THE ARBITRATION AND CONCILIATION ACT, 1996

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In India the law relating to arbitration is contained in the Arbitration and Conciliation Act, 1996 which is drafted on the UNICITRAL Model Law of 1985 formulated by the United Nations Commission on International Trade Law and the UNICITRAL Arbitration Rules of 1976. The fundamental object behind the legislation is to recognize the economic transformations in India and to take steps to harmonize the provisions of nations with that of the international standards. The Act further aims to unify the law dealing with domestic arbitration, international commercial arbitration and proper enforcement mechanism for foreign arbitral awards.  The provisions of the legislation are also in tune with the UNICITRAL Conciliation Rules of 1980.

The Act defines ‘Arbitration’ as any arbitration whether governed by permanent arbitral body or otherwise. According to the Act an arbitration agreement is an agreement entered by the parties to refer certain disputes to arbitration, where the dispute is with regard to legal relationship arisen out of the contract or else. The parties shall include the arbitration agreement as a section in the contract or shall enter into separate agreement. Where the parties have entered into an arbitration agreement, the judicial authority before which an action is initiated regarding a dispute shall immediately pass on the parties to arbitration if an application is filed regarding the matter by either of the parties. The matter shall be referred for arbitration only if the original arbitration agreement is produced by the parties.

The Act grants freedom to the parties to determine the number of arbitrators with a condition that the number shall be even. If the parties fail to determine the number of arbitrators, then the tribunal shall consist of a sole arbitrator. In conducting the arbitral proceedings the arbitrator shall treat the parties without discrimination and shall give both the parties an opportunity to present his case. The arbitrator is not under an obligation to follow the procedures of the Indian Evidence Act or the Civil Procedure Code in its proceedings. The arbitral tribunal is empowered to render the support of the Court in taking evidence. The decision of the tribunal shall be based on substantive law prevalent in India in an arbitration proceeding conducted in India. But in the case of international commercial arbitration the decision shall be on the principle of rules of law that are assigned by the parties that is pertinent to the matter of dispute. The decision of the tribunal is called arbitral award which shall be based on majority opinion.

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The Act under Chapter I of Part II provides for the enforcement mechanisms for certain foreign awards according to New York Convention Awards. The foreign awards made in accordance with the provisions of the Act shall be applicable and binding on the parties to the dispute. To have the force of law, the parties are obliged to produce necessary documents before the Court as specified under the Act. The arbitral award shall have the same status as that of the decree of a civil court where the court is convinced that the award is enforceable.

The enforcement of an arbitral award shall be initiated in consonance with the Geneva Convention Awards. The award shall be enforced only if the award is made in consonance with the matter of the dispute that is valid according to the prevailing laws, the matter under consideration is capable of being settled through arbitration, award has been pronounced as agreed upon by the parties and the award is consistent with the laws prevailing in India.

Where the parties agree upon to refer the dispute to conciliation, the Act grants the appointment of a single conciliator. The Conciliator shall enable the parties to enter a settlement agreement if the matter is settled and it shall have the status of an arbitral award. But the conciliator shall not enjoy the powers of an arbitrator and shall provide mere assistance to the parties to settle dispute.

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The Central Government in 2003 proposed an amendment by introducing Arbitration and Conciliation (Amendment) Bill, 2003. But the proposal was withdrawn by the Union Cabinet for the introduction of a new bill concerning the matter.