Alternative dispute resolution (ADR) includes dispute resolution processes and techniques that act as a means for disagreeing

parties to come to an agreement short of litigation Mechanism used across the world - effective, faster and less expensive. 4 methods of ADR: Negotiation unrecognized Mediation unrecognized Conciliation recognized Arbitration - recognized - Recognized by the Arbitration and Conciliation Act, 1996 The rising popularity of ADR can be explained by the 1) increasing caseload of traditional courts, 2)the perception that ADR imposes fewer costs than litigation, 3)a preference for confidentiality, 4) and the desire of some parties to have greater control over the selection of the individual or individuals who will decide their dispute Need for the A&C Shrinking Boundaries, Free trade & International Commerce have become global necessities. Competition often leads to conflicts between entrepreneurs resulting in commercial disputes. Growing strength and role of India in the global economy Increasing FDI and other forms of collaboration -increasing disputes between Indian and foreign parties Quick redressal to commercial disputes through private Arbitration. Settlement of dispute in an expeditious, convenient, inexpensive and private manner so that they do not become the subject of future litigation between the parties.

Quick decision of any commercial dispute is necessary for smooth functioning of business and industry. In todays world of shrinking boundaries, free trade and international commerce have become global necessities. lncreasing competitiveness often leads to conflicts between entrepreneurs, resulting in commercial disputes. Arbitration is chosen as a means of effective consensual and speedy dispute resolution. The growing strength and role of India and the Indian industry in the Asian and global economy has seen the country's emergence as a force to be contended with. Increasing foreign direct investment and other forms of collaboration by foreign companies have witnessed disputes between Indian and foreign parties. This has raised the need for an act that will address commercial disputes quickly and efficiently

Arbitration is a technique for the resolution of disputes outside the courts by an impartial referee selected or agreed upon by the parties concerned by whose decision they agree to be bound The Arbitration & Conciliation Act is based on the model law drafted by United Nations Commission on International Trade Laws (UNCITRAL). It is an act to consolidate and amend the law relating to: domestic arbitration international commercial arbitration enforcement of foreign arbitral awards conciliation

What can be referred to as ARBITRATION?? All disputes of a civil nature or quasi-civil nature which can be decided by a civil court can be referred to arbitration: Relating to property Right to hold an office Compensation for non-fulfillment of a clause in a contract Disputes in a partnership

DISPUTES EXCLUDED FROM ARBITRATION Generally speaking all disputes of a civil nature can be referred to Arbitration e.g. breach of a contract, question of assignment or right to hold premises etc. However, certain disputes where the law has given jurisdiction to determine certain matters to specified tribunal only, cannot be referred to arbitration. An illustrative list of such matters is given below : Testamentary matters involving questions about validity of a will. Disputes relating to appointment of a guardian. Disputes pertaining to criminal proceedings Disputes relating to Charitable Trusts Winding up of a company Matters of divorce or restitution of conjugal rights

Lunacy proceedings Disputes arising from an illegal contract Insolvency matters, such as adjudication of a person as an insolvent. Matters falling within the preview of the M.R.T.P. Act. International Commercial Arbitration (Section 2(1)(f)

An arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in for in India and where at least one of the parties is o an individual who is a national of, or habitually resident in, any country other than India; or a body corporate which is incorporated in any country than India; or a company or a body of individuals whose central management and control is exercised in any country other than India; or the Government of a foreign country;

o o

Arbitration Agreement (Section 7 & 8) An agreement by the parties to submit to arbitration all disputes which have arisen or which may arise between them in respect of a defined legal relationship An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement An arbitration agreement shall be in writing

If a party approaches court despite the arbitration agreement, the other party can raise objection. However, such objection must be raised before submitting his first statement on the substance of dispute. Such objection must be accompanied by the original arbitration agreement or its certified copy. On such application the judicial authority shall refer the parties to arbitration. Since the word used is shall, it is mandatory for judicial authority to refer the matter to arbitration. [section 8]. However, once first statement to court is already made by the opposite party, the matter has to continue in the court. Once an application is made by other party for referring the matter to arbitration, the arbitrator can continue with arbitration and even make an arbitral award.

Interim Measures by Court

If requested by any or both of the parties the court can take certain measures during arbitration which can be Appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings The preservation or sale of goods which are the subject matter of arbitration Securing the amount in dispute in arbitration Interim injunction or the appointment of a receiver; Any other interim measure of protection as may appear to the Court to be just and convenient

Appointment of arbitrator Any person can be appointed as an arbitrator. Generally impartial and independent persons CAs, engineers, retired judges, advocates and other professionals are preferred. Parties are free to determine the number of arbitrators Number shall not be an even number.

Though any person can be appointed as an arbitrator, generally impartial and independent persons in whom parties repose confidence are to be selected and appointed as arbitrators. Generally, Chartered Accountants, engineers, retired judges, advocates and other professionals are preferred. Parties are free to determine the number of arbitrators, provided that such number shall not be an even number. If the Arbitration Agreement is silent in this respect, the arbitral Tribunal shall consist of a sole arbitrator. In cases, where three arbitrators are to be appointed, each party will appoint one arbitrator and the two appointed arbitrators will jointly appoint a third arbitrator, who will be the presiding arbitrator. In certain cases of failure to appoint the arbitrators, the Chief Justice of the High Court or his designate has been given power to appoint the arbitrator u/s. 11(6) of the Arbitration and Conciliation Act, 1996. In case of odd number-

Each party will appoint one arbitrator and the two appointed arbitrators will appoint the third arbitrator who will act as a presiding arbitrator. If not appointed within 30 days, the party can request Chief Justice of High Court to appoint an arbitrator. In case of international commercial dispute, the application for appointment of arbitrator has to be made to Chief Justice of India. The arbitrator shall disclose in writing to the parties anything that may give rise to justifiable doubts about his independence or impartiality

CHALLENGING THE APPOINTMENT OF AN ARBITRATOR The appointment of an arbitrator may be challenged only if (a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality or (b) he does not possess the qualification agreed to by the parties. An arbitrator has to disclose his interest in writing as discussed above. The Act provides that a party may challenge an arbitrator appointed by him also. But this can be done only for those reasons of which he becomes aware after the appointment has been made The mandate of an arbitrator shall terminate if--He becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and He withdraws from his office or the parties agree to the termination of his mandate. Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. Conduct of Arbitral Proceedings - The Arbitral Tribunal should treat the parties equally and each party should be given full opportunity to present his case. The Arbitral Tribunal is not bound by Code of Civil Procedure, 1908 or Indian Evidence Act, 1872. The parties to arbitration are free to agree on the procedure to be followed by the Arbitral Tribunal. If the parties do not agree to the procedure, the procedure will be as determined by the arbitral tribunal. LAW OF LIMITATION APPLICABLE - Limitation Act, 1963 is applicable. For this purpose, date on which the aggrieved party requests other party to refer the matter to arbitration shall be considered. If on that date, the claim is barred under Limitation Act (time frame prescribed by the Act), the arbitration cannot continue. If Arbitration award is set aside by Court, time spent in arbitration will be excluded for purpose of Limitation Act. [so that case in court or fresh arbitration can start]. FLEXIBILITY IN RESPECT OF PROCEDURE, PLACE AND LANGUAGE - Arbitral Tribunal has full powers to decide the procedure to be followed, unless parties agree on the procedure to be followed. The Tribunal also has powers to determine the admissibility, relevance, materiality and weight of any evidence. Place of arbitration will be decided by mutual agreement. However if the parties do not agree to the place, the same will be decided by tribunal. Similarly, language to be used in arbitral proceedings can be mutually agreed. Otherwise, Arbitral Tribunal can decide.

SUBMISSION OF STATEMENT OF CLAIM AND DEFENCE - The claimant should submit statement of claims, points of issue and relief or remedy sought. The respondent shall state his defense in respect of these particulars. All relevant documents must be submitted. Such claim or defense can be amended or supplemented at any time. HEARINGS AND WRITTEN PROCEEDINGS - After submission of documents and defense, unless the parties agree otherwise, the Arbitral Tribunal can decide whether there will be oral hearing or proceedings can be conducted on the basis of documents and other materials. However, if one of the parties requests, the hearing shall be oral. Sufficient advance notice of hearing should be given to both the parties. [Thus, unless one party requests, oral hearing is not compulsory]. SETTLEMENT DURING ARBITRATION - It is permissible for parties to arrive at mutual settlement even when arbitration is proceeding. In fact, even the Tribunal can make efforts to encourage mutual settlement. If parties settle the dispute by mutual agreement, the arbitration shall be terminated. However, if both parties and the Arbitral Tribunal agree, the settlement can be recorded in the form of an arbitral award on agreed terms. Such Arbitral Award shall have the same force as any other Arbitral Award.

Arbitral Award The decision of Arbitral Tribunal will be by majority The arbitral award shall be in award shall be drawn on a Rs. 100/- stamp paper. It shall be dated and signed by the arbitrators.. States the reasons for the award unless the parties have agreed that no reason for the award is to be given. The award should be dated and place where it is made should be mentioned. Copy of award given to each party. Tribunal can make interim award also.

Cost of Arbitration Fees and expenses of arbitrators and witnesses, legal fees and expenses, administration fees of the institution supervising the arbitration and other expenses. Tribunal can decide the cost and share of each party. If parties refuse to pay the costs, the Arbitral Tribunal may refuse to deliver its award; thus any party can approach Court.

The Court will ask for deposit from the parties and on such deposit, the award will be delivered by the Tribunal. Then Court will decide the costs of arbitration and shall pay the same to Arbitrators. Balance, if any, will be refunded to the party.

Deposits, Section (38) The arbitral tribunal may fix the amount of the deposit or supplementary deposit Equal share of deposits have to be paid by both the parties as per the court If one party does not pay its share the other has to pay If both doesnt pay, arbitral tribunal may terminate the proceedings In case of termination of the arbitral proceedings, the arbitral tribunal shall return any unexpended balance to the party or parties Intervention by Court One of the major defects of earlier arbitration law was that the party could access court almost at every stage of arbitration - right from appointment of arbitrator to implementation of final award. Thus, the defending party could approach court at various stages and stall the proceedings. Now, approach to court has been drastically curtailed. In some cases, if an objection is raised by the party, the decision on that objection can be given by Arbitral Tribunal itself. After the decision, the arbitration proceedings are continued and the aggrieved party can approach Court only after Arbitral Award is made. Appeal to court is now only on restricted grounds. Of course, Tribunal cannot be given unlimited and uncontrolled powers and supervision of Courts cannot be totally eliminated. ARBITRATION ACT HAS OVER-RIDING EFFECT - Section 5 of Act clarifies that notwithstanding anything contained in any other law for the time being in force, in matters governed by the Act, the judicial authority can intervene only as provided in this Act and not under any other Act.

Arbitral Award - Appeal An arbitral award may be set aside by the Court only if: The party furnishes proof of some incapacity the arbitration agreement is not valid under the law the party was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case the arbitral award deals with a dispute not falling within the terms of the submission to arbitration the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties

the arbitral award is in conflict with the public policy of India Finality of arbitral awards, Section(35)

An arbitral award shall be final The parties and persons claiming under it will be bound

Conciliation
The act makes provision for conciliation proceedings. In conciliation proceedings: There is no agreement for arbitration. 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. The conciliator is not given any power to impose a settlement.
His function is to try to break any deadlock and encourage the parties to reach an amicable settlement by acting as a conduit for communication, filtering out the disturbing elements and allowing the parties to focus on the underlying core objectives

In such agreement they may draw and sign a written settlement agreement. Duly 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.

Offer for Conciliation The conciliation proceedings can start when one of the parties makes a written request to other to conciliate, briefly identifying the dispute. The conciliation can start only if other party accepts in writing the invitation to conciliate. Unless there is written acceptance, conciliation cannot commence. If the other party does not reply within 30 days, the offer for conciliation can be treated as rejected

What Can Be Referred To Conciliation

Matters of a Civil nature Breach of contract Disputes of movable or immovable property

What Cannot Be Referred To Conciliation Matters of Criminal nature Illegal transactions Matrimonial matters like divorce suit etc.

Comparison with arbitration

Arbitration is less formal than litigation, and Conciliation is even less formal than arbitration

Conciliation - The parties choose an independent third party (conciliator)who hears both sides, either privately or together, and then prepares a compromise which the conciliator believes is a fair disposition of the matter. The conciliator's report or conclusions are then put to both sides, who may agree or disagree with it. It is not binding nor is it enforceable unless the parties adopt it. The process of adjusting or settling disputes in a friendly manner through extra judicial means. Conciliation means bringing two opposing sides together to reach a compromise in an attempt to avoid taking a case to trial. Arbitration, in contrast, is a contractual remedy used to settle disputes out of court. In arbitration the two parties in controversy agree in advance to abide by the decision made by a third party called in as a mediator, whereas conciliation is less structured. Example of a conciliator
The Panchayat system has long been an accepted method of conflict resolution, in which respected village elder(s) assists in resolving community disputes.