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a. Arbitration & Conciliation Act, 1996. Group members. 04 Scarlet Almeida 05 Mihir Bhammar 09 Sumitra Cardoz 10 Anshul Chadha 29 Fazeel Kazi 31 Prashant Kokare 50 Sandip Saha. Introduction. An Act covering: domestic arbitration international commercial arbitration

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Arbitration & Conciliation Act, 1996

group members

Group members

04 Scarlet Almeida

05 Mihir Bhammar

09 Sumitra Cardoz

10 Anshul Chadha

29 Fazeel Kazi

31 Prashant Kokare

50 Sandip Saha

  • An Act covering:
    • domestic arbitration
    • international commercial arbitration
    • enforcement of foreign arbitral awards
    • conciliation
  • Modern concept of harmonious working partnership between the Court and Arbitration.
  • Has far reaching effect on reducing court litigation
  • Gives more importance to Arbitration and Conciliation by adding speed and economy to settlement of disputes.
alternative dispute resolution adr
Alternative Dispute Resolution (ADR)

Mechanism used across the world - effective, faster and less expensive.

4 methods of ADR:

  • Negotiation – unrecognized
  • Mediation – unrecognized
  • Conciliation – recognized
  • Arbitration - recognized

Recognized by the Arbitration and Conciliation Act, 1996

necessity of the act
Necessity of the Act
  • Shrinking Boundaries, Free trade & International Commerce have become global necessities.
  • Competition often leads to conflicts between entrepreneurs resulting in commercial disputes.
  • Growing strength and role of India in the global economy
  • Increasing FDI and other forms of collaboration -increasing disputes between Indian and foreign parties
  • Quick redressal to commercial disputes through private Arbitration.
  • Settlement of dispute in an expeditious, convenient, inexpensive and private manner so that they do not become the subject of future litigation between the parties.
acts addressing adr in india
Acts addressing ADR in India
  • The law on arbitration in India was substantially contained in three enactments, namely:
    • The Arbitration (Protocol & Convention) Act, 1937
    • The Arbitration Act, 1940
    • The Foreign Awards (Recognition and Enforcement) Act, 1961.
the arbitration conciliation act 1996
The Arbitration & Conciliation Act, 1996
  • 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.
  • "Arbitration is the reference of dispute between not less than two parties, for determination, after hearing both sides in a judicial manner, by a person or persons other than a court of competent jurisdiction.”
law based on uncitral model law
Law Based on UNCITRAL Model Law

The present Act is based on model law drafted by United Nations Commission on International Trade Laws (UNCITRAL), both on domestic arbitration as well as international commercial arbitration, to provide uniformity and certainty to both categories of cases.

what can be referred to arbitration

All disputes of a civil nature or quasi-civil nature which can be decided by a civil court can be referred to arbitration:

  • Relating to property
  • Right to hold an office
  • Compensation for non-fulfillment of a clause in a contract
  • Disputes in a partnership
disputes excluded from the arbitration act
Disputes excluded from the Arbitration Act

The law has given jurisdiction to determine certain matters to specified tribunal only; these cannot be referred to arbitration:

  • Matters involving questions about validity of a will.
  • Relating to appointment of a guardian.
  • Pertaining to criminal proceedings
  • Relating to Charitable Trusts
  • Winding up of a company
  • Matters of divorce or restitution of conjugal rights
  • Lunacy proceedings
  • Disputes arising from an illegal contract
  • Insolvency matters, such as adjudication of a person as an insolvent.
  • Matters falling within the purview of the Competition Act.
scheme of the act
Scheme of the Act

The Act is divided in to the following parts

(a) Part I - Domestic arbitration.

(b) Part II - Enforcement of foreign awards.

(c) Part III - Conciliation procedures.

(d) Part IV - Supplementary provisions.

arbitration agreement
Arbitration Agreement
  • Arbitration Agreement - an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
  • Power to refer parties to arbitration when there is an arbitration agreement.
arbitration agreement1
Arbitration Agreement

Interim Measures by Court

  • appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings
  • protection in respect of preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement
  • securing the amount in dispute
  • the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute
  • interim injunction or the appointment of a receiver;
  • Any other interim measure of protection as may appear to the Court to be just and convenient
appointment of arbitrator
Appointment of Arbitrator
  • Any person can be appointed as an arbitrator.
  • Generally impartial and independent persons –
  • C A’s, engineers, retired judges, advocates and other professionals are preferred.
  • Parties are free to determine the number of arbitrators
  • Number shall not be an even number.
  • The arbitrator shall disclose in writing to the parties anything that may give rise to justifiable doubts about his independence or impartiality.
appointment of arbitrator1
Appointment of Arbitrator
  • If they are unable to agree-

Each party will appoint one arbitrator and the two appointed arbitrators will appoint the third arbitrator who will act as a presiding arbitrator.

  • If not appointed within 30 days, the party can request Chief Justice of High Court to appoint an arbitrator.
  • In case of international commercial dispute, the application for appointment of arbitrator has to be made to Chief Justice of India.
termination of arbitrator
Termination of Arbitrator

Appointment of Arbitrator can be challenged only if

  • Circumstances exist that give rise to justifiable doubts as to his independence or impartiality
  • He does not possess the qualifications agreed to by the parties.
termination of arbitrator1
Termination of Arbitrator

The mandate of an arbitrator shall terminate if---

    • he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and
    • he withdraws from his office or the parties agree to the termination of his mandate.
    • where he withdraws from office for any reason; or by or pursuant to agreement of the parties.
  • Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.
conduct of arbitral proceedings
Conduct of Arbitral Proceedings
  • The Arbitral Tribunal is not bound by Code of Civil Procedure, 1908 or Indian Evidence Act, 1872.
  • The parties to arbitration are free to agree on the procedure to be followed by the Arbitral Tribunal.
  • Law of limitation (1963) applicable
  • Flexibility in respect of procedure, place & language.
  • Submission of statement of claim & defense maybe amended/ supplemented at any time
  • Hearings & Written Proceedings – at the discretion of the tribunal
    • Can be oral at the request of either party
  • Settlements during Arbitration
arbitral award
Arbitral Award
  • The decision of Arbitral Tribunal will be by majority
  • The arbitral award shall be in writing and signed by the members of the tribunal.
  • States the reasons for the award unless the parties have agreed that no reason for the award is to be given.
  • The award should be dated and place where it is made should be mentioned.
  • Copy of award given to each party.
  • Tribunal can make interim award also.
arbitral award appeal
Arbitral Award - Appeal

An arbitral award may be set aside by the Court only if;

  • The party furnishes proof of some incapacity
  • the arbitration agreement is not valid under the law to which the parties have subjected it
  • the party was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
  • the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matter beyond the scope of the submission to arbitration
  • the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties
  • the arbitral award is in conflict with the public policy of India.
cost of arbitration
Cost of Arbitration
  • Fees and expenses of arbitrators and witnesses, legal fees and expenses, administration fees of the institution supervising the arbitration and other expenses.
  • Tribunal can decide the cost and share of each party.
  • If parties refuse to pay the costs, the Arbitral Tribunal may refuse to deliver its award; thus any party can approach Court.
  • The Court will ask for deposit from the parties and on such deposit, the award will be delivered by the Tribunal. Then Court will decide the costs of arbitration and shall pay the same to Arbitrators. Balance, if any, will be refunded to the party.
intervention by court
Intervention by Court
  • The earlier arbitration law was that the party could access court almost at any stage of arbitration.
  • Now, approach to court has been drastically curtailed.
  • If an objection is raised by the party, the decision on that objection can be given by Arbitral Tribunal itself & the arbitration proceedings are continued
  • The aggrieved party can approach Court only after Arbitral Award is made.
  • Appeal to court is now only on restricted grounds.
  • Tribunal cannot be given unlimited and uncontrolled powers and supervision of Courts cannot be totally eliminated.
enforcement of foreign awards
Enforcement of Foreign Awards
  • Foreign award" means an arbitral award on differences relating to matters considered as commercial under the law in force in India. The foreign awards which can be enforced in India are as follows : -
  • New York convention award - made after 11th October, 1960
    • New York convention awards are enforceable in India.
    • New York convention was drafted and kept in United Nations for signature of member countries on 21st December, 1958.
  • Geneva convention award - made after 28th July, 1924.
enforcement of foreign awards1
Enforcement of Foreign Awards
  • To enforce a foreign award party has to
    • produce arbitral award, agreement of arbitration to the district court having jurisdiction over the subject matter of the award.
  • The enforcement of award can be refused by court only in cases specified in law.
  • Otherwise, the foreign award is enforceable through court as if it is a decree of the court.
  • If the court declines to enforce the arbitral award, appeal can be made to the court where appeal normally lies from the district court.
  • No further appeal can be made (except appeal to Supreme Court) .
  • Indian courts can be approached only at the time of implementation of award.
  • The courts can refuse to implement the award only on limited grounds.

The act makes provision for conciliation proceedings. In conciliation proceedings:

  • There is no agreement for arbitration.
  • Conciliation can be done even if there is 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 any award.
  • Helps parties in arriving at a mutually accepted settlement.
  • In such agreement they may draw and sign a written settlement agreement. Duly signed by the conciliator
  • 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.
  • Conciliation is the amicable settlement of disputes between the parties, with the help of a conciliator.
offer for conciliation
Offer for Conciliation
  • The conciliation proceedings can start when one of the parties makes a written request to other to conciliate, briefly identifying the dispute.
  • The conciliation can start only if other party accepts in writing the invitation to conciliate.
  • Unless there is written acceptance, conciliation cannot commence. If the other party does not reply within 30 days, the offer for conciliation can be treated as rejected
what can be referred to conciliation
What Can Be Referred To Conciliation

Matters of a –

  • Civil nature
  • Breach of contract
  • Disputes of movable or immovable property
what cannot be referred to conciliation
What Cannot Be Referred To Conciliation

Matters of –

  • Criminal nature
  • Illegal transactions
  • Matrimonial matters like divorce suit etc.
supplementary provisions
Supplementary Provisions
  • The High Court has the power to make rules under this act
  • Removal of difficulties by central Government through provisions made under the Act
  • Rules made by Central Government subject to approval by parliament
  • The present Act overrules the previous Acts
case study

Case Study

Bhatia International V Bulk Trading & Others


Appeal (civil) 6527 of 2001

facts of case
Facts of Case

Petitioner : Bhatia International

Respondents : Bulk Trading & others

Date of Judgement : 13.2.2002

Bench : G B Pattanik & S N Variava

Appeal : Against the Judgement Dated 10.10.2000: Madras High Court

Petitioner Counsel : Mr.S. Sen

Respondent Counsel : Mr. Sundaram

brief history
Brief History

Bhatia International contract with Bulk trading in 1997 - arbitration clause

Governed by as per rules of International Chambers of Commerce (ICC)

Bulk trading filed a request with ICC for arbitration with parties agreed process to be held in Paris and appointment of Sole Arbitrator

Respondents filed an application u/s 9 of Arbitration & concilation Act 1996 is district courts of Indore & Orissa against Bhatia International

Interim relief was sought – injunction restraining the parties from transferring/creating any third party right & dealing or selling their business assests or properties

Bhatia international – raised plea of maintainability of such an applicaton

case history
Case History

Mr. Sen on behalf of the petitioner Bhatia International stated that Part – I of the act wouldnot apply to arbitrations where the place of arbitrations is not in India

The application was dismissed by the IIIrd Additional District Judge on 1st Feb 2000

A writ petition was filed before the High Court of Madhya Pradesh, Indore Bench & same was dismissed on 10th Oct 2000

case is supreme court
Case is Supreme Court

Counsel Sen – Part –I of the Act applies to arbitration where the place of arbitration is in India other wise it will be Part –II of the Act would apply

Section 2 (2) states that provisions of the Part –I of the Act do not apply where the place of arbitration is not in India

Section 2 (8) of the Act defines international arbitration can take place in India or outside India, if outside India then Part –I doesn’t apply

Arbitration outside India – Part I does not apply hence section 9 & section 17 would not apply.

Part –II of the Act deals with the enforcement of the foreign Awards.

Section 2 & Section 17 have been purposely omitted – reason for this is arbitration take places outside India

Jurisdiction – of courts of that particular country where it is held.

Section 9 – an application for interim measure must be made before the award is enforced also section 36 deals with enforcement of domestic award only

Section 5 of the Act – Judicial authority should not interfere except as provided in the said Act. “reason”

M.P. High court of Indore Bench were wrong in entertaining the application u/s 9 of the Act based on which rejected the appilcation of the Appellant

Inspite of the fact that – A number of high courts Orissa,Madras, & Delhi have held that Part – I of the act would not apply to arbitrations which take place outside India

Judgments – Mariott International V Ansal Hotels Ltd – Delhi Court- accepted the same canvassing as the that of learned counsel Sen

The Respondents – Counselor Advocate Sundaram provided with the argument that if parties by their agreement exclude its provisions of Part I then only will not be part otherwise would apply to all international commercial arbitrations including those that take place outside India

court views
Court Views

If Sen agruments are taken into account – there would be a lacunae as neither Part I nor Part II would apply to arbitration held in a non-conventional country It would mean that there is no law in India governing such arbitrations

International Commercial Arbitration which takes place outside India – no protection to its citizens

Object of the Act was to establish a uniform legal frame work for fair & efficient settlement of disputes arising in international commercial arbitration

Always to look at the intension of the legislative makers

Not possible for most imaginative legislature to forecast exhaustively situations – courts duty to expound arises with a caution that courts should not try to legislate

Section 1 of the Act – implies to the whole of India, inclduing the state of Jammu & Kashmir.

Section 2 (a) – defines arbitration - arbitration could be under a body

like the ICC

Section 2 (f) International Commercial Arbitration makes no difference between International Arb. Takes places in India or internal Arb. which takes place outside India

Section 2 (2) – provides that part I would apply to cases where Arb. Takes place in India – to emphasis that the word “ only” not used hence legislature did not mean that the Part I would not apply to Arb. Outside India

Section 2 (4) & (5) – defines every arbitration - hence the word every arbitration includes all types

Section (5) – judicial intervention not except in Part I, Section (8) allows parties to approach Judicial but only to court is u/s 2 (e)

Legistalure has kept in mind that even international arb. Part I implies

Section 28 – does not provide to rules where Arb. Outside India

Seimilar to u/s 9 & u/s 17 – no section foreign Awards – indicating that legislature that no injunction can be brought – Stated by Sen

Said Act - Consolidated & Integratd Act – General provisons appilcable to all arbitrations would not be repeated in all chapters

Article 23 of the ICC rules permits parties to apply to a competent judicial authority for interim and conservatory measures Therefore, in such cases an application can be made under Section 9

of the said Act.

Act does not appear to be a well drafted legislation Therefore the High Courts of Orissa, Bombay,Madras, Delhi and Calcutta cannot be faulted for interpreting it in the manner indicated above

In this view of the matter we see no reason to interfere with the impugned judgment. The Appeal stands dismissed. There will be no Order as to costs throughout

case study1
Case Study

Supreme Court Judgment, Civil appeal under ‘Arbitration And Conciliation Act’ for setting aside of Foreign Award

  • The parties:
    • Venture Global Engineering (VGE)
    • Satyam Computer Services Ltd.
  • made a 50:50 JV.
  • An SHA was also signed:
    • Disputes have to be resolved amicably.
    • If not resolved, refer to arbitration.
  • Satyam alleged that the VGE had committed a default.
  • Several venture companies became insolvent.
  • Satyam exercised its option to purchase the VGE shares in the JV at its book value.
  • A series of petitions & cross-petitions happened.
  • Finally the case came to Supreme Court.
current case
Current Case
  • JV was situated in India.
  • Satyam enforced the award in USA.
  • VGE challenged it saying the award should have been enforced in India.
  • SC had to decide if enforcement of a foreign award can be challenged in India.
reference case bulk trading vs bhatia international
Reference Case - Bulk Trading vs. Bhatia International
  • Similar case in which arbitration was held by ICC, Paris.
  • Bulk Trading filed an application in District Court which it won.
  • Bhatia International approached SC.
  • SC dismissed the petition in favour of Bulk Trading.
contentions of vge
Contentions of VGE
  • Foreign award can be challenged based on reference case.
  • Satyam cannot enforce in US.
  • SHA did not provide for approaching US Court.
  • Satyam was motivated by the intention of evading the legal and regulatory scrutiny.
contentions of satyam
Contentions of Satyam
  • No suit can be filed against enforcement of foreign award.
  • No compulsion in seeking award in India as per agreement.
  • SHA does not have any objection related to foreign award.
  • VGE riding two horses at the same time.
  • All previous cases except Bhatia held view that foreign award can’t be challenged.
  • Referred Bhatia International case.
  • Even in international arbitrations, unless specifically mentioned in contract, enforcement can be challenged.
  • This case has close link with India and its laws.
  • If foreign award can’t be challenged in India, it leaves a party remediless.
  • Satyam had fraudulent intentions.
  • SC not expressing anything about either party.
  • SC judgment only related to challenging foreign award.
  • Arbitration proceedings to decide further.
  • 6 months notice to dispose of case.
  • Widely criticized in international law community.
  • Erroneous interpretation of act.
  • Party Autonomy rendered useless.
  • The enforcement mechanism has been rendered inefficient, clumsy, and uncertain. 
  • Little use of arbitration.
international commercial arbitration
International Commercial Arbitration

It means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is---

(i) an individual who is a national of, or habitually resident in, any country other than India; or

(ii) a body corporate which is incorporated in any country other than India; or

(iii) a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or

(iv) the Government of a foreign country

case study2
Case Study

Appellants: TDM Infrastructure Private Limited


Respondent: UE Development India Private Limited

the problem
The problem
  • Determination of applicability of Section 2(1)(f) of the Indian Arbitration and Conciliation Act, 1996 questioned
  • Companies registered and incorporated under the Companies Act, 1956, 
  • Directors and shareholders of the Petitioner residents of Malaysia
  • Parties into contractual terms resorted to arbitration clause contained therein pursuant to disputes arose amongst them
  • Neither the proposal nor the nominees proposed by parties accepted and hence the application for appointment of Sole Arbitrator was filed
the problem1
The problem
  • Despite the Company being incorporated and registered in India, since its central management and control being exercised in Malaysia, it would come within the purview of Clause (iii) of Section 2(1)(f) of the 1996 Act 
  • Company incorporated in India can only have Indian nationality for the purpose of the Act
  • Where both parties have Indian nationalities, the arbitration between such parties cannot be said to be an international commercial arbitration 
the outcome
The Outcome

“When both the companies are incorporated in India, and have been domiciled in India, the arbitration agreement entered into by and between them would not be an international commercial arbitration agreement.”

the outcome1
The Outcome
  • For the purposes of taxation, test of residence may not be registration but where the company does its real business and where the central management and control exists
  • All the board meetings in the instant case took place in Malaysia
  • Hence the present Court has no jurisdiction to nominate an Arbitrator and hence the application dismissed 
  • Appellants: National Agricultural Co-op. Marketing Federation India Ltd.Vs.Respondent: Gains Trading Ltd.
case study3
Case Study
  • Dispute arose between the parties
  • Respondent alleged of non-performance of the contract — Invoking the arbitration clause of the agreement, notice sent by the Petitioner
  • Respondent replied with refusal to comply with — Applicability of section 11 questioned
case study4
Case Study
  • Whether an arbitration clause comes to an end if contract abrogated
  • Held, even if the performance of the contract comes to an end on account of repudiation, frustration or breach of contract, the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract
case study5
Case Study
  • Section 16(1) of the Act clarifies that an arbitration clause forming part of the contract to be treated as an agreement independent of the other terms of the contract
  • Contract null and void would not entail ipso jure the invalidity of the arbitration clause

Appellants: India Household and Healthcare Ltd.Vs.Respondent: LG Household and Healthcare Ltd.

effect of fraud on arbitration agreement
Effect of Fraud on Arbitration Agreement

Petitioner called upon the respondent to appoint an Arbitrator to decide the dispute

Respondent contended that arbitration proceedings under MoU and agreement would be null and void as both were vitiated by fraud

On appeal Madras High Court granted interim injunction restricting Petitioner from taking any action in terms of the agreement


Held, a judicial authority obligated to refer the parties to arbitration where arbitration agreement exists

But when instance of fraud is proved, it goes on to vitiate the entire agreement.

Arbitration agreement is rendered null and incapable of being performed due to the effect of fraud

Hence, in cases of fraud, no judicial authority can enforce arbitration clause as the same ceases to operate

Application for appointment of Arbitrator, not maintainable unless the procedure and mechanism agreed to by and between the parties complied with — Application dismissed

case study6
Case Study

Malaysian Airlines Systems BHD (II)


Stic Travels (P) Ltd(Arbitration Petition No. 18 of 2000),

Supreme Court’s ruling on arbitrator’s nationality

Decided by Justice M. Jagannadha Rao, the nominee of the Chief Justice of India.

facts of the case
Facts of the case

Malaysian Airlines(Foreign Co.) appointed Stic Travels Pvt. Ltd(Indian Co.) as the General Sales Agent(Passenger) for various countries.

Two agreement dated September 15, 1986 and January 11, 1989 were entered into for this purpose. The former agreement related to passenger, and latter related to cargo. The originals of these agreements were with the Indian company.

facts of the case1
Facts of the Case

Further, the said agreements were terminated by the foreign company by notice dated March 1, 1999 delivered to the Indian company on the same date. This was done on the ground that the Indian company failed to remit and pay to the foreign company all the sums and money received by it in the course of agency on account of sale of passenger tickets and airway bills.

facts of the case2
Facts of the Case

The foreign company claimed that the Indian Company had, in its letter dated June 15, 1999 admitted liability up to Rs 83,54,655.79 and failed to pay the same and had fraudulently attempted to `arbitrarily and illegally' adjust the same against false claims with a view to defraud it.

case study7
Case Study

The application under Section 11 (5) for appointment of arbitrator by the Chief Justice of India or his nominee is by the Malaysian Airlines company.

The claim of the foreign company is that the Indian company is liable to pay it a sum of Rs 96,21,137 with interest at 24 per cent with quarterly rests with effect from May 1, 1999 besides other amounts.

case study8
Case Study

The Indian company contended that the agreements in question had ceased to exist and, hence, there was no arbitration clause. The notice by the foreign company was bad in law.

The foreign company had not produced the original agreements. They are not with the Indian company. The foreign company cannot file attested copies of the two agreements.

case study9
Case Study

After hearing the parties, the designated judge identified two points for consideration:

(1) Whether the preliminary issues raised by the Indian company can be decided at this stage or be referred to the arbitrator;

(2) Whether, in the case of an international arbitration agreement, where one of the parties is an Indian national, it is not permissible to appoint an arbitrator of Indian nationality

case study10
Case Study

On the first point he declined to decide the preliminary issues and directed that the matter be straight away referred to an arbitrator.

On second point He observed that while the nationality of the Arbitration is a matter to be kept in view, it does not follow from Section 11(9) that the proposed arbitrator is necessarily disqualified because he belongs to the nationality of one of the parties.

In case the party who belongs to a nationality other than that of the proposed arbitrator, has no objection, the Chief Justice of India (or his nominee) can appoint an arbitrator belonging to a nationality of one of the parties.

case study11
Case Study

In case, there is objection by the one party to the appointment of an arbitrator belonging to the nationality of the opposite party, the Chief Justice of India (or his nominee) can certainly consider the objection, and see if an arbitrator not belonging to the nationality of either parties can be appointed.

haryana telecom v sterlite industries
Haryana Telecom v Sterlite Industries

Petitioner : Haryana Telecom Ltd

Respondent : Sterlite Industries (India) Ltd

Date of Judgement : 13/7/1999

Bench B N Kirpal & S. Rajendra Babu

Case no: 1999 (3) SCR 861

Sections referred in the Act – Section 8 of Arbitration and Concilation Act 1996

Petitioner represented by Learned Counsel – Mr. Arun Jaitely

brief history1
Brief History

Haryana Telecom Ltd, a State – PSU entered into agreement with the Sterlite Industries for laying of cables a 150 crore order.

Due to business recession the venture could not be completed by Sterlite Industries and had to go for winding up of its business

A petition was filed in the session court by the respondent Sterlite Industries under the Companies Act for insolvency

The Government has raised objection and filed an application in the High Court for referring the matter to Arbitration

High court rejected its plea and petition was filed in the Supreme Court

what happened
What Happened
  • Petitioner moved against the court – contending that the High Court should refer the matter to the Arbitration
  • Earlier Courts –

- The Single Judge Dismissed the Application

- Same was upheld by the Division bench

  • Similar cases relating to applications which have been filed under the provisions of Arbitration Act 1940- the question regarding the winding up of the company could not be referred to an arbitrator
what happened1
What Happened
  • Learned counsel – Mr. Jaitely – contested that the Section 8 (1) of the Act Judicial Authority is bound to refer the matter to arbitration when the arbitration agreement exist between the parties
  • Section 8 – important points
    • A judicial authority before which an action is brought in a matteris the subject matter of an arbitration agreement shall, refer the parties to arbitration
    • Should not be entertained unless its is accompanied by original arbitration agreement or a duly certified copy there of
    • Arbitral Award, continuation or commencement of the process may be initiated inspite of the application made & pending before the judicial authority
what happened2
What Happened

The court held that : Judicial authorities will refer the matter to the Arbitration only when in their opinion the matter or dispute which the arbitrator is competent or empowered to decide

In this case, the courts held a view that the Claim in petition for winding up is not for money

The company has become commercially insolvent with the petition filed under the Companies Act, hence should wound up

the outcome2
The Outcome

An arbitrator has no jurisdiction to order the winding up of the company.

Notwithstanding any agreements between the parties

Therefore the matter pending before the high court could not be referred to the A and the High Court was right in rejecting the petition.

Hence the petition for the reasons stated above have been dismissed in Limein