Answer ... Various states have also enacted legislation for the arbitration of specific disputes. For example, the state government of Madhya Pradesh has enacted the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 for arbitration relating to works contracts and claims over a specific value where the state government of Madhya Pradesh or any of its bodies are involved. Similar acts exist in Chhattisgarh, Gujarat and Bihar pertaining to works contracts dealt by the state governments and their departments. These acts have their own dispute resolution setup and exclude the jurisdiction of the Arbitration Act.
For a dispute to be resolved through arbitration, it must be arbitrable. The general principle of arbitrability is that rights in rem are not arbitrable, whereas rights in personam are arbitrable. While the Arbitration Act itself is silent on the issue of arbitrability, the Supreme Court has clarified the same. In its landmark judgment in Booz-Allen & Hamilton Inc v Sbi Home Finance Ltd ((2011) 5 SCC 532), the Supreme Court held that: “Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication.”
The court further identified the following as well-recognised examples of non-arbitrable disputes:
- disputes relating to rights and liabilities which give rise to or arise from criminal offences;
- matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights or child custody;
- guardianship matters;
- insolvency and winding-up matters;
- testamentary matters (grant of probate, letters of administration and succession certificate); and
- eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts have jurisdiction to order eviction or hear the dispute.
The Supreme Court added disputes arising from trust deeds and the Trust Act, 1882 to the above list in its decision in Shri Vimal Kishor Shah v Mr Jayesh Dinesh Shah 2016 (8) Scale 116. Further, in A Ayyasamy v A Paramasivam ((2016) 10 SCC 386), the Supreme Court also held that disputes concerning the following are non-arbitrable:
- patents, trademarks and copyright;
- antitrust/competition laws;
- bribery/corruption laws;
- criminal matters; and
There is also a limitation on the scope of the Arbitration Act, insofar as it does not govern oral arbitration agreements, as Section 7(3) clearly states that the arbitration agreement must be in writing. Additionally, in Ramchandra Ram Nag Ram Rice & Oil Mills Ltd v Howrah Oil Mills Ltd (AIR 1958 Cal 620) the Calcutta High Court held that only an arbitration agreement in writing is recognised by the Arbitration Act.
Answer ... The Arbitration Act clearly distinguishes between domestic arbitration and international commercial arbitration. Part I of the Arbitration Act (ie, Sections 1 to 43) applies to domestic arbitration and Part II (ie, Sections 44 to 60, also including Sections 9, 27, and 37(1)(a)) apply to foreign awards and international commercial arbitration.
As per Section 2(1)(f) of the Arbitration Act, ‘international commercial arbitration’ is arbitration relating to disputes arising from legal relationships, whether contractual or not, which are considered as commercial under Indian law and where at least one of the parties is:
- an individual who is a national of, or habitually resident in, any country other than India;
- a body corporate which is incorporated in any country other than India;
- an association or body of individuals whose central management and control is exercised in any country other than India; or
- a foreign government.
‘Domestic arbitration’ is not defined under the Arbitration Act; however, Section 2(2) of the Arbitration Act provides that Part I applies where the place of arbitration is India; while Section 2(7) provides that an arbitral award made under Part I of the Act is considered as a domestic award. Read together, these sections provide that ‘domestic arbitration’ is arbitration held in India whose outcome is an arbitral award under Part I of the Arbitration Act.
Answer ... The preamble to the Arbitration Act states that the UNICTRAL Model Law on International Commercial Arbitration, 1985 and the UNICTRAL Conciliation Rules, 1980 were taken into account in its enactment by the Parliament of India.
Further, in its judgment in Chloro Controls (I) P Ltd v Severn Trent Water Purification Inc ((2012) 9 SCALE 595), the Supreme Court observed that the legislative intent of the Arbitration Act is to harmonise domestic and international commercial arbitration with the UNCITRAL Model Law, the New York Convention and the Geneva Convention.
Answer ... Certain provisions of the Arbitration Act have mandatory application; the rest are directory. The key mandatory provisions are as follows:
- Under Section 7, the arbitration agreement must be in writing.
- Under Section 8, it is mandatory for a judicial authority to refer parties to arbitration if the dispute is the subject of an arbitration agreement.
- Section 10 sets out mandatory provisions on the number of arbitrators.
- Disclosure of arbitration under Section 12 is mandatory in the form specified in Schedule VI, so that a determination regarding the independence and impartiality of the arbitrator can be made in accordance with Schedule V and Schedule VII.
- Section 16 sets out mandatory provisions on the tribunal’s competence to decide on its own jurisdiction when a challenge is made.
- Section 18 requires that the parties be treated equally and given full opportunity to present their respective cases.
- Under Section 28(3), the tribunal must in all cases take into account the terms of the contract and trade customs applicable to the transaction.
- Under Section 28(1(a), in arbitrations other than international commercial arbitrations, the tribunal must mandatorily decide the dispute in accordance with the substantive law in force in India.
- Section 29-A provides that the time limit for issuing an arbitral award is 12 months from the date on which the tribunal enters the reference. The parties may extend this period by mutual consent by a further six months.
- Section 31 contains mandatory provisions on the form and content of awards.
- Section 34 sets out mandatory provisions on applications to set aside awards.
Further, in Alupro Buildings Systems Pvt Ltd v Ozone Overseas Pvt Ltd (OMP 3/2015 (Delhi HC)), the Delhi High Court held that Section 21 (commencement of arbitration proceedings) has mandatory application, making clear that notice under Section 21 of the Arbitration Act is required for the commencement of arbitration proceedings.
In its recent judgment in The State of Bihar v Bihar Rajya Bhumi Vikas Bank Samiti ((Civil Appeal 7314 of 2018, arising out of SLP (Civil) 4475 of 2017) (MANU/SC/0826/2018)), the Supreme Court held that the prior notice requirement under Section 34(5) is not mandatory.
Answer ... The Arbitration Act was amended by the Arbitration and Conciliation (Amendment) Act, 2015 (ie, Act 3 of 2016), with retrospective effect from 23 October 2015, in order to make the arbitration process more user friendly and cost effective, and to ensure the swift disposal of arbitration proceedings and the neutrality of arbitrators.
Thereafter, to give a boost to institutional arbitration over ad hoc arbitration, to remove some practical difficulties in the application of the Arbitration and Conciliation (Amendment) Act, 2015, and to help India become a preferred centre for alternative dispute resolution (ADR), a high-level committee was constituted under the chairmanship of retired Supreme Court judge Justice BH Srikrishna. The Union Cabinet has approved the Arbitration and Conciliation (Amendment) Bill, 2018 for introduction in Parliament; this was passed by the Lok Sabha on 10 August 2018.
The key amendments approved in the bill are as follows:
- Arbitration Council of India: The Arbitration Council of India will be established as an independent body responsible for the formal evaluation and accreditation of arbitrators. The council will frame norms for ADR and develop professional guidelines. This is a positive step to ensure the quality of arbitral institutions.
- Appointment of arbitrators: Section 11 of the Arbitration Act is to be amended so that instead of approaching the Supreme Court or high court to appoint an arbitrator, the court may designate specific arbitral institutions that will make the relevant appointments. This obviates the need to file a formal application for appointment in court, thus speeding up the process.
- Time limit for pleadings: The bill proposes the insertion of a new Section 23(4) which provides that the statement of claim and defence shall be completed within six months of the date on which the arbitrator or arbitrators receive written notice of their appointment.
- Duration of arbitral proceedings: The proposed amendment provides that the timeline set out in Section 29A of the Arbitration Act should exclude international commercial arbitrations and state that the 12-month period begins to run following the completion of pleadings (under the newly inserted Section 23(4)).
- Confidentiality: The bill proposes to insert a new Section 42A to the Arbitration Act which provides that the arbitrator, the arbitral institution and the parties to the arbitration agreement shall keep the proceedings confidential, except the award where disclosure is necessary for the purpose of implementation and enforcement of award.
- Arbitrator’s immunity: The bill proposes to insert a new Section 42B which provides that no lawsuit or other legal proceedings may be brought against an arbitrator for anything which is in good faith done or intended to be done under the Arbitration Act or the rules or regulations thereunder.
Application of Arbitration and Conciliation (Amendment) Act, 2015: The bill also clarifies that unless the parties agree otherwise, the amendments made to the Arbitration Act by the Arbitration and Conciliation (Amendment) Act, 2015 will apply only to arbitration proceedings commenced on or after the entry into force of the Arbitration and Conciliation (Amendment) Act, 2015 (ie, 23 October 2015) and to court proceedings arising out of or in relation to such arbitration proceedings. The Arbitration and Conciliation (Amendment) Act, 2015 will not apply to:
- arbitration proceedings commenced before the entry into force of the Arbitration and Conciliation (Amendment) Act, 2015; or
- court proceedings arising from or in relation to such arbitration proceedings, irrespective of whether such court proceedings are commenced prior to or after the entry into force of the Arbitration and Conciliation (Amendment) Act, 2015.
Answer ... India is a party to the New York Convention. Part II, Chapter I of the Arbitration Act (ie, Sections 44 to 52) is applicable to New York Convention awards.
India has made two reservations to the New York Conventions:
- India will apply the convention only to the recognition and enforcement of awards made in the territory of another contracting state; and
- India will apply the convention only to disputes arising from legal relationships, whether contractual or not, that are considered commercial under national law.
Answer ... India is also a signatory to the Geneva Convention and Part II, Chapter II of the Arbitration Act (ie, Sections 53 to 60) is applicable to Geneva Convention awards.