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Author: Kratika Khandelwal, pursuing B.Com., from M.K.H.S. Gujarati Girls College, Indore, and Institute of company secretaries of India

Arbitration is a procedure of settling a dispute related to civil matters(business matters) arbitration and conciliation act was passed in the year1996 to promote the process of arbitration and also compel the parties to follow the decision passed by an arbitrator.

Our arbitration and conciliation law is based on UNCITRAL, a model law on international commercial arbitration that has helped in receiving foreign investments in the country.

Now let us understand what is UNCITRAL

This is a core legal body of the United Nations system in the field of international trade law. It is a legal body with universal membership specializing in commercial law reform worldwide for over 40 years.

UNCITRAL's business is the moderation and harmonization of rules on international business, if we define the word arbitration in simplewords will say Settlement of commercial or business disputes outside the court. It is more or less the same as court proceedings but it is much more flexible than court proceedings. And the biggest advantage of arbitration law is that if any dispute arises between the two then we can choose the Arbitrator by our wish that is who will take our dispute. It is very conducive when it comes in terms of promoting international trade


Section 2(1) (a) of the act, defines the term "arbitration ". As means any arbitration whether or not administered by a permanent arbitral institution. This means the settlement of a dispute through a third party, without following the normal course of settling the dispute, by approaching the court. Through arbitration, we settle the civil disputes between the parties however the disputes given in section 145 of the criminal procedure code relating to "possession may be settled through arbitration


An arbitration in which the parties themselves agree to appoint an arbitrator and resolve the dispute without administrative support or the help of any arbitral institution this kind of arbitration is called ad hoc arbitration. It can only be successful if it is done in good faith, with mutual respect, and in the spirit of the corporation.

If properly structured as hoc arbitration is less expensive and fast. A distinct disadvantage of this approach is that its effectiveness depends on the willingness of the parties.

Characteristics of an arbitral award section 31

1. Arbitrary awards should be in writing on stamp paper. the award should be signed by all the members of the arbitral tribunal.

2. Signature of the award by the majority of members can be taken as significant in case the reason for the omission of signatures of remaining members is provided.

3. The arbitrary criminal should also give reasons for passing an award or order.

4. However in the following two cases reasons are not required:

a) is the parties agreed for not-providing reasons at the time of entering into the agreement

b)where the award been passed with the mutual consent of the parties

5. Date of passing the award.

6. Place of passing the award.

7. Award contains a provision of interest. In case the arbitral tribunal does not specify the rate of interest, it shall be two percent higher than the current rate of interest.

8. The award must also include decisions and directions of the arbitrator regarding the cost of the arbitration.

9. After the award is made a signed copy should be delivered to each party for appropriate action like implementation or recourse against an arbitral award.

10. The arbitral tribunal may also pass an interim award during the arbitrary proceedings. The interim award is also referred to as a "partial award"


1. He is a person who is appointed to resolve disputes between the parties.

2. The appointment of the arbitrator is complete when he accepts the appointment. there is no qualification prescribed in the act for the appointment of an arbitrator both parties by an agreement can appoint an arbitrator.

3. Arbitrator should be an independent person.

4. He must not have any interest in the dispute.

5. He must be impartial.

6. He must disclose his interest if anyone before his appointment.

The parties may appoint whom so ever they please to arbitrate their dispute. Usually, the parties themselves appoint the arbitrator or arbitrators.

In certain cases, the court can appoint an arbitrator or umpire. The parties to an arbitration agreement may agree that the disputes shall be referred to a particular arbitrator or to the arbitrator designed by any person or by any person who holds any particular office.

Arbitral tribunal

When more than one arbitrator is appointed, such a panel or group of arbitrators becomes an arbitral tribunal

Arbitral award: section 2(1)(a)

It means a judgment or an order passed by an arbitrator or arbitral tribunal

Legal representative - 2(1)(g)

This word has been defined in the same manner as it is defined under the provisions of the code of civil procedure. It means the person who represents the estate of the deceased person or who handles the assets of the deceased person or who represents the deceased person in the capacity of representative. It also includes the executors or officers appointed by the court or the person who has taken responsibilities and duties of the executor's hairs in law are also considered a legal representative. The term legal representative is defined because section 40 clearly states that the arbitration agreement is not discharged by the death of any party to the arbitration.

International commercial Arbitration

This means setting the dispute outside the court and the dispute relates to any business and commercial transaction arising out of a legal relationship between two or more parties and at least one of the parties is:

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

b) body corporate which is incorporated in any country other than India, or

c) government of the foreign country, or

d) an association of persons or body of individuals whose Central management and control are exercised in any country other than India.

Mainly the disputes related to international transactions are settled under the WTO dispute resolution process

What is court?

In case of arbitration other than international commercial arbitration the principal civil court of original Jurisdiction in the district, and includes the high court in the exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of the suit, does not include any civil court of A grade inferior to search principal civil court or any court of small causes

In the case of international commercial arbitration, the high court in the exercise of its ordinary original civil jurisdiction having jurisdiction to decide the questions forming the subject matter of the arbitration is the same had been the subject matter of a suit

Arbitration agreement section 7: it means an agreement between the parties to refer the dispute to an arbitrator or an agreement by which parties agree to resolve their dispute to arbitration procedure.

1. It must be in written and signed form.

2. Arbitration agreement can be separately entered into by the parties or it can be included as a separate clause in any other business agreement.

3. Shall is considered to be in writing if it is in the form of a letter, a paper signed by the parties, or in the form of a statement of claims and defense between the parties

4. Certain disputes related to matrimonial issues, criminal matters, questions related to guardianship, about the validity of a will cannot be solved through arbitration

5. It should contain the date of the agreement, the place of the agreement, and the name of the arbitrator if any.

Per section 31 (8) the cost of arbitration shall be fixed by the arbitral tribunal by section 31A.

In the case of Rukmanibai Gupta Vs Collector, it was decided that there is no particular format of the arbitration agreement it just needs to be in writing and signed by the parties or their authorised representatives. An arbitration clause in the agreement does not attract separate stamp duty. Power to refer parties to arbitration where there is an arbitration agreement

As per section 8 of the Arbitration and Conciliation Act,1996, if any party approaches the court for resolving the dispute which is a subject matter of the Arbitration Agreement, on or before the date of submission of statements to the arbitration then, despite any judgment, decree, or order of the supreme court or any court, refer the parties to Arbitration unless the court is satisfied that there is no valid arbitration agreement.

The party who is applying for relief from the court share submits the original agreement with the application of the duty-certified copy of the agreement. And if the parties are not able to produce the certified copy of the arbitration agreement as the same is not provided by the other party in this case the party may produce a copy of the agreement and request the court to order the other party to produce the original agreement or it certified copy before the court

In the case of Aman Finance Corporation Vs, Nitesh Kumar Sinha, the buyer of a truck on a higher purchase basis defaulted in payment of installments and the higher purchase agreement contain a clause of arbitration despite this, the buyer approached the court when his vehicle was seized, by the financer the court decided that the suit is not maintainable as there is a valid Arbitration Agreement


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