JAMIA MILLIA ISLAMIA

ALTERNATE DISPUTE
REDRESSAL

Submitted To, Submitted By,

Adv. Madhu Saini Jijo Raj P
Professor, Faculty of Law B.A LL.B(IV Year)
Jamia Millia Islamia Section: B
Jamia Nagar, New Delhi Roll No: 17

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 DECLARATION

I, hereby declare that the dissertation entitled “Alternate Dispute Redressal” is based
on original research undertaken by me and it has not been submitted in any
University for any degree or diploma.

New Delhi. Jijo Raj P

30/11/2018. En No: 15-0073

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 CERTIFICATE

This is to certify that the dissertation entitled “Alternate Dispute Redressal” has been
prepared by Jijo Raj P, a student of Faculty of Law, Jamia Millia Islamia Central
University under my supervision and guidance. I recommend it for evaluation.

New Delhi. (Signature of the Guide)

30/11/2018.

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 ACKNOWLEDGEMENT

I am deeply indebted to my professor Adv. Madhu Saini, Lecturer in Faculty of Law,

Jamia Millia Islamia Central University, who has always been a source of inspiration
and has encouraged me in this endeavor. I am obliged to her for having taken greater
care and interest in guiding me at every stage of the work.

I thank all the Library Staffs of Jamia Millia Islamia for assisting me to use the
library resources.

I gratefully acknowledge the enormous blessings and good fortune I have as a

student of Jamia Millia Islamia which has given me the excellent foundation for the
research. I thank all my family and friends who gave me the emotional strength that
worked as a strong force behind the entire work.

JIJO RAJ P

B.A LL.B(IV Year)

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 CONTENTS
Seraial Chapter Topic Page
No: No:

1. _ ABBEREVIATION. 7-8

2. _ LIST OF CASES. 9-11.

3. _ INTRODUCTION. 12.

4. _ HYPOTHESIS. 13.

5. _ OBJECTIVES. 13.

6. _ REASEARCH METHODOLOGY. 13-14.

7. 1. ALTERNATE DISPUTE REDRESSAL. 15.

8. 1.1 HISTORY. 15-17

9. 1.2 ADR IN INDIA. 17-19.

10. 1.3 EVOLUTION OF ADR IN INDIA. 19-34.

11. 1.4 REPORTS OF COMMITTEES AND 34-36.

COMMISSIONS.

12. 1.5 CONSTITUTIONAL PROVISIONS. 37.

13. 1.6 OTHER PROVISIONS. 37-41.

14. 1.7 CASES UNSUITABLE AND SUITABLE FOR ADR 42-43.

PROCESS.
15. 1.8 APPROPRIATE STAGE FOR REFFERING TO ADR. 43.

16. 1.9 CONSENT OF PARTIES. 44.

17. 1.10 GENERAL GUIDELINES. 44-47.

18. 2. KINDS OF ADR. 48.

19. 2.1 ARBITRATION. 48-51.

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20. 2.1 CONCILIATION. 51-52.

21. 2.3 MEDIATION. 52-54.

22. 2.4 JUDICIAL SETTLEMENT. 54.

23. 2.5 LOK ADALAT. 55.

24. 3. ADVANTAGES AND DISADVANTAGES OF 56-57.

ADR.

25. 3.1 SCOPE OF ADR METHODS. 57-58.

26. 4. ARBITRATION AND CONCILIATION ACT, 59.

1996

27. 4.1 SALIENT FEATURES. 59-60.

28. 4.2 PREAMBLE. 60-61.

29. 4.3 ARBITRATION PROVISIONS. 61-99.

30. 4.4 CONCILIATION PROVISIONS. 99-109.

31. 5. LOK ADALATS AS A UNIQUE ADR 110-113.

MEASURE.

32. 6. INFORMATION TECHNOLOGY IN ADR 114.

33. 6.1 ONLINE DISPUTE RESOLUTION IN INDIA. 114-116

34. 6.2 NEED FOR ONLINE DISPUTE RESOLUTION. 116-117.

35. 6.3 JUDICIAL RESPONSE WITH REFERENCE TO 117-119.

INFORMATION AND COMMUNICATION
TECHNOLOGY.
36. _ CONCLUSION. 120-121.

37. _ BIBLIOGRAPHY. 122.

38. - REFERENCE. 123.

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 ABBREVIATIONS

A
AAA : American Arbitration Association.
AC : Appeal Cases.
ADR : Alternate Dispute Redressal.
AHCMCC : Allahabad High Court Mediation and
Mediation Centre.
AIR : All India Reporter.
Arb.J : Arbitration Journal.
C
CEDR : Centre for Dispute Resolution.
CPC : Code of Civil Procedure.
CRS : Community Relations Service.
F
FICCI : Federation of Indian Chamber of Commerce
And Industries.
FLS : Formal Legal System.
H
H.C : High Court.
I
ICA : Indian Council of Arbitration.
ICADA : The International Centre for Alternate Dispute
Resolution.
ICC : International Chamber of Commerce.

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IIAM : Indian Institute of Arbitration and Mediation.
I.L.R : Indian Law Reports.
L
LCIA : London Court of International Arbitration.
L.C.I : Law Commission of India.
L.L.J : Labour Law Journal.
L.L.N : Labour Law Notes.
N
N.A.L.S.A : National Legal Services Authority.
O
ODR : Online Dispute Redressal.
ORD : Order.
S
S.C : Supreme Court.
S.C.C : Supreme Court Cases.
U
U.K : United Kingdom.
U.N : United Nations.
UNCITRAL : United Nations Commission of International
Trade Law.
U.O.I : Union of India.
W
WIPO : World Intellectual Property Organisation.
W.T.O : World Trade Organisation.

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 LIST OF CASES
TABLE OF CASES PAGE NO

Afcons Infrastructure and others v. Cheriyan Varkey Construction Co. 37,39,41.

Pvt. Ltd and others, 2010, 8 S.C.C 24.
Adoor Samia (P) Ltd. V. Peekay Holding Ltd., AIR 1999 S.C 3246. 72.
A.K Kraipak V. Union of India, 1969 (2), S.C.C 262. 81.
B

Brijendra Nath V. Nayak, A.I.R, 1994 S.C 2562. 84.

Basavaray R. Patil V. State of Karnataka, 2000, 8 S.C.C 740. 115.
Banwarilal V. Chano Devi, A.I.R 1993 S.C 1139. 35.
B.P Moideen Sevamandir V. A.M Kutty Hassan, A.I.R 2008, S.C 1123. 52.
Baba V. Raghunathi, A.I.R 1976 S.C 1734. 55
Babar Ali V. Union of India, 2000 2 S.C.C, 178. 57.
Basheshar Nath V. C.I.T, A.I.R 1959, S.C 149. 68.
BHEL V. C.N Garg and ors., 2001 (57) Drj 154. 69.
Bhatia Inter: V. Bulk Trading, A.I.R 2002 Bom 8. 70,82.
D

Datar Switchgears Ltd. V. Tata Finance Ltd, 2008 S.C.C 151. 71,72.
Dulal Podda V. Executive Engineer, 2004 1 S.C.C, 73. 86.
F

Furest Day Lawson Ltd V. Jindal Exports Ltd. A.I.R 2001 S.C 2293. 58,94.
Firm Ashok Trader V. Gurumukh Das Saluja, 2004 (3), S.C.C 155. 67,70.
G

Guru Nanak Foundation V. Ratan and Sons, A.I.R 1981 S.C 2075. 29.
Ghanshyam Das V. Domination of India, A.I.R 1984 S.C 1004. 36.
H

Hussainara Khatoon V. State of Bihar, 1979 CrLJ 1036. 54.

Haresh Dayaram V. State of Maharashtra, A.I.R 2000, S.C 2281. 97,98.
I

India Household and Healthcare Ltd. V. L.G Household and Healthcare 76.
Ltd, 2007 5 S.C.C 510.
J

Jivaji Raja V. Hhimiji Poonja and Co, A.I.R 1934 Bom 476. 63.

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Jayant N. Seth V. Gyaneshwar Housing Society Ltd, 2000 (1) Raj 117 67.
(Bom).
K

Kalyan People Co-op Bank Ltd. V. Dulhabibi, A.I.R 1966, S.C 1072. 75.
M

Manjulata Sharma V. Vinay Kumar, A.I.R 2004 All 92(94) DB. 35.
Motilal V. Kedarnath Jainarayan, 2002 (3) R.J 403 (Bom). 67.
M.M Aqua Technologies Ltd V. Wig Brothers Builders Ltd. 2001 (3) 69.
Raj 531 Del.
Malasyia Airlines System BHD (II) V. Stic Travels (P) Ltd., 2001, 1 73.
S.C.C, 509.
Motilal V. State of H.P, A.I.R 1996 H.P 90. 79.
Mysore Cements Ltd. V. Syedal Barma Ltd, 2003 (10), S.C.C 375. 98.
N

Narayan Prasad Lohiya V. Nikunj Kumar Lohiya, 2002 (3) S.C.C 572. 71.
Nissho Iwa Cor V. Veejay Impex, A.I.R 2000,Cal 207. 77.
N.S Nayak V. State of Goa, 2003 (6) S.C.C 56. 113.
O

O.N.G.C Ltd V. Saw Pipe Ltd., A.I.R 2003, S.C 2629. 88.
P

Price V. Milner, (1996), I WLR 1235. 29.

P. Anand Gajapathi Raju V. P.V.G. Raju, A.I.R 2000, S.C 1886. 68,69,95.
R

Ramji Dayawala and Sons Ltd. V. Invest Import, A.I.R 1981 S.C 2085. 29.
Raj State Transport Co. V. Krishna Kant, A.I.R 1995, S.C 1715. 35.
Raghunath Das V. U.o.I, A.I.R 1969, S.C 674. 36.
S

State of Punjab V. Geeta Iron and Brass Works Ltd., A.I.R 1978, S.C 36.
1608.
Salem Adv. Bar Ass., T.N V. U.o.I, A.I.R 2005, S.C 3353. 36.
S.N Palanitkar V. State of Bihar, A.I.R 1999, S.C 2354. 70.
Sundaram Finance Ltd. V. N.E.P.C India Ltd., 2004 (3), S.C.C 155. 70.
S.B.P and Co. V. Patel Eng, 2005 (3) Arb LR 285 (S.C). 73.
Shivant Rai V. Abdul Ghaffar, 2008 5 S.C.C 135. 74.
S.G.M Avadi Madras V. Oscar Equipment (P) Ltd. 2006 4 M.L.J 1420. 77.
St. Bank of Patiala V. S.K Sharma, 1996 (3) SCC, 346. 78.
St. of U.P V. Allied Constructions, 2003, 7 S.C.C 396. 85.
St of Rajastan V. Nav Bharath Con: Co., A.I.R 2005, S.C 4430. 87.

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 Shyam Sundar V. U.o.I, 1996 (2) S.C.C 132. 96.
St. of M.H V. Dr. Praful B. Desai, 2003 (3) SCALE 554. 115.
T

Trustees for the Port of Madras V. Eng Construction Co. , A.I.R 1995, 29.
SC 2423.
T. N Electricity Board V. Sumathi and Others, 2000 (4), S.C.C 543. 68.
T.D.M Infrastructure Pvt. Ltd. V. U.E Development India Pvt. Ltd, 69.
2008, S.C.C 2263.
U

Union of India V. Mohanlal Kapoor, 1972, 2 S.C.C 836. 81.

Union of India V. Om Prakash, A.I.R 2000 J&K 79. 88.
Union of India V. Shring Con. Co. (P) Ltd, 2006, 8 S.C.C 18. 90.
Union of India V. Popular Construction Co, 2001 (8) S.C.C 470. 94.
V

Vessel M.V, Baltic Confidence V. St. Trading Corp Ltd, 2001 (7), 77.
S.C.C 473.
W

Wellington Association Ltd V. Kirti Mehta, A.I.R 2000, S.C 1379. 66,77.

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 INTRODUCTION
Desire for quick and affordable justice is universal. Right to speedy trial is a right to life and
personal liberty of every citizen guaranteed under Article 21 of the Constitution, which ensures
just, fair and reasonable procedure. “Any conflict is like cancer. The sooner it is resolved the better
for all the parties concerned in particular and society in general. If it is not resolved at the earliest
possible opportunity, it grows at a very fast pace and with time and 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. Disposal of
cases in time is the necessity to maintain the rule of law and providing access to justice, which is
a fundamental right of every citizen guaranteed by the Constitution. “Behind almost every human
conflict someone feels dismissed, discounted, disenfranchised or disrespected. Unresolved
tensions that may have immersed below the surface can resurface and make situations difficult.”

Denial of justice through delay is the biggest mockery of law, but in India it is not limited to mere
mockery; the delay in fact kills the entire justice dispensation system of the country. This has led
to people settling scores on their own, resulting in a growing number of criminal syndicates and
mob justice in various parts of the country and reflecting the loss of people’s confidence in the
rule of law. In 1996, the Indian Legislature accepted the fact that in order to lessen the burden on
the courts, there should be a more efficient justice delivery system in the form of arbitration,
mediation and conciliation as an Alternative Dispute Resolution (ADR) options in appropriate civil
and commercial matters. Thus, Parliament enacted Arbitration and Conciliation Act, 1996, with a
view to provide quick redressal to commercial dispute by private Arbitration. Speedy decision of
any commercial dispute is essential for the smooth functioning of business and industry. ADR has
been recently referred in many areas as “Appropriate Dispute Resolution” and not as “Alternative”.
In fact, litigation is being referred as “Judicial Dispute Resolution” or JDR. ADR is also being
referred as a global system as it is not restricted by territorial jurisdiction, which is a major hurdle
in litigation process.

This research paper deals with the Alternate Dispute Redressal mechanisms and their scope In a
much deeper way.

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 HYPOTHESIS

Dispute resolution process in each and every case cannot be confined to the Courts of Law. Due
to the increased burden, procedural complications and inadequate knowledge about alternative
dispute redressal methods among the public the Courts of Laws are facing the problem of judicial
crises. The study is based on the assumption that, when the rate of filing of the cases before the
Courts is decreased the judicial delays and arrears before the Courts can be properly managed.
Different forms of alternative dispute redressal methods either socially or legally can effectively
be used as a mechanism in reducing the problem of judicial delays and arrears. The lack of
knowledge on the part of the disputed party has also made the existing system not to function in
an effective manner.

OBJECTIVES

The main objectives of the study are:

1. To understand the different concepts related to the research problem.
2. To trace out the history of dispute redressal mechanisms in India.
3. To study, the major legislations that provides for different types of alternative dispute redressal
methods in India.
4. To study, the different alternative dispute redressal methods and their hybrids in resolution of
the disputes.
5. To explore the, uniqueness of the alternative dispute redressal methods that are successfully
functioning in other Countries and the major Institutions providing for them in India and abroad.
6. To comprehend the problem of judicial crises arising out of judicial arrears and delays in the
Courts of law
RESEARCH METHODOLOGY
To fulfill the objective of the study the researcher has adopted the “Doctrinal research” and the
“Empirical research” methodology. The researcher used the doctrinal research method for
gathering the opinions of the textbook writers, the Law Commission reports on the structural and
operational part of the legislative machinery. The methodology helped in systematizing legal
propositions and judicial interpretations for a theoretical assessment of the research problem with
the help of the various law journals, and books of the eminent jurists forming the secondary sources

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of the research. The researcher undertaken the empirical field study by attending the arbitral
proceedings.

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 1. ALTERNATE DISPUTE REDRESSAL
The dispute resolution processes, which are “alternative” to the traditional Court proceedings, are
often referred to as alternative dispute resolution processes. A method of resolving a dispute can
be considered as alternative if it resolves the dispute and provide justice, with a consensual process
between the parties to the dispute. The dispute resolution may be done with the help of a neutral
third person who acts as a mediator or a middle person between the parties to the dispute and tries
to reduce the gap of differences between the parties with the help of different process such as
arbitration, conciliation, mediation or negotiations.

The term "alternative dispute resolution" or "ADR" is often used to describe a wide variety of
dispute resolution mechanisms that are short of, or alternative to, full-scale court processes. The
term can refer to everything from facilitated settlement negotiations in which disputants are
encouraged to negotiate directly with each other prior to some other legal process, to arbitration
systems or minitrials that look and feel very much like a courtroom process. Processes designed
to manage community tension or facilitate community development issues can also be included
within the rubric of Alternate Dispute Redressal. ADR systems may be generally categorized as
negotiation, conciliation or mediation, or arbitration systems. It refers to a set of practices and
techniques aimed at permitting the resolution of legal disputes outside the courts. It is normally
thought to encompass mediation, arbitration, and a variety of "hybrid" processes by which a neutral
facilitates the resolution of legal disputes without formal adjudication. These alternatives to
adjudication are advocated on a variety of grounds. Potential benefits are said to include the
reduction of the transaction costs of dispute resolution because ADR processes may be cheaper
and faster than ordinary judicial proceedings; the creation of resolutions that are better suited to
the parties' underlying interests and needs and improved ex post compliance with the terms of the
resolution.

1.1 HISTORY OF ALTERNATE DISPUTE REDRESSAL

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 rights-based remedies as opposed to creative problem solving. The American
origins of the concept are not surprising, given certain features of litigation in that system, such
as: trials of civil actions by a jury, lawyers' contingency fees, lack of application in full of the rule
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"the loser pays the costs". Beginning in the late nineteenth century, creative efforts to develop the
use of arbitration and mediation emerged in response to the disruptive conflicts between labor and
management. In 1898, Congress followed initiatives that began a few years earlier in
Massachusetts and New York and authorized mediation for collective bargaining disputes. In the
ensuing years, special mediation agencies, such as the Board of Mediation and Conciliation for
railway labor, (1913) (renamed the National Mediation Board in 1943), and the Federal Mediation
and Conciliation Service (1947) were formed and funded to carry out the mediation of collective
bargaining disputes. Additional state labor mediation services followed. The 1913 New lands Act
and later legislation reflected the belief that stable industrial peace could be achieved through the
settlement of collective bargaining disputes; settlement in turn could be advanced through
conciliation, mediation, and voluntary arbitration.

At about the same time, and for different reasons, varied forms of mediation for non-labor matters
were introduced in the courts. When a group of lawyers and jurists spoke on the topic to an
American Bar Association meeting in 1923, they were able to assess court-related conciliation
programs in Cleveland, Minneapolis, North Dakota, New York City, and Milwaukee. Conciliation
in a different form also appeared in domestic relations courts. An outgrowth of concern about
rising divorce rates in the postwar 1940's and the 1950's, the primary goal of these programs was
to reduce the number of divorces by requiring efforts at reconciliation rather than to facilitate the
achievement of divorces through less adversarial proceedings. Following privately funded
mediation efforts by the American Arbitration Association and others in the late 1960s, the
Community Relations Service (CRS) of the United States Department of Justice initiated in 1972
a mediation program for civil rights disputes. Although a small number of individual lawyers had
been interested in and were practicing mediation ADR in Britain for some years, it was only in
1989 when the first British based ADR company - IDR Europe Ltd. - bought the idea across the
Atlantic and opened its doors for business. This was the start of ADR Group. Since then many
other ADR organizations, including CEDR (Centre for Dispute Resolution), followed suite and
assisted in the development and promotion of ADR in the UK. ADR, or mediation (as it is now
synonymously known as), is used world-wide by Governments, corporations and individuals to
resolve disputes big or small, of virtually any nature and in most countries of the world. In
developing countries where most people opt for litigation to resolve disputes, there is excessive
over-burdening of courts and a large number of pending cases, which has ultimately led to

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dissatisfaction among people regarding the judicial system and its ability to dispense justice. This
opinion is generated largely on the basis of the popular belief, “Justice delayed is justice denied”.
However, the blame for the large number of pending cases in these developing countries or docket
explosion, as it is called, cannot be attributed to the Courts alone. The reason for it being the non-
implementation of negotiation processes before litigation. It is against this backdrop that the
mechanisms of Alternative Dispute Resolution are being introduced in these countries. These
mechanisms, which have been working effectively in providing an amicable and speedy solution
for conflicts in developed economies, are being suitably amended and incorporated in the
developing countries in order to strengthen the judicial system. Many countries such as India,
Bangladesh and Sri Lanka have adopted the Alternative Dispute Resolution Mechanism. However,
it is for time to see how effective the implementation of these mechanisms would be in these
countries.

1.2 ALTERNATE DISPUTE REDRESSAL IN INDIA

In our country the justice delivery system through courts has given rise to certain grave problems
like inordinate delays, huge pendency of cases and expensive litigation. Thus, it has become very
difficult for the poor and marginalized people to have access to justice. In these circumstances, it
becomes significantly necessary for all the stake-holders of the judicial system to find out some
mechanism where such grey areas can be effectively and adequately taken care of.

Alternative Dispute Resolution in India is an attempt made by the legislators and judiciary alike to
achieve the “Constitutional goal” of achieving Complete Justice in India. ADR first started as a
quest to find solutions to the perplexing problem of the ever-increasing burden on the courts. A
thought-process that started off to rectify docket explosion, later developed into a separate field
solely catering to various kinds of mechanisms which would resolve disputes without approaching
the Formal Legal System (FLS). The reasoning given to these 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.

In a civilised society, principles of natural justice along with the “Rule of Law” should result in
complete justice in case of a dispute. Rule of Law is defined as the state of order in which events

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conform to the law. It is an authoritative, legal doctrine, principle, or precept applied to the facts
of an appropriate case. These definitions give us the indication that the Rule of Law is a
authoritative concept which might lead to a win-lose situation in cases of dispute. Therefore, ADR
uses the principles of natural justice in consonance with the Rule of Law, in order to create a
favourable atmosphere of a win-win situation.

In India, the quest for justice has been an ideal, which the citizens have been aspiring for
generations down the line. Our Constitution reflects this aspiration in the Preamble itself, which
speaks about justice in all its forms: social, economic and political. Justice is a constitutional
mandate. About half a century of the Constitution at work has tossed up many issues relating to
the working of the judiciary; the most important being court clogging and judicial delays.
Particularly disturbing has been the chronic and recurrent theme of a near collapse of the judicial
trial system, its delays and mounting costs. Here, the glorious uncertainties of the law frustrated
the aspirations for an equal, predictable and affordable justice is also a question, which crops up
often in the minds of the people.

Alternative Dispute Resolution (ADR) contains the effective mechanism to provide speedy and
cost-effective justice, it also has the potential to trim the huge arrears of cases to size. This is much
needed in countries like India where litigation causes a great deal of animosity between the parties
due to the agony caused by the long-standing litigation. ADR, thus, gains its momentum in India
today.

Alternative Dispute Resolution in India was founded on the Constitutional basis of Articles 14 and
21 which deal with Equality before Law and Right to life and personal liberty respectively. These
Articles are enshrined under Part III of the Constitution of India which lists the Fundamental Rights
of the citizens of India. ADR also tries to achieve the Directive Principle of State Policy relating
to Equal justice and Free Legal Aid as laid down under Article 39-A of the Constitution.

Alternative Dispute Resolution (ADR) contains the effective mechanism to provide speedy and
cost-effective justice, it also has the potential to trim the huge arrears of cases to size. Parliament
brought about a legislation and introduced section 89 and Rules 1-A, 1-B and 1-C to Order X in
the Code of Civil Procedure, 1908, so as to make effective use of ADR process. The Acts which
deal with Alternative Dispute Resolution are Arbitration and Conciliation Act, 1996 (discussed in
detail later) and the Legal Services Authorities Act, 1987. Section 89 of the Civil Procedure Code,

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1908 makes it possible for Arbitration proceedings to take place in accordance with the Acts stated
above.

1.3 EVOLUTION OF DISPUTE RESOLUTION SYSTEM IN INDIA

In India, there is no authentic account available for the judicial and political institution and
civilization period prior to Aryans. The available indigenous literature pertaining to that period is
contained in Vedas and sacred religious books. In ancient times, it is found that the supreme duty
of the King was considered to be, punishing the wicked and protecting the righteous. In the Vedic
period, the King in return for the taxes paid to him by the people, performed the duty of a Judge1
. In those early times, administration of justice did not form a part of a State’s Duty. 2

The study of ancient Indian literature, illustrate the conditions where the aggrieved party himself
had to take steps as he could in order to get the wrong redressed. The public devoured one another
as the strong fish devour the weaker ones in the water.3 This arrangement could not hold for long.
As such, this method was not satisfactory and there was a dire need to create the office of Kingship
to avoid the situation of weaker being exploited by the stronger one and there upon Lord Brahma
is said to have introduced Kingship upon Manu. The people agreed to pay certain taxes and prayed
that in turn the King should destroy their enemies to enable them to lead a peaceful life.4 The Vedic
King as the head of the Judiciary claimed himself as the upholder of Dharma. Thus, the origin of
judicial system in India can be traced from pre-historic Vedic times more than 3000 odd years old,
if not older still.5

With the passage of time, the King used to impart Justice with the aid of his Ministers and Legal
experts and the references to this is found in the Manusmriti. The King became the holder of Law
and was not a source of law. He was guided by Dharma. He was expected to live upto the ideals
of Kingship as laid down in the Dharmasastra. The Dharmasastra and Nitisastra regarded the King
as the fountain source of all Justice. The King was the highest Court of appeal and was expected
to decide cases according to Law.6 The Ancient Hindu period of Indian legal system can be

1
Birendra Nath , Judicial Administration in Ancient India, (1979),p.27
2
Dr.A.S.Altekar , State and Government in Ancient India, (1977), p 245.
3
C.P. Ramaswamy Aiyar, Some Aspects of Social and Political evolution in India, (1969),p 497
4
S.K.De, The Cultural Heritage of the India,(1969,Vol.II),p 497.
5
P.B.Mukherji,The Hindu Judicial System,p434.
6
R.C.Majumdar, The History and Culture of the Indian People: The Vedic Age, (1965), p475.

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discussed chronologically under the following heads of Vedic or per Sutra period, Dharma Sutra
period and the Post Smriti period.7

1.3.1 VEDIC OR PRE - SUTRA PERIOD

The Vedic or Pre-Sutra period can be studied under the Aryan Civilization. In the Vedic period
law, religion and justice were closely interconnected and there was no clear-cut demarcation. The
Vedas are said to be four in number namely Rig-Veda, Yajur Veda, Sama Veda and Athurva Veda.
Of these Vedas, Rig-Veda explains the structure of the society and the social and political
institutions that existed in the Vedic period. There was absence of central control of organized
government in the modern sense. The entire territory was divided into small Kingdoms ruled over
by the King, as the head of the State and not of the Society. The State and the Society had distinct
sphere of activities. National life and activities in the earliest times as on record were expressed
through popular assembles and institutions.8 There were a gradation of Courts and the King was
the highest Court of appeal. Appeal lay from the lower Courts to higher Courts. The three most
important and popular bodies were Parishad, Samiti, and Sabha.

The ‘Parishad’ was an advisory body on religious matters but it also discharged some judicial
functions. ‘Samiti’ was the body for general deliberations where all kinds of policy matters were
discussed. This body also discharged legislative and judicial functions. It was the assembly of
whole of the People. The most important function of Samiti was the election and re-election of the
King. The King considered himself duty bound to participate in the deliberations of the Samiti and
thus emerged to be the sovereign body. The ‘Sabha’ was a body of selected persons presided by
the king himself. Sabha was the national judicature, due to the reasons that the resolutions of the
Sabha were considered to be binding on all the persons.9

1.3.2 DHARMA SUTRA PERIOD

Dharma sutra period is also called as the golden period of Indian Legal History. With the
advancement of time and society, the people progressed towards Civilization. The law propounded
by the Smriti writers was more systematic and comprehensive in nature and laid down certain sets
of principles to be followed by the people and the King alike. The principal Sutras are the Dharma

7
S. Varadachariar, The Hindu Judicial System ,p 10
8
Dr. Radha Kumul Mookerjee, Local Government in Ancient India, p22.
9
K.P.Jaiswal, Hindu Polity, p. 21,14.

Page | 20
Sutra of Gautama and Baudhyana, Sutras of Apastamba, Harita, Vashista, and Visnu. The areas
that were mainly dealt by the Sutras were rules of civil and criminal Law, marriage, inheritance,
succession interest and partition.10

The important Smritis, which contributed immensely towards the development, are Manu Smriti,
Yajnavalkya Smriti, Narada Smriti, Brihispati Smriti and the Katyana Smriti. The study of
Arthasastra of Kutilya reveals that there were two types of Courts viz., Dharmasthiya or the Civil
Courts and Kantakasodhana of Criminal Courts.11 The administration of Justice was decentralised
in order to avoid delay and other complications connected with the investigation of cases. Kautilya
and Manu12 have given different system of gradation of Courts. Kautilya has given much
importance to Popular Courts and in his scheme, Courts were instituted at Sangrahana,
Dronamukha, Sthaniya and where the District met. According to the scheme of Manu that was
adopted by Yajnavalkya, Narada, Brihaspati and Katyayana, the Sabha system formed the basis of
forming and grading Courts. The Courts were known as Popular Courts and were termed as Kula,
Sreni, and Gana Courts and the idea behind these Courts was to enable each and every person to
receive justice without delay.13

In the Sutra and the Smiriti period there were hierarchies of Courts at different levels. At the apex
of the Judicial hierarchy was the Royal Court called ‘Sabha’. It was staffed by experienced
Councilors who advised the King on the Points of Law in accordance with the law laid down in
the sacred textbooks and the local customs. The rulers of ancient India who administered justice
were subject to certain traditional obligations and customary limitations. They had to take into
consideration the laws of the guilds in administering justice. Secondly, all were not equal in the
eyes of law. The punishment for the offences depended on the social status of the offender. The
cast of the offender also influenced the judgments.14

The Yajnavalkya mentions three types of Popular Courts namely the Kula, Shreni, and the Pugha.
The ‘Kula’ was the assembly of persons of the same family or community tribe, cast or race and
charged with the function to decide the disputes amongst the persons who felt equality bound by

10
Dr. S.K.Puri , Indian Legal and Constitution History,(1980) ,p. 2,3
11
Birendra Nath , Judicial Administration in Ancient India, (1979),p.27.
12
S.D.Sharma , Administration of Justice in Ancient India,(1988),p.71,72
13
Mulla, Hindu Law,(1974),p15,16,23.
14
H.V. Sreenivasa Murthy, V.S. Elizabeth ,History of India,p8.

Page | 21
its decisions. The ‘Shreni’ was the assembly or association of persons following the same
avocations or trade and the ‘Pugha’ is interpreted in three senses namely companies of traders,
association of persons differing in castes and the riders on the elephants and horses. The existence
of jury system is specifically mentioned in the Smritis. It was the duty of the jury to consider the
truth or the cause before the Court.15 The existence of People’s Court in ancient India finds mention
in Narada Smriti. The Jurors in ancient India were selected from the higher classes and those who
were the most respectable in the society. The main qualification for the person to be juror was that,
he was well versed with the question of law and fact involved in the dispute referred by the
parties.16

1.3.3 THE POST SMRITI PERIOD

This period mainly pertains to Nibandhakars and Digest writers. The study of Kutilya’s
Arthashastra reveals that the Courts of Dharmasthas were located at the junction of two territories
or Janapadas and the Headquarters of 800, 400 and 10 Villages called Sthaniya, Samgrahana and
Dronamukha respectively. There was decentralization of Judiciary to a great extent. Arthashastra
of Kautilya deals with the rights, duties and responsibility of the King in the administration of the
State including judicial administration. The systematic and exclusive treatment of law was a
distinct feature of Arthashastra. The Nibandahas and Tikas commentaries had significant part in
the development of law and it even flourished in India during the Muslim Period. It gave rules as
to, in case of conflict the Suriti will prevail over Smriti, and whenever there was conflict between
the two texts in Suritis or Smritis then the text that was supported by reason and usage would
prevail.17 Thus, it can be said that the task was to lay down the rules of interpretation with
guidelines.

The aim of every judicial administration is to be just, honest and make available speedy remedy to
the aggrieved persons who as a last resort seek the assistance of the Courts. Form the above study
it is enlightened that the entire judicial administration in ancient India functioned under the
supervision of the King and the Courts derived their authority from King. The Hindu system was

15
P.V.Kane, History of Dharmasastra(1973),p281
16
K.P.Jaiswal, Hindu Polity, p. 312.
17
R.B.Pal, The History of Hindu Law,(1930),p. 158,159.

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not prepared to trust the judgments of a single individual, how so ever learned and eminent he
might have been.18

The King discharged his judicial function with the aid and assistance of his ministers, Purohit and
Sabhyas. Later on, the King due to his inability to attend personally to the judicial functions except
in special circumstances used to depute the learned Brahmins to take his place and do justice. In
order to give speedy and proper Justice, there existed well set principles which governed the
proceedings in the Courts. The Courts existing in the ancient India also enjoyed discretionary
powers to deliver justice to the aggrieved persons. The study of the ancient Indian dispute redressal
system reveals that, India was conversant with many of the modern judicial system. The success
of any dispute redressal system depends on the two basic elements, firstly a well– regulated system
of Courts following a simple and orderly procedure and secondly a definite, easily ascertainable
and uniform body of law. Thus, these two basic elements certainly formed the basis of ancient
Indian Judicial system.19 The procedure that was followed for doing Justice to the aggrieved
persons was not very technical. The basic considerations were upholding dharma and to avoid
needless and vexatious litigations compounding. Withdrawing the complaint was treated as
cheating the King. The social interest cases were not sustainable in the Courts. Thus, these are the
indication to say that different forms of dispute redressal machineries and People’s Court existed,
continued to function down to the eighteenth century, and existed in India thereafter.

The Village Courts or the Panchayat played a significant role in settling local disputes, both in
ancient and medieval times in India. It is significant to note that the Law Commission of India, in
its 14th report (1958) has mentioned that the functioning of such different alternative arrangements
like People’s Courts as dispute redressal mechanisms along with the Courts had successfully
reduced the burden of the central judicial administration.20

18
Dr.V.C. Sarkar , Epics of Hindu Legal History, p. 83(1958)
19
M.P.Jain. Outline of Indian Legal History , 5th ed,p.3
20
Dr.A.S.Altekar , State and Government in Ancient India (1977), p 252 ;Law Commission of India, 14th report
(1958)II,p874

Page | 23
1.3.4 MUSLIM PERIOD

The study of history of Indian legal system reveals that the recognized Hindu period changed with
the Muslims invasion. In Medieval period, the society in India was broadly divided in to two parts
Hindus and Muslims. The Muslim invasion was made by Mohammudbin-quasim in 712 AD. He
came to India as invader and returned thereafter. Qutub-uddin Aibek made the real penetration into
India. He in reality established himself firmly in India after waging series of wars. The Muslims
thereafter continued to rule over India until 1857 when the Britishers dethroned the last Mughal
King Bahadhadur Shah Zafar. Their holy books, certain rules of practices and traditions governed
the Hindus and Muslims in their social relations and political organization. The judicial structure,
which existed in India during Muslim rule, is studied under the ‘Sultanate Period’ from 1206 AD
to 1526 AD and under the ‘Mughal Period’ starting from 1526 AD that lasted up to 1680 AD.21

In this period, the civil and canon law cases pertaining to the Hindus were heard by learned
Brahmans appointed for the purpose, while the criminal cases were tried according to Islamic Law.
The revenue cases were tried according to the local tradition. The Muslim Rulers did not interfere
with the Law of Hindus and Hindus continued to be governed by their own laws in personal
matters.22 The judicial structure gave due place to the then existing institution in India, such as
Village Panchayat which served as extremely useful in the settlement of dispute during ancient
India. Panchayat were the lowest trail Courts and their findings were final in petty cases. The
characteristic of the Sultanate Period was that the Sultan was the Supreme authority to administer
Justice in his Kingdom. The Justice was administered in the name of the Sultan in three capacities.
Firstly, as the arbitrator in the disputes of his subjects, he dispensed justice through the Diwan-e-
Qaza. Secondly, as the head of the bureaucracy, he dispensed justice through the Diwan-eMazalim.
Finally, as the Commander-In-Chief of Forces, through his military commanders who constituted
Diwan-e- Siuasat , tried the rebels and those charged with high treasons. As in case of ancient
India, during the Muslim rule also, all were not treated as equals in the eyes of law and the Hindus
as well as poor were discriminated against the Muslims and the rich respectively.23

21
M.B.Ahmad, The Administration of Justice in Medieval India, Pg 98
22
S.K.De, The Cultural Heritage of the India.(1969,Vol.II),p 436.
23
H.Beveridge, History of India (1914),p102.

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The culture of the Muslim ruler and the Hindu subjects differed materially but there was great
affinity with regard to the law as both the system had their origins in the religion. Therefore, both
the systems of law were given due recognition by the Courts in settling the disputes between the
parties with regard to civil matters but the entire Criminal administration of Justice was based on
the Criminal Law principles followed by the Mohammedan. The punishment were inflicted upon
criminals in accordance with the provisions of the criminal law governing Mohammedan.24

The Muslim ruler while ruling over India regarded themselves as the servants of the God (Allah).
Mohammad, the Prophet of Islam, also preached this message. It is pertinent to note that they
considered the administration of justice as an essential act for the fulfillment of this
responsibility.25

As laid down in Fatwa- Alamigiri, the Courts in India were to be guided by the following
authorities while deciding the disputes. Firstly, the sacred book of Muslims the Quran; it collected
the revelations of Mohammed in a definite written form. The Mohammedans were and are still
governed by this sacred book. Secondly, the Sunna, which is the words, deeds, and silent approval
of prophet during his lifetime, which were reduced to writing, and came to be termed as Sunna or
traditions. These traditions gradually laid the foundations of Islam. 26 Thirdly, the concurrent
opinion of the Prophet’s companions called the Ijma, literal meaning of it is “agreeing upon”.
Those disputed point of law which was resolved by the agreement of the persons who have right,
in the nature of knowledge, to form a Judgment of their own after the death of Prophet thus came
to be regarded as a valid source of law. Finally, judgments according to the individual discretion
of the Judge based on the doctrine of Justice, Equity and Good Conscience guided the function of
resolution of disputes.27

There was very systematic classification of the gradation of the Courts during the Muslim Rule in
India.28 The Central Court were six in number namely, the King’s Court , Diwan-e- Muzalim,
Diwan-e- Risalat, Sadre Jahan’s Court, Chief Justice Court and Diwan-e- Siyasat. The Provincial
Courts were five in number namely, Adalat Nazim Sabha, Adalat Qazi-e- Subah, Governor’s

24
Dr.V.C.Sarkar, Epichs in Hindu Legal History,Pg.200-203, (ed.1958)
25
M.B.Ahmad, The Administration of Justice in Medival India, Pg70.
26
Sir.A.Rahim, Mohammedan Jurisprudance, Pg. 59.
27
Dr. S.K.Puri , Indian Legal and Constitution History,(1980) ,p 18.
28
B.M.Ganddhi,V.D.Kulshreshtha’s Landmark in Indian Legal and Constitutional History,(1992),p 19,p20

Page | 25
Bench (Nizam-e- Subha), Diwas-eSubah and Sader Subah. At the District level Qazi, Dadbaks or
Mir Adils, Faujdaris, Sader Amirs and Kotwals were functioning. At each Parghnah headquarter
two Courts were established namely Qazi - e- Parganah and Kotwal. According to Abu Hanifah,
the Quazi could act on the Principle of Istihsan (Public good) Istislah (Public policy) or Istishab
(Concordance). A Parganah was further divided into the village assembly or Panchayat, which
were vested with enormous powers to decide civil and criminal cases of purely local character. 29
The lowest on the ladder of hierarchy of Courts were the village council popularly known as Lok
Adalat of today.30 The Qazi were entrusted primarily with both civil and criminal administration
and their counter parts in the provinces and districts. Nevertheless, it cannot be denied that there
existed qazis who were well known for their character, integrity and sound knowledge of law.
During this period, the gift system was a recognized institution. The Emperor did not consider any
petition unless it was supported by gifts.31 Thus, there existed a well-organized judicial institution
with clearly defined procedure similar to institutions in modern times. The Mughal Dynasty
continued up to 1850 and normally up to 1857, when there after the queen of England took over
the control of India.

1.3.5 BRITISH PERIOD

India had flourishing trade with the western world and the balance of trade was always in the favor
of India. Much of the trade was carried on through land routes. Portuguese were the pioneers in
finding the new sea routs. Vasco da Gama landed at Calicut and thus the cape route to India was
discovered. During the 16th century the Portuguese maintained supremacy in Indian Ocean. The
spectacular success of the Portuguese attracted other European countries and Dutch, the English
and the French, in that order, began to compete with the Portuguese. The British East India
Company received its Charter from Queen Elizabeth in 1600, and the Emperor Jahangir issued a
Farman to the Company in 1613 to establish a permanent factory at Surat. This became the chief
settlement of the company in India. In the due course of time, specifically after the battle of Plassey
in 1757 and until the annexation of Oudh in 1856, the British were successful in establishing their
paramount in India. Thus, by this time the British East India Company was supreme from
Himalayas to Kanyakumari and from Sind to Burma. The Impact of West brought about

29
W.Briggs, Rise of the Mohammedan Power in India, (1829), III, p420
30
Upendra Baxi, Towards A Sociology of Indian Law (1986), p69.
31
A.B.Pande,Society and Government in Medieval India,p166.

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momentous changes in India, which was not anticipated by the Europeans. English replaced
Sanskrit as the language of the intelligentsia, and english language seemed to be Lingua Franca
that is, the Common all India language. It is thus very significant to point out that, it was through
this medium the first fifteen years of the Indian national movement was confined to those, who
had learned and mastered the English language and were brought up essentially in the western
style.32

The dispute redressal function in the beginning of British Raj was delegated to the native people
for the reason the Britishers were unaware of the local language and the local Laws. The Britishers
also had the fear that the act of the punishment of the members of the native population could lead
to agitation at any time.33 With the induction of British judges trained in Common Law into the
Indian Judicial system, the Courts were reorganized and the entire working of local Courts was
reshaped. The judicial administration in three presidency towns namely, the Calcutta Presidency,
Madras Presidency and Bombay Presidency prior to 1726 were found wanting in uniformity and
remained disoriented, informal and unsatisfactory. The Charter Act of 1726, introduced a uniform
judicial system by the creation of Mayors Court in each of the presidency towns, namely Madras,
Bombay and Calcutta and later territories surrounding the presidency towns were brought under
its control.34 In the year 1772 Warren Hasting took over Bengal, Bihar and Orissa and established
a well-organized judicial system. The Chief features of this Adalat System were Mofussil Diwani
Adalat (Civil Court), Mofussil Fauzadari Adalat (Criminal Court), Court of the Head Farmer of
Parganas dealing with petty civil cases, Sadar Diwani Adalat to hear appeals from the decisions
given by Mofussil Diwani Adalat and Sadar Nizamat Adalat to hear appeals from the decisions
given by Mofussil Nizamat Adalat.35 Numbers of regulations were newly introduced and the old
ones were repealed to reform the judicial administration in India. The Government of India Act,
1935 proposed a federal form of government for the whole of India and the provinces were given
some autonomous character and they began to be treated on a federal basis. Thus, Federal Court
was created which were the independent Courts, to decide the future disputes between the units.
First Federal Court was set up at Delhi in 1937. Federal Court possessed exclusive original
jurisdiction to determine disputes between the units inter se or between the center and the units on

32
H.V. Sreenivasa Murthy, V.S. Elizabeth ,History of India,p 9,to 14.
33
R.C..Majumdar, An Advanced History of India, (1977), p553.
34
M.P.Jain, Indian Legal History,(1966),85.
35
Dr. S.K.Puri , Indian Legal and Constitution History,(1980) ,p 45-46

Page | 27
the objective interpretation of the provisions of the Act. As appellate body, it heard appeals from
the High Courts on the certificate that the case involved a substantial question of law for decision.
Through the advisory jurisdictions, the Federal Court rendered advice to the Governor-General on
any point of law referred by him in an open Court in the presence of Lawyers of all the parties. 36
Thus, it was the highest Court in India. The appeals against the decision of the Federal Court lay
to the Privy Council, which was the highest Court of appeal for India in England.

Some of the regulations made during British Rule, played an important role in the survival of
alternative methods of resolving the disputes, along with the system of adjudication through
Courts. The Bengal Regulation Act, 1772 that provided that, in all cases of disputed accounts,
parties are to submit the same to arbitrators whose decision are deemed a decree and shall be final.
The Regulation of 1781 provided for the judges to recommend without any compulsion, prevail
upon the parties to submit to the arbitration before a person that is mutually agreed upon by the
parties to the dispute. The regulation of 1787 empowered the Court to refer suits to arbitration with
the consent of the parties. The procedure of conducting the arbitration was introduced by the
regulation of 1793. The Madras Presidency Regulation VII of 1816 authorized the District Munsif
to convene district panchayat for civil suits relating to real and personal property.37 Bombay
Presidency Regulation VII of 1827 provided for arbitration of Civil Disputes. India was governed
by combination of conflicting laws and systems of administration of justice before the British
rulers enacted The Charter Act, 1833. The codification of laws was the beginning of legal and
judicial reforms in India. When the East India Company started taking over administrative control,
the Presidency Governments in Bengal, Madras and Bombay enacted ‘Regulations’.38

The Charter Act of 1833 provided for the establishment of the legislative council for India in the
year 1834. The Act VIII of 1857 codified the procedure of Civil Courts. Sections 312 to 325 of
this Act dealt with arbitration in suits and Sections 326 and 327 provided for arbitration without
the intervention of Court. The Code of Civil Procedure was revised in the year 1882 and the
provisions relating to arbitration was reproduced under Section 506 to 526. The provision for filing
and enforcement of awards on such arbitrations was made in 1882 Act No. XIV. The first Indian
Arbitration Act was introduced in the year 1899 based on the English Arbitration Act of 1889.It

36
M.V.Paylee, Constitutional History of India,(1600-1950),p.86.
37
Epoch, Hindu Legal History, (1958), p335
38
Thomson and Garratt, Raise and fulfillment of British Rule in India, (1958) ,p300-301.

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was the first Substantive law on the subject of arbitration. Due to several defects in this Act, in the
1908 the Code of Civil Procedure was re-enacted and the provisions relating to arbitration were
set out in the Second Schedule of the code, though no substantial changes were made in the law of
Arbitration. In 1925, the Civil Justice Committee recommended several changes in the arbitration
law. On the basis of the recommendations by this Committee, the Indian legislature passed the
Arbitration Act of 1940.

In the year 1940, the Arbitration Act was enacted.39 This Act replaced the Indian Arbitration Act
of 1899, Section 89, Clauses (a) to (f) of section 104(1) and Second Schedule of Code of civil
Procedure 1908. Thus, Arbitration Act of 1940 finally amended and consolidated the Law relating
to arbitration in the British India.

The ascendance of the People’s Court in British India was not deliberate but was gradually
weakened by several factors. The extension of civil and criminal Courts with adversary system of
adjudication, which was unknown and new to the village population, the progress of English
education, the Police organization, the migration of people from villages to towns, the growing
pursuits of individual interest and consequential lessening of community influence over the people
can be regarded as the main factors, which gradually contributed to the decay of the People’s Court
in India. There was a complete centralization of judiciary and the local Courts were discouraged
and replaced by the Royal Courts.40 Technicalities were introduced into the Indian judicial system;
the adjudicatory process became more and more formal with the introduction of Anglo-Saxon
system. The poor man found it difficult to enter into the portals of the Courts, and found difficulty
in to use of the legal process. The advent of British rule finally led to the decline of People’s Court
in India. The People’s Court thus entered into the era of lessening importance, and finally vanished,
as a result of British policy of Feudalistic control of the countryside.

The legislations introduced by the British Rule brought about a perceptible change and uniformity
in the administration of justice in India.41 The influence of English, after the fall of Muslim rule in
India, made a massive structure of Indian law and jurisprudence resembling the height and
symmetry and grandeur of the Common law of England. The ‘Adversarial System’ of justice was

39
Salil K. Roy Chowdhury,H.K .Saharay, Arbitration Law ,(III Ed),p6,7.
40
K.N.C.Pillai, Criminal Juridiction of Nayaya Panchayats,JILI(1977),p438,439.
41
Dr. S.K.Puri , Indian Legal and Constitution History(1980) ,p 45.

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introduced in India, where two opposite parties are pitched against each other, both given levels
playing field and opportunity to present their case before the judge.42

1.3.6 AFTER INDEPENDENCE

After the dawn of freedom in India, powerful voices were raised for providing speedy, inexpensive
and substantial justice, which suit the genius of Indian people. The drawbacks of Anglo-Saxon
Judicial system were recognized and founding fathers of the National Charter made an effort to
recognise the existing system on the lines of home-grown legal system that existed in India since
the dawn of its civilization. The drafters of the Constitution aimed that, the judicial process must
be reorganized and justice must be brought near to the people.43 The sole of the good government
is providing justice to the people; as such, the Preamble of the Constitution highlighted the aspect
of political, social and economic justice to the people.44 The Article 39-A of the Constitution of
India, secures the operation of the legal system, promotes justice on the basis of equal opportunity,
so that no citizen is denied access to justice on account of financial or other disability.45 With the
enforcement of the Constitution in 1950, the Supreme Court of India is established as the apex
Court in the country. On 26th January 1950 the Federal Court yielded the place to the Supreme
Court, all the judges became the judges of the Supreme Court. It was invested with the original,
appellate and advisory jurisdiction in the constitutional, civil, criminal and other matters.46 Next
the High Courts where established in each State or a group of Union territory and the States. The
lower judicial setup in civil judicial setup consists of the District Courts, Sub-Courts, and the
Munsif Court. The Criminal cases are dealt as per the Section 6 of Code of Criminal Procedure
1973.47 This section states that besides the High Court and the Courts constituted under any law,
other than this Code, there shall be Courts of Sessions, Judicial Magistrate of First class and
Second-class Courts and Executive Magistrates.

Indian judiciary had transverse a long way since the days of rule of East India Company. By the
end of the Second World War in 1945, particularly after independence in 1947, the trade and
industry received a great fillip. The commercial community became more inclined towards

42
Dr.H.R.Bhardwaj, Legal And Judicial Reforms In India.
43
Sunil Deshta, Lok Adalats in India (1995), p35.
44
V.N.Shukla,Constitution Of India,(2003),p 1.
45
Ins.by the Constitution (42nd Amendment) Act, 1976, S.8 (w.e.f. 3-1-1977)
46
V.N.Shukla,Constitution Of India(2003),p304.
47
Ratan Lal and Dhirajlal, The Code of Criminal Procedure ,17th ed,p19-20.

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arbitration for settlement of their disputes. It was the development as against litigation in Courts,
which involved long delays and heavy expenses. With increasing emphasis on arbitration, there
was the judicial grist exposing the infirmities, shortcomings and lacunae in the Act of 1940.48

The Arbitration Act of 1940 could not give desired result. One of the main difficulties faced in
international arbitration was relating to the recognition and enforcement of an arbitral award made
in one country by the Courts of other countries. This difficulty was sought to be removed through
various international Conventions such as the Geneva Convention and the New York Convention.
India became a party to certain international conventions dealing with the enforcement of foreign
arbitral awards. The Geneva Protocol on Arbitration Clauses, 1923, came into force on 28th July
1924. The Geneva Convention on the execution of Foreign Arbitral Awards, 1927, came into force
on 25 July 1929. India became party to both the Protocol and the Convention on 23 October 1937.
The Arbitration (Protocol and Convention) Act 1937 was enacted in India for giving effect to the
obligations under the said instruments. In the year, 1960 India became party to the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. For giving
effect to this convention, India enacted the Foreign Awards (Recognition and Enforcement) Act,
1961. The law of Arbitration was thus contained in these three enactments namely, The Arbitration
Act of 1940, The Arbitration (Protocol and Convention) Act of 1937 and the Foreign Awards
(Recognition and Enforcement) Act of 1961.49

The liberalisation of Indian economy opened the gates for inflow of foreign investment. India
opened its economy and took several measures of economic reforms in the early 90’s. After the
development in the international trade and commerce, with the increasing role of GATT and later
WTO, there was a spurt in trading in goods, services, investments and intellectual property.
Disputes arose between the trading parties, which were diverse in nature and complex, involving
huge sums. Such disputes required quick and amicable settlement since the parties could not
tolerate the prolonged legal process in Courts, appeal, review and revision.50

Indian judiciary played a very substantial role in the process of emphasizing the need for the
change in the then existing arbitration laws. Along the same lines, the apex Court had also

48
N.N.Sircar, The L aw of Arbitration in British India,1942,p12.
49
P.Chandrasekhara Rao,The Arbitration and Conciliation Act,1996,(1997),p4,5
50
O.P Malhotra, Indu Malhotra,The Law and Practice of Arbitration and Conciliation,p13

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recognised the alternate forum in its various decisions. In Sitanna v. Viranna,51 the Privy Council
affirmed the decision of the Panchayat and Sir John Wallis observed that, the reference to a village
panchayat is the time honored 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.

In the year 1981, the Supreme Court of India in Guru Nanak Foundation V/S Rattan & Sons52
observed, “Interminable, time consuming, complex and expensive Court procedures impelled
jurists to search for an alternative forum, less formal, more effective and speedier for resolution of
disputes avoiding procedure claptrap and this led them to Arbitration Act, 1940. However, the way
in which the proceedings under the 1940 Act are concluded and without an exception challenged
in the Courts, had made lawyers laugh and legal philosophers weep. Experience showed and law
reports bore ample testimony that the proceedings under the 1940 Act had become highly
technical, accompanied by unending prolixity, at every stage providing for a legal trap to the
unwary. Informal forum chosen by the parties for expeditious disposal of their disputes had by
decisions of the Court been clothed with ‘legalese’ of unforeseeable complexity.”

In the year 1981, Justice D.A.Desai of the Supreme Court in Ramji Dayawala and Sons (P) Ltd
Vs Invest Import case53 accentuated that, the protracted, time consuming, exasperating and
atrociously expensive Court trails impelled an alternative mode of resolution of disputes between
the parties thus, arbitrate-don’t litigate. Arbitration being a mode of resolution of dispute, by a
Judge of the choice of the parties, can be considered to be preferable to that of adjudication of
disputes by Court. If expeditious, less expensive resolution of disputes by a Judge of the choice of
the parties was the consummation devoutly to be wished through arbitration, experience shows
and this case illustrates that the hope is wholly belied because in the words of Edmond Davis.J in
Price Vs Milner54, these may be disastrous proceedings.

In the year 1995 in the case of, Trustees for the Port of Madras Vs Engineering Construction
Corporation,55 Supreme Court of India said that the Act of 1940, which contained the general law

51
AIR 1934 SC 105.
52
AIR 1981 SC 2075 ;( 1981)4 SCC 634.
53
AIR 1981 SC 2085 ;( 1981) 1 SCC 80.
54
(1966)1WLR 1235.
55
AIR1995 SC 2423;1995(2)Arb LR 331.

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of Arbitration, had become outdated and was not in harmony with the arbitral mechanism available
to resolve the disputes in most of the countries in the world.

A number of foreign investors started expressing restrain, as they would not like to invest in India
unless disputes arising out of their investments are settled abroad. Under the 1940 Act, the parties
had to go to the Court to make the awards final. Interference by the Courts at the instance of one
party or the other and a considerable delay in disposal of matters gave rise to demands to repeal
the 1940 Act. These factors acting together made it essential for India to devise a new legal regime
relating to both domestic and international commercial arbitration. To attract the confidence of the
international mercantile community in the context of growing volume of India's trade and our
commercial relationship with the rest of the world after the new liberalization policy of the
Government, The Arbitration and Conciliation Act, 1996 Act was passed. This Act was in harmony
with the UNCITRAL Model Law on International Commercial Arbitration, 1985.56

The Arbitration Act, 1940 (the 1940 Act) governed the law relating to arbitration until it was
replaced by the Arbitration and Conciliation Act, 1996 (the 1996 Act).The 1940 Act had a number
of drawbacks, including provisions for Court intervention at a number of stages in the proceedings,
which resulted in delays. The 1996 Act remedied these procedural defects. It was enacted to cover
comprehensively international commercial arbitration and conciliation as well as domestic
arbitration and conciliation. It aimed to make the arbitral process fair, efficient and capable of
meeting the needs of arbitrations. The 1996 Act introduced, among others, the changes such as the
arbitral tribunal must give reasons for passing an award and must remain within the limits of its
jurisdiction. An arbitral award must be enforced in the same manner as if it were a decree of a
Court. The arbitral tribunal is permitted to use Conciliation during arbitral proceedings to
encourage settlement of disputes (with a view to minimizing the supervisory role of the Courts in
the arbitral process). A settlement agreement reached by the parties as a result of Conciliation
proceedings, will have the same status and effect as an arbitral award on agreed terms on the
substance of the dispute rendered by the arbitral Tribunal. For the 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 is treated as a
foreign award. The Arbitration and Conciliation Act, 1996 repealed the Arbitration (Protocol and

56
N.K .Acharya,Law Relating to Arbitration and ADR,(2004),p2,3.

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Convention) Act of 1937, the Arbitration Act of 1940 and the Foreign Awards (Recognition and
Enforcement) Act of 1961.The Arbitration and Conciliation Act of 1996 received its assent on
August 16, 1996. It contains 86 Sections and three schedules; Part I of the Act contains general
provisions on Arbitration. Part II of the Act consolidates the two Acts for enforcement of ‘Foreign
Awards’. Part III of the Act provides for Conciliation. Part IV of the Act contains supplementary
provisions. The basic features of the 1996 Act can be summarised as, it provides for the party
autonomy, minimum judicial intervention and maximum judicial support. The main objectives of
the 1996 Act as per the preamble of the Act are to cover international and domestic arbitration
comprehensively, to minimize the role of Courts and treat arbitral award as a decree of Court ,to
introduce concept of conciliation and Lastly, to provide speedy and alternative solution to the
dispute.57

1.4 REPORTS OF COMMITTEES AND COMMISSIONS

To understand and establish the role of alternate dispute redressal methods, that can substitute the
formal method of settlement of disputes within the framework of formal procedures conceived in
the Code of Civil Procedure through the Courts and other enactments, the Government has time
and again appointed various Committees and Commission. The reports of these Committees and
Commission have always played a major part in the various legislative amendments and
recommendations proposed by the Law Commission India in its study on various aspects of
judicial reforms.

In 1949, Justice Sudhi Rajan Das High Court Arrears Committee was constituted to look into the
problem of delays. The committee recommended the curtailment of appeals and revision to reduce
the backlog of cases in the High Courts. In 1951, Justice Das Committee made recommendations
to unify and consolidate the legal profession. In 1972, Justice Shah Committee was constituted to
report on the arrears in the High Courts.

The Seventy-seventh Report of the Law Commission was assigned exclusively to the problem of
"Delays and Arrears” in Trial Courts. This was published in 1978. In this report, the Commission
fairly admitted that, "The problem of delay in the disposal of cases pending in law Courts is not a
recent phenomenon. It has been with us since a long time. A number of Commissions and

57
O.P Malhotra, Indu Malhotra,The Law and Practice of Arbitration and Conciliation,p1,32

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Committees have dealt with the problem, and given their reports. Although, the recommendations,
when implemented, have had some effect, the problem has persisted. Of late, it has assumed
gigantic proportions. This has subjected out judicial system, as it must, to severe strain. It has also
shaken in some measure the confidence of the people in the capacity of the Courts to redress their
grievances and to grant adequate and timely relief”.58

In 1989, the Government of India, on the advice of then Chief Justice of India, constituted Arrears
Committee (1989-1990) under the Chairmanship of Justice Malimath, who was the Chief Justice
of the Kerala High Court. The terms of reference of the Committee were interalia, to suggest ways
and means, to reduce and control the arrears in the High Courts and the subordinate Courts. The
Committee submitted its comprehensive report in 7th August 1990.59 The other members of this
Committee were Dr. Justice A.S. Anand, the then Chief Justice of Madras High Court and Mr.
Justice P.D. Desai, the then Chief Justice of Calcutta High Court. The terms of reference of the
Committee were, inter alias, to suggest ways and means, “to reduce and control arrears in the High
Courts and Subordinate Courts.” It identified the causes of accumulation of arrears like the
litigation explosion; the increased legislative activity; the accumulation of First Appeals; the
continuation of ordinary civil jurisdiction in some High Courts; the Inadequate number of Judges;
the Appeals against orders of quasi-judicial forums going to High Courts; the unnecessary numbers
of revisions and appeals; the lack of modern infrastructure in the High Courts; the unnecessary
adjournments; the indiscriminate use of writ jurisdiction in High Courts; the lack of facilities to
monitor, track and bunch cases for hearing in Courts; the changing pattern of litigation and lack of
strategies to deal with new litigation with new techniques; the social awareness in the masses.60

The Malimath Committee made a large number of useful recommendations like the introduction
of Conciliation procedure in writ matters and setting up of Neighborhood Justice Centers with
statutory status. The function of such centers should be confined to resolving disputes by
reconciliation. The Committee also favored the machinery of Conciliation Courts for resolving
disputes arising under the Rent Control Act.

58
77th Law commission of India Report,1978.
59
Justice Dr. M. K. Sharma ,High Court of Delhi, Conciliation and Mediation, p 2,3.
60
Arrears Committee Report (Malimath Committee Report) dt 7 August 1990.Vol-1section 8.21, 8.37, Vol-II
Section 8.71to 8.91, 112-17.

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The Report of Malimath Committee became the basis of finding solutions of the problems of
arrears during the Law Ministers’ meetings which took place in 1992-93 at Bangalore,
Pondicherry, Pachmarhi and Calcutta. A joint Conference of the then Chief Ministers of the States
and Chief Justices of High Courts was held on 4th December, 1993 at New Delhi under the
Chairmanship of the then Prime Minister of India and presided over by the Chief Justice of India.
It adopted the following resolution: “The Chief Ministers and Chief Justices were of the opinion
that Courts were not in a position to bear the entire burden of justice system and that a number of
disputes lent themselves to resolution by alternative modes such as arbitration, 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”.61

The Malimath Committee while making a study on ‘Alternative Modes and Forums for Dispute
Resolution' endorsed the recommendations made in the 124th and 129th Report of the Law
Commission to the effect that the lacuna in the law as it stands today, arising out of the want of
power in the Courts to compel the parties to a private litigation to resort to arbitration or mediation,
requires to be filled up by necessary amendment being carried out. The Committee stated that the
conferment of such power on Courts would go a long way resulting in reducing not only the burden
of trial Courts but also of the Revisional and Appellate Courts. Thus, there would be considerable
divergence of work at the base level and the inflow of work from Trial Courts to the Revisional
and Appellate Courts would thereby diminish.62

The Law Commission headed by Shri M.C. Setalvad, after thorough survey of the legal and judicial
system, gave the Fourteenth Report dated 9th November 1978. The Report said that the problem
of delay in disposal of cases poses a challenge to the system, presence of conflicting decisions on
various points, areas where reforms were needed and also pointed out that litigation has increased
manifold and costs of litigation have increased frustrating common man's efforts to have access to
justice.63

61
Malimath Committee Report, Chapter VIII, p112 and Chapter IX p168,170,171.
62
Justice Dr. M. K. Sharma ,High Court of Delhi, Conciliation and Mediation,p 4
63
The 14th Law Commission Report(1958)p ,252-263

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The Law Commission in its 129th Report examined at length the nature of litigation in urban areas
and highlighted the staggering pendency of cases in various Courts of urban areas. It was pointed
out that as on 31st December 1984, 2,48,845 cases were pending in Sessions Courts, 77,41,459
cases in Magisterial Courts, 29,22,293 cases in Civil Courts of original jurisdiction and 10,91,760
cases on the appellate side. Special attention was given in the Report to house rent and possession
litigation in urban areas and as an alternative to the present method of disposal of disputes under
the Rent Acts, four distinct modes were considered. Firstly, on the establishment of Nagar
Nyayalaya with a professional Judge and laying them on lines similar to Gram Nyayalaya and
having comparable powers, authority, jurisdiction and procedure. Secondly, on the hearing of
cases in Rent Courts by a Bench Judges, with minimum two in number, and no appeal but only a
revision on questions of law to the district Court. Thirdly, on the setting up a Neighborhood Justice
Centers involving people in the vicinity of the premises in the resolution of dispute; and Finally
on the Conciliation Court system, which is was then working with full efficiency in Himachal
Pradesh.64 Thus, the above study reveals that, the Law Commission of India has considered the
question of delay and arrears in Courts from time to time, and has thus given about 12 reports
covering various aspects of the said problem.

1.5 CONSTITUTIONAL PROVISIONS

Article 39-A of the Constitution of India provides that the State shall secure that the operation of
the legal system promotes justice, on the basis of equal opportunity and shall in particular, provide
free legal aid, by suitable legislations 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. Article
14 also makes it obligatory for the State to ensure equality before law and a legal system which
promotes justice on the basis of equal opportunity to all. Thus, access to justice, provision of legal
aid for poor and needy and dissemination of equal and speedy justice are the cherished goals of
our Constitutional Republic.

1.6 OTHER PROVISIONS

Prior to the existence of S. 89 of the Code of Civil Procedure, there were various provisions that
gave the power to the Courts to refer disputes to mediation. Such provisions are in the Industrial

64
129th Law Commission Report(1984)

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Disputes Act, 1947, Section 23(2) of the Hindu Marriage Act, 1955 and Section 9 of the Family
Courts Act, 1984. We can also find and infer such provisions in Section 80, Order XXIII, Rule 3,
Order XXVII, Rule 5-B, Order XXXII-A & Order XXXVI of the Code of Civil Procedure, 1908.

As regards the Industrial Disputes Act, the Supreme Court observed, “the policy of law emerging
from Industrial Disputes Act, 1947 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 court.65

1.6.1 SECTION: 9 OF THE FAMILY COURTS ACT, 1984

Section 9 of the Family Courts Act, 1984 mandates the family court to assist and persuade the
parties at the first instance, to arrive at a settlement.

1.6.2 SECTION: 107(2) OF THE CODE OF CIVIL PROCEDURE

S. 107(2) of the Code of Civil Procedure provides that subject to such conditions and limitations
as may be prescribed, “………. The appellate court shall have the same powers and shall perform
as nearly as may be the same duties as are conferred and imposed by this Code on courts of original
jurisdiction in respect of suits instituted therein.” Thus, it is inferred that the provisions regarding
Alternative Disputes Resolutions are applicable to appellate courts also.

1.6.3 ORDER 23, RULE 3, CODE OF CIVIL PROCEDURE

Order 23, Rule 3, Code of Civil Procedure mandates the courts to record a full adjustment or
compromise and pass a decree in terms of such compromise or adjustment. But the compromise
decree has to be recorded as a whole so as to gather the intention of the parties.66 The court must
apply its judicial mind while examining the terms of settlement. The compromise shall not be
recorded in a casual manner. The court is under the responsibility to satisfy itself about the
lawfulness and genuineness of the compromise.67 Government of India and State Governments are

65
Rajasthan State Road Transport Corporation v. Krishna Kant, AIR 1995 SC 1715.
66
Manjulata Sharma v. Vinay Kumar Dubey, AIR 2004 All 92 (94) DB.
67
Banwarilal v. Chano Devi, AIR 1993 SC 1139.

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the largest litigants in India. The government or statutory authorities are defendants in a large
number of suits pending in various courts in the country.

1.6.4 SECTION: 80 OF CODE OF CIVIL PROCEDURE

Section 80 of CPC and some other statutes require service of notice as a condition precedent for
filing of a suit or other proceedings against the government or authority. It is observed that in a
large number of cases where government is a defendant either the required notice is not replied or
in a few cases where a reply is sent, it is generally vague and evasive. Thus, the object of S. 80,
CPC and similar provisions get defeated. It not only gives rise to avoidable litigation but also
results in heavy expenses and costs to the government exchequer. The object of notice under
section 80, CPC is to give the government sufficient warning of the case which is going to be filed
against it and an opportunity to it to settle the claim without litigation.68 It gives the government
an opportunity to consider its legal position and accordingly settle the claim out of court.69The
notice under section 80, CPC intends to alert the state to negotiate a just settlement or at least have
the courtesy to tell the potential outsiders why the claim is being resisted.70 The underlying object
of section 80, CPC and other similar provisions is to curtail litigation and area of dispute.

The Supreme Court of India in Geeta Iron and Brass Works Ltd. case has emphasised that
governments must be made accountable by Parliamentary social audit for wasteful litigation
expenditure inflicted on the community through its inaction. The Apex Court has directed that all
governments, central or state or other concerned authorities to nominate within a period of three
month, an officer who shall be made to ensure that replies to notice under section 80, CPC or
similar provisions are sent within the stipulated period and the replies shall be sent after due
application of mind. This direction of Supreme Court shall put the government authorities in a
conciliation mode and promote early settlement of disputes.71

1.6.5 SECTION: 89 OF CODE OF CIVIL PROCEDURE

Section 89 has been inserted in the Code of Civil Procedure by the CPC (Amendment) Act, 1999.
It became effective from 01.07.2002. Section 89 CPC reads as follows: -

68
Ghanshyam Das v. Domination of India; AIR 1984 SC 1004
69
Raghunath Das v. Union of India; AIR 1969 SC 674.
70
State of Punjab v. Geeta Iron and Brass Works Ltd.; AIR 1978 SC 1608.
71
Salem Advocate Bar Association, Tamil Nadu v. Union of India; AIR 2005 SC 3353

Page | 39
 (1) Where it appears to the court that there exist elements of a settlement which may be
acceptable to the parties, the court shall formulate the terms of settlement and give them to
the parties for their observations and after receiving the observations of the parties, the
court may reformulate the terms of a possible settlement and refer the same for,
(a) arbitration;
(b) conciliation;
(c) judicial settlement including settlement through Lok Adalat; or
(d) mediation.

(2) Where a dispute has been referred –

(a) for arbitration or conciliation, the provisions of the Arbitration and
Conciliation Act, 1996 (26 of 1996) shall apply as if the proceedings for
arbitration or conciliation were referred for settlement under the provisions of
that Act.
(b) to Lok Adalat, the court shall refer the same to the Lok Adalat in accordance
with the provisions of sub-section (1) of Section 20 of the Legal Services
Authorities Act, 1987 (39 of 1987) and all other provisions of that Act shall
apply in respect of the dispute so referred to the Lok Adalat.
(c) for judicial settlement, the court shall refer the same to a suitable institution or
person and such institution or person shall be deemed to be a Lok Adalat and
all the provisions of the Legal Services Authorities Act, 1987 (39 of 1987) shall
apply as if the dispute were referred to a Lok Adalat under the provisions of
that Act.
(d) for mediation, the court shall effect a compromise between the parties and shall
follow such procedure as may be prescribed.”

The Supreme Court, in order to correct the draftsman’s error, has held that the definitions of
“judicial settlement” and “mediation” in clauses (c) & (d) of Sec. 89(2), CPC shall have to be
interchanged as follows:72

72
Afcons Infrastructure and others v. Cherian Varkey Construction Company Pvt. Ltd. and others, (2010) 8 SCC 24.

Page | 40
 (c) for “mediation”, the court shall refer the same to a suitable institution or person
and such institution or person shall be Page10 deemed to be a Lok Adalat and all
the provisions of the Legal Services Authorities Act, 1987 (39 of 1987) shall apply
as if the dispute were referred to a Lok Adalat under the provisions of that Act.

(d) for “judicial settlement”, the court shall effect a compromise between the
parties and shall follow such procedure as may be prescribed.

ORDER 10 RULE 1-A

Order 10 Rule 1-A deals with direction of the court to opt for any one mode of alternative dispute
resolution.

According to Order 10 Rule1-A, “after recording the admissions and denials, the court shall direct
the parties to the suit to opt either mode of the settlement outside the court as specified in sub-
section (1) of Section 89. On the option of the parties, the court shall fix the date of appearance
before such forum or authority as may be opted by the parties.”

ORDER 10 RULE 1-B

Order 10 Rule1-B deals with appearance before the conciliatory forum or authority.

According to Order 10 Rule1-B, “where a suit is referred under Rule 1-A, the parties shall appear
before such forum or authority for conciliation of the suit.”

ORDER 10 RULE 1-C

Order 10 Rule 1-C deals with Appearance before the court consequent to the failure of efforts of
conciliation.

According to Order 10 Rule 1-C, where a suit is referred under Rule 1-A and the presiding officer
of conciliation forum or authority is satisfied that it would not be proper in the interest of justice
to proceed with the matter further, then, it shall refer the matter again to the court and direct the
parties to appear before the court on the date fixed by it.”

Section 89, CPC confers the jurisdiction on the court to refer a dispute to an ADR process whereas
Rules 1-A to 1-C of Order X lays down the manner in which the jurisdiction is to be exercised by
the Court. The scheme is that the court explains the choices available regarding ADR process to

Page | 41
the parties, permit them to opt for a process by consensus, and if there is no consensus, proceeds
to choose the process.

1.7 CASES UNSUITABLE AND SUITABLE FOR ADR PROCESSES

In Afcons Infrastructure and others v. Cherian Varkey Construction Company Pvt. Ltd. and
others73 case, the Supreme Court of India has observed that certain categories of cases, having
regard to their nature, are normally considered to be not suitable or suitable for ADR Processes.

1.7.1 CASES UNSUITABLE FOR ADR PROCESSES

(1) Representative suits under order 1 Rule 8 CPC

(2) Dispute relating to Election to Public Offices (excluding disputes between two groups
regarding management of Societies, Clubs, Association etc.)
(3) Cases involving grant of authority by the Court after enquiry for example, suits for grant
of probate or letter of administration.
(4) Cases involving serious and specific allegations of fraud, fabrication of documents,
forgery, impersonation, coercion, etc.
(5) Cases requiring protection of courts for example, claims against minors, deities and
mentally challenged and suits for declaration of title against the Government.
(6) Cases involving prosecution for criminal offences.

1.7.2 CASES SUITABLE FOR ADR PROCESSES

Except the excluded category of cases, all other suits and cases of civil matters in particular, the
following cases are normally considered to be suitable for A.D.R. processes.

(1) All cases relating to trade, commerce and contracts (including all money cases);
➢ disputes arising out of contracts (including all money claims).
➢ disputes relating to specific performance.
➢ disputes between suppliers and customers.
➢ disputes between bankers and customers.
➢ disputes between developers/builders and customers.

73
AIR (2010) 8 SCC 24.

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 ➢ disputes between landlords and tenants or licensors and licensees.
➢ disputes between insurer and insured.
(2) All cases arising from strained or soured relationships, including
➢ disputes relating to matrimonial causes, maintenance, custody of children.
➢ disputes relating to partition/division among family members, coparceners, co-
owners; and
➢ disputes relating to partnership among partners.
(3) All cases where there is a need for continuation of the pre-existing relationship in spite of
the disputes, including
➢ disputes between neighbours (relating to easementary rights, encroachments,
nuisance, etc.).
➢ disputes between employers and employees.
➢ disputes among members of societies or associations or apartment owners or
associations.
(4) All cases relating to tortious liability, including claims for compensation in motor accidents
or other accidents.
(5) All consumer disputes, including where a trader/supplier/manufacturer/service provider is
keen to maintain his business/professional reputation and credibility or product popularity.

The Supreme Court has further observed that the above lists of “suitable” and “unsuitable”
categorization of cases are illustrative and not exhaustive.

1.8 APPROPRIATE STAGE FOR REFERENCE TO ADR PROCESS

The appropriate stage for considering reference to ADR processes is after the pleadings are
complete and before framing the issues. But nothing prevents the court from resorting to S. 89
even after framing issues. But once evidence is commenced, the court will be reluctant to refer the
matter to the ADR processes because if the reference is made at the stage when the evidence has
started, it may become a tool for protracting the trial. In family disputes or matrimonial matters,
the ideal stage for mediation will be immediately after service of notice on respondent and before
the respondent files objections or written statement because in such cases the relationship becomes
hostile on account of various allegations in the petition and the hostility will be further aggravated
by the counter allegations made in the objections or written statement.

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1.9 CONSENT OF PARTIES FOR REFERRING THE MATTER TO ADR
PROCESSES

The consent of all the parties to the suit is necessary for referring the case for arbitration under
section 89, CPC. The court exercising power under section 89, CPC cannot refer a suit to
arbitration unless all the parties to the suit agree to such reference.

The Supreme Court has observed that where there is no pre-existing arbitration agreement, the
parties to the suit can agree for arbitration by means of a joint application or joint affidavit before
the court or by record of the agreement by the court in the order sheet signed by the parties.
Similarly, the consent of all the parties to the suit is necessary for referring the case for conciliation
under section 89, CPC (if the parties are not agreeable for arbitration). If the parties are not
agreeable for either arbitration or conciliation, the court has to consider which of the three other
ADR Processes (Lok Adalat, Mediation and Judicial Settlement) is suitable for reference. In
Afton’s case, the Supreme Court has observed that three ADR Processes – Lok Adalat, Mediation
and Judicial Settlement do not require the consent of parties for reference but the court has to use
its discretion in choosing the ADR Process judiciously, keeping in view the nature of disputes,
interests of parties and expedition in dispute resolution. However, absence of consent for reference
does not affect the voluntary nature of the mechanism of mediation as the parties still retain the
freedom to agree or not to agree for the mediation settlement.

1.10: GENERAL GUIDELINES

In Afcons Infrastructure and others v. Cherian Varkey Construction Company Pvt. Ltd. and
others74, the Supreme Court has given general guidelines regarding the following issues relating
to settlement by ADR methods: -

(A) PROCEDURE TO BE ADOPTED BY A COURT UNDER SEC. 89, CPC:

(1) When the pleadings are complete and before framing the issues, the court shall fix a date for
preliminary hearing and appearance of parties, to know about facts of the case and nature of the
dispute between the parties.

74
AIR (2010) 8 SCC 24.

Page | 44
(2) The court should first consider whether the case falls within the excluded category of cases
which are unsuitable for ADR processes. If the court finds that the case falls under any excluded
category, it should record a brief order mentioning the nature of the case and why it is not fit for
reference to ADR Processes. In such cases, the court will proceed with framing of issues

and trial.

(3) In other cases (which can be referred to ADR Process) the court will explain the choice of five
ADR Mechanisms to the parties to enable them to exercise their option.

(4) The court should first ascertain whether the parties are willing for arbitration. The court should
inform the parties that: -

(a) Arbitration is an adjudicatory process by a chosen forum and reference to arbitration will
permanently take the suit outside the ambit of the court.

(b) The cost of arbitration will have to be borne by the parties. It is significant to note that
matter should be referred to the arbitration only if both the parties agree for arbitration.

(5) If the parties do not agree for arbitration, the court should ascertain whether the parties are
agreeable for reference to conciliation. If the parties agree, the court can refer the matter to
conciliation in accordance with Section 64 of the Arbitration and Conciliation Act, 1996.

(6) The matters referred to arbitration or conciliation will be governed by the provisions of the
Arbitration and Conciliation Act.

(7) If the parties do not agree for arbitration or conciliation, the court should consider the
preferences or options of the parties and refer the matter to any of the other ADR Processes; i.e.-

(a) Lok Adalat

(b) Mediation, and

(c) Judicial Settlement.

(8) In simple cases relating to the matters where legal principles are clearly settled and there is no
personal animosity between the parties, (as in the case of motor accident claims) the court may
refer the matter to Lok Adalat.

Page | 45
(9) Complicated cases which may require several rounds of negotiations, may be referred to
mediation. Where the parties opt for the guidance of a Judge to arrive at a settlement, the court
may refer the matter to another Judge for attempting settlement.

(10) If the reference to the ADR Process fails, the court shall proceed with the hearing of the suit.

(11) If there is a settlement, the court shall examine settlement and make a decree in terms of it,
keeping in view the principles of Order 23, Rule 3, CPC.

(12) If the settlement includes disputes which are not subject matter of the suit, the court may
direct that the same will be governed by: -

(a) S. 74 of the Arbitration and Conciliation Act, if it is a conciliation or settlement, or

(b) S. 21 of the Legal Services Authority Act, 1987 (if it is a settlement by a Lok Adalat
or by Mediation)

(B) CONSEQUENTIAL ASPECTS

(1) If the reference is to arbitration or conciliation, the court has to record that the reference is by
mutual consent and nothing further is required to be mentioned in the order sheet.

(2) If the reference is to any other ADR Process, the court should briefly record that having regard
to the nature of the dispute, the case deserves to be referred to Lok Adalat, or Mediation or Judicial
Settlement.

(C) KEEPING TRACK OF THE MATTER

(1) In order to avoid delay of trial as also to prevent any misuse of the provisions for reference to
ADR, the courts should keep track of the matter. If the court refers the matter to ADR processes,
other than arbitration, it should keep track of the matter by fixing the date of hearing for ADR
report. The date for a week or so may be fixed. Normally, the period allotted for the ADR Processes
should not exceed two months, but the same may be extended in exceptional cases depending upon
the availability of the alternative forum and the nature of the case etc.

(2) Normally the court should not send the original record of the case when referring the matter to
an ADR forum (for this purpose, when pleadings are filed, the court may insist upon filing of an
extra copy).

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(3) Regarding the time limit for completion of mediation, rule 19 of the Uttar Pradesh Civil
Procedure Mediation Rules, 2009 provides as under: -

“on the expiry of 60 days from the date fixed for the first appearance of the parties
before the mediator, the mediation shall stand terminated, unless the court, which referred the
matter, either Suo moto or upon request by the mediator or any of the parties, and upon hearing all
the parties, is of the view that extension of time is necessary or may be useful, but such extension,
shall not be beyond a further period of 30 days.

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 2. KINDS OF ALTERNATE DISPUTE REDRESSAL

Section 89 of the Code of Civil Procedure C refers to five types of Alternate Dispute Redressal
mechanisms. They are as follows;

(1) Arbitration
(2) Conciliation
(3) Mediation
(4) Judicial Settlement
(5) Lok Adalat

2.1 ARBITRATION

Although arbitration is used broadly to describe a method of alternative dispute resolution,

arbitrations themselves can take many forms. In almost any arbitration, however, the complaining
party will send the opposing party a notice of their intent to arbitrate a dispute, outlining the basis
for the dispute. There is typically a period for response, followed by the selection of arbitrators,
and then the hearing itself.

Arbitrations are sometimes presided over by a panel of arbitrators, as opposed to just one arbitrator.
Regardless, the selection process is typically outlined either in the contract, but typically some
type of input from both parties is requested.

The rules of arbitration themselves can also vary widely. In many circumstances, a contract will
specify the rules and timelines that will be applied in a dispute. These are typically more
streamlined but parties should refer to their contract or the rules specified therein for the exact
rules that govern their dispute. An attorney specializing in alternative dispute resolution can also
provide valuable assistance in such matters.

In general, the arbitration process involves many of the same components as a courtroom trial. For
example, evidence is presented, arguments are made, witnesses are called and questioned by the
parties, and so forth. However, many of these facets are simplified or limited so as to make the
process quicker than the typical courtroom trial.

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Following the required hearings, an arbitrator or a panel of arbitrators will usually deliver a ruling
to the parties within a specific period of time. Depending on the type of arbitration, this ruling may
be final, or there may be options to appeal.

Arbitration is an adjudicatory process and remaining four ADR processes are negotiable in nature
(non-adjudicatory processes). Arbitration proceedings in India are governed by the Arbitration &
Conciliation Act, 1996. The Arbitration and Conciliation Act covers both international and
domestic arbitration, i.e., where at least one party is not an Indian national and where both parties
are Indian nationals, respectively. For a reference to arbitration under section 89, CPC, there must
be the consent of all the parties to the suit. The parties to the suit can agree for arbitration by means
of a joint memo, joint application or joint affidavits before court or the court may record such
agreement in the order sheet signed by the parties. On a reference to the arbitration the case will
go outside the stream of the court permanently and will not come back to the court. Parties to the
suit may agree for one arbitrator or each side may select its arbitrator and then two arbitrators
select the third one. The award of the arbitrators is binding on the parties and is enforceable as a
decree of the court in view of section 36 of the Arbitration and Conciliation Act, 1996. If any
settlement is arrived at in the arbitration proceedings then the award passed on the basis of such
settlement will have the same status and effect as any other arbitral award as per section 30 of the
Arbitration and Conciliation Act.

‘Arbitration’ is a private process, as the initiation of arbitration is under an agreement. It may be

less adversarial, less formal, and flexible with the adoption of simpler procedures. Arbitration does
not follow any formal rules of evidence. The findings are limited to some documents, with no
interrogatories or depositions. Generally, the disputed parties select the Adjudicators. Adjudicators
are selected based on their qualification and expertise. Their decisions do not formally set
precedents to any other arbitration. Vacation of award is generally limited to arbitrator's
misconduct and bias. Arbitrators normally are empowered to grant compensatory damages
including provisional relief. All these factors usually reduced costs and makes way for delivery of
quick justice.75 The process of ‘Conciliation’ and ‘Mediation’ is distinguishable from Arbitration
as the disputed party’s willingness to submit to mediation or conciliation does not bind them to

75
Michale Pryles , Dispute Resolution in Asia , Second Edition,123-153.

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accept the recommendation of the conciliation or mediator but an arbitrator’s award, by contrast,
is binding on the parties.76

2.1.1 THE ADVANTAGES OF ARBITRATION OVER LITIGATION

From the study of the provisions of The Arbitration and Conciliation Act, 1996 and the judicial
reviews of the Courts under the said Act of 1996, it is evident that, arbitration offers definite
advantages that litigation from its very nature can never provide. Courts have always adopted a
conservative approach to problems. The Courts of law are put into a straight jacket as it has to
follow fixed procedure and fixed rules of evidence. Arbitration, on the other hand, is more
informal. The Evidence Act is not applicable to arbitration. The Civil Procedure Code has no
application. The arbitrator need only proceed in a manner conforming to justice, equity and good
conscience. Arbitrator is not hunched in by any formulated rules. One of the major advantages of
arbitration is that an expert arbitral tribunal can be selected considering the field of dispute, so
much so that the entire procedure can be conducted without the intervention of expert lawyers,
with major gains in speed and economy. Thus, many disputes as to quality in commodity trades,
many disputes arising out of construction contract etc. can be settled through arbitration in a speedy
manner at lesser cost and more quickly than through Courts. The relevance of arbitration, its
importance and its needs can never be over-emphasized. The rapid and phenomenal growth of
commerce and industry and the complex and varied problems thrown out by them can find solution
only through arbitration.

A final and enforceable decision can generally be obtained only by recourse to the Courts or by
arbitration. In arbitration, since both the parties agree to the terms and conditions, they are bound
by the decisions. It depends ultimately on the goodwill and cooperation of the parties. Over 134
countries have signed the 1958 United Nations Convention on the Recognition and Enforcement
of Foreign Arbitral Awards, known as the New York Convention. The Convention facilitates
enforcement of awards in all contracting states and there by provides international recognition of
the arbitral awards. On studying the provisions of the Arbitration and Conciliation Act, 1996 it can
be said that, in arbitral proceedings, parties can place themselves on an equal footing in five key
respects viz. place of arbitration, language used, procedures or rules of law applied, nationality

76
Robert Merkin , Arbitration Law,2004,p 168,para 6.6.

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and legal representation. Arbitration may take place in any country, in any language and with
arbitrators of any nationality. With this flexibility, it is generally possible to structure a neutral
procedure offering no undue advantage to any party.

In the cases of redressal of disputes through Court of law or judicial systems, do not allow the
parties to a dispute to choose their own judges. However, arbitration offers the parties the unique
opportunity to designate persons of their choice as arbitrators, provided they are independent. This
enables the parties to have their disputes resolved by people who have specialised competence in
the relevant field. Arbitration is faster and less expensive than litigation in the Courts. Although a
complex international dispute may sometimes take a great deal of time and money to resolve even
by arbitration, the limited scope for challenge against arbitral awards, as compared with Court
judgments, offers a clear advantage. Above all, it helps to ensure that the parties will not
subsequently be entangled in a prolonged and costly series of appeals. Furthermore, arbitration
offers the parties the flexibility to set up proceedings that can be conducted as quickly and
economically as the circumstances allow. The arbitration hearings are not public, and only the
parties themselves receive copies of the awards. This is of great significance in commercially
sensitive disputes. Thus, the disputants often seek to resolve their disputes through arbitration
because of such perceived potential advantages over judicial proceedings.

While the Arbitration and Conciliation Act, 1996 was not intended to supplant the tried and tested
judicial system with the non-formal private arbitration or the purely consensual conciliation
mechanisms. The new law certainly ushered in an era of privatisation of the hitherto State
monopoly over dispute settlement procedures and institutions in conformity with the global rend
of liberalisation of economic policies, privatisation of industry and globalisation of markets.

2.2 CONCILIATION

Conciliation is a process by which resolution of disputes is achieved by compromise or voluntary

agreement. 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. So far as
Department of Legal Affairs is concerned, this Department provides annual recurring Grants-in-
aid to National Legal Services Authority (NALSA) which is a statutory body.

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For a reference to conciliation also the consent of the parties to the dispute is a must. If both the
parties do not agree for conciliation, there can be no conciliation. As a consequence, the court
cannot refer the parties to the conciliation u/s. 89, CPC in the absence of consent by all the parties.
When a matter is referred to conciliation, it does not go outside the stream of the court and if the
conciliation fails, the matter is returned to court for hearing of the case. The ADR Process of
Conciliation is also governed by the Arbitration and Conciliation Act.

If a matter is settled through conciliation, then according to S. 74 of the Arbitration and

Conciliation Act, such settlement will have the same status and effect as an arbitral award. Thus,
such settlement is enforceable as a decree of the court as per section 36 of the Arbitration and
Conciliation Act.

2.3 MEDIATION

Mediation is a voluntary party centered and structured negotiation process which is conducted by
neutral third party with his specialized communication skills and negotiation techniques. In order
to emphasize the need of mediation in the process of resolving the disputes, it is significant to
know the characteristic features of this method. At the simplest mediation is an informal, voluntary
process in which an impartial person, trained in facilitation and negotiation techniques, helps the
parties to reach at a mutually acceptable resolution.77 It can also be defined as a process of
resolving dispute by which the ‘mediator’ a neutral person, works with the parties to a dispute to
bring them to an agreement that they can all accept.78 It is thus, impracticable to provide a final
definition of the process of mediation.

According to Christopher W. Moore, “Mediation is essentially a negotiation that includes a third

party who is knowledgeable in effective negotiation procedures and can help people in conflict to
coordinate their activities and to be more effective in their bargaining. Mediation is an extension
of the negotiation process in that it involves extending the bargaining into a new format and using
a mediator who contributes new variables and dynamics to the interaction of the disputant.”

77
Brown and Marriott, Alternative Dispute Redressal methods Principles and Practice, 2nd edn , 1999,p 5,para 1-
017,6-7,1-022
78
R. Charlton, Dispute Resolution Guide book,Law Book Company,Sydney,2000 (p-8).

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The process of mediation is voluntary because the parties have the final say regarding the option
as to whether to get their dispute settled through mediation. They also retain the right to decide the
terms of settlement of dispute. Even if the dispute is required to be settled through mediation under
the contract or statute or if the court has referred a case for mediation, the parties have the right to
decide as to whether to settle the dispute and the term of settlement. Thus, the settlement through
mediation process results in a settlement created by the parties themselves and it is therefore
acceptable to them. Any party is at liberty to withdraw from the mediation proceedings, at any
stage and without assigning any reason, before its termination.

Parties have direct and active participation in the process of mediation for resolution of their
dispute. They play the key role and are actively encouraged to explain the background of the
dispute, identify issues and underlying interests, provide options for agreement and make a final
decision regarding the settlement. Thus, the mediation is a party centered negotiation process.

The mediation process is itself a structured and formalised process which has clearly identifiable
stages with, of course the degree of flexibility. The mediation process is informal in nature which
signifies that this mechanism of dispute resolution is not governed by the rules of evidence and
procedure. But at the same time, it is not a casual process either, because as mentioned above, it
has identifiable stages.

Mediation is broadly focused on the point of facts, law and underlying causes of the dispute which
includes underlying interests of the parties. Such interests of parties may be personal, commercial
or social and may be related to family or community.

In the process of meditation, the mediator assists the parties to bring about a resolution to their
dispute. He does not adjudicate a dispute by imposing a decision upon the parties rather he works
together with parties to facilitate the dispute resolution. The job of mediator is of a facilitator
because he manages the interaction between the parties, encourages and promotes communication
between them and manages interruption and outbursts by them so as to facilitate and motivate
them to arrive at a settlement which is acceptable to the parties.

Mediation is a negotiatory and voluntary process where a neutral third party assists the parties in
bringing about an amicable settlement of their dispute. Parties are the focal point of the mediation
process; their active and direct participation is encouraged in resolution of their dispute. The goal

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of mediation is to find a solution which is acceptable to all the parties and which adequately and
legitimately satisfies the needs, desires and interests of the parties. The mediator remaining
impartial, works together with the parties to facilitate the dispute resolution and for this purpose,
the mediator uses specialized communication skills and negotiation techniques.

Mediation is a private process which is confidential in nature. The settlement reached out in a case
referred for mediation, is required to be reduced in writing and after getting it signed by the parties,
it is filed in the court for appropriate order. In case the mediation fails, the report of the mediator
does not mention the reason for the failure but it would only say “not settled”.

Keeping in view the scope and significance of mediation and recognizing the immense possibility
of the mediation process in the dispute resolution, Hon’ble Allahabad High Court took initiative
to inaugurate on October 06, 2006, the Allahabad High Court Mediation & Conciliation Centre
(AHCMCC). This center became functional on October 16, 2006. As a significant step towards
mediation movement at District Level, as many as 11 Mediation Centers in the largest Districts of
Uttar Pradesh became operational on February 01, 2009 and now Mediation Centers have been
established and made functional in all the Sessions Divisions across the State.

2.4 JUDICIAL SETTLEMENT

The process of judicial settlement is much in vogue in the U.S. It refers to a settlement of a civil
case with the help of a judge who is not assigned the adjudication of such a case.

In Afcon’s case, the Supreme Court in order to correct the draftsmen’s error, has held that the
definitions of “judicial settlement” and “mediation” in clauses (c) & (d) of Section 89(2), CPC
shall have to be interchanged as follows:-

(c) for “mediation”, the court shall refer the same to a suitable institution or person and such
institution or person shall be deemed to be a Lok Adalat and all the provisions of the Legal Services
Authorities Act, 1987 shall apply as if the dispute were referred to a Lok Adalat under the
provisions of that Act;

(d) for “judicial settlement”, the court shall effect a compromise between the parties and shall
follow such procedure as may be prescribed.

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2.5 LOK ADALAT

The first Lok Adalat was organized on an experimental basis on March 14, 1982 at Junagarh in
the State of Gujarat. The Legal Services Authorities Act, 1987 has provided a statutory status to
the Lok Adalat for the purpose of facilitating the smooth functioning of the scheme of organizing
the Lok Adalat and also for providing legal services and free legal aid to the eligible persons,
different legal services institutions have been created and made functional across the country, right
from the Taluka to the National level.

Under the provisions of the Legal Services Authorities Act, 1987 and the amendments carried out
in the year 2002, the Lok Adalats have been established at three levels, viz. Regular Lok Adalats,
Permanent Lok Adalats under Section 19 of the Act and Permanent Lok Adalats for 6 Specific
Public Utility Services created under section 22B of the Act of 1987.

Where a case is referred for settlement through Lok Adalat, there are two options available to it: -
(a) if the compromise or settlement is arrived at, then to make an award in terms of such
compromise or settlement; or

(b) if there is no compromise or settlement, then to return the record to the court with failure
report. There can be no third hybrid order by the Lok Adalat containing directions to the parties.
There cannot be an award when there is no settlement. Nor can there be any directions by the Lok
Adalat determining the rights, obligations or title of parties, when there is no settlement. The
settlement should precede the award and not vice versa.79

79
B.P. Moideen Sevamandir v. A.M. Kutty Hassan, AIR 2008 SC 1123; State of Punjab v. Jalour Singh, (2008) 2
SCC 660.

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 3. THE ADVANTAGES AND DISADVANTAGES OF ADR

Wide range of process are defined as alternative dispute redressal process often, dispute resolution
process that are alternative to the adjudication through Court proceedings are referred to as
alternative dispute resolution methods. These methods usually involve a third party referred to as
neutral, a skilled helper who either assists the parties in a dispute or conflict to reach at a decision
by agreement or facilitates in arriving at a solution to the problem between the party to the dispute.

The alternative dispute resolution mechanisms by the very methodology used in it can preserve
and enhance personal and business relationships that might otherwise be damaged by the
adversarial process. The method has strength because it yields enforceable decisions, and is backed
by a judicial framework, which, in the last resort, can call upon the coercive powers of the State.
It is also flexible because it allows the contestants to choose procedures, which fit the nature of the
dispute and the business context in which it occurs. The process of alternative dispute resolution
mechanisms is facilitative, advisory and determinative in nature.

Distinct advantages of alternative dispute redressal methods over traditional Court proceedings are
its procedural flexibility. It can be conducted at any time, and in any manner to which the parties
agree. It may be as casual as a discussion around a conference table or as structured as a private
Court trial. Also, unlike the Courts, the parties have the freedom to choose the applicable law, a
neutral party to act as Arbitrator or as the Conciliator in their dispute, on such days and places
convenient to them and fix the fees payable to the neutral party. Alternative dispute redressal
methods being a private process between the disputed parties and the arbitrator, mediator or the
conciliator it offers confidentiality, which is generally not available in Court proceedings. While a
Court procedure results in a win-lose situation for the disputants, in the alternative dispute redressal
methods such as Mediation or Conciliation, it is a win-win situation for the disputants because the
solution to the dispute emerges with the consent of the parties.

Some of the disadvantages that are found on the methods of alternative methods of dispute
redressal are that, the arbitrators are not subject to overturn on appeal may be more likely to rule
according to their personal ideals. Large corporations may exert inappropriate influence in
consumer disputes, pressuring arbitrators to decide in their favor or lose future business. The

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burden of paying remuneration for the arbitrators is upon the parties to the dispute, which may
sometime be felt as a burden by the disputants.

The parties can cure these difficulties by prudently entering into the contract and deciding the
terms of referring the dispute, before choosing the alternative dispute redressal forum. The
advantages of alternative dispute redressal methods are so prominent that there is global need and
trend to adopt alternative dispute redressal methods to resolve the dispute as it is quick as well as
cheaper than that of adjudication through Courts of Law. The characteristic features of individual
alternative dispute resolution methods are dealt in detail in the preceding chapters of this study.
As argued by the father of our Nation Mahatma Gandhi, the role of law, is to unite the parties and
not to riven them.80 As compared to Court procedures, considerable time and money can be saved
in solving the disputes through alternative dispute redressal procedures 81 , which can help in
reducing the workload of regular Courts and in long run can pave way in solving the problem of
judicial arrears before the Courts of law.

3.1 THE SCOPE OF ALTERNATIVE DISPUTE REDRESSAL METHODS

Delay, in the justice delivery system with respect to both the civil or criminal justice is a disturbing
feature in the Courts of law. Alternative and consensual means of dispute resolution are needed to
reduce the backlog and delay in civil justice system. In the criminal justice system, the criminal
offences are regarded as a breach of State’s command. The State, as a prosecuting party, cannot
resort to arbitration, mediation and conciliation modes to reduce the backlog of criminal cases.
Nevertheless, a device for compounding is allowed under Section320 of the Criminal Procedure
Code. This section is limited with respect to the minor and domestic offences, where by fulfilling
the ends of criminal justice and stabilizing orderliness in the society. For other crimes, the formal
legal adjudication is the sole means and last resort. In criminal trials the Supreme Court of India
has laid down that, for fairness in the criminal trial no procedure can be regarded as fair and just
if it does not ensure a reasonable quick trial. Expediency and fairness of trial are held by the
Supreme Court as integral part of Fundamental right to life and personal liberty enunciated in
Article 21 of the constitution82. The litigation in this 21st Century needs active intervention of the

80
Mahatma Gandhi, The story of my experiments with truth (1962), p. 258.
81
Hiram Chodosh, Global Justice Reform: A Comparative Methodology, (2005)
82
Hussainara Khatoon Vs State of Bihar ,1979 CrLJ 1036

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judges, mediators, conciliators and arbitrators to achieve speedy disposal of pending cases and
reduce expenditure. In India, The Arbitration and Conciliation Act, 1996 provides for legislative
hold to the methods of Arbitration and Conciliation as, alternative forms of resolving the disputes.
The Indian Supreme Court has interpreted that “social justice includes ‘legal justice,’ which means
that the system of administration of justice must provide a cheap, expeditious and effective
instrument for realization of justice by all section of the people irrespective of their social or
economic position or their financial resources.”83

The time has come for the public at large to understand and adopt the current fact that, there is a
global trend of shifting towards alternative methods of dispute redressal mechanisms like
arbitration, conciliation, negotiation and mediation from that of the predominately-adopted form
of adjudication of disputes by the Courts of law. A settlement agreement arrived at among the
disputants has the same status and effect as if it is an arbitral award on agreed terms and it is final
and binding on them. This chapter dealt with the conceptual analysis of the terms dispute, the
problem of judicial arrears and backlog of cases, different dispute resolution mechanisms and so
forth. To tackle with problems of judicial delays and arrears, all the Courts and members of the
Bar as well as the litigants will have to realize that, there exists a problem of judicial delays and
arrears and the problem is to be dealt with efficiency and fast track manner.

83
Babu Vs. Raghunathji AIR 1976 SC 1734 ;

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 4. THE ARBITRATION AND CONCILIATION ACT, 1996

With a view to give effect the law relating to domestic arbitration, international commercial
arbitration, enforcement of foreign awards and to define the law relating to conciliation, the
Arbitration and Conciliation Bill 199584 was introduced in the Rajya Sabha on 16th May 1995.
The Arbitration and Conciliation Act, 1996 received the Presidential assent and was brought into
force from 16 August 1996, the Act being a continuation of the Ordinance is deemed to have been
effective from 25 January 1996 when the first Ordinance came into force. The long title of this Act
replicates that, the object of the Act is to consolidate and amend the law relating to domestic
arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also
to define the law relating to conciliation and for matters connected therewith or incidental thereto.

The Arbitration and Conciliation Act, 1996 was passed on the basis of the UNCITRAL Model
Law on International Commercial Arbitration, 1985 and UNCITRAL Conciliation Rules, 1980. It
had been recommended by General Assembly of the United Nations that all countries should give
due consideration to the said Model Law in view of the desirability of uniformity of the law of
arbitral procedures and the specific needs of the international commercial arbitration practices. It
has also recommended the use of the said Rules in cases where a dispute arises in the context of
international commercial relations and the parties seek on amicable settlement of that dispute by
recourse to conciliation. These rules are believed to make a significant contribution to the
establishment of a unified legal framework for the fair and efficient settlement of disputes arising
in international commercial relations. These objectives have been laid down in the Preamble to the
Arbitration and Conciliation Act, 1996.

4.1 SALIENT FEATURES OF THE ARBITRATION AND CONCILIATION

ACT, 1996

The Arbitration and Conciliation Act, 1996 lays considerable stress on the party autonomy. The
party to the dispute can decide the number of arbitrators, the rules of procedure, and the rules
governing the substance of the dispute, the place of arbitration and the language of the arbitrators.
The major advantage of the new law is that, it facilitates quick resolution of the commercial
disputes and speeds up arbitration procedure by minimizing intervention by the Court. Under the

84
Bill No.30 of 1995.

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new law, a Court may provide certain interim measures of protection at a party’s request and may
offer assistance in taking evidence or recovering documents at the request of the arbitral tribunal
or a party to the reference. The award of an arbitrator is itself enforceable as a decree of Court and
is not required to be made a “Rule of Court”. The arbitrator has to give reasons for his award.
However, no reasons need to be given if the disputant parties agree beforehand to such a thing. In
Babar Ali Vs Union of India case85 it was held by Supreme Court that, The Arbitration and
Conciliation Act,1996 is neither unconstitutional nor in any way offends the basic structure of the
Constitution of India, as Judicial review is available for challenging the award in accordance with
the procedure laid down therein. The time and manner of the judicial scrutiny can be legitimately
laid down by the Act passed by the parliament.

4.2 PREAMBLE

Preamble to the 1996 Act is an introductory, prefatory and an explanatory note about the sections
namely that of the Arbitration and Conciliation Act, 1996. United Nations Commission on
International Trade Law (UNCITRAL) adopted the UNCITRAL Model Law on International
Commercial Arbitration in 1985. Thereby, the General Assembly of the United Nations
recommended that all countries give due consideration to the said Model Law, in view of the
desirability of uniformity of the law of arbitral procedures and the specific needs of international
commercial arbitration practice. The United Nations Commission on International Trade Law has
adopted the UNCITRAL Conciliation Rules in 1980. Thereby, the General Assembly of the United
Nations recommended the use of the said Rules in cases where a dispute arises in the context of
international commercial relations and the parties seek an amicable settlement of that dispute by
recourse to conciliation. The said Model Law and Rules has a significant contribution to the
establishment of a unified legal framework for the fair and efficient settlement of disputes arising
in international commercial relations.

Based on the above facts the Parliament of India considered that it was expedient to make law with
respect to arbitration and conciliation, taking into account the aforesaid Model Law and Rules in
the forty-seventh year of the Republic. The Arbitration and Conciliation Act, 1996 repealed the
Arbitration Act of 1940, the Arbitration (Protocol and Convention) Act of 1937 and the Foreign

85
(2000) 2 SCC 178

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Awards (Recognition and Enforcement) Act of 1961. Supreme Court in Fuerst Day Lawson Ltd
Vs Jindal Exports Ltd86 held that the provisions of the Arbitration and Conciliation Act, 1996 have
to be interpreted and construed independent to that the Arbitration and Conciliation Act, 1940. In
order to get any further help in construing the provisions, it is more relevant to refer to the United
Nations Commission on International Trade Law. The Arbitration and Conciliation Act, 1996 is
divided into following parts, Part I deals with the “Domestic arbitration”. Part II deals with the
“Enforcement of foreign awards”. Part III deals with the “Conciliation procedures” and Part IV of
the Act deals with the “Supplementary provisions”. Act has three Schedules namely, The First
Schedule on the Convention on recognition and enforcement of foreign arbitral award as per New
York convention, the Second Schedule on the Protocol on Arbitration clauses and Third Schedule
on the convention on the execution of foreign arbitral awards as per Geneva Convention. In
Konkan Railways Corp. Ltd. V. Mehul Construction Co case,87 Supreme Court of India stated that
the Arbitration and Conciliation Act, 1996 was introduced in order to attract the ‘international
mercantile community’ and at the time of interpretation, regard must be had to the objectives
behind the enactment of the Act.

4.3 ARBITRATION PROVISIONS

Under the Arbitration and Conciliation Act, 1996; “arbitration” means any arbitration whether or
not administered by a permanent arbitral institution. This has been discussed in Section 2 of the
Act, along with other definitions, which are peculiar to the Act. Under the Act, written
communication is delivered when it reaches the other party’s place of business, habitual residence
or mailing address. If such an address cannot be traced recorded attempt to find out and mail to
the old address is sufficient (Section 3). In the event that either of the parties know of a provision
from which either parties derogate, or any part of the agreement has not been complied with, if no
obligation is raised to such non-compliance, it is taken that the party has given up his right to object
and that right will be waived (Section 4) The extent of Judicial Intervention and Administrative
assistance are discussed in Sections 5 & 6 of the Act.

Part II of the Act deals with Arbitration Agreements. Section 7 defines an arbitration agreement as
“an agreement by the parties to submit to arbitration all or certain disputes which have arisen or

86
A.I.R. 2001 S.C.2293.,and also Sundaram Finance Ltd Vs NEPC India Ltd.AIR 1999 S.C 565.
87
(2000) 7 SCC 201.

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which may arise between them in respect of a defined legal relationship, whether contractual or
not.” An arbitration agreement may be in the form of an arbitration clause in a contract or in the
form of a separate agreement and it shall be in writing.

In case of a judicial application being filed for a dispute between parties who have agreed to
arbitrate, the judicial authority may refer the case to arbitration if he feels and arbitration can take
place even if the issue is pending before the judicial authority (Section 8) The provisions regarding
interim measures are made under Section 9 of the Act.

Part III of the Arbitration and Conciliation Act, 1996 contains provisions regarding the
composition of an Arbitral Tribunal. The parties to an arbitration agreement are free to determine
the number of arbitrators they want and any person, of any nationality may be appointed as the
arbitrator. The parties are also free to decide on the procedure of arbitration. In case of a “three
arbitrator approach” each party nominates an arbitrator and the two said nominees should nominate
a third arbitrator. In case either of the parties fails to nominate an arbitrator or the two nominees
do not appoint a third arbitrator in 30 days the Chief Justice or any other institution may on a
request by either party appoint the arbitrator. Other provisions regarding the appointment of
arbitrators have been discussed at length under Section 11 of the Act.

Under this Act, an arbitrator may be challenged in case there are circumstances, which give rise to
justifiable doubts regarding his independence or impartiality, or if he does not possess the
qualifications agreed to by the parties (Section 12). A party who has appointed the arbitrator may
also challenge him. The parties may freely determine the procedure for arbitration, and in the event
that they do not decide such procedure, the arbitral tribunal relating to the agreement will look into
the challenge and pass an arbitral award. In case this award is also challenged, then the court will
pass a decree (Section 13). Sections 14 and 15 lay down provisions relating to failure or
impossibility to act by the arbitrator and the termination of mandate and substitution of arbitrator
respectively.

Chapter IV of the Arbitration and Conciliation Act, 1996 deals with the jurisdiction of arbitral
tribunals. Section 16 clearly emphasizes that the arbitral tribunal may rule on its own jurisdiction
even with regards to any objection raised on the validity of the arbitration agreement itself – the
reason being that the arbitration clause, a part of the agreement is treated as an independent contract
of its own. A decision by the arbitral tribunal that the contract itself is null and void does not render

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the arbitration clause as invalid. A plea that the arbitral tribunal does not have jurisdiction cannot
be raised later than after submitting the statement of defence and this plea should be submitted as
soon as the matter alleged to be beyond the scope of its authority is raised in the arbitral
proceedings. Interim measures regarding the dispute may be taken at the request of a party unless
otherwise agreed by the parties.

Chapter V deals with the basic conduct of an arbitral proceeding. Section 18 states that there should
be equal treatment of parties and both parties must be given equal opportunity to present the case.
Section 19 lays down that the arbitral tribunal is not bound by the Code of Civil Procedure, 1908
or the Indian Evidence Act, 1872. The parties are free to determine the procedure to be followed
by the arbitral tribunal in the course of proceedings. In the event that no such procedure is
established by the parties, the tribunal may follow any procedure it deems fit. The power of the
arbitral tribunal includes the power to determine the admissibility, relevance, materiality and
weight of any evidence (Section 19). The parties are free to agree upon the place of arbitration or,
if not determined, the power lies with the tribunal. (Section 20) Arbitration proceedings commence
immediately after a dispute is submitted for arbitration, unless agreed upon otherwise. (Section
21) The language preference also lies with the parties, or the tribunal, which may use a language
it thinks fit. All documents submitted and received should be in the language adopted in the
proceedings or must be translated into it (Section 22).

Statements of claim and defence are dealt with under Section 23:

(1) Within the period of time agreed upon by the parties or determined by the arbitral tribunal, the
claimant shall state the facts supporting his claim, the points at issue and the relief or remedy
sought, and the respondent shall state his defence in respect these particulars, unless the parties
have otherwise agreed as to the required elements of those statements.

(2) The parties may submit with their statement all documents they consider to be relevant or may
add a reference to the documents or other evidence they will submit.

(3) Unless otherwise agreed by the parties, either party may amend or supplement his claim or
defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it
inappropriate to allow the amendment or supplement having regard to the delay in making it.

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Section 24 deals with hearing and written proceedings. It states that in the absence of a particular
clause, the arbitral tribunal shall decide whether to carry on the proceedings orally or on the basis
of documents and evidence. It also says that the parties should be given sufficient notice of any
meeting and all documents submitted must be shown to the other party.

Section 25 deals with the default of the party to claim or to respond or to appear for the oral
hearings. In the case of the former, the proceedings are terminated by the arbitral tribunal whereas
in the case of the latter two instances, the proceedings would continue with the document evidence
on hand.

The arbitral tribunal may appoint an expert to seek opinion, to collect information, and to produce
a report backed up by relevant documents unless otherwise agreed by the parties. The parties may
also examine the report, documents with the expert, again unless otherwise agreed to by the parties.
This is dealt in Section 26.

The arbitral tribunal or the party with the approval of the arbitral tribunal may apply to the court
for evidence. The court may order the evidences to be given directly to the arbitral tribunal or it
may furnish details about processes in earlier cases of similar nature. Disregard to this order by
personnel in absenting themselves to attend to the arbitral tribunal or for any other default in
producing the relevant evidence, invites punishment and penalties. Section 27 elaborates on the
summonses and commissions for the submission of witnesses and summonses for submission of
documents.

Making of arbitral award and termination of proceedings are written in the chapter VI. In this
chapter, Section 28 speaks on the rules applicable to the substance of dispute. In other than the
international commercial arbitration, the existing rules of arbitration prevalent at that time are
taken into account. In international commercial arbitrations, the rules designated by the parties as
applicable to the substance of dispute, the substantive law of the countries and not their conflicts;

In the absence of any such specifications, the rules as circumstantially viable and if the parties so
agree, decide ex aequo et bono or as amiable compositeur. In all cases, the terms of the contract
and the trade usages form a ground for decision making by the arbitral tribunal. Emphasizing on
the majority decision of the arbitral tribunal in case there are more than one in the tribunal, Section
29 spells that the presiding arbitrator would decide on the questions of procedure.

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Section 30 elaborates on the settlement, the conciliatory proceedings, the terms agreed on, and if
requested by the party and if there is no objection by the arbitral tribunal, to record and issue an
award on the terms agreed as per Section 31. Section 31 lists the various aspects of, and the
requirements for, the laying down of the terms of the award of settlement, the date and place
specifications, the monetary details, the costs and expenses – everything pertaining to the
arbitration award.

Under Section 32 and 33, termination of proceedings and the corrections to the award (made within
30 days) respectively. The various instances under which the termination of proceedings occurs
be it for having reached a consensus or withdrawal by either party or if the arbitral tribunal finds
it unnecessary to proceed further for reasons substantiated by the tribunal. Once the award is issued
and if there need be any corrections or amendment, and if within 30 days, it has been put forth to
the arbitral tribunal, an amendment to the award could be given as stated in Section 33.

Chapter VII encompasses Section 34, which covers Recourse against Arbitral Award. Recourse to
the court for setting aside the Arbitral award by an application can be made only if the party to the
application furnishes proof of incapacity, lack of proper notice, not being present for the arbitral
proceedings for valid reasons, and if the decisions made are beyond the scope of the submission
to arbitration. Alternatively, if the court finds the subject-matter of the dispute is not capable of
settlement by arbitration under the law, for the time being in force, or if the arbitral award is in
conflict with the public policy of India.

Section 35 and 36 under Chapter VIII deal with Finality and Enforcement of arbitral awards.
Section 35 makes it final and binding on the parties to adhere to the arbitral award and Section 36
gives the arbitral award the power under the code of Civil Procedure, 1908 and in the same manner
as if it were a decree of court. Chapter XI covers Section 37 on Appeals, the instances when appeals
are allowed and it also states that it a noting under this section shall take away any right to appeal
to the Supreme Court. Also, there is no second appeal provision.

The Arbitration and Conciliation Act, 1996 governs the “arbitration procedures” in India. Part-I of
the Arbitration and Conciliation Act, 1996 comprises of 43 sections spread over ten chapters,
making detailed provisions relating to domestic arbitration and International commercial
arbitration held in India under this Act. ‘Arbitration’ means, a process of dispute resolution in
which a neutral third party called arbitrator, renders a decision after a hearing at which both parties

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have an opportunity to be heard.88 Arbitration is a consensual process. It is not a matter of coercion.
No arbitration statute can require parties to arbitrate when they have not agreed to do so. Nor can
it prevent them from excluding certain claims from the scope of arbitration agreement in any
manner they choose. It requires Courts just to enforce privately negotiated agreements to arbitrate,
like other contracts, in accordance with their terms.

As defined under Section 2(1) (a) of Arbitration and Conciliation Act, 1996 it covers any
arbitration whether it is administered by any permanent arbitral institution or not. It also covers
arbitration relied on voluntary agreement by the private parties or by operation of law. The
Arbitration and Conciliation Act, 1996 does not provide definition of the word "Arbitration".
Arbitration, in law, is a form of Alternative Dispute Resolution - specifically, a legal alternative to
litigation, whereby the parties to a dispute agree to submit their respective positions (through
agreement or hearing) to a neutral third party called the Arbitrator for resolution of the dispute
between them. The literal meaning is that "settlement" of differences or disputes by mutual
understanding or agreement by the parties where the rights and liabilities of the parties are
determined in judicial point of view which are binding to them, such settlement may be before the
arbitral tribunal but not by the Court of law. In Jivaji Raja Vs Khimiji Poonja & Company,89
Bombay High Court observed that, arbitration is the reference of dispute or difference between
two or more parties to a person chosen by the parties or appointed under statutory authority, for
determination of the same. In a broad sense, it is substitution of ordinary judicial machinery by a
mutually chosen tribunal i.e., an Arbitrator or an Arbitral Institution.

4.3.1 KINDS OF ARBITRATION

Depending on the terms of arbitration agreement, the subject matter of the dispute in arbitration,
and the laws governing such arbitrations, arbitrations can be classified into different types. They
are as follows;

Ad-Hoc Arbitration: The Ad-hoc Arbitration is agreed to and arranged by the parties themselves
without recourse to an arbitral institution. It is to get the justice, in the balance of the un-settled
part of their dispute only. It may be either International or Domestic arbitration.90

88
Black's Law Dictionary, 6th edn. (1990), West Publishing Co., p.105
89
AIR 1934 Bom 476.
90
Russell, Arbitration,twenty-second edn,2003,p29.

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Domestic arbitration: The Domestic arbitration means, an arbitration which takes place in India,
wherein parties are Indians and the dispute is decided in accordance with substantive law in India.

International Arbitration: An Arbitration, which may take place either within India or outside
India but, where there are ingredients of foreign origin in relation to the parties, or the subject
matter of the dispute. In this process, the dispute is decided in accordance with substantive law in
India or any other country, depending on the contract in this regard and the rules of conflict of
laws are termed as International Arbitration.

Institutional Arbitration: It means, an arbitration conducted by an arbitral institution in

accordance with the prescribed rules of the institution. In such kind of arbitration, there is prior
agreement between the parties that in case of future differences or disputes arising between the
parties during their commercial transactions, such differences or disputes will be settled by
arbitration as per clause provide in the agreement and in accordance with the rules of that particular
arbitral institution. The arbitrator or arbitrators, as the case may be is appointed from the panel
maintained by the institution either by disputants or by the governing body of the institution. The
Arbitration and Conciliation Act, 1996 gives recognition and effect to the agreement of the parties
to arbitrate according to institutional rules and subject to institutional supervision. Some of the
leading Indian institutions providing for institutional arbitration are, The Indian Council of
Arbitration (ICA), New Delhi, The Federation of Indian Chamber of Commerce and Industries
(FICCI), New Delhi and The International Center for Alternative Dispute Resolution (ICADA).
Some of the leading international institutions are The International Chamber of Commerce (ICC),
Paris, The London Court of International Arbitration (LCIA), London and The American
Arbitration Association (AAA). The World Intellectual Property Organisation (WIPO) is an
agency of the United Nations, which is offering its services exclusively for the intellectual property
disputes. WIPO is based in Geneva.91

Statutory Arbitration: It is mandatory form of arbitration, which is imposed on the parties by

operation of law. It is conducted in accordance with the provisions of an enactment, which
specifically provides for arbitration in respect of disputes arising on matters covered by the
concerned enactment byelaws or Rules made there under having the force of law. In such a case,

91
Indu Malhotra & OP.Malhotra, The Law and Practice of Arbitration And Conciliation,2nd Edn 2006.p117.

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the parties have no option as such but to abide by the law of land. It is apparent that statutory
arbitration differs from the other types of arbitration for the reason that, the consent of parties is
not necessary, it is compulsory form Arbitration and it is binding on the Parties as the law of land.
As an example to it, Sections 24, 31 and 32 of the Defence of India Act, 1971 and Section 43(c)
of The Indian Trusts Act, 1882 are the statutory provision, which deals with statutory arbitration.

Foreign Arbitration: When arbitration proceedings are conducted in a place outside India and the
Award is required to be enforced in India, it is termed as Foreign Arbitration.

Fast Track Arbitration or Documents Only Arbitration: The Documents only arbitration is not
oral and is based only on the claim statement and statement of defence, and a written reply by the
claimant, if any. It also includes the documents the document submitted by the parties with their
statements along with a list of reference to the documents or other evidences submitted by them.
The written submission may take the form of a letter to the tribunal from the party or his
representative, or may be a more formal document produced by lawyers.92The parties may agree
upon, or in default, the tribunal may adopt the procedure to resolve the dispute only on the basis
of the documents submitted to the tribunal and without any oral hearing or cross-examination of
the witnesses.

Look –Sniff Arbitration: Institutions specialised in special types of disputes have their own
special rules to meet the specific requirements for the conduct of arbitration in their specialised
areas. Look –Sniff Arbitration is a hybrid arbitration, and also known as quality arbitration. It is a
combination of the arbitral process and expert opinion. On the bases of the evidence and inspection
of goods or commodities that are subject matter of the dispute placed before the arbitrator, who is
selected based on his specialised knowledge, expertise and experience in a particular area of trade
or business, the arbitrator decides the dispute and makes his award. The award may relate to the
quality or price of the goods or both. There is no formal hearing for taking evidence or hearing
oral submissions. For example, Rules of the London Court of International Arbitration (LCIA)
permit the arbitrator, on his own, to ascertain the quality of goods and their prevalent price.93

Flip –Flop Arbitration: This type of arbitration has its origin in a United States arbitration case,
which dealt with a baseball player. In such arbitration, the parties formulate their respective cases

92
Russell on Arbitration,22nd edn,2003 pp195-96,para 5-128.
93
Indu Malhotra & OP.Malhotra, The Law and Practice of Arbitration And Conciliation,2nd Edn2006.p124-125.

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beforehand. They then invite the arbitrator to choose one of the two. On the evidences adduced by
the parties, the arbitrator decides which submission is the correct submission, and then makes an
award in favour of that party. After both parties have submitted their respective cases to the
arbitrator, he makes an award either favoring the claimant of the respondent. He cannot pick and
choose from a party’s case. If a party inflates its claim, then it is possible that it will everything.
This type of arbitration is also known as ‘pendulum arbitration’.

International Commercial Arbitration: Section 2(1)(f) of the Arbitration and Conciliation

Act,1996 defines an 'International Commercial Arbitration' as the one in which at least one of the
parties is a resident of a country other than India, or a body corporate incorporated in any country
other than India, or a company or association or a body of individuals whose central management
and control is exercised in any country other than India. Arbitration with the government of a
foreign country is also considered to be an international commercial arbitration. Thus, the above
classifications of the process under different heads reflects that, the process of arbitration is flexible
enough so that, it can be altered and modified according to the dispute to its best form, by the
disputed parties. Thus, it is a fact that the above classification is not exhaustive. The best method
or the form of arbitration is to be chosen by the parties according to their requirement, which can
help them fulfill the objective of an amicable resolution of the dispute for the betterment of all.

4.3.2 ARBITRATION AGREEMENT

The first stage in arbitration is the formulation of the arbitration agreement whereby the parties
agree to submit their present or future differences to arbitration. Section 2 (1)(b) does not give a
definition of the term, but states that “Arbitration agreement” means an agreement referred to in
section 7. As per Section 7, the arbitration agreement is defined as, an agreement by the parties to
submit to arbitration all or certain disputes which have arisen or which may arise between them in
respect of a defined legal relationship, whether contractual or not. Thus, the provision of arbitration
can be made at the time of entering the contract itself, so that if any dispute arises in future, the
dispute can be referred to arbitrator as per the agreement. It is also possible to refer a dispute to
arbitration after the dispute has arisen. It was held by the Supreme Court in the Wellington
Association Ltd Vs Kirti Mehta case94 that, the word in the Section 7(1) “means an agreement by

94
AIR 2000 SC 1379.

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the parties to submit to arbitration”, postulates an agreement which necessarily or rather mandatory
requires the appointment of an arbitrator or arbitrators. Section 7 does not cover a case where the
parties agree that they “may” go to a suit or that they “may” also go to arbitration. Arbitration
agreement may be in the form of an arbitration clause in a contract or in the form of a separate
agreement. Section 7(3) of the Act requires that the arbitration agreement must be in writing.
Section 7(2) provides that it may be in the form of an arbitration clause in a contract or it may be
in the form of a separate agreement. Under Section 7(4), an arbitration agreement is in writing, if
it is contained in : (a) a document signed by the parties, (b) an exchange of letters, telex, telegrams
or other means of telecommunication, providing a record of agreement, (c) or an exchange of
claims and defense in which the existence of the agreement is alleged by one party and not denied
by the other. Sec.7 (5) of the Act expressly provides that reference to a document containing an
arbitration clause would constitute an arbitration agreement. In Jayant N.Seth Vs Gyaneshwar
Apartment Cooperative Housing Society Ltd case,95 the Court laid down the essential ingredients
of an arbitration agreement as defined in Clause 2(1) (b) read with Section 7 as, there should be a
valid and binding agreement between the parties. Such an agreement may be contained as a clause
in a contract or in the form of a separate agreement. Such an agreement is deemed to be in writing
if it is contained in a document signed by the parties or in an exchange of letters, telex, telegrams
or other means of telecommunication which provide a record of the agreement or an exchange of
statements of claim and defense in which the existence of the agreement is alleged by one party
and not denied by the other. Reference in a contract to a document containing an arbitration clause
also constitutes an arbitration agreement, provided the contract is in writing and the reference is
such as to make that arbitration clause part of the contract. Parties intend to refer present or future
disputes to arbitration. The dispute to be referred to an arbitrator is in respect of a defined legal
relationship, whether contractual or not. In Motilal Vs Kedarmal Jainarayan Bharadiya case,96 it
is held that, arbitration is an alternate dispute resolution system of quasi-judicial nature and if no
judicial functions are attributed to the nominated persons, the document cannot be said to be an
arbitration agreement. The Supreme Court of India in Firm Ashok Traders Vs Gurumukh Das
Saluja case,97 it was held that, under the scheme of the Arbitration and Conciliation Act, 1996, the

95
2000(1) RAJ 117 (Bom)
96
2002(3) RAJ 403 (Bom)
97
2004 (3) SCC 155.

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Arbitration clause is separable from other clause of partnership deed. The arbitration clause
constitutes an agreement by itself.

In Tamil Nadu Electricity Board Vs Sumathi and others,98 case there was no arbitration agreement
within the meaning of Section 7 of the Arbitration and Conciliation Act, 1996. The dispute relating
to the payment of compensation for the death due to electrocution was under the consideration of
the High Court under Article 226. The High Court appointed an arbitrator in exercise of its power
under the 1996. The Supreme Court quashed the order of the High Court, as the Suo-motu
appointment of arbitrator in the absence of agreement to that effect is not provided for under the
provisions of the Arbitration and Conciliation Act, 1996.

The Section 4 of the Arbitration and Conciliation Act, 1996 is a deeming provision. It lays down
that, where a party precedes with the arbitration without stating his objection to non-compliance
of any provision of Part I from which the parties may derogate or any requirement under arbitration
agreement, it shall be deemed that he has waived his right to so object.99 In Basheshar Nath Vs
Commissioner of Income Tax,100 the Supreme Court held that, ‘There must be an international
relinquishment of a known right or the voluntary relinquishment or abandonment of a known
existing legal right , or conduct such as warrants an inference of relinquishment of a known right
or privilege’. In Union of India Vs MAA Agency,101 it was held that, it was open to the petitioner
to challenge either the jurisdiction of the arbitral tribunal to adjudicate upon the third claim or to
raise the plea that the tribunal was exceeding its scope of authority. However, the petitioner did
not raise any such objection and on the contrary, proceeded with a defense to the claim on merits,
thereafter, which an award was passed. This being the case, it may be deemed that the petitioner
had waived its rights under Section 4, to object on the ground that any requirement of the
arbitration agreement had not been complied with.

The Supreme Court of India in P.Anand Gajapathi Raju Vs PVG Raju,102 held that Section 5 of
the Arbitration and Conciliation Act, 1996 brings out clearly the object of the Act, namely that of
encouraging resolution of disputes expeditiously and less expensively and when there is an

98
2000(4) SCC 543
99
Section 4, The Arbitration and Conciliation Act, 1996.
100
AIR 1959 SC 149
101
2003(3) RAJ 335 (Bom)
102
AIR 2000 SC 1886.

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arbitration agreement, the Court’s intervention should be minimal. In BHEL Vs CN Garg & Ors
case,103 it was held that, Section 5 was inserted to discourage judicial intervention. It is seen that
a party having grievances against an arbitrator on account of bias or prejudice is not without
remedy. It only has to wait till the award is made and then it can challenge the award on various
grounds under Section 34 of the Arbitration and Conciliation Act, 1996.

Determination on the applicability of Section 2(1)(f) of the Indian Arbitration and Conciliation
Act, 1996 the Supreme Court of India in the case of TDM Infrastructure Private Limited Vs UE
Development India Private Ltd104 held that, when both the companies are incorporated in India,
and have been domiciled in India, the arbitration agreement entered into by and between them
would not be an international commercial arbitration agreement. The MM Acqua Technologies Ltd
Vs Wig Brothers Builders Ltd case,105 helps in explaining the definition of a binding agreement
between parties. In order to be a binding arbitration agreement between the parties, the same must
be in writing and the parties should have specifically agreed to settle their disputes by arbitration.
An arbitration agreement cannot be inferred by implication.

4.3.3 THE COURT REFERRAL TO ARBITRATION

If a party to the dispute approaches the Court despite the presence of an arbitration agreement, the
other party can raise the objection. The Arbitration and Conciliation Act, 1996 further says that,
the party must raise such an objection before submitting his first statement on the substance of
dispute. The original arbitration agreement or its certified copy must accompany such objection.
On such application, the judicial authority shall refer the parties to arbitration. Since the word used
is “shall”, it is mandatory for judicial authority to refer the matter to arbitration.106 However, once
the opposite party makes the first statement to Court, the matter has to continue in the Court. Once
the other party for referring the matter to arbitration makes an application, the arbitrator can
continue with arbitration and even make an arbitral award. The Supreme Court of India in P.Anand
Gajapathi Raju Vs P.V.G Raju case,107 held that arbitration agreement being brought into existence
while action is pending before Court is also a valid arbitration agreement. The language of section

103
2001(57) DRJ 154 (DB).
104
(2008) SCC 2263.
105
2001(3) RAJ 531 (Del).
106
The Arbitration and Conciliation Act,1996. Section 8.
107
AIR 2000, SC 1886.

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8 is peremptory. It is therefore, obligator for the Court to refer the parties to the arbitration in terms
of their arbitration agreement. The Supreme Court of India in the case of Haryana Telecom Ltd Vs
Sterlite Industries (India) Ltd108 held that, notwithstanding any agreement between the parties, an
arbitrator would have no jurisdiction to order winding up of a company.

The Supreme Court of India in S.N Palanitkar Vs State of Bihar case,109 held that, merely because
there is an arbitration clause in a commercial agreement, that cannot prevent criminal prosecution
against the accused if an act constitutes a criminal offence is made out even prima facie.

4.3.4 INTERIM MEASURES OF PROTECTION

The Arbitration and Conciliation Act, 1996 under Section 9 empowers the Court to take certain
interim measures of protection including granting of interim injunctions, preservation, interim
custody, sale of goods, appointment of receivers, etc. Supreme Court of India in the case of Bhatia
International Vs Bulk Trading110 held that, the provisions such as section 9 of the 1996 Act, relating
to interim measures of protection by the Court were the, 'general provisions which are applicable
to international commercial arbitrations held outside India, unless excluded either expressly by a
statute or by an agreement between parties, or by implication'. Thus, it is open for parties in an
international arbitration with the seat of arbitration outside India to apply for interim measures of
protection within India where the assets relating to the dispute are located in India. The Supreme
Court of India in Firm Ashok Traders Vs Gurumukh Das Saluja case,111 held that, the Court under
Section 9 is only formulating interim measures to protect the right under adjudication before the
Arbitral Tribunal from being frustrated. The Court is conferred with the same power for making
the specified order as it has for the purpose of and in relation to any proceeding before it through
the venue of the proceedings in relation to which the power under Section 9 is sought to exercised
is the Arbitral Tribunal. The Supreme Court of India in Sundaram Finance Ltd Vs NEPC India Ltd
case,112 held that, in order to give full effect to Section 9, it would not be necessary that a notice
invoking the arbitration clause must be issued to the opposite party before an application under

108
AIR 1999 SC 2354.
109
AIR 2002 Bom 8
110
2002(4 ) SCC 105
111
2004 (3) SCC 155.
112
AIR 1999 SC 565.

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section 9 can be filled. Thus, the Court is not debarred from dealing with an application merely
because no notice has been issued under Section 21 of Arbitration and Conciliation Act, 1996.

4.3.5 APPOINTMENT OF ARBITRATOR

The term arbitrator has already been defined above in this chapter. Under the provisions of the
Arbitration and Conciliation Act, 1996 the arbitral tribunal can consist of either a sole arbitrator or
an odd number of arbitrators. If the arbitral tribunal is to consist of more than one arbitrator, then
the 1996 Act provides that either party can appoint their nominee arbitrator and the appointed
nominee would further appoint a third arbitrator who would be the presiding arbitrator. This is
different from the 1940 Act, wherein it was permissible to appoint an even number of arbitrators
and an umpire to whom the disputes were to be referred to in the event of a deadlock. Section 10
of the 1996 Act provides that the number of arbitrators cannot be an even number. In Narayan
Prasad Lohia Vs Nikunj Kumar Lohia,113 the Supreme Court held that parties would be entitled to
derogate from the provisions of section 10 of the 1996 Act and an award by two arbitrators would
not be void. If either of the parties fails to make an appointment under the agreed appointment
procedure then, the other party may make a request to the Chief Justice or a person or institution
designated by him to take the necessary measure. The arbitration agreement entered into by the
parties can provide for other means of securing the appointment, for example by delegating the
appointing function to an institution.

The parties can agree on a procedure for appointing the arbitrator or arbitrators. If they are unable
to agree on a single arbitrator then, each party will appoint one arbitrator and the two appointed
arbitrators will appoint the third arbitrator who will act as a presiding arbitrator.114 If one of the
parties does not appoint an arbitrator within 30 days, or if two appointed arbitrators do not appoint
third arbitrator within 30 days, the party can request Chief Justice to appoint an arbitrator.115 If the
opposite party makes an appointment even after 30 days of the demand, but before the first party
has moved the Court under section 11, that would be valid and only then the right of the opposite
party ceases.116 The Chief Justice can authorize any person or institution to appoint an arbitrator.
In case of international commercial dispute, the application for appointment of arbitrator has to be

113
2002 (3) SCC 572
114
Section11(3)
115
Section11(4)
116
Datar Switchgears Ltd Vs Tata Finance ltd.(2000)8 S.C.C.151.

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made to Chief Justice of India. In case of other domestic disputes, application has to be made to
Chief Justice of High Court within whose jurisdiction the parties are situated.117

Thus, the study shows that the major difference between an international commercial arbitration
with its seat in India and a domestic arbitration is that, in an international commercial arbitration
there exist provisions for expedited appointment of arbitrators by directly approaching the
Supreme Court. The other difference is that unlike in a domestic arbitration, in an international
commercial arbitration, the parties are free to choose the law applicable to the substance of the
dispute for governing the arbitral proceedings. The decision of the Chief Justice on the issue of
appointment in an international commercial arbitration is final and is not appealable.

The Section 11(6) of the Arbitration and Conciliation Act, 1996 provides for intervention of the
Chief Justice in appointing the arbitrators where there is failure under the appointment procedure
agreed upon by the parties. The Supreme Court of India in Datar Switchgears Ltd Vs Tata Finance
Ltd118 held that, under Section 11(6)if one of the party demands the opposite party to appointment
an arbitrator and the opposite party does not make an appointment within 30 days of the demand ,
the right to appointment does not get automatically forfeited after expiry of 30 days . If the opposite
party makes an appointment even after 30 days of the demand, but before the first party has moved
the Court under Section11 that would be sufficient. Only then, the right of the opposite party
ceases.

The framers used a language different from the Model Law. The question that arose was whether
the Chief Justice to whom the power was conferred to take the necessary measure of making an
appointment was exercising powers in a 'judicial capacity' or in an 'administrative capacity'. The
Arbitration and Conciliation Act, 1996 only refers to the power of the Chief Justice to take the
'necessary measures' for the appointment of arbitrators in case of default by the parties. The
UNCITRAL Model Law provided that the 'Court' would have the power to make the appointment.
The Supreme Court of India in Ador Samia (P) Ltd Vs Peekay Holding Ltd case119 categorically
held that the powers of the Chief Justice under Sec11 are administrative powers and therefore, the
Chief Justice while exercising powers under Section 11 does not act as a “Court”. The Supreme

117
Section 11(12) of Arbitration and Conciliation Act,1996.
118
2000(8)SCC 151.
119
A.I.R 1999 S.C. 3246.also in Konkan Railways Corp Ltd Vs Mehul Construction Pvt Ltd. 2000 (7) SCC 201

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Court in the SBP & Co Vs.Patel Engineering case120 ultimately resolved this controversy. A bench
consisting of seven judges held that the power conferred by section 11 of the 1996 Act was a
‘judicial power’ and the Chief Justice had to act in his judicial capacity and not in an
‘administrative capacity’. The Chief Justice has the power to decide certain preliminary issues
such as existence of a valid arbitration agreement, existence of a live claim, existence of conditions
for the exercise of power and the qualifications of the arbitrator or arbitrators.

The Supreme Court of India in Malaysia Airlines system BHD (II)Vs Stic Travels (P)Ltd,121 held
that while nationality of the arbitrator is a matter to be kept in view while appointing the arbitrator
but, it does not follow from Sec 11(9) that the proposed arbitrator is necessarily disqualified
because he belongs to the nationality of one of the parties. The provision is not mandatory. In
cases, the party who belongs to a nationality other than that of the proposed arbitrator, has no
objection, the Chief justice of India can appoint an arbitrator belonging to a nationality of one of
the parties.

4.3.6 CHALLENGE TO APPOINTMENT OF ARBITRATOR

An arbitrator is expected to be independent and impartial person. If there are some circumstances
due to which his independence or impartiality can be challenged, he must disclose the
circumstances before his appointment.122 Appointment of Arbitrator can be challenged only if (a)
Circumstances exist that give rise to justifiable doubts as to his independence or impartiality (b)
He does not possess the qualifications agreed to by the parties.123 Appointment of arbitrator cannot
be challenged on any other ground. The challenge to appointment has to be decided by the
arbitrator himself. If he does not accept the challenge, the proceedings can continue and the
arbitrator can make the arbitral award. However, in such case, application for setting aside arbitral
award can be made to Court.124 The sub section (4) and (5) of section 13 is designed to prevent
dilatory tactics by not allowing the unsuccessful party to challenge the appointment of the
arbitrator immediately when the challenge had been unsuccessful before the arbitrator, and

120
2005 (3)Arb LR 285 (SC),
121
2001 ,1SCC. 509
122
Section 12(1)
123
Section 12(3)
124
Section 34

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requires such party to wait and challenge the same only after the arbitral award has been made.125
If the Court agrees to the challenge, the arbitral award can be set aside.126 Thus, even if the
arbitrator does not accept the challenge to his appointment, the other party cannot stall further the
arbitration proceedings by rushing to Court. The arbitration can continue and challenge can be
made in Court only after arbitral award is made.

In the case of Shivnath Rai Harnarain (India) Ltd. Vs.Abdul Ghaffar Abdul Rehman (Dead),127
the Supreme Court of India held that, having mutually agreed to have the dispute referred to an
arbitrator at Singapore, the applicant is not permitted to turn around and say that this Court be
appointed an arbitrator. In the case of Aurohill Global Commodities Ltd. Vs. M.S.T.C. Ltd,128 the
Supreme Court of India held that, the Court has the power to appoint an arbitrator in case of
international transaction in accordance with terms of contract.

4.3.7 TERMINATION OF ARBITRATION AGREEMENT

The mandate of an arbitrator shall terminate if the arbitrator becomes de jure or de facto unable to
perform his functions or for other reasons fails to act without undue delay and in the cases where
the arbitrator withdraws from his office or the parties agree to the termination of his mandate.129
If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1),
a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination
of the mandate.130 If, under this section or sub-section (3) of section 13, an arbitrator withdraws
from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not
imply acceptance of the validity of any ground referred to in this section or sub-section (3) of
section 12.131 Thus, these three grounds constitute arbitrators inability. The first being the
arbitrators de jure inability, which is to refer his legal disability to perform his functions. Such
situation of legal disability is found in the lex loci arbitri and relate to circumstances under which
the arbitrator is by law, barred and from continuing in the office, for reasons such as incapacity,

125
Harile Rice Mills Vs State of Punjab 1998 (1) 118 PLR 395 and the decision was followed in Satish Chandra
Gupta & Sons Vs Union Of India 2003 (1)Arb LR 589,599 (P&H)(DB)
126
Section 13(6)
127
(2008) 5 SCC 135
128
(2007)7 SCC 120
129
Section 14 (1).
130
Section 14 (2).
131
Section 14 (3).

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bankruptcy and conviction for a criminal offense. Likewise, the inability on the part of the
arbitrator to make award within the time prescribed in the agreement of the parties, renders him de
jure unable to continue with the proceedings, and has the effect of terminating of his mandate. 132
The second ground of inability concerns cases of factual situations in which the arbitrator is
physically prevented form fulfilling his functions for instance serious illness, other physical
disability or death. Moreover, the third ground refers to other factors influencing the level of
expectations like the ability to function efficiently and expeditiously and any special competence
or other qualification required of the arbitrator by agreement of the parties.

In addition to the circumstances, referred to in section 13 or section 14, the mandate of an arbitrator
shall terminate in the cases where he withdraws from office for any reason; or by or pursuant to
agreement of the parties. In such cases where the mandate of an arbitrator terminates, a substitute
arbitrator shall be appointed according to the rules that were applicable to the appointment of the
arbitrator being replaced.133 Unless otherwise agreed by the parties, where an arbitrator is replaced
under sub section (2), any hearings previously held may be repeated at the discretion of the arbitral
tribunal. Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made
prior to the replacement of an arbitrator under this section shall not be invalid solely because there
has been a change in the composition of the arbitral tribunal.134 Thus, Section 15 is designed for
appointment of a substitute arbitrator, rather than the grounds for the termination of his mandate.
Thus the wording, ‘the rules that were applicable to the appointment on the arbitrator’ in Section
15(2) indicates the party autonomy set forth in Section 11 of the Act. As per the decision taken in
case of San-A Tradubg Co.Ltd Vs I.C.Textiles Ltd it is held that Sec 15 of Arbitration and
Conciliation Act, 1996 a new arbitrator can be appointed if the named arbitrator, refuses to act .135

In Kalyan People’s Cop Bank Ltd Vs Dulhabibi Aqual Aminsaheb Patil case,136 the Supreme Court
of India held that, where there is a change in the constitution of the arbitral tribunal and the parties
consented to the procedure that the tribunal could rely on the evidence adduced before the tribunal

132
Shyam Telecom Ltd Vs.Arm Ltd 2004 (3) Arb. L R 146,153 (Del).
133
Section 15 (1)(a)(b)and (2).
134
Section 15 (1) to (4).
135
(2006) 3 MLJ 154 SC Arbitration Petition No 8and 9 Of 2005.
136
AIR 1966 SC 1072.

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prior to its reconstruction, it would not be open to the parties subsequently to question the
procedure.

In the case of India Household and Healthcare Ltd. Vs LG Household and Healthcare Ltd,137 it is
held by the Supreme Court of India that, Fraud has the effect of vitiating the entire agreement
formed between the parties including the arbitration clause formed under the agreement. Doctrine
of comity or amity required a Court not to pass and order which would be in conflict with another
order passed by a competent Court of law. An application for appointment of an arbitrator is not
maintainable unless the procedure and mechanism agreed to by and between the parties is complied
with.

4.3.8 CONDUCT OF ARBITRAL PROCEEDINGS

The Section 16 of the Arbitration and Conciliation Act, 1996 provides that the arbitral tribunal
may rule on its own jurisdiction, including ruling on any objections with respect to the existence
or authority of the arbitration agreement.138 For this purpose, an arbitration clause that forms part
of a contract will be treated as an agreement independent of the other terms of the contract; and a
decision by the arbitral tribunal that the contract is null and void will not entail, ipso jure, the
invalidity of the arbitration clause. A plea that the arbitral tribunal does not have jurisdiction, will
however have to be raised not later than the submission of the statement of defense. However, a
party shall not be precluded from raising such a plea merely because he has appointed, or
participated in the appointment of an arbitrator. In Nissho Iwai Corpn Vs Veejay Impex case,139 it
was held that Civil Court is not competent to decide the question with respect to the existence or
validity of arbitration. The Arbitral Tribunal only has jurisdiction to decide such questions.

In National Agricultural Co-Op. Marketing Federation India Ltd. Vs. Gains Trading Ltd case,140
it was held that, the arbitration clause forming part of the contract is to be treated as an agreement
independent of the other terms of the contract.

The Arbitration and Conciliation Act, 1996 under Section 16 does not take away the jurisdiction
of the Chief Justice of India or his designate if need be, to decide the question of the “existence”

137
(2007) 5 SCC5 10.
138
Shree Subhlaxmi Fabrics Pvt. Ltd. Vs.Chand Mal Baradia, Civil appeal no: 7653 of 2004.
139
AIR 2000 Cal .207.
140
(2007) 5 SCC 629.

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of the arbitration agreement. In Wellington Associates Ltd Vs Kirit Mehata case,141 Supreme Court
of India held that, Section 16 does not declare that except the Arbitral Tribunal, none else can
determine such question. Merely because the new Act of 1996 permits the arbitrator to decide this
question, it does not necessarily follow that at the stage of Section 11 the Chief Justice of India or
his designate cannot decide a question as to the existence of the arbitration clause. In Owners and
Parties interested in the Vessel M.V. “Baltic Confidence” Vs State Trading Corporation Ltd142 it
was held by the Supreme Court that, whether a particular dispute arising between the parties comes
within the purview of the arbitration clause as incorporated in the Bill of Lading is a matter to be
decided by the arbitrator or the Court. However, that does not mean that despite incorporation of
arbitration clause in the Bill of Lading by specific reference the parties had not intended that an
arbitrator should resolve the disputes arising on the Bill of Lading.

A plea that the arbitral tribunal is exceeding the scope of its authority has to be raised as soon as
the matter alleged to be beyond the scope of its authority is raised during the arbitral
proceedings.143 The arbitral tribunal, in either of the cases referred to above, may admit later a plea
if it considers the delay justified. The arbitral tribunal has to decide on a plea about lack of
jurisdiction or about the tribunal exceeding the scope of its authority. Where the arbitral tribunal
takes a decision rejecting the plea it shall continue with the arbitral proceedings and make the
arbitral award.144 Section 16(6) of the 1996 Act provides that, a party aggrieved by such an arbitral
award is free to make an application for setting aside the award under section 34 of the Act. Section
34(2) (a) inter alia permits a challenge to an award on the above grounds.

In the case of Heavy vehicle factory, Rep By SGM Avadi Madras Vs Oscar Equipments(p)Ltd Rep
By MD Kolkata and another145 it was held by the Madras High Court that, the Court will not
exercise its power under section 34 interfere with the reasoned award passed after consideration
of the entire evidence, merely because another conclusion is possible.

The power of the arbitral tribunal to grant interim relief generally depends on the authority of the
tribunal as agreed upon by the parties. This may be done expressly in the arbitration agreement, or

141
2000 S.C. 1379.
142
2001 (7) SCC 473.
143
The Arbitration and Conciliation Act,1996. Section 16 (3).
144
The Arbitration and Conciliation Act,1996. Section 16 (4) and (5).
145
(2006) 4 MLJ 1420.

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by the choice of institutional rules, which allow arbitrators to grant such relief. This power is
generally classified as a matter of procedure and therefore is governed primarily by law governing
the arbitration concerning the place of arbitration. In addition, regard may be given to the law of
the place where the interim measures is to be enforced.146 The Supreme Court of India in MD,
Army Welfare Housing Organisation Vs Sumangal Services Pvt. Ltd147 held that, the interim order
of the arbitrator which was in the nature of an interim award , in view of the restricted jurisdiction
of arbitrator under Section 17, was held to be wholly without jurisdiction and thus a nullity, being
coram non judice.148 Unless otherwise agreed by the parties, the arbitral tribunal may, at the request
of a party, order a party to take any interim measure of protection, as the arbitral tribunal may
consider necessary in respect of the subject matter of the dispute. The arbitral tribunal may require
a party to provide appropriate security in connection with a measure ordered under sub-section
(1).149 The Arbitration and Conciliation Act, 1996, unlike the predecessor Act of 1940, the Arbitral
Tribunal is empowered by Section 17 of the Act to make order amounting to interim measures.
The need for Section 9, in spite of Section 17 having been enacted is that, Section 17 would operate
only during the existence on the Arbitral Tribunal and its being functional. During that period, the
power conferred on the Arbitral Tribunal under Section17 and the power conferred on the Court
under Section 9 may overlap to some extent but so far as the period pre and the post arbitral
proceeding is concerned, the party requiring an interim measure of protection shall have to
approach only the Court of laws.150

The Arbitral Tribunal should treat the parties equally and each party should be given full
opportunity to present his case.151 In State Bank of Patiala Vs SK Sharma,152 the Supreme Court
stated that it would not be correct to say that for any and every violation of a facet of Natural
Justice or of a rule incorporating such facet, the order passed is altogether void and ought to be set
aside without further enquiry. In all cases, where the complaint is not that there was no hearing but
one of not affording a proper hearing or of violation of a procedural rule or requirement governing
the enquiry, the complaint should be examined on touchstone of prejudice. The two-rule

146
Lew, Mistelis, Kroll, Comparative International Commercial Arbitration,2003,pp587-588,para 23-8 and 23-9.
147
2004 (9) SCC 619.
148
Smt Kanak Vs Uttar Prades Avas Fvam Vikas Parishad. 2003(7) SCALE 157
149
The Arbitration and Conciliation Act,1996. Section17 (1)and (2).
150
Firm Ashok Traders Vs Gurumukh Das Saluja 2004 (3)SCC 155.
151
The Arbitration and Conciliation Act,1996. Section 18
152
1996 (3)SCC 346,387.

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contemplated by this section are two separate concepts and thus are governed by separate
considerations of, impartiality of the arbitrator and fair trail of proceedings.

Code of Civil Procedure, 1908 or Indian Evidence Act, 1872, does not bind the Arbitral Tribunal
functioning under Arbitration and Conciliation Act, 1996. Arbitral Tribunal it is not precluded
from adopting principles of law judicially developed under them.153 The arbitrators generally apply
the rule of res judicata, albeit the strict provisions of the Statute do not bind them.154 The Arbitral
Tribunal is required to comply with the rules of Natural Justice as enshrined in Section18, which
will cover all the necessary procedural requirements. In the case of Moti Lal Vs State of Himachal
Pradesh,155 it was held that the arbitrator has the power to administer oath to the parties and the
witnesses before recording their evidences.

4.3.9 SETTLEMENT DURING ARBITRATION PROCEEDING

It is permissible for parties to arrive at mutual settlement even when arbitration is proceeding.
Settlement of a disputed claim to avoid a lawsuit is, ‘an agreement ending a dispute or law suit,’
arrived at either in or out of Court, for settling a dispute on what appears to the parties to be
equitable terms, having regard to the uncertainty they are in regarding the facts or the law and the
facts together.156 In fact, even the Tribunal can make efforts to encourage mutual settlement. If
parties settle the dispute by mutual agreement, the arbitration shall be terminated. However, if both
parties and the Arbitral Tribunal agree, the settlement can be recorded in the form of an arbitral
award on agreed terms. Such Arbitral Award shall have the same force as any other Arbitral
Award.157It was held in Malpati Sevasangh Vs Gujarat State Khadi and Village Industries Board
case158 that, an effective compromise presupposes that both the parties to the dispute are willing
to abide by the terms and conditions of the agreement. Otherwise, it cannot be said to be effective
because a compromise cannot be one sided, as both the sides to the dispute should agree for such
compromise.

153
The Arbitration and Conciliation Act,1996. Section 19(1)
154
TK Poulton Vs State of Kerala 1995 (2)Arb. LR 182 (Ker);Classic Motors Ltd Vs Maruti Udyog Ltd 1996(Supp)
Ard LR 112 (Del);SP Gupta Vs State of Madhya Pradesh 1996(Supp)Arb. LR 143 (MP).
155
AIR 1996 HP 90; State of Haryana Vs JK Jain AIR 1989 P& H 24
156
Black’s Law Dictionary, eighth edn,2004,p 1405.
157
The Arbitration and Conciliation Act, 1996. Section 30.
158
2004 (2)Arb. LR 521 (Guj).

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4.3.10 ARBITRAL AWARD

The decision of the Arbitral Tribunal is termed as 'Arbitral Award'. Arbitrator can decide the
dispute ex aequo et bono (in justice and in good faith) if both the parties expressly authorize him
to do so.159 Section 28 of the Arbitration and Conciliation Act,1996 grants autonomy to the parties
to choose the substantive law to be applied to ‘Arbitration other than an international commercial
arbitration’ as well as to an ‘international commercial arbitration’, where the place of arbitration
is in India. The Supreme Court of India in Sumitomo Heavy Industries Vs Oil and Natural Gas Co
Ltd160 held that, where the parties had made an express choice of Indian law as proper law of the
contract, then it would follow that the proper law of the arbitration agreement is also Indian Law.
It was held as the arbitration agreement is part of the substance of the underlying contract and
terms of arbitration clause are held to be clear in that respect.161The provisions has made a vital
improvement in making international commercial arbitration considerably more user-friendly and
flexible.162 In the arbitral proceedings with more than one arbitrator, the decision of Arbitral
Tribunal will be by majority.163 In the Shin-Etsu Chemical Co Ltd.Vs.Aksh Optifibre Ltd and
another case164 it was held that, in an application for reference rejected on the ground of invalidity
of agreement under Section 45 of the Act, the judicial authority is required to pass reasoned order
after hearing parties. Impugned order is liable to appeal under Section 50(1) (a) of the Act.

4.3.10.1 FORM AND CONTENTS OF ARBITRAL AWARD

The award must be in writing and signed by the members of Arbitral Tribunal. 165Therefore, an
award is complete and final only when the arbitrators sign it. It was also held that once an arbitrator
has signed an award, he becomes functus officio. It is not necessary that it should also be delivered,
pronounced, or filed in the Court.166 It must state the reasons for the award unless the parties have
agreed that no reason for the award is to be given.167 Reasons are the link between the material on

159
The Arbitration and Conciliation Act, 1996. Section 28(2).
160
1998 (1) 1 SCC 305.
161
Channel Tunnel Group Ltd Vs Balfour Beatty Construction Ltd.1993 (1) ALL ER 664.
162
Peter Binder, International Commercial Arbitration In UNCITRAL Model Law Jurisdictions, second edn,2005 p
238 , para 6-019.
163
The Arbitration and Conciliation Act,1996. Section 29.
164
(2005)7SCC234.
165
The Arbitration and Conciliation Act,1996. Section 31(1).
166
Satwant Singh Sodhi Vs State of Punjab 1999 (3) SCC 487.
167
The Arbitration and Conciliation Act,1996. Section 31(3).

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which certain conclusions are based and the actual conclusion. This was held by the Supreme Court
of India in the Union of India Vs Mohanlal Kapoor case.168 The Arbitration and Conciliation Act,
1996 does not prescribe any particular form for a reasoned award. The reasoned award is
emphasized under the 1996 Act in order to enable the parties and the reviewing Courts169 to
understand the facts and the general reasoning which led the arbitrator to conclude that this was
the decisive point, and to understand the facts and so consider the position with respect to
reviewing the award on any other issue which arose before the arbitrators.170 In AK Kraipak Vs
Union Of India,171 the Supreme Court of India held that there is increasing emphasis on the
requirement of reasons in all judicial, quasi- judicial and arbitral decisions. The award should be
dated and place where it is made should be mentioned. Copy of award should be given to each
party.172 In the Union of India Vs Tecco Trichy Engineers and Contractors case,173 it was held
that, according to Section 31(5), 'after the arbitral award is made, a signed copy shall be delivered
to each party'. Section 2(1) (h) defines a "party" as meaning 'a party to an arbitration agreement'.
In a large organization like the Railways, "party" as referred to in Section 2(1) (h) read with Section
34(3) has to be construed to be a person directly connected and involved in the proceedings and
who is in control of the proceedings before the arbitrator. The delivery of an arbitral award, to be
effective, has to be 'received' by the party and this delivery by the tribunal and receipt by the party
sets in motion several periods of limitation, therefore it is an important stage in the arbitral
proceedings.

4.3.10.2 KINDS OF AWARDS

The Arbitration and Conciliation Act, 1996 contemplates four types of awards, namely the
definition of award under Section 2(c) includes an interim award. Section 31(6) authorizes an
arbitral tribunal to make an interim award on any matter with respect to which it may make final
arbitral award at any time during the arbitral proceeding. Interim award deals only with some of
the matters referred, so that the remaining matters will be dealt with later. As in case of additional
award, Section 33 (4) provides that, in the absence of an agreement by the parties to the contrary,

168
1972 (2)SCC 836.
169
Russell on Arbitration ,22nd Ed ,2003 ,p 238,para 6-028.
170
Transcatalana De Commercio SA Vs Incobrasa Industrial E Commercial Brazileria SA [1995]1 Lloyd’s Rep 215.
171
1969 (2)SCC 262.
172
The Arbitration and Conciliation Act, 1996.Section 31(5)
173
2005(1) RAJ 506 (SC)

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a party with notice to the opposing party may, within 30 days from the receipt of the award, request
the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings
but omitted from arbitral award. If the tribunal considers such request to be justified, it shall make
the additional award within 60 days from the receipt of the request.174 If the parties settle their
dispute during arbitration proceeding, the arbitral tribunal shall terminate the proceedings and if
request by the parties and not object to by the arbitral tribunal, it shall record the settlement in the
form of an arbitral award on agreed terms.175 Section 35 of Arbitration and Conciliation Act,1996
says that once an arbitral award has been made, signed and delivered to the parties, subject to the
provisions of part 1 of the Act, it shall be final and binding on the parties and persons claiming
under them respectively. Corollary rule is that an award must dispose of all the issues in dispute,
unless parties have so agreed. There is the residuary power in the arbitral tribunal to terminate
proceeding where it finds that a continuation thereof has for any other reason, become unnecessary
or impossible. If the situation develops where the arbitration proceedings becomes in-fructus, or
with the continuation of the proceedings becomes impossible, the tribunal shall order termination
of the arbitral proceeding. Likewise, if the subject matter of the dispute is not arbitrable, or the
contract has been frustrated or become impossible of performance and so on the tribunal shall
terminate the arbitral proceedings.176

In the Bhatia International Vs Bulk Trading case,177 it was held that foreign awards are those where
arbitration takes place in a convention country; awards in arbitration proceedings, which take place
in a non-convention country, are considered neither as foreign awards nor as domestic awards
under the Act. The Court also stressed that 'Domestic Awards' include all awards made under Part
I of the Act. Awards made in an international commercial arbitration held in a non-convention
country will also be considered to be a 'domestic award'.

4.3.11 COST OF ARBITRATION

The cost of arbitration means reasonable cost relating to fees and expenses of arbitrators and
witnesses, legal fees and expenses, administration fees of the institution supervising the arbitration

174
The Arbitration and Conciliation Act,1996. Section 33(5)
175
The Arbitration and Conciliation Act,1996. Section30(2)
176
The Arbitration and Conciliation Act,1996. Section 32 (2) c , Maharashtra State Electricity Board Vs Datar
Switchgears Ltd, 2003 (Supp) Arb LR 39, 63 (Bom).
177
2002 AIR SC 1432.

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and other expenses in connection with arbitral proceedings. The tribunal can decide the cost and
share of each party.178 If the parties refuse to pay the costs, the Arbitral Tribunal may refuse to
deliver its award. In such case, any party can approach Court. The Court will ask for deposit from
the parties and on such deposit, the award will be delivered by the Tribunal. Then Court will decide
the costs of arbitration and shall pay the same to Arbitrators. Balance, if any, will be refunded to
the party.179

4.3.12 SETTING ASIDE OF ARBITRAL AWARD

The Arbitration and Conciliation Act, 1996 does not provide any provision for appeal against an
arbitral award and it is final and binding between the parties. However, an aggrieved party may
take recourse to law court for setting aside the arbitration award on certain grounds specified in
Section 34 of the Arbitration and Conciliation Act, 1996.

Section 34 of the Act is based on Article 34 of the UNCITRAL Model Law and the scope of the
provisions for setting aside the award is far less than it was under the Sections 30 or 33 of the 1940
Act.

In Municipal Corp. of Greater Mumbai v. Prestress Products (India)180, the court held that the
new Act was brought into being with the express Parliamentary objective of curtailing judicial
intervention. Section 34 significantly reduces the extent of possible challenge to an award.

It is necessary for the aggrieved party to make an application under Section 34 stating the grounds
of challenge. An application for setting aside the award has to be made by a party to the arbitration
agreement. But a legal representative can apply for it because he is a person claiming under them.
There is no special form prescribed for making an application under Section 34 of the act except
it has to be a written statement filed within the period of limitation.

In Sanshin Chemical Industry v. Oriental Carbons & chemical Ltd.181, there arose a dispute
between the parties regarding the decision of the Joint Arbitration Committee relating to venue of

178
The Arbitration and Conciliation Act, 1996 Section 31(8).
179
Section 39
180
(2003) 4 RAJ 363 (Bom)
181
AIR 2001 SC 1219.

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arbitration. The Apex Court held that a decision on the question of venue will not be either an
award or an interim award so as to be appealable under Section 34 of the act.

In Brijendra Nath v. Mayank182, the court held that where the parties have acted upon the arbitral
award during the pendency of the application challenging its validity, it would amount to estoppel
against attacking the award.

An award which is set aside is no longer remains enforceable by law. The parties are restored to
their former position as to their claims in the dispute. Setting aside an award means that it is
rejected as invalid. The award is avoided and the matter becomes open for decision again. The
parties become free to go back to arbitration or to have the matter decided through court.

Section 34(1) provides that “Recourse to a Court against an arbitral award may be made only by
an application for setting aside such award in accordance with sub-section (2) and sub-section (3)”.

4.3.12.1 GROUNDS FOR SETTING ASIDE AN ARBITRAL AWARD

Section 34(2)(a) provides that an arbitral award may be set aside by a court on certain grounds
specified therein. These grounds are:

1. Incapacity of a party.

2. Arbitration agreement not being valid.

3. Party not given proper notice of arbitral proceedings.

4. Nature of dispute not falling within the terms of submission to arbitration.

5. Arbitral procedure not being in accordance with the agreement.

Section 34(2)(b) mentions two more grounds which are left with the Court itself to decide whether
to set aside the arbitral award:

1. Dispute is not capable of settlement by arbitral process

2. The award is in conflict with the public policy of India

182
AIR 1994 SC 2562.

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4.3.12.1(A) INCAPACITY OF PARTIES

If a party to arbitration is not capable of looking after his own interests, and he is not represented
by a person who can protect his interests, the award will not be binding on him and may be set
aside on his application.

If a minor or a person of unsound mind is a party he must be properly represented by a proper

guardian otherwise the award would be liable to be set aside. Such a person is not capable of
binding himself by a contract and therefore, an award under a contract does not bind him.

Section 9 of the 1996 Act enables him to apply to the court for appointment of a guardian for a
minor or a person of unsound mind for the purpose of arbitral proceedings. The ground of
incapacity would cease to be available when the incompetent person is represented by a guardian.

4.3.12.1(B) INVALIDITY OF AGREEMENT

The validity of an agreement can be challenged on any of the grounds on which the validity of a
contract may be challenged. In cases where the arbitration clause is contained in a contract, the
arbitration clause will be invalid if the contract is invalid.

In State of U.P. v. Allied Constructions183 the court held that the validity of an agreement has to be
tested on the basis of law to which the parties have subjected it. Where there is no such indication,
the validity would be examined according to the law which is in force.

4.3.12.1(C) NOTICE NOT GIVEN TO PARTIES

Section 34(2)(a)(iii) permits challenge to an award if the party was not given proper notice of the
appointment of an arbitrator, or the party was not given proper notice of the arbitral proceedings,
or the party was for some reasons unable to present his case.

Under Section 23(1) the Arbitral Tribunal has to determine the time within which the statements
must be filed. This determination must be communicated to the parties by a proper notice. Section
24(2) mandates that the parties shall be given sufficient advance notice of any hearing or meeting
of the Tribunal for the purpose of inspection of documents, goods or other property.

183
(2003) 7 SCC 396

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If for any good reason a party is prevented from appearing and presenting his case before the
Tribunal, the award will be liable to be set aside as the party will be deemed to have been deprived
of an opportunity of being heard the principle of natural justice.

In Dulal Podda v. Executive Engineer, Dona Canal Division184, the court held that appointment of
an arbitrator at the behest of the appellant without sending notice to the respondent, ex parte award
given by the arbitrator was illegal and liable to be set aside.

4.3.12.1(D) AWARD BEYOND SCOPE OF REFERENCE

The reference of a dispute under an agreement defines the limits of the authority and jurisdiction
of the arbitrator. If the arbitrator had assumed jurisdiction not possessed by him, the award to the
extent to which it is beyond the arbitrator’s jurisdiction would be invalid and liable to be set aside.

Section 34(2)(a)(iv) of the Act provides that an arbitral award is liable to be set aside if it deals
with a dispute not contemplated by the reference, or not falling within the terms of the reference,
or it contains a decision in matters beyond the reference.

In Gautam Construction & Fisheries Ltd v. National Bank for Agriculture and Rural
Development185,the Supreme Court modified the award to the extent that the rate of construction
meant for ground floor could not be applied to the construction of the basement area.

In Rajinder Kishan Kumar v. Union of India186, a matter under a writ petition was referred to
arbitration. The writ petition contained no claim of compensation for damage to potentiality of the
land because of the opposing party discharging effluents and slurry on the land. The award of such
compensation was held to be outside the scope of reference hence liable to be set aside.

Section 16 of the Arbitration and Conciliation Act, 1996 provides that the initial decision as to
jurisdiction lies with the Tribunal. The party should immediately object as to excess of jurisdiction.
If the Tribunal rejects the objection, the aggrieved party may apply under Section 34(2)(a)(iv) for
setting aside on the ground of excess of jurisdiction.

184
(2004) 1 SCC 73
185
AIR 2000 SC 3018.
186
AIR 1999 SC 463.

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An arbitrator cannot go contrary to the terms of the contract. Where the terms of the contract are
not clear or unambiguous, the arbitrator gets the power to interpret them. In State of Rajasthan v.
Nav Bharat Construction Co.187, a majority of claims allowed were against the terms of the
contract.

4.3.12.1(E) ILLEGALITY IN ARBITRAL PROCEDURE

Section 34(2)(a)(v) provide that an award can be challenged if the composition of the Tribunal was
not in accordance with the agreement, or the procedure agreed to by the parties was not followed
in the conduct of proceedings, or in the absence of agreement as to procedure, the procedure
prescribed by the Act was not followed.

Failure to follow the agreed procedure or the procedure prescribed by the Act is a procedural
misconduct. If the arbitral tribunal takes the matter which is clearly beyond the scope of its
authority, it would tantamount to misconduct of arbitrator. An award in which the arbitrator has
deliberately deviated from the terms of reference and arbitration agreement will amount to
misconduct of the arbitrator.

Section 12(3)(a) provides that an arbitrator may be challenged if there is justifiable doubt as to his
independence or impartiality. Section 13 says that if the challenge is not successful and the award
is made, the party challenging the arbitrator may apply to the court under Section 34 for setting
aside the award.

In State Trading Corp. v. Molasses Co., the Bengal Chamber of Commerce188,a permanent arbitral
institution, did not allow a company to be represented by its Law Officer, who was full time
employee of the company. The Court held that it was not only misconduct of the arbitrator but also
misconduct of the arbitration proceedings.

In Bathinda Central Co-operative Bank’s Case, the court observed “it is a typical case where the
arbitrator misconducted the proceedings and also misconducted himself. A complete go bye was
given to the provisions of law, procedure and rules of justice.

187
AIR 2005 SC 4430.
188
AIR 1981 Cal. 440.

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In ONGC Ltd v. Saw Pipe Ltd.189, the Supreme Court held that in exercising jurisdiction, the
Arbitral Tribunal cannot act in breach of some provisions of substantive law or the provision of
the Act. In Section 34(2)(a)(v) of the Act, the composition of the Arbitral Tribunal should be in
accordance with the agreement. The procedure which is required to be followed by the arbitrator
should also be accordance with the agreement. If there is no such agreement then it should be in
accordance with the procedure prescribed in Part 1 of the Act.

In the above case, the losses caused by delay were deducted from the supplier’s bill. The direction
of the Arbitral Tribunal that such deduction should be refunded with interest was held to be neither
in accordance with law, nor contract. The award was set aside to that extent.

In Union of India v. Om Prakash Baldev Krishna190, it was held that a non-reasoned award is liable
to be set aside by the court as contemplated by Section 31(3) which requires that arbitral award
shall State reasons upon which it is based unless the parties have mutually agreed that no reasons
are to be given.

Some other examples of misconduct of proceedings are proceeding ex parte without sufficient
cause; denial of opportunity to parties; acting against the mandate given to the arbitrator under the
agreement; failure or refusal to consider counter-claim of the respondent etc.

4.3.12.1(F) DISPUTE NOT ARBITRABLE

Section 34(2)(b)(i) provides that an application for setting aside an arbitral award can be made if
the subject-matter of the dispute is not capable of settlement by arbitration under the law for the
time being in force.

The existence of an arbitral dispute is a condition precedent for exercise of power by an arbitrator.

Only matters of indifference between the parties to litigation which affect their private rights can
be referred to arbitration.

Therefore, matters of criminal nature, insolvency proceedings, and matters of public rights cannot
be decided by arbitration.

189
AIR 2003 SC 2629.
190
AIR 2000 J&K 79.

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The Delhi High Court, held in PNB Finance ltd v. Shital Prasad Jain191, that specific performance
of an act cannot be granted in an arbitration proceeding. The Supreme Court did not approve the
view point of the Delhi High Court. The Court held that the right to specific performance of an
agreement of sale deals with contractual rights and it is certainly open to the parties to agree to
refer the issue relating to specific performance to arbitration.

4.3.12.1(G) AWARD AGAINST PUBLIC POLICY

Section 34(2)(b)(ii) provides that an application for setting aside an arbitral award can be made if
the arbitral award is in conflict with the public policy of India.

The explanation to clause (b) clarifies that an award obtained by fraud or corruption would also be
an award against the public policy of India. An award obtained by suppressing facts, by misleading
or deceiving the arbitrator, by bribing the arbitrator, by exerting pressure on the arbitrator, etc.
would be liable to be set aside.

The concept of public policy connotes some matter which concerns public good and public interest.

In Venture Global Engg v. Satyam Computer Service Ltd192, it was held that an award could be set
aside if it is contrary to fundamental policy of Indian law, or the interest of India, or justice or
morality, or it is patently illegal.

If the award is contrary to the substantive provisions of law or the provisions of the Act or against
the terms of the contract, it would be patently illegal, which could be interfered under Section 34.
Award could also be set aside if it is as unfair and unreasonable as to shock the conscience of the
court as it is against public policy.

4.3.12.2 TIME LIMIT FOR FILING APPLICATION - (SECTION 34(3))

Section 34(3) provides that an application for setting aside an arbitral award must be made within
3 months of receiving the award or disposition of application by the arbitral tribunal.

The importance of this is emphasized by Section 36 which provides that the award becomes
enforceable as soon as the limitation period under Section 34 expires.

191
AIR 1991 Del 13.
192
2008 (4) SCC 190.

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The proviso to Section 34(3) allows the party a further period of 30 days after the expiry of three
months if the court is satisfied that the party was prevented by a sufficient cause from making the
application. No application for setting aside the award can be entertained by the court after the
expiry of these additional thirty days.

In National Aluminum Co Ltd v. Presteel Fabrication (P) Ltd193, proceedings were instituted
before the Supreme Court under the wrong belief that it had jurisdiction in the matter of setting
aside. Time spent on a bona fide prosecution of an application in a wrong forum was held by the
Supreme Court to be a sufficient cause for condonation of delay.

In Union of India v. Shring Construction Co (P) Ltd194, sometime was lost in challenging the award
in a writ court which was declared to be not maintainable because the petitioner had his remedy
under Section 34 by the proceeding before the District Judge. The District Judge was then
approached along with an application for condonation of delay. He rejected it as time barred. The
Supreme Court held that the District Judge should have decided whether the application was within
time after excluding the period lost in a wrong court.

In Union of India v. Microwave Communication Ltd, the Delhi High Court noted that, in
contradiction with Section 5, Section 4 “does not enlarge the period of limitation but it only enables
the party to file any suit, application, etc. on the reopening day of the Court if the Court is closed
on a day when limitation expires.” As there was no overlap of any sort between Section 4 and
Section 34(3) the Court held that Section 4 would apply in cases where there was not any lack of
due diligence on the part of the applicant. Interestingly, the Court also held that S. 4 was applicable
even to situations where the proviso to Section 34(3) was attracted – i.e., the thirty-day condonation
period.

A bare reading of Section 34(3) read with the proviso makes it abundantly clear that the application
for setting aside the award will have to be made within three months. The period can further be
extended, on sufficient cause being shown, by another period of thirty days but not
thereafter. Section 29 (2) of the Limitation Act, provides that when any special statute prescribes
certain period of limitation as well as provision for extension up to specified time limit, on
sufficient cause being shown, then the period of limitation prescribed under the special law shall

193
(2004) 1 SCC 540.
194
(2006) 8 SCC 18.

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prevail and to that extent the provisions of the Limitation Act shall stand excluded. The provisions
of Section 5 of the Limitation Act would not be applicable because of the provisions of Section 29
(2) of the Limitation Act.

4.3.12.3 REMISSION BY TRIBUNAL- (SECTION 34(4))

When an application for setting aside an arbitral award has been made, under section 34(4) the
court may, instead of adjudicating upon the grounds raised, adjourn the proceedings for a
determined period of time to enable the tribunal to deal with the grounds on which objection have
been raised and to eliminate them.

In T.N. Electricity Board v. Bridge Tunnel Constructions, the court held that where an award is
vitiated by an error of jurisdiction, the court can send it back to the arbitrator for rectification of
the error.

Upon such adjournment the Arbitral Tribunal shall resume the arbitral proceedings and take such
action as will eliminate the grounds. The resumed proceedings can only be relating to the grounds
raised in the application under Section 34.

It may become necessary to record fresh findings and to amend the award. Thereafter the court
would consider whether the grounds raised have been eliminated and whether the award is liable
to be set aside.

4.3.12.4 PRIOR NOTICE - SECTION 34(5)

Section 34(5) says that “an application under this section shall be filed by a party only after issuing
a prior notice to the other party and such application shall be accompanied by an affidavit by the
applicant endorsing compliance with the said requirement.”

4.3.12.5 DISPOSITION OF AN APPLICATION - SECTION 34(6)

Section 34(6) states that an “application under this section shall be disposed of expeditiously, and
in any event, within a period of one year from the date on which the notice referred to in sub-
section (5) is served upon the other party”.

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4.3.12.6 SECTION 34(5): WHETHER MANDATORY OR DIRECTORY

While dealing with whether section 34(5) is directory or mandatory, the Patna High Court in Bihar
Rajya Bhumi Vikas Bank Samiti v. The State of Bihar195, Guwahati High Court in Union of India
and Ors. vs. Durga Krishna Store Pvt. Ltd196, the Uttarakhand High Court in National Highways
Authority of India vs. Ashish Panwar and Ors197. and Himachal Pradesh High Court in Madhav
Hi-tech Engineers Pvt. Ltd. vs. The Executive Engineers and Ors198, held it to be mandatory. Thus,
it came to be understood that the use of the words ‘shall’ and ‘only’ rendered the provision to be
mandatory.

The Bombay High Court, while dealing with whether section 34(5) is directory or mandatory, in
the case of Global Aviation Services Private Limited v. Airport Authorities of India noted that the
provision is directory, largely because no consequence has been provided for breach of the time
limit specified. Furthermore, it observed, that there existed no consequence under section 34(6).
Therefore, if the Court is not able to dispose of the arbitration petition under section 34 within one
year from the date of service of notice, the only consequence would be that the timeline would get
extended. It was further observed that the legislative intent of inserting those provisions is the
speedy disposal of the proceedings and not to penalize the petitioner for non-compliance of the
procedure which, in effect, is directory. This view was followed by the Calcutta High Court in the
case of Sree Infrastructure Finance Limited v. Candor Gurgaon Two Developers and Projects Pvt.
Ltd.199

The Hon’ble Supreme Court in the case of The State of Bihar & Ors. vs. Bihar Rajya Bhumi Vikas
Bank Samiti200, stated that it was the view propounded by the High Courts of Bombay and Calcutta
that represented the correct state of the law. The Court noted that the object of Section 34(5) and
(6) is, as has been stated by the Law Commission, the requirement that an application under Section
34 be disposed of expeditiously within a period of one year from the date of service of notice. It
found it imperative to note that the provision was procedural, the object behind which is to dispose
of applications under Section 34 expeditiously. It was however observed that the aforenoted by

195
L.P.A. No. 1841/2016.
196
Arb. A. 1/2018.
197
2017 AIR 2018 Utr 12.
198
2017 OMP (M) No. 48 of 2016.
199
A.P. No. 346 of 2018.
200
Civil Appeal No. 7314 of 2018

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itself would not be sufficient to construe Section 34(5) as mandatory, keeping in view the fact that
if the time limit of one year is not adhered to under Section 34(6), no consequence thereof is
provided. “To construe such a provision as being mandatory would defeat the advancement of
justice as it would provide the consequence of dismissing an application filed without adhering to
the requirements of Section 34(5), thereby scuttling the process of justice by burying the element
of fairness.” The Court thus, concluded by holding that Section 34(5) is a directory provision and
not mandatory.

4.3.13 FINALITY AND ENFORCEMENT OF ARBITRAL AWARDS

The finality of arbitral awards in an arbitral proceeding is subject to Part VIII of The Arbitration
and Conciliation Act 1996. An award becomes final it prevents the successful party from
subsequently raising a claim on which he has succeeded. Likewise, it prevents the loosing party
from raising the issue on which it has lost ‘just because he believes that on the second occasion,
he may have a more sympathetic tribunal, more convincing witnesses, or a better advocate. There
must be an end to disputes.201 Thus, Section 35 provides that an arbitral award shall be final and
binding on the parties and persons, claiming under them respectively.

Prior to 1940 an award could be executed in the same manner, to the same extent and subject to
the same limitation as a decree of the Court.202Under the Arbitration Act 1940, under section 17,
an award could be enforced by filing it in the Court and obtaining a judgment and decree on it.

The Arbitration and Conciliation Act ,1996 under Section 36, provides that, where the time for
making an application to set aside the arbitral award under section 34 has expired, or such
application having been made, it has been refused, the award shall be enforced under the Code of
Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court. This
section provides for the summary procedure for excluding Court intervention at the enforcement
stage, because most of the object of arbitration would be defeated if a claimant who succeeds in
an arbitration has again stand in the queue of litigations seeking to enforce their agreements. The
fact that an arbitral award is enforceable as if it were a decree does not render the arbitral
proceeding as proceeding in a suit. Nor does it render an arbitration a suit .All that this section

201
Mustin and Boyd , Commercial Arbitration, second edn,1989,p413.
Kanhaya Lal Gauba Vs People’s Bank of Northern India Ltd AIR 1935 Lah 49;Donald Graham and Co Vs
202

Kewalram and Ors AIR 1921 Sind 132.

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provides is that for the purpose of enforcement, an arbitral award can be enforced as if it were a
decree.203

The Supreme Court of India in Fuerst Day Lawson Ltd Vs Jindal Exports Ltd case204 held that, as
the object of the Arbitration and Conciliation Act, 1996 is to provide speedy and alternative
solution to the dispute. Thereby, for the enforcement of a foreign award there is no need to take
separate proceedings, one for deciding the enforceability of the award to make it a rule of the Court
or decree and other to take up execution thereafter. In one proceeding, the Court enforcing a foreign
award can deal with the entire matter.

4.3.14 INTERVENTION BY COURT

One of the major defects of earlier arbitration law was that the party could access Court almost at
every stage of arbitration - right from appointment of arbitrator to implementation of final award.
Thus, the defending party could approach Court at various stages and stall the proceedings. Now,
approach to Court has been drastically curtailed. In some cases, if an objection is raised by the
party, the decision on that objection can be given by Arbitral Tribunal itself. After the decision,
the arbitration proceedings are continued and the aggrieved party can approach Court only after
Arbitral award is made. Appeal to Court is now only on restricted grounds. Of course, Tribunal
cannot be given unlimited and uncontrolled powers and supervision of Courts cannot be totally
eliminated. An application to challenge the award will not be maintainable if the party proposing
to challenge it has accepted and acted upon it. The Supreme Court in Pooran Chand Nangia Vs
National fertilisers Ltd,205 held that the appellant had received the money, which was due to him
under the award accepting it unequivocally and without any reserve and so the challenge was not
maintainable that it did not lie in his mouth to challenge the award. In Union of India Vs Popular
Constructions Co,206 the Supreme Court held that by virtue of Sec34 (1) , recourse to the Court
against an arbitral award cannot be made beyond the prescribed period. The time limit prescribed
under Sec 34 to challenge an award is absolute and un-extendable by Court under Section 5 of
Limitation Act.

203
Saurabh Kalani Vs Tata Finance Ltd 2003(Supp)Arb LR 217,238 (Bom).
204
AIR 2001 SC 2293.
205
2003 (8) SCC 245.
206
2001 (8) SCC 470 and MD, Army Welfare Housing Organisation Vs Sumangal Services Pvt Ltd (2004) 9 SCC
619. In DTC Vs Rose Advertising 2004 (3) Arb.LR 86 (Del).

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In the Venture Global Engineering Vs. Satyam Computer Services Ltd. and Another,207 it was held
that, in case of international commercial arbitrations held out of India provisions of Part-I would
apply unless the parties by agreement express or implied, exclude all or any of its provisions.

The Arbitration and Conciliation Act, 1996 has limited the powers of Court. This Act has restricted
the exercise of judicial powers, in other words confined the extent of judicial intervention as
provided under Section 5 of the Arbitration and Conciliation Act, 1996. Section 5 says that,
"Notwithstanding anything contained in any other law for the time being in force, in matters
governed by this part, no judicial authority shall intervene except where so provided in this part."
The Supreme Court of India in the case of P. Anand Gajapathi Raju Vs P.V.G Raju208 held that,
section 5 brings out clearly the object of the 1996 Act, namely, that of encouraging resolution of
dispute expeditiously and less expensively and when there is an arbitration agreement, the Court’s
intervention should be minimal. Finality of Arbitral Award under Section 35 is subject to the part
according to which an arbitral award shall be final and binding on the parties and persons claiming
under them respectively. Thus, Section 36 of the 1996 Act provided finality of arbitral awards and
its enforcement, without intervention of the Court. The Arbitral Tribunals are empowered to settle
any objections rose in respect of jurisdiction or scope of authority of the arbitrators.

The 1996 Act provides for appeals against orders granting or refusing to grant interim measures
of protection under section 9 and orders setting aside or refusing to set aside, the arbitral award
under section 17 shall lie to the Court authorized by law to here the appeals from original decrees
of the Court passing the order.209 Orders concerning the jurisdiction or authority of the tribunal or
award under Section 16(2), (3) are also appealable. The appellate Court is usually the High Court.
No other statutory appeal is provided. Section 37 (3) prohibits a second appeal against the appellate
order under section 37 (1) and (2). These mandatory provisions shut the door on the face of the
second appeal whether through Scetion100 of the Code of Civil Procedure 1908, or a Letters Patent
appeal. In Nirma Ltd Vs Lurgi Lent Jes Energie technik case,210 dealing with a petition for special
leave to appeal under Art 136 of the Constitution, against an appellate order passed by City Civil
Court, Ahmedabad under Section 37(2), a two judge Bench of the Supreme Court contented itself

207
(2008)4SCC190.
208
AIR 2000 S.C 1886.
209
The Arbitration and Conciliation Act,1996 Section 37
210
2002 (5) SCC 520.

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by echoing the first part of the Shyam Sundar Agarwal and Co Vs Union of India case,211 stating
that, ‘merely because a second appeal against the appellant order is barred by the provisions of
Section 37(3) of the Act 1996 ,the remedy of revision under Section115 of Code of Civil Procedure
does not cease to be available to the petitioner’. In other words, if the Act contains a provision
which bars revisional power of the High Court which militates against giving effect to a provision
of the Act, the revisional jurisdiction will stand superseded under the Act. Any subsequent appeal
can go only to the Supreme Court by way of a special leave.

4.4 CONCILIATION PROVISIONS UNDER 1996 ACT

The proceedings relating to Conciliation are dealt under sections 61 to 81 of Arbitration and
Conciliation Act, 1996. This Act is aimed at permitting Mediation conciliation or other procedures
during the arbitral proceedings to encourage settlement of disputes. This Act also provides that a
settlement agreement reached by the parties as a result of conciliation proceedings will have the
same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered
by an arbitral tribunal.

Section 61 says that conciliation shall apply to disputes arising out of legal relationship, whether
contractual or not and to all proceedings relating thereto. Unless any law excludes, these
proceedings will apply to every such dispute while being conciliated. The parties may agree to
follow any procedure for conciliation other than what is prescribed under the 1996 Act. If any law
certain disputes are excluded from submission to conciliation, the third part will not apply.
According to Section 62, a party can take initiative and send invitation to conciliate under this part
after identifying the dispute. Proceedings shall commence when the other party accepts the
invitation. If the other party rejects, it stops there itself. If other party does not reply within 30 days
it can be treated as rejection.

4.4.1 CONCILIATORS

A Conciliator is basically different from that of a Judge or an Arbitrator. The role of the Conciliator
is to assist the parties to reach their own negotiated settlement and he may make suggestions as
appropriate. Conciliator does not impose a decision on the parties but, on the contrary, his role is

211
1996(2) SCC 132,143.

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to assist the parties to resolve the dispute themselves. He may give opinion on issues in dispute
but his primary function is to assist in achieving a negotiated solution.212 A conciliator can suggest
terms upon which a settlement can be arrived at, but cannot impose a settlement conceived by him
on the parties. His role is merely advisory and not creative or decisive, like the role of an arbitrator
or an adjudicator. In practice, conciliation covers different fields of activity, each with its own
traditions, ethos and culture. The skill and technique adopted by the conciliator in enabling the
parties to come to a voluntary settlement of dispute between them and thereby avoiding
adjudication and in due course bringing about a negotiated settlement vary. A conciliator, dealing
with a commercial dispute, may have to adopt altogether different procedure, technique and
approaches, from that of a conciliator dealing with family disputes or labour disputes.
Nevertheless, all the fundamental principles and procedure prescribed under the Arbitration and
Conciliation Act, 1996 is the same.

A conciliator is as an independent and impartial person and he must enjoy confidence of both the
parties. The parties should be able to repose trust and confidence on him so as to enable them to
share their secrets and their thinking process with the conciliator with the belief that the same
should not be divulged to other party without specific instructions in that regard. Therefore, a
conciliator is bound by rules of confidentiality and not by the strict rules of the Code of Civil
Procedure, 1908 and the Indian Evidence Act, 1872.213 Though Section 66 is not governed by the
provisions of Section 18, the provisions of Section 67, requires the conciliation to be aided by the
principles of objectivity, fairness and justice are applicable to it. This ensures that the conciliator
will conduct the proceedings in a fair and judicious manner, in order to do justice to each one of
the parties. The number of conciliator generally appointed for a conciliation proceeding is one
unless the parties agree and give mutual consent to have more conciliators than one.214

The provisions relating to conciliators are contained in section 63 and 64(1)

(a). There will be only one conciliator, unless the parties agree to two or three.

(b). Where there are two or three conciliators, then as a rule, they ought to act jointly.

212
The Role of ACAS in Arbitration, Conciliation And Mediation,1989,cited in Brown and Marriott, Alternative
Dispute Redressal methods Principles and Practice, Second edn,1999,p272,para 11-018.
213
The Arbitration and Conciliation Act, 1996. Section 66.
214
The Arbitration and Conciliation Act, 1996. Section 63.

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(c). Where there is only one conciliator, the parties may agree on his name

(d). Where there are two conciliators, each party may appoint one conciliator.

(e). Where there are three conciliators, each party may appoint one, and the parties may agree on
the name of the third conciliator, who shall act as presiding conciliator.

(f). But in each of the above cases, the parties may enlist the assistance of a suitable institution or
person.

Section 64(2) and proviso of the new law lay down as under:

(a). Parties may enlist the assistance of a suitable institution or person regarding appointment of
conciliator. The institution may be requested to recommend or to directly appoint the conciliator
or conciliators.

(b). In recommending such appointment, the institutions etc. shall have regard to the considerations
likely to secure an "independent and impartial conciliator".

©. In the case of a sole conciliator, the institution shall take into account the advisability of
appointing a conciliator other than the one having the nationality of the parties.

In sections 65 to 73 contains provisions spread over a number of sections as to the procedure of

the conciliator. Their gist can be stated in short form.

(a). The conciliator, when appointed, may request each party to submit a statement, setting out the

general nature of the dispute and the points at issue. Copy is to be given to the other party. If

necessary, the parties may be asked to submit further written statement and other evidence.

(b). The conciliator shall assist the parties "in an independent and impartial manner", in their
attempt to reach an amicable settlement. See Section 67(1) of the new law.

©. The conciliator is to be guided by the principles of "objectivity, fairness and justice". He is to

give consideration to the following matters:

i) Rights and obligations of the parties;

ii) Trade usages; and

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iii) Circumstances surrounding the dispute, including previous business practices between the
parties. [Section 67(2)].

(d). He may, at any stage, propose a settlement, even orally, and without stating the reasons for the
proposal. [Section 67(4)].

(e). He may invite the parties (for discussion) or communicate with them jointly or separately.
[Section 68].

(f). Parties themselves must, in good faith, co-operate with the conciliator and supply the needed
written material, provide evidence and attend meetings, [Section 71].

(g). If the conciliator finds that there exist "elements of a settlement, which may be acceptable to
the parties", then he shall formulate the terms of a possible settlement and submit the same to the
parties for their observation.

(h). On receipt of the observations of the parties, the conciliator may re-formulate the terms of a
possible settlement in the light of such observation.

(i). If ultimately a settlement is reached, then the parties may draw and sign a written settlement
agreement. At their request, the conciliator can help them in drawing up the same. [ Sections 73(1)
and 73(2)].

4.4.2 LEGAL EFFECT

a. The settlement agreement signed by the parties shall be final and binding on the parties [Section
73(1)].

b. The agreement is to be authenticated by the conciliator. [Section 73(4)].

c. The settlement agreement has the same status and effect as if it were an arbitral award rendered
by the arbitral tribunal on agreed terms. [section 74 read with section 30].

The net result is that the settlement can be enforced as a decree of court by virtue of section 36.

4.4.3 ROLE OF THE PARTIES

Under section 72, a party may submit to the conciliator his own suggestions to the settlement of a
dispute. He at his own initiative or on the conciliator’s request may submit such suggestions.

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4.4.4 CONCILIATOR'S PROCEDURE

The net result of section 66, Section 67 (2) and Section 67(3) can be stated as follows:

a. The conciliator is not bound by the Code of Civil Procedure or the Evidence Act.

b. The conciliator is to be guided by the principles of objectivity, fairness and justice.

c. Subject to the above, he may conduct the proceedings in such manner, as he considers
appropriate, taking into account.

i. The circumstances of the case;

ii. Wishes expressed by the parties;

iii. Need for speedy settlement.

4.4.5 DISCLOSURE AND CONFIDENTIALITY

a. Factual information received by the conciliator from one party should be disclosed to the other
party, so that the other party can present his explanation, if he so desires. But information given
on the conditions of confidentiality cannot be so disclosed.

b. Notwithstanding anything contained in any other law for the time being in force, the conciliator
and a party shall keep confidential "all matters relating to the conciliation proceedings". This
obligation extends also to the settlement agreement, except where disclosure is necessary for its
implementation and enforcement. (Section 75).

4.4.6 ADMISSIONS

In any arbitral or judicial proceedings (whether relating to the conciliated dispute or otherwise),

the party shall not rely on, or introduce as evidence

i. Views expressed or suggestions made by the other party for a possible settlement;

ii. Admissions made by the other party in the course of conciliation proceedings;

iii. Proposal made by the conciliator; and

iv. The fact that the other party had indicated his willingness to accept a settlement proposal
(Section 81).
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4.4.7 PARALLEL PROCEEDINGS

During the pendency of conciliation proceedings, a party is debarred from initiating arbitral or
judicial proceedings on the same dispute, except "such proceedings as are necessary for preserving
his rights". (Section 77) (There is no mention of arbitral or judicial proceedings, which are already
initiated).

4.4.8 CONCILIATOR NOT TO ACT AS ARBITRATOR

Unless otherwise agreed by the parties, the conciliator cannot act as arbitrator, representative or
counsel in any arbitral or judicial proceedings in respect of the conciliated dispute. Nor can he be
"presented" by any party as a witness in such proceedings. (Section 80). Costs and Deposit: The
new law also contains provisions on certain other miscellaneous matters, such as costs and deposit
(Section 78 and 79).

4.4.9 CONDUCT OF CONCILIATION PROCEEDING

A conciliation proceeding could be initiated in India when, one of the parties to the dispute arising
out of legal relationship invites the other parties to get the dispute resolved through conciliation.
The conciliation can start only if other party accepts in writing the invitation to conciliate. If,
however, the other party rejects the invitation for settlement through conciliation, no such
proceeding would be initiated. Even if no response were sent within thirty days to the invitation,
it would be deemed that the said request is rejected.215

A statement of their respective cases is to be submitted by the parties to the conciliator in order to
enable the conciliator to understand the case of the parties and to form an opinion.216 He can call
for additional statement of facts and information in order to enable him to give his suggestion to
the parties.217

The Conciliation proceeding could be classified into two types namely, facilitative conciliation
and evaluative conciliation. In facilitative conciliation, the conciliator avoids opinion and
judgments and he merely assists the parties to clarify their communications, interest and priorities.
On the other hand, in evaluative conciliation, the conciliator expresses his opinion on the merit of

215
The Arbitration and Conciliation Act,1996. Section62(1)to (4).
216
The Arbitration and Conciliation Act,1996. Section65(2).
217
The Arbitration and Conciliation Act,1996. Section65(3).

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the issues so as to enable the parties to approach settlement. His opinion is a third party view on
the merit but such opinion would not be conclusive and binding.218

The section 69 of Arbitration and Conciliation Act, 1996 contains the provision regarding
communication between conciliator and parties whether orally or in writing and about place of
meeting. The conciliator may meet or communicate with the parties together or with each of them
separately. Unless the parties have agreed upon the place where meetings with the conciliator are
to be held, such place shall be determined by the conciliator, after consultation with the parties,
having regard to the circumstances of the conciliation proceedings. When the conciliator receives
factual information concerning the dispute from a party, he shall disclose the substance of that
information to the other party in order that the other party may have the opportunity to present any
explanation, which he considers appropriate. In the proviso to the section 70, it is stated that when
a party gives any information to the conciliator subject to a specific condition that it be kept
confidential, the conciliator shall not disclose that information to the other party. 219 The Supreme
Court of India in Haresh Dayaram Thakur Vs State of Maharashtra case220 reinstated that under
the provisions of section 72 each party may, on his own initiative or at the invitation of the
conciliator, submit to the conciliator suggestions for the settlement of the dispute.

The success of a conciliation proceeding depends upon the genuine and honest desire of the parties
to settle the dispute amongst themselves with the assistance of the conciliator. The parties shall in
good faith cooperate with the conciliator and, in particular, shall endeavor to comply with requests
by the conciliator to submit written materials, provide evidence and attend meetings. 221 Thus, good
faith of the parties in cooperation with the conciliator in the conciliation proceeding, is a sine qua
non for arriving at an amicable settlement of the dispute and in the absence of good faith and bona
fide co-operation by the parties, no conciliator can succeed in bringing about an amicable
settlement.

The parties are entitled to suggest terms of settlement, which would be discussed by the parties
wherein suggestions could be given by the conciliator on such terms for their observations but the

218
Mackie, Miles, Marsh and Allen, The Alternative Dispute Redressal methods Practice Guide; Commercial Dispute
Resolution, 2nd edn, 2000,p 12,para1.3.3.
219
The Arbitration and Conciliation Act,1996. Section 70.
220
2000(6) SCC 179.
221
The Arbitration and Conciliation Act,1996. Section 71.

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conciliator, cannot impose a settlement as conceived by him on the parties.222 Under Section 73 of
Arbitration and Conciliation Act, 1996 it is provided that, after considering the reformulated terms
of possible settlement, if the parties reach a settlement of the dispute, they may draw up and sine
a written agreement. Otherwise, the parties may request the conciliator to draw up or to assist them
in drawing up the settlement agreed upon by them. The parties shall sign the settlement agreed
upon by them. Such settlement shall be final and binding on the parties and persons claiming under
them respectively. The conciliator is then required to authenticate the settlement agreement and
furnish a copy of it to each one of the parties.

The Supreme Court of India in Haresh Dayaram Thakur V. State of Maharashtra case223 held that,
a successful proceeding comes to an 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 of Arbitration and Conciliation Act, 1996. In Mysore Cements
Ltd Vs Svedal Barmac Ltd224 the Supreme Court noted that from the Memorandum of Conciliation
Proceedings and Letter of Comfort, it did appear that parties had agreed to certain terms, but they
could not straightaway be enforced by taking up the execution proceedings. It falls short the
essential legal pre-requisites to be satisfied for being assigned the status of a legally enforceable
agreement of settlement between the parties. In case the parties arrive at a settlement during the
discussion and the proceeding, a settlement agreement is drawn up which would have the same
effect and status as an arbitral award on agreed terms as envisaged under section 30 of the Act.225
The same thereafter could be enforced as a decree of the Court under the Code of Civil Procedure
1908.

A party desiring to avail the remedy could take resort to the said procedure during pre-litigation
and even during the pendency of litigation. If the effort does not succeed, the parties can always
come back to litigation.226 However, during the pendency of conciliation preceding a party is not
entitled to pursue any arbitral or judicial proceedings in respect of a dispute that is the subject
matter of the conciliation proceedings. This is subject to one exception that, a party may initiate

222
The Arbitration and Conciliation Act,1996. Section72.
223
AIR 2000 SC 2281.
224
2003 (10) SCC 375.
225
The Arbitration and Conciliation Act,1996. Section 74.
226
Conciliation and Mediation By Justice Dr.M.K.Sharma. Judge, High Court of Delhi,p1-4.

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arbitral or judicial proceedings where, in his opinion, such proceedings are necessary for the
preserving his rights.227

4.4.10 TERMINATION OF CONCILIATION PROCEEDING

The provision of the Arbitration and Conciliation Act, 1996 set forth the situation and the point
of time at which the conciliation proceedings terminate. Accordingly, the conciliation proceedings
shall be terminated primarily by settlement.228 The conciliation proceeding are terminated on the
date the parties sign the ‘settlement agreement’. The proceeding shall be terminated by a written
declaration of the conciliator, after consultation with the parties, to the effect that further efforts at
conciliation are no longer justified, on the date of the declaration. The conciliation proceeding can
be terminated by the parties on the date when they make a declaration in writing addressed to the
conciliator to the effect that the conciliation proceedings are terminated. The conciliation
proceeding can be terminated by a party on the date when it makes a declaration in writing to the
other party and to the conciliator, if appointed to the effect that the conciliation proceedings are
terminated.

On the termination of the conciliation proceeding in any of the situation enlisted above under
Section76; the conciliator shall fix the costs of the conciliation and give written notice thereof to
the parties. Costs means reasonable costs incurred during the conciliation proceeding. The costs
shall include the fee and expenses of the conciliator and witnesses requested by the conciliator
with the consent of the parties, the expenses in relation to any expert advice requested by the
conciliator with the consent of the parties, expenses incurred for the assistance of an institution or
a person in connection with the appointment of a conciliator229 and the administrative assistance
to facilitate the conduct of the conciliation proceedings.230 In addition to this, it also includes any
other incidental expenses incurred in connection with the conciliation proceedings and the
settlement agreement231. The settlement agreement may provide the mode and the manner of
apportionment of the costs to be fixed by the conciliator after the termination of the conciliation

227
The Arbitration and Conciliation Act, 1996. Section 77.
228
The Arbitration and Conciliation Act,1996. Section76.
229
Section 64(2), The Arbitration and Conciliation Act,1996.
230
Section 68, The Arbitration and Conciliation Act,1996.
231
Section 78(2), The Arbitration and Conciliation Act,1996.

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proceeding. In the absence of such provisions in the settlement agreement, the cost shall be borne
equally by the parties. All the expenses incurred by a party shall be borne by that party.232

Section 38 if the Arbitration and Conciliation Act, 1996 empowers an arbitral tribunal to call for
deposits in an arbitral proceeding. The conciliator may direct each party to deposit an apportioned
amount as an advance for the costs referred to under section 78(2) which he expects will be
incurred during the conciliation proceeding.233 By Section 79 (2), the conciliator during the course
of the conciliation proceedings, if he considers it expedient to call for further deposits, he may
‘direct supplementary deposits in equal amount from each party’. If both the parties default in
paying the amount called for by the conciliator within 30 days from the date of direction to deposit,
the conciliator may suspend the proceedings. Alternatively, he may make a declaration to the
parties in writing that the conciliation proceedings stands terminated.234Under Section79 (4) it is
provided that, after termination of the conciliation proceedings, the conciliator is required to render
an accounting to the parties of the deposits received by him and the conciliator shall refund any
unexpended balance to the parties. The Arbitration and Conciliation Act, 1996 under Section 80,
prohibits the conciliator from acting as an arbitrator or as a representative or council of any party,
in any arbitral or judicial proceedings in, respect of a dispute that is the subject matter of the
conciliation proceedings. The provision further prohibits the parties from presenting a conciliator
as a witness in any arbitral or judicial proceeding.235

There is no conflict between litigation and a conciliation or mediation proceeding. Thus, they can
be said to be complimentary to each other, like a bye pass. Choice is of the parties to choose one
but one has a choice to come back to the main thoroughfare the litigation also, when so intended.
Moreover, when a reference is made by the Court under section 89 Code of Civil Procedure, 1908
to a conciliator or a mediator, not only the Court retains the supervisory jurisdiction over the matter
but the lawyers and the litigants continue to be participants therein It is with the active support of
all the three participants along with an additional player, namely, the mediator or conciliator that
a negotiated mutual settlement is arrived at. Therefore, the system of alternative dispute resolution

232
Section 78(3), The Arbitration and Conciliation Act,1996.
233
Section 79 (1), The Arbitration and Conciliation Act,1996.
234
Section 79 (3),The Arbitration and Conciliation Act,1996.
235
The Arbitration and Conciliation Act,1996. Section 80(a) and (b).

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through mediation and conciliation may not and should not be seen as competitive to litigation in
Court.236

The mechanism of conciliation has also been introduced for settling industrial disputes under
Industrial Disputes Act, 1947 and by the Arbitration and Conciliation Act, 1996. The City Disputes
Panel, UK which offers a range of dispute resolution processes, facilitative, evaluative and
adjudicative stated that conciliation “is a process in which the Conciliator plays a proactive role to
bring about a settlement” and mediator is “a more passive process”.237

236
Peter Binder, International Commercial Arbitration And Conciliation in UNCITRAL Model Law Jurisdictions,
2nd edn 2005,p 328.
237
Brown ,Handbook of the City Disputes Panel, UK.1997 ( p 127)

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 5. LOK ADALATS AS A UNIQUE ADR MEASURE IN INDIA

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.
Resolution of disputes is an essential characteristic for societal peace, amity, comity and harmony
and easy access to justice. It is evident from the history that the function of resolving dispute has
fallen upon the shoulders of the powerful ones. With the evolution of modern States and
sophisticated legal mechanisms, the courts run on very formal processes and are presided over by
trained adjudicators entrusted with the responsibilities of resolution of disputes on the part of the
State. The processual formalisation of justice gave tremendous rise to consumption of time and
high number of cases and resultant heavy amount of expenditure. Obviously, this led to a search
for an alternative complementary and supplementary mechanism to the process of the traditional
civil court for inexpensive, expeditious and less cumbersome and, also, less stressful resolution of
disputes.

As such, ADR has been, a vital, and vociferous, vocal and vibrant part of our historical past.
Undoubtedly, Lok Adalat (Peoples' Court) concept and philosophy is an innovative Indian
contribution to the world jurisprudence. It has very deep and long roots not only in the recorded
history but even in prehistorical era. It has been proved to be a very effective alternative to
litigation. Lok Adalat is one of the fine and familiar fora which has been playing an important role
in settlement of disputes. The system has received laurels from the parties involved in particular
and the public and the legal functionaries, in general. It also helps in emergence of jurisprudence
of peace in the larger interest of justice and wider sections of society.238

Lok Adalat (people’s courts), established by the government settles dispute through conciliation
and compromise. The First Lok Adalat was held in Gujarat in 1982. Lok Adalat accepts the cases
which could be settled by conciliation and compromise, and pending in the regular courts within
their jurisdiction. The Lok Adalat is presided over by a sitting or retired judicial officer as the
chairman, with two other members, usually a lawyer and a social worker. There is no court fee. If
the case is already filed in the regular court, the fee paid will be refunded if the dispute is settled

238
http://www.dca.nic.in/cir/anr2gc1099.html

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at the Lok Adalat. The procedural laws, and the Evidence Act are not strictly followed while
assessing the merits of the claim by the Lok Adalat.

Main condition of the Lok Adalat is that both parties in dispute should agree for settlement. The
decision of the Lok Adalat is binding on the parties to the dispute and its order is capable of
execution through legal process. No appeal lies against the order of the Lok Adalat. Lok Adalat is
very effective in settlement of money claims. Disputes like partition suits, damages and
matrimonial cases can also be easily settled before Lok Adalat, as the scope for compromise
through an approach of give and take is high in these cases. Lok Adalat is a boon to the litigant
public, where they can get their disputes settled fast and free of cost. Parliament enacted the Legal
Services Authorities Act 1987, and one of the aims for the enactment of this Act was to organize
Lok Adalat to secure that the operation of legal system promotes justice on the basis of an equal
opportunity. The Act gives statutory recognition to the resolution of disputes by compromise and
settlement by the Lok Adalats.

According to Legal Services Authorities (Amendment) Act 1994 effective from 09- 11-1995 has
since been passed, Lok Adalat settlement is no longer a voluntary concept. By this Act Lok Adalat
has got statutory character and has been legally recognized. Certain salient features of the Act are
enumerated below:

SECTION 19

1. Central, State, District and Taluk Legal Services Authority has been created who are responsible
for organizing Lok Adalats at such intervals and place.

2. Conciliators for Lok Adalat comprise the following: -

(a). A sitting or retired judicial officer.

(b). Other persons of repute as may be prescribed by the State Government in consultation
with the Chief Justice of High Court.

Lok Adalats has many advantages over the Courts. Fundamentally, Lok Adalats are less formalized
and less expensive than the Courts. The litigants have greater scope for participation in the
satisfactory resolution of their disputes. Lok Adalats can act simultaneously as conciliators,
mediators, arbitrators or adjudicators as the situation demands. As such, Lok Adalats plays many

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different roles such as preventing conflicts from festering, negotiating, bargaining, compromising
and resolving disputes efficiently base on the circumstances of the individual cases. Lok Adalats
can be considered a recent expression of this trend in judicial populism and the benefits of
traditional dispute resolution that has continued in India since Vedic period and re introduced after
independence and traces its roots back to the Britishers attempts to establish local panchayats that
would handle petty disputes.

Originally, Lok Adalats were held only several times per year on Sundays in towns throughout the
Districts of India, and the subject matter jurisdiction was potentially unlimited.239 Lok Adalats
handled disputes arising from the tahsil the subdivision of a district in which the town was located.
This tradition has continued. These days, Lok Adalats have the jurisdiction to settle, by way of
effecting compromise between the parties, matters that may be pending before a Court, as well as
matters at prelitigation stage, i.e. disputes which have not yet been formally instituted in any Court
of law. Nowadays Lok Adalats are held frequently and almost daily. The disputes may be civil or
criminal in nature, but the Lok Adalat cannot decide any matter relating to an offence not
compoundable under any law even if the parties involved therein agree to settle the same.

The benefits of Lok Adalats include no Court fee and if a Court fee has been paid in the Court, it
is refunded when the dispute is settled in a Lok Adalat. There is direct consultation with a judge
without procedural hurdles, an extremely abbreviated hearing schedule and the final decision by
the Lok Adalat is binding. The disputants prefer Lok Adalat, as compromise position is often
reached and the problem of judicial stagnation right away calls for simplifying procedures and
increasing their flexibility.

There is a trend to have specialized Lok Adalats be convened, including consumer commissions
for deficiencies in service provided by contractors, doctors and insurance companies, to dedicated
motor vehicle accident and public utility service disputes.240 The prisons have been hosting Lok
Adalats, in some cases leading to the freeing of dozens of prisoners or under-trials.241 It is entirely
up to the conciliators at the lok adalats whether to accept a petition or reject it. Since 2002, Lok
Adalats have been found to be a successful tool of alternate dispute resolution in India. It is most

239
Legal Services Authorities Act, 1987, Sec 19(3).
240
S. Arunajatesan, Consumer commission holds first Lok Adalat, THE HINDU, Jan. 29, 2006.
241
35 prisoners ordered released, THE HINDU, May 13, 2007.

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popular and effective because of its innovative nature and inexpensive style. These panels have
been described as a “revolutionary evolution of the resolution of disputes”.242 As such, Lok Adalats
have now been widely accepted and recognized as an effective vehicle for conciliating and settling
disputes.243

242
Bhatt, Jitendra N. (Judge, High Court of Gujarat, and Executive Chairperson, Gujarat State Legal Services
Authority, Ahmedabad), A Round Table Justice through Lok Adalat (People’s Court): A Vibrant ADR in India, 1
Supreme Court Cases (Journal) 11(2002).
243
Under Section 89 of the Code, Courts have been empowered to explore the possibilities of settlement of disputes
through Lok Adalats, arbitration and conciliation.

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 6. INFORMATION TECHNOLOGY IN ADR

Alternative dispute redressal mechanism is a better platform to redress grievances of civil nature.
Alternative dispute redressal methods techniques are extra-judicial in nature. They can be used in
almost all contentious matters, which are capable of being resolved, under law, by agreement
between the parties. They can be employed for getting some very encouraging results in several
categories of disputes, especially civil, commercial, industrial and family disputes. These
techniques can work across the full range of business disputes like banking, contract performance,
construction contracts, intellectual property rights, insurance, joint ventures, partnership
differences etc. Alternative dispute redressal methods can offer the best solution in respect of
commercial disputes. However, alternative dispute redressal methods are not intended to supplant
altogether the traditional means of resolving disputes by means of litigation. It only offers
alternatives to litigation. This is more so with the use of information and communication
technology in online dispute redressal methods, because it is not only instantaneous but also
equally cheap and convenient. The companies and individuals engaged in the business of e-
commerce and web dealings can avail its services in resolution of their disputes. The awareness,
popularity and use of different alternative dispute redressal mechanism are to be increased, and
these methods can achieve its best in the present scenario where information technology is
dominating every field only if the same is integrated with the information technology. Mediation
followed by arbitration also referred to as Mediation-Arbitration is a combination of mediation
and arbitration is one of the newly developed hybrids methods, which can also be adopted for an
effective dispute redressal purpose. The necessity of evolution of such different dispute resolution
methods has arisen due to the growing problem of judicial arrears and judicial delay faced globally
by developed as well as developing counties Courts. Thus, there is evolution and use of newer
alternative dispute resolving mechanism worldwide with the aim to reduce the burdening of the
already overburdened Courts in India.

6.1 ONLINE DISPUTE RESOLUTION IN INDIA

Decision based on the law, which does not fulfill the requirements of the ever-changing dynamic
environment of the society is meant to be shunned. Thus, a purposive, modernized and a continuing
interpretation of the Courts is necessary because the interface of justice delivery system with the
information technology is becoming inevitable. Law is not static, it must change with the changing

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social concepts and values for the maintains of social order in the society. Otherwise, either the
old law will suppress the growth of the society and choke its progress or if the society is vigorous
enough, it will cast away the law, which stands in the way of its growth. Law must therefore
constantly keep on adapting itself to the fast-changing society and not lag behind.244 It is a
requirement of the society that the law must respond to its need. The greatest virtue of the law is
its flexibility and its adaptability; it must change from time to time so that it answers the cry of the
people, the need of the hour and the order of the day. Thus, the justice delivery system cannot
afford to take the information technology revolution lightly.245 The judiciary in India has not only
recognised this need but has also utilised the information technology to do complete justice. The
Supreme Court has on various occasions encouraged the use of information technology for meeting
the ends of justice and to do complete justice. The Supreme Court has encouraged the use of
alternative dispute redressal methods in India and very soon, the same will be extended to online
dispute redressal method as well. The need and necessity of online dispute redressal method is in
near future and if Indian government and the people are encouraging online dispute redressal
method it is thereby assisting in the attainment of a speedier, economical and convenient justice
system. Thus, the sooner online dispute redressal method is adopted the better it will be for the
nation in general and the justice seeker in particular.

Dispute resolution can take place on-line by using information technology in certain cases. Online
dispute resolution, is a growing field of dispute resolution, where newer forms of communication
technologies can be used to solve disputes. Online Dispute Resolution is also called as "ODR".
Online Dispute Resolution or ODR also involves the application of traditional dispute resolution
methods to disputes which arise online.

The swift growth of e-commerce and web site contracts has increased the potential for conflicts
over contracts, which have been entered into online. This has necessitated a solution that is
compatible with online matters with the use of internet technology. This challenging task can be
achieved by the use of online dispute redressal method in India. It can be used to resolve such e-
commerce and web site contracts disputes that are crucial for building consumer confidence and
permitting access to justice in an online business environment.

244
Justice Bhagwati in National Textile Worker’s Union Vs. P.R.Ramakrishnan, (1983) 1 SCC 228, at p. 256.
245
Praveen Dalal, “Justice through electronic governance”, http://legalsolutionsindia.com.html.

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The online dispute redressal method are not part and parcel of the traditional dispute resolution
machinery popularly known as “judiciary”, but is an alternative and efficacious institution known
as alternative dispute redressal mechanism. Introduction of information and communication
technology in the traditional Courts has given way to the introduction of the concept of E-Courts.

6.2 NEED FOR ONLINE DISPUTE RESOLUTION

The alternative form of dispute redressal mechanisms can be effectively used to settle online
disputes by modifying it as per the needs. It is time effective and cost efficient. The unique feature
of this method is that, it can also overcome the geographical hurdles. However, the effective
implementation of this method requires the need for personnel with knowledge of information
technology, the different alternative dispute redressal methods and law, technical concerns, legal
sanctity of proceedings, industry support etc. The use of alternative dispute redressal methods for
resolving online disputes is to be increased day by day. Number of web sites provide for different
type of online dispute resolution method like arbitration, conciliation and mediation with certain
conflict management services. The demand for these services will increase as the Arbitration and
Conciliation Act, 1996 has given paramount importance to “party autonomy” by accepting the
intention of parties as a platform for form of dispute resolution. Thus, what law will be applicable
will depend on the intention of parties. If the parties have adopted the mechanism of online dispute
redressal method then it will definitely apply with necessary minor modifications. The language
used in various sections of the 1996 Act, as evident from the last chapter on Arbitration and
Conciliation Act, 1996, gives options to the parties to opt for the procedure as per their agreement
during the arbitral proceedings before the arbitrator.246 However, the appellate procedure would
be governed as per the statutory provisions and parties have no right to change the same.247

There is a rapid growth of e-commerce, e-business and web site with the easy prologue of internets
at every domestic and business front. Contracts entered through internet as a basis of
communications has increased the potential for conflicts over contracts that have been entered into
online. This has necessitated a solution that is compatible with online matters. This challenging
task can be achieved by the use of online dispute redressal method in India. The use of online
dispute redressal method to resolve such e-commerce and web site contracts disputes are crucial

246
Praveen Dalal, “Online dispute resolution in India”,(2005)p.11
247
N S Nayak Vs.State of Goa, 2003 (6) SCC 56

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for building consumer confidence and permitting access to justice in an online business
environment.

Thus, it is high time that for understanding and building a base for offline alternative dispute
redressal mechanism as well as online dispute redressal methods in India. It must be noted that
every new project needs time to mature and become successful. Thus, the success of alternative
dispute redressal mechanisms and online dispute redressal methods depends upon a timely and
early base building by creating awareness of the use of such new reliable dispute redressal methods
for the present global economy.

6.3 THE JUDICIAL RESPONSE WITH REFERENCE TO INFORMATION AND

COMMUNICATION TECHNOLOGY

The concept of speedy trial would cover all the stages including investigation, inquiry, trial, appeal,
revision and re-trial in short everything commencing with an accusation and expiring until the final
verdict and its enforcement. The study of the following cases reveal that the Indian Judiciary has
emphasized that use of information technology and communication technology in dispute
resolution process is positive and technology friendly concept, which would help the dispute
redressal machineries in solving the problem of judicial delay and the problem of judicial arrears.

In M/S SIL Import, USA Vs. M/S Exim Aides Silk Exporters,248 the words "notice in writing", in
Section 138 of the Negotiable Instruments Act, were construed to include a notice by fax. The
Supreme Court observed that, “a notice envisaged under section 138 can be sent by fax. Nowhere
is it said that such notices must be sent by registered post or that it should be dispatched through a
messenger. Chapter XVII of the Act, containing sections 138 to 142 was inserted in the Act as per
Banking Public Financial Institution and Negotiable Instruments Laws (Amendment) Act, 1988.
Technological advancements like Fax, Internet, E-mail, etc were on swift progress even before the
Bill for the Amendment Act was discussed by the Parliament. When the legislature contemplated
that notice in writing should be given to the drawer of the cheque, the legislature must be presumed
to have been aware of the modern devices and equipments already in vogue and also in store for
future. If the Court were to interpret the words "giving notice in writing" in the section as restricted
to the customary mode of sending notice through postal service or even by personal delivery, the

248
AIR 1999 SC 1609.

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interpretative process will fail to cope up with the change of time. So, if the notice envisaged in
clause (b) of the proviso to section 138 was transmitted by Fax, it would be compliance with the
legal requirement".

Thus, the requirement of a written notice will be satisfied if the same is given in the form of a fax,
e-mail etc, using the information technology. It must be noted that a notice by e-mail can be send
instantaneously and its delivery is assured and acknowledged by a report showing the due delivery
of the same to the recipient. This method is more safe, accurate, economical and lesser time
consuming as compared to its traditional counterpart, popularly known as "Registered post with
acknowledgement due".

In Basavaraj R. Patil Vs.State of Karnataka,249 the question was whether an accused need to be
physically present in Court to answer the questions put to him by the Court whilst recording his
statement under section 313. The majority held that the section had to be considered in the light of
the revolutionary changes in technology of communication and transmission and the marked
improvement in the facilities of legal aid in the country. It was held that it was not necessary that
in all cases the accused must answer by personally remaining present in the Court. Once again, the
importance of information technology is apparent from this decision. If a person residing in a
remote area of South India is required to appear in the Court for giving evidence, then he should
not be called from that place, instead the medium of "video conferencing" should be used. In that
case, the requirements of justice are practically harmonized with the ease and comfort of the
witnesses, which can drastically improve the justice delivery system.

In State of Maharashtra V. Dr. Praful. B. Desai,250 the Supreme Court observed that, "The
evidence can be both oral and documentary and electronic records can be produced as evidence.
This means that evidence, even in criminal matters, can also be by way of electronic records. This
would include video conferencing. Video conferencing is an advancement in science and
technology which permits one to see, hear and talk with someone far away, with the same facility
and ease as if he is present before you i.e. in your presence. Thus, it is clear that so long as the
accused or his pleader is present when evidence is recorded by video conferencing that evidence
is recorded in the "presence" of the accused and would thus fully meet the requirements of section

249
(2000) 8 SCC 740
250
2003 (3) SCALE 554.

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273, Criminal Procedure Code. Recording of such evidence would be as per "procedure established
by law". The advancement of science and technology is such that now it is possible to set up video
conferencing equipments in the Court itself. In that case, evidence would be recorded by the
magistrate or under his dictation in the open Court. To this method there is however a drawback.
As the witness is not in the Court, there may be difficulties if commits contempt of Court or
perjures himself. Therefore, as a matter of prudence evidence by video conferencing in open Court
should be only if the witness is in a country which has an extradition treaty with India and under
whose laws contempt of Court and perjury are also punishable".

This judgment of the Supreme Court 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 aware of the advantages of information technology and is actively and
positively using it in the administration of justice. It is an undeniable fact that the "e-justice system"
has found its existence in India. It is not at all absurd to suggest that online dispute redressal method
will also find its place in the Indian legal system very soon.

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 CONCLUSION

Indian courts suffer from a serious backlog of cases, which is mainly due to less number of judges
and insufficient infrastructure which is unable to handle the caseload. India being a developing
country, going through major economic reforms within the framework of the rule of law, for
expeditious resolution of disputes and lessening the burden on the courts, alternative mechanisms
for resolution (ADR) are the only alternative through arbitration, conciliation, mediation and
negotiation. By virtue of Code of Civil Procedure amendment in the year 2002, Section 89 has
been included, which gives importance to mediation, conciliation and arbitration. This section
makes it obligatory on the part of the Court to refer the matter for settlement either before the Lok
Adalat or other methods enumerated in that section. Now it has become an international
phenomenon to resolve commercial disputes through arbitration and not through normal judicial
system. Majority of the persons do not want to become involved in lawsuits due to delays, high
costs, unwanted publicity, and ill will.

Alternate Dispute Redressal, on the other hand, is usually faster and less expensive, and it is also
conclusive. In addition to reducing the burden on the Courts and giving speedy justice to people,
Alternative Dispute Resolution mechanism have been introduced and are being utilized for a
number of other reasons. Alternative Disputes Resolution mechanisms are relatively inexpensive
in comparison with the ordinary legal process. These mechanisms, therefore, help litigants who
are unable to meet the expenses involved in the ordinary process of dispute resolution through
Courts. Furthermore, ADR mechanisms enhance the involvement of the community in the dispute
resolution process.

Alteranate Dispute Redressal encourages the participation of people in the process of dispute
resolution and thus it creates legal awareness and respect for rights of others and promotes self-
reliant development. ADR processes have the advantage of providing parties with the opportunity
to reduce hostility, regain a sense of control, gain acceptance of the outcome, resolve conflict in a
peaceful manner, and achieve a greater sense of justice in each individual case. The resolution of
disputes takes place usually in private and is more viable, economic, and efficient. One of the
foremost advantages of the Alternative Dispute Resolution process is that the dispute remains
under the control of the parties themselves and any settlement entered into is their own and do not
represent a dictate from an outsider. The process of Alternative Disputes Resolution be it

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arbitration, mediation, negotiation or Lok Adalats implies a greater involvement of the disputing
parties. The parties are actively involved in the process of dispute resolution and can, therefore,
more effectively reach a settlement of the dispute.

Alternative Dispute Resolution mechanism (ADR) is not a replacement of litigation, rather it

would be used to make our traditional court systems work more efficiently and effectively. We
have to formulate effective Alternative Dispute Resolution mechanisms to ease the present burden
of judicial functioning. The backlog of cases is increasing day by day; however, judiciary alone is
not responsible for the same. It must be noted that the backlog is a product of “inadequate judge
population ratio” and the lack of basic infrastructure. The government has to play a pro-active role
in this direction. The researcher is of the view that in order to make Alternative Dispute Resolution
Mechanisms more effective and taking it out of very narrow and limited area of application and
widening the area of its operation. Further the lawyers have to play a very active and positive role
and they should never forget that dispute is a problem, which needs to be solved and not contest,
which needs to be won.

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 BIBLIOGRAPHY

• Acharya. N.K, Law Relating to Arbitration and A.D.R., Asian Law House, 2002.
• Aiyer.P. Ramanath, The Law Lexicon, The Encyclopedic Legal and Commercial
Dictionary, Wadhwa and Co., Nagpur, 2002.
• Basu N.D., Basu’s Arbitration Act, 7th Edition, Eastern Law House, 1976.
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• Chowdhury Roy and Saharay, Arbitration, Eastern Law House, Calcutta, 1979.
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Nexis, 2006
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Nagpur, 2001.
• Narayanan. P.S, Arbitration and Conciliation Act 1996, Lexis Nexis, 2002.
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Agency, Allahabad, 2016.
• Ratanlal and Dhirajlal, The Code of Criminal Procedure, Wadhwa and Co, Nagpur, 2005.
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Resolution, 4th Edition, Universal Law Publishing, New Delhi, 2017
• Singh Avtar, Law of Arbitration and Conciliation, Eastern Book Company, 2007
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• www.findlaw.com
• www.legallyindia.com
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• www.lawworld.com
• www.legalservicesindia.com
• www.adrr.com

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 REFERENCE

• http://www.ebc-india.com/lawyer/articles/2002vla.html.
• http://www.ardgroup.co.uk/history.html.
• Birendranath, Judicial Administration in Ancient India, 1979.
• Mulla, Hindu Law, 1974.
• Dr. V.C Sarkar, Epics of Hindu Legal History.
• M.P Jain, Outline of Legal History.
• R.C Majumdar, An Advanced History of India.
• Sunil Deshta, Lok Adalats in India, 1995.
• V.N Shukla, Constitution of India, 2003.
• Ratanlal and Dirajlal, The Code of Criminal Procedure.
• K.N.C Pillai, Criminal Jurisdiction of Nyaya Panchayaths.
• P. Chandrasekhara Rao, The Arbitration and Conciliation Act,1996.
• Malhotra O.P. and Indu Malhotra, Law and Practice of Arbitration and Conciliation, Lexis
Nexis, 2006
• N.K Acharya, Law Relating to Arbitrarion and ADR, 2004.
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• 77th Law Commission of India Report, 1978.
• Malimath Committee Report, Ch VII, P.112, Ch IX p.168,170.
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