| Construction contracts are unique in nature as the | | | | party fails to appoint an arbitrator within 30 days |
| construction industry embraces a very wide | | | | from the receipt of a request to do so from the |
| variety of types of construction ranging from | | | | other party or if the two appointed arbitrators fail |
| pure building work to pure engineering with | | | | to agree on the third arbitrator within 30 days |
| combinations of building and engineering to varying | | | | from the date of their appointment, the |
| degrees. A construction projects is continuous in | | | | appointment shall be made upon request of a |
| nature usually spread over number of years. The | | | | party by the Chief Justice or any person or |
| problems that arise in the working of the projects | | | | institution designation by him. |
| are sometimes not foreseeable or even if they | | | | However, in Datar Switchgear vs Tata Finance |
| are foreseeable, their magnitude may not be | | | | Ltd. (2000)8 SCC 151: 2000(3) Arb LR 447, it had |
| foreseeable before or during the execution of the | | | | been held that if one party demanded |
| contract. Since the numbers of the parties involve | | | | appointment of an arbitrator and the other party |
| in the construction contract it is oblivious that the | | | | did not make the appointment, the right to |
| disputes will arise between them if one party | | | | appoint was not automatically forfeited on the |
| failed to perform their obligation in terms of the | | | | expiry of 30 days, however, the right would be |
| contract. Disputes can be resolved either through | | | | forfeited if the opposite party fails to make the |
| litigation or through Alternative disputes resolution | | | | appointment and the claimant approaches the |
| mechanism, which includes Mediation, Conciliation | | | | Chief Justice or his designate for the needful. |
| and Arbitration. In India where the courts are | | | | Until, the recent judgment pronounced by the |
| already heavy burdened with the backlog of | | | | apex court in M/s. S.B.P. & Co. Versus M/s. |
| cases, the dispute hangs over for years. Litigation | | | | Patel Engineering Ltd. and another 2008) 4 SCC |
| is expensive as well as time consuming. If litigation | | | | 190, the appointment of arbitrator by the court |
| is resorted for every problem, then, such | | | | was an administrative order, however, The |
| problems will likely to increase rather than to | | | | constitutional benches verdict in M/s. S.B.P. & |
| resolve the tension generated by the emergence | | | | Co. Versus M/s. Patel Engineering Ltd. overruling |
| of such problems. | | | | the judgment in Konkan Railway Corpn. Ltd. |
| In the Construction contract, where the huge | | | | & anr. Vs. Rani Construction Pvt. Ltd. [(2000) |
| money involves, an early and inexpensive dispute | | | | 8 SCC 159] held that the order passed by the |
| resolution is required otherwise the project will run | | | | Chief Justice or his delegate of the High Court, |
| in time overrun resulting into the huge losses of | | | | appointing the arbitrator is now appealable, thus |
| money, idling of manpower and machineries. | | | | enunciating that the order passed under section 11 |
| Though Mediation and Conciliation is very | | | | is not an administrative order but a judicial order. |
| inexpensive mode of dispute resolution | | | | Under Section 16 of Arbitration and Conciliation |
| mechanism but the decision of the Mediator and | | | | Act 1996, a party may take a plea of lack of |
| Conciliator are not enforceable. Due to this reason | | | | jurisdiction on many grounds including the |
| the Mediation and conciliation fails in most of the | | | | following:i) Arbitration Agreement |
| cases. Arbitration is also one of the Alternative | | | | does not existii) Contract containing it |
| Dispute Resolution modes, which is more | | | | is invalidiii) There has been full & |
| successful than mediation and conciliation because | | | | final settlement and contract is |
| the Award passed by the Arbitrator is as good as | | | | dischargediv) Disputes do not arise out |
| the decree passed by the Civil Court. | | | | of contractv) Reference is beyond the |
| Before 1996, statutory provisions of Arbitration | | | | scope of Arbitration Agreement. |
| were covered by three different enactments | | | | |
| namely, the Arbitration Act, 1940, The Arbitration | | | | The arbitrators are free to |
| , (Protocol and Convention) Act, 1937 and The | | | | choose procedure and subject to parties |
| Foreign Awards (Recognition and Enforcement) | | | | agreement, may conduct the proceedings "in the |
| Act, 1960. The Arbitration Act, 1940 laid down | | | | manner they consider appropriate. Neither the |
| the framework within which the domestic | | | | Code of Civil Procedure nor the Indian Evidence |
| arbitration was conducted in India while the other | | | | Act applies to arbitrations. In an international |
| two enactments dealt with the foreign awards. In | | | | commercial arbitration, parties are free to |
| 1996, Arbitration and Conciliation Act, 1996 was | | | | designate the governing law for the substance of |
| come into force. This Act repealed all the three | | | | the dispute. |
| previous enactments. Arbitration Act, 1996 is | | | | An award can be challenged before Court under |
| based on UNCITRAL model law. | | | | section 34 of the Arbitration Act, 1996 on the |
| Part I of the Arbitration Act,1996 deals with | | | | following grounds. |
| domestic arbitration, part II deals with | | | | 1. a party was under some incapacity; or |
| enforcement of foreign wards, part III deals with | | | | 2. the arbitration agreement was not valid under |
| conciliation and part IV deals with the | | | | the governing law; or |
| supplementary provisions. Moreover Arbitration | | | | 3. a party was not given proper notice of the |
| and Conciliation Act, 1996 is applicable only to | | | | appointment of the arbitrator or on the arbitral |
| disputes, which are civil in nature. | | | | proceedings; or |
| A valid Arbitration Agreement is must for invoking | | | | 4. the award deals with a dispute not |
| the Arbitration and set into motion the Arbitration | | | | contemplated by or not falling within the terms of |
| mechanism. Section 7 of the Arbitration Act, 1996 | | | | submissions to arbitration or it contains decisions |
| defines the Arbitration Agreement. An arbitration | | | | beyond the scope of the submissions; or |
| agreement may be in the form of an arbitration | | | | 5. the composition of the arbitral tribunal or the |
| clause in a contract or in the form of a separate | | | | arbitral procedure was not in accordance with the |
| agreement. An arbitration agreement shall be in | | | | agreement of the parties; or |
| writing. | | | | 6. the subject matter of the dispute is not |
| An arbitration agreement is in writing if it is | | | | capable of settlement by arbitration; or The |
| contained in- | | | | arbitral award is in conflict with the public policy of |
| (a) A document signed by the parties; | | | | India. |
| (b) An exchange of letters, telex, telegrams or | | | | A challenge to an award is to be made within |
| other means of telecommunication which provide | | | | three months from the date of receipt of the |
| a record of the agreement; or | | | | same. The courts may, however, condone a |
| (c) An exchange of statements of claim and | | | | delay of maximum 30 days on evidence of |
| defence in which the existence of the agreement | | | | sufficient cause. Subject to any challenge to an |
| is alleged by one party and not denied by the | | | | award, the same is final and binding on the parties |
| other.. | | | | and enforceable as a decree of the Court. |
| Section 8 of the Arbitration Act, 1996 bar the | | | | Supreme Court of India decision in Oil and Natural |
| filing of civil suit in relation to any dispute if arises | | | | Gas Corporation vs. Saw Pipe (2003) 5 SCC 705 |
| between the parties where a valid Arbitration | | | | the Court added an additional ground of "patent |
| Agreement between the parties exist. | | | | illegality", thereby considerably widening the scope |
| Section 9 of Arbitration Act, 1996, gives power | | | | of judicial review on the merits of the decision. |
| to Civil Court to grant interim injunction for | | | | In another Judgment Supreme Court in the recent |
| preservation, interim custody or sale of any | | | | case of Venture Global Engineering v. Satyam |
| goods, which are the subject matter of the | | | | Computer Services Ltd (Venture Global) (2008) 4 |
| arbitration agreement or securing the amount in | | | | SCC 190 held that a challenge to a foreign award |
| dispute in the arbitration or Such other interim | | | | in India would have to meet the expanded scope |
| measure of protection as may appear to the | | | | of public policy as laid down in Saw Pipes. The |
| court to be just and convenient, before, during or | | | | Venture Global case creates a new procedure and |
| after the Arbitral proceedings. | | | | a new ground for challenge to a foreign award. |
| Section 10 of the Act, provides for the number | | | | Under Section 37 of the Arbitration Act, 1996, an |
| of arbitrators. The parties are free to determine | | | | appeal shall lie from the following orders (and from |
| the number of arbitrators provided that such | | | | no others) to the court authorised by law to hear |
| number is not an even number. If the parties | | | | appeals from original decrees of the court passing |
| have failed to provide for the number of | | | | the order, namely: - |
| arbitrators, in that case, it is provided that an | | | | (a) Granting or refusing to grant any measure |
| arbitral tribunal shall consist of a sole arbitrator. | | | | under section 9; |
| Section 11 prescribes procedures for appointment | | | | (b) Setting aside or refusing to set aside an |
| of Arbitrator under which a person of any | | | | arbitral award under section 34. |
| nationality may be an arbitrator unless other wise | | | | (2) An appeal shall also lie to a court from an |
| agreed to by the parties. The parties are free | | | | order of the arbitral tribunal-- |
| to agree on a procedure for appointment of an | | | | (a) Accepting the plea referred to in sub-section |
| arbitrator(s). | | | | (2) or sub-section (3) of section 16; or |
| Under Section 11(3) and (4), if the parties fails to | | | | (b) Granting or refusing to grant an interim |
| arrive at an agreement, as mentioned above in an | | | | measure under section 17. |
| arbitration with three arbitrator, each party shall | | | | |
| be entitled to appoint one arbitrator and the two | | | | The award passed by the Arbitral Tribunal can be |
| appointed arbitrators shall appoint a third arbitrator | | | | executed in the same manner as the decree of |
| who shall act as the presiding arbitrator. If a | | | | the Civil Court is executed. |