Indian legal system runs on the strong ethos of justice. In pursuit of justice, courts often delay the proceedings. These continuous adjournments eventually hinder the speed of proceedings. Hence, increasing the pendency ratio in the Indian Courts.
Justice delayed is justice denied. To resolve such a situation, legislators came up with the mechanisms that shall work as an alternative court to provide speedy justice. Hence, Arbitration and Conciliation Act 1996 came up to deliver justice at a fast rate. The act functions in two ways:
Arbitration is a category of Alternate Dispute Resolution (ADR) that aims to resolve the matter outside the purview of traditional courts—commonly used to resolve:
- commercial disputes,
- labour disputes,
- contractual disputes and
- marital disputes.
It has even secured a position in the resolution of international disputes. Even in India, such a mechanism is considered significant.
Hence, a process where the dispute is submitted by the parties’ mutual decision to the conflict, to be solved outside the Court’s purview by a neutral third party whose decision shall be binding on the party and enforceable in the Court of law.
The arbitration act of 1996 facilitates the party to include a clause or an agreement called an Arbitration Agreement in their contract. Under such an agreement, the parties agree to deposit the disputes that might arise to the arbitral proceedings.
Characteristics of Arbitration
- Speedy justice
The aim of setting up ADR is to reduce the burden of traditional courts by providing speedy justice.
Unlike the traditional courts, the procedure observed in the ADR is not so formal. And as per beliefs, the formal process delays the speed of the proceedings.
Matters could be submitted for arbitration only if parties agree upon it to the dispute.
The outcome of the arbitration proceedings is confidential. It remains between the arbitrator and the parties to the dispute.
Enforceable & Finality
The arbitrator’s decision is binding on the parties and enforceable in the court of law.
Types of Arbitration
The following two categories of Arbitration are open to private parties:
Ad Hoc Arbitration
An arbitration outside the purview of any specialised institution gets referred to as Ad Hoc Arbitration. Institutions enacted to control the arbitration proceedings could not exercise their control in Ad Hoc proceedings. Hence, the parties to the proceeding make all the decisions concerning the proceedings.
The benefits of this kind of arbitration could get summed up as:
- More flexible
- Less time consuming
- Comparatively less expensive
The success of Ad Hoc proceedings solely depends upon the corporation of the parties to the proceedings. They are free to opt for any internationally recognised rules of arbitration for the validity of their proceedings.
Unlike Ad Hoc proceedings, such proceedings get administered by the specified institutions set up for the said purpose. The arbitrators belong to the institution themselves. They formulate their own set of rules to which the parties to the proceedings abide.
Specialisation and the proven track record is what influences certain parties to opt for institutional arbitration. Further, these institutions provide exclusive assistance to the parties. But, the aid comes at a high cost. It is why not many parties opt for institutional arbitration.
Indian Council of Arbitration is the national level body that administers the working of the institutional arbitrations in India.
What is an Arbitrator
A professional neutral third party or the individual who presides over such disputes and lead to fruitful resolution gets referred to as an Arbitrator. Some might even call him “Umpire” or “Referee” who listens to the arguments of both sides and helps them reach a binding conclusion. The arbitrator intends to resolve the matter by increasing effective communication amongst the parties.
Section 10 & 11 of the Arbitration and Conciliation Act 1996 provides the arbitrator’s appointment. The decision given by the arbitrator gets referred to as an Arbitral Award. Such an award is binding on all the parties to the dispute.
Power of Arbitrator
Various sections of the Arbitration and Conciliation Act 1996 bestows varied powers upon the arbitrator. These are:
Power to give Arbitral Awards
Award making is an utmost important function and power of the arbitrator. The award is the result of arbitration proceedings. Hence, while making an award, the arbitrator shall take the following into his notice:
- A party entitled to the costs
- The party paying the expenses
- The amount of the costs
- The mechanism for determining the costs
- Mannar for paying the costs
- Proceeding expenses and other charges payable.
If there is more than one arbitrator, all decide the award unanimously and signed by all or the majority.
Power to administer the oath
The Act empowers the arbitrator to administer the oath to the parties and witnesses. The arbitrator could even interrogate the parties if it deems fit to it.
The Act lays no specific provision in this regard. Hence, An arbitrator acts as a quasi-judicial authority in arbitration.
Power to take Interim Measures.
Section 17 of the said Act empowers the arbitrator to take interim measures during or after the proceedings if any party so asks. The tribunal could take interim measures on various matters.
Section 9 of the Arbitration and Conciliation Act, following Section 36 of the same act, lays down the situation when such measures could be taken.
Power to appoint the expert
Section 26 of the Act empowers the arbitrator to appoint one or more experts on the issue at hand. The arbitrator might share with such an expert any relevant information, documents or property for the proceeding.
The expert might participate in the proceedings as well. However, before the appointment, the expert would ensure the expert parties on the subject matter relevant to the case.
Section 21 of the Arbitration and Conciliation Act contains the provision for the commencement of arbitral proceedings. It states that the proceedings would commence on the date request for the dispute is received by the respondent. The parties, through an agreement, might otherwise provide for the commencement.
Setting aside the Arbitral Award
The unsatisfied party might request to set aside the arbitral award under Section 34 of the Arbitration and Conciliation Act. The said section lays the grounds for setting aside and the mechanism for applying.
Another important mechanism of Alternative Dispute Resolution (ADR) is the Conciliation mechanism. Here, the parties agree to negotiate and solve their dispute and reach a decision. The individual who talks to the parties to get the decision gets referred to a Conciliator.
The conciliator plays an essential role in proceedings by acting independently and impartially to reach an amicable dispute settlement. Here, the parties are free to settle the dispute at any stage of the conflict.
The conciliation process begins with the conciliator meeting the parties individually and then together to resolve the differences.
Conciliator works to lower the tensions, initiate communications, analysing the concerns and motivate the parties to evaluate potential solutions and helping them to reach a mutually acceptable outcome. The proceedings take place according to Section 62 of the Arbitration and Conciliation Act.
Mainly disputes of labour relations, employment act or minimum wages get resolved through this mechanism. The meeting between the parties is informal, confidential and not recorded. The conciliation proceedings would not be admissible in a court of law unless otherwise decided by the parties in writing.
The conciliation proceedings might be conducted in person, telephonically or through any digital platform. Depending upon the sensitivity of the case, the conciliator would suggest how the proceeding will take place.
- Party Autonomy
- Proficiency in decision making
- Time and Cost friendly
- Ensures Confidentiality
Difference between Arbitration and Conciliation
|A neutral third party presides the meetings and provides a decision binding on both parties.||An independent individual negotiates the settlement between the parties to the dispute.|
|The arbitrator’s decision is enforceable.||The conciliator’s decision is not enforceable.|
|To submit the dispute, the prior agreement is required||No such agreement is required.|
|It is available for current and future disputes.||Only available for existing disputes.|
|It is similar to court proceedings.||It has an informal mechanism, unlike the traditional courts.|
Arbitration and Conciliation Act 1996
The ethos of arbitration and conciliation have been prevalent in India since 1940. The former Prime Minister, P.V. Narasimha Rao, however, highlighted the insufficiency and incompetency of these provisions.
Therefore, on 25th January 1996, the Arbitration and Conciliation Act came up to remedy the situation. Legislators structured the Act following the United Nations Commission on International Trade Law (UNCITRAL) and Model on Commercial International Arbitration.
The Act includes the four categories of ADR, namely, Arbitration, Conciliation, Mediation, and Negotiation.
The Act includes both substantive and procedural law, so it functions independently. It aims for speedy justice with the minimum formal procedure.
The parties are at liberty to choose the mechanism to resolve the dispute.
Features of Arbitration and Conciliation Act
Salient features of Arbitration and Conciliation Act 1996 are as follows:
- Consolidated Act
The present act is the consolidation of the previous three insufficient acts. Hence, to overcome the drawbacks of the previous three acts, the single consolidated act of 1996 was enacted.
- Arbitration Agreement
The Act emphasis the constitution of the Arbitration Agreement. The absence of such an agreement could not initiate any arbitration proceedings. Such a clause or agreement must contain all the necessary information about the proceedings.
- Domestic and International Arbitration
The Act of 1996 makes room for both domestic and international arbitrations. It further limits the intervention of the judiciary. The foreign award is enforceable as per the said act.
- Procedure to be followed
The Arbitration Tribunal decides the procedure unless the parties decide so. However, the process followed is different from the traditional courts. It is less formal, cost-friendly and time-efficient.
Evolution of Arbitration and Conciliation Act
The Act of 1996, to a greater extent, removed the ambiguities created by the previous acts. However, in the following years, the need for stringent and coherent provisions was felt. Therefore, ever since its enactment, the act has been amended through the following acts:
- Arbitration and Conciliation (Amendment) Act, 2015
The Law Commission of India 246th report issued in 2014 limelighted an extensive overview of the issues and suggestions to implement the 1996 Act. The preview is as following-
- Emphasising the Institutional Arbitration.
- Predetermine the fees of arbitrators in Ad-Hoc Arbitration.
- Limited usage of “Public Policy” as a ground for challenging an award
Few significant changes initiated were:
- Limited the powers of Court under section 9
- High Court or the Apex Court should make Arbitrator’s Appointment instead of CJI or Chief Justice of High Court under section 11.
- Expanded powers of Tribunal to take interim measures under section 17.
- The time frame for passing the award under section 29 A.
- The Arbitration and Conciliation (Amendment) Act, 2019
Recently, The lower house of the Parliament adopted new measures to strengthen the hold of Institutional Arbitration in India. These are:
- The powers of the Supreme Court of India and the High Courts to designate arbitral institutions under section 11 (3A)
- Completion of Statement of Claim and Defence within six months from the date of Constitution of the Tribunal under section 23 (4)
- It makes section 29 A obligatory.
- The intersection of Section 42A and 42B about the confidentiality and protection of arbitrators
- Establishment of Arbitration Council of India (ACI) under section 43A to 43M
The mechanism of ADR is not a novel concept in Indian society. However, the age-old laws were insufficient, and hence, the Arbitration and Conciliation Act 1996 replaced it. The enactment of the act changed the concept of ADR in the Indian legal system.
Repeated adjournments resulted in the backlog of the cases in traditional courts. The ADR ensured flexibility, speedy settlement and a cost-efficient mechanism.
People steadily started opting for this mechanism instead of traditional courts. Therefore, at the present date, arbitration and conciliation have become the easiest way for attaining justice.
Despite the widespread usage, the legal provisions seem to be insufficient in the dynamic environment of court. Since the Act of 1996, measures have been taken to make the act competent enough to deliver justice.
FAQs on Arbitration and Conciliation Act
How many times have the Act of 1996 got amended?
Two times in total.
Is the award of conciliation proceedings binding on the parties?
No, it is not binding.
How many arbitrators can be there in a dispute settlement?
Section 10 of the act talks about the number of arbitrators. The number of arbitrators should be in odd numbers.
Is conciliation proceedings legally binding?
Unlike arbitral proceedings, Conciliation proceedings are not legally binding.
Can an appeal lie against the arbitral award?
Under certain situations. Section 36 and 50 of the Act contains the provision for appealing against the award.