SALB1903 SATHYABAMA SCHOOL OF LAW

ARBITRATION, CONCILIATION & ALTERNATIVE DISPUTE

RESOLUTION SYSTEM

UNIT- 2

ARBITRATION

Arbitration and Conciliation Act, 1996 – Meaning of Arbitration – Attributes of Arbitration-

General Principles of Arbitration- Different Kinds of Arbitration- Qualities and
Qualifications of an Arbitrator- Arbitration Agreement and its Drafting- Appointment of
Arbitrator- Principal Steps in Arbitration- Arbitral Award- – Writing Arbitration Award-
Recent Amendments.

ARBITRATION AND CONCILIATION ACT, 1996

The Arbitration and Conciliation Act, 1996 represents a significant legislative reform in India’s
approach to dispute resolution. Enacted to consolidate, modernize, and streamline the legal
framework governing arbitration and conciliation, the Act brings Indian law in line with
international best practices, particularly the UNCITRAL Model Law on International
Commercial Arbitration (1985) and the UNCITRAL Conciliation Rules (1980).

The preamble to the Act clearly states its object:

“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.”
This comprehensive legislation was a response to the growing need for an efficient, cost-
effective, and time-bound method of dispute resolution, both within India and in cross-border
commercial transactions. Prior to 1996, arbitration in India was governed by three distinct
statutes:

• The Arbitration Act, 1940

• The Arbitration (Protocol and Convention) Act, 1937

• The Foreign Awards (Recognition and Enforcement) Act, 1961

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These Acts were fragmented, outdated, and failed to match the evolving needs of a liberalized
economy. The 1996 Act replaced all three with a single, unified framework, eliminating
procedural redundancies and aligning with India’s obligations under international treaties,
including the New York Convention, 1958 and the Geneva Convention, 1927.

SALIENT FEATURES OF THE ACT

The Arbitration and Conciliation Act, 1996 is notable for the following features:

• Comprehensive coverage: It governs domestic arbitration, international commercial

arbitration, conciliation, and the enforcement of foreign arbitral awards.

• Party autonomy: It respects the freedom of parties to determine procedural and

substantive aspects of arbitration, such as the appointment of arbitrators, venue, and
governing law.

• Minimal court interference: The Act limits the role of courts, emphasizing that judicial
intervention should be kept to the minimum, except where specifically provided.

• Finality of awards: It treats arbitral awards as binding and enforceable like a decree of
a court, ensuring efficiency and legal sanctity.

• Speedy resolution: Time-bound proceedings are encouraged through various

provisions, especially after the 2015 and 2019 amendments, which introduced strict
timelines for award delivery.

• Institutional arbitration: While it allows ad hoc arbitration, the Act also facilitates and
encourages institutional arbitration and the development of arbitral institutions in India.

The 1996 Act marks India’s transition to a modern arbitration regime, addressing the concerns
of the global business community regarding judicial delays and excessive procedural
complexity. It aims to:

• Make India a preferred arbitration hub

• Reduce the burden on Indian courts

• Promote alternate dispute resolution in both commercial and civil contexts

Amendments over the years—particularly in 2015, 2019, and 2021—have further strengthened
the Act’s commitment to speed, efficiency, and transparency, reinforcing India’s ambition to
become an arbitration-friendly jurisdiction.
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MEANING OF ARBITRATION

Arbitration is a form of Alternative Dispute Resolution (ADR) where disputes are submitted,
by agreement of the parties, to one or more neutral third parties—known as arbitrators—who
render a binding decision called an arbitral award.

The term “arbitration” derives from the Latin word arbitrari, meaning “to give judgment.” It
is a voluntary, consensual, and private process that provides an alternative to traditional court
litigation.

As per Section 2(1)(a) of the Arbitration and Conciliation Act, 1996:

"Arbitration means any arbitration whether or not administered by a permanent arbitral

institution."

This indicates that arbitration may be institutional (conducted under the rules of an arbitral
institution like SIAC, ICC, LCIA, or MCIA) or ad hoc (where parties decide their own rules
and procedures, possibly with court support).

Essential Features of Arbitration

• Arbitration is rooted in the mutual agreement of parties, typically contained in an

arbitration clause or a separate arbitration agreement.

• Unlike court proceedings, arbitration is generally held in private, and the details are
confidential, unless otherwise agreed.

• The arbitrator's decision is final and binding on the parties, with limited grounds for
challenge.

• Provides a neutral ground for dispute resolution, especially important in international

commercial arbitration.

• Parties can appoint subject-matter experts as arbitrators, ensuring informed decision-

making.

Objectives of Arbitration

The primary aim of arbitration is to provide a fair, efficient, and less formal means of resolving
disputes. It is particularly suited to:

• Commercial and contractual disputes

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• International trade and investment matters

• Construction and infrastructure-related claims

• Intellectual property and technology agreements

Arbitration seeks to reduce the burden on the judiciary, while offering disputants a cost-
effective and time-sensitive alternative to litigation.

GENERAL PRINCIPLES OF ARBITRATION

Following are the general principles of the arbitration:

▪ Arbitration is Consensual: Arbitration is a mutual process that requires the consent of

both parties. Arbitration can only be initiated, if parties have agreed to initiate it. Parties
can insert any arbitration clause if it is relevant utilizing a submission agreement
between parties. The parties are also not allowed to unilaterally withdraw from the
arbitration.
▪ Arbitration is Neutral: Arbitration is a neutral process hence it provides equal
opportunity to the parties such as; Arbitrator, Arbitration Panel, applicable law,
language, and venue of the arbitration. This also ensures that no parties should enjoy
the home-court advantage.
▪ Arbitration is a confidential procedure: The arbitration rule specifically protects the
confidentiality of the matter. The arbitration process provides privacy and restricts
unnecessary controversies regarding the case and parties. Any disclosure made during
the procedure may result in decisions and awards. In some circumstances, the parties
are allowed to restrict the access of trade secrets and other confidential information
submitted to the arbitration tribunal.
▪ The parties choose the arbitrator: Each party has the right to choose their arbitrator to
whom they think will fit to handle their case. If the parties have chosen a three-member
arbitration tribunal, then each party appoints one of the arbitrators. Then the two
selected arbitration shall agree on the presiding arbitrator. The center can also suggest
the potential arbitrator with relevant expertise or may directly appoint members of the
arbitration tribunal.
▪ The decision of the arbitral tribunal is final and easy to enforce: The decision of the
arbitral tribunal is final and known as Award. The decision of the arbitration tribunal
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must be final and binding on both parties. Arbitration awards can be easily enforced in
other nations than court proceedings

DIFFERENT KINDS OF ARBITRATION

Unlike civil or criminal cases, a dispute is sent to the arbitration tribunal. The tribunal resolves
the dispute and the final decision cannot be appealed, making it binding on both parties. No
judicial proceedings are involved to ensure the swift resolution of the disputes. The following
are the different types of arbitration as per the jurisdiction of the case:

DOMESTIC ARBITRATION

In domestic arbitration, both the parties must be Indians and the proceedings must take place
in India itself. In the Arbitration and Conciliation Act, 1996 there is no specific definition given
to domestic arbitration. A mere reading of Section 2(2) can lead us to infer that domestic
arbitration is when the parties had agreed to resolve any disputes that arise in India. The
proceedings must be held in the domestic territory and must be in lieu of the procedural and
substantive law in India.

INTERNATIONAL ARBITRATION

As the name suggests, international arbitration occurs outside the domestic territory because of
either a clause inserted in the agreement between the parties or the cause of action that arises
from a foreign element relating to the dispute or to the parties. According to the circumstances
that led to a case being filed foreign or Indian law would be applicable.

INTERNATIONAL COMMERCIAL ARBITRATION

According to Section 2(1)(f), international commercial arbitration can be understood as

arbitration that takes place because of a dispute arising from a commercial contract where either
one of the parties resides in a foreign country or is a foreign national; or the core management
committee of an association, company or a body of individuals is controlled by foreign
individuals.

Under Indian law, the involvement of a foreign party would attract Part I of the Act, that is, it
would come under the purview of international commercial arbitration. But it would be
inapplicable in case the international commercial arbitration takes place outside the territory of
India. By virtue of the 2015 Amendment Act, ‘company’ has been removed from the ambit of
ICA. The Supreme Court scrutinised the scope of Section 2 (1) (f) (iii) in TDM Infrastructure
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Pvt. Ltd. v. UE Development India Pvt. Ltd.,(2008) (“TDM Infrastructure”), wherein, even if a
company is in foreign hands, it would be considered as an Indian company as it was
incorporated in India. Therefore, companies that have Indian nationality and have been
registered in India would be excluded from the ambit of foreign body corporate, regardless of
the fact that the company is in foreign hands.

On the basis of the established procedure and rules, there are further three types of arbitration
that have been recognized in India:

AD-HOC ARBITRATION

Ad-hoc arbitration refers to when parties with mutual consent opt for arbitration to resolve the
dispute. It is the most common form of arbitration used in India owing to reasonable costs and
adequate infrastructure. Arbitration is conducted without having any institutional proceedings,
that is, it does not comply with the rules of an arbitral institution. The parties have the option
to choose the rules and procedures to be followed. This form of arbitration can be used for
international commercial transactions and domestic disputes. The jurisdiction is of utmost
importance since a majority of the issues are resolved in conformity with the applicable law in
respect to the seat of arbitration. An example of the same would be if the parties have agreed
to keep the seat in India, the dispute would be resolved in lieu of the provisions of the
Arbitration and Conciliation Act. Also, As per Section 6 of the Act, the arbitral tribunal or the
parties can determine whether to receive administrative assistance from an appropriate
institution or individuals. Moreover, as per Section 11 of the Act, the fees of the arbitrator shall
be determined by the arbitral institution as specified in Schedule 4 of the Act. In case the parties
are unable to reach a consensus on the number of arbitrators, one arbitrator would be part of
the tribunal after being appointed by the Chief Justice of a Supreme Court or the Chief Justice
of a High Court.

FAST TRACK ARBITRATION

Fast track arbitration was inserted by an amendment to the Arbitration and Conciliation Act,
2015 with the purpose of resolving disputes between the parties in less time. The main purpose
of fast track arbitration was to make commercial/trade disputes simpler and expeditious for the
parties. This can be seen as an effective solution to solving the problems faced because of
delays and time-consuming proceedings in other forms of arbitration. It does not involve any
procedure that takes time and upholds the main objective or arbitration, that is, to resolve a
dispute in a short period of time.
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As per Section 29B of the Act, a dispute can be resolved through fast-track arbitration, if parties
agree before or at the time of the appointment of an arbitrator. Parties referring matters under
fast track arbitration can appoint only a sole arbitrator on the consent of the parties. The
arbitrator, under fast track procedure, can only make use of the written submissions filed by
the parties and there shall be no oral hearings until and unless necessary. The arbitrator has to
pass the award within six months from the date of the dispute referred.

INSTITUTIONAL ARBITRATION

In institutional arbitration, the parties are free to choose a particular arbitral institution in the
arbitration agreement itself. The institution’s governing body or the parties can appoint one or
more arbitrators from a panel of arbitrators that had previously been agreed upon. Part I of the
Act gives parties the freedom to appoint an arbitrator to deal with a specific issue.

The institution selects one or more arbitrators who possess the skills and experience stipulated
applicable in a given case when the parties do not appoint an arbitrator themselves. On the
other hand, if the parties choose to appoint one themselves they can choose from the list
provided by the institution.

It is mainly used by business organisations worldwide owing to a specific procedure being

deployed as well as an efficient dispute resolution procedure provided by the institutions. A
few prominent arbitration centres are the Chartered Institute of Arbitrators UK, the London
Court of International Arbitration, the National Arbitration Forum USA, Singapore
International Arbitration Centre, and the International Court of Paris.

In M/S Nandan Biomatrix Limited v. D 1 Oils Limited, (2009), the parties had agreed to resolve
any dispute arising from the agreement via institutional arbitration. The Supreme Court
assessed the validity of the agreement and whether the absence of a specific institution would
make the agreement invalid. It was held that the parties had expressly desired to settle the
disputes through institutional arbitration, making the agreement between them valid.

QUALITIES AND QUALIFICATIONS OF AN ARBITRATOR

Qualifications of an Arbitrator (As per Indian Law)

1. The Indian legislation does not prescribe any specific academic or professional
qualification to become an arbitrator.
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2. A person can be appointed as an arbitrator if they are above 18 years of age and are of
sound mind.

3. The arbitrator must not be declared insolvent or involved in any civil or criminal
charges that disqualify them under the law.

4. Arbitrators in India are commonly appointed through arbitral institutions or

associations that maintain panels of experienced professionals.

5. Parties to a dispute are free to define the desired qualifications of the arbitrator in their
arbitration agreement.

6. While legal knowledge is not mandatory, it is often preferred, especially when the
disputes involve complex legal or contractual issues.

Essential Qualities of a Good Arbitrator

[Link]- A competent arbitrator must fulfill the basic legal requirements such as being
a major and being mentally fit. They must also have a clean legal background and be capable
of performing the duties expected from them.

2. Experience- An arbitrator should have sufficient knowledge and experience in the subject
matter they are appointed to adjudicate. A person with practical and legal experience will be
better equipped to understand disputes, evaluate evidence, and frame issues for resolution.

3. Professionalism- Arbitrators must conduct themselves in a highly professional manner.

They should be respectful, diplomatic, and act fairly. They do not possess judicial powers like
judges, but their authority must come from their conduct, consistency, and impartiality.

4. Task Management- Since arbitration proceedings can be extensive and time-consuming, an

arbitrator must be skilled in managing time, tasks, and people. Poor management can lead to
delays and affect the credibility of the arbitration process.

5. Legal Educational Background (Desirable)- Although not compulsory, an arbitrator with

formal legal education is better suited to handle legal arguments, apply relevant laws, and draft
sound and legally valid awards. Legal knowledge also helps in ensuring that the award is
enforceable and not challenged easily.

6. Drafting and Writing Skills- An arbitrator must possess strong writing and drafting skills.
They are required to write reasoned awards and communicate with the parties clearly. All
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documents, including notices, directions, and awards, should be consistent, precise, and
unambiguous.

7. Certified Training and Courses- Arbitrators can strengthen their understanding of

arbitration by attending certified diploma courses and training provided by institutions like the
Chartered Institute of Arbitrators. Practical exposure and formal training improve the
arbitrator’s credibility and efficiency.

8. Impartiality and Fairness- An arbitrator must always act independently and impartially.
They should not have any personal, business, or social relationship with the disputing parties.
Their decisions should reflect fairness, equity, and the principles of natural justice.

9. Management and Leadership Skills- Effective arbitration requires strong leadership. The
arbitrator should be able to guide the proceedings, control disruptions, and ensure that the
process is conducted smoothly and without unnecessary delays.

10. Communication Skills- Good communication is essential. An arbitrator should be able to

actively listen to the parties, understand their positions, ask appropriate questions, and express
their views clearly, both orally and in writing.

11. Caseload Management- A responsible arbitrator should plan the hearings and procedural
steps in advance. This helps avoid delays, manage time efficiently, and deliver quick and
effective justice to the parties involved.

ARBITRATION AGREEMENT AND ITS DRAFTING

Arbitration agreement has been envisaged under Section 7 of the Act. An arbitration agreement
refers to an agreement that is made between the parties before any actual dispute arises between
them. Through an arbitration agreement, parties can refer all or certain disputes to the arbitral
tribunal rather than forwarding their dispute to litigation. An arbitration agreement can be a
separate agreement or can be invoked as an arbitration clause in the contract.

ATTRIBUTES OF ARBITRATION AGREEMENT

The Hon’ble Supreme Court, in the landmark case K.K. Modi v. K.N. Modi and Ors. (1988) 3
SCC 573, laid down the following attributes that must be present in the arbitration agreement-

1. The agreement shall expressly specify that the decision of the arbitral tribunal will be
binding upon the parties.
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2. The parties must mutually decide or consent to the jurisdiction of the arbitral
proceedings or this can be obtained by the directions of the court’s order that proceeding
must be carried on through arbitration.

3. The tribunal must determine the rights of the parties and ensure a fair and just
judgement.

4. The agreement on the basis of which a dispute is referred to the tribunal, must be legally
valid and the terms of such agreement are enforceable by law.

5. The agreement must state that any dispute being referred to the tribunal must be
formulated before the commencement of the arbitration process.

APPOINTMENT OF ARBITRATOR

Section 11 of the Arbitration and Conciliation Act, 1996

The integrity and fairness of arbitration proceedings hinge upon the selection and appointment
of arbitrators. Section 11 of the Arbitration and Conciliation Act, 1996 outlines the detailed
procedure for appointing arbitrators, respecting the principle of party autonomy while also
providing judicial safeguards in case of non-compliance or deadlock.

This section empowers the High Courts and the Supreme Court to intervene in the appointment
process in certain circumstances, ensuring that arbitration agreements are not rendered
ineffective due to disagreement or inaction.

Freedom to Choose Arbitrators- Section 11(1)

• Parties are free to appoint arbitrators of any nationality, unless agreed otherwise.

• Parties may also decide on their own procedure for appointing one or more arbitrators.

Default Mechanism for Appointment

Three Arbitrators (Section 11(3))

• Each party appoints one arbitrator.

• The two appointed arbitrators jointly appoint the third, who acts as the presiding
arbitrator.
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• If either party fails to appoint an arbitrator within 30 days of a request, or if the two
arbitrators fail to appoint the third within 30 days, then the Chief Justice of the High
Court or their designate can intervene.

Sole Arbitrator (Section 11(5))

• If the parties fail to mutually agree on a sole arbitrator within 30 days of a request, the
Chief Justice of the High Court or their designate can make the appointment.

International Commercial Arbitration

• For international arbitrations, the authority vests with the Chief Justice of India or a
person/institution designated by him.

Intervention in Agreed Appointment Procedures (Section 11(6))

If the appointment mechanism agreed upon by the parties fails due to:

• A party not acting as required,

• Arbitrators not reaching an agreement, or

• Any designated person/institution failing to perform their function,

The decision of the Chief Justice or designate is final and non-appealable under Section 11(7).

Judicial Considerations in Appointment (Section 11(8))

Before appointing an arbitrator, the court must consider:

• The qualifications required by the arbitration agreement.

• Whether the arbitrator is independent and impartial.

The prospective arbitrator must disclose in writing any circumstances likely to raise justifiable
doubts regarding independence, as per Section 12.

Important Judicial Decisions

Indian Drugs & Pharmaceuticals Ltd. v. Indo Swiss Gem Mfg. Co.- The Court held that it
cannot override a contractual clause specifying that the CMD of IPDL shall appoint the
arbitrator. No retired judge can be appointed if the clause gives exclusive appointment power
to a party's official.
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National Aluminium Co. Ltd. v. Metalimpex Ltd.- The Chief Justice of India appointed an
arbitrator on behalf of a foreign company that failed to nominate its arbitrator.

ICICI Ltd. v. East Coast Boat Builders & Engineers Ltd.- When party-appointed arbitrators
failed to agree on a presiding arbitrator, the court intervened and appointed one under Section
11.

Kanagarani Durairaj v. Dwaragan- The City Civil Court has no jurisdiction to appoint
arbitrators under Section 11 unless delegated by the Chief Justice.

Probodh v. Union of India- If arbitrators disagree, there is no valid award, and the presiding
arbitrator can adjudicate the case, in the absence of contrary provisions.

Procedure for Appointment under Section 11

To invoke Section 11, the following preconditions must be fulfilled:

• A valid arbitration agreement exists.

• The agreement specifies the mode of appointment of arbitrators.

• A dispute has arisen, and parties have failed to appoint arbitrators in accordance with
the agreement.

• Parties have not mutually agreed upon a sole arbitrator.

• Appointed arbitrators fail to agree on the presiding arbitrator.

Section 11 of the Arbitration and Conciliation Act, 1996 ensures that the appointment process
is not frustrated due to delay, inaction, or disagreement between the parties. It strikes a balance
between party autonomy and judicial intervention, maintaining the sanctity of the arbitration
agreement while providing an efficient mechanism for the constitution of the arbitral tribunal.

PRINCIPAL STEPS IN ARBITRATION

Principal Steps in Arbitration Proceedings under Indian Law

Arbitration, as governed by the Arbitration and Conciliation Act, 1996, is designed to offer a
speedy, cost-effective, and less formal dispute resolution mechanism compared to litigation.
The Act outlines the entire procedural framework, from the initiation of arbitration to the
enforcement of the award.

1. Arbitration Agreement(Section 7)
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The journey of arbitration begins with a valid arbitration agreement. This is a written agreement
between parties to submit disputes, whether contractual or otherwise, to arbitration. It may be
a separate contract or a clause within a broader contract.

"An arbitration agreement means an agreement by the parties to submit to arbitration all or
certain disputes which have arisen or which may arise between them..."

2. Invocation of Arbitration (Section 21)

Unless otherwise agreed by the parties, arbitral proceedings commence when one party sends
a written notice of request for arbitration to the other party.

"The arbitral proceedings in respect of a particular dispute commence on the date on which a
request for that dispute to be referred to arbitration is received by the respondent." – Section 21

3. Appointment of Arbitrators (Section 11)

The parties are free to determine the number and procedure for appointing arbitrators. In the
absence of an agreement:

• For three arbitrators, each party appoints one, and the two appoint a third (presiding
arbitrator).

• For a sole arbitrator, if the parties fail to agree, the appointment is made by the High
Court (for domestic arbitration) or the Supreme Court (for international commercial
arbitration).

4. Challenge and Grounds for Disqualification of Arbitrators (Section 12 and 13)

Once appointed, arbitrators must disclose any circumstances that may give rise to justifiable
doubts about their independence or impartiality. Parties may challenge an arbitrator on these
grounds or for failing to meet agreed qualifications.

Section12(1): Disclosure requirements

Section 12(5): Automatic disqualification for certain relationships unless waived in writing

Section 13: Procedure for challenging arbitrators

5. Jurisdiction of Arbitral Tribunal (Kompetenz-Kompetenz) (Section 16)

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The arbitral tribunal has the power to rule on its own jurisdiction, including objections
regarding the existence or validity of the arbitration agreement. The doctrine of separability
ensures that the arbitration clause survives even if the main contract is invalidated.

6. Conduct of Proceedings (Sections 18 to 27)

The procedural framework under Chapter V governs how arbitral proceedings are conducted:

• Section 18: Equal treatment of parties

• Section 19: Tribunal not bound by Civil Procedure Code or Evidence Act

• Section 20: Place of arbitration

• Section 21: Commencement of proceedings

• Section 22: Language of proceedings

• Section 23: Filing of claims, defences, counterclaims

• Section 24: Oral hearings and submissions

• Section 25: Default of parties (ex parte proceedings)

• Section 26: Appointment of experts by tribunal

• Section 27: Assistance from courts in taking evidence

7. Interim Measures (Sections 9 and 17)

• Section 9: Parties may apply to the court for interim protection before, during, or after
arbitration.

• Section 17: The arbitral tribunal may also grant interim measures of protection during
the proceedings.

8. Making of the Arbitral Award (Section 29 and 31)

• The arbitral award must be made within 12 months from the date of completion of
pleadings (extendable by 6 months with mutual consent).

• The award must be in writing, signed by the arbitrators, and state the reasons upon
which it is based, unless otherwise agreed by the parties.

Section 31: Form and contents of the award

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Section 29A: Time limit for arbitral award

9. Termination of Proceedings (Section 32)

Proceedings are terminated upon the final award or by an order of the tribunal if:

• The claimant withdraws the claim, or

• The parties agree to terminate, or

• The tribunal finds continuation unnecessary.

10. Correction and Interpretation of Award (Section 33)

Parties may request correction of clerical or computational errors or seek interpretation of

a specific point in the award.

11. Setting Aside the Award (Section 34)

A party may apply to the court to set aside the arbitral award on limited grounds, including:

• Incapacity of a party

• Invalid arbitration agreement

• Party was not given notice or unable to present the case

• Award deals with matters beyond the scope of arbitration

• Conflict with the public policy of India

The application must be filed within 3 months from receipt of the award.

12. Finality and Enforcement of Award (Sections 35 and 36)

• Section 35: The award is final and binding on the parties.

• Section 36: The award is enforceable as a decree of the court, once the time for setting
aside the award has expired or such an application has been rejected.

The Arbitration and Conciliation Act, 1996 provides a comprehensive legal framework that
balances party autonomy with procedural safeguards. Understanding each principal step—from
the arbitration agreement to enforcement—enables practitioners and disputing parties to
navigate arbitration effectively and efficiently. The Act’s provisions aim to promote confidence
in arbitration as a reliable alternative dispute resolution mechanism.
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ARBITRAL AWARD

An arbitral award, also known as an arbitration award, is a decision granted by the arbitral
tribunal with respect to the disputed matter. The awards granted by tribunals procure the same
legal binding force over the parties just like the decisions of normal courts do. The arbitral
tribunal also passes interim, partial, additional awards with respect to the matter in dispute.
Awards granted can be pecuniary and non-pecuniary in nature. Tribunal can impose
injunctions, performance of work etc. as a non-pecuniary award. As per, Arbitration and
Conciliation Act, 1996, tribunal can pass award with respect to disputes that are domestic in
nature as well as international in nature.

ESSENTIAL CHARACTERISTICS OF ARBITRAL AWARD

As per Section 31 of the Arbitration and Conciliation Act, 1996, an arbitral award –

1. Shall be in written form and be signed by all the members of the arbitral tribunal; if
there is more than one arbitrator, the signature of majority of the arbitrator shall be
considered sufficient for a valid arbitral award if the reason for omitted signature is
stated.

2. Shall state the reasons as to on what basis an arbitral award has been passed by the
arbitral tribunal, provided that if the parties have consensually agreed that reasons not
to be stated while passing arbitral tribunal or the award has been passed as per the
provisions of Section 30 of the Act.

3. Shall state and mention its date and place, i.e., at what date and place an arbitral award
has been passed by the arbitral tribunal.

4. Signed copy must be delivered to both parties after the arbitral award is passed and
made.

TYPES OF ARBITRAL AWARDS

1. Interim award – It is the determination of any issue arising out of the main dispute. It
is a temporary arrangement to satisfy a party and is subject to the final award.

2. Additional award – According to Section 33 of the Act, if the parties find that certain
claims have been missed out by the arbitral tribunal and they were present in the
proceedings then it can after notifying other parties, make a request to the arbitral
tribunal to make an additional award and cover the claims which have been left.
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3. Settlement awards – It is made if the parties agree on certain terms of the settlement.
As per Section 30 of the Act, the arbitral tribunal may use any method of dispute
resolution like mediation, conciliation or negotiation to bring a settlement between the
parties.

4. Final award – It is an award which finally determines all the issues in a dispute. It is
conclusive unless set aside by courts and binding on the parties.

RECOURSE AGAINST ARBITRAL AWARDS

Under Section 34 of the Act, a party if not satisfied can make an application to set aside the
award granted by an arbitral tribunal. The time limit to make such an application is not
more than 3 months from the date the arbitral award was made. The grounds are:

• Incapacity of parties.

• Non-existence of the agreement of arbitration.

• Did not follow the due process.

• Error on the part of the arbitral tribunal to exercise its jurisdiction.

• Improper composition of the arbitral tribunal.

• The subject matter is not capable of being referred to arbitration.

• It is against public policy.

• Fraud or corruption.

Section 37 of the Act provides that if a person is not satisfied with the order passed by the
tribunal, he/she can appeal to the court. However, there are no provisions for a second appeal
once an appeal has been made. In the case of Pandey and Co. Builders Pvt. Ltd. v. State of
Bihar (2007), it was held that the appellate authority in any case which is referred to arbitration
must be decided from the definition of court given under Section 2 of the Act.

ENFORCEMENT OF ARBITRAL AWARD

Once the award is passed by the tribunal, it does not immediately get enforced on the parties.
Before an award is enforced through court, a time period is given to the parties in which they
can file an application for setting aside the award, correction/addition of the award, and after
the elapse of said time period, parties can file an application for enforcement of the arbitral
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award. Arbitral awards are mainly categorised into domestic and foreign arbitral awards which
are regulated and enforced by the Arbitration and Conciliation Act, 1996, where domestic
arbitral awards are governed by Part I and foreign arbitral awards are governed by Part II of
the Act, respectively.

RECENT AMENDMENTS

The Arbitration and Conciliation Act, 1996 and Its Amendments

The Arbitration and Conciliation Act, 1996 (hereinafter “the Act”) was enacted with the
objective of consolidating and amending the law relating to domestic arbitration, international
commercial arbitration, and enforcement of foreign arbitral awards. Based on the UNCITRAL
Model Law, the Act came into force on January 25, 1996, marking a significant reform in
India’s dispute resolution framework.

Despite its promise, the implementation of the Act revealed several structural and procedural
shortcomings—ranging from prolonged delays, ambiguity in legal provisions, excessive
judicial interference, and increased costs of arbitration. These challenges hindered the effective
use of arbitration as a viable alternative to litigation, particularly in sectors like construction,
where dispute resolution demands expertise, speed, and commercial sensibility.

To address these challenges and promote India as an arbitration-friendly jurisdiction, the Act
was amended thrice in the last decade:

• The Arbitration and Conciliation (Amendment) Act, 2015

• The Arbitration and Conciliation (Amendment) Act, 2019

• The Arbitration and Conciliation (Amendment) Act, 2021

These amendments have revitalized India’s arbitration landscape by enhancing tribunal

authority, institutionalising arbitration practice, reducing court interference, and prioritising
efficiency and enforceability—particularly critical in resolving complex construction disputes.

1. Empowerment of the Arbitral Tribunal and Judicial Mandates for Referral

The 2015 Amendment made it mandatory for courts under Section 8 to refer parties to
arbitration where a valid arbitration agreement exists, barring judicial discretion. Under Section
9, once interim measures are granted by the court, arbitral proceedings must commence within
90 days, ensuring that interim relief does not become a stalling tactic.
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The enhanced powers of arbitral tribunals under Section 17, through the 2015 and 2019
Amendments, allow them to grant interim measures enforceable as court orders, aligning
India’s arbitration practice with international standards.

Further, Section 2(2), as amended, extends key provisions such as Sections 9, 27, and 37 to
international commercial arbitration seated outside India, subject to party agreement—
broadening the applicability of Indian arbitration law beyond territorial limits.

These reforms significantly strengthen arbitral autonomy and judicial respect for party
intention.

2. Eliminating Automatic Stay on Awards

One of the most impactful reforms came through amendments to Section 36 and Section 87,
which clarify that the mere filing of an application under Section 34 to set aside an award does
not result in an automatic stay.

The 2021 Amendment further refined Section 36(3) by introducing a specific safeguard in
cases involving allegations of fraud or corruption. If the court finds a prima facie case, an
unconditional stay may be granted pending disposal of the challenge.

This curtailment of delays caused by vexatious litigation promotes finality and swift
enforcement of awards—an essential feature for construction projects dependent on timely
dispute resolution.

3. Freedom to Appoint Foreign Arbitrators

With the 2021 Amendment, Section 43J was substituted and the Eighth Schedule was deleted,
thereby liberalising the eligibility criteria for arbitrators. This reform allows parties to appoint
foreign arbitrators, thereby expanding the pool of professionals with domain-specific
expertise—crucial for technical disputes in the construction sector.

This move has brought India in sync with global best practices and increases confidence among
foreign parties engaging in Indian-seated arbitration.

4. Impartiality and Disclosure Obligations

The 2019 Amendment introduced stricter disclosure requirements for arbitrators under Section
12, read with the Sixth and Seventh Schedules. Arbitrators are now obligated to disclose any
past or present relationships that may affect their independence or impartiality.
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These provisions have been instrumental in preventing the appointment of arbitrators closely
connected to government or public bodies, thereby enhancing credibility and neutrality in
arbitrations involving public infrastructure and government contracts.

5. Confidentiality and Protection of Arbitrators

The 2019 Amendment introduced two critical sections—Section 42A and Section 42B.

• Section 42A imposes a duty of confidentiality on arbitrators, institutions, and parties,

with an exception only for award enforcement.

• Section 42B grants legal immunity to arbitrators for actions done in good faith under
the Act.

Together, these provisions foster professional confidence, encourage the involvement of

experts in sensitive disputes, and ensure the integrity of the arbitration process.

6. Establishment of Arbitration Council of India (ACI)

A landmark development under the 2019 Amendment was the establishment of the Arbitration
Council of India (ACI) under Section 43A. The ACI is entrusted with:

• Grading of arbitral institutions and arbitrators

• Policy formulation and accreditation

• Maintaining an electronic depository of awards

• Promoting ADR mechanisms

The construction industry, which requires sophisticated institutional support, benefits

immensely from the availability of institutions like MCIA (Mumbai) and DIAC (Delhi) which
provide infrastructure, case management, and panel expertise.

Arbitration Council of India (ACI)

Arbitration and Conciliation (Amendment) Act 2019 seeks to insert a new Part to the Act of
1996 for the establishment and incorporation of an independent body namely, the Arbitration
Council of India (ACI) for the purpose of grading of arbitral institutions and accreditation of
arbitrators, etc.
Composition: The ACI will consist of a Chairperson who is either a Judge of the Supreme
Court or a Judge of a High Court or Chief Justice of a High Court or an eminent person with
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expert knowledge in the conduct of the arbitration. Other members will include an eminent
arbitration practitioner, an academician with experience in arbitration, and government
appointees.
Functions includes - Framing policies for grading arbitral institutions and accrediting
arbitrators and for the establishment, operation and maintenance of uniform professional
standards for all alternate dispute redressal matters, Maintaining a depository of arbitral
awards (judgments) made in India and abroad.

7. Enhanced Scope of Pleadings and Decision-Making

The 2015 and 2019 Amendments have improved procedural flexibility through:

• Section 23: Allowing respondents to file counterclaims and set-offs, and requiring
pleadings to be completed within six months of tribunal constitution.

• Section 25: Permitting tribunals to proceed ex parte without treating non-filing of

defence as admission.

• Section 28: Granting arbitrators discretion to look beyond contract strictures while still
upholding its core intent.

These measures increase flexibility and give arbitrators greater control over proceedings—an
essential feature in complex and layered construction disputes.

8. Time and Cost Efficiency in Arbitration

Perhaps the most celebrated reform pertains to time-bound proceedings:

• Section 29A requires the award to be rendered within 12 months (extendable by 6

months with consent), with further extension only through court approval.

• Section 24 mandates day-to-day hearings, limiting adjournments.

• Section 11 obligates courts to appoint arbitrators within 60 days of receiving a notice,

and empowers them to refer such appointments to graded arbitral institutions.

• Fee caps may now be prescribed under the Fourth Schedule, bringing predictability and
transparency to arbitration costs.
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These changes address the core concerns of delay and cost, making arbitration a practical
choice for the construction sector, where project timelines and financial closure are critical.

The recent amendments to the Arbitration and Conciliation Act, 1996 have significantly
improved the arbitration ecosystem in India. These legislative changes have addressed critical
pain points—such as delays, lack of neutrality, enforceability concerns, and procedural
rigidity—making arbitration an effective remedy for construction and infrastructure disputes.

With the establishment of modern arbitration centres, clearer timelines, international arbitrator
eligibility, institutional support, and judicial backing, India is well on its way to becoming a
preferred arbitration hub in the Asia-Pacific region. Though improvements are still possible in
areas such as digitisation and appellate efficiency, the trajectory is set, and the winds of change
are decisively in favour of arbitration.