ALTERNATE DISPUTE

RESOLUTION

AN ANALYSIS OF THE ARBITRATION AND

CONCILIATION ACT, 1996.
- R. SRIRAM VIGNESH
VTA 1203
INTRODUCTION
• ADR means Alternative Dispute Resolution which includes various methods of settling
a dispute without getting into the intricacies of the court. It is a method where parties
try to resolve their disputes privately in front of a third-person expert. It includes
methods like arbitration, mediation, conciliation and negotiation. These work on the
principles of justice, legal aid and speedy trial as given under Article 39A of the
Indian Constitution. Even Section 89 of the Code of Civil Procedure, 1908 provides
settling disputes by way of ADR.
• The United Nations In 1985 adopted the Model Law
on International Arbitration and Conciliation and
asked all the countries to give due importance to it.
The Parliament felt the need and passed
an Act regarding this matter.
THE ACT IS DIVIDED INTO FOUR PARTS:

• Part I (Sections 2-43) – Applies to the place of arbitration in India. The

award granted is treated as a domestic award.
• Part II (Sections 44-60) – Enforcement of foreign awards.
• Part III (Sections 61-81) – Conciliation
• Part IV (Sections 82-86) – Supplementary provisions
ARBITRATION (PART I)
• It is defined under Section 2 (1)(a) of the Act. It is an alternative to litigation in courts and is advantageous as
it provides flexibility and confidentiality.

• According to Black Law Dictionary, it means a method of resolving disputes which includes two parties and
third party whose decision is binding on both parties.

• The Hon’ble Supreme Court in the case of P. Anand Gajapati Raju v. P.V.G Raju (2000) gave certain
requirements necessary for referring parties to arbitration:
• An arbitration agreement must be there.
• A party must bring an action in court against others.
• The subject matter must be the same as in arbitration.
• One party demands arbitration in court.
WHO CAN BE AN ARBITRATOR?
In arbitration, an arbitrator is the presiding officer.
• A person who is of sound mind can be appointed as an arbitrator. The nationality of an
arbitrator is not specifically restricted. Hence, the arbitrator may be of any nationality. This is
as per Section 11 of the Arbitration and Conciliation Act, 1996 (“The Act”). Furthermore, the
parties are free to choose the arbitrator and determine the arbitrator’s qualifications.
• A person to become an arbitrator must qualify the following conditions:
• He can be a judge.
• He can be an advocate; or
• He can be a chartered accountant; or
• He can be a maritime expert.
• He can be an executive; or
• He can be an engineer; or
• He can be a businessman;
CASES NOT REFERRED TO ARBITRATION
Section 2(3) of the Act gives the list of such cases which cannot be submitted to arbitration. These are:
• Winding up proceedings of any company. (Haryana Telecom Ltd. V. Sterlite Industries
(1999);
• Disputes that have to be determined by any particular tribunal as the law may provide;
• Proceedings related to insolvency;
• Question of will and genuineness;
• Guardianship matters;
• Succession disputes;
• Disputes related to immovable property;
• Illegal transaction cases;
• A criminal case cannot be referred to arbitration;
PROCESS OF ARBITRATION IN INDIA
Arbitration clause: A contract or agreement that was entered by the parties must contain an arbitration clause in
order to resolve the disputes through arbitration. An arbitration clause can be a separate agreement or an agreement in
an agreement. That means the arbitration clause may be in the form of a separate agreement or in a contract. An
arbitration clause says that when a dispute arises between the parties, it must be resolved through the process of
arbitration. The parties shall also mention the seat and venue of the proceedings in the arbitration clause itself.

Arbitral tribunals (Composition of tribunals) : It is the creation of an agreement which conforms with the law.
Section 10 of the Act enables the parties to determine freely the number of arbitrators to settle their dispute. The only
restriction is that the number of such arbitrators must not be even. If the parties are not able to decide then there will be
only 1 arbitrator. But if there are even number of arbitrators then the agreement cannot be held valid merely on this
ground. ( Narayan Prasad Lohia v. Nikunj Kumar Lohia, 2002)

Appointment of arbitrator : After the respondent receives the notice from the applicant about commencement of
arbitration, both the parties will appoint an arbitrator in a manner that is described in the arbitration clause. This
provision is given under section 11 of the 1996 Act.
Termination of arbitrator : The grounds for termination are given under Section 14 and Section 15
of the Act. These are:
• If he is not able to perform his functions without undue delay (whether de jure or de facto),
• If he withdraws or is terminated by the parties,
• He shall be terminated where he withdraws himself or by agreement of the parties.
• On his termination, a substitute arbitrator will be appointed as per Section 15.
Notice for commencement of arbitration: ( Beginning of an actual process) : The provision for
notice for commencement of arbitration was given in section 21 of the 1996 Act. When the dispute
arises and the party has opted for arbitration, the aggrieved party will send a notice to the other
party for invoking the arbitration proceedings. It contains the names of the parties and their
representatives, a brief description of the dispute, a statement of relief sought etc.
Statement of claim and defence: This provision is given under section 23 of the arbitration and
conciliation Act, 1996. After the commencement of arbitration and appointment of arbitrator by the
parties, the claimant drafts a statement of claims which contains all the documents which they
think are relevant to the case and also all the evidences proving their statements.
The respondent may also submit a counter claim or a statement of defense in support of his case
which shall be examined before the arbitral tribunal.
Hearings and written proceedings: The arbitral tribunal will hear both the parties and
examine the evidences. The Tribunal will decide whether the documents or the evidences
produced are valid or not and proceed the case further. This provision is given under section
24 of the 1996 Act.
Arbitral award: After hearing the parties and examining all the issues a final award will be
given by the arbitrator. This award shall be made in writing and shall be signed by all the
members of the Tribunal. This award shall be final and binding on both the parties.
However, an appeal cannot be filed before the Arbitral tribunal but the parties can appeal
against the arbitral award before the court. Form and contents of the arbitral award are
described under section 31 of the Act.
Enforcement of arbitral award: After the award is passed by the arbitral tribunal it has to
be executed. The provision related to the finality and enforcement of arbitral award is given
under sections 35 and 36 respectively.
Recourse against arbitral awards
Under Section 34 of the Act, a party if not satisfied can make an application to set aside the award granted by an
arbitral tribunal. The time limit to make such an application is not more than 3 months from the date the arbitral
award was made. The grounds are:
• Incapacity of parties.
• Non-existence of the agreement of arbitration.
• Did not follow the due process.
• Error on the part of the arbitral tribunal to exercise its jurisdiction.
• Improper composition of the arbitral tribunal.
• The subject matter is not capable of being referred to arbitration.
• It is against public policy.
• Fraud or corruption.
Section 37 of the Act provides that if a person is not for satisfied with the order passed by the tribunal, he/she
can appeal to the court. However, there are no provisions for a second appeal once an appeal has been made.
According to Section 2(1)(e)(i) of the Arbitration Act provides that an application for setting aside an arbitral
award passed in an arbitration other than an international commercial arbitration must be filed either before a
district court, being a principal civil court of original jurisdiction.
According to section 2(1) (e) (ii) for international Commercial Arbitration, it can be appealed in High Court.
FOREIGN AWARDS (PART II)
Simple terms, it means the awards given in International commercial arbitration. Foreign awards
are granted in foreign countries and are enforceable in India under the Act
Enforcement of a Foreign Award.
New York Convention - Section 48 of the Arbitration and Conciliation Act, 1996, contains the requirements for
enforcing a New York Convention award. These are:
• Unless the parties to the arbitration agreement were physically or mentally disabled, a foreign award is
enforceable.
• The award must be made in a country that is a party to the New York Convention.
• The award must not be contrary to the public policy of India.
Geneva Convention - Section 57 of the Arbitration and Conciliation Act, 1996, contains the requirements for
enforcing a judgement. A foreign judgement will only be enforceable if:
• The award must be made in a contracting state of the Geneva Convention.
• The arbitration agreement must be in writing.
• The subject matter of the dispute must be capable of settlement by arbitration under the laws of India.
• The recognition and enforcement of the award must not be contrary to the public policy of India.
CONCILIATION (PART III)
It is a process in which a neutral party helps the parties in dispute to resolve it by way of agreement. The person
authorised to do so is called a Conciliator. He may do it by giving his opinion regarding the dispute to help parties reach
a settlement. In other words, it is a compromise settlement between the parties.
Features of conciliation
• The person assisting the parties to come to a compromise is called a conciliator.
• Conciliators give their opinion regarding the dispute.
• The process of conciliation is voluntary.
• It is a non-binding process.
• The main difference between arbitration and conciliation is that,
unlike arbitration, the parties in this process control the whole
procedure and the outcome.
• It is a consensual party and the desired outcome is the final settlement
between the parties based on their wishes, terms and conditions.
• A conciliator can become an arbitrator on the wish of the parties
if no compromise could be reached by the process of conciliation.
This is known as Hybrid Conciliation.
PROCEEDINGS OF CONCILIATION UNDER THE ACT
Section 62 of the Act provides that in order to initiate the conciliation proceedings one party to the
dispute has to invite the other party in writing for conciliation. However, there will be no
proceedings if the other to whom notice/invitation is sent, reject it or does not reply.
The general rule states that there must be one conciliator but in the case of more than one
conciliator they have to function together with each other as per Section 63 of the Act.
The appointment of the conciliator like an arbitrator will be done by the parties themselves under
Section 64 of the Act.
A party according to Section 65 of the Act is under an obligation to submit in writing the nature of
the dispute and all the necessary information related to it to the conciliator.
Role of conciliator - It is mentioned under Section 67 of the Act:
• He must be independent and impartial.
• He must assist the parties to come to a settlement.
• He must adhere to the principles of fairness and justice.
Place of Meeting (Section 69(2) The parties can agree upon the location for meetings with the conciliator. In the absence of
such an agreement, the conciliator will determine the meeting place after consulting with the parties, considering the
circumstances of the conciliation proceedings.
Termination of Conciliation Proceedings – Section 76
• Termination by Signing of Settlement Agreement (Section 76(a) )
• Termination by Conciliator’s Declaration (Section 76(b) )
• Termination by Written Declaration of Parties (Section 76©)
• Termination by Party’s Written Declaration to Other Party and Conciliator (Section 76(d) )

SUPPLEMENTARY PROVISIONS (PART IV)

• Section 82 empowers the High Court to make rules relating to any provision of the Act.
• The Central Government has the power to remove any kind of difficulties and make rules in the Act as per Section 83 and
Section 84 respectively.
• There were 3 Acts dealing with the arbitration in India which have now been repealed by the Act of 1996. These were:
• The Indian Arbitration Act, 1940
• The Arbitration (Protocol and Convention) Act, 1937
• Foreign Awards (Recognition and Enforcement) Act, 1961
CASE LAWS - ARBITRATION
Bharat Aluminium Co. V. Kaiser Aluminium Technical Services Inc. (BALCO Case) –
2002: In this case dealt with the validity of arbitration agreements in contracts where
one party is Indian and the other party is foreign. BALCO, an Indian company, entered
into a contract with Kaiser, a foreign company, which contained an arbitration clause
stipulating that disputes would be resolved by arbitration in accordance with the
UNICITRAL rules. A dispute arose, and BALCO sought to challenge the arbitration
agreement.
Judgment: The Supreme Court held that when parties agree to arbitration, the court
should refer them to arbitration and not adjudicate on the matter. It emphasized the
principle of minimal interference by courts in arbitration proceedings.
CASE LAW - CONCILIATION
Salem Advocate Bar Association v. Union of India” (2005).
Facts: The case originated from a petition filed by the Salem Advocate Bar Association
challenging certain provisions of the Advocates Act, 1961. The petitioners argued that the
provisions relating to disciplinary proceedings against advocates were unconstitutional and
violated their fundamental rights.
Judgment: The Supreme Court recognized the significance of conciliation in resolving disputes
and promoting harmony within the legal profession. The court highlighted the need for
alternative dispute resolution mechanisms like conciliation to alleviate the burden on the
judiciary and provide quicker and cost-effective solutions to disputes.
The judgment emphasized the role of conciliation in fostering amicable settlements and
reducing adversarial litigation. It underscored the importance of parties' voluntary
participation in the conciliation process and the need for confidentiality to encourage open
communication.
CONCLUSION
The Act deals with alternate dispute resolution methods which are effective, cost-friendly, and time-
saving. Due to the pendency of cases and rigid procedural laws of the courts and to prevent
litigation, people nowadays generally prefer settling a dispute outside the courts with the help of
ADRs like arbitration, conciliation, mediation etc.
In conclusion, arbitration offers a more formal process where a third party, the arbitrator, makes a
binding decision based on evidence presented by both sides. This method is often used when parties
prefer a structured process and need a final resolution.
Conciliation, on the other hand, focuses on facilitating
communication and negotiation between parties with the
help of a neutral third party, the conciliator .
It emphasizes finding a mutually acceptable solution without the
need for a binding decision. Conciliation is often preferred when parties want to preserve their
relationship and have more control over the outcome.
Ultimately, the choice between arbitration and conciliation depends on the nature of the dispute, the
preferences of the parties involved, and the desired outcome
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