Practice and Procedure of Arbitration
Practice and Procedure of Arbitration under the Arbitration and Conciliation Act, 1996
1. Introduction
Arbitration is an alternative dispute resolution mechanism where disputes are resolved by one or more arbitrators instead of the courts. The procedure aims at being less formal, faster, and cost-effective.
The Arbitration and Conciliation Act, 1996 is the primary legislation governing arbitration in India, based on the UNCITRAL Model Law (1985).
2. Commencement of Arbitration
Arbitration proceedings begin when the respondent receives the notice of arbitration or the statement of claim from the claimant (Section 21).
The notice must indicate the intention to arbitrate as per the arbitration agreement.
3. Appointment of Arbitrators
Section 11: Appointment Procedure
If parties have agreed on the procedure for appointing arbitrators, that procedure is followed.
In case of failure or absence of agreement, the Chief Justice of the High Court or his designate appoints the arbitrator upon request by either party.
Number of arbitrators is usually one or three, depending on the agreement.
Case: S.B.P. & Co. v. Patel Engineering Ltd. (2005)
The Supreme Court held that the appointment of arbitrators should be strictly in accordance with the arbitration agreement.
Courts cannot appoint arbitrators if parties have agreed on a procedure unless the procedure fails.
4. Conduct of Arbitral Proceedings
Sections 24 and 25:
The arbitral tribunal must treat all parties equally and provide them a full opportunity to present their case.
Parties have autonomy to decide the procedure of arbitration.
In absence of agreement, tribunal conducts proceedings as it deems fit.
Section 26:
The place (seat) of arbitration is agreed by parties or decided by the tribunal.
The seat determines the procedural law applicable and court supervision.
5. Powers of Arbitral Tribunal
The tribunal can order interim measures for protection of assets or evidence (Section 17).
The tribunal can call for evidence, examine witnesses, and determine admissibility of evidence.
The tribunal is empowered to regulate its own procedure (Section 19).
6. Role of Courts During Arbitration
Courts play a limited supervisory role.
They intervene in:
Appointment or removal of arbitrators (Section 11)
Granting interim relief (Section 9)
Setting aside arbitral awards (Section 34)
Enforcement of awards (Section 36)
Case: Guru Nanak Foundation v. Rattan Singh (1981)
Courts should not interfere in arbitration except where permitted by the statute.
Excessive interference defeats the purpose of arbitration.
7. Submission of Statements
Claimant submits statement of claim detailing the facts, issues, and relief sought.
Respondent submits statement of defense.
Further written statements or documents can be submitted as allowed.
8. Hearings and Evidence
The tribunal may hold hearings for oral arguments and evidence.
Witnesses can be examined and cross-examined.
Tribunal has discretion on procedural aspects and admissibility of evidence.
9. Award
The tribunal delivers the arbitral award in writing, signed by the arbitrators (Section 31).
The award must state reasons unless parties agree otherwise.
The award is final and binding on the parties.
10. Time Frame
Section 29A (Inserted by Amendment 2015):
Arbitration must be completed within 12 months from the date the tribunal enters upon reference.
This can be extended by parties or court.
The tribunal must apply for extension before expiry of 12 months.
Case: Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India (2019)
The Supreme Court emphasized strict adherence to the 12-month timeline to promote timely dispute resolution.
11. Setting Aside of Award
Parties can apply to set aside award on limited grounds under Section 34:
Incapacity of parties
Invalid arbitration agreement
Lack of proper notice or opportunity
Award beyond jurisdiction
Violation of natural justice
Award is patently illegal
Case: Associate Builders v. Delhi Development Authority (2015)
Supreme Court clarified that setting aside must be based on objective and substantial grounds.
Courts should not reappraise evidence or interfere lightly.
12. Enforcement of Award
Arbitral awards are enforceable as a decree of a civil court (Section 36).
The enforcement process is simpler than court decrees.
13. Summary of Procedure
| Step | Description |
|---|---|
| Initiation | Notice of arbitration / Statement of claim |
| Appointment of arbitrators | As per agreement or court appointment |
| Preliminary meeting | Fixing procedures, timelines |
| Statements of claim & defense | Exchange of written pleadings |
| Hearings | Oral arguments, evidence, examination of witnesses |
| Interim measures | Protection of assets/evidence if required |
| Award | Written, reasoned, signed by arbitrators |
| Setting aside | Challenge on limited grounds under Section 34 |
| Enforcement | Execution as a decree under Section 36 |
14. Conclusion
The Arbitration and Conciliation Act, 1996 lays down a structured but flexible framework for conducting arbitration. It combines party autonomy with procedural safeguards to ensure fair, speedy, and efficient resolution of disputes.
Judicial pronouncements have reinforced minimal court interference, respect for arbitration agreements, and timely disposal of arbitration proceedings.
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