What is Arbitration?

Arbitration is outside the court settlement of a dispute by one or more (odd number) persons who
are appointed as arbitrators by both the parties. According to Section 2(1)(a) of the Arbitration
and Conciliation Act, 1996 “Arbitration means any arbitration whether or not administered by
permanent arbitral institution”. In other words, any form of arbitration irrespective of its nature
has been recognised statutorily in India by bringing such arbitration under the ambit of the
Arbitration and Conciliation Act, 1996. It consists of a simplified trial, with simplified rules of
evidence and with no discovery. Arbitration hearings are usually not a matter of public record.
The arbitral award is binding on the parties just like a court decree or order.

Laws dealing with Arbitration in India

1. Arbitration and Conciliation Act, 1996
In India, the main law which governs arbitration is the Arbitration and Conciliation Act,
1996 which came into force on 22nd August, 1996 and extends to the whole of India. In
the 246th Report of the Law Commission, it was noted that “The 1996 Act is based on the
UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL
Conciliation Rules, 1980.” After the enactment of the Arbitration and Conciliation (Amendment)
Act, 2015 and 2019, recently the Arbitration and Conciliation (Amendment) Act, 2021 was
passed into law on 10th March, 2021 and retrospectively came into force on and from 4th
November, 2020 except as otherwise stated.

2. New Delhi International Arbitration Centre Act of 2019 (NDIAC Act, 2019)
The New Delhi International Arbitration Centre Act, 2019 was enacted to establish the New
Delhi International Arbitration Centre. This centre is meant to act as an independent and
autonomous institutionalised arbitration centre and for acquisition and transfer of the
undertakings of the International Centre for Alternative Dispute Resolution for the more efficient
and better management of arbitration. The New Delhi International Arbitration Centre has also
been declared as an institute of national importance and the Indian government is actively
working to make it a major arbitration hub which can provide quick and efficient dispute
resolution. This centre was necessary to overcome the failures of the International Centre for
Alternative Dispute Resolution which was established in 1995.

3. Arbitration Council of India (ACI)

The Arbitration and Conciliation (Amendment) Act, 2019 under its Clause (10) introduced Part
IA in the Arbitration and Conciliation Act, 1996. This part consists of Sections 43A to 43M and
inter alia, speaks about the setting up of the Arbitration Council of India as a body corporate with
headquarters in Delhi. The Council will be entrusted to perform functions and discharge duties as
per the provisions of this Act. Part 1A is yet to come into force as the same has not yet been
notified by the central government in the Official Gazette. One of the major functions of the
Arbitration Council will be to boost institutionalised arbitration by grading institutes of
arbitration and accrediting arbitrators as per the provisions of the Eighth Schedule, which has yet
to come into force.

How does arbitration take place?

Every case that goes to arbitration has unique circumstances, but more or less all of them follow
the given arbitration procedure.
• Initiation stage: The parties are notified by the arbitration centre that the case has been
registered. The parties are also informed about the arbitration process, the due date to file
the responses, the documents which need to be submitted and fees (if any) to be paid
before the process starts.
• Invitation stage: Depending upon the rules which govern the arbitration of the parties, the
arbitration centre arbitrator or arbitrators serve on the case. The arbitrator reviews the
documents, studies the dispute and returns a signed oath document with any needed
disclosure.
• Appointment stage: The parties are notified about the appointment of the arbitrator and
provided with the opportunity to raise any objection regarding the same. If any objection
is raised before the due date, the arbitration centre decides whether to replace the
arbitrator or not. If the arbitrator is removed, then the case goes back to the invitation
stage and if the arbitrator is not removed then the case moves to the next stage.
• Preliminary hearing and information exchange stage: After an arbitrator is confirmed for
the case, a preliminary meeting is scheduled and held with the parties and the arbitrators.
During this meeting, issues of both parties are addressed, information is exchanged
between the parties and a hearing date is scheduled.
• Hearing stage: Both parties present their case to the arbitrator. This stage can take place
either in-person or through the medium desirable by the parties. The arbitration
agreement and the rules governing the case will govern the proceedings.
• Award stage: When the arbitrator has heard all the points of both parties and is satisfied
that the parties don’t have any new evidence to submit, the hearing is closed and a date is
scheduled for announcing the award. The arbitrator provides the parties with the written
award with which the case comes to an end and the file is closed by the arbitration centre.

What is Mediation?
“An ounce of mediation is worth a pound of arbitration and a ton of litigation”. – Joseph
Grynbaum
Mediation is a voluntary, binding process in which an impartial and neutral mediator helps the
disputing parties arrive at a settlement. A mediator does not impose a solution but creates a
conducive environment in which disputing parties can resolve all their disputes.
Mediation was traditionally used to resolve family disputes arising between husband and wife or
between brothers. In recent years, it has also been used for resolving disputes of a commercial
nature.
Legislation such as the Consumer Protection Act, 2019, as well as the Companies Mediation
Rules, 2016, and Pre-Institution Mediation Rules under the Commercial Courts, the Commercial
Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment)
Act, 2018 provide mediation as one of the modes of amicable resolution of disputes. Given the
absence of unified legislation, mediation is not treated as seriously as other modes of dispute
resolution.

The Mediation Act, 2023

The Mediation Act of 2023 was approved by the Rajya Sabha on 1st August 2023 and by the Lok
Sabha on 7th August 2023. It received the assent of the President of India on 14th September
2023. The Mediation Act of 2023 became effective from 9th October 2023; however, only
certain parts of the Act came into force on that date. The purpose of the Act is to encourage,
support and facilitate mediation, especially institutional mediation.

How does mediation take place

Mediation appears to be a less formal process than other modes of dispute resolution
mechanisms, but that’s not the reality. Mediation involves a multi-stage process to arrive at a
desired solution.
The mediation proceeding takes place in the following order:
• Commencement of mediation: The process of mediation begins when one of the parties
submits the dispute to the mediation centre and requests that mediation proceedings take
place. The submission contains the details of the dispute and information regarding the
parties.
• Appointment of mediator: After receiving the request the mediation centre will start the
process of appointing a mediator following the circumstances of the dispute. The
mediator is appointed after consulting both parties.
• Pre-mediation communications: After the appointment of a mediator, he communicates
with the parties through telephone or any other means of communication to finalise the
schedule of the mediation. He also informs the parties to provide him with documents
related to disputes before the first meeting and the deadline to submit those documents.
• First meeting: At the first meeting, the mediator introduces everyone and explains the
objective of the meeting, and the rules to be followed during the whole procedure and
encourages the parties to communicate to settle the dispute amicably. Both parties are
asked to explain their reason for the dispute and the repercussions it is going to have on
them. The mediator encourages the parties to respond to each other’s questions to help
them communicate their points.
 • Private meetings: The private meeting is an opportunity for both parties to separately
meet the mediator. Each party is placed in a separate room. The mediator goes between
the two rooms to discuss the strengths and weaknesses of each party and to exchange
offers.
• Joint negotiation: After a private meeting, the mediator brings the parties to negotiate
directly, but this rarely happens. The mediator brings the parties back together only when
a settlement has been reached or the time allotted for the mediation expires.
• Final decision: When parties arrive at a unanimous decision, the mediator puts it in
writing and asks both parties to sign the written document of the settlement. When they
don’t agree with the final decision, the mediator suggests the parties either once again
meet for further discussion or to go for other modes of dispute resolution.

Differences between mediation and arbitration

Point of differences Mediation Arbitration

Costs Economical Process Expensive Process

Neutral third party The mediator acts as a facilitator. The arbitrator acts as an adjudicator.

The proceedings are not governed The proceedings are governed by the
Nature of the
by any specific statute and provisions of the Arbitration and
proceeding
therefore are flexible. Conciliation Act, 1996, and are rigid.

A settlement is binding only when The award given in an arbitration proceeding

Nature of decision it is mutually agreed upon by both is binding on the parties and can be
parties. challenged only on some specific grounds.

An informal proceeding is held in

A formal proceeding is held in secret and
Level of formality private with flexible procedural
consists of strict procedural stages.
stages.

Parties communicate with each

Communication
other in the presence of a Parties do not communicate with each other.
between parties
mediator.

Court fees are refundable in cases

Court Fees of settlement where the court has There are no court fees.
annexed mediation.