India opened a fresh chapter in its arbitration laws in 1996 when it enacted the Arbitration and Conciliation Act ('the Act' or 'new Act'). This article presents salient features of the Act and analyses its workings in its near one decade of existence.

A. The Pre-1996 Position

Prior to 1996, the arbitration law of the country was governed by a 1940 Act. This Act was largely premised on mistrust of the arbitral process and afforded multiple opportunities to litigants to approach the court for intervention. Coupled with a sluggish judicial system, this led to delays rendering arbitrations inefficient and unaractive. A telling comment on the working of the old Act can be found in a 1981 judgment of the Supreme Court where the judge (Justice DA Desai) in anguish remarked 'the way in which the proceedings under the (1940) Act are conducted and without an exception challenged in Courts, has made lawyers laugh and legal philosophers weep ...'. 1

B. A New Act, A New Beginning

India (in the good company of several other nations) enacted its new Arbitration Act based on the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration2 and the Arbitration Rules of the United Nations Commission on International Trade Law 1976.3 This was in January 1996. The Statement of Objects and Reasons to the Act made no bones of the inefficiency of the old legislation. It said that the same had 'become outdated' and there was need to have an Act 'more responsive to contemporary requirements'. It added: 'Our economic reforms may not become fully effective if the law dealing with settlement of both domestic and international commercial disputes remains out of tune.'

Amongst the main objectives of the new Act (set out in the Statement of Objects and Reasons) are 'to minimize the supervisory role of courts in the arbitral process' and 'to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court'.

This is how the Supreme Court dwelled on the new Act:

To attract the confidence of International Mercantile community and the growing volume of India's trade and commercial relationship with the rest of the world after the new liberalization policy of the Government, Indian Parliament was persuaded to enact the Arbitration & Conciliation Act of 1996 in UNCITRAL model and therefore in interpreting any provisions of the 1996 Act Courts must not ignore the objects and purpose of the enactment of 1996. A bare comparison of different provisions of the Arbitration Act of 1940 with the provisions of Arbitration & Conciliation Act, 1996 would unequivocally indicate that 1996 Act limits intervention of Court with an arbitral process to the minimum.4

C. The Scheme of the Act

The Act is a composite piece of legislation. It provides for domestic arbitration, international commercial arbitration, enforcement of foreign award and conciliation (the latter being based on the UNCITRAL Conciliation Rules of 1980).

The more significant provisions of the Act are to be found in Parts I and II thereof. Part I contains the provisions for domestic and international commercial arbitration. Any arbitration to be conducted in India would be governed by Part I, irrespective of the nationalities of the parties. Part II provides for enforcement of foreign awards.

Part I is more comprehensive and contains extensive provisions based on the Model Law. It provides, inter alia, for arbitrability of disputes, non-intervention by courts, composition of the arbitral tribunal, jurisdiction of the arbitral tribunal, conduct of the arbitration proceedings, recourse against arbitral awards and enforcement. Part II, on the other hand, is largely restricted to enforcement of foreign awards governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards5 or the Convention on the Execution of Foreign Arbitral Awards.6 Part II is thus, (by its very nature) not a complete code. This led to judicial innovation by the Supreme Court in the case of Bhatia International v Bulk Trading.7 Here the Indian court's jurisdiction was invoked by a party seeking interim measures of protection in relation to an arbitration under the Rules of Arbitration of the International Chamber of Commerce International Court of Arbitration8 to be conducted in Paris. The provision for interim measure (s 9) was to be found in Part I alone (which applies only to domestic arbitration). Hence, the court was faced with a situation where there was no proprio vigore legal provision under which it could grant interim measures of protection. Creatively interpreting the Act, the Supreme Court held that the 'general provisions' of Part I would apply also to offshore arbitrations, unless the parties expressly or impliedly exclude applicability of the same. Hence, by judicial innovation, the Supreme Court extended the general provisions of Part I to foreign arbitrations as well.

It may be stated that this was premised on the assumption that the Indian courts would otherwise have jurisdiction in relation to the matter (in the international sense). This became clear in a subsequent decision of the Supreme Court in Shreejee Traco (I) Pvt Ltd v Paperline International Inc.9 Here the court's assistance was sought for appointing an arbitrator in a foreign arbitration. The power of appointment by the court exists under s 11 of Part I of the Act (which applies to domestic arbitration alone). The court declined to exercise jurisdiction. It found that the arbitration was to be conducted in New York and that the law governing the arbitration proceedings would be the law of seat of the arbitration. Hence, the extension of Part I provisions to foreign arbitrations sanctified by Bhatia10 would not be resorted to in every case. The Indian courts would have to first determine if it has jurisdiction, in the international sense.

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Footnotes

1. Guru Nanak Foundation v Raan Singh & Sons 1981 (4) SCC 634.

2. General Assembly Resolution 40/72, adopted on 11 December 1985 ('Model Law').

3. General Assembly Resolution 31/98, adopted on 15 December 1976 ('UNCITRAL Arbitration Rules').

4. Konkan Railway Corporation v Mehul Construction Co 2000 (7) SCC 201.

5. New York, 10 June 1958 ('New York Convention').

6. Geneva, 26 September 1927 ('Geneva Convention').

7. 2002 (4) SCC 105 ('Bhatia').

8. Effective 1 January 1998 ('ICC Rules').

9. 2003 (9) SCC 79.

10. Supra, n 7.

Originally published by Kluwer: Asia International Arbitrational Journal; Volume 1, Number 2, 2005

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