Amendments to the Arbitration & Conciliation Act,
1996- A Consultation Paper
Introduction:
1. The Arbitration and Conciliation Act, 1996 enacted in 1996 is an Act to consolidate and
amend the law relating to domestic arbitration, international commercial arbitration and
enforcement of foreign arbitral awards. Copy of the Act is annexed as Annexure-I. The
Act is based on the Model Law adopted by the United Nations Commission on
International Trade Law (UNCITRAL) in 1985. The objects and basis of the said Act is
to speedy disposal with least court intervention. Some of the objects, as mentioned in the
Statement of Objects and Reasons for the Arbitration and Conciliation Bill, 1995 are as
follows:
(a) to comprehensively cover international commercial arbitration and conciliation as
also domestic arbitration and conciliation;
(b) to minimise the supervisory role of courts in the arbitral process;
(c) to provide that every final arbitral award is enforced in the same manner as if it
were a decree of court.
2. In the year 2001, the Law Commission of India undertook a comprehensive review of the
working of the said Act and recommended many amendments to the Act in its 176
th
Report submitted to the Government. Summary of recommendations made in the report
is annexed as Annexure-II.
The Government after considering the recommendations of the Report and after
consulting the State Governments and certain institutions, decided to accept almost all the
recommendations. Accordingly the Arbitration and Conciliation (Amendment) Bill 2003
was introduced in Rajya Sabha on 22
herewith as Annexure-III.
It may be stated that in July 2004, Government constituted a Committee under the
Chairmanship of Justice Dr.B.P.Saraf to make in-depth study of the implications of the
recommendations of the Law Commission made in its 176
nd December, 2003. A copy of the Bill is annuealth Report and all aspects
2
relating to the Arbitration and Conciliation (Amendment) Bill, 2003. The report
submitted by the said Committee is annexed as Annexure-IV.
3. The Bill was then referred to the Departmental Related Standing Committee on
Personnel, Public Grievances, Law and Justice for examination and report. The said
Committee after taking oral evidence of eminent advocates and the representatives from
trade and industry, Public Sector Undertakings, representatives of this Department,
submitted its report to the Houses of Parliament on 4
was of the view that the provisions of the Bill gave room for excessive intervention by
the Courts in the arbitration proceedings and emphasized upon the need for establishing
an institution in India which would measure up to international standards and for
popularizing institutionalized arbitration. The Committee further expressed the view that
since many provisions of the Bill were contentious, the Bill may be withdrawn and a
fresh legislation may be brought after considering the recommendations of the
Committee. Copy of the report is annexed as Annexure-V.
4. In view of the large number of amendments recommended by the Committee and because
many provisions of the Bill were contentious, the said Bill was withdrawn from the Rajya
Sabha. At that time it was decided that a new legislation will be brought in Parliament
after undertaking an in depth examination of the various recommendations of the
Committee.
5. As we know that main purpose of the 1996 Act is to encourage an ADR method for
resolving disputes speedy and without much interference of the Courts. In fact Section 5
of the Act provides, “Notwithstanding anything contained in any other law for the time
being in force, in matters covered by this Part (i.e. Part I), no judicial authority shall
intervene except where so provided in this Part.” However, with the passage of time,
some difficulties in its applicability of the Act have been noticed. The Supreme Court and
High Courts have interpreted many provisions of the Act and while doing so they have
also realized some lacunas in the Act which leads to conflicting views. Further, in some
cases, courts have interpreted the provisions of the Act in such a way which defeats the
main object of such a legislation. Therefore, it becomes necessary to remove the
difficulties and lacunas in the Act so that ADR method may become more popular and
object of enacting Arbitration law may be achieved.
th August, 2005. The Committee
3
6. The following sections of the Act and interpretation by courts have given rise to
difficulties which require to be addressed:
4
(A) – Application of Part I- Section 2(2)
(i) The 1996 Act covers both domestic arbitration (where both parties are Indian national) as
well as international commercial arbitration where at least one party is not an Indian
national. The Act of 1996 has been divided in three Parts. Part I entitled,
“ARBITRATION” and there are 10 Chapters containing Sections 2 to 43. Part II entitled,
“Enforcement of certain Foreign Awards” and contains Chapter I & II containing
Sections 44 to 60. Chapter I of part II deals with “New York Convention Awards” and
Chapter II deals with ‘Geneva Convention Awards”. Part III (Sections 61 to 81) deals
with ‘Conciliation’. Part IV (Sections 82 to 86) provides for Supplementary Provisions.
Section 2(2) provides for applicability of Part I. Existing Section 2 (2) reads as follows:
–
“Section 2(2): This part shall apply where the place of arbitration is in India.”
(ii) There are conflicting views of the Courts in India about applicability of Part I in respect
of International Commercial Arbitration where seat of arbitration is not in India. In a case
before the Delhi High Court (Dominant Offset Pvt. Ltd. Vs. Adamouske Strojirny AS,
(1997) 68 DLT 157) the petitioners entered into two agreements with a foreign concern
for technology transfer and for purchase of certain machines. The agreement carried an
arbitration clause which provided that the place of arbitration would be London and the
arbitration tribunal would be International Chamber of Commerce in Paris. The parties
having developed a dispute, a petition was filed in the High Court of Delhi with a prayer
for reference to arbitration in terms of the Arbitration Clause for enforcement of the
agreement. The Court extensively studied the provisions of the Act so as to see whether
it was a matter coming under Part I of the Act. The Court held that Part I of the Act
applies to International Commercial arbitration conducted outside India. The Court
opined that Section 2(2) which states that “Part I shall apply where the place of
arbitration is in India” is “an inclusive definition and does not exclude the applicability of
Part I to those arbitrations which are not being held in India”. The Court also held that the
application under Section 11 for the appointment of arbitrators could be treated as a
petition under section 8 for reference of the parties to arbitration. This decision was
followed in Olex Focas Pvt. Ltd. Vs. Skodaexport Company Ltd. AIR 2000 Del.161. In
this case the High Court allowed relief under Section 9 (interim measure by Court) and
ruled -
