In arbitration, the disputing parties settle their dispute through the
process of a court by a third person who is a person chosen by concerning
parties. The general perception is that litigation is costly, time-consuming,
and full of complications. Thus the arbitration is a term of alternate dispute
resolution whereby two litigating parties desire their dispute to be settled
outside the court.
This method of resolving disputes outside the court or without the court's
involvement is alternate dispute resolution. There are various techniques in
alternate dispute resolution. They are:
Due to delays in injustice by the court, some of these techniques developed
significantly. One of the techniques that developed rapidly is arbitration. The
main purpose of arbitration is to provide speedy justice to the parties
Arbitration and conciliation act 1996 and its preamble
The arbitration and conciliation act, 1996 contains the law relating to
arbitration. The act came into force on January 25th, 1996. This act gives the
provision for international commercial arbitration, domestic arbitration, and
also enforcement of foreign arbitral awards. It is based on the U.N model of law
to equate with the law adopted by the united nations commission on international
The preamble of the act is interpreted as follows:
- Domestic arbitration
- International and commercial arbitration
- Enforcement of foreign arbitral award
Types of arbitration proceedings
Domestic arbitration: Domestic arbitration is a type of arbitration where the
subject matter of an agreement or a contract is wholly governed by Indian law or
when the cause of action of a dispute wholly arises in India or when the parties
opt for an Indian jurisdiction.
In domestic arbitration:
- The parties should not be from any nationality or a resident in any
country other than India
- A body corporate should not be incorporated in any country other than
- The government should not be of a foreign country.
- In international arbitration: international arbitration may result in the
application of a different set of rules. In this type of arbitration, the
law-governed for the resolution of disputes can either be Indian law or foreign
law. The arbitration proceedings can take place in India or outside India.
- Clause (f) of sub-section (1) of section 2 of the arbitration and
conciliation act, 1996 defines international commercial arbitration.
According to that section, the arbitration is considered to be an
international commercial arbitration where:
Thus arbitration becomes international where at least one of the parties is a
resident of another country other than India and the subject matter of the
dispute is abroad. Depending on the terms of the contract, the law applicable
for resolving the dispute may be Indian law or foreign law.
- At least one of the parties is an individual who is a resident from
another country other than India.
- A corporate body that is not incorporated in India.
- The government should be of a foreign country.
- Ad hoc arbitration:
unlike institutional arbitration ad hoc arbitration is not
administered by any institute. In this type of arbitration, the parties are at
liberty to decide the procedure that has to be followed during the resolution of
a dispute. The parties are free to decide an arbitrator and other procedures
like time table for filing the documents, applicable rules, etc. if the parties
are not able to decide then the arbitral tribunal will decide the procedure and
other rules in a way it thinks fit.
- Sometimes, an ad hoc arbitration can be turned into an institutional
arbitration at some point, if the parties feel necessary and they may by
agreement make such an appointment.
In institutional arbitration parties take the help of
an institute for deciding the procedures of arbitration. Such an institution
takes care of all the procedures like appointing an arbitrator, time table for
filing the documents, etc. institutional arbitration lessens the burden of the
parties by giving administrative assistance. This timely assistance helps move
the process smoothly. The institutions will charge the parties a certain amount
of money as a fee for assisting them through the arbitration process.
Some of the prominent institutions in India are:
Process of arbitration in India
- Indian Institute of arbitration and mediation, Delhi.
- Indian institute of technical arbitrators, Chennai
- Mumbai center for international arbitration
The arbitration arises due to a dispute between the two parties. So, to start an
arbitration procedure, the contract or the agreement that is executed between
the parties must have an arbitration clause. The arbitration procedure will be
carried in the following manner.
A contract or agreement that was entered by the parties
must contain an arbitration clause to resolve the dispute through arbitration.
An arbitration clause can be a separate agreement or an agreement in agreement.
That means the arbitration clause may be in the form of a separate agreement or
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
Notice for commencement of arbitration:
The provision for notice for
commencement of arbitration was given in section 21 of the 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 proceeding. It contains
the names of the parties and their representatives, a brief description of the
dispute, a statement of the relief sought, etc.
Appointment of arbitrator:
After the respondent receives the notice from the
applicant about the commencement of arbitration, both parties will appoint an
arbitrator in a manner that is described in the arbitration clause. This
provision is given under section 11 of the act.
Statement of claim and defense:
This provision is given under section 23 of
the act. 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 the evidence
proving their statements.
Hearing and written procedures:
The arbitral tribunal will hear both the
parties and examine the evidence. The tribunal will decide whether the documents
or the evidence produced are valid or not and proceed with the case further.
This provision is given under section 24 of the act.
After hearing the parties and examining all the issues a final
award will be given by the arbitrator. This award shall be final and binding on
both parties. However, an appeal cannot be filed before the arbitral tribunal
but the parties can appeal against the arbitral before the court. The 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 the arbitral award is given under section 35 36 respectively.
Arbitration has developed significantly in India and also justice is served to
the people without any delay. Nowadays most people are including the arbitration
clause in their contracts or agreements to solve their dispute without the
court's involvement. However, there are some decisions and provisions which are
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