EXPLAIN THE MEANING OF INTELLECTUAL PROPERTY RIGHRS AND DISCUSS

THEIR IMPORTANCE
Intellectual property rights includes all rights resulting from intellectual activity in the
industrial, scientific, literary or artistic fields. Mostly one thinks of property either movable or
immovable property. Intellectual property law confers property rights on intangibles.
Intellectual property has been characterized as
Information which can be incorporated in tangible objects at the same time in an unlimited
number of copies at different locations anywhere in the world. The property is not in those
copies but in the information reflected in those copies.
The objects of Intellectual property are the creations of the human mind, the human intellect.
This is why this kind of property is called intellectual property. In simplified way one can
state that intellectual property relates to pieces of information which can be incorporated in
tangible objects at the same time in an unlimited member or copies at different locations
anywhere in the world. The property is not in those copies but information reflected in those
copies. Similar to property in movable things and immovable property, intellectual property
too is characterized by certain limitations for example limited duration in the case of
copyright and patents.
The convention establishing the World Intellectual Property Organization in Stockholm in
1967 provides that Intellectual Property shall include rights relating to
1. Literary, artistic and scientific works
2. Performances of performing artists, phonograms and broadcasts
3. Inventions in all fields of human endeavour
4. Scientific discoveries
5. Industrial designs
6. Trademarks, service marks and commercial names and designations
7. Protection against unfair competition.
The knowledge of Intellectual Property rights is must to a common man. A common man
everywhere and every time come across the things created, invented, discovered and
produced by some human mind. A design of a house, the material used in a house, its
furnishings like a carpet, sofa, fridge, television, telephone, paintings, photographs, wall
clock, the articles of daily use like a pens, books, the newspapers, tissue papers, shoes etc, the
things that are worn by him like jeans, t-shirts etc the items like conveyance like cycles, cars,
bikes etc the list is endless. Almost all things that surround a common man are one way or
other, property intellectual properties of some one. Somebody has spent his time, money and
energy to invent and create them. Therefore, these all common things are intellectual property
of someone and are protected by law. These items of intellectual properties can be classified
into two main categories
1. Industrial property items
2. Copyright and related rights items.
The industrial property items include all sort of inventions, trade marks, industrial designs.
They are found in all around us. All inventions are covered under this category. An invention
has been defined as a process or a product which provides a new way of doing something or
provides a new solution to a problem. Inventions are protected by the patents. The owner of
inventions can get his invention registered under a patent. After this period the invention is
available to all for commercial exploitation and it becomes a public property.
Some of the products we use in daily life are protected by Trade marks. The trademark laws
are generally registered for seven years but they can be renewed indefinitely by applying
again and paying the required fee.

The copy rights are provided for itmes like literary, musical, artistic woks like songs,
dialogues, poetry etc are provided to the creators. Copy right provide exclusive right to the
creatoro to use or authorized other to use their works.
The reproduction in various forms, copying, printing, recording or adaptation are prohibited.
The right provides right to the creator that is the financial benefit for a lasting period of 60
years after the creators death.
A common man comes across literary, artistic, musical works in his daily life.
The properties have been covered under a patent or a copyright or a trademark. Since
common mans life is very closely linked with articles and products which are protected by
law which under Intellectual property rights. The copying, imitation, adaptation and
unauthorized reproduction of these this, without the permission of the owner, may amount to
serious offence.
IPR CONTRACTS, BREACH AND REMEDIES
According to Section 10 of the Indian Contract Act, 1872, all agreements are contracts if they
are made by the free consent of parties competent to contract, for a lawful consideration and
with a lawful object and are not expressly declared to be void. The IPR contracts where the
owner of the property holder or the license of the property holder transfer the intellectual
properties through transfer, sell, assign, transfer of license rights etc where the licensee will
enter into an agreement with others. Ex. The author of the book authorise the publisher to
print and sell the books for which he gets the royalty for every print the publisher makes or
for the period the publisher prints. The family of late Jawaharlal Nehru are still getting the
royalty for the book Discovery of India written by Jawaharlal Nehru. While transferring the
intellectual rights by way of licensing, assignment, sell etc, the owner of the property rights
enter into an agreement.
An agreement enforceable by law is a contract according to section 2(h) of Indian contract
Act, 1872. All agreements are contracts if they are made by the free consent of the parties,
competent to contract for a lawful consideration and with a lawful object not expressly
declared as void. That is fulfilling the essentials of section10 of the contract Act. The
consideration for publishing a book is to pay royalty to the author of the book.
The breach of contract with regard to intellectual property rights is known as infringement of
rights. The following are the infringements and remedies of intellectual rights of copy rights,
patents and trademarks.
Infringments of Copyright
Some of the commonly known acts involving infringement of copyright:
Making infringing copies for sale or hire or selling or letting them for hire
Permitting any place for the performance of works in public where such performance
constitutes infringement of copyright
Distributing infringing copies for the purpose of trade or to such an extent so as to
affect prejudicially the interest of the owner of copyright
Public exhibition of infringing copies by way of trade;
Importation of infringing copies into India.
Civil Remedies for Copyright Infringement
The copyright owner is entitled to remedies by way of injunctions, damages and accounts.
Anton Piller Order: The Courts in England have invented a new order for better protection of
copy right and other forms of intellectual property. The court may pass an ex parte directing
the defendant to permit to enter his premises accompanied by solicitor or attorney, inspect
documents, articles and take copies or remove them for safe custody. This is an order named
after a plaintiff in a case where such an order was first passed.
Universal thermosensors ltd V Hibben and others.

The Criminal Offence

Any person who knowingly infringes or abets the infringement of the copyright in any work
commits criminal offence under Section 63 of the Copyright Act. The minimum punishment
for infringement of copyright is imprisonment for six months with the minimum fine of Rs.
50,000
In the case of a second and subsequent conviction the minimum punishment is imprisonment
for one year and fine of Rs. one lakh.
Infringement of Patents
Infringement of a patent consists of the unauthorized making, importing, using, offering for
sale or selling any patented invention within the India.
Remedies against infringement of a patented invention
1. Interlocutory Injunction
A patent owner at the start of a trial can request for an interim injunction to restrain the
defendant from committing the acts complained of until the hearing of the action or further
orders. Permanent injunction is given based on the merits of the case at the end of the trial.
2. Relief of damages: A patent owner is entitled to the relief of damages as compensation to
the patentee and not punishment to the infringer.
3. Account of profits: Account of profits focuses on the profits made by the defendant,
without reference to the damage suffered by the claimant. The purpose of the account is to
prevent the unjust enrichment.
Penalties
1) Contravention of secrecy provisions relating to certain inventions (Sec.118) - If any
person fails to comply with any directions given under section 35 or makes or causes to be
made an application in contravention of section 39 he shall be punishable with imprisonment
up to 2 years or with fine or with both.
2) Falsification of entries in register etc (Sec.119) - If any person makes, or causes to be
made, a false entry in any register kept under this Act, he shall be punishable with
imprisonment for a term that may extend to 2 years or with fine or with both.
3) Unauthorized claim of patent rights (Sec.120) - If any person falsely represents that any
article sold by him is patented in India or is the subject of an application for a patent in India,
he will be punishable with fine that may extend to Rs.1,00,000.
4) Wrongful use of words, "patent office" (Sec.121) - If any person uses on his place of
business or any document issued by him or otherwise the words patent office or any other
words which reasonably lead to the belief that his place of business is, or is officially
connected with, the patent office, he will be punishable with imprisonment for a term that
may extend to 6 months, or with fine, or with both.
5) Refusal or failure to supply information (Sec.122) - If he furnishes false information
knowingly he shall be punishable with imprisonment that may extend to 6 months or with
fine or with both.
6) Practice by non-registered patent agents (Sec.123) - Any person practicing as patent
agent without registering is liable to be punished with a fine of Rs 1,00,000/- in the first
offence and Rs.5,00,000/- for subsequent offence.
7) Deals with offences by companies (Sec.124) - When offence is committed by a company
as well as every person in charge of and responsible to the company for the conducts of its
business at the time of the commission of the offence will be deemed to be guilty and will be
liable to be preceded against and punished accordingly.
Offences & Penalties of trademark
There are mainly two classes of Offences relating to Trademarks
(a) Falsification of Trademark

(b) Falsely applying the trademark to goods or services

The punishment for the above offences shall not be less than 6 months imprisonment which
may extend to three years and a fine which shall not be less 50,000/-, but may extend to
Rupees Two Lakh. However second and subsequent offences shall be more severely
punished. There shall be an Imprisonment of not less than one year which may extend to
three years and a fine which shall not be less Rupees One lakh, but may extend to Rupees
Two Lakh.
IPR CONTRACTS RELATING TO TRANSFER OF IPRs
The following are the contracts relating to transfer of intellectual property rights form an
individual to another or from a company to another company.
ASSIGNMENT:
Assignment agreement pertains to the transfer of intellectual property rights from the owner
of the rights to another person or organization. An Intellectual property agreement or an
intellectual property assignment agreement is a written and enforceable contract that
consummates and formalization agreement between two individuals or companies for the
purchase and sale of ip rights.
LICENSING:
A licence is the formal granting of permission by someone who owns rights to someone else
to use them. Traditionally, a licence is a grant of party for a party to enter into the physical
property of another, that is, an agreement not to hold the party liable for unlawful trespass.
With respect to intellectual property, a licence is a promise not to sue a party for actions that
would otherwise constitute infringement. In other words, a licence is permission to make use
of anothers intellectual property under carefully laid out conditions and terms.
MORTGAGES:
A Paptent can be the subject matter of a mortgage, a patent can be mortgatged to secure the
payment of a debt or sum of money. On repayment of the money, the mortgagor becomes
entitled to have his name entered in the patent register as the proprietor, but he may have his
name registered as the mortgagee in respect of that patent.
SALE:
The intellectual property my transfer by sale also. It would be an absolute transfer.
TRANSMISSION:

Explain the historical background of intellectual property. Is there economic value of

IP?

Intellectual property law dates at least as far back as medieval Europe. In those times,
guilds, or associations of artisans in a particular industry, were granted authority by the
governments to control the regulation and conduct of the various industries. These guilds
exercised control over what items could be imported, marketed and produced and the manner
in which new inventions, devices and procedures could be introduced to the stream of
commerce. Because the authorities for these guilds were given by the governments, and
because they concentrated the power to regulate an industry in a select few, and were not
earned by innovation, skill or creativity, these guilds did far more to stifle creativity and
invention than to encourage it. Renaissance northern Italy is thought to be the cradle of the IP
system so the concept is not a new one. A Venetian law of 1474 made the first systematic
attempt to protect inventions by a form of patent, which granted an exclusive right to an
individual. In the same century, the invention of movable type and the printing press by
Johannes Gutenberg around 1440 contributed to the birth of the first copyright system in the
world.
Towards the end of the 19th century, inventive new ways of manufacture helped trigger largescale industrialization accompanied by such phenomena as rapid city growth, expanding
railway networks, the investment of capital, and growing transoceanic trade. New ideals of
industrialism, the emergence of stronger centralized governments, and stronger nationalism
led many countries to establish their first modern IP laws.
Intellectual property law at that time was driven not by an interest in creation and innovation,
but rather by political and religious motivations. For example, the 1556 establishment of the
Stationers Companys monopoly in England was largely intended to help limit the Protestant
Reformation movement's power. By putting the entire printing industry in the control of this
company, the government and church could prevent the dissemination of ideas.
See Copyright for the Nineties, Gorman and Ginsburg, 1, the Michie Company (1993). See
also Intellectual Property: The Law of Copyrights, Patents and Trademarks, Schechter and
Thomas, 13, West Group (2003) (stating the monopoly was granted in 1557).
HISTORICAL BACKGROUND
1) Great depression of 1930s of international trade
2) Many countries imposed restriction for their safe guards.
3) 30 October 1947:23 countries signed on GATT.
4) To settle disputes regarding who gets what share of the world trade.
5) Enforced on 1st Jan 1948.
6) 8th round: September 1986: Urugvay.

7) Mr. Arther Dunkel, then Director General compiled detailed document known
as DUNKEL PROPOSAL. In this, namely, agriculture, service & TRIPs, were
included.
8) 15th April 1994: Morocco: 124 countries signed an accord to give rise to WTO.

IPR DEVELOPMENTS IN INDIA

1) 1947: Patents & Designs Act, 1911
2) 1995: India joins WTO
3) 1998: India joins Paris Convention/PCT
4) 1999: Patent amendment provided EMR retrospectively from 1/1/95
5) 2003: 2nd amendment in Patents Act
6) Term of Patent 20 years after 18 months publication
7) Patent Tribunal Set up at Chennai
8) 2005: Patents (Amendment) Act 2005
9) 1999 2005: Plant Varieties and Farmers Rights Act & Biodiversity Act.
Designs, TM/Copyright Acts updated GI Registry set up at Chennai. IP Acts TRIPS
Compliant
The Economic Theory of Intellectual Property Julius Stone, in his work Social
Dimensions of Law and Justice, says, It has been seen that claims of economic purport are
entangled wth law in some of the most intimate claims of personality. Roscoe Pound too
commented on the classifications of claims to control valuable things to the exclusion of
others. The argument of Julius Stone, who propounded the Economic Theory, argued that the
maximum production of goods and services is the aim of the society. It can be achieved by
means of maximum productivity. On scrutiny, it can be found that the quality, quantity and
nature of production is correlated and geared to increase the individual profits. The desire for
individual profits which is paramount, subordinates all the ends, useful to the society.
Secondly, private property by itself does not result in the increase of certain things. It is
proved by experiments that land yielded more fruts under the government care than under
private ownership. The conomic reason for creating such a property right is also obvious. It is
argued that unless the inventor is given the monopoly right to exploit his invention or

innovation, the inventor will neither have impetus to invent things nor invest huge amounts of
money that the research and development requires for inventing new ideas and newer
technologies. This would adversely affect the progress of every nation.
Intellectual property is a 'power tool' for economic development and wealth creation that has
not yet being used to optimal effect in all countries, particularly in the developing world.
Within every regime, building IPR protection systems through laws, mainly consider two
reasons. One is to promote investments in knowledge creation and innovation by establishing
exclusive rights to use and sell newly developed technologies, goods, and services; for
knowledge is a kind of non-rival merchandise, which is easy to be obtained by the public.
Without protection from the laws, the imitators can easily reproduce the advanced technology
without paying any cost for the research work. The imitators can easily offer a more
competitive price and gain more profit than the innovators, with a lower cost. Hence, they
would be less willing to invest on the research and innovation process in the under protection
situation. All producers would like to share the free advanced knowledge developed by others
rather than investing a lot of MONEY , human capital, and time on high risk and expensive
research work. With protection from the IPR system, the innovators and creators could gain
additional profit through monopoly protection; they would be more willing to spend physical
capital and human resources on innovation activities with the expectation of gaining more
monopoly profit.
It is a practical guide to using those intangible assets, such as, knowledge, information,
creativity, and inventiveness, which are rapidly replacing traditional and tangible assets, such
as, land, labor, and capital, as the driving forces of economic health and social well-being.
For many years, economists have tried to provide an explanation as to why some economies
grow fast, while others do not; in other words, why some countries are rich and others poor. It
is generally agreed that knowledge and inventions have played an important role in recent
economic growth. The renowned economist Paul Romer suggests that the accumulation of
knowledge is the driving force behind economic growth. For countries to promote growth, his
theory states, that their economic policies should encourage investment in new research and
development (R and D) and subsidize programs that develop human capital.
In the 1990s, an increasing number of policy-makers in the emerging economic powers
recognized the important role played by the IP system in the institutional infrastructure for
encouraging private investment in R and D, especially in the industrial and scientific fields.
Many studies suggest a healthy IP system as a key element in encouraging foreign direct
investment (FDI). An increased and steady level of FDI in India, for example, has been
evident ever since the patent and trademark reform was introduced in the early 1990s
(Reserve Bank of India data). An even more dramatic development has taken place in Brazil
with spectacular growth in FDI, following the introduction of a new industrial property law in
1996 ($4.4 billion in 1995 to $32.8 billion in 2000) (Banco Central do Brasil data). Foreign
direct investment occurs when a TRADE Negotiations Committee (TNC) has a sufficient
cost or technological advantage over firms in the host country to offset the higher costs of
operating
internationally.

The tendency of firms to patent their inventions has similarly increased worldwide and is
particularly noticeable in Japan, the United States, and Europe. In Japan, it took 95 years to
grant the first million patents, whereas, it took only 15 years to grant the next million.
Applications for patents are also increasing in developing countries. It is generally agreed that
technology and knowledge have played an important role in economic growth, however,
when it comes to exploring these issues in a multi-jurisdiction context, the most relevant
analyses are those that examine a world composed of two types of countries: a developed,
innovating 'North' and the developing countries. The main concerns have been whether
increased IPR protection in the Developing countries would increase (a) the rate of (global)
growth, (b) the rate of technology transfer from the North to the Developing countries, and,
(c) welfare levels in both locations. A straightforward partial equilibrium analysis reveals that
while the North always benefits from stronger IPR protection in the Developing countries, the
Developing countries themselves are found to benefit only when the R and D is highly
productive, such that, the R and D induced by stronger IPR protection in the Developing
countries results in significant cost reductions when the Developing countries comprise of a
large share of the overall market for the goods (Chin and Grossman, 1990). Intellectual
property could be called the 'Cinderella' of the new economy. A drab, but useful servant,
consigned to the dusty and uneventful offices of corporate legal departments until the princes
of globalization and technological innovation - revealing her true value - have swept her to
prominence and given her an enticing new allure. Not so long ago, protecting and managing
intellectual property was a fairly quiet field of endeavor, not given to making headlines or
causing ripples in the stock market. However, in the space of a few years, IP issues have
come to feature regularly as major news items and have taken their place as a key element in
corporate strategy, affecting company ratings.
Study after study confirms that strong intellectual property rights are beneficial. In an
UNIDO (United Nations Industrial Development Organization) review of close to 200 studies
on intellectual property rights and economic growth, Falvey, Foster and Memedovic (2006)
find overwhelming evidence that strong intellectual property rights protection generates
economic growth.[2] Moreover, while the impact depends on the countrys level of
development, this powerful result holds true for industrialized and developing nations. For
high-income countries, their analysis concludes that strengthening intellectual property rights
leads to growth through increased innovation and technological diffusion. For middleincome countries, they establish that a more robust IPR environment boosts domestic
innovation. Although stronger IPR protection will preclude imitation, domestic firms benefit
from technology diffusion through foreign patenting and international trade, all of which can
lead to economic growth. Finally, for low-income countries, the authors conclude that
increased IPR protection encourages growth, but the manner in which this is manifest is not
yet known.
The bottom line is that decades of study and scores of researchers demonstrate that a robust
intellectual property rights regime is beneficial to economic development. Fundamentally,
strong IPRs are an essential foundation for long-term growth. Moreover, this happens

through a variety of welfare-enhancing channels, including technology transfer, tacit skill

acquisition, education, job creation, wage growth, and foreign direct investment.
While the big picture undeniably indicates that stronger intellectual property rights are good
for economic development and growth, it is also worth focusing on the details of this process
and the microeconomic ways in which this takes place. First, the ideas and innovations
protected by intellectual property rights are the engines of economic growth that spur
development. IP-intensive industries sustain greater long-term economic growth and job
creation.
IP-intensive industries pay higher wages, generate more sales and value-added, and result in
more exports, R&D spending and capital spending. Among the key findings of his analysis
are the following benefits of IP-intensive industries:
IP-intensive industries sustain greater long-term economic growth.
IP-intensive industries accounted for approximately 60% of total US exports (2000-2007).
During 2000-2007, the annual value of exports-per-employee was 235% higher in IPintensive industries than non-IP-intensive industries.
IP-intensive industries pay both highly-skilled and low-skilled employees relatively more
than non-IP-intensive industries pay their employees. Wages are 60% higher on average and
40% higher for low-skilled employees relative to non-IP-intensive industries.
Beyond these benefits, robust intellectual property rights are an essential component of a
nations economic infrastructure and a prerequisite for attracting Foreign Direct Investment
(FDI). Foreign Direct Investment is far more than an investment of FINANCIAL and
capital resources. FDI results in technology transfer, the dissemination of new management
and production techniques, the transfer of tacit knowledge, productivity gains and job
creation.
A recent study by Shapiro and Mathur reviews the economic impact of FDI on growth and
development in developing nations. In countries as disparate as Mexico, Indonesia, China
and Russia as well as India FDI has been shown to have strong, positive effects on a
countrys growth, productivity and incomes. These positive effects reflect not only the direct
benefits from applying the technologies and business methods brought in through FDI, but
also spillover effects from domestic workers learning new skills and domestic companies
adopting the new technologies and business methods. (Shapiro & Mathur 2014, p.2) India
is an apt point of comparison, an economically vibrant Asian nation clinging to a weak,
ineffectual intellectual property rights regime. The authors conclude that if India achieved
greater levels of intellectual property protection equivalent to those of China, annual FDI
inflows would increase by 33% annually. Further, if India achieved levels of intellectual
property protection equivalent to the United States, the benefits would be greater still,
increasing FDI by as much as 83% annually by 2020.

In addition to increasing Foreign Direct Investment, stronger IP regimes attract greater

spending on research and development (R&D). Again, to contrast the experiences of India,
China and the United States, it is illustrative to consider their abilities to attract global R&D
spending. In 2009, the U.S. share was 34%, which has now dropped to 31%. Over the same
five year period, Chinas share has risen from 10% to nearly 18%. India, with its inadequate
intellectual property rights regime, currently attracts a mere 2.7% of global spending on
research and development.
While all nations have a great deal to gain from attracting FDI and research spending from
multinational firms, developing nations in particular stand to gain tremendously.
These investments create jobs, enhance productivity, and foster economic growth and
development. However, robust intellectual property rights are a necessary prerequisite. The
activists and government policymakers who claim that IP rights are a barrier to economic
development have it backwards. Strong intellectual property rights incentivize innovation
which facilitates economic growth and development. The benefits of intellectual property
rights are well established and impossible to deny, translating into greater prosperity for
nations, industries, firms and individuals. We all stand to gain from enhancing IP rights,
industrialized and developing nations alike.

Critically examine the application of general principles of contract to IPR contracts.

According to Section 10 of the Indian Contract Act, 1872, all agreements are contracts if they
are made by the free consent of parties competent to contract, for a lawful consideration and
with a lawful object and are not expressly declared to be void. In order to become a contract,
an agreement must have the following essential elements/principles that are applicable to IPR
contracts too in India.
1) Offer and acceptance there must be two parties to an agreement one party making the
offer and the other accepting it. The terms of offer must be definite and the acceptance
must be absolute and unconditional and conveyed according to the mode prescribed and
communicated to the offeror.
2) Intention to create legal relationship -- when the two parties enter into an agreement,
their intention must be to create legal relationship between them. If there is no such

intention on the part of the parties, ther is no contract between them. Agreements of a
social or domestic nature do not contemplate legal relationship. As such, they are not
contracts. (Balfour v. Balfour 1919). In commercial and business agreements, the
presumption is usually that the parties itended to create legal relations unless rebuttable by
evidence. In Rose & Frank Co v. Crompton Bros 1925 AC 445, it was held there was no
binding contract as there was no intention to create legal relationship.
3) Lawful consideration Consideration means something in return. The agreement is
legally enforceable only when both the parties give something and get something in return.
It need not necessary be in cash or kind. It may be an act or abstinence or promise to do or
not to do something. It may be past, present or future and need not be adequate. But it
must be real and lawful.
4) Capacity of the parties/competency The parties to the agreement must be capable of
entering into a valid contract. Every person is competent to contract if he/she (a) is of the
age of majority (b) is of sound mind and (c) is not disqualified from contracting by any
law to which he is subject (Sections 11 and 12). Flaw in capacity to contract may arise
from minority, lunacy, idiocy, drunkenness, etc., and status. If a party suffers from any
flaw in capacity, the agreement is not enforceable except in some special cases.
5) Free and genuine consent it is essential to the creation of every contract that there must
be a free and genuine consent of the parties to the agreement. The consent of the parties s
said to be free when they are of the same mind on all the material terms of the contract.
(Sec.13) There is absence of free consent, if the agreement is induced by coercion, undue
influence, fraud, misrepresentation, etc (Sec.14).
6) Lawful object (Sec.23) the object of the agreement must be lawful. In other words, it
means that the object must not be illegal, immoral or opposed to public policy. If an
agreement suffers from any legal flaw, it would not be enforceable by law.
7) Agreement not declared void the agreement must not have been expressly declared
void by any law in force in the country (Secs. 24 to 30 and 56). The Indian Contract Act,
1872, provides a framework of rules and regulations governing the formation and
performance of a contract in India. It deals with the legality of non-compete covenants and
stipulates that an agreement, which restrains anyone from carrying on a lawful
profession, TRADE or business, is void to that extent. Agreement in restraint of trade is
defined as the one in which a party agrees with any other party to restrict his liberty in the
present or the future to carry on a specified trade or profession with other persons not
parties to the contract without the express permission of the latter party in such a manner
as he chooses. Negative covenants operative during the period of contract when the
licensee is bound to serve the licensor exclusively are not regarded as restraint of trade and
do not fall under Section 27 of the Act. Section 27 of the Act implies that, to be valid, an
agreement in restraint of trade must be reasonable as between the parties and consistent
with the interest of the public. Recently, in an appeal (Homag India Pvt. Ltd. vs. Mr.
Ulfath Ali Khan and IMA AG Asia Pacific PTE. Ltd) preferred against trial judge's order
on appellant's application for temporary injunction in a suit filed to restrain the defendants
from dealing or transacting in any manner utilizing Homag India's confidential
information / trade secret.

8) Certainty and possibility of performance the agreement must be certain and not value
or indefinite (Section 29). If it is vague and it is not possible to ascertain its meaning, it
cannot be enforced. Scammel v. Ouston O agreed to purchase a motor van from S on
hire purchase terms. The hire purchase price was to be paid over two years. Held, there
was no contract as the terms were not certain about rate of interest and mode of payment.
No precise meaning could be attributed to the words on hire purchase since there was a
wide variety of hire purchase terms.
9) Legal formalities A contract may be made by words spoken or written. As regards the
legal effects, there is no difference between a contract in writing and a contract made by
word of mouth. It is, however, in the interest of the parties that the contract should be in
writing. There are some other formalities like stamping of the documents, registration, etc.,
in the presence of witnesses, etc. (Sec.10 para 2).

What is IP licensing? Explain types of licensing agreements.

There are various ways in which the owner of the intellectual property could invite others to
utilize his property. One way is to commit the intellectual property to public domain. This is
similar to gift. Another way is to assign all the rights to another person in return of some
consideration which is assignment and this is analogous to sale of property. Yet another way
is to selectively grant certain rights and withhold others. This is known as licence.
The word licence has been derived from the Latin term licentia meaning freedom or liberty.
To licence or grant licence is to give permission. So, a licence is the formal granting of
permission by someone who owns rights to someone else to use them. Traditionally, a licence
is a grant of party for a party to enter into the physical property of another, that is, an
agreement not to hold the party liable for unlawful trespass. With respect to intellectual
property, a licence is a promise not to sue a party for actions that would otherwise constitute
infringement. In other words, a licence is permission to make use of anothers intellectual
property under carefully laid out conditions and terms.
Law confers exclusive rights to the owners of intellectual property to do various acts. An
infringement occurs if any one of these acts is done without licence. A licence, therefore,

passes no interest but merely makes lawful that which would otherwise be unlawful. (Canon
Kabushiki Kaisha v. Green cart Ridge Co (Hong Kong) Ltd (1997) AC 728 (PC). A licence is
generally recognized as having the legal effect of waiving a right to sue or prosecute. The
licensee for conduct that without the licence, would be actionable. Thus, a patent licence is a
waiver by the patent owner of his right to exclude the licensee from making, using, selling,
offering for sale or importing the claimed invention.
At the barest minimum level, a licence is a mere covenant not to sue or otherwise enforce
intellectual property rights against the licensee when the licensee acts within the scope of the
licence.(General Talking Pictures Corporation v. Western Electric Co 305 US). However, this
definition reflects only a part of the modern practice of licensing. It is narrow in its scope and
the barest minimum aspect of it. Though it helps explain an important aspect of licensing, ie.,
its passive part. Modern licensing practices often entail more active commitments by the
licensor and more dynamic expectations by the licensee regarding his ability to use the
licensed property. Accordingly, the extent of rights granted in a licence may span from a mere
permission to use the licensed property in some limited manner (non exclusive licence) to all
but ownership of property (exclusive licence).
A licence is that transfer of intellectual property which does not affect the monopoly of the
owner, except by estopping him from exercising his prohibitory powers in derogation of
privileges conferred upon licensee. As a matter of law, a license is a grant of rights that
represent less than all of the rights which would accompany full ownership.
In a license, there is no transfer of proprietary interest because by licensing, the owner retains
the ownership to the rights to that intellectual property and thus retains proprietary control
over it. Simply put, a licence grants the licensee rights in property without transferring
ownership of the property. According to the general principle of Common law a licence does
not confer proprietary rights, but merely makes lawful what would otherwise be unlawful.
(Heap v. Hartley (1889) 42 ChD 468.
For temporal divisions, an intellectual property owner may license his rights for a
period which is less than the full term of the intellectual property. For example, the owner of
a trade mark may grant the right to use his trade mark for a period of five years or the owner
of copyright in a novel may grant distribution rights to a licensee for a period of ten years.
Substantially, a patent owner may licence a manufacturer to make the patented invention
while reserving the right to sell the invention or the owner of copyright may grant the right to
translate his work in a particular language while reserving the right to sell the invention or the
owner of copyright may grant the right to translate his work in a particular language while
reserving other rights to himself. In Penguin Books Ltd. v. India Book Distributors and
others, the plaintiff, Penguin Books Ltd, who was the owner of copyright, filed a suit against
certain Indian book distributors. It was contended by the plaintiff that importation of
American editions by defendant distributors without a licence for the purpose of resale in
India is an infringement of his copyrights. The defendants contended that they had lawfully
purchased published books in America and had imported them into India for sale, so they are

not guilty of infringing the plaintiffs copyright. The court held that importing and selling the
books without a licence would amount to violation of plaintiffs copyright. Importation is
forbidden unless a licence has been given.
The question of whether one can licence to oneself has been decided in Texmo Industries,
Coimbatore & Others v. Aqua Pump Industries & Others 2004 Ubdkaw IPAB 103 2005 (31)
PTC 335. The facts of the case were that the trade mark Texmo was adopted by a partnership
firm consisting of two brothers and the mark was registered jointly in their name. Later, two
sister partnership firms were constituted wherein also the same two brothers were partners
and these new firms were permitted by way of a licence to use the trademark Texmo as
against a royalty at the rate of 1% of net sales. Subsequently, with the demise of one of the
partners, a division of business was decided, where both partners/successors entered into a
separate agreement for the proprietorship and use of the trade mark by all the three firms
respectively. By virtue of the agreement, the first firm went in the share of successor of one
brother and the other two firms went in the share of the second brother. The relevant clause
for sharing of the trade mark as: the party of the second part hereby agrees and do not have
any objections to the said firms AQUA in applying for, owning and using the said trade
marks only in respect of those products being manufactured or to be manufactured by the said
firms AQUA specifically described in Schedules I and II. It was the case of the respondents
that under the said agreement, they have been assigned the trade mark Texmo. On the
contrary, it was the case of the applicants that no such assignment was given and what was
granted was only a licence. The Intellectual Property Appellate Board held that all the three
firms are proprietors of the trade mark in respect of their respective products. The board
reasoned: When once the partners of the partnership firm are the registered proprietors of the
trade mark till the dissolution of the partnership comes into effect, the partners of the firm are
deemed to continue as the proprietors of the registered trade mark. Hence, both the brothers,
as partners are the registered proprietors of the trade mark. When on their own volition, the
new firms were constituted and the manufacture of products was divided, there cannot be any
licence in favour of the newly constituted firm. The partners being the registered proprietors
of the trade mark cannot grant any licence to use the trade mark in their own favour.
Types of Licences
As L. Kenneth opined in his book Licensing Intellectual Property in the Information Age, the
intangible nature of intellectual property provides marvelous opportunities for splitting the
baby without killing it. Just as there are no real limits to the bargains we can make, there is no
limit to the type of contracts we can create. Effective licensing strategies and ways are,
therefore, virtually unlimited. Licences come in many forms, taking their hue and substance
from their subject matter, transactional type and the purpose. They are:
1) Exclusive Licence -- There is no single or comprehensive definition of an exclusive
licence, which concept is present in the Copyright Act, 1957, Trade Marks Act, 1999 and
Patents Act, 1970 but these statutes do not define the expression. An exclusive licence
divests the licensor of the rights to grant further licences of the rights licensed. It also

deprives the licensor himself from exercising th rights thus granted. Since an exclusive
licence has practically the same rights and remedies as if the licence were an assignment,
it follows that the rights granted by such licence must be capable of forming the subject
matter of a valid assignment. That does not mean that a particular intellectual property
could be exclusively licensed to only one person. The monopoly rights secured by an
intellectual property can be exclusively licensed out in ways limited only by the
imagination of the parties. A clever division and apportionment of these rights would
permit the intellectual property owner to imaginatively issue several exclusive licences to
different licensees simultaneously. This creates room for enormous creativity in the
licensing activity.
2) Non-Exclusive Licence -- Exclusivity comes in degrees. Only the extreme case where
even the licensor is excluded from exploiting the property is described as exclusive
licence , while while all others are variations of non exclusive licences. Non exclusive
licences permit the licensor to grant further licences as desired and thus a non exclusive
licence is normally considered as being a mere agreement by licensor not to sue the
licensee for infringement so long as the licensee complies with all the terms and
conditions of the licence. The licensor remains free to use the licensed rights himself and
to grant additional licenses to others. Normally, it is clear what an exclusive or a non
exclusive license is but again it does no harm to spell it out in the contract.
3) Sole Licence In case of sole licence, the licensee is the nly licensee in that territory or
for the right licensed. This is different from an exclusive licence wherein the licensor
himself will not compete. Sole licences mean that the licensor remains free to compete
with the licencee but he will not grant licences to others. If the licence is exclusive then it
is not sold and if it is sole, then it cannot be exclusive. Even if we assume that there are
only two variants of licences, ie., exclusive and non exclusive, still sole licence would be
described as genre of non exclusive licence. Therefore, a licence should not be described
as sole and exclusive, as this phrase is oxymoronic and its use can only create confusion.

4) Implied Licence A contract could either be express or implied as per the Indian contract
Act, 1872. Implied licences can result from the conduct of parties where no written
contract has been signed. It is also possible for the owner of the intellectual property to
allege tht the conduct of an infringer was such as to imply acceptance of a licence.
However, the existence of an implied licence is ultimately determinable based upon
theintention of the parties and the scope of such licence depends on the circumstances
surrounding the creation of such licence. An implied licence may also result by estoppels.
Conduct by the owner of intellectual property to place himself in a situation where he
must suffer injury, unless such right to practice the invention is conceded, will be
regarded as implying such right. Where no objection had been raised by the owner of the
copyright to the alleged use by the plaintiff, the court refused to imply an oral licence
(Babulal Products Pvt. Ltd. v. Zen Products 2005(31) PTC 135). In Houghton Mifflin Co

v. Rajinder Kumar Aruya, the defendant was plaintiffs licensee with authorization to
reprint and market books for a period of five years. On the expiry of the said term of the
licence, the parties entered in some negotiations to extend licence. During these
negotiations, the defendant licensee, without permission of the licensor reprinted and
marketed certain books in respect of which license had expired. The court held that in the
presence of specific mandate of the Copyright Act requiring a written licence, no implied
licence could be made out.
5) Inchoate Licence -- Law is generally anxious to uphold he contract wherever possible
lest it should be criticized as the destroyer of bargain. (Hillas v. Arcos (1932) 147 L.T.
503). Law expects the parties to make their own contract and it is hesitant to construct a
contract for them out of terms that are indefinite and uncertain. Therefore, even after
reaching an agreement in the sense of complying with the formal requirements of
proposal, acceptance, consideration, etc., a licence may not be valid contract because it
contains terms that are uncertain, unsettled, indefinite or vague. A contract cannot arise if
a material term is neither settled nor implied by law and the document contains no
machinery for ascertaining it. The maxim Id certum est quod certum redid potest means
that is certain which is capable of being made certain. Sometimes the agreement is
qualified by reference to the need for a future agreement between them. In Rickmers
Verwaltung GmbH v. Indian Oil Corporation Ltd., the Supreme Court of India stated that
the intention of the parties is to be gathered only from the expressions used in the
correspondence. A contract will not fail for uncertainty even though a material term is to
be agreed in future if the contract itself provides machinery for ascertaining it.
6) Compulsory Licence At first sight, the expression compulsory licence or compulsory
contract appears to be a contradiction in terms. This is especially true in the backdrop of
the classical will theory of contract law, according to which a contract is the result of
exercise of free will of the parties. Contract has always been known as voluntarily created
civil obligation. The very foundation of classical theory of contract is free consent of the
parties while the word compulsory cannotes absence of it. Though the freedom of parties
to contract or not is a paramount value under the law of contract, yet the Supreme Court
has stated that in exceptional situations for public good limited exceptions can be made.
In Salar Jung Sugar Mills Ltd., India Sugars and Refineries Ltd. v. State of Mysore, a
Constitution Bench of the Supreme Court has held that statutory orders regulating the
supply and distribution of goods by and between the parties under Control Orders do not
absolutely impinge on the freedom to enter into a contract. The aspect of compulsory
contracts becomes relevant in the context of compulsory licensing of patents, lay out
designs and copyrights.
7) Statutory Licence A statutory licence is a genre of compulsory licence in copyright
parlance. It allows the use of content under reasonable and non discriminatory terms. This
is compulsory because under this scheme, the one who wishes to use a work does not
need the permission of the copyright owner but instead merely files the proper notice and
pays a set fee established by statute for every copy made. A statutory licence can also be

seen as an exception to copyright because it takes away the normal right of a copyright
owner to determine whether and how to grant a licence. Statutory licence is different from
collective licensing of copyright because under collective licensing copyright owners may
give direct permission to a copyright society to licence their works for royalties but as it is
an exercise of the owners rights, this is not a statutory licence. Statutory licences are
efficient because they do not require the person using the works to obtain separate
licences from each copyright owner.
8) Electronic Licences --- Electronic licences have evolved as a result of the impact of
computer technology which has provided easy access to e-mail and the internet. The result is
the establishment of a new type of contract which often appears on a computer screen and
invites acceptance by clicking on the acceptance symbol.
9) Assignable and Non-Assignable Licences A licence may be assignable, ie., it may be
transferred or assigned by the licensee to a third party who then stands in the shoes of the
original licensee. On the other hand, a non assignable licence is the one which cannot be
so assigned. In actual practice, most licences would be neither assignable without any
restrictions nor absolutely non-assignable. That means they could be assigned under
certain defined conditions.
10) Cross Licence From the standpoint of a business enterprise, licensing-in would mean
obtaining a licence of an intellectual property belonging to another. Licencing out would
mean that the business enterprise has allowed others to exploit its intellectual property.
Cross licensing means that a business enterprise has allowed its intellectual property to be
used by another and in return it gets a right to exploit that others intellectual property.
Cross licences are particularly relevant in patent and technology licensing.
11) Single and hybrid licences In single licensing only one kind of intellectual property is
licensed. For example, the author of a book licensing the publisher to publish the book
involves only copyright. In hybrid licensing, more than one tool of intellectual property is
granted. For example, franchising or technology transfer would usually involve the grant
of multiple intellectual properties like patents, trade secrets, trade marks, etc. The
majority of licences in todays business world involve more than one licensed intellectual
property right.
THE ARBITRATION AND CONCILIATION ACT, 1996. BASIC FEATURES OF THE
ACT.
(i) The Arbitration Act, 1940 was repealed by this legislation to cover Domestic
Arbitration, International Commercial Arbitration and enforcement of Foreign Arbitral
Awards and also to define the law relating to conciliation and for matters
(ii) This Act was framed and passed taking into account the UNCITRAL (United Nations
Commission on International Trade Law) Model Law. The objective is to bring out a uniform
Law in the international arena on arbitration and conciliation.
(iii) A new meaning has been provided to the term Arbitration Agreement.
(iv) A separate challenge procedure on the appointment of the arbitrators and also on the
jurisdiction of the arbitral tribunals has been provided.

(v) The arbitral awards need not be made into a Rule of Court. The awards are executable
as if they are decrees of a Court subject to the provisions of the Act on appeals.
(vi) Provisions have been made for enforcement of foreign awards under Part II of the Act.
(vii) Under Part III of the Act, for the first time conciliation has been recognised as a legally
valid method of alternative dispute resolution.
(viii) The appointment of arbitrators by a Court has been simplified.
(ix) The Arbitration Act 1940, the Arbitration (Protocol and Convention) Act, 1937 and the
Foreign Award (Recognition and Enforcement) Act, 1961 have been repealed since the
subjects have been covered under this Act.
(x) The Scheme of the Act:
The statement of objects and reasons depict the purpose and the necessity of enforcing this
legislation.
The main objectives of the Bill are as under:
(i) to comprehensively cover international 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.
The contents of the Act follows:
the Chief Justice of India and Chief Justices of High Courts framed schemes for appointment
of arbitrators and the necessary Rules are also framed.
(xii) Territorial Jurisdiction:
This Act applies to the whole of India except to the State of Jammu and Kashmir. The
State of J&K has enacted a separate J&K Arbitration and Conciliation Act, 1997.
(xiii) Applicability of the Act:
This Act applies to national (domestic) arbitration whether it is commercial or non
commercial.
This Act also applies to international arbitration if the disputes are only commercial in
nature.
(xv) Constitutional sanctity:

As per Entry 13 of the List - III (Concurrent List) of the VII Schedule, both State and Central
Governments can legislate on arbitration matters.
(xvi) Statutory Arbitral Tribunals
Certain arbitral tribunals are constituted by a special State Act and such tribunals are
not governed by this Act. Those tribunals are called Statutory Tribunals like the Co-operative
Tribunals in different states under the respective State Co-operative Societies Act.

SECTION 89 OF CPC AND SECTIOIN 10 OF INDIAN CONTRACT

Section 89 (1) of CPC deals with the settlement of disputes outside the court. It provides that
where it appears to the court that there exist elements, which may be acceptable to the parties,
the court may formulate the terms of a possible settlement and refer the same for arbitration,
conciliation, mediation or judicial settlement.1 While upholding the validity of the CPC
amendments in Salem Advocate Bar Association, Tamil Nadu v. U.O.I, 2 the Supreme Court
had directed the constitution of an expert committee to formulate the manner in which section
89 and other provisions introduced in CPC have to be brought into operation. The Court also
1
2

directed to devise a model case management formula as well as rules and regulations, which
should be followed while taking recourse to alternative dispute redressal referred to in
Section 89 of CPC. All these efforts are aimed at securing the valuable right to speedy trial to
the litigants.3
ADR was at one point of time considered to be a voluntary act on the apart of the parties
which has obtained statutory recognition in terms of Civil Procedure Code (Amendment)
Act, 1999; Arbitration and Conciliation Act, 1996; Legal Services Authorities Act, 1997
and Legal Services Authorities (Amendment) Act, 2002. The access to justice is a human
right and fair trial is also a human right. In India, it is a Constitutional obligation in terms of
Art.14 and 21. Recourse to ADR as a means to have access to justice may, therefore, have to
be considered as a human right problem. Considered in that context the judiciary will have an
important role to play.4
CONTRACT ACT
Fix the date of appearance before such forum or authority as opted by parties.
According to Section 2 (1) (b) of the Arbitration and Conciliation Act, 1996 an arbitration
agreement means an agreement referred to in Section 7 of the Act.
According to Section 7(1)(Chapter-II) of the Arbitration and Conciliation Act, 1996, an
arbitration agreement means an agreement by the parties to submit to arbitration all or
certain disputes which have arisen or which may arise between them in respect of a defined
legal relationship, whether contractual or not.
Further, according to Section 7(2) of the Act, an arbitration agreement may be in the form of
an arbitration clause in a contract or in the form of a separate agreement.
Under Section 7(3) of the Act, the agreement shall be in writing.
Under section 7(4) the term writing is explained. Accordingly, an arbitration agreement is
in writing if it is contained in: (a) a document signed by the parties;
(b)
an exchange of letters, telex, telegrams or other means of telecommunication which
provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is
alleged by one party and not denied by the other.
Under Section 7(5) of the Act, the reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the contract is in writing and the
reference is such as to make that arbitration clause part of the contract.
ESSENTIAL INGREDIENTS OF ARBITRATION AGREEMENT.
As per the aforementioned definition, an arbitration agreement must be in writing in
whatever form it may be. This definition under Section 7 of the Act resembles the definition
stated in the New York and Zeneva Conventions.
Accroding to section 2(h) of the Act an agreement enforceable by law is contract.
The section 10 gives those essential elements which would make an agreement enforceable.
Section 10 of the Act defines what agreements are contracts. According to section 10 all
agreements are contracts if they are made by
3
4

a) Free consent
b) Parties competent to contract
c) Lawful consideration
d) Lawful object
e) Not declared to be void.
The Supreme Court of India, in K.K. Modi vs. K.M. Modi, 1 laid down the essential
ingredients of arbitration agreement as follows:
(i) The agreement must comply with the requirements as stated under Section 7 of the
Arbitration and Conciliation Act, 1996.
(ii) The agreement must also be legally valid in accordance with the following provisions
of the Indian Contract Act, 1872:(a) Competency of the parties under Sections 11 and 12;
(b) Mutual consent of the parties under Sections 13 to 22;
(c) As to lawfulness of subjects under Sections 23 to 27 and 30;
(d) Certainty of agreement under Section 29;Section 10 of Indian Contract Act:
CONCILIATION
Conciliation is a process wherein the parties to a dispute appoint a neutral third party to assist
them to resolve their disputes in an amicable manner. The law is clearly laid under Sections
61 to 81 of the Arbitration and Conciliation Act, 1996. The conciliator assists the parties in
an independent and impartial manner in their attempt to reach an amicable settlement of their
dispute. Once a settlement is reached by the parties, it must be reduced into writing on an
appropriate stamp paper as per the State Law and it should be signed by the parties and
further authenticated by the conciliator. The Settlement Agreement so signed then shall
become a Decree of Court of Law by itself.
Conciliation under Section 89 of CPC
The Supreme Court in Afcons Infrastructure Ltd., and another Vs. Cherian Varkey
Construction Co. (P) Ltd., and others {(2010) 8 SCC 24} decided held as Conciliation is a
non-adjudicatory ADR process, which is also governed by the provisions of A&C Act. There
can be a valid reference to conciliation only if both parties to the dispute agree to have
negotiations with the help of a third party or third parties either by an agreement or by the
process of invitation and acceptance as provided in Section 62 of the A&C Act followed by
appointment of conciliator / s as provided in Section 64 of A&C Act. If both parties do not
agree for conciliation, there can be no conciliation. As a consequence, as in the case of
arbitration, the court can not refer the parties to conciliation under Section 89, in the absence
of consent by all parties. As contrasted from arbitration, when a matter is referred to
conciliation, the matter does not go out of the stream of court process permanently. If there is
no settlement, the matter is returned to the court for framing issues and proceeding with the
trial.
Under Section 61(1) of the Act, subject to any law for the time being in force and subject to the
agreement of the parties, Part III of the Act applies to conciliation of disputes arising out of legal
relationship, whether contractual or not and to all proceedings
under Section 61(2) of the Act these provisions shall not apply to such disputes which may not be
submitted to conciliation by virtue of any law for the time being in force.
2. COMMENCEMENT OF CONCILIATION PROCEEDINGS
2.1 Basic features
(a) Written invitation
The party inclined to adopt the method of conciliation shall send to the other party a written
communication inviting him to conciliate [Section 62(1)].
(b) Written acceptance

The other party must accept this invitation in writing. Conciliation proceedings commence on such
written acceptance [Section 62(2)].
(c) Effect of rejection of invitation
If the other party rejects the invitation to conciliate, there will be no conciliation proceedings [Section
62(3)].
(d) Effect of silence to invitation
If the party initiating conciliation does not receive a reply within thirty days from the date on which
he sends the invitation, or within such other period of time as specified in the invitation, he may elect
to treat this as a rejection of the invitation to conciliate and if he so elects, he shall inform in writing
the same to the other party [Section 62(4)].
SUBMISSION OF STATEMENTS
3.1 Appointment of conciliators
Section 63 advocates that there can be one, two or three conciliators to settle a dispute subject to the
agreement of the parties and where more than one conciliator is appointed they must act jointly as a
general rule.
Section 64 contains provisions on the appointment of conciliators.
Submission of statements
in conciliation also submission of written statement is required but with a difference. Upon
appointment of a conciliator, under Section 65 of the Act, each party shall submit a brief written
statement describing the general nature of the dispute and points at issue, under service to the other
party.
COMMUNICATION BETWEEN CONCILIATOR AND PARTIES
Section 69 of the Act advocates that the conciliator may invite the parties to meet him or may
communicate with them orally or in writing. T the other party to know that partys version.
SUGGESTIONS FOR SETTLEMENT
Under Section 72 of the Act, each party may, on his own initiative or at the invitation of the
conciliator, submit to the conciliator suggestions for the settlement of the dispute.
CONFIDENTIALITY OF INFORMATION
The parties and the conciliator(s) must keep all the matters of conciliation proceedings in strict
confidence. Under Section 75 of the Act,
ADMISSIBILITY OF EVIDENCE IN OTHER PROCEEDINGS
Section 81 pertains to this subject matter. The evidence recorded in conciliation proceedings cannot
be used as evidence in any judicial or arbitral proceedings.
if conciliation fails, the aforementioned provisions will ensure the strict confidentiality of the
conciliation proceeding and the vital information there of, so that no party can take undue advantage
of the information in judicial or arbitral proceedings, which may be initiated subsequently.
ROLE OF CONCILIATOR IN CONCILIATION PROCEEDINGS
Independence and impartiality
Section 67(1) of the Act advocates that the conciliator shall act independently and also impartially and
assist the parties in their attempt to reach an amicable settlement of their dispute.
Points for consideration
The conciliator should take into consideration the principles of objectivity, fairness and justice, the
rights and obligations of the parties, the usages of the trade and circumstances of the dispute and also
any previous business practices between the parties [Section 67(2)].
Conduct of proceedings
The conciliator may conduct the proceedings taking into account the circumstances of the case,
wishes of the parties and in such a manner as he considers appropriate.
Proposal for settlement
Section 67(4) advocates that the conciliator may at any stage of the proceedings, make proposals for
settlement of the dispute
Application of certain Laws
Under Section 66 of the Act, the conciliator is not bound by the Code of Civil Procedure, 1908 or the
Indian Evidence Act, 1872.
SETTLEMENT AGREEMENT; STATUS AND EFFECT

Sections 73 and 74 of the Act contain the relevant provisions on this subject. Under the Arbitration
and Conciliation Act, 1996 the settlement agreement authenticated by the conciliator attains the status
of a decree of the Court.
Status and effect
Under Section 74 of the Act, the settlement agreement shall have the same status and effect as if it is
an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal
under Section 30 of the Act.
TERMINATION OF CONCILIATION PROCEEDINGS
10.1 Section 76 of the Act contains the relevant provisions on termination of
conciliation
proceedings.

APPOINTMENT OF ARBITRATORS
Section 2(1)(d) of the Act defines an arbitral tribunal as: Arbitral tribunal means a
sole arbitrator or a panel of arbitrators.
Under section 10 of the Arbitration and Conciliation Act, 1996, the parties are free to
determine the number of arbitrators but such number shall not be an even number.
Always the number should be an odd number. However if there is no specific
reference to the number, the tribunal shall consist of a sole arbitrator as stated under
section 10(2) of the Act.
In Narayan Prasad Lohia vs. Nikunj Kumar Lohia and others 1
The Supreme Court held that: where the parties appointed two arbitrators it does
not mean that the agreement itself becomes invalid. In such a situation the two
arbitrators should under section 11(3) appoint a third arbitrator to act as presiding
arbitrator and the appointment of the third arbitrator should preferably made at the
beginning. the Supreme Court further held that unless the objection is made before
the arbitral tribunal itself within the time prescribed under section 16(2) of the
Arbitration and Conciliation Act, 1996, there would be a deemed waiver under
section 4 of the Act.
Section 4 of the Act reads as follows:
A party who knows that (a) any provision of this Part from which the parties may derogate; or
(b) any requirement under the arbitration agreement, has not been complied with
and yet proceeds with the arbitration without stating his objection to such noncompliance without undue delay or, if a time limit is provided for stating that
objection, within that period of time, shall be deemed to have waived his right to so
object.
2. ELIGIBILITY, QUALIFICATIONS AND APPOINTMENT OF ARBITRATORS
As provided under Section 11(1) of the Arbitration and Conciliation Act, 1996, the
parties are free to appoint a person of any nationality as an arbitrator.
The parties are basically free to agree on a procedure for appointing an arbitrator or
a panel of arbitrators [Section 11(2)].
If the parties do not specify the number in their agreement, the reference shall be to
a sole arbitrator and if there are no consensus on the selection of the arbitrator, any
party can move the Chief Justice of the appropriate High Court for appointment of
the arbitrator if it is a matter of domestic arbitration and the Chief Justice of India, if it
is a matter of international commercial arbitration.
Under Section 11(3) of the Act, if the parties do not specifically lay the procedure
for appointing a panel of arbitrators, in an arbitration with three arbitrators, each party
shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third
arbitrator who shall act as the presiding arbitrator.

Procedure for appointment of arbitrators by the Chief Justice of the High

Courts in domestic arbitration.
As provided under Section 11(1) and 11(2), the parties are basically at full liberty to
agree on the qualifications, eligibility criteria, nationality etc., to appoint arbitrators. If
the agreement is silent or if one of the parties do not agree on the choice of the other
party or silent to the notice of the other party to appoint arbitrator(s), or there is a
difference of opinion and conflict on the choice of presiding arbitrator, the procedure
as laid under Section 11(4) to 11(12) shall be followed by the parties. These
provisions enable the Chief Justice of High Courts and the Chief Justice of India as
the case may be to appoint arbitrators. Chief Justice of High Court of a State is
empowered to appoint arbitrator(s) in case of domestic arbitration.
In case the appointment procedure as laid under Section 11(3) applies on the
appointment of a panel of three arbitrators and a party fails to appoint an arbitrator
within thirty days from the receipt of a request to do so from the other party or the
two appointed arbitrators fail to agree on the third arbitrator within thirty days from
the date of their appointment, the appointment shall be made upon request of a party
by the Chief Justice or any person or institution designated by him [Section 11(4)].
If the parties failed to agree as provided under Section 11(2) of the Act, in an
arbitration with a sole arbitrator if the parties fail to agree on the arbitrator within
thirty days from receipt of a request by one party from the other party to so agree,
the appointment shall be made upon request of a party, by the Chief Justice or any
person or institution designated by him [Section 11(5)].
As provided under section 11(2) read with Section 11 (6) of the Act, where under an
appointment procedure agreed upon by the parties: (a) a party fails to act as
required under that procedure: (b) or the parties, or the two appointed arbitrators, fail
to reach an agreement expected of them under the procedure; (c) or a person,
including an institution, fails to perform any function entrusted to him or it under the
procedure, a party may request the Chief Justice or any person or institution
designated by him to take the necessary measure, unless the agreement on the
appointment procedure provides other means for securing the appointment.
Finality of the decision of Chief Justice.
As provided under section 11(7) of the Act, a decision on a matter entrusted under
section 11(4) or Section 11(5) or Section 11(6) to the Chief Justice or the person or
institution designated by him is final.
Regarding the finality of the decision of the Chief Justice, earlier there was a
controversy as to the availability of appellate jurisdiction over such decisions and the
maintainability of SLP before the Supreme Court. The Supreme Court in Konkan
Railway Corporation Ltd. and another vs. Rani Construction Pvt. Ltd. 2 held as
follows:
Section 11 of the Act deals with the appointment of arbitrators. It provides that the
parties are free to agree on a procedure for appointing an arbitrator or arbitrators. In
the event of there being no agreement in regard to such procedure, in an
arbitration by three arbitrators each party is required to appoint one arbitrator and the
two arbitrators so appointed must appoint the third arbitrator. If a party fails to
appoint an arbitrator within thirty days from the request to do so by the other party or
the two arbitrators appointed by the parties fail to agree on a third arbitrator within

thirty days of their appointment, a party may request the Chief Justice to nominate
an arbitrator and the nomination shall be made by the Chief Justice or any person or
institution designated by him. If the parties have not agreed on a procedure for
appointing an arbitrator in an arbitration with a sole arbitrator and the parties fail to
agree on an arbitrator within thirty days from receipt of a request to one party by the
other party, the nomination shall be made on the request of a party by the Chief
Justice or his designate. Where an appointment procedure has been agreed upon
by the parties but a party fails to act as required by that procedure or the parties, or
the two arbitrators appointed by them fail to reach the agreement expected of them
under that procedure or a person or institution fails to perform the function entrusted
to him or it under that procedure, a party may request the Chief Justice or his
designate to nominate an arbitrator, unless the appointment procedure provides
other means in this behalf. The decision of the Chief Justice or his designate is final.
In nominating an arbitrator the Chief Justice or his designate must have regard to
the qualifications required of the arbitrator in the agreement between the parties
and to other considerations that will secure the nomination of an independent and
impartial arbitrator.
There is nothing in Section 11 that requires the party other than the party making
the request to be noticed. It does not contemplate a response from that other party.
It does not contemplate a decision by the Chief Justice or his designate on any
controversy that the other party may raise, even in regard to its failure to appoint an
arbitrator within the period of thirty days. That the Chief Justice or his designate has
to make the nomination of an arbitrator only if the period of thirty days is over does
not lead to the conclusion that the decision to nominate is adjudicatory. In its request
to the Chief Justice to make the appointment, the party would aver that this period
has passed and, ordinarily, correspondence between the parties would be annexed
to bear this out. This is all that the Chief Justice or his designate has to see. That
the Chief Justice or his designate has to take into account the qualifications required
of the arbitrator by the agreement between the parties (which, ordinarily, would also
be annexed to the request) and other considerations likely to secure the nomination
of an independent and impartial arbitrator also cannot lead to the conclusion that the
Chief Justice or his designate is required to perform an adjudicatory function. That
the word decision is used in the matter of the request by a party to nominate an
arbitrator does not of itself mean that an adjudicatory decision is contemplated.
As we see it, the only function of the Chief Justice or his designate under Section 11
is to fill the gap left by a party to the arbitration agreement or by the two arbitrators
appointed by the parties and nominate an arbitrator. This is to enable the Arbitral
Tribunal to be expeditiously constituted and the arbitration proceedings to
commence. The function has been left to the Chief Justice or his designate
advisedly, with a view to ensure that the nomination of the arbitrator is made by a
person occupying high judicial office or his designate, who would take due care to
see that a competent, independent and impartial arbitrator is nominated.
It might be that though the Chief Justice or his designate might have taken all due
care to nominate an independent and impartial arbitrator, a party in a given case may
have justifiable doubts about that arbitrators independence or impartiality. In that
event it would be open to that party to challenge the arbitrator nominated under
Section 12, adopting the procedure under Section 13. There is no reason whatever
to conclude that the grounds for challenge under Section 13 are not available only
because the arbitrator has been nominated by the Chief Justice or his designate
under Section 11.

It might also be that in a given case the Chief Justice or his designate may have
nominated an arbitrator although the period of thirty days had not expired. If so, the
Arbitral Tribunal would have been improperly constituted and be without jurisdiction.
It would then be open to the aggrieved party to require the Arbitral Tribunal to rule on
its jurisdiction. Section 16 provides for this. It states that the Arbitral Tribunal may
rule on its own jurisdiction. That the Arbitral Tribunal may rule on any objections
with respect to the existence or validity of the arbitration agreement, shows that the
Arbitral Tribunals authority under Section 16 is not confined to the width of is
jurisdiction, as was submitted by learned counsel for the appellants, but goes to the
very root of its jurisdiction. There would, therefore, be no impediment in contending
before the Arbitral Tribunal that it had been wrongly constituted by reason of the fact
that the Chief Justice or his designate had nominated an arbitrator although the
period of thirty days had not expired and that, therefore, it had no jurisdiction.
The schemes made by the Chief Justices under Section 11 cannot govern the
interpretation of Section 11. If the schemes, as drawn, go beyond the terms of
Section 11 they are bad and have to be amended. To the extent that the
appointment of Arbitrators by the Chief Justice of India Scheme, 1996, goes beyond
Section 11 by requiring, in clause 7, the service of a notice upon the other party to
the arbitration agreement to show cause why the nomination of an arbitrator, as
requested, should not be made, it is bad and must be amended. The other party
needs to be given notice of the request only so that it may know of it and it may, if it
so chooses, assist the Chief Justice or his designate in the nomination of an
arbitrator.
In conclusion, we hold that the order of the Chief Justice or his designate under
Section 11 nominating an arbitrator is not an adjudicatory order and the Chief
Justice or his designate is not a tribunal. Such an order cannot properly be made
the subject of a petition for special leave to appeal under Article 136. The decision of
the three-Judge Bench in Konkan Railway Corporation Ltd. v. Mehul
Construction Co.3 is affirmed.
So as per this decision the order of the Chief Justice is only an administrative order
and is not appealable.
This decision of the Constitutional Bench of the Supreme Court in Konkan Railway
Corpn. Ltd., and another Vs. Rani Construction Pvt. Ltd., {(2000) 8 SCC 159} was
overruled by the decision of a Larger Bench of Supreme Court in S.B.P. & Co., Vs.
Patel Engineering Ltd., and another [2005 (7) Supreme 610]. The decision earlier
stated in Konkan Railway Corporation Ltd., case was totally reconsidered and a
different view was laid by the Supreme Court in this decision in SBP & Co. The
Supreme Court held 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 earlier part of this
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 Judge designated 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 Judge designate.

v)

Designation of a District Judge as the authority under section 11(6) of

the Act by the Chief Justice of the High Court is not warranted on the
Scheme of the Act.

vi)

Once the matter reaches the arbitral tribunal or the sole arbitrator,
the High Court would not interfere with 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 or in terms of Section 34 of the Act.

vii)

Since an order passed by the Chief Justice of the High Court or by

the designated Judge of that Court is a judicial order, an appeal will
lie against the order only under Article 136 of the Constitution of
India to the Supreme Court (SLP).

viii)

There can be no appeal 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)

In a case 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.

x)

Since all were guided by the decision of this Court in Konkan Railway
Corpn. Ltd., & another Vs. Rani Construction Pvt. Ltd., {(2000) 8
SCC 159} and orders under Section 11(6) of the Act have been
made based on the position adopted in that decision, we clarify that
appointments of arbitrators or arbitral tribunals thus far made are to
be treated as valid, all objections being left to be decided under
Section 16 of the Act. As and from this date, the position as adopted
in this Judgment will govern even pending application under section
11(6) of the Act.

xi)

Where District Judges had been designated by the Chief Justice of

the High Court under Section 11(6) of the Act, the appointment
orders thus far made by them will be treated as valid; but
applications if any pending before them as on this date will stand
transferred, to be dealt with by the Chief Justice of the concerned
High Court or a Judge of that Court designated by the Chief Justice.
The decision in Konkan Railway Corpn. Ltd., & another Vs. Rani
Construction Pvt. Ltd., {(2000) 8 SCC 159} is overruled.

With this decision, the Chief Justice cannot designate any person or
institution to appoint an arbitrator. Wherever in the Act, the terms person
or institution occurred (like under Sub Section (5) or (7) to Section 11 of the
Arbitration and Conciliation Act, 1996), must be ignored as they cannot be
designated to appoint arbitrators. However, the institution can be consulted.
The sole appointing authority is only the Chief Justice or the Judge
designated and the judges of subordinate courts cannot appoint an
arbitrator under the Arbitration & Conciliation Act, 1996 from the date of this
judgment.
2.4.4.2 With regard to issues like the stipulation in the agreement that only certain
persons must be appointed as arbitrators and one of the parties abdicates his/her
power, the Andhra Pradesh High Court in Union of India vs. Vengamamba
Engineering Co., Juputi, Krishna District and another 4 held that under section
11(6) of the Arbitration and Conciliation Act, 1996 if an order is made appointing an
arbitrator, no writ petition lies questioning the said order. It was further held that the
contention that if there is any delay or refusal in appointing an arbitrator by the
authority specified in the arbitration agreement, the Court can direct the said
authority to appoint an arbitrator but the Court cannot appoint an independent
arbitrator is not tenable. The jurisdiction to appoint an arbitrator exclusively vests
with the Chief Justice and once the appointing authority abdicates his power, no
further chance can be given to him.
It was further held that it is not necessary
that the arbitrator should possess a special knowledge in the matter 5. Thus,
the sole criteria to appoint an
4. (2001) volume 3, Andhra Legal Decisions, page 776 (DB).
5. Also refer: Union of India and others vs. Vungarala Constructions, Hyderabad and another (2001, vol.5, Andhra
Legal Decisions, page 79 (DB) and Union of India and others vs. K.B. Joseph and another (2001, vol.4, Andhra Legal
Decisions page 620 (DB). Ace Pipeline Contract Pvt. Ltd., Vs. Bharat Petroleum Corpn. Ltd., {(2007) (5) SCC.304}.

arbitrator by the Chief Justice of High Court / Supreme Court is that if one of the
parties failed to appoint an arbitrator within 30 days from the date of receipt of a
request from the other party to appoint an arbitrator, the requesting party can
move the Chief Justice and the Chief Justice can appoint any person of his choice
as an arbitrator irrespective of the qualifications stipulated for an arbitrator in the
agreement.
2.5 PROCEDURE TO BE FOLLOWED BY THE CHIEF JUSTICE.
Under Section 11(8) of the Act, the Chief Justice or the person or institution
designated by him, in appointing an arbitrator, shall have due regard to (a) any
qualifications required of the arbitrator by the agreement of the parties; and (b)
other considerations as are likely to secure the appointment of an independent
and impartial arbitrator.

2.5.1 For appointment of arbitrators, the Chief Justice may make such scheme as
he may deem appropriate for dealing with matters entrusted by Section 11(4) or
11(5) or 11(6) to him.
2.5.2 Where the matters referred to in Section 11(4) or 11(5) or 11(6) or 11(7) or
11(8) or 11(10) arise in any arbitration (i.e. domestic arbitration) other than
international commercial arbitration, the reference to Chief Justice in the above
sub-sections shall be construed as reference to the Chief Justice of the High
Court within whose local limits the Principal Civil Court referred to in clause (e) of
sub-section (1) of Section 2 of the Arbitration and Conciliation Act, 1996 is situate
and, where the High Court itself is the Court referred to in that clause, to the Chief
Justice of that High Court [Section 11(12) (b)].
2.6

Appointment of an arbitrator in International Commercial

Arbitration.

While the cause of action and procedure remain same as stated in Su b-sections
(4), (5), (6), (7), (8) and (10) to Section 11 of the Act for appointing an arbitrator in
International Commercial Arbitration, the only difference is that the appointing
authority is the Chief Justice of India or his nominee. So, the parties cannot
approach the High Courts accessible to them for appointing an arbitrator in a dispute
pertaining to international commercial arbitration [Sec. 11(12)(a)].

2.6.1 As provided under section 11(9) of the Act, in the case of appointment of a
sole or third arbitrator in an International Commercial Arbitration, the Chief Justice of
India or the person or institution designated by him may appoint an arbitrator of a
nationality other than the nationalities of the parties where the parties belong to
different nationalities.
2.6.2 The Chief Justice of India may make such a scheme as he may deem
appropriate in this regard.
2.7
What is the position if more than one request is made to the Chief Justices of
different High Courts by the respective parties?

Where more than one request has been made under sub-section (4) or (5) or
(6) of section 11 of the Act to the Chief justices of different High Courts or their
designates, the Chief Justice or his designate to whom the request has been first
made under the relevant sub-section shall alone be competent to decide on the
request.
APPLICATION OF INDIAN CONTRACT ACT TO INTERNATIONAL COMMERCIAL
ARBITRATION
The Act is clear about this definition under Section 2(1)(f) International Commercial
Arbitration means an arbitration relating to disputes arising out of legal relationships,
whether contractual or not, considered as commercial under the law in force in India and
where atleast one of the parties is, (i) an individual who is a national of or habitually resident in any country other than
India; or
(ii) a body corporate which is incorporated in any country other than India; or
(iii) a company or an association or a body of individuals whose central management and
control is exercised in any country other than India; or
(iv) the Government of a foreign country;

COMMERCIAL DISPUTES
Business disputes of international character incorporate a dispute resolution clause in case of
international transactions. International commercial arbitration has become a way of
resolving disputes which the parties chose for themselves
CHOICE OF LAW
The parties to the agreement may insert a clause which defines the system of law by which
they intend to be governed. Such a clause specifying the proper law of the contract is known
as choice of law.
LEX LOCI CONTRACTUS
The court has to impute an intention or to determine the parties what is a proper law which as
just and reasonable persons they ought to or would have intended if they had thought about
the questions when they made the contract.
Jacobs v Lyonnais ( Where the contract is to be performed in a country other than the country
it was entered).
Lloyd v Guibert: if the contract is to be performed in a country other than the country where
it was entered, the courts have taken the view that the applicable law is the law of the country
where the contract is performed as the real connection is established in that country.
LEX LOCI SOLUTIONS:
The principle of incorporating the law of the place of performance of contract as the
applicable law. The principle comes into place only when the intention is not expressly or
impliedly made out through the terms of the contract.
APPLICABILITY OF INDIAN CONTRACT ACT: the Indian contract Act is the bible of all
commercial laws existing in India.
Arbitration agreement: an arbitration agreement must be in writing in whatever form it may
be. This definition under Section 7 of the Act resembles the definition stated in the New York
and Zeneva Conventions.
The Supreme Court of India, in K.K. Modi vs. K.M. Modi, 1 laid down the essential
ingredients of arbitration agreement as follows:
(i) The agreement must comply with the requirements as stated under Section 7 of the
Arbitration and Conciliation Act, 1996.
(ii) The agreement must also be legally valid in accordance with the following provisions
of the Indian Contract Act, 1872:(a) Competency of the parties under Sections 11 and 12;
(b) Mutual consent of the parties under Sections 13 to 22;
(c) As to lawfulness of subjects under Sections 23 to 27 and 30;
(d) Certainty of agreement under Section 29;
unless the parties are competent to deal with the subjects as required under the Indian
Contract Act, 1872 they cannot enter into a valid arbitration agreement. The provisions under
Section 7(1) however empowers the competent parties to submit their present disputes to
arbitration or they may agree to submit the disputes which may arise in future to arbitration.
But the subject matter must be connected to defined legal relationship which is created out
of a legally binding contract. Thus, the following persons cannot enter into an arbitration
agreement:(a) Minors
a person who has not attained the age of majority cannot enter into arbitration agreement. 2
However,
(b) Person of unsound mind
The provisions of Order 32 of Code of Civil Procedure, 1908 apply here also.
(c) Insolvent

person disqualified by any Statute cannot enter into a contract and also arbitration agreement.
Likewise, a contract with an alien enemy is void under the Law of Contract.
(d) Agents
Agents can enter into any arbitration agreement depending upon the authority delegated to
them by the principal as per the provisions of the Indian Contract Act, 1872. The authority
can be implied or express.
(e) Trustees
Under section 43 of the Indian Trusts Act, 1882, the Trustees can refer a dispute connected to
the Trust to arbitration.
(f) Artificial Persons
Juridical persons like companies, societies can enter into arbitration agreements subject to
the contents of the Memorandum of Association, Articles of Association and the bye-laws if
any.
(g) Firms
The position of the partners is same as of the trustees. The partners are bound by the
arbitration clause in the partnership deed. Same is the case in commercial contracts of the
firm.
(h) Government Contracts
All Government Contracts must be signed on behalf of the President of India or
Governor of the State concerned as the case may be as provided under Article 299 of the
Constitution of India. Any violation of this provision automatically invalidates the contract.
The Supreme Court in P. Anand Gajapathi vs. P.V.G. Raju held that even at appellate
stage, the parties can prefer to settle the dispute by arbitration.
Section 28 of the Indian Contract Act defines the agreements in restraint of legal proceedings
void. The section prohibits agreements which have for their object the restraining of an
individual from enjoying the fundamental right of resorting to a courr of law for redress and
relief.
The exceptions are intended to save contracts to refer to arbitration present or future disputes.
The agreement whereby a tramway employee agreed that the certificate of an arbitrator shall
be final as to the companys right to retain his deposit was upheld in AGHORENATH v
CALCUTTA TRAMWAYS.
In Ganges Manufacturing company V indira a contract providing that differences should be
referred to the arbitration of the Bengal chamber of commerce was held enforceable.
The exception applies only to that class of contracts in which the parties have agreed that no
action shall be brought until some question of amount has been decided by arbitrators.

1. 1985 UNCITRAL Model Law on International Commercial Arbitration:5

The UNCITRAL Model Law on International Commercial Arbitration was prepared by

UNCITRAL and adopted by the United Nations Commission on International Trade Law on
5

21st June 1985. The model law is not binding, but individual states may adopt the model law
by incorporating it into their domestic law.
UNCITRAL Model Law on International Commercial Arbitration provides with the receipt of
written communications. Unless agreed by the parties that the receipt has been delivered by
following proper manner the communication is deemed to have been received on the day it is
so received. The communication is deemed to have been received on the day it is so received.
This is not applied to communications in court proceedings.
A party who knows that any provision of this Law from which the parties may derogate or
any requirement under the arbitration agreement has not been complied with and yet proceeds
with the arbitration without stating his objection to such non-compliance without undue delay
or, if a time-limit is provided therefore, within such period of time, shall be deemed to have
waived his right to object.
This Law mentions certain functions of arbitration assistance and supervision to be performed
by the Courts or other authority.
It deals with the definition and form of arbitration agreement. It also deals with the number of
arbitrators where the parties are free to determine the number of arbitrators but actually they
should be three in number.
This Model Law deals with the appointment of the arbitrators and also with the appointment
of the substitute arbitrator. It mentions the different grounds for challenge:
1. When a person is approached in connection with his possible appointment as an
arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts as
to his impartiality or independence.
2. An arbitrator may be challenged only if circumstances exist that give rise to justifiable
doubts as to his impartiality or independence, or if he does not possess qualifications
agreed to by the parties. A party may challenge an arbitrator appointed by him, or in
whose appointment he has participated, only for reasons of which he becomes aware
after the appointment has been made.
UNCITRAL Law Model on International Commercial Arbitration deals with the competence
of arbitral tribunal to rule on its jurisdiction. It also states with the power of the arbitral
tribunal to order interim measures.
This Law states that the parties shall be treated with equality and each party shall be given a
full opportunity of presenting his case. It deals with a particular provision for determining
the rules of procedure and also mentions the place of arbitration.
UNCITRAL Model Law on International Commercial Arbitration states that the parties are
free to agree on the language or languages to be used in the arbitral proceedings. Failing
such agreement,
UNCITRAL Model Law on International Commercial Arbitration presents the statements of
claim and defence. It deals with the hearing ad written proceedings.
While dealing with the procedure if it is seen that there is a default of a party, the arbitral
tribunal shall either terminate the proceedings, or shall continue the proceedings without
treating such failure as an admission of the claimants allegation, or may continue the
proceedings and make the award on the evidence before it.
UNCITRAL Model Law on International Commercial Arbitration provides with an expert
appointed by arbitral tribunal. It provides with those rules applicable to substance the
dispute.
1. The arbitral tribunal shall decide the dispute in accordance with such rules of law as are
chosen by the parties as applicable to the substance of the dispute. Any designation of the
law or legal system of a given State shall be construed, unless otherwise expressed, as
directly referring to the substantive law of that State and not to its conflict of laws rules.

2. Failing any designation by the parties, the arbitral tribunal shall apply the law determined
by the conflict of laws rules.
3. The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the
parties have expressly authorized it to do so.
4. the arbitral tribunal shall decide in accordance with the terms of the contract and shall
take into account the usages of the trade applicable to the transaction.
It states that in arbitral proceedings the decision is to be taken by a panel of arbitrators if the
parties agree to it.
UNCITRAL Model Law on International Commercial Arbitration deals with the provision of
settlement of disputes.
It presents with the forms and contents of the award. UNCITRAL Model Law on
International Commercial Arbitration deals with the provision when the arbitral proceedings
can be terminated by the arbitral tribunal.
UNCITRAL Model Law on International Commercial Arbitration states that if there is any
error in the award then within thirty days of the receipt of the award a party has to send a
request to the arbitral tribunal to give an interpretation to that particular error and correct
such error. If needed the parties, where one party, with notice to the other party, may request
the arbitral tribunal to make an additional award as to claims presented in the arbitral
proceedings. If the arbitral tribunal considers the request to be justified then it shall make the
additional award within sixty days.
1. Recognition or enforcement of an arbitral award, irrespective of the country in which it
was made, may be refused only:
a. at the request of the party against whom it is invoked, if that party furnishes to the
competent court where recognition or enforcement is sought proof that:
i.a party to the arbitration agreement referred to in article 7 was under some incapacity; the
said agreement is not valid under the law to which the parties have subjected it, failing
any indication thereon, under the law of the country where the award was made; or
ii.the party against whom the award is invoked was not given proper notice of the appointment
of an arbitrator or of the arbitrator proceedings or was otherwise unable to present his
case; or
iii.the award deals with a dispute not contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on matters beyond the scope of the
submission to arbitration, provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted, that part of the award which
contains decisions on matters submitted to arbitration may be recognized and enforced; or
iv.the composition of the arbitral tribunal or the arbitral procedure was not in accordance with
the agreement of the parties or, failing such agreement, was not in accordance with the
law of the country where the arbitration took place; or
v.the award has not yet become binding on the parties or has been set aside or suspended by a
court of the country in which, or under the law of which, that award was made;
b. if the court finds that:
i.The subject matter of the dispute is not capable of settlement by arbitration under the law of
the State,
ii.The recognition or enforcement of the award would be contrary to the public policy of this
State.
2.If an application for setting aside or suspension of an award has been made to a court
referred to in paragraph 1(a) (v) of this article, the court where recognition or enforcement is
sought may, if it considers it proper, adjourn its decision and may also, on the application of
the party claiming recognition or enforcement of the award, order the other party to provide
appropriate security.

ADVANRAGES AND DISADVANTAGES OF ADR MECHANISM

Alternative Dispute Resolution is based on more direct participation by the disputants rather
than being run by lawyers and Judges. Most ADR processes are based on an integrative
approach, most co-operative and less competitive than court based methods like litigation.
ADR tends to generate less escalation and ill-will between parties. Following are the
advantages of ADR:
1. It can be used at any time, even when a case is pending before a Court of Law.
2. It can be used to reduce the number of contentious issues between the parties; and it can
be terminated at any stage by any of the disputing parties.
3. It can provide a better solution to dispute more expeditiously and at less cost than
regular litigation.
4. It helps in keeping the dispute a private matter and promotes creative and realistic
business solutions.
5. The ADR is flexible and not governed by the rigorous of rules or procedures.
6. The freedom of parties to litigation is not affected by ADR proceedings. Even a failed
ADR proceeding is never a waste either in terms of money or times spent on it,
7. The ADR can be used with or without a lawyer. A lawyer however, plays a very useful
role in identification of contentious issues, position of strong and weak points in a case,
rendering advice during negotiations and overall presentation of his clients case.
8. ADR helps in reduction of work load of courts and thereby helps them to focus
attention on other cases.
9. The ADR procedure permits to choose neutrals who are specialists in the subject-matter
of the dispute.
10. The parties are free to discuss their difference of opinion without any fear of disclosure
of facts before a Court of Law.
11. The last but not the least is the fact that parties are having the feeling that there is no
losing or winning feeling among the parties by at the same time they are having the
feeling that their grievance is redressed and the relationship between the parties is
restored.
12. The ADR system is apt to make a better future. It paves the way to further progress.
Disadvantages:
There are some ADR does not have many potential advantages, but there are also some
possible drawbacks and criticisms of pursuing alternatives to court-based adjudication. Some
critics have concerns about the legitimacy of ADR outcomes, charging that ADR provides
second-class justice. It is argued that people who cannot afford to go to the court are those
most likely to use ADR procedures. As a result, these people are less likely to truly win a
case because of the co-operative nature of ADR. 6 Following points may be dealt as some of
the disadvantages of ADR7:

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1. Situations when ADR may not be appropriate, and may even carry a degree of risk for one
of the parties. It is important for the advisers to use their professional judgement in each
case, but this section outlines key factors for consideration.
2. There may be an imbalance of power between the parties, which could make face-to-face
mediation unfair. This could include family or neighbour mediation where there has been
violence or the threat of violence; or mediation between an individual and a large
organisation such as a local authority, where the size and resources of the organization
would put the individual at a disadvantage.
3. There may be an urgent need (for example to prevent eviction) which requires an
immediate legal remedy.
4. Mediation and Ombudsmen do not provide a legally binding, enforceable outcome, and
decisions do not act as precedents in future cases.
5. Legal rights and Human rights cannot be relied on in ADR processes, which are private,
confidential and not open to public scrutiny.
6. Ombudsmen investigations can be very slow.
7. Although Ombudsmen can make compensation awards, they are often lower than is likely
to be achieved in court.
8. There are no consistent quality standards or regulation for ADR providers, so it can be
hard for the advisers or their clients to know how to choose a good service.
9. Where a dispute involves difficult legal points a mediator or an arbitrator is unlikely to
have the same legal expertise and knowledge as a judge.
10. The arbitrators decision can require a court action if one of the parties refuse to accept
the arbitrators decision. This would not only create chaos but also a mandatory review by
the court.
11. Alternative Dispute Resolution generally resolves only issues of money or civil disputes.
Alternative Dispute Resolution proceedings will not result in injunctive orders.
12. ADR generally proceed without protections offered to the parties in litigation, such as
those rules governed through discovery. Courts generally allow a great deal of latitude in
the discovery process.
It is important to consider these advantages and disadvantages before agreeing to arbitration,
or any other kind of alternative dispute resolution.
LIBERALIZATION
The adoption of the liberalized economic policy by India in 1991 has paved way for
integration of Indian economy with global economy. This resulted in the enactment of the
Arbitration and Conciliation Act, 1996 (new Act) by the legislature as India had to comply
with well-accepted International norms. It superseded the obsolete and cumbersome
Arbitration Act, 1940. The new Act has made radical and uplifting changes in the law of
arbitration and has introduced new concepts like conciliation to curb delays and bring about
speedier settlement of commercial disputes. The new Act has been codified on the lines of the
Model Law on International Commercial Arbitration as adopted by the United Nations
Commission on International Trade Law (UNCITRAL). One of the most commendable
objects of the new Act is to minimize the role of the courts in the arbitration process. The
Arbitration and Conciliation Act, 1996 laid down the minimum standards, which are required
for an effective Alternative Dispute Resolution Mechanism.8
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Further, the recent amendments of the Civil Procedure Code will give a boost to ADR.
Section 89 (1) of CPC deals with the settlement of disputes outside the court. It provides that
where it appears to the court that there exist elements, which may be acceptable to the parties,
the court may formulate the terms of a possible settlement and refer the same for arbitration,
conciliation, mediation or judicial settlement.9 While upholding the validity of the CPC
amendments in Salem Advocate Bar Association, Tamil Nadu v. U.O.I, 10 the Supreme Court
had directed the constitution of an expert committee to formulate the manner in which section
89 and other provisions introduced in CPC have to be brought into operation. The Court also
directed to devise a model case management formula as well as rules and regulations, which
should be followed while taking recourse to alternative dispute redressal referred to in
Section 89 of CPC. All these efforts are aimed at securing the valuable right to speedy trial to
the litigants.11
ADR was at one point of time considered to be a voluntary act on the apart of the parties
which has obtained statutory recognition in terms of Civil Procedure Code (Amendment)
Act, 1999; Arbitration and Conciliation Act, 1996; Legal Services Authorities Act, 1997
and Legal Services Authorities (Amendment) Act, 2002. The access to justice is a human
right and fair trial is also a human right. In India, it is a Constitutional obligation in terms of
Art.14 and 21. Recourse to ADR as a means to have access to justice may, therefore, have to
be considered as a human right problem. Considered in that context the judiciary will have an
important role to play.12
The Supreme Court of India has also suggested making ADR as a part of a package system
designed to meet the needs of the consumers of justice. The pressure on the judiciary due to
large number of pending cases has always been a matter of concern as that being an obvious
cause of delay. The culture of establishment of special courts and tribunals has been pointed
out by the Honble Supreme Court of India in number of cases. The rationale for such an
establishment ostensibly was speedy and efficacious disposal of certain types of offences.

I.

MEANING AND DEFINITION OF ALTERNATIVE DISPUTE RESOLUTION

Human conflicts are inevitable. Disputes are equally inevitable. It is difficult to imagine a
human society without conflict of interests. Disputes must be resolved at minimum possible
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cost both in terms of money and time, so that more time and more resources are spared for
constructive pursuits.
Alternative Dispute Resolution or ADR is an attempt to devise a machinery which should
be capable of providing an alternative to the conventional methods of resolving disputes. An
alternative means the privilege of choosing one of two things or courses offered at ones
choice. It does not mean the choice of an alternative court but something which is an
alternative to court procedures or something which can operate as court annexed procedure.13
Carrow defined Alternative Dispute Resolution as including binding arbitration in the minds
of some since it qualifies as an alternative to court litigation. The better view is that the
distinguishing feature of ADR is that the parties with few exceptions, determine their own
destiny rather than having the decision of another imposed upon them.14
Mr. Aina defines Alternative Dispute Resolution in these words15:The letters ADR stands for Alternative Resolution Dispute- a new approach to dispute processing.
It refers to a range of mechanisms designed to assist disputing parties in resolving an ongoing dispute.

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