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Table of Contents Index of authorities 3 Introduction. 4 Research Methodology. 5 Chapter 1: Arbitration and Indian legal system..

6 Chapter 2: The means of Alternative Dispute Resolution, covered in the Arbitration Conciliation Act 1996 A glance. 10 Chapter 3: Arbitration Conciliation Act 1996: Problems and Possible Changes. 13

Is there a need for a separate law regarding Domestic & International Arbitration Agreements? 13 Grounds for challenge: A need for enlargement?. 14 Impartiality of the Arbitrator and the Allegation of BiasA need to change the procedure for challenges to the Arbitrators award. 16 Fairness of arbitrators. 19 Power of Courts to refer suits for arbitration. 20 Prescription of a time limit, for the rendering of the arbitration award. 21 Jurisdictional Issues How are they to be dealt with?. 22 Other important issues. 24

Conclusion. 26 Bibliography. Index of authorities Cases: 28

Herike Rice Mills v. State of Punjab, (1998) 29 CLA 3(P&H). ONGC v. Saw Pipes Ltd, AIR 2003 SC 2629. Renusagar Power Company Limited v. General Electric Company, AIR 1994 SC 860.
Arbitration Act, 1940. Arbitration and Conciliation Act, 1996. 176th Report of the Law Commission of India. Arbitration and Conciliation (Amendment) Bill, 2003

Statues:

Miscellaneous:

Introduction With a backlog of nearly 30 million cases pending in the Courts today, and the fact that the average pendency of nearly a decade in all matters, even criminal matters there is much truth today in the common mans cynicism and scepticism of the judicial system to deliver justice. Add to this the fact that everyday with developments in technology there is an added pressure on the Courts with the new and new areas of litigation threatening to further choke the embattled system. In such a situation ADR techniques are being seen as the way out. And India is not alone in realising it; All over the globe we can see a trend of a conscious shift away from Litigation towards Alternative Dispute Resolution (ADR) methods with the focus on Arbitration, Mediation and Conciliation. Apart from the time and cost benefits that are felt to be the hallmarks of the ADR methods, the party autonomy and the amicable resolution of the dispute is definitely a huge plus especially in business relations with can allow transactions to continue at the rapid pace that is seen in everyday life today.

Due to the growing needs of trade and commerce, and the rapid Globalisation and the rising International Trade, the United Nations formed the Arbitration Conciliation Rules in 1980. Later on it formed and codified a Model Arbitration Law, and once adopted by the UN General Assembly, the member states were to frame their domestic laws in line with the Model UN Legislation. To comply with the international standards, the 1996 Arbitration Conciliation Act was passed in India. The Law Commission of India in its 176th Report has analysed the deficiencies of the above law in the Indian context, and recommended certain changes. Based on these recommendations and those of the judiciary and the demands of commercial enterprise in the present context, an amendment bill is currently pending in the central legislature to overcome the deficiencies of the Arbitration law in the Indian context. This paper looks at the 1996 Arbitration law and looks at the areas that the Law Commission of India has felt a need to change, looks into the viability of the proposed amendments. Research Methodology

Aims and objectives

This paper attempts to look at the Arbitration Conciliation Act 1996, and the recommendation for changes to it, and the see extent to which these are justified, given the working of the Act.

Scope and limitations

This paper is only a small step in the understanding of the Arbitration Conciliation Act 1996, and the researcher might not been able to do justice to the various aspects involved therein, due to the paucity of time and space. He begs forgiveness for the same.

Research Questions 1. 2. 3. 4. What are the Areas of controversy in the Arbitration Conciliation Act 1996? What are the recommendations of the Law Commission? How do these recommendations compare with the previous enactments on the point? What are the possible effects and the impact of these amendments?

Chapterisation

The First Chapter delves into the history of Arbitration in India, and traces the development of the Law, while the Second Chapter is an attempt to familiarise the reader with areas covered under the Arbitration Conciliation Act. The Third Chapter goes into the Arbitration Law as it stands in India, today and the Recommendation for changes that have come from the Law Commission and tries to compare it with the position earlier to the present Arbitration law.

Sources

This project uses information from the work of other authors as available in books, articles and online databases.

Mode of Citation

A uniform mode of citation has been followed in the project. Chapter 1: Arbitration and Indian legal system Arbitration has an old legal history in India, and it cannot be denied that the Panchayats that have down the ages been the principal law-making authorities in India, practiced arbitration, and to so some extent negotiated settlements (with or without a facilitator) in a certain form. The same of course is true for many local level bodies for dispute resolution over the ages. The coming of the British East India Company saw legislation on arbitrated dispute resolution in India. Some of the regulation it framed, even if they were limited to certain areas only the Bengal Regulation 1 of 1772, the Bombay Regulation 1 of 1799 and the Madras Regulation 1 of 1802. These

empowered the Courts to submit the matters in dispute to an arbitrator mutually agreed to by the parties. The Court couldnt however choose to appoint an arbitrator if the parties didnt agree on one. The Code of Civil Procedure (CPC) in 1859 was the first to recognise a reference to an arbitrator without the intervention of the Courts, along with provision for arbitration in suits filed in Court, arbitration clauses in agreement along with the issue of filing of arbitration awards.[1] The First Indian Arbitration Act was passed in 1899, based on the English Arbitration Act and was limited to presidency towns and covered only situations of arbitration without the intervention of the Court. The CPC post the changes made to it 1908 with slight modifications continued the position of the earlier code, except that it separated the arbitration procedures for a future comprehensive legislation on the subject the Arbitration Act in 1940. The 1940 enactment essentially dealt with the issue of domestic arbitration, and international arbitration and foreign awards and their enforcement was essentially seen to by the Arbitration (Protocol and Convention) Act 1937 and the Foreign Awards (Recognition and Enforcement) Act 1961.[2] The latter two also didnt really deal with issue of international arbitration as such, but merely laid down the guidelines for the enforcement of foreign awards in India. [3] The 1940 Arbitration Act referred in most part to arbitration in suits though there had been provision briefly for arbitration without the intervention of the Court. Yet there were many issues with the working of the Arbitration Act of 1940, in fact the situation became almost farcical with the proceedings under the enactment becoming exceedingly technical and long winded with the law seemingly deviating from the necessities of everyday situations and a hindrance to the economic development of the nation.. These problems in the implementation of the law meant that there was a need for a need law to be introduced in its place.[4] There was also felt a need to reduce the caseload on the Courts and speed up the justice delivery mechanism. Given this background, and the recommendation of the 76th Law Commission and the UNCITRAL[5] Model Law of 1985, the Indian Parliament enacted the Arbitration Conciliation Act of 1996. The Act is essentially based on the UNCITRAL Model law, but it does also incorporates in its three schedules, the Geneva Convention on Execution of Foreign Arbitral Awards, 1927, the Geneva Protocol on Arbitration Clauses, 1923 and the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1958. Provisions of the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961 are also incorporated within the act, and the two earlier enactments are therefore repealed by this enactment. The Basic object of the 1996 law has been its focus on Party Autonomy the Right of users to appoint arbitrators of their choice. Apart from it implies greater freedom for arbitrators to choose the procedure and jurisdiction. The intervention of the Courts was intended to be kept to a minimum with the intervention only being limited to the cases of a non-appointment of an arbitrator, a wrong choice of an arbitrator, or in cases of the arbitrator giving a wrong award or his using the wrong procedure.[6] This is reinforced by the express statement made in Section 5 that there is to be no judicial intervention into the matter in the act except in the areas provided by the act. As to the scope of the Arbitration Conciliation Act 1996, it maybe said that most disputes of civil nature maybe said to be covered by the act, of course with certain exceptions. These are mainly in areas that involve questions of morality, public policy, status and religious rights. Thus there can be no arbitration agreement executed[7] in the areas of: 1. 2. Matrimonial Disputes. Industrial Disputes.

3. 4. 5. 6. 7.

Testamentary matters under the Indian Succession Act. Insolvency, Dissolution and Winding up of Proceedings under the Companies Act. Criminal Proceedings. Matters under the Indian Trust Act, Trusteeship of Charitable Institutions, Public Charities, matters falling under the Monopolies and Restrictive Trade Practices Act. Determination of Guardianship of wards.[8]

Though the act carries with itself the burden of failure of the earlier legislations in the field and the responsibility of filling in the gaps that they have left, the main objectives of the act can be stated to be: (i) to comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation; (ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration? (iii) to ensure that the Arbitral Tribunal gives reasons for its arbitral award; (iv) to ensure that the Arbitral Tribunal remains within the limits of its jurisdiction; (v) to minimise the supervisory role of Courts in the arbitral process; (vi) to permit an Arbitral Tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes; (vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court; (viii) to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an Arbitral Tribunal; and (ix) to provide that for purposes of enforcement every arbitral award made in a country to which one of the two international conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award. The extent to which it performs these functions or lives up to the expectations remains to be seen. Chapter 2: The means of Alternative Dispute Resolution, covered in the Arbitration Conciliation Act 1996 A glance. Arbitration: Blacks Law Dictionary[9] defines arbitration as An arrangement for taking and abiding by the judgment of selected persons in some disputed matter, instead of carrying it to established tribunals of justice, and is intended to avoid the formalities, the delay, the expense and vexation of ordinary litigation. Here an Arbitrator, an impartial third person(s) chosen by mutual assent of the parties, assesses the situation and decides the case on the merits. This doesnt however mean that there is no autonomy of the parties, for it they who choose the arbitrator, decide the procedure to be followed etc i.e., there is scope for the procedure to be tailored to the needs of the parties. But, once the parties have decided upon the parameters of the arbitration, the arbitrator assumes full control.[10] Arbitration is covered under the Arbitration and Conciliation Act under sections 1-43. The act contemplates a provision for reference to arbitration in case of a future dispute can be made through a contract (written), or after a dispute itself arisen. It must however be noted that the contract for arbitration must be a valid contract for the Purpose of S.10 of the Indian Contract Act. It must be noted that there must be noted that the arbitrator(s) can itself be specified in the agreement or must necessarily be appointed as per the procedure of the arbitration agreement. However in either case, the award of the arbitrator is given the status of a deemed decree for the purpose of its enforcement.

Mediation and Conciliation: they are both essentially a facilitated negotiation, wherein the focus is on reaching a mutually amicable solution, to look for joint gains in a mutually collaborative manner in the presence of a dispute. They are essentially non-contentious procedure wherein an impartial third party (the conciliator or the mediator), assists the parties in reaching a solution. The solution reached is more on the lines of a compromise solution a kind of give and take rather than strictly following the law. This is especially important as the both parties leave the mediation/conciliation feeling that they have gained something and ensures that harmony and cordial relationship is maintained between the parties. The role of the Conciliator or the Mediator is essentially to bring the parties to a position where they can reach a settlement, and unlike an arbitrator they cannot force a particular decision upon the parties, for the settlement is one that the parties mutually agree upon. The position of the mediator and the conciliator is unique as these third parties, are present only to facilitate the negotiation process between the parties. As there is no decision making power with the mediator (or as the case maybe the conciliator, the disputing parties retain control over the proceedings. The purpose of the mediator/conciliator is to only control the process with the help of the parties; This is done through the process of setting up and enforcing the ground rules of the entire process.[11] The difference between conciliation and mediation essentially lies in the nature of the two, with the conciliator having to strictly follow the procedure as laid down in the Arbitration Conciliation Act[12], and this means that conciliation is more formal, and less flexible than mediation. Further in mediation, there is scope for a more active role for the neutral third party- the facilitator (in this case the mediator). The consensus that is reached between the parties through the mediator is called a mediated settlement. It is essentially a contract, and must therefore meet all the requirements of a valid contract, in order to be enforced by the Court. But, the conciliated settlement is given the same status as the award of the arbitrator, and can be enforced like the decree of the Court. One odd point of difference between mediation and conciliation is that in conciliation the focus is more towards the resolution of the case, and conciliation may take place without the two parties actually being conciliated. In mediation however, there are cases where though the problem at hand maynt really be resolved, there can be reconciliation between the parties.[13] Chapter 3: Arbitration Conciliation Act 1996: Problems and Possible Changes The working of the Arbitration and Conciliation Act has shown that it has certain deficiencies and does not deal with certain areas in a comprehensive manner. Some of those have been looked into by the Law Commission and an amendment bill to rectify some of the problems and reduce the deficiencies is pending in the Parliament. Given below is a study of the same. Is there a need for a separate law regarding Domestic & International Arbitration Agreements? The United Nations wanted the nations to give consideration to the Model law with regard to the desirability of a uniformity of the law of arbitral procedures and the special need of international commercial arbitration practice. Yet the question before India is whether there should be a separate set of arbitration laws for domestic and international commercial arbitration. This argument is raised given the fact that there are differing needs of the two, given the fact that while domestic arbitration is more ad hoc than institutionalised, with non-uniform rules separate for

each arbitral institution, and generally there is no time frame set for the conclusion of the proceedings. On the other hand International Commercial arbitration is more institutionalised, with a known set of rules and arbitrators appointed from a panel of well-known arbitrators. There is also a strict time frame given the fact that the parties are from different countries and there is pressure to conclude the arbitration within an agreed time frame. [14] As of now the grounds for objecting to an award under S.34 and S.37 of the Arbitration & Conciliation Act, 1996 are common. Given the above distinction it is suggested that there be a separate law for international commercial arbitration, with lesser interference from Courts in the award, but greater control on domestic arbitration; the rationale here is that the state would desire greater control on the domestic arbitration given the fact that it is an alternative recourse from the litigative judicial process, and involves its own residents/nationals, unlike international commercial arbitration which may take place in a state in some cases only because of geographical convenience.[15] The Law Commission has looked into this aspect and proposed that in fact there be lesser judicial interference in for both the Domestic as well as International Commercial Arbitration, under which all matters that come to the Court against the award are to be listed for preliminary hearing and rejected straight away before notice. Further the Commission recommends a provision on the lines of S.99 of the CPC, wherein awards are not to be interfered with unless substantial prejudice is shown. Grounds for challenge: A need for enlargement? Under the existing law there are certain specified grounds for appeal from the decision of the arbitrator, as contemplated under S.34 of the act. The Law Commission has stated that there is a need to incorporate certain fresh grounds for the appeal. a. Reasons not given: There is a provision under S.31 of the act that the arbitrator must provide reasons for his decision, (except in certain specified cases where the parties have mutually agreed not to require this, or have reached a settlement). Yet there is as yet no clear statement in the present law as under S.34 of the present act. There is real need for the award to state the reasons behind it, as that enables the litigating party to know the basis of the decision being in favour of the party that it was made. Further, the presence of the reasons, would allow the Court to look into the matter to see whether there has been sufficient application of mind on the part of the Arbitrator to the issue under dispute. On an absence of proper application of mind, the court could set aside the award on the basis of inadequacy of reasons.[16] The Law Commission has recommended, therefore that there should be a requirement for the Arbitrator to state the reasons for his award, failing which the award would be set aside, also that this requirement is to be applied to both domestic and international commercial arbitration. A provision to that effect is to be incorporated in the law, through Arbitration Conciliation (Amendment) Bill, 2003 under section 34A. b. There is a greater issue which the Law Commission has talked of, the issue of an award that suffers from an error apparent on the face of it, and whether such an error should be made a challenge to the decision of the arbitrator. Under the 1940 Arbitration Act, an error of law apparent on the face of the award was not available statutorily, however, it was judicially recognised and an award could under Section 16(1) be set aside and remitted in case of an objection to the legality of the law apparent on the face of the award.

The Law Commission has recommended that there is a need to incorporate the judicial precedents, where the Higher Courts had held that the award could be set aside where there is an error on the face of it. However a new condition is recommended that the error must give rise to a substantial question of law. This has been incorporated in the Amendment Bill, and through the addition of S.34A, a new ground for challenge to the decision of the arbitrator, where there is an error apparent on the face of the arbitration award giving rise to a substantial question of law for challenge of domestic award, is made available for challenge to the decision of the arbitrator. Yet this change has come under widespread criticism, as it is felt that a Section 34(2) read with Section 28 of the Act would be wide enough to enable the arbitration tribunal to set aside an award that is violative of Indian Law and hence the new provision is not required. The challenge under the public policy is sufficient for the purpose.[17] Further there is a fear that the law is a throwback to the 1940 position, which was criticised widely for the scope it gave to the parties to unnecessarily prolong the process. Apart from this it is alleged that there is no provision for the parties to choose not to allow this ground. It would be pertinent here to note, that as the new ground is based on the S.69 of the (English) Arbitration Act, as the Law Commission has stated. However, the English law does have a provision that the parties can consent to it exclude this ground.[18] The Law Commission on the other hand, relying on the Judgement of the Supreme Court, Renusagar

Power Company Limited v. General Electric Company, AIR 1994 SC 860[19], has stated that the term
Public Policy under S.34 (2) of the Arbitration Conciliation Act 1996, covers Fundamental Policy of India, Interest of India, Justice or morality; and therefore doesnt cover errors of law, or awards made in contravention of the law. It must be noticed that the Bill contemplates that this new ground be available only in cases of domestic arbitration and excluded in cases of International Commercial arbitration, as the Law Commission has recommended. Impartiality of the Arbitrator and the Allegation of BiasA need to change the procedure for challenges to the Arbitrators award. Section 13[20] of the arbitration conciliation act deals with the challenge as to the biased nature of the arbitrator, under which the party in who has in his knowledge the circumstances that affect the impartiality of the arbitrator, can send a statement to the arbitral tribunal, and if the arbitrator so challenged doesnt withdraw from the office or the order party agrees to the challenge the arbitral tribunal shall decide on the issue and if the challenge proves unsuccessful, the proceeding shall continue and award be given. This provision thus denies the possibility of the of the removal of a biased arbitrator at the very beginning of the arbitration, or at the earliest after the discovery of a real danger of bias or the likelihood of a bias.[21] Further the arbitrator is empowered to decide the challenge against his impartiality himself, and the challenge if rejected leaves the party so challenging with no remedy, at that particular moment. He has to wait until the award is passed and then challenge the award under S.34 of the Act.[22] It has been held that there is no recourse to the civil Court or even a High Court, under Art.226 to challenge the order of an arbitrator who rejects a challenge to his appointment.[23] This is a dangerous situation, and though under S.12 of the act the arbitrator has a duty cast upon him to disclose any circumstances that give rise to justifiable doubts as to his impartiality. Yet there is no provision for the party alleging bias to immediately bring the challenge to a Court of law, and side by side continuing with the arbitration proceedings as is provided under the UNICTRAL Model Law. Further there is no provision under S.34 or S.37 of the act enabling an objection to be filed or appeal

to be made challenging the decision of the arbitrator rejecting the plea of bias or disqualification, even as S.13(5) permits the decision to be challenged in Court. Though section 13 was meant to strike a balance between speedy disposal of cases and the giving of immediate decisions regarding bias and disqualification it seems to have failed on that account. In cases where the arbitrator rejects the challenge, the only remedy available for the aggrieved party is to wait until the award is passed and then challenge the award on the ground of bias and disqualification; and if the Court were to set aside such award all it would have meant was that the aggrieved party had to participate in arbitration proceedings has wasted both his time and money.[24] Further the section as it exits today is seen as a violation of the principles of natural justice: a) b) No man should be a judge in his own cause. Justice should not just be done, but it also manifestly appear to be done. [25]

Further, the existence of a judicial remedy at the very outset of the judicial proceeding rather than waiting for the post award stage has in the international experience, proved to helpful in avoiding the unnecessary waste of time and money, over fresh/frustrated rounds of arbitration.[26] Now the earlier Arbitration Act of 1940 contained a judicial remedy to remove a biased arbitrator at the earliest possible opportunity. On the same lines the Law Commission in its 176 th report has recommended the provision of an appeal under S.37 against the decision of the arbitrator made under S.13(4); Further the commission has suggested that the appeal so provided be immediate appeal to the Court, and for this purpose the term shall in S.1395) be replaced with may, so that pending a decision by the Court on the issue of the bias of the arbitrator it would be within the discretion of the arbitrators to proceed further with the arbitration proceedings or not.[27] Fairness of Arbitrators Section 18 of the 1996 Arbitration Conciliation Act, mandates that the parties to the arbitral proceedings are to be treated equally and each party is to be given full opportunity to present and make their representations case, regarding their own case and the case of their opponent.[28] Now there were cases of the arbitrator that was appointed by the parties was very often someone who had the possibility of being in a position that he would defer to the opinion of one of the parties, despite the requirement of S.18, and the declaration made under S.12 regarding the absence of reasons that would affect his impartiality. The net result was that the entire credibility of the arbitration proceedings was under threat. Therefore the Law Commission in 176th Report proposes the insertion of a new section, 10A to provide that no party to the arbitration agreement can appoint its own employees, consultants, advisors or any persons having business relations with them as arbitrators. If the parties, despite this provision choose to continue the practice, then such arbitration agreement shall be void. The Arbitration and Conciliation (Amendment) Bill, 2003 however has not adopted this recommendation incorporates this suggestion. Yet, on the recommendation of the Law Commission, there is an exception made in cases where such arbitration agreement is entered into with any public sector organizations/statutory/governmental authority or to resolve international commercial arbitration. The former was done, despite a consideration that even government employees could also lean in favour of their employers, but the Commission choose to ignore this , and in hindsight it would make sense, as many a time, the government employees also perform judicial and quasi-judicial functions and a certain higher degree of adroitness is to be expected of them. Further the alternative in such cases would have been, giving

the court the power to appoint the arbitrator, even if the procedure in the arbitration agreement would state otherwisea situation that would lead to a reduction of party autonomy and increased judicial interference. Yet other have chosen to criticise exception in the recommendation saying that there is no need to exclude government employees; however there is no need to really go into the issue since this recommendation is not present in the Amendment Bill. Power of Courts to refer suits for arbitration. Section 8 of the Arbitration Conciliation Act 1996, gives the judicial authority before which an action is brought in a matter, which is the subject of an arbitration agreement to refer such dispute for arbitration.[29] However it didnt clothe the judicial authority with the discretion to make a reference of disputes to arbitration. Further, such reference is available only if the parties asked for such a reference before filing his statement. The Law Commission has recommended that a provision on the lines of S.21 in the Arbitration Act 1940, which enabled a Court, before which any suit is pending, to refer such matter to arbitration, on the request of the parties, in cases where the agreement to refer the matters to arbitration were to be made subsequent to the filing of the suit. Also this power was available to be exercised at any time before the judgement was given, The Commission has gone on to say that the new section is to have a provision for the challenge such arbitral award, as is passed post the reference to be made to the same Court as had referred the case for arbitration, if the parties would agree to the same, which would mean that a fresh litigation would not have to be instituted in case of a challenge to the arbitrators award. By this the Commission intended to remove some of the problems involved in the entire interpretation of S.8 of the Act. The Arbitration Conciliation Amendment bill incorporates the recommendations of the commission and there is a new section 8-A, enable reference to arbitration at any stage of a civil suit pending in the City Civil Court or in the High Court or in the Supreme Court if all the parties the dispute enter into an arbitration agreement to resolve their disputes and make an application to that effect before the Court. The reference to arbitration is to be made in civil cases, at any stage of the trial institution, appeal, revision etc. Also, it would be applicable to writes as issued under Art. 226/227 and appeals there form.[30] It would be important to note that there has been another recommendation by the Law Commission with regard to the replacing of the term judicial authority with the term Court, and the same has also been incorporated into the amendment bill in order to make the position of law clearer. The idea behind this is to get the rest of section 8 in line with the proposed amendment, especially with regard to the provision for challenge to the award being made in the court referring the issue for arbitration. For if other judicial and quasi judicial bodies were to be included within the new section, there would be uncertainty and dispute as to which body would decide on the correctness of the decision so given.[31] Prescription of a time limit, for the rendering of the arbitration award. The 1940 Act had period of 4 months from the date of reference to the arbitrator within which the arbitrator has to give his decision, subject of course to the parties asking for such time to be extended. The Law Commission in its 76th Report has stated that apart from the existing provision a condition should be set, and that no extension of the time beyond the period of one year from the date of

reference is to be granted, unless the arbitrator for adequate reasons that are to be recorded in writing, that the extension is necessary. [32] There is no specific time limit fixed in the Arbitration Conciliation Act 1996, within which the award of the arbitrator has to be given, this was done to confer greater autonomy on the arbitrators, and insulate them from judicial interference. This came out of the fact that in the previous legislation, of 1940, under which there had been tremendous litigation for the extension of the time period. Also the Model law on which the Indian law of arbitration is undoubtedly based upon makes no mention of a time. But, it must however be kept in mind that even as there is no fixed time limit in the legislation, the tribunal cannot unnecessarily prolong its decision, as undue delay on the part of the arbitrator can in fact be used to take his mandate as is provided for under S.14(a). The presumption that was made in 1996 while framing the new law was that judicial interference was the root cause of delays in arbitration and that the problem would get solved once the arbitrators were given greater autonomy. In reality, things did not quite work out that way. The arbitrators, who are mostly retired Supreme Court and high Court judges, have used the newfound freedom to revert to the habit they would have acquired in the Courts of giving adjournments liberally and for long periods. This meant that arbitral proceedings often held in five-star hotels dragged on for years, defeating the whole point of seeking to resolve the dispute outside the judicial framework. The fees that the arbitrators charges per sitting are often as outrageous an amount as say Rs. 30000, which only goes to show a great possibility of their having a well developed vested interest in prolonging the proceedings. Given this, the Arbitration and Conciliation (Amendment) Bill, 2003, incorporates the pre-1996 situation in which there was a time limit to completion of arbitral arbitrators. But since the deadline of four months set by the 1940 Act was often found to be unrealistic, the 2003 Bill provides that arbitration should normally be wrapped up in one year. If that does not prove sufficient, the Bill says that the proceedings could, with the consent of all concerned, be stretched to a maximum of another year. [33] Jurisdictional Issues How are they to be dealt with? Under Section 16 of the Arbitration Conciliation the Arbitrators are given the power to decide on issues of their own jurisdiction, including ruling on any objection as to the validity of the arbitration agreement. This was a deviation from the 1940 Arbitration Act which has no specific provision as to this effect.[34] It would be important to note that just like the above discussion for the challenge on the grounds of bias, there is also no provision under S. 34 of the act, challenging the decision of the arbitrator regarding his own jurisdiction, immediately after the objection to the jurisdiction is rejected, even as S. 16(6) does make this enables a party to apply for setting aside the final award passed in such cases after deciding the jurisdictional issue. The situation is indeed very similar to the problematic situation that under S.13 and the allegation of bias of the arbitrator.[35] Apart from this there is no option for the arbitrator to decide the issue of jurisdiction as a preliminary issue as that provision though available in the UNCTRAL Model Law, is however lacking in S.16. Also under S.16(5), the Arbitral Tribunal has to consider the objection to its jurisdiction, and in case it rejects the objection it has no option but to continue with the arbitration proceedings and pass and award, even if an appeal is made under S.16(6) of the Act.

Law Commission has also stated that a right of appeal be available to the parties under S.34, as it has recommend for S.13, as additional grounds for appeal. The Commission has recognised the possibility that this may amount to wastage of time and resources, as the parties may unnecessarily be forced to continue with the arbitration proceedings even as the fate of the proceeding itself depends on the appeal. Hence the Commission has suggested that the Arbitral Tribunal be given the discretion to continue to the proceedings or stay them for the duration of the appeal. Also it has recommended that the issue of jurisdiction be decided as a preliminary issue, after which the tribunal may choose to continue or discontinue the proceedings, pending the appeal to the court. The idea behind giving the discretion here is to prevent the unnecessary waste of the time of the parties pending the decision, while at the same time acting as a barrier to frivolous and unnecessary appeals.[36] Other important issues 1. Peremptory orders: On the recommendation of the 176th Report of the Law Commission of India, there is a proposal in the Arbitration and Conciliation (Amendment) Bill, 2003 through S. 24A & 24B to allow the Arbitral Tribunals to pass peremptory orders, to ensure the implementation of the interlocutory orders made by it, in case of default or delay, empower itself with the ability to order costs, draw adverse inference, dismiss the case or pass other such orders against the parties in default. 2. Fast Track Arbitration: Under the Amendment Act, provision has been made under S.43A, 43B & 43C, to provide for single member fast tract arbitrators; Parties have the choice under these provisions now have the option of choosing to go in for fast track arbitration in modification of their agreement, provided this is done before the appointment of the Arbitral tribunal. Yet, in these fast track arbitrations, the arbitrator has the choice of imposing harsher measures to prevent the unnecessary delay by the parties and can force them to adhere to a strict schedule or arbitration. But, it can be said these strict measures are necessary to ensure that the fast-track arbitration lives up to its name and the parties can be said to give up their freedom to decide the pace of arbitration by their own volition, in order to attain a quick remedy.[37] 3. Application of Indian Law: The Law Commissions recommendations regarding the change to S. 2(2) have been made a part of the 2003 Amendment Bill. This change has the effect of applying Indian Law to all arbitral proceedings where the site of arbitration is India. Those proceedings that would otherwise have been excluded are not brought under Part I of the Arbitration Conciliation Act 1996. This change has special importance in regard of the granting of interim orders, for under current arbitration law, the jurisdiction of the Indian Courts to provide interim relief, as under S.9, has been ousted in the case of international arbitration. This is so given the fact that the provision regarding interim relief is under Chapter II Part I of the act, while Part I had been expressly stated to cover domestic arbitrations.[38] 4. Appointment of Arbitrators: The Amendment Bill, following the Law Commissions proposal, has a provision for the Supreme Court or the High Court as the case maybe to make appointments to the Arbitral Tribunal. There is no longer any provision as was present in the 1996 Act, the need of the parties to request the Chief Justice to do so. Under, S.11 sub-sections 5,6 as is it is proposed to be amended, there is a assumption that if no appointment within the specified period or in the prescribed manner, is made there is a waiver of the authority to appoint the arbitrator, and the Courts are to make the appointment on behalf of the parties.

The purpose of the change clearly is to speed up the entire process. Also it removes the exercise of the power from the Chief Justices of the Supreme Courts and the High Courts, and enables judicial exercise of the power, which is clearly more preferable. Yet there is a negative to it also, as it can lead to increased judicial intervention, which has been sought to be curtailed by the makers of the 1996 Act. Further this compulsory appointment can have ofcourse an adverse impact on the viability of arbitration. An option would perhaps be to enable the recognised institutions of Arbitration in India, say the Indian Council of Arbitrators (ICA), to make the appointment on behalf of the court.[39] Conclusion The basic purpose behind the amendment of the Arbitration and Conciliation Act, 1996 was to speed up the entire arbitration process and make it a realistic alternative to litigation. Though the new law brought with it many hopes and expectations, a few of them still remain nothing beyond a distant dream. In keeping with this greater purpose, of providing speedy resolution of disputes and reducing the workload of the courts, while at the same time maintaining the party autonomy that is the hallmark of Alternative Dispute Resolution, the Law Commission of India has suggested various changes to the Arbitration and Conciliation Act, after making a detailed analysis of the various problematic areas. The changes like allowing for appeals in the course of the arbitral proceedings itself, making allowance for fast track arbitration, and provisions for reference to arbitration, in the pendency of a suit, all would if implemented go far in unburdening the judicial system, while at the same time making Arbitration an increasingly attractive option. The Recommendations for change though comprehensive, do leave behind certain questions.

Take for example the amendments to S.23 and 24, which are meant to expedite the entire process of arbitration, may make commercial arbitration an unattractive option, as the elementary focus of the ADR process, the Party Autonomy is under threat. Was this the purpose?

Similarly with regard to the addition of S. 10A, there has been specific exclusion of the states employees, which despite the entire discussion on the issue, has been rather unreasonably maintained, for is there any reason why the government like any other employer, couldnt influence its own employees to decide in its favour?

The changes to Section 11 are indeed welcome, and instead of the Chief Justices of the Supreme Court and the High Court having to perform the executive function statutorily of appointing the Arbitrator, the courts are to decide. Yet what is to be about the increased level of judicial interference that it implies, or the negative impact it may have on the appeal of arbitration?

Further, the provisions added to the 4th Schedule guideline recommended to be added to the Arbitration and Conciliation Act, for facilitating fast-track arbitration, though a step in the right direction, could well from another angle could be seen as restricting the freedom of the fast track arbitrators.

Also as to the accountability of the arbitrators, there is an interesting question that arises. Though the arbitrators appointed a public authority (say a stock exchange), like judges and their delegates are covered under S.2(c) of the Prevention of Corruption Act, 1988, yet the same doesnt apply to other arbitrators.[40]

Yet despite these issues, it is high time that the recommendations be implemented; as with every passing day, in the globalising and rapidly moving yet increasingly interconnected world of today,

nations cannot be expected to move on with the drudgery of the court system. And India cannot afford to let itself be left behind, must have in place a well settled regime of Alternative Dispute Resolution and a legal system built around it. At the same time there is a need to develop a culture of arbitration, rather than dragging every dispute to the courtrooms for resolution. The success of the institution of arbitration like any judicial institution depends upon the confidence the institution can create and establish in the mind of the public. Ofcourse the credibility of the field depends on the credibility of the persons involved in it and their ability to deliver results, and there is a need for professional arbitrators trained in the techniques of ADR to undertake the dispute resolution. Stop-gap measures like the appointment of retired judges of the courts, or bureaucrats, even those with years of integrity, ability & impartiality behind them fail to live upto expectations, as even though they might have been the leading lights of their field, but the demands of arbitration are completely unlike those of adjudication or policy execution. Bibliography Books:

Albert Fiadjoe, Alternative Dispute Resolution: A Developing worlds perspective, (London: Cavendish Publishing House, 2004).

Justice R S Bachawats Law of Arbitration and Conciliation, (3rd Edn, K K Venugopal Ed, Nagpur:
Wadhwa & Co, 1999). P Chandrasekhara Rao, The Arbitration Conciliation Act 1996 A Commentary (Delhi: Universal Law Publishing Co Ltd., 1999).

Articles:

Consultation Paper on Review of Arbitration & Conciliation Act, 1996, 1, Company Law

Journal, 206(2001).
A K Ganguli, The Proposed Amendments to the Arbitration and Conciliation Act, 1996 A Critical Analysis, 45(1), Journal of the Indian Law Institute, 3 (2003). Aarti Joshi, Challenge of Arbitrators under the Arbitration and Conciliation Act, 1996, 31 Tax

and Corporate Referncer 209(2004).


D R Dhanuka, Deficiency in Arbitration Law and proposals for Law reform, 5 Corporate Law

Advisor, 237(2002).
Dr S K Rashid, The Proposed Amendment Abrogate a Basic Feature of the Arbitration Act, 1996, AIR 2002 Journal 177. Gautam Gandotra, Arbitration and Conciliation Act, 1996: Need for a few amendments, 51, SEBI and Corporate Laws Magazine 188(2002). GCV Subba Rao, Combining Mediation and Arbitration in Construction Contract Disputes and Information Technology under the Arbitration Conciliation Act 1996, 49, CLC Journal, 768 (2001).

Naresh Kumar, Arbitration and Conciliation Draft (Amendment) Bill 2001: An Analysis, 26, Tax

and Corporate Referencer, 140 (2002).


P.K. Ravindranatha Menon, Role of Arbitral to Institutions the in the Modern Act, World, PL 10 Lawyers

WebJour21(2004).
Somashekar Sunderesan, Its Time Review Arbitration

Collective 17(2002).
Miscellaneous:

Manoj Mitta, Breathe Life into this Bill, The Indian Express, August 19, 2004.

[1] These matters have been discussed in Sections 312-327 of the Code of Civil Procedure.

[2] These laws were enacted in pursuance of the Geneva protocol on the Execution of Foreign Arbitral Awards, 1927 and the New York Convention on the Recognition an Enforcement of Foreign Arbitral Awards, 1958. [3] A K Ganguli, The Proposed Amendments to the Arbitration and Conciliation Act, 1996 A Critical Analysis, 45(1), Journal of the Indian Law Institute, 3 (2003). [4] P Chandrasekhara Rao, The Arbitration Conciliation Act 1996 A Commentary (Delhi: Universal Law Publishing Co Ltd, 1999) at 4. [5] United Nations Commission on International Trade Law. [6] Naresh Kumar, Arbitration and Conciliation Draft (Amendment) Bill 2001: An Analysis, 26, Tax

and Corporate Referencer, 140 (2002).


[7] The judicial/ quasi-judicial bodies that decide these issues are to some extent moving towards the technique of arbitration rather than merely adjudicating. [8] GCV Subba Rao, Combining Mediation and Arbitration in Construction Contract Disputes and Information Technology under the Arbitration Conciliation Act 1996, 49, CLC Journal, 768 (2001); there maybe more cases where arbitration is barred, and for this further reference maybe made to the Indian Contract Act 1872. [9] As cited from, P.K. Ravindranatha Menon, Role of Arbitral Institutions in the Modern World, PL

WebJour 21(2004).
[10] Albert Fiadjoe, Alternative Dispute Resolution: A Developing worlds perspective, (London: Cavendish Publishing House, 2004) at 27. [11] Ibid at 22. [12] Sections 61 to 89 of the said Act deal with Conciliation. [13] Supra note 10 at 24. [14] Supra note 3. [15] Redfern & Hunter in the Law and Practice of International Arbitration, (2nd Edn) at 14-15 as cited

fromThe Law Commission of India, 176th Report, at 6. [16] Supra note 3 at 19-20.
[17] D R Dhanuka, Deficiency in Arbitration Law and proposals for Law reform, 5 Corporate Law

Advisor, 237(2002).
[18] Dr S K Rashid, The Proposed Amendment Abrogate a Basic Feature of the Arbitration Act, 1996, AIR 2002 Journal 177. [19] It should however be noted that the Supreme Court in its Judgment in ONGC v. Saw Pipes Ltd, AIR 2003 SC 2629. has stated that under S.34 (2), the term public policy is used in a much wider sense than is interpreted in Renusagar and an award shown to be suffering from a patent error of law (which neednt of course be an error apparent on the face of the award), could be challenged under the head of Public Policy of India. [20] S.13 of the Arbitration Conciliation Act,1996 reads as S.13 Challenge Procedure.(1) Subject to subsection (4), the parties are free to agree on a procedure for challenging an arbitrator. (2) Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. (3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other

party agrees to the challenge, the arbitral tribunal shall decide on the challenge.

(4) an award. (5)

If a challenge under any procedure agreed upon by the parties or under the procedure under

sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make

Where an arbitral award is made under sub-section (4), the party challenging the arbitrator

may make a petition setting aside such an arbitral award in accordance with S.34. [21] Gautam Gandotra, Arbitration and Conciliation Act, 1996: Need for a few amendments, 51, SEBI

and Corporate Laws Magazine 188(2002).


[22] Aarti Joshi, Challenge of Arbitrators under the Arbitration and Conciliation Act, 1996, 31 Tax

and Corporate Referncer 209(2004) at 218. [23] Herike Rice Mills v. State of Punjab, (1998) 29 CLA 3(P&H).
[24] It would be important to note that the same is the procedure regarding challenges to the jurisdiction of the arbitrator under S.16. [25] Supra note 21. [26] Supra note 22 at 218. [27] Consultation Paper on Review of Arbitration & Conciliation Act, 1996, 1, Company Law Journal, 206(2001). [28] Justice R S Bachawats Law of Arbitration and Conciliation, (3rd Edn, K K Venugopal Ed, Nagpur: Wadhwa & Co, 1999) at 497. [29] Ibid at 263. [30] The Arbitration and Conciliation (Amendment) Bill, 2003. [31] Supra note 27 at 209. [32] Ibid at 232. [33] Manoj Mitta, Breathe Life into this Bill, The Indian Express, August 19, 2004. [34] Supra note 27 at 216. [35] For more a more detailed explanation of how this is so, Refer to the discussion under Challenge to impartiality of the Arbitrator and the Allegation of BiasA need to change the procedure for challenges to the Arbitrators award. [36] Supra note 27 at 217. [37] Supra note 3 at 20. [38] Supra note 27. [39] Supra note 3 at 20. [40] Somashekar Sunderesan, Its Time to Review the Arbitration Act, 10 Lawyers Collective 17(2002).