Adopting an alternative legal remedy to resolve a dispute is called alternate dispute resolution [hereafter 'ADR']. It does not affect any substantive rights but ensures remedy will be obtained and enforced through a different legal course. Despite courts being there, parties can agree to settle differences through other legal systems. Also, these alternate dispute resolution mechanisms are not applicable for matters involving criminal law. Types of ADRs include:
1. Arbitration
2. Conciliation
3. Lok Adalat
4. Judicial settlement
5. Negotiations
Arbitration is a quasi-judicial alternate dispute resolution mechanism wherein a dispute is submitted to an Arbitral Tribunal which can comprise of one or more Arbitrators which hear both the parties to adjudicate and give a binding Arbitral Award to settle the dispute.
Arbitrators are appointed with mutual consent of the parties involved. This mode of ADR is flexible, faster and more convenient to settle disputes. Arbitration law was codified for the first time back in the 19 th century through the Indian Arbitration Act, 1899 which later was replaced by the following laws with time to update, enhance and promote the practice of Arbitration through by Arbitration (Protocol and Convention) Act, 1937, then Arbitration Act, 1940 followed by Foreign Awards (Recognition and Enforcement) Act 1961.
These laws became outdated with time and a new Act was imperative for complete implementation of 1991 Indian Economic reforms. A need for laws on conciliation was also realised. In Guru Nanak Foundation vs Ratan Singh & Sons 1981 The Hon'ble Supreme Court of India made an observation that the 1940 Act i.e. Arbitration Act, 1940 is outdated and has many loopholes which makes enforcement of awards difficult. This concern was finally addressed in 1996 through the introduction of Arbitration and Conciliation Act, 1996 which came in force on 22nd August 1996. This act introduced new features and clarity on subjects of domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and conciliation. India was a signatory to United Nations Commission on International Trade Law (UNCITRAL) which adopted
(i) UNCITRAL Model Law on International Commercial Arbitration, 1985 and
(ii) UNCITRAL Conciliation Rules 1980 and being a signatory, India was
bound by public international law to ratify new arbitration laws and rules
to give effect to the above resolutions. Certain branches of law like
Intellectual Property Rights, Arbitration, etc. have evolved from a global
platform as these laws involve cross border applications and they require to
be same in every country.
Arbitration and Conciliation Act, 1996 is divided into 5 parts which are:
Part 1 - Arbitration
Part 1A - Arbitration Council of India
Part 2 - Enforcement of certain Arbitral Awards
Part 3 - Conciliation
Part 4 - Supplementary provisions
The 1996 Act was enacted by the Indian Parliament to fulfill the following
objectives to
1. Provide legislative framework including recognition and procedural laws for international commercial arbitrations and conciliations;
2. Establish Arbitral Tribunals that work within specific jurisdictions and give reasonings behind Arbitral awards granted;
4. Minimise role of courts in arbitral process;
5. Encourage parties to seek other forms of dispute resolution during arbitral proceedings like mediation, conciliation etc..;
6. Enforce of arbitral awards in India just like court orders;
7. Give settlements reached from conciliation to have same legal value as
that of one reached through arbitration.
8. Enforce foreign awards in India
The Act of 1996 also evolved with time when needed through judgments and
legislative enactments explained as:
1. Arbitration and Conciliation (Amendment) Act, 2015 The 2015 amendment
came after 19 years of successful
implementation of Arbitration and Conciliation Act, 1996. It brought the
following changes:
1. Matters pertaining to international commercial arbitration to be dealt
by concerned High Court for proper superintendence
and timely justice. Some High Courts even established special benches for
Arbitration matters.
2. 2015 amendment empowered the Hon'ble Supreme Court and Hon'ble High
Courts to grant interim relief in arbitral matters
even when seat of arbitration is outside India.
3. It stipulated a 60-day time limit for the Supreme Court and concerned
High Court dispose of applications for appointment
of arbitral tribunal.
4. Courts shall now look into arbitration agreement only while considering a matter of appointing arbitrator(s).
5. Arbitral Tribunal has to grant arbitral award within 12 months from
date of commencement of proceedings which can be
extended by 6 more months by Court if sufficient cause exists.
6. Model Fee Schedule based on which High Court appoints Arbitrator was set up to ensure a fair remuneration system
7. Parties to an arbitral proceeding can now at any stage mutually agree in writing to fast track disposal of dispute within 6 months by the Arbitral Tribunal.
8. Application which challenges an Arbitral Award to be disposed within one year.
2. Arbitration and Conciliation (Amendment) Act, 2019
The 2019 amendment brought the following changes:
1. Section 11 was amended to change appointment of Arbitrators by the
Supreme Court of High Court to appointment of
Arbitrators by 'Arbitral Institutions' designated by courts.
2. Where no graded arbitral institution is available, Chief Justice of
the concerned High Court shall now appoint a panel of
arbitrators to discharge functions of Arbitral Institutions.
3. Newly introduced Part -IA in Arbitration and Conciliation Act, 1996
provides for 'Arbitration Council of India' to perform
functions of grading Arbitral Institutions and accreditation of arbitrators
etc..
4. Section 23 amended to ensure completion of statement of claim and
defence within 6 months of date of appointment of
arbitrator.
5. Arbitrators, Arbitral Institution and the parties to the arbitral
proceedings shall strictly ensure confidentiality of information
accessed during arbitral proceedings.
6. Provisions of 2015 Amendment shall apply only to arbitral proceedings started on or after 23 rd October 2015.
3. Arbitration and Conciliation (Amendment) Act, 2021
The 2021 amendment brought the following changes:
1. Unconditional stay to be granted on arbitral awards influenced by fraud or corruption.
2. Repealment of Schedule VIII of the Arbitration and Conciliation Act, 1996 which mentioned qualifications, experience required and norms for accreditation of arbitrators.
3. Bringing decision of parameters of qualifications, experience etc...
for accreditation of arbitrators under administrative discretion through
introduction of regulations instead of legislative framework.
Growth of Arbitration as an ADR has been rapidly increasing over the years
because of numerous advantages it has over regular legal procedures
involving adjudication by courts.
Written by
Vaishak Omanakuttan
Campus Law Centre, Faculty of Law, University of Delhi