"Arbitration agreement" means an agreement by the
parties (to an Agreement) to submit to an arbitrator
certain disputes which have arisen (in present) or
which may arise (in future) between the parties to
An arbitration agreement may be in the form of an
arbitration clause in a contract or
by way of a separate agreement.
An arbitration agreement must be in writing.
An arbitration agreement is void if a party
to the agreement is a minor or a person of unsound
mind or one who is incapable of contracting.
Example: An agreement involving dealing with a
national enemy is illegal. Hence, the arbitration
agreement which forms a part of this agreement is
void and unenforceable.
Expert/Engineers: A contract between the
parties for resolution of disputes by an ‘expert’
does not amount to an arbitration clause even
though it is termed as such.
Winding-up Court: An arbitration clause
does not take away the jurisdiction of the company
Termination of Contract and its effect on Arbitration
An arbitration clause is a collateral term of a
contract as distinguished from a substantive one.
Nevertheless, it forms an integral part of the
contract. It perishes with the contract. If the
contract is null and void, it will not lead to the
invalidity of the arbitration clause or agreement
therein contained in the contract.
It may sometimes include a single arbitrator or a
panel of arbitrators. The parties to Arbitration are
free to determine the number of Arbitrators except
that this shall not be an even number. However, if the
parties fail to determine the number of arbitrators,
then the arbitral tribunal shall consist of a sole
A person of any nationality may become an
In case of three arbitrators, each party must
appoint one arbitrator and the two appointed
arbitrators should appoint the third arbitrator who
will act as the "Presiding arbitrator". On failure
of a party to appoint an arbitrator within 30 days
of the other party requesting for such an
appointment, the power vests with the Chief Justice
of the High Court or his designate to make such
When appointing an arbitrator in an International
Commercial Arbitration, the Chief Justice may
appoint an arbitrator of a different nationality.
The parties are free to agree on a procedure for
appointing arbitrator or arbitrators.
Grounds to challenge the authority of the arbitrator
An Arbitrator may be challenged only,
A party to the arbitration can challenge his own
appointee but only on the ground which he became aware
after the appointment. It can be challenged within 15
days of becoming aware of the constitution of the
arbitral tribunal or after becoming aware of the
circumstances of doubt. Further, an interested person
is disqualified from acting as an arbitrator. The
parties are free to agree on a procedure for
challenging an arbitrator.
Example: A and B had agreed to submit disputes
between them to a common arbitrator C. A subsequently
found out that C and B were related to each other and
hence he was justified in challenging the authority of
C to act as arbitrator between himself and B.
Extent of Judicial Intervention
The Courts are restrained from interfering in disputes
when there is an arbitration agreement between the
parties. However, the Court has:
Instances of Matters which cannot be referred to
A criminal complaint cannot be referred to
arbitration. The arbitrators cannot arrogate to
themselves the powers of a Magistrate and pass an
award purporting to decide whether an offence has
been committed or not.
Matrimonial matters cannot be referred to
arbitration. However, civil disputes between a man
and wife or between family members are referable.
Power of a Judicial Authority
Power of a Judicial Authority to refer to
arbitration when there is an arbitration agreement –
A judicial authority shall refer the parties to
arbitration provided there is an application in
writing made to such effect. Further, the Authority
has to ensure that there is an arbitration
agreement; there is a dispute falling within the
scope of the arbitration agreement.
A Court may refuse to stay the suit/action in
certain instances including those:
Where the Court finds that the arbitration is
beset with difficulties and arbitration may never
Where Court Orders have been flouted by the
Serious allegations are made against the
The appointment of a guardian for a minor or a
person of unsound mind;
For an interim measure of protection in respect of
goods and /or security.
Securing the amount in dispute in the arbitration.
Interim injunction or the appointment of a
If the parties do not agree on a place, the place of
arbitration must be determined by the Arbitral
tribunal with regard to circumstances of the case and
convenience of the parties.
Commencement of Arbitration
It is said to commence on the date on which a request
is received by the respondent from the claimant
to refer the dispute to arbitration.
The parties are free to agree upon the language to be
used in the arbitral proceedings. On failure to agree
upon the language, Arbitral tribunal will determine
Procedure of Arbitration
The claimant has to file his statement of claim and
the respondent, his written statement.
The arbitrator may terminate the proceedings where
the claimant fails to file his statement of claim in
time without ‘sufficient cause’.
The arbitrator may proceed with the arbitration
proceedings without the respondent, if the
respondent does not file his written statement of
defence in reply to the claimant’s statement in
The tribunal has the power of judicial review and
can recall its order of termination of proceedings
provided sufficient cause was shown. There is no
right in the arbitrator to restore proceedings
without sufficient cause. He becomes ‘functus
It is the duty of the arbitrator to treat each of
the parties to the arbitration with equality. The
arbitrator is bound to observe the principles of
natural justice in conducting the proceedings.
The arbitral tribunal may appoint an Expert for help
in the proceedings.
Example: In case of a family dispute relating to
immovable properties the arbitrator can take the
assistance of a valuer for valuing the properties.
Settlement of a dispute
The arbitral tribunal can encourage the settlement of
a dispute with the agreement of parties and may use
procedures such as mediation, conciliation or other
procedures to encourage settlement. The arbitration
proceedings shall be terminated on a settlement.
An award is a final determination of a claim or a part
of a claim by the Arbitral Tribunal. Under the
Arbitration Act, 1940 an award was required to be
filed in Court. However, this requirement has been
done away with under the present Act. An award becomes
binding on the expiry of 3 months from date of receipt
of award by the parties.
Successive Awards: There may be as many awards as
there are disputes out of the contract.
Contents of Arbitral Award
An Arbitral award must be in writing and signed by
the members of the arbitral tribunal.
The award must state the reasons on which it is
given except when the parties have agreed
that no reason be given or when the award is on the
Date and place of the Arbitration must be mentioned
in the award.
Correction and interpretation of Award, Additional
Within 30 days from the receipt of an award by a
party, the party may request the tribunal to correct
any errors in the award or for the interpretation of
the award. If a party is desirous for an additional
award to be passed in the same proceeding, then it may
request the tribunal within 60 days from the receipt
of the award to pass an additional award.
Setting aside Arbitral Award by the Court
An award may be set aside by the Court in the
The party making the application furnishes proof that:
a party was under some incapacity or
the agreement of arbitration is not valid or
improper notice as regards the appointment of
the award deals with a dispute not contemplated
under the reference.
composition of arbitral tribunal or arbitral
proceedings was not in accordance with the agreement
Application for setting aside the award is to be made
within 3 months of the award.
An appeal lies to the Court authorized by law from an:
order granting or refusing interim measures under
section 9 or
award by arbitral tribunal.
Enforcement of Award
An award can be enforced under Code of Civil Procedure
as if it were a decree of the court.
Registration and Stamping of Award
When an award relates to creation of any right in
immovable property of Rs. 100 or upwards it requires
registration. An award is chargeable to stamp duty.
Lien as to Arbitral Award and deposits as to cost
The Arbitral Tribunal has a lien on the arbitral award
for any unpaid costs of the arbitration proceedings.
The Court may, on an application in this behalf, order
the Tribunal to deliver the award to the applicant on
payment of the costs (demanded by the Tribunal) in the
Court by the applicant.