AN Assignment ON Arbitration: Rbitral Awards AND Termination OF Proceeding

AN
ASSIGNMENT
ON
ARBITRATION
ARBITRAL
AWARDS
AND TERMINATION OF
PROCEEDING
[clinical Course III]
Name-jarrar ahmad
B.A LL.B (H) 9th Semester
TABLE OF CONTENTS
Description
Page No.
i) Acknowledgment.
ii) Research Methodology.
5
iii)Abbreviations.
6
iv)Table of Cases.
7
CHAPTER I
INTRODUCTION
A. ALTERNATIVE DISPUTE RESOLUTION

B. HISTORY OF ADR IN INDIA
C. ADR IN MODERN INDIA
D. NEED FOR ADR IN INDIA
E. ADVANTAGES OF A DEVELOPED SYSTEM OF ADR IN INDIA:
CHAPTER II CONCEPT OF ARBITRATION

A. BRIEF HISTORY OF ARBITRATION
B. MEANING OF ARBITRATION
C. SCOPE OF ARBITRATION
D. ARBITRABILITY
E. NEED FOR ARBITRATION
F. ADVANTAGES OF ARBITRATION
G. DISADVANTAGES OF ARBITRATION
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PROJECT for CLINICAL IIIIII-
H. MAJOR KINDS OF ARBITRATION

I. ARBITRAL AGREEMENT
J. VALIDITY OF AN ARBITRATION AGREEMENT
K. POWER TO REFER PARTIES TO ARBITRATION WHERE THERE IS AN
ARBITRATION AGREEMENT
L. ARBITRAL TRIBUNAL
M. DUTIES OF TRIBUNAL
N. ARBITRAL AWARDS
O. ENFORCEMENT OF ARBITRATION AWARDS
CHAPTER III ARBITRATION AND CONCILIATION ACT, 1996

A. MAIN OBJECTIVES OF THE ACT:
B. FLAWS IN THE ACT OF 1996
CHAPTER IV
ARBITRATION IN INDIA
A. ARBITRATION PRACTICE ACROSS INDUSTRIES

B. ARBITRATION IN
THE INFORMATION TECHNOLOGY (IT) INDUSTRY
C. RESOLVING INTERNATIONAL COMMERCIAL DISPUTES IN INDIA

D. LEGAL FRAMEWORK
E. MAXIMUM COURT SUPPORT
F. MINIMUM COURT INTERFERENCE
G. JUDICIAL INTERVENTION
H. NEW GROUND OF CHALLENGE TO AWARD THROUGH JUDGE- MADE
LAW
I. CONCLUSION
J. RECOMMENDATIONS
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ACKNOWLEDGMENT
I have a great pleasure in expressing my

deep sense of indebtness and gratitude to
my Professor Dr S.Z AMANI , for his
valuable guidance, meticulous supervision
and perpetual inspiration which provided
me with the strength and zeal to complete
the project work.
I also extend my gratefulness to all the

people who help me in my project and to
the learned authors whose works I have
consulted and referred on many occasions.
Delhi
JARRAR AHMAD
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RESEARCH METHODOLOGY
The Methodology used in the assignment is Doctrinal
Method of Research, and the material is collected from
statutes,
textbook,
published
articles,
internet
information and other sources which are specified in

the Bibliography page.
JARRAR
AHMAD
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ABBREVIATIONS
AIR
C.P.C
Cr.P.C
Ed
HLR
i.e
ibid
Id.
I.P.C
J.
JILI
Mat Suit
Misc App
MACC
MACT
No
NGO
P.,PP
Rs
SC
SCC
SLSA
u/s
viz
Vol
V., Vs.
All India Reporter

Code of Civil Procedure.
Code of Criminal Procedure
Edition
Harvard Law Review
id est; that it
ibidem
Idem.
Indian Penal Code.
Justice
Journal of Indian Law Institute
Matrimonial Suit
Misc.Appeal
Motor Accident Compensation Claim.
Motor Accident Claims Tribunal.
Number
Non-governmental organization
Page, Pages
Rupees.
Supreme Court
Supreme Court Cases.
State Legal Services Authority.
Under Section
videlicet; namely
Volume
Versus; Against.
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LIST OF CASES
1. Hitesh Narendra Doshi V/s. Jesal Hitesh Doshi 2000 (2) Hindu LR (A.P)
(D.B) 45: AIR 2000 (A.P) 362
2. Gulzar Singh V/s.State of Punjab 1998 (2) HLR 204 (P&H)
3. Mohinder Pal Kaur V/s. Gurmeet Singh 2002 (1) Hindu LR (Pb & Hry)
537.
4. Shiv Kumar Gupta v Lakshmi Devi Gupta 2005 (1) HLR 483
5. Love Kumar Vs. Sunita Puri AIR 1997 Punjab and Haryana 189: 1997(1)
HLR 179.
6. Rajesh Kumar Saxena v Nidhi Saxena. 1995(1) HLR 472.
7. Baljinder Kaur V/s. Hardeep Singh AIR 1998 SC 764
8. Aviral Bhatla v Bhavana Bhatla 2009 SCC (3) 448.
9. Hussainara Khatoons Case AIR 1979 SC 1360,
10.Pramila V/s. Ajit, AIR 1989 Pat 163: (1989) 2 DMC 466.
11.Khatri Case AIR 1981 SC 928,
12.Zeve Powell v. State of Alabama 287 US (1932)
13.Maganlal Chaganlal v. Municipal Corporation, 435-436, 1974
14.State of Kerala v. N.H.Thomas AIR 1976 SC 490 at 513.
15.Peoples Union for Democratic Rights & other v. UOI & other, AIR 1982
SC 1473.
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16.Keshvananda Bharati v. State of Kerala, 1973 (4) SCC 225 at p.947.

17.Abul Hasan v/s Delhi Vidyut Board, AIR 1999 Del 88 at 90
18.K.Venakata Seshiah v. Kanduru Ramasubbamma, 1991 (3) SCC 338.
19.Gurpreet Singh v. Chatur bhuj Goel, AIR 1988 SC 400.
20.Manik Chandra Nandy v. Deb Das, AIR 1986 SC 446,
21.Banwari Lal v. Smt. Chando Devi. AIR 1983 SC 1139,
22.Dr.Mahesh Chandra Sharma v. Smt. Rajkumari Sharma, AIR 1996 SC
869.
23.Supreme Court Legal Services Committee v. Union of India AIR 1998
24.Centre for Legal Research & other v. State of Kerala AIR 1986 SC 2195.
25.Sukh Das & Ors. V. Union Territory of Arunanchal Pradesh, AIR 1986
SC 991.
26.Pushpa Suresh Butada & Other v. Subha Bansilal Maheshwari & other,
AIR 2002 Bom 126
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STATUTES
I.
II.
THE NEGOTIABLE INSTRUMENTS ACT

CIVIL PROCEDURE CODE
III.
CONSTITUTION OF INDIA, 1950
IV.
LEGAL SERVICES AUTHORITY ACT, 1987
V.
VI.
CRIMINAL PROCEDURE CODE.

THE ARBITRATION AND CONCILIATION ACT, 1996
BOOKS/ARTICLES/COMMISSION & COMMITTEE

REPORTS & JOURNALS REFERRED
The Culture of ADR in India-by Praveen Dalal [http://www.odr.info/ THE

%20CULTURE%20O F%20 ADR %20IN%20INDIA.doc]
Appadorai, Chapter 5, Vyasas Mahabharata- Shanti Parva, Indian Political

Thinking Through the Ages, New Delhi. Khaam Publishers, 1992, note
35, p. 90.
Abdul Hamid El-Ahdab, Arbitration With the Arab Countries, (Kluwer
Law&Taxation Publisher, Deventer/Boston, 1990), pp. 15, 20-22; and Abdul
Hamid El-Ahdab, General Introduction On arbitration in Arab Countries,
International Handbook On Commercial Arbitration, Supplement 27
(December 1998), citing Fatawa Al-Hindiyyah, vol. 3 at 468, and Ibn Qudama,
Al Mughni, vol. 9, 3rd (Cairo, 1367 H.); Ibnu Abedin, Radd Al Muhtar, p. 483.
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Access to Justice Act, 1999. The Act was enforced on 27th July, 1999.
Alternative Dispute Resolution, Practitioners Guide, Centre for Democracy and
Governance, Washington, 1998
<http://www.usaid.gov/our_work/democracy_and_governance/publications/pdfs
/pnacb895.pdf>
Article 21 is a Fundamental Right that can be directly enforced in the Supreme
Court under Article 32 of the Constitution of India. Fundamental Rights, as
incorporated in Part III of the Constitution, are different from Constitutional
Rights that cannot be directly enforced U/A 32. All Fundamental Rights are
Constitutional Rights but not vice-versa.
As part of his research into conflict resolution, Rao attended a program
sponsored by the Dispute Resolution Institute of Hamline University School of
Law, held in Budapest. The Dispute Resolution Institute (DRI) offers academic
discourse, hands-on simulation experience, and cross-disciplinary examination
of ADR themes in domestic and summer abroad courses for law students,
lawyers, and other professionals.
Bharat Chugh : The journey that refuses to endthy name is litigation
www.lawstudentscollective.blog.com
Civil Judicial Reform and ADR (2002) 6 CLA-BL-Supp.(Mag)
Dr. Shraddhakara Supakar, Law of Procedure and Justice in Ancient India, Deep
& Deep Publication, New Delhi, 1986.
George H.Gadbois, the Supreme Court of India : As a Political institution in
Rajeev Dhavan, R.Sudarshan & Salman Khurshid, Judge & Judiciary power,
(1985) P-251 referred in id.
George H.Gadbois, the Supreme Court of India : As a Political institution in
Rajeev Dhavan, R.Sudarshan & Salman Khurshid, Judge & Judiciary power,
(1985) P-251 referred in id.
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11
Granville Austin, The Indian Constitution, Cornerstone of a Nation (1966)

Gurcharan Das, The Difficulty of Being Good: On the Subtle Art of Dharma,
New Delhi, Allen Lane/Penguin, 2009, p. xlix.
H.S Bhatia, Society, Law and Administration in Ancient India, Vol. 3, Deep &
Deep Publications Pvt. Ltd., New Delhi, 1992, (2nd Ed.), p. 179
http://india.indymedia.org/en/2005/05/210579.html
http://library.thinkquest.org/C006203/cgibin/stories.cgi?
article=government&section=history/mughals&frame=story
http://voice.indiasite.com/ancient.html
http://www.culturalindia.net/indian-history/ancient-india/ancientgovernment.html
http://www.drgokuleshsharma.com/pdf/mughal%20rule.pdf
http://www.gatewayforindia.com/history.htm#Golden period of Indian History
http://www.gloriousindia.com/history/kushans.html
http://www.hyperhistory.net/apwh/essays/comp/cw02summeriansharappans341
00118.htm
http://www.indiabuzzing.com/2009/12/31/maratha-administration/
http://www.indianetzone.com/5/gupta_dynasty.htm
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http://www.indianmirror.com/dynasty/kushandynasty.html
http://www.indiavideo.org/text/british-colonization-335.php
http://www.infinityfoundation.com/mandala/h_es/h_es_shah_m_sreni_frameset
http://www.kettering.edu/news/conflict-resolution-and-hinduism
http://www.localhistories.org/india.html
http://www.mu.ac.in/myweb_test/M.A.%20-%20II%20-%20History%20%20VIII.pdf
http://www.nishithdesai.com/Research-Papers/adr.pdf
http://www.preservearticles.com/2011081610828/essay-on-the-administrativesystem-of-guptas.html
http://www.preservearticles.com/2011101815640/essay-on-the-judicial-systemof-the-mauryanrulersindia. ht ml
http://www.preservearticles.com/2012041030124/get-complete-information-onthejudicial- administration-of-mughal-empire.html
http://www.publishyourarticles.org/knowledge-hub/history/akbar-and-the-eraof-multi-religiousempire. html
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In the Original Act of 1987, the provision for formation of High Court Legal
Services Committee was not there but subsequently Sec. 8A was inserted in the
Act in order to provide Legal Aid as well as to organize Lok Adalat at High
Court Level.
Inserted by CPC (Amendment) Act 1999 w.e.f. 01.07.2002. The earlier Section
89 CPC which was repealed by the Arbitration Act, 1940. There now be an
independent Arbitration and Conciliation Act, 1996, the law has been
consolidated in that Act and hence the present parallel amendment was
necessitated in the CPC in 1999.
Justice Dr.A.S.Anand, Fifty years of Indian Judiciary Its achievements &
failures, 19, Nyaya Deep, April-June-2000
Justice Dr.A.S.Anand, Fifty years of Indian Judiciary Its achievements &
failures, 19, Nyaya Deep, April-June-2000
Justice K.Ramaswamy, Settlement of Disputes through Lok Adalat is one of the
effective ADR on statutory basis.
Justice K.Ramaswamy, Settlement of disputes through Lok Adalat is one the
effective dispute resolution on a statutory basis.
Justice M.B.Shah, effective fast track Court, Nyaya Path, Souvenir (2000) P. 25
Justice M.G.Chitkara, Accessibility of Justice, P.83 Nyaya Path, Souvenir 2000
Justice PS Narayana, Law relating to Lok Adalat (2002)
Justice S.B.Majumdar, Profile of a Legal Aid Scheme in India post & presents.
Justice S.B.Sinha, Alternative Dispute Resolution with special reference to Civil
Procedure (Amendment) Act, 1999, 8, Souvenir published by LASWEB (2001)
K Gupteshwar The Statutory Lok Adalat : its structure and role. June, vol 30,
April June, 1988.
K. Jayachandra Reddy, Alternate Dispute Resolution, in P.C. Rao and William
Sheffield (eds.), Alternative Dispute Resolution: What it is and How it Works,
Universal Law Publishing Co., New Delhi, (1997) p. 79.
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K.Ramaswamy Settlement of Dispute through Lok Adalat, In P.C.Rao

William Sheffield, ADIR, what it is and how its works, 94, (1997)
&
K.Ramaswamy, Settlement of Disputes through Lok Adalat, is one of the effect

ADR on statutory basis. P.96, in PC Rao, ADR : what it is and how it works,
(1997)
Legal Aid Newsletter- May-Aug 1990
LOK ADALAT An Effective Alternate Dispute Resolution Mechanism .by
Sarfaraz Ahmed Khan
Mool Chand Sharma, Justice P.N.Bhagwati, Court Constitution & Human
Rights, 1, (1995) Universal Book Traders.
Mool Chand Sharma, Justice P.N.Bhagwati, Court Constitution & Human
Rights, 1, (1995)
N.R.Madhava Menon, Justice Sans Lawyer : Some India Experiments, Indian
Bar Review, 446 (Vol-2 1985)
N.R.Madhava Menon, Lok Adalat in Delhi.
NR Madhava Menon Lok Adalat : People Programme for Speedy Justice,
Indian Bar Review
Nripendra Nath Sircar, Law of Arbitration in British India (1942), p. 6 cited in
76th Report of Law Commission of India, 1978, p. 6, para 1.14
Nyaya Deep, A Resume of Legal Services Authority Act, 1987, 35 (Jan 1999)
P.B. Udgaonkar, Political Institutions and Administration, Motilal Banarsidass
Publishers Pvt. Ltd., New Delhi, 1986, p. 209.
P.C. Rao, Alternatives to Litigation in India, in P.C. Rao and William Sheffield
(eds.), Alternative Dispute Resolution: What it is and How it Works, Universal
Law Publishing Co., New Delhi, (1997) p. 27.
Quran, Surah Al-Hujarat (49), ayat 10
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Quran, Surah Al-Hujurat, (49), ayat 9

RAJYA SABHA, DEB, 1959, Vol. 27, No.3, Col 388, See also SUPRA 26. 71-72
Received the assent of the president on Oct 11. 1987 and published in the
gazette of India, Extra pt II. S. I dt Oct 10.1987 pp- 1-12
Report of the Committee on Legal Aid (1971), Report of the Expert Committee
on Legal Aid: Processual ustice to the People, Government of India, Ministry
of Law, Justice and Company Affairs (1973), Report on National Juridicare
Equal Justice Social Justice, Ministry of Law, Justice and Company Affairs
(1977)
Robert Lingat, The Classical Law of India, Oxford University Press, 1998, pp.
9-10.
Romesh C. Dutt, Book XIII, ASWA-MEDHA, (Sacrifice of the Horse), The
Ramayana & Mahabharta, condensed into English verse by, Dent: London,
Everymans Library, First version 1910, last reprinted 1969, p. 312.
Sahih Al Bukhari, vol. 3, p. 533, Eng. Tr. by M. Muhsin Khan, (Dar Al Arabia,
Beirut, n.d.)
Sahih Al-Bukhari, vol. 3, p. 535, Eng. Tr. by Muhsin Khan (Dar Al Arabia,
Beirut, n. d.)
Sarvesh Chandra, ADR: Is Conciliation the Best Choice, in P.C. Rao and
William Sheffield (eds.), Alternative Dispute Resolution: What it is and How it
Works, Universal Law Publishing Co., New Delhi, (1997) p. 85.
See Centre for Legal Research & other v. State of Kerala AIR 1986 SC 2195.
See http://en.wikipedia.org/wiki/J._Robert_Oppenheimer.
See Law of Marriage & Divorce; Paras Diwan, (preface to the 1st Edition) 5th
Edition.
Sibnath Bhattacharya, Rural Poverty in India, 137 (1989)
Sumitra Kulkarni, The Satara Raj, 1818-1848: A Study in History,
Administration and Culture, p. 128.google book store
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Sunil Deshta, Lok Adalat in India ; genesis & functioning, 63

Sunil Desta, Lok Adalat in India : Genesis & Functioning.
Suniti Kumar Pathak, The Indian Nitisastras in Tibet, Delhi, Motilal
Banarasidas, 1974.
The 129th Law Commission of India Report pg. 32 para 3-14 The Bhagavadgita,
Note 1.
The Bhagavadgita, with an introductory Essay, Sanskrit Text, English
translation and Notes by S. Radhakrishnan, Bombay, Blackie & Sons (India)
Ltd, 1977, p.13; first published by George Allen & Unwin, 1948.
The Book Review, Vol. XXXVII, No.1, January 2013, pp. 5-6.
The letter is still preserved. For its authenticity, which is established with carbon
dating process, see, D. D. Margolith, Omars Instructions to the Qadi, Journal
of Royal Asiatic Society, (1910), p. 307 at 311- 312; Asif A. A. Fyzee, A Modern
Approach to Islam, (Lahore, 1978 ed. Of the original Indian Edition), pp. 41-46;
Mahmood A. Ghazi, Adab al Qadi, (Urdu) 2nd ed. (Islamabad, Islamic
Research Institute, 1993), p. 164
The Regulation was notified on 26.07.1996, Vide Notification No. GSR 336(3)
pub in Gazette of India, Ext, Pt II, Sec 3(i), dated 26.07.1996, w.e.f 26.07.1996,
Regulation five prescribed the power & functioning of the committee.
These systems are the pre-Buddhist Vaisesika Sutra of Kanda or Uluka
(owl), Samkhya Sutra of Kapila, Nyaya Sutra of Gautama, Mimamsa
Sutra of Badarayana and Yoga Sutra of Patanjali.
Upendra Baxi, The Indian Supreme Court & Politics, (1980) referred in Supra
111.
V.R.Krishna Iyer A Constitution Miscllany.
V.R.Krishna Iyer Law versus Justice..
V.R.Krishna Iyer, Our Courts on trial (1987) quoted in Sunil Deshta : Lok
Adalat In India Genesis & Functioning, 51 (1995)
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CHAPTER I
1. INTRODUCTION
If there is a valid arbitration agreement between parties, the parties are
required to adhere to and are bound by the same.1
A. ALTERNATIVE DISPUTE RESOLUTION
Alternative dispute resolution (ADR)
(also known as external dispute
resolution in some countries, such as Australia) includes dispute resolution

processes and techniques that act as a means for disagreeing parties to come to
an agreement short of litigation. ADR basically is an alternative to a formal
court hearing or litigation. It is a collective term for the ways that parties can
settle disputes, with (or without) the help of a third party. ADR are ways and
methods of resolving disputes outside the judicial process (formal litigation
court). Alternative dispute resolution (ADR) (also known as external dispute
resolution in some countries, such as Australia) includes dispute resolution
processes and techniques that act as a means for disagreeing parties to come to
an agreement short of litigation. ADR basically is an alternative to a formal
court hearing or litigation.2 It is a collective term for the ways that parties can
1 Everest Holding Ltd. Vs Shyam Kumar Shrivastava and Ors. 2008 (14) SCALE 294
2 Report of the Committee on Legal Aid (1971), Report of the Expert Committee on Legal Aid: Processual
ustice to the People, Government of India, Ministry of Law, Justice and Company Affairs (1973), Report on
National Juridicare Equal Justice Social Justice, Ministry of Law, Justice and Company Affairs (1977)
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settle disputes, with (or without) the help of a third party. ADR are ways and
methods of resolving disputes outside the judicial process (formal litigation
court).
Alternative dispute resolution in India is not new and it was in existence

even under the previous Arbitration Act, 1940. The Arbitration and Conciliation
Act, 1996 has been enacted to accommodate the harmonisation mandates of
UNCITRAL Model. To streamline the Indian legal system the traditional civil
law known as Code of Civil Procedure, (CPC) 1908 has also been amended and
section 894 has been introduced. Section 89 (1) of CPC provides an option for
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.
Alternative dispute resolution in India is not new and it was in existence
even under the previous Arbitration Act, 1940. The Arbitration and Conciliation
Act, 1996 has been enacted to accommodate the harmonisation mandates of
UNCITRAL Model. To streamline the Indian legal system the traditional civil
3 See The Culture of ADR in India-by Praveen Dalal [http://www.odr.info/ THE%20CULTURE%20O F
%20 ADR %20IN%20INDIA.doc]
4 Inserted by CPC (Amendment) Act 1999 w.e.f. 01.07.2002. The earlier Section 89 CPC which was repealed
by the Arbitration Act, 1940. There now be an independent Arbitration and Conciliation Act, 1996, the law has
been consolidated in that Act and hence the present parallel amendment was necessitated in the CPC in 1999.
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law known as Code of Civil Procedure, (CPC) 1908 has also been amended and
section 89 has been introduced. Section 89 (1) of CPC provides an option for
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.
Due to extremely slow judicial process, there has been a big thrust on
Alternate Dispute Resolution mechanisms in India. While Arbitration and
Conciliation Act, 1996 is a fairly standard western approach towards ADR, the
Lok Adalat system constituted under National Legal Services Authority Act,
1987 is a uniquely Indian approach.
B. HISTORY OF ADR IN INDIA
India has had a long history of ADR; the earliest recorded instances date back to
several centuries before Christ. Many of these forms exist with little change in
the interiors and rural India. Bodies such as the panchayat, a group of elders and
influential persons in a village deciding the dispute between villagers are not
uncommon even today. A famous letter which the second caliph of Islam Umar bin Khattab - wrote to Abu Musa Al-Ashri after appointing him as a qadi
(judge) contained rules to guide him in deciding cases. One of these rules
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spelled out the wide span of coverage of amicable settlement of disputes. The
exact words of Umar are:
All types of compromise and conciliation among Muslims are permissible
except those which make haram (unlawful) anything which is halal (lawful),
and a halal as haram.5
This principle is directly based on the saying of the Prophet that if somebody
innovates something which is not in harmony with the principles of our religion,
that thing is rejected.6
There are also instances of disputes between persons of two different villages
being settled by a body of individuals drawn from the disputants villages, a third
village or a combination of the two. The disputants are required to present their
cases before the panchayat which will attempt to resolve the dispute. The
working of the panchayat is such that it would be difficult to classify it as a
mediator, a conciliator, an arbitral tribunal or a judicial body. While all disputes
are heard by the panchayat it dons different forms, depending on the
circumstances and the situation. If the facts disclose a clear legal obligation, it
would act as a judicial body to decide the rights of the parties and enforce the
5 The letter is still preserved. For its authenticity, which is established with carbon dating process, see, D. D.
Margolith, Omars Instructions to the Qadi, Journal of Royal Asiatic Society, (1910), p. 307 at 311- 312; Asif
A. A. Fyzee, A Modern Approach to Islam, (Lahore, 1978 ed. Of the original Indian Edition), pp. 41-46;
Mahmood A. Ghazi, Adab al Qadi, (Urdu) 2nd ed. (Islamabad, Islamic Research Institute, 1993), p. 164
6 Sahih Al-Bukhari, vol. 3, p. 535, Eng. Tr. by Muhsin Khan (Dar Al Arabia, Beirut, n. d.)
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decision by sanction. On the other hand, it may persuade one of the parties to
act in a particular manner in a situation where the petitioner has no real claim in
law but appeals to the righteousness of action to seek relief.
This may be seen as the first indication of the process of conciliation in India.
The disputants would ordinarily accept the decision of the panchayat and hence
a settlement arrived consequent to conciliation by the panchayat would be as
binding as the decision that was on clear legal obligations. One ought to
understand that the decision of the panchayat was always to be followed,
irrespective of the source of the decision. The panchayat has, in the recent past,
also been involved in caste disputes. One may compare some activities of the
panchayat to that of the 18th century English guilds since the caste system began
with a classification based on the profession of its members. In rural India, the
panchayats (assembly of elders and respected inhabitants of the village)
decided nearly all the disputes between the residents of the village, while
disputes between the members of a clan continued to be decided by the elders of
the clan. These methods of amicable dispute resolution were recognized
methods of administration of justice and not just an alternative to the formal
justice system formed by the sovereigns, feudal lords or the adalat
systems initiated by the British and the formal court system. The two systems
continued to function analogous to each other. The process followed by the
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traditional institutions was that of arbitration and conciliation, depending on the

character of dispute. By its official designation, the Gita is called Upanishad,
since it derives its main inspiration from the remarkable group of scriptures, the
Upanishad. The Bhagavadgita.7 The famous Gautam rishi was the founder of
the Nyaya or Analytical system of Indian philosophy, which forms part of the
six systems.8
Ancient Indian guilds are a unique and multi-faceted form of organization,
which combined the functions of a democratic government, a trade union, a
court of justice and a technological institution. 9 The guilds of ancient India are
often referred to by Sanskrit writers as the Srenya. This term means a fraternal
organization of a group of labourers or artisans. A Srenya is thus primarily a
combination of manual workers forsome common purposes. The early Hindu,
Jain and Buddhistic traditions often refer to the Srenyas.10
The Muslim rule in India saw the incorporation of the principles of Muslim law
in the Indian culture. The Kazi was the designated judicial officer who decided
disputes between individuals. There are many recorded instances where the kazi
7 The Bhagavadgita, with an introductory Essay, Sanskrit Text, English translation and Notes by S.
Radhakrishnan, Bombay, Blackie & Sons (India) Ltd, 1977, p.13; first published by George Allen & Unwin,
1948.
8 These systems are the pre-Buddhist Vaisesika Sutra of Kanda or Uluka (owl), Samkhya Sutra of Kapila,
Nyaya Sutra of Gautama, Mimamsa Sutra of Badarayana and Yoga Sutra of Patanjali.
9
http://www.infinityfoundation.com/mandala/h_es/h_es_shah_m_sreni_frameset.htm
10 H.S Bhatia, Society, Law and Administration in Ancient India, Vol. 3, Deep & Deep Publications Pvt. Ltd.,
New Delhi, 1992, (2nd Ed.), p. 179
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has decided a case beyond the law by getting the disputants to agree to a
solution that has been arrived at by conciliation, without actually giving that
colour to the decision. Thus the decision from the authority of the kazi would be
binding on the parties before him, it may just be that the decision is more
acceptable and the disputants go back with the feeling that the decision was just
and neither lost. Both under HMA and SMA,11 the court has an obligation to
make efforts at reconciliation . This mandatory and statutory duty of the court
12
cannot be waived. The Supreme Court of India in the case Baljinder Kaur V/s.
Hardeep Singh13 laid down that stress should always be on the preserving the
institution of marriage. That is the requirement of law.14
In another case, the High Court of Allahabad called it the bounded duty of the
Family Court for making an attempt for conciliation before proceeding with the
trial of the case. In a very recent case titled Aviral Bhatla v Bhavana Bhatla ,
16
15
the Supreme Court has upheld the settlement of the case through the Delhi
11
Shiv Kumar Gupta v Lakshmi Devi Gupta2005 (1) HLR 483
12 Pramila V/s. Ajit, AIR 1989 Pat 163: (1989) 2 DMC 466.
13 AIR 1998 SC 764
14 Love Kumar Vs. Sunita Puri AIR 1997 Punjab and Haryana 189: 1997(1) HLR 179.
15 Rajesh Kumar Saxena v Nidhi Saxena. 1995(1) HLR 472
16
2009 SCC (3) 448
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mediation centre, appreciating the effective manner in which the mediation

centre of the Delhi High Court helped the parties to arrive at a settlement.
Everyone has heard the phrase looking at a problem with fresh eyes, and that
is precisely what Dr. Badrinath Rao , associate professor of Liberal Studies at
17
Kettering University has done.

C. ADR IN MODERN INDIA
In the not so distant past too, conciliation has been effectively used in dispute
resolution. The most prominent and effective use of conciliation has been in the
Industrial Disputes Act, 1947. Conciliation has been statutorily recognised as an
effective method of dispute resolution in relation to disputes between workmen
and the management of the industry. The I.D. Act makes it attractive for
disputing parties to settle disputes by negotiation, failing which by conciliation
by an officer of the Government before resorting to litigation.
D. NEED FOR ADR IN INDIA
Like every developed legal system, India too has a reputation for long winding
procedures and an elaborate system of revisions and appeals from the order of
the court of first instance.
17 As part of his research into conflict resolution, Rao attended a program sponsored by the Dispute Resolution
Institute of Hamline University School of Law, held in Budapest. The Dispute Resolution Institute (DRI) offers
academic discourse, hands-on simulation experience, and cross-disciplinary examination of ADR themes in
domestic and summer abroad courses for law students, lawyers, and other professionals.
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There have been attempts to simplify the appeals procedure but the sheer
number of cases seems to overwhelm the system. In the background of this and
the fact that India is presently at a critical stage of its development, one needs to
rethink the dispute resolution mechanisms of the past so that those
contemplating investment in India are satisfied that they will get the benefit of
international dispute resolution procedures in India.
Unless Indian law is as effective as some of the legal systems of other nations,
investors would not be comfortable investing in India. The restriction on the
choice of law is also a restriction on ADR techniques and choice of forum for
ADR. Consequently, unless India provides a good system of dispute resolution,
it would be difficult to attract and retain investment.
The Supreme Court Legal Services Committee Regulations 1996 prescribe the
detailed guidelines for the functioning of the Committee at the apex level.
18
The Act also provides for State Government to constitute High court Legal
Services, which shall consist of a sitting judge of the High Court, who shall be
the chairman, and such number of other members as may be determined by the
18 The Regulation was notified on 26.07.1996, Vide Notification No. GSR 336(3) pub in Gazette of India, Ext,
Pt II, Sec 3(i), dated 26.07.1996, w.e.f 26.07.1996, Regulation five prescribed the power & functioning of the
committee.
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State Government.
19
Initially the provisions for formation of the High Court
Legal Services Authority was not there and was subsequently incorporated20
In no other system except perhaps in the United States of America, the judges
and the judicial branch of the Government occupy as prominent and powerful a
position as in the Indian System. Indeed the importance of the Courts,
particularly the Supreme Court and its judge has, if anything, increased over the
decades. 21 Right from its inception, the Apex Court in India has influenced the
national policy making agenda in significant proportions. 22 The judiciary,
specifically Apex Court, has not only indulged in judicial legislation but has
even exercised the constituent power unknown anywhere in the World, and the
seemingly transcending all, received notions of separation of power.
23
The
institution of judiciary has not only influenced the enactment of the Legal
Services Authority Act, 1987 but was also determined so that the Act can be
implemented all over the country with its true spirit24. The judiciary even
19 Sec. 8A, The Act.
20 In the Original Act of 1987, the provision for formation of High Court Legal Services Committee was not
there but subsequently Sec. 8A was inserted in the Act in order to provide Legal Aid as well as to organize Lok
Adalat at High Court Level.
21 Mool Chand Sharma, Justice P.N.Bhagwati, Court Constitution & Human Rights, 1, (1995) Universal Book
Traders.
22 George H.Gadbois, the Supreme Court of India : As a Political institution in Rajeev Dhavan, R.Sudarshan
& Salman Khurshid, Judge & Judiciary power, (1985) P-251 referred in id.
23 Upendra Baxi, The Indian Supreme Court & Politics, (1980) referred in Supra 111.
24 In Supreme Court Legal Services Committee v. Union of India AIR 1998
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directed the Government to provide funds to NGOs in order to encourage

people participations through legal awareness, so that the Legal Aid programme
can succeed.25 It went to further directing the Government and Governmental
organizations to hold permanent Lok Adalat in their concerned departments to
settle the grievances of the citizens speedily and cost effectively. 26
Again in 1986, Supreme Court enhanced the ambit of the Legal Aid to the
Appellate Court.27 The Court again re-iterated similar views in Khetri Case. 28.
Introduction of section 89 and Order X Rule 1A, 1B and 1C by way of the 1999
Amendment in the Code of Civil Procedure, 1908 is a radical advancement
made by the Indian Legislature in embracing the system of Court Referred
Alternative Disputes Resolution.
Dr.A.S.Anand with regard to the process of access to justice through the means
of social action lititgation is noteworthy. To Quote
29
while the judiciary was
striving a balance between dignity of the individual and the unity of the nation,
it found itself faced with a serious challenge concerning access to justice.
25 See Centre for Legal Research & other v. State of Kerala AIR 1986 SC 2195.
26 Hussainara Khatoon (1) v. Home Secretary, State of Bihar, (1980) 1 SCC 81.
27 Sukh Das & Ors. V. Union Territory of Arunanchal Pradesh, AIR 1986 SC 991.
28 Khatri & Ors. V. State of Bihar, AIR 1979, SC 1369
29 Justice Dr.A.S.Anand, Fifty years of Indian Judiciary Its achievements & failures, 19, Nyaya Deep, AprilJune-2000
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E. ADVANTAGES OF A DEVELOPED SYSTEM OF ADR IN INDIA:

It includes:
Choice of judges/experts who understand international business,
commercial transactions and are not lost in the language of the law.
One expects that the chosen person(s) will not only understand the
transaction better and more easily but also appreciate the underlying
motivations and expectations that led the parties to enter into the
transaction and act the way they did.
The expert who applies ADR is expected to understand these positions of
the parties and guide the procedure to the solution accordingly. It is not
expected that the judge, a generalist would understand such
considerations of the parties. The expert who applies ADR is expected to
understand these positions of the parties and guide the procedure to the
solution accordingly. It is not expected that the judge, a generalist would
understand such considerations of the parties.
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CHAPTER II
CONCEPT OF ARBITRATION
A. BRIEF HISTORY OF ARBITRATION
Arbitration is a part of Alternate Dispute Resolution or ADR with other popular
ADR processes like Conciliation and Mediation. Arbitration in India is
governed by the Indian Arbitration and Conciliation Act 1996. The Arbitration
and Conciliation Act, 1996 as applicable in India today was created on the lines
of the Model Law of the UNCITRAL (United Nations Commission on
International Trade Law). The popularity of choosing arbitration over mediation
and/ or conciliation has created the term Arbitration Dispute Resolution.
The Arbitration and Conciliation Act, 1996 as applicable in India today was
created on the lines of the Model Law of the UNCITRAL (United Nations
Commission on International Trade Law) but Alternate Dispute Resolution as
such was incorporated in laws of India as way back in 1840. Over a period of
time, processes, procedures and powers pertaining to Arbitration and the right of
parties to the same were incorporated in The Civil Procedure Code, Indian
Contract Act, Specific Relief Act and by further incorporation of Indian
Arbitration Act 1899, subsequently repealed by the Indian Arbitration Act of
1940 and them finally by the Arbitration and Conciliation Act, 1996 which
came in force with effect from 25th January 1996.
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The Arbitration and Conciliation Act 1996, seeks to consolidate and amend the
laws pertaining to arbitration as were in force pre 25 January 1996 and seeks to
fortify the domestic and international commercial arbitration including
enforcement of the foreign arbitration awards on the lines of Model Law on
International and Commercial Arbitration adopted by UN commission on
International Trade Law, 1985
Arbitration is a part of Alternate Dispute Resolution or ADR with other popular
ADR processes like Conciliation and Mediation. Arbitration in India is
governed by Indian Arbitration and Conciliation Act 1996. The Arbitration and
Conciliation Act, 1996 as applicable in India today was created on the lines of
the Model Law of the UNCITRAL (United Nations Commission on
International Trade Law). The popularity of choosing arbitration over mediation
and/ or conciliation has created the term Arbitration Dispute Resolution.
B. MEANING OF ARBITRATION
Halsbury defines "Arbitration is the reference of dispute between not less
than two parties, for determination, after hearing both sides in a judicial
manner, by a person or persons other than a court of competent
jurisdiction.
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Ronald Bernstein defines arbitration as Where two or more persons

agree that a dispute or a potential dispute between them shall be decided
in a legally binding way by one or more impartial persons in a judicial
manner that is, upon evidence put before him or them the agreement is
called an arbitration agreement or a submission to arbitration.
Arbitration, a form of alternative dispute resolution (ADR), is a legal technique
for the resolution of disputes outside the courts, wherein the parties to a dispute
refer it to one or more persons (the arbitrators, arbiters or arbitral
tribunal), by whose decision (the award) they agree to be bound. It is a
settlement technique in which a third party reviews the case and imposes a
decision that is legally binding for both sides. The essence of arbitration,
therefore, is that it is the arbitrator who decides the case and not the ordinary
civil courts established by the state. The law of arbitration, is based upon the
principle of referring the disputes to a domestic tribunal substituted in the place
of a regular Court.
Arbitration is a dispute settlement technique outside the court where the
conflicting parties any choose to bound to the decision made by a third party or
person. The third person/party acts as the mediator between the opposite parties
and is called as arbiter or arbitrators, if they are many. Arbitration
definition also includes the strict and legal acceptance of the decision finalised
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by the arbitrators. This technique is majorly employed in case of commercial

disputes, employment issues and customer related conflicts. Arbitrators majorly
play role in compromising the situation by presenting such a case which should
be convenient to accept by both the parties.
This technique of settling disputes is effective when the subject of conflict is
technical enough so that it is not feasible to take it to the regular judicial
proceedings. Arbitration definition specifies the speed of the process which is
suitable for businesses therefore most of the corporate cases are handles by
arbitrators only. Apart from being quick, it is cheaper than normal proceedings.
It has the advantage of being confidential, making sure that the whole process
could be carried out in the vicinity of both the parties and the details could be
remain not exposed to public or media. The panel of arbiters could be appointed
by both parties and it is generally done on the basis of experience. The final
decision made by the arbitrators is generally called award'. But in spite of
having so many merits, certain disadvantages also exist in having third party act
as a mediator, which are discussed next.
The first and the obvious demerit of this method is that it may turn very
complex over the period of time. Additionally, as defined in arbitration
definition, it is mandatory to accept the final verdict announced by the
arbitrators, the conflicting parties would be left with no choice but to go along
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with the decision. There are fairly positive chances that the panel may come
under the pressure of stronger party and the final decision is also inclined in
their favour. There are also very limited chances to challenge the decision made
by panel of arbiters and that too with very little success rate. Normally, a
number of legal agreements are associated with the arbitration and the clients
may not be aware that they have to be agreed to them before hiring them. Due
to their disadvantages, this method is considered successful with a very low
success rate and that too in concern of much bigger and wealthy organisations.
C. SCOPE OF ARBITRATION
Arbitration is a legal procedure for the resolution of disputes outside the courts,
wherein the parties to a dispute refer it to one or more persons, mutually agreed
upon and by whose decision they are bound. The decision of the Arbitrator is
known as the "award".
Commercial disputes, arising out of International or domestic commercial
transactions are usually resolved through arbitrations. Apart from this arbitration
is also effective in resolving labour disputes or family disputes, and also
disputes between states and between investors and states. The use of arbitration
is also frequently employed in consumer and employment matters, where
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arbitration may be mandated by the terms of employment or commercial

contracts.
Arbitration can be either voluntary or mandatory (although mandatory
arbitration can only come from a statute or from a contract that is voluntarily
entered into, where the parties agree to hold all disputes to arbitration, without
knowing, specifically, what disputes will ever occur) and can be either binding
or non-binding. Non-binding arbitration is, on the surface, similar to mediation.
However, the principal distinction is that whereas a mediator will try to help the
parties find a middle ground on which to compromise, the (non-binding)
arbitrator remains totally removed from the settlement process and will only
give a determination of liability and, if appropriate, an indication of the
quantum of damages payable.
Arbitration is a proceeding in which a dispute is resolved by an impartial
adjudicator whose decision the parties to the dispute have agreed, or legislation
has decreed, will be final and binding. Arbitration is not the same as:
judicial proceedings, although in some jurisdictions, court proceedings
are sometimes referred as arbitrations[3]
alternative dispute resolution (or ADR)[4]
expert determination
mediation
D. ARBITRABILITY
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By their nature, the subject matter of some disputes is not capable of arbitration.
In general, two groups of legal procedures cannot be subjected to arbitration:
Procedures which necessarily lead to a determination which the parties to
the dispute may not enter into an agreement upon. Some court procedures
lead to judgments which bind all members of the general public, or public
authorities in their capacity as such, or third parties, or which are being
conducted in the public interest. For example, until the 1980s, antitrust
matters were not arbitrable in the United States. Matters relating
to crimes, status and family law are generally not considered to be
arbitrable, as the power of the parties to enter into an agreement upon
these matters is at least restricted. However, most other disputes that
involve private rights between two parties can be resolved using
arbitration. In some disputes, parts of claims may be arbitrable and other
parts not. For example, in a dispute over patent infringement, a
determination of whether a patent has been infringed could be adjudicated
upon by an arbitration tribunal, but the validity of a patent could not: As
patents are subject to a system of public registration, an arbitral panel
would have no power to order the relevant body to rectify any patent
registration based upon its determination.
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Some legal orders exclude or restrict the possibility of arbitration for

reasons of the protection of weaker members of the public, e.g.
consumers. Examples: German law excludes disputes over the rental of
living space from any form of arbitration ], while arbitration agreements
with consumers are only considered valid if they are signed by either
party, and if the signed document does not bear any other content than the
arbitration agreement.
E. NEED FOR ARBITRATION
The act of 1996 has defined arbitration in the following ,manner Section 2 (a)
Arbitration means any arbitration whether or not administered by permanent
arbitral institution.
A fair, just and quick process of resolution of disputes is indispensable in any
democratic society becoming increasingly aware of their human and legal
rights. The human and material resources in Courts are inadequate to meet the
ever growing demands, resulting in backlog of cases and delay in the
administration of justice. Our justice delivery system is bursting at the seams
and unless timely measures are adopted, for the quick disposal of cases,
particularly at the grass-roots it will lead to very dire consequences.
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In certain disputes like financial matters involving the individuals, firms and
even multinational companies, they do not want to submit to the jurisdiction of
the courts of obvious reasons of delay, rigid procedural rules and provisions of
appeals and revisions. The simple logic is that both the parties are not interested
in getting a proposition of law on any point laid down but they are interested to
settle their money matters and for that purpose they can even give up certain
claims which they are otherwise entitled to. One such method of dispute
resolution is arbitration governed in India by the Arbitration and Conciliation
Act 1996.
F. ADVANTAGES OF ARBITRATION
Finality Of Decisions
The decision (i.e. award) of arbitral tribunal is final and binding on the parties.
A final and enforceable decision by amicable settlement can generally be
obtained only by recourse to arbitration because arbitral tribunals are not subject
to appeal. Arbitral awards may be challenged only on a very few limited
grounds.
International Recognition
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Arbitral awards enjoy much greater international recognition than judgments of

national Courts. The New York Convention facilitates enforcement of awards in
all contracting states.
Unbiased Jurisdiction
Neutrality and mutuality are perhaps the most redeeming features of arbitration
process. At least in matters such as:
i.
ii.
iii.
iv.
place of arbitration
language to be used procedure or rules to be applied
nationality of arbitration
legal representation and that the parties can place themselves on equal
footing
Choice of Judges
Arbitration offers parties a unique opportunity to designate persons of their
choice as arbitrators, which is not possible in case of courts. This enables the
parties to have their disputes resolved by people who have specialized
competence and expertise in the relevant field. Another important factor is the
lack of specialized judges and Courts; this can be an impediment both in terms
of time taken and also in terms of injustice being done due to lacunae in
knowledge. Arbitration helps in overcoming this.
Faster & Less Expensive
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Arbitration is faster and less expensive than litigation in courts. Where the
arbitral proceedings can often score over judicial methods is in the duration of
time taken- the latter tends to be lengthy for a variety of reasons which includes
the enormous pendency of existing caseloads as well as the various levels of
original and appellate jurisdiction which need to be completed before a final
solution is arrived at.
Confidential
The element of confidentiality, which is wanting in judicial proceedings in an
attribute of arbitration system. Arbitration hearings are not public and only the
parties receive the copies of the arbitral award.
Specialised Judges
The undisputed advantage of arbitration lies in the fact that the judges
themselves can be unbiased experts in the field within which the issues being
arbitrated fall.30 While the efficacy of the existing judiciary is undoubted,
certain fields demand specialized knowledge not easily acquired by a regular
judge. Intellectual property disputes- to take just one example- demand a high
degree of technical skill and knowledge and even lawyers handling such
disputes are required to possess the same. Given that arbitrators can be (and
30 Phillips, Philip G., A Lawyer's Approach to Commercial Arbitration, The Yale Law Journal, 31, 51,
(1934).
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often are) experts in their arenas, the need for expert witnesses can be
eliminated- saving both much time and much money as well as potentially
ensuring a fairer results for the disputants.
Amicable and Mutual
The method of arbitration creates understanding between disputants as it
resolves the disputes through compromise and co-operation without leaving an
intolerable trial of bitterness behind.
G. DISADVANTAGES OF ARBITRATION
Arbitration agreements are sometimes contained in ancillary agreements
or in small print in other agreements, and consumers and employees
sometimes do not know in advance that they have agreed to mandatory
binding pre-dispute arbitration by purchasing a product or taking a job.
If the arbitration is mandatory and binding, the parties waive their rights
to access the courts and have a judge or jury decide the case
In some arbitration agreements, the parties are required to pay for the
arbitrators, which add an additional layer of legal cost that can be
prohibitive, especially in small consumer disputes.
In some arbitration agreements and systems, the recovery of attorneys
fees is unavailable, making it difficult or impossible for consumers or
employees to get legal representation; however most arbitration codes
and agreements provide for the same relief that could be granted in court.
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If the arbitrator or the arbitration forum depends on the corporation for

repeat business, there may be an inherent incentive to rule against the
consumer or employee.
There are very limited avenues for appeal, which means that an erroneous
decision cannot be easily overturned
Although usually thought to be speedier, when there are multiple
arbitrators on the panel, juggling their schedules for hearing dates in long
cases can lead to delays
In some legal systems, arbitral awards have fewer enforcement remedies
than judgments; although in the United States, arbitration awards are
enforced in the same manner as court judgments and have the same effect
Arbitrators are generally unable to enforce interlocutory measures against
a party, making it easier for a party to take steps to avoid enforcement of
an award, such as the relocation of assets offshore
Rule of applicable law is not necessarily binding on the arbitrators,
although they cannot disregard the law.
Discovery may be more limited in arbitration
The potential to generate billings by attorneys may be less than pursuing
the dispute through trial
Unlike court judgments, arbitration awards themselves are not directly
enforceable. A party seeking to enforce an arbitration award must resort
to judicial remedies, called an action to confirm an award.
Although grounds for attacking an arbitration award in court are limited,
efforts to confirm the award can be fiercely fought, thus necessitating
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huge legal expenses that negate the perceived economic incentive to

arbitrate the dispute in the first place.
H. MAJOR KINDS OF ARBITRATION

Ad-hoc Arbitration:
When a dispute or difference arises between the parties in course of
commercial transaction and the same could not be settled friendly by
negotiation in form for conciliation or mediation, in such case ad-hoc
arbitration may be sought by the conflicting parties. This arbitration is
agreed to get justice for the balance of the un-settled part of the dispute
only.
Institutional Arbitration:
This kind of arbitration there is prior agreement between the parties that
in case of future differences or disputes arising between the parties during
their commercial transactions, such differences or disputes will be settled
by arbitration as per clause provide in the agreement.
Statutory Arbitration:
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It is mandatory arbitration which is imposed on the parties by operation

of law. In such a case the parties have no option as such but to abide by
the law of land. It is apparent that statutory arbitration differs from the
above 2 types of arbitration because (i) The consent of parties is not
necessary; (ii) It is compulsory Arbitration; (iii) It is binding on the
Parties as the law of land; For Example: Section 31 of the North Eastern
Hill University Act, 1973, Section 24,31 and 32 of the Defense of India
Act, 1971 and Section 43(c) of The Indian Trusts Act, 1882 are the
statutory provision, which deal with statutory arbitration.
Domestic or International Arbitration:
Arbitration which occurs in India and have all the parties within India is
termed as Domestic Arbitration. An Arbitration in which any party
belongs to other than India and the dispute is to be settled in India is
termed as International Arbitration.
Foreign Arbitration:
When arbitration proceedings are conducted in a place outside India and
the Award is required to be enforced in India, it is termed as Foreign
Arbitration.
I. ARBITRAL AGREEMENT
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Arbitration Agreement: Section 7 of Arbitration & Conciliation Act, 1996 says

that it 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. It may be in the form of a
clause in a contract or in the form of a separate agreement and should be in
writing. Agreement shall be considered in writing if it is contained in a
document signed by the parties or an exchange of letters, telex, telegrams or
other means of telecommunication which provide a record of the agreement or
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.
Since Arbitration is based upon either contract law of the law of treaties, the
agreement between the parties to submit their dispute to arbitration is a legally
binding contract. All arbitral decisions are considered to be final and binding.
This does not, however, void the requirements of law. Any dispute not excluded
from Arbitration by virtue of law (e.g. criminal proceedings of compoundable
nature) may be submitted to arbitration.
Arbitration exists under national and international law and Arbitration and it can
be carried out between private individuals, between states or between states and
private individuals.
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In theory, arbitration is a consensual process; a party cannot be forced to

arbitrate a dispute unless he agrees to do so. In practice, however, many fineprint arbitration agreements are inserted in situations in which consumers and
employees have no bargaining power. Moreover, arbitration clauses are
frequently placed within sealed users' manuals within products, within lengthy
click-through agreements on websites, and in other contexts in which
meaningful consent is not realistic. Such agreements are generally divided into
two types:
Agreements which provide that, if a dispute should arise, it will be
resolved by arbitration. These will generally be normal contracts, but they
contain an arbitration clause.
Agreements which are signed after a dispute has arisen, agreeing that the
dispute should be resolved by arbitration (sometimes called a "submission
agreement").
The former is the far more prevalent type of arbitration agreement. Sometimes,
legal significance attaches to the type of arbitration agreement. For example, in
certain Commonwealth countries, it is possible to provide that each party should
bear their own costs in a conventional arbitration clause, but not in a submission
agreement.
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In keeping with the informality of the arbitration process, the law is generally
keen to uphold the validity of arbitration clauses even when they lack the
normal formal language associated with legal contracts. Clauses which have
been upheld include:
"arbitration in London - English law to apply"
"suitable arbitration clause"
"arbitration, if any, by ICC Rules in London"
The courts have also upheld clauses which specify resolution of disputes other
than in accordance with a specific legal system. These include provision
indicating:
that the arbitrators "must not necessarily judge according to the strict law
but as a general rule ought chiefly to consider the principles of practical
business"
"internationally accepted principles of law governing contractual
relations"
Agreements to refer disputes to arbitration generally have a special status in the
eyes of the law. For example, in disputes on a contract, a common defence is to
plead the contract is void and thus any claim based upon it fails. It follows that
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if a party successfully claims that a contract is void, then each clause contained
within the contract, including the arbitration clause, would be void. However, in
most countries, the courts have accepted that:
a contract can only be declared void by a court or other tribunal; and
if the contract (valid or otherwise) contains an arbitration clause, then the
proper forum to determine whether the contract is void or not, is the
arbitration tribunal.
Arguably, position is potentially unfair; if a person is made to sign a contract
under duress, and the contract contains an arbitration clause highly favourable
to the other party, the dispute may still referred to that arbitration tribunal.
Conversely a court may be persuaded that the arbitration agreement itself is
void having been signed under duress. However, most courts will be reluctant to
interfere with the general rule which does allow for commercial expediency;
any other solution (where one first had to go to court to decide whether one had
to go to arbitration) would be self defeating.
J. VALIDITY OF AN ARBITRATION AGREEMENT
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Section 16 of the Act empowers the arbitral tribunal to rule on its jurisdiction
Under the Act, the arbitration tribunal can rule on its own jurisdiction, including
ruling on any objections with respect to the existence or validity of the
arbitration agreement, and for this purpose:
an arbitration clause which forms part of a contract will be treated as an

agreement independent of the other terms of the contract; and
a decision by the arbitral tribunal that the contract is null and void will
not entail, ipso jure, the invalidity of the arbitration clause.
A plea that the arbitral tribunal does not have jurisdiction will, however, have to
be raised not later than the submission of the statement of defense. However, a
party shall not be precluded from raising such a plea merely because he has
appointed, or participated in the appointment of an arbitrator.
A plea that the arbitral tribunal is exceeding the scope of its authority has to be
raised as soon as the matter alleged to be beyond the scope of its authority is
raised during the arbitral proceedings.
The arbitral tribunal may, in either of the cases referred to above, admit later a
plea if it considers the delay justified.
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The arbitral tribunal has to decide on a plea about lack of jurisdiction or about
the tribunal exceeding the scope of its authority and where the arbitral tribunal
takes a decision rejecting the plea, it shall continue with the arbitral proceedings
and make the arbitral award.
A party aggrieved by such an arbitral award is free to make an application for
setting aside the award under section 34 of the Act. Section 34(2)(a) inter alia
permits a challenge to an award on the above grounds.
K. POWER TO REFER PARTIES TO ARBITRATION WHERE THERE IS AN
ARBITRATION AGREEMENT
(1) A judicial authority before which an action is brought in a matter, which
is the subject of an arbitration agreement, shall, if a party so applies not later
than when submitting his first statement on the substance of the dispute,
refer the parties to arbitration.
(2) The application referred to in sub-section (1) shall not be entertained
unless it is accompanied by the original arbitration agreement or a duly
certified copy thereof.
(3) Notwithstanding that an application has been made under sub-section (1)
and that the issue is pending before the judicial authority, an arbitration may
be commenced or continued and an arbitral award made.
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The court has read this section strictly and has in its interpretation made it
clear that without an agreement to that effect no arbitration under this section
lies, the court said that For application of Section 8 of the Arbitration and
Conciliation Act, 1996, it is absolutely essential that there should be an
arbitration agreement between the parties.31 However this reading of the
section seems to be in contradiction with provisions in the act which allow a
person recourse to arbitration even without an agreement in the interest of
speedy resolution of disputes.
L. ARBITRAL TRIBUNAL
The term arbitral tribunal is used to denote the arbitrator or arbitrators sitting to
determine the dispute. The composition of the arbitral tribunal can vary
enormously, with either a sole arbitrator sitting, two or more arbitrators, with or
without a chairman or umpire, and various other combinations.
In most jurisdictions, an arbitrator enjoys immunity from liability for anything
done or omitted whilst acting as arbitrator unless the arbitrator acts in bad faith.
Arbitrations are usually divided into two types:
ad hoc arbitrations and administered arbitrations.
31 Atul Singh and Ors. Vs. Sunil Kumar Singh and Ors. AIR 2008 SC 1016
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In ad hoc arbitrations, the arbitral tribunals are appointed by the parties or by an

appointing authority chosen by the parties. After the tribunal has been formed,
the appointing authority will normally have no other role and the arbitation will
be managed by the tribunal.
In administered arbitration, the arbitration will be administered by a
professional arbitration institution providing arbitration services, such as
the LCIA in London, or the ICC in Paris, or the American Arbitration
Association in the United States. Normally the arbitration institution also will be
the appointing authority.
Arbitration institutions tend to have their own rules and procedures, and may be
more formal. They also tend to be more expensive, and, for procedural reasons,
slower.
M. DUTIES OF TRIBUNAL
The duties of a tribunal will be determined by a combination of the provisions
of the arbitration agreement and by the procedural laws which apply in the seat
of the arbitration. The extent to which the laws of the seat of the arbitration
permit "party autonomy" (the ability of the parties to set out their own
procedures and regulations) determines the interplay between the two.
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However, in almost all countries the tribunal owes several non-derogable duties.
These will normally be:
To act fairly and impartially between the parties, and to allow each party a
reasonable opportunity to put their case and to deal with the case of their
opponent (sometimes shortened to: complying with the rules of "natural
justice"); and to adopt procedures suitable to the circumstances of the particular
case, so as to provide a fair means for resolution of the dispute.
N. ARBITRAL AWARDS
An arbitration award (or arbitral award) is a determination on the merits by an
arbitration tribunal in an arbitration, and is analogous to a judgment in a court of
law. It is referred to as an award even where all of the claimants claims fail
(and thus no money needs to be paid by either party), or the award is of a nonmonetary nature.
Although arbitration awards are characteristically an award of damages against
a party, in many jurisdictions tribunals have a range of remedies that can form a
part of the award. These may include:
1.
payment of a sum of money (conventional damages)
2.
the making of a declaration as to any matter to be determined in the
proceedings
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3.
in some jurisdictions, the tribunal may have the same power as a court to:
1.
order a party to do or refrain from doing something (injunctive relief)
2.
to order specific performance of a contract
3.
to order the rectification, setting aside or cancellation of a deed or other
document.
4.
In other jurisdictions, however, unless the parties have expressly granted
the arbitrators the right to decide such matters, the tribunals powers may be
limited to deciding whether a party is entitled to damages. It may not have the
legal authority to order injunctive relief, issue a declaration, or rectify a
contract, such powers being reserved to the exclusive jurisdiction of the courts.
O. ENFORCEMENT OF ARBITRATION AWARDS
One of the reasons that arbitration is so popular in international trade as a means
of dispute resolution, is that it is often easier to enforce an arbitration award in a
foreign country than it is to enforce a judgment of the court.
Under the New York Convention 1958, an award issued a contracting state can
generally be freely enforced in any other contracting state, only subject to
certain, limited defences.
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Only foreign arbitration awards can be subject to recognition and enforcement

pursuant to the New York Convention. An arbitral decision is foreign where the
award was made in a state other than the state of recognition or where foreign
procedural law was used.
Virtually every significant commercial country in the world is a party to the
Convention, but relatively few countries have a comprehensive network for
cross-border enforcement of judgments of the court.
The other characteristic of cross-border enforcement of arbitration awards that
makes them appealing to commercial parties is that they are not limited to
awards of damages. Whereas in most countries only monetary judgments are
enforceable in the cross-border context, no such restrictions are imposed on
arbitration awards and so it is theoretically possible (although unusual in
practice) to obtain an injunction or an order for specific performance in an
arbitration proceeding which could then be enforced in another New York
Convention contracting state.
The New York Convention is not actually the only treaty dealing with crossborder enforcement of arbitration awards. The earlier Geneva Convention on the
Execution of Foreign Arbitral Awards 1927 remains in force, but the success of
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the New York Convention means that the Geneva Convention is rarely utilized
in practice.
Article V of the New York Convention provides an exhaustive list of grounds on
which enforcement can be challenged. These are generally narrowly construed
by the courts in arbitration centres to uphold the pro-enforcement bias of the
Convention.
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CHAPTER III
ARBITRATION AND CONCILIATION ACT, 1996
A. MAIN OBJECTIVES OF THE ACT:
The main objectives of the Arbitration and Conciliation Act, 1996 may be
summarized as follows:
To cover within its fold International commercial arbitration and
conciliation as also the domestic arbitration and conciliation.
To make provision for an efficient and effective procedure to meet the
requirements and needs of specific arbitration.
To ensure that arbitral tribunals functions within the framework of the
Act.
To minimize supervisory role of courts in the arbitral process and thus
ensure minimal judicial intervention.
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To encourage amicable settlement of disputes between parties using

arbitration as an alternative disputes resolution mechanism.
To ensure making of an award on settled terms of the parties.
To provide that every final award is enforced in the same manner as if it
were a decree of the Court and thus eliminate the necessity of
approaching a law court to make a decree of the Court.
Last but not least, to provide conditions and procedure for the purpose of
enforcement
of
foreign
awards
under New
York and
Geneva
Conventions.
B. FLAWS IN THE ACT OF 1996
In Bhatia International Vs. Bulk Trading SA. 32 The Supreme Court described
the Act as an ill-drafted enactment.
If the arbitration law does not contain a statutory procedure for speeding up
the arbitral processat least after one yearor for control of the excessive
charge of fee by the arbitrators, the State must step in and make some law for
speeding up arbitration. The amendments which the 176th Report of the Law
Commission had proposed addressed these questions. The arbitration has to
be completed in one year, if not, the court will monitor it by fixing dates and
32 2002 (4) SCC 105
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during the interregnum, when the court is moved and it passes orders, there
shall be no stay of the arbitral proceedings. The prospect of a civil court
setting the time schedule for retired judges of the superior courts (whose
award would any way go under the Act before the civil courts, if challenged)
should be a deterrent and I am sure once this amendment comes into force,
arbitration in India will be quite fast, if not faster than elsewhere. I may also
say that the mechanism we have proposed for speeding up arbitration is
unique and there are no parallel provisions elsewhere in any other country. If
we do not address the questions of speed and costs, parties will soon opt for
other alternativesalternative not only to court adjudication but also to
arbitration.
Article 21 of the ICC Arbitration Rules and Article 25.4 of the UNCITRAL
Arbitration Rules both emphasise the safeguarding of privacy and holding in
camera hearings as a primary characteristic of the arbitral process. However,
in keeping with recent trends of openness and an emphasis on the peoples
right to know, Courts have begun drawing a balance between the need for
knowledge to be disclosed in the public interest and the equally pressing
need to maintain confidentiality of the proceedings. Confidentiality, while
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permissible to a certain degree, cannot be guaranteed absolutely, keeping in

view the publics legitimate interest in obtaining information.33
CHAPTER IV
C. ARBITRATION IN INDIA
A. ARBITRATION PRACTICE ACROSS INDUSTRIES
Generally speaking, unlike in Europe, where the manner of settling disputes has
substantially evolved separately across various industry sectors, there is no
marked difference in arbitration practice from one industry to another in India.
The exceptions to this rule, however, are the construction industry and the IT
industry. Due to the technical complexities and long term nature of relationships
between parties in these industries, arbitration in construction and IT industry
disputes are characterized by certain peculiarities quite distinct from other
industries.
The growth in the infrastructure and the IT industry in India are a recent
development, and a result of the globalization of the Indian economy. An
important secondary effect of this development is that arbitration has also
33 Redfern Alan, Hunter Martin, Law and Practice of International Commercial Arbitration, 4th Edn. (London:
Sweet & Maxwell, 2004), 22.
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streamlined a sector-specific approach to cater to the technicalities and specific

requirements of such specific sectors.
In the standard forms adopted by the government departments like the Central
Public Works Department (CPWD), Military Engineer Services (MES),
railways and public enterprises, although an arbitration clause may include
within its purview all the possible disputes relating to the transaction, there are
exemption clauses or exclusion clauses that make the decision of an authority
named in the agreement, final and binding on the parties.
These clauses are included, because in construction contracts, situations arise
for which immediate decisions on a point of difference or dispute is required to
avoid costly delays. In these situations, the excepted matters or exclusion
clauses, make the decision of a particular authority final and binding on both
the parties, and not subject to arbitration.
B. ARBITRATION IN THE INFORMATION TECHNOLOGY (IT) INDUSTRY
IT disputes differ from disputes in other industries mostly in their substance. IT
projects tend to be complex and characterized by a network of responsibilities
shared between parties that are dedicated to carry through a technology-related,
long term relationship. Thus, IT disputes typically center on contractual or
intellectual property (IP) law issues.
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The Indian Council of Arbitration (ICA), which is now considered to be an apex

arbitral institution in the country, has started the process of identifying and
training specialized arbitrators for disputes connected with the IT industry. In
relation to this aspect, the ICA conducted an in-depth seminar on Alternate
Dispute Redressal methods for the IT sector in Indias major cyber cities like
Bangalore and Hyderabad for the purpose of creating an expert pool of
arbitrators specialized in cyber laws.
C. RESOLVING INTERNATIONAL COMMERCIAL DISPUTES IN INDIA
Increasingly, arbitration is recognised as the most effective method of solving
commercial disputes, especially those of an international dimension. It can
achieve equitable solutions more quickly than litigation, and at less cost; it
allows parties to adopt whatever procedure they choose for the resolution of
differences; it enables parties to decide where disputes shall be heard.
Within and around Asia, India offers both the resources and a venue for
Arbitrations and dispute resolution procedures and is dedicated in its mission to
advancing and supporting arbitration as a means of resolving commercial
disputes
The Indians have long been aware of the advantages of arbitration,
acknowledging its value as a method of resolving disputes, and more recently
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has extended tradition by the statutory adoption of the UNCITRAL Model Law
for international commercial arbitration and the UNCITRAL Rules of
Arbitration, with relevant modifications to fit into its institutional framework.
With a sophisticated and well placed legal system, India is also a party to the
New York Convention (on enforcement of arbitration awards) allowing arbitral
awards to be enforced by the Courts in almost any country around the world.
D. LEGAL FRAMEWORK
India has a comprehensive, contemporary and progressive legal framework to
support international arbitration that is on a par with that of the world's leading
arbitration institutions. Party autonomy and maximum judicial support with
minimum judicial intervention are the abiding features of the New Arbitration
and Conciliation Act, 1996, which provides for maximum judicial support of
arbitration and minimal intervention.
E. MAXIMUM COURT SUPPORT
The courts in India offer full support and encouragement for arbitration. At the
request of a party:
They stop a court case from being carried on in breach of an arbitration
agreement.
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They enforce foreign arbitral awards made in New York Convention

countries.
They enforce awards made in international arbitrations taking place in
India.
They issue a wide range of interim measures of protection, including:
i.
preservation and interim custody of the subject matter of the

dispute
ii.
interim injunctions to preserve the status quo
iii.
appointment of receiver
iv.
securing the amount in dispute
v.
securing costs of the arbitration
They issue processes to compel witnesses to attend arbitral proceedings

F. MINIMUM COURT INTERFERENCE
3 United Nations Commission on International Trade Law
Indian courts do not review the merits of an award in an arbitration, unless it is
at the request of a party and only under restricted grounds of challenge laid
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down in the Arbitration Act. A foreign award may also only be reviewed
according to a similarly limited set of criteria.
Cost-Effective Legal Services
In addition to using lawyers from their own country, parties to an international
arbitration have the choice of being represented by experienced arbitration
lawyers from among India's leading full service law firms with offices in all
major cities of the country. This large pool of legal expertise is available at a
cost that is considerably lower as compared to other countries of the world.
Arbitration in India offers parties to a dispute the advantages of
i.
quality trained arbitrators
ii.
speed of resolution
iii.
a lower cost base
iv.
internationally enforceable decrees
It is not this alone however, which makes India a compelling choice for the
conduct of international arbitration
With an open economy & pro-business environment, India offers substantial
legal and business expertise - embracing all areas of comparative law, and of
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commercial/industrial practice, which operates under the aegis of the Federation

of Indian Chambers of Commerce and Industry.
The country is excellently placed geographically. A sub-continent in itself and

also a part of Asia, historically and linguistically linked to the English language,
being the language of international business.
Finally there is the lure of the country itself. India lies in south Asia, between
Pakistan, China and Nepal, bordered by the world's highest mountain chain.
Side by side with the country's staggering topographical variations is its cultural
diversity, offering visitors a complete experience in itself.
G. JUDICIAL INTERVENTION
Major thrust and legislative intent of the new Arbitration and Conciliation Act,
1996 Is to reduce excessive judicial intervention due to which the earlier
Arbitration Act, 1940 suffered serious infirmities. Section 8(1) of the New Act,
therefore, makes it mandatory duty for the judicial authority i.e. court to stay
legal proceedings if started, where the subject matter has been referred to an
arbitral tribunal. Similar provisions are made in connection with the New
York and Geneva.
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The enactment of the 1996 Act was initially met with approbation by the Court
in cases like Konkan,34 (which stated clearly that the provisions of the 1996 Act
unequivocally indicate that the Act limits intervention of the Court with an
arbitral process to the minimum) but subsequent reality however, has been far
from ideal. Even as a global study has indicated that an overwhelming 91% of
the respondents were against the mechanism of appealing international
arbitration, cases like35 have sharply belied governmental attempts to promote
arbitration in India. ONGC witnessed the challenge of an arbitral award on the
ground that it was in conflict with the public policy of India; instead of taking
a narrow interpretation of the phrase public policy as being something in
excess of a prima facie transgression of Indian law, the Court adopted a very
broad understanding of the same. The Court went on to equate patent illegality
with error of law and held that any contravention of an Indian legislation
would ipso facto make the award violative of public policy.
The doors were thus flung open for the very rounds of painstaking judicial
review that the Act was put in place to avoid. 36 .SBP & Co further extended the
scope of judicial intervention when the Supreme Court ruled that it was within
the powers of the Chief Justice of India to adjudicate on issues like valid
34 Konkan Railway Corporation v. Mehul Construction Co., 2000 (7) SCC 201.
35 ONGC Oil and Natural Gas Corporation v. SAW Pipes, (2003) 5 SCC 705 and SBP & Co. SBP & Co. v.
Patel Engineering, (2005) 8 SCC 618.
36 Aloke Ray, Dipen Sabharwal, What Next for Indian Arbitration? The Economic Times, 29 August, 2006
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arbitration agreements and went on to state that the CJ could even call for
evidence to resolve jurisdictional issues while performing the function of
appointing an arbitrator when the parties failed to come to an agreement. The
Supreme Court went on to say that such decisions would be final and binding
upon the parties. This effectively flouted the principle of competence and thus
amounted to a situation where the arbitral tribunals power to determine its
jurisdiction was undermined.
Effectively therefore, Courts endowed themselves with powers which would
substantively delay arbitral proceedings (be it by raising specious objections to
preliminary issues or by sabotaging the appointment process) which goes
against the fundamental reason for enacting Section 13 of the 1996 Act. This
thus brings us to what has been called the dispute between high principles
(stressing the need for justice, though the heavens fall) and low principles (an
equally insistent clamour to end litigation) in adjudication today.37 The
expansion of the Courts intervention into the judicial sphere has aroused
serious misgivings; ONGCs expansive interpretation of the term public policy
has been followed by a catena of cases which all reiterate the judiciarys right to
review the arbitral award. In cases like Hindustan Zinc 38, the Supreme Court has
37 Zaiwalla, Sarosh, Challenging Arbitral Awards: Finality is Good but Justice is Better 20(2) Journal of
International Arbitration (2003).
38
Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445.
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stated that awards could be set aside on grounds like being contrary to the terms
of contract since ONGC gave license for interference in such grounds. This
indeed sets a dangerous precedent since, as stated earlier; the encouragement of
ADR was based on a need to circumvent the lengthy court process.
The debate between finality and justice is perhaps best resolved by the reasoned
judgment of Evans J., in Indian Oil39 where he held that these two factors []
are not inconsistent with each other. If either of them is to prevail, then it should
be the requirement of justice. But justice, even fairness, is not an abstract
concept. It has to be applied in this context between two parties who were in
dispute with each other and who agreed that the dispute should be resolved by
an arbitral tribunal. They agreed that the tribunal's award should be final. But
they agreed this on the basis that the arbitration procedure would be regulated
by law. The Court has statutory power to set aside an award when the arbitrators
misconduct themselves or the references. [] but it also has the unqualified
discretion to remit the award to the chosen tribunal [.]. If the power is
exercised, but only in circumstances when it would be unjust not to do so, then
there is not, in my judgment, an uncovenanted or an unacceptable restriction on
the agreed finality of the tribunal's award.
39 Indian Oil Corporation Ltd., v. Coastal Bermuda Ltd., [1990] 2 Lloyds Rep., 407.
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H. NEW GROUND OF CHALLENGE TO AWARD THROUGH JUDGEMADE LAW

To the above-mentioned legislatively stipulated grounds, came to be added a
new judge-made ground. This came about in the Supreme Court decision of
Oil and Natural Gas Corp v Saw Pipes Ltd.40 The issue here was whether an
award could be set aside on the ground that the arbitral tribunal had incorrectly
applied the law of liquidated damages to the case. The question turned around
the scope of s 34 of the 1996 Act, which on a plain reading does not permit a
challenge on merits. The Supreme Court in Saw Pipes came to the conclusion
that the impugned award was legally flawed in so far as it allowed liquidated
damages on an incorrect view of the law.
In the process it held, that an award can also be challenged on the ground that it
contravenes the provisions of the Act (i.e. Arbitration Act) or any other
substantive law governing the parties or is against the terms of the contract.
Further, the judgment expanded the concept of public policy to add that the
award would be contrary to public policy if it is patently illegal. The Supreme
Court in Saw Pipes confined the expansion of public policy to domestic awards
alone as an earlier larger Bench decision of the court in the case of Renu Sagar
40 2003 (5) SCC 705 (Saw Pipes).
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Power Co v General Electrical Corp had construed narrowly this ground as

limited to fundamental policy of Indian law.
A recent decision of the Supreme Court in the case of Venture Global
Engineering v Satyam Computer Services has held that the wider interpretation
of public policy would apply to foreign awards as well. 41 The Venture
Global case is far reaching for it creates a new procedure and a new ground for
challenge to a foreign award (not envisaged under the Act). The new procedure
is that a person seeking to enforce a foreign award has not only to file an
application for enforcement under Section 48 of the Act, it has to meet an
application under Section 34 of the Act seeking to set aside the award. The new
ground is that not only must the award pass the New York Convention grounds
incorporated in Section 48, it must pass the expanded "public policy" ground
created under Section 34 of the Act.
The Saw Pipes judgment has come in for some sharp criticism from several
quarters.42 Read literally, the judgment sets the clock back to the old position
where an award could be challenged on merits and indeed renders the court as a
court of appeal. Some judicial decisions have tried to reign in the effect of Saw
Pipes.
41 AIR 2008 SC 1061
42
See, for instance, the chapter entitled Judicial Supervision and Intervention by Mr Fali S Nariman in Asias
Leading Arbitrators Guide to International Arbitration JurisNet, LLC 2007 at p 353.
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One instance of this is the Supreme Court decision in the case of McDermott
International Inc v Burn Standard Co Ltd,43 where the court somewhat read
down Saw Pipes. It held: The 1996 Act makes provision for the supervisory
role of courts, for the review of the arbitral award only to ensure fairness.
Intervention of the court is envisaged in few circumstances only, like, in case of
fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot
correct the errors of arbitrators. It can only quash the award leaving the parties
free to begin the arbitration again if it is desired. So, the scheme of the provision
aims at keeping the supervisory role of the court at minimum level and this can
be justified as parties to the agreement make a conscious decision to exclude the
courts jurisdiction by opting for arbitration as they prefer the expediency and
finality offered by it.
Commenting on Saw Pipes the court held: We are not unmindful that the
decision of this court in ONGC had invited considerable adverse comments but
the correctness or otherwise of the said decision is not in question before us. It
is only for a larger Bench to consider the correctness or otherwise of the said
decision. The said decision is binding on us. The said decision has been
followed in a large number of cases.
43
2006 (11) SCC 181 at 208.
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A few High Court decisions have also sought to narrowly read Saw Pipes on the
ground that a literal construction of the judgment would expand judicial review
beyond all limitations contained not only under the 1996 Act but even under the
old regime. These High Court decisions have (rightly) held that one judgment of
the Supreme Court cannot render naught the entire law on the subject.
The High Court of Bombay in the case of Indian Oil Corp Ltd v Langkawi
Shipping Ltd44 held that to accept a literal construction on Saw Pipes: would be
to radically alter the statutorily and judicially circumscribed limits to the courts
jurisdiction to interfere with arbitration awards. It would indeed confer a First
Appellate Courts power on a court exercising jurisdiction under s 34 of the
1996 Act. There is nothing in the 1996 Act which indicates such an intention on
the part of the legislature. That the intention is to the contrary is clear, inter alia,
from the Arbitration and Conciliation Bill 1995 which preceded the 1996 Act
which stated as one of its main objectives the need to minimize the supervisory
role of Courts in the Arbitral process.
The Honble Court went on to say In the circumstances, the aforesaid
principles laid down consistently by the Supreme Court and the various High
Courts cannot be said to be no longer good law in view of the 1996 Act. Nor can
it be said that the observations of the Supreme Court in Oil and Natural Gas
44 2004 (3) Arb LR 568.
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Corp v Saw Pipes Ltd (supra), have expressly or impliedly rendered the
aforesaid judgments and the principles contained therein no longer good law in
view of the 1996 Act. The principles apply with equal force under the 1996
Act.
The High Court of Gauhati following the above Bombay High Court decision
held: The observations of the Apex Court in ONGC v Saw Pipes, did not
expressly or impliedly render the Ratio Decidendi on the issue contained in a
plethora of judgments and the laid down principles therein non est. On a due
consideration of the entire gamut of the provisions of the Act and the
precedential law, we, without hesitation subscribe, to the view expressed in IOC
Ltd, supra. The decision in Saw Pipes, does not depart from the judicially
evolved precepts bearing on the authority and jurisdiction of an arbitrator in
determining a dispute referred to him, the norms and measures to be applied for
assessment of damages and the scope of courts interference with his findings
The above decision does not intend, according to our construction, to efface
the time-tested legal propositions and judicial tenets on arbitration and thus
ought not to be construed away from the well-established trend set by a string of
decisions preceding the same.45
45 Daelim Industrial Co v Numaligarh Re_ nery Ltd Arbitration Appeal No 1 of 2002 (24 August 2006).
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The Saw Pipes judgment has quite rightly been criticised. To begin with it is
contrary to the plain language of the 1996 Act and indeed also the spirit of the
law. Its expanded judicial review is especially unsuitable in the Indian context
where courts are overwhelmed with backlog. In such a scenario, to permit a
challenge on merits would considerably delay the enforcement proceedings. A
majority of parties opting for arbitration do so to avoid court delays and legal
niceties. To engage them back into the same system at the enforcement stage
would be ironic. An unfortunate side effect of this decision is that it has become
a ground for parties to shift the venue of arbitration outside India (lest
arbitration in Indiarenders the award more vulnerable or judicial review delay
enforcement).
On this point, there is near unanimity of opinion as amongst the High Courts of
the country as well. Illustratively, we may refer to a few cases. In Union of
India v. Ajit Mehta and Associates, Pune and Ors 46, the Division Bench held
that the Court has suo motu power to set aside an award on ground other than
those covered by Section 30 such as an award made by arbitrators who can
never have been appointed under Section 8, as such an award would
undoubtedly be ab initio void and no nest. In Union of India v. South Eastern
Railway47 and Rajendra Dayal v. Govind, both Division Bench decisions, the
46 MANU/MH/0007/1990
47
AIR 1992 M.P. 47
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High Court of Madhya Pradesh has held that in certain situations the Court may
set aside an Award even without there being an application under Section 30 or
even if the petition under Section 30 has not been filed within the period of
limitation if the Court finds that the award is void or directs a party to do an act
which is prohibited by law or is without jurisdiction or patently illegal. We need
not multiply the number of authorities on this point as an exhaustive and
illuminating conspectus of judicial opinion is found to be contained in Law of
Arbitration and Conciliation - Practice and Procedure by S.K. Chawla (Second
Edition, 2004 at pp. 181-184) under the caption - "Whether the Court has suo
motu power to set aside an Arbitral Award - " and the answer given in the
discussion there under is in the affirmative.
CONCLUSION
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Arbitration is a sum of many parts. There are benefits and costs and the
reminder that one is incomplete without the other. As things stand today,
arbitration is poised to effect great changes to the ways in which dispute
resolution is conducted. It brings with it the solemnity and finality of the
judicial process and couples it with the procedural flexibilities of nonconventional dispute resolution methods. There is, however, an equally pressing
need to recognize that much more can and should be done to improve the
conduct of arbitral proceedings in India but most importantly, we, the
researchers, feel that there is a need to effect a change in perceptions. As our
nation moves towards increasing litigiousness, alternative methods of dispute
resolution might just provide the key to resolving the problems of overburdened
case loads, long pendency of cases and an all too frequent case of justice
delayed. For long, the problem plaguing the effective implementation of ADR
methods has been their perception as being subordinate to the court process- a
perception shared and fostered by lawyers and people alike. It is imperative, that
this be changed and this can only be achieved if there is active engagement from
all the stakeholders in this process. Certainly, there are some disputes inherently
unsuited for alternative channels but there are so many more which fit perfectly
within the vision envisaged for if a system of rendering justice that runs
concurrent to the Courts. It is necessary for the Courts themselves to mandate
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recourse to ADR methods in inter alia international commercial disputes,

employment disputes, matrimonial cases, compoundable criminal offences, to
name just a few. At the end of the day, what should take precedence is the
provision of justice, in substance more than in form. As our country grows and
flowers, taking wing on issues unimagined before, it is time also for our dispute
resolution systems, the undisputed backbone of our nation, to follow suit.
RECOMMENDATIONS
In my contention, it is clear that globalization of the Indian economy in the
early nineties and the consequent economic reforms necessitated the existence
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of effective dispute resolution mechanisms to quickly settle commercial

disputes. The 1996 Act was enacted to achieve this purpose of quick and costeffective dispute resolution. Arbitration occupies a prime position in
commercial dispute resolution in India. An examination of the working of
arbitration in India reveals that arbitration as an institution is still evolving, and
has not yet reached the stage to effectively fulfil the needs accentuated with
commercial growth.
Viewed in its totality, India does not come across as a jurisdiction which carries
an anti-arbitration bias. Notwithstanding the interventionist instincts and
expanded judicial review, Indian courts do restrain themselves from interfering
with arbitral awards.
However, there are still inherent problems that hindered in the working of
successful arbitration in India which are multifold starting from requirement
for amendment of certain provision of law to changing the mindset of the
stakeholders who are judges, arbitrators, lawyers and parties involved.
Power vested in the Chief Justice of a High Court (or any person or
institution designated by him) for appointment of an arbitrator under
Section 11 of the 1996 Act is not being used properly. The practice of
appointing retired judges has recently come under strong criticism from
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the proponents of the alternate dispute resolution mechanism. There is

reason for complaint that the appointment of arbitrators is widely
perceived as avenues of patronage of superannuated judges. This practice
should be corrected. Unless this is corrected, the legitimacy of Section 11
is bound to be seriously undermined.
The government should disseminate knowledge of the benefits of
alternate dispute resolution mechanisms to foster growth of
an
international arbitration culture amongst lawyers, judges and national

courts. The real problem in enforcing foreign awards around the globe
despite the enabling provision of the New York Convention, 1958, is not
a legal one; but it is a lack of awareness particularly, amongst lawyers and
judges, of the benefits of international arbitration and of its true
consensual nature.
Questions relating to lack of impartiality of arbitrators and procedural
defects in the conduct of arbitration proceedings are the subject-matter of
frequent litigation and hence add to the caseload before an already
overburdened judiciary. In fact, judicial interventions with arbitral
proceedings and awards in India have come to constitute a distinct branch
of law, i.e. the law of arbitration. This trend clearly frustrates the
-P
80
foundational aim of providing for arbitration clauses - which is to ensure

speedy and efficient dispute-resolution in the commercial context.
-P

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AN Assignment ON Arbitration: Rbitral Awards AND Termination OF Proceeding

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AN

A. ALTERNATIVE DISPUTE RESOLUTION

CHAPTER II CONCEPT OF ARBITRATION

H. MAJOR KINDS OF ARBITRATION

CHAPTER III ARBITRATION AND CONCILIATION ACT, 1996

A. ARBITRATION PRACTICE ACROSS INDUSTRIES

THE INFORMATION TECHNOLOGY (IT) INDUSTRY

C. RESOLVING INTERNATIONAL COMMERCIAL DISPUTES IN INDIA

I have a great pleasure in expressing my

I also extend my gratefulness to all the

information and other sources which are specified in

All India Reporter

16.Keshvananda Bharati v. State of Kerala, 1973 (4) SCC 225 at p.947.

THE NEGOTIABLE INSTRUMENTS ACT

CONSTITUTION OF INDIA, 1950

LEGAL SERVICES AUTHORITY ACT, 1987

CRIMINAL PROCEDURE CODE.

BOOKS/ARTICLES/COMMISSION & COMMITTEE

The Culture of ADR in India-by Praveen Dalal [http://www.odr.info/ THE

Appadorai, Chapter 5, Vyasas Mahabharata- Shanti Parva, Indian Political

Granville Austin, The Indian Constitution, Cornerstone of a Nation (1966)

K.Ramaswamy Settlement of Dispute through Lok Adalat, In P.C.Rao

K.Ramaswamy, Settlement of Disputes through Lok Adalat, is one of the effect

Quran, Surah Al-Hujurat, (49), ayat 9

Sunil Deshta, Lok Adalat in India ; genesis & functioning, 63

(also known as external dispute

resolution in some countries, such as Australia) includes dispute resolution

Alternative dispute resolution in India is not new and it was in existence

traditional institutions was that of arbitration and conciliation, depending on the

mediation centre, appreciating the effective manner in which the mediation

Kettering University has done.

Initially the provisions for formation of the High Court

directed the Government to provide funds to NGOs in order to encourage

while the judiciary was

E. ADVANTAGES OF A DEVELOPED SYSTEM OF ADR IN INDIA:

Ronald Bernstein defines arbitration as Where two or more persons

by the arbitrators. This technique is majorly employed in case of commercial

arbitration may be mandated by the terms of employment or commercial

judicial proceedings, although in some jurisdictions, court proceedings

are sometimes referred as arbitrations[3]

alternative dispute resolution (or ADR)[4]

Some legal orders exclude or restrict the possibility of arbitration for

Arbitral awards enjoy much greater international recognition than judgments of

If the arbitrator or the arbitration forum depends on the corporation for

huge legal expenses that negate the perceived economic incentive to

H. MAJOR KINDS OF ARBITRATION

It is mandatory arbitration which is imposed on the parties by operation

Arbitration Agreement: Section 7 of Arbitration & Conciliation Act, 1996 says

In theory, arbitration is a consensual process; a party cannot be forced to

J. VALIDITY OF AN ARBITRATION AGREEMENT

an arbitration clause which forms part of a contract will be treated as an

In ad hoc arbitrations, the arbitral tribunals are appointed by the parties or by an

payment of a sum of money (conventional damages)

the making of a declaration as to any matter to be determined in the

order a party to do or refrain from doing something (injunctive relief)

to order specific performance of a contract

to order the rectification, setting aside or cancellation of a deed or other

In other jurisdictions, however, unless the parties have expressly granted

Only foreign arbitration awards can be subject to recognition and enforcement

To encourage amicable settlement of disputes between parties using

permissible to a certain degree, cannot be guaranteed absolutely, keeping in

streamlined a sector-specific approach to cater to the technicalities and specific

The Indian Council of Arbitration (ICA), which is now considered to be an apex