Challenges to Arbitrators

12. Grounds for challenge.—When a person is appointment as an arbitrator, he shall

disclose in writing any circumstances,—
(a) such as the existence either direct or indirect, of any past or present relationship
with or interest in any of the parties or in relation to the subject-matter in dispute,
whether financial, business, professional or other kind, which is likely to give rise to
justifiable doubts as to his independence or impartiality; and
(b) which are likely to affect his ability to devote sufficient time to the arbitration and in
particular his ability to complete the entire arbitration within a period of twelve months.
Explanation —The disclosure shall be made by such person in the form specified in the
Sixth Schedule.
(3) An arbitrator may be challenged only if—
(a) circumstances exist that give rise to justifiable doubts as to his independence or
impartiality,
(b) he does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose appointment
he has participated, only for reasons of which he becomes aware after the
appointment has been made.
13. Challenge procedure.— The parties are free to agree on a procedure for challenging
an arbitrator.
(2) A party who intends to challenge an arbitrator shall, within fifteen days after becoming
aware of the constitution of the arbitral tribunal or after becoming aware of any
circumstances referred to in sub-section (3) of section 12, send a written statement of the
reasons for the challenge to the arbitral tribunal.
(3) Unless the arbitrator challenged withdraws from his office or the other party agrees to
the challenge, the arbitral tribunal shall decide on the challenge.
(4) If a challenge under any procedure agreed upon by the parties or under the procedure
under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral
proceedings and make an arbitral award.
(5) Where an arbitral award is made under sub-section (4), the party challenging
the arbitrator may make an application for setting aside such an arbitral award in
accordance with section 34.
(6) Where an arbitral award is set aside on an application made under sub-section
(5), The Court may decide as to whether the arbitrator who is challenged is entitled
to any fees.
15. Termination of mandate and substitution of arbitrator.—(1) In addition to the
circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall
terminate—
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be
appointed
(3) Where an arbitrator is replaced under hearings previously held may be repeated at
the discretion of the arbitral tribunal.
(4) An order or ruling of the arbitral tribunal made prior to the replacement of an
arbitrator under this section shall not be invalid solely because there has been a
change in the composition of the arbitral tribunal.
Making of arbitral award and
termination of proceedings
28. Rules applicable to substance of dispute.—(1) Where the place of arbitration is
situate in India,—
(a) the arbitral tribunal shall decide the dispute submitted to arbitration in accordance
with the substantive law for the time being in force in India;
(b) in international commercial arbitration,—
(i) the arbitral tribunal shall decide the dispute in accordance with the rules of law
designated by the parties as applicable to the substance of the dispute;
(ii) failing any designation of the law under clause (a) by the parties, the arbitral tribunal
shall apply the rules of law it considers to be appropriate given all the circumstances
surrounding the dispute.
29. Decision making by panel of arbitrators.—(1) Unless otherwise agreed by the
parties, in arbitral proceedings with more than one arbitrator, any decision of the
arbitral tribunal shall be made by a majority of all its members.
(2) if authorised by the parties or all the members of the arbitral tribunal, questions of
procedure may be decided by the presiding arbitrator.
[Link] limit for arbitral award.—(1) The award shall be made within a period of
twelve months from the date the arbitral tribunal enters upon the reference.
(2) If the award is made within a period of six months from the date the arbitral
tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such
amount of additional fees as the parties may agree.
(3) The parties may, by consent, extend the period specified in sub-section (1) for
making award for a further period not exceeding six months.
(4) If the award is not made within the period specified in sub-section (1) or the
extended period specified under sub-section (3), the mandate of the arbitrator(s) shall
terminate unless the Court has, either prior to or after the expiry of the period so
specified, extended the period:

(5) The extension of period referred to in sub-section (4) may be on the application of
any of the parties and may be granted only for sufficient cause and on such terms and
conditions as may be imposed by the Court.
(6) While extending the period referred to in sub-section (4), it shall be open to the
Court to substitute one or all of the arbitrators and if one or all of the arbitrators are
substituted, the arbitral proceedings shall continue from the stage already reached and
on the basis of the evidence and material already on record, and the arbitrator(s)
appointed under this section shall be deemed to have received the said evidence and
material.
(8) It shall be open to the Court to impose actual or exemplary costs upon any of the
parties under this section.
(9) An application filed under sub-section (5) shall be disposed of by the Court as
expeditiously as possible and endeavour shall be made to dispose of the matter within a
period of sixty days from the date of service of notice on the opposite party.
29B. Fast track procedure.—(1) The parties to an arbitration agreement, may, at any
stage either before or at the time of appointment of the arbitral tribunal, agree in
writing to have their dispute resolved by fast track procedure specified in sub-section
(3).
(2) The parties to the arbitration agreement, while agreeing for resolution of dispute by
fast track procedure, may agree that the arbitral tribunal shall consist of a sole
arbitrator who shall be chosen by the parties.
(3) The arbitral tribunal shall follow the following procedure while conducting
arbitration proceedings under sub-section (1):—
(a) The arbitral tribunal shall decide the dispute on the basis of written pleadings,
documents and submissions filed by the parties without any oral hearing;
(b) The arbitral tribunal shall have power to call for any further information or
clarification from the parties in addition to the pleadings and documents filed by them;
(c) An oral hearing may be held only, if, all the parties make a request or if the arbitral
tribunal considers it necessary to have oral hearing for clarifying certain issues;
(d) The arbitral tribunal may dispense with any technical formalities, if an oral hearing is
held, and adopt such procedure as deemed appropriate for expeditious disposal of the
case.
(4) The award under this section shall be made within a period of six months from the
date the arbitral tribunal enters upon the reference.
(5) If the award is not made within the period specified in sub-section (4), the
provisions of sub-sections (3) to (9) of section 29A shall apply to the proceedings.
(6) The fees payable to the arbitrator and the manner of payment of the fees shall be
such as may be agreed between the arbitrator and the parties.]
30. Settlement
(1) The arbitral tribunal may use mediation, conciliation or other procedures at any
time during the arbitral proceedings to encourage settlement.
(2) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal
shall terminate the proceedings and, if requested by the parties and not objected to by
the arbitral tribunal, record the settlement in the form of an arbitral award on agreed
terms.
(3) An arbitral award on agreed terms shall be made in accordance with section 31 and
shall state that it is an arbitral award.
(4) An arbitral award on agreed terms shall have the same status and effect as any
other arbitral award on the substance of the dispute.
31. Form and contents of arbitral award
(1) An arbitral award shall be made in writing and shall be signed by the members of
the arbitral tribunal.
(2) In arbitral proceedings with more than one arbitrator, the signatures of the
majority of all the members of the arbitral tribunal shall be sufficient so long as the
reason for any omitted signature is stated.
(3) The arbitral award shall state the reasons upon which it is based, unless—
(a) the parties have agreed that no reasons are to be given, or
(b) the award is an arbitral award on agreed terms under section 30 (Settlement).
(4) The arbitral award shall state its date and the place of arbitration and the award
shall be deemed to have been made at that place.
(5) After the arbitral award is made, a signed copy shall be delivered to each party.
(6) The arbitral tribunal may, at any time during the arbitral proceedings, make an
interim arbitral award on any matter with respect to which it may make a final arbitral
award.
(7) (a) where an arbitral award is for the payment of money, the arbitral tribunal may
include in the sum for which the award is made interest, A sum directed to be paid by
an arbitral award shall, carry interest at the rate of two per cent. higher than the
current rate of interest prevalent on the date of award, from the date of award to the
date of payment.
[(8) The costs of an arbitration shall be fixed by the arbitral tribunal in accordance
with section 31A.
Explanation.—For the purpose of clause (a), “costs” means reasonable costs relating
to—
(i) the fees and expenses of the arbitrators and witnesses,
(ii) legal fees and expenses,
(iii) any administration fees of the institution supervising the arbitration, and
(iv) any other expenses incurred in connection with the arbitral proceedings and the
arbitral award.
31A. Regime for costs
(1) In relation to any arbitration proceeding or a proceeding under any of the
provisions of this Act pertaining to the arbitration, the Court or arbitral tribunal, shall
have the discretion to determine—
(a) whether costs are payable by one party to another;
(b) the amount of such costs; and
(c) when such costs are to be paid.
(2) If the Court or arbitral tribunal decides to make an order as to payment of costs,—
the general rule is that the unsuccessful party shall be ordered to pay the costs of the
successful party; or
(3) In determining the costs, the Court or arbitral tribunal shall have regard to all the
circumstances, including—
(a) the conduct of all the parties;
(b) whether a party has succeeded partly in the case;
(c) whether the party had made a frivolous counterclaim leading to delay in the disposal
of the arbitral proceedings; and
(d) whether any reasonable offer to settle the dispute is made by a party and refused by
the other party.
(4) The Court or arbitral tribunal may make any order under this section including the order
that a party shall pay—
(a) a proportion of another party’s costs;
(b) a stated amount in respect of another party’s costs;
(c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun;
(e) costs relating to particular steps taken in the proceedings;
(f ) costs relating only to a distinct part of the proceedings; and
(g) interest on costs from or until a certain date.
(5) An agreement which has the effect that a party is to pay the whole or part of the costs of
the arbitration in any event shall be only valid if such agreement is made after the dispute in
question has arisen.
37. Appealable orders
(1) An appeal shall lie from the following orders (and from no others) to the Court
authorised by law to hear appeals from original decrees of the Court passing the order,
namely:—
(a) granting or refusing to grant any measure under section 9;
(b) setting aside or refusing to set aside an arbitral award under section 34.
(2) Appeal shall also lie to a court from an order of the arbitral tribunal—
(a) granting or refusing to grant an interim measure under section 17.
(3) No second appeal shall lie from an order passed in appeal under this section, but
nothing in this section shall affect or take away any right to appeal to the Supreme
Court.
38. Deposits
(1) The arbitral tribunal may fix the amount of the deposit or supplementary deposit, as
an advance for the costs which it expects will be incurred in respect of the claim
submitted to it:
Provided that where, apart from the claim, a counter-claim has been submitted to the
arbitral tribunal, it may fix separate amount of deposit for the claim and counter-claim.
(2) The deposit shall be payable in equal shares by the parties:
Provided that where one party fails to pay his share of the deposit, the other party may
pay that share:
Provided further that where the other party also does not pay the aforesaid share in
respect of the claim or the counter-claim, the arbitral tribunal may suspend or
terminate the arbitral proceedings in respect of such claim or counter-claim, as the
case may be.
(3) Upon termination of the arbitral proceedings, the arbitral tribunal shall render an
accounting to the parties of the deposits received and shall return any unexpended
balance to the party.
39. Lien on arbitral award and deposits as to costs
(1) The arbitral tribunal shall have a lien on the arbitral award for any unpaid costs of
the arbitration.
(2) If in any case an arbitral tribunal refuses to deliver its award except on payment
of the costs demanded by it, the Court may, on an application in this behalf, order that
the arbitral tribunal shall deliver the arbitral award to the applicant on payment into
Court by the applicant of the costs demanded, and shall, after such inquiry, further
order that out of the money so paid into Court there shall be paid to the arbitral
tribunal by way of costs such sum as the Court may consider reasonable and that the
balance of the money, if any, shall be refunded to the applicant.
(3) The Court may make such orders as it thinks fit respecting the costs of the
arbitration where any question arises respecting such costs and the arbitral award
contains no sufficient provision concerning them.
40. Arbitration agreement not to be discharged by death of party thereto
(1) An arbitration agreement shall not be discharged by the death of any party
thereto either as respects the deceased or as respects any other party, but shall in
such event be enforceable by or against the legal representative of the deceased.
(2) The mandate of an arbitrator shall not be terminated by the death of any party
by whom he was appointed.
41. Provisions in case of insolvency
(1) Where a person who has been adjudged an insolvent had, before the commencement
of the insolvency proceedings, become a party to an arbitration agreement, and any
matter to which the agreement applies is required to be determined in connection with,
or for the purposes of, the insolvency proceedings, then, if the case is one to which sub-
section (1) does not apply, any other party or the receiver may apply to the judicial
authority having jurisdiction in the insolvency proceedings for an order directing that
the matter in question shall be submitted to arbitration in accordance with the
arbitration agreement, and the judicial authority may, if it is of opinion that, having
regard to all the circumstances of the case, the matter ought to be determined by
arbitration, make an order accordingly.
42. Jurisdiction
Where with respect to an arbitration agreement any application under this Part has
been made in a Court, that Court alone shall have jurisdiction over the arbitral
proceedings and all subsequent applications arising out of that agreement and the
arbitral proceedings shall be made in that Court and in no other Court.
43. Limitations
(1) The Limitation Act, 1963 (36 of 1963), shall apply to arbitrations as it applies to
proceedings in court.
(2) Where an arbitration agreement to submit future disputes to arbitration provides that
any claim to which the agreement applies shall be barred unless some step to commence
arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to
which the agreement applies, the Court, if it is of opinion that in the circumstances of the
case undue hardship would otherwise be caused, and notwithstanding that the time so
fixed has expired, may on such terms, if any, as the justice of the case may require, extend
the time for such period as it thinks proper.
(4) Where the Court orders that an arbitral award be set aside, the period between
the commencement of the arbitration and the date of the order of the Court shall be
excluded in computing the time prescribed by the Limitation Act, 1963 (36 of 1963),
for the commencement of the proceedings (including arbitration) with respect to the
dispute so submitted.