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CONDUCT OF ARBITRAL PROCEEDINGS (CH-5)

18-27

Section 18 of Arbitration and Conciliation Act: Equal Treatment of Parties

The parties shall be treated with equality and each party shall be given a
full opportunity to present the case.
PRINCIPLES OF NATURAL JUSTICE:
The minimum requirement of a proper hearing should include:
• Each party must have notice of place, date and time of hearing
• Each party must have reasonable opportunity to be present throughout
the hearing
• Each party must have reasonable opportunity to present statements,
documents, evidence and arguments in support of case
• Each party must be provided by statements, documents and evidence
adduced by other side
• ·Each party must have reasonable opportunity to cross-examine his
opponents’ witness and reply to the arguments advanced

1. Section 18 of the Arbitration and conciliation act , it provides that principle

of natural justice ,that an arbitral tribunal should treat the parties with
equality and provide equal opportunities for presentation , prosecution
defence and interim application in respect of the case. Under this section
principle of justice and fairplay must be applicable during entire process
of an arbitration.

2. This section provides that no arbitrator should identify himself with the
interests of a particular party merely because of the reason that he was
appointed by the party.
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CASE LAWS :-

UNION OF INDIA V. HINDUSTAN DEVELOPMENT COR.[AIR 1994 SC 988]

It has held that if it is found that the arbitral proceedings were

unfair , unreasonable , arbitrary or violative of principles of natural justice the
decision of the arbitrator itself becomes questionable and his award is likely to
be set aside.

Section 19 of Arbitration and Conciliation Act: Determination of rules of

procedure :-
STATEMENT:
(1) The arbitral tribunal shall not be bound by the Code of Civil Procedure,
1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).
(2) Subject to this Part, the parties are free to agree on the procedure to be
followed by the arbitral tribunal in conducting its proceedings.
(3) Failing any agreement referred to in in sub-section (2), the arbitral tribunal
may, subject to this Part, conduct the proceedings in the manner it considers
appropriate.
(4) The power of the arbitral tribunal under sub-section (3) includes the power
to determine the admissibility, relevance, materiality and weight of any
evidence.
EXPLANATION :-
Section 19 of the ac act , provides the procedure to be adopted by the
arbitral tribunal . The provisions of cpc,1908 must not be applied in arbitration
proceedings where mere procedure is likely to hinder speedy justice but there
should be no hesitation to invoke them if they may be helpful in rendering
justice.
The cpc applies only to judicial proceedings in courts where as the proceedings
before the arbitrator are not judicial proceedings in a court but a quasi judicial
nature . The arbitrator being the creation of an agreement , he is supposed to
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follow the procedure by the agreement under which he has been appointed by
the parties but he need not follow the procedure of the cpc .
In case of J. Kaikobad vs. F. Khambatta (1930),
it was stated by court that an arbitrator is not bound to follow the technical
provisions of the Evidence Act, and his decision can’t be challenged on ground
that he relied upon document not admissible under the Act. The only limitations
on the powers of an arbitrator are that he should not violate the principles of
natural justice, he should give a hearing to the parties, and should give a
reasonable time and opportunity to them to substantiate their respective claims.
The act of an arbitrator in not making a document as inadmissible can’t be a
ground for setting aside the award since strict rules of evidence are not
applicable to arbitration proceedings.
Jagjeet Singh Lyallpuri v. Unitop Apartments & Builders Ltd., (2020) 2 SCC 279
Grounds for setting aside award ---Non-granting of opportunity to cross
examine the witnesses is not a ground to set aside the award, when parties had
agreed to such procedure. There is estoppel against challenging agreed upon
procedure and raising contention of misconduct on part of arbitrator for having
following agreed upon procedure.

Section 20 of Arbitration and Conciliation Act ---Place of arbitration

STATEMENT:
(1) The parties are free to agree on the place of arbitration.
(2) Failing any agreement referred to in sub-section (1), the place of arbitration
shall be determined by the arbitral tribunal having regard to the circumstances
of the case, including the convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may,
unless otherwise agreed by the parties, meet at any place it considers
appropriate for consultation among its members, for hearing witnesses, experts
or the parties, or for inspection of documents, goods or other property.
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EXPLANATION:-
This section allows the parties freedom to agree on the place of arbitration
within India and in case of their failing to agree, authorises the arbitral tribunal
to determine the place taking into account the circumstances of the case and
the convenience of the parties.
The provisions of sub section 1 permits the tribunal the discretion to meet at any
appropriate place within India for the purpose of :-
➢ consultation among its members
➢ for hearing witnesses
➢ experts or the parties
➢ for inspection of documents
➢ goods or other property

SEAT AND VENUE OF ARBITRATION

• The seat of arbitration determines whether the court has jurisdiction

over an award, on the other hand, venue of arbitration; though not
defined in Arbitration and Conciliation Act, 1996 is the physical location or
place chosen by the parties of the arbitration agreement to conduct the
arbitration proceedings.

• The "Venue" of arbitration defines the geographical place where such

proceeding is held and is not related with either the curial law or court‘s
jurisdiction. It is crucial to know the difference between the terms "Seat"
and "Venue" as agreed under the agreement between the parties. The
"Seat" of arbitration is the "Situs" of arbitration which means the place
where arbitration is anchored. The seat defines the curial law or
procedural law governing the arbitration and also determines which court
will have supervisory jurisdiction over such arbitration. In contrast, The
"Venue" of arbitration merely defines the geographical place where such
proceeding is held and is certainly not related with either the curial law or
court‘s jurisdiction.
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CASE LAWS:-
1. In Bhatia International v. Bulk Trading S.A. & Anr. MANU/SC/0185/2002

The Court held that an international commercial arbitration where an Indian

party is involved, being proceeded within any part of the world, would confer
jurisdiction on Indian Courts to exercise powers under Part 1 of the Arbitration
and Conciliation Act, 1996. Basically if the subject matter is in india then the
Indian courts will have jurisdiction even if the place of arbitration is outside india.
2. In Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. -
(BALCO overruled Bhatia case). MANU/SC/0722/2012

court observed that Part I of the Act would apply only when the
place/seat of the arbitration is in India. The Apex Court stated that the
word "place" in Section 20(1) & 20(2) of the 1996 Act would mean "seat"
and the word "place" in Section 20(3) of the act would mean "venue".
After reading section 2(2) along with section 20, the Court held that the
Arbitration act of 1996 has no extraterritorial application.

3. In Reliance Industries Ltd. and Anr. v. Union of India (2014) 7 SCC 603

the court opined that when the parties to agreement have decided that
London as seat and agreement to be governed by Law of London, then
Part 1 would not be applicable.

Section 21 of Arbitration and Conciliation Act: Commencement of arbitral

proceedings:-
STATEMENT:
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 respondents.
EXPLANATION:-
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The date of commencement of arbitral proceedings does not relate to
ar,bitrators entering on the reference or having been called upon to act as
arbitrator but on receipt of request by the respondent that tehe dispute be
reffered to arbitration for settlement.
Therefore, once the request is received by the opposite party , it is
immaterial whether he assents to the request for arbitration or not, whereas a
reference is made under an agreement already entered into by mutual consent
of the parties and there is no point in requiring a party to make a request and
the other giving its consent again when the dispute between them arises.
Hence, Unilateral reference may be sufficient for the
commencement of the arbitral proceedings if it is proved that the request had
actually been made by the party.

CASE LAWS:-
1. ALUPRO BUILDINGS SYSTEM PVT. LTD. vs. OZONE OVERSEAS PVT. LTD. Citation: 2017
SCC Online DEL 7228

➢ Court: Delhi HC
➢ Judgement: • The Delhi HC in this case while observing the importance
of issuing notice under Section 21 of the Act observed that the party
against whom any claim is made must know what the claim is.
➢ The other party is given an opportunity to raise objections on the claims
raised based on whether the claims are time barred, barred by estoppel
or file counter-claims if any.
➢ Where the parties have agreed upon a particular procedure for the
appointment of arbitrators, it is not possible to identify whether the said
procedure was followed or not in the absence of such notice.
➢ Arbitral proceedings cannot be commenced on mere filing of an
application u/s 34 of the act.
➢ The arbitration proceedings shall be deemed to commence on the date
on which “the request for that dispute to be inferred to arbitration is
received by the respondent”.

2. MALVIKA RAJNIKANT MEHTA vs. JESS CONSTRUCTION PVT. LTD. Citation: 2022
SCC Online BOM 920
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Court: Bombay HC
Judgment:
• The court furthered the intentions of serving a notice u/s 21 of this
act.
• Issuing such a notice to the opposite party provides a nature of claims
asked by the party requesting to refer a dispute to arbitration.
• It provides an opportunity to the other party to accept or reject the
claims and raise any objections with respect to appointment or
impartiality of the arbitrator.
• The date of receipt of notice is necessary to determine the date of
commencement of arbitral proceedings.

3. M/S D.P. CONSTRUCTION VS. M/S VISHVARAJ ENVIRONMENT PVT. LTD.

Citation: (2021) SCC Online SC 1029
Court: Bombay HC
Judgement:
• The notice which invokes the option of arbitration must be clear and
there must be an intention to refer the dispute to arbitration and call the
opposite party for the same.
• It is necessary that there is a request to refer a dispute to arbitration
from one party. Mere setting out the dispute and claim does not help the
parties avail the option of arbitration.
• In order to invoke the jurisdiction of the court under Section 11 of the
Act, it is necessary that the parties have triggered the agreed procedure
as set out in the arbitration clause. This also acts as a pre-condition for
invoking the jurisdiction of court for appointment of arbitrators.

4. MONIKA OLI VS. M/S CI EDUCATE LTD.

Citation: (2023) SCC Online DEL 361

Court: Delhi HC
Judgement: • Issuance of notice u/s 21 of the A&C act is mandatory and
its non-issuance renders the entire arbitral

Section 22 of Arbitration and Conciliation Act- Language

STATEMENT:
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(1) The parties are free to agree upon the language or languages to be used in the arbitral
proceedings.
(2) Failing any agreement referred to in sub-section (1), the arbitral tribunal shall determine
the language or languages to be used in the arbitral proceedings
(3) The agreement or determination, unless otherwise specified, shall apply to any written
statement by a party, any hearing and any arbitral award, decision or other communication
by the arbitral tribunal.
(4) The arbitral tribunal may order that any documentary evidence shall be accomplished by
a translation into the language or languages agreed upon by the parties or determined by
the arbitral tribunal.

EXPLANATION :-
Section 22 of the act gives the parties freedom to agree upon the language or languages to
be used in arbitral proceedings. In case the parties fail to agree , the arbitral tribunal shall
determine the language to be used in the arbitral proceedings and such language shall be
used for any written statement by a party.
The provisions of this section have been incorporated in the act keeping in
view the ever increasing demand for international arbitration which involves languages of
different countries. However , in India the arbitral proceedings are conducted mostly in
English language.

Section 23 of Arbitration and Conciliation Act– Statements of claim and defence

STATEMENT:

(1) Within the period of time agreed upon by the parties or determined by the
arbitral tribunal, the claimant shall state the facts supporting his claim, the points at
issue and the relief or remedy sought, and the respondent shall state his defence in
respect of these particulars, unless the parties have otherwise agreed as to the
required elements of those statements.
(2) The parties may submit with their statements all documents they consider to be
relevant or may add a reference to the documents or other evidence they will
submit.
(3) Unless otherwise agreed by the parties, either party may amend or supplement
his claim or defence during the course of the arbitral proceedings, unless the arbitral
tribunal considers it inappropriate to allow the amendment or supplement having
regard to the delay in making it.

EXPLANATION :-
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❖ Section 23 provides as to how the parties should act and react as to what facts the
parties shall mention in their statement of claim or statement of difference by
abiding the time scheduled so fixed by the arbitral tribunal.
❖ This section deals with the initial stage of arbitral proceedings.
❖ This section does not specify that statement of claim and defence are to be in writing
but commonly the statements will be submitted in writing.
❖ These statements and any document as such to be communicated on according to
section 24(3) of the act.

Section 23(1): Submission of Statement of Claim and Defence

The claimant (the party bringing the dispute) must submit a statement of claim to
the arbitral tribunal. This statement must include:

1. Facts supporting the claim: These are the reasons or evidence that explain why the
claimant is seeking relief.

2. Points of disagreement: These are the specific issues or disputes between the
parties.

3. Relief or remedy sought: This is what the claimant wants as a result, such as
compensation or a specific action to be taken.
Likewise
The respondent (the defending party) must submit a statement of defence that
responds to the claimant’s statement of claim. It addresses the facts, points of issue,
and the relief the claimant is seeking.
And
The parties can agree to change or simplify the requirements for what should be
included in their statements.

Section 23(2): Submission of Documents

Both the claimant and the respondent have the right to submit all relevant
documents or evidence that support their claims or defences. This can include
contracts, emails, financial records, or any other material that helps explain their side
of the dispute.

Section 23(2A): Counterclaim and Set-Off

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The respondent may also submit a counterclaim (a claim against the claimant) or
request a set-off (asking for compensation for something the claimant owes the
respondent).

These counterclaims or set-offs will be dealt with in the same arbitration proceeding,
as long as they are related to the original arbitration agreement. This is important
because it allows all issues between the parties to be settled in one arbitration
process, instead of starting a new case for the counterclaim.

This amendment was introduced in 2015 to simplify the process. Previously, some
tribunals treated counterclaims as separate matters, leading to additional costs and
delays.

Section 23(3): Amendment of Claims or Defence

Either party (the claimant or respondent) can amend or add to their statements of
claim or defence during the arbitration process. This means they can correct, update,
or provide more details, but only with the approval of the arbitral tribunal.

However, the tribunal may refuse to allow changes if the amendments are:

● Submitted too late in the process, causing delays.

● Considered inappropriate for the case or situation.

The term "claim" in this section does not just refer to monetary demands. It also
covers any right that the parties are disputing. For example, if the dispute involves a
contract, the claim could relate to the right to continue a business relationship, not
just financial compensation.

Section 23(4): Time Frame for Submission of Statements

Both the claimant and the respondent must submit their statements of claim and
defence within six months from the date when the arbitrators were notified of their
appointment.

This strict timeline helps ensure that the arbitration process moves forward quickly
and efficiently. By setting this six-month limit, the law aims to avoid unnecessary
delays, keeping the process effective and ensuring that parties do not have to wait
too long for a resolution to their dispute.
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The six-month period includes the exchange of the initial statements, ensuring that
both sides present their case clearly and with full documentation early on in the
proceedings.

Case laws :

National Highway Authority of India vs. M/s. Patel Engineering Co. Ltd. (2022):

Judgment:

The Supreme Court ruled that a bare reference to "damages" without specifics in the
Statement of Claim is not sufficient. The Court emphasized the need for compliance
with Section 23(1), which requires that the claimant and respondent clearly state
their respective cases with detailed particulars. This means that the claimant must
provide specific details, such as:

● When, where, and how the dispute or contractual breach occurred.

● How the claimant suffered harm or damages.

● The method used to calculate the compensation or damages being claimed.

In this case, Patel Engineering’s failure to specify these particulars in their Statement
of Claim was inadequate. The Court held that to meet the requirements of Section
23(1), the statement must include a clear and detailed description of the facts,
breaches, and how the damages were calculated.

The judgment clarified that vague claims are not acceptable in arbitration
proceedings, and the parties must ensure their claims are supported by sufficient
details to facilitate the arbitration process effectively. This ruling reinforces the
principle that the Statement of Claim under Section 23 must be specific and detailed,
not just a general assertion of damages.

Section 24 of Arbitration and Conciliation Act– Hearings and written proceedings

STATEMENT:

(1) Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether
to hold oral hearings for the presentation of evidence or for or an argument, or
whether the proceedings shall be conducted on the basis of documents and other
materials: Provided that the arbitral tribunal shall hold oral hearings, at an
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appropriate state of the proceedings, on a request by a party, unless the parties have
agreed that no oral hearing shall be held.

(2) The parties shall be given sufficient advance notice of any hearing and of any
meeting of the arbitral tribunal for the purposes of inspection of documents, goods
or other property-

(3) All statements, documents or other information supplied to, or applications made
to the arbitral tribunal by one party shall be communicated to the other party, and
any expert report or evidentiary document on which the arbitral tribunal may rely in
making its decision shall be communicated to the parties.

This provision underlies the basic principle that nothing should transpire at the back
of the parties and each party must be apprised by the other party stand in the matter
under arbitration so that full justice is done to each of them.

Section 25 of Arbitration and Conciliation Act-Default of a party

STATEMENT:
Unless otherwise agreed by the parties, where, without showing sufficient cause –
(a) The claimant fails to communicate his statement of claim in accordance with
subsection (1) of section (2), the arbitral tribunal shall terminate the proceedings;
(b) The respondent fails to communicate his statement of defence in accordance with
sub-section (1) of section 23, the arbitral tribunal shall continue the proceedings
without treating that failure in itself as an admission of the alienations by the
claimant;
(c) A party fails to appear a tan oral hearing or to produce documentary evidence,
the arbitral tribunal may continue the proceedings and make the arbitral award on
the evidence before it.
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