ARBITRATION, CONCILIATION AND ADR

Alternative Dispute Resolution

The concept of Alternative Dispute Resolution (ADR) mechanism is capable of providing a

substitute to the conventional methods of resolving disputes. ADR offers to resolve all type
of matters including civil, commercial, industrial and family etc., where people are not being
able to start any type of negotiation and reach the settlement. Generally, ADR uses neutral
third party who helps the parties to communicate, discuss the differences and resolve the
dispute. It is a method which enables individuals and group to maintain co-operation, social
order and provides opportunity to reduce hostility.

Importance of ADR in India

To deal with the situation of pendency of cases in courts of India, ADR plays a significant
role in India by its diverse techniques. Alternative Dispute Resolution mechanism provides
scientifically developed techniques to Indian judiciary which helps in reducing the burden on
the courts. ADR provides various modes of settlement including, arbitration, conciliation,
mediation, negotiation and lok Adalat. Here, negotiation means self-counseling between the
parties to resolve their dispute but it doesn’t have any statutory recognition in India.

ADR is also founded on such fundamental rights, article 14 and 21 which deals with equality
before law and right to life and personal liberty respectively. ADR’s motive is to provide
social-economic and political justice and maintain integrity in the society enshrined in the
preamble. ADR also strive to achieve equal justice and free legal aid provided under article
39-A relating to Directive Principle of State Policy(DPSP).

Few important provisions related to ADR

 Section 89 of the Civil Procedure Code, 1908 provides that opportunity to the
people, if it appears to court there exist elements of settlement outside the court
then court formulate the terms of the possible settlement and refer the same for:
Arbitration, Conciliation, Mediation or Lok Adalat.
 The Acts which deals with Alternative Dispute Resolution are Arbitration and
Conciliation Act, 1996 and,
 The Legal Services Authority Act, 1987

Advantages of Alternative Dispute Resolution

  Less time consuming: people resolve their dispute in short period as compared to
courts
 Cost effective method: it saves lot of money if one undergoes in litigation process.
 It is free from technicalities of courts, here informal ways are applied in resolving
dispute.
 People are free to express themselves without any fear of court of law. They can
reveal the true facts without disclosing it to any court.
 Efficient way: there are always chances of restoring relationship back as parties
discuss their issues together on the same platform.
 It prevents further conflict and maintains good relationship between the parties.
 It preserves the best interest of the parties.

Various modes of Alternative Dispute Resolution

Arbitration

The process of Arbitration cannot exist without valid arbitration agreement prior to the
emergence of dispute. In this technique of resolution parties refer their dispute to one or more
persons called arbitrators. Decision of arbitrator is bound on parties and their decision is
called ‘Award’. The object of Arbitration is to obtain fair settlement of dispute outside of
court without necessary delay and expense.

Any party to a contract where arbitration clause is there, can invoke arbitration clause either
himself or through their authorized agent which refer the dispute directly to the arbitration as
per the Arbitration clause. Here, arbitration clause means a clause that mention the course of
actions, language, number of arbitrators, seat or legal place of the arbitration to be taken place
in the event of dispute arising out between the parties.

 Initially, applicant initiates an arbitration by filing a statement of claim that

specifies the relevant facts and remedies. The application must include the
certified copy of arbitration agreement.
 Statement of claim is a written document filed in the court or tribunal for judicial
determination and a copy also send to the defendant in which claimant described
the facts in support of his case and the relief he seeks from the defendant.
 The respondent reply to the arbitration by filing an answer against the arbitration
claim of claimant that specifies the relevant facts and available defenses to the
statement of claim.
 Arbitrators selection is the process in which the parties receive lists of potential
arbitrators and select the panel to hear their case.
  Then there is the exchange of documents and information in preparation for the
hearing called ‘Discovery’.
 The parties meet in persons to conduct the hearing in which the parties present the
arguments and evidences in support of their respective cases.
 After the witnesses examined and evidences are presented, then there in
conclusion arbitrator gives an ‘Award’ which is binding on the parties.
Now the intricacies of the proceedings vary with the arbitration agreement. For example,
there could be a timeline which must be followed. This timeline would be stipulated in the
agreement.

Section 8 of Arbitration and Conciliation Act, 1996 provides if any party disrespects the
arbitral agreement and instead of moving to arbitration, moves that suit to civil court, other
party can apply the court for referring the matter to arbitration tribunal as per the agreement
but not later the submission of the first statement. The application must include a certified
copy of arbitration agreement and if courts satisfy with it, the matter will be referred to
arbitration.

Mediation

Mediation is an Alternative Dispute resolution where a third neutral party aims to assist two
or more disputants in reaching agreement. It is an easy and uncomplicated party centered
negotiation process where third party acts as a mediator to resolve dispute amicably by using
appropriate communication and negotiation techniques. This process is totally controlled by
the parties. Mediator’s work is just to facilitate the parties to reach settlement of their dispute.
Mediator doesn’t impose his views and make no decision about what a fair settlement should
be.

THE PROCESS OF MEDIATION WORKS IN VARIOUS STAGES. THESE ARE,

 Opening statement
 Joint session
 Separate session and,
 Closing
At the commencement of mediation process, the mediator shall ensure the parties and their
counsels should be present.

 Initially in the opening statement he furnishes all the information about his
appointment and declares he does not have any connection with either of parties
and has no interest in the dispute.
 In the joint session, he gathers all the information, understand the fact and issues
about the dispute by inviting both the parties to present their case and put forward
their perspective without any interruption. In this session, mediator tries to
 encourage and promote communication and manage interruption and outbursts by
the parties.
 Next is separate session, where he tries to understand the dispute at a deeper level,
gathers specific information by taking both the parties in confidence separately.
 Mediator asks frequent questions on facts and discusses strengths and weaknesses
to the parties of their respective cases.
 After hearing both the sides, mediator starts formulating issues for resolution and
creating options for settlement.
 In the case of failure to reach any agreement through negotiation in mediation,
mediator uses different Reality check technique like:
Best Alternative to Negotiated Agreement (BATNA)

It is the best possible outcome both the party come up with or has in mind. Its suitable
situation as each party thinks about their most favorable scenario looks like.

Most Likely Alternative to Negotiated Agreement (MLATNA)

For a successful negotiation the result always lies in the middle, mediator after considering
both the parties comes up with most likely outcome. Here result is not always in the middle
but little left or right of the center depending on negotiation situation.

Worst Alternative to Negotiated Agreement (WATNA)

It the worst possible outcome a party has in their mind for what could happen during
negotiation.

It may be helpful to the parties and mediator to examine the alternative outside the
mediation(specifically litigation) and discusses the consequences of failing to reach
agreement like: effect on the relationship of the parties or effect on the business of the parties.
It is always important to consider and discuss the worst and most probable outcomes, it’s not
always people get the best outcome.

Mediator discusses the perspective of the parties about the possible outcome at litigation. It is
also helpful for the mediator to work with parties and their advocates to come to a proper
understanding of the best, worst and most probable outcome to the dispute through litigation
as that would help the parties to acknowledge the reality and prepare realistic, logical and
workable proposals.

Conciliation

Conciliation is a form of arbitration but it is less formal in nature. It is the process of

facilitating an amicable resolution between the parties, whereby the parties to the dispute use
conciliator who meets with the parties separately to settle their dispute. Conciliator meet
separately to lower the tension between parties, improving communication, interpreting issue
to bring about a negotiated settlement There is no need of prior agreement and cannot be
forced on party who is not intending for conciliation. It is different from arbitration in that
way.

 The party initiating conciliation shall send to the other party a written invitation to
conciliate under this part, briefly identifying the subject of the dispute.
 Conciliation proceedings shall commence when the other party accepts in writing
the invitation to conciliate.
 If the other rejects the invitation, there will be no conciliation proceedings.
Above provision clearly states conciliation agreement should be an extemporary agreement
entered into after the dispute has but not before. Parties are also permitted to engage in
conciliation process even while the arbitral proceedings are on(section 30).

Lok Adalat

Lok Adalat is called ‘People’s Court’ presided over by a sitting or retired judicial officer,
social activists or members of Legal profession as the chairman. National Legal Service
Authority(NALSA) along with other Legal Services Institutions conducts Lok Adalats on
regular intervals for exercising such jurisdiction. Any case pending in regular court or any
dispute which has not been brought before any court of law can be referred to Lok Adalat.
There is no court fees and rigid procedure followed, which makes the process fast. If any
matter pending in court of referred to the Lok Adalat and is settled subsequently, the court fee
originally paid in the court when the petition filed is also refunded back to the parties.

Parties are in direct interaction with the judge, which is not possible in regular courts. It
depends on the parties if both the parties agree on case long pending in regular court can be
transferred to Lok Adalat. The persons deciding the cases have the role of statutory
conciliators only, they can only persuade the parties to come to a conclusion for settling the
dispute outside the regular court in the Lok Adalat. Legal Services Authorities (State or
District) as the case may be on receipt of an application from one of the parties at a pre-
litigation stage may refer such matter to the Lok Adalat for which notice would then be
issued to the other party. Lok Adalats do not have any jurisdiction to deal with cases of non-
compoundable offenses.

The functioning of Lok Adalats

Level of Organization

Lok Adalats are better known as the people’s courts, therefore they need to be available to
people on every level of governance[7]. The Legal Services Authority Act, 1987 (Hereafter
“the Act”) prescribes for several levels wherein Lok Adalats can be organized, ranging from
the lowest courts to the apex court which can take cognizance and organize Lok Adalats for
effective and speedy justice[8]. The persons residing over these Adalats include serving or
retired judicial officials as well as other persons as prescribed by the authority conducting the
Lok Adalats in the given area[9].

Jurisdiction

The jurisdiction of these Lok Adalats is parallel to the courts organizing them, therefore it
extends to any case or matter which is being heard by that court under its original
jurisdiction[10]. Matters with respect to offences not compoundable under law are an
exception to this jurisdiction. They cannot be adjudicated in Lok Adalats[11]. These courts
may also take cognizance of cases as per provisions of the Act for disputes agreed by the
parties to be resolved under them or if one of the parties makes an application to the courts
for referring the case to Lok Adalats for settlement and the court is prima facie[12] satisfied
that there are chances of settlement[13].

Resolution and Award

After admission of disputes, the Lok Adalats proceed to hear the case and dispose of the
matter by reaching a settlement or compromise in an expeditious manner[14]. The manner of
resolution in Lok Adalats is more towards compromise and less towards conclusive
determination[15]. In any case, if the parties are unable to reach a compromise and the Lok
Adalat deems that matter needs more determination, it can refer the matter back to the courts
for adjudication[16].

Eventually once the court is satisfied, it passes an award with respect to the dispute is final
and binding on the parties[17]. The award is enforceable as a decree of the civil court and no
appeal lies from this award[18]. Therefore, this provision ensures that the award is conclusive
and the matter is put to rest once and for all.

Advantages of Lok Adalats

The reason behind the efficiency of Lok Adalats is based on several advantages which it
holds over normal courts of law. These factors are responsible for its quick disposal of
several disputes. They are:

Procedural Flexibility

There exist considerable procedural flexibility as major procedural laws such as the Code of
Civil Procedure, 1908 or the Indian Evidence Act, 1882 are not strictly enforced[19]. The
parties can interact directly through their counsels which is not possible in a regular court of
law. This dynamic nature of Lok Adalats allows them to conciliate both party interests and
pass awards which are acceptable to both parties[20].
No Court Fees

There is no court fee payable when a matter is filed in a Lok Adalat[21]. 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[22].

Final and Binding Award

Under Section 21 of the Act, the award passed by the Lok Adalats stand final and binding. As
no appeal lies to this conclusive determination, the cases are put to rest on first instance[23].

Maintenance of Cordial Relationships

The main thrust of Lok Adalats is on compromise between parties. While conducting the
proceedings, a Lok Adalat acts as a conciliator and not as an arbitrator. Its role is to persuade
the parties to reach a solution and help in reconciling their contesting differences[24]. This
encourages consensual arrangements. Therefore, disputes are not only settled but also the
cordial relations between parties can be retained. Hence, it is a very healthy way of dispute
resolution[25].

 Powers:
o The Lok Adalat shall have the same powers as are vested in a Civil
Court under the Code of Civil Procedure (1908).
o Further, a Lok Adalat shall have the requisite powers to specify its
own procedure for the determination of any dispute coming
before it.
o All proceedings before a Lok Adalat shall be deemed to be judicial
proceedings within the meaning of the Indian Penal Code
(1860) and every Lok Adalat shall be deemed to be a Civil Court
for the purpose of the Code of Criminal Procedure (1973).
o An award of a Lok Adalat shall be deemed to be a decree of a Civil
Court or an order of any other court.
o Every award made by a Lok Adalat shall be final and binding on all
the parties to the dispute. No appeal shall lie to any court against
the award of the Lok Adalat.

Areas for Improvement within Lok Adalats

Some areas of improvement whereby the functioning of Lok Adalats can be improved are as
follows:
Enforceability lies with Civil Court

The awards passed by the Lok Adalats are deemed equivalent to decrees of the civil
court[26]. Although, the enforcement of these decrees cannot be carried out by the Lok
Adalats. This function rests with the civil courts, therefore the parties need to apply for
enforcement to execute the award. It is the author’s recommendation that this power to
enforce needs to be provided to the Lok Adalats itself to ensure that the decisions passed are
executed to their finality.

Lack of Criminal Jurisdiction

The jurisdiction of Lok Adalats with respect to criminal disputes is limited to offences which
are compoundable under law[27]. This removes crimes such as that of petty theft other small
crimes from the purview of Lok Adalats. Hence, this should be reviewed to bring petty
crimes within the purview of Lok Adalats.

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

Negotiation

Negotiation is a process of discussion and communication between two or more parties with
the aim of reaching an agreement or resolving a dispute. It involves identifying common
interests, exploring potential solutions, and finding compromises that satisfy all parties
involved.

One of the key reasons why negotiation is important is its ability to preserve relationships.
Unlike litigation, which often results in winners and losers, negotiation allows people to work
together towards a resolution that meets everyone’s needs. This collaborative approach
fosters understanding, builds trust, and maintains positive connections for future interactions.

Moreover, negotiation provides a cost-effective alternative to legal proceedings. Litigation

can be time-consuming, expensive, and emotionally draining for all parties involved. By
engaging in negotiations instead, individuals can save valuable time and resources while still
achieving their desired outcomes.

Additionally, negotiation promotes creative problem-solving. It encourages participants to

think outside the box and explore innovative solutions that may not have been considered
initially. This flexibility allows for unique agreements tailored specifically to the needs of
those involved.

Characteristics of negotiation
Characteristics of negotiation are:

 Voluntary: This is one of the important characteristics of negotiation, i.e., it

should be completely voluntary, and no party can be forced to negotiate with the
other party. Whichever party wants to negotiate will send a letter to the other party,
asking to negotiate. If the other party agrees to negotiate without any force or
threat, only then can both parties take further steps to negotiate.
 Bilateral/multilateral: Negotiation can be conducted between two or more
parties, as many as may be required.
 Non adjudicative: Negotiation is a process that includes only parties to the issue
to get a solution amicably and no third neutral party takes part in the negotiation
process.
 Informal: unlike other alternative dispute resolutions, negotiation is an informal
method. There are no rules defined for negotiation; parties to the issue make their
own rules with mutual discussion and acceptance.
 Flexible: Negotiation totally depends on the choice of parties, i.e., where it will
take place, when it will take place, what will be the topic of negotiation, which
approach they will take, etc.

Mini-trial:

The mini-trial is also an important alternative dispute resolution techniques. This is different
from a formal case trial. In this method, the party have the freedom to select and impartial
and honest person of undisputed integrand the parties can present their case in a summarised
form. That person on the basis of submission of the parties considers the positive and
negative point concerning the parties and thereafter he renders advice to the parties and
makes effort to get settle the method by the parties. The parties believe in such a person and
negotiate on such advice because such a person is an impartial and honest person and
Standards his advice after hearing both the parties.
Fast Track Arbitration

1. It is majorly governed by strict time limit policies which have to be complied with
by both the arbitrators and the parties. Basically, it means to accelerate the arbitral
proceedings and resolve the matter by the shortest deadline possible.
2. If the time limit is not followed then the mandate of the arbitrator shall terminate,
unless the court has extended the time period. If while extending the period the
Court finds out that the delay has been caused without any substantial reasons,
then there is a reduction of fees of the arbitrator by not exceeding five -per cent for
each month of the delay. This punishment procedure has been mentioned
under Section 15 of the Arbitration and Conciliation Act, 1996.
3. It does not provide a fixed set of elements or procedures to be followed as done in
ordinary arbitral proceedings, mentioned in the following head, any practice
which helps in resolving the issue as soon as possible is accepted under fast track
arbitration.
4. Mostly in Fast Track Procedures for Arbitration, no oral proceedings are required
and only written submissions are relied upon.
5. The parties can appoint a sole arbitrator and the submissions majorly have to be
written.
6. It protects the cost, speed and time without infringing any law and sometimes
procedures like the examination of a witness are also avoided.

Medola
When the party fails to reach any settlement of the dispute by mediation then the process of
Medola beings. In this method, the person who doing mediation occupies the place of the
arbitrator . This person impartially picks up the dispute points from the proposal taken
between the parties during the negotiation. Dispute. So pick up by that third person is binding
upon the parties. That person keeps the agreed point aside and the dispute. Are taken up so as
to settle the dispute by taking a middle course to the satisfaction of the parties in dispute.

Online Dispute Resolution

As we have witnessed that India has seen a rapid growth in the field of lawful means, from
conventional courts to adopting alternate means of dispute resolution which fostered the
development of Arbitration, Conciliation, Mediation, Judicial Settlement and Lok Adalat.
The primary underlying issue does not lie in the right means to access justice, but to the
increased number of cases filed on a daily basis. This not only reduces the court’s workload,
but it also speeds up the delivery of justice and makes it more cost-effective for general
public.

The process of ADR involves physical proceedings which are most of the times barred by the
geographical limitations, and during the times of COVID-19 such limitations have become
peculiar. And in order to overcome such a situation, it is needed that we adapt and utilize
potentially advantageous solution called online dispute resolution. It provides us with
recourse of settling dispute through online means in the form of arbitration, negotiation or
mediation with the use of modern technology like video conferencing and online circulation
of documents.

The emergence of Online dispute resolution in India can be both cost effective and less time
consuming. It would further be beneficial to disputes which are left unheard because of
various reasons either due to cost or time issues, such disputes can take recourse of ODR
which is both cost efficient and less time consuming. Amid the outbreak of COVID 19,
disputes related to lending, property, credit, commerce and retail are resolved through ODR,
which is one of the impactful part of economic revival.

Advantages of ODR
The following are the main benefits of ODR-

1. Speedy Resolution- One of the prominent advantages of ODR is that it is less time
consuming in comparison to conventional courts. As there has been significant
increase in the number of disputes involving consumer issues, transactions and
other isuues. The most convenient choice appears to be ODR, which provides an
efficient basis for implementing a speedier dispute resolution system, on the other
hand where ADR takes several months to pass an award, ODR offers dispute
resolution in a matter of weeks.
2. Feasible from a financial standpoint- It not only provides speedy resolution but
also is economically viable. As the process of arbitration involves physical
proceedings which are most of the times barred by the geographical limitations,
travelling and being present physically is in itself have become expensive and
complicated.
3. It is possible to avoid complex jurisdictional difficulties- One of the prominent
issues of geographical limitation can be avoided with the help of ODR. It further
remodels the system of dispute resolution from justice administered in a court
room to a service that can be availed anywhere.
4. Useful in resolving cross border disputes- In order to address this issue, early
adoption of online dispute resolution (ODR) has been focused on resolving e-
commerce transactions where parties are located in different jurisdictions, as well
as low value disputes arising out of both business to business as well as business to
consumer transactions, where going to court makes little economic sense.

Family Settlement

A family settlement is an agreement mutually worked out by a settler among his

family or by family members among themselves as to how the common property
should be distributed and sold separately following the agreement. It settles the
division or distribution of common property that the family members already own
as common property. It can be used to dispose of even a self-acquired property in
consideration of marriage or for any charitable or religious purpose. The parties
 involved in such a settlement or arrangement should be related to each other or
having some interest in the property. Both moveable and immoveable property can
be disposed of by family settlement.

The settlement is usually initiated by a person acceptable to all the parties. A

respectful third party, a lawyer, or a senior family member can initiate the
settlement process. The settlement can be arrived at by a single document or a
series of documents denoting the division or distribution of property. The
document thus created is neither a gift deed nor a transfer deed. In addition to
arriving at a family settlement agreement, a separate transfer document will have
to be prepared in the form of a gift or sale deed.

The family settlement document must be signed by all the family members
involved. The document should be attested by two witnesses, though it is not
legally mandated. The document should be registered at the registration office. A
family settlement that intends to assign immoveable property requires registration.
The stamp duty depending on the value of the property applies to such a document.

What is Arbitration
“Arbitration is a form of Alternative Dispute Resolution (ADR)”.

 The concept of arbitration means resolution of disputes between the parties at the
earliest point of time without getting into the procedural technicalities associated
with the functioning of a civil court.
 The dictionary meaning of Arbitration is “hearing and determining a dispute
between the parties by a person or persons chosen by the parties”.
 In an English judgement named Collins v. Collins, 1858 28 LJ Ch 184: 53 ER
916 the court gave a wide definition to the concept of Arbitration which reads as
follows:”An arbitration is a reference to the decisions of one or more persons
either with or without an umpire, a particular matter in difference between the
parties”. It was further observed by the court that proceedings are structured for
dispute resolution wherein executives of the parties to the dispute meets in
presence of a neutral advisor and on hearing both the sides and considering the
facts and merits of the dispute, an attempt is made for voluntary settlement.
 Arbitration can be a voluntary one i.e., agreed between the parties or it can be
ordered by the court.
 Unlike litigation, arbitration proceeding takes place out of the court and the
arbitrator’s decision is final and the courts rarely reexamine it.
 There are several modes of dispute resolution outside the Judicial process. These
modes are as follows:

1. Negotiation
2. Mediation
3. Conciliation
4. Arbitration
 5. Mini Trial

 But Arbitration is considered as an important Alternative Dispute Resolution

mechanism and is been encouraged in India due to the high pendency of cases in
the courts.

Some Important Terms in Arbitration

Arbitration Clause

 An Arbitration clause is a section of the contract that defines the rights of the
parties in the case any dispute arises over the contractual obligation or any
other matter related to such contract.
 Generally, an arbitration clause contains that the parties will not sue each other in
the court of law, if any dispute arises, instead they will resolve the dispute through
arbitration.

Arbitration Tribunal

 According to Section 2(1)(d) of the Arbitration and Conciliation Act, an

Arbitration Tribunal means a sole arbitrator or a panel of arbitrators.
 Thus from the interpretation of this definition, the parties are free to determine
the number of arbitrators.
 However, if the parties fails to determine the number of arbitrators, then in that
case, the arbitration tribunal shall consist of a sole arbitrator.

Arbitration Award

An arbitration award is an award granted by the arbitrator in the proceeding before it. This
award can be a money award and it can also be a non-financial award.

Principle Characteristics of Arbitration

 Arbitration is consensual: An arbitral proceeding can only take place if both the
parties to the disputes have agreed to it. Generally, parties insert an arbitration
clause in the contract for future disputes arising from non- performance of
contractual obligations. An already existing dispute can also be referred to
arbitration if both the parties to the dispute agree to it (submission agreement).
  Parties choose the Arbitrators: Under the Indian Arbitration Act parties are
allowed to select their arbitrator and they can also select a sole arbitrator together
who will act as an umpire. However, the parties should always choose an arbitrator
in an odd number.

 Arbitration is neutral: Apart from selecting neutral persons as arbitrators, the

parties can choose other important elements of proceeding such as the law
applicable, language in which the proceedings should be conducted, the venue for
arbitration proceedings. All these things ensure that no party enjoys a home court
advantage.
 Decision of the Arbitral Tribunal is final and easy to enforce: The decision or
award given by the arbitral tribunal is final and binding on the parties and persons
only after the expiry of the time limit prescribed under Section 33 and 34 of the
Act.

Advantages of Arbitration in India

 Expertise in Technical matters: An arbitrator can easily deal with technical

matters which is scientific in nature because generally arbitrators are appointed
based on their expertise and skill in a particular field. Thus the disputes are
resolved more effectively and efficiently.

1. The arbitral process is cost effective and less time consuming than the traditional
way of dispute resolution in the court of law.
2. There is the convenience of the parties as they are able to decide on the language,
venue and time of the proceedings.
3. Privacy and confidentiality of the parties are maintained as there is no
unnecessary publicity of the dispute.
4. Arbitral proceeding is more flexible than the court proceeding as under the
arbitral proceeding one does not have to follow the strict and rigid rules and
regulation as that of the court. This is due to the reason that parties set the rules
and regulations of the proceedings.

Arbitration Agreement
An arbitration agreement is the raison d’être of an arbitration proceeding. It is only through
an arbitration agreement that parties can submit their issues to be adjudicated by the arbitral
tribunal. An arbitration agreement not only engenders an arbitral tribunal but also gives shape
to it. Therefore, it is crucial to understand the position of the arbitration agreement under the
statute.

In the 1940 Act, the Arbitration Agreement was defined under Section 2(a) as-
“A written agreement to submit present or future differences to arbitration, whether an
arbitrator is named therein or not.”

The vague definition was replaced in the 1996 Act by Section 7 which stated –

“7. Arbitration agreement. —

(1) In this Part, “arbitration agreement” means an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which may arise between them in
respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in

the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in—

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which

provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is
alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an

arbitration agreement if the contract is in writing and the reference is such as to make that
arbitration clause part of the contract.”

In short, an arbitration agreement is formed when two parties enter into a contract and agree
in writing that any disputes arising between them out of that contract will have to be resolved
without going to the courts and with the assistance of a neutral person: a third party appointed
by both of the parties, known as the Arbitrator, who would act as a judge and whose decision
will be binding upon the parties.

Also, the 1996 Act ascribes an inviolable position to the arbitration agreement. Section 8
clearly states that after taking cognizance of a valid arbitration agreement between the parties
the court shall abstain from dwelling into the merits of the dispute and refer the parties to
arbitration.

An arbitration agreement once made, cannot be deterred when a dispute arises. In Ravi
Prakash Goel v. Chandra Prakash Goel, the Supreme Court held that where there is an
arbitration agreement present and applicable, the parties cannot take recourse to the civil
court without first undergoing arbitration. It is mandatory for the courts under Section 8 of
the 1997 Act, to refer the parties to arbitration when there is an applicable arbitration
agreement.

Forms of Arbitration Agreement

A fundamental requirement under Section 7 of the 1997 Act is that an arbitration agreement
shall be in writing. Besides that, Section 7 grants liberty to the parties to form an arbitration
agreement in multiple ways as enumerated below:

 A standalone separate Arbitration Agreement

A separate arbitration agreement can be formed in addition and reference to the operative
agreement between the parties.

 An Arbitration Clause
An arbitration clause can be formed in the operative agreement as to the section of the
agreement that deals with the rights and options of the parties in the event of a legal dispute
arising out of the contract. An arbitration clause is construed as an arbitration agreement.

 Incorporation by reference
An arbitration clause contained in a separate contract can also be incorporated in a contract
being drafted. As per Section 7(5), any reference to a document containing an arbitration
clause shall also be construed as an arbitration agreement provided that the referred contract
is in writing and the reference is made with the intention to make that arbitration clause the
part of the contract.

In M/s Elite Engineering and Construction (HYD.) Private Ltd. v. M/s Techtrans
Construction India Private Ltd., the Supreme Court held that a general reference to the
incorporation of a separate arbitration clause will not be tenable in law. The reference shall be
clear and must indicate the intention of the parties to incorporate.

 By communication
According to Section 7(b) of the 1996 Act, an arbitration agreement can also be inferred from
the exchange of letters, telex, telegrams, or other means of telecommunication, which provide
a record of the agreement between the parties. In short, an agreement can be construed from
the correspondence of the parties where there is a clear and unequivocal intention to refer the
disputes to arbitration.

Recently, in Galaxy Infra and Engineering Pvt. Ltd v. Pravin Electricals Pvt. Ltd the Delhi
High Court held that the draft agreement exchanged by email between the parties can be
construed as a valid arbitration agreement.

In Pravinchandra Murarji Savla v. Meghji Murji Shah, it was held that it is the substance of
the agreement and not the form which is of importance.
Also, as per Section Section 7(c) of the 1996 Act and S.N. Prasad v. Monnet Finance Ltd.,
where a statement of claims or allegations is made and is met with ‘non-denial’ by the other
party, the presence of an arbitration agreement can be construed. Therefore in the

Even though the 1996 Act has left the field open with a plethora of ways to form an
arbitration agreement, it is always recommended as a standard practice to choose to have an
arbitration clause in a contract itself.

Drafting an Effective Arbitration Agreement

Supreme Court, in the cases Jagdish Chander v. Ramesh Chander and K. K. Modi v. K. N.
Modi directly tackled the question of what constitutes a valid arbitration agreement. The
Hon’ble Court arrived at a list of principles that should be incorporated in an arbitration
agreement. The principles are as follows:

1. The arbitration agreement must be in writing.

2. The parties shall agree to refer any dispute (present or future) arising out of a
contract to a private tribunal.
3. The private tribunal should be empowered to adjudicate upon the disputes in an
impartial manner, giving due opportunity to the parties to put forth their case
before it.
4. The parties must agree to be bound by the decision of the arbitral tribunal.
5. The intention of the parties to refer the dispute to a private tribunal must be
unequivocally reflected.
6. There must be ‘consensus ad idem’ between the parties i.e. they should agree to
the same thing in the same sense.
7. The words shall contemplate an obligation and determination on the part of the
parties to invoke arbitration and not merely a possibility. For example, use of the
words such as “parties can if they so desire, refer their dispute to arbitration” or “
in the event of any dispute, the parties may also agree to refer the same to
arbitration” shall not be construed as submission to arbitration.
8. The agreement clauses shall not in any way specifically exclude any of the
aforementioned essentials. For example, a clause permitting the tribunal to decide
a claim without hearing the other side.
Although it is always preferable to draft clear and unambiguous clauses, an arbitration
agreement not mentioning the words “arbitration”, “arbitration tribunal” and/or “the
arbitrator” may still be considered a valid arbitration agreement if the basic attributes of a
valid arbitration agreement (as aforementioned) are present therein.

It is to be noted that the aforementioned list is not comprehensive. To draft effective

arbitration agreements, contemplating some additional mechanisms can help the parties
overcome complications that may arise in the arbitral process. The following are such
mechanism:
  Number of arbitrators
Deciding the composition of the arbitrator tribunal is crucial. At times, the subject matter of
the contract may be so intricate and convoluted that it would require the expertise of multiple
arbitrators. Furthermore, in some cases, both the parties may want to exercise the right of
appointing a nominee arbitrator.

The 1940 Act allowed the parties to appoint any number of arbitrators. Oftentimes in
tribunals where even-numbered arbitrators were appointed, the award faced inordinate delay
due to conflicting opinions between the arbitrators. Therefore, the 1996 Act, under Section
10, brought a welcomed change allowing the parties to appoint as many arbitrators as they
wished, as long as the number of arbitrators is odd

Since appointing multiple arbitrators adds to the cost burden of the parties and causes
difficulties in scheduling dates, the general practice is to appoint either a sole arbitrator or
three arbitrators.

 Procedure for appointment

Under the 1996 Act, Section 11, empowers the parties to formulate and agree upon an
appointment procedure by themselves. If the parties fail to agree upon a procedure, in an
arbitration with a sole arbitrator, the court shall make the appointment and in an arbitration
with three arbitrators, each party must appoint one arbitrator and then the two appointed
arbitrators choose a presiding arbitrator.

Since the 1940 Act, a standard drafting practice being followed in India was to give unilateral
powers to one party to appoint the sole arbitrator. However, since the 246th Report of the
Law Commission of India and the subsequent amendments of 2015 and 2019, more and more
cases cropped up where the unilateral appointment was struck down by the courts to uphold
the principle of party autonomy. The dispute finally came to rest in Perkins Eastman
Architects DPC & Anr v. HSCC (India) Ltd, where the Supreme Court held that unilateral
appointment of the sole arbitrator would no longer be valid. Therefore, while drafting the
arbitration clause one must eschew giving appointment rights to a single party.

 Language of the proceedings

Many a time, the parties (domestic or international) may suffer communication difficulties
during the dispute resolution process due to different language proficiencies. In such
situations, the translation fee may skyrocket and bring further distress to the parties.
Therefore, choosing the language of the arbitration proceedings beforehand is always a wise
decision.

 Ad hoc or institutional arbitration

In an arbitration agreement, the parties must select either ad hoc or institutional arbitration. In
ad hoc arbitration, the proceedings are carried out as per the procedure and modalities agreed
to by the parties. In institutional arbitration, a specialised institution is appointed to
administer the proceedings and appoint the arbitrator. Some of the arbitration institutes in
India are Delhi International Arbitration Centre (DIAC), Nani Palkhivala International
Arbitration Centre,, and Mumbai Centre for International Arbitration (MCIA). The ad hoc
system grants more autonomy and is cost-effective. On the other hand, the institutional
arbitration model offers pre-established fine-tuned procedure, administrative assistance and
qualified empanelled arbitrators.

In India, ad hoc arbitration is more prevalent as compared to institutional arbitration. Through

the Arbitration and Conciliation Amendment Act, 2019, through the Arbitration and
Conciliation Amendment Act, 2019, the government has tried to push the arbitral institutions
to develop into cost-effective centres for domestic and international arbitration.

 Seat and Venue

The words ‘‘seat’’ and ‘‘venue’’ are not defined under the 1996 Act and were
interchangeably used before the judgement of Bharat Aluminium Company v. Kaiser
Aluminium Technical Services Inc. (Balco). In Balco, tIn Balco, the Supreme Court held that
the ‘‘seat’’ is the centre of gravity of arbitration and decides the jurisdiction of the court
along with the jurisdiction of the place where the cause of action arises. So, if arbitration is
seated in London, Part 1 of the 1996 Act will not be applicable and the courts in London will
have jurisdiction over the arbitration.

Whether an arbitration agreement needs to be signed

In Svapn Const. v. IDPL Employees Co-op. Group Housing Society Ltd., it was held that the
agreement need not be signed by the parties if it is established by another written

contemporaneous document, which is binding between the parties. However, in 2018, the
Supreme Court held in M/s Caravel Shipping Services Pvt Ltd v M/s Premier Sea Food Exim
Pvt Ltd that an unsigned arbitration agreement is valid as the only prerequisite for a valid
arbitration agreement under the 1996 Act is that it must be in writing.

Composition of Arbitral Tribunal

Chapter-III of the Arbitration and Conciliation Act, 1996 talks about the composition of the
arbitral tribunal.

The provisions which are discussed in detail in Chapter-III are mentioned below-

1. The number of arbitrators

2. Their appointment
3. Power of the Central Government to amend the schedule
4. Grounds on which the appointment of the arbitrator can be challenged
5. Procedure to challenge the appointment
6. Failure or impossibility on the part of the arbitrator to act
 7. Termination of the mandate and substitution of the arbitrator
The number of arbitrators should be odd and not even. It helps in determining the clear
majority of the tribunal and avoids any sort of discrepancy in that regard.

Also, the Arbitration and Conciliation (Amendment) Act, 2019 provided for the
establishment of the Arbitration Council of India with the view of promoting the other
alternative dispute redressal mechanisms such as arbitration, mediation and negotiation. Also,
the composition as well as the functions of the council were provided in the same amendment
Act.

Composition of the Arbitration Council of India

It consists of a Chairperson who is either:

 A judge of the Supreme Court

 A judge of a High Court
 Chief Justice of a High Court
 An eminent person with expert knowledge in the conduct of arbitration.
Other members will include an eminent arbitration practitioner, an academician with
experience in arbitration, and government appointees.

Selection of arbitrators

In the same amendment Act, the provisions regarding the selection of arbitrators were also
modified. A person of any nationality can be an arbitrator in a case unless specifically
provided in the agreement. As per the new provisions, if the parties or the two arbitrators(in
the case of three arbitrators tribunal) are not able to appoint the required arbitrator then the
Supreme Court and High Courts have the responsibility to designate arbitral institutions as
per their respective jurisdictions. Parties to the dispute approach the courts for the
appointment of arbitrators to decide upon the dispute at hand. Appointments for international
commercial arbitration are made by the institution designated by the Supreme Court. For
domestic arbitration, appointments are made by the institution designated by the concerned
High Court. If a situation arises in which no arbitral institutions are available, then the Chief
Justice of the concerned High Court may maintain a panel of arbitrators to perform the
functions of the arbitral institutions. An application for the appointment of an arbitrator is
required to be disposed of within 30 days, and the appointment of the arbitrator should take
place.

Also, as per the Arbitration and Conciliation (Amendment) Act, 2021, the previously
provided qualification criteria were removed and replaced with a provision that the
qualifications, experience, and norms for accreditation of arbitrators were to be specified
under the regulations.
Removal of arbitrators

The provisions for the removal of arbitrators are mentioned in Section 12(3). As per Section
12(3), if the circumstances suggest that a person is either related to the parties or has a self-
vested interest in the dispute and will not be able to be impartial in the proceedings, then
removal proceedings can be initiated against the arbitrator. Also, an arbitrator can leave the
case in between in case of some special circumstances in which he is not able to act
according to the needs of the case and in that case a new arbitrator is appointed. An arbitrator
can also be removed if he/she misconducts in the proceedings in any manner.

Section 16 of the Arbitration and Conciliation Act, 1996

The provisions under Section 16 of this Act are framed in accordance with Article 23 of
the UNCITRAL Arbitration Rules.

Section 16 (1): Power to decide the jurisdiction

It provides that an arbitration tribunal is competent to rule on its own jurisdiction. The
doctrine of Kompetenz-kompetenz or competence de la competence applies to the arbitration
tribunal recognizing that the law is competent to rule on its own jurisdiction. This is a way to
minimize judicial intervention in the arbitration proceedings. Thus, where a party raises a
question as to the jurisdiction of the arbitral tribunal, he shall apply before the tribunal itself,
and the tribunal shall either accept or reject such a plea.

Sub-section (1) of Section 16 of the Act also empowers the arbitral tribunal to decide on the
objections regarding the existence or validity of the arbitration agreement. The powers under
Section 16 (1) are discretionary in nature, as it contains the expression “may rule,” which
means that the arbitral tribunal may exercise this power on its own motion or at the request of
a party.

Further, for determining the validity of the arbitration agreement following two things are
specified:-

(a) Where an arbitration clause forms part of a contract, the said arbitration clause shall be
considered an independent agreement, and it becomes self-sustaining. An arbitration clause,
while being part of a contract, becomes independent of the other terms of the contract.

(b) Where the arbitration tribunal declares the contract null and void, the arbitration clause
contained in that contract does not become invalid by itself.

Thus, the invalidity of the contract shall not automatically render the arbitration agreement
invalid.
Section 16 (2): Objection upon the jurisdiction

This sub-section lays down a two-fold provision:

(1) If any party wants to raise an objection regarding the jurisdiction of the arbitration
tribunal, such objection shall be raised at the first instance, i.e., before or along with the
submission defence statement but not later than that.

(2) A party who appointed or participated in the appointment of an arbitrator is not deprived
of the right to raise such an objection.

In the case of UP Rajkija Nirman Nigam Ltd. v. Indure (P) Ltd. (1996), it was observed that a
party will not be restricted from raising a plea/objection as to jurisdiction merely because he
was a party to the appointment of the arbitrator.

Section 16 (3): Plea on exceeding the scope of authority

This sub-section states that as soon as the matter alleged to be beyond the scope of authority
of the arbitration tribunal is raised during the arbitral proceedings, a plea that the arbitration
tribunal is exceeding the scope of authority shall be raised.

Section 16 (4): Condonation of delay

Sub-section (4) of Section 16 is to enable the tribunal to condone the delay in raising the plea
against jurisdiction under Section 16 (2) as well as for the plea on exceeding the scope of
authority by the arbitration tribunal under Section 16 (3). In other words, it empowers the
arbitration tribunal to admit a delayed plea if the arbitration tribunal considers that the reason
for the delay was justified.

In S.N. Malhotra & Sons. v. Airport Authority of India & Ors (2008), it was observed that if
the delay is not justified, the tribunal may reject such a plea.

Section 16 (5): Decision on plea u/s 16 (2) or 16 (3) and further proceedings

This sub-section mandates the arbitration tribunal to decide the plea raised u/s 16 (2) or 16
(3). It further states that if either of the pleas is rejected, the arbitration tribunal should
continue with the arbitration proceedings and declare the final award.

 In Odisha State Road Transport v. Arss Bus Terminal Pvt. Ltd. (2021)., Orissa
High Court observed that Sec 16(5) lays down that once the arbitration tribunal
rejects the challenge to its jurisdiction, it can continue arbitration proceedings and
 make an award & the aggrieved party has to wait for the final award to challenge
the same.
 In Smt. Arati Dhar vs Sri S.K. Dutta (2002), the Court stated that the question of
jurisdiction goes to the root of the matter and it should be decided first before
submitting the final award. In this case, the court also referred to the case
of Konkan Railway Corporation v. Rani Construction (P) Ltd. (2002).

Section 16 (6): Remedy against such an arbitral award

The last sub-section of Section 16 provides a remedy to a party who is aggrieved by an award
as per sub-section (5). It gives the aggrieved party an option to file an application in
accordance with Section 34 for setting aside the said arbitral award. This provision is
available only after the award is made by the tribunal, and the party cannot directly file an
appeal based on the rejection of its plea under Sections 16 (2) or 16 (3).

Thus, where the plea under Sections 16(2) or 16(3) is rejected and an arbitral award is passed,
parties may challenge the final award, but they cannot appeal the rejection of the plea under
Sections 16(2) and 16(3) of the Act. The reason is that such an order of rejection is
considered an interim order and not an interim award. However, if the plea under Sections
16(22) or 16(3) is allowed by the arbitral tribunal and the proceedings are terminated, then
the parties may prefer an appeal under Section 37 of the Act. Section 37 provides for certain
specific orders that are open for appeal.

Relevant case laws related to Section 16 of the Arbitration and Conciliation Act, 1996
Some of the relevant case laws related to Section 16 of the Arbitration and Conciliation Act,
1996, are discussed as follows:

Union of India v. East Coast Boat Builders & Engineers Ltd. (1998)

The Learned Delhi High Court, in this case, noted that if the arbitration tribunal rejects the
plea challenging jurisdiction, the Court cannot interfere at that stage. The only remedy
available to the party arises after the declaration of the final arbitral award.

M/s Uttam Singh Dugal v. M/s Hindustan Steel Ltd (1981)

In this case, it was held that the finding on the question of jurisdiction is not an interim award
as no part of the dispute is decided. Thus, such a finding is not appealable.
Arbitration Proceedings
Section 21 of the Act provides the rules which govern the commencement of arbitral
proceedings. It gives freedom to the parties to agree and determine when the arbitration
proceeding can officially commence. But in the absence of such an agreement or where the
parties fail to arrive at an agreement, the arbitral proceedings can commence when one party
issues a notice to the other party, in writing, showing its intention to refer the dispute to
arbitration.

So in respect of a particular dispute, the arbitral proceeding commences on the date on which
a request for that dispute to be referred to arbitration is received by the other party. In order to
determine the date of receipt, the provisions of Section 3 of the Act must be looked into.

Rules and legislation

Limitation period

Section 43 of the Act provides that the Limitation Act, 1963 shall apply to arbitrations as it
applies to civil suit proceedings in the courts, except to the extent expressly excluded by the
Arbitration and Conciliation Act. Thus, the date of commencement of arbitral proceedings
assumes relevance for calculating the time-limit for arbitral proceedings under the Limitation
Act, 1963. Any arbitration proceedings commenced after the limitation period, i.e., three
years from the date on which the cause of action arose, will be time-barred.

Equal Treatment of Parties

Section 18 of the Act has two fundamental principles. Firstly, it provides that the parties to an
arbitration proceeding shall be treated with equality and secondly, that each party shall be
given a full opportunity to present their case. This section is a mandatory provision and the
arbitral tribunal has to comply with it. The tribunal has to act in an impartial manner to the
parties and no party has to be given an advantage over the other.

Procedure of Arbitral Proceedings

Section 19 of the Act recognises the right of the parties to agree on the procedural rules
which are applicable in conducting the arbitral proceedings. This provision establishes the
procedural autonomy of the parties.

When the parties fail to agree on a procedure or frame the procedure, it grants the arbitral
tribunal a wide range of discretionary powers to frame the arbitral proceedings. The Act does
not prescribe any default rules regulating the arbitral proceedings.
This provision also provides that the application of the Code of Civil Procedure, 1908 or
the Evidence Act, 1872 to the arbitral proceeding is also at the discretion of the parties.

Place of Arbitration

Section 20 of the Act provides that the parties are free to agree on the place of arbitration and
if they fail to agree then the arbitral tribunal has to determine the place of arbitration in a
judicial manner, considering the circumstances of the case and convenience of the parties.

Also, the place of arbitration is of paramount importance because the laws of the place of
arbitration play a fundamental role in the arbitral proceeding. It determines the substantive
laws for the time being in force in India.

Language to be used in Arbitral Proceedings

Section 22 of the Act deals with the language which has to be used in arbitral proceedings.
The parties to the arbitration agreement are free to choose the language or languages which
have to be used in the arbitral proceedings. In cases where the parties fail to arrive at such an
agreement then it is the role of the arbitral tribunal to determine the language or languages to
be used in the arbitral proceedings. The language shall also apply to any written statement by
a party, any hearing and any arbitral award, decision or other communication by the arbitral
tribunal.

When the arbitral tribunal agrees on the language to be used in arbitral proceedings, it may
order that any documentary evidence shall be accompanied by a translation into the language
agreed. The arbitral tribunal must ensure that all the parties are able to follow and understand
the proceedings.

Statement of Claim and Defence

Section 23 of the Act provides for pleadings of the parties before the arbitral tribunal. After
the arbitral tribunal has been established, the usual practice is to exchange and file their
pleadings before the tribunal.

The claimant states the facts and other relevant matters, while the respondent opposes the
facts and the averments made in the claim statement and contests the relief claimed by the
claimant. The contents of pleading may vary from case to case depending upon the facts and
circumstances of each case.

Within six months of the appointment of the arbitral tribunal, the statement of claim and
defence has to be completed under this section.
Hearing and written proceedings

Section 24 of the Act discusses the manner in which arbitral proceedings are to be conducted.
In the absence of any prior agreement between the parties relating to this matter, the arbitral
tribunal has the power to decide whether the proceedings shall be held orally or on the basis
of documents and other materials.

Default of Party

Section 25 of the Act deals with three situations where the parties are at default.

Firstly, the arbitral tribunal terminates the proceedings when the claimant without showing
sufficient cause, fails to communicate his statement of claim in accordance with Section
23(1). Secondly, the arbitral tribunal continues the proceeding when the respondent fails to
communicate his statement of defence in accordance with Section 23(1).

Thirdly, if there is sufficient cause then the termination is recalled and proceeding gets
restored.

Appointment of Experts

Section 26 of the Act gives the arbitral tribunal power to appoint one or more experts based
on the requirement or request of the parties. It requires the parties to provide relevant
information to the experts.

Also, the arbitral tribunal cannot appoint experts and delegate the duty of determination of
the dispute.

Court Assistance

Section 27 of the Act provides the arbitral tribunal with the power to apply for the court
assistance in taking evidence. Persons can also be held guilty and tried before the court, if
they refuse to give evidence or do not cooperate.

Termination

The arbitral proceedings are terminated either by the final arbitral award or by an order of the
arbitral tribunal terminating the arbitral proceedings.

The arbitral tribunal terminates the arbitral proceedings in any of these cases where:
 1. the claimant withdraws the claim and respondent does not object to it,
2. both parties are in consensus and agree to terminate the arbitral proceedings, or
3. the continuation of the arbitral proceedings has become impossible or irrelevant
considering the present facts of the case.
Also, the termination of the arbitral proceedings terminates the mandate of the arbitral
tribunal and the arbitral tribunal becomes functus officio. The term “functus officio”
means no longer holding office or having official authority once a decision is rendered.

Arbitral Award under Arbitration and Conciliation Act, 1996

According to the definition given under Section 2(c) it’s clear that the 1996 Act doesn’t
provide a concrete definition of Arbitral awards. It solely affirms that arbitral awards include
interim awards too. However, the ultimate call given by the arbitral tribunal [as per Section
2(d)] is the arbitral award.

Accordingly, an arbitral award could be defined as the binding and final decision made by an
arbitral tribunal or a sole arbitrator, that resolves, wholly or in part, the dispute submitted to
his/its jurisdiction.

The award can give a spread of remedies to the parties depending on the issue of the dispute.
This include:

 Injunctive Remedies: Once a court orders that a party should take an action or stop
an action, it’s called an injunction. An arbitrator may offer the same award in a dispute
wherever one party needs such relief.
 Money: Several award can decide that one party will need to pay the opposite party
based on the contract or dispute controlling the award.
 Creative Relief: Typically, the dispute between the parties can have several
underlying emotions and interests that are driving the parties. Whereas the arbitrator
will not have as much freedom as a mediator to assist the parties come to a reasonable
agreement, an arbitrator could have one party issue an apology or provide a positive
employment reference.
 Incentives: An arbitrator could add incentives for certain behaviours to encourage the
parties to suits the award.

Case Laws dealing with Arbitral Award under Arbitration and Conciliation Act, 1996

Calcutta High Court described an arbitral award as a result of the consensual justice of the
parties[1]. Within the case of Bhajahari v. Bihari arbitral award was outlined as the final
determination of the claim or issue, by an arbitrator of the parties of their own choice[2].

 In Harinarayan Bajaj v. Sharedeal Finance[3] it was held that as per definition under
Section 2 an arbitral award includes an interim award. However, an interim award to
be an award had to determine a claim with finality. Once the claim is determined, the
Tribunal couldn’t adjudicate more thereon claim and become functus officio.
Moreover, the procedural orders passed throughout the arbitral proceeding is
essentially excluded from the concept of award.
  In Paradise Hotel v. Airport Authority of India Ltd[4] the enforcement of an award is
complete only when it has been implemented under CPC within the same manner as if
wee a decree of court.
 In Pandit Munsi Ram and associates v. Union of India[5] it was interpreted that since
an arbitral award is taken into account a decree as under Section 35 of the 1996 Act,
the court held that an arbitral award is an order which determines the rights of parties
involved by finally determining the actual claim or issue within the course of arbitral
proceedings.

Types of Arbitral Award under Arbitration and Conciliation Act, 1996

There are two types of awards –

 Domestic awards- this sort of award is governed under Part I of the Act
As per Section 2(7), Domestic awards, are altogether dealt with in part one till Section 43 of
the Arbitration and conciliation act whereas Sections 44 to 60 deal with different kinds of
foreign arbitral awards.

The arbitral award is worth solely to the extent of the parties’ ability to enforce the terms they
ab initio prescribed. Section 36 lays down provisions for the speedy enforcement of the
domestic awards. Under this very section, it is made clear that a domestic award is
enforceable within the same manner as that of a decree passed by a court. In domestic
arbitrations, if the assets of the parties are almost in one and the same jurisdiction, the
enforcement of domestic award abundant easier. And it is easier to enforce an arbitral award
than judgment by a court.

 Foreign awards- this type is subsequently governed under Part II

Part II of Chapter 1 deals with the New York Convention awards. In this Section 48 deals
with the refusal of enforcement of the foreign award. Chapter 2 Section 57 deals with the
provisions regarding the enforcement of Geneva Convention awards.

In Serajuddin v. Michael Golodetz[6] the Calcutta High Court laid down the essential
conditions of a ‘foreign arbitration’ where the award is further called a foreign arbitral award,
the main points of this case were:
1. Arbitration should have been held in foreign a foreign country
2. By a foreign arbitrator
3. Arbitration by applying foreign laws
4. One of the parties consists of foreign nationals

Provisions of Arbitration and Conciliation Act, 1996 dealing with Arbitral Award

 Section 28 of the Arbitration and Conciliation Act, 1996

An Arbitrator should decide the dispute in justice and in good faith. However, there’s a
condition precedent, given that each parties expressly authorize an arbitrator to adjudicate
then solely he will decide the dispute between them.

Domestic arbitrations should follow Indian arbitration law. However, for international
arbitrations agreements primarily based in India, the arbitral tribunal should follow the laws
the parties have agreed to apply in their agreement to settle disputes. The selected law as
agreed within the agreement should be construed unless expressly agreed otherwise.
It should also be kept in mind that while applying the law of a unique legal system, the
substantive laws of India shouldn’t be in conflict with them. Within the absence of any such
agreement or any indication of what would be the applicable laws once a dispute arises, the
arbitral tribunal shall apply laws that are applicable and relevant to the dispute.

Furthermore, the arbitral tribunal should apply provisions solely consistent with the terms of
the contract between parties. However, the tribunal should additionally take into account the
usages and also the current trade practices that are relevant to the contract.

 Section 29 of the Arbitration and Conciliation Act, 1996

The decision of the Arbitral Tribunal are going to be in the majority. The arbitral award is the
conclusive stage of the arbitral proceedings. The choice made by the majority of the members
of the tribunal are going to be declared in the form of an award.

 Section 30 of the Arbitration and Conciliation Act, 1996

Section 30 permits the encouragement settlement amongst the parties by the arbitral tribunal.
If the parties with success conform to a settlement then the same can be incorporated within
the form of an award. Such settlements are recorded because the Arbitral award on agreed
terms. Such amicable arbitral awards should be create according to Section 31. It has the
same effect and status as that of an arbitral award passed by an independent tribunal to
substance a dispute.

 Section 31 of the Arbitration and Conciliation Act, 1996

According to Section 31 Arbitral awards shall be in signed and writing by all the members of
the tribunal.

The reason applied behind the award should be explicit clearly. However, if the parties have
agreed for settlement then no reason behind an arbitral award on agreed terms, need to be
showcased. The date of declaration of an Award and also the place wherever it’s made shall
be mentioned. Place of the award is additionally called as the seat of arbitration. A replica of
the award shall be issued to every party. Arbitral Tribunals can also pass an interim award.

In the case of Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya[7] non-signatories to an

arbitration agreement can even participate in arbitration proceedings as long as the necessary
and proper parties to the agreement are present. This is often to both Indian seated
International Commercial Arbitration and domestic arbitration.

Termination of Arbitral Proceedings under Arbitration and Conciliation Act, 1996

Section 32 of the Arbitrational and Conciliation Act, 1996 is totally coherent with Article 32
of UNCITRAL Model Law. According to Section 32(1) of the Act termination of Arbitral
proceedings takes place once the final award declared by the arbitral tribunal. The other three
grounds of termination of arbitral proceedings are given under Sub-section 2 of Section 32.

To terminate the arbitration proceedings arbitral tribunal shall issue an order:

 The parties themselves agree to terminate the proceedings.

 If the arbitral tribunal finds that the continuation of the proceedings is either
unnecessary or impossible for any other reason.
  the plaintiff withdraws their claim. It can also be terminated if the respondent objects
to the arbitral award. Looking at which the arbitral tribunal come to a conclusion that
it has a legitimate interest in obtaining a final settlement.
In the last, The mandate of the arbitral tribunal will terminate with the termination of the
procedure itself. Sub-section (3) of this section lays down that the above provisions are
subject to Section 34(4) and section 33.

Conditions of a valid award

For an award to be valid, it must meet the following requisites:

 Be made pursuant to a valid arbitration agreement.

 The parties were afforded equal opportunity to submit and argue their case.
Moreover, they must have had proper notice of the constitution of the tribunal and
the appointment of arbitrators.
 The award itself should not travel beyond the scope of the arbitration agreement. It
must deal with the dispute as contemplated by the arbitration agreement.
 The composition of the arbitral tribunal must be in conformity with the agreement
between the parties.
 The dispute should be arbitrable, and the award should not be against the public
policy of the enforcing country.
 Further, the arbitral tribunal must pass an award that is reasoned unless the parties
agree otherwise.

Essential elements of a valid award

As per Section 31 of the 1996 Act, the following elements are necessary for an arbitral award
to be construed as valid:

 Firstly, the arbitral award must be in written form.

 Secondly, it must be signed by the members of the tribunal. However, it is
pertinent to mention that the signatures of all members are not mandatory to make
an award valid. In the event that the arbitral tribunal is composed of more than one
arbitrator, it is not mandatory that the signatures of all the members be provided. If
the majority of the members of the tribunal provide their signature, that shall
suffice so long as the arbitrator who has not signed provides the reason behind
such an omission.
 Thirdly, the award must be a reasoned one.
 Fourthly, the award should provide the date of passing the award. As per Section
31 of the 1996 Act, the award should also provide the place at which it was made.
For the purposes of this requirement, it would be deemed that the award was made
at the seat or place of arbitration determined in line with Section 20 of the 1996
Act.
Thus, by virtue of Section 31 of the 1996 Act, any award that fails to meet the requirements
specified under Section 31 may be declared invalid.

Enforcement of domestic awards

The process for enforcement of a domestic award is provided in Section 36 of the 1996 Act.
Once the award attains finality in terms of Section 35 of the 1996 Act, the parties may
approach the appropriate court for enforcement of the award.

Finality of an award

Every arbitration proceeding has one ultimate objective, which is to result in an award that is
both valid and enforceable. For this reason, the final award must be such that it fully decides
all the issues and differences that had arisen between the parties and were in dispute between
the parties, which they had ultimately raised for determination in the arbitration
proceeding. Section 35 of the 1996 Act confers the status of finality on an arbitral award. It
goes on to state that an arbitral award shall be final and binding not just on those who have
been parties to the arbitration proceedings but also on every person claiming under the
parties. Therefore, this arbitral award that has attained finality and which has decided all the
differences raised and in dispute between the parties would be binding on the parties as well
as those other persons who seek to claim through the parties.

In fact, a three judge bench of the Apex Court examined the scope of Section 35 in the case
of Cheran Properties Limited v. Kasturi and Sons Limited (2018). The observation made with
regard to the scope of this section was that Section 35 of the 1996 Act essentially widens the
scope of who may be bound by an arbitral award. It does so by binding not only those who
have been parties to the arbitration proceeding but also those who derive their authority
through the parties to the proceedings.

Meaning of Arbitral Award

An arbitral honor or intervention grant alludes to a choice made by a discretion court in a

mediation continuing. An arbitral honor is closely resembling a judgment in a courtroom. An
example of arbitration would be when two people who are divorcing cannot agree on terms
and allow a third party to come in to help them negotiate. The process to confirm the arbitral
award proceeds much faster than a regular lawsuit. This speed and efficiency are
demonstrated by the fact that a party seeking to confirm can do so as soon as ten days after
the arbitrator makes an award.

Concept of Arbitral Award

The requirements or mould of an arbitral award is – regardless, an honor should:

i) be recorded as a hard copy;

ii) contain purposes behind the choice, except if the gatherings have concurred in any case or
on the off chance that it is an assent grant;

iii) express the date and the spot of discretion, and

iv) be marked by the entirety of the authorities or contain a clarification for any missing
signature(s).

Basis of an arbitral award

A discretion of grant is the honor allowed by the judge in their choice. This honor can be cash
one gathering hosts to pay to the next get-together. It can likewise be a non-money related
honor, for example, halting a specific business practice or including a work impetus.

An Arbitrator is designated distinctly to determine a debate which implies there is a particular

supplication. Yet, without a particular petition, the intervention procedures will be a pointless
activity. It isn’t just troublesome however wrong with respect to the Arbitrator to expect
things and grant. The award must contain reasons; the honor must express the “seat” of the
intervention (where the mediation occurred); and. the honor must express the date whereupon
it is made. This is significant for the estimation of intrigue.

Various kinds of arbitral awards are there:-

1. Domestic Arbitration is a form of ADR where one or more person(s) are

appointed to hear a case that takes place within one jurisdiction. With
arbitration an award is made by the Arbitrator, this award is binding and
enforceable in court.
2. Institutional arbitration
3. Foreign awards
4. Ad hoc arbitration
Status of the arbitral award in India

Arbitral honors allude to the choice of an arbitral council, regardless of whether in a local or
global intervention. Arbitral honors incorporate interval grants. Residential honors are
administered by Part I though remote honors are represented by part II of the Arbitration and
Conciliation Act of India. The Arbitration and Conciliation Act contains no particular
arrangements on separation. Be that as it may, Indian law perceives the principle of
distinguishableness and a substantial intervention proviso is divisible from the parent contract
and comprises an understanding without anyone else.
There is no arrangement for request against an arbitral award and it is conclusive and official
between the gatherings. In any case, a bothered gathering may take a plan of action to law
court for putting aside the intervention grant on specific grounds indicated in Section 34 of
the Arbitration and Conciliation Act, 1996.

Legal provisions of Arbitral awards

Section 36 proclaims that an arbitral honor has the power of the declaration, however, in
certainty it’s anything but a pronouncement. An ex parte Award passed by an Arbitral
Tribunal under Section 28 of the Act is additionally enforceable under Sec. 36. Indeed, even a
settlement came to by the gatherings under Section 30 of the Act that can be enforceable
under the section.

An award may be challenged on what may be broadly described as procedural grounds, such
as failure to give proper notice of the appointment of an arbitrator. An award may be
challenged on substantive grounds, on the basis that the arbitral tribunal made a mistake of
law or on the grounds of a mistake of fact

Legal provisions related to Appeal, Challenge and Modification of Arbitral Awards

There are limited rights of review and appeal of arbitration awards.

There is no provision for appeal against an arbitral award and it is final and binding between
the parties. However, an aggrieved party may take recourse to a law court for setting aside the
arbitration award on certain grounds specified in Section 34 of the Arbitration and
Conciliation Act, 1996.

According to section 34(2), an award may be set aside on the application of an aggrieved
party. Under certain circumstances, the court can set aside the award made by the arbitral
tribunal even without an application made by the party.

The option to challenge an award is a legal right and consequently can’t be postponed or
removed by an understanding between the parties.

APPEAL

What is the method for challenging award?

An application to challenge the award must be recorded in court inside a quarter of a year of
receipt of the honor. In specific conditions, the court may consider an application for putting
aside inside a further time of 30 days in the event that it is fulfilled that there was an adequate
reason for such postponement. On the off chance that the court dismisses the application for
the challenge, the honor is enforceable as a pronouncement of the court. The fruitless party
has just one option to claim a request saving or declining to put aside an honor and no
subsequent intrigue can be made against a re-appraising request. In any case, there is a sacred
option to document an intrigue under the steady gaze of the Supreme Court of India (an
‘uncommon leave appeal’). The Supreme Court will practice its watchfulness sparingly and
consider such an intrigue just if there is a gross blunder of law or a significant issue of law is
included.

The parties can’t go into consent to postpone their entitlement to challenge an arbitral award.

On what grounds can parties appeal an award?

The Arbitration and Conciliation Act takes into account difficulties to the honor. The reason
for testing household grants under Indian law are to a great extent dependent on Article 34 of
the UNCITRAL Model Law.

Parties can raise on the accompanying grounds:

 absence of limit of the gatherings to close a mediation understanding;

 absence of a legitimate mediation understanding;
 absence of appropriate notification of arrangement of a judge or of the
discretion procedures, or powerlessness of involved with present its case;
 absence of unprejudiced nature or autonomy of the judge;
 creation of the court or lead of the procedures as opposed to the compelling
understanding of the parties;
 non-arbitrability of the topic of the contest; or
 struggle with the open approach of India

Meaning Of Conciliation
Briefly stated, conciliation means any third party assisted alternate dispute resolution (ADR)
approach. He discusses the details of the dispute with the parties and on the basis of facts
collected, he himself draws up and proposes a solution, which in his opinion is most fair and
reasonable. It differs from mediation, the mediator only assists the parties to resolve their
dispute without, however, himself drawing up a solution. It is far less informal than the
process of conciliation.

Conciliation is generally a voluntary process and discussions made in the process of

conciliation are not binding on the parties unless the parties themselves agree to treat as
binding. It is an (ADR) process of settling the dispute outside the Court.

Features Of Conciliation
The main features of conciliation under the Arbitration and Conciliation Act, 1996 are as
follows:

 The process is non-adversary in nature there being no plaintiff or defendant or

claimant or opposite party.
  It is voluntary in nature, depending on parties to agree or not to agree with the
solution drawn up by the conciliator.
 The conciliator has discretion to decide the procedure so as speedy and less
expensive disposal of the dispute. Thus it is fairly flexible.
In conciliation, the causes of dispute or differences are first identified and then resolved by
the conciliator thus protecting the interests of the parties. The process of conciliation being
flexible and more or less informal, the parties readily agree to get their disputes resolved
through this method. When the parties enter upon conciliation and reach an agreement on a
settlement of dispute, the agreement so reached has the status and effect as if it was an
arbitral award. The Act also provides confidentiality in respect of all matters in the
conciliation proceedings.

Application & Scope Of Conciliation In India

Section 61 of the Arbitration and Conciliation Act of 1996, provides for the Application
and Scope of Conciliation.

Section 61 points out that the process of conciliation extends, in the first place, to disputes,
whether contractual or not. But the disputes must arise out of the legal relationship. It means
that the dispute must be such as to give one party the right to sue and to the other party the
liability to be sued. The process of conciliation extends, in the second place, to all
proceedings relating to it.

But Part III of the Act does not apply to such disputes as cannot be submitted to conciliation
by the virtue of any law for the time being in force.
Appointment Of Conciliators
Section 64 deals with the appointment of the conciliators.

Where the parties agree to take recourse to conciliation with one conciliator, the conciliator
so appointed will be called the sole conciliator and he will be named by the parties
themselves. When the parties prefer conciliation proceedings to be conducted by two
conciliators, each party may appoint (name) one conciliator. However, where the parties opt
for conciliation by three conciliators, each party may appoint one conciliator and both the
parties may agree upon the name of the third conciliator who shall act as the presiding
conciliator.

Section 64 sub section 2, also provides for institutional appointment of conciliators, that is,
the parties may seek the assistance of suitable institutions or persons for appointment of
conciliator/conciliators, if they so desire. The institutions would maintain a panel of skilled
negotiators who have special expertise in different fields so that they may make the services
of well qualified conciliators available to the parties needing their assistance for appointment
of suitable persons as conciliators
In case of sole or third conciliator’s appointment, the appointing institution has to take into
consideration the advisability of appointing a person of a nationality other than the
nationalities of the parties in dispute. This proviso is intended to ensure impartiality and
independence of the conciliator.

Number & Qualification Of Conciliators–

Section 63 fixes the number of conciliators. There shall be one conciliator. But the parties
may by their agreement provide for two or three conciliators. Where the number of
conciliators is more than one, they should as general rule act jointly.
Principles of Conciliation Procedure
Independence And Impartiality– Section 67(1)
According to it the conciliator should be independent and impartial. He should assist the
parties in an independent and impartial manner while he is attempting to reach an amicable
settlement of their dispute.

Fairness and justice- Section 67(2)

According to it the conciliator should be guided by the principles of fairness and justice. He
should take into consideration, among other things, the rights and obligations of the parties,
the usages of the trade concerned, and the circumstances surrounding the dispute including
any previous business practices between the parties.

Confidentiality- Section 70
According to it the conciliator and the parties are duly bound to keep confidential all matters
relating to conciliation proceedings. Similarly when a party gives information to the
conciliator on the condition that it be kept confidential, the conciliator should not disclose
that information to the other party.

Disclosure Of The Information– Section 70

According to it when the conciliator receives information about any fact relating to the
dispute from a party, he should disclose the substance of that information to the other party.
The purpose of this provision is to enable the other party to present an explanation which he
might consider appropriate.

Co-operation Of The Parties With Conciliator– Section 71

According to it the parties should in good faith cooperate with the conciliator. They should
submit the written materials, provide evidence and attend meetings when the conciliator
requests them for this purpose.

Procedure Of Conciliation

Commencement of the conciliation proceedings– Section 62

According to it the conciliation proceedings are initiated by one party sending a written
invitation to the other party to conciliate. The invitation should identify the subject of the
dispute. Conciliation proceedings are commenced when the other party accepts the invitation
to conciliate in writing. If the other party rejects the invitation, there will be no conciliation
proceedings. If the party inviting conciliation does not receive a reply within thirty days of
the date he sends the invitation or within such period of time as is specified in the invitation,
he may elect to treat this as rejection of the invitation to conciliate. If he so elects he should
inform the other party in writing accordingly.

Submission of Statement to Conciliator- Section 65

According to it the conciliator may request each party to submit to him a brief written
statement. The statement should describe the general nature of the dispute and the points at
issue. Each party should send a copy of such a statement to the other party. The conciliator
may require each party to submit to hima further written statement of his position and the
facts and grounds in its support. It may be supplemented by appropriate documents and
evidence. The party should send the copy of such statements, documents and evidence to the
other party. At any stage of the conciliation proceedings, the conciliator may request a party
to submit to him any additional information which he may deem appropriate.

Conduct of Conciliation Proceedings- Section 69(1) and 67(3)

According to it the conciliator may invite the parties to meet him. He may communicate with
the parties orally or in writing. He may meet or communicate with the parties together or
separately. In the conduct of the conciliation proceedings, the conciliator has some freedom.
He may conduct them in such a manner as he may consider appropriate. But he should take in
account the circumstances of the case, the express wishes of the parties, a party’s request to
be heard orally and the need for speedy settlement of the dispute.
Administrative assistance- Section 68
It facilitates administrative assistance for the conduct of conciliation proceedings.
Accordingly, the parties and the conciliator may seek administrative assistance by a suitable
institution or the person with the consent of the parties.

Difference Between Conciliation and Arbitration

Though like arbitration, conciliation is also another means of settling disputes, the two differ
in many vital aspects. The only similarity that appears between the two is that a ‘third person’
is chosen or nominated by the parties to resolve their disputes.

 In case of arbitration, a prior ‘agreement in writing to submit to arbitration disputes

which have arisen or which may arise in future, is necessary. But conciliation may
be resorted to without the existence of such prior agreement and it generally relates
to disputes which have already arisen.
 As a corollary of this, it follows that there being a prior arbitration agreement
between the parties, both of them are bound by the agreement. But in case of
conciliation, since a written invitation is made by one party, the other party may or
may not accept the same.
 While the role of conciliator is to help and assist the parties to reach an amicable
settlement of their dispute, the arbitrator does not merely assist the parties but he
also actively arbitrates and resolves the dispute by making an arbitral award.
 In case of conciliation a party may require the conciliator to keep the factual
information confidential and not disclose it to the other party, but it is not so in
arbitration as the information given by a party is subjected to scrutiny by the other
party. Thus there is no question of confidentiality in case of arbitration awards.
 A settlement agreement may be made by the parties themselves and the conciliator
shall authenticate the same. An arbitration award on the other hand, is not merely a
settlement agreement but it is a judgment duly signed by the arbitrator.
 The conciliation proceedings may be unilaterally terminated by a written
declaration by a party to the other party and the conciliator, but arbitration
proceedings cannot be so terminated.
 Conciliator is subjected to certain disabilities under Section 80 of the Act and he
cannot act as arbitrator or as a council or a witness in any arbitral or judicial
proceedings but there are no such disabilities imposed on an arbitrator or parties to
arbitral proceedings.
 The arbitration proceedings or awards may be used as evidence in any judicial
proceedings but the conciliation proceedings cannot be used as evidence in any
arbitral or judicial proceedings.
  Last but not the least, an arbitrator has to decide according to law, but a conciliator
can conciliate irrespective of law.

What is the Role of the Conciliator?

 Assisting Parties in Reaching an Amicable Settlement

The primary role of a conciliator, as stated in Section 67, is to assist the parties in reaching a
mutually acceptable resolution to their dispute.

This involves facilitating communication, encouraging dialogue, and exploring possible

solutions. The conciliator acts as a neutral and impartial third party, promoting a cooperative
environment where parties can freely express their concerns and interests.

 Guided by Principles of Objectivity, Fairness, and Justice

A conciliator must uphold objectivity, fairness, and justice principles throughout the
conciliation proceedings. This means treating both parties equally without favouring one over
the other.

The conciliator must consider various factors, including the rights and obligations of the
parties, trade usage, and the circumstances surrounding the dispute. By doing so, they ensure
that the proposed settlement aligns with the principles of equity and fairness.

 Conducting the Conciliation Proceedings Appropriately

Section 67 grants conciliators the flexibility to conduct the conciliation proceedings in a
manner they deem appropriate. This enables them to tailor their approach to the case’s
specific needs.

They may take into account the circumstances of the dispute, the expressed wishes of the
parties, and the need for a speedy resolution. Furthermore, if a party requests the conciliator
to hear oral statements, the conciliator should consider such requests.

 Making Proposals for Settlement

At any stage of the conciliation process, a conciliator is empowered to make settlement
proposals to the parties. These proposals, which need not be in writing and are not required to
be accompanied by a statement of reasons, can serve as potential solutions for the parties to
consider. The aim is to guide the parties towards a settlement that effectively accommodates
their interests and resolves their dispute.

Settlement
1. Settlement of dispute – Sec 67(4), 72, 73

The role of the conciliator is to assist the parties to reach an amicable settlement of the
dispute. He may at any stage of the conciliation proceedings make proposals for the
settlement of the dispute. Such proposals need not be in writing and need not be
accompanied by a statement of reasons. (Sec. 67(4)) Each party may, on his own
initiative or at the invitation of the conciliator, submit to the conciliator the
suggestions for the settlement of the dispute. (Sec. 72)
 When it appears to the conciliator that there exist elements of a settlement likely to be
accepted by the parties, he shall formulate the terms of a possible settlement and
submit them to the parties for their observations. After receiving the observations of
the parties, the conciliator may reformulate the terms of a possible settlement in the
light of such observations. (Sec 73(1)) If the parties reach agreement on the settlement
of a dispute, a written settlement agreement will be drawn up and signed by the
parties.

If the parties request, the conciliator draw up or assist the parties in drawing up the
settlement agreements. (Sec 73(2)) When the parties have signed the settlement
agreement, it becomes final and binding on the parties and persons claiming under
them. (Sec 73(3)) The conciliator shall authenticate the settlement agreement and
furnish its copy to each of the parties. (Sec 73(4)

2. Status and effect of settlement agreement – Sec 74

Section 74 provides that the settlement agreement shall have the same status and
effect as an arbitral award on agreed terms under Section 30. This means that it shall
be treated as a decree of the court and shall be enforceable.

Restrictions on Role of Conciliator – Section 80

Section 80 places two restrictions on the role of the conciliator in the conduct of
conciliation proceedings:

1. Clause (a) of Section 80 prohibits the conciliator to act as an arbitrator or as a

representative or counsel of a party in any arbitral or judicial proceeding in respect of
a dispute which is subject of the conciliation proceedings.
2. Clause (b) of Section 80 prohibits the parties to produce the conciliator as a witness in
any arbitral or judicial proceedings.

Termination of Conciliation Proceedings – Section 76

Section 76 lays down four ways of the termination of conciliation proceedings. These
are:

1. The conciliation proceedings terminate with the signing of the settlement agreement
by the parties. Here the date of termination of conciliation proceedings is the date of
the settlement agreement. (Sec 76(a))
2. The conciliation proceedings stand terminated when the conciliator declares in writing
that further efforts at conciliation are no longer justified. Here the date of termination
of conciliation proceedings is the date of the declaration. (Sec 76(b))
3. The conciliation proceedings are terminated by written declaration of the parties
addressed to the conciliator to the effect that the conciliation proceedings are
terminated. Here the date of termination of conciliation proceedings is the date of the
declaration. (Sec 76(c))
 4. The conciliation proceedings are terminated when a party declares in writing to the
other party and the conciliator, that the conciliation proceedings are terminated. Here
the date of termination of conciliation proceedings is the date of the declaration. (Sec
76(d))

Costs – Sec 78
Costs means reasonable costs relating to the following:

1. The fee and expenses of the conciliator and witness requested by the conciliator with
the consent of the parties
2. Any expert advice requested by the conciliator with the consent of the parties
3. Any assistance provided to sec 64(2)(b) and sec 68
4. Any other expenses incurred in connection with the conciliation proceedings and the
settlement agreement. (Sec 78(2))

It is the conciliator who fixes the costs of the conciliation proceedings upon their termination
and gives written notice of it to the parties. (Sec78 (1)) The costs are borne by the parties in
equal shares. (Sec 78(3))

Deposits – Sec 79
The conciliator may estimate the costs likely to be incurred and direct each party to deposit it
in advance in an equal amount. During the conciliation proceedings, the conciliator may
demand supplementary deposits from each party. If the require deposits are not paid in full by
both parties within 30 days, the conciliator may either suspend the proceedings or terminate
the proceedings by making a written declaration to the parties.

The termination of proceedings become effective from the date of declaration. Upon
termination of the proceedings, the conciliator shall render to the parties accounts of deposits
received and return the unexpected balance to the parties.

POWERS OF HIGH COURT

 In the Indian single integrated judicial system, the high court operates below the
Supreme Court but above the subordinate courts.
 A state's judiciary consists of a high court and a hierarchy of lower courts. The high
court is the highest level of judicial administration in a state.
 The High Court was established in India in 1862, when high courts were established
in Bombay, Calcutta, and Madras.
 The Constitution directs the government that the High Court shall have the power,
throughout its jurisdiction, to issue directions, orders, or writs to any person or
authority, including, in appropriate cases, any Government, for the enforcement of
any of the rights conferred by Part III, as well as for any other purpose.
 A high court's territorial jurisdiction is co-terminus with a state's territory.
 Similarly, a common high court's territorial jurisdiction is co-terminus with the
territories of the concerned states and union territory.

Constitutional Provisions
  The Constitution makes no specific provisions regarding the jurisdiction and powers
of a high court.
 It only states that the jurisdiction and powers of a high court must be the same as they
were prior to the adoption of the Constitution.
 However, the Constitution grants the High Court jurisdiction over revenue matters
(which it did not have prior to the Constitution).
 Other provisions of the Constitution grant a high court additional powers such as writ
jurisdiction, superintendence, consultative power, and so on.
 It gives Parliament and state legislatures the authority to change a high court's
jurisdiction and powers.
 Article 225 deals with the jurisdiction of existing high courts.
 Article 226 deals with the power of High Courts to issue certain writs.
 Article 227 deals with the power of superintendence over all courts by the High
Court.
 Article 230 deals with the extension of jurisdiction of High Courts to union
territories.
 Article 231 deals with the establishment of a common High Court for two or more
states.
 Although the Indian Constitution provides for a high court in each state, the Seventh
Amendment Act of 1956 authorised Parliament to establish a common high court for
two or more states or two or more states and a union territory.

Jurisdiction and Powers

Jurisdiction and Powers of High Court

The current jurisdiction and powers of a high court are controlled by

 The constitutional provisions

 The Letters Patent
 The Acts of Parliament
 The Acts of State Legislature
 Indian Penal Code, 1860
 Criminal Procedure Code, 1973
 Civil Procedure Code, 1908.

A high court currently has the following jurisdiction and powers:

1. Original Jurisdiction
It refers to the ability of a high court to hear disputes in the first instance rather than on
appeal. It applies to the following:

 Disputes of admiralty and contempt of court.

 Disputes over the election of members of Parliament and state legislatures
 In relation to a revenue matter or an act ordered or performed in the course of revenue
collection.
 Protection of citizens' fundamental rights.
 Cases ordered to be transferred from a subordinate court to its own file involving
constitutional interpretation.
 In cases of higher value, the four high courts (Calcutta, Bombay, Madras, and Delhi
High Courts) have original civil jurisdiction.
2. Writ Jurisdiction

 Article 226 of the Constitution authorises a high court to issue writs such as for
enforcement of fundamental rights and for any other purpose.
 The phrase "for any other purpose" refers to the enforcement of a common legal right.
 The high court has the authority to issue writs to any person, authority, or government
not only within its territorial jurisdiction but also outside it if the cause of action arises
within its territorial jurisdiction.
 The high court's writ jurisdiction is not exclusive, but rather concurrent with the
Supreme Court's writ jurisdiction (under Article 32).
 It means that when a citizen's fundamental rights are violated, the aggrieved party has
the option of directly moving either the high court or the Supreme Court.
 However, the high court's writ jurisdiction is broader than that of the Supreme Court.
 This is because the Supreme Court can only issue writs for the enforcement of
fundamental rights and not for any other purpose, which means that it does not apply
in cases where an ordinary legal right is allegedly violated.

3. Appellate Jurisdiction

 A high court is primarily a court of appeal. It hears appeals againstsubordinate court

decisions rendered within its territorial jurisdiction.
 In both civil and criminal cases, it has appellate jurisdiction.
 Civil Jurisdiction entails district court, civil district court, and subordinate court
decisions and judgments.
 Criminal Jurisdiction comprises decisions and orders of the Sessions Court and
Additional Sessions Court.
 As a result, a high court's appellate jurisdiction extends beyond its original
jurisdiction.

4. Supervisory Jurisdiction

 A high court has the authority to superintend all courts and tribunals operating within
its territorial jurisdiction (except military courts or tribunals).
 This power of superintendence of a high court is very broad because:
o it extends to all courts and tribunals, whether or not they are subject to the
high court's appellate jurisdiction;
o it covers both administrative and judicial superintendence;
o it is a revisional jurisdiction; and
o it can be suo-motu (on its own) and not necessarily on the application of a
party.
 This power, however, does not give the high court unrestricted authority over the
lower courts and tribunals.
 Since it is an extraordinary power, it should be used sparingly and only in appropriate
cases.

5. Control over Subordinate Courts

A high court has administrative control and other powers over subordinate courts in addition
to its appellate and supervisory jurisdiction over them. It includes the following:
  It advises the governor on the appointment, posting, and promotion of district judges,
as well as the appointment of individuals to the state's judicial service (other than
district judges).
 It deals with the posting, promotion, leave, transfers, and discipline of members of the
state's judicial service (other than district judges).
 It has the authority to withdraw a case pending in a subordinate court if it involves a
substantial question of law requiring constitutional interpretation.
 It can then either decide the case on its own or decide the question of law and return
the case to the subordinate court with its decision.
 Its law is binding on all subordinate courts operating within its territorial jurisdiction
in the same way that the Supreme Court's decision is binding on all courts in India.

6. A Court of Record
A high court has two powers as a court of record:

 The high courts' judgments, proceedings, and acts are recorded for perpetual memory
and testimony.
 When produced before any subordinate court, these records are admitted to have
evidentiary value and cannot be questioned.
 They are accepted as legal precedents and references.
 It has the authority to punish for contempt of court with simple imprisonment, a fine,
or both.
 A high court, as a court of record, has the authority to review and correct its own
judgement, order, or decision, despite the fact that no specific power of review is
granted to it by the Constitution.
 The Supreme Court, on the other hand, has been expressly granted review power by
the constitution.

7. Power of Judicial Review

 Judicial review refers to a high court's authority to examine the constitutionality of

legislative acts and executive orders issued by both the central and state governments.
 If they are found to be in violation of the Constitution (ultra-vires), the high court can
declare them illegal, unconstitutional, and invalid (null and void). As a result, the
government cannot enforce them.
 Though the term "judicial review" is not used in the Constitution, the provisions
of Articles 13 and 226 explicitly grant the high court the power of judicial review.
 The constitutional validity of legislative enactment or an executive order can be
challenged in a high court on three grounds:
o it violates fundamental rights (Part III);
o it is outside the competence of the authority that framed it; and
o It violates the provisions of the constitution.
 The 42nd Amendment Act of 1976 limited the high court's judicial review power. It
prohibited the high courts from considering the constitutionality of any central law.
 The 43rd Amendment Act of 1977, however, restored the original position.

POWERS TO MAKE RULES OF CENTRAL GOVT

Basic Structure of the Central Government of India

The Central Government of India is divided into three main sections, as outlined in the
Constitution. The power of the each department of the government is separated. Various roles
and responsibilities are assigned to each department for the proper functioning of the country.

 Executive: President, the Vice President and the Cabinet Ministers

 Legislature: Parliament, Lok Sabha, Rajya Sabha
 Judiciary: Supreme Court of India, High Courts of India at the state level, and
District Courts and Sessions Courts at the district level

Roles and Responsibilities

The executive branch: This section of the Central Government comprises the President, the
Vice President and the Cabinet Ministers and the Independent Executive Agencies. The
President of the country is the head of the state. The department executes its powers through
the President. Its responsibility is to carry out and enforce laws. In other words, the executive
department does not pass laws or interpret them. However, it enforces the laws framed by the
legislature and interpreted by the judiciary. The executive department of the Central
Government can be the source of certain types of laws in the country. This branch of
government has sole authority and responsibility for the daily administration and functioning
of the state bureaucracy.

The legislature branch: Also referred to as the Parliament. The Indian Parliament, which is
the main component of the legislature branch, consists of the two houses called the Lok
Sabha (House of People) and the Rajya Sabha (Council of States) and the President of
India is the head of the Parliament or the Legislature.

This branch makes laws and policies, which apply to the entire nation. The legislative branch
enjoys parliamentary supremacy but not complete sovereignty. However, it does exercise
some control over the executive branch. Its responsibilities are:

 Drafting of all principal legislation for the Central Government

 To decide on bills to be introduced in the Parliament
 Ordinances to be announced by the President
 Regulations to be made by the President for Union Territories
 Measures to be taken for States under the President`s rule and
 Framing of election laws
 Also deals with certain matters like personal law, contracts, evidence etc.
The legislature does not enjoy complete sovereignty. The reason being its laws are subject to
judicial review by the judiciary or the Supreme Court of India.
The judiciary: It is the Supreme Court of India. The Supreme Court of India is the final
judicial authority in India. The judiciary maintains and propagates law and order of the
country. Its responsibilities are:

 It interprets the laws and carries out judicial reviews, sentences verdict in
complying with laws as per the Constitution, and ensures equality of everyone in
front of law.
 It also solves conflicts between Executive and Legislature and other public related
matters or conflicts.
 It solves disputes between the Government of India and one or more states.
 It solves disputes between two or more states

Powers of the Central Government of India

 States must exercise their executive power in compliance with the laws made by
the Central government (Article 356).
 No state government can impede on the executive power of the Central
government within the states (Article 357).
 The central government has the power to take over the state in matters related to
national security (Articles 352 to 360).
 The Central Government regulates trade and trade affairs between states and
foreign trade;
 It has the power to declare war, raise and maintain the armed forces.
 It can also conducts diplomacy and authorize treaties with foreign countries.
 The Central Government of India possesses special powers to reduce oppression
and mismanagement in a company (under Sec. 408 of the Companies Act, 1956).
 The Central Government has the power to take all measures as it seems necessary
for the purpose of protecting and improving the quality of the environment and
preventing and controlling pollution (1986 Environment Protection Act) etc.

CASES ON ARBITRATION

M/s Dharmaratnakara Rai Bahadur v. M/s Bhaskar Raju & Brothers (2020)

In this case, the claim was made, after a dispute arose regarding a lease deed that was not
sufficiently stamped or registered as per the Karnataka Stamp Act, 1957, that whether an
insufficiently stamped lease deed could invoke the arbitration clause mentioned in the deed.

Further, it was also admitted that the respondent did not pay the stamp duty and penalty even
after being directed by the registrar, High Court of Karnataka.
The Supreme Court held that when a deed or any document containing an arbitration clause,
the court, in the beginning, considers whether an objection is raised on its behalf or not, or
whether it is duly stamped. So, Section 35 of the Karnataka Stamp Act requires the document
to be duly stamped in order to be admissible in evidence and acted upon. Hence, unless the
stamp duty and penalty due are not paid regarding the instrument, the court cannot act upon
its arbitration clause as it is a part of an unstamped instrument.