“ALTERNATE DISPUTE

RESOLUTION TECHNIQUES “
 AD R – H ist oric al us e i n India
• Not a new concept – Historically recognized
• Ancient India - 3 types of popular courts
– Puga (local courts)
– Sreni (local business guilds)
– Kula (social matters of community)
• Medieval India
– Panchayats : Territorial or Sectarian
– Held in great veneration (Panch Parameshwar)
• British India
– Lord William Bentick (Act VIII of 1859), had Sections
312 – 327 dealing with arbitration)
– Above provisions formally separately enacted under
Arbitration Act 1940
 Lit iga tion – Us ua l Met hod
• ADR did not catch on and took a Back Seat to
Litigation
• Reasons :
– Quick availability of interim relief (preliminary injunction,
seizure of goods) especially relevant in IP rights : Half
the battle won
– Flaws in Arbitration Act 1940, namely
• No interim power in the arbitrator
• Too many grounds for judicial intervention at all stages –
– Pre-arbitral,
– During arbitration,
– Post award
• Result – defeated the whole object of speedy and cost effective
dispute resolution
• Substituted in 1996 by the Arbitration and Conciliation Act, 1996
which is ADR friendly
 Grow th of ADR

• 4 major reasons for Resurgence

– Drawback of Litigation
– Changing Business Scenario
– Legislative responses including in India
to promote ADR
– Judicial sponsorship
 Gro wth o f AD R (Reaso ns )
Dra wb acks of Li ti ga ti on

Adversarial in nature –
– winner takes all
– permanent rupture of relationship
• Complex and time consuming procedures
– Pleadings
– Evidence and cross examination
– Hearings and
– Decision
– Appeals up to Supreme Court
• Overburdened, slow dispensation
 Grow th of AD R (Re asons )
Dra wba cks of Li ti ga tion
(C ontd .)
• Lack of Judicial Appreciation of IP dispute
• Ill-equipped to handle certain IP disputes
(e.g. patents)
• Very Costly – Court & Legal Fees
• Summarized by Warren Burger (Ex-chief
Justice, U.S. Supreme Court) “…. the system
is too costly, too painful, too destructive, too
inefficient for a truly civilized world”
• Only two certainties in litigation – Costly and
no certainty as to outcome
 Gro wth o f AD R (Reaso ns )
Changing Bus ine ss Sc ena rio

• Global operation of business

– Overseas JV’s/ Subsidiaries etc.
– Technology/ brand licensing in various
countries
• Object of Business – Earn profits, not
to fight lengthy legal cases
• Need of the hour – QUICK and
IMPARTIAL resolution of business
disputes
 SO IS TH ER E ANY ALT ER NAT IVE ?
(AD R)

• Methods – Negotiation,Mediation &

Arbitration, Conciliation
• Importance realized by business,
jurists, and judiciary itself
• Judicial response – Supreme Court
and other courts have repeatedly
emphasized – ADR deserves the
serious look
 Su itabi lit y of A DR
Comm on F eat ures

• Neutral decision making (important factor

in international business)
• Consensual (not adversarial – preserves
relationships)
• Private (unlike the court system which is
public )- Confidentiality of proceedings
• Technical expertise in a Commercial
Setting
• Informal
 Su itabi lit y of ADR
Comm on Feat ures
(Contd.)
• Wide autonomy in the parties as regards all
matters, e.g. Appointment and Powers of
Mediator/ Arbitrator, Rules and Procedure of the
process, Proper law, Venue,
• Relatively less expensive
• Relatively speedy
• Final and binding
– Mediation “Agreement” not “judgment” – a win-win
situation.
– Not many grounds would challenge arbitral award
under 1996 Act
 Le gi sla ti ve & Judic ial Re spo ns e

• Legislative response (1996 Act)

– Judical Intervention minimized (15:5)
– Power of grant interim measures
– Limited grounds to challenge arbitral award
– Direct Enforcement (obstacles in 1940 Act
removed/ minimized)
 Media tio n ( Featur es)
• By Agreement (clause in a contract or a separate
contract)
– Completely Voluntary- Submission and Termination at
any stage
• Mediation Process
– Commencement by filing Request for Mediation in
writing
• Details of all the Parties/name, address, e-mail
• Mediation Agreement
• Brief Statement of Nature of Dispute
• Copy to the other party
• Mediator Selected by - parties / prescribed procedure /
institution selected after consultation with parties
• Qualification : Neutral and should make sufficient time to
mediate
• Conduct of Mediation
– Conference: Mediator free to communicate separately
with each party
• Fix timetable for submissions/meetings in consultation
with parties (representation allowed)
 Me di at ion (Feature s)
(Contd.)
• Disputes not susceptible to Mediation – May suggest
such issues to Alternate means like ‘Expert
Determination’ or ‘Arbitration’
• Objective to assist the parties in reaching amicable
“settlement” (settles the matter on the basis of the
respective interests of the parties rather than on legal
basis alone).
– No power to impose
• “Settlement” if reached is a “CONTRACT” between the
parties – NOT A “DECISION” of the mediator
• Termination
• Advantages
– non-adversarial, (preserves the relationship of the parties).
– informal (not bound by strict rules of legal procedure)
– Confidentiality Obligation of parties & Arbitrator
 Arbi tra ti on (Feat ure s)

• Has the above features as in mediation

– voluntary by contract.
– Control of proceedings,
– confidentiality,
• Party Autonomy -Parties to choose;
– The institutional rules of procedures e.g. ICC,
ICA Rules
– The Powers conferred on the Arbitrator
– The Applicable Law and
– The Venue
 Arbit rat io n (Advant ages )
• Particularly helpful in international transactions –
– Situs in different countries (multi jurisdiction dispute)
– Problem of enforcement of decision of one court of one
nation in another country,
– avoids all these problems.
• Enforceable internationally (New York Convention) -
the contracting states are obliged to enforce the
Arbitral Awards.
• Expert Determination
• Confidentiality of arbitration proceedings
• Confidentiality of Technical know-how and other
confidential information duly preserved
• Award is final and binding – absence of institutional
appeal
 INTRODUCTION

• Arbitration has at its centre, the stone that the

builders of the Courts rejected- ‘ You can choose
your own judge’
• The Arbitration and Concillation Act, 1996 is
based on the United Nation Commission on
International Trade Law (UNCITRAL) Model Law
• Before this ,India had the Arbitration (Protocal
and Convention) Act, 1937, the Arbitration Act
1940 and the Foreign Awards (Recognition and
Enforement) Act, 1961.
 Main Objectives

• To Comprehensively cover international commercial

arbitration as also domestic arbitation
• To make provision for an arbitral procedure which is fair
and efficient
• To minimize the supervisory role of courts in the arbitral
process
• To provide that the arbitral tribunal gives reasons for its
arbitral award
• To provide that every final arbitral award is enforced in
the manner as it were a decree of court
 Important Provisions
• The Arbitration Agreement (Section 7) :
Agreement in writing by the parties to arbitrate
Disputes which have arisen or may arise
Defined legal relationship, whether contratual or
not
Submission to arbitration
Appointment of Arbitrator (Section 11):
The procedure for appointment of arbitrators can
be set out by parties in their agreement
Interim Measures by Court (Section 9) :

-Appointment of a guardian for a minor or person

of unsound mind

-- The preservation or sale of goods which are the

subject matter of arbitration

-- Interim injuction or the appointment of receiver

-- Such other interim measures as may appear to

the court to be just and convenient.
Grounds For Challenge (Section 12):
Circumstances exist that give rise to justifiable
doubts as to his independence Or impartiality
He does not possess the qualifications agreed to by
the parties

Form and Content of Award (Section 31)

The award must be in writing and signed by
arbitrators and must also contain the reasons
 Interim Measures
Any attempt to enforce interim measures granted
by a tribunal could meet resistance on the ground
of section 5 which provides that no judicial
authority shall intervene except where so provided
in the act.
The effect of providing appeal against interim
measures granted by the tribunal is that it gives to
a defendant in arbitration an undue advantage
 Ar bit rat ion & Conci li at ion Act , 1996 (19 96 Act )
Key Feat ures

• Arbitrator to rule on his Jurisdiction (validity

of Agreement, Qualification)
• Commencement - WITHOUT Application to
Court (old law : S.20 petition)
• Interim Measures to protect subject matter of
Disputes
• Sanctity of Arbitration clause
– Elaborate provision for Appointment of Arbitrator
in Default Cases
• Domestic Arbitrator : CJ
• International Arbitrator : CJI
 Ar bit rat io n & Co nci li at ion Act , 1996 (199 6 Act )
Key Fea tu res
(Co nt d.)
• Agreement cannot be allowed to be defeated
(Ved Prakash v UOI A 1984 Del, Sec. 325)
• Courts DUTY TO REFER where Arbitration Clause
provided for -Suit to be stayed
– (Kamani Engg. Case : A 1964 SC 558)
• Delay in Award is ground to terminate
Arbitrators mandate
• Provision of CPC, Evidence Act not applicable
• Governed by Substantive Law & Rules chosen by
parties and Principles of Natural Justice
 Arbitration & Conciliation Act, 1996 (1996 Act)
Key Features
(Contd.)

• Arbitrator can encourage parties for

conciliation during pendency (JUST
settlement rather than proper law)
• Award –
– Written and signed (by majority)
– Speaking award (unless waived by parties)
– Place & date
– Stamping
– Registration (Immovable Property)
 Ar bit rat io n & Co nci li at ion Act , 1996 (19 96 Act )
Key Fea tur es
(Cont d.)

• Judicial intervention minimized -

– Interim Measures
– Appointment of Arbitrator (Default)
– Controversy re. Termination of mandate
of Arbitrator
– Taking Evidence
– Jurisdiction/ Scope of Authority of
Arbitrator (post-award )
 Ar bit rat io n & Co ncil iat ion Act , 199 6 (1996 Act )
Key Feat ures
(Co ntd.)
• Limited Statutory Grounds of Challenge to Award
e.g.
- Procedural violation (Natural Justice
principles)
- Appointment of Arbitrator not per Agreement
- Incapacity
- Agreement not valid under proper law
- Jurisdiction error - No Arbitrable dispute
- Public Policy (induced by fraud, corruption)
- Bias
 Ar bit rat io n & Co ncil iat ion Act , 199 6 (1996 Act )
Key Feat ures
(Co ntd.)

• Enforcement:
- Final & Binding if no challenge within 4 months’ of
Award Date
- Enforceable on Decree of Court (no need for separate
execution proceedings)

• All India application (including J & K)

• Foreign Awards (Foreign venue or Law)
enforceable
– India has retified New York Convention & Geneva
Convention
 Case - Law
• ONGC v. SAW Pipes (2003 SC) Pub lic Pol icy In Pri vat e Mat ters .

ONGC had placed an order on Saw Pipes for supply of equipment for offshore
exploration, to be procured from approved European manufacturers. The delivery
was delayed due to a general strike of steel mill workers in Europe. Timely delivery
was the essence of the contract. ONGC granted extension of time, but invoked the
clause for recovery of liquidated damages (LD), by withholding the amount from the
payment to the supplier. Saw Pipes disputed the deduction and the matter was
referred to arbitration.
• While the arbitral tribunal rejected Saw Pipes’ defence of force majeure, it required
ONGC to lead evidence to establish the loss suffered by the breach and proceeded to
hold, in absence of evidence of financial losses, that the deduction of LD was
wrongful
• The award was challenged by ONGC, inter alia, as being opposed to public policy.
• This decision, therefore, augments the concept of public policy to the extent that the
ground of patent illegality can be invoked to set aside an award as being repugnant
to public policy.
 Case - Law
• Konkan Railway Corporation Ltd Vs. Rani Construction
Pvt Ltd . AIR 2002 SC 778 : 2002(1) RAJ 165 at 175 (SC)
Interpretation of Arbitration and Conciliation Act 1996.
The Model law was only taken in account in drafting the
said Act, is therefore patent. The Act and the Model law
are not indentically drafted. The Model Law and
judgements and literature thereon are therefore not a
guide to the intrepretation of the Act.

UNCITRAL- United Nations Commission on International

Trade Laws
 Case - Law
• Pamvi Consultancy Services Ltd Vs. Global
Syntex (Bhilwara) Ltd. 2003(2) RAJ 203 at 209
(BOM)
Sou Motu artibration reference by Court not
permissible :Clearly , it must be application to
the court.
 Con cilia tion
• Part III of the Act makes provision for conciliation proceedings. In
conciliation proceedings, there is no agreement for arbitration. In fact,
conciliation can be done even if there is arbitration agreement.

• The conciliator only brings parties together and tries to solve the dispute
using his good offices. The conciliator has no authority to give any award.
He only helps parties in arriving at a mutually accepted settlement. After
such agreement they may draw and sign a written settlement agreement. It
will be signed by the conciliator.

• However after the settlement agreement is signed by both the parties and
the conciliator, it has the same status and effect as if it is an arbitral award.

• Conciliation is the amicable settlement of disputes between the parties, with

the help of a conciliator.
 Conc lus ion
• ADR offers real advantageous
– Relatively speedy
– Amicable : more suitable for businessrather than
litigation which is adversarial
• Internationally Widely used
• India Experience
– Legal Framework is ADR friendly
– Judicial sponsorship
– Present Reality
• ADR an “exception” rather than an “alternative” to litigation,
• Has worked well (efficiently and expeditiously) within trade
associations context (Jute/Cotton exchanges)
• Reasons
– Attitude of parties – cultural differences – in India, approach is to
delay the proceedings – unduly challenge the award
– Attitude of courts – grounds for interference liberally interpreted
– Has become time consuming and costly like litigation
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