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Arbitration and Conciliation

Arbitration and Conciliation Act 1996

The laws pertaining to Arbitration and Conciliation can be found in Arbitration and Conciliation Act, 1996. The Act applies throughout the country, except for the state of Jammu and Kashmir.


Definition of Arbitration:

Arbitration is the mode of settlement of the dispute between the parties, by means of a nominated person (called as arbitrator) without going to the court of law.

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Arbitration Agreement

When the parties involved in a dispute make an agreement, that instead of going to court, they would settle the dispute through arbitration, the agreement is called as Arbitration agreement.
Once when the Arbitration agreement is made, no party can take up any matter pertaining to the dispute to the court of law.
Any person capable of entering into a contract can enter into Arbitration agreement.

Advantages of Arbitration:

1) Less costly in comparison to the court of law.
2) Less time taking and simple
3) Dispute is not publicized
4) Award is final (except in rare instances)

Disputes of Arbitration:

Disputes arising out of the legal relationship between the parties (present or future state) can be referred to arbitration.
However, following disputes cannot be referred to arbitration:
1) Proceedings of insolvency
2) Proceedings of lunacy
3) Proceedings for the appointment of guardian to a minor
4) Matter of criminal nature
5) Matter pertaining to Public Charitable Trust

Appointment of Arbitrator

Qualification of an Arbitrator:

There is no hard and fast rule defined for the qualification of an arbitrator. And the parties can select any person as an arbitrator. However, it is in the interest of parties to select an intelligent, rational, impartial person as their arbitrator. An arbitrator can be disqualified if he has a personal interest in the matter pertaining to the dispute

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Number of Arbitrators:

The number of Arbitrator should be of odd number (i.e. 1,3,5,7 etc.)

Nationality of an Arbitrator:

An Arbitrator can be of any nationality unless otherwise agreed by the parties. However, in the case of an international dispute, the Chief Justice of India may appoint an arbitrator other than the nationality of parties.

Appointment of Arbitrator by Agreement:

If there is an agreement regarding the procedure for appointment of the director, the parties must appoint the director in accordance with the agreement. The agreement may provide for:
• Number of arbitrators
• Qualification of arbitrators
• Procedure for appointment of arbitrators
• Procedure for termination of arbitrators
• Place, the language of arbitration etc.

Appointment of Arbitrator by Chief Justice of India:

The Chief Justice of Indian may appoint arbitrators in the following cases:
1) When the parties fail to agree upon a sole arbitrator within 30 days.
2) When a party fails to appoint an arbitrator within 30 days.
3) When the two appointed arbitrators fail to agree upon the third arbitrator within 30 days of appointment.
4) When the party (or parties) or arbitrators fail to act in accordance with the agreement.

Termination of Arbitrator:

An arbitrator can be terminated on following ground:
1) When the arbitrator becomes unable to perform his function (either by law or in fact).
2) When the arbitrator fails to act within the specified time period
3) When the arbitrator withdraws from his office.
4) When the parties agree for termination.

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Arbitral Award

At the end of the arbitral proceeding, an Arbitral Award is to be made in writing, duly signed by all the members of Arbitral Tribunal. The Arbitral Tribunal should also mention the date and place of Arbitration. A copy of award is to be given to each of the parties.
The Arbitral shall be final and binding upon the parties.

An Arbitral Proceeding is terminated when:

1) The Arbitral award is made
2) The continuity of proceeding becomes unnecessary or impossible.
3) The parties agree on the termination.
4) The claimant withdraws his claim, and the respondent does not object to it

The Arbitral Award becomes enforceable to the parties, normally after 3 months from the date it has been received by the parties. However, any of the parties can appeal to the court for setting aside the award before this period (3 months).
The court can set aside the Arbitration award on following grounds:
1) Incapacity of a party.
2) Invalid arbitration agreement.
3) Invalid arbitral tribunal or its proceedings.
4) The subject matter of dispute cannot be settled through arbitration.
5) The Arbitration award is in conflict with the public policy of India.


Definition of Conciliation:

Conciliation is the mode of friendly settlement of the dispute between the parties, with the assistance of a nominated person (called as conciliator) without going to the court of law.
Although both in Arbitration and Conciliation the dispute is settled outside the court, there is a fundamental difference between two. While, in the case of Arbitration, an award is given by the arbitrator, at the end of the tribunal; in the case of Conciliation, the two parties arrive at mutually agreed decision with the help of the conciliator.

Notice of conciliation:

A party initiating conciliation will send a written invitation to the other party. If the other party accepts the invitation, the conciliation proceeding will start from that point.
However, if the party initiating conciliation does not receive the reply within 30 days of from the date of invitation, the invitation is treated as the rejection.

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Appointment of conciliator:

Unless otherwise agreed, there shall only be one conciliator. However, the parties on mutual consent can even select more conciliator.

Settlement Agreement:

If the conciliator feels that a settlement is possible for the dispute, he will formulate a possible settlement and submit a copy to the parties for observation. If the parties feel satisfied with the solution given by the conciliator, they may give approval to it by signing to it. The settlement agreement thus reached will be binding and final to both the parties.

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