The economic reforms and the economic policies introduced by the country made it
a favourable destination for foreign investments and trading relations with the
world. The Indian court system has had to undergo immense pressure since the
advent of the commercial relations. It has been overburdened by the presence of
pending cases, and the addition of further cases would have resulted in an
overload to the system. When foreign investors desired to resolve their disputes
either by litigation or by alternative means under India's notoriously
gridlocked court system, they often found it necessary to move on.
Alternate Dispute Resolution:
The purpose of dispute resolution is to settle disagreements
outside of court with the help of a third party after the two parties have
failed to resolve their differences and reached an impasse. The path forward
is well-established after efforts between the client or policy holder and the
insurer to resolve any differences between them have progressed without
resolution and reached a disagreement in an effort to avoid the cost and time
associated with trial.
The law allows the court to suggest terms for a possible
settlement if it appears as though there may be elements that would be
acceptable to the parties, and this settlement will then proceed to arbitration,
conciliation, mediation, or judicial settlement in accordance with the
One reason for the slow judicial process in India is the emphasis placed on
alternative dispute resolution mechanisms the People's Court system, based on
mediation, is a uniquely Indian approach to alternative dispute resolution, as
it is very different from the standard approach towards alternative dispute
resolution in the form of arbitration and conciliation provided by the
Arbitration and Conciliation Act of 1996.
This is because it is a mediation-based
system, as opposed to an adversarial system based on litigation. The India's
constitution guarantees every one access to justice, and this is provided
principally through Article 39A, which provides that everyone has the right
to get justice. This right must not be denied to any citizen, as this was
concluded by the 222 nd law commission of India in its report.
In India the development of arbitration is divided into three phases called
as the Pre- British rule, commencement of British rule and the last is the
position after the arbitration and conciliation act, 1996.
Pre-British Rule: Arbitration proceedings have developed in India since the beginning of the
19th century, and they are a long history and prevalent form of alternative
dispute resolution. They are used in India since the Vedic times. In the past,
we have learned that there have been many disputes and problems, and in order to
solve these disputes or problems, people have often gone to a group of wise men
within the community known as a ‘Panchayat' to seek advice.
The decisions they have made are significant for the parties. So, earlier
disputes were resolved through the local governing body.
Commencement Of British Rule: The Bengali judicial system allowed the judge to recommend the parties to the
arbitration, with the parties themselves to be mutually agreed upon. The Bengal
regulation acts of 1787, 1793 and 1795 provided certain powers to the court to
refer suit to arbitration in the case where both the parties consent to go for
arbitration. These acts also authorize the courts to provide references for the
cases not exceeding more than two hundered rupees for the disputes relating the
cases of debts, breach of contracts and partnership accounts.
Position After The Act Of 1996:The Arbitration and Conciliation (Amendment) Act, 2000 was in force from 1 April
2000 and it was repealed by The Arbitration and Conciliation Act, 2009, which
came into force on 01 April 2009. It was an effective amendment.
- An act to consolidate and amend the law relating to domestic.
- To define the law relating conciliation.
- Enforcement of foreign arbitral award.
- The act of 1996 has advantage over 1940 Act.
- Where there is arbitration agreement, the curt is required to direct the
parties to resort to arbitration per agreement.
- The ground on which award of arbitrator could be challenged before the
court under the 1940 have been severely cut down.
- The role of arbitral institution in promoting and organizing arbitration
has been recognized for the first time in law.
- Under act of 1940 there was a time limit of four month within which
arbitrator had to make award.
- The importance of transnational commercial arbitration has been
recognized and it has been specifically provided that even where the
arbitration is held in India the parties would be free to designate the
applicable to the subject of dispute.
Kinds Of Arbitration:
Alternate dispute resolution involves settling a dispute outside the court.
In one form of alternative dispute resolution (ADR), early neutral evaluation,
there is an attempt to understand and possibly resolve the dispute before the
The following are the kinds of arbitration recognized in India:
- Institutional arbitration:
Institutional arbitration is the procedure in which a professional
organization assumes the functions of a dispute resolution institution,
including assisting in the processes, and administering that process as provided
by the rules of that organization. When an arbitral institution conducts
arbitration, it is called institutional arbitration.
The parties have a choice
of referring any differences to be resolved to the institution of their choice,
as elected. One or more arbitrators can be chosen either by the governing body
of an organization, where the disputants can select the arbitrators from that
organization's pre-selected panel, but this should be restricted to the panel
selected by the governing body.
- Ad hoc arbitration:
In case of an ad hoc arbitration, an institution is not appointed to
administer the process, but the parties themselves will be in charge of the
decision making process. They will be choosing the procedure, the number of
arbitrators, and the manner in which the proceedings must take place. Ad hoc
arbitration means that the party that is going to be the arbitrator or the
arbitrator is completely free to set their own rules.
So, the arbitrator is not
required to imp element the same rules that are applied in other arbitrations.
The geographic jurisdiction of Ad hoc Arbitration is important, since most of
the issues will be resolved in accordance with the laws of the nations where the
seat of arbitration is located. This makes it very important for the parties to
the agreement to decide on the location of the arbitration.
- Fast track arbitration:
The fact that the arbitration process is time-consuming is why the "court of
public opinion" works like a remedy to the issue of time. Fast track arbitration
is a method which is time-dependent in relation to the arbitration and
conciliation act. Its procedure is set up in a way that it abolished all time
consuming techniques, and upholds the simplicity which is the original prime
Overcoming The Issues:
- Conventional thinking
Although India is currently moving towards modernization, it is yet an
underdeveloped country. This means that most people are still ignorant about
arbitration and still prefer courts to alternate dispute resolution. When people
are ignorant or when others don't agree with a given system, it may sometimes be
a good idea to put your faith in that system, but when people are unwilling to
change it often does more harm than good.
- Lack of Proper Laws
It is necessary to introduce more comprehensive provisions on arbitration
processes and proceedings in order to ensure procedural justice in arbitration
proceedings between companies and employees in India.'. The law makers need to
study the problems relating to the needs and requirements of business houses,
which are usually involved in arbitration proceedings. The laws must be made
stricter and more elaborately elaborated so that more and more people can gain
confidence in arbitration procedures than the judicial system.
- Intervention of Courts in Arbitration Proceedings
The intervention of courts in arbitration proceedings shall be kept to a
minimum. This is why those who opt for arbitration rather than pleat a court,
people will tend to develop a sense of favoritism towards the proceedings, as
well. People often find it better to approach the court at first.
be a limit on court intervention, not only the intervention during the judicial
process but also the intervention during arbitral proceedings. This means, there
must be a limited scope to challenge the arbitral award under Section 34 of
Arbitration Act, 1996. And, so it was well debated and agreed that the
involvement of the judiciary should be minimised to an extent.
- Lack of Awareness
The main impediment to the growth of arbitration in India is a lack of
awareness among people.As a matter of fact only some of the business people,
advocates, are aware of the process relating to dispute resolution., and, it is
obvious that many small-scale businesspeople who are unaware of such remedies
are unable to avail themselves of such procedures.
- Problems in enforcement
The award must be enforced at any cause so as to protect the parties. Lack of
enforcement of arbitral award is also one of the major cause in failure of the
development in India.
As we know that, each and every problem has a solution. As a result it is
important to address the solutions.
The solutions to certain problems faced in
arbitration are as follows:
- Creating awareness among each and every individual.
An awareness must be created to each and every individual irrespective of their
professions in order to resolve the disputes quickly.
- It must be made mandate in order to get recognized and resolve disputes
- Court should interfere to refer parties to arbitration:
An intervention might be best kept to a minimum and under control, there should
nonetheless be a limited scope to challenge an arbitral award under section 34
of the Arbitration Act 1996
- Enforcement should be made mandatory:
In some cases of Bhatia International v. Bulk Trading, Venture Global
Engineering v. Satyam Computer ltd and Bharat Aluminium Co v. Kaiser
Aluminium Technical Service. The court in Bharat Aluminum observed that the
first part of the act exclusively lays down the procedures and guidelines for
domestic arbitrations whereas the second part of the act in accord with the
UNCITRAL Model Law, New York Convention, and Geneva Convention applies.It should
be noted that arbitrations under Part I of the Arbitration and Conciliation Act,
1996 include both, arbitration in India between two Indian parties, and
international commercial arbitration held in India.
- Proper laws must be introduced:
In the case of Konkan Railway Corporation Ltd V. Mehul Construction Pvt
Ltd reaffirmed the judgment in the case of Ador Samia in 1997 and
subsequently the decision in Konkan Railway Company PV. Ltd V.
Rani Construction it was observed that there is no adjudicatory function to
be performed by the Chief Justice and his designation, therefore stating that
the appointment orders passed under Article 11 of the act are purely
administrative and not judicial, thereby invoking Section 141 of the Indian
Arbitration not only helps reduce the excess burden that is placed on the legal
system in a number of countries, parties can propose their own terms and
conditions, etc. If these reasons are overcome, the legislature and the
judiciary keep a check on arbitration. Alternate Dispute Resolution has been
evolving in India for a long time. With the ongoing development of the world
economy and the impact of globalization, it has become very difficult to keep up
with the pace and fulfill the ever changing needs of current times.
- Arbitration and conciliation act, 1996
- The constitution of India
- Article 39A of the Constitution of India provides for free legal aid to
the poor and weaker sections of the society and ensures justice for all.
- Panchayati raj
- Bhatia International v. Bulk trading S.A, (2002) 4 S.C.C. 105.
- Venture Global Engineering v. Satyam Computers Services Ltd., (2008) 4 S.C.C.
- Bharat Aluminum Co. v. Kaiser Aluminum Technical Services Inc., (2012) 9
- Konkan Railway Corpn. Ltd. v. Mehul Constructions., (2000) 7 S.C.C. 201.
- Ador Samia (P) Ltd. v. Peekay Holdings Ltd and Ors., (1999) 8 S.C.C. 572.
- Konkan Railway Corpn. Ltd. v. Rani Construction Pvt. Ltd., (2002) 2 S.C.C.