Arbitration in India

Arbitration in India

Arbitration in India

ADR i.e. Alternative Dispute Resolution is referred to as a method by which disputes are settled outside the courtroom. ADR typically involves initial neutral negotiation, evaluation, mediation, conciliation and arbitration. As because of the increasing court queues, the rising amount of litigation and time delays continue to affect and trouble litigants, so, many states have started experimenting with ADR programs. The two most common kinds of ADR are mediation and arbitration, as negotiation is almost always approached first to settle a dispute.


Arbitration is a process whereby an impartial third party is authorized to decide the result of a dispute. It is usually a preferred method of resolving disputes in order to avoid the expenditure, delay, and acrimony of more formal litigation and trial. Disputes in arbitration can be settled by a sole arbitrator or a jury of three arbitrators (tribunal). When parties present their dispute to arbitration, they consent that they will obey and be bound by the arbitrator’s decision which is also called an award. The award is given after each side present witnesses and provides evidence, and has the same force and effect as a contract in writing among the parties. Later, the Court can confirm or vacate the award on the basis of a petition by the prevailing or non-prevailing party. When the award is confirmed, the award is recorded as a judgment. Arbitration can be especially suitable where mediation or conciliation have not led to a consensus or if you want a procedure where a decision is made for you but is kept confidential and normally cheaper and faster than going to court. The arbitration may be ordered by the court, voluntary or obligatory as part of a contract.

Arbitration Process

Following are the steps of the arbitration process :

  1. Arbitration Clause: A clause or an agreement particularly stating that if a conflict arises between the parties they will settle it through the process of arbitration.
  2. Arbitration notice: In case a conflict has arisen and the party has chosen to follow the process of arbitration then the party against whom the default has been made will send an arbitration notice for invoking the process of arbitration between the parties.
  3. Appointment of Arbitrator: When the notice is received by the other parties both the parties will make an appointment of the arbitrators in the manner as mentioned in the arbitration clause or an arbitration agreement.
  4. Statement of Claim: Statement of claim comprises of the following i.e. the dispute between the parties, the compensation claimed from the defaulting party and events which lead to the dispute.. The other party while replying to the statement of claim can also file the statement of the counterclaim.
  5. Hearing of Parties: Both the parties along with their evidence will be heard by the Arbitral Tribunal.
  6. Award: The tribunal will pass the decision after hearing both the parties. The decision of the tribunal is binding on the parties and is known as Award. However, an appeal can be filed before the High Court against an arbitral award.
  7. Execution of Award: The award has to be executed once it has been passed by the tribunal. The enforcement or execution of the award has to be filled by the party in whose favour it has been passed with the help of a good lawyer.
Legal Framework

The Arbitration and Conciliation Act 1996 is the chief law governing arbitration in India. The act has four parts:

  1. Part I lays down general provisions on domestic arbitration;
  2. Part II provides the enforcement of foreign awards (Chapter 1 deals with New York Convention awards and Chapter II deals with awards under the 1927 Geneva Convention);
  3. Part III deals with conciliation; and
  4. Part IV contains certain supplementary provisions.

Parts I and II have great significance and are found on the UNCITRAL Model Law and the New York Convention respectively. The act also consists of seven schedules which are as under:

  1. The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Section 44);
  2. The 1923 Geneva Protocol on Arbitration Clauses (Section);
  3. The 1927 Geneva Convention on the Execution of Foreign Arbitral Awards (Section 53);
  4. The Model Fee Schedule for Calculating Arbitrators’ Fees [Section 11(14)];
  5. The Arbitrator Guidelines on Impartiality and Independence [Section 12(1)(b)];
  6. The Model Form for Arbitrators’ Disclosure of Independence and Impartiality [Section 12(1)(b)];
  7. The grounds for ineligibility in case of an arbitrator’s relationship with the parties or counsel [Section 12(5)].
Arbitration Agreement

The Act provides a definition of Arbitration Agreement under Section 7. The chief ingredients of an arbitration agreement are as follows:

  1. Agreement by the parties to submit to arbitration all or certain disputes
  2. The dispute must have occurred in regard to a defined legal relationship (may or may not be contractual)
  3. Agreement can be
    1. in the form of an arbitration clause or
    2. in a contract form or
    3. a separate agreement
  4. Agreement must be in written format.
  5. Agreement must be signed by both the parties