Arbitration, Conciliation and ADR (Alternative Dispute Resolution) system

Alternative Dispute Resolution (ADR) System: An Overview

Definition:

Alternative Dispute Resolution (ADR) refers to a set of dispute resolution processes that serve as
alternatives to traditional litigation in courts. ADR aims to provide parties with faster, less formal,
and often less expensive methods to resolve conflicts.

Key Objectives of ADR:

 Reduce burden on courts

 Provide cost-effective and timely justice

 Maintain confidentiality

 Promote harmonious relationships

 Provide expertise-driven outcomes (in technical disputes)

Types of ADR Mechanisms:

1. Arbitration

Definition:

Arbitration is a legal technique where a dispute is submitted, by agreement of the parties, to one or
more arbitrators who make a binding decision (called an award).

Key Features:

 Governed by the Arbitration and Conciliation Act, 1996 (India)

 Binding and enforceable award

 Confidential process

 Often used in commercial and international disputes

Process:

1. Agreement to Arbitrate (Arbitration Clause or Agreement)

2. Appointment of Arbitrator(s)

3. Hearings and Submission of Evidence

4. Arbitral Award (Final decision)

2. Conciliation

Definition:

Conciliation is a non-binding process in which a neutral third party (conciliator) helps the disputing
parties to reach a mutually acceptable agreement.
Key Features:

 Voluntary and flexible

 Not necessarily based on a prior agreement

 The conciliator may suggest solutions

 Less formal than arbitration

 Governed by Part III of the Arbitration and Conciliation Act, 1996

Process:

1. Request for Conciliation

2. Appointment of Conciliator

3. Meetings and Negotiations

4. Settlement Agreement (binding if accepted)

3. Other ADR Mechanisms:

a) Mediation

 Similar to conciliation, but the mediator facilitates dialogue rather than proposing solutions.

 Non-binding, voluntary, and often used in family, civil, and commercial disputes.

b) Negotiation

 Parties themselves attempt to resolve their dispute without third-party intervention.

 Most informal and direct method.

c) Lok Adalats (People’s Courts)

 Established under the Legal Services Authorities Act, 1987 (India)

 Deals with cases pending in court or at the pre-litigation stage

 Decisions are binding and final

Advantages of ADR:

Benefit Explanation

Time-Saving Faster resolution compared to court proceedings

Cost-Effective Lower legal and procedural costs

Confidential Disputes are resolved privately

Flexible Process Procedures can be tailored to the parties’ needs

Benefit Explanation

Preserves Relationships Especially useful in family, business, and workplace disputes

Expert Decision-Makers Arbitrators/mediators often have expertise in the subject matter

Arbitration: Meaning, Scope, and Types

1. Meaning of Arbitration:

Arbitration is a method of dispute resolution wherein the conflicting parties agree to submit their
dispute to one or more impartial persons called arbitrators, whose decision, known as the arbitral
award, is final and binding.

 It is an Alternative Dispute Resolution (ADR) method.

 It is governed by the Arbitration and Conciliation Act, 1996 in India.

 Arbitration can be domestic or international, depending on the nature of the dispute and
the parties involved.

2. Scope of Arbitration:

The scope of arbitration is wide and covers a broad range of disputes, especially those arising out of
commercial contracts. It can be applied to:

Scope Area Details

Contractual disagreements, business transactions, supply

Commercial Disputes
agreements, etc.

Construction and
Disputes related to delay, quality of work, and cost overruns
Engineering

Maritime Disputes Shipping and international trade-related disagreements

International Trade Disputes between parties in different countries

Disputes regarding contracts, wages, or wrongful termination (if

Employment and Labor
agreed)

IP and Technology Licensing, software contracts, and patent disputes

Financial Services Disputes in loan agreements, insurance, banking, etc.

Note: Certain matters like criminal cases, matrimonial issues, and matters concerning public policy
are not arbitrable.
3. Types of Arbitration:

Arbitration can be classified into various types based on different criteria:

A. Based on Jurisdiction:

Type Explanation

Disputes where both parties and the cause of action are based
Domestic Arbitration
in India

One party is not a resident or the dispute involves foreign

International Arbitration
elements

International Commercial Arbitration involving at least one foreign party in a commercial

Arbitration matter

B. Based on Procedure:

Type Explanation

Institutional Conducted under the supervision of a recognized arbitral institution (e.g.,

Arbitration ICC, LCIA, ICA)

Parties themselves set the rules and procedure without involving any
Ad-hoc Arbitration
institution

C. Based on Nature of Decision:

Type Explanation

Binding Arbitration The decision of the arbitrator is final and enforceable in a court of law

Non-binding The arbitrator gives a recommendation that parties may or may not
Arbitration accept

D. Based on Legal Framework:

Type Explanation

Required by law/statute (e.g., disputes under certain government

Statutory Arbitration
contracts)

Contractual
Arises from an agreement or arbitration clause in a private contract
Arbitration
Distinction Between the Arbitration Act, 1940 and the Arbitration and Conciliation Act, 1996

Overview:

Feature Arbitration Act, 1940 Arbitration and Conciliation Act, 1996

Aimed to cover both domestic and

Objective Regulated only domestic arbitration international arbitration, and
conciliation

Model Based on British Law Based on UNCITRAL Model Law (1985)

Covers arbitration, conciliation, and

Scope Limited to arbitration only
international arbitration

Judicial Extensive court intervention at every Minimal judicial intervention (pro-

Intervention stage arbitration)

Autonomy of Limited party autonomy; courts had Greater party autonomy in procedure
Parties major control and arbitrator selection

Arbitral Award Required court approval for Treated like a decree of the court;
Enforcement enforcement easier enforcement

Institutional
No provision Encourages institutional arbitration
Arbitration

Both courts and tribunals can grant

Interim Measures Only courts could grant interim relief
interim relief

Appeals and Limited scope for appeal; fewer

Multiple appeals allowed
Review grounds for setting aside awards

Time-bound Encourages faster proceedings; later

No specific timelines
Proceedings amendments introduced time limits

Dealt with under separate laws

Foreign Awards (Geneva and New York Convention Included under Part II of the Act itself
Acts)

Key Improvements in the 1996 Act:

1. Unified Framework: Brought domestic arbitration, international arbitration, and conciliation

under a single legislation.

2. Reduced Court Involvement: Encouraged the principle of minimum judicial intervention.

3. Recognition of Institutional Arbitration: Provided scope for arbitration through bodies like
ICA, ICC, LCIA, etc.
 4. Speed and Efficiency: Although initially without strict timelines, the Act promotes speedy
resolution of disputes.

5. Modern Procedures: Incorporates modern practices such as party autonomy, interim

measures by tribunals, and finality of awards.

UNCITRAL Model Law on International Commercial Arbitration

Meaning:

The UNCITRAL Model Law is a legislative framework developed by the United Nations Commission
on International Trade Law (UNCITRAL) in 1985, and amended in 2006, to assist countries in
reforming and harmonizing their arbitration laws.

Purpose:

 To promote uniformity and fairness in international arbitration

 To encourage efficiency, neutrality, and enforceability of arbitral awards

 Adopted wholly or partly by many countries, including India (via the Arbitration and
Conciliation Act, 1996)

Salient Features:

Feature Explanation

Applicability Primarily for international commercial arbitration

Allows parties to choose rules, procedure, language, and seat of

Party Autonomy
arbitration

Minimal Court Limits court interference to specific instances like appointment or

Involvement enforcement

Recognition &
Enforces awards in line with New York Convention
Enforcement

Neutrality Ensures procedural neutrality and independence of arbitrators

2. Arbitration vs. Expert Determination

Aspect Arbitration Expert Determination

A formal dispute resolution process where An informal process where an expert

Definition
an arbitrator delivers a binding award gives a decision, often binding

Legal Governed by laws such as the Arbitration Not governed by a statute; governed
Framework and Conciliation Act, 1996 by contract terms
Aspect Arbitration Expert Determination

Formal procedure, written pleadings, and Less formal, more technical, may not
Formality
hearings involve hearings

Decision Subject matter expert (e.g., engineer,

Arbitrator (neutral third party)
Maker accountant)

Binding Legally binding and enforceable like a court May be binding, but depends on
Nature decree contract terms

Appeal or
Limited judicial review allowed Very limited scope for challenge
Review

Legal disputes—commercial, contractual, Technical issues—valuation, defects,

Use Case
etc. pricing adjustments

3. Extent of Judicial Intervention in Arbitration

General Principle:

The 1996 Act (inspired by the UNCITRAL Model Law) emphasizes “minimum judicial intervention” to
uphold the autonomy and efficiency of the arbitral process.

Instances Where Judicial Intervention is Permitted (Section-wise):

Section Provision Purpose of Intervention

Extent of judicial Expressly restricts court interference unless provided by the

S. 5
intervention Act

Directs courts to refer parties to arbitration if there's an

S. 8 Reference to arbitration
agreement

Court can grant interim relief before, during, or after

S. 9 Interim measures
arbitration

S. 11 Appointment of arbitrators Court assists if parties fail to appoint within prescribed time

Setting aside arbitral Courts may set aside awards on limited grounds (public policy,
S. 34
awards bias, etc.)

S. 37 Appeals Limited grounds for appeal from orders under specific sections

S. 36 Enforcement of awards Courts may stay enforcement if award is challenged under S.34

Judicial Approach in India:

 Pro-arbitration stance post 2015 and 2019 amendments

  Encourages expeditious disposal of cases involving arbitration

 Courts discourage interference in merits of the arbitral award

International Commercial Arbitration (ICA)

Definition:

International Commercial Arbitration refers to arbitration involving a commercial dispute where at

least one party is based outside India, or the transaction has international elements.

Legal Basis in India:

 Governed by Part I (for domestic arbitration) and Part II (for foreign awards) of the
Arbitration and Conciliation Act, 1996, as amended.

 Based on the UNCITRAL Model Law and the New York Convention (1958).

✅ 2. Arbitration Agreement

Essentials of a Valid Arbitration Agreement (Section 7):

Essential Element Explanation

Writing Must be in writing (contract, email, exchange of letters, etc.)

Consent of Parties Free, informed, and mutual consent to arbitrate

Definite Intention Clear reference that disputes “shall” be referred to arbitration

Dispute must be Arbitrable Subject-matter must be legally capable of arbitration

Kinds of Arbitration Agreements:

1. Arbitration Clause – Clause in a contract referring future disputes to arbitration.

2. Submission Agreement – Agreement to arbitrate an existing dispute.

Validity (S. 7 read with Indian Contract Act):

 The agreement must not be void (due to coercion, fraud, misrepresentation, etc.)

 The subject matter must be capable of settlement by arbitration

Reference to Arbitration by Court (Section 8):

 If a suit is filed in court despite an arbitration agreement, the court must refer the matter to
arbitration on request.

Interim Measures by Court (Section 9):

 Before or during arbitration or before enforcement, the court may:

o Grant injunctions

o Secure property

o Appoint a guardian
 o Prevent asset transfer, etc.

✅ 3. Arbitral Tribunal

Appointment of Arbitrators (Section 11):

Category Provision

Number Parties are free to decide the number (default: one arbitrator)

Appointment Parties can appoint directly; else court assists via Section 11

Time Limit Appointment process to be concluded within 30 days (post-amendment)

Grounds for Challenge (Section 12):

 Reasonable doubt about impartiality or independence

 Lack of required qualifications agreed upon by the parties

Jurisdiction of Tribunal (Section 16):

 Tribunal has the power to rule on its own jurisdiction (Kompetenz-Kompetenz principle)

Powers of Tribunal (Sections 17 & 19):

 Can order interim measures (post-2015 amendment)

 Not bound by Civil Procedure Code or Indian Evidence Act

 Full discretion over procedure

Assistance by Court (Sections 27, 43):

 Court may assist in evidence collection, summoning witnesses, etc.

✅ 4. Arbitral Award

Form and Content (Section 31):

 In writing and signed by members

 Reasons to be stated unless parties agree otherwise

 Date and place of arbitration mentioned

 Copy given to each party

Grounds for Setting Aside Award (Section 34):

Ground Explanation

Incapacity of a party Party was underage, unsound mind, etc.

Invalid agreement Agreement itself is void

Ground Explanation

Improper notice or hearing One party not given chance to present case

Excess of jurisdiction Award deals with matters beyond scope of arbitration

Arbitral procedure not followed Procedure violated without consent

Conflict with Public Policy Award contrary to public interest, justice, morality, etc.

Enforcement of Award (Section 36):

 After 2015 amendment, no need to wait for stay under Section 34

 Award is treated as a decree of the court

Appeal and Revision (Section 37):

 Appeals permitted only on limited grounds such as:

o Setting aside or refusal of interim measures

o Refusal to set aside award

✅ 5. Enforcement of Foreign Awards

Legal Framework:

 Part II of the Arbitration and Conciliation Act, 1996

 Based on:

o New York Convention (1958)

o Geneva Convention (1927)

Requirements for Enforcement (Section 44–52):

 Must be a commercial dispute

 Award must be from a country that is a reciprocating territory

 Application made with original or certified copy of:

o Arbitration agreement

o Final award

Grounds for Refusal (Section 48):

Ground Explanation

Invalid arbitration agreement Agreement is not valid under the law

Party was not given notice Violation of natural justice

Ground Explanation

Award beyond scope Award goes beyond submission to arbitration

Award not binding/set aside Award not final or annulled in the country where made

Violation of Public Policy Award contrary to Indian public policy

Introduction to Foreign Awards

A foreign award refers to an arbitral award delivered outside India or one involving international
commercial disputes under a foreign legal system.

India recognizes and enforces foreign awards under two international conventions:

 New York Convention (1958) – Chapter I of Part II

 Geneva Convention (1927) – Chapter II of Part II

✅ 2. New York Convention Awards (1958)

Overview:

 Full name: Convention on the Recognition and Enforcement of Foreign Arbitral Awards

 Adopted in 1958, entered into force in 1959

 India became a signatory in 1960

 Recognized in Section 44 to 52 of the Arbitration and Conciliation Act, 1996

Purpose:

To ensure that arbitral awards passed in one country are recognized and enforced in other signatory
countries, provided certain conditions are met.

Conditions for Applicability in India:

1. The award must be made in a country that is a party to the Convention.

2. The award must be a result of commercial disputes.

3. The country must be notified by the Indian Government as a reciprocating territory (e.g.,
USA, UK, France, Singapore, etc.).

Key Provisions (Sections 44–52):

Section Title Explanation

Definition of a Foreign Must be made in pursuance of a written arbitration

S. 44
Award agreement in a notified territory

Evidence Required for

S. 47 Original/certified copy of arbitration agreement and award
Enforcement
Section Title Explanation

Grounds for Refusing Similar to Section 34: incapacity, invalid agreement,

S. 48
Enforcement procedural defects, public policy

S. 49 Finality and Enforceability Once enforceable, treated as a decree of Indian court

S. 50 Appeal Provision Appeal only against refusal of enforcement

Grounds for Refusal of Enforcement (Section 48):

 Party under incapacity

 Invalid arbitration agreement

 Lack of proper notice/opportunity to present case

 Award exceeds scope of arbitration agreement

 Award not binding or set aside by competent authority

 Contrary to public policy of India (narrowly construed post-2015)

✅ 3. Geneva Convention Awards (1927)

Overview:

 Full name: Convention on the Execution of Foreign Arbitral Awards (Geneva Convention)

 India is a signatory via the Arbitral Awards (Geneva) Act, 1937 (later merged into 1996 Act)

 Applicable through Sections 53 to 60 of the Arbitration and Conciliation Act, 1996

 Much less used after the New York Convention became dominant

Conditions for Applicability in India:

1. Award made in a reciprocating territory notified by the Central Government

2. Dispute must arise from a contractual obligation

3. Award must be final and binding in the country where made

Key Provisions (Sections 53–60):

Section Title Explanation

Definition of a Geneva Arbitral award in a notified territory, arising out of legal

S. 53
Convention Award relationships

Requires finality, proper notice, arbitrability, and public

S. 57 Conditions for Enforcement
policy compliance

S. 58 When Enforceable Treated as a decree of Indian court once enforceable

Grounds for Refusal (Section 57):

 Parties not competent under the applicable law

 Award not final or enforceable in the original country

 Procedural irregularities

 Award deals with non-arbitrable matters

 Public policy violations

✅ 4. Comparison: New York vs Geneva Convention

New York Convention

Aspect Geneva Convention (1927)
(1958)

Enforcement
More flexible and liberal More formal and restrictive
Simplicity

Number of Signatories Over 170 countries Limited number of signatories

Section 44 to 52 of 1996
Applicability in India Section 53 to 60 of 1996 Act
Act

Requirement of Must be final and enforceable in the country of

Must be binding
Finality origin

Reciprocating
Must be notified Must be notified
Countries

Preference in Practice Commonly used Rarely used (mostly obsolete today)

Distinction Between Conciliation, Negotiation, Mediation, and Arbitration

Criteria Negotiation Conciliation Mediation Arbitration

A neutral Dispute is submitted

Direct discussion A mediator facilitates
conciliator assists to an arbitrator who
Definition between parties to communication to
parties in resolving gives a binding
resolve a dispute help parties settle
the dispute award

Active facilitator Facilitator; does not

Third Party Decision-maker with
Not involved who may propose propose solution
Role authority
solutions unless asked

Binding only if Non-binding unless Binding and

Binding
Non-binding settlement agreement is reached enforceable as a
Nature
agreement is signed and signed court decree
Criteria Negotiation Conciliation Mediation Arbitration

Formality Informal Semi-formal Semi-formal Formal legal process

Part III of the Part I of the

Legal Status Not governed by Arbitration and Not codified; widely Arbitration and
in India specific statute Conciliation Act, practiced Conciliation Act,
1996 1996

Parties control
Control
Complete party outcome, Parties control Arbitrator decides
over
control conciliator can outcome the outcome
Outcome
propose terms

Labour,
Business Commercial,
commercial, Civil, family, workplace
Use Case discussions, early- technical, and
contract-related disputes
stage disputes contractual disputes
disputes

Confidentiality, Resort to Judicial Proceedings, and Costs

Aspect Negotiation Conciliation Mediation Arbitration

Generally Strictly confidential Confidential by Confidential (unless

Confidentiality
confidential as per law convention agreed otherwise)

Minimal, only if Permitted only in

Judicial
Not applicable settlement Rarely involved specific cases (S.5,
Intervention
enforced S.34)

Lowest (no third Moderate (one High (arbitrator fees,

Cost Moderate to low
party involved) conciliator) legal costs)

Moderate to long,
Speed Fastest Fast Fast
depending on case

Enforceable if Enforceable if Enforceable as court

Enforceability Not enforceable
recorded in writing written settlement decree (S.36)

✅ 3. Dispute Resolution Boards (DRBs)

Definition:

A Dispute Resolution Board (DRB) is a standing panel of independent experts set up at the
beginning of a large project (especially in infrastructure or construction) to help prevent and resolve
disputes during the execution of the contract.

Objective:

 Prevent disputes from escalating into litigation or arbitration

  Provide early neutral evaluation and facilitate amicable resolution

Structure:

 Typically consists of 1 or 3 impartial members

 Appointed jointly by contracting parties

Functions:

1. Regularly visits project sites

2. Reviews project progress and documents

3. Acts as an advisor or neutral evaluator

4. Issues recommendations or non-binding decisions when disputes arise

5. Helps maintain relationship and project momentum

Benefits of DRBs:

 Timely resolution of issues

 Maintains contractual relationships

 Reduces delays and costs

 Reduces the need for arbitration or court cases

Binding Nature:

 Recommendations may be binding or non-binding depending on the contract

 Often serve as the first tier of dispute resolution before arbitration

Lok Adalats – Overview

Meaning:

Lok Adalat (People’s Court) is an alternative dispute resolution forum where disputes/cases pending
in courts or at pre-litigation stages are settled amicably. The decisions (awards) of Lok Adalats are
deemed to be a decree of a civil court and are final and binding on the parties.

✅ Legal Framework:

Law Governing Legal Services Authorities Act, 1987 (Amended in 1994)

Relevant Sections Sections 19 to 22

Supervising National Legal Services Authority (NALSA) and State Legal Services
Authority Authorities (SLSA)

✅ Objectives of Lok Adalats:

 To provide free and speedy justice

  To reduce the burden of cases pending in courts

 To promote conciliation and compromise

 To enhance access to justice especially for weaker sections of society

✅ Types of Lok Adalats:

Type Description

Permanent Lok Adalat For disputes related to public utility services (like transport, postal, water
(PLA) supply) under Section 22B

National Lok Adalat Held nationwide on a single day for settlement of specific types of cases

Mega Lok Adalat Held state-wide on a single day across all courts

Mobile Lok Adalat Travelling Lok Adalats to provide access in remote/rural areas

✅ Jurisdiction of Lok Adalats:

Lok Adalats can take up:

 Pending cases in regular courts (civil, compoundable criminal, and others)

 Pre-litigation matters (before the case is formally filed in court)

Cases not admissible:

 Non-compoundable criminal offences (like murder, rape, dacoity)

✅ Procedure in Lok Adalats:

Step Description

Case Identification Either parties or courts identify suitable cases

Consent of Parties Settlement only possible if both parties agree

Panel Composition Typically includes a judicial officer, a lawyer, and a social worker

Conciliation Process Friendly discussion guided by the panel

Award Issuance If compromise is reached, a written Lok Adalat Award is passed

Enforceability Award is final, binding, and enforceable like a civil court decree

No Appeal No appeal lies against the award. Dissatisfied parties may file a regular suit
✅ Advantages of Lok Adalats:

Benefit Explanation

Speedy Disposal Cases are resolved quickly, often on the same day

Cost-Effective No court fee; if already paid, it is refunded

Informal Proceedings Less rigid procedures, more accessible to the common man

Finality Binding decisions reduce further litigation

Mutual Satisfaction Settlements based on consensus help preserve relationships

Legal Empowerment Empowers weaker and marginalized sections of society

✅ Recent Developments:

 Digital Lok Adalats: Held via virtual platforms to increase accessibility.

 Use of AI and online case management for better scheduling and case handling.

 E-Lok Adalats are being adopted post-COVID in several states.