B.A.LL.B.

VII Semester

Short Notes

ALTERNATIVE DISPUTE RESOLUTION

(Unit II)
Question: How does the Arbitration and Conciliation Act, 1996, outline the composition of an arbitral
tribunal, specify the grounds and procedure for challenging an arbitrator, and regulate the termination
of an arbitrator's mandate along with the substitution process?
Answer: Under S. 2(1)(d) of the Arbitration and Conciliation Act, 1996 the term ‘arbitral tribunal’ means a
sole arbitrator or a panel of arbitrators. It is also to be noted that composition of arbitral tribunal has been
provided in Chapter II namely, in Section 10 of the said Act, wherein the parties are free to determine the
number of arbitrators, provided that such number shall not be even number.

Chapter-III of the Arbitration and Conciliation Act, 1996 talks about the composition of the arbitral
tribunal.
The provisions which are discussed in detail in Chapter-III are mentioned below-

1. The number of arbitrators

7. Termination of the mandate and substitution of the arbitrator

Challenge against appointment of an arbitrator

When an individual is approached to be appointed as an arbitrator, they are obliged to disclose certain
information. Section 12 of the Act regulates the grounds for challenge of appointment. It states that the person
must, in writing, detail any circumstances or relationships, be it direct or indirect, that they have in the interest
of the parties or the dispute at hand. Said interest could be past or present, and can be of a business, financial,
professional, familial, or any other nature. There must be no situation that can create or develop doubt in the
arbitrator’s impartiality and independence. The individual must also disclose whether they are capable of
undertaking the procedure and devote sufficient time in order to optimally finish it within twelve months.

TERMINATION OF AN ARBITRATOR

When an arbitral award is set aside based on an application made under Section 13 Sub- Section (5), the court
will decide on whether the challenged arbitrator in default is entitled to any fees.

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Apart from the challenge of the arbitrator, their mandate is liable to be terminated under certain circumstances,
resulting in their “removal”. Section 14 and Section 15 of the Arbitration and Conciliation Act 1996 provide
guidelines regarding this.

Section 15 of the Arbitration and Conciliation Act, 1996, talks both about the termination of the Arbitrator’s
authority in a case/proceeding and addresses the aspect of substitution. It states that the authority and mandate
of the arbitrator will be terminated when the arbitrator agrees to withdraw from their position, or the parties
agree to drop them as an arbitrator.

The termination of an arbitrator is followed by a substitute arbitrator being appointed to the proceedings. The
appointment procedure will follow the rules that were previously established by the parties. The proceedings
and hearings, at the discretion of the arbitral tribunal, will either continue where it was interrupted or will
repeat from the beginning. However, if the parties to the dispute have agreed on the procedure regarding this,
it will be followed. Additionally, the mere substitution of an arbitrator will not imply that any orders or rulings
by the arbitral tribunal will be invalidated – this also will be agreed to by the parties.

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Question: How does the Arbitration and Conciliation Act, 1996, empower arbitral tribunals to
determine their own jurisdiction, conduct proceedings efficiently, appoint expert advisors, and seek
court assistance for evidence gathering, ensuring a robust arbitration process?

Answer: The terms “arbitrator” and “arbitration tribunal” are interchangeable and refer to the same
authority/person or group of persons. The Arbitration and Conciliation Act, 1996 enables the parties referring
a dispute for arbitration to have the liberty to appoint a sole arbitrator or a panel of arbitrators.

There is no inherent jurisdiction of an arbitral tribunal. Instead, its jurisdiction is derived from the agreement
between the parties to decide a particular dispute by way of arbitration. Thus, the jurisdiction of an arbitral
tribunal is not derived from any legislation. There is a high level of party autonomy. As a result, the arbitration
tribunal enjoys the power to rule on its own jurisdiction, and Section 16 of the Arbitration and Conciliation
Act, 1996, envisages the same. After briefly mentioning what types of disputes are arbitrable, the various
nuances of Section 16 of the Arbitration and Conciliation Act, 1996, with relevant case laws, have been
discussed below.

The provisions under Section 16 of this Act are framed in accordance with Article 23 of the UNCITRAL
Arbitration Rules.

It provides that an arbitration tribunal is competent to rule on its own jurisdiction. The doctrine of Kompetenz-
kompetenz or competence de la competence applies to the arbitration tribunal recognizing that the law is
competent to rule on its own jurisdiction.

Under the provisions of the 1996 Act, the parties have been given a choice in accordance with which they wish
the Arbitral Tribunal to proceed with the adjudication of the controversy between the parties subject only to
certain restrictions concerning public interest.

Under Section 26 of the Arbitration and Conciliation Act, 1996, arbitral tribunals in India are empowered to
appoint expert advisors to assist in the resolution of disputes. This provision is particularly crucial in cases
that involve technical, scientific, or specialized issues that the tribunal may not have the expertise to fully
understand or resolve on its own.

Section 26 states that the arbitral tribunal may appoint one or more experts to report to it on specific issues to
be determined by the arbitral tribunal, unless otherwise agreed by the parties.

Section 27 of the Arbitration and Conciliation Act, 1996, empowers arbitral tribunals to seek assistance from
courts in gathering evidence. This provision is particularly important in situations where the tribunal or a party
faces challenges in obtaining necessary evidence. Court assistance is crucial when a party or a third party is
unwilling to produce evidence voluntarily or when evidence is beyond the reach of the tribunal or the parties,
such as evidence held by non-parties or located in different jurisdictions.

In Sigma Plastics Ltd. v. Standard Chartered Bank (2002), the Bombay High Court dealt with an
application under Section 27, where the court was asked to assist in obtaining documents that were crucial for
the arbitration. The court’s involvement ensured that the necessary evidence was produced, illustrating the
practical application of this provision.

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Question: How does the Arbitration and Conciliation Act, 1996, regulate the making of an arbitral
award and the termination of proceedings, including the time limits for issuing an award, the fast-track
procedure, and provisions for settlement?

Answer: Just like judgment ends a court case or trial; an award is the final determination of the arbitral tribunal
in disputes arbitrated upon by it. The decision of the arbitral tribunal is called an “Award”
(even when the Claimant’s claim fails and no damages are paid), it is just as final and binding as a court
judgment.

Under the Act, the process of making an arbitral award is governed by several provisions that ensure the award
is fair, just, and delivered within a reasonable time frame.

The arbitral award represents the culmination of the arbitral process, a binding decision that carries the same
weight as a court judgment. The Act meticulously outlines the procedure for making an arbitral award to ensure
its legitimacy and enforceability.

Section 31 of the Act emphasizes clarity and comprehensiveness in drafting the arbitral award. The award
must be in writing, clearly demonstrating its formal nature, and signed by all the arbitrators forming the
tribunal. Unless the parties agree otherwise or the award embodies a settlement agreed upon by the parties,
the award must explicitly state the reasons underpinning the tribunal's decision. The award must bear the date
of its issuance and clearly specify the physical location or 'seat' of the arbitration.

Recognizing the importance of timely dispute resolution, Section 29A of the Act imposes a time limit within
which the arbitral tribunal must endeavor to render its award. The general rule mandates that the award should
be made within 12 months from the date the arbitral tribunal receives the final statements of claim and defense
from the parties. The Act acknowledges that exceptional circumstances may justify an extension of this 12-
month period. In such cases, the parties may mutually agree to extend the time limit.

The termination of arbitral proceedings signifies the formal conclusion of the arbitration, either by a binding
award or through alternative means. The Act outlines different scenarios leading to the termination of
proceedings.

In India, the concept of fast-track arbitration came up with the recommendations of 246th Law Commission
Report on 5th August 2014, which referred to a number of cases to provide the benefits of a speedy proceeding.
Following this, came up the Amendment Act of 2015, where section 29B of the Arbitration and Conciliation
Act, 1996 with the addition of amendments, talked about the procedure involved for fast-track arbitration.
Section 29B talks about the procedure involved and the rules to be followed for fast-track arbitration. The
Hon’ble Supreme Court in Board of Control for Cricket in India V. Kochi Cricket Private Limited(2018) held
that the provisions of Section 29B of the said Act could only be made applicable to the arbitration proceedings
commenced after the Amendment of 2015, i.e. 23rd October, 2015.

Section 30 of the Arbitration and Conciliation Act, 1996, encourages the settlement of disputes during the
arbitral process. It allows the arbitral tribunal to facilitate settlement discussions and, if a settlement is reached,
to record the settlement in the form of an arbitral award. This award has the same status and effect as any other
arbitral award on the merits of the case.

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Question: How does the arbitral tribunal handle the form and contents of an arbitral award, the regime
for costs, the termination of proceedings, and the processes for correction, interpretation, and issuing
additional awards?

Answer: The form and contents of an arbitral award, as governed by Section 31 of the Arbitration and
Conciliation Act, 1996, are essential to ensure clarity, fairness, and enforceability of the arbitration process.
This section outlines specific requirements that the arbitral tribunal must adhere to when crafting an award.

The Act mandates that the arbitral award must be in writing. This requirement underscores the need for a
formal and tangible record of the tribunal's decision, which can be referred to by the parties and enforced by
courts if necessary. Additionally, the award must be signed by all members of the arbitral tribunal.

Section 31(3) of the Act specifies that the award must state the reasons upon which it is based, unless the
parties have agreed that no reasons are to be given, or the award is an arbitral award on agreed terms under
Section 30. In Som Datt Builders Ltd. v. State of Kerala (2009), the Supreme Court of India emphasized
the necessity of providing reasons for an arbitral award.

Interest and Costs:

Unless otherwise agreed by the parties, the tribunal may award interest on the whole or part of the money at
such rate and for such period as it deems reasonable. Section 31(8) allows the tribunal to apportion these costs
between the parties, taking into account the conduct of the parties and the outcome of the proceedings.

Termination of proceeding:

Section 32 of the Arbitrational and Conciliation Act, 1996 is totally coherent with Article 32 of UNCITRAL
Model Law. According to Section 32(1) of the Act termination of Arbitral proceedings takes place once the
final award declared by the arbitral tribunal. the termination of the arbitral proceedings terminates the mandate
of the arbitral tribunal and the arbitral tribunal becomes functus officio. The term “functus officio” means no
longer holding office or having official authority once a decision is rendered.

Correction and Interpretation of arbitral award

Correction and interpretation of an arbitral award is a post-award process. The arbitration law is based on the
UNCITRAL model law (The United Nations Commission on International Trade Law).

Section 33 of the Arbitration and Conciliation Act, 1996 is the statutory provision that allows for correction
and interpretation of an award.

The important reason here is that human errors can occur. This means that there are situations when there are
errors in an arbitral award. These errors could be simply typing errors or something major such as a decision
missing from the proceedings in the final award. These kinds of errors put one party at a disadvantage. These
errors are unacceptable as the award, once granted, is not up for appeal.

Additional award

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Section 33(4) of the Arbitration and Conciliation Act

This sub-section states that:

Unless otherwise agreed by the parties, a party with notice to the other party may request, within thirty days
from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims
presented in the arbitral proceedings but omitted from the arbitral award.

The main difference to be noted in a correction/interpretation given and an additional award given is that:

 The correction and interpretation made, merges with the original award. This is because there are only
calculative or clerical changes to be made.

 An additional award by its name itself implies that another award is granted. This award does not merge
with the original award.