Introduction
The Arbitration and Conciliation Act, 1996 is a landmark legislation in India that consolidates and amends the law related to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards. It also provides a legal framework for conciliation, a form of Alternative Dispute Resolution (ADR).
This Act is based on the UNCITRAL Model Law on International Commercial Arbitration (1985) and the UNCITRAL Arbitration Rules, ensuring its compatibility with international standards.
Objectives of the Act
- To streamline the arbitration process and reduce judicial intervention.
- To provide a unified legal framework for arbitration and conciliation.
- To encourage expeditious and cost-effective dispute resolution.
- To recognize and enforce foreign arbitral awards in India.
- To ensure finality of arbitral awards and minimize litigation post-award.
Salient Features of the Arbitration and Conciliation Act, 1996
1. Comprehensive Coverage of ADR
The Act covers domestic arbitration, international commercial arbitration, conciliation, and the enforcement of foreign arbitral awards under a single, unified law.
2. Minimal Judicial Intervention
Section 5 of the Act explicitly states that courts shall not intervene in arbitration proceedings except where provided in the Act. This ensures the autonomy of arbitration is preserved.
3. Party Autonomy
The Act emphasizes party autonomy, allowing parties to decide:
- The procedure for arbitration
- The seat and venue
- The number and qualifications of arbitrators
- The substantive law applicable to the dispute
4. Fast-Track Arbitration (Amendment 2015)
Introduced through the 2015 Amendment, fast-track arbitration under Section 29B allows parties to opt for a simplified, time-bound process where a sole arbitrator delivers the award within 6 months.
5. Recognition of International Commercial Arbitration
The Act applies to international commercial arbitration where one party is a foreign national, company, or government, promoting cross-border dispute resolution.
6. Binding Nature of Arbitral Awards
Section 35 of the Act declares that an arbitral award is final and binding on the parties. Section 36 allows for enforcement of awards as if they were court decrees.
7. Appointment of Arbitrators
The Act lays down clear provisions for the appointment of arbitrators under Section 11. In the event of disagreement, the Supreme Court or High Court may appoint an arbitrator.
8. Equal Treatment of Parties
Section 18 ensures equality and fairness in arbitration. Both parties must be given a full opportunity to present their case.
9. Flexibility in Procedure
The Act allows parties and arbitrators to decide the procedure to be followed (Section 19). There is no requirement to follow the Civil Procedure Code or Indian Evidence Act strictly.
10. Interim Measures by Court and Tribunal
Sections 9 and 17 empower both the court and the arbitral tribunal to grant interim measures such as injunctions, preservation of assets, or security.
11. Time Limits for Arbitration Proceedings
As per Section 29A (inserted via 2015 Amendment and updated in 2019), the arbitration award should be made within 12 months, extendable by 6 months with mutual consent. Further extensions require court approval.
12. Conciliation Provisions
Part III of the Act deals with conciliation, a non-binding ADR process. The conciliator assists parties in reaching a mutual settlement, which can be converted into an agreement enforceable like an arbitral award.
13. Enforcement of Foreign Arbitral Awards
Part II of the Act deals with foreign awards under:
- New York Convention (1958)
- Geneva Convention (1927)
This ensures international enforceability of awards and aligns India with global arbitration norms.
14. Limited Grounds for Setting Aside Awards
Section 34 allows a party to challenge an arbitral award only on specific grounds such as:
- Incapacity of a party
- Invalid arbitration agreement
- Misconduct by arbitrator
- Conflict with public policy
This ensures the finality of awards and discourages unnecessary litigation.
15. Cost and Fee Transparency
Amendments have introduced guidelines for arbitration costs, especially in institutional arbitrations, to enhance transparency and predictability.
16. Arbitral Institutions
The 2019 Amendment encourages institutional arbitration by empowering designated arbitral institutions to appoint arbitrators and administer the proceedings.
17. Confidentiality of Proceedings
The Act (post-2019 Amendment) includes confidentiality provisions under Section 42A. Arbitrators and arbitral institutions must maintain confidentiality of all proceedings and documents.
18. Immunity for Arbitrators
Section 42B grants civil immunity to arbitrators for acts done in good faith, encouraging professionals to act without fear of liability.
Important Sections at a Glance
| Section | Subject |
|---|---|
| 2 | Definitions |
| 5 | Extent of judicial intervention |
| 7 | Arbitration agreement |
| 9 | Interim measures by court |
| 11 | Appointment of arbitrators |
| 17 | Interim measures by arbitral tribunal |
| 18 | Equal treatment of parties |
| 19 | Procedure not bound by CPC or Evidence Act |
| 29A | Time limit for arbitral award |
| 29B | Fast-track arbitration |
| 34 | Application for setting aside arbitral award |
| 36 | Enforcement of award |
| 42A | Confidentiality of proceedings |
| 42B | Protection to arbitrators |
Quick Memory Code – “MUST AVOID DELAY CASE”
Use this acronym to recall key features of the Act:
| Code | Feature |
|---|---|
| M | Minimal court interference |
| U | UNCITRAL Model Law based |
| S | Speedy dispute resolution (12-month rule) |
| T | Time-bound fast-track arbitration |
| A | Appointment of arbitrators |
| V | Voluntary and flexible procedures |
| O | Overseas award enforcement (NY Convention) |
| I | Interim relief by court/tribunal |
| D | Domestic and international coverage |
| D | Due process and equal treatment |
| E | Enforceability of awards like decrees |
| L | Limited grounds to challenge award |
| A | Autonomy of parties |
| Y | Yes to confidentiality and arbitrator immunity |
| C | Conciliation included in same Act |
| A | Amendments enhance institutional arbitration |
| S | Section 36 – Award enforceability |
| E | Equal treatment of parties (Sec 18) |