UNIT - II. According to Section 10 of Arbitration and Conciliation Act the qualification and procedure for the Appointment of Arbitrators are :

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1 UNIT - II ARBITRATION TRIBUNAL According to Section 10 of Arbitration and Conciliation Act the qualification and procedure for the Appointment of Arbitrators are : 1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. 2) Subject to sub section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. 3) Failing any agreement referred to in sub section (2), 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. 4) If the appointment procedure in sub section (3) applies and a. a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or b. The two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. 5) Failing any agreement referred to in sub section (3), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. 6) Where, under an appointment procedure agreed upon by the parties a. a party fails to act as required under that procedure; or b. the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or c. a person, including an institution, fails to perform any function entrusted to him or if under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. 7) A decision on a matter entrusted by sub section (4) of sub section (5) on sub section (6) to the Chief Justice or the person or institution designated by him is final.

2 8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to a. any qualifications required of the arbitrator by the agreement of the parties; and b. other considerations as are likely to secure the appointment of an independent and impartial arbitrator. 9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. 10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub section (4) or sub section (5) or sub section (6) to him. 11) Where more than one request has been made under sub section (4) or sub section (5) or subsection (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub section shall alone be competent to decide on the request. 12) a. Where the matters referred to in sub sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to Chief Justice in those subsections shall be construed as a reference to the Chief Justice of India. b. Where the matters referred to in sub sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to Chief Justice in those sub sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the Principal Civil Court referred to in clause (e) of sub section (1) of Section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court. Appointment by Chief Justice (Section 11) : The expression Chief Justice in this connection virtually means the court because in most cases the Chief Justices have authorised Civil Judges. In the three cases mentioned in the section the Chief Justice gets the power to appoint an arbitrator. They are : 1) Where he parties fall to appoint or concur in the appointment of an arbitrator or arbitrators; 2) Where the two appointed arbitrators fail to appoint or concur in the appointment of the presiding arbitrator. 3) Where the person or institution designated by the parties for appointment fails to act.

3 Thirty day Notice : Before asking the Chief Justice to act in the matter, a thirty clear days notice should be given to the other party to concur in the appointment and if he fails to do so then an application can be made to the court. The court will also give an opportunity to the other party to explain his position. The Chief Justice must have due regard to the qualifications f the arbitrators required by the parties under their agreement and also independence and impartiality of the person in question. An application for appointment of arbitrator made before giving any notice to the other party or raising a demand against him was held to be incompetent. Challenge to Arbitrators : The old topic of revoking the authority of an arbitrator and seeking his removal has been given a new jargon, namely challenging the arbitrator. The grounds on which a challenge can be presented are listed in Section 12 of Arbitration and Conciliation Act, Grounds for Challenge : 1) When a person is approached in connection with his possible appointment as an arbitrator he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. 2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay, disclose to the parties in writing any circumstances referred to in sub section (1) unless they have already been informed of them by him. 3) An arbitrator may be challenged only if a. circumstances exist that give rise to jusificable doubts as to his independence or impartiality, or b. he does not possess the qualifications agreed to by the parties. 4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made. Doubt as to Independence or Impartiality at initial stage : One of the grounds for challenge is the existence of a doubt about the arbitrator s independence or impartiality. Section 12 (1) says that when a person is approached in connection with his possible appointment as an arbitrator, he is under a duty to disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. Disclosure of circumstances by proposed arbitrator : Sub section (1) casts a duty upon a person who is approached for appointment as an arbitrator to disclose in writing any circumstances which are liable to cast justifiable doubts as to his independence or impartiality. The arbitrator must be, and must be seen to be, disinterested and unbiased. Unless both parties, with full knowledge of the facts expressly agree to his acting, no one should adjudicate in proceedings in the

4 outcome of which he has a direct pecuniary interest. For example, no one should accept appointment in a dispute if he holds shares in one of the parties, or if he would benefit in some other way from a decision in favour of one of the parties. And the arbitrator in a valuation dispute should not be remunerated on a scale such that the higher the amount of his award, the higher his fee. The arbitrator should have no connection, direct or indirect, with a party such that it creates an appearance of partiality. It is easier to recognise than to define the boundary between what previous connections do and what do not disqualify. Actual bias is irrelevant for this purpose. The test is whether a reasonable person who was not a party to the dispute would think it likely that the connection was close enough to cause the arbitrator to be biased. Thus, personal friendship or hostility; an employment relationship; a previous professional relationship either direct or through other members of a firm in which the arbitrator is a partner; these are examples of a relationship which might create in a responsible outsider a reasonable suspicion of bias. If there is any real doubt about the matter, the arbitrator should disclose the facts to the parties and should ask if they object to his accepting the appointment. If the facts become known to him after appointment, he should disclose them and ask if they object to his continuing. It is well settled that there must be purity in the administration of justice as well as in administration or quasi judicial functions as are involved in the adjudicatory process before the arbitrators. An arbitrator ought to be an indifferent and impartial person between the disputants. When the parties entrust their facts into the hands of an arbitrator, it is essential that there must be abundant good faith. The arbitrator must be absolutely disinterested and impartial. An interested person is disqualified from acting as an arbitrator. The interest disqualifies the arbitrator if it is calculated to produce a bias in his mind. The test is whether he is likely to be biased. Actual bias need not be proved. Doubts Developing Afterwards : Disclosure after appointment : Sub section (2) casts a duty on the arbitrator after his appointment and throughout the arbitral proceedings to make to the parties the disclosures, mentioned in sub section (1), relating to matter which may have arisen after the appointment began. He may not do so if he has already made the disclosure before the appointment. Section 12(2) takes care of doubts which develop after the appointment. It requires the arbitrator to disclose to the parties in writing and without any delay any circumstances developing after the time of his appointment and during the course of the arbitral proceedings which give rise to a justifiable doubt about his independence or impartiality. Thus an arbitrator can be challenged, whether he discloses his disqualification or not if there are justifiable doubts about his independence or impartiality. The appointment of an arbitrator can be challenged only on one or more of the following grounds : a) That circumstances exist which give rise to justifiable doubts as to his independence of impartiality, or b) That he does not possess the qualifications agreed to by the parties. The appointment can not be challenged on any other grounds.

5 Party s Challenge to his own arbitrator : An arbitrator can be challenged by the party who appointed him or in whose appointment he participated only for reasons of which the party became aware after the appointment has been made. Challenge Procedure : 1) Subject to sub section (4), the parties are free to agree on a procedure for challenging an arbitrator. 2) Failing any agreement referred to in sub section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub section (3) of Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. 3) Unless the arbitrator challenged under sub section(2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. 4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. 5) Where an arbitral award is made under sub section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34. 6) Where an arbitral award is set aside on an application made under sub section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees. On this point also the Act gives freedom to the parties to settle by agreement the procedure by which the arbitrator in question would be challenged. If there is no agreement on the point or the parties have failed to agree, then the procedure to be followed is that the party wishing to challenge the person has to inform the Arbitral Tribunal of the matter. This should be done within fifteen days. If the other party agrees to the challenge and the arbitrator does not voluntarily withdraw, the Tribunal shall decide the matter. If the challenge is not successful, the Tribunal shall continue with the proceeding and make an award. The party who challenged the arbitrator may challenge the award also and make an application for setting aside in accordance with Section 34. If the award is set aside, the court can consider whether the arbitrator shuld be entitled to his remuneration or not. The grounds on which leave to revoke could be given were put under five heads : 1. Excess or refusal of jurisdiction by the arbitrator. 2. Misconduct of arbitrator. 3. Disqualification of arbitrator 4. Charges of fraud.

6 5. Exceptional cases. Termination of authority of arbitration : Sub section (1) of Section 14 sets out the following grounds on which the mandate or authority of an arbitrator can be terminated : 1) a. the arbitrator either in law or factually becomes unable to perform his functions, or b. for some reasons he fails to act without undue delay, and 2) a. he withdraws from his office, or b. the parties agree t the termination. There was no provision corresponding to Section 14 in the repealed Arbitration Act, Section 11(1) of the old Act gave power to the Court to remove an arbitrator in circumstances similar to those mentioned in Section 14(1) (a) of the present Act. Section 11(1) of the old Act provided : The court may, on the application of any party to a reference, remove an arbitrator or umpire who fails to use all reasonable despatch in entering on the proceeding with the reference and making an award. Retirement or Change of Posting of Ex officio Arbitrator : An arbitration agreement provided for reference to an engineer officer to be appointed by a third party. The arbitrator so appointed retired during the pendency of the proceedings. The Supreme Court held that the retirement resulted in the termination of the authority of the arbitrator. A new arbitrator would be appointed and the proceedings would be deemed to have continued before the new arbitrator. Court s Assistance : If there is a dispute between the parties as to the existence of the grounds mentioned in clause (a) of sub section (1) of Section 14, any party may apply to the Court for resolution of the dispute. Such grounds are de jure or de facto inability to act or failure to act without undue delay. But the section does not contemplate a dispute as regards the grounds mentioned in Section 14 (1) (b) and there is no provision for a reference to the Court in this regard. These grounds are withdrawing from office or termination of authority under parties agreement. There can hardly be any doubt about the operation of these grounds. Effect of withdrawal : Where (a) an arbitrator withdraws from his office, or (b) a party agrees to the termination of his mandate, it will not be inferred that any of the grounds referred to in Section 14 (1) or in Section 12 (3) have been established. Withdrawal from office by the arbitrator is not on account of any decision on the merits of grounds for termination of his mandate. Likewise the agreement of the parties to the termination of the mandate does not entail any decision on merits. The mandate of an office holder arbitrator comes to an end on his withdrawal from office. The court cannot provide an extension except perhaps, where he was appointed by the court. Additional Grounds for Termination : Section 15 (1) purports to set out an additional ground for terminating the mandate of an arbitrator namely, where he withdraws from office for any reason. But

7 the provisions being of overlapping nature, it seems that the ground mentioned is already covered by Section 14(1) (b). Removal of arbitrator (Sections 12 and 13) : The provisions of the Arbitration and Conciliation Act, 1996 about removal of arbitrators are somewhat different. They do not confer a straight power on the court. Section 12 casts a duty upon a would be arbitrator to disclose in writing if there is anything which gives rise to a justifiable doubt as to his independence and impartiality. An arbitrator s appointment can be challenged on that ground and also on the ground of his being not in possession of requisite qualifications as agreed to between the parties. A party can challenge his own appointee only on the basis of a ground which he discovered afterwards. If the arbitrator does not withdraw after the challenge, the Tribunal would decide the question. If the challenge is successful the mandate of the arbitrator would be terminated. The mandate of an arbitrator also becomes terminated under Section 14 if he becomes unable to perform his functions de facto or de jure or if he withdraws or agrees to the termination of his mandate or fails to act without under delay. Jurisdiction of Arbitral Tribunal : 1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose : a. an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and b. a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. 2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. 3) 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 of its authority is raised during the arbitral proceedings. 4) The arbitral tribunal may, in either of the cases referred to in sub section (2) or sub section (3), admit a later plea if it considers the delay justified. 5) The arbitral tribunal shall decide on a plea referred to in sub section (2) or sub section 93) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. 6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with Section 34.

8 Challenge to Jurisdiction : Section 16(1) empowers an Arbitral Tribunal to decide : a) The question as to its jurisdiction, and b) The objection as to the existence or validity of the arbitration agreement. For this purpose an arbitration clause in a contract shall be treated as an arbitration agreement independent of the contract. If the Arbitral Tribunal holds that the contract is null and void it will not result in the automatic invalidity of the arbitration clause. Though there was no similar provision in the erstwhile 1940 Act, the position in law was more or less the same. AWARD When an award has been made after rejection of the objections as to lack of or excess of jurisdiction the aggrieved party may make an application under Section 34 to set aside the award. In these proceedings the award can be challenged, inter alia, on the ground that the objections were wrongly rejected. This provision [Section 16(5)] has been held to be constitutionally valid. The fact that the court can consider the question of jurisdiction of arbitrator only after passing of the award was held to be not a ground for contending that the award is not subject to any judicial scrutiny. Arbitration Clause is Collateral or Ancillary Contract : The arbitration agreement contained in the arbitration clause in a contract is often referred to as a collateral or ancillary contract in relation to the main contract of which it forms a part in the sense that it survives even after the parties have broken or repudiated the rest of the contract and will remain applicable for the settlement of the resulting dispute. The repudiation or breach of the main contract does not put an end to the arbitration clause. The failure of the main contract constitutes the occasion for the application of the arbitration clause. The main contract does not become irrelevant. That still provides the framework within which the rights and liabilities of the parties would be determined. The arbitration would, therefore, proceed according to the proper or applicable law of contract. Section 7(2) of the Arbitration and Conciliation Act, 1996 provides that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Section 16 (1) (b) further provides 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. Interim Measures by Tribunal According to Section 17 of Arbitration and Conciliation Act, 1996 Interim Measures Ordered by Arbitral Tribunal

9 1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute. 2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub section (1). While Section 9 provides for the taking of interim measures by the Court in certain matters, Section 17 provides for the taking of interim measures in respect of the subject matter of the dispute by the Arbitral Tribunal. The opening words of Section 17(1) indicate that the parties may be agreement exclude the exercise of such a power by the arbitral Tribunal. Sub section (2) empowers the tribunal to order the furnishing of adequate security by a party for carrying out an interim measure ordered under the section. Conduct of Arbitral Proceedings : The Arbitrator has to come to a conclusion on the matters of difference between the parties which are referred to him and to express it in terms of an award. He cannot delegate this function to any other person. The parties have appointed him because of their trust and confidence in him and they may not repose the same trust in any other person. But he may obtain legal assistance of drawing up his award. The Tribunal has to treat the parties with equality. They should be given full opportunity to present their respective cases. Time and Place of Hearing (Section 20) Equal Treatment of Parties : The parties shall be treated with equality and each party shall be given a full opportunity to present his case. This section casts a two fold duty on the arbitral tribunal : a) It must be independent and impartial and must mete out equal treatment to each party. [See Section 12 Note (1)] b) It must give each party a full opportunity to present its case. Sections 23 and 24 provide for the giving of such opportunity. A time and place should be fixed for hearing and notice should be given to the parties accordingly. Section 20 provides that the parties are free to agree on the place of arbitration. Failing such agreement the place is to be determined by the Arbitral Tribunal. In doing so, the Tribunal has to give due consideration to the circumstances of the case and also the convenience of the parties. Unless otherwise agreed by the parties, the Tribunal may meet at any appropriate place for mutual consultation, for hearing witness, experts or other parties or for inspection of documents, goods or other property. Rules of Procedure

10 1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872). 2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. 3) Failing any agreement referred to in sub section (2),the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate. 4) The power of the arbitral tribunal under sub section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence. CPC & Evidence Act : Sub section (1) provides that the Code of Civil Procedure, 1908, and the Evidence Act, 1872 are not to be binding in arbitration proceedings. The position under the repealed Arbitration Act, 1940 was the same. Natural Justice : No doubt arbitrator is not bound by technical rules of procedure but he cannot ignore rules of natural justice. The thread of natural justice should run through the entire arbitration proceedings and the principles of natural justice require that the person who is to be prejudiced by the evidence ought to be present to hear it taken, to suggest cross examination or himself to cross examine and to be able to find evidence, if he can, that shall meet and answer it, in short, to deal with in the same manner as in the ordinary course of legal proceedings. Except in a few cases where exceptions are unavoidable, both sides must be heard, each in the presence of the other. COURT ASSISTANCE (SECTION 27) The Tribunal may by itself, or any party with the approval of the Tribunal, apply to the court of assistance in taking evidence. The application has to specify the particulars as stated in Section 27 1) The arbitral tribunal, or a party with the approval of the arbitral tribunal, may apply to the court for assistance in taking evidence. 2) The application shall specify : a. the names and addresses of the parties and the arbitrators; b. the general nature of the claim and the relief sought; c. the evidence to be obtained, in particular i. the name and address of any person to be heard as witness or expert witness and a statement of the subject matter of the testimony required; ii. be inspected the description of any document to be produced or property to

11 3) The court may, within its competence and according to its rules on taking evidence, execute the request by ordering that the evidence by provided directly to the arbitral tribunal. 4) The court may, while making an order under sub section (3), issue the same processes to witnesses as it may issue in suits tried before it. 5) Persons failing to attend in accordance with such process, or making any other default, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the Court. 6) In this section the expression Processes includes summonses and commissions for the examination of witnesses and summonses to produce documents. Seeking Court s assistance : Under Section 27(1), the Arbitral Tribunal as well as any part with the approval of the Arbitral Tribunal can apply to the court for assistance in taking evidence. Under Section 43 of the old 1949 Act only the arbitrator or umpire could apply and not a party. Orders of Court : The court may order that the evidence be provided directly to the Arbitral Tribunal. It will issue to the witnesses the same processes as it issues in the suits before it. The processes that may be issued include : a) summonses for the examination of witnesses, b) commissions for the examination of witnesses, and c) summonses for the production of documents. Disobedience of Orders : Persons who fail to attend as required, or make any other default; or refuse to give evidence; or are guilty of contempt of the Arbitral Tribunal, shall be dealt with by the Court on the representation of the Arbitral Tribunal in the same way as a person who was guilty of like offences in suits before the court. Default of Party (Section 25) Default of a Party : Unless otherwise agreed by the parties, where, without showing sufficient cause : 1) the claimant fails to communicate his statement of claim in accordance with sub section (1) of Section 23, the arbitral tribunal shall terminate the proceedings : 2) the respondent fails to communicate his statement of defence in accordance with sub section (1) of Section 23, the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant; 3) a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it.

12 Principles governing ex parte proceedings : The principles governing the arbitrator s right to proceed ex parte are : 1) If a party to an arbitration agreement fails to appear at one of the sittings, the arbitrator cannot or, at least, ought not to proceed ex parte against him at that sitting; 2) Where non appearance was accidental or casual, the arbitrator should ordinarily proceed it the ordinary way, fixing another date of hearing and awaiting the future behaviour of the defaulting party; 3) If, on the other hand, it appears that the defaulting party had absented himself for defeating the object of the reference, the arbitrator should issue a notice that he intended at specified time and place to proceed with the reference and that if the party concerned did not attend he would proceed in his absence; 4) But if after making such peremptory appointment issuing such a notice the arbitrator did not in fact proceed ex parte on the day fixed, but fixed another subsequent date, he could not proceed ex parte on such subsequent date, unless he issued a similar notice in respect of the date as well; and 5) If he issued a similar notice and the party concerned did not appear, an award made ex parte would be in order. But, if he did not issue such notice on the second occasion but nevertheless proceeded ex parte, the award would be liable to be set aside in spite of a notice of peremptory hearing having been given in respect of the earlier date, subject, however, to the condition that prejudice was caused to the party against whom the ex parte order was made. Arbitrator s action ought to be in due compliance with the concept of natural justice. In the event of there being any such violation, courts oughts not to hesitate to strike down an action of the Arbitrtrator and set aside the award if made. In Juggilal Kamlapat v. General Fibre Dealers Ltd., AIR 1955 Cal 354, the Calcutta High Court laid down the procedural rule to be followed by the arbitrators : If a party fails to appear, the arbitrator ought ordinarily to fix another date of hearing and await the future behaviour of the defaulting party, and give the party notice that is he does not appear, he (the arbitrator) would proceed ex parte against him. If after having issued such a notice the arbitrator does not proceed ex parte on the adjourned date, and fixed another date, he cannot proceed ex parte on that date, unless similar notice has been given in respect of that date as well. The same view was been taken by the Punjab High Court. If no such notice was given, and it could be shown that no prejudice was caused to the absenting party, the award would not be set aside. But it has been held in the very same case that where no such notice was given, there will always be a presumption that prejudice has been caused. Power to Limit evidence [Section 19(4)] : The arbitrator may restrict evidence to the necessities of the case and the court may not interfere in such matters.

13 A contract for the construction of two office blocks contained an arbitration clause. Disputes arose as to 81 separate roofs in the two blocks. They were referred to arbitration. The roofs involved being too many, attempts were made by the parties to limit the issues. The parties failed to agree. One of them asked the arbitrator to do so by an order. He accordingly ordered that the issue of liability be determined by reference to a maximum of 25 roofs and then suspended it to enable the parties to test its validity in a court. He indicated by his letter that the parties were still free to raise any matter requiring special consideration. It was held that in general the court should be slow to interfere with an arbitrator s procedural orders. In this case, the particular question of law was one which the arbitrator ought not to have been asked to state. There was no requirement that an arbitrator must allow each party to call the evidence which he wishes to call. In all the circumstances of the case the arbitrator was not acting unfairly or refusing to decide the case submitted to him. An arbitrator may order for filing of pleadings, or for discovery or inspection of documents. Under the preceding 1940 Act, the arbitrator could call upon a party to provide security for costs unless such power was granted to him by the partie. But now by virtue of the provisions in Section 38 of the Arbitration and Conciliation Act, 1996, the Arbitral Tribunal can call upon the parties to deposit a sum of money for covering costs. The arbitrator has to follow the ordinary rules of evidence. The owner engaged a building contractor. Disputes arose as to adjustments to be made for certain sums and were referred to arbitration. Closure of Hearings : There is no provision in the 1996 Act requiring the arbitrator to give notice of closure of hearing to the parties. But judicial pronouncements and fair play require that the parties should be informed of the closure of the proceedings. The Courts have held that such a notice should be given so as to enable the parties to lead any additional evidence if they so desire. Settlement 1) It is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute and, with the agreement of the parties, the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement. 2) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms. 3) An arbitral award on agreed terms shall be made in accordance with Section 31 and shall state that it is an arbitral award. 4) An arbitral award on agreed terms shall have the same status and effect as any other arbitral award on the substance of the dispute.

14 Settlement Through Alternative Dispute Resolution (ADR) : Though there was no specific provision corresponding to this section in the repealed Arbitration Act, 1940, the law was the same. An award which merely embodied a compromise of the parties themselves was a valid award. Accepting a compromise is an adjudication of the case as is a decree of the court founded on a compromise. An award remains an award even though it approved an arrangement putforward by the parties and was in accordance with their wishes. The rule that all award is not open to objection on the sole basis that it merely reproduced an agreement come to between the parties, applies only where the consent of the parties is regarded by the arbitrator as evidence of the fact that the settlement proposed is fair to all. If the existence of the compromise is disputed, the arbitrator can go into that question and if he finds the compromise to be valid, he can given his award in terms of the same. This section gives this position to the arbitral tribunal that to the extent possible it should encourage the parties to come to a voluntary settlement and for this purpose to use mediation, conciliation and other procedures. Sub section (2) provides that if the parties settle the dispute the Tribunal may terminate the proceedings and if the parties so desire record the settlement in the form of an award on agreed terms. Sub section (3) requires that an award on settled terms should state that it is an award and it has to be made in accordance with the requirements of Section 31. Sub section (4) gives to an agreed award the same status and force as if it were an arbitral award. Form and Contents of Award Form and Contents of Arbitral Award 1) An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal. 2) For the purposes of sub section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omittee signature is stated. 3) The arbitral award shall state the reasons upon which it is based, unless : a) the parties have agreed that no reasons are to be given, or b) the award is an arbitral award on agreed terms under Section 30. 4) The arbitral award shall state its date and the place of arbitration as determined in accordance with Section 20 and the award shall be deemed to have been made at that place. 5) After the arbitral award is made, a signed copy shall be delivered to each party. 6) The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award.

15 7) a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment. 8) Unless otherwise agreed by the parties a) the costs of an arbitration shall be fixed by the arbitral tribunal; b) the arbitral tribunal shall specify i) the party entitled to costs, ii) iii) iv) the party who shall pay the costs, the amount of costs or method of determining that amount, and the manner in which the costs shall be paid. Explanation : For the purpose of clause (a), costs mans the reasonable costs relating to : a) the fees and expenses of the arbitrators and witnesses. b) legal fees and expenses. c) any administration fees of the institution supervising the arbitration, and d) any other expenses incurred in connection with the arbitral proceedings and the arbitral award. Requirements of Valid Award : At the conclusion of the hearing, the Tribunal passes its judgment and it is known as the award. There is no presumption that merely because an award had been made, it is a valid award. It has to be proved by the party who sues upon it that it was made by the arbitrators within the terms of the authority. A valid award has to satisfy the following requirements : 1) Must Conform to Submission : The arbitrator should conform to the terms of the agreement under which he is appointed and is supposed to function. He has no authority to arbitrate that which is not submitted to him. One of the grounds of setting aside in Section 34(2) (iv) says : (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;

16 Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may beset aside; or Hence an award which is outside the submission is void. If an arbitrator has awarded something beyond authority the award is pro tanto void and if the void part is so mixed up with the rest that it cannot be separated, the award is void altogether and such an ward is liable to be set aside. For example, where the arbitrator awarded damages in lump sum and in reckoning the amount he had taken into account matters which he had no jurisdiction to consider, the award was held to be bad. But where the excess part can be separated from the rest, the part which is within the reference remains valid. 2) Must be Certain : The award must be certain in its operative particulars. For example, there must be certainty as to the party who has to perform, who has to receive the payment, the time and mode of payment, the amount payable. An award which says that A or B shall do a certain act, or that the money shall be paid by some or one of the several named persons on demand, has been held to be bad for uncertainty. An award allowed the supplier of electricity to recover the amount only as shown by the meter or according to the report of the inspector. Under Section 26(6) of the Electricity Act, 1910, the inspector s report superseded the award. The Supreme Court held that the award was not uncertain. The supplier claimed that the meter was slow. The Supreme Court referred the matter to arbitration. The arbitrator decided in the above manner. Where the arbitrator passed an award stating that the claimant will be paid 10% more than the measured quantity of the embankment for conveyance charges after deducting the quantity of cut earth, it was held that the language of the award was highly vague even to a technically equipped engineer. The court agreed with the following remark of the trial judge : Apart from the language, the determination calls for a further calculation based upon several records such as the measurement books, a matter on which there may still be scope for controversy. Why the arbitrator should not at least take the trouble of doing this work rather than leaving it to the parties to fight out later. The courts are not obliged to pass a decree based on awards unless the awards are self contained; if an award calls for other records or evidence so as to be the basis for an executable decree the award is incomplete. The court agreed with the judge and said that the award was too vague and in determinative of the main points in controversy. It was difficult to confirm the decree which was passed in terms of such an award. An award may be referred back to an arbitrator where it is so indefinite as to be incapable of execution. An uncertain award is not capable of being executed with any certainty and, therefore, it may be referred back to the arbitrator to remove the elements of uncertainty from

17 it. Where the setting aside of an award is demanded on the ground of wrong application of law, it may be sent back to the arbitrator with a guidance note as to the state of the law. A vessel was chartered for a period of 24 months. Its engine suffered a major breakdown. The charterer purported to treat the contract as terminated on this ground. The ship owner, however, elected to continue the contract, hecarried out extensive repairs and re tendered the ship. The charterer refusecd to take ti saying that by failing to make the vessel seaworthy at the inception the ship owner had committed repudiatory breach of the contract. The arbitrator held that the ship owner had committed the alleged breach, but it did not go to the roof of the contract. The character s repudiation was wrong, but even so the ship owner was bound to accept it. The ship owner brought the matter before the court. The court felt that there was a strong prima facie case that the arbitrator s decision that the ship owner was bound to accept the repudiation was wrong. The case thus involved a question or importance in the development of the law of contract as to whether a party is bound to accept a repudiation. The ship owner s appeal for a consideration f this question was allowed. The court also held that the award would be remitted to the arbitrator in order that he should summarise the facts upon which he had concluded that the ship owner had no legitimate interest in keeping the contract alive and was, therefore, bound to accept the repudiation. 3) Must be Consistent and Not Vague : An award may be set in terms of alternatives. An award directed the party to do one of two things. One of the alternatives was certain and impossible, but the other was certain and possible. The award was held to be valid and binding. The award should be consistent in all its terms. At inconsistent award is as bad as an uncertain one. 4) Must be Complete and Final : the arbitrator should finally dispose of the matter before him and not leave it a part of the way The award found that some sleepers were merchantable and some not and directed that the buyer should dispose of them and the sleeping broker should certify the difference in amount realised by the unmerchantable and merchantable sleepers and that amount the seller should pay. The award was held to be bad for want of finality. Similarly, where an arbitrator made his award subject to the opinion of a third person, it was held to be a substituted judgment and the award was not final. Where the award finally decides the facts involved in the submission but is stated in the form of a special case for the opinion of the court over a matter of law, it will not be void for want of finality. The power of the arbitrator to state a special case for the opinion of the court has not been included in the Arbitration and Conciliation Act, 1996 Act. Now under the new Act, it is the duty of the arbitrator to record his finding of facts on the basis of evidence adduced before him and apply the substantive law to the facts so found. Facts must be recorded in the award itself. A mere reference to the evidence is not enough.

18 Grounds of Challenge Resulting into Termination : The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub section (2). 1) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where : a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute, b) the parties agree on the termination of the proceedings, or c) the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible. 2) Subject to Section 33 and sub section (4) of Section 34, the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings. Automatic Termination : The arbitration proceedings stand automatically terminated when the final arbitral award is made. Where the contract under which an arbitration arose is assigned to another person on an assignment takes place by reason of take over of the concern, it becomes the duty of the assignee to give notice to the arbitrator, within a reasonable period, that he has succeeded to the rights of the previous party to the arbitration. His failure to do so would bring the arbitration agreement to an end. Termination by Tribunal : An order for the termination of arbitral proceedings has to be passed by the Arbitral Tribunal in the following cases : 1) when proceedings under section 33 have been initiated : a. for correction of errors, b. for interpretation of the award, or c. for making an additional award, or 2) when proceedings for setting aside an award under Section 34(1) have been adjourned by the court to enable the Arbitral Tribunal to take action to eliminate the grounds for setting aside the award. [Section 34(4)]. Powers of Arbitrators : Under Section 13 of the erstwhile 1940 Act the powers of the arbitrator included the following : 1) The powers to administer oath to parties and witnesses appearing before him.

19 2) In reference to questions of law, he had the power to refer the matter for the opinion of the court or he could write his award his award in terms of a reference to the court on a point of law so that the court s opinion would finally decide the matter. (Not applicable under 1996 Act) 3) He had the power to make the award conditional or in terms of alternatives. 4) He had the power to rectify any clerical error or mistake arising from any accidental slip or omission. 5) He had the power to administer such interrogatories to the parties as may in his opinion be necessary. Power to Rectify clerical errors or accidental slip or omission [Section 33(1) (a), 1996 Act] : Though the words accidental slip or omission are not there in Section 33(1) (a) but such matters are likely to be covered by the words any other errors of a similar nature. Under clause (a) of Section 33 (1) of the 1996 Act the arbitrator has the power to rectify any clerical mistake or error which arises due to any accidental slip or omission. In Rikhabdas v. Ballabhdas, AIR 1962 SC 551, before the Supreme Court, an arbitrator submitted his award without using proper stamps and one of the questions was whether the award could be sent back to the arbitrator for rectifying this error. SARKAR, J. (afterwards C.J.) held that the provision as to rectification was not applicable. Similarly, where an arbitrator had mentioned costs in his award, he was not allowed subsequently by issuing a new award to say that the intended to include a larger amount by way of costs and by mistake mentioned less. Power Generally to award Interest [Section 31(7), 1996 Act] : Section 31(7) enables the Arbitral Tribunal to award interest. The provisions of the sub section are as follows : Section 7 a) Unless otherwise agreed by the parties, where and insofar as an arbitral award is for the payment of money, the Arbitral Tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen percentium per annum from the date of the award to the date of payment. The parties may make their own agreement as to the matter of interest. If they have not done so, these provisions would come into play. Where the award is for payment of money, the Tribunal may add a sum by way of interest to the amount awarded at such rate as it deems reasonable. Interest may be allowed on the whole amount awarded or on any part of it and also for the whole or any part of the period between the date of the cause of action and the date on which the award is made. If the Tribunal