The Arbitration and Conciliation Act, 1996

What it does

The Act is a single statute for arbitration and conciliation in India (Act No. 26 of 1996). It follows the model law on international commercial arbitration prepared by the United Nations Commission on International Trade Law, and its central idea is party autonomy: the parties choose the tribunal, the seat and the procedure, and the court steps in only where the Act says it may.

It is built in parts. Part I deals with arbitration seated in India, whether the dispute is domestic or international: the arbitration agreement, the appointment and challenge of arbitrators, interim measures, the conduct of proceedings, the making of the award and the grounds on which a court may set it aside. Part II deals with the enforcement of foreign awards under the New York Convention and the Geneva Convention. Part III deals with conciliation, and Part IV with supplementary provisions.

A court asked to decide a dispute that is covered by an arbitration agreement is directed by the Act to refer the parties to arbitration, subject to the conditions the Act sets. A party that wants urgent protection before or during the arbitration may apply to the court for interim measures, and the tribunal has its own power to order them once constituted.

Who it binds

Any person who is party to a written arbitration agreement, which includes companies, firms, individuals and public bodies. The Act does not ask what kind of business the parties carry on. It does ask where the arbitration is seated, because that decides whether Part I or Part II applies, and so decides which court supervises the award and what remedy lies against it.

Arbitrators are bound by the Act's duties of independence and impartiality and by the disclosure requirements that go with them. Courts are bound by the limits the Act places on their own role, which is the feature that distinguishes it most sharply from the older law.

What moved out of it

The 1996 Act replaced three earlier laws: the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. Domestic arbitration and the enforcement of foreign awards, which sat in separate statutes, now sit in one. Arbitral proceedings commenced before the 1996 Act came into force continue under the old law unless the parties agreed otherwise, so an old reference may still be decided under the 1940 Act.

What has changed, and when

The Act has been amended in 2015, 2019 and 2021. The 2015 amendments tightened the grounds for challenging an award, introduced time limits for completing an arbitration and changed the rule on automatic stay of an award once it is challenged. The 2019 amendments changed the framework for appointing arbitrators and for the time within which an award is to be made. The 2021 amendments dealt with the stay of an award obtained by fraud or corruption. A dispute that began under one version of the Act is decided under the version the amending law makes applicable to it, so the date on which the proceedings began is the first fact to establish.

What turns on it in practice

The drafting of the arbitration clause decides more than any later argument. A clause that names the seat, the rules, the number of arbitrators and the language leaves little to litigate. A clause that is silent or inconsistent produces a dispute about where the arbitration sits before the dispute about the contract is reached. This is why the arbitration clause is reviewed with the same care as the payment clause in the firm's work on contracts and procurement.

The second point is the narrow scope for challenge. A party that loses an arbitration does not get a second hearing on the merits. The grounds for setting aside an award are limited, the time for applying is short and a late application is not rescued by the strength of the case. A party planning to resist enforcement must act within the Act's time limits and on the Act's grounds.

The third is the point at which a court becomes involved: a reference to arbitration, an application for interim relief, the appointment of an arbitrator where the parties cannot agree, and the enforcement of the award. Each is a distinct application with its own court and its own test, and treating them as one proceeding is the commonest error.