Understanding the Conditions for Judicial Referral to Arbitration in India, Summaries of Law

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INTRODUCTION

State the object and scope of Arbitration and Conciliation law in India. [16] May 08

Define Arbitration Agreement. Explain the nature, meaning and importance

of Arbitration Agreement. [16] Dec 06, 05, 03, Dec 02, 02, Dec 01

Introduction: To internationalise the Arbitration Law in India, it was felt that the Arbitration Law, 1940 has become out dated in the present scenario of economic reforms world wide. The Law Commission of India as well as the domestic and international arbitration and conciliation bodies including several experts in the field of arbitration relating to trade and industry have proposed amendments, modifications to the Arbitration Act, 1940 to make the law more responsive and effective to suit most with the law dealing with the settlement of disputes in respect of domestic and international commercial matters. There was no law in India to provide the comprehensive enactment to meet the present requirements to settle domestic and international commercial disputes amicably by arbitration and conciliation machinery.

At the international level it was also felt that the increasing arbitration and conciliation acceptance in trade and industry is the most important requirement of the present commercial activities, and as such the United Nations Commission on International Trade Law (UNCITRAL) have adopted the Model Law with focus on International Commercial Arbitration in the year 1985. Subsequently, the General Assembly of the United Nations affirmed and all member countries were directed to give recognition to the United Nations Commission on International Trade's Model Law, which was introduced with the object to make arbitration procedure and practice in the matter of international commercial activities uniform and simple.

The United Nations Commission on International Trade also adopted a set of conciliation rules in the year 1980 which were recommended by the General Assembly of the United Nations to be followed by the member countries where the parties in international commercial disputes intended to settle their dispute amicably without taking recourse of strict legal system.

Although, aforesaid Model Law and Conciliation Rules provided international commercial arbitration and conciliation, there was still a need to legislate law on domestic arbitration and conciliation on the pattern of the Model Law and Conciliation Rules. With this object and based on the UNCITRAL Model Law and New York Convention and Conciliation Rules – the Arbitration and Conciliation Bill, 1995 was introduced in both the Houses of Parliament on 8th^ May, 1995. This Bill contained the reflection of the International Chamber of Commerce Arbitration Rules and in their 1993

provides finality of arbitral awards and its enforcement (Section 36) without intervention of the Court.

4. Procedure for Conduct of Arbitration and Awards in detail – Chapter V of the Arbitration and Conciliation Act, 1996 from Section 18 to Section 27 provides detailed procedure, practice whether in hearings or statements of claim and defence. The Arbitral Tribunals are empowered to settle any objections raised in respect of jurisdiction or scope of authority of the arbitrators.
5. Precised Powers of the Court - The Act of 1996 has précised the powers of the court by taking assistance only in certain specific matters. The Court's assistance can be sought in taking evidence only with the prior approval of the arbitral tribunals, as under Section 27(1): ‘The arbitral tribunal or a party with the approval of the arbitral tribunal, may apply to the court for assistance in taking evidence.’ In the matter of jurisdiction Section 42 of the Act of 1996 states that: ‘Notwithstanding anything contained elsewhere in this part or in any other law for the time being in force, 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.’
6. Powers of the Arbitrators enhanced - In comparison with the old Act, the new Act has enhanced the powers of the arbitrators in respect of jurisdiction of Arbitral Tribunals and also improved the competency of the arbitrators to rule. Chapter IV, Section 16 and Section 17 of the Act 1996 provide these measures.
7. A new form of Conciliation - Part III of the Act, 1996 deals with new internationalized conciliation approach and explains the application and scope of conciliation. The Act under Section 63 intends to prescribe number of conciliators and in case of more than one conciliator, it should be by the agreement of the parties. Section 63(2) States: ‘Where there is more than one conciliator, they ought, as a general rule, to act jointly.’ Thus, the new Act contains object of conciliation' more wide, and much emphasis has been provided on mutual rather consented conciliation in every respect.
8. International applicability - Under the old Act of 1940, there was no provision for applicability of any interim award made by the Foreign Arbitral Tribunal i.e., an Arbitral Tribunal Constituted by the ICC Court Arbitration at London. But, the new Act of 1996, has provisions for applicability of Foreign Arbitral Tribunal's awards.

Scope of Arbitration Law in India

In the present time the globalization of trade and commerce and economic liberalization created need for effective implementation of economic reforms. It was realized that the old Indian Arbitration Law, 1940 is not effective enough to meet the present day requirement. Since the multinational companies/enterprises are pouring into India in the field of banking, insurance, building, construction, electricity, telecommunication etc. and there is commercial interaction between India and foreign countries wherein such parties who agree or have agreed for arbitration in case of dispute arising out of such

commercial activities, it shall be determined and settled in accordance with the Arbitration and Conciliation Act, 1996 and the rules framed thereunder.

However, it is to be noted that the expression ‘commercial’ in the context of the Arbitration Law has been observed by the Apex Court in R.M. Investment and Trading Co. Pvt. Ltd. v. Boeing Company, as follows: ‘While construing the expression "commercial" in section 2 of the Act, it has to be borne in mind that the Act is calculated and designed to subserve the cause of facilitating international trade and promotion thereof by providing speedy settlement of disputes arising in such trade through arbitration and any expression or phrase occurring therein should receive a.liberal construction".

In the present case the Apex Court has held that consultancy rendered by R.M. Investment and Trading Co. Pvt. Ltd. to Boeing Company for the purpose of developing commercial activities of sale of Boeing aircrafts is purely "commercial" in nature, hence, relationship between two companies with each other is commercial.

In another case, the Apex Court has held that activities such as exchange of commodities for money or other commodities, carriage of persons and goods by road, rail, air or waterways, contract, postal and telegraph services, banking, insurance and transactions in stock exchange are considered to be commercial interaction within the ambit of Article 301 of the Constitution of India, 1950 which deals with freedom of trade, commerce and intercourse – ‘Subject to the other provisions of this part, trade, commerce and intercourse throughout the territory of India shall be free.’

Thus, all kinds of commercial activities may be arbitrable provided there is an agreement in this regard between the parties. But in Kamini Engineering Corporation v. Re Traction, the Apex Court has held that merely providing technical assistance in electrification of railways which did not involve assistance or consultancy into active business and therefore such an agreement cannot be interpreted to be commercial in nature as it is outside the scope of term ‘commercial’ in the context of the Arbitration Act.

Where there is an arbitration agreement within the meaning of Section 7 of the Arbitration and Conciliation Act, 1996 in case of dispute the conflicting parties can be referred for arbitration. S. 7(1) of the Arbitration and Conciliation Act, 1996 defines the term ‘arbitration agreement’ as follows: ‘Arbitration agreement’ means an agreement by the parties to submit to arbitration all or certain disputes which have may arise or which may arise between them in respect of defined legal relationship, whether contractual or not.’

S. 7(2) of the said Act provides that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement Although Section 7(3) makes it compulsory that an arbitration agreement shall be in writing. According to

It was realized from all quarters that the (Indian) Arbitration Act, 1940 has become outdated as it contained the general law relating to arbitration and with a view to provide more responsive arbitration law to contemporary requirements and also to provide effective law dealing with settlement of both domestic and international disputes regarding commercial intercourse such major reformative amendments in the (Indian) Arbitration Act, 1940 have been incorporated by the Indian Parliament. Undoubtedly the arbitration and conciliation in the commercial transactions are getting global recognition as a machinery for settlement of disputes.

The Model Law on International Commercial Arbitration has been adopted by the United Nations Commission on International Trade, Law (UNCTIRAL) in 1985. The United Nation's General Assembly has recommended that all countries give due recognition to said Model Law, in view of the desirability of uniformity of the Law of arbitral procedures and specific needs of international commercial arbitration practice. Also, the United Nations Commission on International Trade Law (UNCTIRAL) has adopted a set of Conciliation Rules in 1980. It was intended by the General Assembly of the United Nations that these Conciliation Rules are to be used in case of disputes arising in the context of the international commercial relations and. conflicting parties can seek friendly settlement of their disputes by taking recourse to conciliation. It is important to note that the United Nations Commission on International Trade Law (UNCTIRAL), the Model Law and Rules aimed to harmonise the concept of arbitration and conciliation of different legal systems worldwide, therefore, these UNCITRAL Model Law have such provisions which are designed for universal application.

It would be seen that the said UNCITRAL Model Law and Rules served as a model for legislation on domestic arbitration and conciliation. The Arbitration and Conciliation Bill, 1995 seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the United Nations Commission on International Trade Law (UNCITRAL), Model Law and Rules.

The Arbitration Act, 1940 has become outdated - Object of the Present Act

In Objects and Reasons appended to the Arbitration and Conciliation Bill, 1995 it has been stated that the Arbitration Act, 1940 has become outdated and therefore, the present Bill sought to consolidate and amend the law relating to domestic arbitration and International commercial arbitration.

Prior to the promulgation of the Arbitration and Conciliation Act, 1996 the law on arbitration in India was substantially contained in three enactments, namely the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and' Enforcement) Act, 1961. In the statement of Objects and Reasons appended to the Bill it was stated that the Arbitration Act 1940, which contained the general law on arbitration, had become outdated. The said objects and reasons stated that the United Nations Commission on International Trade Law

(UNCITRAL) adopted in 1985 the Model Law on International Commercial Arbitration. The General Assembly had recommended that all countries give due consideration to the said Model Law which along with the rules, was stated to have harmonized concepts on arbitration and conciliation of different legal systems of the world and thus contained provisions which were designed for universal application. The above said statement of objects and reasons in para 3 states that ‘though the said UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation they could, with appropriate modifications serve as a model for legalization on domestic arbitration and conciliation. The present Bill seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign awards and to define the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules.

The main objectives of the said Bill are as follows:

1. to comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation;
2. to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration;
3. to provide that the arbitral tribunal gives reasons for its arbitral award;
4. to ensure that the arbitral tribunal remains within the limits of its jurisdiction;
5. to minimize the supervisory role of courts in the arbitral process;
6. to permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes;
7. to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court;
8. to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal; and
9. to provide that for the purpose of enforcement of foreign awards, every arbitral award made in a country to which one of the two international conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award. It is to be noted that in this context the International Conventions mean the New York Convention and the Geneva Convention relating to foreign arbitral awards, to which India is a party, and which will be considered as a foreign award.

It would be relevant to be mentioned here that the expression ‘arbitration’ has been included in Entry 13 of the Concurrent Lists of the 7th^ Schedule to the Constitution of India, 1950. Thus, State Legislature can enact legislation relating to arbitration only with obtaining the assent of the President of India. When the assent is obtained the enacted law can become effective in the State concerned.

Conclusion

Inference of an Agreement

The term ‘agreement’ has been defined under the Indian Contract Act, 1872. The said Act defines that every promise and every set of promises forming the consideration for each other is an agreement.

It is voluntary agreement, it is willingness of either side to abide by arbitral award of the arbitrator. Thus, agreement is a reciprocal promise from either side. Arbitration agreement gives right to parties to initiate arbitration proceedings when rights of the parties are violated or liabilities of the parties are not being discharged. The determination whether a particular clause amounts to a valid submission is whether both, parties are bound by the clause or not and whether a right has been expressly given to both the parties to initiate proceedings.

Essential Ingredients of a Valid Arbitration Agreement

It is settled legal position that a valid agreement should have the following: (1) it must be in writing; (2) there must be agreement between the parties; (3) the parties must be ad idem; and (4) there should be intention of the parties to have their disputes or differences referred and decided through arbitration.

Thus, the parties, disputes and finality of the decision are three essentials of an arbitration agreement. However, the statutory essentials of an arbitration agreement may be listed as:

• an agreement;
• it must be in writing;
• it may be relating to either present or future differences or disputes;
• whether an arbitrator is named therein or not.

Validity of an arbitration agreement does not depend on the number of arbitrators

It is well settled legal position that the validity of an arbitration agreement does not depend on the number of arbitrators specified therein. The present Arbitration and Conciliation Act, 1996 does not suggest anywhere that a number of arbitrators is a part of an arbitration agreement.

Factum of a contract - Submission to Arbitrator for decision

The parties are free to submit by an agreement even the factum of a contract for the decision by the arbitrator. It is all a matter of interpretation of a contract from which th arbitrators derive their authority.

Parties should intend to settle their disputes by arbitration

It is one of the essential requirement of an arbitration agreement that the parties should intend to make a reference to arbitration in case of any dispute relating to the terms of the contract. There must be clear intention in this regard, because consent of the parties is necessary before making a reference to arbitration. Where, there is express intention in the agreement to resolve the disputes if it arises by way of arbitration and on arising of dispute a reference to arbitration may be made by one party without the consent of the other party.

Bilateral Rights of Reference to the Parties

Whether the arbitration agreement should show mutuality to confer the right to exercise to initiate arbitration proceeding. On the point there is conflicting opinions expressed by the High Courts.

The Calcutta High Court in New India Assurance Co. Ltd. v. Central Bank of India, observed that - "where there is an arbitration agreement providing the option to the parties, to elect the dispute being referred to the arbitration, it amounts to a valid arbitration agreement and merely unilateral option as to refer the dispute to arbitration does not negative the very existence of the arbitration agreement, it only restricts the enforceability. The court opined though it lacks mutuality but it can not be treated as invalid.

On the other hand the Delhi High Court in Union of India v. Bharat Engineering Corporation, was of the opinion that an arbitration agreement should show bilateral rights of reference to arbitration in a case of disputes or differences arising between the parties.

Under the Act oral agreement cannot be recognized

It is one of the essential requirement that an arbitration agreement must be in writing. Neither the Arbitration Act, 1940 nor the Arbitration and Conciliation Act, 1996 recognises oral agreement. It is a mandatory provision as provided under Section 7 of the new Act, 1996 which must be complied with to make a valid arbitration agreement.

In Owal Chand, v. Madan Lal, the court has refused to recognize oral agreement, regarding arbitration of dispute and, it was held that oral submission / agreement may be the basis of a suit but it cannot be a basis of arbitration as it has no weight in the eyes of law.

Signature of parties is necessary in arbitration agreement

Even the Arbitration and Conciliation Act, 1996 nowhere says that an arbitration agreement should necessarily be signed by both the parties, though the Act makes it mandatory that an arbitration agreement must be in writing. The Apex Court in Jugal

arbitrator, on the other hand, because the parties’ agreement expressly gave him such power, was entitled to modify the parties’ contractual rights by substituting his own discretion for that of the architect if he disagreed with the architect’s certificates and opinions. Accordingly, if the parties chose to litigate rather than arbitrate the court would not have the same power.’

8. Complementary to C.P.C. - The Arbitration and Conciliation Act, 1996 is only complementary and not contradictory to the Civil Procedure Code, 1908. It means it works on the same principles, aims and objects of the Civil Procedure Code. An award passed by the arbitral tribunal is equal to a ‘decree’ of a civil court. Even though the arbitral tribunal is exempted from the adjective law, it has to follow the principles of natural justice, which include the adjective laws inherently. Further the arbitral tribunal should follow the substantive laws strictly.

Conclusion

Under what conditions judicial authority can refer parties to arbitration?

When can the parties seek interim order from the court for arbitration?

[16] Dec 06, May 01

Explain the powers of court to pass interim orders. [16] May 09, May 07, May 05, Dec 05, Dec 04, May 03, Dec 03

Explain the rules relating to interim measures, etc. by the courts with

decided cases. [16] May 08

Introduction: S. 8 and 9 of the Arbitration and Conciliation Act, 1996 refer to the matters dealing with the provisions wherein the judicial authority can refer parties to arbitration and the interim reliefs that can be asked for respectively.

Power to refer parties to arbitration where there is an arbitration agreement [S. 8]

Section 8 of the Act, 1996 is on the pattern of Article 8 of the Model Law. It states:

(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.

Section 8(1) provides discretionary power to the judicial authority, and the parties to an arbitration agreement make such request before a judicial authority but not later than submitting his first statement, the judicial authority should refer the parties to arbitration. It is necessary for application of this sub-section that a judicial authority can refer only the subject-matter of an arbitration agreement but not otherwise.

Although, under Section 8(1) a court cannot adopt on its own motion to avail this provision; the parties have to apply with request, however while considering such request, the court cannot go into the merits of the dispute.

Section 8(2) provides mandatory provision for application of Section 8(1) which specified that, "The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

Section 8(3) empowered the arbitral tribunal to start off arbitration and if already commenced can continue arbitration and also can make award, it is not the point that an application under Section 8(1) is pending before the court. Thus, the parties are not deprived to initiate arbitral proceeding even if proceeding before a judicial authority have already commenced. The main object of this sub-section is to discourage deserters instead push them to their agreement to arbitration.

It is important to note that Section 8 of the 1996 Act postulates not only request by the party for staying legal proceedings but also contemplates for referring the parties to arbitration.

Expression ‘Party’ under Section 8

Although, Section 2(1)(h) of the Arbitration and Conciliation Act, 1996 defines the expression ‘party’, it means a party to an arbitration agreement. Thus, the party to an arbitration agreement, may be between two or more persons, it may also be between body of persons or incorporated bodies. But, certainly they are disputed parties who submit their dispute for settlement under the arbitration agreement.

It is to be noted that the ‘party’ referred to in Section 8(1) of the Arbitration and Conciliation Act, 1996 is a party who is entitled to maintain the application thereunder. The party to the arbitration agreement who has himself instituted the suit is clearly not the ‘party’ envisaged. In Magma Leasing Ltd. v. NEPC Micon Ltd. wherein first defendant however, a party to the arbitration agreement who has elected to institute the

It is to be noted that an order made by the court / judicial authority while exercising power u/S 8 of the A&C Act, 1996 is not challengeable, thus such order is not appealable u/S 37 of the said Act.

Non-existence of a valid arbitration agreement - High Court cannot pass a decree in terms of award

In Tamil Nadu Electricity Board v. Sumathi, a writ petition was filed claiming compensation on account of death due to tortuous act. However, the High Court held and referred the matter to the arbitrator and made the award rule of the court and also passed a decree in terms of award. The Supreme Court while considering the above mentioned case observed that since disputed question of facts arose in the present appeals the High Court should not have entertained writ petitions, under Article 226 of the Constitution of India, 1950 and then referred the matter to arbitration in violation of the provisions of the Act, 1996. There was no arbitration agreement within the meaning of Section 7 of the Act, 1996 under the Arbitration and Conciliation Act, 1996. Award can be enforced as if it is a decree of account and yet the High Court passed a decree in terms of the award which is not warranted by the provisions of the new Act, 1996. Appellant also had raised plea of bar of limitation as in many cases if suits had been filed those would have been dismissed as having been filed beyond the period of limitation. The Supreme Court held that exercise of jurisdiction by the High Court in entertaining the writ petition was not proper and High Court in any case could not have proceeded to have the matter adjudicated by an arbitrator in violation of the provisions of the new Arbitration and Conciliation Act, 1996.

Submission of first statement not a bar on the court referring the parties to arbitration

The Supreme Court in P. Anand Gajapathi Raju v. P.V.G. Raju, while considering the power of the court to refer the dispute to arbitration under Section 8 of the new Act, 1996 where during the pendency of the dispute before the Supreme Court, parties entered into arbitration agreement and sought reference, it was held that the submission of first statement on substance of dispute was not a bar on the court referring the parties to arbitration provided other parties do not object. In the present case the court observed as follows: ‘The conditions which are required to be satisfied under sub-sections (1) and (2) of Section 8 before the court can exercise its powers are:

1. There is an arbitration agreement.
2. A party to the agreement brings an action in the court against the other party.
3. Subject-matter of the action is same as the subject-matter of the arbitration agreement.
4. The other party moves the court for referring the parties to arbitration before it submits his first statement on the substance of dispute.

The last provision creates a right in the person bringing the action to have the dispute adjudicated by court, once the other party has submitted his first statement of defence.

But, if the party, who wants the matter to be referred to arbitration applies to the court after submission of his statement and the party who has brought the action does not object, as is the case before the court, therefore, is no bar on the court referring the parties to arbitration.

Grounds for which Stay of Legal Proceedings may be Refused

There are certain circumstances when judicial authority may refuse the stay of legal proceeding, these are as under:

1. When it appears that the party has waived his right to seek stay of legal proceedings before submission of first statement on the substance of dispute.
2. When the Judicial authority or court is of the view that no adequate relief would be available to the party.
3. When the Court / Judicial authority is of the opinion that no contract has in fact been concluded between the parties.
4. When the contract itself is vitiated by bias or fraud.
5. When the main contract is void ab initio or illegal or non-existent.
6. Where the suits or claim has foundation on Hundies or on Negotiable Instruments.

Interim Measures etc by Court [Section 9]

Section 9 empowers the courts to grant interim measures at their discretion, thus it is the discretionary power of the court. The Court while considering an application made by a party would consider the various aspects of the matter such as whether prima facie case has been made out, whether the loss would be huge or beyond economic repair, if the suitable interim measures not being granted. But, such measures can be granted in aid of the arbitration proceedings and not to frustrate them. An application to the court to grant interim measures can be made on specified purposes under the Act,

1. for the appointment of a guardian for a minor or person of unsound mind for the arbitral proceeding;
2. to obtain custody, preservation and sale of any goods provided such goods is the subject-matter of an arbitration agreement;
3. to cause recovery of the amount as a result of an arbitral award;
4. to detain, preserve and inspect any property or thing which is subject-matter of an arbitration agreement,
5. to obtain interim injunction,
6. to appoint a receiver.

The aforesaid purposes to grant interim measures contained in [clauses (a) to (e). Section 9 of the Act provide certain guidelines to a court and also provides the grounds to the parties in an arbitration agreement.

To grant interim measures under Section 9, a court has discretionary power and this section does not specify all the interim measures. The court has to take account of every aspect of each case and also requirement of a case. This power of the courts to grant

Under the new Act, 1996 the court can pass interim orders when the request to refer the dispute is received by the respondent as per S. 21 of the Act. The material words occurring in Section 9 are ‘before or during the arbitral proceedings.’ This clearly contemplates two stages when the court can pass interim orders i.e. during the arbitral proceedings or before the arbitral proceedings. There is no reason as to why S. 9 of the new Act should not be liberally construed.

Conclusion

COMPOSITION OF ARBITRAL TRIBUNAL

Define an Arbitrator. Explain the provisions relating to appointment of

arbitrators under the Act. What are the grounds on which the appointment

can be challenged? [16] May 08, Dec 01

Explain the provisions relating to appointment and removal of arbitrators.

[16] May 07, Dec 06, May 04, May 03, Dec 03, May 01

On what grounds the appointment of an arbitrator can be challenged in

court? Discuss. [16] Dec 06, 06

Introduction: An ‘Arbitrator’ may be defined as ‘a private, neutral person chosen to arbitrate a disagreement, as opposed to a court of law. An arbitrator could be used to settle any non-criminal dispute, and many business contracts make provisions for an arbitrator in the event of a disagreement. Generally, resolving a disagreement through an arbitrator is substantially less expensive than resolving it through a court of law.’

The legal definition of an ‘arbitrator’ is the submission of a dispute to an unbiased third person designated by the parties to the controversy, who agree in advance to comply with the award—a decision to be issued after a hearing at which both parties have an opportunity to be heard.

Appointment of Arbitrators [S. 11]

Section 11 of the Act, 1996 is the lengthiest section. There are 12 clauses under this section which elaborate on the matter.

Section 11(1) - After internationalization of present Act, nationality of an arbitrator is immaterial and so this Section 11(1) of the Act provides freedom to the parties to appoint a person of any nationality as an arbitrator, however, the parties may restrict themselves to certain nationalities of the states to be appointed as an arbitrator. There is no discrimination in respect of nationality of an arbitrator. Therefore, a foreign national may be appointed as an arbitrator.

Section 11(2) - This sub-section prescribes a procedure appointing the arbitrators and the parties have been given the freedom to lay-down procedure under this sub-section (2)