Arbitration: Introduction, Agreements and its Institutions: formula sheet

Key formulas

Meaning of arbitration

Arbitration = any arbitration, whether or not administered by a permanent arbitral institution

Section 2(1)(a). It covers both ad hoc and institutional arbitration.

Arbitral tribunal

Tribunal = sole arbitrator or a panel of arbitrators

Section 2(1)(d).

Party

Party = a party to an arbitration agreement

Section 2(1)(h). No agreement means no arbitration, except arbitration under another enactment (section 2(4)).

International commercial arbitration

Commercial dispute + at least one party is a foreign national or habitual resident, a foreign body corporate, an association whose central management and control is abroad, or a foreign Government

Section 2(1)(f). Otherwise the arbitration is domestic.

Judicial reference to arbitration

Apply not later than the date of the first statement on substance → refer, unless prima facie no valid arbitration agreement

Section 8(1). The application must come with the original agreement or a certified copy (section 8(2)).

Limitation

Limitation Act, 1963 applies to arbitrations as to court proceedings

Section 43(1). Arbitration is deemed to commence on the date in section 21 (section 43(2)).

Territorial rule

Part I applies ⇔ place of arbitration is in India (Section 2(2))

Proviso: Sections 9, 27, 37(1)(a) and 37(3) can apply to an international commercial arbitration seated abroad, unless the parties agree otherwise.

Court (domestic)

Principal Civil Court of original jurisdiction in a district, or High Court exercising ordinary original civil jurisdiction

Excludes inferior civil courts and Courts of Small Causes. Section 2(1)(e)(i).

Court (international commercial arbitration)

High Court exercising ordinary original civil jurisdiction; otherwise a High Court hearing appeals from subordinate courts

Section 2(1)(e)(ii).

International commercial arbitration test

Commercial legal relationship + at least one foreign party (individual, body corporate, association or body of individuals, or foreign Government)

Section 2(1)(f). A company with Indian incorporation is not foreign, even if foreign-owned. Check central management and control for associations or bodies of individuals.

Domestic award

Award made under Part I = domestic award (Section 2(7))

This holds even if the arbitration was an international commercial arbitration held in India.

Party autonomy

Where Part I leaves parties free, they may authorise any person or institution to decide (Section 2(6))

Exception: Section 28, which deals with rules applicable to the substance of the dispute.

Agreement includes rules

Agreement of parties includes arbitration rules referred to in it (Section 2(8))

Claim includes counterclaim, defence includes defence to counterclaim (Section 2(9)), with two stated exceptions.

Part III scope

Conciliation covers disputes from a legal relationship, contractual or not, unless law bars conciliation (Section 61)

Parties may agree otherwise, and other laws prevail where they say so.

Definition (Section 7(1))

Agreement to submit to arbitration all or certain disputes (arisen or may arise) in respect of a defined legal relationship, contractual or not

Cover both existing and future disputes. Legal relationship can be non-contractual, such as a tort-based relationship.

Forms (Section 7(2))

Arbitration clause in a contract OR separate agreement

Clause is usually pre-dispute. Separate agreement (submission agreement) is usually post-dispute, but the section does not fix the timing.

Writing (Sections 7(3) and 7(4))

Must be in writing: (a) document signed by parties; (b) exchange of letters, telex, telegrams or other telecommunication including electronic means providing a record; (c) exchange of statements of claim and defence, existence alleged by one and not denied by other

Electronic communication was added by the 2015 amendment (effective 23-10-2015).

Incorporation by reference (Section 7(5))

Contract in writing + reference to a document containing an arbitration clause + reference makes the clause part of the contract = arbitration agreement

A casual mention of a document is not enough. The reference must make the clause part of the contract.

Section 8(1): duty to refer

Action on a matter covered by an arbitration agreement + application by a party (or person claiming through or under him) not later than the first statement on the substance of the dispute → refer, unless prima facie no valid arbitration agreement exists

The duty is mandatory. The application must be made by a party; the court does not act on its own.

Section 8(2): documents

Application must be accompanied by the original arbitration agreement or a duly certified copy

Proviso: if the other party holds the original or certified copy, file a copy of the agreement with a petition asking the court to call upon that party to produce it.

Section 8(3): parallel arbitration

Even while the Section 8 application is pending, arbitration may be commenced or continued and an award made

A pending court application does not stop the arbitration.

Section 45: Part II reference

Action on a matter covered by an agreement referred to in Section 44 + request by a party → refer, unless court prima facie finds the agreement null and void, inoperative or incapable of being performed

Applies notwithstanding Part I and the Code of Civil Procedure, 1908.

Test applied by the court

Section 8: prima facie no valid arbitration agreement. Section 45: prima facie null and void, inoperative or incapable of being performed

Both are limited, first-look tests. Neither is a full trial.

Party autonomy on place

Section 20(1): parties are free to agree the place of arbitration

The agreement comes first. The tribunal acts only if there is no agreement.

Tribunal's determination

Section 20(2): no agreement → tribunal decides, having regard to circumstances, including convenience of parties

Convenience is one factor. The text says 'including', so other circumstances count too.

Meeting elsewhere

Section 20(3): unless otherwise agreed, tribunal may meet at any place it considers appropriate

Purposes: consultation among members, hearing witnesses, experts or parties, inspecting documents, goods or property.

Applicability of Part I

Section 2(2): Part I applies where the place of arbitration is in India

This is why the place or seat matters. The proviso extends sections 9, 27 and 37(1)(a) and 37(3) to certain international commercial arbitrations seated outside India, subject to contrary agreement.

Seat vs venue

Seat = legal place deciding supervisory courts; Venue = physical location of hearings

A judicial concept. Section 20(3) hearings elsewhere do not shift the seat.

Section 40(1): agreement survives death

Death of a party ⇒ arbitration agreement NOT discharged (for the deceased or any other party); enforceable by or against the legal representative

Quote the words 'not discharged' and 'legal representative' in your answer.

Section 40(2): arbitrator's mandate

Death of the appointing party ⇒ arbitrator's mandate NOT terminated

This covers the arbitrator appointed by the party who died.

Section 40(3): saving of other laws

Section 40 does not affect any law that extinguishes a right of action on death

Use this to separate the agreement surviving from the claim surviving.

Section 41(1): insolvent, contract adopted

Receiver adopts contract ⇒ arbitration term enforceable by or against the receiver, as far as it relates to such disputes

Receiver includes an Official Assignee (Section 41(3)).

Section 41(2): insolvent, contract not adopted

Matter needed for insolvency proceedings ⇒ other party or receiver may apply to the insolvency judicial authority ⇒ authority may order arbitration if it so opines, on all the circumstances

This is discretionary, not automatic.

Meaning of arbitration

Section 2(1)(a): arbitration = any arbitration, whether or not administered by a permanent arbitral institution

Both ad hoc and institutional arbitration are valid under the Act.

Institutional rules become part of the agreement

Section 2(8): agreement of the parties includes any arbitration rules referred to in that agreement

Naming an institution's rules in the clause adopts them.

Parties may authorise an institution

Section 2(6): where the Part leaves parties free to determine an issue, they may authorise any person, including an institution, to determine it

Exception: this does not apply to Section 28.

Agreed appointment procedure

Section 11(2): parties are free to agree the appointment procedure, subject to Section 11(6)

This is where an institution is usually named as appointing authority.

Failure of appointment procedure

Section 11(6): a party may ask the Supreme Court or High Court, or its designated person or institution, to take the necessary measure

Applies if a party, the parties or arbitrators, or an institution fails to act, unless the agreement gives other means.

Designation not delegation

Section 11(6B): designation by the Court is not a delegation of judicial power

This supports Court-designated institutions.

Which Court

Section 11(12): international commercial arbitration → Supreme Court; other arbitration → High Court

The High Court is the one within whose limits the principal Civil Court is situated.

Fees

Section 11(14): High Court may frame fee rules using the Fourth Schedule rates

Does not apply to international commercial arbitration, or where parties agreed fees under an institution's rules.

Quick revision

• Arbitration agreement means an agreement to submit present or future disputes to arbitration in respect of a defined legal relationship, contractual or not.
• It may be a clause in a contract or a separate agreement.
• It must be in writing.
• Writing is met by a signed document, an exchange of letters or electronic communication that records the agreement, or an exchange of claim and defence where one alleges the agreement and the other does not deny it.
• A reference in a written contract to a document with an arbitration clause makes that clause part of the contract if the reference is such as to do so.
• Under Section 8, the application to refer must be made not later than the date of submitting the first statement on the substance of the dispute.
• Under Section 8, the court refers parties unless it finds that prima facie no valid arbitration agreement exists.
• The application must come with the original agreement or a certified copy, with a proviso if the other party holds it.
• Arbitration may begin or continue even if a Section 8 application is pending before the court.
• Death of a party does not discharge the arbitration agreement; it is enforceable by or against the legal representative.
• The mandate of an arbitrator is not ended by the death of the party who appointed him.
• During conciliation, parties cannot start arbitral or judicial proceedings on that dispute, except to preserve their rights.

Common mistakes

• Saying arbitration needs a permanent institution. Fix: Quote section 2(1)(a): arbitration is valid whether or not administered by a permanent arbitral institution.
• Treating mediation and conciliation as the same as arbitration because all are private. Fix: Say the arbitrator decides and the award binds, while a mediator or conciliator only helps the parties reach their own settlement.
• Saying Part I applies to every arbitration with an Indian party. Fix: Section 2(2) uses the place of arbitration as the test. Check the place first, then the proviso for international commercial arbitration.
• Treating a company incorporated in India but owned by foreign shareholders as a foreign party. Fix: Section 2(1)(f)(ii) asks whether the body corporate is incorporated outside India. Ownership is not the test.
• Saying an arbitration agreement must be signed by the parties. Fix: Signature is only one route. Exchange of communications under 7(4)(b) and exchange of claim and defence under 7(4)(c) also satisfy the writing requirement.
• Treating an oral arbitration agreement as valid. Fix: Section 7(3) says an arbitration agreement shall be in writing. Without writing under 7(4) or 7(5), the agreement fails the section.
• Saying the court can refer the parties on its own motion. Fix: State that a party, or a person claiming through or under a party, must apply. Section 45 says "at the request of one of the parties".
• Ignoring the deadline in Section 8. Fix: Always check whether the application was made not later than the date of submitting the first statement on the substance of the dispute.
• Saying the tribunal always decides the place of arbitration. Fix: Write that the parties' agreement comes first under Section 20(1). The tribunal decides only failing agreement.
• Treating seat and venue as the same thing. Fix: Define both. Seat is the legal place deciding supervisory courts. Venue is where hearings physically happen.

Exam tips

• Open every answer with a definition tied to the Act, such as section 2(1)(a) or 2(1)(d).
• For compare-and-contrast questions, use fixed heads and cover every mode under each head; do not write loose paragraphs.
• In case questions, always check three facts first: is there an arbitration agreement, who are the parties, and what is the place of arbitration.
• Close with a practical point, such as drafting a clear arbitration clause naming seat, number of arbitrators and rules.
• Balance advantages with limitations; examiners reward a measured view.
• Open every answer by stating the Part and section that govern the issue. Examiners reward the right provision first.
• Learn the two limbs of Section 2(1)(e) and the four limbs of Section 2(1)(f) word for word in plain language. They are common case-based triggers.
• In fact-based questions, underline the place of arbitration and each party's incorporation or residence before writing anything.