ARBITRATION CONCILATION AND ADRS

ADRS

INTRODUCTION-

ADR is a term that refers to several different methods of resolving

business related, civil based dispute and matrimonial disputes outside
traditional legal and administrative forums. These methodologies, which
include various types of arbitration and mediation, have surged in
popularity in recent years because companies, parties and courts became
extremely frustrated over the expenses, time and emotional troll involve
in resolving dispute through the usual avenue of litigation. ADR
programs have emerged as an alternative, litigation free method of
resolving disputes. The entire globe of ADR can be further subdivided
under two major subheads which are Mediation and Arbitration.
Mediation is a process whereby the parties involved utilize an out-side
party to help them reach a mutually agreeable settlement. The mediator
who maintains scrupulous neutrality throughout, suggest various
proposal to help the two parties reach a mutually agreeable solution.
Arbitration, a process in which parties agree to submit their dispute to an
independent natural third party, known as arbitrator who consider
argument and evidence from both side, then hands down a full and final
binding decision, in contract to arbitration.

MEANING OF ADRS-

ADRS stand for Alternate disputes resolution system. The term is often
used to describe a wide variety of dispute resolution mechanism that are
sort of or alternative to full- scale court processes.

With court congestion and excessive litigiousness drawing criticism it is

clear that lawyers in the future will have to be trained to find fresh
approaches to explore non-ligation routes to resolve disputes.

ADVANTAGES OF ADRS-

1. Private process of dispute settlement- It helps in keeping the

dispute a private matter and promotes creative and realistic
business solutions since the parties are in control of ADR
proceedings.
2. Expeditious- It can provide a better solution to disputes more
expeditiously. ​ADR procedures take only one day or a few days to
arrive at a negotiated settlement.
3. Informal- It can be used at any time even when case is pending
before a court of law.
4. Inexpensive- At lesser cost than litigation
5. Lack of technicality- A
​ DR programmes are flexible and are not

affected with rigorous of rules and procedures.

6. Involve community participation- ADR procedures can be used
with or without a lawyer. A lawyer, however, plays a very
significant role in identifying the contentious issues and in
rendering advice during notations and over-all presentation of his
clients cases.
7. ADR procedures help in the reduction of the work load of the
courts and thereby help them to focus attention on the cases which
ought to be decided by the courts.
8. Decision making process is controlled by the parties- The freedom
of parties parties to litigation is not affected by the ADR
proceedings.
9. Leads to amicable results- The ADR systems permit parties to
choose neutral persons who are specialists in the subject-matter of
the disputes. Such persons help in various ways in arriving at
peaceful negotiated settlement of the disputes.
10. Relationship is secured-
11. Finality of result confidentiality-
VARIOUS FORMS OF ADRS

Negotiation​- a non-binding process in which discussions between the

parties are initiated without the intervention of any third party with the
object of arriving at a negotiated settlement of the dispute.

Conciliation mediation​- a non-binding procedure in which an impartial

third party, the conciliator/mediator, assists the parties to a dispute in
reaching a mutually satisfactory and agreed settlement of the dispute.

Med-Arb​- a procedure which combines sequentially

conciliation/mediation and where the dispute is not settled through
conciliation/mediation within a period of time agreed in advance by the
parties, arbitration.

MEDOLA​- a procedure in which if the parties fail to reach an

agreement through mediation, a neutral person, who may be the original
mediator or an arbitrator, will select between the final negotiated offers
of parties such selection being binding on the parties.

Mini-trial – a non-binding procedure in which the disputing parties are

presented with summaries of their cases to enable them to assess the
strengths, weaknesses, and prospects of their case and then an
opportunity to negotiate a settlement with the assistance of a neutral
adviser.

Arbitration​- a procedure in which the dispute is submitted to an arbitral

tribunal which makes a decision (an award) on the dispute that is
binding on the parties.

Fast track Arbitration​- a form of arbitration in which the arbitration

procedure is rendered in a particularly short time and at reduced cost.

Neutral listener Agreement​- parties to a dispute discuss their

respective best settlement offer in confidence with a neutral third party
who after his own evaluation, suggests settlements to assist the parties to
attempt a negotiated settlement.

Rent a judge- disputing parties mutually approach a referee, usually a

retired judge or lawyer before whom they present their case in informal
proceedings. The referee judge gives his decision which is enforceable
in a court of law. The fee of the referee is paid by the parties.

Final offer arbitration- each party submits its monetary claim before
panel that renders its decision by awarding one and rejecting th other
claim.

ADRS procedures can be broadly divided into 2 categories namely,

adjudicatory and non-adjudicatory. The adjudicatory procedures such as
arbitration and binding expert determination lead to a binding ruling that
decides the case.

The non-adjudicatory procedures contribute to resolution of disputes by

agreement of the parties without adjudication such as Negotiation,
Mediation and conciliation. Mediation is different from conciliation only
in that in the former the neutral third party plays a more active role in
putting forward his own suggestions for the settlement of the dispute.

The ADR mechanisms are legally valid and accepted by the courts. The
courts have now been encouraging the use of ADR in cases where
compromise is possible. The effect of an arbitration award which is
similar to decision by a court has the same effect of a decree and is final,
binding and non-challengeable.

Similarly the settlement agreements reached through the process of

conciliation or mediation is deemed to be a decree and is binding. The
centre achieves settlement between the parties through the various
modes in the best interest of the parties themselves. Where the
agreement is on a dispute already pending before the courts, it shall be
enforced as a decree by filing a compromise suit. Thus willing parties
who want to get their disputes settled and who does not want to undergo
the long procedure and delay caused in the courts may resort to ADR by
effectively utilizing the serviced of the ADR centre.
 *****

ARBITRATION

MEANING

According to Byrne’s law dictionary- the term “arbitration” includes practically every question,
which might be determined by a civil action, referred to arbitration.

According to Russel, “the essence of arbitration is that some dispute is referred by the parties for
settlement to a tribunal of their own choice instead of to a court.”

Section 2(1) (a) of the Arbitration and conciliation Act,1996, states that “Arbitration” means any
arbitration whether or not administered by permanent arbitral institution. The present act does
not define the term “arbitration” but in literal sense arbitration means mutual settlement of a
dispute by understanding or by an agreement where the rights and liabilities of the arbitrating
parties are determined on the principles of just and countable basis. In other words “arbitration”
means “settlement of a dispute by a person who is called an arbiter. He decides as an arbitrator.
Thus, arbitration means an act of settling of a dispute o differences by mutual understanding.

INTERNATIONAL HISTROY (DEVELOPMENT)

First, the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (the “New York Convention”). 149 States are party to the New York Convention. Its
premise – that an arbitral award rendered by a tribunal seated in one Member State can be
directly enforceable in another Member State – has been an enormously significant development
in international arbitration. It has made arbitration awards a global currency. With a single treaty,
an arbitration award rendered in Azerbaijan is enforceable in Fiji or 147 other States. The
popularity of arbitration as a dispute resolution mechanism must, in part, be attributed to the
success of the New York Convention measured by the number of adhering States and the general
respect it is afforded by national courts.

Second, the 1965 Washington International Centre for Settlement of Investment Disputes
Convention (the “ICSID Convention”) was another landmark treaty that furthered the cause of
international arbitration although, in this case, specifically investment treaty arbitration between
investors and States. That Convention established ICSID, an independent international institution
that forms part of the World Bank Group. Though the ICSID Convention itself does not establish
consent to arbitration, by signing it, 158 signatory States have demonstrated their commitment to
resolving investment disputes by arbitration within an autonomous legal framework. The ICSID
Convention ushered in the era of the investment treaty. By affording foreign investors
substantive protections (such as the right to fair and equitable treatment and protection from
unlawful expropriation) that they can directly enforce through arbitration against the host State
of their investment, investment treaties have revolutionized the arbitration landscape. In 1965
there were only a handful of investment treaties. By the end of 2011, there were 2833 bilateral
investment treaties, supplemented with a number of free trade agreements ( e.g. NAFTA,
DRCAFTA) and multilateral treaties (e.g. the Energy Charter Treaty) with investment chapters
providing for international arbitration.

Finally, the establishment of the United Nations Commission on International Trade Law
(“UNCITRAL”) by the United Nations in 1966, with its general mandate to further the
progressive harmonization and unification of the law of international trade, was a boon to
international arbitration. The UNCITRAL Arbitration Rules (first drafted in 1976, updated in
2010) are often used for ad hoc arbitrations and are commonly referenced in arbitration clauses
found in both commercial contracts and investment treaties. The 1985 UNCITRAL Model Law
on International Commercial Arbitration (updated in 2006) has provided a “best practice” model,
supportive of arbitration, and been the genesis for much of the international harmonization of
States’ arbitration legislation.

Beyond the practical implications of these treaties and global initiatives, these developments are
significant because of the international legitimacy they have conferred upon arbitration. They
demonstrate that States recognize arbitration as a valid and important dispute resolution forum.
Thus, from its historical background (ancient, mediaeval and modern) it is incontrovertible that
arbitration has both an illustrious international provenance and legitimacy. However, whilst a
necessary pre-condition, this alone is insufficient to designate arbitration as a World Court.

Background to arbitration legislation:

The Indian law of arbitration is contained in the Arbitration and Conciliation Act 1996 (Act).

1 The Act is based on the 1985 UNCITRAL Model Law on International Commercial
Arbitration and the UNCITRAL Arbitration Rules 1976. The Statement of Objects and Reasons
of the Act recognises that India’s economic reforms will become effective only if the nation’s
dispute resolution provisions are in tune with international regime. The Statement of Objects and
Reasons set forth the main objectives of the Act as follows:

(i) to comprehensively cover international and commercial arbitration and conciliation as also
domestic arbitration and conciliation;

ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the
needs of the specific arbitration;

iii) to provide that the arbitral tribunal gives reasons for its arbitral award;

iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction;

v) to minimise the supervisory role of courts in the arbitral process;

vi) to permit an arbitral tribunal to use mediation, conciliation or other procedures during the
arbitral proceedings to encourage settlement of disputes;
vii) to provide that every final arbitral award is enforced in the same manner as if it were a
decree of the court;

viii) to provide that a settlement agreement reached by the parties as a result of conciliation
proceedings will have the same status and effect as an arbitral award on agreed terms on the
substance of the dispute rendered by an arbitral tribunal; and

ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a
country to which one of the two International Conventions relating to foreign arbitral awards to
which India is a party applies, will be treated as a foreign award.”

Scheme of the Act:

The Act is a composite piece of legislation. It provides for domestic arbitration; international
commercial arbitration; enforcement of foreign award and conciliation (the latter being based on
the UNCITRAL Conciliation Rules of 1980).

The more significant provisions of the Act are to be found in Part I and Part II thereof. Part I
contains the provisions for domestic and international commercial arbitration in India. All
arbitration conducted in India would be governed by Part I, irrespective of the nationalities of the
parties. Part II provides for enforcement of foreign awards. Part I is more comprehensive and
contains extensive provisions based on the Model Law. It provides inter alia for arbitrability of
disputes; non-intervention by courts; composition of the arbitral tribunal; jurisdiction of arbitral
tribunal; conduct of the arbitration proceedings; recourse against arbitral awards and
enforcement. Part II on the other hand, is largely restricted to enforcement of foreign awards
governed by the New York Convention or the Geneva Convention. Part II is thus, (by its very
nature) not a complete code. This led to judicial innovation by the Supreme Court in the case of
Bhatia International v. Bulk Trading

2. Here the Indian courts jurisdiction was invoked by a party seeking interim measures of
protection in relation to an arbitration under the ICC Rules to be conducted in Paris. The
provision for interim measure (section 9) was to be found in Part I alone (which applies only to
domestic arbitration).

Hence the Court was faced with a situation that there was no proprio vigore legal provision under
which it could grant interim measure of protection. Creatively interpreting the Act, the Supreme
Court held that the “general provisions” of Part I would apply also to offshore arbitrations, unless
the parties expressly or impliedly exclude applicability of the same. Hence by judicial
innovation, the Supreme Court extended applicability of the general provisions of Part I to
off-shore arbitrations as well.

It may be stated that this was premised on the assumption that the Indian Court would otherwise
have jurisdiction in relation to the matter (in the international sense). This became clear in a
subsequent decision of the Supreme Court in Shreejee Traco (I) Pvt. Ltd. v. Paperline
International Inc.3 Here the Court’s assistance was sought for appointing an arbitrator in an
offshore arbitration. The power of appointment by court exists under Section 11 of Part I of the
Act.

The Court declined to exercise jurisdiction. It found that the arbitration was to be conducted in
New York and that the law governing the arbitration proceedings would be the law of seat of the
arbitration. Hence, the extension of Part I provisions to foreign arbitrations sanctified by Bhatia4
could not be resorted to in every case. The Indian Courts would have to first determine if it has
jurisdiction, in the international sense.

Subject matter of arbitration:

Any commercial matter including an action in tort if it arises out of or relates to a contract can be
referred to arbitration. However, public policy would not permit matrimonial matters, criminal
proceedings, insolvency matters anti-competition matters or commercial court matters to be
referred to arbitration. Employment contracts also cannot be referred to arbitration but director
company disputes are arbitrable (as there is no master servant relationship here)5. Generally,
matters covered by statutory reliefs through statutory tribunals would be non-arbitrable.
Role of the court:

One of the fundamental features of the Act is that the role of the court has been minimised.
Accordingly, it is provided that any matter before a judicial authority containing an arbitration
agreement shall be referred to arbitration (Section 8 provided the non - applicant objects no later
than submitting its statement of defense on merits). Further, no judicial authority shall interfere,
except as provided for under the Act (Section 5).

In relation to arbitration proceedings, parties can approach the Court only for two purposes:

(a)for any interim measure of protection or injunction or for any appointment of receiver etc.6; or

(b) for the appointment of an arbitrator in the event a party fails to appoint an arbitrator or if two
appointed arbitrators fail to agree upon the third arbitrator. In such an event, in the case of
domestic arbitration, the Chief Justice of a High Court may appoint an arbitrator, and in the case
of international commercial arbitration, the Chief Justice of the Supreme Court of India maycarry
out the appointment7. A court of law can also be approached if there is any controversy as to
whether an arbitrator has been unable to perform his functions or has failed to act without undue
delay or there is a dispute on the same. In such an event, the court may decide to terminate the
mandate of the arbitrator and appoint a substitute arbitrator.

Jurisdiction of the arbitrator:

The Act provides that the arbitral tribunal may rule on its own jurisdiction, including any
objections with respect to the existence or validity of the arbitration agreement. The arbitration
agreement shall be deemed to be independent of the contract containing the arbitration clause,
and invalidity of the contract shall not render the arbitration agreement void. Hence, the
arbitrators shall have jurisdiction even if the contract in which the arbitration agreement is
contained is vitiated by fraud and/or any other legal infirmity. Further, any objection as to
jurisdiction of the arbitrators should be raised by as party at the first instance, i.e., either prior to
or along with the filing of the statement of defence. If the plea of jurisdiction is rejected, the
arbitrators can proceed with the arbitration and make the arbitral award. Any party aggrieved by
such an award may apply for having it set aside under Section 34 of the Act. Hence, the scheme
is that, in the first instance, the objections are to be taken up by the arbitral tribunal and in the
event of an adverse order, it is open to the aggrieved party to challenge the award.

In SBP & Co. v. Patel Engg Ltd.8 the Supreme Court of India (in a decision rendered by a Bench
of Seven Judges) held that the nature of power conferred on the Court under Section 11 of the
Act is judicial (and not administrative) in nature. Accordingly, if parties approach the Court for
appointment of arbitral tribunal (under Section 11) and the Chief Justice pronounces that he has
jurisdiction to appoint an arbitrator or that there is an arbitration agreement between the parties
or that there is a live and subsisting dispute to be referred to arbitration and the Court constitutes
the Tribunal as envisaged, this would be binding and cannot be re-agitated by the parties before
the arbitral tribunal.

In S.B.P & Co. case the Supreme Court has defined what exactly the Chief Justice, approached
with an application under Section 11 of the Act, is to decide at that stage. The Chief Justice has
the power to decide his own jurisdiction in the sense whether the party making the motion has
approached the right court. He has to decide whether there is an arbitration agreement, as defined
in the Act and whether the person who has made the request before him, is a party to such an
agreement. He can also decide the question whether the claim was a dead one; or a long-barred
claim that was sought to be resurrected and whether the parties have concluded the transaction
by recording satisfaction of their mutual rights and obligations or by receiving the final payment
without objection.

The Court in SBP & Co case, inter alia, concluded as follows:

(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under
Section 11(6) of the Act is not an administrative power. It is a judicial power.

(ii) The power under Section 11(6) of the Act, in its entirety, could be delegated, by the Chief
Justice of the High Court only to another Judge of that Court and by the Chief Justice of India to
another Judge of the Supreme Court.
(iii) In case of designation of a Judge of the High Court or of the Supreme Court, the power that
is exercised by the designated Judge would be that of the Chief Justice as conferred by the
statute.

(iv) The Chief Justice or the designated Judge will have the right to decide the preliminary
aspects as indicated in the judgment. These will be, his own jurisdiction to entertain the request,
the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the
existence of the condition for the exercise of his power and on the qualifications of the arbitrator
or arbitrators. The Chief Justice or the designated Judge would be entitled to seek the opinion of
an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the
Act if the need arises but the order appointing the arbitrator could only be that of the Chief
Justice or the designated Judge.

(v) The District Judge does not have the authority under Section 11(6) of the Act to make
appointment of an arbitrator.

(vi) The High Court cannot interfere with the orders passed by the arbitrator or the Arbitral
Tribunal during the course of the arbitration proceedings and the parties could approach the
Court only in terms of Section 37 of the Act (appealable orders) or in terms of Section 34 of the
Act (setting aside or arbitral award).

(vii) Since it is a judicial order, an appeal will lie against the order passed by the Chief Justice of
the High Court or by the designated Judge of that Court only under Article 136 of the
Constitution to the Supreme Court.

(viii) No appeal shall lie against an order of the Chief Justice of India or a Judge of the Supreme
Court designated by him while entertaining an application under Section 11(6) of the Act.

(ix) Where an Arbitral Tribunal has been constituted by the parties without having recourse to
Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide all matters as
contemplated by Section 16 of the Act.