Object and Scheme of the Arbitration and Conciliation Act, 1996

The Act of 1996 was enacted to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and the enforcement of foreign arbitral awards, and to define the law relating to conciliation. Its guiding objects are stated in the Statement of Objects and Reasons: to cover both domestic and international arbitration comprehensively, to make provision for a fair and efficient procedure, to require the tribunal to give reasons, to confine the supervisory role of the court, and to provide that an award is enforceable as a decree. The structure of the Act follows those objects part by part.

1. The Objects

The Statement of Objects and Reasons accompanying the Bill set out the main objectives of the legislation, and they are the standard starting point for construing any provision of the Act.

To comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation.
To make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration.
To provide that the arbitral tribunal gives reasons for its arbitral award.
To ensure that the arbitral tribunal remains within the limits of its jurisdiction.
To minimise the supervisory role of courts in the arbitral process.
To permit the tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes.
To provide that every final arbitral award is enforced in the same manner as if it were a decree of the court.
To provide that a settlement agreement reached by the parties as a result of conciliation proceedings has the same status and effect as an arbitral award on agreed terms.
To provide that, for the purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two international Conventions applies is treated as a foreign award.

⚠ Each object is traceable to a provision

Reasons for the award appear in Section 31(3); the limits of jurisdiction in Section 16 and in Section 34(2)(a)(iv); minimal supervision in Section 5; settlement during arbitration in Section 30; enforcement as a decree in Section 36; the status of a conciliation settlement in Sections 73 and 74 as they originally stood; and the treatment of foreign awards in Sections 44 and 53. Where a provision is ambiguous, the object it was enacted to serve is the legitimate guide to its construction.

2. The Scheme

The four Parts, the chapters within Part I, and the Schedules

The Act is divided into four Parts and is supplemented by Schedules. Part I, Sections 2 to 43, governs arbitration where the place of arbitration is in India, and is arranged in ten chapters that follow the life of a reference: general provisions, the arbitration agreement, the composition of the tribunal, its jurisdiction, the conduct of proceedings, the making of the award and termination of proceedings, recourse against the award, finality and enforcement, appeals, and miscellaneous matters. Part II, Sections 44 to 60, governs the enforcement of foreign awards, with Chapter I for New York Convention awards and Chapter II for Geneva Convention awards. Part III contained the law of conciliation. Part IV, Sections 82 to 86, contains supplementary provisions including the power of the High Court to make rules and the repeal and savings clause.

⚠ Part III no longer contains a conciliation procedure

By Section 61 of the Mediation Act, 2023 read with its Sixth Schedule, Sections 61 to 81 of the Arbitration and Conciliation Act, 1996 were replaced by a new Section 61, which provides that a reference to conciliation in any other enactment is to be read as a reference to mediation under the Mediation Act, 2023, and by Section 62, which saves conciliation proceedings already commenced. The older provisions remain important for those proceedings and for understanding the sectoral statutes that still use the word conciliation.

3. The Load-Bearing Provisions of Part I

Provision	Function in the scheme
Section 2(2) and its proviso	Part I applies where the place of arbitration is in India; Sections 9, 27 and parts of Section 37 also apply to an international commercial arbitration seated abroad unless excluded
Section 5	No judicial authority is to intervene except where the Part so provides
Section 7	Definition and form of the arbitration agreement
Section 8	Reference of parties to arbitration where an action is brought in a matter covered by the agreement
Section 9	Interim measures by the court, before or during the proceedings or after the award but before enforcement
Section 11	Appointment of arbitrators by the court or by a designated arbitral institution
Section 12 with the Fifth and Seventh Schedules	Disclosure, grounds of challenge and ineligibility
Section 16	Competence of the tribunal to rule on its own jurisdiction; separability of the clause
Sections 18 and 19	Equal treatment and full opportunity to present the case; freedom from the Code of Civil Procedure, 1908 and the law of evidence
Sections 29A and 29B	Time limit for the award, and fast track procedure
Sections 31 and 31A	Form and contents of the award, and costs
Sections 34, 35, 36 and 37	Recourse against the award, finality, enforcement and appeals

4. The Principles Running through the Act

Party autonomy. Almost every provision on procedure is subject to the agreement of the parties, who may settle the number of arbitrators, the procedure, the seat, the language, the rules of an institution and, in international commercial arbitration, the substantive law.
Minimal court intervention. Section 5 states the rule and the Act names the exceptions; the court supports the process rather than supervising it generally.
Competence-competence and separability. The tribunal decides on its own jurisdiction, and the arbitration clause survives the invalidity of the contract containing it.
Finality. The award binds under Section 35 and is enforced under Section 36; there is no appeal on the merits, and the grounds in Section 34 are exhaustive.
Encouragement of settlement. Section 30 permits the tribunal, with the agreement of the parties, to use mediation or other procedures during the proceedings and to record a settlement as an award on agreed terms.
Equal treatment. Section 18 applies to every arbitration and cannot be contracted out of; its breach is a ground under Section 34(2)(a)(iii).

📖 Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605, decided on 30 April 2025

Held: A Constitution Bench, by a majority of four to one, held that the court has a limited power under Sections 34 and 37 to modify an arbitral award: by severing the invalid portion from the valid portion where the award is severable; by correcting clerical, computational or typographical errors apparent on the face of the record; by modifying post-award interest in some circumstances; and, in the case of the Supreme Court, under Article 142 of the Constitution, to be exercised with great care and within constitutional limits.

Significance: The decision reconciles the conflict between the earlier view that no power of modification exists and the practice of correcting severable defects, and it qualifies, without displacing, the principle that the court exercising jurisdiction under Section 34 does not sit in appeal over the award.

5. The Schedules

First, Second and Third Schedules. The texts of the New York Convention, the Geneva Protocol of 1923 and the Geneva Convention of 1927.
Fourth Schedule. A model fee structure for arbitrators, which applies where the High Court has framed rules for the purpose; relevant chiefly to ad hoc references.
Fifth Schedule. Grounds giving rise to justifiable doubts as to the independence or impartiality of an arbitrator, to guide disclosure.
Sixth Schedule. The form of the disclosure to be made by a prospective arbitrator.
Seventh Schedule. Relationships which make a person ineligible to be appointed, subject to waiver by express agreement in writing after the dispute has arisen.

6. How the Scheme Has Been Adjusted

The architecture has not changed since 1996, but three rounds of amendment have adjusted it. The Amendment Act of 2015 inserted Sections 29A, 29B and 31A and the Schedules on impartiality, narrowed the public policy ground, added patent illegality for purely domestic awards and removed the automatic stay of enforcement. The Amendment Act of 2019 introduced designated arbitral institutions for appointment under Section 11, provided for the Arbitration Council of India and inserted Section 42A on confidentiality. The Amendment Act of 2021 inserted the proviso to Section 36(3) on unconditional stay where fraud or corruption is shown prima facie, and omitted the Eighth Schedule. A draft Amendment Bill of 2024 proposing statutory recognition of emergency arbitration and audio-visual hearings remains under consideration.

7. Related Topics and Provisions

Topic or provision	Connection
Arbitration: Meaning, Nature and Essentials	The concept the Act regulates
Arbitration Act, 1940 vs Arbitration and Conciliation Act, 1996	What the scheme replaced and why
UNCITRAL Model Law and Indian Arbitration Law	The source of the scheme and India's departures
Domestic ADR vs International ADR	The operation of Section 2(2) and Part II
Sections 5, 16, 31, 34, 35 and 36, A&C Act, 1996	The provisions in which the objects are embodied