Laws and institutions

Multilateral conventions relating to arbitration

Is your jurisdiction a contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? Since when has the Convention been in force? Were any declarations or notifications made under articles I, X and XI of the Convention? What other multilateral conventions relating to international commercial and investment arbitration is your country a party to?

Yes, India is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the Convention). It signed the Convention on 10 June 1958 and ratified it on 13 July 1960. The Convention has been in force since 11 October 1960.

India has taken reservations under article I of the Convention. These reservations clarify that, in India, the Convention applies only to recognition and enforcement of awards made in the territory of another contracting state under the Convention and only to differences arising out of legal relationships, whether contractual or not, that are considered commercial under Indian law.

India is also a contracting party to the Geneva Convention of 1927. However, this Convention ceased to apply to those awards to which the New York Convention applies.

Until 1996, three enactments governed the law of enforcement of arbitral awards in India. The Arbitration Act 1940 for the enforcement of domestic awards, the Arbitration (Protocol and Convention) Act 1937 to give effect to the Geneva Convention awards and the Foreign Awards (Recognition and Enforcement) Act 1961 to give effect to the New York Convention awards.

The enactment of the Arbitration and Conciliation Act 1996 (the Arbitration Act) in August 1996 repealed all of the above statutes. The Arbitration Act contains two parts. Part I deals with domestic arbitrations (ie, any arbitration conducted in India and the enforcement of awards thereunder), and Part II deals with the enforcement of foreign awards to which the New York Convention and the Geneva Convention applies.

The 246th Law Commission Report released in 2014 proposed amendments to various provisions of the Arbitration Act, of which only certain select recommendations were included in the Arbitration and Conciliation (Amendment) Act 2015 (the 2015 Amendment Act). The report is available at www.lawcommissionofindia.nic.in/reports/report246.pdf.

Notable changes were introduced to the Arbitration Act through the 2015 Amendment Act, which received the assent of the President of India on 31 December 2015 and came into force with effect from 23 October 2015. The 2015 Amendment Act was notified in the Official Gazette of India on 1 January 2016.

The report of the High-Level Committee to Review the Institutionalisation of arbitration mechanism in India, constituted on 29 December 2016 and chaired by Justice B N Srikrishna (Retd), recommended further amendments to the 2015 Amendment Act primarily for the purpose of promoting institutional arbitration in India. The report is available at http://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf. Some of these recommendations were incorporated by way of the Arbitration and Conciliation (Amendment) Act 2019 (the 2019 Amendment Act). The 2019 Amendment Act received the assent of the President of India on 9 August 2019 and came into force with effect from 9 August 2019, on which date it was notified in the Official Gazette of India.

Bilateral investment treaties

Do bilateral investment treaties exist with other countries?

Prior to 2017, India was a signatory to 70 bilateral investment treaties (BITs). With the introduction of the Model Bilateral Investment Treaty Text (Model BIT Text) on 28 December 2015, the decision was made to terminate all BITs and renegotiate terms in consonance with the Model BIT Text. In March 2017, the government of India terminated the majority of subsisting BITs and endeavoured to issue joint interpretative statements (JIS) in respect of those BITs that were not yet up for termination (ie, the original duration of which had not yet expired). The Department of Economic Affairs, Ministry of Finance leads all negotiations of standalone BITs. Thus far, after the adoption of the Model BIT Text, India has entered into a BIT with the Republic of Belarus, which is yet to come into force. Further, agreements have been concluded with the Federative Republic of Brazil and the Kingdom of Cambodia, but are yet to be signed. Additionally, JIS have been issued in respect of the earlier BITs with the People’s Republic of Bangladesh and the Republic of Colombia.

India is also a signatory to several multilateral treaties on investments including the SAFTA (2004), BIMSTEC Framework Agreement (2004), ASEAN-India Framework Agreement (2004), India-MERCOSUR Framework Agreement (2003), EC-India Cooperation Agreement (1993), GCC-India Framework Agreement (2004) and ASEAN-India Investment Agreement (2014), among several other CECA, CEPA, FTA, EPA and Framework Agreements. India is signatory to a total of 14 multilateral agreements.

Domestic arbitration law

What are the primary domestic sources of law relating to domestic and foreign arbitral proceedings, and recognition and enforcement of awards?

The primary domestic source of law relating to domestic and foreign arbitral proceedings and recognition and enforcement of awards is the Arbitration Act amended as on 6 August 2019. The Arbitration Act lays down guidelines for domestic arbitrations, international commercial arbitrations, conciliation and enforcement of domestic and foreign awards. Part I of the Arbitration Act provides general provisions, applicable to all domestic arbitral proceedings in India. Section 36 of the Arbitration Act stipulates enforcement of domestic arbitral awards under the Code of Civil Procedure 1908 in the same manner as if it were a court decree. Further, the proviso to section 36 inserted by the 2015 Amendment Act mandates that the court adjudicating an application for stay in a proceedings to set aside a domestic award, where the arbitral award is for payment of money, shall have due regard to the corresponding provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure 1908. Part II provides guidelines for the enforcement of certain foreign awards. Chapter I of Part II covers awards under the New York Convention, whereas Chapter II of Part II covers awards under the Geneva Convention.

Sections 44 and 53 of the Arbitration Act define a ‘foreign award’ as an arbitral award on differences arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India. The award should be in pursuance of an agreement in writing for arbitration, and an award made in a country that has been identified as being a reciprocating territory.

The term ‘commercial’ has not been defined in the Arbitration Act; however, the courts have propounded a wide interpretation of the term. In Union of India and Ors v Lief Hoegh Co (Norway), a 1984 case, the concept of a commercial relationship was taken to mean those arising out of, or incidental or ancillary to, business dealings. However, the general trend in case law has been to interpret the word ‘commercial’ widely. Guidance can also be taken from the UNCITRAL Model Law (the Model Law), which considers ‘consulting’ and ‘commercial representation or agency’ to also fall under this category.

The provisions of sections 9, 27, 37(1)(a) and 37(3) of the Arbitration Act shall, per the 2015 Amendment Act, also apply to an international commercial arbitration, even if the place of arbitration is outside India, unless parties contract to the contrary. An arbitral award made or to be made in such a place would be enforceable and recognised under the provisions of Part II of the Arbitration Act. Section 9 pertains to interim measures sought from a court. Section 27 refers to court assistance in taking evidence, section 37(1)(a) contemplates the right to appeal against the refusal of a court to refer parties to a suit to arbitration where there exists a valid arbitration agreement between such parties, and section 37(3) states that no second appeal shall lie from an order passed in appeal under section 37 except to the Supreme Court of India.

Domestic arbitration and UNCITRAL

Is your domestic arbitration law based on the UNCITRAL Model Law? What are the major differences between your domestic arbitration law and the UNCITRAL Model Law?

The Indian arbitration law is largely based on the UNCITRAL Model Law. The ‘Statement and Objects’ enshrined in the Arbitration Act reveals that the domestic arbitration law is based on the Model Law with ‘appropriate modifications’ to serve the needs of the domestic legal framework.

The Arbitration Act is divided into four parts. Parts I and II contain extensive provisions relating to arbitration agreements, the composition of an arbitral tribunal, the jurisdiction of arbitral tribunals, the conduct of arbitration proceedings, interim measures by the court, recourse against arbitral awards and enforcement of arbitral awards. Part III deals with conciliation proceedings, the procedure for appointment of a conciliator and conduct of conciliation proceedings. The role of the conciliator is sufficiently elucidated in this Part. Part IV provides ‘Supplemental Provisions’ to remove any procedural difficulty or ambiguity.

Part I is largely based on the original 1985 version of the Model Law. Part II mostly deals with enforcement of foreign awards governed by the New York and Geneva Conventions.

The key differences between the Arbitration Act and the Model Law are outlined below:

  • the Arbitration Act states that the number of arbitrators shall not be an even number, but the Model Law has no such restriction;
  • if the parties fail to determine the number of arbitrators, the arbitral tribunal, according to the Arbitration Act, shall consist of a sole arbitrator, in contrast with three arbitrators mandated under the Model Law;
  • the power of appointment of an arbitrator under the Arbitration Act is vested in the Supreme Court or, as the case may be, the High Court or any person or institution designated by such court;
  • article 8 of the Model Law enables a court to decline to refer parties to arbitration if it is found that the arbitration agreement is null and void, inoperative or incapable of being performed. Section 8 of the Arbitration Act uses the expansive expression ‘judicial authority’ rather than ‘court’, and the words ‘unless it finds that the agreement is null and void, inoperative and incapable of being performed’ do not find a place in section 8. However, the section does use the words ‘unless it finds that prima facie no valid arbitration agreement exists’, which is narrower than the provision contained in the Model Law;
  • if any person is found guilty of any contempt of the arbitral tribunal, then according to the Arbitration Act, he or she shall be subject to penalties or punishments similar to those incurred for like offences in suits tried before a court, a provision that is absent in the Model Law;
  • unlike the Model Law, interim measures also include measures for securing the amounts in dispute in the arbitration;
  • a court under the Arbitration Act has the power to grant interim measures even after the making of the arbitral award, but before it is enforced. Under the Model Law, a court can grant interim measures only before or during the pendency of arbitral proceedings; and
  • any controversy concerning the failure or impossibility of an arbitrator to act and the termination of the mandate of the arbitrator by the court is subject to appeal, as against the Model Law that specifically provides that such decision of the court shall not be subject to an appeal.

The Arbitration Act also provides for the following additional provisions that do not form part of the Model Law:

  • award of interest (section 31);
  • costs of arbitration (section 31);
  • the award will be enforced as a decree of the court if it is not challenged within the period provided under section 34, or the challenge made has been rejected by the court (sections 35 and 36);
  • appeals (section 37) against:
    • refusal to refer parties to arbitration under section 8;
    • grant or refusal of an interim measure by the court or the arbitral tribunal;
    • acceptance or refusal of a challenge to set aside an award; and
    • acceptance of a plea that the arbitral tribunal does not have jurisdiction or that the arbitral tribunal has exceeded its scope of authority;
  • the deposit of an amount or a supplementary deposit as an advance for the costs of arbitration (section 38);
  • arbitral tribunals shall have a lien on the arbitral award for any unpaid costs of arbitration and recourse to the courts by a party in respect thereof (section 39);
  • arbitration agreements are not discharged on the death of a party (section 40); and
  • provisions in case of insolvency (section 41).

The 2015 Amendment Act has brought about the following changes that are not present in the Model Law:

  • arbitration proceedings shall be commenced within a period of 90 days from date of an interim order granted by the court (amendment to section 9);
  • the court shall not grant interim relief under section 9 once the tribunal has been constituted unless circumstances exist to justify court intervention (amendment to section 9);
  • the tribunal has power to grant interim reliefs that are similar to the reliefs provided for under section 9 (amendment to section 17);
  • the tribunal must decide and make an award within a period of 12 months from the date the arbitral tribunal enters upon the reference, which is extendable by a maximum period of six months with the consent of both parties. If the award is not made within such a period, the mandate of the arbitrators stands terminated (section 29A);
  • a fast-track procedure has been introduced for resolution of disputes within six months where proceedings are carried on, based on written pleadings, documents and submissions filed by the parties without any oral hearing (section 29B);
  • applications for the appointment of arbitrators by the courts shall be endeavoured to be disposed of within 60 days commencing from the date of service of notice on the opposite party (section 11(13));
  • the text of the IBA Guidelines on the Conflict of Interest in International Arbitration (the IBA Guidelines) has been incorporated (section 12 read with the Fifth and Seventh Schedules);
  • the court has the power to grant interim relief in arbitrations seated outside India (section 9); and
  • costs will follow an arbitral award (section 31A).

The 2019 Amendment Act has brought about the following significant changes that are not present in the Model Law:

  • the power of appointment of an arbitrator on application by a party has now been wholly delegated to arbitral institutions designated by the Supreme Court in the case of international commercial arbitrations and the High Court in the case of all other arbitrations (amendment to section 11);
  • the statements of claim and defence in a domestic arbitration shall be completed within a period of six months from the date on which the arbitral tribunal has received written notice of its appointment (amendment to section 23);
  • the arbitral tribunal shall make its award in a domestic arbitration within a period of 12 months from the date of completion of pleadings under section 23; this time limit is no longer applicable to international commercial arbitrations (amendment to section 29A);
  • a party challenging a domestic arbitral award must do so on the basis of the record of the arbitral tribunal and may not furnish additional proof to that end (amendment to section 34);
  • the arbitrator, the arbitral institution and the parties to an arbitration shall maintain confidentiality of proceedings except where such disclosure is necessary for the purpose of implementation and execution of an award (insertion of section 42A);
  • an arbitrator shall not be susceptible to suits or other legal proceedings in respect of acts done or intended to be done by him or her in good faith (insertion of section 42B);
  • the insertion of Part I-A of the Arbitration Act brings with it the establishment and incorporation of the Arbitration Council of India (insertion of Part I-A);
  • accreditation of arbitrators by professional institutes recognised by the Arbitration Council of India shall be governed by the qualifications, experience and norms enumerated in the Eighth Schedule of the Arbitration Act (insertion of Eighth Schedule).
Mandatory provisions

What are the mandatory domestic arbitration law provisions on procedure from which parties may not deviate?

The parties are free to make agreements in certain matters, such as determining the number of arbitrators, the procedure for appointing an arbitrator, the seat and venue of arbitration, and determining the law that governs the arbitration proceedings.

However, in the case of arbitrations seated in India, certain provisions on procedure contained in Part I of the Arbitration Act are binding on the parties, necessitating mandatory compliance.

The following is an indicative list of such provisions:

  • the arbitration agreement must be in writing (section 7);
  • the power of a court to refer parties to arbitration (section 8);
  • the court’s power to grant interim measures (section 9) (per the 2015 Amendment Act, this power is now extended to international commercial arbitrations even if not seated in India, unless the parties agree to the contrary);
  • the procedure and period for appointment of an arbitrator by the arbitral institution designated by the court, failing an agreement between the parties (section 11);
  • the grounds for challenging the appointment of an arbitrator and procedure for challenging an arbitrator by the parties (sections 12 and 13);
  • the procedure in the event of failure or impossibility of an arbitrator to act (sections 14 and 15);
  • the procedure upon a plea taken by a party that the arbitral tribunal does not have jurisdiction to entertain the dispute and the rights of the parties thereof (section 16);
  • the equal treatment of parties (section 18);
  • the submission of statements of claim and defence (section 23), though the form and manner of submission is left to the discretion of parties;
  • an arbitration seated in India (other than an international commercial arbitration), shall be conducted in accordance with the Arbitration Act (section 28);
  • the form and contents of an arbitral award (section 31);
  • the termination of arbitral proceedings upon final arbitral award, withdrawal of claim by a claimant, or the mutual agreement of parties or for any other reason (section 32);
  • setting aside of an arbitral award and grounds thereof (section 34);
  • enforcement of an arbitral award (sections 35 and 36);
  • appeals against certain orders of the court or arbitral tribunal (section 37) (certain provisions of section 37 shall also apply to international commercial arbitrations seated outside India unless the parties agree to the contrary under the 2015 Amendment Act);
  • provisions for deposits and liens on arbitral awards (sections 38 and 39);
  • provisions in respect of death of a party and insolvency (sections 40 and 41); and
  • provisions relating to jurisdiction and limitation (sections 42 and 43).

The 2015 Amendment Act has inserted the following mandatory provisions:

  • for a mandatory period for deciding and making an award by the tribunal (section 29A); and
  • with respect to the cost regime (section 31A).

The 2019 Amendment Act has also inserted a mandatory period of six months for the completion of pleadings, commencing from the date of the arbitral tribunal receiving notice of its appointment (section 23).

Substantive law

Is there any rule in your domestic arbitration law that provides the arbitral tribunal with guidance as to which substantive law to apply to the merits of the dispute?

For domestic arbitrations (ie, arbitrations, other than international commercial arbitration, with a seat in India), the applicable law is the substantive law of India in force at the time (ie, the Arbitration Act). For international commercial arbitrations, the arbitral tribunal shall decide the disputes in accordance with the rules of law designated by the parties as applicable to the dispute. This is a mandatory provision contained in section 28(1)(b)(i) of the Arbitration Act and cannot be contracted out of by the parties. If the parties fail to designate the law, the arbitral tribunal shall apply rules of law it considers to be appropriate in the circumstances of the case. This provision is contained in section 28(1)(b)(iii) of the Arbitration Act and cannot be contracted out of by the parties. In such circumstances, the law applied is generally the law with which the contract is most closely connected (connecting factor). Factors such as the nationality of the parties, the place of performance of the contract, the place the contract was entered into and the place of payment under the contract can be examined to ascertain the intention of the parties and are the frequently used indicators of the connecting factor.

The designation of the law of any country by the party is construed to mean the substantive law of the country in question, unless there is an express designation by the parties to the contrary. The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised it to do so.

The 2015 Amendment Act also provides that in any event and in all cases, the arbitral tribunal shall take into account the terms of the contract and trade usages applicable to the transaction - a relaxation of the earlier provision that mandated that the terms of the contract must be strictly adhered to while deciding and making an award (section 28(3)).

Arbitral institutions

What are the most prominent arbitral institutions situated in your jurisdiction?

The most prominent arbitral institutions in India are:

The Indian Council of Arbitration (ICA)

Room 112, Federation House

Tansen Marg

New Delhi 110001

India

Tel: +91 11 2371 9103 / 2331 9760 / 2373 8760 70

Fax: +91 11 2332 0714 / 2372 1504

[email protected]

www.icaindia.co.in

The International Centre for Alternative Dispute Resolution

(ICADR)

Plot No. 6

Vasant Kunj Institutional Area, Phase-II

New Delhi 110070

India

Tel: +91 11 2613 9704 / 2613 9706 / 6593 1884 / 6593 1886

Fax: +91 11 2613 9707

[email protected]

www.icadr.nic.in

The Delhi Arbitration Centre

Delhi High Court Campus

Shershah Road

New Delhi 110 003

India

Tel: +91 11 2338 6492

Fax: +91 11 2338 6493

[email protected]

www.dacdelhi.org

The Arbitration Centre - Karnataka

Arbitration Centre - Karnataka (Domestic and International)

‘Khanija Bhavana’, No. 49, 3rd Floor, East Wing

Racecourse Road

Bangalore 560 001

Karnataka

India

Tel: +91 80 2295 4571 / 2295 4572 / 2295 4573

Fax: +91 80 2295 4572

[email protected]

www.arbitrationcentreblr.org

Nani Palkhivala Arbitration Centre

New No. 22, Karpagambal Nagar

Mylapore, Chennai - 600 004

India

Tel: +91 44 6513 0808 / 6565 1329 / 6565 1330

Fax: +91 44 24986697

www.nparbitration.in

FICCI Arbitration and Conciliation Tribunal (FACT)

Federation House

Tansen Marg

New Delhi 110 001

India

Tel: +91 11 2331 9849 / 2373 8760 70

Fax: +91 11 2332 0714 / 2372 1504

[email protected]

www.ficci-arbitration.com

Indian Institute of Arbitration & Mediation

G-254, Panampilly Nagar, Cochin 682 036

Kerala

India

Tel: +91 484 4017731 / 6570101

[email protected]

[email protected]

www.arbitrationindia.org

The Mumbai Centre for International Arbitration (MCIA)

20th Floor, Express Towers, Ramnath Goenka Marg

Nariman Point, Mumbai

Maharashtra 400021

India

Tel: +91 22 6105 8888

[email protected]

www.mcia.org.in

Of these, the ICA is the most recognised and widely used institution and is governed by Rules of Arbitration and Conciliation (as amended on and with effect from 8 May 2012) for domestic arbitration. The ICA now also provides for Rules of International Commercial Arbitration (with effect on and from 1 January 2014).

The MCIA, which was formally launched in Mumbai, India, on 8 October 2016, is a first-of-its-kind arbitral institution in India, established in a joint initiative between the government of Maharashtra and the domestic and international business and legal communities. The MCIA aims to be India’s premier forum for commercial dispute resolution, and provides its own rules for the conduct of arbitration. The MCIA Rules came into effect on 15 June 2016.

Arbitration Agreement

Arbitrability

Are there any types of disputes that are not arbitrable?

Yes, there are certain disputes that are not arbitrable in India, although the Arbitration Act does not expressly exclude any dispute as non-arbitrable. However, courts can set aside the award if the substance of the dispute is such that settlement by arbitration is not possible under the laws in force, or if the award conflicts with the public policy of India.

In general, disputes that can be decided by a civil court that involve rights in personam can be referred to arbitration.

However, the following subject matters are barred from being referred to arbitration:

  • matrimonial cases;
  • testamentary cases;
  • guardianship of a minor or disabled person;
  • insolvency;
  • criminal proceedings;
  • winding up or dissolution of a company;
  • matters arising out of a trust deed or the Indian Trusts Act;
  • matters relating to competition law; and
  • matters relating to eviction or tenancy governed by special statutes; enforcement of mortgage; matters under the securitisation laws; and in general matters for which the jurisdiction lies with the Debt Recovery Tribunal.

In Shri Vimal Kishor & Ors v Mr Jayesh Dinesh Shah & Ors, decided on 17 August 2016, the Supreme Court held that cases arising out of a trust deed cannot be the subject matter of arbitration.

In Booz Allen and Hamilton Inc v SBI Home Finance Ltd & Ors (AIR 2011 SC 2507), the Supreme Court ruled that a suit for enforcement of a mortgage by sale of the mortgaged asset was non-arbitrable, as it involved a right in rem.

In a judgment of the Bombay High Court in Eros International Media Ltd v Telemax Links India Pvt Ltd (decided on 12 April 2016), copyright disputes were held to be arbitrable.

In N Radhakrishnan v Maestro Engineers and Ors (2010) 1 SCC 72, the Supreme Court held that when the seat of arbitration is in India, issues involving criminality, serious fraud and financial malpractices can only be resolved by a court. In World Sport Group (Mauritius) Ltd v MSM Satellite (Singapore) Pte Ltd (AIR 2014 SC 968), the Supreme Court held that:

In the case of such arbitrations covered by the New York Convention, the Court can decline to make a reference of a dispute covered by the arbitration agreement only if it comes to the conclusion that the arbitration agreement is null and void, inoperative or incapable of being performed, and not on the ground that allegations of fraud or misrepresentation have to be inquired into while deciding the disputes between the parties.

However, the decision in N Radhakrishnan was not held to be per incuriam. This decision has also been distinguished in Swiss Timing v Organising Committee, Commonwealth Games (2014) 6 SCC 677 and A Ayyasamy v A Paramasivam (2016) 10 SCC 386, which held that even domestic disputes involving allegations of fraud arising out of contracts bearing an arbitration clause shall be referred to arbitration.

Requirements

What formal and other requirements exist for an arbitration agreement?

The Arbitration Act provides that all arbitration agreements must be in writing. Section 7 of the Arbitration Act states that an arbitration agreement:

1. May be in the form of an arbitration clause in a contract or in the form of a separate agreement;

2. Is in writing if it is contained in:

(a) document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

3. Can also be a reference in a contract to a document containing an arbitration clause if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

Section 7(4)(b) of the 2015 Amendment Act permits the creation of arbitration agreements through electronic communication. Such agreements shall also be regarded to fulfil the requirements of section 7.

Enforceability

In what circumstances is an arbitration agreement no longer enforceable?

An arbitration agreement is unenforceable in the following circumstances:

  • if the party to the arbitration was under some incapacity;
  • the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force;
  • the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force;
  • if the agreement is void or otherwise not valid on account of incapacity or disqualification of one of the parties to the contract; or
  • in a contract wherein one of the contracting parties is an insolvent and a dispute arises, the arbitration agreement cannot be enforced unless the receiver seeks permission from the judicial authority for an order directing that the matter in question shall be submitted to arbitration.

Recently, courts have ensured that poorly drafted (or even ‘pathological’) arbitration clauses will be given effect to in the best possible way and parties will be referred to arbitration. In Pricol Ltd v Johnson Controls Enterprises Ltd & Ors (2015) 4 SCC 177, the Supreme Court referred parties to arbitration even though the clause provided for reference to arbitration under the arbitration rules of the Singapore Chamber of Commerce (a non-existent institution), by construing it to mean a reference to the Singapore International Arbitration Centre (SIAC).

Separability

Are there any provisions on the separability of arbitration agreements from the main agreement?

Yes, the doctrine of separability of arbitration agreements from main agreements finds expression in the Arbitration Act under section 16(1)(b) which states that a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. Interpreting this provision and applying the doctrine, the Supreme Court, in National Agricultural Co-op Marketing Federation India Ltd v Gains Trading Ltd (2007) 5 SCC 692, held:

An arbitration clause is a collateral term in the contract which relates to resolution (of?) disputes and not performance. Even if 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.

Third parties - bound by arbitration agreement

In which instances can third parties or non-signatories be bound by an arbitration agreement?

The Arbitration Act does not provide for third parties or non-signatories to be bound by an arbitration agreement. An arbitration agreement remains valid even if the underlying contract has been assigned to a third party.

Section 37 of the Indian Contract Act 1872 provides that a contract may be performed by a person’s legal heirs on his or her death, unless a contrary intention is evident from the contract. The same principle would apply to arbitration agreements. In the case of insolvency, as stated above, the receiver may adopt the contract to be enforceable by or against him or her.

The 2015 Amendment Act has provided for third parties to subject themselves to an arbitration agreement (domestic arbitrations seated in India) by amending section 8 to allow parties, or those claiming through or under such party, to apply to the court to refer the dispute to arbitration. This amended wording is identical to the wording contained in section 45 (international commercial arbitration), which provides for a party, or any person claiming through or under him or her, to apply to the court to refer a dispute to arbitration.

Non-signatories to an arbitration agreement have also been referred to arbitration under a section 45 application in Chloro Controls (I) P Ltd v Severn Trent Water Purification Inc and Ors (2013) 1 SCC 641, wherein the Supreme Court observed that any person claiming through or under a party to the arbitration agreement could also initiate arbitration.

The 2015 Amendment Act now permit such references in accordance with the language in section 45 and the decision of the Supreme Court in Chloro Controls. More recently, in its decision in Mahanagar Telephone Nigam Ltd v Canara Bank & Ors AIR 2019 SC 4449, the Supreme Court invoked the group of companies doctrine (see question 14) in allowing the impleading of non-signatories.

Third parties - participation

Does your domestic arbitration law make any provisions with respect to third-party participation in arbitration, such as joinder or third-party notice?

The Arbitration Act does not provide for joinder or third-party participation in arbitration.

In Sukanya Holdings, the Supreme Court held that parties who were not signatories to the agreement cannot be added to the proceedings by the Court. Similarly, in Indowind Energy Limited v Wescare (India) Ltd & Anr (2010) 5 SCC 306, the Supreme Court held that a company that was not party to an arbitration agreement could not be joined as a party to the proceedings solely by virtue of its conduct.

Groups of companies

Do courts and arbitral tribunals in your jurisdiction extend an arbitration agreement to non-signatory parent or subsidiary companies of a signatory company, provided that the non-signatory was somehow involved in the conclusion, performance or termination of the contract in dispute, under the ‘group of companies’ doctrine?

The group of companies doctrine, used to extend the scope of a tribunal’s jurisdiction to companies that are not signatory to the agreement itself but are part of the corporate group that the signatory company is a part of, was until recently not recognised in India.

However, in Chloro Controls, the Supreme Court held that where there are multiple transactions between parties involving several composite agreements that may have a collective bearing on a dispute, the courts will have the power to direct even a non-signatory to be joined as a party to the arbitration. This would be applicable in exceptional cases only, depending on the commonality of the subject matter and whether the various agreements formed a composite transaction, where the performance of the main agreement would not be possible without the execution of the other agreements. More recently, the Supreme Court has invoked this doctrine in its decision in Mahanagar Telephone Nigam by allowing non-signatory parties to be added to in an arbitration.

Multiparty arbitration agreements

What are the requirements for a valid multiparty arbitration agreement?

The Arbitration Act does not stipulate any particular requirements for a valid multiparty arbitration agreement. The requirements contained in section 7 of the Arbitration Act for single arbitration agreements are deemed to apply to multiparty arbitration agreements.

In Olympus Superstructures v Meena Vijay Khetan (1999) 5 SCC 651, the court found that in cases where the main agreement exists among multiple parties, and disputes arise under various sub-agreements to which all parties are not signatories, and a dispute arises in relation to issues that overlap, parties may be referred to a single arbitration by relying upon a widely drafted clause in the main agreement.

Consolidation

Can an arbitral tribunal in your jurisdiction consolidate separate arbitral proceedings? In which circumstances?

The Arbitration Act does not contemplate consolidation of arbitration proceedings. Parties, however, have frequently approached courts or made applications for consolidation of arbitral proceedings. In such cases, the courts endeavour to determine the true essence of the commercial arrangement between the parties to uncover the intent of binding a non-signatory who is bound by the actions of a signatory. In Cheran Properties Ltd v Kasturi and Sons Ltd (2018) 16 SCC 413, the court applied the group of companies doctrine where circumstances indicate that the intent of the arbitration agreement was to bind both signatories and non-signatories.

In order to comprehensively address this question, the position of law must be gleaned from decisions of the Supreme Court in this regard. The Supreme Court, in P R Shah, Shares and Stock Broker (P) Ltd v B H H Securities (P) Ltd (2012) 1 SCC 594, opined as follows:

If A had a claim against B and C, and there was an arbitration agreement between A and B but there was no arbitration agreement between A and C, it might not be possible to have a joint arbitration against B and C. A cannot make a claim against C in an arbitration against B, on the ground that the claim was being made jointly against B and C, as C was not a party to the arbitration agreement. But if A had a claim against B and C and if A had an arbitration agreement with B and A also had a separate arbitration agreement with C, there is no reason why A cannot have a joint arbitration against B & C. Obviously, having an arbitration between A and B and another arbitration between A and C in regard to the same claim would lead to conflicting decisions. In such a case, to deny the benefit of a single arbitration against B and C on the ground that the arbitration agreements against B and C are different, would lead to multiplicity of proceedings, conflicting decisions and cause injustice. It would be proper and just to say that when A has a claim jointly against B and C, and when there are provisions for arbitration in respect of both B and C, there can be a single arbitration.

Thereafter, in Chloro Controls, the Supreme Court had occasion to consider a scenario wherein disputes had arisen under multiple agreements signed between different parties, some of which contained arbitration clauses and others which did not. The disputes, having arisen in the context of an incorporated joint venture and various agreements thereunder, were held to be capable of reference to arbitration on the basis that the shareholders’ agreement between the parties to the joint venture was the ‘principal agreement’ to which all subsequent agreements were ‘ancillary or incidental’. In arriving at its decision, the Supreme Court, although refusing to opine on the correctness of its decision in Sukanya Holdings, seemingly departed from the ratio laid down in that case.

In its decision in Duro Felguera S A v Gangavaram Port Ltd (2017) 9 SCC 729, the Supreme Court declined to consolidate arbitration proceedings arising out of multiple agreements executed in the course of a tender bidding process. In this particular case, certain disputes were the subject matter of domestic arbitration while certain others were the subject matter of international arbitration. In such a circumstance, the Supreme Court held that a ‘composite reference’ to arbitration would not be appropriate considering that a party aggrieved by an arbitral award has wider scope of challenge in the case of a domestic arbitration as compared to an international arbitration. Furthermore, the Supreme Court distinguished the case before it from the decision in Chloro Controls on the ground that the arbitration clause considered therein covered disputes arising under or in connection with the principal agreement. It was held that the words ‘under or in connection with’ were very wide and thus brought within the ambit of the clause all other agreements executed ancillary to the principal agreement. In the absence of a similar clause in the facts before it, the Supreme Court refused to make a composite reference.

The position of law in respect of consolidation of arbitral proceedings is not codified in India and the applicability of ‘the doctrine of composite reference’ as developed by the Supreme Court in these decisions mainly hinges on the language of the arbitration agreement or clause and the intent of the parties that can be discerned therefrom.

Constitution of arbitral tribunal

Eligibility of arbitrators

Are there any restrictions as to who may act as an arbitrator? Would any contractually stipulated requirement for arbitrators based on nationality, religion or gender be recognised by the courts in your jurisdiction?

Yes, the Arbitration Act places certain restrictions on the individual acting as an arbitrator. The rules applicable to the appointment of an arbitrator have seen a graded filter in the recent amendments to the Arbitration Act.

Pursuant to the 2015 Amendment Act, when a person is approached in connection with his or her possible appointment as an arbitrator, he or she is required to disclose in writing circumstances 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 another kind, that are likely to give rise to justifiable doubts as to his or her independence or impartiality, or that are likely to affect his or her ability to devote sufficient time to the arbitration, and in particular his or her ability to complete the entire arbitration within a period of 12 months. This declaration is required to be made in accordance with the format provided in the Sixth Schedule. The 2015 Amendment Act has introduced grounds (under the Fifth Schedule) that may determine whether circumstances exist that give rise to justifiable doubts as to the independence or impartiality of an arbitrator.

The 2015 Amendment Act also introduced categories (under the Seventh Schedule) in relation to an arbitrator’s relationship with the parties, counsel or the subject matter of the dispute, under which a person shall be ineligible to be appointed as an arbitrator. Some instances of these categories include a person who is an employee, consultant, adviser or has any other past or present business relationship with a party; currently represents or advises one of the parties or an affiliate of one of the parties; represents the lawyer or law firm acting as counsel for one of the parties; or is a lawyer in the same law firm that is representing one of the parties. The fifth and seventh schedules Introduced in the 2015 Amendment Act are largely Inspired by the IBA Guidelines on Conflict of Interest in International Arbitration.

Section 11(1) of the Arbitration Act states that a person of any nationality may be an arbitrator, unless otherwise agreed by the parties. If the parties fail to appoint an arbitrator - or in an arbitration tribunal of three arbitrators, the two arbitrators fail to appoint the presiding arbitrator within 30 days of the dispute - recourse is to the High Court or any designated person or institution for appointment of the arbitrator or presiding arbitrator as the case may be (section 11(6)). In international commercial arbitration, recourse is available only with the Supreme Court or any designated person or institution, as reflected in the 2015 Amendment Act.

The 2019 Amendment Act introduced the Eighth Schedule to the Arbitration Act, which specifically sets out the requisite qualifications and experience for an arbitrator. The Eighth Schedule has significantly expanded the ambit of professionals capable of acting as arbitrators, such as qualified chartered accounts, company secretaries and cost accountants. Furthermore, the Eighth Schedule also enumerates certain norms applicable to arbitrators.

In a dispute between Assignia-VIL JV and Rail Vikas Nigam decided on 29 April 2016, the Delhi High Court observed that if the arbitrator and the parties enjoy any of the relationships mentioned in the Seventh Schedule to the Arbitration Act, the arbitrator cannot be appointed. One of these relationships is that of employer-employee.

In Reliance Industries & Ors v Union of India (Arbitration Petition No. 27 of 2013, Supreme Court of India, order dated 31 March 2014), it was highlighted that the trend of appointing an arbitrator from a ‘neutral nationality’, which is now universally accepted, will also be adopted under the Arbitration Act.

Background of arbitrators

Who regularly sit as arbitrators in your jurisdiction?

In the majority of domestic arbitrations, arbitrators are retired judges or practising lawyers. Section 11 of the Arbitration Act provides for the appointment of arbitrators by the parties or the court, as the case may be, which gives discretion with regard to the person appointed as the arbitrator. That being the case, lawyers and judges are preferred in most arbitrations owing to the frequency of arbitrations handled by them and the indispensable practical experience. In disputes requiring technical expertise, non-lawyers such as engineers or securities experts have been appointed as part of three-member tribunals because of their relevant expertise. For instance, the ICA website has a section that contains the names of qualified arbitrators from various fields, such as judges, advocates, engineers, chartered accountants, executives, maritime experts, businesspeople and foreign nationals. The Eighth Schedule introduced under the 2019 Amendment Act now permits professionals such as chartered accounts, company secretaries and cost accountants having more than 10 years’ experience to be appointed as arbitrators.

There is no specific mandate or direction by any domestic arbitral institutions to ensure gender diversity in appointments. However, several practitioners on the MCIA Council have taken the Pledge for Equal Representation of Women in Arbitration.

Default appointment of arbitrators

Failing prior agreement of the parties, what is the default mechanism for the appointment of arbitrators?

Section 11 of the Arbitration Act, as amended by the 2019 Amendment Act, prescribes the default mechanism for the appointment of an arbitrator or arbitrators, as follows:

  • failing any agreement between the parties on a procedure for appointing arbitrators, in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator (section 11(3));
  • if a party fails to appoint an arbitrator within 30 days from the receipt of a request to do so from the other party, or the two appointed arbitrators fail to agree on the third arbitrator within 30 days from the date of their appointment, the appointment shall be made, upon the request of a party, by the arbitral institution designated by the Supreme Court, in cases of international commercial arbitration, or that designated by the High Court, in cases of arbitrations other than international commercial arbitration (section 11(4)); and
  • failing any agreement between the parties, in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within 30 days from receipt of a request by one party from the other party to agree, the appointment shall be made, upon request of a party by the arbitral institution designated by the Supreme Court, in cases of international commercial arbitration, or that designated by the High Court, in cases of arbitrations other than international commercial arbitration (section 11(5)).

Pursuant to the recent 2019 amendment, the power of appointment of arbitrators is now solely vested in the arbitral institutions designated by the Supreme Court or the High Courts in terms of section 11(3A) of the Arbitration Act. For international commercial arbitrations, an arbitral institution designated by the Supreme Court shall have the power to appoint the arbitrator. In domestic arbitrations, the power of appointment of arbitrators has been conferred upon arbitral institutions designated by the High Courts.

In Northern Railway Administration, Ministry of Railway, New Delhi v Patel Engineering Company Limited (2008) 10 SCC 240, the Supreme Court affirmed that a court cannot intervene in the appointment of an arbitrator where the parties have specified a procedure in the agreement, unless fraud, disqualification or legal misconduct of the arbitrator has been both pleaded and proven.

The Supreme Court, in Sun Pharmaceutical Industries Ltd v Falma Organics Limited Nigeria (Arbitration Case No. 33 of 2014, Order dated 3 May 2017), designated the MCIA as the appointing authority. This is the first known instance of the Supreme Court calling upon an independent arbitration institution to act as appointing authority under section 11 of the Arbitration Act.

Challenge and replacement of arbitrators

On what grounds and how can an arbitrator be challenged and replaced? Please discuss in particular the grounds for challenge and replacement, and the procedure, including challenge in court. Is there a tendency to apply or seek guidance from the IBA Guidelines on Conflicts of Interest in International Arbitration?

Section 12 of the Arbitration Act, as amended by the 2015 Amendment Act, provides that the an arbitrator is required to disclose, in writing, any circumstances that give rise to justifiable doubts as to his or her independence or impartiality, or that are likely to affect his or her ability to complete the arbitration within a period of 12 months.

The 2015 Amendment Act incorporated a modified version of the IBA Guidelines, under two new Schedules - the Fifth Schedule and the Seventh Schedule - to be read with section 12 of the Act. The Fifth Schedule lists the grounds that give rise to justifiable doubts as to the independence or impartiality of the arbitrators, and contains categories specified in the Non-Waivable Red List, the Waivable Red List and the Orange List, as provided under the IBA Guidelines. A party may challenge its own appointment, or in whose appointment it participated, only for reasons that it becomes aware of after the appointment has been made.

The Seventh Schedule lists the grounds under which an individual is ineligible for appointment as arbitrator. The categories under the Waivable and Non-Waivable Red Lists have been included under the Seventh Schedule. All grounds under this Schedule can be waived by the parties by express agreement in writing.

Section 13 of the Arbitration Act provides that the arbitral tribunal shall decide on the challenge raised by a party under section 12 and then proceed with arbitration. The challenging party may only approach the court once to challenge the award passed by the arbitral tribunal under section 34 of the Arbitration Act. When the court in such an application sets aside the award, the court may decide whether the challenged arbitrator is entitled to any fees.

It is not common practice for courts to refer to the IBA Guidelines, although the Delhi High Court in Shakti Bhog Foods Ltd v Kola Shipping Ltd & Anr 193 (2012) DLT 421, did refer to these Guidelines.

Section 13 of the Arbitration Act lays down the procedure to be followed in cases of challenge. Section 13 provides that a party that intends to challenge an arbitrator shall, within 15 days after becoming aware of the constitution of the arbitral tribunal, which may raise justifiable doubts as to the independence or impartiality of the arbitrator, send a statement of reasons for the challenge to the arbitral tribunal. The arbitral tribunal shall then decide on the challenge. If such challenge is unsuccessful, the tribunal shall continue arbitral proceeding and make an arbitral award. If such award is made, the party challenging the arbitrator may apply to set aside the arbitral award.

Even after the introduction of new grounds of challenge in the 2015 Amendment Act, the Supreme Court in HRD Corporation (Marcus Oil and Chemical Division) v GAIL (India) Limited (Civ App 11127 of 2017, judgment dated 31 August 2017), confirmed that even if a challenge arises under Schedule Five that is dismissed by the arbitral tribunal, the court may only interfere after the passing of an award.

That said, under section 14(3) of the Arbitration Act, if the mandate of an arbitrator is terminated or an arbitrator becomes de jure or de facto unable to perform his or her functions or withdraws from his office, an application can be made to the court to resolve any controversy that remains arising out of such termination of mandate.

Relationship between parties and arbitrators

What is the relationship between parties and arbitrators? Please elaborate on the contractual relationship between parties and arbitrators, neutrality of party-appointed arbitrators, remuneration and expenses of arbitrators.

The principles of natural justice, impartiality and a fair trial guide the proceedings of the arbitral tribunal. Fairness, impartiality, independence and neutrality are, therefore, the indispensable qualities of an arbitrator. An arbitral tribunal is not a court and, therefore, the arbitrators are not judges, but the relationship between an arbitrator and the parties to the dispute is analogous to the relationship between a judge and parties to court proceedings.

An arbitrator’s remuneration is fixed prior to his or her entering upon the reference of arbitration and can be modified by an agreement between the parties or by an order of the court or tribunal. The parties may also increase the fee of the arbitrator.

The Supreme Court held that: ‘The concept of party autonomy cannot be stretched to a point where it negates the very basis of having impartial and independent adjudicators for resolution of disputes’ in Indian Oil Corp Ltd & Ors v M/s Raja Transport (P) Ltd (2009 (8) SCC 520).

The 2015 Amendment Act has inserted the Fourth Schedule into the Arbitration Act providing for a model fee structure of arbitrators in domestic arbitrations (section 11(14)). This section shall not, however, apply to international commercial arbitration or in arbitrations (other than international commercial arbitration) if parties have agreed for determination of fees as per the rules of an arbitral institution.

Sum in dispute (in rupees)

Model fee (in rupees)

Up to 500,000

45,000

Above 500,000 and up to 2 million

45,000 plus 3.5 per cent of the claim amount over and above 500,000

Above 2 million and up to 10 million

97,500 plus 3 per cent of the claim amount over and above 2 million

Above 10 million and up to 100 million

337,500 plus 1 per cent of the claim amount over and above 10 million

Above 100 million and up to 200 million

1,237,500 plus 0.75 per cent of the claim amount over and above 10 million

Above 200 million

1,987,500 plus 0.5 per cent of the claim amount over and above 200 million, with a ceiling of 3 million

Section 11(14) of the 2015 Amendment Act states that the high courts may frame rules for determining the fees of arbitrators after taking the above model fee structure into account.

Section 12 of the 2015 Amendment Act read with Schedule VI also requires that at the time a party approaches a potential arbitrator for appointment, the arbitrator is required to disclose information required to determine his or her eligibility as prescribed in the Act.

Section 42B, inserted by the 2019 Amendment Act, provides that no suit or other legal proceedings shall lie against the arbitrator for anything which is, in good faith, done or intended to be done under the Arbitration Act or rules or regulations thereunder.

Duties of arbitrators

What are arbitrators’ duties of disclosure regarding impartiality and independence throughout the arbitral proceedings?

Section 12 of the Arbitration Act provides for the grounds on which an arbitrator’s appointment may be challenged. Section 12(1) provides that an arbitrator shall disclose in writing the existence, either direct or indirect, of any past or present relationship with or interest in any of the parties before them. Arbitrators are further required to disclose any interest they may have in the subject matter of the dispute, whether financial, business, professional or any other kind. The form of disclosure countenanced under this provision is prescribed in the Sixth Schedule of the Arbitration Act, while the grounds that may give rise to justifiable doubts as to the independence or impartiality of an arbitrator are enumerated in the Fifth Schedule of the Arbitration Act. Section 12(5) of the Arbitration Act stipulates that any person whose relationship with the parties, counsel or the subject matter of the dispute falls under any of the categories mentioned in the Seventh Schedule of the Arbitration Act shall be ineligible to be appointed as an arbitrator.

Similarly, arbitral institutions also stipulate mandatory disclosures by the arbitrator in terms of his or her impartiality and independence with respect to the reference. For Instance, Rule 6 of the MCIA Rules calls upon the arbitrator to disclose any facts or circumstances that may give rise to justifiable doubts as to his or her impartiality or independence. Should the arbitrator fail to comply with this provision, Rule 10 categorically states that such an arbitrator’s appointment is liable to be challenged.

The threshold of showing circumstances giving rise to justifiable doubts as to the arbitrator’s independence or impartiality is a rather high bar.

Immunity of arbitrators from liability

To what extent are arbitrators immune from liability for their conduct in the course of the arbitration?

There are no reported cases of personal liability of the arbitrators for either negligence or intentional breach of duty. However, section 42B, inserted by the 2019 Amendment Act, provides that no suit or other legal proceedings shall lie against the arbitrator for anything which is, in good faith, done or intended to be done under the Arbitration Act or rules or regulations thereunder.

Section 29A, brought in by the 2015 Amendment Act, adheres to a very stringent deadline, whereby arbitrators must decide and make an award within 12 months, extendable by a further six months, failing which their mandate is terminated. Section 29A(4) contains a proviso to the effect that where the delay is attributable to the tribunal, the courts may reduce the arbitrators’ fees.

Similarly, section 13(6) of the Arbitration Act states that where an arbitrator’s appointment has been challenged before a court at the stage of challenging the award, and the same succeeds, the court is at liberty to also decide whether the arbitrator is entitled to any fees.

Jurisdiction and competence of arbitral tribunal

Court proceedings contrary to arbitration agreements

What is the procedure for disputes over jurisdiction if court proceedings are initiated despite an existing arbitration agreement, and what time limits exist for jurisdictional objections?

Section 8 of the Arbitration Act makes provisions in relation to the power of a judicial authority to refer parties to arbitration where there is an arbitration agreement. It provides that when an action is brought before a judicial authority concerning a matter that is the subject of an arbitration agreement, the judicial authority shall refer the parties to arbitration upon an application being made by a party to the dispute requesting that the dispute be referred to arbitration, unless the judicial authority finds that prima facie no valid agreement subsists. The application to refer to arbitration must be accompanied by the original arbitration agreement or a certified copy of the arbitration agreement and must be made to the judicial authority no later than the date of submitting the first statement on the substance of the dispute. The section also provides that if original arbitration agreement or the certified copy thereof is unavailable to the party applying to the judicial authority and the same is retained by the other party to the arbitration agreement, the party applying shall have the right to apply to the judicial authority to call upon the other party to produce the original agreement.

Section 45 (in Part II of the Arbitration Act, which makes provisions in relation to enforcement of certain foreign awards) provides that a judicial authority shall, at the request of one of the parties who have executed an arbitration agreement, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

In Ananthesh Bhakta, the Supreme Court held that the filing of the application without the original or certified copy of the arbitration agreement but bringing the original arbitration agreement on record at the time when the Court is considering the application, shall not entail rejection of the application under section 8(2).

Jurisdiction of arbitral tribunal

What is the procedure for disputes over jurisdiction of the arbitral tribunal once arbitral proceedings have been initiated, and what time limits exist for jurisdictional objections?

The tribunal may rule upon its own jurisdiction, including upon the validity of the arbitration agreement under section 16 of the Arbitration Act. A plea that the arbitral tribunal lacks jurisdiction must be raised at a time no later than the submission of the statement of defence (MP Rural Road Development Authority v. LG Chaudhary Engineers and Contractors (2018) 10 SCC 826). The section further provides that a plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope is raised during the arbitral proceedings. However, the tribunal has the power to admit a later plea if it considers delay in raising the plea justified.

If the tribunal accepts the plea that it lacks the requisite jurisdiction to adjudicate a dispute, such an order is an appealable order under section 37(2)(a) of the Arbitration Act.

If the tribunal rejects the plea that it lacks the requisite jurisdiction to adjudicate the dispute, it shall continue with the proceedings and make an arbitral award. The party aggrieved by the ruling may make an application to the court under section 34(2)(iv) of the Arbitration Act for setting aside the award on the ground that the arbitral award deals with a dispute not falling within the terms of the contemplated arbitration or that the award contains decisions on matters beyond the scope of the submission to arbitration. This application must be made within three months from the date on which the aggrieved party received the arbitral award. However, the court may entertain the application to set aside the award for a further 30 days if the applicant is able to satisfy the court that the delay was with sufficient cause.

Further, the settled position of law regarding parallel proceedings occurring in relation to an arbitration between two parties is possible if a consumer forum is also considering the issue. The Supreme Court, in Fair Air Engineers (P) Ltd v NK Modi (1996) 6 SCC 385, held that consumer forums are at liberty to proceed with the matters in accordance with the provisions of the Consumer Protection Act 1986 rather than relegating the parties to arbitration proceedings pursuant to a contract entered into between the parties. The reason is that the Consumer Protection Act intends to relieve the consumers of the cumbersome arbitration proceedings or civil action, unless the forums on their own, and on the peculiar facts and circumstances of a particular case, come to the conclusion that the appropriate forum for adjudication of the disputes would be other than those given in the said Act.

Arbitral proceedings

Place and language of arbitration, and choice of law

Failing prior agreement of the parties, what is the default mechanism for the place of arbitration and the language of the arbitral proceedings? How is the substantive law of the dispute determined?

Section 20(2) of the Arbitration Act provides that, failing any agreement between the parties on the place of arbitration, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. Furthermore, section 22(2) of the Arbitration Act provides that, failing any agreement on the language to be used in the arbitral proceedings, the arbitral tribunal shall determine the language or languages to be used in the arbitral proceedings.

Section 28 of the Arbitration Act provides that in an arbitration other than an international commercial arbitration where the place of arbitration is situated in India, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India. In the case of international commercial arbitration, 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.

It is further provided that any designation by the parties of a law or legal system of a given country shall be construed, unless otherwise expressed, as directly referring to the substantive law of that country and not to its conflict of laws rules. Failing any designation by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate given the circumstances surrounding the dispute to identify the legal system which the dispute or its underlying transaction has the closest and most real connection.

In a recent significant decision of the Supreme Court in BGS SGS Soma JV v NHPC Ltd 2019 SCC Online SC 1585, it has been held that where there is an express designation of a place of arbitration under an arbitration agreement or clause as being the ‘venue’ of the ‘arbitration proceedings’, it can be concluded, in the absence of any contrary indicia, that the venue is really the seat. Further, the reference to ‘shall be held’ in respect of an arbitration proceedings would also indicate that the parties intended to anchor arbitration proceedings to a particular place, signifying thereby that the place is actually the seat of the arbitration proceedings. The decision crystallises the parameters of interpreting the proper law of the arbitration by giving a wider and fuller interpretation to the designated place of the arbitral proceedings. The Supreme Court’s decision holds that where a place has been designated as the venue for arbitration proceedings, the use of the phrase ‘arbitration proceedings’ necessarily connotes the entirety of the arbitration proceedings, and not just one or more individual hearings. This decision is a comprehensive take on the issue of determining the proper law of the arbitration agreement by determining the seat of the arbitration even in circumstances where the parties have only designated a place or destination as a ‘venue’, further to its precedents such as Brahmani River Pellets v Kamachi Industries Ltd 2019 SCC Online SC 929.

Commencement of arbitration

How are arbitral proceedings initiated?

Section 21 of the Arbitration Act provides that in the absence of an agreement between the parties, the arbitral proceedings in respect of a particular dispute shall commence on the date on which a request for that dispute to be referred to arbitration (notice of arbitration) is received by the other party.

The communication by a party of the recourse to arbitration and a requirement that the other party should do something on its part in that regard will in general suffice to define the commencement of arbitration. There are no formal requirements for a notice or request prescribed under the Arbitration Act. The communication should make it clear that the arbitration proceedings are commenced, and not merely indicate the intention of initiating arbitral proceedings.

The commencement of the arbitration proceedings will depend on the nature of the arbitration being ad hoc or institutional. In the case of an institutional arbitration, the rules of the institution will govern the initiation of the arbitration, and in case of an ad hoc arbitration, the arbitral tribunal will determine the procedure of filing the pleadings, etc.

Hearing

Is a hearing required and what rules apply?

Section 24(1) of the Arbitration Act states that the arbitral tribunal shall decide whether to hold oral hearings for presentation of evidence or oral arguments, or whether the proceedings can be conducted on the basis of documents and other materials. The section further provides that the tribunal shall hold oral hearings if a party requests it, unless the parties have agreed that no oral hearings will be held. In order to complete the arbitration in an efficient manner, the section also provides that, as far as possible, the arbitral tribunal shall hold oral hearings for the presentation of evidence on a day-to-day basis and not grant any adjournments, unless sufficient cause is made out and the tribunal is empowered to impose exemplary costs on the party seeking such adjournment without sufficient cause.

Section 19 of the Arbitration Act provides that the parties are at liberty to adopt their choice of procedure governing the arbitral tribunal. The Code of Civil Procedure and the Indian Evidence Act are not applicable to arbitration proceedings, unless otherwise agreed by the parties.

Fast-track procedure is an option available to the parties to an arbitration under section 29B. This provision was introduced under the 2015 Amendment Act. If parties elect the applicability of fast-track procedure, the dispute shall be decided by the tribunal on a ‘documents-only’ basis (ie, written pleadings, documents and submissions filed by the parties without any oral hearing). Further, section 29B(3)(c) states that an oral hearing may only be held if all the parties make a request or if the arbitration tribunal considers it necessary to have oral hearing for clarifying certain issues.

Evidence

By what rules is the arbitral tribunal bound in establishing the facts of the case? What types of evidence are admitted and how is the taking of evidence conducted?

The arbitral tribunal endeavours to identify the facts of the case on the basis of the admissibility, relevance, materiality and weight of evidence presented before it The Arbitration Act states that a domestic arbitration is not bound by the Indian Evidence Act 1872. The parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. Parties and tribunals are free to seek guidance from the IBA Rules on the Taking of Evidence in International Commercial Arbitration.

Section 26 of the Arbitration Act authorises the arbitral tribunal to appoint an expert on the specific issues arising from the subject matter of the dispute. The arbitral tribunal records both documentary and oral evidence having regard to its admissibility, relevance, materiality and weight of evidence. When authorising the tribunal to appoint an expert, the parties may also stipulate that the appointment should be made with their consent. It will be open to a party or to the arbitral tribunal to require the expert, after delivery of his or her report, to participate in an oral hearing where the parties would have an opportunity to put questions to him or her. Section 24(3) of the Arbitration Act mandates the arbitral tribunal to communicate to the parties any expert report or evidentiary document on which the arbitral tribunal is relying on.

Witnesses appearing before an arbitral tribunal can be sworn in by the tribunal and required to state the truth on oath before any person authorised to administer oaths. A party to a dispute may agree to be bound by the special oath of the other party and have the evidence taken after administration of a reasonable form of oath. However, arbitrators can force unwilling witnesses to appear before the arbitral tribunal only with the court’s assistance, as provided under section 27 of the Arbitration Act. This section prescribes that the application must specify the name and address of any person to be heard as a witness or expert witness, a statement of the subject matter of the testimony required, and a description of any document to be produced or property to be inspected.

Any person failing to attend in accordance with any process, making any other default, refusing to give evidence or being guilty of any contempt of the arbitral tribunal shall be subject to the same penalties and punishment as he or she would incur for the same offences in suits tried before a court.

Court involvement

In what instances can the arbitral tribunal request assistance from a court, and in what instances may courts intervene?

Section 27 of the Arbitration Act provides that the powers of the court in an arbitration matter, upon an application made by the arbitral tribunal or a party with the approval of the arbitral tribunal, includes the power to issue summonses, issue commissions, compel attendance, compel the production of documents, and perform the inspection and discovery of documents. The court may intervene upon the failure of such witnesses to attend, or if they refuse to give evidence or are guilty of any contempt of the arbitral tribunal during arbitral proceedings, and the court may subject such persons to penalties or punishments, after representations from the arbitral tribunal, similar to what they would incur for such offences if they occurred in court.

Confidentiality

Is confidentiality ensured?

The 2019 Amendment Act has introduced section 42A on ‘Confidentiality of Information’, which imposes a mandatory obligation on the arbitrator, the arbitral institutions and parties to the arbitration agreement to maintain confidentiality of all arbitral proceedings, with the exception of the award where its disclosure is necessitated for the implementation and enforcement of the award.

Interim measures and sanctioning powers

Interim measures by the courts

What interim measures may be ordered by courts before and after arbitration proceedings have been initiated?

Section 9 of the Arbitration Act provides a party the right to approach a court before or during arbitral proceedings, or any time after the making of an award but before its enforcement, to seek interim reliefs in the nature of appointment of a guardian for a minor or a person of unsound mind; preservation, interim custody or sale of any goods that are the subject matter of an arbitration agreement; securing the amount in dispute in the arbitration; or the detention, preservation or inspection of property or the subject matter of arbitration, or the appointment of a receiver in respect of such goods. The court may also pass any other order necessary to protect the interests of the parties insofar as it does not impede the arbitration proceedings.

Section 9 further provides that if an order is passed by a court before the commencement of the arbitral proceedings, the proceedings shall be commenced within a period of 90 days from the date of such order or such further time as the court may determine.

In addition, seeking interim reliefs under section 9, a party may approach the arbitral tribunal under section 17 upon its constitution for interim relief of the aforesaid nature during either the arbitration proceedings or after the making of the award (but before it is enforced). Pursuant to the 2015 Amendment Act, once the arbitral tribunal has been constituted, the court shall not entertain an application for interim measures, unless the court finds that circumstances exist that may not render the remedy provided under section 17 efficacious. Section 17 of the amended Arbitration Act clarifies that an arbitral tribunal shall have the same power for making orders as the court has for the purpose of, or in relation to, any proceedings before it. Subject to any orders passed in appeal under section 37, any order issued by the arbitral tribunal under section 17 shall be deemed to be an order of the court for all purposes and shall be enforceable in the same manner as if it were as such.

Interim measures by an emergency arbitrator

Does your domestic arbitration law or do the rules of the domestic arbitration institutions mentioned above provide for an emergency arbitrator prior to the constitution of the arbitral tribunal?

There are no provisions for the appointment of emergency arbitrators under the Arbitration Act. However, institutional rules of arbitration, such as the International Chamber of Commerce Rules on Arbitration (ICC Rules) and the SIAC Rules, which are popularly used as the procedural rules for conducting arbitration proceedings, even if the seat is in India, contain provisions for the appointment of emergency arbitrators by parties to obtain interim measures. The ICA Rules for domestic and international arbitrations, however, which have been amended with effect from 1 April 2016, include provisions for the appointment of an emergency arbitrator. The MCIA Rules also make available the services of an emergency arbitrator to determine urgent applications for interim relief before the main arbitral tribunal is appointed.

Though emergency arbitration has not been expressly recognised in the Act, in spite of the recommendations of the 246th LCR, courts have enforced such orders in applications under section 9 of the Act. In Avitel Post Studioz Ltd v HSBC Pi Holdings (Mauritius) Ltd (Bombay High Court, App No. 196 of 2014 in Arb Pet No. 1062 of 2012), the Bombay High Court relied on the award of an SIAC emergency arbitrator to grant an interim mandatory injunction on the basis that the petitioner had made out a strong case on merits before the emergency arbitrator.

In the case of Raffles Design International India Private Limited & Ors v Educomp Professional Education Limited & Ors, the Delhi High Court ruled that an emergency award in a foreign-seated arbitration cannot be enforced in India under the Arbitration Act. The Court relied on article 17 of the Model Law to find that the court enforcing an emergency arbitrator’s award must undertake a review of the substance of the interim measure’s claim.

Interim measures by the arbitral tribunal

What interim measures may the arbitral tribunal order after it is constituted? In which instances can security for costs be ordered by an arbitral tribunal?

As stated above, pursuant to section 17 of the Arbitration Act (as amended in 2015) the arbitral tribunal now has the same powers as that of a court in respect of interim measures. The arbitral tribunal may require a party to provide appropriate security as an interim measure, if it is considered a necessary measure to safeguard the right of the applicant seeking the interim measure.

Section 38 of the Arbitration Act allows the arbitral tribunal to fix an amount of the deposit or supplementary deposit as an advance for costs it expects will be incurred in respect of the claims submitted to it. This provision also provides for a separate amount of deposit to be paid for counterclaims. This deposit is to be payable in equal shares by the parties, but if one of the parties fails to pay its share, it may be deposited by the other party. If this deposit is not paid by either party, the arbitral tribunal may suspend the proceedings with respect to the claims or counterclaims with regard to which the deposits have not been paid. Pursuant to section 39 of the Arbitration Act, the arbitral tribunal will have a lien on the award for any unpaid costs of the arbitration.

Sanctioning powers of the arbitral tribunal

Pursuant to your domestic arbitration law or the rules of the domestic arbitration institutions mentioned above, is the arbitral tribunal competent to order sanctions against parties or their counsel who use ‘guerrilla tactics’ in arbitration? May counsel be subject to sanctions by the arbitral tribunal or domestic arbitral institutions?

There is no express provision under the Arbitration Act empowering the arbitral tribunal to order sanctions against parties or their counsel who use guerrilla tactics in arbitration. However, generally, it is seen that the arbitral tribunals do impose exemplary or punitive costs on a party for obvious delaying tactics, unjustified challenges, absence from proceedings or even withholding of evidence. Courts even impose costs on a party for a challenge, which has been noticeably used to delay arbitral proceedings. Section 35A of the Code of Civil Procedure deals with compensatory costs in respect of false and vexatious claims. Section 35B deals with costs for causing delays.

The 2015 Amendment Act introduced section 31A, which expressly deals with the regime of costs in arbitration proceedings. Subsection 1 of this section strictly deals with costs relating to the proceedings of the arbitral tribunal, namely: fees and expenses of the arbitrators, courts and witnesses; legal fees and expenses; administration fees for the institution supervising the arbitration; and any other expenses incurred in connection with the arbitral or court proceedings, and the arbitral award. Factors determining the imposition of costs as above include the conduct of parties.

Awards

Decisions by the arbitral tribunal

Failing party agreement, is it sufficient if decisions by the arbitral tribunal are made by a majority of all its members or is a unanimous vote required? What are the consequences for the award if an arbitrator dissents?

Consistent with the Model Law, section 29(1) of the Arbitration Act provides that in the absence of an agreement to the contrary, any decision of an arbitral tribunal shall be made by a majority of all the members of the tribunal. The Arbitration Act does not require a unanimous verdict of the arbitral tribunal to declare an award.

Dissenting opinions

How does your domestic arbitration law deal with dissenting opinions?

Dissenting opinions are permitted under Indian law. This can also be said to logically flow from section 29(2) of the Arbitration Act, which permits the arbitral tribunal to decide by majority. Courts have held that a dissenting arbitrator may sign the award with his or her dissenting opinion. Alternatively, he or she may not sign the award at all. However, such actions will not affect the validity of an award. An arbitrator refusing to take part in a vote or sign the award will also not impair the award.

Form and content requirements

What form and content requirements exist for an award?

The form and content requirement for an award are provided for in section 31 of the Arbitration Act, as follows:

  • it should be made in writing;
  • it should be signed by the majority of the members of the arbitral tribunal provided that the reason for the omitted signature is stated;
  • it should be a reasoned award unless the parties have agreed that no reasons are to be given or it is an award on agreed terms under section 30; and
  • it shall include the date and place and be delivered to each party to the arbitration.
Time limit for award

Does the award have to be rendered within a certain time limit under your domestic arbitration law or under the rules of the domestic arbitration institutions mentioned above?

Section 29A of the Arbitration Act provides for a time limit of 12 months for the arbitral tribunal to decide and make an award. This period can only be extended by a maximum of six months upon agreement by the parties. If the award is not made within the stipulated period, the mandate of the arbitrators stands terminated. Section 29A also states that where the award is made within a period of six months, arbitrators shall be entitled to claim additional fees from the parties. However, the proviso to section 29A(4) states that if there is any delay beyond the agreed upon or specified extension of time, and if such delay can be attributed to the arbitral tribunal, the fee of the arbitrators will be reduced by up to 5 per cent of the original fee, for each month of such delay.

The ICADR Rules provide for a specified time for making an award after the conclusion of proceedings in case of a fast-track arbitration. The ICA Rules and FACT Rules provide that the arbitral tribunal shall render the award preferably within six months and subject to a maximum period of two years from the date of reference. Article 30 of the ICC Rules states that the arbitral tribunal must render its final award within six months from the date of the last signature by the arbitral tribunal or from the date of the terms of reference of the dispute as set out under the ICC Rules. However, this time limit can be extended at the request of the parties or of the arbitral tribunal by the court of international arbitration under the ICC Rules.

Date of award

For what time limits is the date of the award decisive and for what time limits is the date of delivery of the award decisive?

Section 34(3) of the Arbitration Act provides that an award becomes final after three months from the date of the award, unless one of the parties files an application for setting aside the award. However, if the applicant shows sufficient cause, the court can extend the time limit of three months by a further 30 days. Section 33(1)(a) of the Arbitration Act permits any party to request the arbitral tribunal to correct any computational, clerical or typographical errors, or other errors of a similar nature, within 30 days from the receipt of the arbitral award, unless another period has been agreed upon by the parties.

Section 36 of the Arbitration Act provides that the award shall be enforced under the Code of Civil Procedure in the same manner as if it were a decree of the court, upon the expiration of the time limit for filing an application for setting aside the award (provided under section 34(3)) or such application has been refused.

In Northern Railway v M/s Pioneer Publicity Corp Pvt Ltd, decided on 1 September 2015, the Supreme Court observed that section 34(3) of the Arbitration Act has no application in the refiling of a petition but only applies to the initial filing of the objections under section 34 of the Act.

Types of awards

What types of awards are possible and what types of relief may the arbitral tribunal grant?

The arbitral tribunal may grant interim, partial or final awards. An interim award may be passed by the arbitral tribunal subject to the final determination of the dispute. A final award is an award that finally determines all the issues in dispute between the parties that have been referred to arbitration. A partial award may be given by the arbitral tribunal on part of the claims or issues brought before the arbitral tribunal. The parties may continue to arbitrate on the remaining issues.

In terms of the types of reliefs that may be granted by an arbitral tribunal, the tribunal may grant such relief as are not in the exclusive domain of a public forum such as the court. (A comprehensive list is provided in question 8.)

Under section 30 of the Arbitration Act, if the parties to the dispute arrive at a settlement, the arbitral tribunal may terminate the proceedings and record the settlement in the form of an arbitral award.

Termination of proceedings

By what other means than an award can proceedings be terminated?

Section 32 of the Arbitration Act provides that the arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal in the following circumstances:

  • the claimant withdraws the claim unless the respondent objects to the order and the arbitral tribunal concurs with such objection;
  • by mutual agreement of the parties; or
  • the arbitral tribunal finds that the continuation of the proceedings has, for any reason, become unnecessary or impossible.
Cost allocation and recovery

How are the costs of the arbitral proceedings allocated in awards? What costs are recoverable?

Section 31(8) of the Arbitration Act provides that the costs of the arbitration shall be fixed by the arbitral tribunal. Section 31A of the Act sets out the regime for costs.

The following costs are recoverable:

  • fees and expenses of arbitrators, courts and witnesses;
  • legal fees and expenses;
  • administrative fees of the institution supervising the arbitration (where applicable); and
  • other expenses incurred in connection with the arbitral or court proceedings, and the arbitral award.

The general rule is that costs shall follow the award (ie, the unsuccessful party will have to bear the costs of the successful party, unless the tribunal, for reasons recorded in writing, decides otherwise). The conduct of the parties and the outcome of the case will have a bearing on costs, although settlement offers will also be taken into account. Any agreement between the parties as to costs shall have effect only if the agreement is made after the dispute has arisen.

Interest

May interest be awarded for principal claims and for costs, and at what rate?

Section 31(7)(a) of the Arbitration Act provides that an arbitral tribunal can award interest for the period between the date on which the cause of action arose and the date on which the award is made, and from the date of the award to the date of payment.

Section 31(7)(b) states that unless the award otherwise directs, the sum directed to be paid by an arbitral award shall carry interest at the rate of 2 per cent higher than the current rate of interest prevalent on the award, from the date of the award to the date of payment.

Proceedings subsequent to issuance of award

Interpretation and correction of awards

Does the arbitral tribunal have the power to correct or interpret an award on its own or at the parties’ initiative? What time limits apply?

Section 33 of the Arbitration Act provides that the arbitral tribunal may:

  1. at the request of a party, with notice to the other party, correct computational, clerical, typographical or other errors that have arisen by accident or by omission within 30 days from the receipt of such request;
  2. at the request of a party, with notice to the other party, give interpretation of a specific point or part of the award within 30 days from the receipt of such request; or
  3. on its own motion make a correction of the kind mentioned in item 1 above within 30 days from the date of the arbitral award.

The arbitral tribunal may also, at the request of a party and with notice to the other party, make an additional award on claims presented in the arbitral proceedings but omitted from the arbitral award within 60 days of the receipt of such request. Additionally, the arbitral tribunal may extend the period within which it shall make a correction, give an interpretation or make an additional award, if necessary.

Challenge of awards

How and on what grounds can awards be challenged and set aside?

An award can be challenged under section 34 of the Arbitration Act, by an application to the court for setting aside the award on the following grounds established on the basis of the record of the arbitral tribunal:

  • incapacity of a party;
  • the arbitration agreement being invalid under the law;
  • improper notice of the appointment of an arbitrator or of the arbitral proceedings to the applicant, or the applicant was unable to present his or her case;
  • the arbitral award decided on a dispute beyond the scope of the reference to arbitration or contains decisions beyond the scope of the submission to arbitration;
  • the procedure for the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties;
  • the subject matter of the dispute is incapable of being settled by arbitration under the law at the time; or
  • the arbitral award is in conflict with public policy (this includes awards:
    • affected by fraud or corruption;
    • in contravention with fundamental policy of Indian law or basic notions of morality or justice; and
    • those in violation of confidentiality and admissibility of evidence provisions in the Act.

An application for setting aside an award must be made before the expiry of three months from the date on which the applicant received the arbitral award, unless it is extended by the court for a further period of 30 days if the applicant shows sufficient cause for delay.

In light of the decision of the Supreme Court in the case of Bharat Aluminium Company v Kaiser Aluminium Technical Service Inc 2012 (8) SCALE 333 (the BALCO judgment), parties to a foreign-seated arbitration no longer had recourse to any Indian courts for relief. Courts in India had also granted a wide meaning to public policy and had interpreted that even an illegality under Indian law would be against public policy. The recourse to setting aside an award under section 34 is also no longer available to any party to a foreign-seated arbitration, which was earlier extended by the courts through judicial interpretation. All parties to any such foreign arbitration upon receipt of an award of a foreign tribunal, if required to be enforced in India, would need to present such an award for enforcement under section 48 of the Arbitration Act. An Indian court can review the foreign award to the limited extent provided under section 48 to examine whether it should be enforced. BALCO applies to all agreements that have been executed after 6 September 2012 for foreign-seated arbitrations.

The 2015 Amendment Act has clarified the reversal of position in the BALCO judgment, by way of insertion of a proviso to section 2(2). The proviso states that sections 9 (interim relief by courts), 27 (court assistance in taking evidence), 37(1)(a) (appeals in respect of interim relief by the courts) and 37(3) (appeals to the Supreme Court) will also be made applicable to international commercial arbitrations, even where the seat of arbitration is outside India, and an award of the said arbitration will be enforceable and recognised under Part II of the Arbitration Act.

In another significant ruling in the case of Shri Lal Mahal v Progetto Grano Spa Civil Appeal No. 5085 of 2013, decided on 3 July 2013, the Supreme Court not only restricted the interpretation of ‘public policy’ in the context of enforcement proceedings, but also held that the scope of public policy is narrower under section 48 than under section 34. The court held that enforcement under section 48 can only be opposed on grounds of public policy where it is contrary to fundamental policy of Indian law, the interest of India or justice and morality. In the case of ONGC v Western Geco International Ltd Civil Appeal No. 3415 of 2007, the scope of public policy under section 34(2)(b)(ii) of the Arbitration Act was once again under consideration. The Supreme Court reduced the amount awarded to Western Geco by one-third, stating that the tribunal had committed a ‘palpable error’. Further, the court, while examining if the award was in conflict with ‘public policy of India’, elaborated the scope of ‘fundamental policy of Indian law’ to include three principles to be followed by the tribunal: a judicial approach, principles of natural justice and the Wednesbury principle of reasonableness.

The Supreme Court in the case of Associate Builders v Delhi Development Authority Civil Appeal No. 10531 of 2014, stated that section 34 of the Arbitration Act does not ordinarily permit the courts to review findings of facts made by arbitrators, and subsequently restored the award. The court merely clarified and has not restricted the law concerning public policy and stated that an award can be set aside if it is contrary to fundamental policy of Indian law, interest of India, justice or morality, or if it is patently illegal.

Through the introduction of section 34(2A) by the 2015 Amendment Act, an application for setting aside the award on the ground of ‘patent illegality’ as a violation of public policy shall only be applicable to awards in domestic arbitrations. Furthermore, an award shall no longer be liable to be set aside merely on the ground of erroneous application of law or re-appreciation of evidence.

As per the amendment to section 36 of the Arbitration Act, the mere filing of a challenge to an award under section 34 does not render the award unenforceable unless an application is made by the challenging party, upon which the court may grant a stay on the enforcement of the award. In other words, filing of an application under section 34 does not automatically operate as a stay on enforcement proceedings. A separate application for stay will have to be applied for.

Levels of appeal

How many levels of appeal are there? How long does it generally take until a challenge is decided at each level? Approximately what costs are incurred at each level? How are costs apportioned among the parties?

Ordinarily an appeal under the domestic arbitration regime may be preferred against certain orders of the arbitral tribunal, as enumerated under section 37 of the Arbitration Act. It provides that the following orders shall be appealable to the court authorised to hear such appeals from original decrees of the court passing the order:

  • refusal to refer the parties to arbitration under section 8 of the Act;
  • a grant or refusal to grant an interim measure under section 9 of the Act;
  • setting aside or refusing to set aside an arbitral award under section 34 of the Act;
  • a grant of the plea of a party by the arbitral tribunal that it does not have jurisdiction;
  • a grant of the plea of a party by the arbitral tribunal that it is exceeding the scope of its authority; and
  • a grant or refusal to grant an interim measure by the arbitral tribunal under section 17 of the Act.

No second appeal shall automatically lie against an order passed in appeal under section 37 of the Act. However, it is clarified that nothing in section 37 shall affect or take away a right to seek special leave to appeal to the Supreme Court under article 136 of the Constitution of India against an order passed in appeal under section 37.

There is no set procedure or time line for decisions on the challenge; the actual time generally varies from six months to three years. The costs involved at each level are the attorneys’ fees and other legal expenses. Courts usually grant costs to the successful party; however, these costs are generally notional and not commensurate with the actual costs.

Recognition and enforcement

What requirements exist for recognition and enforcement of domestic and foreign awards, what grounds exist for refusing recognition and enforcement, and what is the procedure?

Domestic and foreign awards are enforced in India in the same manner as a decree of the Indian courts. This Is true even with respect to consent awards resulting from a settlement between the parties. The distinction between the process of enforcement of an India seated arbitration and a foreign seated arbitration is the application of the Arbitration Act. Part I applies to an India seated arbitration while Part II applies to a foreign seated arbitration.

A foreign award may be enforced in India under the multilateral international conventions or the New York Convention if the conventions apply to the relevant arbitration, the award was made in a country that is a party to the above conventions and the award was made in a country that is notified as a reciprocating territory. The countries notified as reciprocating territories include Australia, Austria, Belgium, Botswana, Bulgaria, the Central African Republic, Chile, Cuba, Czech Republic, Slovakia, Denmark, Ecuador, Egypt, Finland, France, Germany, Ghana, Greece, Hungary, Ireland, Italy, Japan, South Korea, Kuwait, the Malagasy Republic, Malaysia, Mauritius, Mexico, Morocco, the Netherlands, Nigeria, Norway, China (including the Special Administrative Regions of Hong Kong and Macao), the Philippines, Poland, Romania, San Marino, Singapore, Spain, Sweden, Switzerland, Syria, Tanzania, Thailand, Trinidad and Tobago, Tunisia, the United Kingdom, the United States and Ukraine.

It has been held by the courts in India that if a state has been notified as a reciprocating territory for the purposes of recognition and enforcement of awards, then all territories forming part of that state would be covered under such notification. Where such state thereafter separates into different territories, as long as the new territory is also a signatory to the New York Convention, no separate notification would be required for each new territory for the purpose of recognition and enforcement of awards.

In respect of domestic awards, prior to the 2015 Amendment Act, section 36 of the Arbitration Act provided that where the time limit for preferring an application under section 34 of the Arbitration Act has expired or such application has been dismissed, an arbitral award shall be enforceable in the same manner as if it were a decree of the Court. The provision as it stood then came to be interpreted by the Supreme Court as an implied automatic stay on enforceability of an award till such time as a challenge under section 34 of the Arbitration Act may be successful.

Thereafter, the 2015 Amendment Act substituted a new section 36 of the Arbitration Act which provides that the filing of an application under section 34 of the Arbitration Act shall not by itself render the award unenforceable, unless the Court grants an order of stay. In considering an application for grant of stay of an arbitral award for payment of money, the Court shall have due regard to the provisions governing grant of stay of money decrees under the provisions of the Code of Civil Procedure 1908. Requisites for the successful enforcement of arbitral awards include:

  • lapse of the three-month period from the date of receipt of the award;
  • effective service of notice on the opposite party;
  • award to be made on a stamp paper of appropriate value;
  • steps to attach, arrest or appoint a receiver; and
  • compliance with the principles of natural justice.

Requisites for the enforcement of a foreign awards include:

  • the original award or an authenticated copy in the manner required by the country where it is made; and
  • the original agreement or a certified copy.

The Supreme Court, in its decision in Board of Control for Cricket in India v Kochi Cricket P Ltd & Ors (2018) 6 SCC 287, clarified the effect of this amendment as applicable to court proceedings arising out of arbitrations that were initiated after the coming into effect of the 2015 Amendment Act (ie, on 23 October 2015). It further clarified that the amended section 36 of the Arbitration Act would also be applicable to court proceedings pending before the Court on 23 October 2015.

Subsequent to this decision, the legislature, by the 2019 Amendment Act, inserted section 87 of the Arbitration Act so as to nullify the effect of the decision of the Supreme Court in Kochi Cricket. The validity of this inserted provision was challenged and in the Supreme Court’s decision in Hindustan Construction Co Ltd v Union of India (decision dated 27 November 2019 in Writ Petition (Civil) 1074 of 2019 and Connected Matters), the inserted section 87 of the Arbitration Act was struck down as unconstitutional on the ground of it being vitiated by manifest arbitrariness.

Thus, the position of law as it stands today is that no automatic stay of an arbitral award shall operate merely due to the pendency of an application under section 34 of the Arbitration Act in respect of any arbitration proceeding, whether initiated prior to or subsequent to the commencement of the 2015 Amendment Act.

Time limits for enforcement of arbitral awards

Is there a limitation period for the enforcement of arbitral awards?

The Arbitration Act does not specify a time limit for filing an application for enforcement of an arbitral award under section 36 of the Act. However, section 43 of the Act sets out that the limitation act applies to arbitration. Article 136 of the limitation act prescribes that the application for enforcement must be made within 12 years from the date at which it becomes enforceable.

Enforcement of foreign awards

What is the attitude of domestic courts to the enforcement of foreign awards set aside by the courts at the place of arbitration?

Under section 48 of the Arbitration Act, enforcement of a foreign award may be refused, at the request of a party against whom it is invoked, only if that party furnishes to the court proof that:

  • the parties to the agreement were under some incapacity;
  • the arbitration agreement is not valid under the law to which the parties have subjected themselves;
  • the party against whom the award has been invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present its case;
  • the arbitral award deals with a difference not contemplated or not falling within the terms of submission to arbitration or it contains decisions 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 and failing such agreement, was not in accordance with the law of the country where the arbitration took place;
  • the award has not yet become binding on the parties;
  • the award has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made;
  • the subject matter of the dispute is incapable of being settled by arbitration under the laws of India; or
  • the enforcement of the arbitral award would be contrary to public policy.

Further, it has been held that a foreign award not bearing stamp duty under the Indian Stamp Act 1899 would not render it unenforceable (M/s Shriram EPC Limited v Rioglass Solar SA 2018 SCC Online SC 1471).

Enforcement of orders by emergency arbitrators

Does your domestic arbitration legislation, case law or the rules of domestic arbitration institutions provide for the enforcement of orders by emergency arbitrators?

No, the concept of emergency arbitrators does not yet exist under the Arbitration Act or the new 2019 Amendment Act. However, for details on alternative modes of enforcement, see response to question 33. Hence, enforcement of orders by emergency arbitrators is also not yet provided under the law. However, through the introduction of section 29B, the 2015 Amendment Act has introduced the concept of fast-track procedure whereby the award shall be made within six months from the date the arbitral tribunal entered upon the reference.

Cost of enforcement

What costs are incurred in enforcing awards?

Costs incurred in the enforcement of an arbitral award are the costs of an attorney and court fees.

Other

Influence of legal traditions on arbitrators

What dominant features of your judicial system might exert an influence on an arbitrator from your jurisdiction?

Section 26 of the Arbitration Act provides that the arbitral tribunal may appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal. Section 27 provides that the arbitral tribunal, or a party with the approval of the arbitral tribunal, may apply to the court for assistance in taking evidence and the court may execute the request by ordering that the evidence be provided directly to the arbitral tribunal. In such cases, the court may issue the same processes to witnesses as it may issue in suits tried before it.

There is no tendency towards US-style discovery. Written witness statements are common, followed by cross-examination. Party officers may testify.

Parties and arbitrators are accustomed to dictating minutes of an arbitration meeting or even proceedings in a cross-examination to a stenographer. This is a time-consuming process that may lead to differences of opinion on the actual events. In recording details with a stenographer, often the record may be altered to reflect what is suitable to the arbitrator and the parties. Transcription is being increasingly used but is hardly common in India.

The newly introduced time limit for conducting arbitrations is expected to have a significant impact on the arbitration process and the arbitrators, whose fees may be subject to reduction if the delays are attributable to them. Arbitrators will have to adapt to a more truncated procedure to meet the deadlines.

Professional or ethical rules

Are specific professional or ethical rules applicable to counsel and arbitrators in international arbitration in your jurisdiction? Does best practice in your jurisdiction reflect (or contradict) the IBA Guidelines on Party Representation in International Arbitration?

Currently, there are no rules that regulate the professional or ethical conduct of counsel in international arbitrations in India. However, as per the recommendations of the 246th Law Commission Report, the Arbitration Act was amended in 2015 to incorporate the IBA Guidelines. The 2019 Amendment Act has also brought the insertion of the Eighth Schedule to the Arbitration Act, which specifies the qualification and experience requirements for arbitrators to be accredited by the newly constituted Arbitration Council of India.

Third-party funding

Is third-party funding of arbitral claims in your jurisdiction subject to regulatory restrictions?

The practice of third-party funding of arbitral claims is not prevalent. Rule 20 under Section II of the Bar Council of India Rules prohibits an advocate from stipulating a fee contingent on the results of litigation or agreeing to share the proceeds thereof. Furthermore, third-party funding has recently been expressly recognised in the context of civil suits in states such as Maharashtra, Madhya Pradesh, Gujarat and Uttar Pradesh by virtue of their amendments to Order XXV, which provides that courts have the power to secure costs for litigation by asking a financier to become a party and depositing costs in court.

However, if a third-party funding arrangement contains an extortionate or unconscionable object or consideration, such an agreement would be unenforceable under the Indian Contract Act.

Regulation of activities

What particularities exist in your jurisdiction that a foreign practitioner should be aware of?

In AK Balaji v The Government of India and Others (AIR 2012 Mad 124), the Madras High Court held that foreign law firms or foreign lawyers cannot practise law in India, on either the litigation or non-litigation side, unless they fulfil the requirement of the Advocates Act 1961 and the Bar Council of India Rules. In a challenge to this judgment before the Supreme Court, the Court passed a final order permitting foreign practitioners to ‘fly-in-fly-out’ and advise on foreign law. The Bar Council of India has proposed draft rules by which it seeks to maintain a separate roll for foreign law firms that will also be governed by a set of practice rules framed specifically for them. These proposed practice rules, if ratified, would set out practice eligibility conditions for foreign lawyers in India.

Update and trends

Legislative reform and investment treaty arbitration

Are there any emerging trends or hot topics in arbitration in your country? Is the arbitration law of your jurisdiction currently the subject of legislative reform? Are the rules of the domestic arbitration institutions mentioned above currently being revised? Have any bilateral investment treaties recently been terminated? If so, which ones? Is there any intention to terminate any of these bilateral investment treaties? If so, which ones? What are the main recent decisions in the field of international investment arbitration to which your country was a party? Are there any pending investment arbitration cases in which the country you are reporting about is a party?

Legislative reform and investment treaty arbitration57 Are there any emerging trends or hot topics in arbitration in your country? Is the arbitration law of your jurisdiction currently the subject of legislative reform? Are the rules of the domestic arbitration institutions mentioned above currently being revised? Have any bilateral investment treaties recently been terminated? If so, which ones? Is there any intention to terminate any of these bilateral investment treaties? If so, which ones? What are the main recent decisions in the field of international investment arbitration to which your country was a party? Are there any pending investment arbitration cases in which the country you are reporting about is a party?

The Arbitration Act has been amended twice in recent years, once in 2015 and then again in 2019. While the 2015 Amendment has mostly settled in, the 2019 Amendment has been the centre point of discussion. Both amendments have been enacted with the intent to streamline the arbitration process by introducing mandatory timelines that bind parties and arbitrators as well as guidelines for eligibility of arbitrators, with emphasis on their impartiality and neutrality.

The 2019 amendment shifts the emphasis from court-assisted arbitration towards institutional arbitration. Going forward, where parties fail to agree upon a procedure for appointment of an arbitral tribunal, they will have to approach arbitral institutions designated by the courts under section 11. This signals a significant shift of emphasis in respect of the appointment procedure in India, where ad hoc arbitration has thus far been the preferred mode of arbitration.

The statutory mandate of establishing the Arbitration Council of India is another step towards the formalisation of arbitration in India, with the Council having powers to grade arbitral institutions and recognise professional institutions providing accreditation to arbitrators.

The recent decision of the Supreme Court in Hindustan Construction (see question 48) has definitively clarified the position as regards the enforceability of an arbitral award where a challenge under section 34 is pending. The effect of the decision is such that it has removed the clog on enforceability and gives full and wide effect to the amended section 36, which stipulates that a stay cannot be presumed to be in force merely due to the pendency of a challenge to an arbitral award. Thus, a stay can now only be said to operate upon the express grant of the same by a competent court.

India adopted a new Model BIT Text in 2016 and is presently in the process of negotiating and ratifying new treaties with other states. In 2017, India terminated 58 of its existing BITs and as of 2019, India has discontinued 69 of its BITs. India has since entered into a BIT with the Republic of Belarus, which will come in force post ratification by both states. The official website of the Department of Economic Affairs, Ministry of Finance reveals that India has concluded its negotiations of a BIT with the Federative Republic of Brazil and the Kingdom of Cambodia but are yet to be signed. Potential BITs with Iran, Switzerland, Morocco, Kuwait, Ukraine and UAE are said to be under discussion.

JIS have been issued in respect of earlier BITs entered into with the People’s Republic of Bangladesh and the Republic of Colombia. Both statements are similar in their content and clarify the interpretation of provisions of the parent agreement. The contracting parties have recorded their understanding that the fair and equitable treatment standard would not require treatment beyond that required by customary international law and further, does not create additional substantive rights. Furthermore, the contracting parties are absolved of liability to compensate for measures designed to further public policy objectives, even if such measures are in the form of new legislation or amendments to existing legislation. It has also been noted that a dispute can only be said to be existing where an investor has suffered actual and non-speculative damages as a direct and foreseeable result of a breach by a contracting party.

The arbitral tribunal constituted in Astro All Asia Networks and South Asia Entertainment Holdings Limited v India (brought against India under the India-UK BIT and the India-Mauritius BIT), recently passed two awards in favour of India, including full costs.

As of 2019, India is a party to 12 investor treaty disputes (also as per the UNCTAD website).