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 Arbitration is a process in which a dispute is
submitted to an impartial outsider who makes a
decision which is usually binding on both the
 The arbitrator enforces his own point of
view on the contending parties and the
opinions of the participants are not given
any predominance.
 Arbitration is a judicial process
 The award of the arbitrator is binding
and rests on equity and justice, i.e., there
is no scope for compromise
Arbitration is an alternative to legal action in the courts,
in order to settle an unresolved dispute.

• It is legal
• It is popular
• It is easier than a judicial process

• Arbitrator : The person appointed with agreement from the parties.
• Arbitral tribunal: A group of arbitrators.
• Award : The final decision of the arbitrator.

Brief History:
• Predates formal courts
lements of Valid Arbitration Agreement
• Legal Contract
The parties must be capable of entering into a legally binding
• Written Agreement
The agreement, whenever possible, should be in writing.
• Signed
It must be signed by the parties concerned.
• Matters Clearly Stated
It must state clearly those matters which will be submitted to
• No Illegal Content
It must not contain anything that is illegal.
Selecting Arbitrator
Criteria for selecting an Arbitrator

• Mutual Consultation
Arbitration can only take place if both the parties have agreed to it. Both the
parties have mutually consult each other and agree on selecting an
arbitrator(S). Unlike in judicial courts.
• Neutral
The arbitrator should be a neutral person. Independent from the parties. And
should be biased towards one party or individual.
• Qualified & Experienced
The arbitrator should be sufficiently qualified and experienced in the matter of
dispute. He/She might not be having enough knowledge about the judicial
 To administer oath to the parties and witness
 To act judicially and impartially
 To put necessary interrogatories to any party to
the dispute
 To determine by and to whom the costs of
reference and the award shall be paid
 To award interest
 To fix amount, mode and time of payment


Advantages of Arbitration
 Choice of decision maker with expertise
 Speed
 Lower-cost
 Flexible
 Confidentiality
 Less formal than court
 Preservation of business relationships
Disadvantages of Arbitration
 Limited recourse
 Uneven playing field
 Lack of transparency
 Cost: parties pay for arbitrator and agency
 Limited rights of appeal, fewer means to
challenge award
 Lack of formal discovery
Main Types of Arbitration


 Voluntary arbitration
implies that the two
contending parties, unable to
compose their differences by
themselves agree to submit the
conflict/dispute to an impartial
authority, whose decision they
are ready to accept.
Essentials of voluntary arbitration
 The voluntary submission of dispute to an
 The subsequent attendance of witnesses and
 The enforcement of an award may not be
necessary and binding
 Voluntary arbitration may be specially needed
for disputes arising under agreements
Compulsory Arbitration

 Compulsory arbitration, is one where

the parties are required to accept arbitration
without any willingness on their part.

 When one of the parties to an industrial dispute feels

aggrieved by an act of the other, it may apply to the
appropriate government to refer the dispute to an
adjudication machinery.
Essentials of Compulsory Arbitration

 the country is passing through grave

economic crisis
 industries of strategic importance are
 parties are ill balanced
 Compulsory arbitration leaves no scope for
strikes and lockouts; it deprives both the
parties of their very important and
fundamental rights.
Other Types of Arbitration
 Ad-hoc Arbitration

 Institutional Arbitration

 Statutory Arbitration

 Domestic or International Arbitration

 Foreign Arbitration
(1) Ad-hoc Arbitration:- When a dispute or
difference arises between the parties in course of
commercial transactions.This arbitration is agreed
to get justice for the balance of the un-settled part of
the dispute only.
(2) Institutional Arbitration: There is
prior agreement between the parties that in case of
future differences or disputes arising between the
parties during their commercial transactions, such
differences or disputes will be settled by arbitration
as per clause provide in the agreement.

(3) Statutory Arbitration: It is mandatory
arbitration which is imposed on the parties by operation
of law. In such a case the parties have no option as such
but to abide by the law of land.
(4) Domestic or International
Arbitration: Arbitration which occurs in India and
have all the parties within India is termed as Domestic
Arbitration. An Arbitration in which any party belongs to
other than India and the dispute is to be settled in India is
termed as International Arbitration.
(5) Foreign Arbitration: When arbitration
proceedings are conducted in a place outside India and
the Award is required to be enforced in India, it is termed
as Foreign Arbitration.

Arbitration in india
 Indian council of arbitration (1965)
 Abide Arbitration and Conciliation Act, 1996
 Comprehensive legal framework
 95% arbitration is of type ad-hoc
 India No. 2 in arbitration cases reaching Singapore
 Mumbai to have India's first International Arbitration
Centre soon

Construction disputes;

Change of project’s scope, shortage of manpower and technical
resources, lack of planning and finance management, to name a
few. Delays (and even rampant delays) are clear and present risks for
infrastructure projects in India. Causing many types of construction
disputes. legal disputes between developers and executing agencies
(contractors) related to time overruns appear to have been
increasing over the past few years. The genesis of such disputes is
usually the delay clause in the contract itself – which imposes stiff
legal ramifications upon the party responsible for the delay. the
need of the hour is honest and transparent dealing between the
parties to a project contract – not only through careful contract
mechanisms, but also by realistic project management. While it is
undeniable that external factors beyond control of both parties do
play a major role in delays,

 There may be only one contract, if the work is small in
magnitude. Or, there may be a number of contracts, where the
project is a large one - a case of "horizontal multiplicity". If the
contract is a complex one, then there may be an hierarchy of
contractors, involving several "sub-contractors". That can be
called an instance of "vertical multiplicity". But, whatever the
nature and magnitude of the contract involved, it is obvious that
the transaction is a consensual one, intended to have "defined
legal consequences". In terms of the Arbitration and Conciliation
Act, 1996, it is a "defined legal relationship", which is contractual
in nature. It is in this respect, that the law of contracts becomes
very relevant.

 Sources of the law

Undoubtedly, there is no separate set of legal rules for

construction contracts, as such. The law relevant to such
contracts is to be derived (in a broad sense) from the same
sources of law, as are the sources relevant for any other
contract. These sources (in the main) are - the law of
contracts, and the law of dispute resolution (through
courts or otherwise). In regard to some contracts, there
also exist special statutes dealing with buildings etc. - such
as, the Defective Premises Act, 1972 (in U. K.)

 There may be only one contract, if the work is small in
magnitude. Or, there may be a number of contracts, where the
project is a large one - a case of "horizontal multiplicity". If the
contract is a complex one, then there may be an hierarchy of
contractors, involving several "sub-contractors". That can be
called an instance of "vertical multiplicity". But, whatever the
nature and magnitude of the contract involved, it is obvious that
the transaction is a consensual one, intended to have "defined
legal consequences". In terms of the Arbitration and Conciliation
Act, 1996, it is a "defined legal relationship",which is contractual
in nature. It is in this respect, that the law of contracts becomes
very relevant.

the law of contracts
certain aspects of the law of contracts acquire special
relevance in the context of construction contracts. So do
some aspects of the law of dispute resolution and the law
of arbitration (as will be dealt with, presently). In
particular, in a construction contract, the number of
persons interested in its successful completion would be
large. Hence, the number of persons who can benefit
from prompt and peaceful settlement of disputes, is also
correspondingly large.

Nature of Construction projects and problems involved
special features of the construction industry can be thus enumerated:
(a) The industry itself is a specialised one, with its own patterns and
(b) Planning and execution of a construction project involves numerous
parties and organisations, who must work in unison -
though temporarily. A small
deviation (real or alleged) affects numerous parties.
(c) A construction project is a continuous one, usually spread over a
number of years. A dispute that operates as an
impediment at any single stage may upset the entire time-table, unless the
dispute is speedily resolved.
(d) Some of the problems that arise in the working of the project are not
foreseeable or, even if they are foreseeable, their
magnitude may not be foreseeable. If litigation is resorted to, then such
problems may increase (rather than resolve) the
tension generated by the emergence of various problems.

Proper approach
When a legal question arises pertaining to a construction contract, one
has first to study and apply the provisions or rules of the general
law of contracts, and then to see whether any special or peculiar approach
(in applying those rules) is needed, in the light of the fact that
one is concerned with a construction contract. And, of course, the specific
terms of the particular contract under consideration have to be
kept in mind.
Categories of dispute resolution
Resolution of disputes comprises:
(a) resolution without litigation, (b) resolution through litigation,
and (c) resolution through alternative dispute resolution.
The term "Alternative Dispute Resolution" ( ADR ) in its wider
sense, can include arbitration also

Central Government Act

 This Act called the Arbitration and Conciliation

Act, 1996. extends to the whole of India: they relate
to international commercial arbitration
subject to the modification that for the word
“arbitration” occurring therein, the word
“conciliation” shall be substituted. It shall come
into force on such a date, as the Central
Government may appoint by notification in the
official Gazette. For dealings on a particular case
of dispute.
(a) “arbitration” means any arbitration whether or not administered by permanent arbitral
(b) “arbitration agreement” means an agreement referred to in section 7;
(c) “arbitral award” includes an interim award;
(d) “arbitral tribunal” means a sole arbitrator or a panel of arbitrators;
(e) “Court” means the principal Civil Court of original jurisdiction in a district, and includes the
High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the
questions forming the subject-matter of the arbitration if the same had been the subject-matter of
a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any
Court of Small Causes;
(f) “international commercial arbitration” means an arbitration relating to disputes arising out of
legal relationships, whether contractual or not, considered as commercial under the law in force in
India and where at least one of the parties is—
(i) an individual who is a national of, or habitually resident in, any country other than India; or
(ii) a body corporate which is incorporated in any country other than India; or
(iii) a company or an association or a body of individuals whose central management and control
is exercised in any country other than India; or
(iv) the Government of a foreign country

Administrative assistance.—In order to facilitate the conduct of the arbitral
proceedings, the parties, or the arbitral tribunal with the consent of the parties,
may arrange for administrative assistance by a suitable institution or person
Arbitration Agreement : _“arbitration agreement” means an agreement by the
parties to submit to arbitration all or certain disputes which have arisen or which
may arise between them in respect of a defined legal relationship, whether
contractual or not. It may be in the form of an arbitration clause in a contract or in
the form of a separate agreement.
An arbitration agreement shall be in writing. a document signed by the parties;
The parties are free to determine the number of arbitrators, provided that such
number shall not be an even number for finding a solution to their dispute.

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.

Order of Reference
The Order of Reference in arbitration is an Agreement drawn
between the disputing parties referring the matter for Adjudication
by an Arbitrator, after the actual dispute has arisen. It contains the
names of the Arbitrators, details of the specific dispute & a time
limit within which the Arbitrators should declare the award.
The difference between an Agreement of Arbitration & an Order of
Reference is that, the former is executed before any dispute takes
place & does not contain any names of the Arbitrators and the
latter is actually the submission prepared after the disputes have
arisen, containing all the details about the same.
“Submission to Arbitration” means submitting both the Agreement
for Arbitration & the Order of Reference. to the selected
Arbitrators for their Judgment of the Case.

Arbitration Procedure
 The Arbiration can be with or without the intervention of the Court. In the former case, a
regular suit is required to bring the arbitration agreement on to the records of the Court. While
in the later Case, No suit is Required to be filed to bring the Arbitration agreement on to the
records of the Court.
 When the intervention of the court is not there, Each party appoint his own arbitrator & the
proceedings are conducted. In such cases, there is a likelihood of some differences between the
two arbitrators during the course of proceedings or at the time of declaration of award (
Judgement) and if these differences are not resolved, the proceedings will never come to an
end. Hence both the Arbitrators appoint a third Arbitrator known as an UMPIRE and to whom
all differences between the arbitrators are referred for his decision. & the same is Final &
binding on both the Parties.
 When the proceedings are required to be conducted with the intervention of the court, The
court with the arbitration agreement to be filed and an order of reference to the arbitrators who
may be suggested by the parties are appointed by the Court. Unless otherwise expressly
provided in the arbitration agreement about the appointment of two or more arbitrators, the
court may appoint ONE arbitrator for the complete proceedings & he is known as SOLE

An arbitration award (or arbitral award);
It is a determination on the merits by an arbitration
tribunal in an arbitration, and is analogous to a judgment
in a court of law.
Although arbitration awards are characteristically an award of damages against a
party, tribunals usually have a range of remedies that can form a part of the award.

the tribunal may order the payment of a sum of money (conventional damages)
the tribunal may make a "declaration" as to any matter to be determined in the
in most jurisdictions, the tribunal has the same power as a court to:
 order a party to do or refrain from doing something ("injunctive relief")
 to order specific performance of a contract
 to order the rectification, setting aside or cancellation of a deed or other