DHARMASHASTRA NATIONAL

LAW UNIVERSITY

Drafts & Pleadings

Project Topic
Analysis of Efficacy of Arbitration as A Dispute
Settlement Mechanism

Submitted by~
SHIVANSH PARIHAR
BAL/121/18

Submitted to~
Mrs. Shruti Nandwana
(Asst. Professor of Law)

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 ACKNOWLEDGEMENT

I would like to thank the university and then our Hon’ble Vice Chancellor Prof. (Dr.) V.
Nagaraj for giving me this great opportunity to work on a topic like this, which was
enlightening, and of considerable relevance.

I would also like to thank Mrs. Shruti Nandwana, who helped me the most in completing
this project through all the consultations given by them. The consultations were of utmost
help.

Thank You

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 TABLE OF CONTENTS

1. ACKNOWLEDGEMENT...........................................................................................2

2. RESEARCH METHODOLOGY...............................................................................4

3. IMPORTANCE OF ARBITRATION........................................................................5

4. ELEMENTS OF AN ARBITRATION AGREEMENT...........................................6

5. CHALLENGES IN GROWTH OF ARBITRATION IN INDIA............................7

6. ADDRESSING ISSUES AND OVERCOMING THEM..........................................9

7. CONCLUSION...........................................................................................................10

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 RESEARCH METHODOLOGY

RESEARCH QUESTION

1. What is arbitration & its importance?

2. What are key elements of arbitration agreement in India?

3. What are the challenges in growth of arbitration in India?

HYPOTHESIS

Arbitration is cheaper, faster, confidential and is more flexible than litigation and is popular
adjudicatory process than litigation

RESEARCH METHODOLOGY
The researcher has relied upon the analytical and doctrinal method of research for the project.

MODE OF CITATION
20th Blue Book edition.

AIMS AND OBJECTIVES

The aim and objective of the researcher is to analyze the efficacy of arbitration in India as a
method of dispute resolution, key elements of arbitration agreement in India and also the
challenges in growth of arbitration in India

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 IMPORTANCE OF ARBITRATION

“Arbitration currently is a much better alternative than a court/judicial proceeding.  Though

arbitration may be a costly affair due to expensive arbitrator fees, it’s a generally much more
favoured medium of conciliation.  Arbitration helps ease the burden on courts while
providing gratifying relief to the disputants to the arbitration”1.

Arbitration is helpful in the following cases:

 It is a consensual process, as it requires the specific permission to both parties of

the dispute.
 It is a confidential yet neutral procedure as it is protects the identity of the
disputants, existence of the arbitration, disclosures made during the process and
the award of the arbitration. Arbitration does not sympathize with any of the party
involved; it is the product of mutual understanding of both the parties.
 Unlike in a court proceeding, the disputants in an arbitration process have the
liberty to choose their arbitrator.
 The award to the dispute given by an arbitral tribunal is enforceable and final.
These awards can be set aside or can be challenged only in exceptional situations.

1
https://blog.ipleaders.in/effectiveness-arbitration-dispute-resolution-mechanism-e-commerce/

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 ELEMENTS OF AN ARBITRATION AGREEMENT

a. Consent: -“Without the parties' consent, an arbitration cannot take place. A consent clause
is included in an arbitration agreement. This agreement expresses the parties' intention for
their dispute to be resolved through arbitration. In other words, they expressly state that if
they have a disagreement, they will resolve it through arbitration rather of going to court.
This agreement is written in the form of a legally binding contract. "Arbitration agreement,"
as defined by section 7 of the Act, is an agreement between the parties to submit all or
specific disputes that have arisen or may arise between them in respect of a defined legal
relationship, whether contractual or not. If the contract is in writing and the reference is such
that the arbitration clause becomes part of the contract, the reference establishes an arbitration
agreement”2.

b. Presiding Authority – “The Authority adjudicating the dispute is better known as the
arbitral tribunal. It is similar to a judge that presides over a court of law. The presiding
authority is known as the arbitrator, who is in charge of deciding the disputes between the
parties. Just like the judge an arbitrator also has several responsibilities set out in the code.
The arbitrator is under oath to perform its duties. He/She is bound to take decisions and
conduct proceedings in a neutraland impartial manner.One of the key features of an
Arbitration Agreement is the fact that the parties are free to choose their presiding authority.
This legislative clause not only inspires confidence in the arbitrators but also the process and
the decisions taken. The Act also has provisions for removing arbitrators, if found guilty of
not being neutral and independent”3.

c. Seat of arbitration – “The seat of arbitration determines the courts which would exercise
jurisdiction over the arbitration proceeding. In absence of such an agreement, the 1996 Act
solely operates within the territory of India”.

d. Party autonomy and procedure – “Arbitration gives the parties the choice to select
applicable laws, especially if the arbitration is an international commercial arbitration.
Additionally, there is an enormous flexibility to choose the procedure that shall be applicable.
The Rules of the arbitration can be self - governed, however, the said rules have to be in the
spirit of Public Interest of India”4.

e. Finality of outcome – “No appeal lies against an arbitral award, however, an arbitral
award can only be set aside if the said award suffers from as invalid arbitration agreement,
party's incapacity to enter into an agreement, independence and impartiality of an arbitrator,
unfair procedure, etc”5.

2
https://www.mondaq.com/india/arbitration-dispute-resolution/arbitration-a-perspective
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 CHALLENGES IN GROWTH OF ARBITRATION IN INDIA

 Conventional thinking of Indians 

“Although India is moving towards modernisation, it is yet a developing country. Which
means, most people are ignorant towards arbitration and still trust courts more than alternate
dispute resolution. This is not necessarily a bad thing, putting faith in one’s judicial system,
but when the citizens of a country are ignorant and are unwilling towards change, this kind of
orthodox thinking can really harm rather than helping anyone”.

 Lack of Proper Laws

The Arbitration and Conciliation Act was first passed in 1996, and it was recently updated in
2015. There is a pressing need in India for a more comprehensive law governing the
arbitration procedure and hearings. Lawmakers must conduct significant research on the
issues relating to the demands and requirements of businesses that engage with arbitration
hearings on a regular basis. The laws must become stricter and more thoroughly crafted so
that an increasing number of people trust Arbitration over the judicial system. Simply said,
most people are still unwilling to take risks or leaps of faith when it comes to major issues
that they may encounter in company.
 Intervention of Courts in Arbitration Proceedings
Court interference in arbitration procedures should be reduced to a bare minimum. Those
who choose arbitration over going to court as a result of such interventions have a stronger
preference for going to court. It is sometimes preferable to approach the court first. Not only
should court participation be limited during arbitral procedures, but it should also be limited
once the processes are over. This means that under Section 34 of the Arbitration Act, 1996,
there must be a restricted scope for challenging the arbitral judgement. Two concerns arise in
White Industries vs. Republic of India6: a) Judicial intervention and b) Arbitration delays
As a result, it was widely argued and agreed that the judiciary's involvement should be
limited.
 Lack of Awareness

The lack of information among the public is one of the primary reasons why arbitration is not
developing in India. Because some businessmen, advocates, or legal advisors are only aware
of the circumstances relating to arbitration proceedings, many small-scale businessmen or
newcomers who are uninformed of such remedies are left out of the purview of such
proceedings.

6
White Industries Australia Ltd v India, Final award, IIC 529 (2011), 30th November 2011, Arbitration

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The above-mentioned factors are the primary reasons why arbitration in India is not
developing at a quicker rate. Now we must consider how to address these issues in order to
improve India's reputation as a commercial and arbitration destination..

ADDRESSING ISSUES AND OVERCOMING THEM

 Creating Awareness
 If we want to improve the position of arbitration in India, we must first address the needs of
the people. It's crucial to communicate. Promoting arbitration and, as a result, avoiding
private participants from going to court without first consulting the contract's applicable
arbitration terms, must be an aim. People can never seek justice if they are uninformed of
their rights. With this in mind, it is critical that we raise awareness of arbitration, its demands,
and its significance.

 Mandatory Arbitration

It should be brought up, unless institutional arbitration becomes mandatory, India will not
have a vibrant domestic arbitration environment. This is only possible if arbitration
agreements specify the institution that will conduct the arbitration..

 Minimum Court Intervention

Only the bare minimum of court intervention is required. Arbitration is an Alternative
Dispute Resolution (ADR) method, which implies it is a method of settling conflicts rather
than through the courts. However, because courts can intervene in arbitration procedures, the
whole concept of ADR is lost. Court participation should be kept to a bare minimum and in
check, such as under Section 34 of the Arbitration Act, 1996, there should be a limited scope
for challenging an arbitral result.

 Introduction of Proper Laws

Introduction of proper laws is also a necessary requirement in such scenarios. Arbitration
laws are required to be amended on a regular basis, and are crucial if our goal is to improve
the conditions of the arbitration in India.

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 CONCLUSION

“It is an adjudicatory process in the nature of adversarial proceedings, wherein parties submit
their disputes to a neutral third party (arbitrator) for a decision. The proceedings, similar to
litigation are however, faster, cheaper, confidential and more flexible in procedure and
application of rules of evidence. The parties have the independence to chalk out the same in
the agreement to arbitration. The said agreement, which must necessarily precede arbitration,
should be a valid one as per the Indian Contract Act, 1872. The parties to an arbitration
agreement must have the capacity to enter into a contract in terms of Sections 11 and 12 of
the said Act. Arbitral decisions are final and binding on the parties with very limited scope of
objecting to them”.