Alternative Dispute Resolution (ADR) consists of methods and techniques to deal with disputes without

involving lawsuit or any other litigation process. Due to quicker and cost effective decision capability of
ADR, it has gained noticeable popularity among the commercial and social parties around the world.
Though the techniques have disadvantages, the benefits are widespread and considered as most
effective ones. The major types of ADR and their characteristics are renowned amongst the law
practitioners as well is to the lawyers. Thus, ADR serves significant deal of settling a dispute or conflict.

1. Introduction
In general terms, dispute is referred to as a disagreement or argument between the parties. The dispute
generally takes place between two parties which can be a person or a group of person composing a single
entity. Parties comprise of plaintiff and defendant. In this case, plaintiff is the person who brings charges
and files a suit and defendant is the person accused with charges.Dispute can be resolved in both using
legal jurisdiction and also compromising settlement without reaching the court. This dispute can be between
individuals and corporations and even between public officials.

Perhaps, different parties try to resolve the dispute which they considered to result with the best outcome.
Thus there is necessity of Alternative Dispute Resolution (ADR)in order to ensure justified resolution
without the involvement of legal jurisdiction and court. The aspects of ADR are perhaps extended since
there are different methods and implications of resolving disputes. The resolution of ADR is not only for
commercial conflicts but also in many cases found in the dispute resolution of public officials.

2. Dispute Resolution
Dispute resolution refers to the settlement of conflicts or arguments between various parties. The conflict
is resolved by considering satisfying at least some of each side’s needs and addressing the interest.

Dispute resolution processes fall into two major types:

1. Adjudicative processes, such as litigation or arbitration, in which a judge, jury or arbitrator

determines the outcome.
2. Consensual processes, such as collaborative law, mediation, conciliation, or negotiation, in which
the parties attempt to reach agreement. These processes are not influenced by the court judgment
and settlement is rather privately decided. Thus it is in simple form called alternative dispute
resolution (ADR).

3. Alternative Dispute resolution (ADR)

Alternative Dispute Resolution (ADR) includes dispute resolution mechanisms and techniques that perform
as a means for disagreeing parties to attain an agreement short of lawsuit. It is basically a substitute of
formal court hearing. It is a cooperative term for the ways that parties can settle disputes, with (or without)
the help of a third party. ADR are conducts and methods of resolving conflicts outside the judicial practice.
Despite the resistance of many renowned parties and advocates, ADR has gained prevalent reception both
among the general public and legal profession. Even now in many situations, court requires the parties to
execute of some type of ADR before the permission of case trial.The rising popularity of ADR can be
explained by the increasing caseload of traditional courts, the perception that ADR imposes fewer costs
than litigation, a preference for confidentiality, and the desire of some parties to have greater control over
the selection of the individual or individuals who will decide their dispute.[1]Many of the sovereign countries
refer ADR as an extra judicial procedure (i.e. Australia). Some of the senior judiciary in certain jurisdictions
(of which England and Wales is one) are strongly in favor of the use of mediation to settle disputes. [2]

The adoption of ADR depends on three major factors:

 1. The degree to which disputants and their advisors are responsive of ADR
2. The sufficiency of the supply of ADR services for those that would wish to take-up ADR services
3. The perceived advantages and disadvantages of ADR

Therefore, by satisfying the three crucial factors, ADR can be successfully implanted for resolving critical
dispute issues. The third critical factor indicates the perception of parties regarding the pros and cons of
ADR, since legal hearing is perhaps avoided. Thus, both the parties require being fully conscious of the
advantages and disadvantages prior to the successful implication of ADR.

Introduction
Dispute resolution is an important mechanism in order to make social life stable.
When civilization began and when people started interacting with each other, the
basis of their rights gave birth to the dispute between them. To resolve the dispute
between them, a mechanism was required. Dispute resolution mechanism aims to
settle and manage disputes, facilitating cooperation between individuals and
groups. Thus, it can be argued that it is the stability that people require socially,
without which it can be difficult for individuals to carry on with life together.
Commercial transactions are increasing in today’s world. All trade can involve
disputes, and effective trade must have the means to resolve disputes other than
force them. In trade, if two traders are in a dispute over the price or quality of the
delivered products, they will normally turn to a third party whom they trust. In the
modern world this process is known as arbitration, international commercial
arbitration takes formal action at international level as a dispute settlement
mechanism between the parties during international trade i.e. when two countries
trade with each other.

What is Alternative Dispute Resolution?

Alternative Dispute Resolution (ADR) is a term used to describe the various ways in
which legal disputes are resolved. The business world as well as common people
are discovering that it is impracticable for many individuals to file lawsuits and seek
timely justice. The Courts are backlogged with case files resulting in a year or more
delay for the parties to hear and resolve their cases. In response to this question of
delayed justice, the ADR Mechanism was created.

Alternate dispute resolutions approaches are gradually being recognized at both

national and international level in the field of law and commercial sectors. The
diverse approaches can help parties settle their conflicts efficiently and
expeditiously on their own terms.

In addition to the trials, alternate conflict resolution strategies are in character.

Alternative conflict resolution techniques can be used in almost all contested
matters, which can be settled by agreement between the parties according to
statute. Alternative conflict resolution methods can be used in different dispute
types, in particular; legal, economic, industrial and family disputes. Alternative
dispute resolution strategies provide the best solution with respect to trade disputes
to aid the country’s economic development.
The aim of justice is to provide redress for the aggrieved and helpless. If, after the
death of the petitioner or if the subject matter exhausts, the courts delay the trial
and give justice, it cannot be termed as punishment. The alternative dispute
resolution process is being implemented because a mechanism was required that
worked effectively and offered a friendly and speedy solution to people’s disputes.
As the name suggests, ADR is an alternative to the conventional court-led dispute
resolution procedure. It is the method of dispute settlement as an alternative to the
standard judicial process.

Such approaches are appropriate for reform and implemented to improve the
judicial system in developing countries. The alternative dispute resolution system
has been adopted by many countries like India. The adoption of ADR in India is a
major step by lawmakers and the judiciary towards achieving the “Constitutional
Target” of complete justice in India.

Given the huge number of cases pending, governance and administrative oversight
of the judiciary by manual processes has become extremely difficult. The Supreme
Court stated emphatically that somehow this matter must be addressed: ‘An
impartial and effective judicial system is among our constitution’s core
components… It’s indeed our statutory role to check that a bottleneck of cases are
reported and that measures are made to expedite case disposition.” By the very
technique used, the alternative dispute resolution system will maintain and
strengthen personal and business relationships which the adversarial process might
otherwise be harmful. It is also versatile because it requires the contestants to
choose procedures that stipulate the essence of the conflict and the market sense in
which it takes place.

ADR system in India

There is a long and old tradition in India of the encouragement of dispute resolution outside the formal legal
system. Disputes were quite obviously decided by the intervention of elders or assemblies of learned men
and other such bodies. Nyaya Panchayats at the grass root level were there even before the advent of the
British system of justice. However, with the advent of the British Raj, these traditional institutions of dispute
settlement somehow started withering and the formal legal system introduced by the British began to rule
on the basis of the concept of omissions of rule of law and the supremacy of law.
It was only after Independence, the fact that the formal legal system will not be in a position to bear the
entire burden and the system requires drastic changes. The mounting arrears in the courts, inordinate
delays in the administration of justice and expenses of litigation have gradually undermined the people’s
faith in the system. Today, therefore, the issue is to examine and choose a right formal legal system, such
as Alternative Dispute Resolution procedures and to organise the same on more scientific lines.
IMPORTANCE OF ADR

On account of arrears of pending cases and experience litigations compel to search for alternative means.
The present days crumbling administration of justice is also a factor which makes alternative dispute
resolution acceptable. At present, there are over 2.5 crore cases pending in various courts all over the
country. In a democracy, this situation may lead to the failure of
the administration of justice. Justice delayed is justice denied, this legal maxim speaks for itself in the
context of clogging the judicial system. The judicial system today lacks judicial officers, staff and proper
infrastructure to deal with the backlog cases which is being stretched for years and decades without
reaching a final decision. Such situations call for ADR to step in where the justice system fails.
Thus to sum it up we can say that ADR is needed to counter the following situations:
Arrears of pending cases

As stated earlier a load of pending cases is way too much for the present justice delivery system to handle.
This makes the justice system sluggish and technically dead. Overpopulation and modern complications
of human life make the judicial system prone to collapse in future if there are no alternative and effective
means to be adopted. This is why ADR steps in to efficiently resolve disputes harmoniously.
Repeated Adjournments
The practice of seeking adjournments is prevalent specifically in our country. It is a true fact that
unwarranted adjournment makes the life of litigation, it is, however, being prolonged than being extended
due to repeated adjournments granted.

Sluggish Government Machinery

It is to be noted that the ‘State’ is the major litigant because in most of the litigations the State is an
essential party. It has been seen that the Government machinery specifically the Judiciary is not well
equipped. A number of vacant posts of judges are lying vacant on account of the governmental
heedlessness. Lack of required infrastructure is further aggravating the course of litigation. On account of
overpopulation and a tremendous increase in commercial activities, it is quite natural that the number of
litigations also increase resulting in a massive backlog of cases.
Concentration of Litigation
The concentration of cases on a particular advocate badly affects his/her functioning and he/she finds
himself/herself in such a demanding position that he/she is expected to make an effective presentation of
the case. To avoid such problems, it is most desirable to pursue alternative resolution in the form of ADR.

Modes & Practices of Arbitration

1. Arbitration;

2. Conciliation;

3. Mediation;

4. Judicial Settlement;

5. Lok Adalat.

What is arbitration
Alternative Dispute Resolution which is also referred to as appropriate or amicable
dispute resolution is another way of resolving disputes between parties without
taking them to the courts. While courts decide the outcome in a case, ADR resolves
the dispute effectively, efficiently, and amicably. Arbitration is one of the prominent
forms of ADR.

It is commonly used in disputes that are commercial in nature. Parties who have
inserted an arbitration clause in the contract can refer the dispute to arbitration. A
significant difference of arbitration as compared to mediation is that one of the
parties cannot withdraw from arbitration one-sidedly. The parties can select the
venue, the language in which the proceedings take place as well as the applicable
law so as to make certain that no party gets an undue advantage.

Kinds of arbitration
Unlike civil or criminal cases, a dispute is sent to the arbitration tribunal. The
tribunal resolves the dispute and the final decision cannot be appealed, making it
binding on both parties. No judicial proceedings are involved to ensure the swift
resolution of the disputes. The following are the different types of arbitration as per
the jurisdiction of the case:

Domestic arbitration
In domestic arbitration, both the parties must be Indians and the proceedings take
place in India itself. In the Arbitration and Conciliation Act, 1996 there is no specific
definition given to domestic arbitration. A mere reading of Section 2(2) can lead us
to infer that domestic arbitration is when the parties had agreed to resolve any
disputes that arise in India. The proceedings must be held in the domestic territory
and must be in lieu of the procedural and substantive law in India.

International arbitration
As the name suggests, international arbitration occurs outside the domestic
territory because of either a clause inserted in the agreement between the parties
or the cause of action that arises from a foreign element relating to the dispute or
to the parties. According to the circumstances that led to a case being filed foreign
or Indian law would be applicable.

International commercial arbitration

According to Section 2(1)(f), international commercial arbitration can be
understood as arbitration that takes place because of a dispute arising from a
commercial contract where either one of the parties resides in a foreign country or
is a foreign national; or the core management committee of an association,
company or a body of individuals is controlled by foreign individuals.

Under Indian law, the involvement of a foreign party would attract Part I of the Act,
that is, it would come under the purview of international commercial arbitration.
But it would be inapplicable in case the international commercial arbitration takes
place outside the territory of India. By virtue of the 2015 Amendment Act,
‘company’ has been removed from the ambit of ICA. The Supreme Court scrutinized
the scope of Section 2 (1) (f) (iii) in TDM Infrastructure Pvt. Ltd. v. UE
Development India Pvt. Ltd., (“TDM Infrastructure”) wherein, even if a company is
in foreign hands, it would be considered as an Indian company as it was
incorporated in India. Therefore, companies that have Indian nationality and have
been registered in India would be excluded from the ambit of foreign body
corporate, regardless of the fact that the company is in foreign hands.

On the basis of the established procedure and rules, there are further three types of
arbitration that have been recognized in India:

Ad-hoc Arbitration
Ad-hoc arbitration refers to when parties with mutual consent opt for arbitration to
resolve the dispute. It is the most common form of arbitration used in India owing
to reasonable costs and adequate infrastructure. Arbitration is conducted without
having any institutional proceedings, that is, it does not comply with the rules of an
arbitral institution. The parties have the option to choose the rules and the
procedure to be followed. This form of arbitration can be used for international
commercial transactions and domestic disputes. The jurisdiction is of utmost
importance since a majority of the issues are resolved in conformity with the
applicable law in respect to the seat of arbitration. An example of the same would
be if the parties have agreed to keep the seat in India, the dispute would be
resolved in lieu of the provisions of the Arbitration and Conciliation Act. The Act
also provides that the arbitral tribunal or the parties can determine whether to
receive assistance from an appropriate institution or individuals. In case the parties
are unable to reach a consensus on the number of arbitrators, one arbitrator would
be part of the tribunal after being appointed by the Chief Justice of a Supreme
Court or the Chief Justice of a High Court.

Fast track Arbitration

Fast track arbitration can be seen as an effective solution to solving the problems
faced because of delays and time-consuming proceedings in other forms of
arbitration. It does not involve any procedure that takes time and upholds the main
objective or arbitration, that is, to resolve a dispute in a short period of time. In
the provision of the Act, fast-track arbitration is given a stipulated time period of six
months. The arbitrator only makes use of the written submission and unlike other
forms of arbitration, one sole arbitrator is sufficient to resolve the dispute.

Institutional Arbitration
In Institutional Arbitration, the parties are free to choose a particular arbitral
institution in the arbitration agreement itself. The institution’s governing body or
the parties can appoint one or more arbitrators from a panel of arbitrators that had
been previously agreed upon. Part I of the Act gives parties the freedom to appoint
an arbitrator to deal with a specific issue.
The institution selects one or more arbitrators who possess the skills and
experience stipulated applicable in a given case when the parties do not appoint an
arbitrator themselves. On the other hand, if the parties choose to appoint one
themselves they can choose from the list provided by the institution.

It is mainly used by business organizations worldwide owing to a specific procedure

being deployed as well as an efficient dispute resolution procedure provided by the
institutions. A few prominent arbitration centres are the Chartered Institute of
Arbitrators UK, the London Court of International Arbitration, the National
Arbitration Forum USA, Singapore International Arbitration Centre, and the
International Court of Paris.

In M/S Nandan Biomatrix Limited vs D 1 Oils Limited, 2009, the parties had agreed
to resolve any dispute arising from the agreement via institutional arbitration. The
Supreme Court assessed the validity of the agreement and whether the absence of
a specific institution would make the agreement invalid. It was held that the parties
had expressly desired to settle the disputes through institutional arbitration, making
the agreement between them valid.

Conciliation
Conciliation means settling disputes without litigation. It is an informal process in
which conciliator i.e. third party tries to bring the disputants to agreement. He
overcomes the disputable issues by lowering the tension, improvement in
communication, interpreting issues, providing technical assistance, exploring
potential solutions and bringing the negotiated settlement before the parties.
Conciliator adopts his own method to resolve the dispute and the steps taken by him
are not strict and legal. There is no need of agreement like arbitration agreement.
The acceptance of settlement is needed by both of the parties.

Part III of the Arbitration and Conciliation Act, 1996 deals with conciliation. it is a
voluntary proceeding where parties in dispute agree to resolve their dispute through
conciliation. It is a flexible process which allows the parties to decide the time and
place for conciliation, structure, content and terms of negotiations. In Conciliation,
the conciliators are trained and qualified neutral person who help the conflicting
parties to make them understand the issues in dispute and their interest to reach
mutually accepted agreements. The conciliation process includes the discussion
between the parties which is made with the participation of the conciliator. It covers
many disputes like industrial disputes, marriage disputes, family disputes etc. This
allows the parties to control the output of their dispute. The result is also likely to be
satisfactory.

Conciliator
Conciliator is the third party who is involved in settling the dispute of the parties.
Generally, there is one conciliator for the settlement but there can be more than one
conciliator, if the parties have requested for the same. If there is more than one
conciliator then they will act jointly in the matter. Section 64 deals with the
appointment of conciliator which states that if there is more than one conciliator then
the third conciliator will act as the Presiding Conciliator.

Kinds of Conciliation
1. Voluntary Conciliation- In this method parties can voluntarily participate in
the process of conciliation for resolving their dispute.
2. Compulsory Conciliation- If parties do not want to take the opportunity of
voluntary conciliation then they can go for compulsory conciliation. In this
method, if the parties do not want to meet the other party to resolve the
dispute then the process is said to be compulsory. This method is commonly
used in labour cases.

Procedure of Conciliation
The objective of the conciliation proceedings is to reach upon mutual terms, speedy
and cost-effective settlement of the dispute. Section 62 discuss the initiative of
conciliation will start when one party will send Written Invitation to conciliate upon
the matter to the other party. There will be the commencement of procedure if the
other party accepts the invitation in writing to conciliate. If the other party rejects
the invitation or the party who is willing for the conciliation does not get a reply from
the other party within Thirty days then it will be treated as a Rejection of the
Invitation.

Section 65 explains the submission of the statements of both the parties to the
conciliators. Each party should submit a brief written statement regarding dispute as
requested by the conciliator. The statement should describe the general nature of the
dispute and the points of issue. Each party should send a copy of their statement to
the other party. The conciliator can also ask for the submission of written statements
which includes issues of the parties, grounds of settlement etc. These statements
must be supplemented by evidence, documents or visual representation. The copy of
the same statement must be sent to the other party. Conciliator can also request for
additional documents whenever he needs them. According to Section
67(3) and 69(1), the conciliator can set up meetings for the parties or he can meet
parties together or separately. The place of meeting can be decided by parties or
conciliators. He can also communicate with the parties orally or in written form. He
must also consider the party’s expressed wishes like quick settlement of the case
which also depends upon the circumstances of the case.

Mediation And Brief Concept Of Mediation:

According to Black Law Dictionary, “Mediation is a method of non-binding dispute resolution
involving a neutral third-party who tries to help the disputing parties reach a neutrally agreeable
solution.”[3]

Mediation is a voluntary, party-centred, non-binding, confidential, and structured process, where a

rational and neutral third party, who possesses special communication, negotiation, social and
interactive skills to facilitate a mutual settlement between the disputant parties. In mediation, the
parties settle their disputes themselves on mutually agreed terms, leading to a win-win situation.
The approach in mediation is not to see the guilt or innocence of the disputant parties, but to help
the parties to focus on their interests and priorities. Mediation promotes active and direct
participation of the parties. The function of the mediator is mainly that of a facilitator.

Mediation is a confidential process and whatever transpires in the mediation is not subject to
disclosure without the written consent of all the disputant-parties. The mediator cannot be called to
the court or be asked to testify any of the proceedings or reveal any discussion that took place
during mediation. The statements made during mediation process cannot be leaked. In India,
mediation is still primarily Court-annexed. If a settlement is reached in a Court-annexed mediation,
then the mediator, or parties with the assistance of the mediator, frames the settlement agreement,
which is duly signed by the parties and the mediator and then sent to the Court for passing of an
appropriate order. In Salem Advocate Bar Association v. Union of India, (2005) 6 Supreme Court
Cases 344, the Supreme Court construed Clause (d) of Section 89 (2) of Code of Civil Procedure to
mean that when the mediation succeeds and the agreement is made on the consensus of both the
parties, the mediator will send the report of settlement agreement to the Court for the Court, after
giving notice and hearing the parties, to give effect to the compromise and pass a decree in
accordance with the terms of settlement accepted by the parties.

Should there be no settlement, the mediator sends a report to the Court stating that the mediation
was “not settled”, the reason for such non-settlement is not mentioned by the mediator. Thus,
mediation is a people-friendly, effective, efficient, less expensive, time saving, less stressful and
convenient process to resolve disputes with mutual respect and without painting the other party
black. The focus in mediation is on the future, with an emphasis on building relationships, rather
than fixing the blame for what has happened in the past.[4]It is perhaps the best way to part ways
amicably and brings closure to the conflict.

Fundamental Rules Of Mediation Are As Follows:[5]

1. A neutral mediator to conduct the mediation: A mediator should always be neutral, having no
personal or monetary interest in the dispute, or in either party.

2. Self-determination of the parties: Mediation is a process that is based on the self-

determination of disputant parties that is to say that the parties can make free choices keeping their
interest in mind. The mediator is thus responsible to conduct the process whereas the parties
determine the outcome of the settlement.

3. Confidentiality: The very essence of mediation is its confidentiality. The mediator should take
note:

ØThat she and the parties shall maintain confidentiality in all the matters relating to the mediation
proceedings. The confidentiality shall extend to the settlement agreement, unless there is a
necessity for the disclosure in order to implement and enforce it.
ØThat it is not legally permissible for her, unless otherwise agreed to by the parties, to act as an
arbitrator or witness in any arbitral or judicial proceeding with respect to the dispute which is the
subject matter of mediation proceedings and the parties are also not allowed to introduce such
evidence.
ØThat the only information regarding the behavior of the parties might be reported is: whether the
parties appeared at a scheduled mediation and whether or not they reached a solution.

4. Fairness of process: The mediation process should be a fair one. The parties should be treated
fairly and not arbitrarily and that their concerns should be addressed properly.

5. Voluntary process: The mediation process is impossible without the consent of the parties
involved. The parties are bound once they sign the settlement arrived at during mediation.

Judicial settlement
Section 89 of the Code of Civil Procedure also refers to judicial settlement as one of
the alternative modes of resolution of disputes. There are, of course, no specific
rules for such settlements framed up to now. The term “Judicial Settlement” is
however specified in Section 89 of the Code. It was provided that the provisions of
the Legal Services Authority Act, 1987, would apply when there is a judicial
settlement. This means that the Judge concerned, seeks to settle the dispute
between the parties in a legal settlement amicably. Such settlement shall be
deemed to be an agreement within the scope of the Legal Services Authority Act,
1987, if any friendly settlement is resorted to and reached in the case at
question. Section 21 of the Legal Services Authorities Act, 1987 specifies that each
Lok Adalat award shall be deemed a Civil Court decree. India has no written
guidance on judicial settlement.

Lok Adalat
The idea that is gaining popularity is that of Lok Adalats or the courts of the people
as formed by the government to settle disputes through conciliation and
compromise. It is a judicial body and a dispute settlement organization established
for social justice by the citizens themselves, based on the settlement or agreement
obtained through formal negotiations. The first Lok Adalats was conducted as far
back as 1982 in Una village of Junagadh (Gujrat). Adalats also recognize cases
within their jurisdiction which are pending in regular courts. Section 89 of the Code
of Civil Procedure also provides for the appeal to the Lok Adalat of pending Civil
disputes. When the matter is referred to the Lok Adalat then it will follow the
provisions of the Legal Services Authorities Act, 1987. The holding of Lok Adalat is
governed by Section 19 of the Legal Services Authorities Act, 1987.

NALSA along with other Legal Services Institutions conducts Lok Adalats. Lok Adalat is one of the
alternative dispute redressal mechanisms, it is a forum where disputes/cases pending in the court
of law or at pre-litigation stage are settled/ compromised amicably. Lok Adalats have been given
statutory status under the Legal Services Authorities Act, 1987. Under the said Act, the award
(decision) made by the Lok Adalats is deemed to be a decree of a civil court and is final and
binding on all parties and no appeal against such an award lies before any court of law. If the
parties are not satisfied with the award of the Lok Adalat though there is no provision for an
appeal against such an award, but they are free to initiate litigation by approaching the court of
appropriate jurisdiction by filing a case by following the required procedure, in exercise of their
right to litigate.

There is no court fee payable when a matter is filed in a Lok Adalat. If a matter pending in the
court of law is referred to the Lok Adalat and is settled subsequently, the court fee originally paid
in the court on the complaints/petition is also refunded back to the parties. The persons deciding
the cases in the Lok Adalats are called the Members of the Lok Adalats, they have the role of
statutory conciliators only and do not have any judicial role; therefore they can only persuade the
parties to come to a conclusion for settling the dispute outside the court in the Lok Adalat and
shall not pressurize or coerce any of the parties to compromise or settle cases or matters either
directly or indirectly. The Lok Adalat shall not decide the matter so referred at its own instance,
instead the same would be decided on the basis of the compromise or settlement between the
parties. The members shall assist the parties in an independent and impartial manner in their
attempt to reach amicable settlement of their dispute.

Nature of Cases to be Referred to Lok Adalat

1. Any case pending before any court.

2. Any dispute which has not been brought before any court and is likely to be filed before the
court.

Provided that any matter relating to an offence not compoundable under the law shall not be
settled in Lok Adalat.

Which Lok Adalat to be Approached

As per section 18(1) of the Act, 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 -

(1) Any case pending before; or

(2) 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 matters relating to divorce or
matters relating to an offence not compoundable under any law.

How to Get the Case Referred to the Lok Adalat for Settlement

(A) Case pending before the court.

(B) Any dispute at pre-litigative stage.

The State Legal Services Authority or District Legal Services Authority as the case may be on receipt
of an application from any one of the parties at a pre-litigation stage may refer such matter to the
Lok Adalat for amicable settlement of the dispute for which notice would then be issued to the
other party.

Levels and Composition of Lok Adalats:

At the State Authority Level -

The Member Secretary of the State Legal Services Authority organizing the Lok Adalat would
constitute benches of the Lok Adalat, each bench comprising of a sitting or retired judge of the
High Court or a sitting or retired judicial officer and any one or both of- a member from the legal
profession; a social worker engaged in the upliftment of the weaker sections and interested in the
implementation of legal services schemes or programmes.

At High Court Level -

The Secretary of the High Court Legal Services Committee would constitute benches of the Lok
Adalat, each bench comprising of a sitting or retired judge of the High Court and any one or both
of- a member from the legal profession; a social worker engaged in the upliftment of the weaker
sections and interested in the implementation of legal services schemes or programmes.

At District Level -

The Secretary of the District Legal Services Authority organizing the Lok Adalat would constitute
benches of the Lok Adalat, each bench comprising of a sitting or retired judicial officer and any
one or both of either a member from the legal profession; and/or a social worker engaged in the
upliftment of the weaker sections and interested in the implementation of legal services schemes
or programmes or a person engaged in para-legal activities of the area, preferably a woman.

At Taluk Level -

The Secretary of the Taluk Legal Services Committee organizing the Lok Adalat would constitute
benches of the Lok Adalat, each bench comprising of a sitting or retired judicial officer and any
one or both of either a member from the legal profession; and/or a social worker engaged in the
upliftment of the weaker sections and interested in the implementation of legal services schemes
or programmes or a person engaged in para-legal activities of the area, preferably a woman.

National Lok Adalat

National Level Lok Adalats are held for at regular intervals where on a single day Lok Adalats are
held throughout the country, in all the courts right from the Supreme Court till the Taluk Levels
wherein cases are disposed off in huge numbers. From February 2015, National Lok Adalats are
being held on a specific subject matter every month.

Permanent Lok Adalat

The other type of Lok Adalat is the Permanent Lok Adalat, organized under Section 22-B of The
Legal Services Authorities Act, 1987. Permanent Lok Adalats have been set up as permanent
bodies with a Chairman and two members for providing compulsory pre-litigative mechanism for
conciliation and settlement of cases relating to Public Utility Services like transport, postal,
telegraph etc. Here, even if the parties fail to reach to a settlement, the Permanent Lok Adalat gets
jurisdiction to decide the dispute, provided, the dispute does not relate to any offence. Further,
the Award of the Permanent Lok Adalat is final and binding on all the parties. The jurisdiction of
the Permanent Lok Adalats is upto Rs. Ten Lakhs. Here if the parties fail to reach to a settlement,
the Permanent Lok Adalat has the jurisdiction to decide the case. The award of the Permanent Lok
Adalat is final and binding upon the parties. The Lok Adalat may conduct the proceedings in such
a manner as it considers appropriate, taking into account the circumstances of the case, wishes of
the parties like requests to hear oral statements, speedy settlement of dispute etc.

Mobile Lok Adalats are also organized in various parts of the country which travel from one
location to another to resolve disputes in order to facilitate the resolution of disputes through this
mechanism.

As on 30.09.2015, more than 15.14 lakhs Lok Adalats have been organized in the country since its
inception. More than 8.25 crore cases have been settled by this mechanism so far.

Arbitration

Introduction
We often hear a plethora of complaints by the petitioners or the plaintiff of a
particular case. The legal fees charged were exorbitantly high, the dispute was
resolved after a number of hearings, or that the verdict did not provide them with
the appropriate remedy. But with the advent of alternative dispute resolution, we
can observe a significant decrease in such complaints. Arbitration can especially be
seen as a recent trend in commercial contracts and disputes.

An increase in foreign trade has resulted in a subsequent increase in cross-border

disputes giving rise to a need for an effective form of dispute resolution. Arbitration
has emerged as a way to preserve the relationships between two companies and
resolve a dispute amicably. A recent judgment given by the Supreme Court in the
case of Amazon v Future Retail Limited, 2021 garnered attention to the parties
opting for arbitration to resolve the dispute. But what is arbitration? Is it more
time-efficient and cost-saving as compared to the traditional courts? What are the
different types of arbitration prevalent and what is their significance? The questions
will be answered in the course of the article.

Historical background of arbitration

A number of authors have argued that the first arbitrator, King Solomon, had used
a procedure similar to the modern-day procedure while resolving a dispute that
emerged when two women protested that they were the mother of a baby boy.

Another influential figure, Philip the Second, had used arbitration to amicably
resolve a territorial dispute that took place way back in 337 BC. In Roman law,
‘compromissum’ was used to indicate a process of dispute resolution which would
draw out a compromise between the parties. Therefore, we can see that there have
been a number of examples of arbitration that actually took place in the ancient era
and can be seen as a trailblazer for the laws we have today.

In India, arbitration came to be known and given recognition when the Arbitration
Act 1899 was enacted but its applicability only extended to Bombay, Madras and
Calcutta. The provisions were given an extension to the remaining areas in Section
89 as well as Schedule II of the Code of Civil Procedure, 1908. However, it was
observed that arbitration did not reap the expected benefits to the public at large
and to meet the economic reforms in the country, the Arbitration Act was enacted
in 1940. The previous Act along with the provisions in the Code of Civil
Procedure were repealed.

The Act can be seen as a consolidation of the existing laws; however, there was no
stipulated procedure pertaining to the enforcement of foreign awards. It was
confined to the domestic territory and therefore, it did not achieve the purpose
behind its enactment. In the case of Guru Nanak Foundation v Rattan Singh, 1981,
Justice D.A Desai criticized the ineffectiveness and poor implementation of the Act.
He explained how the complex, expensive and time-consuming court procedure
involved to resolve disputes compelled jurists to switch to a more effective forum;
however, the way the forum operates has invited harsh criticism from the courts.

The Arbitration and Conciliation Act, 1996 was then introduced with the objective of
providing speedy dispute resolution. The Act covered international arbitration as
well and was based on the UNCITRAL Model Law on International Commercial
Arbitration. The Act, however, was met with criticism due to exorbitant costs,
absence of a stipulated time period for making an arbitral award, interference by
the court beyond a reasonable limit which went against the essence of the Act.

Subsequently, the Arbitration and Conciliation (Amendment) Act, 2015 was passed
with a number of amendments. After taking into account the recommendations
made by a committee headed by Justice B.N. Srikrishna, the Arbitration and
Conciliation (Amendment) Act, 2019 was enacted. The Arbitration Council of
India was instituted with the goal to promote ADR in India, boost the established
arbitration in the country, and evaluate the functioning of the arbitral institutions
and the arbitrators.

On November 4, 2020, the Arbitration and Conciliation (Amendment) Ordinance,

2020 was implemented with two major amendments. First, the enforcement of an
arbitration award could be stayed unconditionally if the court can infer that the
contract/agreement or the award was given fraudulently or under undue influence.
Second, after much scrutiny and discourse, the qualifications and experience
required for approving an arbitrator were deleted from the Eighth Schedule of the
said Act.

What is arbitration
Alternative Dispute Resolution which is also referred to as appropriate or amicable
dispute resolution is another way of resolving disputes between parties without
taking them to the courts. While courts decide the outcome in a case, ADR resolves
the dispute effectively, efficiently, and amicably. Arbitration is one of the prominent
forms of ADR.

It is commonly used in disputes that are commercial in nature. Parties who have
inserted an arbitration clause in the contract can refer the dispute to arbitration. A
significant difference of arbitration as compared to mediation is that one of the
parties cannot withdraw from arbitration one-sidedly. The parties can select the
venue, the language in which the proceedings take place as well as the applicable
law so as to make certain that no party gets an undue advantage.

Salient Features of the Arbitration and Conciliation Act,

1996: (Arbitration points not found, so use these)

1. Replacement of three old statutes: The Act is a consolidation of three

laws of arbitration previously in force – viz, the Arbitration Act, 1940,
the Arbitration (Protocol and Convention) Act, 1937, and the Foreign
Awards (Recognition and Enforcement) Act, 1961 into one enactment.
Though the three Acts have been consolidated the provisions regarding
each of the acts have been kept distinct within the 1996 Act.
2. Necessity of Arbitration Agreement: The Act emphasizes the
importance of the Arbitration agreement without which arbitration
proceedings cannot be instituted. The arbitration agreement is a clause in
a contract or an agreement between parties stating that any dispute will
be referred to arbitration proceedings. The Act mentions that the
arbitration agreement or arbitration clause must contain the following
information – the subject matter of dispute, the timing of dispute
(past/present/future), number of arbitrators, qualifications of arbitrators,
jurisdiction, and composition of the tribunal.
3. Application to Domestic and International Arbitration: The Act
provides the procedure not only for domestic arbitration but also
includes International Commercial Arbitration. The 1996 Act is a law
that relates to the enforcement of foreign Arbitration awards and ensures
greater autonomy in the process of arbitration and puts a limit on the
intervention of the judiciary.
4. Procedural Advantage: Arbitral Tribunal has full powers to decide the
procedure to be followed unless parties agree on the procedure to be
followed. The Tribunal also has powers to determine the admissibility,
relevance, materiality, and weight of any evidence. The place of
arbitration will be decided by mutual agreement. However, if the parties
do not agree to the place, the same will be decided by a tribunal.
Similarly, language to be used in arbitral proceedings can be mutually
agreed upon. Otherwise, Arbitral Tribunal can decide. The Act allows
parties to choose the substantive law to be applied by the arbitration
tribunal and this must also be mentioned in the arbitration agreement.
5. Party Autonomy: The concept of party autonomy is the central theme
of the Act. The expressions used in the Act – ‘unless otherwise agreed by
the parties’, ‘with the agreement of parties’, `if the parties in dispute have
expressly authorized’ etc., strengthens the idea of party autonomy.
6. Minimal Interference by Judiciary: One of the major defects of earlier
arbitration law was that the party could access court almost at every stage
of arbitration – right from the appointment of an arbitrator to
implementation of the final award. Thus, the defending party could
approach the court at various stages and stall the proceedings. Now, the
approach to court has been drastically curtailed. In some cases, if an
objection is raised by the party, the decision on that objection can be
given by Arbitral Tribunal itself. After the decision, the arbitration
proceedings are continued and the aggrieved party can approach Court
only after Arbitral Award is made.
7. Arbitral Award: Decision of Arbitral Tribunal is termed as ‘Arbitral
Award’. The arbitrator can decide the dispute ex aequo et bono (In
justice and in good faith) if both the parties expressly authorized him to
do so. The decision of the Arbitral Tribunal will be by majority. The
arbitral award shall be in writing and signed by the members of the
tribunal. The award should be dated and the place, where it is made,
should be mentioned. Copy of award should be given to each party.
8. Reasoned Award: The award must be in writing and signed by the
members of the Arbitral Tribunal. It must state the reasons for the award
unless the parties have agreed that no reason for the award is to be given.
Previous to this Act reasoning of the award by the arbitrator was not
mandatory.
9. Enforceability of Award: Under this Act, every final arbitral award is
enforceable as a decree of the court of law and not required to be made a
“rule of court”.
 10. Over-Riding Effect of the Act: Section 5 of the Act clarifies that
notwithstanding anything contained in any other law for the time being
in force, in matters governed by the Act, the judicial authority can
intervene only as provided in this Act and not under any other Act.
11. Applicability of the Limitation Act: For this purpose, the date
on which the aggrieved party requests another party to refer the matter
to arbitration shall be considered. If on that date, the claim is barred
under Limitation Act, the arbitration cannot continue. If the Arbitration
award is set aside by Court, time spent in arbitration will be excluded for
purpose of the Limitation Act.
12. Aligning Procedure with the UNCITRAL Model Law: The
Act has been enacted taking into account the United Nation’s
Commission on International Trade Law (UNCITRAL) Model Law and
UNCITRAL Conciliation Rules. This promotes unification and
harmonization of International Tarde Law by harmonizing concepts of
Arbitration and Conciliation of the legal system of the world.
13. Clear Distinction Between Arbitration and Conciliation: The
provisions that relate to the process of Arbitration are contained in
Part I which includes Chapters I to IX, while the provisions that relate to
the process of Conciliation are dealt with in Part III that includes section
61 to 81.
14. Conciliation: Conciliation is the amicable settlement of disputes
between the parties, with the help of a conciliator. Part III of the Act
makes provision for conciliation proceedings. In conciliation
proceedings, there is no agreement for arbitration. In fact, conciliation
can be done even if there is an arbitration agreement. The conciliator
only brings parties together and tries to solve the dispute using his good
offices. The conciliator has no authority to give an award. He only helps
parties in arriving at a mutually acceptable settlement. After such an
agreement, they may draw and sign a written settlement agreement.
However after the settlement agreement is signed by both the parties and
the conciliator, it has the same status and effect as if it is an arbitral
award.
Procedural requirements in Arbitration

Section 19 of the Arbitration and Conciliation Act,1996 recognizes the right of the parties to agree on the
procedural rules applicable to the arbitral proceedings. Parties are free to adopt procedural rules or
comply with have their arbitration administered by an establishment with its own rules in exercise of this
choice. If the parties fail to decide on a procedure, the arbitral tribunal can conduct the proceedings in the
manner it considers appropriate. However, the tribunal in case of domestic proceedings is not mandated
to follow procedural rules. However, the procedure devised by the parties or the tribunal must meet the
essential tenets of an adjudicatory process; that is, the parties must be treated with equality, and every
party must be given a full opportunity of presenting their case.

Though the Arbitration Act does not prescribe detailed default rules regulating procedures. However, it
provides some useful guidance to the parties and, therefore, the arbitrators on how arbitrations should
be conducted. Parties can deviate from these default rules by specific agreement, subject to the limitation
that any procedure devised by the parties or the tribunal must meet the essential tenets of an adjudicatory
process.

The procedure of the proceeding is as follows-

 The claimant must usually state the facts were supporting their claim, the points in dispute. Therefore,
the relief or remedy sought and the respondent must state their defense in respect of those particulars
and any counterclaim or set-off they seek to say while filing their statement of claim and defense,
respectively.
 Parties can submit with their statements all documents they concede to be relevant or add regard to the
documents or other evidence they're going to submit.
 Either party can amend or supplement their claim or defense during the arbitral proceedings unless the
arbitral tribunal considers it inappropriate to permit the amendment or supplement having reference to
the delay in making it.
 The arbitral tribunal must hold the oral hearings for the presentation of evidence or oral argument daily
and not grant any adjournments unless sufficient cause is formed out. The tribunal has the power to
impose costs, including exemplary costs, on the party seeking adjournment with insufficient cause.
 The parties must issue sufficient notice before any hearing and of any meeting of the arbitral tribunal for
the needs of inspection of documents, goods or other property.
 All statements, documents or other information supplied to or applications made to the arbitral tribunal
by one party must be communicated to the opposite party. The shreds of evidence must be
communicated to both parties.
 If without showing sufficient cause, the claimant fails to speak their statement of claim, the arbitral
tribunal must terminate the proceedings.
 Suppose without showing sufficient cause. The respondent fails to speak their statement of defense. In
that case, the arbitral tribunal must continue the proceedings without treating that failure in itself as an
admission of the allegations by the claimant. It must have the discretion to treat the right of the
respondent to file such a statement of defense as having been forfeited.
 Suppose without showing sufficient cause. A party fails to appear at an oral hearing or to supply
documentary evidence. In that case, the arbitral tribunal can continue the proceedings and make the
arbitral award on the evidence before it.

Advantages of arbitration in India

1. Mutual consent of both parties – Arbitration can only take place when
both the parties have given their consent and the contract includes an
arbitration clause.
2. Unbiased procedure – No party enjoys an undue advantage because of
the fact that the parties are free to decide the relevant venue, language,
and the applicable law.
3. Confidential procedure – Any disclosure made by the parties in the
proceedings and when the arbitration award is given is to be kept
confidential.
4. Cost-effective procedure – No exorbitant cost is charged from the
parties making it common for parties to prefer arbitration over the
traditional form of litigation.
 5. Simple and informal procedure – The parties do not have to separately
hire an attorney to represent them and the outcome of the case can be
adapted in compliance with the needs of both parties. The environment is
comfortable and no formal mannerisms are used, making it easier for the
parties to reach a suitable outcome.
6. Freedom to choose arbitrator – The parties can select an arbitrator or
agree to get an arbitrator with relevant exercise in the particular domain
by the institution.
7. Stipulated time period for giving an award – The tribunal will give the
award within a short tenure of twelve months from the last day of the
pleadings in case of domestic arbitration. On the other hand, in internal
commercial disputes, the time period is rather relaxed and no stipulated
time period is allotted. Hence, there are no unnecessary delays in giving
the award.
8. Binding decision – The arbitration awards given are enforceable making
the decision binding on the parties.
9. Position of control – The parties have a position to control the outcome
as they can directly participate in the decision-making procedure. In this
way, the dispute is amicably resolved.

Disadvantages of Arbitration
There are also some disadvantages of arbitration to consider:

 No Appeals: The arbitration decision is final. There is no formal appeals process

available. Even if one party feels that the outcome was unfair, unjust, or biased, they
cannot appeal it.
 Cost: While arbitration is generally a more cost-efficient legal settlement option, it might
not make sense in cases when minimal money is involved.
 Rules of Evidence: A judge in a traditional court setting has specific regulations to
follow when it comes to accepting evidence. Arbitrators, however, can utilize any
information that is brought to them.
 Lack of Cross-Examination: The arbitration process generally includes documents and
not witnesses, voiding the ability to cross-examine.
 Limited Discovery: In the event that arbitration is not filed until litigation has already
begun, both parties lose the cost-saving advantage of limited discovery.
 Lack of Consistency: There are no set standards for arbitration, making it difficult to
find consistency. It is possible that an arbitrator can be biased, which is sometimes
the case in mandatory arbitration contracts.
 Lack of Evidence: Because arbitration is not evidence-based, you entrust the
experience of the arbitrator to make the right legal decision.
 Not Public: The level of confidentiality involved in arbitration cases could potentially be
disadvantageous to one party. There is also a lack of transparency, which is not the case
in public courtrooms.

Unilateral Option Clauses: A Case For Validity In India

Introduction

Unilateral Option Clauses (hereinafter, ‘UOCs’), also known as hybrid jurisdiction clauses or
asymmetric jurisdiction clauses, are a type of dispute resolution clause which give only one
party unrestricted rights to choose the method and/or jurisdiction for resolution of disputes
under a contract. Since they restrict the rights of one party, while allowing a discretionary
exercise of rights by the other party, they are characterised by varied provisions depending on
whether the proceedings are initiated by one party to the agreement rather than the other. [1]

UOCs form the third type of jurisdiction clauses after exclusive and non-exclusive jurisdiction
clauses and may include features of both.[2] The mechanisms set out by such clauses pertain
to the choice of court, choice of method or means of dispute resolution or both. These clauses
are most commonly used in international financial agreements like loans where they work in
favour of the lenders alone (banks and financial institutions), as against the borrowers. They
are incorporated to provide the lenders with the flexibility to choose the jurisdiction where
the assets of the debtor-defaulter are located and at the same time, cover their risk of being
dragged into unfamiliar or unfavourable jurisdictions by the borrowers. [3]

Therefore, a characteristic feature of such clauses is the imbalance in the bargaining position
of the parties that allows one to restrict the choices of the other in certain ways. This inherent
imbalance, which acts as a genesis of such clauses, is what has mired the use of these clauses
in controversies across jurisdictions.[4] While some countries, mostly common law
jurisdictions, accept them for being an epitome of party autonomy and contractual freedom,
others have invalidated them for reasons such as public policy, want of mutuality
(consideration), uncertainty, etc.[5]

A Contentious Case in India

The desirability of UOCs in the increasing complexities of the commercial world is apparent
from the growing use of such clauses across sectors. However, the Indian courts have not yet
settled on the validity of this emerging mechanism. The multiple reasons cited by the courts
for the invalidation of UOCs range from the want of mutuality [6] to the contravention of
Section 28 of the Indian Contract Act, [7] which ultimately makes it against public policy.

In the case of Bhartia Cutler Hammer v. AVN Tubes,[8] the defendant solely reserved the right
to refer the dispute to arbitration; however, the plaintiff was not barred from pursuing other
legal remedies. The court held that when the arbitration clause does not provide an
“unqualified or unconditional agreement in favour of all the parties to exercise the option to
submit present or future differences to arbitration”, it suffers from want of ‘mutuality’ and is
therefore invalid.

In the case of Lucent Technologies Inc. v. ICICI Bank Limited,[9] the unilateral clause was held
invalid on the grounds of lack of mutuality as well as uncertainty. In Union of India v. Bharat
Engineering Corporation,[10] the court held that the unilateral right of reference was invalid
on the grounds of it being discriminatory, contingent and outside the scope of the Arbitration
and Conciliation Act, 1996 (hereinafter, ‘the Act’).

On the other hand, a second tide of judgements created a favourable space for UOCs by
holding them valid, albeit on a circumstantial basis.[11] A direct contravention to the position
taken by the Delhi High Court in Bharat Engineering can be found in the Calcutta High
Court’s judgement of New India Assurance Co. Ltd. v. Central Bank of India,[12] wherein the
court laid down that the mere existence of an option does not negate the existence of the
arbitration agreement, but only restricts its enforceability. In the case of Jyoti Brothers v.
Shree Durga Mining Co.,[13] the court hinted towards accepting the ‘doctrine of option’.
However, it was not applicable to the given circumstances of the case since the impugned
option clause unequivocally laid down the sole right of reference of a single party and the
course to be adopted thereon. In Jindal Exports Ltd. v. Fuerst Day Lawson Ltd.,[14] the court
noted that even when only one of the parties had the option to invoke arbitration, the power
of acceptance vested in the other party made the arbitration agreement valid and the
contention of invalidity on the grounds of lack of mutuality was untenable.

A Case for Validity

The position taken by the Delhi High Court in Bhartia Cutler is in direct contravention of the
position that the English court has taken in Pittalis v. Sherefetin[15], with respect to mutuality
of UOCs. The fact that only one party has the right to initiate the reference or invoke
arbitration suffices for an arbitration agreement and the party having the right to invoke
arbitration has the complete right to ask for a stay in the court proceedings in order to bring
the unilateral right into fruition.[16]

Clearly, the exclusion of one party from submitting the dispute to arbitration does not mean
that the parties do not ‘agree’ that the dispute can be submitted to arbitration. The party
devoid of the right to invoke arbitration remains aware of and gives an advance consent to
such unilateral exercise of this right by the other party, should the need arise. [17] Therefore, an
agreement whereunder only one party has the right to refer the dispute to arbitration should
be construed as an ‘agreement’ in the literal sense of the term, being well within the ambit of
Section 2(1)(b) of the Act. The fact that it confers an additional advantage to one party is not
a peculiarity of UOCs alone and should be taken as any other contractual clause giving
advantages to one party over the other.[18]

This leads us to another ground of public policy that has been used by the Indian courts to
invalidate UOCs.[19] After the 2015 amendment, the grounds of public policy have been
squarely defined under Section 34 of the Act and include notions of morality or justice as well
as fundamental policy of the Indian law. The English courts have long held, through the
decisions in Mauritius Commercial Bank and Law Debenture Trust Corp, that UOCs do not
contravene the factors of morality, equality and justice.

By virtue of the decisions of the Indian Courts in Renusagar Power Co. Ltd v. General Electric
Co.[20] and Vijay Karia v. Prysmian Cavi E Sistemi SRL,[21] UOCs validly forming a part of
contractual agreements cannot be regarded as contravening the fundamental policy of the
Indian Law, which extends beyond mere statutory violation to breaches that shock the
conscience of the court or that transgress the core, time-honoured, and hallowed principles
of India as a nation.

While invocation of arbitration is unilateral and affords a greater advantage to one party over
the other, it does not indicate a compromise on the process of arbitration, once invoked. This
means that a unilateral option to invoke arbitration does not give the party deriving benefit
from the clause the right to unilaterally appoint the arbitrator and thus prejudice the
principles of equality or equal access to justice. As held by the court in Mauritius Commercial
Bank v. Hestia Holdings Limited,[22] the concerns regarding equal access to justice are
warranted within the forum chosen by the parties and not to the choice of forum.

In cases where the UOCs are not explicitly against the law or unconscionable, a minimum
interference by the Courts is desirable to enable the parties to exercise their basic rights to
pursue legal remedies, without destroying the essence of party autonomy that allows one party
to be in a ‘better’ position than the other. For example, where a unilateral clause lays down
the remedies that can be exercised by one party and is silent with respect to the rights of the
other party,[23] the court can reasonably interfere to provide the party at disadvantage
remedies in accordance with the law, such as the right to move to any competent court,
without an objective of bringing the parties to an equal footing. [24] Similarly, the parts of UOCs
that suffer from inherent defects can be severed to hold the rest of the clause valid. [25]

Conclusion

Although courts in continental jurisdictions, in certain circumstances, have expressed

concerns over UOCs for reasons such as their potestative character, lack of balance,
inoperability of state-forum options due to counter actions in favour of arbitration, unfairness
and procedural inequality, the tide in common law courts has been to not invalidate UOCs
based on these broad legal standards but to evaluate the clauses against such parameters on
a case-to-case basis, while generally accepting the validity of UOCs. [26]

Uncertainty regarding the validity or acceptance of UOCs by Indian courts remains a

hindrance in commercial and business transactions. However, the multitude of English
judgments and commentaries validating UOCs lay a solid path for the Apex Court to tread on,
in order to settle the speculations that have arisen after a string of contradictory judgments of
the High Courts.

Bilateral Intervention

Bilateral or multi-lateral option clauses are dispute resolution agreements that either set out a
default forum or give the parties the option to choose an alternative forum to which disputes
can be referred. These option clauses are becoming more frequent in international commercial
contracts and, in particular, in project financing.
A similar clause was upheld in England in Westfal-larsen & Co A/S v Ikerigi Compania Naviera
SA.(5) In France, Thermodyn confirms an older Supreme Court decision in SA Sicaly v Grasso
Stacon Koninklijke. In SA Siccaly, the court upheld the validity of option clauses under French
law.(6)
However, in Thermodyn, the Supreme Court held that the disputed bilateral option clause –
which gave the option to resort to arbitration, but did not compel the parties to submit their
dispute to arbitration – could not be considered a binding arbitration agreement per se. Article
1442 of the Code of Civil Procedure provides that "an arbitration clause is an agreement
whereby the parties to a contract commit themselves to refer to arbitration the disputes that
their contract may give rise to". In Thermodyn, the court considered that resorting to arbitration
was "purely optional". In its view, the references to an arbitral institution were not enough to find
that the parties had committed themselves to arbitration. In strict application of Article 1442,
the court thus concluded that the disputed bilateral option clause was not a binding arbitration
agreement. This decision is consistent with previous case law and, in particular, with an October
30 2006 decision in which the Supreme Court refused to consider that a clause which provided
that the parties had to consult with each other before submitting their dispute to arbitration was
a binding arbitration agreement.(7)
Having concluded that no arbitration agreement compelled the parties to submit their dispute to
arbitration, the court found that the Paris Commercial Court did not have to decline jurisdiction.
The defendant in Thermodyn had invoked the competence-competence principle, which
provides for the arbitrators' power to rule on their own jurisdiction.(8) This principle embodies the
corollary that courts should refrain from examining the arbitrators' jurisdiction before the
arbitrators themselves have had an opportunity to do so; this is known as the 'negative effect of
the principle of competence-competence'.
While the decision of the court not to admit the competence-competence claims should be
applauded as it ensured efficiency and good administration of justice, this does not mean that
the rule of priority in favour of arbitrators will never apply where there is an option clause. The
competence-competence principle is likely to apply when one of the parties opts for arbitration.
This means that if Thermodyn had initiated arbitration under the London Court of International
Arbitration Rules before MRA commenced proceedings before the Paris Commercial Court, the
court would have had to decline jurisdiction.

Triadic (Third Party) Intervention

Introduction
Arbitration has become the most preferred method to resolve disputes in
international commercial transactions and transactional contracts. This is the result
of the flexibility provided by this method regarding the choice of the forum that
provides control to both parties and provides them an equal opportunity to be
heard. It is also an attempt to avoid potential national bias as possible in litigation.
More importantly, it’s easier to enforce an international arbitral award as it is well
regulated in comparison to a judgment of a domestic court. The other factors that
make arbitration a widely preferred dispute resolution mechanism are neutrality,
faster procedures, reduction in costs, and confidentiality.

In the realm of increasing multi-party transactions, the effect of the proceedings on

the third party is becoming an increasing problem. This issue was considered in the
case of Siemens v. Dutco Construction Company wherein third-party was given the
right to intervene in the constitution of the tribunal and it was given the status of
“public policy” wherein refusal to include the third party could be a sole ground to
overturn the arbitral award. However many commentators have argued that third-
party intervention defeats the principles of “procedural party autonomy” as
promised by arbitration.

The objective of this article is to provide an insight above joinder and intervention
of third parties and its benefits in spite of the barriers associated with it.

Joinder & intervention

In the case of a multi-party contract, several parties are involved in the subject
matter of the dispute. The arbitration arising out of such a contract affects the
rights of all the parties involved in it. This will result in concurrent arbitration or
non-compliance of arbitration proceedings arising out of an underlying transaction.
Therefore it is important to recognize the right of the third party in a multi-party
contract. They can be involved in the proceedings either through joinder or
intervention.
Joinder of the third party refers to a situation where the third party is asked to join
the proceedings and Intervention of a third party is a situation when the party
seeks to join the proceedings on its own motion. This can be either before the
commencement of the proceedings or after it. This definition is in pari materia to
the definitions in U.S federal practice. It is now clearly understood that joinder is
when the existing party involves the third-party in the proceedings in contrast to
intervention where the party to the agreement involves itself in the proceedings.

While the distinction in both the scenarios can be clearly understood, the effect
rendered on the proceedings by third-party involvement is the same as they enjoy
similar rights over enforcement of the arbitral award, i.e.; third-party rights. In
both these cases, the third party does not participate in the constitution of the
arbitral tribunal. In case of intervention, the party on its own will waive the right
but in case of a joiner, the third-party is left with no option, thereby defeating one
of the important features of arbitration of actively participating in the constitution of
the tribunal.

Arbitration agreements
The formation of an arbitration agreement takes place when two parties, enter into
a contract and in which, the contract states that any dispute arising between the
parties have to be solved without going to the courts with the assistance of a person,
who would be a neutral person, a third party, appointed by both of the parties, known
as the Arbitrator, who would act as a judge. The arbitrator so appointed should have
been previously mentioned in the contract that they made. They should also state
who should select the arbitrator, regarding the kind of dispute the arbitrator should
give decisions on, the place where the arbitration would take place. Furthermore,
they should also state the other kinds of procedures mentioned or that has to be
required during an arbitration agreement.

The parties are generally required to sign an Arbitration Agreement. The decision
taken by the arbitrator regarding any issue, is binding on both the parties, as stated
by the agreement. In any event, where one party decides that an agreement must
be made prior to entering the contract, it can be stated that the agreement was made
to deviate from the hassles of the court. These agreements are like contingent
contracts, which means that these agreements shall only come into force or become
enforceable if any dispute happens, and on the basis of the same dispute between
two parties mentioned in the contract. It also takes place or is enforceable in the light
of any dispute that arises between the parties to the contract.

Essentials of an Arbitration Agreement

 There must be a dispute that should take place, only then the agreement
will be valid. The presence of a dispute amongst the parties is an essential
condition for the contract to take place. When the parties have already
settled the dispute, in no case, they can invoke the arbitration clause to
refute the settlement.
  Another essential is the written agreement. An agreement related to the
arbitration must always be in writing. An arbitration agreement will be
considered as a written agreement when:

1. It has been signed by both parties and it is in the form of a document.

2. It can be the exchange of the telex, the letters, the telegrams, or any other
means of communication which provides the record of the exchange and the
agreement for arbitration.
3. There must be an exchange of statements between the parties that gives
the statement of claim and defence in which the existence of the agreement
of the arbitration is agreed by one of the parties and which is not defined by
the other party.

 The third essential intention. The intention of the parties while forming the
contract is of utmost importance and it forms the basis of the agreement.
There have been no prerequisite citations of terms such as an “arbitrator”
or “arbitration” to be made in the agreement. Therefore, it is necessary to
note that the intention of both parties plays a very important role in such an
agreement. However, one must keep in mind that even if the words have
not been mentioned, the intention must show that both the parties have
agreed to come to the terms with the Arbitration Agreement.
 The fourth essential element is the signature of the parties. The signature
of the parties is an essential element to constitute an arbitration agreement.
The signature can be in the form of a document signed by both the parties
to the contract which comprises all the terms and conditions, or it can also
be in the form of a document which is signed by only one party to the
contract which contains the terms and acceptance by the other party to the
contract. It will be sufficient if one party puts up a signature in the
agreement and the other party accepts that.
In the landmark case of K.K. Modi v. K.N. Modi and Ors. (1998) 3 SCC 573, it was
held by the Hon’ble Supreme Court that the following attributes must be present in
an arbitration agreement:

1. The agreement must state that the decision of the tribunal will be binding
upon by both the parties.
2. That the jurisdiction of the tribunal on the rights of the parties should be
decided by both the parties consensually or from an order obtained by the
Court which states that the proceeding shall be made through arbitration.
3. The tribunal has the right to determine the rights of the parties by being fair
and just.
4. The agreement that the parties will refer to the tribunal must be enforceable
by law.
5. The agreement must state that any decision made by the tribunal on the
dispute must be formulated prior to the time when the reference is made.
Some common elements included in the Agreement
other than the essential agreements
The following are some of the common elements included in an arbitration
agreement, which is generally not considered as an essential element, but shall be
included if the parties want it to be mentioned in the contract.

1. Seat of Arbitration- the seat here means the place. Therefore, this clause
states that there will be a place of arbitration in the case of the dispute. This
provision is an important one, especially in the case of an international
commercial arbitration, as this seat helps in determining the procedural laws
that govern the procedure of the arbitration. However, the seat of the
arbitration does not have to be the same place as the hearing of the
proceedings. It is the place where the arbitration takes place, even though
it differs from the place of the hearings.
2. Procedure for appointing the Arbitrators- the procedure is the same as
mentioned in the Arbitration Act. It states that any person, irrespective of
the nationality, may be appointed as an arbitrator, unless the parties agree
to something otherwise. The parties can themselves agree for the
appointment of an arbitrator.
3. Language- The language plays an important role while making an
agreement. It is necessary that the language which has been chosen in the
contract doesn’t have to be the one that is not understood by both parties.
There must not be any sort of communication gap and that the agreement
made by the parties are of such a manner that each and every clause
mentioned in the contract is actually understood by both the parties signing
the contract. Picking the language which can be understood by both parties
is important because then it would save both the parties, the cost of a
translator.
4. Number and Qualifications of Arbitrators- The Act allows the parties to
determine the number of the arbitrators, with the only condition that the
number shall not be an even number, but an odd number of arbitrators, so
that the decision can be made even if there is a disagreement amongst the
arbitrators.
5. Type of Arbitration- The parties have the choice to choose between the
institutional and the ad hoc (which means it is created for that specific
purpose) kind of arbitration. Institutional means that agreeing to be bound
by the rules of the arbitration institutions ad hoc means that the parties
themselves agree to arrange an arbitrator.
6. Governing Law- It is important to mention the substantive law that they
want to be governed by as failing to mention this substantive law might be
a huge issue in the future disputes arising between the parties, if any.
Important provisions in the arbitration
agreement
There are a few important provisions under an arbitration agreement, and these are
mentioned below:

1. Written Agreement- As stated as an essential condition, there must be a

written agreement. Section 7(4) of the Act, states that every agreement
made must be in the form of a written document or even in the form of any
kind of communication whether or not those communications take place
through telegrams, telex or even other telecommunication devices provided
that there must be a record of the communication.
2. Appointment of the Arbitrators- Section 11 states that the arbitrator can be
appointed at the liberty of the parties to the contract. In case, where the
parties fail to decide the appointment of the arbitrator, the Chief Justice of
the High Court, in case of the domestic arbitration and the Chief Justice of
the Supreme Court, in case of International Commercial Arbitration is
approached.
3. Interim Relief- Section 9 and Section 17 of the Act provide for the Interim
relief orders with respect to the arbitration. The relief petition is
maintainable under section 9 if there is prima facie evidence that there is an
agreement for the arbitration proceeding. The parties, if they want, can
move to the Court before the arbitration proceeding actually starts or even
after making the arbitral award but before its enforcement as per section
36 of the Act. Section 17 states that, at the parties’ request, the tribunal
may order the party to take interim measures, the way it deems fit and
necessary in respect to the subject matter of the dispute.
4. Finality of an Award by Arbitration- Section 34 states that the award given
by the arbitrator is final and is binding upon the parties who have signed the
contract. Once the decree is granted by the court, it shall be enforceable
with respect to section 34 of the Act.
5. Appeal- Section 37 states that if the parties are not satisfied with the
decision of the arbitrators, an appeal lies against the order granting or
refusing to grant any measure under section 9 and also against refusing to
set aside or setting aside an award. An appeal can also lie against the order
of the tribunal accepting the plea referred to in section 16 or granting or
refusing to grant an interim measure under section 17. However, there is
no provision for an appeal against the appointment of an arbitrator as given
under section 11.

Arbitral Tribunal
An arbitral tribunal or arbitration tribunal, also arbitration commission, arbitration committee or
arbitration council is a panel of unbiased adjudicators which is convened and sits to resolve a dispute by
way of arbitration. The tribunal may consist of a sole arbitrator, or there may be two or more arbitrators,
which might include a chairperson or an umpire. Members selected to serve on an arbitration panel are
typically professionals with expertise in both law and in friendly dispute resolution (mediation). Some
scholars have suggested that the ideal composition of an arbitration commission should include at least
also one professional in the field of the disputed situation, in cases that involve questions of asset or
damages valuation for instance an economist

Composition of arbitral tribunal

2. Number of arbitrators.—(1) The parties are free to determine the number of arbitrators,
provided that such number shall not be an even number.
(2) Failing the determination referred to in sub-section (1), the arbitral tribunal shall consist of a sole
arbitrator.
3. Appointment of arbitrators.—(1) A person of any nationality may be an arbitrator, unless
otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the
arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each
party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator
who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and—
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so
from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the
date of their appointment,
the appointment shall be made, upon request of a party, by 1[the Supreme Court or, as the case may be,
the High Court or any person or institution designated by such Court];
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the
parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the
other party to so agree the appointment shall be made, upon request of a party, by 1[the Supreme Court
or,as the case may be, the High Court or any person or institution designated by such Court].
(6) Where, under an appointment procedure agreed upon by the parties,—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them
underthat procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it
underthat procedure,
a party may request 1[the Supreme Court or, as the case may be, the High Court or any person or institution
designated by such Court]to take the necessary measure, unless the agreement on the appointment
procedure provides other means for securing the appointment.
2
[(6A) The Supreme Court or, as the case may be, the High Court, while considering any application
under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or
order of any Court, confine to the examination of the existence of an arbitration agreement.
(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High
Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme
Court or the High Court.]
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to 3[the
Supreme Court or, as the case may be, the High Court or the person or institution designated by such
Court is final and no appeal including Letters Patent Appeal shall lie against such decision].
 4
[(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated
by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective
arbitrator in terms of sub-section (1) of section 12, and have due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties; and
(b) the contents of the disclosure and other considerations as are likely to secure the appointment
of an independent and impartial arbitrator.]
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, 5[the
Supreme Court or the person or institution designated by that Court] may appoint an arbitrator of a
nationality other than the nationalities of the parties where the parties belong to different nationalities.
6
[(10)The Supreme Court or, as the case may be, the High Court, may make such scheme as the said
Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-
section (6), to it.]
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub- section
(6) to the Chief Justices of different High Courts or their designates, 7[different High Courts or their
designates, the High Court or its designate to whom the request has been first made] under the relevant sub-
section shall alone be competent to decide on the request.
1
[(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise
in an international commercial arbitration, the reference to the “Supreme Court or, as the case may be, the
High Court” in those sub-sections shall be construed as a reference to the “Supreme Court”; and
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any
other arbitration, the reference to “the Supreme Court or, as the case may be, the High Court” in those sub-
sections shall be construed as a reference to the “High Court” within whose local limits the principal Civil
Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is
the Court referred to in that clause, to that High Court.]
2
[(13) An application made under this section for appointment of an arbitrator or arbitrators shall be
disposed of by the Supreme Court or the High Court or the person or institution designated by such Court,
as the case maybe, as expeditiously as possible and an endeavour shall be made to dispose of the matter
within a period of sixty days from the date of service of notice on the opposite party.
(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its
payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into
consideration the rates specified in the Fourth Schedule.
Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to
international commercial arbitration and in arbitrations (other than international commercial arbitration)
in case where parties have agreed for determination of fees as per the rules of an arbitral institution.]
3
[11A. Power of Central Government to amend Fourth Schedule.—(1) If the Central Government is
satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, amend
the Fourth Schedule and thereupon the Fourth Schedule shall be deemed to have been amended
accordingly.

(2) A copy of every notification proposed to be issued under sub-section (1), shall be laid in draft
before each House of Parliament, while it is in session, for a total period of thirty days which may be
comprised in one session or in two or more successive sessions, and if, before the expiry of the session
immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving
the issue of the notification or both Houses agree in making any modification in the notification, the
notification shall not be issued or, as the case may be, shall be issued only in such modified form as may
be agreed upon by the both Houses of Parliament.]
12. Grounds for challenge.—4[(1) When a person is approached in connection with his possible
appointment as an arbitrator, he shall disclose in writing any circumstances,—
(a) such as the existence either direct or indirect, of any past or present relationship with or
interest in any of the parties or in relation to the subject-matter in dispute, whether financial,
 business, professional or other kind, which is likely to give rise to justifiable doubts as to his
independence or impartiality; and
(b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular
his ability to complete the entire arbitration within a period of twelve months .
Explanation1.—The grounds stated in the Fifth Schedule shall guide in determining whether
circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an
arbitrator.
Explanation 2.—The disclosure shall be made by such person in the form specified in the Sixth
Schedule.]
(3) An arbitrator may be challenged only if—

(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality,
or
(b) he does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose appointment he has
participated, only for reasons of which he becomes aware after the appointment has been made.
1
[(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the
parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the
Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability
of this sub-section by an express agreement in writing.]
13. Challenge procedure.—(1) Subject to sub-section (4), the parties are free to agree on a procedure
for challenging an arbitrator.
(2) Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator
shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after
becoming aware of any circumstances referred to in sub-section(3) of section 12, send a written statement
of the reasons for the challenge to the arbitral tribunal.
(3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party
agrees to the challenge, the arbitral tribunal shall decide on the challenge.
(4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-
section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an
arbitral award.
(5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may
make an application for setting aside such an arbitral award in accordance with section 34.
(6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may
decide as to whether the arbitrator who is challenged is entitled to any fees.
14. Failure or impossibility to act.—(1) 2[The mandate of an arbitrator shall terminate and he shall be
substituted by another arbitrator, if]—
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to
act without undue delay; and
(b) he withdraws from his office or the parties agree to the termination of his mandate.
(2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1),
a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of
the mandate.
(3) If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a
party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the
validityof any ground referred to in this section or sub-section(3) of section 12.
 15. Termination of mandate and substitution of arbitrator.—(1) In addition to the circumstances
referred to in section 13 or section 14,the mandate of an arbitrator shall terminate—
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed
according to the rules that were applicable to the appointment of the arbitrator being replaced.
(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any
hearings previously held maybe repeated at the discretion of the arbitral tribunal.

(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to
the replacement of an arbitrator under this section shall not be invalid solely because there has been a
change in the composition of the arbitral tribunal.

Jurisdiction of arbitral tribunals

16. Competence of arbitral tribunal to rule on its jurisdiction.—(1) The arbitral tribunal may rule on
its own jurisdiction, including ruling on any objections with respect to the existence or validity of the
arbitration agreement, and for that purpose,—
(a) an arbitration clause which forms part of a contract shall be treated as an agreement
independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the
submission of the statement of defence; however, a party shall not be precluded from raising such a plea
merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as
thematter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3),
admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and,
where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and
make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an
arbitral award in accordance with section 34.
1
[17.Interim measures ordered by arbitral tribunal.—(1) A party may, during the arbitral proceedings
2
***, apply to the arbitral tribunal—

(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of
arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely:—
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the
arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-
matter of the dispute in arbitration, or as to which any question may arise therein and authorising
 for any of the aforesaid purposes any person to enter upon any land or building in the possession
of any party, or authorising any samples to be taken, or any observation to be made, or
experiment to be tried, which may be necessary or expedient for the purpose of obtaining full
information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the arbitral tribunal to be just
and convenient,
and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of,
and in relation to, any proceedings before it.
(2) Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal
under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable
under the Code of Civil Procedure,1908 (5 of 1908), in the same manner as if it were an orderof the Court.]
Conduct of arbitral proceedings

18. Equal treatment of parties.—The parties shall be treated with equality and each party shall be
given a full opportunity to present this case.
19. Determination of rules of procedure.—(1) The arbitral tribunal shall not be bound by the Code of
Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).
(2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral
tribunal in conducting its proceedings.
(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part,
conduct the proceedings in the manner it considers appropriate.
(4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the
admissibility, relevance, materiality and weight of any evidence.
20. Place of arbitration.—(1) The parties are free to agree on the place of arbitration.
(2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined
by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the
parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise
agreed by the parties, meet at anyplace it considers appropriate for consultation among its members, for
hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.
21. Commencement of arbitral proceedings.—Unless otherwise agreed by the parties, the arbitral
proceedings in respect of a particular dispute commence on the date on which a request for that dispute
to be referred to arbitration is received by the respondent.
22. Language.—(1) The parties are free to agree upon the language or languages to be used in the
arbitral proceedings.
(2) Failing any agreement referred to in sub-section (1), the arbitral tribunal shall determine the
language or languages to be used in the arbitral proceedings.
(3) The agreement or determination, unless otherwise specified, shall apply to any written statement
by a party, any hearing and any arbitral award, decision or other communication by the arbitral tribunal.
(4) The arbitral tribunal may order that any documentary evidence shall be accompanied by a
translation into the language or languages agreed upon by the parties or determined by the arbitral
tribunal.
23. Statements of claim and defence.—(1) Within the period of time agreed upon by the parties or
determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at
issue and the relief or remedy sought, and the respondent shall state his defence in respect of these
particulars, unless the parties have otherwise agreed as to the required elements of those statements.
(2) The parties may submit with their statements all documents they consider to be relevant or may
add a reference to the documents or other evidence they will submit.
1
[(2A) The respondent, in support of his case, may also submit a counterclaim or plead a set-off,
which shall be adjudicated upon by the arbitral tribunal, if such counterclaim or set-off falls within the
scope of the arbitration agreement.]
(3) Unless otherwise agreed by the parties, either party may amend or supplement his claim or
defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it
inappropriateto allow the amendment or supplement having regard to the delay in making it.
1
[(4) The statement of claim and defence under this section shall be completed within a period of six
months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing of
their appointment.]
24.Hearings and written proceedings.—(1) Unless otherwise agreed by the parties, the arbitral
tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument,
or whether the proceedings shall be conducted on the basis of documents and other materials:
Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings,
on a request by a party, unless the parties have agreed that no oral hearing shall be held:
2
[Provided further that the arbitral tribunal shall, as far as possible, hold oral hearings for the
presentation of evidence or for oral argument on day-to-day basis, and not grant any adjournments unless
sufficient cause is made out, and may impose costs including exemplary costs on the party seeking
adjournment without any sufficient cause.]
(2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the
arbitral tribunal for the purposes of inspection of documents, goods or other property.
(3) All statements, documents or other information supplied to, or applications made to the arbitral
tribunal by one party shall be communicated to the other party, and any expert report or evidentiary
document on which the arbitral tribunal may rely in making its decision shall be communicated to the
parties.
25.Default of a party.—Unless otherwise agreed by the parties, where, without showing sufficient
cause,—
(a) the claimant fails to communicate his statement of claim in accordance with sub-section (1) of
section 23, the arbitral tribunal shall terminate the proceedings;
(b) the respondent fails to communicate his statement of defence in accordance with sub-section
(1) of section 23, the arbitral tribunal shall continue the proceedings without treating that failure in
itself as an admission of the allegations by the claimant 3[and shall have the discretion to treat
theright of the respondent to file such statement of defence as having been forfeited].
(c) a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral
tribunal may continue the proceedings and make the arbitral award on the evidence before it.
26. Expert appointed by arbitral tribunal.—(1) Unless otherwise agreed by the parties, the arbitral
tribunal may—
(a) appoint one or more experts to report to it on specific issues to be determined by the arbitral
tribunal, and
(b) require a party to give the expert any relevant information or to produce, or to provide access
to, any relevant documents, goods or other property for his inspection.
(2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it
necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where
the parties have the opportunity to put questions to him and to present expert witnesses in order to
testify on the points at issue.
(3) Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available
 to that party for examination all documents, goods or other property in the possession of the expert with
which he was provided in order to prepare his report.
27.Court assistance in taking evidence.—(1) The arbitral tribunal, or a party with the approval of the
arbitral tribunal, may apply to the Court for assistance in taking evidence.

(2) The application shall specify—

(a) the names and addresses of the parties and the arbitrators;
(b) the general nature of the claim and the relief sought;
(c) the evidence to be obtained, in particular,—
(i) the name and address of any person to be heard as witness or expert witness
and astatement of the subject-matter of the testimony required;
(ii) the description of any document to be produced or property to be inspected.
(3) The Court may, within its competence and according to its rules on taking evidence, execute the
request by ordering that the evidence be provided directly to the arbitral tribunal.
(4) The Court may, while making an order under sub-section (3), issue the same processes to
witnesses as it may issue in suits tried before it.
(5) Persons failing to attend in accordance with such process, or making any other default, or refusing
to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral
proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court
on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before
the Court.
(6) In this section the expression “Processes” includes summonses and commissions for the
examination of witnesses and summonses to produce documents.

What is an Arbitral Award

An arbitral award is a decision made by an arbitration tribunal in an arbitration
proceeding that is believed to be equivalent to a court of law’s judgment concerning
certain exceptions. The award may provide the parties with a number of remedies,
including money, consent, injunctions, and other remedies. Depending on the
nature of the dispute, the award may be interim, partial, or final.

Furthermore, under Section 31 of the Arbitration and Conciliation Act of 1996, the
arbitral award must include the reasons for its decision unless the parties have
agreed that no reasons should be given or the ruling is an arbitral award on agreed
conditions under Section 30.

28. Form and contents of arbitral award.—(1) An arbitral award shall be made in writing and shall be
signed by the members of the arbitral tribunal.
(2) For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the
signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the
reason for any omitted signature is stated.
(3) The arbitral award shall state the reasons upon which it is based, unless—
 (a) the parties have agreed that no reasons are to be given, or
(b) he award is an arbitral award on agreed terms under section 30.
(4) The arbitral award shall state its date and the place of arbitration as determined in accordance
withsection 20 and the award shall be deemed to have been made at that place.
(5) After the arbitral award is made, a signed copy shall be delivered to each party.
(6) The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral
award on any matter with respect to which it may make a final arbitral award.
(7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the
payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at
such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the
period between the date on which the cause of action arose and the date on which the award is made.
1
[(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry
interest at the rate of two per cent. higher than the current rate of interest prevalent on the date of award,
from the date of award to the date of payment.
Explanation.—The expression “current rate of interest” shall have the same meaning as assigned to it
under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978).]
2
[(8) The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with section 31A.]
Explanation.—For the purpose of clause (a), “costs” means reasonable costs relating to—
(i) the fees and expenses of the arbitrators and witnesses,
(ii) legal fees and expenses,
(iii) any administration fees of the institution supervising the arbitration, and
(iv) any other expenses incurred in connection with the arbitral proceedings and the
arbitralaward.
32. Termination of proceedings.—(1) The arbitral proceedings shall be terminated by the final
arbitral award or by an order of the arbitral tribunal under sub-section (2).
(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings
where—
(a) the claimant withdraws his claim, unless the respondent objects to the order and the
arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the
dispute,
(b) the parties agree on the termination of the proceedings, or
(c) the arbitral tribunal finds that the continuation of the proceedings has for any other
reason become unnecessary or impossible.
(3) Subject to section 33 and sub-section (4) of section 34, the mandate of the arbitral tribunal shall
terminate with the termination of the arbitral proceedings.
33. Correction and interpretation of award; additional award.—(1) Within thirty days from the
receipt of the arbitral award, unless another period of time has been agreed upon by the parties—
(a) a party, with notice to the other party, may request the arbitral tribunal to correct any
computation errors, any clerical or typographical errors or any other errors of a similar nature
occurring in the award;
(b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral
tribunal to give an interpretation of a specific point or part of the award.
(2) If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall
make the correction or give the interpretation within thirty days from the receipt of the request and the
interpretation shall form part of the arbitral award.
 (3) The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1),
on its own initiative, within thirty days from the date of the arbitral award.
(4) Unless otherwise agreed by the parties, a party with notice to the other party, may request, within
thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award
as to claims presented in the arbitral proceedings but omitted from the arbitral award.
(5) If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall
make the additional arbitral award within sixty days from the receipt of such request.
 (6) The arbitral tribunal may extend, if necessary, the period of time within which it shall
make a correction, give an interpretation or make an additional arbitral award under sub-section
(2) or sub-section(5).
(7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an
additionalarbitral award made under this section.
Recourse against arbitral award

34. Application for setting aside arbitral award.—(1) Recourse to a Court against an arbitral
awardmay be made only by an application for setting aside such award in accordance with sub-
section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if—
(a) the party making the application 1[establishes on the basis of the record of the arbitral
tribunal that]—
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have
subjected it or, failing any indication thereon, under the law for the time being in force;
or
(iii) the party making the application was not given proper notice of the appointment
of an arbitrator or of the arbitral proceedings or was otherwise unable to present his
case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within
the termsof the submission to arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated
from those not so submitted, only that part of the arbitral award which contains decisions
on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties, unless such agreement was in conflict with
a provision of this Part from which the parties cannot derogate, or, failing such
agreement, was not in accordance with this Part; or
(b) the Court finds that—
(i) the subject-matter of the dispute is not capable of settlement by arbitration under
the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
2
[Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict
with the public policy of India, only if,—
(i) the making of the award was induced or affected by fraud or corruption or was
in violationof section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention
with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.]
3
[(2A) An arbitral award arising out of arbitrations other than international commercial
arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by
patent illegality appearing on the face of the award:
 Provided that an award shall not be set aside merely on the ground of an erroneous application
of the law or by reappreciation of evidence.]
(3) An application for setting aside may not be made after three months have elapsed from
the date on which the party making that application had received the arbitral award or, if a
request had been made under section 33, from the date on which that request had been disposed
of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from
making the application within the said period of three months it may entertain the application
within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate
and it is so requested by a party, adjourn the proceedings for a period of time determined by it
in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take
such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside
the arbitral award.
1
[(5) An application under this section shall be filed by a party only after issuing a prior notice
to the other party and such application shall be accompanied by an affidavit by the applicant
endorsing compliance with the said requirement.
(6) An application under this section shall be disposed of expeditiously, and in any event, within a
period of oneyear from the date on which the notice referred to in sub-section (5) is served
upon the other party.]

Finality and enforcement of arbitral awards

35. Finality of arbitral awards.—Subject to this Part an arbitral award shall be final and
binding on the parties and persons claiming under them respectively.
2
[36. Enforcement.—(1) Where the time for making an application to set aside the arbitral
award under section 34 has expired, then, subject to the provisions of sub-section (2), such award
shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of
1908), in the same manner as if it were a decree of the court.
(2) Where an application to set aside the arbitral award has been filed in the Court under
section 34, the filing of such an application shall not by itself render that award unenforceable,
unless the Court grants an order of stay of the operation of the said arbitral award in accordance
with the provisions of sub-section (3), on a separate application made for that purpose.
(3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral
award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation
of such award for reasons to be recorded in writing:
Provided that the Court shall, while considering the application for grant of stay in the case of
an arbitral award for payment of money, have due regard to the provisions for grant of stay of a
money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).]
1
[Provided further that where the Court is satisfied that a Prima facie case is made out that,—
(a) the arbitration agreement or contract which is the basis of the award; or
(b) the making of the award,
was induced or effected by fraud or corruption, it shall stay the award unconditionally pending
disposal ofthe challenge under section 34 to the award.
Explanation.—For the removal of doubts, it is hereby clarified that the above proviso shall
apply toall court cases arising out of or in relation to arbitral proceedings, irrespective of whether
the arbitral or court proceedings were commenced prior to or after the commencement of the
Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016).]
 Appeals

37. Appealable orders.—(1) 2[Notwithstanding anything contained in any other law for the
time being in force, an appeal] shall lie from the following orders (and from no others) to the
Court authorised by law to hear appeals from original decrees of the Court passing the order,
namely:—
3
[(a) refusing to refer the parties to arbitration under section 8;
(b) granting or refusing to grant any measure under section 9;
(c) setting aside or refusing to set aside an arbitral award under section 34.]
(2) Appeal shall also lie to a court from an order of the arbitral tribunal—
(a) accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or
(b) granting or refusing to grant an interim measure under section 17.
(3) No second appeal shall lie from an order passed in appeal under this section, but
nothing in thissection shall affect or takeaway any right to appeal to the Supreme Court.

Finality and enforcement of arbitral awards

35. Finality of arbitral awards.—Subject to this Part an arbitral award shall be final and
binding on the parties and persons claiming under them respectively.
2
[36. Enforcement.—(1) Where the time for making an application to set aside the arbitral
award under section 34 has expired, then, subject to the provisions of sub-section (2), such award
shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of
1908), in the same manner as if it were a decree of the court.

(4) Where an application to set aside the arbitral award has been filed in the Court under
section 34, the filing of such an application shall not by itself render that award unenforceable,
unless the Court grants an order of stay of the operation of the said arbitral award in accordance
with the provisions of sub-section (3), on a separate application made for that purpose.
(5) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral
award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation
of such award for reasons to be recorded in writing:
Provided that the Court shall, while considering the application for grant of stay in the case of
an arbitral award for payment of money, have due regard to the provisions for grant of stay of a
money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).]
1
[Provided further that where the Court is satisfied that a Prima facie case is made out that,—
(a) the arbitration agreement or contract which is the basis of the award; or
(b) the making of the award,
was induced or effected by fraud or corruption, it shall stay the award unconditionally pending
disposal ofthe challenge under section 34 to the award.
Explanation.—For the removal of doubts, it is hereby clarified that the above proviso shall
apply toall court cases arising out of or in relation to arbitral proceedings, irrespective of whether
the arbitral or court proceedings were commenced prior to or after the commencement of the
Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016).]

CONCILIATION
Conciliation means settling disputes without litigation. It is an informal
process in which conciliator i.e. third party tries to bring the disputants to
agreement. He overcomes the disputable issues by lowering the tension,
improvement in communication, interpreting issues, providing technical
assistance, exploring potential solutions and bringing the negotiated
settlement before the parties. Conciliator adopts his own method to resolve
the dispute and the steps taken by him are not strict and legal. There is no
need of agreement like arbitration agreement. The acceptance of
settlement is needed by both of the parties.

60. Commencement of conciliation proceedings.—(1) The party initiating conciliation shall

send tothe other party a written invitation to conciliate under this Part, briefly identifying the
subject of the dispute.
(2) Conciliation proceedings, shall commence when the other party accepts in writing the
invitation toconciliate.
(3) If the other party rejects the invitation, there will be no conciliation proceedings.
(4) If the party initiating conciliation does not receive a reply within thirty days from the date
on which he sends the invitation, or within such other period of time as specified in the invitation,
he may elect to treat this as a rejection of the invitation to conciliate and if he so elects, he shall
inform in writing the other party accordingly.
61.Number of conciliators.—(1) There shall be one conciliator unless the parties agree that
there shall be two or three conciliators.
(2) Where there is more than one conciliator, they ought, as a general rule, to act jointly.
62.Appointment of conciliators.—(1) Subject to sub-section (2)—
(a) in conciliation proceedings, with one conciliator, the parties may agree on the
name of a soleconciliator;
(b) in conciliation proceedings with two conciliators, each party may appoint one
conciliator;
(c) in conciliation proceedings with three conciliators, each party may appoint one
conciliator andthe parties may agree on the name of the third conciliator who shall act as
the presiding conciliator.
(2) Parties may enlist the assistance of a suitable institution or person in connection with
theappointment of conciliators, and in particular,—
(a) a party may request such an institution or person to recommend the names
of suitableindividuals to act as conciliator; or
(b) the parties may agree that the appointment of one or more conciliators be made
directly bysuch an institution or person:
Provided that in recommending or appointing individuals to act as conciliator, the
institution orperson shall have regard to such considerations as are likely to secure the appointment
of an independent and impartial conciliator and, with respect to a sole or third conciliator, shall
take into account the advisability of appointing a conciliator of a nationality other than the
nationalities of the parties.