Salient Features of Arbitration and Conciliation Act, 1996

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The Arbitration and Conciliation Act, 1996 proceeds on the basis of the UN Model Law so as to make our law in accordance with the United Nations Commission on International Trade Law (UNCITRAL). This Act consolidated the law of arbitration in three enactments previously in force – viz, the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937, and the Foreign Awards (Recognition and Enforcement) Act, 1961. The Act itself is a self-contained code and a complete answer for all matters relating to arbitration. It excludes the applicability of general law procedure, and is a complete code for designing, consolidating, and amending the law related to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards.

With a view to a recommendation by the Law Commission and to implement the recommendation of the General assembly of the United Nations. it was considered desirable to implement UNCITRAL Model Law, the UNICITRAL Arbitration Rules and the UNICITRAL Conciliation Rules, the Arbitration and Conciliation Bill, 1995, consolidating and amending the law related to domestic arbitration, international commercial arbitration, enforcement of foreign awards and to define the law of conciliation, was introduced in Rajya Sabha on 16 May 1995.

The Arbitration and Conciliation Bill, 1995, was passed by both the Houses of the Parliament in August 1996 and received the assent of the President on 16 August 1996, which became the Arbitration and Conciliation Act, 1996. However, it is deemed to have commenced from 25 January 1996. Therefore, the provisions of this Act will only be application on arbitrations commenced post 25 January 1996. It extends to the whole of India.

Objects of the Arbitration and Conciliation Act, 1996:

The preamble of the Act reads as follows: “An Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto”.

The main object of the Act is to consolidate and amend the law relating to:

1. domestic arbitration;
2. international commercial and business arbitration;
3. enforcement and implementation of foreign arbitral awards; and
4. to define the laws relating to conciliation and matters that are connected therewith or incidental thereto.

Some of the other objects, as provided in the Statement of Objects and Reasons for the Arbitration and Conciliation Bill, 1995 are as follows:

• To ensure that rules are laid down for international as well as domestic arbitration and conciliation;
• To ensure that arbitration proceedings are just, fair, effective, and capable of meeting the needs of specific arbitration;
• To ensure that the arbitral tribunal gives reasons for its award given;
• To ensure that the arbitral tribunal remains within the limits of its jurisdiction;
• To minimize the supervisory role of courts in the arbitral process;
• To permit the arbitral tribunal to use methods such as mediation and conciliation during the procedure of arbitration to encourage settlement of disputes;
• To ensure that every final arbitral award is enforceable as a decree of the court of law;
• To ensure that the settlement agreement reached by parties as a result of conciliation proceedings may be treated as arbitral awards on agreed terms on the substance of the dispute rendered by an Arbitral Tribunal;
• To treat awards given in a foreign country to which any one of the two international conventions to which India is a party.

Salient Features of the Arbitration and Conciliation Act, 1996:

Following are some of the key features of the Arbitration and Conciliation Act, 1996:

1. Replacement of three old statutes: The Act is a consolidation of three laws of arbitration previously in force – viz, the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937, and the Foreign Awards (Recognition and Enforcement) Act, 1961 into one enactment. Though the three Acts have been consolidated the provisions regarding each of the acts have been kept distinct within the 1996 Act.
2. Necessity of Arbitration Agreement: The Act emphasizes the importance of the Arbitration agreement without which arbitration proceedings cannot be instituted. The arbitration agreement is a clause in a contract or an agreement between parties stating that any dispute will be referred to arbitration proceedings. The Act mentions that the arbitration agreement or arbitration clause must contain the following information – the subject matter of dispute, the timing of dispute (past/present/future), number of arbitrators, qualifications of arbitrators, jurisdiction, and composition of the tribunal.
3. Application to Domestic and International Arbitration: The Act provides the procedure not only for domestic arbitration but also includes International Commercial Arbitration. The 1996 Act is a law that relates to the enforcement of foreign Arbitration awards and ensures greater autonomy in the process of arbitration and puts a limit on the intervention of the judiciary.
4. Procedural Advantage:  Arbitral Tribunal has full powers to decide the procedure to be followed unless parties agree on the procedure to be followed. The Tribunal also has powers to determine the admissibility, relevance, materiality, and weight of any evidence. The place of arbitration will be decided by mutual agreement. However, if the parties do not agree to the place, the same will be decided by a tribunal. Similarly, language to be used in arbitral proceedings can be mutually agreed upon. Otherwise, Arbitral Tribunal can decide. The Act allows parties to choose the substantive law to be applied by the arbitration tribunal and this must also be mentioned in the arbitration agreement.
5. Party Autonomy: The concept of party autonomy is the central theme of the Act. The expressions used in the Act – ‘unless otherwise agreed by the parties’, ‘with the agreement of parties’, `if the parties in dispute have expressly authorized’ etc., strengthens the idea of party autonomy.
6. Minimal Interference by Judiciary: One of the major defects of earlier arbitration law was that the party could access court almost at every stage of arbitration – right from the appointment of an arbitrator to implementation of the final award. Thus, the defending party could approach the court at various stages and stall the proceedings. Now, the approach to court has been drastically curtailed. In some cases, if an objection is raised by the party, the decision on that objection can be given by Arbitral Tribunal itself. After the decision, the arbitration proceedings are continued and the aggrieved party can approach Court only after Arbitral Award is made.
7. Arbitral Award: Decision of Arbitral Tribunal is termed as ‘Arbitral Award’. The arbitrator can decide the dispute ex aequo et bono (In justice and in good faith) if both the parties expressly authorized him to do so.  The decision of the Arbitral Tribunal will be by majority. The arbitral award shall be in writing and signed by the members of the tribunal. The award should be dated and the place, where it is made, should be mentioned. Copy of award should be given to each party.
8. Reasoned Award: The award must be in writing and signed by the members of the Arbitral Tribunal. It must state the reasons for the award unless the parties have agreed that no reason for the award is to be given. Previous to this Act reasoning of the award by the arbitrator was not mandatory.
9. Enforceability of Award: Under this Act, every final arbitral award is enforceable as a decree of the court of law and not required to be made a “rule of court”.
10. Over-Riding Effect of the Act: Section 5 of the Act clarifies that notwithstanding anything contained in any other law for the time being in force, in matters governed by the Act, the judicial authority can intervene only as provided in this Act and not under any other Act.
11. Applicability of the Limitation Act: For this purpose, the date on which the aggrieved party requests another party to refer the matter to arbitration shall be considered. If on that date, the claim is barred under Limitation Act, the arbitration cannot continue. If the Arbitration award is set aside by Court, time spent in arbitration will be excluded for purpose of the Limitation Act. 
12. Aligning Procedure with the UNCITRAL Model Law: The Act has been enacted taking into account the United Nation’s Commission on International Trade Law (UNCITRAL) Model Law and UNCITRAL Conciliation Rules. This promotes unification and harmonization of International Tarde Law by harmonizing concepts of Arbitration and Conciliation of the legal system of the world.
13. Clear Distinction Between Arbitration and Conciliation: The provisions that relate to the process of Arbitration are contained in Part I which includes Chapters I to IX, while the provisions that relate to the process of Conciliation are dealt with in Part III that includes section 61 to 81.
14. Conciliation: Conciliation is the amicable settlement of disputes between the parties, with the help of a conciliator. Part III of the Act makes provision for conciliation proceedings. In conciliation proceedings, there is no agreement for arbitration. In fact, conciliation can be done even if there is an arbitration agreement. The conciliator only brings parties together and tries to solve the dispute using his good offices. The conciliator has no authority to give an award. He only helps parties in arriving at a mutually acceptable settlement. After such an agreement, they may draw and sign a written settlement agreement. However after the settlement agreement is signed by both the parties and the conciliator, it has the same status and effect as if it is an arbitral award.

In Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC 245 case, the Court gave beneficial features of the Arbitration and Conciliation Act as follows:

• fair resolution of a dispute by an impartial tribunal without any unnecessary delay or expense;
• party autonomy is paramount subject only to such safeguards as are necessary in public interest; and
• the Arbitral Tribunal is enjoined with a duty to act fairly and impartially.

In the same case Court also gave the shortcomings of the Act as follows:

• no provision is made for expediting awards or the subsequent proceedings in the courts where applications are filed for setting aside awards;
• an aggrieved party has to start again from the District Court for challenging the award.

In Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 case, the Court observed that the object of the Act is to provide a speedy and alternative solution to the dispute and avoid protraction of litigation. The provisions of the Act have to be interpreted accordingly.

The Arbitration and Conciliation Act, 1996 is Self-Contained Code:

In Girnar Traders v. State of Maharashtra (2011) 3 SCC 1 case, the apex code held that for an Act to be a self-contained code, it must be shown that the special statute is a complete legislation for the purpose for which it was enacted, or under which the applicability of any other statute is barred by specific language, or by necessary implication.

The Arbitration and Conciliation Act, 1996 excludes the applicability of general law procedure, and is a complete code for designing, consolidating, and amending the law relating to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards.

In Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 case, the Court held that where a special Act sets out self-contained code, the applicability of general law procedure would be impliedly excluded. Since the 1940 Act was held to be a self-contained code from its inception till 2004, the 1996 Act, which aimed at consolidating, amending, and designing the law relating to Arbitration, must be held to be more so. The 1996 Act carries with it, “ a negative import that only such acts as are mentioned in the Act are permissible to be done, and acts or things not mentioned therein are not permissible to be done”.

Thus, the Arbitration and Conciliation Act, 1996 is a self-contained code and exhaustive in nature.

Conclusion:

The Arbitration and Conciliation Act, 1986 is the consolidation of three previous statutes. It takes into consideration all the essential ingredients necessary for providing an easy and unambiguous procedure for dispute resolution. It makes the procedure provided by it in line with the Model Law. The Act tries to make the procedure smooth by minimizing the interference by Courts. The reasoned award makes the procedure transparent.

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