Important Definitions under Section 2 and the Kinds of Arbitration

Section 2 of the Arbitration and Conciliation Act, 1996 carries more weight than an ordinary definition clause. It states what an arbitral tribunal and an arbitral award are, identifies the court that exercises every supervisory power conferred by Part I, defines international commercial arbitration by reference to the parties rather than the place, and fixes the territorial reach of the Part. Around those definitions the practice has developed a set of classifications, ad hoc and institutional, statutory and contractual, fast track, emergency, online and foreign seated, and the whole is held together by two ideas: the seat of the arbitration and the autonomy of the parties.

1. The Structure of Section 2

Section 2(1) defines the terms used in Part I. Sub-sections (2) to (5) state the scope of the Part, sub-section (6) preserves the freedom of the parties to authorise a third person to determine a matter, sub-section (7) defines a domestic award, sub-section (8) provides that a reference to an agreement includes the arbitration rules referred to in it, and sub-section (9) explains how references to a claim and a defence are to be read. Definitions in Part II are separate: Section 44 defines a foreign award for the purposes of the New York Convention and Section 53 for the Geneva Convention.

2. Arbitration, Arbitration Agreement and the Tribunal

Clause (a) is not a definition of the process. Its purpose is to make clear that the Act applies equally to ad hoc references and to references administered by an institution, so that nothing in the statute turns on the presence or absence of administrative machinery. The substance of what arbitration is comes from Section 7 and from the decisions identifying its attributes, principally K.K. Modi v. K.N. Modi, (1998) 3 SCC 573.

Clause (d) is equally spare, but two consequences follow from it. The tribunal is whatever the parties have constituted, whether one person or several, and Section 10 leaves the number to their agreement provided it is not an even number, with a default of a sole arbitrator. And the tribunal is not a court: it derives no authority from the State, it cannot bind strangers to the agreement, and it must apply to the court under Section 27 for assistance in taking evidence. It is nevertheless under a duty to act judicially, which Section 18 states as a duty to treat the parties with equality and to give each a full opportunity to present his case.

3. Arbitral Award

Section 2(1)(c) provides only that an arbitral award includes an interim award. The content of the expression comes from Section 31, which requires the award to be in writing and signed, to state the reasons on which it is based unless the parties have agreed otherwise or the award is on agreed terms, and to state its date and the place of arbitration. Several kinds are met in practice.

• Final award, disposing of all the issues referred and terminating the proceedings under Section 32.
• Interim award, made under Section 31(6) on any matter on which a final award may be made, and having the same force as a final award on that matter. It is distinct from an interim measure of protection under Section 17, which is an order and not an award.
• Award on agreed terms, recorded under Section 30 where the parties settle during the proceedings, with the same status and effect as any other award on the merits.
• Additional award, made under Section 33(4) on claims presented in the proceedings but omitted from the award, on a request made within thirty days.
• Foreign award, defined separately by Sections 44 and 53 and enforced under Part II; it is deemed a decree under Section 49 once found enforceable.

A domestic award is defined by Section 2(7) as an arbitral award made under Part I, which means an award made in an arbitration seated in India, whether or not the arbitration was an international commercial arbitration. The distinction matters for Section 34(2A), under which patent illegality is available only for a purely domestic award and not for an international commercial arbitration held in India.

4. Court

Three points follow. The definition excludes courts of a grade inferior to the principal civil court and courts of small causes, so an application under Section 9, 11, 14, 27, 34 or 36 cannot be entertained by them whatever the value of the claim. In an international commercial arbitration the High Court alone is the court, which was the change made in 2015 to keep cross-border matters at that level. And Section 42 provides that where an application has been made to a court under Part I, that court alone has jurisdiction over the arbitral proceedings and over all subsequent applications, which prevents the parties from moving between forums.

5. Other Definitions in Brief

6. The Kinds of Arbitration

Five independent tests, each producing a different classification of the same reference

6.1 Domestic and international commercial arbitration

Section 2(1)(f) makes the test one of the identity of the parties and not of the place of the arbitration. An arbitration is international commercial if the relationship is commercial under the law in force in India and at least one party is a national of or habitually resident in a country other than India, or a body corporate incorporated abroad, or an association or body of individuals whose central management and control is exercised abroad, or the Government of a foreign country. Domestic arbitration is not defined; it is what remains, namely an arbitration between Indian parties seated in India.

6.2 Institutional and ad hoc

In an ad hoc reference the parties and the tribunal supply the rules, the fees, the timetable and the logistics themselves; on failure to appoint, the court is approached under Section 11. In an institutional reference an arbitral institution administers the proceedings under its published rules, which the parties adopt by naming it, and Section 2(6) confirms that the parties may authorise an institution to determine any matter they are themselves free to determine. Section 11, as amended in 2019, permits appointment by an arbitral institution designated by the Supreme Court or the High Court. Indian practice remains predominantly ad hoc, and the reform effort since the Srikrishna Committee has been directed at changing that.

6.3 Statutory and contractual

A contractual arbitration rests on an agreement within Section 7. A statutory arbitration is one which a special enactment itself directs, whether or not the parties have agreed: examples are Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, under which the Facilitation Council takes up the dispute for arbitration on the failure of mediation, and Section 42 of the Industrial Relations Code, 2020, under which the Arbitration and Conciliation Act, 1996 is expressly excluded. Section 2(4) applies Part I to every statutory arbitration save as otherwise provided, and Section 2(5) applies it to all arbitrations under any other enactment, so the general law fills the gaps in the special one unless the special statute displaces it.

6.4 Fast track arbitration

Section 29B, inserted in 2015, permits the parties to agree in writing, before or at the time of appointment, that the dispute be resolved by fast track procedure. The tribunal decides on written pleadings, documents and submissions without an oral hearing, unless all the parties request one or the tribunal considers it necessary for clarification; it may call for further information; and the award is to be made within six months of the date on which the tribunal enters upon the reference. The fees of the tribunal are as agreed between the parties and the tribunal.

6.5 Emergency arbitration

An emergency arbitrator is appointed under institutional rules to grant urgent interim relief before the tribunal is constituted. The Act contains no reference to the institution, and the question was whether an order so made could be enforced in India.

6.6 Online arbitration

Nothing in the Act requires a physical hearing. Section 7(4)(b) recognises an arbitration agreement contained in an exchange of communications by electronic means, Section 19 leaves procedure to the parties, Section 24 permits a decision on documents where the parties so agree, and Section 31 requires the award to be in writing and signed, which an electronic signature under the Information Technology Act, 2000 satisfies. Online arbitration is therefore ordinary arbitration conducted by electronic means, and the questions it raises are practical: the identification of the seat where nothing physical happens anywhere, the integrity and confidentiality of the record, and access for a party without the means to participate.

7. Seat, Venue and the Territorial Principle

The consequences that follow from the seat, and the limited role of the venue

Section 20 provides that the parties are free to agree on the place of arbitration, that failing agreement the tribunal determines it having regard to the circumstances and the convenience of the parties, and that the tribunal may meet at any place it considers appropriate for consultation, for hearing witnesses or for inspection. The word place in Section 20(1) and (2) carries the sense of seat; in Section 20(3) it carries the sense of venue. The seat is the juridical home of the arbitration and fixes the curial law and the supervisory court. The venue is only where the hearings happen.

Foreign seated arbitration follows from the same principle. Where the seat is outside India, Part I does not apply save as the proviso to Section 2(2) preserves, the award cannot be set aside in India under Section 34, and the only resistance available here is at the enforcement stage under Section 48. The award is a foreign award within Section 44 if it was made in the territory of a State notified by the Central Government as a party to the New York Convention and arises out of a relationship considered commercial under Indian law.

8. Party Autonomy

Party autonomy is the organising principle from which most of the classifications above derive. The Act leaves to the parties the number of arbitrators under Section 10, the procedure for appointment under Section 11(2), the procedure of the reference under Section 19, the place under Section 20, the language under Section 22, the rules applicable to the substance in an international commercial arbitration under Section 28(1)(b), the adoption of fast track procedure under Section 29B, the extension of time by consent under Section 29A, and the adoption of institutional rules under Section 2(6) and 2(8). It was party autonomy which allowed emergency arbitration to be read into Section 17 in the Amazon case.

9. Related Topics and Provisions