Two-Tier Arbitration | Permissible Under Arbitration Act

In an interesting development, three bench of Supreme Court in a recent judgment has approved of the two tier arbitration process under the Arbitration and Conciliation Act, 1996 ("Arbitration Act").

The two-tier arbitration process provides the parties dissatisfied with the first award have an opportunity to appeal against the first award by way of appeal, wherein the parties are to be heard afresh on the merits of the case. The second award, then, which is passed at such second arbitration is binding on the parties, subject to the recourse that the parties may have under the provisions of the Arbitration Act.

The permissibility of agreements containing a two-tier arbitration clause had been under doubt for quite some time. There were differences of opinion on this issue between the two judges of the Division Bench of Supreme Court in their judgment which has been pending since May 2006. However, the position now stands cleared in light of the judgment delivered