
International Arbitration Centre (DIAC), Nani Palkhivala
International Arbitration Centre,, and Mumbai Centre for
International Arbitration (MCIA). The ad hoc system
grants more autonomy and is cost-effective. On the other
hand, the institutional arbitration model offers pre-
established fine-tuned procedure, administrative
assistance and qualified empanelled arbitrators.

In India, ad hoc arbitration is more prevalent as compared

to institutional arbitration. Through the Arbitration and
Conciliation Amendment Act, 2019, through the
Arbitration and Conciliation Amendment Act, 2019, the
government has tried to push the arbitral institutions to
develop into cost-effective centres for domestic and
international arbitration.
● Seat and Venue

The words ‘‘seat’’ and ‘‘venue’’ are not defined under the
1996 Act and were interchangeably used before the
judgement of Bharat Aluminium Company v. Kaiser
Aluminium Technical Services Inc. (Balco). In Balco, tIn
Balco, the Supreme Court held that the ‘‘seat’’ is the
centre of gravity of arbitration and decides the jurisdiction
of the court along with the jurisdiction of the place where
the cause of action arises. So, if arbitration is seated in
London, Part 1 of the 1996 Act will not be applicable and
the courts in London will have jurisdiction over the
arbitration.

Diluting the Balco judgement, the Arbitration and

Conciliation Amendment Act, 2015 added a proviso
under Section 2. The proviso was added to the effect that
unless agreed to the contrary, Section 9, 27 and 37(1)(a)
and 37(3) shall also apply to international commercial
arbitrations even if the place of arbitration was outside
India.

After the Balco judgement, issues started arising as to the

interpretation of the terms “venue” or “place” in an
arbitration. The Hon’ble Supreme Court in the judgement
of UOI Vs. Hardy Exploration and Production (India) Inc.
distinguished between ‘distinguished between ‘venue’’
and ‘‘seat’,’, and held that the ‘‘venue’’ of the arbitration
signifies only the place where the arbitration proceedings
are held. Therefore, in arbitrations with a foreign venue
but the seat in India, Part 1 of the 1996 Act would be
applicable.

Thereafter, in the case of BGS-SGS SOMA-JV Vs. NHPC

Ltd., the three-judge bench of the Hon’ble Supreme
Court, while deciding a matter of domestic arbitration
held that where an arbitration agreement designates a
venue but does not make any mention of the seat or the
rules governing the tribunal, the place of the venue will be
construed as the seat of the arbitration. Therefore, in
absence of seat and governing law, the jurisdiction of the
arbitration shall exclusively be vested in the venue.

Based on the catena of judgements by the Supreme Court

taking different positions, it can be concluded that the seat
and venue debate is around the curial law of the
arbitration. Curial law is the law governing the arbitration
proceedings and the rights of the party to the arbitration.
Therefore, the seat of arbitration gains a much greater
significance and must be specified in the arbitration
agreement. It should be borne in mind that the courts in
the designated seat will have the exclusive jurisdiction
over the matters arising out of the arbitration and the
arbitration itself will be governed by the laws of the seat.

Whether an arbitration agreement needs to be signed

In Svapn Const. v. IDPL Employees Co-op. Group
Housing Society Ltd., it was held that the agreement need
not be signed by the parties if it is established by another
written

contemporaneous document, which is binding between

the parties. However, in 2018, the Supreme Court held in
M/s Caravel Shipping Services Pvt Ltd v M/s Premier Sea
Food Exim Pvt Ltd that an unsigned arbitration agreement
is valid as the only prerequisite for a valid arbitration
agreement under the 1996 Act is that it must be in writing.

Whether an arbitration agreement needs to be

stamped

Arbitration Agreement is chargeable under Section 5 of

the Indian Stamp Act, 1899. With respect to the 1940 Act,
the Calcutta High Court held in Bengal Hire Purchase
Corpn v. Harendra Singh that an unstamped arbitration
agreement cannot be given effect unless the full stamp
duty is duly paid. The courts would first impound the
unstamped agreement and send it to the relevant
authorities for the payment of stamp duty and penalty (if
any). Only after ensuring that the lacuna is cured, the
arbitration agreement can be executed. The Supreme
Court held the same position with respect to the 1996 Act
in Garware Walls Ropes Ltd. v. Coastal Marine
Constructions & Engineering Ltd.

When the Arbitration Agreement is Vague

the Calcutta High Court held in State Trading

Corporation of India Ltd. v. Owners & Parties Interested
in the Vessel M.V. Baltik Confidence, that an application
referring to an ambiguous and ambiguous agreement will
not be maintained. However, in the judgement of
Zhejiang Bonly Elevator Guide Rail Manufacture Co.
Ltd. v. M/S Jade Elevator Components, the Supreme
Court while dealing with a vague arbitration clause,
scrutinized the clause examining the intention of the
parties instead of doing away with the agreement itself.
Therefore vague and unclear arbitration agreements can
hold validity as long as the intention to refer the parties to
arbitration is clear. and upheld the validity of the
arbitration agreement.

An arbitration agreement serves several essential

functions within the context of dispute resolution,
providing a structured framework for the arbitration
process. Here are the key functions:

1. Dispute Resolution Mechanism:

- Primary Purpose: The fundamental role of an
arbitration agreement is to establish a mechanism for
resolving disputes outside of traditional litigation.
- Function: It outlines the process by which parties
agree to submit their conflicts to an arbitrator or panel
rather than pursuing litigation in court.

2. Autonomy and Party Control:

- Primary Purpose: Granting autonomy to parties
involved in a contract.
- Function: Enables parties to define the rules,
procedures, and conditions of arbitration, tailoring the
dispute resolution process to their specific needs and
preferences.

3. Choice of Law and Venue:

- Primary Purpose: Providing parties with the ability to
choose the governing law and the venue for arbitration.
- Function: Allows flexibility in determining the legal
framework and geographical location most suitable for
the resolution of their disputes.
4. Confidentiality:
- Primary Purpose: Maintaining privacy and
confidentiality in dispute resolution.
- Function: Often includes provisions ensuring that
arbitration proceedings and awards remain confidential, a
crucial aspect for businesses and individuals seeking to
keep sensitive matters private.

5. Speed and Efficiency:

- Primary Purpose: Offering a faster and more efficient
alternative to traditional litigation.
- Function: Arbitration agreements often specify
timelines for various stages of the process, promoting a
quicker resolution compared to court proceedings.

6. Specialized Expertise:
- Primary Purpose: Allowing parties to select arbitrators
with expertise in the relevant subject matter.
- Function: Ensures that the decision-makers have a
deep understanding of the industry or issues in dispute,
contributing to more informed and specialized rulings.

7. Enforceability of Awards:
- Primary Purpose: Facilitating the enforcement of
arbitral awards.
- Function: Arbitration agreements create a framework
that aligns with international conventions, making it
easier for parties to enforce awards across different
jurisdictions.

8. Flexibility and Informality:

- Primary Purpose: Promoting a less formal and rigid
process compared to traditional court proceedings.
- Function: Parties have the flexibility to tailor
procedures to their needs, fostering a more collaborative
and less adversarial environment.
9. Cost-Effectiveness:
- Primary Purpose: Reducing the overall costs
associated with dispute resolution.
- Function: By streamlining procedures and avoiding
lengthy court battles, arbitration agreements contribute to
a more cost-effective resolution process.

10. Finality of Awards:

- Primary Purpose: Providing a conclusive end to
disputes.
- Function: Arbitral awards are generally final and
binding, offering a degree of certainty and closure that is
crucial for parties seeking resolution.

Rights of Parties:

1. Right to Arbitrate:
- Explanation: The right to arbitrate stems from the
freedom of contract, allowing parties to choose arbitration
as the method for resolving their disputes.
- Implication: This right promotes party autonomy and a
consensual approach to dispute resolution.

2. Right to Choose Arbitrators:

- Explanation: Parties typically have the right to
participate in the selection of arbitrators, ensuring a
neutral and qualified decision-maker.
- Implication: This right fosters trust in the arbitration
process and allows parties to have confidence in the
expertise of those adjudicating their dispute.

3. Right to Present Evidence and Arguments:

- Explanation: Parties are entitled to present their case
fully, including witnesses, documents, and legal
arguments.
- Implication: This right ensures that the arbitrator has
access to all relevant information, contributing to a fair
and informed decision.

4. Right to a Fair and Impartial Process:

- Explanation: Parties have the right to a process free
from bias, where the arbitrator treats both sides equally.
- Implication: This right safeguards the integrity of the
proceedings and the ultimate fairness of the arbitration
process.

5. Right to Legal Representation:

- Explanation: Parties generally have the right to be
represented by legal counsel during arbitration, ensuring
effective advocacy.
- Implication: Legal representation helps parties
navigate complex legal issues, enhancing the overall
quality of their participation.
6. Right to Challenge Awards:
- Explanation: Parties can challenge arbitral awards on
limited grounds, such as procedural irregularities or a lack
of jurisdiction.
- Implication: This right acts as a safeguard, allowing
parties recourse in case of fundamental flaws in the
arbitration process.

Responsibilities of Parties:

1. Duty to Participate in Good Faith:

- Explanation: Parties must engage in the arbitration
process sincerely and cooperatively, fostering a spirit of
fairness and resolution.
- Implication: Good faith participation is essential for
maintaining the effectiveness and legitimacy of the
arbitration process.

2. Compliance with Arbitration Agreement:

- Explanation: Parties are obliged to adhere to the terms
of the arbitration agreement, including any specified
procedures or rules.
- Implication: Adherence to the agreement ensures that
the arbitration proceeds in an organized and predictable
manner.

3. Cooperation in the Arbitration Process:

- Explanation: Parties are expected to collaborate,
exchange necessary information, and adhere to procedural
timelines.
- Implication: Cooperative behavior enhances the
efficiency of the arbitration process, reducing delays and
fostering a more constructive resolution environment.

4. Timely Submission of Documents and Information:

- Explanation: Parties have the responsibility to provide
all required documents and information within agreed-
upon timeframes.
- Implication: Timely submissions are crucial for
maintaining the momentum of the arbitration and
avoiding unnecessary delays.

5. Respect for Confidentiality:

- Explanation: Parties should respect the confidentiality
of the arbitration process, keeping information disclosed
during proceedings confidential.
- Implication: Upholding confidentiality safeguards
sensitive information, encouraging open communication
during the resolution process.

6. Payment of Arbitration Costs:

- Explanation: Parties may be responsible for covering
arbitration costs, such as arbitrator fees or administrative
expenses.
- Implication: Meeting financial obligations ensures the
smooth functioning of the arbitration process and the
enforceability of any eventual award.
The Competence-Competence Principle in Arbitration

The theory of competence-competence, a cornerstone in

the realm of arbitration, embodies the principle that an
arbitral tribunal possesses the authority to rule on its own
jurisdiction. This encompasses key aspects such as
challenges to the validity, applicability, or scope of the
arbitration agreement. This principle, often referred to as
kompetenz-kompetenz, plays a pivotal role in shaping the
landscape of modern arbitration by empowering
arbitrators and underscoring the efficiency and autonomy
of the arbitral process.

Understanding the Competence-Competence Principle:

At its core, the competence-competence principle

emphasizes the autonomy of arbitral tribunals in
determining their own jurisdiction. This means that
arbitrators have the initial authority to decide on questions
related to the existence and validity of the arbitration
agreement. This authority extends to preliminary issues,
allowing arbitrators to efficiently resolve jurisdictional
matters before delving into the substantive aspects of the
dispute.

Statutory Foundations and Separability Doctrine:

The competence-competence principle finds solid footing

in many arbitration laws, reflecting its recognized
importance in the legal framework. This recognition is
closely tied to the separability doctrine, a concept that
treats the arbitration agreement as an independent and
separable contract. Challenges to the underlying contract
do not automatically extend to the arbitration agreement,
providing arbitrators with the autonomy to decide on their
jurisdiction.
Empowering Arbitrators and Limited Court Intervention:

Arbitrators, armed with the competence-competence

principle, have the authority to make decisions on
jurisdictional issues. This authority limits court
intervention, with the courts generally refraining from
deciding on matters already within the tribunal's
jurisdiction. This streamlined approach contributes to the
efficiency of the arbitration process and aligns with the
overarching goal of providing parties with an expeditious
and flexible means of dispute resolution.

Party Autonomy and Contractual Freedom:

The principle is inherently linked to the concept of party

autonomy, emphasizing the freedom of parties to choose
arbitration as their preferred dispute resolution
mechanism. Parties are granted the initial authority to
select their arbitrators, who, in turn, have the competence
to rule on jurisdictional questions. This collaborative
approach aligns with the essence of contractual freedom,
empowering parties to shape the terms and conditions of
their dispute resolution process.

Challenges and Exceptions:

While the competence-competence principle stands as a

robust foundation, there are exceptions that warrant court
intervention. Instances of fraud, corruption, or clear
illegality may justify courts stepping in to address
jurisdictional matters. These exceptions serve as
safeguards, ensuring that the arbitration process remains
anchored in principles of justice and legality.

International Recognition and Procedural Efficiency:

The competence-competence principle enjoys

international recognition, contributing to the
harmonization of arbitration practices across jurisdictions.
This global acknowledgment facilitates the enforcement
of arbitral awards and underscores the efficiency of
arbitration as a cross-border dispute resolution
mechanism. By empowering arbitrators to decide on
jurisdictional matters, the principle fosters procedural
efficiency, avoiding the potential delays associated with
parallel court proceedings.

Arbitrators under the Arbitration and Conciliation

Act, 1996

1. Appointment of Arbitrators (Section 11):

- Explanation: The Act provides a comprehensive
framework for the appointment of arbitrators. If parties
fail to agree on arbitrators, the Chief Justice or his
nominee has the authority to appoint arbitrators.
- Implication: This ensures a fair and impartial selection
process, promoting trust in the arbitration proceedings.

2. Number of Arbitrators (Section 10):

- Explanation: The Act allows parties to determine the
number of arbitrators, and in case of disagreement, it
defaults to a three-member tribunal.
- Implication: Provides flexibility for parties to tailor the
arbitration process based on the complexity and nature of
the dispute.

3. Qualifications of Arbitrators (Seventh Schedule):

- Explanation: The Act incorporates the Seventh
Schedule, specifying the qualifications and eligibility
criteria for arbitrators.
- Implication: Ensures that arbitrators possess the
requisite expertise, independence, and integrity,
contributing to the competence of the tribunal.
4. Challenge and Removal of Arbitrators (Sections 12-
14):
- Explanation: The Act outlines grounds for challenging
arbitrators, including lack of independence or impartiality.
It also empowers the parties to remove an arbitrator
through mutual agreement.
- Implication: Safeguards against potential bias or
conflicts of interest, fostering confidence in the integrity
of the arbitration process.

5. Arbitrator's Jurisdiction and Powers (Section 16):

- Explanation: Arbitrators have the authority to rule on
their own jurisdiction, and they can grant interim
measures, summon witnesses, and seek assistance from
courts for evidence.
- Implication: This grants arbitrators the necessary tools
to conduct fair proceedings and resolve disputes
effectively.
6. Conduct of Arbitral Proceedings (Sections 19-24):
- Explanation: The Act outlines the procedure for
conducting arbitral proceedings, including the
presentation of evidence, examination of witnesses, and
making awards.
- Implication: Establishes a structured and transparent
process, ensuring that parties have ample opportunities to
present their case.

7. Confidentiality (Section 75):

- Explanation: The Act emphasizes the confidentiality
of arbitral proceedings and awards unless disclosure is
required by law.
- Implication: Protects sensitive information,
encouraging open communication during arbitration while
respecting privacy.

8. Time Frame for Making Awards (Section 29A):

- Explanation: Recent amendments introduce a time
frame for making awards, ensuring expeditious resolution
of disputes.
- Implication: Enhances the efficiency of arbitration,
discouraging unnecessary delays in the issuance of
awards.

9. Enforcement of Awards (Chapter 1 of Part II):

- Explanation: The Act provides a streamlined process
for the enforcement of arbitral awards through the courts.
- Implication: Reinforces the finality and enforceability
of arbitration awards, contributing to the effectiveness of
the dispute resolution mechanism.

10. Court's Role in Support of Arbitration (Section 5):

- Explanation: Courts are directed to act in a supportive
role and refer parties to arbitration unless the arbitration
agreement is null and void, inoperative, or incapable of
being performed.
- Implication: Promotes minimal court interference,
aligning with the pro-arbitration ethos of the Act.

Arbitral Award

1. Definition:
- Explanation: An arbitral award is the final decision
rendered by an arbitral tribunal, resolving the substantive
issues in dispute.
- Implication: This document encapsulates the tribunal's
findings, legal reasoning, and the remedy or relief granted
to the parties.

2. Types of Arbitral Awards:

- Explanation: Arbitral awards can be classified into two
main types - final awards and interim awards.
- Implication: Final awards conclude the entire dispute,
while interim awards address specific issues within the
larger dispute, providing a partial resolution.
3. Form and Content (Section 31):
- Explanation: The Arbitration and Conciliation Act of
1996 prescribes the form and content of an arbitral award
in Section 31.
- Implication: This ensures that awards are
comprehensive, including the reasons for the decision, the
amount awarded (if applicable), and any other relevant
details.

4. Finality and Binding Nature:

- Explanation: An arbitral award is generally considered
final and binding on the parties, limiting the scope for
further legal challenges.
- Implication: This attribute provides parties with
closure and certainty, encouraging compliance and
enforcement.

5. Enforcement of Arbitral Awards (Part II, Chapter 1):

- Explanation: The Arbitration and Conciliation Act,
1996 provides a robust mechanism for the enforcement of
arbitral awards through the courts.
- Implication: The enforceability of awards enhances the
efficacy of arbitration, as parties can rely on the legal
system to compel compliance.

6. Setting Aside an Award (Section 34):

- Explanation: Section 34 of the Act allows parties to
challenge the arbitral award before the courts on limited
grounds, such as fraud, corruption, or a contravention of
public policy.
- Implication: This provision serves as a check against
potential procedural irregularities or legal errors in the
arbitral process.

7. Time Frame for Making Awards (Section 29A):

- Explanation: Recent amendments introduce a time
frame within which arbitrators must make their awards.
- Implication: This amendment aims to expedite the
arbitration process, ensuring timely resolution and
reducing the likelihood of prolonged disputes.

8. Confidentiality of Awards (Section 75):

- Explanation: The Act emphasizes the confidentiality
of arbitral proceedings and awards.
- Implication: This provision protects sensitive
information, fostering a more candid exchange of
information during arbitration while maintaining privacy.

9. Recognition of Foreign Awards (Part II, Chapter 1A):

- Explanation: The Act incorporates provisions for the
recognition and enforcement of foreign arbitral awards in
India.
- Implication: This facilitates international arbitration by
ensuring that awards rendered in other jurisdictions are
recognized and can be enforced within Indian territory.
10. Limits on Court Intervention (Section 5):
- Explanation: The Act directs courts to limit their
intervention in arbitration matters, emphasizing the
autonomy of the arbitral process.
- Implication: Courts are instructed to refer parties to
arbitration unless the agreement is null and void,
inoperative, or incapable of being performed, contributing
to the pro-arbitration stance of the legislation.