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Report No. 176

(11) Section 8: Several amendments are proposed in Section 8 as follows:

(i) Section 8(1): This sub-section is proposed to be amended by permitting, as under the UNCITRAL Model Law, judicial authority to decide certain preliminary questions which are raised by the respondent before filing the defense statement, so that the said issues can be decided before making a reference to arbitration.

(Paragraph 2.4.9)

(ii) Section 8(1A): This sub-section is proposed to be added to require the judicial authority to stay the action pending a decision on the preliminary issues of jurisdiction and subject to the outcome of a decision on those preliminary issues.

(Paragraph 2.4.9)

(iii) Section 8(3): Section 8(3) is proposed to be amended. As it stands now, the arbitral tribunal, if already appointed by the respondent, the arbitral tribunal can proceed with the arbitral proceedings, while the court is still dealing with the earlier application of the respondent seeking reference.

The proposed amendment states that the continuance of such an arbitration proceeding will depend upon the decision of the judicial authority on the preliminary issues. In case it is decided by the judicial authority to reject the preliminary issues of jurisdiction and make a reference to another arbitral tribunal, the mandate of the earlier arbitral tribunal appointed by the respondent, shall cease.

(Paragraph 2.4.9)

(iv) Section 8(4): This sub-section is proposed to be added enabling the judicial authority to decide, subject to the proposed sub-section (5), the preliminary issues as to whether (a) there is no dispute in existence (b) the arbitration agreement is null and void or inoperative (c) the arbitration agreement is incapable of being performed (d) the arbitration agreement is not an existence.

(Paragraph 2.4.9)

(v) Section 8(5): This sub-section is proposed to be added to say that the judicial authority may not decide the above issues referred to in the proposed sub-section (4), if

(a) the relevant facts or documents are in dispute or

(b) oral evidence is necessary to be adduced or

(c) enquiry into the preliminary questions is likely to delay reference to arbitration or

(d) the request for a decision is unduly delayed or

(e) the decision on the questions is not likely to produce substantial savings in costs of arbitration or

(f) there is no good reason as to why these questions should be decided at that stage.

Depending upon the above factors, the judicial authority shall either decide the issues or make reference to arbitration. The above conditions are imposed to see that frivolous jurisdictional issues are not raised at the preliminary stage so as to delay the reference. At the same time, if the said issues can be decided easily and without oral evidence being adduced, they can be decided and will certainly save costs of arbitration.

(Paragraph 2.4.9)

(vi) Section 8 (6): This sub-section is proposed to be added to deal with situations arising out of, what is known as, a Scott v Avery clause. Under such a clause, a party cannot ignore an arbitration clause and file an action before a judicial authority and the clause requires the party to first obtain an arbitration award as a condition precedent for filing an action before the judicial authority.

But there may be cases where the judicial authority decides that the arbitration agreement is null and void, inoperative or unenforceable or not in existence and in such a case, it is obvious that no award can be obtain as required by the clause. The proposed sub-section (6) states that in such situations referred to above, the condition precedent in the Scott v Avery clause need not be complied with.

(paragraph 2.4.9)

(12) Section 8A and Explanation: This section is proposed to be introduced in view of the difficulty faced by the Supreme Court in the interpretation of Section 8 to cover arbitration agreements entered into during the course of a pending litigation. The Supreme Court, no doubt, held that the language of Section 8 could, with some difficulty, be extended to include such a situation.

But the Supreme Court stated, in that case, that even if a reference is made at an appellate stage, such as by the High Court or Supreme Court, the objections to the award have to be filed only in the Principal District Court as defined in Section 2(1)(e). Such a procedure will obviously lead to a further litigation starting from the District Court, and is wholly undesirable.

It has, therefore, become necessary to get over these problems by permitting objections to the award to be filed in the same Court which has made the reference. An Explanation is proposed to be added to the new Section 8A to cover a situation which arose in a case before the Supreme Court. In that case the writ court referred parties to arbitration, in accordance with the agreement entered into by them, pending the writ proceedings.

It is proposed therefore to provide for such a situation, enabling parties to go to arbitration in writ jurisdiction also, where they have disputes about their rights under the civil law. The proposed Explanation states that the word 'legal proceeding' in Section 8A will cover Writ Petitions also where civil disputes between parties are involved.

(paragraph 2.5.2)

The Arbitration and Conciliation (Amendment) Bill, 2001 Back

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