Definition, Origin and Scope

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LECTURE 01 (INTRODUCTION, ORIGIN AND SCOPE)

INTRODUCTION:-

Alternative Dispute Resolution was conceived of as a dispute resolution mechanism outside the
court of law established by the Sovereign or the State. ADR can be defined as a collective
description of process or mechanisms that parties can use to resolve disputes rather than bringing
a claim through the formal court structure. ADR is a key aspect of the civil justice system and has
grown over the past forty years.
Arbitration is a method of settlement of disputes as an alternative to the normal judicial method. It
is one of the methods of alternative dispute resolution (ADR). Of all the forms of ADR like
conciliation, mediation, negotiations, etc, arbitration has become the dominant form of ADR. It is
more firmly established in its utility. The law relating to arbitration is contained in the Arbitration
and Conciliation Act, 1996. It came into force on the 25th of January, 1996. Presently it's the
Arbitration and Conciliation (Amendment) Act, 2019, which came into force in India on 9th August,
2019 so as to promote institutional arbitration in India and expedite the resolution of commercial
disputes with a view to making India a hub for domestic arbitration and international commercial
arbitration. Like arbitration, conciliation is also getting increasing worldwide recognition as an
instrument for settlement of disputes. However, with the passage of time, the phrases "Arbitration
and ADR" came in vogue, which implied that arbitration was distinct from other ADR forms.
Before the enactment of Arbitration and Conciliation Act, 1996 the practice of amicable resolution
of disputes can be traced back to historic times, when the villages' disputes were resolved
between members of particular relations or occupations or between members of a particular
locality.
"Of all mankind's adventures in search of peace and justice, arbitration is amongst the
earliest. Long before law was established or courts were organised, or judges has
formulated principles of law, man had resorted to arbitration for resolving disputes."
With the advent of the British rule and the introduction of their legal system in India starting from
the Bengal Regulation of 1772, the traditional system of dispute resolution methods in India
gradually declined. The successive Civil Procedure Codes enacted in 1859, 1877 and 1882, which
codified the procedure of civil courts, dealt with both arbitration between parties to a suit and
arbitration without the intervention of a court. The first Indian Arbitration Act was enacted in 1899.
The year 1940 is an important year in the history of law of arbitration in British India, as in that year
the Arbitration Act, 1940 was enacted. It consolidated and amended the law relating to arbitration
as contained in the Indian Arbitration Act, 1899 and the Second Schedule to the Code of Civil
Procedure, 1908. It was largely based on the English Arbitration Act, 1934. Later on this was
repealed and thus The Act of 1996 was enacted due to some misconstruction of the before Act of
1940.
The Arbitration Act, 1940 dealt with only domestic arbitration. In so far as international arbitration
was concerned, there was no substantive law on the subject. However, enforcement of foreign
awards in this country was governed by two enactments, the Arbitration (Protocol and Convention)
Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. These two statutes,
in their entity, except for Section 3 (in both of them) did not deal with international arbitration as
such but merely laid down the conditions for 'enforcement of foreign awards' in India.
Though the Act of 1940 was a good piece of legislation but it was considered to be ineffective.
In M/S Guru Nanak Foundation v. M/S Ratan Singh & Sons, (1981) 4 SCC 634, the Hon'ble
Supreme Court observed that the Act was ineffective and the way the proceedings under this Act
were conducted in the Courts made the lawyers laugh and legal philosophers weep.
In India, ADR has an important place, because of historical reasons. In regard to the global
perspective, the international business community realised that court cases was not only time
 consuming but also very expensive. Various methods were adopted to solve the disputes. They
are arbitration, conciliation, mediation, negotiation and the Lok Adalats. Alternative Dispute
Resolution is today being increasingly acknowledged in the field of law as well as in the
commercial sector.
The very Reasons for origin of Alternative Dispute Resolution are the tiresome processes of
litigation, costs and inadequacy of the court system. It broke through the resistance of the vested
interests because of its ability to provide cheap and quick relief. In the last quarter of the previous
century, there was the phenomenal growth in science and technology. It made a great impact on
commercial life by increasing competition throughout the world. It also generated a concern for
consumers for protection of their rights.
The purpose of ADR is to resolve the conflict in a more cost effective and expedited manner, while
fostering long term relationships. ADR is in fact a less adverse means, of settling disputes that
may not involve courts. ADR involves finding other ways (apart from regular litigation) which act as
a substitute for litigation and resolve civil disputes, ADR procedure are widely recommended to
reduce the number of cases and provide cheaper and less adverse form of justice, which is a
lesser formal and complicated system. Off late even Judges have started recommending ADR to
avoid court cases. In essence the system of ADR emphasizes upon:
 Mediation rather than winner take all.
 Increasing Accessibility to justice.
 Improving efficiency and reducing court delays.
ADR aims to provide the parties with cheap, speedy and less formalistic remedy to the aggrieved
party. It aims at providing a remedy which is most appropriate in the circumstances of the case.
This makes ADR a viable substitution for arbitration or litigation. ADR is an umbrella term for a
variety of processes which differ in form and application. Alternative Dispute Resolution, as the
name suggests, is an alternative to the traditional process of dispute resolution through courts. It
refers to a set of practices and techniques to resolve disputes outside the courts. It is mostly a
non-judicial means or procedure for the settlement of disputes. In its wider sense, the term refers
to everything from facilitated settlement negotiations in which parties are encouraged to negotiate
directly with each other prior to some other legal process, to arbitration systems or mini trials that
look and feel very much like a court room process.
The search for a simple, quick, flexible and accessible dispute resolution system has resulted in
the adoption of 'Alternative Dispute Resolution' mechanisms. The primary object of ADR system is
avoidance of vexation, expense and delay and promotion of the ideal of "access to justice".
'Alternative Dispute Resolution' or ADR is an attempt to devise machinery which should be
capable of providing an alternative to the conventional methods of resolving disputes. An
alternative means the privilege of choosing one of two things or courses offered at one's choice. It
does not mean the choice of an alternative court but something which is an alternative to court
procedures or something which can operate as court annexed procedure. The ADR techniques
mainly consist of negotiation, conciliation, mediation, arbitration and a series of hybrid procedures.
ADR has many advantages and disadvantages.
Few of the advantages are:-
It can be used at anytime, reduces the number of contentious issues, It costs less than regular
litigation, it is flexible, ADR can be used with or without a lawyer, it helps in reduction of work load
of courts, etc. Besides advantages there are various drawbacks of ADR, some of them are
follows
ADR may not be appropriate, and may even carry a degree of risk for one of the parties,
imbalance of power between the parties which could make face-to-face mediation unfair, legal
rights and Human rights cannot be relied on in ADR processes, Ombudsmen investigations can be
very slow, etc.
"It is settled law that free legal aid to the indigent persons who cannot defend themselves in a
Court of law is a Constitutional mandate under Article 39-A and 21 of the Indian Constitution. The
right to life is guaranteed by Article 21." The law has to help the poor who do not have means i.e.
economic means, to fight their causes.
 The history of Alternative Dispute Resolution forum at international level can be traced back from
the period of Renaissance, when Catholic Popes acted as Popes as arbitrators in conflicts
between European countries. Many international initiatives are taken towards alternative dispute
resolution. The growth of international trade is bound to give rise to international disputes which
transcend national frontiers and geographical boundaries. ADR has given fruitful results not only in
international political arena but also in international business world in settling commercial disputes
among many co-operative houses. ADR is now a growing and accepted tool of reform in dispute
management in American and European commercial communities. ADR can be considered as a
co-operative problem-solving system. The biggest stepping stone in the field of international ADR
is the adoption of UNCITRAL (United Nations Commission on International Trade Law) model on
international commercial arbitration. An important feature of the said model is that it has
harmonised the concept of arbitration and conciliation in order to designate it for universal
application. General Assembly of UN also recommended its member countries to adopt this model
in view to have uniform laws for ADR mechanism. Many international treaties and conventions
have been enacted for establishing ADR worldwide. Some of the important international
conventions on arbitration are:
 The Geneva Protocol on Arbitration clauses of 1923.
 The Geneva Convention on the execution of foreign award, 1927.
 The New York Convention of 1958 on the recognition and enforcement of foreign arbitral
award.
In India, Part III of Arbitration and Conciliation Act, 1996 provides for International Commercial
Arbitration.
Another step in strengthening the international commercial arbitration is the established of various
institutions and organizations such as:
 International Court of Arbitration of the International Chamber of Commerce (ICC).
 Arbitration and Mediation Centre of World Intellectual Property Organization.
 American Arbitration Association (AAA).
 Tehran Regional Arbitration Centre (TRAC).
 International Centre for Dispute Resolution (ICDR).
 Organization of American States (OAS), etc.
ADR strategies which facilitate the development of consensual solution by the disputing parties
are therefore considered a viable alternative. ADR methods such as mediation, negotiation and
arbitration along with many sub-strategies are increasingly being employed world over in a wide
range of conflict situations, ranging from family and marital disputes, business and commercial
conflicts, personal injury suits, employment matters, medical care disputes, construction disputes
to more complex disputes of a public dimension such as environmental disputes, criminal
prosecutions, professional disciplinary proceedings, inter-state or international boundary and water
disputes.
The establishment of the International Centre for Alternative Dispute Resolution (ICADR), an
independent non-profit making body, in New Delhi on May 1995 is a significant event in the matter
of promotion of ADR movement in India. Lastly, to make arbitration and conciliation a success
story in India, three things are needed:
1. A good law that is responsive to both domestic and international requirements.
2. Honest and competent arbitrators and conciliators without whom any law or arbitration or
conciliation can succeed.
3. Availability of modern facilities and services such as meeting rooms, communication
facilities, administrative and secretariat services.
With the increasing population, complications and disputes are increasing day by day between the
parties regarding various matters and as the courts are having a huge number of cases pending in
there, this method is put into practice for reducing the burden of cases and to solve the matters
quickly in parallel with the fast running of the life in the society. Dispute resolution is one of the
main functions of the stable society. States function through different organs and the judiciary is
one that is directly responsible for the administration of justice. Resolving disputes is fundamental
to the peaceful existence of society. The only field where the Courts in India have recognized ADR
is in the field of arbitration.
Preamble to our Constitution reflects such aspiration as "justice-social, economic and political".
Article 39A of the Constitution provides for ensuring equal access to justice. Administration of
Justice involves protection of the innocent, punishment of the guilty and the satisfactory resolution
of disputes.
In order to overcome the much criticised delay in justice delivery, the adoption of Alternative
Dispute Resolution (ADR) mechanisms like Lok Adalats, arbitration, mediation and conciliation
was thought of and subsequently practised with commendable success. Although the alternative
mechanisms have delivered speedy justice to the people, yet the exercise has raised some
pertinent questions by some legal luminaries.
The Apex Court in the case of Food Corporation of India v. Joginder Pal, AIR 1989 SCC 1263,
also laid emphases on ADR system of adjudication through arbitration, mediation and conciliation
is a modern innovation into the arena of the legal system and it has brought revolutionary changes
in the administration of justice. It can provide a better solution to a dispute more expeditiously and
at a lesser cost than in regular litigation.
The Supreme Court realized the scope of ADRM in procedural as well in family law in Jag Raj
Singh v. Bripal Kaur, (2007) 2 SCC 564, the Court affirmed and observed that the approach of a
court of law in matrimonial matters is much more constructive, affirmative and productive rather
than abstract, theoretical or doctrinaire. The Court also said that matrimonial matters must be
considered by the courts with human angle and sensitivity and to make every endeavour to bring
about reconciliation between the parties.
Since law is changing with the changing demand of time, to meet with the needs of the peoples.
ADR mechanisms would certainly supplement the existing adjudicatory machinery so as to
develop the confidence of common man in the justice delivery system.
Recently, in the past few years E- Commerce has become very important and is inevitable. The
advent of internet has created challenges and opportunities for dispute resolution mechanisms
and particularly ADR. However, the lack of dispute resolution mechanisms in cyberspace will
constitute a serious obstacle in the growth and development of e-commerce. Alternative Dispute
Resolution (ADR) and the internet are two very topical issues. Online Alternative Dispute
Resolution (OADR) or ADR online, refers to the use of internet technology, wholly or partially, as a
medium by which to conduct the proceedings of ADR in order to resolve commercial disputes that
arise from the use of the Internet. Neutral private bodies operate those proceedings under
published rules of procedure. Thus ADR emerged as a powerful weapon for resolution of disputes
at domestic as well as international level. It is developing as a separate and independent branch of
legal discipline.
The growth of Online Dispute Resolution (ODR) is very recent. With the fast and quick lifestyle and
with the increase of various e-commerce problems, this method is adopted as it can solve the
disputes very fast and is easily accessible at a low cost. The whole procedure is carried over
online, no matter wherever the parties are. Distance does not cause any barrier in solving such
disputes whether it is business related or consumer related, whether related to marital separation
or interstate conflicts. The concept of Online Dispute Resolution (ODR) has been accepted in
many countries worldwide.
In India, to reduce the burdening of the already overburdened courts the Alternative Dispute
Resolution Mechanism has been put into practice and is gaining its popularity as days are passing
by. The importance of Information and Communication Technology (ICT) for resolving
contemporary electronic commerce (e-commerce) and other disputes. The best example of the
same is the use of Online Dispute Resolution (ODR) for resolving these disputes and
misunderstandings. The swift growth of e-commerce and website contracts has increased the
potential for conflicts over contracts which have been entered into online. The use of Online
Dispute Resolution Mechanism (ODRM) to resolve such e-commerce and web site contracts
disputes are crucial for building consumer confidence and permitting access to justice in an online
business environment. These ODRM are not part and parcel of the traditional dispute resolution
machinery popularly known as judiciary but is an alternative and efficacious institution known as
ADRM. Thus, ADR techniques are extra-judicial in character.
The term Online Dispute Resolution (ODR) has emerged as the most used term in the recent
years but it is also termed as internet dispute resolution, electronic dispute resolution, electronic
ADR, Online ADR. Various methods of Online Dispute Resolution adopted such as- Automated
Negotiation, Assisted Negotiation, Online Arbitration, Uniform Domain Names Dispute Resolution
Policy, Chargeback's.
If we need to relate the practice of Online Dispute Resolution Mechanisms with the Legal
framework then we need to go through the provisions of the Information Technology Act, 2000 (IT
Act, 2000) for establishing an ICT base that may be conducive for the development of ODRM in
India. The Government must appreciate the need of ODRM for resolving disputes originating due
to the liberalisation of its economy. It is also important to remember that the foreign countries are
very particular about getting their disputes resolved through ADR/ODR methods and India may
find itself in an embarrassing situation if its ICT strategies are not modified accordingly.
As this is a growing up method of dispute settlement and is in process, so it can be considered
that there are a lot of advantages. And thus, it shall be glad to mention some of the advantages,
they are- hassle-free process, information is kept confidential, speedy outcome, highly
economical, etc.
Actually the main aim or rather the mission in using ODR is to increase integrity and accountability
in the Internet community, both locally and worldwide. ODR is firstly, concerned with the civilized
(i.e. peaceful) resolution of disputes between private parties, and, secondly, with the prevention of
such conflicts through the provision of legal certainty.
The judgment of the Supreme Court in State of Maharashtra v. Dr. Praful B. Desai, (2003) 4
SCC 601, is a landmark judgment as it has the potential to seek help of those witnesses who are
crucial for rendering the complete justice but who cannot come due to "territorial distances" or
even due to fear, expenses, old age, etc. The Courts in India have the power to maintain
anonymity of the witnesses to protect them from threats and harm and the use of information
technology is the safest bet for the same. The testimony of a witness can be recorded
electronically the access to which can be legitimately and lawfully denied by the Courts to meet
the ends of justice.
The judiciary in India is not only aware of the advantages of information technology but is actively
and positively using it in the administration of justice, particularly the criminal justice. Thus, it can
be safely concluded that the "E-justice system" has found its existence in India. It is not at all
absurd to suggest that ODRM will also find its place in the Indian legal system very soon.
Recently many initiatives are taken by the governments around the world, industry groups,
consumer advocacy groups and dispute resolution professionals devoted great attention to the
development of ODR services and the standards and oversight over these ODR providers. The
Internet will work out for arbitration online what Google did for the retrieval of information. By
bringing the concept of ODR to our home, office or cell phone, time and inconvenience are no
longer an obstacle to justice worldwide.
In court system, time zones and physical locations are obstacles to justice. It is very expensive as
well as time consuming. Whereas, in Online Dispute Resolution Mechanisms (ODRM) all the
procedures is carried over through online and so the matter is solved or rather settled within a few
days or which may take a week or so, but shall not extend to months or year after years. With the
help of ODR a wide range of disputes are solved in a very short time, where disputes includes
inter-personal disputes i.e. consumer to consumer, business to business, business to consumer;
marital separation; court disputes and inter-state disputes.

ORIGIN OF ALTERNATIVE DISPUTE RESOLUTION SYSTEM IN INDIA

1. Ancient India
It was since the ancient India; law of arbitration was very popular and was highly accessible.
While dealing with such cases on arbitration, the awards were known as decisions
of Panchayats, commonly known as Panchats. The decisions of Panchayats were of binding
nature in law in force in those times. The head of a family, the chief of a community or selected
inhabitants of a village or town might act as Panchayat.
In words of Martin, C.J., "arbitration was indeed a striking feature of ordinary Indian life and it
prevailed in all ranks of life to a much greater extent than was the case of England. To refer
matters to a Panch, was one of the natural ways of deciding many disputes in India".
The Hindu idea of Panchayats was that a Panchayat was the lowest tribunal and as such its
award was subject to appeal. The Bengal Regulation of 1781 imported the idea that it was the
tribunal of the parties' own choice, hence in the absence of misconduct the parties were bound
by its decision. Accordingly, the only course left open to the aggrieved parties was that they
had to impeach the awards on the grounds of misconducts of the Panchayats. The known
misconduct was gross corruption or partiality. This caused the respectable persons to be
reluctant to become Panches and the Panchayat system fell in disuse or public infancy. Then
the Regulation of 1787 empowered the Courts to refer certain suits to arbitration, but no
provision was made in the Regulation for cases wherein difference of opinion among the
arbitrator arose. The Bengal Regulation of 1793 (XVI of 1793) empowered courts to refer
matters to arbitration with the consent of the parties where the value of the suit did not exceed
Rs. 200/- and the suits were for accounts, partnership, debts, non-performance of contracts,
etc. In this Regulation, the procedure for conducting an arbitration proceeding was also
provided. Regulation XV of 1795 extended the Regulation XVI of 1793 to Benaras. Similarly,
the Regulation XXI of 1803 extended the Regulation XVI of the territory ceded the Nawab
Vazeer.
Since by then, the Madras Regulation IV of 1816 and V of 1816 empowered the Panchayats to
settle disputes by them. In Bombay Regulations IV and VII of 1827 similar provisions were
made.
2. British Period:
Thereafter, the Civil Procedure Code, 1859; the Indian Contract Act, 1872 and the Specific
Relief Act, 1877 mandated that no contract to refer the present or further differences to
arbitration could specifically enforce. A party refusing to reform his part of the contract was
debarred from bringing a suit on the same subject-matter. The Arbitration Act, 1877 came as a
complete code in itself. It made rules as to appeals and the Code of Civil Procedure aforesaid
was not applicable to matters covered by the Arbitration Act, or the second schedule to the
Code of Civil Procedure. The Code of Civil Procedure, 1859 (VII of 1859), was the first Civil
Code of British India. The law relating arbitration was incorporated in Chapter VI of the Code
(Sections- 312 to 327). It was, however, not applicable to the Supreme Court or to the
Presidency Small Cause Courts or to non- Regulation Provinces. This Act was repealed by Act
X of 1877 which consolidation the law of Civil Procedure which was further replaced by Act XIV
of 1882. This Code of Civil Procedure also was replaced by the Code of Civil Procedure, 1908
(V of 1908), the present Code. The Second Schedule of the Code comprised the law regarding
arbitration.
The law of Arbitration in the British Rule in India was comprised in two enactments. One was
the Indian Arbitration Act, 1899, which was based on the English Arbitration Act, 1899. Many
sections of the Indian Act were the verbal reproduction of the schedule to the Code of Civil
Procedure Code, 1908. The Arbitration Act, 1899 extended to the Presidency Towns and to
such other areas as it might be extended by the appropriate Provincial Government. Its scope
was confined to 'arbitration' by agreement without the intervention of a Court. Outside the
scope of operation of Arbitration Act 1899, the Second Schedule to the Code of Civil Procedure
Code, 1908 was applicable. The Schedule related mostly to arbitration in suits. The Schedule
contained an alternative method also, whereby the parties to a dispute or any of them might file
the concerned arbitration agreement before a Court having jurisdiction, which Court following a
certain procedure referred the matters to an arbitrator.
The Arbitration Act, 1940 consolidated and amended the law relating to Arbitration very
exhaustively. This Act repealed Section 89, clauses (a) to (f), of sub-section (1) of Section 104
and the Second Schedule to the Code of 1908. The Civil Justice Committee had recommended
various changes in the Arbitration Law. Since the Arbitration Act of 1899 was based on the
English Law then in force, to which several substantial amendments were affected by the
Amendment Act of the British Parliament in 1934. The recommendations of the Civil Justice
Committee were scrutinized together and the Arbitration Bill sought to consolidate and
standardise the law relative to arbitration throughout British India in details. This Bill received
the assent of the Governor-General on 11th March, 1940 and was called the Arbitration Act,
1940. This Act was passed mainly to consolidate and amend the law relating to arbitration.
The Arbitration Act, 1940 had been described in the oft-quoted passage from the Guru Nanak
Foundation vs. Rattan Singh and Sons ,(1981) 4 SCC 634 as follows-
"However, the way in which the proceedings under the act are conducted and without an
exception challenged in courts, has made lawyers laugh and legal philosophers weep.
Experience shows and laws reports bear ample testimony that the proceedings under the Act
have become highly technical accompanied by unending prolixity, at every stage providing a
legal trap to the unwary".
Interminable, time consuming, complex and expensive court procedures impelled jurists to
search for an alternative forum, less formal, more effective and speedy for resolution of
disputes avoiding procedural claptrap and this led them to Arbitration Act, 1940.
The system of resolving disputes by an Arbitrator was not only confined to India but elsewhere
in the world also. Since ages, the practice was prevalent in several parts of the world. Greek
and Romans attached greater importance to arbitration.
The Arbitration Act, 1940 dealt with only domestic arbitration. In so far as international
arbitration was concerned, there was no substantive law on the subject. However, enforcement
of foreign awards in this country was governed by two enactments, the Arbitration (Protocol
and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961.
These two statutes, in their entity, except for Section 3 (in both of them) did not deal with
international arbitration as such but merely laid down the conditions for 'enforcement of foreign
awards' in India.
The Arbitration Act of 1940, though a good piece of legislation, in its actual operation and
implementation by all concerned – the parties, arbitrators, lawyers and the courts- proved
ineffective. In M/S Guru Nanak Foundation v. M/S Ratan Singh & Sons, the Hon'ble
Supreme Court observed that the Act was ineffective and the way the proceedings under this
Act were conducted in the Courts made the lawyers laugh and legal philosophers weep.
Experience shows and law reports bear ample testimony that the proceedings under the Act
have become highly technical accompanied by unending prolixity at every stage providing a
legal trap to the unwary. Informal forum chosen by the parties for expeditious disposal of the
disputes has by the decision of the courts been clothed with "legalese" of unforeseeable
complexity.
A few years later, the Court suggested simplification of the law of arbitration releasing the law
from the shackles of technical rules of interpretation. The Hon'ble Court observed in Food
Corporation of India v. Joginderpal Mohinderpal, (1981) 2 SCC 349,
The law of arbitration should be simple, less technical and more responsible to the actual
realities of the situations, but must be responsive to the canons of justice and fair play and
make the arbitrator adhere to such process and norms which will create confidence, not only by
doing justice between the parties, but by creating sense that justice appears to have been
done.
3. Modern India:
The Arbitration Act, 1940 was holding the field for nearly half a century but with the
phenomenal growth of commerce and industry the effect of globalization required substantial
changes. The Alternative Dispute Redressal mechanism was increasingly attracting serious
notice and that led to the enactment of Arbitration and Conciliation Act, 1996 and the
incorporation of Section 89 of the Code of Civil Procedure, 1908 i.e. 1st July, 2002 as a part of
this mechanism.
The Arbitration Act, 1940 was not meeting the requirements of either the international or
domestic standards of resolving disputes. Enormous delays and court intervention frustrated
the very purpose of arbitration as a means for expeditious resolution of disputes. The Supreme
Court in several cases repeatedly pointed out the need to change the law. The Public Accounts
Committee too deprecated the Arbitration Act of 1940. In the conferences of Chief Justices,
Chief Ministers and Law Ministers of all the States, it was decided that since the entire burden
of justice system cannot be borne by the courts alone, an Alternative Dispute Resolution
system should be adopted. Trade and industry also demanded drastic changes in the 1940
Act. The Government of India thought it necessary to provide a new forum and procedure for
resolving international and domestic disputes quickly.
Alternative Dispute Resolution is today being increasingly acknowledged in the field of law as
well as in the commercial sector. The very reasons for origin of Alternative Dispute Resolution
are the tiresome processes of litigation, costs and inadequacy of the court system. It broke
through the resistance of the vested interests because of its ability to provide cheap and quick
relief. In the last quarter of the previous century, there was the phenomenal growth in science
and technology. It made a great impact on commercial life by increasing competition
throughout the world. It also generated a concern for consumers for protection of their rights.
The legal system did not give any response to the new atmosphere and problems of the
commercial world. Thus ADR emerged as a powerful weapon for resolution of disputes at
domestic as well as international level. It is developing as a separate and independent branch
of legal discipline.
It offers to resolve matters of litigants, whether in business causes or otherwise, who are not
able to start any process of negotiation and reach any settlement. Alternative Dispute
Resolution has started gaining its ground as against litigation and arbitration.
In modern India for the first time where Alternative Dispute Resolution as a method of
conciliation has been effectively introduced and recognised by law was in Labour Law, namely
Industrial Dispute Act, 1947. Conciliation has been statutorily recognized as an effective
method of dispute resolution in relation to disputes between workers and the management. All
parties to an industrial dispute who have had the misfortune of going through litigation knew
that it is a tedious process and one which could go well beyond the life time of some of the
beneficiaries. It is this factor that has contributed greatly to the success of conciliation in
industrial relations.
Thus "The Arbitration and Conciliation Act, 1996"came into being. The law relating to
Arbitration and Conciliation is almost the same as in the advanced countries. Conciliation has
been given statutory recognition as a means for settlement of the disputes in terms of this Act.
In addition to this, the new Act also guarantees independence and impartiality of the arbitrators
irrespective of their nationality. The new Act of 1996 brought in several changes to expedite the
process of arbitration. This legislation has developed confidence among foreign parties
interested to invest in India or to go for joint ventures, foreign investment, transfer of technology
and foreign collaborations. Presently it's the Arbitration and Conciliation (Amendment) Act,
2019, which came into force in India on 9th August, 2019 so as to promote institutional
arbitration in India and expedite the resolution of commercial disputes with a view to making
India a hub for domestic arbitration and international commercial arbitration.
The emergence of alternative dispute resolution has been one of the most significant
movements as a part of conflict management and judicial reform, and it has become a global
necessity. Such specially devised machinery can also be described as "Appropriate Dispute
Resolution" or "Amicable Dispute Resolution" so as to stress upon its non-adversarial
objectives. In disputes arising across national frontiers covering the field of private international
law ADR is of special significance to combat the problems of applicability of laws and
enforcement.
ADR has thus been a vital, vociferous, vocal and vibrant part of our historical past.
Undoubtedly, the concept and philosophy of Lok Adalat or "People's Court Verdict" has been
mothered by the Indian contribution. It has very deep and long roots not only in the recorded
history but even in pre-historical period. It has proved to be a very effective alternative to
litigation. People's Court is one of the fine and familiar forum which has been playing an
important role still today in settlement of disputes.
Modern ADR is a voluntary system, according to which the parties enter a structured
negotiation or refer their disputes to a third party for evaluation and/or facilitation of resolution.
Especially in the light of the facts that the justice system is flooded by disputes of variable
importance and complexity, and that the parties are almost invariably intimidated by the
atmosphere in the courtroom and the litigation process itself. ADR has now become an
acceptable and often preferred alternative to judicial settlement and an effective tool for
reduction of arrears of case.
 SCOPE OF ALTERNATIVE DISPUTE RESOLUTION

It is the spirit and not the form of law that keeps the justice alive" – LJ Earl Warren.
The concept of Conflict Management through Alternative Dispute Resolution (ADR) has introduced
a new mechanism of dispute resolution that is non adversarial. A dispute is basically 'lis inter
partes' and the justice dispensation system in India has found an alternative to Adversarial
litigation in the form of ADR Mechanism.
"Alternative Dispute Resolution" (ADR) is supposed to provide an alternative not only to civil
litigation by adjudicatory procedures but includes arbitration itself. The institution of arbitration
came into being as a very useful alternative to litigation. But it is now being viewed as closer to
litigation because it has to be in accordance with statutory provisions and becomes virtually an
adjudicatory process with all the formalities of the functioning of a court. A method of dispute
resolution would be considered as a real alternative only if it can dispense with the adjudicatory
process, even if it is wholly a consensual process. It may be worked by a neutral third person who
may bridge the gap between the parties by bringing them together through a process of
conciliation, mediation or negotiations.
Nevertheless, arbitration has also been considered as an alternative to litigation and is generally
included in the study of all other alternatives. This is so because arbitration has been the mother
source of other alternatives not only in substance but also in the procedural working of the
alternative methods. The principles and procedure of arbitration have influenced the growth of
many of the ancillary and hybrid processes used in the alternative methods of dispute resolution.
ADR can be defined as a technique of dispute resolution through the intervention of a third party
whose decision is not legally binding on the parties. It can also be described as mediation though
mediation is only one of the modes of ADR. ADR flourishes because it avoids rigidity and
inflexibility which is inevitable in litigation process apart from high lawyer and court fee and long
delays.
ADR aims to provide the parties with cheap, speedy and less formalistic remedy to the aggrieved
party. It aims at providing a remedy which is most appropriate in the circumstances of the case.
This makes ADR a viable substitution for arbitration or litigation. In western countries, neutral
evaluation is also frequently resorted to but in India this or other forms of ADR have not yet come
in vogue. Conciliation and mediation are often used as interchangeable terms although there is a
subtle difference between the two.
As previously noted, ADR is a broad spectrum of structured processes, including mediation and
conciliation, which does not include litigation though it may be linked to or integrated with litigation,
and which a involves the assistance of a neutral third party, and which empowers parties to
resolve their own disputes. ADR is an umbrella term for a variety of processes which differ in form
and application. Differences include: levels of formality, the presence of lawyers and other parties,
the role of the third party (for example, the mediator) and the legal status of any agreement
reached. Some common features relating to the acronym ADR. For example:
i. There is a wide range of ADR processes;
ii. ADR excludes litigation;
iii. ADR is a structured process;
iv. ADR normally involves the presence of an impartial and independent third party;
v. Depending on the ADR process, the third party assists the other two parties to reach a
decision, or makes a decision on their behalf; and
vi. A decision reached in ADR may be binding or non-binding.
Time has come to think to provide a forum for the poor and needy people who approach the Law
Courts to redress their grievance speedily. As we all know the delay in disposal of cases in Law
Courts, for whatever reason it may be, has really defeated the purpose for which the people
approach the Courts to their redressal. Justice delayed is justice denied and at the same time
justice hurried will make the justice buried. So we will have to find out a via media between these
two to render social justice to the poor and needy who wants to seek their grievance redressed
through Law Court. Considering the delay in resolving the dispute Abraham Lincoln has once said:
"Discourage litigation. Persuade your neighbours to compromise whenever you can point out to
them how the nominal winner is often a real loser, in fees, expenses, and waste of time".
A committee was formed under Indira Gandhi Government, to recommend measures at national
level to secure for the people a democracy of remedies and easy access to justice. In one of such
committee meetings a dialectical diagnosis of the Pathology of Indo Anglican Judicial Process was
presented by the committee as follows:
Where the bulk of social and economic justice, the rule of law, notwithstanding its mien of majestic
equality but fail its mission in the absence of a scheme to bring the system of justice near to down-
trodden. Therefore it becomes a democratic obligation to make the legal process a surer means to
Social Justice".
All the above has made us to think and find out a way to resolve the dispute between the parties
otherwise than by going to law Court which is called the Alternate Dispute Resolution.

Salient Features of Alternative Dispute Resolution Mechanisms

BACK

LECTURE 02

SALIENT FEATURES OF ALTERNATIVE DISPUTE RESOLUTION

Alternative Dispute Resolution, as the name suggests, is an alternative to the traditional process of
dispute resolution through courts. It refers to a set of practices and techniques to resolve disputes
outside the courts. It is mostly a non-judicial means or procedure for the settlement of disputes. In
its wider sense, the term refers to everything from facilitated settlement negotiations in which
parties are encouraged to negotiate directly with each other prior to some other legal process, to
arbitration systems or mini trials that look and feel very much like a court room process. The need
for public adjudication and normative judicial pronouncements on the momentous issues of the
day is fundamental to the evolution of the land. ADR is necessary to complement and preserve
this function of the courts. It has some instrumental and intrinsic functions; it is instrumental in so
far as it enables amicable settlement of disputes through means which are not available generally
through courts. It is intrinsic because it enables the parties themselves to settle their disputes.
Our Constitutional goal is to achieve Justice- social, economic and political (as mentioned in the
Preamble of the Constitution). Access to fast, inexpensive and expeditious justice is a basic
human right. Equal access to justice for all segments to society is important to engender respect
for law and judicial system. Access to justice would be meaningful, if the judicial system yields
result through a fair process and within a prescribed time. Amicable settlement of disputes is very
essential for maintenance of social peace and harmony in the society. Our Constitution mandates
that the "state shall secure that the operation of the legal system promotes justice, on a basis of
equal opportunity and shall, in particular, provide free legal aid, by suitable legislation or schemes
or in any other way, to ensure that the opportunities for securing justice are not denied to any
citizen by reason of economic or other disabilities."
The mounting arrears in the courts, inordinate delays in the administration of justice and expenses
of litigation have the potential to erode public trust and confidence in the judicial system, which is
the pillar of our democracy. Delay also gives rise to corruption and other evils. Ideally speaking
judicial system is blind to power, wealth and social status. Courts are supposed to offer a forum,
where the poor, powerless and marginalized can stand with all others as equals before the law.
With the present state of affairs, many of our poor fellow citizens have chosen to avoid courts
rather than face intimidation cost and time in legal proceedings. The legal problems faced by the
poor and down trodden are compounded by their lack of awareness of whom to approach to
redress their grievances.
The need to get away from the conception that court is the only place to settle disputes has led to
exploring the possibility of creating a dispute resolving mechanism which would be flexible and
saves valuable time and money. In its 14th Report, Law Commission of India recommended
devising of ways and means to ensure that justice should be simple, speedy, cheap effective and
substantial. In its 77th Report Law Commission of India observed that the Indian society is
primarily an agrarian society and is not sophisticated enough to understand the technical and
cumbersome procedures followed by the courts.
The search for a simple, quick, flexible and accessible dispute resolution system has resulted in
the adoption of 'Alternative Dispute Resolution' mechanisms. ADR represents only a change in
forum, not in the substantive rights of the parties. ADR is not intended to supplant altogether the
traditional means of resolving disputes by means of litigation. The primary object of ADR system is
avoidance of vexation, expense and delay and promotion of the ideal of "access to justice".
There are three important factors in every arbitration arrangement. The first relates to nomination,
second relates to legality of the award given by the arbitrator and third the permissible area of
challenge to the arbitrator's award. Accepting the award is the normal excepted code of conduct of
the parties who have chosen an arbitrator. It is but natural that they have initially reposed faith on
the arbitrator or the arbitrators, as the case may be. If the award is not to the choice of the parties
or any one of them, it would be unfair to the arbitrator or the arbitrators, as the case may be, to
term the award as the outcome of the malafide. It is, therefore, very unfortunate that increasingly
misconduct by the arbitrator or the arbitrators as the case may be is alleged. Sometimes
obnoxious allegations are made. The image should be untarnished. There may be black sheep
like any other sphere of human life. But then that fallacy can be remedied by making a wise choice
at the threshold.

Following are the SALIENT FEATURES of Alternative Disputes Resolution Mechanism:

I. MEANING AND DEFINITION OF ALTERNATIVE DISPUTE RESOLUTION

Human conflicts are inevitable. Disputes are equally inevitable. It is difficult to imagine a human
society without conflict of interests. Disputes must be resolved at minimum possible cost both in
terms of money and time, so that more time and more resources are spared for constructive
pursuits.
'Alternative Dispute Resolution' or ADR is an attempt to devise a machinery which should be
capable of providing an alternative to the conventional methods of resolving disputes. An
alternative means the privilege of choosing one of two things or courses offered at one's choice. It
does not mean the choice of an alternative court but something which is an alternative to court
procedures or something which can operate as court annexed procedure.
ADR originated in the USA in a drive to find alternatives to the traditional legal system, felt to be
adversarial, costly, unpredictable, rigid, over-professionalized, damaging to relationships and
limited to narrow right-based remedies as opposed to creative problem-solving. The American
origin of the concept is not surprising, given certain features of litigation in that system, such as:
trial of civil actions by a jury, lawyers' contingency fees, and lack of application in full of the
rule "the loser pays the costs".
Alternative Dispute Resolution is an alternative to the traditional process of dispute resolution
through courts. It refers to set of practices and techniques to resolve disputes outside the courts. It
is mostly a non-judicial means or procedures for the settlement of disputes. ADR has been a
spoke in the wheel of the larger formal legal system in India since time immemorial. The search for
a simple, quick, flexible and accessible dispute resolution system has resulted in the adoption of
'Alternative Dispute Resolution' mechanisms. The primary object of ADR system is avoidance of
vexation, expense, and delay and the promotion of the ideal of "access to justice".
The ADR techniques mainly consist of negotiation, conciliation, mediation, arbitration and Lok
Adalats.
Arbitration is adjudicatory and the result is binding, where as Conciliation is consensual and very
helpful in making the parties in setting their disputes mutually with the help of a neutral third
person. The success of conciliation depends on the mental attitude of the parties, the skill of the
conciliator and creation of proper environment which is most essential in matrimonial disputes.
Negotiation is a non-binding procedure resorted to buy the parties for arriving at a negotiated
settlement. Willingness to resolve the dispute and objectivity necessarily becomes essential to
arrive at a negotiated settlement.
Mediation is a decision- making process in which the parties are assisted by a third party, the
mediator. The mediator attempts to improve the process of decision making and to assist the
parties' reach an outcome to which each of them can consent.
ADR is based on more direct participation by the disputants rather than being run by lawyers and
judges. This type of involvement is believed to increase people's satisfaction with the outcome as
well as their compliance with the settlement reached. Most ADR processes are based on an
integrative approach. They are more cooperative and less competitive than adversarial court
based methods like litigation. For this reason, ADR tends to generate less escalation and ill-will
between parties. This is a key advantage in situation where the parties continue to interact after
settlement is reached, such as in matrimonial cases or labour-management cases.
Alternative Dispute Resolution System (ADR) has been a spark in the wheel of larger formal legal
system in India since time immemorial. If we look back in to our history, we find that during ancient
and medieval period the disputes were being resolved in an informal manner by a neutral third
person, who would be either an elderly person or a chief of a village or a clan or by a panchayat.
The adversarial system of justice, which we adopted later, has proved costly and time consuming.
To a great extent time is consumed over procedural wrangles, technicalities of Law and inabilities
of large number of litigants to engage lawyers. The problem of delay in deciding the matters has
resulted in long pendency.
A time had come when litigants were afraid of approaching the courts with their civil and other
types of disputes, as they have no assurance that the claims would be settled within the near
foreseeable future. Equally, the time had come when parties or clients to a contract, which had an
alternative dispute settlement clause or arbitration clause were wondering whether it would not be
safer and quicker to resort to the civil and other courts. In this regard the Arbitration and
Conciliation (Amendment) Bill, 2003 when passed proved to be a true panacea to cure these ills.
Presently it's the Arbitration and Conciliation (Amendment) Act, 2019, which came into force in
India on 9th August, 2019, which deals with all types of arbitration.
The search for a simple, quick, flexible and accessible dispute resolution system has resulted in
the adoption of 'Alternative Dispute Resolution' mechanisms. Most simply put, Alternative Dispute
Resolution denotes all forms of dispute resolution other than litigation and adjudication through
courts.
However, Carrow defined "Alternative Dispute Resolution as including binding arbitration in the
minds of some since it qualifies as an alternative to court litigation. The better view is that the
distinguishing feature of ADR is that the parties with few exceptions, determine their own destiny
rather than having the decision of another imposed upon them".
According to Akinsaya, "ADR is the abbreviation of Alternative Dispute Resolution and is generally
used to describe the methods and procedures used to resolve disputes either as an alternative to
the traditional disputes resolution mechanism of the court or in some cases as supplementary to
such mechanism". In other words, these processes are designed to aid parties in resolving their
disputes without the need for a formal judicial proceeding. He went further to say that Alternative
Resolution Mechanism is also known as PDR- Preferred Dispute Resolution. Many writers are of
the view that ADR is strictly not a new idea because from idea because from time immemorial
people have settled their disputes through third party intervention using alternative forum.
Mr. Aina defines Alternative Dispute Resolution in these regards:-
"The letters ADR stands for 'Alternative Resolution Dispute'- a new approach to dispute
processing. It refers to a range of mechanisms designed to assist disputing parties in resolving an
ongoing dispute.
In other words, ADR thus involves not only the application of new or different methods to resolve
disputes, but also the selection or design of a process which is best suited to the particular dispute
and to the parties in dispute".
The term "ADR" or "Alternative Dispute Resolution" has different meanings in different contexts.
The literature review did not reveal an accepted definition of the term, but rather suggested that it
is commonly used as an umbrella term for practices that go beyond the resolution of specific
disputes between parties. ADR may not refer to a specific process, but rather to a shared set of
methods, goals assumptions or values.
As of the early 2000s, ADR techniques were being used more and more, as parties and lawyers
and courts realized that these techniques could often help them resolve legal disputes quickly and
cheaply and more privately than could conventional litigation. Moreover, many people preferred
ADR approaches because they saw these methods as being more creative and more focused on
problem solving than litigation, which has always been based on an adversarial model.
The term alternative dispute resolution is to some degree a misnomer. In reality, fewer than 5% of
all lawsuits filed go to trial; the other 95% are settled or otherwise concluded before trial. Thus, it is
more accurate to think of litigation as the alternative and ADR as the norm. Despite of this fact, the
term alternative dispute resolution has become such a well accepted shorthand for the vast array
of non-litigation processes that its continued use seems assured.
II. JUSTICE MALIMATH COMMITTEE REPORT
Justice Malimath Committee in its Report recommended:
If a law is enacted giving legal sanction to such machinery for resolution of disputes and resort
thereto is made compulsory, much of the inflow of commercial litigation in regular civil courts
gradually moving up hierarchically would be controlled and reduced.
This Committee agreeing with the Law Commission recommended that Conciliation Courts should
be established all over the country with power, authority and jurisdiction to initiate conciliation
proceedings in all types of cases at all levels and that the amendment suggested by the Law
Commission should be carried out to enable the Scheme to function effectively. The conciliation
procedure should also be made applicable to the Motor Accident Claims Tribunal.
III. CONSTITUTIONAL BACKGROUND OF ALTERNATIVE DISPUTE RESOLUTION
"It is settled law that free legal aid to the indigent persons who cannot defend themselves in a
Court of law is a Constitutional mandate under Article 39-A and 21 of the Indian Constitution. The
right to life is guaranteed by Article 21." The law has to help the poor who do not have means i.e.
economic means, to fight their causes.
Indian civilisation put at about 6000 years back, at the dawn of civilisation (i.e. the age of the
Vedas), when habitation was growing at river banks, was devoid of urbanisation, where the
Creator was presumed to be the head of humanity. With the dawn of industrialisation, man was
walking into orderly society, State and nation, dependence on law for orderly conduct gained
momentum. Then came on the horizon of social dispute resolution mechanism. With Indian Courts
piling up cases for millennium (in the place of indigenous system which was cheap and quick),
alternative dispute systems had to be found. Thus this system took birth. Once the dispute was
resolved, there was no further challenge.
The Constitutional mandate rescue operation began with Justice V.R Krishna Iyer and Justice P.N.
Bhagawati's Committees' report; weaker section thus became enabled to approach law courts,
right from Munsiff Courts to the Supreme Court.
Committee for the Implementation of Legal Aid Services (CILAS) also came on to the scene and
initiated methods of solving civil disputes in non-legal forum and non-formal forum
Based on this, States adopted (through State Legal Aid and Advice Boards) Lok Adalats and Legal
Aid Camps, Family Courts, Village Courts, Mediation Centres, Commercial arbitration, Women
Centres, Consumer Protection Forums, etc which are but various facets of effective Alternative
Dispute Resolution systems.
The soul of good Government is justice to people. Our Constitution, therefore, highlights triple
aspects of Economic Justice, Political Justice and Social Justice. This requires the creation of an
ultra-modern disseminating infrastructure and man-power; sympathetic and planned; need for new
judiciary technology and models; and remedy-oriented jurisprudence.
IV. LEGISLATIVE RECOGNITION OF ALTERNATIVE DISPUTE REDRESSAL
Alternative Dispute Redressal or Alternative Dispute Resolution has been an integral part of our
historical past. Like the zero, the concept of Lok Adalat (Peoples' Court) is an innovative Indian
contribution to the world of Jurisprudence. The institution of Lok Adalat in India, as the very name
suggests means, Peoples' Court. 'Lok' stands for 'people' and the vernacular meaning of the term
'Adalat' is the Court. India has long tradition and history of such methods being practiced in the
society at grass root level. These are called panchayat, and in legal terminology these are called
arbitration. These are widely used in India for resolution of disputes both commercially and non-
commercially.
The ancient concept of settlement of disputes through mediation, negotiation or through arbitral
process is known as "Peoples' Court Verdict" or "Nyaya-Panch" which is conceptualized and
institutionalized in the philosophy of Lok Adalat. Some people equate Lok Adalat to conciliation or
mediation, whereas some treat it with negotiation or arbitration. Those who find it different from all
these, call it "Peoples' Court". It involves people who are directly and indirectly involved by dispute
resolution.
The concept of Lok Adalat was pushed back into oblivion in last few centuries before
independence and particularly during the British regime. Now this concept has once again been
rejuvenated. It has once again become familiar and popular amongst litigants.
The movement towards Alternative Dispute Redressal (ADR) has received Parliamentary
recognition and support. The advent of Legal Services Authorities Act, 1987 gave a statutory
status to Lok Adalats, pursuant to the constitutional mandate in Article- 39A of the Constitution of
India, which contains various provisions for settlement of disputes through Lok Adalat. It is an Act
to constitute legal service authorities to provide free and competent legal services to the weaker
sections of the society to ensure that opportunities for securing justice are not denied to any
citizen by reason of economic and other disabilities, and to organise Lok Adalats to secure that the
operation of the legal system promotes justice on a basis of equal opportunity. Before the
enforcement of the Act, the settlements of disputes were in the hands of the Panchayat head or
the tribal head. But when statutory recognition had been given to Lok Adalat, it was specifically
provided that the award passed by the Lok Adalat formulating the terms of compromise will have
the force of decree of a court which can be executed as a civil court decree.
In India, laws relating to resolution of disputes have been amended from time to time to facilitate
speedy dispute resolution. The Judiciary has also encouraged out of court settlements to alleviate
the increasing backlog of cases pending in the courts. To effectively implement the ADR
mechanism, organizations like ICA, ICADR were established, Consumer Redressal forums and
Lok Adalats revived. The Arbitration Act, 1940 was repealed and a new and effective arbitration
system was introduced by the enactment of the Arbitration and Conciliation Act, [Link] law is
based on the United Nations Commission on International Trade Law (UNCITRAL) model law on
International Commercial Arbitration.
In Sitanna v. Viranna, AIR 1934 SC 105, the Privy Council affirmed the decision of the Panchayat
and Sir John Wallis observed that the reference to a village panchayat is the time-honoured
method of deciding disputes. It avoids protracted litigation and is based on the ground realities
verified in person by the adjudicators and the award is fair and honest settlement of doubtful
claims based on legal and moral grounds.
The legislative sensitivity towards providing a speedy and efficacious justice in India is mainly
reflected in two enactments. The first one is the Arbitration and Conciliation Act, 1996 and the
second one is the incorporation of section 89 in the traditional Civil Procedure Code (CPC).
The adoption of the liberalized economic policy by India in 1991 has paved way for integration of
Indian economy with global economy. This resulted in the enactment of the Arbitration and
Conciliation Act, 1996 (new Act) by the legislature as India had to comply with well-accepted
International norms. It superseded the obsolete and cumbersome Arbitration Act, 1940. The new
Act has made radical and uplifting changes in the law of arbitration and has introduced new
concepts like conciliation to curb delays and bring about speedier settlement of commercial
disputes. The new Act has been codified on the lines of the Model Law on International
Commercial Arbitration as adopted by the United Nations Commission on International Trade Law
(UNCITRAL). One of the most commendable objects of the new Act is to minimize the role of the
courts in the arbitration process. The Arbitration and Conciliation Act, 1996 laid down the minimum
standards, which are required for an effective Alternative Dispute Resolution Mechanism.
Further, the recent amendments of the Civil Procedure Code will give a boost to ADR. Section 89
(1) of CPC deals with the settlement of disputes outside the court. It provides that where it appears
to the court that there exist elements, which may be acceptable to the parties, the court may
formulate the terms of a possible settlement and refer the same for arbitration, conciliation,
mediation or judicial settlement. While upholding the validity of the CPC amendments in Salem
Advocate Bar Association, Tamil Nadu v. U.O.I, (2005) SCC6 (344), the Supreme Court had
directed the constitution of an expert committee to formulate the manner in which section 89 and
other provisions introduced in CPC have to be brought into operation. The Court also directed to
devise a model case management formula as well as rules and regulations, which should be
followed while taking recourse to alternative dispute redressal referred to in Section 89 of CPC. All
these efforts are aimed at securing the valuable right to speedy trial to the litigants.
ADR was at one point of time considered to be a voluntary act on the apart of the parties which
has obtained statutory recognition in terms of Civil Procedure Code (Amendment) Act, 1999;
Arbitration and Conciliation Act, 1996; Legal Services Authorities Act, 1997 and Legal
Services Authorities (Amendment) Act, 2002. The access to justice is a human right and fair
trial is also a human right. In India, it is a Constitutional obligation in terms of Art.14 and 21.
Recourse to ADR as a means to have access to justice may, therefore, have to be considered as
a human right problem. Considered in that context the judiciary will have an important role to play.
The Supreme Court of India has also suggested making ADR as 'a part of a package system
designed to meet the needs of the consumers of justice'. The pressure on the judiciary due to
large number of pending cases has always been a matter of concern as that being an obvious
cause of delay. The culture of establishment of special courts and tribunals has been pointed out
by the Hon'ble Supreme Court of India in number of cases. The rationale for such an
establishment ostensibly was speedy and efficacious disposal of certain types of offences.
Industrial Disputes Act, 1947 provides the provision both for conciliation and arbitration for the
purpose of settlement of disputes. In Rajasthan State Road Transport Corporation v. Krishna
Kant, 1995 AIR 1715, the Supreme Court observed: "The policy of law emerging from Industrial
Disputes Act and its sister enactments is to provide an alternative dispute-resolution mechanism
to the workmen, a mechanism which is speedy, inexpensive, informal and unencumbered by the
plethora of procedural laws and appeals upon appeals and revisions applicable to civil courts.
Indeed, the powers of the courts and tribunals under the Industrial Disputes Act are far more
extensive in the sense that they can grant such relief as they think appropriate in the
circumstances for putting an end to an industrial dispute."
Section 23(2) of the Hindu Marriage Act, 1955 mandates the duty on the court that before
granting relief under this Act, the Court shall in the first instance; make an endeavour to bring
about reconciliation between the parties, where it is possible according to nature and
circumstances of the case. For the purpose of reconciliation the Court may adjourn the proceeding
for a reasonable period and refer the matter to person nominated by court or parties with the
direction to report to the court as to the result of the reconciliation [Section 23(3) of the Act].
The Family Court Act, 1984 was enacted to provide for the establishment of Family Courts with a
view to promote conciliation in, and secure speedy settlement of, disputes relating to marriage and
family affairs and for matter connected therewith by adopting an approach radically different from
the ordinary civil proceedings . Section 9 of the Family Courts Act, 1984 lays down the duty of the
family Court to assist and persuade the parties, at first instance, in arriving at a settlement in
respect of subject matter. The Family Court has also been conferred with the power to adjourn the
proceedings for any reasonable period to enable attempts to be made to effect settlement if there
is a reasonable possibility.
Shri M.C. Setalvad, former Attorney General of India has observed: "….equality is the basis of all
modern systems of jurisprudence and administration of justice… in so far as a person is unable to
obtain access to a court of law for having his wrongs redressed or for defending himself against a
criminal charge, justice becomes unequal, …Unless some provision is made for assisting the poor
men for the payment of Court fees and lawyer's fees and other incidental costs of litigation, he is
denied equality in the opportunity to seek justice."
V. ADVANTAGES AND DISADVANTAGES OF ALTERNATIVE DISPUTE RESOLUTION
Mahatma Gandhi, the Father of the Nation, wrote in his autobiography about the role of law and
the lawyer-
"I had learnt the true practice of law. I had learnt to find out the better side of human nature, and to
enter man's heart. I realised that the true function of a lawyer was to unite parties. The lesson was
so indelibly burnt into me that the large part of my time during the 20 years of my practice as a
lawyer was occupied in bringing about private compromise of hundreds of cases. I lost nothing
thereby not even money, certainly not my soul."
 Any conflict is like cancer. The sooner it is resolved the better for all the parties concerned in
particular and the society in general. If it is not resolved at the earliest possible opportunity, it
grows at a very fast pace and with time the effort required to resolve it increases exponentially as
new issues emerge and conflicting situations galore. One dispute leads to another. Hence, it is
essential to resolve the dispute the moment it raises its head. The method to achieve this goal
must be agreeable to both the parties and it should achieve the goal of resolving the dispute
speedily.
As Justice Warren Burger, the former Chief Justice of the American Supreme Court observed in
the American context:
"The harsh truth is that we may be on our way to a society overrun by hordes of lawyers, hungry
as locusts, and bridges of judges in numbers never before contemplated. The notion that ordinary
people want black-robed judges, well-dressed lawyers, and fine panelled courtrooms as the
setting to resolve their disputes is not correct. People with legal problems like people with pain,
want relief and they want it as quickly and inexpensively as possible."
This observation with greater force applies in the Indian context. Alternative Dispute Resolution
consists of several techniques being utilized to resolve disputes involving a structural process with
third party intervention. ADR system avoids the rigidity and inflexibility of traditional and orthodox
procedures. Technique of ADR is an effort to design workable and fair alternative to our traditional
judicial system. The traditional system of dispute resolution is doing away with delays and
congestion in courts. With the drastic increase in population, such number of cases is also
increasing day by day. So quick disposal of cases is required so that the court does not remain
over burdened with cases. And so for this reason ADR mechanisms are proceeded with for quick
disposal of cases.
The framework of ADR mechanism that has emerged is comprehensive. But its success depends
much on the will of the people to work it up in the right spirit and with good faith. The parties have
to be made aware and educated about the advantage of adopting ADR mechanism. The reason
given to the ADR mechanisms is that the society, state and the party to the dispute are equally
under an obligation to resolve the dispute as soon as possible before it disturbs the peace in the
family, business community, society or ultimately humanity as a whole. The system of dispensing
justice in India has come under a great stress of several reasons mainly because of the huge
pendency of cases in courts. In India, the number of cases filed in the courts has shown a
tremendous increase in recent years resulting in pendency and delays underlining the need for
alternative dispute resolution methods. While discussing in brief about the need for Alternative
Dispute Resolution in India, it is to mention that a resolution was adopted by the Chief Ministers
and Chief Justices of the States in a conference which was held in New Delhi on 4th Dec. 1993
under the chairmanship of the then Prime Minister and presided over by the Chief Justice of India.
Thereby, the Chief Ministers and the Chief Justices were of the opinion that the Courts were not in
a position to bear the entire burden of justice system and the number of disputes lent themselves
to resolution by alternative modes such as arbitration, conciliation, mediation and negotiation.
They emphasized the desirability of disputants taking advantage of alternative dispute resolution
which provided procedural flexibility, saved valuable time and money and avoided the stress of a
conventional trial.
Globalization has been a great stimulation in the process of integration of economics and societies
of different countries across the globe. It has been a great tool for breaking economic barrier and
envisioning world as a market for trade. When economies and societies integrate it indubitably
leads to the rise in various types of disputes such as- industrial disputes, commercial disputes,
international disputes etc. The remedy is not in avoidance of these disputes but rather in building
mechanisms to resolve these disputes amicably. It is a sine quo non for growth and for
maintaining peace and harmony in every society. ADR is being increasingly acknowledged in the
field of law and commercial sectors both at national and international levels. Its diverse methods
have helped parties to resolve their disputes at their own terms cheaply and expeditiously.
 Advantages:
Alternative Dispute Resolution is based on more direct participation by the disputants rather than
being run by lawyers and Judges. This type of involvement is believed to increase people's
satisfaction with the outcome as well as their compliance with the settlement reached. Most ADR
 processes are based on an integrative approach. They are most co-operative and less competitive
than adversarial court based methods like litigation. For this reason, ADR tends to generate less
escalation and ill-will between parties. This is a key advantage in situations where the parties must
continue to interact after settlement is reached, such as in matrimonial cases or labour-
management cases. Following are the advantages of ADR:
1. It can be used at any time, even when a case is pending before a Court of Law.
2. It can be used to reduce the number of contentious issues between the parties; and it can
be terminated at any stage by any of the disputing parties.
3. It can provide a better solution to dispute more expeditiously and at less cost than regular
litigation.
4. It helps in keeping the dispute a private matter and promotes creative and realistic business
solutions, since parties are in control of ADR proceedings.
5. The ADR is flexible and not governed by the rigorous of rules or procedures.
6. The freedom of parties to litigation is not affected by ADR proceedings. Even a failed ADR
proceeding is never a waste either in terms of money or times spent on it, since it helps parties
to appreciate each other's case better.
7. The ADR can be used with or without a lawyer. A lawyer however, plays a very useful role
in identification of contentious issues, position of strong and weak points in a case, rendering
advice during negotiations and overall presentation of his client's case.
8. ADR helps in reduction of work load of courts and thereby helps them to focus attention on
other cases.
9. The ADR procedure permits to choose neutrals who are specialists in the subject-matter of
the dispute.
10. The parties are free to discuss their difference of opinion without any fear of disclosure of
facts before a Court of Law.
11. The last but not the least is the fact that parties are having the feeling that there is no losing
or winning feeling among the parties by at the same time they are having the feeling that their
grievance is redressed and the relationship between the parties is restored.
12. The ADR system is apt to make a better future. It paves the way to further progress.
 Disadvantages:
There are some ADR does not have many potential advantages, but there are also some possible
drawbacks and criticisms of pursuing alternatives to court-based adjudication. Some critics have
concerns about the legitimacy of ADR outcomes, charging that ADR provides "second-class
justice." It is argued that people who cannot afford to go to the court are those most likely to use
ADR procedures. As a result, these people are less likely to truly "win" a case because of the co-
operative nature of ADR. Following points may be dealt as some of the disadvantages of ADR:
1. Situations when ADR may not be appropriate, and may even carry a degree of risk for one
of the parties. It is important for the advisers to use their professional judgement in each
case, but this section outlines key factors for consideration.
2. There may be an imbalance of power between the parties, which could make face-to-face
mediation unfair. This could include family or neighbour mediation where there has been
violence or the threat of violence; or mediation between an individual and a large organisation
such as a local authority, where the size and resources of the organization would put the
individual at a disadvantage.
3. There may be an urgent need (for example to prevent eviction) which requires an
immediate legal remedy.
4. Mediation and Ombudsmen do not provide a legally binding, enforceable outcome, and
decisions do not act as precedents in future cases.
5. Legal rights and Human rights cannot be relied on in ADR processes, which are private,
confidential and not open to public scrutiny.
6. Ombudsmen investigations can be very slow.
7. Although Ombudsmen can make compensation awards, they are often lower than is likely
to be achieved in court.
8. There are no consistent quality standards or regulation for ADR providers, so it can be hard
for the advisers or their clients to know how to choose a good service.
9. Where a dispute involves difficult legal points a mediator or an arbitrator is unlikely to have
the same legal expertise and knowledge as a judge. Disputes can be of various situations such
as- commercial conflicts, social conflicts, legal conflicts and many others which require
specialized mediator. Most of the cases the mediator possess a judge's point of view.
10. The arbitrator's decision can require a court action if one of the parties refuse to accept the
arbitrator's decision. This would not only create chaos but also a mandatory review by the
court. Thus ADR sometimes raises the question of biasness of arbitrator's decision. Also there
is very limited opportunity for judicial review of an arbitrator's decision. A court might also
overturn an arbitrator's decision if its decided issues were not within the scope of the arbitration
agreement.
11. Alternative Dispute Resolution generally resolves only issues of money or civil disputes.
Alternative Dispute Resolution proceedings will not result in injunctive orders. They cannot
result in an order requiring one of the parties to do or cease doing a particular affirmative act.
12. ADR generally proceed without protections offered to the parties in litigation, such as those
rules governed through discovery. Courts generally allow a great deal of latitude in the
discovery process, which is not active in alternative dispute resolution.
It is important to consider these advantages and disadvantages before agreeing to arbitration, or
any other kind of alternative dispute resolution. Chances are that we have already agreed to
arbitration in many situations, without even knowing it. Many lease agreements and employment
contracts have mandatory arbitration provisions, and they are usually enforced, as long as certain
standards are met (generally, they must not deprive a person of a constitutional right, and they
should be reciprocal).

Arbitration and Conciliation Act, 1996 - Part I

BACK

LECTURE 03 PART I

Concept of Arbitration as under ‘THE ARBITRATION AND CONCILIATION ACT,1996’

INTRODUCTION:
 According to Russell, "the essence of arbitration is that some disputes are referred by the
parties for settlement to a tribunal of their own choice instead of to a court." Arbitration is a
procedure for the resolution of disputes on a private basis through the appointment of an
arbitrator, an independent, neutral third person who person who hears and considers the
merits of the dispute and renders a final and binding decision called an award. The parties
to the arbitration have some control over the design of the arbitration process.
In the Indian context the scope of the rules for the arbitration process are set out broadly by the
provisions of the Arbitration and Conciliation Act, 1996 and in the areas uncovered by the Statute
the parties are free to design an arbitration process appropriate and relevant to their disputes.
There is more flexibility in the arbitration process than in the traditional courts system as the
parties can facilitate the creation of an arbitral process relevant to their disputes. Once the process
is decided upon and within the parameters of the Statute, the Arbitrator assumes full control of the
process.
Arbitration may be ad-hoc , contractual, institutional or statutory, domestic, international and
foreign.
Arbitration is thus defined by ROMILLY MR. in the well- known case of Collins vs. Collins:
"Arbitration is a reference to the decision of one or more persons, either with or without an umpire,
of a particular matter in difference between the parties."

MAIN OBJECTIVES OF THE ACT:

The main objectives of the Arbitration and Conciliation Act, 1996 may be summarized as follows:
1. To cover within its fold International commercial arbitration and conciliation as also the
domestic arbitration and conciliation.
2. To make provision for an efficient and effective procedure to meet the requirements and
needs of specific arbitration.
3. To provide that the Arbitral tribunal give reasons for its arbitral award.
4. To ensure that the arbitral tribunal functions within the framework of the Act.
5. To minimize supervisory role of courts in the arbitral process and thus ensure minimal
judicial intervention.
6. To encourage amicable settlement of disputes between parties using arbitration as an
alternative disputes resolution mechanism.
7. Last but not the least, to provide conditions and procedure for the purpose of enforcement
of foreign awards under New York and Geneva Conventions.
Major thrust and legislative the Act of 1996 is to reduce excessive judicial intervention due to
which earlier Arbitration Act, 1940 suffered serious infirmities.

THE ARBITRATION AND CONCILIATION ACT,1996

Section 2 (1) (a) defines ‘Arbitration’, the Arbitration Act of 1940 did not contain the definition of
the term ‘Arbitration’. The word ‘Arbitration’, as defined in the present Act, connotes the same
meaning as contained in Article 2 (a) of the Model law of UNCITRAL.
According to Halsbury’s Law of England, arbitration means the reference of a dispute or difference
between not less than two parties for determination, after hearing both sides, in a judicial manner,
by a person or persons other than a Court of competent jurisdiction.
Thus, arbitration is an alternative to litigation. It is a particular method for the settlement of
disputes when two or more parties submit themselves to the judgment of arbitrator(s) who is to
decide the controversy i.e. dispute or difference.
 Few of the General Sections of the said Act are section 3, 4 and 6.
 Section 3 relates to the manner of service of notice by a party or y the arbitrator. The notice shall
be served in the manner provided in the arbitration agreement and if there is no such provision
concerned or by sending it by post at his usual or last known residence or place of business.
The communication is deemed to have been received on the day it ought to have been delivered
to the party or arbitral tribunal in normal course of time.
Sub-Section (3) makes it clear that the deeming provisions of this section in respect of written
communications will apply only to arbitral proceedings and arbitral tribunal and not to the judicial
authority because the proceedings of a judicial authority are governed by Order V of the Civil
Procedure Code.
Section 4:
The word waiver connotes voluntary and intentional relinquishment of a known right or privilege by
silence or by conduct.
In Bharat Sanchar Nigam Ltd. & another v. Motorola (India) Ltd., 2008 (12) SCALE 720, It was
held that a party who knows that a requirement has not been complied with and still proceeds with
the arbitration without raising an objection, a soon as possible, is deemed to have waived his right
to object under this section.
Section 6:
This section permits the arbitrator the delegation of administrative or ministerial acts but he has no
authority to delegate his official functions and if he does so, it will amount to judicial misconduct.
In State of Punjab v. Chandrabhan Harbhajan Lal, AIR 1964 Punj 424, Where the arbitrator
delegated a matter in dispute to a third person and made the award on the basis of that third
person, the award was held to be invalid as it was not open to arbitrator to delegate his authority to
a stranger. He was therefore held guilty of judicial misconduct.
 Arbitration Agreement:
Section 7
This section refers to the disputes which have arisen or which may arise between the parties in
respect of a certain legal relationship, whether contractual or not.
A relationship which though legal may not necessarily be a contractual as in case of professionals
like doctor and a patient or a lawyer and his client etc. particularly with reference to liability arising
out of their negligence in their professional conduct.
The word ‘party’ connotes ‘party to the agreement’ as distinguished from party to the suit. Both the
claimant who has brought legal action and the respondent who applies for reference of the dispute
to arbitration must be parties to the arbitration agreement.
What constitutes an arbitration agreement, well settled principles in respect thereof are –
i. The intention of the parties to enter into an arbitration agreement shall have to be gathered
from the terms of the agreement. If the terms of the agreement clearly indicate an intention
on the part of the parties to the agreement to refer their disputes to a private tribunal for
adjudication and an willingness to be bound by the decision of such tribunal on such
disputes, it is arbitration agreement. While there is no specific form of an arbitration
agreement, the words used should disclose a determination and obligation to go to
arbitration and not merely contemplate the possibility of going for arbitration. Where there is
merely a possibility of the parties agreeing to arbitration in future, as contrasted from an
obligation to refer disputes to arbitration, there is no valid and binding arbitration
agreement.
ii. Even if the words 'arbitration' and 'arbitral tribunal (or arbitrator)' are not used with reference
to the process of settlement or with reference to the private tribunal which has to adjudicate
upon the disputes, in a clause relating to settlement of disputes, it does not detract from the
clause being an arbitration agreement if it has the attributes or elements of an arbitration
agreement. They are: (a) The agreement should be in writing. (b) The parties should have
agreed to refer any disputes (present or future) between them to the decision of a private
 tribunal. (c) The private tribunal should be empowered to adjudicate upon the disputes in an
impartial manner, giving due opportunity to the parties to put forth their case before it. (d) The
parties should have agreed that the decision of the Private Tribunal in respect of the disputes
will be binding on them.
iii. Where the clause provides that in the event of disputes arising between the parties, the
disputes shall be referred to Arbitration, it is an arbitration agreement. Where there is a specific
and direct expression of intent to have the disputes settled by arbitration, it is not necessary to
set out the attributes of an arbitration agreement to make it an arbitration agreement. But
where the clause relating to settlement of disputes, contains words which specifically excludes
any of the attributes of an arbitration agreement or contains anything that detracts from an
arbitration agreement, it will not be an arbitration agreement. For example, where an
agreement requires or permits an authority to decide a claim or dispute without hearing, or
requires the authority to act in the interests of only one of the parties, or provides that the
decision of the Authority will not be final and binding on the parties, or that if either party is not
satisfied with the decision of the Authority, he may file a civil suit seeking relief, it cannot be
termed as an arbitration agreement.
iv. But mere use of the word 'arbitration' or 'arbitrator' in a clause will not make it an arbitration
agreement, if it requires or contemplates a further or fresh consent of the parties for reference
to arbitration. For example, use of words such as "parties can, if they so desire, refer their
disputes to arbitration" or "in the event of any dispute, the parties may also agree to refer the
same to arbitration" or "if any disputes arise between the parties, they should consider
settlement by arbitration" in a clause relating to settlement of disputes, indicate that the clause
is not intended to be an arbitration agreement. Similarly, a clause which states that "if the
parties so decide, the disputes shall be referred to arbitration" or "any disputes between
parties, if they so agree, shall be referred to arbitration" is not an arbitration agreement. Such
clauses merely indicate a desire or hope to have the disputes settled by arbitration, or a
tentative arrangement to explore arbitration as a mode of settlement if and when a dispute
arises. Such clauses require the parties to arrive at a further agreement to go to arbitration, as
and when the disputes arise. Any agreement or clause in an agreement requiring or
contemplating a further consent or consensus before a reference to arbitration, is not an
arbitration agreement, but an agreement to enter into an arbitration agreement in future.
The above mentioned observations were laid down in Jagdish Chander v. Ramesh Chander,
(2007) 5 SCC 719.
Section 8:
The language of Section 8 is pre-emptory. It is, therefore, obligatory for the Court to refer the
parties to arbitration in terms of their arbitration agreement. There is no question of stay of
proceedings till the arbitration proceedings conclude and the award becomes final in terms of the
provisions of this Act.
The conditions which are required to be satisfied under sub-sections (1) and (2) of Section 8
before the Court can exercise its powers to refer parties to arbitration are:
i. There is an arbitration agreement.
ii. A party to the agreement brings an action in the Court against the other party.
iii. Subject-matter of the action is same as the subject-matter of arbitration agreement.
iv. The other moves the Court for referring the parties to arbitration before it submits his first
statement on the substance of the dispute.
In Rashtriya Ispat Nigam Ltd. v. Verma Transport Company, AIR 2006 SC 2800, it was held
that:
The expression 'first statement on the substance of the dispute' contained in Section 8(1) of the
1996 Act must be contra-distinguished with the expression 'written statement'. It employs
submission of the party to the jurisdiction of the judicial authority. What is, therefore, is needed is a
finding on the part of the judicial authority that the party has waived his right to invoke the
arbitration clause. If an application is filed before actually filing the first statement on the substance
of the dispute, the party cannot be said to have waived his right or acquiesced himself to the
jurisdiction of the court.
Section 9:
In order to invoke the provisions relating to interim relief under this section, the contracting parties
must have referred their dispute to arbitration. The provision of this section may be invoked
where:-
1. A dispute/difference has arisen with respect to subject-matter of the agreement which is
referable to an arbitral tribunal.
2. The intention of the parties must be manifest to seek recourse to arbitration proceedings at
the time of filing application for interim relief under this section.
3. Only that Civil Court shall have jurisdiction to entertain application under this section in
whose original Civil Jurisdiction (both pecuniary and territorial) the subject-matter of arbitration
falls.

SCOPE:

In Narain Sahai Aggarwal v. Santosh Rani, 1997 (2) Arb LR 322,

It was held that Section 9 only deal with the interim measure by the court. Obviously it is not within
the scope of this section to inquire into the claim and the counter-claim made by both the parties in
regard to the custody of the articles beyond what has been admitted by the respondent.
It may be stated that this section confers wide pre-emptive measures on the courts to order
interlocutory measures of protection in certain situations. It is a mandatory provision entitling a
party, after entering into arbitration agreement, at any time to approach the court before or during
the proceedings or at any time after the making of the award but before its enforcement. The
section vests the court with two-fold powers:
i. For the purpose of arbitral proceedings to appoint a guardian for a minor or a person of
unsound mind.
ii. To grant interlocutory pre-emptive measures of protection.
Such pre-emptive measures may be granted in the following situations:
a. For the preservation, interim custody or sale of any goods which are the subject-matter of
the arbitration agreement;
b. securing the amount in dispute in the arbitration;
c. the detention, preservation or inspection of any property or thing which is the subject-matter
of the dispute in arbitration, or as to which any question may arise therein;
d. authorising for any of the aforesaid purposes any person to enter upon any land or building
in the possession of any party;
e. authorising any samples to be taken or any observation to be made, or experiment to be
tried, which may be necessary or expedient for the purpose of obtaining full information or
evidence;
 f. interim injunctions;
g. the appointment of a receiver;
h. such other interim measure of protection as may appear to the court to be just and
convenient, and the Court shall have the same power for making orders as it has for the
purpose of, and in relation to, any proceedings before it.
 Composition of Arbitral Tribunal:
Section 10
This section provides for the appointment of a sole arbitrator or more than one arbitrator but such
arbitrators shall not be even in number.
But where the number of arbitrator is three, the third arbitrator will be appointed by two arbitrators
nominated by one of each parties. The ‘third arbitrator’ shall act as Presiding officer. The three
arbitrators will participate in the decision making process of the tribunal and the award of majority
shall prevail.
In M.M.T.C. Ltd. v. Sterlite industries (India) Ltd., AIR 1997 SC 605, The Supreme Court held
that there is nothing in Section 7 to indicate the requirement of number of arbitrators as a part of
arbitration agreement. Thus the validity of arbitration agreement does not depend on number of
arbitrators specified therein. The number of arbitrators is dealt with separately in Section 10 which
is a part of machinery provision for the working of the arbitration agreement. It is, therefore, clear
that an agreement specifying an even number of arbitrators cannot be a ground to render the
arbitration agreement invalid under the 1996 Act.
Section 11:
The right of parties to choose their own arbitrator is recognized as one of the pillars of the principle
of ‘party autonomy’ as envisaged by the UNCITRAL Model Law and incorporated under Section
11 of the Arbitration and Conciliation Act, 1996.
Where the parties fail to adhere to the terms of their agreement in appointing the arbitrator, the
approval of arbitrator maybe made by the Chief Justice or any person or any institution designated
by him upon the request of a party to the arbitration agreement as contemplated by sub-sections
(5) & (6) of Section 11 of the Act.
An arbitrator/ arbitrators are appointed in pursuance of the arbitration agreement. The appointment
of arbitrator/ arbitrators may be:
1. By the parties, or
2. By designated authority. Or
3. Arbitral Institution.
The Supreme Court in Asian Thermal Insulation Pvt. Ltd. v. Bridge & Roof Co. Ltd., AIR 2007
SC 2877, held that where application is filed before the High Court or Chief Justice of India, as the
case may be, for appointment of an arbitrator, the nature of power exercised by the Court shall be
judicial power and not an administrative power.
Other highlights of such power exercised by Court under Section 11 (6) may briefly be stated as
follows:-
i. The power under Section 11 (6) of the Act, in its entirety, could be delegated, by the Chief
Justice of the High Court only to another Judge of that Court and by the Chief Justice of
India to another Judge of the Supreme Court.
ii. In case of designation of a Judge of the High Court or of the Supreme Court, the power that
is exercised by the designated Judge would be that of the Chief Justice as conferred by the
statute.
iii. The Chief Justice or the designated Judge will have the right to decide the preliminary
aspects as indicated in the earlier part of this judgment. These will be his own jurisdiction to
entertain the request, the existence of a valid arbitration agreement, the existence or otherwise
of a live claim, the existence of the condition for the exercise of his power and on the
 qualifications of the arbitrator or arbitrators. The Chief Justice or the designated Judge would
be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified
in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator
could only be that of the Chief Justice or the designated Judge.
iv. Designation of a District Judge as the authority under Section 11(6) of the Act by the Chief
Justice of the High Court is not warranted on the scheme of the Act.
v. Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High Court would
not interfere with the orders passed by the arbitrator or the Arbitral Tribunal during the course
of the arbitration proceedings and the parties could approach the Court only in terms of Section
37 of the Act or in terms of Section 34 of the Act.
vi. Since an order passed by the Chief Justice of the High Court or by the designated Judge of
that Court is a judicial order, an appeal will lie against that order only under Article 136 of the
Constitution to the Supreme Court.
vii. There can be no appeal against an order of the Chief Justice of India or a Judge of the
Supreme Court designated by him while entertaining an application under Section 11(6) of the
Act.
viii. In a case where an Arbitral Tribunal has been constituted by the parties without having
recourse to Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide all
matters as contemplated by Section 16 of the Act.
In this case, since the appellant had already nominated its arbitrator, the court directed the
respondent to nominate it arbitrator within a period of 30 days, thereafter, the Chief Justice shall
nominate the Presiding Arbitrator who shall be a retired Judge of High Court. Appeal disposed
accordingly.
Section 12:
Sub-section (3) of this section enumerates certain grounds on which the appointment of an
arbitrator can be challenged by a party or parties whereas the succeeding section i.e. Section 13
prescribes the procedure to be adopted for challenging the appointment of an arbitrator. Both the
sections are therefore cognate sections.
Sub-sections (1) and (2) of Section 12 enjoin a duty upon the arbitrator to disclose at the time of
his appointment or after appointment throughout the arbitral proceedings, any circumstances
which are likely to give rise to reasonable apprehension as to his impartiality or independence.
Sub-section (3) lays down yet another ground, namely, lack of qualifications on which the
appointment of an arbitrator may be challenged by a party to arbitration dispute.
Sub-section (4) enables a party who has participated in the appointment of the arbitrator or
appointed an arbitrator to challenge such appointment if he becomes aware of any reason which
may have rendered the arbitrator disqualified to act as such, any time during the arbitration
proceedings.
The object of this section obviously is to cast a duty upon the parties to make sure that the person
or persons whom they propose to appoint as an arbitrator/ arbitrators are willing to be so
appointed and do not suffer from any disqualification which is likely to impair their independent and
impartial decision in the dispute under arbitration. The Section, however, does not contemplate
any written consent or approval by the arbitrator.
Section 14:
In Jayesh H. Pandya v. Subhtex India Ltd., [Civil Appeal No. 6300 of 2009], It was held that:
"It is clear from the bare reading of Sub¬-Section 1(a) of Section 14 that mandate of an Arbitrator
shall terminate if it fails to act without undue delay. In the instant case, the Arbitrator became de
jure unable to perform his functions. The parties agreed to bind themselves by the time fixed for
the Arbitration and/or schedule of time limit in such Arbitration Proceedings. There is no reason
not to accept the same. Section 14 read with Section 15 of the 1996 Act recognizes the Arbitrator
indeed became de jure unable to perform his functions and the mandate to act as an Arbitrator in
the Arbitral Proceedings stood terminated."
(NOTE: Rest of the Arbitration Act, 1996 to be contd. in Lecture 03 part II.)

Arbitration and Conciliation Act, 1996 - Part II

BACK

LECTURE 03 PART II

Concept of Arbitration and Conciliation as under 'THE ARBITRATION AND

CONCILIATION ACT,1996'

Jurisdiction:

Section 16

Section 16 (1)(a) of the present Act provides that an arbitration clause which forms part of the
contract shall be treated as independent of other terms of the contract and therefore if the arbitral
tribunal decides that the contract is null and void, it shall not render ipso facto the arbitration
clause as invalid.
Reiterating this view, the Supreme Court in
Enercon (India) Ltd. v. Enercon GMBH and Another, AIR 2014 SC 3152, ruled that absence of
any concluded contract between parties have no effect on the existence of a binding arbitration
where the parties have irrevocably agreed to resolve all the disputes through arbitration. In other
words, parties cannot be permitted to avoid arbitration, without satisfying the Court that it would be
just and in the interest of all the parties not to proceed with arbitration. The Court restated that
Section 16 provides that Arbitration clause forming part of the contract shall be treated as an
agreement independent of such contract.
Section 16 of the Act prohibits the party from raising the plea that the Tribunal does not have a
jurisdiction after the party has submitted it statement of defence. Therefore, this provision
disentitles a party from petitioning Tribunal to challenge its jurisdiction belatedly, having once
submitted to the jurisdiction of the Tribunal, filed the statement of defence, led evidence, made
arguments and untimely challenged the award under Section 34 of the Act.
By the virtue of sub-section (2) of the Section 16, a party is bound to raise any objection which it
may have to the jurisdiction of the Tribunal before or at the time of submission of its statement of
defence and it is prohibited to raise any such objection at any time thereafter.
Sub-sections (2) and (3) mark the stages at which objection to excess of jurisdiction may be
raised.
Sub-sections (2), (3) and (4) lay down the procedure of raising plea as to jurisdiction of the Arbitral
Tribunal and entertaining such plea.
Sub-sections (5) mandates that Arbitral Tribunal shall decide such plea where the Arbitral Tribunal
rejects the plea and continues with the arbitral proceedings and make an award.
Sub-sections (6) expressly provides that a party aggrieved by arbitral award may invoke Section
34 of the Act for setting aside such award.
Thus provisions of sub-sections (5) and (6) of Section 16 make it clear that if an aggrieved party
has right to move the Court, it would not have been possible to preclude the Court from granting
stay or interim relief which would have brought arbitral proceedings to a grinding halt.

Section 17:
This section empowers the arbitral tribunal to order interim measures for the protection of the
subject-matter of the dispute and also provides for appropriate security in respect of such a
measure.
The provisions contained in this section are analogous to those contained in Section 9 of the Act.
But so far as their effect is concerned, the two differ in the following aspects:
1. The Court's power to order interim measures under Section 9 is unrestricted but arbitral
tribunal's power under Section 17 is conditioned by the words 'unless otherwise agreed by
the parties'.
2. The Court is empowered to make orders under Section 9 'before, during or after' the arbitral
proceedings but the arbitral tribunal can exercise its power to order interim measures only
during the arbitral proceedings. Thus, arbitral tribunal's power under Section 17 is far more
restrictive.
3. The Court can exercise its power under Section 9 only when a party applies for it for an
interim measure of protection. Though the arbitral tribunal also makes an order of interim
measure 'at the request of a party' as provided in sub-section (1) of the section but sub-section
(2) authorizes the arbitral tribunal to 'require the party to provide appropriate security' in
connection with measures ordered under sub-section (1).

Conduct of Arbitral Proceedings:

Section 18 of the Act has two fundamental principles. Firstly, it provides that the parties to an
arbitration proceeding shall be treated with equality and secondly, that each party shall be given a
full opportunity to present their case. This section is a mandatory provision and the arbitral tribunal
has to comply with it. The tribunal has to act in an impartial manner to the parties and no party has
to be given an advantage over the other.

Procedure of Arbitral Proceedings

Section 19 of the Act recognizes the right of the parties to agree on the procedural rules which are
applicable in conducting the arbitral proceedings. This provision establishes the procedural
autonomy of the parties.
When the parties fail to agree on a procedure or frame the procedure, it grants the arbitral tribunal
a wide range of discretionary powers to frame the arbitral proceedings. The Act does not prescribe
any default rules regulating the arbitral proceedings.
This provision also provides that the application of the Code of Civil Procure, 1908 or the Evidence
Act, 1872 to the arbitral proceeding is also at the discretion of the parties.

Place of Arbitration

Section 20 of the Act provides that the parties are free to agree on the place of arbitration and if
they fail to agree then the arbitral tribunal has to determine the place of arbitration in a judicial
manner, considering the circumstances of the case and convenience of the parties.
Also, the place of arbitration is of paramount importance because the laws of the place of
arbitration play a fundamental role in the arbitral proceeding. It determines the substantive laws for
the time being in force in India.
Section 21 of the Act provides the rules which govern the commencement of arbitral proceedings.
It gives freedom to the parties to agree and determine when the arbitration proceeding can
officially commence. But in the absence of such an agreement or where the parties fail to arrive at
an agreement, the arbitral proceedings can commence when one party issues a notice to the other
party, in writing, showing its intention to refer the dispute to arbitration.
So in respect of a particular dispute, the arbitral proceeding commences on the date on which a
request for that dispute to be referred to arbitration is received by the other party. In order to
determine the date of receipt, the provisions of Section 3 of the Act must be looked into.

Language to be used in Arbitral Proceedings

Section 22 of the Act deals with the language which has to be used in arbitral proceedings. The
parties to the arbitration agreement are free to choose the language or languages which have to
be used in the arbitral proceedings. In cases where the parties fail to arrive at such an agreement
then it is the role of the arbitral tribunal to determine the language or languages to be used in the
arbitral proceedings. The language shall also apply to any written statement by a party, any
hearing and any arbitral award, decision or other communication by the arbitral tribunal.
When the arbitral tribunal agrees on the language to be used in arbitral proceedings, it may order
that any documentary evidence shall be accompanied by a translation into the language agreed.
The arbitral tribunal must ensure that all the parties are able to follow and understand the
proceedings.

Statement of Claim and Defence

Section 23 of the Act provides for pleadings of the parties before the arbitral tribunal. After the
arbitral tribunal has been established, the usual practice is to exchange and file their pleadings
before the [Link] claimant states the facts and other relevant matters, while the respondent
opposes the facts and the averments made in the claim statement and contests the relief claimed
by the claimant. The contents of pleading may vary from case to case depending upon the facts
and circumstances of each case.
Within six months of the appointment of the arbitral tribunal, the statement of claim and defence
has to be completed under this section.

Hearing and written proceedings

Section 24 of the Act discusses the manner in which arbitral proceedings are to be conducted. In
the absence of any prior agreement between the parties relating to this matter, the arbitral tribunal
has the power to decide whether the proceedings shall be held orally or on the basis of documents
and other materials.

Default of Party

Section 25 of the Act deals with three situations where the parties are at default.
Firstly, the arbitral tribunal terminates the proceedings when the claimant without showing
sufficient cause, fails to communicate his statement of claim in accordance with Section 23(1).
Secondly, the arbitral tribunal continues the proceeding when the respondent fails to communicate
his statement of defence in accordance with Section 23(1).
Thirdly, if there is sufficient cause then the termination is recalled and proceeding gets restored.
Section 26 of the Act gives the arbitral tribunal power to appoint one or more experts based on
the requirement or request of the parties. It requires the parties to provide relevant information to
the experts.
Also, the arbitral tribunal cannot appoint experts and delegate the duty of determination of the
dispute.

Court Assistance

Section 27 of the Act provides the arbitral tribunal with the power to apply for the court assistance
in taking evidence. Persons can also be held guilty and tried before the court, if they refuse to give
evidence or do not cooperate.
Termination

The arbitral proceedings are terminated either by the final arbitral award or by an order of the
arbitral tribunal terminating the arbitral proceedings.
The arbitral tribunal terminates the arbitral proceedings in any of these cases where:
1. the claimant withdraws the claim and respondent does not object to it,
2. both parties are in consensus and agree to terminate the arbitral proceedings, or
3. the continuation of the arbitral proceedings has become impossible or irrelevant considering
the present facts of the case.
Also, the termination of the arbitral proceedings terminates the mandate of the arbitral tribunal and
the arbitral tribunal becomes functus officio. The term "functus officio" means no longer holding
office or having official authority once a decision is rendered.
Thus, The arbitral proceeding is based completely on the concept of party autonomy, where both
the parties decide the procedure as well as the circumstances under which arbitration is sought.
The "rules of the game", such as applicable law, the seat of arbitration, the language of the
proceedings, etc. are in the hands of the parties and the arbitral proceedings are mostly conducted
based on those rules. So, there are no particular set of rules and applicable laws which govern the
arbitral proceedings. However, Arbitration and Conciliation Act, 1996 limits judicial intervention and
reinforces the importance to party autonomy, confidentiality and expeditious completion of arbitral
proceedings.

Recourse Against Arbitral Award:

An Application to set aside an Arbitral award may be made on the following grounds: [Section
34(2) (a)]
1. Incapacity of any Party to arbitration;
2. The Arbitration agreement is not valid under the law to which parties have subjected it;
3. No notice for appointment of arbitrator has been given to the party making application under
section 34;
4. The arbitration award deals with a dispute which does not fall in terms of submission to
Arbitration or it is beyond the scope of arbitration agreement;
5. The Composition of Arbitral Tribunal was not in accordance with the Agreement between
the parties;
Apart from these aforesaid grounds Section 34(2) (b) also enumerates two additional grounds
upon which the Court itself can set aside the award. These grounds are:
1. If the Subject-matter of dispute is not capable of settlement by arbitration under the law
2. If the arbitral Award is in conflict of Public Policy of India.
All the aforesaid grounds are available to both domestic as well as international arbitral awards.
The Supreme Court in
State of U.P. v. Allied Constructions, (2003) 7SCC 396, made it clear that an award cannot be
aside by the Court unless it is challenged on one or the other statutory grounds specified in
Section 34 of the Act. The only other grounds besides those mentioned in section 34 are
challenge to the jurisdiction of arbitrator [i.e. Section 16 (6)] and arbitrator being interested [i.e.
Section 13 (5)].

Finality and enforcement of arbitral award:

Section 35 envisages that the arbitral award is final and binding between the parties and other
persons claiming under them.
Where (1) the time of making an application for setting aside the award under Section 34 has been
expired, or (2) such application has been made but rejected by the Court, the award may be
enforced under CPC, 1908 in the same manner as if it were a decree of the Court.
The expression 'final award' implies an arbitral award complete in all respects leaving nothing to
be done by the Arbitral Tribunal. Such an award is legally binding on the parties. It may be
reiterated that requirement of filing the award in court has been dispensed with under the Act.
In Ravi Prakash Goel v. Chandra Prakash Goel, AIR 2007 SC 1517,
It provides that persons claiming under the rights of a deceased person are the legal
representatives of the deceased party and they have the right to enforce the award and are also
bound by it.

Section 36

The Supreme Court in Leela Hotels Ltd. v. Housing & Urban Development Corporation Ltd.
(HUDCO), AR 2012 SC 903,
held that the award has to be enforced under the Code of Civil Procedure in the same manner as
if it were a decree of the Court. The language used in Section 36 of the Act leaves no room for
doubt as to the manner in which the award of the arbitrator is to be accepted.

Concept of "CONCILIATION"

Introduction:

Conciliation is a private, informal process in which a neutral third person helps disputing parties in
reaching an agreement. This is a process by which resolution of disputes is achieved by
compromise or voluntary agreement.
Here the parties, together with the assistance of the neutral third person or persons, systematically
isolate the issues involved in the dispute, develop options, consider alternatives and reach a
consensual settlement that will accommodate their needs.
In contrast to arbitration, the conciliator does not render a binding award. The parties are free to
accept or reject the recommendations of the conciliator. The conciliator is, in the Indian context,
often a Government official whose report contains recommendations.
The conciliation process is sometimes considered synonymous to mediation. Where a third party
is informally involved without a provision under any law, which is mediation. In other words a non-
statutory conciliation is what mediation is.
Essentially however in effect and structure, conciliation and mediation are substantially identical
strategies where assistance is provided to parties to a dispute by a stranger to the dispute. Both
the conciliator and mediator are required to bring to the process of dispute resolution fairness,
objectivity, neutrality, independence and considerable expertise, to facilitate a resolution of the
conflict.
Part III of the Arbitration and Conciliation Act, 1996 deals with conciliation. Conciliation means "the
settling of disputes without litigation." The main difference between arbitration and conciliation is
that in arbitration proceedings the awards is the decision of the Arbitral Tribunal while in the case
of conciliation the decision is that of the parties arrived at with the assistance of the conciliation.

As per the Act:

The law relating to conciliation has been codified for the first time in India on the pattern of
UNCITRAL Conciliation Rules.

Section 61

1. This part shall apply to conciliation of disputes arising out of legal relationship, whether
contractual or not and to all proceedings.
2. This part shall not apply where by virtue of any law for the time being in force certain
disputes may not be submitted to conciliation.
Section 61 points out that the process of conciliation extends, in the first place, to disputes,
whether contractual or not. But the disputes must arise out of legal relationship. It means that the
dispute must be such as to give one party the right to sue and other party the liability to be sued.
The process of conciliation extends, in the second place, to all proceedings relating to it. But Part
3rd of the Act does not apply to such disputes as cannot be submitted to conciliation by virtue of
any law for the time being in force.
Section 63 fixes the number of conciliators.
There shall be one conciliator. But the parties may by their agreement provide for two or three
conciliators. Where the number of conciliators is more than one, they should as a general rule act
jointly.
In a conciliating proceeding if there is one conciliator, then the parties agree on the name sole
conciliator. And if there are two conciliators then each party may appoint one conciliator, whereas
if there are three conciliators then each party may appoint one conciliator and the parties may
appoint the third one who shall act as the presiding conciliator.

Sub- section (2) of section 64

provides for the assistance of a suitable institution or person in the appointment of conciliators.
Either a party may request such institution or person to recommend the names of suitable
individuals to act as conciliators, or the parties may agree that the appointment of one or more
conciliators be made directly by such institution or person.

Principles of Procedure

a. Independence and impartiality Sec 67(1)

The conciliator should be independent and impartial. He should assist the parties in an
independent and impartial manner while he is attempting to reach an amicable settlement of
their dispute.
b. Fairness and justice Sec 67(2)
The conciliator should be guided by principles of objectivity, fairness and justice. He should
take into consideration, among other things, the rights and obligations of the parties, the
usages of the trade concerned, and the circumstances surrounding the dispute, including any
previous business practices between the parties.
c. Confidentiality Sec 75, proviso to 70
The conciliator and the parties are duly bound to keep confidential all matters relating to the
conciliation proceedings. Similarly, when a party gives an information to the conciliator on the
condition that it be kept confidential, the conciliator should not disclose that information to the
other party. (Sec 70, proviso)
d. Disclosure of information Sec 70
When the conciliator receives an information about any fact relating to the dispute from a party,
he should disclose the substance of that information to the other party. The purpose of this
provision is to enable the other party to present an explanation which he might consider
appropriate.
e. Cooperation of parties with conciliator Sec 71
 The parties should in good faith cooperate with the conciliator. They should submit the written
materials, provide evidence and attend meetings when the conciliator requests them for this
purpose.
f. Rules of procedure Sec 66
The conciliator is not bound by the rules contained in the Code of Civil Procedure, 1908 or the
Indian Evidence Act, 1872. Though the conciliator is not bound by the technical rules of
procedure, he should not ignore the principles of natural justice.
g. Place of meeting Sec 69(2)
The parties have freedom to fix by their agreement the place where meetings with the
conciliator are to be held. Where there is no such agreement, the place of meeting will be fixed
by the conciliator after consultation with the parties. In doing so, the circumstances of the
conciliation proceedings will have to be considered.
h. Communication between conciliator and parties Sec 69(1)
The conciliator may invite the parties to meet him or may communicate with them orally or in
writing. He may do so with the parties together or with each of them separately.

Procedure of Conciliation

i. Commencement of conciliation proceedings Section 62

The conciliation proceedings are initiated by one party sending a written invitation to the other
party to conciliate. The invitation should identify the subject of the dispute. Conciliation
proceedings are commenced when the other party accepts the invitation to conciliate in writing.
If the other party rejects the invitation, there will be no conciliation proceedings. If the party
inviting conciliation does not receive a reply within 30 days from the date he sends the
invitation, he may elect to treat this as rejection of the invitation to conciliate. If he so elects he
should inform the other party in writing.
ii. Submission of statements to conciliator Section 65
of the dispute and the points at issue. Each party should send a copy of such statement to the
other party. The conciliator may require each party to submit to him a written statement of his
position and the facts and grounds in its support. It may be supplemented by appropriate
documents and evidence. The party should send a copy of such statements, documents and
evidence to the other party.
iii. Conduct of conciliation proceedings Section 69(1), 67(3)
The conciliator may invite the parties to meet him. He may communicate with the parties orally
or in writing. He may meet or communicate with the parties together or separately. (Sec 69(1))
In the conduct of conciliation proceedings, the conciliator has some freedom. He may conduct
them in such manner as he may consider appropriate. But he should take into account the
circumstances of the case, the express wishes of the parties, a party's request to be heard
orally and the need of speedy settlement of dispute. (Sec 67(3))
iv. Administrative assistance Section 68
Section 68 facilitates administrative assistance for the conduct of conciliation proceedings. The
parties and the conciliator may seek administrative assistance by a suitable institution or the
person with the consent of the parties.
Settlement

i. Settlement of dispute Sec 67(4), 72, 73

The role of the conciliator is to assist the parties to reach an amicable settlement of the dispute.
He may at any stage of the conciliation proceedings make proposals for the settlement of the
dispute. Such proposals need not be in writing and need not be accompanied by a statement of
reasons (Sec. 67(4)).
Each party may, on his own initiative or at the invitation of the conciliator, submit to the
conciliator the suggestions for the settlement of the dispute (Sec.72).
When it appears to the conciliator that there exist elements of a settlement likely to be
accepted by the parties, he shall formulate the terms of a possible settlement and submit them
to the parties for their observations. After receiving the observations of the parties, the
conciliator may reformulate the terms of a possible settlement in the light of such observations
(Sec 73(1)).
If the parties reach agreement on the settlement of a dispute, a written settlement agreement
will be drawn up and signed by the [Link] the parties request, the conciliator draw up or
assist the parties in drawing up the settlement agreements (Sec 73(2)).
When the parties have signed the settlement agreement, it becomes final and binding on the
parties and persons claiming under them (Sec 73(3)).
The conciliator shall authenticate the settlement agreement and furnish its copy to each of the
parties (Sec 73(4)).
ii. Status and effect of settlement agreement Sec 74
Section 74 provides that the settlement agreement shall have the same status and effect as an
arbitral award on agreed terms under Section 30. This means that it shall be treated as a
decree of the court and shall be enforceable.

Restrictions on Role of Conciliator Section 80

Section 80 places two restrictions on the role of the conciliator in the conduct of conciliation
proceedings:
1. Clause (a) of Section 80 prohibits the conciliator to act as an arbitrator or as a
representative or counsel of a party in any arbitral or judicial proceeding in respect of a
dispute which is subject of the conciliation proceedings.
2. Clause (b) of Section 80 prohibits the parties to produce the conciliator as a witness in any
arbitral or judicial proceedings.

Termination of Conciliation Proceedings Section 76

Section 76 lays down four ways of the termination of conciliation proceedings. These are:
1. The conciliation proceedings terminate with the signing of the settlement agreement by the
parties. Here the date of termination of conciliation proceedings is the date of the settlement
agreement (Sec 76(a)).
2. The conciliation proceedings stand terminated when the conciliator declares in writing that
further efforts at conciliation are no longer justified. Here the date of termination of conciliation
proceedings is the date of the declaration (Sec 76(b)).
3. The conciliation proceedings are terminated by written declaration of the parties addressed
to the conciliator to the effect that the conciliation proceedings are terminated. Here the date of
termination of conciliation proceedings is the date of the declaration (Sec 76(c)).
4. The conciliation proceedings are terminated when a party declares in writing to the other
party and the conciliator, that the conciliation proceedings are terminated. Here the date of
termination of conciliation proceedings is the date of the declaration (Sec 76(d)).

Resort To Arbitral or Judicial Proceedings Sec 77

As a general rule, the parties cannot initiate arbitral or judicial proceedings during the conciliation
proceedings in respect of a dispute which is the subject matter of the conciliation proceedings. But
in exceptional cases a party may initiate arbitral or judicial proceedings if in his opinion such
proceedings are necessary for preserving his rights.

Costs Sec 78

Costs means reasonable costs relating to the following:

1. The fee and expenses of the conciliator and witness requested by the conciliator with the
consent of the parties
2. Any expert advice requested by the conciliator with the consent of the parties
3. Any assistance provided to sec 64(2)(b) and sec 68
4. Any other expenses incurred in connection with the conciliation proceedings and the
settlement agreement (Sec 78(2)).
It is the conciliator who fixes the costs of the conciliation proceedings upon their termination and
gives written notice of it to the parties. (Sec78 (1)) The costs are borne by the parties in equal
shares (Sec 78(3)).

Deposits Sec 79

The conciliator may estimate the costs likely to be incurred and direct each party to deposit it in
advance in an equal amount. During the conciliation proceedings, the conciliator may demand
supplementary deposits from each party. If the required deposits are not paid in full by both parties
within 30 days, the conciliator may either suspend the proceedings or terminate the proceedings
by making a written declaration to the parties.
The termination of proceedings become effective from the date of declaration. Upon termination of
the proceedings, the conciliator shall render to the parties accounts of deposits received and
return the unexpected balance to the parties.

Case Laws Relating To Conciliation

1. Haresh Dayaram Thakur v. State of Maharashtra and Ors. AIR 2000 SC 2281 While
dealing with the provisions of Sections 73 and 74 of the Arbitration and Conciliation Act of
1996 in paragraph 19 of the judgment as expressed thus the court held that- From the
statutory provisions noted above the position is manifest that a conciliator is a person who
is to assist the parties to settle the disputes between them amicably.
For this purpose the conciliator is vested with wide powers to decide the procedure to be
followed by him unaffected by the procedural law like the Code of Civil Procedure or the Indian
Evidence Act, 1872.
 When the parties are able to resolve the dispute between them by mutual agreement and it
appears to the conciliator that their exists an element of settlement which may be acceptable to
the parties he is to proceed in accordance with the procedure laid down in Section 73,
formulate the terms of a settlement and make it over to the parties for their observations; and
the ultimate step to be taken by a conciliator is to draw up a settlement in the light of the
observations made by the parties to the terms formulated by him.
The settlement takes shape only when the parties draw up the settlement agreement or
request the conciliator to prepare the same and affix their signatures to it. Under Sub-section
(3) of Section 73 the settlement agreement signed by the parties is final and binding on the
parties and persons claiming under them.
It follows therefore that a successful conciliation proceedings comes to end only when the
settlement agreement signed by the parties comes into existence. It is such an agreement
which has the status and effect of legal sanctity of an arbitral award under Section 74.
2. Mysore Cements Ltd. V. Svedala Barmac Ltd. AIR 2003 SC 3493 It was said that
Section 73 of the Act speaks of Settlement Agreement. Sub-section (1) says that when it
appears to the Conciliator that there exist elements of settlement which may be acceptable
to the parties, he shall formulate the terms of a possible settlement and submit them to the
parties for their observation. After receiving the observations of the parties, the Conciliator
may reformulates the terms of a possible settlement in the light of such observations.
In the present case, we do not find there any such formulation and reformulation by the
Conciliator, under Sub- section (2), if the parties reach a settlement agreement of the dispute
on the possible terms of settlement formulated, they may draw up and sign a written settlement
agreement. As per Sub-section
3. When the parties sign the Settlement Agreement, it shall be final and binding on the parties
and persons claiming under them respectively. Under Sub-section (4), the Conciliator shall
authenticate the Settlement Agreement and furnish a copy thereof to each of the parties.
From the undisputed facts and looking to the records, it is clear that all the requirements of
Section 73 are not complied with.

Conclusion :

The process of conciliation as an alternate dispute redressal mechanism is advantageous to the

parties in the sense that it is cost effective and expeditious, it is simple, fast and convenient then
the lengthy litigation procedure and it eliminates any scope of biasness and corruption.
The parties who wish to settle their disputes they can be provided great intensive by the process
of conciliation. In order to enable the conciliator to play his role effectively ,the parties should be
brought together face to face at a common place where they can interact face to face and with the
conciliator, separately or together without any distraction and with only a single aim to sincerely
arrive at the settlement of the dispute.
Conciliation is a boon and it is a better procedure to settle any dispute as in this process it is the
parties who by themselves only come to the settlement of the dispute and the role of the
conciliator is to bring parties together and to make an atmosphere where parties can themselves
resolve their disputes. Conciliation tries to individualize the optimal solution and direct parties
towards a satisfactory common agreement.
 Mediation and Negotiation

BACK

LECTURE 03 PART III

CONCEPT OF MEDIATION AND NEGOTIATION

CONCEPT OF MEDIATION

With changing times, an increasing number of people are resorting to alternative methods of
dispute resolution such as mediation in order to resolve their issues. Over the years, mediation
has been recognised as the fastest growing method to resolve disputes worldwide.
Mediation allows parties to relook at mutual interests and rights of each other, and to come up with
amicable and innovative solutions. This helps in maintaining cordial relations between the parties.
The role of courts or arbitrators is adjudicative and more formal in nature. In contrast, the nature of
mediators or the process of mediation is very practical and flexible. Many a time, it can prove to be
speedier, more effective and economical than the other adjudicative processes.

DEFINITION:

It is an informal process in which a neutral third party without the power to decide or usually to
impose a solution helps the parties resolve a dispute or plan a transaction. Mediation
is voluntary and non-binding, although the parties may enter into a binding agreement as a result
of mediation. It is not an adjudicative process. The process of mediation aims to facilitate their
negotiations. The mediator has no independent decision-making power, jurisdiction or legitimacy
beyond what is voluntarily offered by the parties themselves.
Mediation is a process of structured negotiation conducted by a facilitator with skill, training and
experience necessary to assist the litigating parties in reaching a resolution of their dispute. It is a
process that is confidential, non-coercive and geared to aid them in arriving at a mutually
acceptable resolution to their dispute of any nature.
One of the advantages of the mediation process is its flexibility. It is not as if one party wins and
the other party looses. But the parties arrive at an equitable solution that is why mediation is said
to be a win-win situation. Mediation employs several strategies, sub-strategies and techniques to
encourage the parties to reach an agreement.

ADVANTAGES:

Mediation like many ADR strategies has distinct advantages over the traditional courts/ tribunals
format of dispute resolution.
Mediation is a better and more lucrative alternative to the court system as-
Control- It gives the parties control over the scope of the mediation in terms of the issues
discussed, and its outcome, with regard to the terms of the settlement and to settle or not.
Control is vested not with a judge or jury, but the parties themselves and helps them in reaching a
mutually agreeable solution.
By giving control to the parties, it may also result in the settling of related and connected issues
and disputes.
It also allows the parties to satisfy their long-term and underlying interests at each stage. This is
immensely beneficial as it allows the parties creativity in examining alternatives, evaluating options
and reaching a settlement. When the parties themselves agree to the terms of the settlement,
there is compliance with the terms.
 Consent-based- Based on voluntary consent, it allows any party to opt out at any stage if
they find mediation to be unhelpful.
 Participation- It allows the parties to directly participate in the negotiation and present the
case in their own perspective.
 Economical- Mediation takes less time to resolve disputes than standard legal channels.
While courts may take months or years to pronounce judgments in cases, mediations take mere
hours. According to figures released by the Bangalore Mediation Centre, while the mediation
process can take a maximum of 60 days, the average time taken to settle a case is a mere two
hours.
If a settlement is reached, the parties also save money on their hourly costs and no further
litigation. Court fees are also refunded.
Since it takes less time, it is speedy, economical and efficient.
 Confidentiality-Mediations remain strictly confidential, with the terms of the mediation
being known only to the parties involved and the mediator. This aids in better and effective
communication between the parties.
 Conducive to dispute resolution- By providing a procedure that is simple and flexible,
mediation can be modified to the demands of each case and allows the parties to carry on with
their day to day activities. It thus created an informal, cordial and conducive environment for
dispute resolution.
 Mutuality- Since parties to mediation are amenable to mutually working towards a solution,
they are more receptive to the other party's side. This aids in restoring the relationship between
the parties and settles the dispute in a mutually beneficial manner.
 Support by mediator- As a neutral, impartial and independent third-party, mediators
ensure that the mediation remains a fair process. They also guide the parties through the process
as neutral facilitators, encourage creativity in resolution and broaden the range of solutions.
 Finality- Mediation promotes finality in dispute resolution as there is no scope for an
appeal, a revision or further litigation on the successful conclusion of mediation.
 Refund of court fees- Court-referred mediation also allows for a refund of court fees in
cases of settlement.

DISADVANTAGES:

 Informality-In the informal setting of mediation, there are no formal rules or procedures that
have to be followed. Thus, mediators do not have access to a lot of tools to get people to testify or
produce evidence to get to the truth of a matter.
 Unfairness- Moreover, the lack of formal rules means that there is no way to ensure a fair
procedure for the parties involved. An aggressive party might be able to steamroll a timid one
despite the best efforts of the mediator.
The imbalances of power that exist in a family may thus also lead to unfairness in the mediation.
 Success not guaranteed- Mediation may also be unsuccessful and not lead to a
settlement between the parties involved. The parties will then have to resort to the money and time
intensive court system after already wasting a significant amount of them in the mediation.
 Non-binding- The agreement reached in mediation is non-binding. Parties to a settlement
may also attempt to dispute the settlement agreement in case the agreement is not made binding
on them. They can file another suit in court challenging the legitimacy of the settlement, creating
another dispute on top of the underlying one.
The only solution to this is to agree to make the settlement agreement binding on both parties
before signing it.
The appropriate CASES suited for mediation are those where-
1. Parties want to control the outcome.
2. Communication problem exist between parties or their lawyers.
3. Personal or emotional barriers prevent settlement.
4. Resolution is more important than vindicating legal or moral principles.
5. Creative possibilities for settlement exist.
6. Parties have an ongoing or significant past relationship.
7. Parties disagree about the facts or interpretation.
8. Parties have incentive to settle because of time, cost of litigation, drain on productivity, etc.
9. A formidable obstacle to resolution appears to be the reluctance of the lawyers, not the
parties.
Practitioners in this field adopt their own perfected styles. They differ in their basic steps. A lot
depends upon their nature of the dispute. The more complicated the matter, the more private
meetings would be necessary to pave the ground for a joint meeting.

APPROACHES OF MEDIATION:

A mediator may adopt either an

1. Facilitative Approach; or
2. Evaluative Approach
In Facilitative mediation or traditional mediation, a professional mediator attempts to facilitate
negotiation between the parties in conflict. Rather than making recommendations or imposing a
decision, the mediator encourages disputants to reach their own voluntary solution by exploring
each other's deeper interests. In facilitative mediation, mediators tend to keep their own views
regarding the conflict hidden. Mediators try to avoid opinions and judgments. They either facilitate
or encourage parties to open upon their communications and disclose their interests and priorities.
In this process the mediator gets the opportunity of locating the points of difference and the area of
controversy or dispute. He may then help the parties to bridge the gap between them.
Standing in direct contrast to facilitative mediation is Evaluative mediation , a type of mediation in
which mediators are more likely to make recommendations and suggestions and to express
opinions. Instead of focusing primarily on the underlying interests of the parties involved,
evaluative mediators may be more likely to help parties assess the legal merits of their arguments
and make fairness determinations. Evaluative mediation is most often used in court-mandated
mediation, and evaluative mediators are often attorneys who have legal expertise in the area of
the dispute.

Current scenario of Mediation under statutory provisions

1. Conciliators appointed under Section 4 the Industrial Disputes Act, 1947 are assigned with
the duty to mediate and promote settlement of industrial disputes with detailed prescribed
procedures for conciliation proceedings. If used appropriately, it's a cheap and quick
process. However, only a few cases have been resolved and the very intent of having such
provision has been frustrated. Unfortunately, large numbers of matters which ought to have
been resolved by this provision are still pending in courts and new matters are filed every
day.
2. In 2002, an amendment to the Code of Civil Procedure, 1908 (CPC) was brought in.
Section 89 read with Order X Rule 1A provided for reference of cases pending in the courts to
 ADR. In addition, Order XXXIIA of the CPC recommends mediation for familial/personal
relationships, as the ordinary judicial procedure is not ideally suited to the sensitive area of
personal relationships. Though many courts in India now have mediation centres, there is no
accurate data available to show that this provision has been utilised successfully.
3. Even Section 442 of the Companies Act, 2013, read with the Companies (Mediation and
Conciliation) Rules, 2016, provides for referral of disputes to mediation by the National
Company Law Tribunal and Appellate Tribunal.
4. The Micro, Small and Medium Enterprises (MSME) Development Act, 2006 mandates
conciliation when disputes arise on payments to MSMEs.
5. More particularly, family and personal laws including the Hindu Marriage Act, 1955 and
the Special Marriages Act, 1954 require the court in the first instance to attempt mediation
between parties.
6. Section 32(g) of the Real Estate (Regulation and Development) Act, 2016 provides for
amicable conciliation of disputes between the promoters and allottees through dispute
settlement forum, set up by consumer or promoter associations.

Measures for effective implementation and growth of Mediation in India

The judiciary mostly deals with matters that require adjudication, but there are situations where
mediation techniques would be more appropriate and beneficial to the parties. Therefore,
identification of such matters and situations by parties, lawyers and judges becomes extremely
crucial and important in the promotion of mechanism.
The following steps may be taken:
1. Grassroots level awareness of public at large (particularly parties, lawyers, judges and
other stakeholders) and easy access to the Mediation.
2. Legislative framework on Mediation and its practice (many other countries have already
adopted this and India is now signatory to the United Nations Convention on International
Settlement Agreements).
3. Mediation Centres need good infrastructure and a standard pattern to make parties
comfortable.
4. Mediation must develop into a full-time profession (efforts by senior lawyers, members of
the judiciary and all state bar councils will be required for promotion of this mechanism) as it
gives lawyers an excellent opportunity to demonstrate their legal, analytical and professional
skills.
5. Incentives and recognitions to lawyers to educate parties about the inner workings of the
mediation process in order to make such informed choices.
6. High ethical standards (code of ethics and conduct) to be followed.
7. Theoretical as well as practical training in mediation to be included in syllabi of law colleges
and introduction to mediation course to be conducted for all practicing lawyers. Structured
mediation training with accreditation for specialising in mediation should be provided in a cost
effective manner all over India. Continued skill enhancing courses should be conducted from
time to time for lawyers and other professionals who wish to take up mediation as a profession.
8. Multiple Mediation drives should be conducted by courts on various levels, be it at the
district level or the national level. These drives can prove to be extremely successful and can
 help in clearing a large backlog of cases pending before various courts. During the recently
conducted Family Courts Mediation Drive conducted by the Delhi High Court, out of the 2,884
cases referred to mediation by the Family Courts, 2,171 cases were successfully disposed of,
which resulted in the disposal rate of 75.27%. This clearly indicates that the judicial system
requires heavy promotion of the process of mediation.
9. The selection process of mediators and adequate training standards for the mediators
should be developed. There is a need to ensure standardized training programs for potential
mediators and details about the professional and educational background of the mediators,
including previous mediations conducted, areas covering the issues involvement in prior
mediations, expertise in other discipline(s), if any, etc. need to be maintained.
10. For mediation to develop as a significant practise area, mediators shall be required to be
attached with extremely transparent and eminent professional bodies under the active
surveillance of the government and the judiciary.
The Chief Justice of Supreme Court of New South Wales has observed that:
"Mediation is an integral part of the Courts adjudicative processes and the ‘shadow of the Courts'
promotes resolution."

2. CONCEPT OF NEGOTIATION

DEFINITION:

Negotiation is the process of dispute resolution between parties, through mutual understanding
and agreement where there is no involvement of the third party. Negotiation is a contemporary
form of dispute resolution.
Negotiation in principle is any form of communication between two or more people for the purpose
of arriving at a mutually agreeable situation. Negotiation has been defined as "the process we use
to satisfy our needs when someone else controls what we want." Most of the disagreements or
differences are dealt with in one way or the other by negotiation between the principals
themselves, relatively few involve legal intervention.
In this form of ADR the disputants or their agents maintain control over the negotiation process.

There are several techniques of negotiation:

1. Competitive bargaining
2. cooperation bargaining and
3. principled negotiation
which are but different facets and styles of negotiations.
In the competitive bargaining method the negotiators are essentially concerned with substantive
results and advocate extreme positions, create extravagant issues, mislead the other negotiator or
even bluff in order to gain an advantage and to ascertain the other negotiator's bottom line.
In Cooperative bargaining both negotiations focus on building up a relationship of trust and
cooperation. In this strategy the negotiators are prepared to make concessions even on
substantives issues as the endeavour is to preserve the relationship.
In Principled negotiations the negotiator focus on the interests of each of the disputants, with the
goal of creating satisfactory and elegant options for resolutions, which may be assessed by
objective criteria. This is the business method that can be said to be used more than any other,
and with good cause- it is the most flexible, informal and party directed, closest to the parties'
circumstances contrast and can be geared to each party's own concerns.

AREAS OF NEGOTIATION:
 Negotiation occurs in:
a. business,
b. non-profit organizations,
c. government branches,
d. legal proceedings,
e. among nations, and
f. in personal situations such as marriage, divorce, parenting, and everyday life.
The study of the subject is called negotiation theory. Those who work in negotiation professionally
are called negotiators. Professional negotiators are often specialized, such as union negotiators,
leverage buyout negotiators, peace negotiators, hostage negotiators, or may work under other
titles, such as diplomats, legislators or brokers.

The Essential steps required for a negotiation to be successful are as follows:-

1. The voluntary consent of both parties to negotiate on the dispute.

2. The dispute concerns both parties in such a way that the parties are dependent on each
other.
3. The parties should have the willingness to settle the dispute.
4. The dispute at hand should be negotiable.
5. In certain cases there is sense of urgency and deadline in the dispute leading to
negotiation.

ADVANTAGES OF NEGOTIATION

 In procedural terms, negotiation is probably the most flexible form of dispute resolution as it
involves only those parties with an interest in the matter and their representatives, if any. The
parties are free to shape the negotiations in accordance with their own needs, for example, setting
the agenda, selecting the forum (public or private) and identifying the participants. By ensuring that
all those who have an interest in the dispute have been consulted regarding their willingness to
participate and that adequate safeguards exist to prevent inequities in the bargaining process (i.e.,
an imbalance in power between the parties), the chances of reaching an agreement satisfactory to
all are enhanced.
 Like any method of dispute resolution, negotiation cannot guarantee that a party will be
successful. However, many commentators feel that negotiations have a greater possibility of a
successful outcome when the parties adopt an interest-based approach as opposed to a
positional-based approach. By focusing on their mutual needs and interests and the use of
mechanisms such as objective standards, there is a greater chance of reaching an agreement that
meets the needs of the parties. This is sometimes referred to as a "win-win" approach.
 Negotiation is a voluntary process. No one is required to participate in negotiations should
they not wish to do so.
 There is no need for recourse to a third-party neutral. This is important when none of the
parties wants to involve outside parties in the process, e.g., the matter to be discussed or the
dispute to be resolved may be highly sensitive in nature.
 Unlike the outcomes of certain adjudicative processes, e.g., the courts, the outcome of a
negotiation only binds those parties who were involved in the negotiation. The agreement must
 not, of course, be contrary to Canadian law (e.g., an agreement to commit a crime would be illegal
and thus void for public policy reasons).
 Assuming that the parties are negotiating in good faith, negotiation will provide the parties
with the opportunity to design an agreement which reflects their interests.

DISADVANTAGES OF NEGOTIATION:

 A particular negotiation may have a successful outcome. However, parties may be of

unequal power and the weaker party may be placed at a disadvantage. Where a party with an
interest in the matter in dispute is excluded or inadequately represented in the negotiations, the
agreement's value is diminished, thereby making it subject to future challenge. In the absence of
safeguards in the negotiating process, the agreement could be viewed by a participant or others
outside the process as being inequitable, even though the substance of the agreement may be
beyond reproach.
 A successful negotiation requires each party to have a clear understanding of its
negotiating mandate. If uncertainty exists regarding the limits of a party's negotiating authority, the
party will not be able to participate effectively in the bargaining process.
 The absence of a neutral third party can result in parties being unable to reach agreement
as they be may be incapable of defining the issues at stake, let alone making any progress
towards a solution.
 The absence of a neutral third party may encourage one party to attempt to take advantage
of the other.
 No party can be compelled to continue negotiating. Anyone who chooses to terminate
negotiations may do so at any time in the process, notwithstanding the time, effort and money that
may have been invested by the other party or parties.
 Some issues or questions are simply not amenable to negotiation. There will be virtually no
chance of an agreement where the parties are divided by opposing ideologies or beliefs which
leave little or no room for mutual concessions and there is no willingness to make any such
concessions.
 The negotiation process cannot guarantee the good faith or trustworthiness of any of the
parties.
 Negotiation may be used as a stalling tactic to prevent another party from asserting its
rights (e.g., through litigation or arbitration).

Lok Adalats

BACK

LECTURE 03 PART IV

CONCEPT OF LOK ADALATS:

Equal Justice for all is a cardinal principle on which the entire system of administration of justice is
based. It is deep rooted in the body and spirit of common law as well as civil law jurisprudence.
This ideal has always been there in hearts of every man since the dawn of civilisation. It is
embedded in Indian ethos of justice- 'dharma'. The ideal of justice was even inserted in "Magna
Carta" where it was stated that:
"To no man will we deny, to no man will we sell, or delay, justice or right."

Recognition of Legal Aid as a Human Right:

The 'right to life' as contained in Article 21 of the Constitution covers a wide sphere of rights
including those pertaining to livelihood, clean environment, right to education, guarantee against
illegal arrest or detention, speedy trial, access to justice and so on.
Mr. Justice P.N. Bhagwati, former Chief Justice of India in his book entitled 'Legal Aid as Human
Right' has stated that Legal Aid as a human right is implicit in Articles: 7, 8 and 10 of theUniversal
Declaration of Human Rights (UDHR), and is also observed under clause 3(d) of Article 14 of
the International Covenant on Civil and Political Rights. Under theIndian Constitution, Article
39A has been inserted by the Forty-second Amendment of the Constitution in 1976 which states:
"Equal Justice and free Legal Aid: The State shall secure that the operation of the legal system
promotes justice, on a basis of equal opportunity, and shall, in particular, provide free legal aid, by
suitable legislation or schemes or in any other way, to ensure that opportunities for securing
justice are not denied to any citizen by reason of economic or other disabilities."
In a country like India where Rule of Law prevails, legal aid is a means of dispensation of justice to
the poor. It is both a technique and a discipline. As a technique it has developed in the form of Lok
Adalat which takes justice to the door steps of the poor rather than requiring them to come to the
Court for Justice.
The Law Commission of India in its 41st Report (1969) had suggested that at least in sessions
trial, legal aid should be made available to the indigent accused for defending himself.
The Indian Society has suffered from inequality on economic and social plane for centuries and
now it is high time when it needs to be removed by the constitutional process and perhaps the
implementation of Directive Principles enshrined in part IV of the Constitution would be the right
step in this direction.

LOK ADALATS as ADR:

ADR (Alternate Dispute Resolution) system has been an integral part of our historical past. The
concept of Lok Adalat (Peoples' Court) is an innovative Indian contribution to the world of
jurisprudence. The institution of Lok Adalat in India, as the very name suggests, means, People's
Court."Lok" stands for "people" and the term "Adalat" means court. India has a long tradition and
history of such methods being practiced in the society at grass roots level.
In ancient times the disputes were used to be referred to "panchayat" which were established at
village level. Panchayat's used to resolve the dispute through arbitration. It has proved to be a
very effective alternative to litigation. This very concept of settlement of dispute through mediation,
negotiation or through arbitral process known as decision of "Nyaya-Panchayat" is conceptualized
and institutionalized in the philosophy of Lok Adalat. It involves people who are directly or
indirectly affected by dispute resolution.
The evolution of movement called Lok Adalat was a part of the strategy to relieve heavy burden on
the Courts with pending cases and to give relief to the litigants who were in a queue to get justice.
Lok Adalat as an alternative dispute resolution forum not only minimizes expenses on litigation but
it saves valuable time of the parties and their witnesses and facilitates settlement to the
satisfaction of the parties.
"While Arbitration and Conciliation Act, 1996 is a fairly standard western approach towards ADR,
the Lok Adalat system constituted under National Legal Services Authority Act, 1987 is a uniquely
Indian approach."
It roughly means "People's court". India has had a long history of resolving disputes through the
mediation of village elders. The system of Lok Adalats is an improvement on that and is based on
Gandhian principles. This is a non-adversarial system, whereby mock courts (called Lok Adalats)
are held by the National Authority, State Authority, District Authority, Supreme Court Legal
Services Committee, High Court Legal Services Committee, or Taluk Legal Services Committee,
 periodically for exercising such jurisdiction as they thinks fit. These are usually presided by retired
judge, social activists, or members of legal profession. It does not have jurisdiction on matters
related to non-compoundable offence.

THE LEGAL SERVICES AUTHORITIES ACT, 1987

Section 13 of the Act provides that persons who satisfy all or any of the criteria specified in Section
12 shall be entitled to avail legal services provided that the concerned Legal Aid Authority is
satisfied that such person has a prima facie case to prosecute or to defend. The person concerned
is required to file an affidavit stating that he is entitled to legal services under the Act.
Section 12 enumerates the categories of persons who are entitled to legal services. These are as
follows:
a. a member of a Scheduled Caste or Scheduled Tribe;
b. a victim of trafficking in human beings or beggar as referred to in Article 23 of the
Constitution;
c. a women or a child;
d. a person with disability as defined in clause (i) of section 2 of the Persons with Disabilities
(Equal Opportunities, Protection of Rights and Full Participation) Act, 1995;
e. a victim of a mass disaster, ethnic violence, caste atrocity, flood, drought, earthquake or
industrial disaster; or
f. an industrial workman; or
g. a person who is in custody under the Immoral Traffic (Prevention) Act, 1956; Juvenile
Justice Act, 2000, Mental Health Act, 1987 (14 of 1987);
h. a person whose annual income is less than rupees nine thousand or such other higher
amount as may be prescribed by the State Government, and less than rupees twelve thousand
when the case is before the Supreme Court.

Cases for which Legal Aid is NOT available:

The cases coming under any of the following category shall not entitle a person to receive legal
aid from the State:
i. cases involving the offence of defamation, contempt of Court, perjury etc.
ii. proceedings relating to elections;
iii. cases in which fine imposed is not more than Rupees fifty;
iv. economic offences and offences against social laws;
v. cases where the person is seeking legal aid is not directly concerned with the proceedings
and whose interests will not be affected, if not represented properly.

Organisation of LOK ADALATS:

The constitution of National legal Services Authority, Supreme Court Legal services Committee,
State legal Services Authority, High Court Legal services Committee, District legal Services
Authority and Taluk Legal services Committee is mentioned under Section 3, Section 3A, Section
6, Section 8A, Section 9 and Section 11A respectively.
Section 19 of the Act provides that every Central, State or District Legal Services Authority or
Supreme Court Legal services Committee and High Court Legal services Committee, as the case
may be, the Taluk Legal services Committee shall organize Lok Adalats at such intervals and
places and for exercising such jurisdiction and for such areas as it deems fit.
Every Lok Adalat organized for an area shall consist of:
 i. a sitting or retired judicial officer, and
ii. other persons of repute as may be prescribed by the concerned authority organizing such
Adalat.
The qualifications and experience of these persons for Lok Adalats organized by the Supreme
Court Legal services Committee shall be such as may be prescribed by the Central government in
consultation with Chief Justice of India.
Rule 13 of the National legal Services Authority provides that a person shall not be qualified to be
included as a Lok Adalat member unless he is:
a. a member of the legal profession; or
b. a person of repute who is specially interested in the implementation of the Legal Services
Schemes and Programmes; or
c. an eminent social worker who is engaged in the upliftment of the weaker sections of the
people including Scheduled Castes, Scheduled Tribes, women, children, rural and urban
labour.

Jurisdiction of LOK ADALATS:

The matters over which the Lok Adalat has the jurisdiction are enumerated in Section 20 of the Act
which reads as follows:
Cognizance of cases by Lok Adalats can be taken where in any case pending before any Court for
which Lok Adalat is organized
1. the parties thereof agree; or
2. one of the parties makes an application to the court, for referring the case to the Lok Adalat
for settlement and if such court is satisfied that there are chances of such settlement; or
3. the Court is satisfied that the matter is an appropriate case of which the Lok Adalat can take
cognizance.
The settlement in Lok Adalat shall be guided by the principles of justice, equity, fair play and
natural justice.
Where no settlement or compromise has been arrived at through conciliatory efforts of the Lok
Adalat, the matter shall be returned to the concerned Court which had referred the case to Lok
Adalat and that Court will proceed to deal with such case from the stage which was reached
before the reference was made.

AWARD Of LOK ADALAT:

The provisions relating to settlement or award made by the Lok Adalat are contained in Section 21
of the Act. The Section provides that every award of the Lok Adalat shall be deemed to be a
decree of a Civil Court. Therefore, the award needs to be referred to the Court for consent-decree.
The Section further provides that every award made by the Lok Adalat shall be final and binding
on all the parties to the dispute and there shall be no appeal against such award.

PERMANENT LOK ADALAT:

The other type of Lok Adalat is the Permanent Lok Adalat, organized under Section 22-B of The
Legal Services Authorities Act, 1987. Permanent Lok Adalats have been set up as permanent
bodies with a Chairman and two members for providing compulsory pre-litigative mechanism for
conciliation and settlement of cases relating to Public Utility Services like transport, postal,
telegraph etc. as defined under Section 22-A. Here, even if the parties fail to reach to a settlement,
the Permanent Lok Adalat gets jurisdiction to decide the dispute, provided, the dispute does not
relate to any offence.
Further, the Award of the Permanent Lok Adalat as under Section 22-E, is final and binding on all
the parties. The jurisdiction of the Permanent Lok Adalats is upto Rs. One Crore. Here if the
parties fail to reach to a settlement, the Permanent Lok Adalat has the jurisdiction to decide the
case. The award of the Permanent Lok Adalat is final and binding upon the parties. The Lok
Adalat may conduct the proceedings in such a manner as it considers appropriate, taking into
account the circumstances of the case, wishes of the parties like requests to hear oral statements,
speedy settlement of dispute etc.

Few more Features of the ACT:

There is no court fee and no rigid procedural requirement (i.e. no need to follow process given by
Civil Procedure Code or Evidence Act), which makes the process very fast. Parties can directly
interact with the judge, which is not possible in regular courts. Cases that are pending in regular
courts can be transferred to a Lok Adalat if both the parties agree. A case can also be transferred
to a Lok Adalat, if one party applies to the court and the court sees some chance of settlement
after giving an opportunity of being heard to the other party.
The focus in Lok Adalats is on compromise. When no compromise is reached, the matter goes
back to the court. However, if a compromise is reached, an award is made and is binding on the
parties. It is enforced as a decree of a civil court. An important aspect is that the award is final and
cannot be appealed, not even under Article 226 because it is a judgment by consent. All
proceedings of Lok Adalat are deemed to be judicial proceedings and every Lok Adalat is deemed
to be a Civil Court.
Lok Adalat i.e. the People's court is established by the Government which settles disputes through
conciliation and compromise. The first Lok Adalat was established in Chennai in 1986. Lok Adalat
accepts those cases which can be settled by conciliation and compromise and pending in the
regular courts within their own jurisdiction.
The Institution of Lok Adalat tries to resolve the people's disputes by discussions, counselling,
persuasions and conciliation, which results in quick and cheap justice. Initially, civil, revenue and
criminal disputes, which were compoundable, were taken up by the Lok Adalats. Types of cases
taken up by Lok Adalat prior to 2002 amended Act are: Insurance cases, Motor Accident Claims
Tribunal cases, Mutation of Land, Land Pattas, Electricity cases, Forest land cases, Bonded
Labour cases, Acquisition cases, Matrimonial and Family Disputes, Bank Loan cases, etc.
Recently, the Parliament amended the Legal Services Authorities Act, 1987 with the intention to
constitute 'Permanent Lok Adalat' for deciding the disputes concerning 'Public Utility Services'
which means transport services; postal or telephone services; supply of power, light or water;
system of public conservancy or sanitation; services in hospital or dispensary; Insurance services.
In 1987 Legal Service Authorities Act was enacted to give a statutory base to legal aid
programmes throughout the country on a uniform pattern. This Act was finally enforced on 1995
after certain amendments were introduced therein by the Amendment Act of 1994. National Legal
Service Authority (NALSA) was constituted on 5th December, 1995. It is a statutory body
constituted under the National Legal Services Authorities Act, 1986 as amended by the Act of
1994, is responsible for providing free legal assistance to poor and weaker sections of the society
on the basis equal opportunity. NALSA is engaged in providing legal services, legal aid and
speedy justice through Lok Adalats. The Authority has its office at New Delhi and is headed by the
Chief Justice of India, who is the ex-officio Patron-in-Chief.
Similarly, the State Legal Service Authorities have been constituted in every State Capital.
Supreme Court Legal Services Committee, High Court Legal Services Committees where it is
headed by Chief Justice of the State High Court who is the Patron-in-Chief and a serving or retired
Judge of the High Court is its ex-officio Chairman, District Legal Services Authorities where it is
headed by the District Judge of the District and acts as the ex-officio Chairman, Taluk Legal
Services Committees have also been constituted in every State. Every Taluk Legal Services
Committee is headed by a senior Civil Judge operating within the jurisdiction of the Committee
who is its ex-officio Chairman.
Up to 31st March, 1996, more than 13,000 Lok Adalats have been held in the country, where over
5 million cases have been settled. Out of these, 2, 78,801 Motor Accident Claims Tribunal cases
have been settled where compensation amounting to over 8,612 million rupees has been paid to
the claimants. Lok Adalat is a boon to the litigant public.

UNCITRAL Model Law and Enforcement of Foreign Awards

BACK

LECTURE 04:

UNCITRAL MODEL LAW AND ENFORCEMENT OF FOREIGN AWARDS

(a) UNCITRAL MODEL LAW

The United Nations Commission on International Trade Law (UNCITRAL) is a subsidiary body of
the General Assembly. It plays an important role in improving the legal framework for international
trade by preparing international legislative texts for use by States in modernizing the law of
international trade and non-legislative texts for use by commercial parties in negotiating
transactions. UNCITRAL legislative texts address international sale of goods; international
commercial dispute resolution, including both arbitration and conciliation; electronic commerce;
insolvency, including cross-border insolvency; international transport of goods; international
payments; procurement and infrastructure development; and security interests. Non-legislative
texts include rules for conduct of arbitration and conciliation proceedings; notes on organizing and
conducting arbitral proceedings; and legal guides on industrial construction contracts and
countertrade.

*ORIGIN

It may be pointed out that efforts were already being made by the United Nations to work out a
comprehensive uniform Model Arbitration Law at the International level which could be uniformly
adopted by the member countries with suitable modifications keeping in view their domestic needs
national laws.
For this purpose, the Model Law on International Commercial Arbitration was adopted in the
United Nations Commission on International Trade Law (hereinafter referred to as UNCITRAL) on
21st June, 1985 in its 18th Annual Session.
The General Assembly, in its Resolution dated 11th December, 1985 recommended that all States
should adopt UNCITRAL Model Law on International Commercial Arbitration. India, being a
member country, has adopted the UNCITRAL Model Law by enacting the Arbitration and
Conciliation Act, 1996 with a view to bringing about uniformity in arbitration procedures and meet
the needs of international commercial arbitration in its commercial transactions with foreign
countries.
With the increasing role of international trade and developing economy, the risk of commercial
disputes has also grown substantially. Therefore, the importance of international dispute resolution
mechanism including arbitration as a means of resolving trade disputes has assumed greater
importance in recent decades. The recent trends in international commercial arbitration which is
based on UNCITRAL Model Law clearly indicate that there has been greater emphasis on:
1. Greater party autonomy and non-intervention of Court in the arbitral process;
2. Preference for institutional arbitration instead of ad hoc arbitration;
3. Recourse to arbitral process instead of Court litigation.
With the enactment of this Act, the Arbitration (Protocol and Convention) Act, 1937; the Foreign
Awards (Recognition and Enforcement) Act, 1961 and the Arbitration Act, 1940 stand repealed.
The justification for adopting the Model Law on International Commercial Arbitration lies in the fact
that with the liberalisation and globalization on Indian Economy in recent past more and more non-
resident Indians (NRIs) and Foreign Investment Institutions are entering the Indian Market which
necessitated re-drafting of the Arbitration Act of 1940 to be made more responsive to the change
in Indian Economy.
The UNCITRAL also adopted in 1980 a set of Conciliation Rules. The General Assembly of the
United Nations has recommended the use of these Rules in cases where the disputes arise in the
context of international commercial relations and the parties seek amicable settlement of their
disputes by recourse to conciliation.

*IMPORTANT FEATURE

An important feature of the said UNCITRAL Model Law and Rules is that they have harmonized
concepts on arbitration and conciliation of different legal systems of the world and thus contain
provisions which are designed for universal application.
The main objectives of the said UNCITRAL Model Law and Rules are as under:-
1. To comprehensively cover international and commercial arbitration and conciliation as also
domestic arbitration and conciliation.
2. To make provision for an arbitral procedure which is fair , efficient and capable of meeting the needs
of the specific arbitration.
3. To provide that the arbitral tribunal gives reasons for its arbitral award.
4. To ensure that the arbitral tribunal remains within the limits of its jurisdiction.
5. To minimize the supervisory role of courts in the arbitral process.
6. To permit an arbitral tribunal to use mediation, conciliation, or other procedures during the arbitral
procedures to encourage settlement of disputes.
7. To provide that every final arbitral award is enforced in the same manner as if it were a decree of
the court.
8. To provide that, for purposes of enforcement of foreign awards, every arbitral award made in a
country to which one of the two international Conventions relating to foreign arbitral awards to which
India is a party applies, will be treated as a foreign award.

b) ENFORCEMENT OF FOREIGN AWARDS

*INTRODUCTION:
Prior to the enactment of the present Arbitration and Conciliation Act, 1996, the foreign arbitration
agreements and awards were regulated by two separate acts, namely, the Foreign Awards
(Recognition and Enforcement) Act, 1961 and the Arbitration (Protocol and Convention) Act, 1937,
both of which now stand repealed consequent to passing of the present Arbitration and
Conciliation Act of 1996.
The provisions of these two earlier enactments are incorporated in Chapter I and Chapter II
respectively of Part II of the present Act of 1996. This Part i.e. Part II consists of only two chapters,
the first chapter containing the provisions of the earlier Foreign Awards (Recognition and
Enforcement) Act, 1961, which relate to the awards under the New York Convention Awards,
1958, and the second chapter is devoted to provisions of the earlier Arbitration (Protocol and
Convention) Act, 1937 which relate to the awards under the Geneva Convention Awards, 1927.
Section 52 of the Arbitration and Conciliation Act, 1996 provides that Chapter I of part II excludes
the application of Chapter II but Chapter II does not exclude the application of Chapter I.
Excepting Section 52 in Chapter I, both the Chapters consist of eight sections each dealing with
the same subject matter and the phraseology of the sections is also almost the same barring of
Chapter I and Section 57 of Chapter II which deal with the enforcement of foreign awards.
The awards contemplated under this Part i.e. Part II relate to International Commercial Arbitration.
Though the term 'International Commercial Arbitration' has been defined in Section 2(1) (f) of the
Arbitration and Conciliation Act, 1996, the term 'Commercial' has not been defined in the Act.
However, the Model Law guidelines provide that the term 'Commercial' should be given a wider
 interpretation so as to cover matters arising from transactions which are commercial in nature
whether contractual or not.
The term 'commercial' as explained in UNCITRAL Model Law on International Commercial
Arbitration, 1985 includes matters and relationships of a commercial nature, but are not limited to,
the following transactions-
i. Any trade transaction for the supply or exchange of goods or services;
ii. Distribution agreements;
iii. Commercial agencies;
iv. Factoring, leasing, licensing, consulting, etc.;
v. Construction and engineering works;
vi. Investment, financing, banking, insurance, exploitation agreement or concession;
vii. Joint ventures and other forms of industrial or business co-operation;
viii. Carriage of goods or passengers by air, sea, rail or road.

*FOREIGN AWARD:

A 'foreign award' has been defined in Section 44 of the Act. It means an award on or after October
11, 1960 on differences arising between persons out of legal relationships, whether contractual or
not, which are considered to be 'commercial' under the law in force in India.
In Centro-Trade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC 245, it was
held:
An award to be treated as foreign award, must fulfill the three basic conditions which are as
follows:
a. The legal relationship between the parties must be of a commercial nature;
b. The award must have been made in pursuance of an agreement in writing; and
c. The award must have been made in a country which is a signatory to New York or Geneva
Convention.
It must be stated that an award does not become a foreign award merely because it was made
territory outside India, but it becomes so because it is made in the territory of a foreign state where
arbitration agreement is not governed by the law of India.
In other words, if an award is made on an arbitration agreement governed by the Indian Law,
though rendered outside India, will not be treated as 'foreign award' by the Indian courts. This may
be illustrated by the leading case of Harendra H. Mehta v. Mukesh H. Mehta, AIR 1999 SC
2054, In this case, parties were two brothers having their joint business in India as well as USA.
They also had properties in both the countries. When differences arose between them they
appointed an arbitrator for distribution of their business and property between them. The
arbitration agreement was made in USA and the proceedings were held and award was made in
USA. The court held that this was a foreign award. The differences between parties pertained to
their legal relationship which was of a commercial nature under the Indian Law.
The fact that they were brothers did not take the award out of purview of the Act. Though the
parties entered into a settlement during the pendency of arbitral proceedings and the award was
made in terms of the said settlement, it was still a 'award' under the Act of 1996 and its
enforcement in India could not be refused on the ground that it was not made a decree by court in
USA where it was passed.

1. NEW YORK CONVENTION AWARDS

Section 44:
This section defines the expression "foreign award" as also the meaning of the term "commercial"
in context of foreign awards.
Explaining the phrase "unless the context otherwise requires" the Supreme Court in Centrotrade
Minerals & Metals Inc. v. Hindustan Copper Ltd. (2006)11 SCC 245, held that where the
 arbitration agreement contains two phases, the first to be held in India under Part I of the Act while
the second i.e., the appellate proceeding was to be held in a New York Convention Country under
Part II of the Act, the appellate award fell within the meaning of foreign award under Section 44 of
the Act.
Explaining the term "commercial" with reference to Section 44 :
The term commercial including manifold activities which are integral part of international trade and
includes within it relationships of a commercial nature such as agency or consulting firms etc.
In Atiabari Tea Co. Ltd. v. State of Assam, AIR 1961 SC 232, It was held that the
expression "commercial"should not be construed only to mean traffic in goods and exchange of
commodities. It also includes carriage of passengers and goods by rail, air and water ways,
contracts, banking, insurance, transactions in stock market communication of information, supply
of energy, postal and telegraphic service.
A 'Foreign award' as distinguished from 'Domestic award' is one which has any of the
following elements:
i. One of the parties is a national of a foreign country; or
ii. The subject matter of arbitration agreement is international in character. That is, it deals with
international commerce, trade or investment etc;
iii. The award is made in foreign country.
On the other hand, a domestic award is one which does not have any of the aforesaid elements or
characteristics.
Section 45:
The provisions of this section are analogous to those of Section 8 of Part I of the Act which are
applicable in for referring parties to arbitration in case of domestic arbitration.
Distinguishing Section 45 from Section 8 of the Act, the Court in Shin Etsu case (2005)7 SCC
234, observed that Section 8 makes it mandatory for the judicial authority to refer the parties to
arbitration on the existence of conditions stipulated in the section. But this section does not confer
power to refuse reference to arbitration on the ground of invalidity of agreement which the judicial
authority is conferred to exercise under Section 45. Thus under Section 45 which deals with
arbitrations which deals with arbitrations to which New York Convention applies a specific
provision has been made to examine the validity of the arbitration agreement. Further, Section 45
does not provide the limitation that application should be moved not later than submitting the first
statement on the substance of the dispute as provided under Section 8 of the Act.
The obvious reason for this difference is that insofar as domestic arbitration is concerned, the
legislature intended to achieve speedy reference of disputes to the Arbitral Tribunal and left most
of the matters to be raised before the arbitrators. But in case of foreign arbitration under Section
45, the legislature, left the question relating to the validity of the arbitration agreement to be
examined and decided by the Court.
Where one of the parties to an arbitration agreement institutes a suit in a Court of law of the
contracting state despite the fact that there was an arbitration agreement Section 45 of the Act
empowers the judicial authority i.e. the Court to refer the parties back to arbitration if the following
conditions are fulfilled—
i. There is an agreement between the parties to which the New York or Geneva Convention applies;
ii. The action relates to a matter agreed to be referred to arbitration;
iii. The dispute arose out of the legal relationship whether contractual or not; and
iv. Such differences are considered as 'commercial' under the law enforced in India;
v. The dispute should be arbitrable.
*The provision contained in Section 45 relating to New York Convention is analogous to that
contained in Section 54 of the Act which relates to Geneva Convention.
Section 46:
The New York Convention provides that an award would be binding on parties when
i. It has been made by a regular proceeding and
ii. It complies with the formalities required for an arbitral award.
 It becomes final when application for setting aside is refused. A 'binding' award is enforceable, but
it is not final as long as it is 'open to means of recourse'.
Under the Indian law, an arbitral award is recognized as binding and final after the expiry of the
period for making application for setting aside of the award or where such an application was
made, but rejected.
In Ludwig Wunscha & Co. v. Raunaq International, AIR 1983 Del. 247, it was held that:
This Section provides that a foreign award cannot be challenged on merits, being final, conclusive
and binding for all purposes, except the circumstances set out in Section 48 in which enforcement
thereof will be refused. Domestic Courts cannot set aside or annul a foreign award. The Court has
only jurisdiction to decide whether the award is enforceable or not.
Section 47:
This Section lays down the method of proof for the enforcement of the foreign award. The New
York Convention provides that "recognition and enforcement of the award may be refused at the
request of the party against whom it is invoked, only if that party furnishes proof that the award
deals with a dispute or difference not contemplated by, or not falling within the terms of reference
of arbitration or it contains decisions on matters beyond the scope of submission to arbitration.
The High Court of Madras in Compania Naviera 'SODNOC' v. Bharat Refineries Ltd., AIR 2007
Mad 251, held that a party having foreign award in its favour could straightaway apply for its
enforcement since foreign award is already stamped as a decree. Such an award may be
enforced within a period of 12 years time as in case of a decree holder of a court.
A party seeking enforcement of a foreign award is required to produce at the time of application
before the Court the original award or copy thereof. If the copy of the award is authenticated in the
manner required by the law, it would be enforceable subject to the right of the respondent under
Section 48(2) of the Act.
Section 48:
It may be noted that the triology of the sections 46, 47 and 48 collectively deals with the legal
status of foreign award and its proof for being recognised and binding. While Section 46 envisages
binding nature of the award for all purposes, Section 47 provides the method of proof. The present
Section (i.e. Section 48) deals with the conditions for enforcement of foreign awards and
enumerates the circumstances which justify Court's refusal to enforce the award. Briefly stated,
these circumstances under which enforcement of the award may be refused by the Court are as
follows:-
i. If the arbitral award is invalid;
ii. Due process of law has been violated;
iii. Arbitrator has exceeded his authority;
iv. Irregularity in the composition of Arbitral Tribunal or proceedings;
v. Award being set aside or suspended in the country in which, or under the law which, the award was
made;
vi. Non-arbitrability of the dispute; and
vii. Award being contrary to public policy.
It, therefore, follows that for the enforcement of foreign award there is limited scope of enquiry as
envisaged under Section 48 of the Act.
The grounds enumerated under Section 48(1) are to be construed narrowly and do not permit
review of foreign award on merits. The Courts are not expected in enforcement proceedings, to re-
determine questions of law. Thus, where the challenge specifically in reference to the existence of
arbitration agreement had been decided by the Arbitral Tribunal, against which no appeal had
been preferred by the respondents, they cannot be allowed to re-agitate the same issue to
challenge the enforcement of foreign award.
Explanation to Section 48 further makes it clear that if the making of the award was induced or
affected by fraud or corruption, it would be deemed to be opposed to public policy in India and
therefore, it would not be enforceable.
Sub-section (3) of Section 48 provides that where a party has made an application for setting
aside or suspension of the foreign award, the Court, on the application of the party claiming
 enforcement of the award, may require the other party to give suitable security, if it considers it
proper and reasonable.
The Bombay High Court in Sukuma Exports Ltd. v. Louis Drefus Commodities Suisse, South
Africa, 2012(3) RAJ 675 (Bom), held that all the contracts which provide for arbitration and
contain foreign element may involve three relevant systems of law i.e.
i. Law governing the Substantive contract or the proper law of contract;
ii. The governing the agreement to arbitrate, which is the proper law of the arbitration agreement; and
iii. The law governing the conduct of arbitration proceedings.
It is the law governing the arbitration proceedings which is crucial law.
The Supreme Court in Controtrade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2003)3
Bom. LR 948, interpreted the phrase "country under the law of which, that award was made" used
in Section 48(1)(e) to mean law of the country in which the arbitration has its seat rather than the
country whose law governs the substantive contract.
Section 49:
The section confers the status of decree on foreign award as a result of which it becomes
executable by its own force. This deeming provision has been incorporated in this section with a
view to ensuring smooth and speedy execution of recognized and unobjectionable foreign awards.
The Supreme Court in Fuerst Day Lawson v. Jindal Exports Ltd., AIR 2001 SC 2293, held that
the provisions of Sections 46 to 49 read together make it clear that no separate proceedings are
necessary for the enforcement of foreign award. The Court can decide the enforceability of the
award to make it a decree or rule of Court and also take up its enforcement in the same
proceedings instead of two separate proceedings.
Section 50:
The Section enumerates two circumstances referred to under Sections 45 and 48 when an appeal
shall lie against those orders. There is no scope for a second appeal but the section does not
preclude the right of the parties to appeal by a Special Leave Petition to the Supreme Court under
Article 136 of the Constitution.
The Supreme Court in Shin Etsu case, has clarified that an appeal by Special Leave Petition
under Article 136 of the Constitution cannot be considered as right of appeal vested in the party.
Section 51:
An award is 'foreign' not merely because it is made in the territory of a foreign State but because it
is made in a territory not governed by the law of India. An award made on an arbitration
agreement governed by the law of India, though rendered outside India, is attracted by the saving
clause in Section 51 of the Act and is, therefore, not treated as a 'foreign award'.
Section 52:
It has already been stated in the Introduction to Part II dealing with enforcement of foreign awards
that Section 52 of the Act statutorily excludes the application of the succeeding Chapter II of the
Geneva Convention Awards to foreign awards to which the New York Convention i.e. Chapter I
applies. In other words, this section contemplates that Chapter II shall not be applicable to foreign
awards to which the provisions of New York Convention as contained in Chapter I apply.

2. GENEVA CONVENTION AWARDS

Section 53:
The definition of 'foreign award' for the purposes of Geneva Convention as contained in this
section differs from the foreign award as defined in Section 44 under the New York Convention.
The differences may be stated as follows:
i. The definition of 'foreign award' as given in Section 44 begins with the non-obstante clause i.e.,
'unless the context otherwise requires', but it is not so in case of Section 53.
ii. The words 'arising out of legal relationships, whether contractual or not' as used in Section 44 are
conspicuously missing from the definition of 'foreign award' in Section 53.
iii. While Section 44 insists that the agreement must be in writing, Section 53 simply talks of
agreement simpliciter, omitting the words 'in writing'.
Section 54:
This Section corresponds to Section 45 relating to New York Convention. The Section makes it
obligatory for the Courts to refer the parties to the decision of arbitrators.
Award to be 'final' or 'binding':
This is yet another substantial difference between Section 54 relating to Geneva Convention and
Section 45 which relates to New York Convention. In the former, the expression used is 'the award
has become final' whereas in the latter the expression is 'the award has become binding'. The
essence of the difference lies in the fact that 'binding' award is an enforceable instrument as it has
executor force, but it is not final as long as it is open to other means of recourse. The award
becomes final under the Geneva Convention in the country in which it has been made.
Section 55:
An award is regarded as binding when two conditions are fulfilled, namely:
i. The award has been regularly made, and
ii. When it complies with the formalities required for the arbitral award.
The purpose of inserting this section is to avoid the system of double exequatur which existed in
earlier Geneva Convention of 1927. The 'binding' nature of the award as envisaged by this section
refers to its effectiveness which should no longer be open to attack in the arbitral procedure.
Under the Indian law, the award when made binding automatically becomes final like a decree of a
Court on expiry of the period for making an application for setting aside of the award or refusal of
the application made under Section 34 of the Arbitration and Conciliation Act,1996.
Section 56:
While the preceding Section 55 refers to the binding nature of the foreign award for all purposes
including by way of defence, set-off or otherwise, Section 56 deals with the method of proof. The
burden of proof under this section is on the party applying for the enforcement of a foreign award.
For the purposes of clause (b) of sub-section (1) of this section, an award shall not be deemed
final if any proceedings for the purpose of contesting the validity of the award are pending the
country in which it is made.
Section 57:
This section lays down the conditions for enforcement of a foreign award. In order to be an
enforceable foreign award, the award must have been made in pursuance of the submission to
arbitration and the submission must be on an arbitral dispute. The section also enumerates the
conditions of refusal to enforce a foreign award. The circumstances justifying refusal by the Court
must be proved beyond doubt to get an order of refusal of the enforcement of foreign award.
The conditions of refusal to enforce a foreign award are:-
i. Where the award does not cover all the differences submitted to the Arbitral Tribunal, the Court
may, if it thinks fit, postpone the enforcement of the award. The Court may, however, allow
enforcement of the award subject to such guarantee as the Court as its discretion may decide.
ii. Where the party against whom the award is made successfully contests the validity of the award on
the grounds stated in clauses (b), (d) and (e) of sub-section (1) of section 57, the Court may, at its
discretion adjourn the enforcement of the award allowing the party reasonable time to get the award
annulled by the competent tribunal.
Section 58:
The enforcement of a foreign award may be refuse dif the applicant furnishes evidence before the
Court that the agreement which was entered into between the parties was invalid or that the party
was suffering from some incapacity stated in section 57(2) or the party did not receive proper
notice of the appointment of the arbitrator or the proceedings or was otherwise unable to present
the case. The other provisions relating to enforcement of foreign award are similar to those of the
domestic award and there is no difference insofar the enforcement of the award is concerned.
Section 59:
This section limits the scope of appeal against an order of the Court refusing to recognize or
enforce a foreign award. The section provides that an appeal shall lie against an order refusing to
refer the parties to arbitration under Section 54 or refusal to enforce an award by the Court under
Section 57 of the Act, The section prohibits second appeal but this would not take away the right
of the aggrieved party to move in appeal to the Supreme Court against the order of the appellate
Court.
Section 60:
This Section is saving clause. Many of the rights of persons regarding enforcement of a foreign
award would have become redundant or obsolete had this saving clause not been inserted in this
Chapter. Therefore, the right for enforcement of a foreign award by a person has been preserved
unless a different intention appears in the repealing Act.