Conducting the Arbitration: Equal Treatment, Procedure, Place, Commencement and Language
Chapter Thirty-One
Syllabus topic 2.1, "The Arbitration and Conciliation Act, 1996"
Pages 156 to 160 of 377
In one line
The tribunal must treat the parties equally and hear them both; beyond that it is free of the Code of Civil Procedure and the Evidence Act and can run the case as it thinks fit.
In exam wording: section 18 requires the parties to be treated with equality and each to be given a full opportunity to present his case; section 19 frees the tribunal from the Code of Civil Procedure 1908 and the Indian Evidence Act 1872; and sections 20 to 22 govern the place of arbitration, the commencement of proceedings and the language.
Section 18: the one rule that cannot be bent
The parties shall be treated with equality and each party shall be given a full opportunity to present his case.
One sentence, and it is the most important in Chapter V.
Everything else in the conduct of an arbitration is flexible. This is not. Section 18 is the arbitral expression of natural justice, and it is what stops "freedom from procedure" becoming "freedom from fairness". Note the two limbs, because they are different duties:
Equality of treatment. Whatever is allowed to one side must be allowed to the other. If one party gets three weeks to file evidence, so does the other.
A full opportunity to present his case. Not a token one. Enough notice, enough time, and a real chance to answer the other side's material.
Section 18 has no "unless otherwise agreed by the parties". Almost every other section in this chapter does. That absence is the strongest signal in the Act that the provision is mandatory: the parties cannot contract out of it, and section 4's waiver rule does not reach it, because it is not a provision from which the parties may derogate.
Where it bites. Section 34(2)(a)(iii) makes it a ground for setting aside an award that a party was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case. Chapter 400 works that through. In practice this is the commonest real complaint about an arbitration.
Section 19: free of the Code and the Evidence Act
Section 19(1): the arbitral tribunal shall not be bound by the Code of Civil Procedure 1908 or the Indian Evidence Act 1872.
Section 19(2): subject to this Part, the parties are free to agree on the procedure to be followed.
Section 19(3): failing agreement, the tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.
Section 19(4): that power includes the power to determine the admissibility, relevance, materiality and weight of any evidence.
This is where arbitration's speed comes from. There is no framing of issues, no rule against hearsay, no requirement that a document be proved through a witness who made it. The tribunal decides what to look at and what it is worth.
Conducting the Arbitration: Equal Treatment, Procedure, Place, Commencement and Language
But read section 19 with section 18, and note the words "subject to this Part" in sub-sections (2) and (3). Freedom from the Code is not freedom from the Act. A tribunal that refuses to let a party answer the other side's evidence has not exercised section 19(4); it has broken section 18.
And note what section 19 does not say. It does not free the tribunal from the substantive law. Section 28 requires a domestic tribunal to decide according to the substantive law for the time being in force in India, and chapter 350 works through it.
Section 20: the place of arbitration
Section 20(1): the parties are free to agree on the place of arbitration.
Section 20(2): failing agreement, the place is determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
Section 20(3): notwithstanding sub-sections (1) and (2), the tribunal may, unless otherwise agreed, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.
Sub-section (3) is the key to the section and to a distinction that runs through modern arbitration law: the difference between the seat and the venue.
The seat is the legal home of the arbitration. It decides which country's arbitration law governs the process and which courts supervise it. That is what sub-sections (1) and (2) are about, and it is what section 2(2) means by "the place of arbitration is in India".
The venue is simply where a hearing physically happens, which sub-section (3) allows to be anywhere convenient.
The Act uses the single word "place" for both, which is the source of a great deal of litigation. A clause saying "arbitration shall be held in Mumbai" is usually read as fixing the seat; a clause saying "hearings may be held in Pune for convenience" is fixing a venue and changes nothing about which courts supervise.
Why it matters. The seat decides whether Part I applies at all, which is chapter 210 and the BALCO line, and it decides which court is "the Court" for sections 9, 11, 34 and 37.
Section 21: when the arbitration begins
Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
Conducting the Arbitration: Equal Treatment, Procedure, Place, Commencement and Language
Short and heavily used. Note three things.
It is receipt, not despatch. Section 3 tells you when a communication is deemed received.
It is per dispute, not per contract. The words are "in respect of a particular dispute".
It is a default rule, displaceable by agreement or by institutional rules that fix commencement at the filing of a request with the institution.
Section 21 is the trigger for several other provisions: section 9(2)'s ninety day rule speaks of the arbitral proceedings being commenced; section 43 applies the Limitation Act 1963 to arbitrations, and section 21 supplies the date on which time stops running for that purpose. Chapter 430 works through section 43.
Section 22: the language
Section 22(1): the parties are free to agree upon the language or languages to be used.
Section 22(2): failing agreement, the tribunal shall determine it.
Section 22(3): the agreement or determination, unless otherwise specified, applies to any written statement by a party, any hearing, and any award, decision or other communication by the tribunal.
Section 22(4): the tribunal may order that any documentary evidence be accompanied by a translation into the agreed or determined language.
In a country with this many languages the section is not a formality. It lets an arbitration be conducted in the language the parties and their witnesses actually use, which is one of arbitration's real practical advantages over a court whose language is fixed.
A worked example
A contract between a Nagpur company and a Kochi company says: "Disputes shall be referred to arbitration. The arbitration shall be held at Mumbai." Nothing is said about procedure or language. On 4 March the Nagpur company posts a notice calling on the other to concur in the appointment of an arbitrator; it is received on 9 March.
When did the arbitration commence? On 9 March, under section 21: the date the request for that dispute to be referred is received by the respondent. Not the date of posting.
Where is the seat? Mumbai, under section 20(1), the parties having agreed. That decides that Part I applies under section 2(2) and which court is "the Court" for sections 9, 11 and 34.
The witnesses are all in Kochi. May the tribunal sit there? Yes. Section 20(3) lets the tribunal meet at any place it considers appropriate for hearing witnesses, unless otherwise agreed. Sitting in Kochi is a venue; the seat remains Mumbai and nothing about the supervising court changes.
In what language? Failing agreement, the tribunal determines it under section 22(2), and under section 22(3) that governs the pleadings, the hearings and the award. Under section 22(4) it may require documents to be translated.
Conducting the Arbitration: Equal Treatment, Procedure, Place, Commencement and Language
Can the tribunal admit a photocopy that nobody proves? Yes. Section 19(1) frees it from the Evidence Act and section 19(4) lets it decide admissibility, relevance, materiality and weight.
Can it decide the case on that photocopy without letting the other side comment on it? No. That is section 18, and section 24(3) reinforces it by requiring that everything supplied to the tribunal by one party be communicated to the other.
What beginners get wrong
Section 18 is not subject to party agreement. Its absence of an "unless otherwise agreed" is deliberate.
Freedom from the Evidence Act is not freedom from fairness. Sections 19(2) and (3) are expressly subject to the rest of Part I, and section 18 is part of it.
"Place" in section 20 means two different things, seat in sub-sections (1) and (2), venue in sub-section (3).
Arbitration commences on receipt of the request, not on the appointment of the arbitrator. Section 21.
Section 19 does not free the tribunal from the substantive law. That is section 28.
Quick revision
- Section 18: parties treated with equality; each given a full opportunity to present his case. Mandatory, and the foundation of section 34(2)(a)(iii).
- Section 19: tribunal not bound by the Code of Civil Procedure or the Evidence Act; parties may agree the procedure; failing that the tribunal conducts proceedings as it considers appropriate, including determining admissibility, relevance, materiality and weight of evidence. All subject to this Part.
- Section 20: parties agree the place; failing that the tribunal determines it having regard to convenience; and the tribunal may meet anywhere for consultation, witnesses, experts or inspection. Seat against venue.
- Section 21: proceedings commence, unless otherwise agreed, on the date the request for that dispute to be referred is received by the respondent.
- Section 22: parties agree the language; failing that the tribunal determines it; it applies to statements, hearings and the award; and translations may be ordered.
Test yourself
1. Why is section 18 different from the other sections in this chapter? Because it carries no "unless otherwise agreed by the parties". It is mandatory, cannot be contracted out of, and is not a provision from which the parties may derogate for the purposes of section 4's waiver rule. It is also the basis of the setting-aside ground in section 34(2)(a)(iii).
2. The tribunal admits a document that would be inadmissible in a civil court. Is the award vulnerable? Not on that ground alone. Section 19(1) frees the tribunal from the Indian Evidence Act and section 19(4) empowers it to determine admissibility, relevance, materiality and weight. It becomes vulnerable if the other party was not allowed to deal with the document, which offends section 18.
Conducting the Arbitration: Equal Treatment, Procedure, Place, Commencement and Language
3. What is the difference between the seat and the venue of an arbitration? The seat is the legal place of the arbitration, fixed under section 20(1) or (2), which determines the applicable arbitration law and the supervising courts. The venue is where hearings physically take place, which section 20(3) allows the tribunal to choose for convenience without changing the seat.
4. When do arbitral proceedings commence? Unless otherwise agreed, on the date on which a request for that particular dispute to be referred to arbitration is received by the respondent, under section 21. Receipt is governed by section 3.
5. In what language is the award written? In the language agreed by the parties or, failing agreement, determined by the tribunal under section 22(2). By section 22(3) that language applies, unless otherwise specified, to written statements, hearings, and any award, decision or other communication of the tribunal.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself for the same subject.