What is Arbitration and Conciliation Act,1996? CS Executive Programme JIGL

Arbitration and Conciliation Act,1996
Arbitration and Conciliation Act,1996

CS Executive Programme – Jurisprudence, Interpretation, and General Laws

Arbitration and Conciliation Act,1996

Here, we will know What is Arbitration and Conciliation Act 1996? from CS Executive Programme Jurisprudence, Interpretation and General Laws.

To have a basic understanding on Arbitration, it is a form of alternative dispute resolution by which disputes are resolved outside the courts. Now looking at it technical, Arbitration is the method in which parties to a dispute get the dispute settled through the intervention of a third person (or more persons) but without recourse to a Court of Law. It is basically the mutual agreement to the parties which binds them.


The essence of arbitration is based on the principle of resolving the dispute with the domestic tribunal instead of reaching out to Courts. Having a significant impact on dispute redressal, the need for arbitration grew globally. United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985 and the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice.


In the exam point of view, students should be well versed in this subject so as to understand Arbitration, Conciliation, International Commercial Arbitration, and Alternate Disputes Resolution.




The Arbitration and Conciliation Act, 1996 is an Act formulated with an objective to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards as also to define the law relating to conciliation and connected matters. It is primarily based on United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration.


The Arbitration and Conciliation Act, 1996 aims at streamlining the process of arbitration and facilitating conciliation in business matters. The Act recognizes the self-rule of parties in the conduct of arbitral proceedings by the arbitral tribunal and abolishes the scope of judicial review of the award and minimizes the supervisory role of Courts. The independency of the arbitral tribunal is further strengthened by empowering them to decide on jurisdiction and to consider objections regarding the existence or validity of the arbitration agreement.




Similar to other laws, terminologies in Arbitration and Conciliation Act has its own significance-


Arbitration – Section 2(1)(a) defines the term “arbitration” as to mean any arbitration whether or not administered by a permanent arbitral institution.


Arbitrator – The term “arbitrator” is not defined under the Act. But “arbitrator” is a person who is appointed by the parties to a dispute with their mutual consent to determine differences and disputes between two or more parties. The person who is so appointed as arbitrator must also give his consent

to act as an arbitrator.


Arbitral Award – Section 2(1)(c) states that an “arbitral award” includes an interim award. Though the definition does not give much detail of the ingredients of an arbitral award, with the provisions laid in the Act the significance features of the Arbitral Award can be determined. The same shall be detailed in the later part of this article.


Arbitral Tribunal – Section 2(1)(d) “Arbitral tribunal” means a sole arbitrator or a panel of arbitrators.


International Commercial Arbitration – means an arbitration relating to disputes arising out of legal

relationships, whether contractual or not, considered as commercial under the law in for in India and where at least one of the parties is-

  • an individual who is national of, or habitually resident in, any country other than India; or
  • a body corporate which is incorporated in any country other than India; or
  • an association or a body of individuals whose central management and control is exercised in any country other than India; or
  • the Government of a foreign country.[Section 2(1)(f)]


Legal Representative – Section 2(1)(g) Legal representative means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased, and, where a party acts in a representative character, the person on whom the estate devolves on the death of the party so acting.


Arbitration Agreement – Section 2(1)(b) states it as an agreement referred to in Section 7. Under Section 7, the Arbitration agreement has been defined to mean 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.


Party – Section 2(1)(h) Party means a party to an arbitration agreement.

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Section 11 of the Act deals with the appointment of Arbitrators, they state that

a) section 11(1) a person of any nationality may be an arbitrator unless otherwise agreed by the

b) Section 11(2) states that subject to Section 11(6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. The relevant provisions under Section 11 (6) follow.

c) Section 11 (3) states that failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.

d) Section 11 (4) if the appointment procedure in Section 11 (3) applies and

i. a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or

ii. the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made upon request of a party, “the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court”.


e)  Section 11 (5) says that failing any agreement referred to in Section 11 (2), in an arbitration with a sole arbitrator if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by “the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court”.

f) Section 11(6) provides that where under an appointment procedure agreed upon by the parties,-

i. a party fails to act as required under that procedure; or

ii. the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

iii. a person, including an institution, fails to perform any function entrusted him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.\


g) Section 11(6A) states that the Supreme Court or, as the case may be, the High Court, while considering any application under Section 11(4) or Section 11(5) or Section 11(6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement.


h) Section 11(6B) the designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section, shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.


i) Section 11(7) provides that a decision on a matter entrusted by Section 11(4) or Section 11(5) or Section 11(6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision.


j) Section 11 (8) says that the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek disclosure in writing from the prospective arbitrator in terms of section 12(1), and have due regard to-


i. any qualifications required for the arbitrator by the agreement of the parties; and

ii. the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.”;

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k) Section 11(9) in the case of appointment of a sole or third arbitrator in international commercial arbitration, “the Supreme Court or the person or institution designated by that Court” may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.

l) Section 11(10) provides that the Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by Section 11(4) or Section 11(5) or Section 11(6), to it.;


m) Section 11(11) states that where more than one request has been made under Section 11(4) or subsection Section 11(5) or Section 11(6) to “different High Courts or their designates, the High Court or its designate to whom the request has been first made” under the relevant sub-section shall alone be competent to decide on the request.


n) Sub-section 12(a) where the matters referred to in Section 11 (4), (5), (6), (7), (8), and (10) arise in international commercial arbitration, the reference to the “Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “Supreme Court; and


o) Sub-section 12 (b) provides that where the matters referred to in Sub-section 11(4), (5), (6), (7), (8), and (10) arise in any other arbitration, the reference to “the Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “High Court” within whose local limits the principal Civil Court referred to in section 2(1)(e) of the Act is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.;


p) Section 11(13) states that an application made under this section for the appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavor shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.


q) Section 11(14) says that for the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.


Explanation -For the removal of doubts, it is hereby clarified that Section 11(14) stated shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.


Further in the governance perspective, the arbitrator must be absolutely disinterested and impartial. This is to ensure the independency of the arbitration procedure. He is an extra-judicial tribunal whose decision is binding on the parties. Any interest of the arbitrator either in one of the parties or in the subject-matter of reference unknown to either of the parties or all the parties, as the case may be, is a disqualification for the arbitrator. Such disqualification applies only in the case of a concealed interest.


In general parties themselves appoint the arbitrator or arbitrator. However, in certain cases, the Court can appoint an arbitrator or umpire. The parties to an arbitration agreement may agree that any reference there under shall be referred to an arbitrator or arbitrator to be appointed by a person designated in the agreement either by name or as the holder for the time being of any office or appointment.



Having not been defined specifically, the feature that determines the arbitral award lays in the provisions of the Act. They state that-

a) An arbitration agreement is required to be in writing. Similarly, a reference to arbitration and award is also required to be made in writing.

The arbitral award is required to be made on stamp paper of prescribed value and in writing. An oral decision is not an award under the law.


b) The award is to be signed by the members of the arbitral tribunal. However, the signature of

the majority of the members of the tribunal is sufficient if the reason for any omitted signature is stated.

c) The making of an award is a rational process which is noted by recording the reasons. The award should contain reasons. However, there are two exceptions where an award without reasons is valid i.e.

i. Where the arbitration agreement expressly provides that no reasons are to be given, or

ii. Where the award has been made under Section 30 of the Act i.e. where the parties settled the dispute and the arbitral tribunal has recorded the settlement in the form of an arbitral award on agreed terms.


d) The award should be dated i.e. the date of making of the award should be mentioned in the award.

e) Place of arbitration (jurisdiction of the Court of a particular city or State.) is important for the determination of rules applicable to the substance of the dispute, and recourse against the award. The arbitral tribunal is under obligation to state the place of arbitration as determined in accordance with Section 20.

f) The arbitral tribunal may include in the sum for which award is made, interest up to the date of award, and also a direction regarding future interest.

g) The award may also include decisions and directions of the arbitrator regarding the cost of the arbitration.

h) After the award is made, a signed copy should be delivered to each party for appropriate action like implementation or recourse against the arbitral award.





Section 34(1) provides that recourse to a Court against an arbitral award may be made only by an

application for setting aside such award in accordance with sub-section (2) and subsection (3).

Section 34 (2) states that an arbitral award may be set aside by the Court only if

a) the party making the application furnishes proof that─

i. a party was under some incapacity, or

ii. the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

iii. the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

iv. the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be  separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

v. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or


b) the Court finds that─


i. the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

ii. the arbitral award is in conflict with the public policy of India.


Further, the provision under the section lays down the extent of an arbitral award arising out of arbitrations other than international commercial arbitrations, the time period for setting aside the arbitral award, time limit for application etc.


Read another article on Administrative Law



Conciliation is an informal process in which the conciliator (the third party) tries to bring the disputants to an agreement. The Conciliator does this by lowering tensions, improving communications, interpreting issues, providing technical assistance, exploring potential solutions and bringing about a negotiated settlement.




Medication is a structured process in which the mediator assists the disputants to reach a negotiated settlement of their differences. It is usually a voluntary process that results in a signed agreement which defines the future behavior of the parties. The mediator uses a variety of skills and techniques to help the parties reach the settlement, but is not empowered to render a decision.




ADR processes provide procedural flexibility save valuable time and money and avoid the stress of a conventional trial. The International Centre for Alternative Dispute Resolution (ICADR) is a unique centre in this part of the world that makes provision for promoting teaching and research in the field of ADR as also for offering ADR services to parties not only in India but also to parties all over the world.


When it comes to provisions under Arbitration and Conciliation Act, 1996, though the concept is simple the coverage of provisions is vast. Thus important topics are alone dealt with in this article.

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