Conduct of Arbitral Proceedings under Arbitration and Conciliation Act, 1996

Arbitration has emerged as one of the most preferred methods of dispute resolution in commercial and contractual disputes in India. The effectiveness of arbitration does not merely depend on the enforceability of the arbitral award, but largely on how arbitral proceedings are conducted. 

The Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) lays down a comprehensive statutory framework governing arbitral proceedings, with a clear emphasis on fairness, flexibility, and procedural efficiency.

Governing Laws on Conduct of Arbitral Proceedings

The conduct of arbitral proceedings is primarily governed by Chapter V of Part I of the Act, comprising Sections 18 to 27. These provisions regulate the procedural aspects of arbitration, including equal treatment of parties, procedural autonomy, place and language of arbitration, pleadings, hearings, evidence, default of parties, appointment of experts, and court assistance in taking evidence.

Unlike traditional court litigation, arbitration is not bound by rigid procedural laws. The Act consciously departs from the Code of Civil Procedure, 1908 and the Indian Evidence Act, 1872, allowing parties and arbitral tribunals to design procedures suited to the nature of the dispute. At the same time, the Act incorporates essential safeguards of natural justice to ensure fairness and impartiality.

This article provides a detailed analysis of the statutory provisions governing the conduct of arbitral proceedings under the Arbitration and Conciliation Act, 1996, along with doctrinal explanations and judicial principles that guide arbitral practice in India.

Key Provisions on Conduct of Arbitral Proceedings under Arbitration and Conciliation Act, 1996

Equal Treatment of Parties (Section 18)

Section 18 of the Act embodies the most fundamental principle of arbitration procedure. It mandates that:

1. The parties shall be treated with equality, and
2. Each party shall be given a full opportunity to present its case.

This provision reflects the principles of natural justice, particularly the rule against bias and the right to a fair hearing. Section 18 is mandatory in nature and binds the arbitral tribunal irrespective of any agreement between the parties.

Equality of Treatment

Equal treatment means that the arbitral tribunal must act impartially and must not favour one party over the other. Procedural equality does not require identical treatment in all circumstances, but it does require that no party is placed at a disadvantage in presenting its case.

Any act of the arbitral tribunal that gives one party an undue advantage, such as receiving evidence in the absence of the other party or relying on material not disclosed to both parties, would amount to procedural unfairness. Such conduct may render the arbitral award vulnerable to challenge.

Judicial decisions have consistently held that private enquiries, undisclosed communications, or consideration of evidence without giving the other party an opportunity to respond amounts to misconduct and vitiates the award.

Full Opportunity to Present the Case

The second limb of Section 18 requires that each party must be given a full and effective opportunity to present its case. This includes:

• Proper notice of arbitral proceedings
• Adequate opportunity to file pleadings
• Opportunity to lead evidence
• Opportunity to cross-examine witnesses
• Opportunity to address arguments

The concept of “full opportunity” is not rigid and depends on the facts and circumstances of each case. What is reasonable in one arbitration may not be reasonable in another. However, denial of an effective opportunity, either directly or indirectly, would amount to violation of natural justice.

This requirement is closely linked with Section 34(2)(a)(iii) of the Act, which allows setting aside of an arbitral award if a party was unable to present its case.

Determination of Rules of Procedure (Section 19)

Section 19 establishes the principle of procedural autonomy, which is one of the defining features of arbitration.

Non-Applicability of CPC and Evidence Act

Section 19(1) expressly provides that the arbitral tribunal shall not be bound by:

• The Code of Civil Procedure, 1908
• The Indian Evidence Act, 1872

This does not mean that principles underlying these statutes are irrelevant. Rather, it means that arbitral proceedings are not constrained by technical procedural requirements applicable to courts.

Party Autonomy in Procedure

Under Section 19(2), the parties are free to agree on the procedure to be followed by the arbitral tribunal, subject to the provisions of Part I of the Act. This allows parties to:

• Design tailor-made procedures
• Adopt institutional arbitration rules
• Choose simplified or expedited procedures
• Incorporate procedural rules of a particular legal system

If the parties agree to follow certain procedural laws, such laws apply by virtue of party agreement and not by statutory compulsion.

Tribunal’s Discretion in Absence of Agreement

Where parties fail to agree on the procedure, Section 19(3) empowers the arbitral tribunal to conduct proceedings in a manner it considers appropriate. Section 19(4) further authorises the tribunal to determine:

• Admissibility of evidence
• Relevance of evidence
• Materiality of evidence
• Weight to be given to evidence

While exercising this discretion, the arbitral tribunal must act judicially and in conformity with Section 18.

Place of Arbitration (Section 20)

The determination of the place, or seat, of arbitration is of great legal significance because it determines the lex arbitri, that is, the law governing the arbitration.

Party Autonomy

Section 20(1) allows parties to agree on the place of arbitration. This agreement may be explicit or implied, including by reference to institutional rules.

Tribunal’s Power in Absence of Agreement

If parties fail to agree, Section 20(2) authorises the arbitral tribunal to determine the place of arbitration, having regard to:

• Circumstances of the case
• Convenience of the parties

The discretion under this provision must be exercised judiciously and not arbitrarily.

Venue for Hearings

Section 20(3) clarifies that the tribunal may hold meetings or hearings at any place it considers appropriate for:

• Consultation among arbitrators
• Hearing witnesses or parties
• Inspection of documents or property

Such meetings do not change the juridical seat of arbitration.

Commencement of Arbitral Proceedings (Section 21)

Section 21 determines the point in time when arbitral proceedings are deemed to commence.

Unless otherwise agreed, arbitration commences on the date on which the respondent receives a request for the dispute to be referred to arbitration.

Importance of Commencement Date

The date of commencement is crucial for several reasons:

• Applicability of the Limitation Act, 1963
• Compliance with time-bar clauses in arbitration agreements
• Determination of jurisdictional timelines

Section 3 of the Act governs the rules regarding receipt of written communications, and Section 43 makes the Limitation Act applicable to arbitration.

The form of the request is immaterial. What matters is that the communication clearly indicates the intention to refer the dispute to arbitration and identifies the dispute.

Language of Arbitral Proceedings (Section 22)

Section 22 deals with the language to be used in arbitral proceedings.

Party Autonomy

Under Section 22(1), parties are free to agree on the language or languages of arbitration.

Tribunal’s Determination

If parties fail to agree, Section 22(2) empowers the arbitral tribunal to determine the language.

Scope of Language Determination

Unless otherwise specified, the chosen language applies to:

• Written pleadings
• Oral hearings
• Arbitral awards
• Tribunal communications

The tribunal may also order translation of documents under Section 22(4).

While determining the language, the tribunal must ensure that all parties are able to effectively participate in the proceedings, in line with Section 18.

Statements of Claim and Defence (Section 23)

Section 23 governs pleadings before the arbitral tribunal.

Statement of Claim

The claimant must state:

• Facts supporting the claim
• Points at issue
• Relief or remedy sought

Statement of Defence

The respondent must respond to the claimant’s assertions and state the defence.

Submission of Documents

Parties may submit relevant documents along with pleadings or indicate documents to be relied upon later.

Amendment of Pleadings

Under Section 23(3), parties may amend or supplement pleadings unless:

• Parties have agreed otherwise, or
• Tribunal considers it inappropriate due to delay

Procedural Flexibility

Parties may agree on timelines and contents of pleadings. In absence of agreement, the tribunal determines the procedure. Parties may also adopt procedural rules of arbitral institutions or principles of civil procedure by agreement.

Hearings and Written Proceedings (Section 24)

Section 24 regulates oral hearings and document-based proceedings.

Oral Hearings or Documents Only

Unless otherwise agreed, the tribunal decides whether proceedings shall be:

• Oral, or
• Based on documents

However, if a party requests an oral hearing, the tribunal must grant it unless parties have agreed otherwise.

Notice of Hearings

Section 24(2) requires sufficient advance notice of hearings and meetings for inspection of documents or property.

Disclosure of Materials

Section 24(3) mandates that all statements, documents, and expert reports relied upon by the tribunal must be communicated to both parties.

Evidence in Arbitration

Evidence may be adduced through:

• Documentary evidence
• Oral or written witness testimony
• Expert opinions
• Inspection of subject-matter

Although not bound by the Evidence Act, arbitral tribunals often follow its basic principles, particularly in examination and cross-examination of witnesses.

Default of a Party (Section 25)

Section 25 addresses situations where a party defaults without sufficient cause.

Default by Claimant

If the claimant fails to submit the statement of claim, the tribunal shall terminate the proceedings.

Default by Respondent

Failure by the respondent to submit defence does not amount to admission. The tribunal may continue proceedings.

Non-Appearance or Failure to Produce Evidence

If a party fails to appear or produce evidence, the tribunal may proceed and make an award based on available material.

This provision ensures that arbitration is not frustrated by deliberate non-cooperation.

Appointment of Experts by Arbitral Tribunal (Section 26)

Section 26 empowers the arbitral tribunal to appoint experts for technical or specialised issues.

Role of Experts

Experts assist the tribunal by providing impartial opinions on technical matters such as engineering, accounting, or valuation.

Participation and Examination

Experts may be questioned by parties, and parties may present their own expert witnesses.

Access to Materials

Experts must disclose all materials relied upon in preparing their reports when requested by a party.

Court Assistance in Taking Evidence (Section 27)

Arbitral tribunals lack coercive powers to compel witnesses or third parties. Section 27 bridges this gap.

Application to Court

The tribunal or a party with tribunal approval may seek court assistance for:

• Summoning witnesses
• Production of documents
• Inspection of property

Powers of Court

The court may issue the same processes as in civil suits, including summons and commissions. Non-compliance attracts penalties similar to court proceedings.

Section 27 ensures effective evidence-gathering while maintaining minimal judicial intervention.

Conclusion

The provisions governing the conduct of arbitral proceedings under the Arbitration and Conciliation Act, 1996 reflect a carefully balanced approach. The Act prioritises party autonomy and procedural flexibility while embedding essential safeguards of fairness and natural justice. By freeing arbitration from rigid procedural laws and empowering tribunals with wide discretion, the Act promotes efficiency and adaptability. At the same time, mandatory principles such as equal treatment, full opportunity to present the case, and transparency ensure legitimacy and fairness.

Collectively, Sections 18 to 27 form the procedural backbone of arbitration in India and play a crucial role in strengthening arbitration as a credible and effective alternative dispute resolution mechanism.