The arbitration in India has evolved over many years since the British introduced the concept of parties choosing their own adjudicators
The British introduced in India the concept of parties in dispute choosing their own adjudicator. Such adjudication on disputes relating to immovable property was introduced in 1813. In case of disputed accounts the Bengal Regulation of 1772 and 1780 recommended the dispute to be adjudicated on reference to arbitration. The award of such proceedings had the equivalence of a civil court decree.
The Regulations of 1781 popularly known as the ‘Elijah Impey’ regulation provided that a judge before whom such a case was brought would recommend the parties in disputes to submit to the jurisdiction of a Sole Arbitrator who would be appointed onaccount of mutual consent of such parties. The grounds of challenging such an award was limited to bias or gross misconduct/ corruption of the arbitrator. The 1787 Regulations prescribed rules for adjudicating disputes by reference to arbitration with the agreement of the parties. The rules were very fundamental and basic and did not have regulations on the procedural aspect or indeed conduct of the arbitral proceedings.
Subsequently, Regulations XVI of 1793 brought about statutory provision for reference of a broad spectrum of disputes like those relating to reconciliation of accounts, disputes between partners relating to the partnership accounts, specific performance of contracts, etc and provided for reference of such dispute persons with credibility as arbitrators and for adjudication by non-coercive means. These were considerably evolved and prescribed provisions right from reference of the disputes, passing of the award and such challenge to the award. Vakils were often appointed arbitrators without fee or reward except when such appointments were made by the court with agreement of the parties in dispute.
The Regulation VI of 1813 saw inclusion of adjudication of disputes relating to the rights in land arbitrable. Further the restriction of authorized vakils acting as arbitrators was withdrawn by theRegulation of XXVI of 1814.The rent and revenue disputes were allowed to be arbitrated under the Bengal Regulation VII of 1822.
The Legislative Council enacted the procedural law for Civil Courts in India, the Code of Civil Procedure as act VIII of 1859. Chapter VI of the said Code contained provisions for reference of the dispute to arbitration, more specifically section 312 to 327. Section 312 provided for matters in difference between the parties in a suit to be referred to the final decision of one or more arbitrators as long as they made an application to the effect to the judge before the final adjudication. Section 313 to 325 defined the procedure for such proceedings. It is found that in case the parties were not able to arrive mutually at the arbitral tribunal, the court had the power to appoint such arbitrator/s. Sections 326 and 327 authorized arbitration with the intervention of the court and provided for a requirement to file the award within 6 months of it having been passed and in case of no sufficient cause is shown by the opposite party shall be enforceable in law.
Till then arbitration of disputes was possible only when the disputes arose, no statutory provision provided for the reference of future disputes. The British Arbitration Act, 1889 had the provision for refereeing future disputes and in line the Indian Arbitration Act, i.e., Act IX of 1899. The said act made provisions for reference of disputes current and future to adjudication by arbitration without court intervention. The provisions of the Act however were limited by jurisdiction to the Presidency Towns. Whether the arbitration agreement named an arbitrator or not the both such agreements were recognized by the said new Act in India. Outside of the Presidency Towns and generally matters outside the scope of the 1899 Act the provisions for reference to Arbitration was found in the second Schedule to the Code of Civil Procedure as it stood then.
It is with this history that the Arbitration Act, 1940 was legislated and received the assent of His Excellency the Governor General on March 11 1940.It amended and consolidated the law relating to arbitration in British India and repealed the Arbitration Act, 1899, and sec 89 and 104(1), clauses (a) to (f), and the second schedule of code of civil procedure, 1908.
The 1940 Act was the single window legislation now dealing with procedure, defining jurisdiction and appeal across the country. While most of the provisions were drawn from the repealed enactments, it had several features from the British Arbitration Act of 1934. It introduced the provision for award by the majority of arbitrators, remission, correction in case of arbitration referred independent of the court procedure and for matters pertaining to arbitration through the court procedure it defines process for appeal for or against setting aside of the award. It confined the jurisdiction of reference and appeal to the same court, and the unsuccessful party to the arbitral reference could not get the matter reopened by filing a regular court suit. In a further improvement from previous provisions merely filing a suit the subject matter and cause was pending adjudication by the process of arbitration would not automatically stay the arbitral proceedings, for stay of the proceedings conditions were laid down u/s 35 of the 1940 act.
It is pertinent to note here that India became a signatory to the Geneva Protocol on Arbitration Clause (1923) and the International Convention on the Execution of Foreign Arbitral Awards (1927) subject to reservation limiting India’s obligation under the instruments to Commercial Contracts and excluding the Indian States from the scope of the instruments. The ratification necessitated the enactment of the Arbitration (Protocol & Convention) Act, 1937.
It was felt that the Geneva Convention was an impediment to the speedy settlement of disputes through arbitration and this was hampering in adjudication of international commercial disputes since it placed undue emphasis on the law of the land, the selection of arbitrators and the procedure to be followed by the tribunals, etc. It also over emphasized on the remedies that wereopen to the parties to invoke the law of the country for the setting aside of the award.
To remedy the defects of the Geneva Convention, a draft convention was prepared by the International Chamber of Commerce and placed before the United Nations Economic and Social Council in consultation with the Government of various countries and non – governmental organizations. Besides the consultation, a new international convention on the Recognition and Enforcement of the Arbitral Awards was adopted at New York on June 10, 1958. This convention was ratified by the Government of India on July 13 1960. Since the Geneva Convention would cease to effect between the contracting States on being bound by the New York convention, hence the Act of 1937 was replaced by the Foreign Award (Recognition & Enforcement) Act, 1961. The said act applied to foreign awards made on or after the 11th day of October 1960 and the foreign awards made before that date continues to be governed by the 1937 Act.
Hence the statutory provisions on arbitration in India came to be covered by three enactments namely the Arbitration Act, 1940 the Arbitration ( Protocol & Convention) Act, 1937 and the Foreign Awards ( Recognition and Enforcement) Act, 1961.
The United Nations Commission on International Trade Laws (UNCITRAL) adopted the Model Law on International Commercial Arbitration in 1985.In light of the need for a uniform international commercial arbitration practice, the General Assembly of the United Nations had recommended that the countries give due consideration to the said Model Law. The Arbitration and Conciliation Act or Act 26 of 1996 which is modeled around the UNCITRAL MODEL came to force from August 22, 1996, thus repealing the Arbitration Act, 1940.
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