E-Notes - ADR - LLB 309.

Chanderprabhu Jain College of Higher
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E- NOTES
Class : BBALLB/ BALLB V Semester

Paper Code : LLB 309
Subject : ADR
Unit 1
CONCEPT OF ADR
a. Meaning, Nature and Genesis of Alternative Dispute

Resolution Origin of Alternative Dispute Resolution System
in India
1. Ancient India:
It was since the ancient India; law of arbitration was very popular and were highly
accessible. While dealing with such cases on arbitration, the awards were known as
decisions of Panchayats, commonly known as Panchats. The decisions of
Panchayats were of binding nature in law in force in those times. The head of a
family, the chief of a community or selected inhabitants of a village or town might
act as Panchayat.
In words of Martin, C.J., “arbitration was indeed a striking feature of ordinary
Indian life and it prevailed in all ranks of life to a much greater extent than was the
case of England. To refer matters to a Panch was one of the natural ways of
deciding many disputes in India”.
The Hindu idea of Panchayats was that a Panchayat was the lowest tribunal and as
such its award was subject to appeal. The Bengal Regulation of 1781 imported the
idea that it was the tribunal of the parties’ own choice, hence in the absence of
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misconduct the parties were bound by its decision. Accordingly, the only course left
open to the aggrieved parties was that they had to impeach the awards on the grounds
of misconducts of the Panchayats. The known misconduct was gross corruption or
partiality. This caused the respectable persons to be reluctant to become Panches and
the Panchayat system fell in disuse or public infancy. Then the Regulation of 1787
empowered the Courts to refer certain suits to arbitration, but no provision was made in
the Regulation for cases wherein difference of opinion among the arbitrator arose. The
Bengal Regulation of 1793 (XVI of 1793) empowered courts to refer matters to
arbitration with the consent of the parties where the value of the suit did not exceed Rs.
200/- and the suits were for accounts, partnership, debts, non-performance of
contracts, etc. In this Regulation, the procedure for conducting an arbitration
proceeding was also provided. Regulation XV of 1795 extended the Regulation XVI of
1793 to Benaras. Similarly, the Regulation XXI of 1803 extended the Regulation XVI
of the territory ceded the Nawab Vazeer.
Since by then the Madras Regulation IV of 1816 and V of 1816 empowered the
Panchayats to settle disputes by them. In Bombay Regulations IV and VII of 1827
similar provisions were made.
2. British Period:
Thereafter, the Civil Procedure Code, 1859; the Indian Contract Act, 1872 and the
Specific Relief Act, 1877 mandated that no contract to refer the present or further
differences to arbitration could specifically enforce. A party refusing to reform his
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part of the contract was debarred from bringing a suit on the same subject-matter.
The Arbitration Act, 1877 came as a complete code in itself. It made rules as to
appeals and the Code of Civil Procedure aforesaid was not applicable to matters
covered by the Arbitration Act, or the second schedule to the Code of Civil
Procedure. The Code of Civil Procedure, 1859 (VII of 1859), was the first Civil
Code of British India. The law relating arbitration was incorporated in Chapter VI
of the Code (Sections- 312 to 327). It was, however, not applicable to the Supreme
Court or to the Presidency Small Cause Courts or to non- Regulation Provinces.
This Act was repealed by Act X of 1877 which consolidation the law of Civil
Procedure which was further replaced by Act XIV of 1882. This Code of Civil
Procedure also was replaced by the Code of Civil Procedure, 1908 (V of 1908), the
present Code. The Second Schedule of the Code comprised the law regarding
arbitration.
The law of Arbitration in the British Rule in India was comprised in two
enactments. One was the Indian Arbitration Act, 1899, which was based on the
English Arbitration Act, 1899. Many sections of the Indian Act were the verbal
reproduction of the schedule to the Code of Civil Procedure Code, 1908. The
Arbitration Act, 1899 extended to the Presidency Towns and to such other areas as
it might be extended by the appropriate Provincial Government. Its scope was
confined to ‘arbitration’ by agreement without the intervention of a Court. Outside
the scope of operation of Arbitration Act 1899, the Second Schedule to the Code of
Civil Procedure Code, 1908 was applicable. The Schedule related mostly to
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arbitration in suits. The Schedule contained an alternative method also, whereby
the parties to a dispute or any of them might file the concerned arbitration
agreement before a Court having jurisdiction, which Court following a certain
procedure referred the matters to an arbitrator.
The Arbitration Act, 1940 consolidated and amended the law relating to
Arbitration very exhaustively. This Act repealed Section 89, clauses (a) to (f), of
sub-section (1) of Section 104 and the Second Schedule to the Code of 1908. The
Civil Justice Committee had recommended various changes in the Arbitration Law.
Since the Arbitration Act of 1899 was based on the English Law then in force, to
which several substantial amendments were affected by the Amendment Act of the
British Parliament in 1934. The recommendations of the Civil Justice Committee
were scrutinized together and the Arbitration Bill sought to consolidate and
standardise the law relative to arbitration throughout British India in details. This
Bill received the assent of the Governor-General on 11th March, 1940 and was
called the Arbitration Act, 1940. This Act was passed mainly to consolidate and
amend the law relating to arbitration.
The Arbitration Act, 1940 had been described in the oft-quoted passage from the
Guru Nanak Foundation vs. Rattan Singh and Sons as follows-
“However, the way in which the proceedings under the act are conducted and
without an exception challenged in courts, has made lawyers laugh and legal
philosophers weep. Experience shows and laws reports bear ample testimony that
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the proceedings under the Act have become highly technical accompanied by
unending prolixity, at every stage providing a legal trap to the unwary”.
Interminable, time consuming, complex and expensive court procedures impelled
jurists to search for an alternative forum, less formal, more effective and speedy for
resolution of disputes avoiding procedural claptrap and this led them to Arbitration
Act, 1940.
The system of resolving disputes by an Arbitrator was not only confined to India
but elsewhere in the world also. Since ages, the practice was prevalent in several
parts of the world. Greek and Romans attached greater importance to arbitration.
The Arbitration Act, 1940 dealt with only domestic arbitration. In so far as
international arbitration was concerned, there was no substantive law on the
subject. However, enforcement of foreign awards in this country was governed by
two enactments, the Arbitration (Protocol and Convention) Act, 1937 and the
Foreign Awards (Recognition and Enforcement) Act, 1961. These two statutes, in
their entity, except for Section 3 (in both of them) did not deal with international
arbitration as such but merely laid down the conditions for ‘enforcement of foreign
awards’ in India.
The Arbitration Act of 1940, though a good piece of legislation, in its actual
operation and implementation by all concerned – the parties, arbitrators, lawyers
and the courts- proved ineffective. In M/S Guru Nanak Foundation v. M/S
Ratan Singh & Sons, the Hon’ble Supreme Court observed that the Act was
ineffective and the way the proceedings under this Act were conducted in the
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Courts made the lawyers laugh and legal philosophers weep. Experience shows
and law reports bear ample testimony that the proceedings under the Act have
become highly technical accompanied by unending prolixity at every stage
providing a legal trap to the unwary. Informal forum chosen by the parties for
expeditious disposal of the disputes has by the decision of the courts been clothed
with “legalese” of unforeseeable complexity.
A few years later, the Court suggested simplification of the law of arbitration
releasing the law from the shackles of technical rules of interpretation. The
Hon’ble Court observed in Food Corporation of India v. Joginderpal
Mohinderpal,:
The law of arbitration should be simple, less technical and more responsible to the
actual realities of the situations, but must be responsive to the canons of justice
and fair play and make the arbitrator adhere to such process and norms which will
create confidence, not only by doing justice between the parties, but by creating
sense that justice appears to have been done.
3. Modern India:
The Arbitration Act, 1940 was holding the field for nearly half a century but with
the phenomenal growth of commerce and industry the effect of globalization
required substantial changes. The Alternative Dispute Redressal mechanism was
increasingly attracting serious notice and that led to the enactment of Arbitration
and Conciliation Act, 1996 and the incorporation of Section 89 of the Code of
Civil Procedure, 1908 i.e. 1st July, 2002 as a part of this mechanism.
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The Arbitration Act, 1940 was not meeting the requirements of either the
international or domestic standards of resolving disputes. Enormous delays and
court intervention frustrated the very purpose of arbitration as a means for
expeditious resolution of disputes. The Supreme Court in several cases repeatedly
pointed out the need to change the law. The Public Accounts Committee too
deprecated the Arbitration Act of 1940. In the conferences of Chief Justices, Chief
Ministers and Law Ministers of all the States, it was decided that since the entire
burden of justice system cannot be borne by the courts alone, an Alternative
Dispute Resolution system should be adopted. Trade and industry also demanded
drastic changes in the 1940 Act. The Government of India thought it necessary to
provide a new forum and procedure for resolving international and domestic
disputes quickly.
Alternative Dispute Resolution is today being increasingly acknowledged in the
field of law as well as in the commercial sector. The very reasons for origin of
Alternative Dispute Resolution are the tiresome processes of litigation, costs and
inadequacy of the court system. It broke through the resistance of the vested
interests because of its ability to provide cheap and quick relief. In the last quarter
of the previous century, there was the phenomenal growth in science and
technology. It made a great impact on commercial life by increasing competition
throughout the world. It also generated a concern for consumers for protection of
their rights. The legal system did not give any response to the new atmosphere and
problems of the commercial world. Thus ADR emerged as a powerful weapon for
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resolution of disputes at domestic as well as international level. It is developing as
a separate and independent branch of legal discipline.
It offers to resolve matters of litigants, whether in business causes or otherwise,
who are not able to start any process of negotiation and reach any settlement.
Alternative Dispute Resolution has started gaining its ground as against litigation
and arbitration.
In modern India for the first time where Alternative Dispute Resolution as a
method of conciliation has been effectively introduced and recognised by law was
in Labour Law, namely Industrial Dispute Act, 1947. Conciliation has been
statutorily recognized as an effective method of dispute resolution in relation to
disputes between workers and the management. All parties to an industrial dispute
who have had the misfortune of going through litigation knew that it is a tedious
process and one which could go well beyond the life time of some of the
beneficiaries. It is this factor that has contributed greatly to the success of
conciliation in industrial relations.
Thus "The Arbitration and Conciliation Act, 1996"came into being. The law
relating to Arbitration and Conciliation is almost the same as in the advanced
countries. Conciliation has been given statutory recognition as a means for
settlement of the disputes in terms of this Act. In addition to this, the new Act also
guarantees independence and impartiality of the arbitrators irrespective of their
nationality. The new Act of 1996 brought in several changes to expedite the
process of arbitration. This legislation has developed confidence among foreign
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parties interested to invest in India or to go for joint ventures, foreign investment,
transfer of technology and foreign collaborations.
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. Such specially devised machinery can also be
described as “Appropriate Dispute Resolution” or “Amicable Dispute Resolution”
so as to stress upon its non-adversarial objectives. In disputes arising across
national frontiers covering the field of private international law ADR is of special
significance to combat the problems of applicability of laws and enforcement.
ADR has thus been a vital, vociferous, vocal and vibrant part of our historical past.
Undoubtedly, the concept and philosophy of Lok Adalat or “People’s Court
Verdict” has been mothered by the Indian contribution. It has very deep and long
roots not only in the recorded history but even in pre-historical period. It has
proved to be a very effective alternative to litigation. People’s Court is one of the
fine and familiar fora which has been playing an important role still today in
settlement of disputes.
Modern ADR is a voluntary system, according to which the parties enter a
structured negotiation or refer their disputes to a third party for evaluation and/or
facilitation of resolution. Especially in the light of the facts that the justice system
is flooded by disputes of variable importance and complexity, and that the parties
are almost invariably intimidated by the atmosphere in the courtroom and the
litigation process itself. ADR has now become an acceptable and often preferred
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alternative to judicial settlement and an effective tool for reduction of arrears of
case. The alternative modes of dispute resolution include arbitration, negotiation,
mediation and conciliation. The ADR system by nature of its process is totally
different from Lok Adalat.
b.FORMS OF ADR MECHANISM
The five different methods of ADR can be summarized as
follows: -
1. Arbitration
2. Conciliation
3. Mediation
4. Judicial Settlement &
5. Lok Adalat
ARBITRATION:
Arbitration, a form of alternative dispute resolution (ADR), is a technique for the
resolution of disputes outside the courts, where the parties to a dispute refer it to
one or more persons – arbitrators, by whose decision they agree to be bound. It is a
resolution technique in which a third party reviews the evidence in the case and
imposes a decision that is legally binding for both sides and enforceable. There are
limited rights of review and appeal of Arbitration awards. Arbitration is not the
same as judicial proceedings and Mediation. Arbitration can be either voluntary or
mandatory. Of course, mandatory Arbitration can only come from statute or from a
contract that is voluntarily entered into, where the parties agree to hold all existing
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or future disputes to arbitration, without necessarily knowing, specifically, what
disputes will ever occur.
The advantages of Arbitration can be summarized as follows: -
a) It is often faster than litigation in Court.
b) It can be cheaper and more flexible for businesses.
c) Arbitral proceedings and an arbitral award are generally nonpublic, and
can be made confidential.
d) In arbitral proceedings the language of arbitration may be chosen,
whereas in judicial proceedings the official language of the competent
Court will be automatically applied.
e) There are very limited avenues for appeal of an arbitral award.
f) When the subject matter of the dispute is highly technical, arbitrators with
an appropriate degree of expertise can be appointed as one cannot choose
judge in litigation.
However, there are some disadvantages of the Arbitration, which
may be summarized as follows: -
a) Arbitrator may be subject to pressures from the powerful parties.
b) If the Arbitration is mandatory and binding, the parties waive their
rights to access the Courts.
c) In some arbitration agreements, the parties are required to pay for the
arbitrators, which add an additional cost, especially in small consumer
disputes.
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d) There are very limited avenues for appeal, which means that an
erroneous decision cannot be easily overturned.
e) Although usually thought to be speedier, when there are multiple
arbitrators on the penal, juggling their schedules for hearing dates in long
cases can lead to delays.
f) Arbitration awards themselves are not directly enforceable. A party
seeking to enforce arbitration award must resort to judicial remedies. In
view of provisions of Section 89 of the Civil Procedure Code, if the matter is
referred to the Arbitration then the provisions of the Arbitration and
Conciliation Act, 1996 will govern the case.
CONCILIATION:
Conciliation is an alternative dispute resolution process whereby the parties to a
dispute use a conciliator, who meets with the parties separately in order to resolve
their differences. They do this by lowering tensions, improving communications,
interpreting issues, providing technical assistance, exploring potential solutions
and bring about a negotiated settlement. It differs from Arbitration in that.
Conciliation is a voluntary proceeding, where the parties involved are free to agree
and attempt to resolve their dispute by conciliation. The process is flexible,
allowing parties to define the time, structure and content of the conciliation
proceedings. These proceedings are rarely public. They are interest-based, as the
conciliator will when proposing a settlement, not only take into account the
parties'legal positions, but also their; commercial, financial and /or personal
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interests. The terms conciliation and mediation are interchangeable in the Indian
context. Conciliation is a voluntary process whereby the conciliator, a trained and
qualified neutral, facilitates negotiations between disputing parties and assists them
in understanding their conflicts at issue and their interests in order to arrive at a
mutually acceptable agreement. Conciliation involves discussions among the
parties and the conciliator with an aim to explore sustainable and equitable
resolutions by targeting the existent issues involved in the dispute and creating
options for a settlement that are acceptable to all parties. The conciliator does not
decide for the parties, but strives to support them in generating options in order to
find a solution that is compatible to both parties. The process is risk free and not
binding on the parties till they arrive at and sign the agreement. Once a solution is
reached between the disputing parties before a conciliator, the agreement had the
effect of an arbitration award and is legally tenable in any court in the country.
Most commercial disputes, in which it is not essential that there should be a
binding and enforceable decision, are amenable to conciliation. Conciliation may
be particularly suitable where the parties in dispute wish to safeguard and maintain
their commercial relationships.
The following types of disputes are usually conducive for
conciliation:
commercial,
financial,
family,
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real estate,
employment, intellectual property,
insolvency,
insurance,
service,
partnerships,
environmental and product liability.
Apart from commercial transactions, the mechanism of Conciliation is also
adopted for settling various types of disputes such as labour disputes, service
matters, antitrust matters, consumer protection, taxation, excise etc.
Conciliation proceedings:
Either party to the dispute can commence the conciliation process. When one party
invites the other party for resolution of their dispute through conciliation, the
conciliation proceedings are said to have been initiated. When the other party
accepts the invitation, the conciliation and justice, and by the usage of the trade
concerned and the circumstances surrounding the dispute, including any previous
business practices between the parties. The conciliator is not bound by the rules of
procedure and evidence. The conciliator does not give any award or,order. He tries
to bring anacceptable agreement as to the dispute between the parties by mutual
consent. The agreement so arrived at is signed by the parties and authenticated by
the conciliator. In some legal systems, the agreement so arrived at between the
parties resolving their dispute has been given the status of an arbitral award. If no
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consensus could be arrived at between the parties and the conciliation proceedings
fail, the parties can resort to arbitration.
Conciliation has received statutory recognition as it has been proved useful that
before referring the dispute to the civil court or industrial court or family court etc,
efforts to concile between the parties should be made. It is similar to the American
concept of court-annexed mediation. However without structured procedure &
statutory sanction, it was not possible for conciliation to achieve popularity in the
countries like USA & also in other economically advanced countries.
MEDIATION:
Now, worldwide mediation settlement is a voluntary and informal process of
resolution of disputes. It is a simple, voluntary, party centered and structured
negotiation process, where a neutral third party assists the parties in amicably
resolving their disputes by using specified communication and negotiation
techniques. Mediation is a process where
it is controlled by the parties themselves. The mediator only acts as a facilitator in
helping the parties to reach a negotiated settlement of their dispute. The mediator
makes no decisions and does not impose his view of what a fair settlement should
be.
In the mediation process, each side meets with a experienced neutral mediator. The
session begins with each side describing the problem and the resolution they desire
– from their point of view. Once each sides’respective positions are aired, the
mediator then separates them into private rooms, beginning a process of “Caucus
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Meeting” and thereafter“joint meetings with the parties”. The end product is the
Settlement as one of the mode of alternative dispute resolution. Ofcourse, there are
no specified rules framed so far for such settlement.
However, the term Judicial Settlement is defined in Section 89 of the Code. Of
course, it has been provided therein that when there is a Judicial Settlement the
provisions of the Legal Services Authorities Act, 1987 will
apply. It means that in a Judicial Settlement the concerned Judge tries to settle the
dispute between the parties amicably. If at the instanceofjudiciary any amicable
settlement is resorted to and arrived at in the given case then such settlement will
be deemed to be decree within the meaning of the Legal Services Authorities Act,
1987.
The chief advantages of the mediation are: -
1. The agreement which is that of the parties themselves;
2. The dispute is quickly resolved without great stress and expenditure;
3. The relationship between the parties are preserved; and
4. The confidentiality is maintained.
JUDICIAL SETTLEMENT:
Section 89 of the Civil Procedure Code also refers to the Judicial Settlement as one
of the mode of alternative dispute resolution. Of course, there are no specified rules
framed so far for such settlement.. However, the term Judicial Settlement is
defined in Section 89 of the Code. Of course, it has been provided therein that
when there is a Judicial Settlement the provisions of the Legal Services Authorities
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Act, 1987 will apply. It means that in a Judicial Settlement the concerned Judge
tries to settle the dispute between the parties amicably. If at the instanceofjudiciary
any amicable settlement is resorted to and arrived at in the given case then such
settlement will be deemed to be decree within the meaning of theLegal Services
Authorities Act, 1987. Section 21 of the Legal Services Authorities Act, 1987
provides that every award of the Lok Adalat shall be deemed to be a decree of the
Civil Court. There are no written guidelines prescribed in India as to judicial
settlement. But in America, ethics requiring judicial settlement has been
enumerated by Goldschmidt and Milford which are as under:
JUDICIAL SETTLEMENT GUIDELINES50
The following are guidelines for judicial settlement ethics:
1. Separation of Functions: Where feasible, the judicial functions in the
settlement and trial phase of a case should be performed by separate
judges.
2. Impartiality and Disqualification: A judge presiding over a settlement
conference is performing judicial functions and, as such, the applicable
provisions of the code of judicial conduct, particularly the disqualification
rules, should apply in the settlement context.
3. Conference Management: Judges should encourage and seek to
facilitate settlement in a prompt, efficient, and fair manner. They should not,
however, take unreasonable measures that are likely under normal
circumstances to cause parties, attorneys, or other representatives of
litigants to feel coerced in the process. The judge should take responsibility
in settlement conferences.
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4. Setting Ground Rules on Issues Such as Confidentiality, Disclosure
and Ex Parte Communications: In settlement conferences, judges should
establish ground rules at the onset, either orallyor in writing, informing parties and
their attorneys of the procedures that will be followed. The rules should include
ground rules governing issues such as confidentiality, disclosure of facts and
positions during and after conferences, and ex parte communications.
5. Focusing the Discussions: A judge should use settlement techniques
that are both effective and fair, and be mindful of the need to maintain
impartiality in appearance and in fact.
6. Guiding or Influencing the Settlement: The judge should guide and
supervise the settlement process to ensure its fundamental fairness. In
seeking to resolve disputes, a judge in settlement discussions should not
sacrifice justice for expediency.
7. Sanctions or Other Penalties Against Settlement Conference
Participants: A judge should not arbitrarily impose sanction or other
punitive measures to coerce or penalize litigants and their attorneys in the
settlement process.
LOK ADALAT:
The concept that is gaining popularity is that of Lok Adalats or people’s courts as
established by the government to settle disputes through conciliation and
compromise. It is a judicial institution and a dispute settlement agency developed
by the people themselves for social justice based on settlement or compromise
reached through systematic negotiations. The first Lok Adalats was held in Una
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aim the Junagadh district of Gujarat State as far back as 1982. Lok Adalats accept
even cases pending in the regular courts within their jurisdiction. Section 89 of the
Civil Procedure Code also provides as to referring the pending Civil disputes to the
Lok Adalat. When the matter is referred to the Lok Adalat then the provisions of
the Legal Services Authorities Act, 1987 will apply. So far as the holding of Lok
Adalat is concerned, Section 19 of the Legal Services Authorities Act, 1987
provides as under: -
Section 19 Organization of Lok Adalats . (1) Every State Authority orDistrict
Authority or the Supreme Court Legal Services Committee or every High Court
Legal Services Committee or, as the case may be,Taluka Legal Services
Committee may organise Lok Adalats at such intervals and places and for
exercising such jurisdiction and for such areas as it thinks fit.
(2) Every Lok Adalat organised for an area shall consist of such number of:-
(a) serving or retired judicial officers; and
(b) other persons, of the area as may be specified by the State Authority or
the District Authority or the Supreme Court Legal Services Committee or
the High Court Legal Services Committee, or as the case may be, the
Taluka Legal Services Committee, organising such Lok Adalat.
(3) The experience and qualifications of other persons referred to in clause
(b) of sub-section (2) for Lok Adalats organised by the Supreme Court
Legal Services Committee shall be such as may be prescribed by the
Central Government in consultation with the Chief Justice of India.
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(4) The experience and qualifications of other persons referred to in clause
(b) of sub-section (2) for Lok Adalats other than referred to in subsection
(3) shall be such as may be prescribed by the State Government in
consultation with the Chief Justice of the High Court.
(5) A Lok Adalat shall have jurisdiction to determine and to arrive at a
compromise or settlement between the parties to a dispute in respect of -
(i) any case pending before it; or
(ii) any matter which is falling within the jurisdiction of, and is not brought
before any court for which the Lok Adalat is organised :
Provided that the Lok Adalat shall have no jurisdiction in respect of any case or
matter relating to an offence not compoundable under any law.
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, thus making it available to those who are the financially vulnerable
section of society. In case the fee is already paid, the same is refunded if the
dispute is settled at the Lok Adalat. The Lok Adalat are not as strictly bound by
rules of procedure like ordinary courts and thus the process is more easily
understood even by the ,uneducated or less educated. The parties to a dispute can
interact directly,with the presiding officer, which is not possible in the case of
normal court proceedings. Section 21 of the Legal Services Authorities Act, 1987
is also required to be referred to here which runs as follows: -
Section 21 Award of Lok Adalat. (1) Every award of the Lok Adalat shall
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be deemed to be a decree of a civil court or, as the case may be, an order of any
other court and where a compromise or settlement has been arrived at, by a Lok
Adalat in a case referred to it under subsection (1) of section 20, the court-fee paid
in such case shall be refunded in the manner provided under the Court Fees Act,
1870 (7 of 1870).
(2) Every award made by a Lok Adalat shall be final and binding on all the parties
to the dispute, and no appeal shall lie to any court against the award.
In view of the aforesaid provisions of the Legal Services Authorities Act, 1987 if
any matter is referred to the Lok Adalat and the members of the Lok Adalat will
try to settle the dispute between the parties amicably, if the dispute is resolved then
the same will be referred to the concerned Court, which will pass necessary decree
therein. The decree passed therein will be final and binding to the parties and no
appeal will lie against that decree. On the flip side, the main condition of the Lok
Adalat is that both parties in dispute have to be agreeable to a settlement. Also, 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
finality attached to such a determination is sometimes a retarding factor for
however be passed by Lok Adalat, only after obtaining the assent of all the parties
to dispute. In certain situations, permanent Lok Adalat can pass an award on
merits, even without the consent of parties. Such an award is final and binding.
From that, no appeal is possible. This is not to the say that Lok Adalat don’t have
many advantages. Lok Adalat are especially effective in settlement of money
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claims. Disputes like partition suits, damages and even matrimonial cases can also
be easily settled before a Lok Adalat as the scope for compromise is higher in these
cases. Lok Adalat is a definite boon to the litigant public, where they can get their
disputes settled fast and free of cost. The appearance of lawyers on behalf of the
parties, at the Lok Adalats in not barred.
Lok Adalat are not necessarily alternatives to the existing courts but rather only
supplementary to them. They are essentially win-win systems, an alternative to
‘Judicial Justice’, where all the parties to the dispute have something to gain.
There are certain hybrids of Alternative Dispute Resolution that also deserve a
mention. These processes have evolved in combination of various Alternative
Dispute Resolution mechanisms with the ultimate objective of achieving a
voluntary settlement. The purpose of many of these hybrids is that the principle
objective of achieving a settlement is kept in mind and all permutations and
combinations should be utilized towards that objective to reduce the burden of the
adjudicatory process in courts. The different Alternative Dispute Resolution
processes and their hybrids have found solutions to different nature of disputes and
thus the knowledge of these processes can be a significant aid.
c. LEGAL AID
Article 39A of the Constitution of India provides for free legal aid to the poor and
weaker sections of the society and ensures justice for all. Article 14 and 22(1) of
the constitution also make 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,
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In 1987, the Legal Services Authorities Act was enacted by the Parliament which
came into force on 9th November, 1995 with an object to establish a nationwide
uniform network for providing free and competent legal services to the weaker
sections of the society on the basis of equal opportunity. The National Legal
Services Authority (NALSA) has been constituted under the Legal Services
Authorities Act, 1987 to monitor and evaluate implementation of legal services
available under the Act.
Hon'ble Mr. Justice K.G. Balakrishnan, the Chief Justice of India is the Patron-in-
Chief and Hon'ble Mr. Justice S.B. Sinha, Judge Supreme Court of India, is the
Executive Chairman of the Authority.
In every State, a State Legal Services Authority and in every High Court, a High
Court Legal Services Committee has been constituted. District Legal Services
Authorities and Taluka Legal Services Committees have been constituted in the
Districts and most of the Talukas in order to give effect to the policies and
directions of the NALSA and to provide free legal services to the people and
conduct Lok Adalats in the State. The State Legal Services Authorities are chaired
by Hon'ble Chief Justice of the respective Districts and the Taluk a Legal Services
Committees are chaired by the Judicial Officers at the Taluka Level.
Supreme Court Legal Services Committee has been constituted to administer and
implement the legal services programme in so far as it relates to the Supreme Court
of India.
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National Legal Services Authority (NALSA)
Functioning of NALSA
The NALSA issues guidelines for the State Legal Services Authorities to
implement the Legal Aid Programmes and schemes throughout the country.
Primarily, the State Legal Services Authorities, District Legal Services Authorities,
Taluka Legal Services Committees, etc. have been asked to discharge the
following two main functions on regular basis:
 To Provide Free Legal Services to the eligible persons; and
 To organize Lok Adalats for amicable settlement of disputes.
Free Legal Services
The Free Legal Services include:
 Payment of court fee, process fees and all other charges
payable or incurred in connection with any legal proceedings;
 Providing Advocate in legal proceedings;
 Obtaining and supply of certified copies of orders and other
documents in legal proceedings;
 Preparation of appeal, paper book including printing and
translation of documents in legal proceedings.
Eligible persons for getting free legal services include:
 Women and children;
 Members of SC/ST;
 Industrial workmen;
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 Victims of mass disaster; violence, flood, drought, earthquake,
industrial disaster;
 Disabled persons;
 Persons in custody;
 Persons whose annual income does not exceed Rs. 50,000/-
 Victims of Trafficking in Human beings.
NALASA Schemes
The NALSA has formulated the following schemes to perform its functions under
the Legal Services Authorities Act, 1987;
Legal and Counsel Scheme
NALSA has initiated Legal Aid Counsel Scheme to provide meaningful legal
assistance to under-trial prisoners who, on account of lack of resources or other
disabilities, cannot engage a counsel to defend them. Now, Legal Aid Counsel
have been attached to each Magisterial Court who provide assistance and defend a
person who is not able to engage a counsel, right from the stage he/she is produced
in the court by the police.
Permanent and Continuous Lok Adalat Scheme
A Permanent and Continuous Lok Adalat Scheme has been formulated and
implemented to establish Lok Adalats under Section 19 of the Act in all the
districts of the country. Under this scheme, the Lok Adalats are now organized
regularly at designated venues, even away from court complexes and the cases
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which remain unsettled are taken up in the next Lok Adalat. Lok Adalats have thus
acquired permanency and continuity and are no more occasional.
Counseling and Conciliation Scheme
NALSA has formulated a Counseling and Conciliation Scheme to encourage the
settlement of disputes by way of negotiations and conciliation. Under this scheme,
Counseling and Conciliation Centres are being set up in all the Districts of the
country for guiding and motivating the migrants to resolve their disputes amicably.
Such Centres have been set up in most of the Districts.
Legal Literacy Programme
NALSA has formulated a strategy to provide basic and essential knowledge to the
vulnerable groups so that they can understand the law and know the scope of their
rights under the law and eventually assert their rights as a means to take action,
uplift their social status and being in social change.
NALSA has been organizing the Legal Aid Camps through State Legal Services
Authorities, Taluka Legal Services Committees, NGOs. etc. in the rural area and
slum areas for educating the weaker sections as to their rights and for encouraging
them to settle their disputes through ADR Mechanism. The people are
educated/made aware of their rights, benefits and privileges guaranteed by social
welfare legislations, administration programmes and measures etc.
The NALSA has been organizing meetings, seminars and workshops connected
with legal services programmes in different parts of the country. The NALSA has
developed audio visual spots and publicity material to make the common man
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aware of the various aspects of the legal services programmes. Documentary films
have also been prepared and are being screened in the different parts of the country
through Directorate of Field Publicity, Government of India.
Accreditation of Voluntary Social Service Institutions
NALSA has formulated a scheme for accreditation of Voluntary Social Service
Institutions to establish a nation wide network of voluntary agencies in order to
spread legal literacy, legal awareness and publicity for legal services throughout
the nook and corner of the country. All the State Legal Services Authorities have
been urged to identify Social Service Institutions in all Districts and give them
accreditation.
Scheme on supporting the implementation of National Rural Employment
Guarantee Scheme (NREGS) through the State Legal Services Authorities
A scheme on Supporting the Implementation on NREGS through State Legal
Services Authorities has been formulated by NALSA for generating awareness
through Legal Literacy and Awareness Campaign and to establish a grievance
redressal forum by Organising Lok Adalats to resolve the disputes/complaints or
legal problems of any person in respect of implementation of the scheme and
employment guaranteed under NREGA.
Plan of Action for 2009-2010
In order to implement the Legal Aid Schemes and Legal Services Programmes of
NALSA in accordance with the object of the Legal Services Authorities Act, 1987,
the following Plan of Action for the financial year 2009-2010 was drawn up:
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Legal Awareness Programme
 Continuation of Micro Legal Literacy Projects in all States.
 Continuation of the NALSA awareness programmes and Lok Adalats
relating to NERGA matters.
 State Legal Awareness Programmes in the States on the following laws :
o Maintenance and Welfare of Parents and Senior Citizens Act,
2007.
o Gram Nyayalaya Act.
o Protection of Women From Domestic Violence Act, 2005.
o Persons with Disabilities (Equal Protection of Rights and
Full Participation) Act.
o National Trust Act.
o Laws relating to Marriage.
o Labour Laws.
o Environmental Protection Laws.
o Consumer Protection Laws.
o Campaign against Female Infanticide.
o Campaign against Human Trafficking.
 Cooperation with National Commission for Women at the Centre and
associating the activities of State Legal Services Authorities with the
State Women's Commissions.
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 Conduct awareness programmes and seminars with the involvement of
National Women's Commission, Ministry of Social Welfare, Ministry of
Child Welfare and Development and Ministry of Rural Development.
Para-legal Volunteer Scheme: It is a scheme for building up a group of
volunteers from among the rural people to act as intermediates between the
common people and legal services institutions at Central, State, District and Taluka
levels.
Lok Adalats: Widening the network of Lok Adalat to Government Departments,
Petitions pending before Women's Commissions, various Tribunals, Labour
Courts, Industrial Tribunal and Tax Tribunals etc., setting-up Special Lok Adalats
in all Family Courts.
Legal Aid Clinics
 Establishing Legal Aid Clinics in all Gram Panchayats (similar to
primary health centres) by engaging competent lawyers as legal
consultants in the clinics. Give wide publicity about the clinics with the
help of local Self- Government Institutions.
 Setting-up Legal Aid Clinics in all law colleges and law universities and
to encourage students to adopt remote village areas as their area of
operation. For this purpose, the following strategies may be adopted:
o The students may be divided into small groups and deputed to the
adopted villages.
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o In urban areas, colonies and slum areas where economically and
socially backward people reside may be chosen for setting up Legal
Aid Clinics.
o Law Students should be guided by a team of senior
Professors/Lecturers including part-time Lecturers. Rapport between
the students and the people of the adopted area should be
maintained throughout the year.
o Law Students shall identify the problems which require Legal Aid.
They shall discuss the problem with the teacher-in-charge and if it
warrants further free legal services, the matter should be brought
before the Legal Services Authorities/Committees concerned.
o The students shall be encouraged to organize legal awareness
classes for small groups of people (4 or 5 houses together or 10 to 12
people). It should be more in the form of informal gatherings.
o The students should aim at preventive and strategic legal aid.
o In appropriate cases, senior students and postgraduate students who
have already enrolled as lawyers, may be entrusted with the filing
and conducting of the litigation in the Courts free of cost.
o No fee shall be collected from the beneficiaries of legal aid clinic.
Legal Aid
Bringing in more competent, well-known and senior lawyers for rendering Legal
Services and Legal Aid.
 Payment of better honorarium to the lawyers who provide Legal Aid.
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 Inclusion of all designated senior lawyers in the Legal Aid Schemes
and requesting them to undertake at least two cases free of charge
every year.
 In appropriate cases, payment of the entire expenses including the
normal fees of the lawyers.
 Annual evaluation of the progress of cases in which Legal Aid was
given. Success rate of the legal aid cases also should be a component of
the evaluation measures.
Schemes, Projects and Programmes drawn up by the State Legal Services
Authorities for the year 2009-10
 Encouraging the preparation of blue-prints for activities for the year
2009- 10 by the State Legal Services Authorities.
 Calling for monthly progress reports in respect of each such
programme.
 Take steps for establishment of Permanent Lok Adalats for Public
Utility Services U/s 22B in all Districts.
 Take steps for appointing full time Secretaries in all District Legal
Services Authorities.
Evaluation of Projects and Schemes
Directing the State Legal Services Authorities to set-up Committees for evaluation
of the actual benefit received by the beneficiaries under Section 12 of this Act in
respect of each project and programme, and to send copy of such reports to
NALSA.
Measures for Publicity
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 Liaison with the Information and Broadcasting Ministry and Prasar
Bharti for timely briefing about the projects and programmes to the
Press and Media.
 Other publicity measures like, hoardings, production of short-films,
skits in CD form and distribute copies to all TLSEc and DLSAs.
 Printing of publicity materials like posters, pamphlets, booklets and
distributing the required quantity of such materials to all States Legal
Services Authorities in requisite number, advertisements in
newspapers and television (both private and Government owned) etc.
To take necessary steps for ensuring commitment to the provisions in Part-IV of
the Constitution of India
Improving the quality and contents of 'Nyayadeep', an official
Newsletter of NALSA Interaction and exchange of ideas: With the legal
services institutions of the neighbouring countries (e.g. Sri Lanka,
Bangladesh, Nepal, Malaysia, Singapore, Thailand, Taiwan etc.) and other
Commonwealth Countries.
Achievement
Till 31.03.2009 about 96.99 lakh people have benefited through legal aid and
advice throughout the country in which about 13.83 lakh persons belonging to
Scheduled Caste and 4.64 lakh people of Scheduled Tribe communities were
beneficiaries. More than 10.22 lakh people were women and about 2.35 lakh
people in custody were also benefited.
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About 7.25 lakh Lok Adalats have been held throughout the country in which more
than 2.68 crore cases have been settled. In about 16.87 lakh Motor Accident Claim
cases, more than Rs. 7593 crore has been awarded as compensation.
UNIT 2
A.
NEGOTIATION
Negotiation can take a wide variety of forms, from a trained negotiator acting on
behalf of a particular organization or position in a formal setting, to an informal
negotiation between friends. Negotiation can be contrasted with mediation, where
a neutral third party listens to each side's arguments and attempts to help craft an
agreement between the parties.[1] It can also be compared with arbitration, which
resembles a legal proceeding. In arbitration, both sides make an argument as to the
merits of their case and the arbitrator decides the outcome. This negotiation is also
sometimes called positional or hard-bargaining negotiation. Negotiation theorists
generally distinguish between two types of negotiation. Different theorists use
different labels for the two general types and distinguish them in different ways.
One very common distinction concerns the distribution of gains (distributive
versus integrative models):[1] Distributive negotiation Distributive negotiation is
also sometimes called positional or hard-bargaining negotiation. It tends to
approach negotiation on the model of haggling in a market. In a distributive
negotiation, each side often adopts an extreme position, knowing that it will not be
accepted, and then employs a combination of guile, bluffing, and brinkmanship in
order to cede as little as possible before reaching a deal. Distributive bargainers
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conceive of negotiation as a process of distributing a fixed amount of value. The
term distributive implies that there is a finite amount of the thing being distributed
or divided among the people involved. Sometimes this type of negotiation is
referred to as the distribution of a "fixed pie." There is only so much to go around,
but the proportion to be distributed is variable. Distributive negotiation is also
sometimes called win-lose because of the assumption that one person's gain results
in another person's loss. A distributive negotiation often involves people who have
never had a previous interactive relationship, nor are they likely to do so again in
the near future. Simple everyday examples would be buying a car or a house.
Integrative negotiation Integrative negotiation is also sometimes called interest-
based or principled negotiation. It is a set of techniques that attempts to improve
the quality and likelihood of negotiated agreement by providing an alternative to
traditional distributive negotiation techniques. While distributive negotiation
assumes there is a fixed amount of value (a "fixed pie") to be divided between the
parties, integrative negotiation often attempts to create value in the course of the
negotiation ("expand the pie"). It focuses on the underlying interests of the parties
rather than their arbitrary starting positions, approaches negotiation as a shared
problem rather than a personalized battle, and insists upon adherence to objective,
principled criteria as the basis for agreement.[3] Integrative negotiation often
involves a higher degree of trust and the forming of a relationship. It can also
involve creative problem-solving that aims to achieve mutual gains. It is also
sometimes called win-win negotiation Tactics There are many different ways to
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categorize the essential elements of negotiation. One view of negotiation involves
three basic elements: process, behavior and substance. The process refers to how
the parties negotiate: the context of the negotiations, the parties to the negotiations,
the tactics used by the parties, and the sequence and stages in which all of these
play out. Behavior refers to the relationships among these parties, the
communication between them and the styles they adopt. The substance refers to
what the parties negotiate over: the agenda, the issues (positions and - more
helpfully - interests), the options, and the agreement(s) reached at the endAnother
view of negotiation comprises four elements: strategy, process, tools, and tactics.
Strategy comprises the top level goals - typically including relationship and the
final outcome. Processes and tools include the steps that will be followed and the
roles taken in both preparing for and negotiating with the other parties. Tactics
include more detailed statements and actions and responses to others' statements
and actions. Some add to this persuasion and influence, asserting that these have
become integral to modern day negotiation success, and so should not be omitted
Adversary or partner The two basically different approaches to negotiating will
require different tactics. In the distributive approach each negotiator is battling for
the largest possible piece of the pie, so it may be quite appropriate - within certain
limits - to regard the other side more as an adversary than a partner and to take a
somewhat harder line. This would however be less appropriate if the idea were to
hammer out an arrangement that is in the best interest of both sides. A good
agreement is not one with maximum gain, but optimum gain. This does not by any
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means suggest that we should give up our own advantage for nothing. But a
cooperative attitude will regularly pay dividends. What is gained is not at the
expense of the other, but with him. Employing an advocate A skilled negotiator
may serve as an advocate for one party to the negotiation. The advocate attempts to
obtain the most favorable outcomes possible for that party. In this process the
negotiator attempts to determine the minimum outcome(s) the other party is (or
parties are) willing to accept, then adjusts their demands accordingly. A
"successful" negotiation in the advocacy approach is when the negotiator is able to
obtain all or most of the outcomes their party desires, but without driving the other
party to permanently break off negotiations, unless the best alternative to a
negotiated agreement (BATNA) is acceptable. Another negotiation tactic is bad
guy/good guy. Bad guy/good guy is when one negotiator acts as a bad guy by
using anger and threats. The other negotiator acts as a good guy by being
considerate and understanding. The good guy blames the bad guy for all the
difficulties while trying to get concessions and agreement from the opponent.
Perspective taking for integrative negotiation Perspective taking can be helpful for
two reasons: that it can help self-centered negotiators to seek mutually beneficial
solutions, and it increases the likelihood of logrolling (when a favor is traded for
another i.e. quid pro quo). Social motivation can increase the chances of a party
conceding to a negotiation. While concession is mandatory for negotiations,
research shows that people who concede more quickly, are less likely to explore all
integrative and mutually beneficial solutions. Therefore, conceding reduces the
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chance of an integrative negotiation. Negotiation styles Kenneth W. Thomas
identified 5 styles/responses to negotiation These five strategies have been
frequently described in the literature and are based on the dual-concern model. The
dual concern model of conflict resolution is a perspective that assumes individuals'
preferred method of dealing with conflict is based on two themes or dimensions A
concern for self (i.e. assertiveness), and 1. A concern for others (i.e. empathy).
Based on this model, individuals balance the concern for personal needs and
interests with the needs and interests of others. The following five styles can be
used based on individuals’ preferences depending on their pro-self or pro-social
goals. These styles can change over time, and individuals can have strong
dispositions towards numerous styles.
1. Accommodating: Individuals who enjoy solving the other party's
problems and preserving personal relationships. Accommodators are
sensitive to the emotional states, body language, and verbal signals of the
other parties. They can, however, feel taken advantage of in situations
when the other party places little emphasis on the relationship.
2. Avoiding: Individuals who do not like to negotiate and don't do it unless
warranted. When negotiating, avoiders tend to defer and dodge the
confrontational aspects of negotiating; however, they may be perceived as
tactful and diplomatic.
3. Collaborating: Individuals who enjoy negotiations that involve solving
tough problems in creative ways. Collaborators are good at using
negotiations to
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understand the concerns and interests of the other parties. They can, however,
create problems by transforming simple situations into more complex ones.
4. Competing: Individuals who enjoy negotiations because they present
an opportunity to win something. Competitive negotiators have strong
instincts for all aspects of negotiating and are often strategic. Because their
style can dominate the bargaining process, competitive negotiators often
neglect the importance of relationships.
5. Compromising: Individuals who are eager to close the deal by doing
what is fair and equal for all parties involved in the negotiation.
Compromisers can be useful when there is limited time to complete the
deal; however, compromisers often unnecessarily rush the negotiation
process and make concessions too quickly. Types of negotiators Three
basic kinds of negotiators have been identified by researchers involved
in The Harvard Negotiation
Project. These types of negotiators are: Soft bargainers, hard
bargainers, and principled bargainers. Soft. These people see
negotiation as too close to competition, so they choose a gentle style of
bargaining. The offers they make are not in their best interests, they yield
to others' demands, avoid confrontation, and they maintain good relations
with fellow negotiators. Their perception of others is one of friendship, and
their goal is agreement. They do not separate the people from the problem,
but are soft on both. They avoid contests of wills and will insist on
agreement, offering solutions and easily trusting others and changing their
opinions.
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Hard. These people use contentious strategies to influence, utilizing phrases such
as "this is my final offer" and "take it or leave it." They make threats, are
distrustful of others, insist on their position, and apply pressure to negotiate. They
see others as adversaries and their ultimate goal is victory. Additionally, they will
search for one single answer, and insist you agree on it. They do not separate the
people from the problem (as with soft bargainers), but they are hard on both the
people involved and the problem. Principled. Individuals who bargain this way
seek integrative solutions, and do so by sidestepping commitment to specific
positions. They focus on the problem rather than the intentions, motives, and needs
of the people involved. They separate the people from the problem, explore
interests, avoid bottom lines, and reach results based on standards (which are
independent of personal will). They base their choices on objective criteria rather
than power, pressure, self-interest, or an arbitrary decisional procedure. These
criteria may be drawn from moral standards, principles of fairness, professional
standards, tradition, and so on. Researchers from The Harvard Negotiation Project
recommend that negotiators explore a number of alternatives to the problems they
are facing in order to come to the best overall conclusion/solution, but this is often
not the case (as when you may be dealing with an individual utilizing soft or hard
bargaining tactics) (Forsyth, 2010). Bad faith negotiation When a party pretends to
negotiate, but secretly has no intention of compromising, the party is considered to
be negotiating in bad faith. Bad faith is a concept in negotiation theory whereby
parties pretend to reason to reach settlement, but have no intention to do so, for
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example, one political party may pretend to negotiate, with no intention to
compromise, for political effect. In international relations and political psychology
Bad faith in political science and political psychology refers to negotiating
strategies in which there is no real intention to reach compromise, or a model of
information processing. The "inherent bad faith model" of information processing
is a theory in political psychology that was first put forth by Ole Holsti to explain
the relationship between John Foster Dulles' beliefs and his model of information
processing. t is the most widely studied model of one's opponent. A state is
presumed to be implacably hostile, and contra-indicators of this are ignored. They
are dismissed as propaganda ploys or signs of weakness. Examples are John Foster
Dulles' position regarding the Soviet Union, or Hamas's position on the state of
Israel. Problems with laboratory studies Negotiation is a rather complex
interaction. Capturing all its complexity is a very difficult task, let alone isolating
and controlling only certain aspects of it. For this reason most negotiation studies
are done under laboratory conditions, and focus only on some aspects. Although
lab studies have their advantages, they do have major drawbacks when studying
emotions: Emotions in lab studies are usually manipulated and are therefore
relatively 'cold' (not intense). Although those 'cold' emotions might be enough to
show effects, they are qualitatively different from the 'hot' emotions often
experienced during negotiations. In real life there is self-selection to which
negotiation one gets into, which affects the emotional commitment, motivation and
interests. However this is not the case in lab studies. Lab studies tend to focus on
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relatively few well defined emotions. Real life scenarios provoke a much wider
scale of emotions. Coding the emotions has a double catch: if done by a third side,
some emotions might not be detected as the negotiator sublimates them for
strategic reasons. Self-report measures might overcome this, but they are usually
filled only before or after the process, and if filled during the process might
interfere with it.
Barriers
 Lack of trust
 Informational vacuums and negotiator's dilemma
 Structural impediment
 Spoilers
 Cultural and gender differences
 Communication problems
 The power of dialogue
Tactics
Tactics are always an important part of the negotiating process. But tactics don't
often jump up and down shouting "Here I am, look at me." If they did, the other
side would see right through them and they would not be effective. More often
than not they are subtle, difficult to identify and used for multiple purposes. Tactics
are more frequently used in distributive negotiations and when the focus in on
taking as much value off the table as possible. Many negotiation tactics exist.
Below are a few commonly used tactics. Auction: The bidding process is designed
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to create competition. When multiple parties want the same thing, pit them against
one another. When people know that they may lose out on something, they will
want it even more. Not only do they want the thing that is being bid on, they also
want to win, just to win. Taking advantage of someone's competitive nature can
drive up the price. Brinksmanship: One party aggressively pursues a set of terms to
the point at which the other negotiating party must either agree or walk away.
Brinkmanship is a type of "hard nut" approach to bargaining in which one party
pushes the other party to the "brink" or edge of what that party is willing to
accommodate. Successful brinksmanship convinces the other party they have no
choice but to accept the offer and there is no acceptable alternative to the proposed
agreement.[37] Bogey: Negotiators use the bogey tactic to pretend that an issue of
little or no importance to him or her is very important Then, later in the
negotiation, the issue can be traded for a major concession of actual importance.
Chicken: Negotiators propose extreme measures, often bluffs, to force the other
party to chicken out and give them what they want. This tactic can be dangerous
when parties are unwilling to back down and go through with the extreme measure.
Defence in Depth: Several layers of decision-making authority is used to allow
further concessions each time the agreement goes through a different level of
authority In other words, each time the offer goes to a decision maker, that
decision maker asks to add another concession in order to close the deal.
Deadlines: Give the other party a deadline forcing them to make a decision. This
method uses time to apply pressure to the other party. Deadlines given can be
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actual or artificial. Good Guy/Bad Guy: The good guy/bad guy approach is
typically used in team negotiations where one member of the team makes extreme
or unreasonable demands, and the other offers a more rational approach This tactic
is named after a police interrogation technique often portrayed in the media. The
"good guy" will appear more reasonable and understanding, and therefore, easier to
work with. In essence, it is using the law of relativity to attract cooperation. The
good guy will appear more agreeable relative to the "bad guy." This tactic is easy
to spot because of its frequent use. Highball/Lowball: Depending on whether
selling or buying, sellers or buyers use a ridiculously high, or ridiculously low
opening offer that will never be achieved. The theory is that the extreme offer will
cause the other party to reevaluate his or her own opening offer and move close to
the resistance point (as far as you are willing to go to reach an agreement Another
advantage is that the person giving the extreme demand appears more flexible he
or she makes concessions toward a more reasonable outcome. A danger of this
tactic is that the opposite party may think negotiating is a waste of time. The
Nibble: Nibbling is asking for proportionally small concessions that haven't been
discussed previously just before closing the deal. This method takes advantage of
the other party's desire to close by adding "just one more thing." Snow Job:
Negotiators overwhelm the other party with so much information that he or she has
difficulty determining which facts are important, and which facts are diversions.
Negotiators may also use technical language or jargon to mask a simple answer to
a question asked by a non- expert.
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b.MEDIATION
 Mediation is the attempt to help parties in a disagreement to hear one

another, to minimise the harm that can come from disagreement (e.g.
hostility or ‘demonising’ of the other parties) to maximize any area of
agreement, and to find a way of preventing the areas of disagreement
from interfering with the process of seeking a compromise or mutually
agreed outcome. Mediation, as used in law, is a form of alternative
dispute resolution (ADR), a way of resolving disputes between two or
more parties with concrete effects. Typically, a third party, the mediator,
assists the parties to negotiate a settlement. Disputants may mediate
disputes in a variety of domains, such as commercial, legal, diplomatic,
workplace, community and family matters. The term "mediation" broadly
refers to any instance in which a third party helps others reach
agreement. More specifically, mediation has a structure, timetable and
dynamics that "ordinary" negotiation lacks. The process is private and
confidential, possibly enforced by law. Participation is typically voluntary.
The mediator acts as a neutral third party and facilitates rather than
directs the process. Mediators use various techniques to open, or
improve, dialogue and empathy between disputants, aiming to help the
parties reach an agreement. Much depends on the mediator's skill and
training. As the practice gained popularity, training programs,
certifications and licensing followed, producing trained, professional
mediators committed to the discipline. The benefits of mediation include:
Cost While a mediator may charge a fee comparable to that
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of an attorney, the mediation process generally takes much less time than
moving a case through standard legal channels. While a case in the hands of a
lawyer or a court may take months or years to resolve, mediation usually
achieves a resolution in a matter of hours. Taking less time means expending
less money on hourly fees and costs. Confidentiality While court hearings are
public, mediation remains strictly confidential. No one but the parties to the
dispute and the mediator or mediators know what happened. Confidentiality in
mediation has such importance that in most cases the legal system cannot force
a mediator to testify in court as to the content or progress of mediation. Many
mediators destroy their notes taken during a mediation once that mediation has
finished. The only exceptions to such strict confidentiality usually involve child
abuse or actual or threatened criminal acts. Control Mediation increases the
control the parties have over the resolution. In a court case, the parties obtain a
resolution, but control resides with the judge or jury. Often, a judge or jury
cannot legally provide solutions that emerge in mediation. Thus, mediation is
more likely to produce a result that is mutually agreeable for the parties.
Compliance Because the result is attained by the parties working together and is
mutually agreeable, compliance with the mediated agreement is usually high.
This further reduces costs, because the parties do not have to employ an
attorney to force compliance with the agreement. The mediated agreement is,
however, fully enforceable in a court of law. Mutuality Parties to a mediation
are typically ready to work mutually toward a resolution. In most circumstances
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the mere fact that parties are willing to mediate means that they are ready to
"move" their position. The parties thus are more amenable to understanding the
other party's side and work on underlying issues to the dispute. This has the
added benefit of often preserving the relationship the parties had before the
dispute. Support Mediators are trained in working with difficult situations. The
mediator acts as a neutral facilitator and guides the parties through the process.
The mediator helps the parties think "outside of the box" for possible solutions
to the dispute, broadening the range of possible solutions. Workplace matters
The implementation of human resource management (HRM) policies and
practices has evolved to focus on the individual worker, and rejects all other
third parties such as unions and AIRC. HRM together with the political and
economic changes undertaken by Australia's Howard government created an
environment where private ADR can be fostered in the workplace The decline
of unionism and the rise of the individual encouraged the growth of mediation.
This is demonstrated in the industries with the lowest unionization rates such as
in the private business sector having the greatest growth of mediation. The 2006
Work Choices Act made further legislative changes to deregulate industrial
relations. A key element of the new changes was to weaken the AIRC by
encouraging competition with private mediation. A great variety of disputes
occur in the workplace, including disputes between staff members, allegations
of harassment, contractual disputes and workers compensation claims At large,
workplace disputes are between people who have an ongoing working
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relationship within a closed system, which indicate that mediation or a
workplace investigation would be appropriate as dispute resolution processes.
However the complexity of relationships, involving hierarchy, job security and
competitiveness can complicate mediation. Party-Directed Mediation (PDM) is
an emerging mediation approach particularly suited for disputes between co-
workers, colleagues or peers, especially deep-seated interpersonal conflict,
multicultural or multiethnic disputes. The mediator listens to each party
separately in a precaucus or pre-mediation before ever bringing them into a
joint session. Part of the pre-caucus also includes coaching and role plays. The
idea is that the parties learn how to converse directly with their adversary in the
joint session. Some unique challenges arise when organizational disputes
involve supervisors and subordinates. The Negotiated Performance Appraisal
(NPA) is a tool for improving communication between supervisors and
subordinates and is particularly useful as an alternate mediation model because
it preserves the hierarchical power of supervisors while encouraging dialogue
and dealing with differences in opinion. Community mediation Disputes
involving neighbors often have no official resolution mechanism. Community
mediation centers generally focus on neighborhood conflict, with trained local
volunteers serving as mediators. Such organizations often serve populations that
cannot afford to utilize the courts or professional ADR-providers. Community
programs typically provide mediation for disputes between landlords and
tenants, members of homeowners associations and small businesses and
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consumers. Many community programs offer their services for free or at a
nominal fee. Experimental community mediation programs using volunteer
mediators began in the early 1970s in several major U.S. cities. These proved to
be so successful that hundreds of programs were founded throughout the
country in the following two decades. In some jurisdictions, such as California,
the parties have the option of making their agreement enforceable in court. Peer
Mediation A peer mediator is one who resembles the disputants, such as being
of similar age, attending the same school or having similar status in a business.
Purportedly, peers can better relate to the disputants than an outsider Peer
mediation promotes social cohesion and aids development of protective factors
that create positive school climates The National Healthy School Standard
(Department for Education and Skills, 2004) highlighted the significance of this
approach to reducing bullying and promoting pupil achievement Schools
adopting this process recruit and train interested students to prepare them. Peace
Pals is an empirically validated peer mediation program. was studied over a 5-
year period and revealed several positive outcomes including a reduction in
elementary school violence and enhanced social skills, while creating a more
positive, peaceful school climate. Peer mediation helped reduce crime in
schools, saved counselor and administrator time, enhanced self-esteem,
improved attendance and encouraged development of leadership and problem-
solving skills among students. Such conflict resolution programs increased in
U.S. schools 40% between 1991 and 1999 Commercial disputes Mediation was
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first applied to business and commerce and this domain remains the most
common application, as measured by number of mediators and the total
exchanged value.[ The result of business mediation is typically a bilateral
contract. Commercial mediation includes work in finance, insurance, ship-
brokering, procurement and real estate. In some areas, mediators have
specialized designations and typically operate under special laws. Generally,
mediators cannot themselves practice commerce in markets for goods in which
they work as mediators. Procurement mediation comprises disputes between a
public body and a private body. In common law jurisdictions only regulatory
stipulations on creation of supply contracts that derive from the fields of State
Aids (EU Law and domestic application) or general administrative guidelines
extend ordinary laws of commerce. The general law of contract applies in the
UK accordingly. Procurement mediation occurs in circumstances after creation
of the contract where a dispute arises in regard to the performance or payments.
A Procurement mediator in the UK may choose to specialise in this type of
contract or a public body may appoint an individual to a specific mediation
panel. Process Roles Mediator The mediator's primary role is to act as a neutral
third party who facilitates discussions between the parties In addition, the
mediator can contribute to the process ensuring that all necessary preparations
are complete Finally, the mediator should restrict pressure, aggression and
intimidation, demonstrate how to communicate through employing good
speaking and listening skills, and paying attention to nonverbal messages and
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other signals emanating from the context of the mediation and possibly
contributing expertise and experience. The mediator should direct the parties to
focus on issues and stay away from personal attacks. Parties The role of the
parties varies according to their motivations and skills, the role of legal
advisers, the model of mediation, the style of mediator and the culture in which
the mediation takes place. Legal requirements may also affect their roles. Party-
Directed Mediation (PDM) is an emerging approach involving a pre-caucus
between the mediator and each of the parties before going into the joint session.
The idea is to help the parties improve their interpersonal negotiation skills so
that in the joint session they can address each other with little mediator
interference. One of the general requirements for successful mediation is that
those representing the respective parties have full authority to negotiate and
settle the dispute. If this is not the case, then there is what Spencer and Brogan
refer to as the "empty chair" phenomenon, that is, the person who ought to be
discussing the problem is simply not present. Preparation The parties' first role
is to consent to mediation, possibly before preparatory activities commence.
Parties then prepare in much the same way they would for other varieties of
negotiations. Parties may provide position statements, valuation reports and risk
assessment analysis. The mediator may supervise/facilitate their preparation and
may require certain preparations. Disclosure Agreements to mediate, mediation
rules, and court-based referral orders may have disclosure requirements.
Mediators may have express or implied powers to direct parties to produce
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documents, reports and other material. In court-referred mediations parties
usually exchange with each other all material which would be available through
discovery or disclosure rules were the matter to proceed to hearing, including
witness statements, valuations and statement accounts. Participation Mediation
requires direct input from the parties. Parties must attend and participate in the
mediation meeting. Some mediation rules require parties to attend in person.
Participation at one stage may compensate for absence at another stage.
Preparation Choose an appropriate mediator, considering experience, skills,
credibility, cost, etc. The criteria for mediator competence is under dispute.
Competence certainly includes the ability to remain neutral and to move parties
though various impasse-points in a dispute. The dispute is over whether
expertise in the subject matter of the dispute should be considered or is actually
detrimental to the mediator's objectivity. Preparatory steps for mediation can
vary according to legal and other requirements, not least gaining the willingness
of the parties to participate. In some court-connected mediation programs,
courts require disputants to prepare for mediation by making a statement or
summary of the subject of the dispute and then bringing the summary to the
mediation. In other cases, determining the matter(s) at issue can become part of
the mediation itself. Consider having the mediator meet the disputants prior to
the mediation meeting. This can reduce anxiety, improve settlement odds and
increase satisfaction with the mediation process. Ensure that all participants are
ready to discuss the dispute in a reasonably objective fashion. Readiness is
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improved when disputants consider the viability of various outcomes. Provide
reasonable estimates of loss and/or damage. Identify other participants. In
addition to the disputants and the mediator, the process may benefit from the
presence of counsel, subject-matter experts, interpreters, family, etc. Secure a
venue for each mediation session. The venue must foster the discussion, address
any special needs, protect privacy and allow ample discussion time. Ensure that
supporting information such as pictures, documents, corporate records, pay-
stubs, rent-rolls, receipts, medical reports, bank-statements, etc., are available.
Have parties sign a contract that addresses procedural decisions, including
confidentiality, mediator payment, communication technique, etc. Meeting The
typical mediation has no formal compulsory elements, although some elements
usually occur: establishment of ground rules framing the boundaries of
mediation parties detail their stories identification of issues clarify and
detail respective interests and objectives search for objective criteria identify
options discuss and analyze solutions adjust and refine proposed solutions
record agreement in writing Individual mediators vary these steps to match
specific circumstances, given that the law does not ordinarily govern mediators'
methods. Criteria The following are useful criteria for selecting a mediator:
Personal attributes—patience, empathy, intelligence, optimism and flexibility
Qualifications—knowledge of the theory and practice of conflict, negotiation
and mediation, mediations skills. Experience— mediation experience,
experience in the substantive area of dispute and personal life experience
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Training Professional background Certification and its value Suitability of
the mediation model Conflicts of interest Cost/fee Third party nomination
Contracts that specify mediation may also specify a third party to suggest or
impose an individual. Some third parties simply maintain a list of approved
individuals, while others train mediators. Lists may be “open” (any person
willing and suitably qualified can join) or a “closed” panel (invitation only). In
the UK and internationally, lists are generally open, such as The Chartered
Institute of Arbitrators, the Centre for Dispute Resolution. Alternatively, private
panels co-exist and compete for appointments e.g.,Savills Mediation Liability
Legal liability may stem from a mediation. For example, a mediator could be
liable for misleading the parties or for even inadvertently breaching
confidentiality. Despite such risks, follow-on court action is quite uncommon.
Only one case reached that stage in Australia as of 2006. Damage awards are
generally compensatory in nature. Proper training is mediators' best protection.
Liability can arise for the mediator from Liability in Contract; Liability in Tort;
and Liability for Breach of Fiduciary Obligations. Liability in Contract arises if
a mediator breaches (written or verbal) contract with one or more parties. The
two forms of breach are failure to perform and anticipatory breach. Limitations
on liability include the requirement to show actual causation. Liability in Tort
arises if a mediator influences a party in any way (compromising the integrity
of the decision), defames a party, breaches confidentiality, or most commonly,
is negligent. To be awarded damages, the party must show actual damage, and
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must show that the mediator's actions (and not the party's actions) were the
actual cause of the damage. Liability for Breach of Fiduciary Obligations can
occur if parties misconceive their relationship with a mediator as something
other than neutrality. Since such liability relies on a misconception, court action
is unlikely to succeed. Tapoohi v Lewenberg (Australia As of 2008 Tapoohi v
Lewenberg was the only case in Australia that set a precedent for mediators'
liability. The case involved two sisters who settled an estate via mediation.
Only one sister attended the mediation in person: the other participated via
telephone with her lawyers present. An agreement was executed. At the time it
was orally expressed that before the final settlement, taxation advice should be
sought as such a large transfer of property would trigger capital gains taxes.
Tapoohi paid Lewenberg $1.4 million in exchange for land. One year later,
when Tapoohi realized that taxes were owed, she sued her sister, lawyers and
the mediator based on the fact that the agreement was subject to further taxation
advice. The original agreement was verbal, without any formal agreement.
Tapoohi, a lawyer herself, alleged that the mediator breached his contractual
duty, given the lack of any formal agreement; and further alleged tortious
breaches of his duty of care. Although the court dismissed the summary
judgment request, the case established that mediators owe a duty of care to
parties and that parties can hold them liable for breaching that duty of care.
Habersberger J held it "not beyond argument" that the mediator could be in
breach of contractual and tortious duties. Such claims were required to be
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assessed at a trial court hearing.[clarification needed] This case emphasized the
need for formal mediation agreements, including clauses that limit mediators'
liability. Mediation with arbitration Mediation has sometimes been utilized to
good effect when coupled with arbitration, particularly binding arbitration, in a
process called 'mediation/arbitration'. The process begins as a standard
mediation, but if mediation fails, the mediator becomes an arbiter. This process
is more appropriate in civil matters where rules of evidence or jurisdiction are
not in dispute. It resembles, in some respects, criminal plea-bargaining and
Confucian judicial procedure, wherein the judge also plays the role of
prosecutor—rendering what, in Western European court procedures, would be
considered an arbitral (even 'arbitrary') decision. Mediation/arbitration hybrids
can pose significant ethical and process problems for mediators. Many of the
options and successes of mediation relate to the mediator's unique role as
someone who wields no coercive power over the parties or the outcome. The
parties awareness that the mediator might later act in the role of judge could
distort the process. Using a different individual as the arbiter addresses this
concern. Alternatives Mediation is one of several approaches to resolving
disputes. It differs from adversarial resolution processes by virtue of its
simplicity, informality, flexibility, and economy. Not all disputes lend
themselves well to mediation. Success is unlikely unless All parties' are ready
and willing to participate.
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 All (or no) parties have legal representation. Mediation includes no
right to legal counsel
 All parties are of legal age (although see peer mediation) and are
legally competent to make decisions.
UNIT 3
ARBITRATION AND
CONCILIATION
a. Arbitration agreement,Essentials, Rule Of

Severability Arbitration agreement and doctrine of
separability
Arbitration is a form of alternative dispute resolution (ADR), which is a legal

technique settling the disputes outside courts, wherein the parties to a dispute refer
it to one or more persons, by whose decision they agree to be bound. The persons
to whom the dispute is referred to are called the arbitrator or arbitral tribunal. The
basic concept of arbitration is that the parties must repose trust and faith in a
person or a committee for deciding and must agree to accept such decision.
Arbitration is a settlement technique in which a third party reviews the case and
imposes a decision that is legally binding for both sides. Other forms of ADR
include mediation and non-binding resolution by experts. It is more helpful,
however, simply to classify arbitration as a form of binding dispute resolution,
equivalent to litigation in the courts, and entirely distinct from the other forms of
dispute resolution, such as negotiation, mediation, or determinations by experts,
which are usually non-binding.
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Arbitration is most commonly used for the resolution of commercial disputes,
particularly in the context of international commercial transactions. In the recent
past and at present Arbitration is the most sought after mode of settling disputes
between in view of the increased number of pending cases and the time consuming
processes of the courts. The main characteristics of Arbitration are
a) Arbitration is consensual
b) The parties choose the arbitrator(s)
c) Arbitration is neutral
d) Arbitration is a confidential procedure
e) The decision of the arbitral tribunal is final and easy to enforce.
The Indian Government has passed the Arbitration Act, 1940 which was later
replaced by the Arbitration and Conciliation Act, 1996.
ARBITRATION AGREEMENT
An Arbitration agreement means an agreement by the parties to submit to
arbitration the disputes which may have arisen or which may arise between them in
respect of a defined legal relationship, may it be contractual or not.
Section 2 (a) of the Arbitration Act, 1940 (now repealed) defines an arbitration
agreement as
"arbitration agreement" means a written agreement to submit present future
differences to arbitration, whether an arbitrator is named therein or not. An
arbitration agreement according to the 1940 Act should be a written document with
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the consensus of the parties and reference to a dispute. This definition, after the
1940 Act was repealed,and was replaced by Section 7 in the 1990 Act.
S 7 of Arbitration and conciliation act 1996 deals with Arbitration Agreement
It goes like this,
Arbitration Agreement –
(1) In this Part, arbitration agreement means 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.
(2) An arbitration agreement may be in the form of an arbitration clause in
a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(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 which provide a record of
the agreement; or (c) An exchange of statements of claim and defence in
which the existence of the agreement is alleged by one party and not
denied by the other.
(5) There reference in a contract to a document containing an arbitration
clause constitutes an arbitration agreement if the contract is in writing and
the reference is such as to make that arbitration clause part of the contract.
This section is modelled on UNCITRAL Model Law. In simple words an
arbitration agreement is an agreement between the parties to refer their disputes to
the arbitral tribunal. To constitute an arbitration agreement, first of all there should
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be an agreement, that is, ad idem. An arbitration agreement like all other contracts
must satisfy all the essential requirements of section 10 of the Indian Contract Act,
1872 i.e., the parties to the arbitration agreement must be competent to enter into a
contract and the agreement should be made by the free consent of the parties.
Furthermore, the parties should have the intention of entering into a legally binding
obligation. However, if the arbitration agreement does not fulfil the requirements
of section 10 of the Indian Contract Act, the arbitration agreement becomes void
and any award given to either of the parties will not be enforceable.
FEATURES OF ARBITRATION AGREEMENT
i) Arbitration Agreement Should Be In Writing
S 7 clearly specifies that the Arbitration Agreement should be in writing. This we
see in S7 (3), it says that an Arbitration Agreement shall be in writing An oral
agreement to submi9t a dispute to Arbitration is not binding .If the Agreement is in
writing it will bind, even if some of its details are filed in by oral understanding
.The court ruled thus in the case of Banarasi Das v Cane Commr [1] .
Telex and Fax
An agreement by telex has been held to be an agreement in writing. A tacit
acceptance of a written quotation which contained an arbitration clause is sufficient
to comply with the requirements of an agreement in writing.
Exchange of Letters
In the case of Ganga pollution control unit, U.P. Jal Nigam v Civil Judge [2] , a
letter was sent by one party to the other suggesting settlement of disputes, if any,
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through arbitration. The other party accepted the same. This exchange of letters
was held to have constituted an Arbitration agreement.
ii) No Prescribed Form Of Agreement
In Rukminibai v Collector, Jabalpur [3] , the Supreme Court laid down that an
arbitration clause is not required to be stated in any particular form .If the intention
of the parties to refer the dispute to arbitration can be clearly ascertained from the
terms of the agreement, it is immaterial whether or not the expression arbitration or
arbitrator has been used. Nor is it necessary that it should be contained in the same
contract document. An arbitration clause may be incorporated into an existing
contract by specific reference to it.
An Arbitration agreement may be in the form of a separate contract or in the form
of a clause in a normal contract. Section 16 (1) of the Arbitration and Conciliation
Act, 1996 provides that an arbitration clause which forms part of a contract shall be
treated as an agreement independent of the other terms of the contract and that a
decision by the arbitral tribunal that the contract in null and void shall not ipso
facto entail the invalidity of the arbitration clause. Nevertheless, if a contract is
illegal and void, an arbitration clause which is one of the terms thereof is also
illegal
The Supreme Court stated the essential elements of an Arbitration agreement to be
as follows,
a) The existence of a present possibility or of a future difference.
b) The intention of the parties to settle such difference by a private tribunal.
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c) The agreement in writing to be bound by the decision of the tribunal and
that the parties must be ad idem.
Nature of disputes
Disputes which can be referred to Arbitration are:
a) Present or future disputes which are,
b) In respect of a defined legal relationship whether contractual
or not. Present or future disputes
All matters of a civil nature with a few exceptions, whether they relate to present
or future disputes, may form the subject of reference but not a dispute arising from
and founded on an illegal transaction. Though the existence of a dispute is essential
to the validity of a reference to arbitration, an arbitration agreement may provide
for a present or a future dispute. If the agreement relates to a present dispute it will
generally amount to a reference but if it has been entered into merely to provide for
any future dispute it is an arbitration clause.
Defined legal relationship
S. 7 (1) of the arbitration and conciliation act, 1996 requires that the disputes must
be in respect of a defined legal relationship whether contractual or not. It follows
that the dispute must be of a legal nature. Matters of moral or spiritual relations are
not fit subjects for arbitration. If a contract is not enforceable for want of legal
relationship, the question of arbitration in respect of such a contract would not
arise. The word defined would signify the known categories of legal relationships
and also upcoming categories. If the matter or transaction is outside the known
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categories of relation under which legal rights or liabilities are likely to be created,
it would not be an arbitrable matter.
Cases of Special Jurisdiction
Where the law has given jurisdiction to determine certain matters to specified
tribunals only, such matters cannot be referred to Arbitrations, e.g.:
a) Insolvency proceedings
b) Probate proceedings
c) Suit under s 92 CPC
d) Proceedings for appointment of guardian
e) Matrimonial causes--- except settlement of terms of separation or divorce
f) Industrial disputes
g) Title o immovable property in a foreign country.
h) Claim for recovery of octroy duty
Arbitration Agreement and Reference
The expressions arbitration agreement and reference have been seperately defined.
Explaining the purpose and effect of this scheme the Supreme Court observed ,"the
expression ( reference) obviously refers to an actual reference made jointly by the
parties after disputes have arisen between them for adjudication to named
Arbitrator or Arbitrators, while the expression Arbitration Agreement is wider as it
combines two concepts
a) A bare agreement between the parties that disputes arising between
them should be decided over or resolved through Arbitration and
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b) An actual reference of a particular dispute for adjudication to named
Arbitrator. The term Arbitration Agreement covers both the concepts (a)
and (b). If that be so its stands to reason that only when the Arbitration agreement
is of the former type, namely, a bare agreement ,a separate reference to arbitration
with fresh assent of both the parties will be necessary and in the absence of such
consensual reference resort to s 20 will be essential, but where the Arbitration
Agreement conforms to the definition given in s 2 (1)b of 1996 act the party
desiring arbitration can straight away approach the arbitrator and resort to s 8 of
1996 act, is unnecessary because consent to such actual reference to arbitration
shall be deemed to be there as the second concept is included in the agreement
signed by the parties. The fact that differences or disputes actually arose
subsequently would be inconsequential because the arbitration agreement as
defined in s 7 of 1996 act covers not merely present but future differences also.
In the case of Banwari Lal Kotiya v P.C. Aggarwal [4] there was a deal about
shares between a stock exchange member and an outsider under which a sum of
money had become due to the member. The parties signed the contract-notes on a
prescribed form. The transaction was subject to the rules, regulations and bye-laws
of the stock exchange, one of which provided for arbitration in such matters. The
member appointed his arbitrator the other refuse to reciprocate. In such cases the
rules provided for appointment for the Exchange. The latter accordingly appointed
one. The other party participated in the proceedings under protest that he had not
given his consent and, and therefore, the award would not be binding on him. The
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Supreme Court came to the conclusion that no fresh consent was necessary on his
part. He had consented to the rules and regulations which contained elaborate
machinery for submission. No fresh consent was necessary.
Attributes Of an Arbitration Agreement
Arbitration agreement attributes—among the attributes which must be present, for
an agreement to be considered as an arbitration agreement are:—
(i) The arbitration agreement must contemplate that the decision of the
Tribunal will be binding on the parties to the agreement.
(ii) That the jurisdiction of the Tribunal to decide the rights of parties must
derive either from the consent of the parties or from an order of the Court
or from a statute the terms of which make it clear that the process is to be
an arbitration,
(iii) The agreement must contemplate that substantive rights of the parties
will be determined by the agreed Tribunal.
(iv) That the Tribunal will determine the rights of the parties in an impartial
and judicial manner with the Tribunal owing an equal obligation of fairness
towards both sides.
(v) That the agreement of the parties to refer their disputes to the decision
of the Tribunal must be intended to be enforceable in law and
(vi) The agreement must contemplate that the Tribunal will make a decision
upon a dispute which is clearly formulated at the time when a reference is
made to the tribunal.
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The other factors which are relevant include whether the agreement contemplates
that the Tribunal will receive evidence from both sides and hear the contentions or
at least give the parties an opportunity to put them forward; whether the working of
the agreement is consistent or inconsistent with the view that the process was
intended to be an arbitration, and whether the agreement requires the Tribunal to
decide the dispute according to law. Therefore, our courts have laid emphasis on
(i) existence of disputes as against intention to avoid future disputes ;
(ii) the Tribunal or Forum so chosen is intended to act judicially after taking
into account relevant evidence before it and the submissions made by the
parties before it and
(iii) the decision is intended to find the parties.
Thus we can conclude the essential features of Arbitration Agreement From the
above discussion, as
a. The parties should have the intention to enter into an arbitration
agreement
b. The agreement should comply with all the conditions of a contract as
per the Indian Contract Act, 1872.
c. The agreement should in reference to a dispute i.e., it should be for
the reference of an existing or a future dispute to an arbitrator or a
arbitral tribunal
d. The arbitration agreement should be in written
DOCTRINE OF SEPERABILITY
The “separability doctrine" was articulated comprehensively by the United States
Supreme Court in Prima paint Corp v. Flood & Conklin Manufacturing
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Co. [5] where the Court ruled that arbitration clauses can be ‘separable’ from the
contracts in which they are included. The plaintiff in Prima paint Corp brought an
action to rescind a contract on the grounds that the contract has been fraudulently
induced. The defendant moved to stay the court action, invoking the contract’s
arbitration clause and contending that an arbitrator, and not a court, should decide
whether the contract was valid. Agreeing with the defendant, the Supreme Court
concluded that because the plaintiff was challenging the underlying contract
generally rather than the arbitration clauses specifically, arbitration of plaintiff’s
fraudulent inducement claims were required. The court was careful to distinguish
this from a claim that the arbitration clause itself had been fraudulently induced.
The doctrine would not apply in situations where parties claim that they never
agreed to arbitrate, or they were fraudulently induced into signing an arbitration
agreement.
In the international context, arbitration clauses are generally deemed to be
presumptively "separable" or "severable" from the underlying contract within
which they are found. The "separability doctrine" is specifically provided for by
leading institutional arbitration rules, and by national arbitration legislation or
judicial decisions from many jurisdictions, including the United States and India.
The separability doctrine provides that an arbitration agreement, even though
included in and related closely to an underlying commercial contract, is a separate
and autonomous agreement. According to a leading international arbitral award,
"The principle ... of the autonomy or the independence of the arbitration clause ...
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has been upheld by several decisions of international case law." The analytical
rationale for the separability doctrine is that the parties' agreement to arbitrate
consists of promises that are distinct and independent from the underlying contract:
"the mutual promise to arbitrate form the quid pro quo of one another and
constitute a separable and enforceable part of the agreement."
The separability doctrine is regarded as having important consequences for the
arbitral process: "Acceptance of autonomy of the international arbitration clause is
a conceptual cornerstone of international arbitration." Among other things, the
separability doctrine is generally understood as implying the continued validity of
an arbitration clause (notwithstanding defects in the parties' underlying contract),
and as permitting the application of different substantive laws to the parties'
arbitration agreement and underlying contract.
The UNCITRAL Model Law, the Swiss Law on Private International Law, the
English Arbitration Act, 1996, the Indian Arbitration and Conciliation Act, 1996
and the Federal Arbitration Act ("FAA"), as well as provisions from the
UNCITRAL, ICC, and LCIA arbitration rules introduce the separability doctrine.
A Soviet arbitral tribunal in All-Union Export-Import Association v. JOC Oil Ltd,
by its award dealt rigorously with the separability doctrine and other related issues.
Sojuznefteexport (the "Association" or "SNE") was a foreign trade organization
established under the laws of the former Union of Soviet Socialist Republics
("USSR"). In 1976, SNE entered into various agreements to sell quantities of oil to
JOC Oil Limited ("JOC"), a Bermuda company. The purchase agreements
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incorporated SNE's standard conditions, which contained the following arbitration
clause:
"All disputes or differences which may arise out of this contract or in connection
with it are to be settled, without recourse to the general Courts of law, in the
Commission of the U.S.S.R. Chamber of Commerce and Industry in Moscow
["FTAC"], in conformity with the rules of procedure of the above Commission."
JOC took delivery of 33 oil shipments (worth approximately $100 million) without
paying for them. Following JOC's non-payment, SNE initiated arbitration under
the arbitration clause set forth above. JOC replied, in part, by claiming that the
purchase agreement had not been executed by two authorized representatives of
SNE and accordingly was void under Soviet law. JOC also alleged that, as a
consequence, the arbitral tribunal lacked competence to adjudicate the dispute
because the arbitration clause was void. SNE claimed that the sales agreement was
not void and that, even if it were, the arbitration clause was separable and the law
applicable to that agreement did not require two signatures to be valid.
As a result the arbitral tribunal held that "the Commission has recognized that an
arbitration agreement (arbitration clause) is a procedural contract, independent
from the material-legal contract and that therefore the question as to the validity or
invalidity of this contract does not affect the agreement of the parties about the
submission of the existing dispute to the jurisdiction of the FTAC. The
Commission has come to the conclusion that the arbitration clause contained in the
contract is valid and therefore in accordance with the right assigned to it has
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recognized itself as competent to hear the dispute as to its essence and to rule upon
it. The arbitral tribunal further held that, although the underlying sales contract was
void, Soviet principles of restitution applied. Under these principles, the tribunal
awarded SNE the value of the oil shipped to JOC Oil, at the then-prevailing
international oil prices. It also awarded SNE lost profits realized by JOC Oil (in an
amount equal to market interest rates. This produced an award of approximately
$200 million in SNE's favour.
After the arbitral award was made against JOC Oil, Sojuznefte export sought to
enforce it in Bermuda. The first instance court denied recognition on various
grounds, including that the arbitral tribunal lacked jurisdiction. The court held that
"based on the Tribunal's finding that the underlying contract was invalid ab initio,
then under both Soviet and English law there never was any contract between the
parties from the very onset as such there never was an arbitration clause or
agreement which could be submitted to arbitration." This judgment was reversed
on appeal.
Finally, the U.S. Supreme Court's decision in Prima Paint Co. v. Conklin Mfg Co.,
is one of the cases of seminal treatment of the separability doctrine by a national
court, Justice FORTAS said "This case presents the question whether the federal
court or an arbitrator is to resolve a claim of "fraud in the inducement," under a
contract governed by the Federal Arbitration Act, 1925, where there is no evidence
that the contracting parties intended to withhold that issue from arbitration ".
Flood & Conklin Manufacturing Company ("F&C") entered into a Consulting
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Agreement with Prima Paint Corporation ("Prima Paint"); at about the same time,
Prima Paint also purchased F&C's paint business. The Consulting Agreement
obligated F&C to assist Prima Paint's exploitation of the paint business, and forbid
it from competing with that business.
The agreement contained what the Court termed "a broad arbitration clause,"
which provided:
"Any controversy or claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled by arbitration in the City of New York, in
accordance with the rules then obtaining of the American Arbitration Association
..." One week after the Consulting Agreement was executed, F&C filed a
bankruptcy petition. Prima Paint thereafter withheld amounts payable under the
agreement and notified F&C that it had breached the contract by fraudulently
representing that it was solvent. F&C then served a notice of intention to arbitrate.
Prima Paint responded by filing suit in federal district court, seeking to rescind the
Consulting Agreement on grounds of fraudulent inducement. F&C moved to stay
the judicial action pending arbitration.
The District Court granted F&C's motion to stay the action pending arbitration,
holding that a charge of fraud in the inducement of a contract containing an
arbitration clause as broad as this one was a question for the arbitrators and not for
the court. For this proposition it relied on Robert Lawrence Co. v. Devonshire
Fabrics, Inc120. The Court of Appeals for the Second Circuit dismissed Prima
Paint's appeal. It held that the contract in question evidenced a transaction
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involving interstate commerce; that under the controlling Robert Lawrence Co.
decision a claim of fraud in the inducement of the contract generally as opposed to
the arbitration clause itself, is for the arbitrators and not for the courts and that this
rule of "national substantive law" governs even in the face of a contrary state rule.
We agree, albeit for somewhat different reasons, and affirm the decision of the
District Court.
The case of Great Offshore Ltd. v. Iranian Offshore Engineering and Construction
Company, decided by a single judge bench of the Supreme Court as recently as
August 2008, is a very important shot in the arm for arbitration in India. The case
involved a dispute between the two parties over the existence of an arbitration
agreement. The contentions centred upon a series of mutual exchanges of faxes and
letters, at the conclusion of which Great Offshore Ltd. (GOL) sent a Charter Party
Agreement (CPA) to Iranian Offshore Engineering and Construction Company
(IOE) on 22 August 2005. GOL subsequently contended that a faxed copy of the
CPA with its signature was provided to it by IOE on 12 October, whereas IOE
alleged that the document was forged.
In the meanwhile, IOE, in an email dated 14 September had stated that the CPA
was ready and had even agreed to deliver it to GOL. However, in a subsequent
letter on 23 September, it put in certain specific demands as a pre-condition to its
signing the CPA. GOL contended that the pre-conditions were not acceptable. And
in any event, it alleged that IOE had given its approval to the CPA through the 14
September email. Consequently, it requested IOE to dispatch the signed CPA as
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soon as possible and honour its commitments. IOE, in response, strongly denied
any concluded contract between the parties and contended that the matter had not
progressed beyond the negotiation stage. Therefore, on the ground that there was
an arbitration agreement, GOL moved the Supreme Court for the appointment of a
sole arbitrator under Section 11 of the Arbitration and Conciliation Act. As per its
holding in the Patel Engineering Case, the Supreme Court limited its consideration
to the judicial determination of the existence of an arbitration agreement. This
hinged on the fact whether a valid contractual agreement existed between the
parties. GOL raised a number of contentions. First, that the CPA was signed by
both the parties.
Second, this fact was not denied in the pleadings. Third, placing reliance on 14
September email, it contended IOE had signed the original CPA. Fourth was that
this fact was not initially denied by IOE. IOE, in its counter, contended that the
original copy was never sent back to GOL as the matter was pending negotiations.
Further, it requested the Court to look at the ‘intent’ of the parties, rather than
disputed documents. Thus, it asserted that as most of the material clauses in the
contract were left unsettled, there was no ‘meeting of minds’ between the parties.
The Court remarked that the matter turned on the question whether the faxed CPA
with IOE’s signature was a ‘forged document’. It observed that as CPA appeared
to be prima facie valid and IOE could not discharge its burden to prove forgery, the
CPA was not forged. Therefore, it concluded that as the document was validly
signed contractual agreement, IOE was bound by the same.
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It buttressed its conclusions by relying on Section 7 of the Arbitration &
Conciliation Act, 1996. Section 7 defines ‘arbitration agreement’. Section 7(3)
states that the agreement should be in writing. Section 7(4) (a) states that an
arbitration agreement is in writing if it is a document signed by both the parties.
Section 7(4) (b) provides that an exchange of letters, telex or other means of
telecommunications can amount to an agreement in writing, provided a record of
such agreement is contained therein. Relying on these provisions, the Court
concluded that there is no requirement of the document containing the contract to
be original (in this case, the CPA; a faxed copy of the same was sent back to GOL
while IOE had retained the original). It can be a copy of the original.
It also observed that there is no requirement of the document to be signed on every
page. Interpreting Section 7(4) (b), it stated that ‘fax’ comes under the purview of
‘other means of telecommunication’ and signature of the parties is sufficient
attestation of an agreement on record. Thus, the Supreme Court made light work of
the objections raised by IOE on formalities and technicalities of the requirement of
an arbitration agreement, and concluded that a valid arbitration clause was in
existence.
This case is important mainly for the reason that by giving a wide scope to the
language of Section 7, and bringing communication by fax within the ambit of
Section 7, the Court has shown itself to be abreast of times, especially with regard
to commercial transactions. There is an increasing awareness in the commercial
world that transactions are no longer limited to paper and pen, and traditional laws
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must be evolved to take into accounts disputes that arise out of transactions that
take place through electronic media. As recently as 2003, for instance, an advisory
opinion has been written that seeks to include electronic media within the scope of
the United Nations Convention on Contracts for the International Sale of Goods
(CISG). Furthermore, it can also be said that in this judgment the Court has given
primacy to substance over form, holding that if, in actuality, an arbitration
agreement was concluded, it should not be rejected on mere technicalities. Thus,
on both these grounds, the judgment of the Supreme Court can be praised as one
that will improve the perception of India as a destination both for commerce, and
for the use of arbitration.
The scope of this judgment is limited to arbitration agreements, which may or may
not be part of the main contract between the parties, and therefore can be viewed at
independent of the requirements to complete a contract under the ICA. Even in
situations where the arbitration agreement is part of the main contract between the
parties, there is an interesting issue relating to the doctrine of separability. In
accordance with the doctrine of separability, the arbitration clause can be treated
separate from the main contract and its existence and validity is to be established
separately from the main contract. For example, there may be a situation where a
standard form contract is being used, that contains the arbitration clause as well.
Suppose further that the offeror chooses to revoke his offer with the simple phrase,
"I revoke my offer to purchase x from you." Under the doctrine of separability,
while the original offer is certainly revoked, it can be argued that such revocation
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did not extend to the arbitration agreement as well. Carrying the doctrine of
separability to its logical conclusion, the tests of validity of contracts and of
arbitration agreements therefore need not be the same. So this judgment is
important in upholding one particular way of the formation of arbitration
agreements, as opposed to main contracts.
Hence what in effect needs to be done is clarity on the doctrine and its applicability
under Indian conditions for a clearer picture of the Indian Arbitration scenario and
more particularly the trade and commercial space in India.
b. COMPOSITION OF ARBITRAL TRIBUNAL
Section 12.Number of arbitrators
The parties are free to determine the number of arbitrators. Failing such
determination, the number of arbitrators shall be three.
Section 13.Appointment of arbitrators
The arbitrators shall be impartial and independent of the parties and shall be
qualified for the office.
The parties shall if possible appoint the arbitrators jointly.
If the arbitral tribunal is to comprise three arbitrators and the parties fail to agree
on its composition, each party shall appoint one arbitrator. The time-limit for
making the appointment shall be one month after the party received the request to
appoint an arbitrator. The two arbitrators thus appointed shall within one month
jointly appoint the third arbitrator who shall act as chairman of the arbitral tribunal.
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If the arbitral tribunal cannot be established pursuant to the agreement or
subsections 2 or 3, each of the parties may ask the court to appoint the remaining
arbitrator or arbitrators. Such appointment shall not be subject to any appeal.
The parties may contract out of the provisions of subsections 1, 2 and 3.
Section 14.Grounds for challenge of arbitrators
When a person is approached in connection with his possible appointment as an
arbitrator, he shall of his own accord disclose any circumstances likely to give rise
to justifiable doubts about his impartiality or independence. From the time of his
appointment and throughout the arbitral proceedings, an arbitrator shall
immediately disclose any new such circumstances to the parties.
An arbitrator may only be challenged if there are circumstances that give rise to
justifiable doubts about his impartiality or independence or if he does not possess
the qualifications agreed on by the parties. A party may challenge an arbitrator in
whose appointment he has participated only for reasons of which he became aware
after the appointment was made.
Section 15.Challenge procedure
Unless the parties have agreed to a different procedure, a challenge of an arbitrator
shall state the reasons for the challenge and shall be submitted in writing to the
arbitral tribunal within fifteen days after the party became aware of the
appointment of the arbitrator and the circumstances on which the challenge is
based. Unless the challenged arbitrator withdraws from his office or the other party
agrees to the challenge, the arbitral tribunal shall decide on the challenge.
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If a challenge is unsuccessful and the parties have not agreed to a different
procedure, the challenging party may bring the issue before the courts within one
month after he received notice of the decision rejecting the challenge. The court
shall determine the issue by way of interlocutory order. The interlocutory order
shall not be subject to appeal. The challenge may not subsequently be invoked as
grounds for invalidity or an objection to recognition and enforcement of the award.
While such issue is pending before the courts, the arbitral tribunal, including the
challenged arbitrator, may continue the arbitral proceedings and make an award.
Section 16.Failure by an arbitrator to perform his functions
If an arbitrator becomes de jure or de facto unable to perform his functions or if an
arbitrator for other reasons fails to act without undue delay, his mandate shall
terminate if he withdraws from his office or if the parties agree on the termination.
Otherwise, any party may ask the courts to decide by way of interlocutory order
whether the mandate shall terminate for one of the said reasons. The interlocutory
order shall not be subject to appeal.
The withdrawal by an arbitrator from his office or an agreement between the
parties to terminate the mandate pursuant to subsection 1 or section 15 subsection 1
shall not imply acceptance of the validity of any challenge pursuant to subsection 1
or section 14 subsection 2.
Section 17.Appointment of substitute arbitrator
Where the mandate of an arbitrator terminates pursuant to sections 15 or 16 or
because of his withdrawal from office for any other reason or because of the
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revocation of his mandate by agreement of the parties or in any other case of
termination of his mandate, a substitute arbitrator shall be appointed according to
the rules that were applicable to the appointment of the arbitrator to be replaced.
If a substitute arbitrator is appointed, all previous arbitral proceedings that form
part of the basis for the ruling in the case shall be repeated.
The parties may contract out of the provisions of this section.
C. JURISDICTION OF ARBITRAL TRIBUNAL
Section 18.Competence of the arbitral tribunal to rule on its jurisdiction
The arbitral tribunal rules on its own jurisdiction, including any objections to the
existence or validity of the arbitration agreement.
For the purpose of rulings pursuant to subsection 1, an arbitration agreement which
forms part of a contract shall be treated as an agreement independent of the other
terms of the contract. A decision by the arbitral tribunal that the contract is null and
void shall not in itself entail that the arbitration agreement is null and void.
An objection that the arbitral tribunal does not have jurisdiction over the case or
the claim shall be raised no later than the submission of the first statement of such
party on the merits of the case. The arbitral tribunal may allow such an objection to
be raised later if the party is not significantly to be reproached for not raising the
objection earlier. A party is not precluded from raising such an objection by the
fact that he has participated in the appointment of the arbitral tribunal.
The arbitral tribunal may rule on an objection to its jurisdiction either during
the arbitral proceedings or in an award on the merits. If the arbitral tribunal rules
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during the arbitral proceedings that it has jurisdiction, any party may, within one
month after he received notice of that ruling, bring the issue before the courts,
which shall determine the issue by way of interlocutory order. While such issue is
pending before the courts, the arbitral tribunal may continue the arbitral
proceedings and make an award.
Section 19.The power of the arbitral tribunal to order interim measures
The arbitral tribunal may, at the request of a party, order any party to take such
interim measures as the arbitral tribunal may consider necessary based on the
subject matter of the dispute. As a condition for effecting and implementing the
measure, the arbitral tribunal may order the applicant of the measure to provide
security for any consequences thereof within a prescribed time-limit.
The arbitral tribunal may reduce or revoke an interim measure.
If it transpires that the claim to be secured by the interim measure did not exist
when the interim measure was decided, the party who requested the measure shall
indemnify other parties for the loss suffered by them as a result of the measure.
The arbitral tribunal shall decide the claim for indemnification if requested to do so
by a party.
Section 20.Equal treatment of the parties
The parties shall be treated equally at all stages of the arbitral proceedings and
each party shall be given a full opportunity to present his case.
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Section 21.Procedural rules
The arbitral tribunal shall conduct the arbitration in such manner as it considers
appropriate within the limits prescribed in the arbitration agreement and this Act.
As soon as it is appointed, the tribunal or the chairman shall draw up a plan for the
further conduct of the case following discussion with the parties, unless otherwise
agreed.
Section 22.The place of arbitration
Failing agreement on the place of arbitration, the arbitral tribunal shall determine
the place of arbitration having regard to the practical conduct of the case, including
the prospects for the parties to participate in oral proceedings.
Notwithstanding the place of arbitration, the arbitral tribunal may, unless otherwise
agreed between the parties, meet at any place it considers appropriate to deliberate
among its members, to examine witnesses, experts or parties, or to inspect
evidence.
Section 23.Commencement of arbitral proceedings
Unless otherwise agreed between the parties, the arbitral proceedings are deemed
to commence on the date when the respondent received the request for the dispute
to be referred to arbitration.
Section 24.Language of the arbitration
Failing agreement on the language of arbitration, the arbitral tribunal shall
determine the language of the arbitration.
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If the language of the arbitration is Norwegian, the proceedings may also be
conducted in Swedish or Danish.
The language of the arbitration shall apply to any written statement by a party, any
oral hearings and any ruling or other communication by the arbitral tribunal.
The arbitral tribunal may order that any documentary evidence shall be
accompanied by a translation into the language agreed on by the parties or
determined by the arbitral tribunal.
The parties may contract out of the provisions of subsections 2, 3 and 4.
Section 25.Particulars of claim and reply
The claimant shall submit particulars of claim to the arbitral tribunal within the
time-limit agreed between the parties or determined by the arbitral tribunal. The
particulars shall state the claim that is being made, a prayer for relief which states
the outcome the claimant is requesting by way of award, the factual and legal
grounds on which the claim is based and the evidence that will be presented.
The respondent shall submit a reply to the arbitral tribunal within the time-limit
agreed between the parties or determined by the arbitral tribunal. The reply shall
state whether the claim is accepted or contested and whether there are objections to
the arbitral tribunal dealing with the case. The reply shall contain the respondent's
prayer for relief which states the outcome the respondent is requesting by way of
award, the factual and legal grounds on which the prayer for relief is based and the
evidence that will be presented. If the respondent is also bringing a claim in respect
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of which he requests an award, the provisions on particulars of claim and reply
shall apply to such claim.
The parties may contract out of the provisions in subsections 1 and 2 on the
requirements of the particulars of claim and the reply.
Unless otherwise agreed between the parties, either party may bring new
claims, broaden the prayer for relief in respect of existing claims, submit new
grounds on which to base such prayer and present new evidence. At the request of
a party, the arbitral tribunal may disallow the amendment if it finds that it should
not be permitted out of regard for the progress of the case or other important
consideration.
Section 26.Oral hearings and written proceedings
The arbitral tribunal shall decide whether to hold oral hearings or whether the case
shall be decided on the basis of written proceedings. A party may request an oral
hearing, which hearing shall then be held at an appropriate stage of the
proceedings.
The arbitral tribunal shall give the parties reasonable advance notice of any oral
hearing and of any meeting which the parties are entitled to attend.
All statements, documents and other information supplied to the arbitral tribunal
by one party shall at the same time be communicated to the other parties. If the
arbitral tribunal receives material directly from third parties, it shall immediately
send copies to the parties.
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The parties may contract out of the provisions of this section, except in consumer
relations.
Section 27.Default of a party
The arbitral tribunal shall terminate the arbitral proceedings if the claimant fails
without reasonable cause to submit particulars of claim in accordance with section
25 subsection 1.
The arbitral tribunal shall continue the proceedings if the respondent fails without
reasonable cause to submit a reply in accordance with section 25 subsection 2.
Such failure on the part of the respondent shall not be construed as an admission of
the claims submitted by the claimant.
If a party fails without just cause to appear at an arbitral hearing or fails to submit
documentary evidence, the arbitral tribunal may continue the proceedings and
make the award on the basis of the evidence before it.
Section 28.Evidence
The parties are responsible for substantiating the case and are entitled to present
such evidence as they wish.
The arbitral tribunal may disallow evidence that is obviously irrelevant to the
determination of the case. The arbitral tribunal may limit the presentation of
evidence if the extent of such presentation is unreasonably disproportionate to the
importance of the dispute or the relevance of the evidence to the determination of
the case.
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Section 29.Experts
The arbitral tribunal may appoint one or more experts to report to it on specific
issues to be determined by the arbitral tribunal. The arbitral tribunal may require
the parties to provide the expert with relevant information and to produce or
provide access to evidence.
If requested by a party or the arbitral tribunal, an expert who has submitted a
written report is obliged to attend an oral hearing where the parties have the
opportunity to put questions to him and to present expert witnesses to testify on the
points at issue.
The provisions on challenge of arbitrators in sections 14 and 15 subsection 1 apply
correspondingly to experts appointed by the arbitral tribunal as far as they are
appropriate.
Section 30.Court assistance in taking evidence
The arbitral tribunal or a party with the consent of the arbitral tribunal may ask the
court to take testimony from parties and witnesses and take other evidence. The
arbitral tribunal shall be given reasonable advance notice of the taking of evidence.
The arbitrators are entitled to be present and to ask questions.
Unless otherwise agreed between the parties, an arbitral tribunal that is required to
take a position on the interpretation of the EEA Agreement, including its protocols,
annexes and the legislative acts with which such annexes are concerned, may, of its
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own accord or at the request of a party, ask the courts to submit the interpretation
issue to the EFTA Court pursuant to the provisions of section 51 a of the Courts of
Justice Act. The courts may seek an advisory opinion from the EFTA Court on the
interpretation of the EEA Agreement.
D. ARBITRAL AWARD, TERMINATION AND ENFORCEMENT
Section 36.The award
The award shall be made in writing and shall be signed by all arbitrators. In arbitral
proceedings with more than one arbitrator, the signatures of the majority of the
members of the arbitral tribunal shall suffice provided that the reason for any
omitted signature is stated in the award.
The award shall state the reasons on which it is based unless it is an award on
agreed terms pursuant to section 35. The award shall state whether it is unanimous.
If it is not unanimous, the award shall state who is in dissent and to which issues
the dissent relates.
The award shall state its date and the place of arbitration pursuant to section 22
subsection 1. The award shall be deemed to have been made at that place.
The award shall be delivered to the parties.
The arbitral tribunal shall send one signed copy of the award to the local district
court to be filed in the archives of the court.
The parties may contract out of the provisions of subsections 2 and 4.
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Section 37.Termination of proceedings
The arbitral proceedings are terminated by the final award or by an order of the
arbitral tribunal for the termination of the arbitral proceedings in accordance with
subsections 2 to 4.
The arbitral tribunal shall issue an order for termination of the arbitral proceedings
if the claimant withdraws his claim, unless the respondent objects to the
termination and the arbitral tribunal finds that the respondent has a legitimate
interest in an award being made.
if the parties agree on such termination.
if it finds that it has become unnecessary or impossible to continue the
proceedings.
The mandate of the arbitral tribunal terminates with the termination of the arbitral
proceedings, subject to the provisions of sections 38 and 44 subsection 2.
Section 45.Recognition and enforcement
An arbitral award shall be recognised and enforceable pursuant to this provision
and section 46 irrespective of the country in which it was made.
Recognition and enforcement of an award is dependent on a party providing the
original award or a certified copy thereof. If the award is not made in Norwegian,
Swedish, Danish or English, the party shall also provide a certified translation
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thereof. The court can require documentary proof of the existence of an agreement
or other basis for arbitration.
Enforcement shall take place pursuant to the provisions of the Enforcement Act
except as provided by this Chapter.
Section 47.Adjournment and provision of security
If an action to set aside an award has been brought before a court referred to in
section 46 subsection 1 f), the court may, if it considers it proper, adjourn its ruling
on recognition and enforcement. In that case the court may, at the request of the
party asking for recognition or enforcement of the award, order the other party to
provide security.
UNIT 4
A. INTERNATIONAL COMMERCIAL ARBITRATION
With the growth of International Trade and Commerce, there was an increase in
disputes arising out of such transactions being adjudicated through Arbitration.
Arbitration is the favoured method for resolving international commercial disputes.
When companies or individuals from different countries do business often neither
party will be willing to submit disputes that may arise between them to the courts
of the other party’s country. Each party will view the other party’s legal system
with distrust perceiving that they will not get a fair hearing, or simply that they do
not understand the other party’s legal system and feeling if they are forced to
litigate in the foreign country, they will be hampered by language and cultural
problems, and systems and procedures that they do not know anything about.
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One of the problems faced in Arbitrations, related to 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.
The first such International Convention was the Geneva Protocol on Arbitration
Clauses, 1923. The 1923 Protocol sought to make arbitration agreements and
arbitration clauses in particular enforceable internationally. It was also sought to
ensure that Awards made pursuant to such arbitration agreements would be
enforced in the territory other than the state in which they were made. The 1923
Protocol proved to be inadequate. It was followed by the Geneva Convention on
the execution of Foreign Arbitrated Awards, 1927 and is popularly known as the
"Geneva Convention of 1927".
In 1953 the International Chamber of Commerce promoted a new treaty to govern
International Commercial Arbitration. The proposals of ICC were taken up by the
United Nations Economic Social Council. This in turn led to the adoption of the
convention on the Recognition and Enforcement of Foreign Arbitral Awards at
New York in 1958 (popularly known as "the New York Convention") (hereinafter
NYC). The NYC is an improvement on the Geneva Convention of 1927. It
provides for a much more simple and effective method of recognition and
enforcement of foreign arbitral awards. It gives much wider effect to the validity of
arbitration agreement. The NYC is primarily concerned with two matters: the
recognition of, and giving effect to, arbitration agreements and the recognition, and
enforcement, of international (non-domestic) arbitral awards. India became a State
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Signatory to this convention on 13th July, 1960. The Foreign Awards (Recognition
and Enforcement) Act, 1961 was enacted to give effect to the New York
Convention.
International commercial arbitration is a means of resolving disputes arising under
international commercial agreements. United Nations Commission on International
Trade Law (UNICTRAL) has framed a Model Law on International Commercial
Arbitration on 21 June 1985. The model law is not binding, but individual states
may adopt the model law by incorporating it into their domestic law. In 2006 the
model law was amended, it now includes more detailed provisions on interim
measures. The UNCITRAL Arbitration Rules, on the other hand, are selected by
parties either as part of their contract, or after a dispute arises; to govern the
conduct of arbitration intended to resolve a dispute or disputes between
themselves. In short, the Model Law is directed at the National Governments to
implement, while the Arbitration Rules are directed at potential or actual parties to
a dispute. The General Assembly in its Resolution 40 of 1972 on 11th December,
1985 recommended that "all States give due consideration to the Model Law on
international commercial arbitration, in view of the desirability of uniformity of the
law of arbitral procedures and the specific needs of international commercial
arbitration practice.”
In an international commercial arbitration, parties are free to designate the
governing law for the substance of the dispute. If the governing law is not
specified, the arbitral tribunal shall apply the rules of law it considers appropriate
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in view of the surrounding circumstances. Arbitration enables the parties to a
contract, to agree that if a dispute arises, a neutral and respected third party or
parties will be appointed to resolve their dispute in accordance with procedures
that they will have a large part in devising, in a desired venue, in accordance with a
set of arbitration rules they have chosen, with a particular set of laws to give the
arbitration its legal basis (the lex arbitri[i]) and another set of laws in accordance to
which the dispute will be resolved (lex causa[ii]).
The choice of where an arbitration is venued, known as the seat or the place of
arbitration, has important implications and should not be made lightly. The venue
of an arbitration impacts the role of local courts in relation to the arbitration, the
conduct of the arbitration, and ultimately the enforceability of the award. Careful
selection of the venue of an arbitration is important for several reasons. First, state
courts of the selected venue have a role in supervising the arbitration and can
influence the process not only before the proceedings have been initiated, but also
during the arbitral hearing. The parties, therefore, should pay attention to the local
laws and general judicial attitude towards arbitration in the chosen jurisdiction.
Secondly, the seat of arbitration may lead to the imposition of specific rules
regarding the conduct of the arbitration, whether relating to the treatment of
witnesses or even who may act as counsel or arbitrator. Thirdly, the local laws of
the seat of arbitration will be important for the enforcement of the ultimate award
or for the applications seeking to annul it. The choice of venue impacts many other
issues, including some that may significantly affect cost and convenience. For
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example, the venue is frequently (although not always) the location where the
hearings are held. Thus, it is important to ensure parties and their witnesses have
easy physical and legal access to the area.
Local courts of the selected jurisdiction are often called on to provide substantial
assistance to the parties even before the arbitration process has been initiated.
While many courts follow the principle that an arbitral tribunal is empowered to
rule on its own jurisdiction, this doctrine has been undermined in India by a recent
apex court decision[iii], is not recognized at all in China, and varies according to
the wording of the arbitration clause in the United States.
Some of the most important effects of the choice of venue are revealed only at the
post-award stage. Thus, the grounds for annulment of the arbitral award vary from
venue to venue. For example, while most local courts will revoke an award for
“violation of public policy,” the interpretation of what constitutes a violation of
public policy can vary tremendously between venues. The timeframe during which
the parties can demand annulment also varies significantly by jurisdiction. Finally,
the parties should remember that the award can be set aside only in local courts of
the venue under their local rules and procedures, and the proceedings are
conducted in the local language. Thus, the time and cost associated with annulment
actions will vary greatly from one venue to another.
While few countries like Australia and Singapore have a different statute for only
International Arbitrations, India has enacted laws for arbitration of both domestic
and International in single enactment repealing the earlier Arbitration Act of 1940
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and the Foreign Awards (Recognition and Enforcement) Act, 1961. The Objects
and Reasons of the Indian Arbitration and Conciliation Act, 1996 reflect the
intention of incorporation of the UNCITRAL Model Law in the Indian Arbitration
Process. The Act is one “to consolidate and amend the laws 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.”
In Indian Arbitration Laws, provisions of Section 28 of the Indian Arbitration and
Conciliation Act, 1996 deals International Commercial Arbitration held in India,
which says:
(1) Where the place of arbitration is situate in India,-
(a) in an arbitration other than an international commercial arbitration, the
arbitral tribunal shall decide the dispute submitted to arbitration in
accordance with the substantive law for the time being in force in India;
(b) in international commercial arbitration,-
(I) the arbitral tribunal shall decide the dispute in accordance with the rules of law
designated by the parties as applicable to the substance of the dispute;
(ii) any designation by the parties of the law or legal system of a given
country shall be construed, unless otherwise expressed, as directly
referring to die substantive law of that country and not to its conflict of laws
rules;
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(iii) failing any designation of the law under clause (a) by the parties, the
arbitral tribunal shall apply the rules of law it considers to be appropriate
given all the circumstances surrounding the dispute.
(2) The arbitral tribunal shall decide ex aequo et bono or as amiable
compositeur[iv]only if the parties have expressly authorised it to do so.
(3) In all cases, the arbitral tribunal shall decide in accordance with the
terms of the contract and shall take into account the usages of the trade
applicable to the transaction.
International commercial arbitration has proven spectacularly successful in the
recent past and will no doubt continue to be so. With the great opportunities for
international trade and commerce, as the preferred form of dispute resolution of
international commercial disputes, international commercial arbitration offers
practitioners new opportunities for practice, and is deserving of close attention.
B. NEW YORK CONVENTION AND GENEVA CONVENTION
Part II of the Arbitration and Conciliation Act, 1996 (the Act) amended by the
Arbitration and Conciliation (Amendment) Act, 2015 deals with enforcement of
certain foreign awards. India recognises foreign awards under the New York
Convention and the Geneva Convention.
CHAPTER I – NEW YORK CONVENTION AWARDS
1. DEFINITION OF FOREIGN AWARD
According to Section 44 of the Act a foreign award means an arbitral award on
disputes arising between parties to arbitration, whether in contractual or non-
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contractual relationship, considered as commercial under Indian laws enacted on or
after the 11thday of October, 1960. But the country must be a signatory to the New
York Convention and recognised by the Central Government of India as a
Convention country and the award shall be passed in the territory of another
contracting country which is a reciprocating territory, i.e the Central Government
of India has notified it as Convention country in its Official Gazette.
2. POWER OF JUDICIAL AUTHORITY TO REFER PARTIES TO
ARBITRATION
Section 45 of the Act empowers a judicial authority to refer the parties to
arbitration at the request of one of the parties or any person claiming through or
under him except in the situation when the agreement is found to be void,
inoperative or incapable of being performed.
3. FOREIGN AWARD WHEN BINDING
Section 46 of the Act provides that any foreign award which would be enforceable
under this Chapter shall be treated as binding for all purposes on the persons as
between whom it was made. It may be relied upon by the parties in any legal
proceedings in India.
4. EVIDENCE REQUIRED TO APPLY FOR ENFORCEMENT OF A
FORIEGN AWARD
According to section 47 of the Act a person seeking to enforce a foreign arbitral
award shall make an application to a court, i.e. high court having jurisdiction in the
matter as per the provisions of the Amendment Act, 2015 and provide the original
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award or its certified copy; original arbitration agreement or its duly certified copy;
and if the award or agreement is in a foreign language, the party seeking to enforce
must produce a certified copy of a foreign award translated into English and/or any
other evidence to establish that the award is a foreign award. The burden of proof
is on the party seeking to enforce the foreign arbitral award to prove that it is a
genuine foreign award and the aforesaid documents form a prima facie evidence to
establish the same.
5. CONDITION FOR ENFORCEMENT OF FOREIGN AWARDS
1. As per section 48 (1) of the Act, a foreign award may not be enforced in
India if it is proved by the party against whom it is sought to be enforced
that:
2. the parties to the agreement were under some incapacity to perform under
the law to which they were subjected to and in the absence of any mention
of such law, the law of the country where the award was made, i.e. the
place of arbitration, or,
3. the agreement was invalid under the law to which the parties have
subjected it and in the absence of any mention of such law, the law of the
country where the award was made, or,
 a fair trial was not conducted by the tribunal passing the award by failing to
adhere to the principles of fair hearing, or,
1. the award passed was partly or wholly beyond the scope of the arbitration
agreement, in which case the part of the award exceeding the scope of
submission to arbitration may be separated from rest of the award, or,
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2. the composition of the arbitral tribunal or authority and/or the procedure of
its appointment was not in accordance with the arbitration agreement or in
the absence of any mention of the same in the agreement, it was not in
accordance with the law of the country where the arbitration proceedings
were held, i.e. the place of arbitration, or,
3. the award has not yet been made binding on the parties or has been set
aside or suspended by a competent authority of the country which is either
the place or seat of arbitration.
The court may call upon such party making an application under section 48 (1) to
provide evidence to prove the existence of any or all of the grounds for refusal of
enforcement of award as mentioned above.
1. As per section 48 (2) of the Act, a foreign award may not be enforced in
India if it is found by the court in India that:
2. the settlement of the award is not as per Indian arbitration laws, or
3. the enforcement of the award is contrary to the public policy of India. This
defense should be construed narrowly. It has to be something more than
mere contravention of law to attract this defense. An award is said to be in
conflict with the public policy of India if it has been affected by fraud or
corruption; or it was in violation of the of the Act; or it was in contravention
with the fundamental policy of Indian law or basic principles of morality or
justice.
Section 48 only provides grounds for refusal of enforcement of foreign award as
mentioned in A and B and it does not permit the court to make a review of the
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foreign award on the merits of the case; does not permit the court to exercise its
appellate jurisdiction over the foreign award; and does not permit the court to
enquire as to whether some error has been committed by the tribunal while passing
the foreign award.
It is further provided that if an application for the setting aside or suspension of the
award has been made to a competent authority, the court may, if it considers it
proper adjourn the decision on the enforcement of the award and may also, on the
application of the party claiming enforcement of the award, order the other party to
give suitable security.
6. ENFORCEMENT OF FOREIGN AWARDS
As per section 49 of the Act if a court decides to uphold the foreign award and
enforce it then it shall be deemed to be a decree of the court and no appeal shall lie
against the award so upheld except for a discretionary appeal to Supreme Court of
India under Article 136 of the Constitution of India when it is a question of
fundamental importance or public interest. But in the case of an award held to be
non-enforceable by the court, an appeal may be allowed under section 50 (1) (b) of
the Act.
The decree shall be executed, on application by the decree-holder, in accordance
with the provisions of CPC by the court which passed it.
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CHAPTER II – GENEVA CONVENTION AWARDS
1. INTERPRETATION
As per section 53 of the Act a foreign award is an arbitral award on disputes
relating to matters which are considered commercial under Indian laws enacted
after 28th day of July, 1924 and comply with the following conditions:
 The award is in accordance with the agreement for arbitration to which the
Protocol laid down in the Second Schedule of the Act is applicable;
 The award is with respect to the persons, one of whom is subjected to the
jurisdiction of the country which has been recognised as a Convention
party by the Central Government of India vide notification in the Official
Gazette and the other who is subject to the jurisdiction of any other
Convention country so recognised by India through notification in the
Official Gazette.
 The award has been made in any of the Convention countries so
recognised by the Central Government of India vide notification in the
Official Gazette and the award shall be deemed final only if no legal
proceedings or appeal against such award is not pending in such
jurisdictions.
2. POWER OF JUDICIAL AUTHORITY TO REFER PARTIES TO
ARBITRATION
Section 54 of the Act empowers a judicial authority at the request of one of the
parties or any person claiming through or under him to refer the parties to
arbitration if it is satisfied about the validity of the agreement. The section is
attracted only if there is an actual reference to the arbitration.
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3. FOREIGN AWARD WHEN BINDING
Section 55 of the Act provides that an award which satisfies the conditions of
enforceability mentioned under section 57 of the Act is enforceable and is to be
treated as binding for all purposes and also on persons as between whom it was
made. It may be relied upon by the parties in any legal proceedings in India. Any
references to enforcing a foreign award shall be construed as including references
to relying on an award.
4. EVIDENCE REQUIRED TO APPLY FOR ENFORCEMENT OF A
FORIEGN AWARD
According to section 56 of the Act a party seeking to enforce a foreign arbitral
award shall make an application to a court, i.e. high court having jurisdiction in the
matter as per the provisions of the Amendment Act, 2015 and provide the original
award or its certified copy; evidence to prove that the award has become final and
is in pursuance with section 57 (1) (a) and (c); and if the award or agreement is in a
foreign language, the party seeking to enforce must produce a certified copy of a
foreign award translated into English and/or any other evidence to establish that
the award is a foreign award.
If the award or agreement is in a foreign language, the party seeking to enforce
must produce a certified copy of a foreign award translated into English. As per the
Amendment Act, 2015 the application for enforcement of a foreign award will only
lie to a high court having jurisdiction.
5. CONDITION FOR ENFORCEMENT OF FOREIGN AWARDS
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As per section 57 (1) of the Act, there are certain conditions for enforcement of
foreign awards under the Geneva Convention, such as:
 The award has been passed in accordance with the submission to
arbitration by parties;
 The Indian laws of arbitration allow the settlement of the award;
 The award has been passed in accordance with the arbitration agreement
by the tribunal or arbitration arbitral authority as determined by the parties
mutually and according to the law governing the;
 The award has become final in the country where it has been passed and
no objections or appeal or any other proceedings are pending against it;
 The enforcement of the award is not contrary to the public policy or the
laws of India. An award is said to be in conflict with the public policy of India
if it has been affected by fraud or corruption; or it is in violation of
confidentiality provisions of an attempted conciliation under the Act; or it
was in contravention with the fundamental policy of Indian law or basic
principles of morality or justice. As per section 57 (2) of the Act, a foreign
award may not be enforced in India if it is found by the court in India that:
1. the award has been declared null and void by courts in the country in which
it was made;
2. fair trial was not held by the arbitrator, in the sense, that the party was not
given a fair opportunity to be heard or that he was not properly represented
by an advocate, pending which the award has been passed;
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3. The award is beyond the scope of the submission to arbitration: Provided
that if the award has not covered all the disputes submitted to the arbitral
tribunal, the court may either postpone such enforcement or grant it subject
to such guarantee as the court may decide.
Section 57 only provides grounds for refusal of enforcement of foreign award as
mentioned in A and B and it does not permit the court to make a review of the
foreign award on the merits of the case; does not permit the court to exercise its
appellate jurisdiction over the foreign award; and does not permit the court to
enquire as to whether some error has been committed by the tribunal while passing
the foreign award.
The party against whom the award has been passed, if he proves, that there exists
any other ground other than mentioned above to challenge the validity of the
award, then the court, may, either refuse the enforcement of such award or
postpone the proceedings and give the party sufficient time to get the award
cancelled by the competent tribunal.
6. ENFORCEMENT OF FOREIGN AWARDS
As per section 58 of the Act if a court decides to uphold the foreign award and
enforce it then it shall be deemed to be a decree of the court. The Arbitration Act
and interpretations by the Supreme Court provide that every final arbitral award is
enforced in the same manner as if it were a decree of the court and as per section
59 of the Act appeals may lie against the order refusing to refer the parties to
arbitration under section 54; refusing to enforce a foreign award under section 57.
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Generally, no second appeal shall lie from the order passed in the appeal under
section 58 but right to appeal to Supreme Court is not barred.
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Chanderprabhu Jain College of Higher

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