The Arbitration and Conciliation Act, 1996, stands as a cornerstone in India’s legal framework for arbitration and alternative dispute resolution (ADR). Definitions under Section 2: Part I provides a comprehensive list of terms that lay the foundation for interpreting and applying the law. These definitions are crucial for understanding the Act and ensuring its effective implementation in resolving disputes efficiently and equitably.

Key Definitions in Section 2 of the Arbitration and Conciliation Act, 1996

Section 2 of the Arbitration and Conciliation Act, 1996, contains several important definitions that are instrumental for arbitration and conciliation proceedings in India. It serves as the dictionary for the Arbitration and Conciliation Act, 1996.

It defines the essential terms and phrases used in the Act, ensuring clarity and uniform interpretation. Without this section, the legal framework would lack precision, making dispute resolution unnecessarily complicated. Below, we delve into these definitions to provide clarity and context.

Arbitration: Section 2(1)(a) defines arbitration as any arbitration, whether or not administered by a permanent arbitral institution. This broad definition encompasses all forms of arbitration, including ad hoc and institutional arbitration.
Arbitral Tribunal: Under Section 2(1)(d), an arbitral tribunal refers to a sole arbitrator or a panel of arbitrators. This definition underscores the flexibility offered by the Act in forming tribunals based on the needs of the disputing parties.
Arbitration Agreement: Section 2(1)(b) defines an arbitration agreement as an agreement referred to in Section 7 of the Act. It is a prerequisite for initiating arbitration proceedings and can be in the form of a clause in a contract or a standalone agreement.
Arbitration Award: According to Section 2(1)(c), an arbitration award includes both interim and final awards. This definition ensures clarity on the scope of awards that can be made by an arbitral tribunal.
Court: Section 2(1)(e) defines “court” as:

(i) For arbitration other than international commercial arbitration: The principal Civil Court of original jurisdiction in a district, including the High Court exercising its ordinary original civil jurisdiction, that has the authority to decide the questions forming the subject matter of the arbitration (if it had been the subject matter of a suit). However, this does not include any Civil Court of a grade inferior to the principal Civil Court or any Court of Small Causes.

(ii) For international commercial arbitration: The High Court exercising its ordinary original civil jurisdiction, having the authority to decide the questions forming the subject matter of the arbitration (if it had been the subject matter of a suit). In other cases, it refers to a High Court with jurisdiction to hear appeals from decrees of courts subordinate to that High Court.

International Commercial Arbitration: Section 2(1)(f) defines international commercial arbitration as arbitration relating to disputes where at least one of the parties is:

An individual who is a national of, or habitually resides in, any country other than India.
A body corporate incorporated in any country other than India.
An association or body of individuals whose central management and control is exercised in any country other than India.
A government of a foreign country.

Legal Representative: Section 2(1)(g) defines a legal representative as a person who, in law, represents the estate of a deceased person. This includes executors and administrators.
Party: Section 2(1)(h) defines a party as a party to an arbitration agreement. This encompasses all individuals or entities bound by the agreement, whether directly or indirectly.

Context and Relevance of Section 2

The definitions in Section 2 serve as the bedrock for interpreting the Act and determining its applicability. This section also addresses the Act’s scope, ensuring clarity for parties engaging in arbitration and conciliation.

By providing precise meanings to commonly used terms, it eliminates ambiguity and ensures uniformity in interpretation. These definitions influence how disputes are handled, from appointing arbitrators to enforcing awards. Clarity in terminology ensures smoother proceedings and fewer legal challenges.

Rules of Arbitration

While not explicitly detailed in Section 2, the Act refers to procedural rules parties may adopt, such as the UNCITRAL Arbitration Rules. These rules provide a roadmap for arbitration proceedings, ensuring transparency and fairness.

Related Sections in the Arbitration and Conciliation Act, 1996

Section 7: Arbitration Agreement- This section elaborates on the definition provided in Section 2(1)(b) and specifies the requirements for a valid arbitration agreement.
Section 34: Application for Setting Aside Arbitral Awards– While Section 2 defines arbitration awards, Section 34 provides the grounds on which such awards can be challenged.
Section 36: Enforcement of Arbitral Awards- Linked to the definition of arbitration awards in Section 2(1)(c), this section outlines the procedure for enforcing these awards.
Section 11: Appointment of Arbitrators- Building on the definition of arbitral tribunals in Section 2(1)(d), this section describes the appointment process for arbitrators.
Section 9: Interim Measures by the Court- Complementing the definition of “court” in Section 2(1)(e), this section specifies the types of interim relief courts can grant before or during arbitration.

The Evolution of Section 2

Over the years, amendments have refined Section 2 to keep pace with modern arbitration practices. For instance, the 2015 and 2019 amendments clarified terms like “court” and introduced provisions for expedited arbitration.

Section 2(ca) was inserted by the Arbitration and Conciliation (Amendment) Act, 2019 which states “Arbitral institution” means an arbitral institution designated by the Supreme Court or a High Court under this Act.
Section 2(i) was inserted by the Arbitration and Conciliation (Amendment) Act, 2019 which states “prescribed” means prescribed by rules made under this Act.
Section 2(e) which defines ‘court’ was also substituted by the Arbitration and Conciliation (Amendment) Act, 2015.

How Does Section 2 Align with Global Standards?

The Arbitration and Conciliation Act, 1996, is modeled on the UNCITRAL Model Law, making Section 2’s definitions globally relevant. This alignment ensures Indian arbitration is in sync with international practices, boosting its appeal as a hub for arbitration.

Common Misunderstandings About Section 2

Some believe Section 2 definitions are exhaustive, but in reality, they provide a framework rather than an absolute guide. Courts often expand on these definitions to address evolving legal and commercial complexities.

Layout of Part I of the Arbitration and Conciliation Act, 1996:

Part I of the Arbitration and Conciliation Act, 1996, is dedicated to “Arbitration” and provides a detailed framework for conducting arbitration in India. It is structured into 4 chapters, encompassing 43 sections (Sections 2 to 43). Below is an overview of its layout:

Chapter I: General Provisions (Sections 2 to 6)

Part I: Section 2 defines important terms (e.g., arbitration, arbitration agreement, court).
Highlights the applicability of Part I.
Emphasizes the principle of party autonomy and the minimal intervention of courts.
Addresses the validity and enforceability of arbitration agreements.

Chapter II: Arbitration Agreement (Sections 7 to 9)

Explains what constitutes an arbitration agreement.
Details the process for referring disputes to arbitration when a valid arbitration agreement exists.
Provides for interim measures by courts before or during arbitration proceedings.

Chapter III: Composition of Arbitral Tribunal (Sections 10 to 15)

Discusses the number and qualifications of arbitrators.
Outlines the procedure for the appointment of arbitrators.
Addresses challenges to arbitrators, their inability to act, and replacement procedures.

Chapter IV: Jurisdiction of Arbitral Tribunals (Sections 16 to 17)

Recognizes the arbitral tribunal’s authority to rule on its jurisdiction (kompetenz-kompetenz).
Clarifies the power of tribunals to determine interim measures.

Chapter V: Conduct of Arbitral Proceedings (Sections 18 to 27)

Establishes the principles of equal treatment of parties.
Specifies the procedure for determining rules of procedure, place of arbitration, and language.
Details the submission of claims and defenses.
Discusses hearings, evidence, and assistance by courts in taking evidence.

Chapter VI: Making of Arbitral Awards and Termination of Proceedings (Sections 28 to 33)

Details the rules governing the decision-making process.
Sets out the requirements for the form and content of arbitral awards.
Addresses correction, interpretation, and additional awards.
Provides for termination of arbitration proceedings.

Chapter VII: Recourse Against Arbitral Award (Sections 34)

Allows limited grounds for challenging an arbitral award.
Specifies procedural requirements for such recourse.

Chapter VIII: Finality and Enforcement of Arbitral Awards (Sections 35 to 36)

Declares arbitral awards as final and binding.
Provides for the enforcement of arbitral awards as decrees of the court.

Chapter IX: Appeals (Sections 37)

Lists specific orders and decisions that can be appealed.

Chapter X: Miscellaneous (Sections 38 to 43)

Addresses costs, deposit fees, and lien on arbitral awards.
Discusses limitations on claims and procedural aspects like arbitration under other enactments.
Contains provisions on the applicability of the Limitation Act to arbitration.

Scope of Part I of the Arbitration and Conciliation Act, 1996

Applicability: Part I applies where the place of arbitration is in India.
Provisions Applicable to International Arbitration: Even when the place of arbitration is outside India, the provisions of Sections 9 (interim measures), 27 (court assistance in taking evidence), and specific clauses of Section 37 (appeals) also apply to international commercial arbitration, provided:

There is no agreement to the contrary.
The arbitral award made or to be made in such cases is enforceable and recognized under Part II of the Act.

Non-Arbitrable Disputes: Part I does not override existing laws that prohibit certain disputes from being submitted to arbitration.
Application to Statutory Arbitrations: Except for Section 40(1), Sections 41, and 43, the provisions of Part I apply to arbitrations under any other statute. These provisions apply as if such arbitration were conducted pursuant to an arbitration agreement, except where inconsistent with the other enactment or its rules.
Universal Applicability: Subject to statutory limitations or agreements between India and other countries, Part I applies to all arbitrations and proceedings related to arbitration.
Party Autonomy: Where Part I permits parties to decide on certain issues, parties may authorize a person or institution to determine those issues on their behalf.
Domestic Nature of Awards: Any arbitral award made under Part I is treated as a domestic award.
Inclusion of Arbitration Rules in Agreements: References in Part I to agreements between parties include arbitration rules mentioned in the agreement.
Counterclaims and Defenses: References in Part I to claims also include counterclaims, and references to defenses include defenses to counterclaims, except in specific provisions (Section 25(a) and Section 32(2)(a)).

This broad scope ensures that Part I of the Act provides a comprehensive framework for arbitration in India while accommodating international arbitration under specified conditions.

Conclusion

Section 2 of the Arbitration and Conciliation Act, 1996, is indispensable for understanding the Act’s application and interpretation. By defining key terms, it lays the groundwork for arbitration and conciliation processes in India.

Frequently Asked Questions (FAQs)

What is arbitration under the Arbitration and Conciliation Act, 1996?

Arbitration, as defined in Section 2(1)(a) of the Act, refers to any arbitration, whether ad hoc or institutional, that resolves disputes outside the traditional court system.

What is an arbitration agreement?

An arbitration agreement, defined under Section 2(1)(b), is a written agreement between parties to refer their disputes to arbitration instead of litigation.

Who constitutes an arbitral tribunal?

According to Section 2(1)(d), an arbitral tribunal can be a sole arbitrator or a panel of arbitrators chosen by the parties or appointed under the provisions of the Act.

Which courts handle arbitration matters in India?

Section 2(1)(e) specifies that the principal civil court of original jurisdiction or the High Court having jurisdiction handles arbitration matters, excluding lower civil courts.

What is international commercial arbitration?

Section 2(1)(f) defines international commercial arbitration as arbitration involving disputes where at least one party is a foreign national, a foreign corporation, or a foreign-controlled entity.