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/ 38
40 ALTERNATIVE DISPUTE REDRESSAL SYSTEM
tic Arbitration. : ;
a eee "Domestic Arbitration" denotes arbitration which occury jy
India. This is when the subject-matter rather scope of the agreement, the
merits of the dispute and the procedure for arbitration are all governed by
Indian law or when the cause of action for the dispute has arisen wholly jy
India or where the parties of commercial transaction are otherwise subjeg
to Indian jurisdiction, The Arbitration and Conciliation Act, 1996 mentions
the term “domestic arbitration" in its preamble and the term “domestic
award" in Section 2(7) read with section 2(2) of the said Act, It is to be noted
that Article 51(d) of the Constitution of India, 1950 makes provision that the
State should encourage settlement of international disputes by arbitration,
it includes domestic arbitration.
(vi) International Arbitration.
A foreign ingredient is found in "international arbitration". When
atleast one of the parties involved is domiciled or resident outside India or
subject-matter of the difference or dispute is related to a place outside India,
such arbitration is treated as an international arbitration. However, the law
applicable to such arbitration proceedings may be the foreign law or may be
the Indian law subject to terms of the contract between the parties and the
rules of conflict of laws.
Section 2(1)(f) of the Arbitration and Conciliation Act, 1996 defines the
term “International Commercial Arbitration" as arbitration relating to
disputes arising out of legal relationship, whether contractual or not,
considered as commercial under the law in force in India where atleast one
of the parties is—
(@ an individual who is a national of, or habitually resident in, any
country other than India; or
(ii) a body corporate which is incorporated in any country other than
India; or
ii) a company or an association or a body of individuals whose
central management and control is exercised in any country other
than India; or
(iv) the Government of a foreign country.
In this regard, Section 28 of the Act deals with the rules applicable to
the substance of dispute namely where the place of arbitration is situate in
India and also rules applicable to international commercial arbitration as
provided in Section 28(1\b) of the Act,
(vii) Foreign Arbitration.
When the arbitration proceeding is conducted in a place outside India,
it is called "foreign arbitration". In such arbitration a "foreign award" is
sought to be enforced, ARBITRATION a
ARBITRATION AGREEMENT
of the Act of 1996 provides that the word “Arbitration
ent’ 1s to be interpreted and understood with
* 0 be in , ood with reforonce to Chapt
a a Arbitration and Conciliation Act, 1996. aor
end : : ss aves and Conciliation Act. 1996 while
. ration agreement refers to Section 7 which may be read as a
: Section 7 is sot out below for ready reference =
Arditr
‘on agreement—(1) In this Part, “arbitration
ceement” means an agreement by the parties to submit to arbitration
in disputes which have arisen or which may arise between
spect of a defined legal relationship, whether contractual or
An arbitration agreement may be in the form of an arbitration
contract or in the form of a separate agreement.
An arbitration agreement shall be in writing.
) An arbitration agreement is in writing if it is contained in—
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means
of telecommunication [including communication through electronic
means)’ which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which
the existence of the agreement is alleged by one party and not
denied by the other.
(5) The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the contract
is in writing and the reference is such as to make that arbitration
clause part of the contract."
It is to be noted that arbitration agreement is an important segment of
the Act which requires careful consideration and comprehensive study,
which is hereunder :—
(i) Inference of an agreement.
The term ‘agreement’ has been defined under the Indian Contract Act,
1872. The said Act defines that every promise and every set of promises
forming the consideration for each other is an agreement. ‘
It is a voluntary agreement, it is willingness of either side to abide by
arbitral award of the arbitrator. Thus, agreement is a reciprocal promise
from either side. Arbitration agreement gives right to parties to initiate
arbitral proceedings when rights of the parties are violated or liabilities of
the parties are not being discharged. The determination whether a
particular clause amounts to a valid submission is whether both parties 7
bound by the clause or not and whether a right has been expressly given
both the parties to initiate proceedings.
1, Ins. by Act 3 of 2016, Sec. 3 (w.ref, 23/10/2015). ‘AUR 1929 Bom, 188 ¢ oe
2. Maritime Itraliana, Steamship Co. ¥. Burjor Framroze Joshiy
54 Bom. 278. ARBITRATION
41
ARBITRATION AGREEMENT
Section 2(1Xb) of the Act of 1996 provides th
ment" is to be interpreted and understood ‘at the word "Arbitration
He eiition 7 of the Arbitration and Conciliation Avt 1606” nT
Section 2(1Xb) of the Arbitration and Cor i i
Gefining arbitration agreement, refers to Section 7 which uae
part thereof. Section 7 is set out below for ready tied Bae
"7, Arbitration agreement — i ie
agreement" means a e () In this Part, “arbitration
gre ans an agreement by the parties to submit to arbitrati
BP certain, dincuten which have arias oh eee
se rospect af a deiitedfiesal sletmeare ach meyanuee hegre
not. gal relationship, whether contractual or
2) A i i
(2) An arbitration agreement may be in the form of an arbitration
Miiiso in a contract or in the form of a separate agreement:
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in—
(a) a document signed by the parties;
(b) an exchange of lotters, telex, telegrams or other means
of telecommunication {including communication through electronic
means]' 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.
(5) The reference in a contract to a document containing an
bitration agreement if the contract
arbitration clause constitutes an ar!
such as to make that arbitration
is in writing and the reference is s
clause part of the contract."
It is to be noted that arbitration agreement is an important segment of
the Act which requires careful consideration and comprehensive study,
which is hereunder -
() Inference of an agreement.
: The term ‘agreement’ has been defined under the Indian Contract Act,
4872, The said Act defines that every promise and every set of promises
forming the consideration for each other is an agreement. ’ a
: It is a voluntary agreement, it is willingness of either side to abide by
Vrbitrel award of the arbitrator. Thus, agreement is @ reciprocal promise
"from either side. Arbitration agreement gives right to panne
jtral proceedings when rights of the parties are violated or iat &
Be cn ae imino rs
r i ts to a valid sul -
bound pe eaten: and whether a right has been expressly given to
_ both the parties to initiate proceedings.
BE by Act & of 2016, Seo. 8 (wet 25/10/2006)
2. Maritime Itraliana, Steamship Co. V- Burjor Fra
54 Bom. 278.
- roze Joshi, AIR, 1929 Bom. 185 + IR vSTEM
ALTERNATIVE DISPUTE REDRESSAL 5)
any arbitrati
there can be any ar
re has to be dispute before (ere ven the dispt te aie
eo kind of disagreement bé ‘dmits that the sum is due
means some kind ‘spute until the defendant admit Gost the Sonal
lability.’ There is a dispute until the deter NT Present. disputes, there can
and payable. Therefore, if ther Pee existence of « guna
* The initial burden of Pret ia spite of a full and fing)
in the contract may subsist
e was no accord
be no arbitration:
lid concluded contract is on the applican
\e arbitration cl
settlement of the claim, the ar are.
where the party invoking it alleges that in fact ther
edients of a valid arbitration agreement.
al a valid agreement should have the
Gi) Evsential ing
It is settled legal position that
following ~
(i) it must be in writing;
ctween the parties;
(ii) there must be :
e parties mus id iden; and :
ee ene of the parties to have their disputes or
ured and decided through arbitration.” Thus, the
parties, disputes and finality of the decision are three
of an arbitration agreement. However, the statutory e:
an arbitration agreement may be listed as :-—
(iv) there should b
differences
1. an agreement;
2. it must be in writing;
3, it may be relating to either present or future differences or
disputes;
4, whether an arbitrator is named therein or not,
A Valid Arbitration Agreement—Ingredients of —Jurisdiction of
Additional District Judge—Seope of—Division Bench of Allahabad High
Court in Northern Coal Fields Ltd, Singrauli (M.P.) v. Aluminiam
held that Additional District Judge not
ict Judge had
6 under Section 34 of the Act” *
Additional District Ju u
idge is not the pri sil
1996 of original jurisdiction. Principal Civil Court under Act,
Birla Cotton Mills, ATR. 1967 SC 688, 1H 422 (MP. See also Union of
2. Templeman LJ in Ellerine v. Klinger,
Gato: linger, (1982) 1 WLR 1375,
Tray
eetiOfit ¥- Hranian Offshore Engineering and Construction Co., 2008 (6)
4: Union of India v. Ajit Mehta, AYR 1
i 1990 Bom. 45,
5. Union of India v. Janki Prasad Aggai
5 2013 (6) ADJ 104 (DB) (al), a
1
2013 (6) ADJ—104 (DB) {All}; (Rakesh
4 Tewari and Anil Kumar Sharma
a.
i
;
; Therefore, the Additional District Judgo is not impowered to enter in
jection filed under Section 34 of the said Act.
—In terms of Section 2(1Xb) read with Section 7 of the Arbitration and
ciliation Act, 1996 a valid arbitration agreement must contain the
dients as under—
1, There must be a written arbitration agreement between the
parties;
2. The agreement must be for reference to arbitration;
8. The dispute to be submitted to arbitration is in respect of defined
contractual relationship between the parties.
Intention of the parties.—According to the Supreme Court’ when the
ement was in writing and not a contingent or a future contract was a
act at that time, endeavour should always be made to find out the
tion of the parties and that intention has to be found out by reading
erms broadly, clearly and without being circumscribed.
What amounts to arbitration agreement.
The Madhya Pradesh High Court in M.P. Housing Board v. Satish
ar Raizada,’ has held that where the words "reference" and “final”,
elusive" and "binding" were used in the clause, it amounts to arbitration
ment. However, clause 29(2) of the contract read as under :—
4 "If any party to the contract is not satisfied with the decision of
_ the “Superintending Engineer", it may make a reference to the Chief
Engineer, P.W.D., Madhya Pradesh, through the Executive Engineer
concerned within 30 days from the date of communication of the
decision of the Superintending Engineer, and the Chief Engineer will
give his decision after hearing the parties and his decision thereon
shall be final, conclusive and binding on all parties to the contract. In
Teak: im. a aii al aod ia a4 ALTERNATIVE DISPUTE REDRESSAL SYSTEM
agreement by the parties to submit to arbitration” Ik p
agreement, which necessitates or mandates the parties te
arbitrator and then submit their disputes to arbitration.
(iv) Validity of an arbitration agreement;does not depend on
number of arbitrators.
It is well settled legal position that the validity of an
agreement does not depend on the number of arbitrators specified
The present Arbitration and Conciliation Act, 1996 does not
anywhere that number of arbitrators is a part of an arbitration
@w) Sp soc. contict-_Scdnisiuslomstol Acie
The parties are free to submit by an agreement even the factum
contract for the decision by the arbitrator. It is all a matter of it
of a contract from which the arbitrators derive their authority.*
(vi) Difference between a reference and an arbitration
The important difference between a reference, and an
agreement or an arbitration clause, is that where the agreement te
a present dispute, it generally amounts to a reference, but if it is «1
into merely to provide for any future dispute or disputes, it is am “
clause. The definition of an "arbitration agreement” makes it clear
future differences can form the basis of an agreement to refer those du (ce) Contract between employer ond employee oo Ache
sovaneat in the inion progremme
Ths Supreme Cro in Poel Chania Singh v Employee Coe al
4 Aur Bl tae where the toi regramine othe ae
et, tetree ‘pera anf’ angles tere is on, hoa
Tetress tes sad wheres har hoan provided io coo am
owl be scr othe jradicon ofthe Bembay igh Can
rere in aatnes ot ding iratonaprecment the dpe Smee
relrrdtaabtraton, ene there isn quston spinon of Arter
car Soi Il ofthe Arie sad Conlin, Ae, 3008, Than the
application seoking appointment of the Arbitrator under Section
filets sek sa ‘Ai der Section 11 is ible
(27) Arbiteation—In absence of agreement to that effect
‘The Supreme Court in Karnataka Per Tr Co Ld &
7 Tranamision Co. Lid. & An
» Leip Cabes nds Ld, ie nephron of Sexion
‘oid with Seton 13 of the ct, 1996 eld hat where the partes dnt have
tration agreement in the contractual mater and in ese of pale
1. Slate of Oriewa «. Domadar Das, AK 1908 i,
2 AIR 1908 Kant. 406. acs
1 Am ioe 86 a8
| ite re Dano es 199 8692
CN San 6 ee Met aw 6
nt 9) 09 014) HER (Cr (8) 1 0) ape
em if iter party approaches the Cour fr the reference of
we Soe The ese enot referred to eritation tn sme
2 ts agreement Thm i dea thatthe artreton dome
ot Set mt cen the ext pons or erence of Spe
Ca esa in the aimee of the same te Gapeting par? cana
ssa >the raion for resavng ofthe upste wing of
seb Invoking of Arbitration agreement for appoiniment of
‘Soicator—Whes justified
srtae prewat case wher the arabe dapat wae rained ad Iest
cit ine vaingdaoe fhe MoU en tb arn
ee We ng appnent of esttetoe beware the TS
rt pte gl no, the splint epecialy timated
Ie ot Conc respondent fing to express cmcutrene fer the
hat te ee mame arta, willbe mo er enon te
sopra toe Seca Sect ofthe Ack The respondent Berne
snows the Hh Com oy dated 4::2013 to the lawyer notice sting th
se eg ies er a refrece, the spelt nad no ber eon
Se was i San Bah Cour by fing = apesation ender Section 13
eae
be treated Arbitration
vit) Application under Section 151 of C:P.C. not msintainable—
(Er ieemintation of mandate of the appointment of Arbitrator
‘Spslcation for termination of the Mandate of AMitrator
appointed Termination of saandate of on Arbitrator, the proces. o
wrosintment of Arbitrator begins afresh in accordance with the terms of th
Centrect, thea Court cana’t assume jurisdiction under Section 11(6) of th
‘fat oo as to substitute a new Arbitrator An application under Section 1
GP.6. for replacemontiubstitation ofthe Arbitrator not maintainable bel
the Court!
(xix) Breach of work contract—entitlement for damages
thas been ruled by the Allahabad High Court that once bres
‘work contract is proved and expected earning out of such work contr
Ulso proved the agreement party is entitled to claim damages in ter
fepected profit out of just contract!
T Taapara Mine Gem Li. ajo Mineral DeoopmentCrpration 2188)
1 Mehesh Ghondw: Bosnt Dest Fal Tras, Ghsicad fs), 2390) ADS
4 Sure Chandre Agra v Mahesh Kamar Awa, 2018) ADI 438 (AL
4 non of Indio BK. Traders (a), 218 (7) ADI 258 (A
OO ——<——- tbe slgned hy
above ae be sgned by thy
ped by the Baseative Hagin
h te negations may have ba
eens oi ear be town bd widen to sla
west that they either expresly authorised i beforehand or have
Cheereetty ede tt rte i taken, by the teres fii
tina can be inpied that the erbirtion was within th
Thon, Bag
law provides that ifthe sgroment is exeuted by doe
binding all an t may be treated within the normal
‘Under the Indian Law—Whes ene partner sgns on behalf of ll th
partners in the Sem same, ean well be contended that all place at
ngataries through the mgning partner ss their agent. However, the
reemen! signed by ne prtner
ame must be determined by reference to the rleveat lea
roraizes, which or consied in Sections 18,19 and 22 ofthe Partnerip
1832 Its w be seen that Section 18 of the Partnership Ac, 1688
Fostlaies that wae: tothe provisions of this Act, a partner 1s the aes
srbitration. Ia frm
aaa ox eens ti,
i chili Dire he pre wih vnes cri al
re debit and cote 1,
ait Pron or tare pi may tere to lon
ar dp amen cele oem,
Sev queoon, whet is aitable dapat, was considered by the Apex
{Ur Ge'ten that disputes arniog re in relation to the subjedematuer of
axe) Whether Arbitrator can grant specific performance,
‘On this pint there are coneting opinions ofthe various High Cours
‘The Punjab, Bombay and Caleta High Courts are of the view that an
‘bitraor ean grant specie performance of «contact relating t immovable
property under an award"
But, the Delhi High Court in PIV. Finance Lid. v. Shital Prasad
Lehi Narain. Raghbi Singh, AB 1856 Pai 45; Feri Corortin of dl
‘Ghent! Cansacn Coportion, ILR (14) Bom 88 (DB Kener Ao Lt.
Seqrom Corpoatian id, APO 408 197 aod APD 48 of 68 ALTERNATIVE DISPUTE REDRESSAL SYSTEM
not grant specific performanse , —
Jain’ hu» held that the arbitrator eannot grant specific ate,
ie ats to be td thas view ‘alin iy the Pasjale/ Coeaa ou
High Courts seom to be correct, Thore in no grebion i the Seite Wag ”
ct, 1908 th ing to upecific performance of contract re arbitral »
Act, 1965 that issues rolating to #p oe ae
immovable property cannot be referred to arbitration, Also here inh oon
prohibition contained in the Arbitration and Co Y oto ha
ARBITRAL AWARD ; ; ,
Under Section 21%¢) the word “Arbitral Award” is a but ig J
states thal the *Atcitral ewand” Sncludes as oteriod “wai. Aga
Section 3116) submits explanation in this regard as under “The Arbitray |
" g the arbitral proceedings, make an interim
Tribunal" may, at any time during the arbits *
arbitral award on any matter with respect to which it ini ihe @ fina) There
arbitral award. Thus, an interim award may be the Arbitral Award. So, an ' the :
interim award may be a final award. ee eae
According to H. Lesicon—'It is an instrament which embodies —<
decision of an arbitrator or arbitrators as regards matters referred to him of ¥ Terms ar
them, ’ am
Although, according to Russell—"An award in order to be valid, must arbitral @
be final, certain, consistent and possible and must decide matters to be x
‘submitted and no more than the matters submitted i
An arbitral award is not a contract but the decision determined out of 2
the contract, .
An award, whether it is arbitral or interim award is a decision of the a
arbitrator or arbitrators which is determined after contentions of the Parties :
are considered and an arbitrator or
in the form of decision, The consent
decision. An arbitral award decided by the Arbitral Insti
have binding effect in respect of the parties in dispute
aie, contents of an arbitral award must be in writing, not oral, Am
wary award ia like a decree which comes into effet fren the deve sn
which it has been signed and right of the related coat effect
from that date onward? . cra Seminal
the arbitrators put his or their opinion
, if an agent is
has power to refer
ar for arbitratio am
|. AIR 1991 Del. 13,
2. Lal Das v. Bai Lal, 11 Bom. LR 29,
3. 1965 ALJ 698 at 705,
re ARBITRATION a
It is expected that the arbitrator has accept
or-claims. and, considered ¢ha cepted all claims and
punt 'm all in quasi-judicial ar
: e at the final award, quasi-judicial manner before it
gould arr
“arbitral award"—Form and Contents of,
Icis to be noted that the definition of "
of the Arbitration and Conciliation Act, 199
However, every arbitral award must contai
(i) Factual aspect of disputed
Gi) Submission of the parties;
Gi) Contention of parties to rival submission;
(iv) Arbitrator’s view;
() Delivery of an arbitral award.
There is no prescribed form of arbitral award. However, Section 31 of
Act, 1996 provides certain: criteria, which is to be followed by the
iitrator while delivering the arbitral award!
‘arbitral award" in Seetion 2(1Xe)
6 is not an exhaustive definition.
in the following five things :—
matter;
rms and Contents of Arbitral award.
The following terms and contents are required to be mentioned in the
arbitral award :—
1. The arbitral award must be in writing and signed by the
arbitrator/arbitrators.
- The arbitral award must be based on reasoning. It must be a
speaking award.
. The arbitral award must show date and place of arbitration.
A certified copy of arbitral award is required to be delivered to
each party.
If the arbitral award is for payment of money, the arbitral award
may include interest at such rate as the arbitral tribunal deems
reasonable.
6. The costs of the arbitration, shall be fixed by arbitral award.
* 7. The language used in passing the arbitral award must be free
from any ambiguity.
(i) Arbitral award operates as res judicata.
In Shashi Sekhareswar v. Lalit Mohan,? the Privy Council, inter alia
observed that a decree passed on the foundation of arbitral award would
__ have the same effect as an ordinary judgment of a court and on the question
" which has already been decided by the arbitrators it operates as res judicata.
But, where a claim in question has not been included as a subject-matter of
reference to arbitration, it was held that principle of res judicata will not be
applied in respect of the claim.’
In the view of the Apex Court an arbitral award is to be treated as a
Meneses ’ i
|. Charan Sharan Khemka v. Achint Chemicals, 2005 (2) Raj 465 (Raj).
2. AIR 1925 PC 34,
3. Damoder Engineering Construction Co. In Re, (1994) 1 Arb. LT 133. /->
ALTERNATIVE DISPUTE REDRESSAL SYSTEM
4 by the Civil Court, and it is binding on the parties.‘
‘ral award i# not a contract but a deci
"4 ward must be in writing and signed.
TO ssa be competent to initiate arbitral proceedings,
Fe esraranie arbitral award must be reasoned one—Section 311g) |
0 in snd Conan Aa 1008
4. There must be arbitration clause to assign disputes or differences
before arbitral tribunal.
5 the Sem of an arbitral award must be connected with the |
subject-matter of the dispute arbitrated. sis
6 An arbitral award must be founded on the principle of mutuality, k
Where the arbitral award is based on mutual settlement of the dispute
by the parties, no reason need be given.”
(iii) Arbitral award may be final or interim.
An arbitral award may be a final award or an “interim award” unless
there is an agreement to the contrary between the parties and depending
upon the nature of the dispute, the arbitrator could make an interim award.
An interim award has the same sanctity as final award. If it was not
complied with, it could not be enforced through the court by the same _
procedure as in the case of final award.*
(iv) Time limit for making the arbitral award.
The Arbitration and Conciliation Act, 1996 does not Provide any time ;
deel "wehi
means in fact if he is guilty of undue delay." > vases al
(v) Arbitral award by consent,
The Arbitration and Conciliation Act, 1996 i
: a reco; liberty
Parties to ra to a settlement. The arbitrator, VE ae =
genuineness and validity of the settlement has tw ch in terms
the settlement. The Act further envisay obit =
Weems ges that the arbitrator May encourage
to be neat
silent on this point. noted that the Arbitration Act, 1940 was
4. Section 14 of the Arbit
itration and Cor
5. Section 30 of the Arbi neiliatic
tration and Concilia
ion Act, 1996,
tion Act, 1996, 313)
arbitration
shall be deemed to
ences
(wii) Arbitral award to be made by majori
tion 291) of the Arbi
It is mandate of Se
1996 that the decision of
of all its members. An arbitral
1 the
a arbitrator to give it validity. Where there were
a then unless the arbitration agreement a
the award would have to be the decision of ti
arbitrator dissented from the majority decisi
dissenting opinion to the majority decision, though
less
ing (viii) Arbitral award shall be final and binding on the parti
rd. ‘As provided under Section 35 of the Arbitration and Conciliation Act.
not 1996 an arbitral award shall be final and binding on the parties and
me claiming under them. Where the time for making the application to To.
an arbitral award has expired or where such application has been refused
by the court, the award shall be enforced as if it were the decree of the
court.*
It is to be noted that under the present Act it will not be necessary te
make the award a rule of the court and to pass a decree in terms of the
award, as is mandatory under the repealed law.
(ix) Law of Limitation Applicable to Arbitral Award.
It is the mandate of the present Act that the enforcement of an arbitral
award shall be.subject to Limitation Act, as it is applicable to "contracts"
and thus a suit for specific performance could be filed within the period of
limitation as prescribed under Article 54 of the Limitation Act, 1963
Therefore, after the expiry of period of limitation an arbitral award cannot
be set aside. It would amount to waiver of rights by the parties.
On the point of limitation for setting of arbitral award, Section 4 of
the Act provides that an application for setting aside the arbitral award may
1. Section 31 of the Arbitration and Coneiliation Act, 1996.
2. Sections 2(1X¢) and 291) of the Arbitration and Cancilliation Act, 1996,
3. Section 36 of the Arbitration and Conciliation Act, 1996.
4. Section 34(3) of the Arbitration and Conciliation Act, 1996. — ho are in disputes.
would be chosen by the parties, who are in disputes
Arbitration agreement (8. 7)-
() In this Part, “arbitration agreem rh
parties to submit to arbitration all or certain dis opis
which may arise between them in respect of a def
whether contractual or not.
ment may be in the form arbitration,
form of a separate agreement
greement shall be in writing
(4) An arbitration agreement is in writing if it is contained in—
(2) An arbitration agr
clause in a contrai
or in
(3) An arbitration a;
(a) a document signed by th
(b) an exchange of lette
telecommunication [including comm
means] which provide a record
(c) an exchange of statements of
existence of the agreement is allege
by the other.
1. AIR 2007 SC 683,
2. Ins, by Act 3 of 2016, Sec, 3 (wre 23/
—_—_—_— ee ARBITRATION
n”
he reference in a contract to a docu
‘ an arbitration aj at if t
nt containing an arbitra
stitute’
contract is in writing and
‘s such as to make that arbitration el
oN ion clause part of the ¢
fer an 7 of the Act, 1996 is on the pattern of Article 7 of the Mo
Sect yas beon taken from Article I (1) of the Ni
w York Convention
in 7 defines an arbitration agreement, This section state
nt is an aj
submitted to
that, ar
en ent which provides that in
arbitration", the nature of such agreement
. voluntary, however it does not matter whether such dispute is «
jr future dispute, Section 7(1) of the Act, recognises both type
it is to b
tion 7(1) provides classification by means of agreement betwes
jwios that all or certain disputes are to be submitted to arbitration as
‘an agreement in respect of existing dispute and future dispute, Howe
s® xpected that arbitration agreement is to be made in specific clauses,
i hao particular form of arbitration agreement is prescribed under the Ad
In Rukmanibai y. Collector, Jabalpur,’ the Supreme Court t
wat is required to be ascertained is whether the parties have agreed tha
{disputes arise between them in respect of the subject-matter of the
ggrement such dispute shall be referred to arbitration, then such
ggreement would spell out an arbitration agreement. That means what is
fequired under Section 7(2) to (5) is the terms of an arbitration agreement
‘thich must be very clear and specific, may be, in form of clauses and
expression used in an arbitration agreement such as “arbitrator’,
‘arbitration and “arbitral tribunal” should be defined. The clauses contained
in an arbitration agreement is not like the clauses of a contract because the
clauses of an arbitration agreement are enforceable under this Act.
Section 7(3) makes necessary that an arbitration agreement must be in
writing so, it does not recognise oral or verbal agreement. Section 2(a) of the
Arbitration Act, 1940 also provided similar condition in respect of an
arbitration agreement.
Section 7(4) affirms essential condition that an arbitration agreement
must be in writing signed by the parties and it recognises the modern mode
of communication such as telex, telegrams, letters and also a communication
by means of tele-communication which forms a record of the arbitration
agreement, Section 7(4)(c) deals with an arbitration agreement contained in
an exchange of statements in respect of claim and defence in which the
existence of the agreement is alleged by one party and not denied by the
other party,
Although, Section 7(4), clause (b) and clause (c) explains that it is not
med that an arbitration agreement in all cases should be signed by the
Parties,’
Section 7(5) explains that in a contract agreement if the reference is
1
2 AIR 1981 SC 479, 481 and State of Orissa v. Shri Damodar Das, 1996 (1) Seale 6S
narsi Das v. Cane Commr. AIR 1963 SC 1417 —_—
STEM
78 ALTERNATIVE DISPUTE REDRESSAL sys
t to an “arbitration agrecmen. |
ae of a contract provided it ng ;
gection recognises the prac
ining an arbitration clause
made as to ‘arbitration clause’ it will am
Thus, an “arbitration clause" can be 2 P
writing, Now, it is clear that this sv >"
prevailing in such documents of contract con!
n of
i) Term "agreement'—Connotatio a
rm grement ar bon id eration for och a
promise and Naver vet of promises forming the Cm nevoanaiaal
; a, mises fon for, an arbitration) SEF oe aay
seins “area a to abide by the decision (away ) of he aa
slings of either se proce PrOT een a wa
ide. The test to determine whether 4 particular TaHaee pee whet
submission is whether both parties are pee parties to initiate arbitral
es res a wivet chat an agroement/arbitration agreement
Feeney a crstaining reciprocal promises between the Pou with the
ghject that in case of any dispute arising out of a contract, the same would
be liable to be submitted for arbitration.
Considering the financial resources and the size of the contract site
parties have whole, separate agreements on arbitration and more properly,
verse can be stated as arbitration agreements.” Others simply insert a clause
related to arbitration in the primary contract; this can be more appropriately
stated to be an arbitration clause. It is not essential that an arbitration
agreement must not be incorporated in a formal agreement executed by both
parties nor it is required to be signed by the parties. A document signed by
one party and accepted by the other is good enough.” The parties can always
keep the power to appoint arbitrators and if the arbitration agreement is not
against the provisions of 1996 Act, it should be given effect. An arbitral
een a constituted should follow the rules of Indian Council of
tration therefore if an agreement insists o1 i ‘
Arbitration, the same is permissible.* acrulesiof Tadic aeaaaaa
(ii) Form of an arbitration agreement
Section 7(2) of the Act
in the form of an arbitration
agreement. Thus, if there
provides that an arbitration
agreement may
clause in a contract or in the form of a onli s the requirement of Section 7(2) of
that Section 7(2) deals with exte
nt: Whereas a contract is
ration clause for future disputes, a separate agreement
ation clause both for existing and future disputes That
is not required to be endorsed in any particular for:
ertained is whether the parties have agreed that
n them in respect of the subject-matter of the
utes shall be referred to arbitration, then such an
q spell out an arbitration agreement.'
9
the Act. It appears
nal aspects of an
Kenerally used for
vv pat constitutes an “arbitration agreement"
whe ander v. Ramesh Chander; the Apex Court had occasion
inciple as to what constitutes an arbitration agreement,
lowing -—
Intention of parties.—The intention of the parties to enter into
greement shall have to be gathered from the terms of the
terms of the agreement clearly indicating an intention on
,e parties to the agreement to refer their disputes to a private
jjudication and a willingness to be bound by the decision of
‘on such disputes, it is an arbitration agreement. While there
form of an arbitration agreement, the words used should disclose
‘tion and an obligation to go to arbitration and not merely
nts the possibility of going to arbitration. Where there is merely a
sf the parties agreeing to arbitration in future, as contrasted from
“Son to refer disputes to arbitration, there is no valid and binding
tion agreement. i
ib) Clause relating to settlement of disputes.—Eiven if the words
coon’ and “Arbitral Tribunal" (or arbitrator) are not used with
‘rath the process of settlement or with reference to private tribunal
"> adjudicate upon the disputes, in a clause relating to settlement
St does not detract from the clause being an arbitration
count if it has the attributes or elements of an arbitration agreement.
a) the agreement should be in writing; :
») the parties should have agreed to refer any disputes (present or
future) between them to the decision of a pavers, ealtingsly ”
(c) the private tribunal should be empowered to adjudicate hpi
disputes in an impartial ae one se opportunity
ies to put forth their case before it} an¢
@ ee should have agreed that the Bapincn aati private
tribunal in respect of disputes will be pinding on them;
""T Rubmanibai v, Colleior, Jabalpur, ATR 1981 SC 479; Siote of West Bengal v. Haripada
fantra, ATR 1990 Cal. 83; State of Orissa v. Das, 1996 (1) Seale 68; see DG:
Fas on Arbitration Law, Bd 1997, p. 55.
2 (2007) 5 sco 719,
1 cadence, as i mote thas jose pleading nid
nts pursl.Fexed Chart Party Agrees (GPA) eos
ea unter law. The Supreme Cour further held hat once
ont existed, applicant ended to eerence of isp 2a
to be eppanted by the Court.
‘Existence of arbitration apreement—inference of
°° Karting to the Apex Court existence of an arbitration agreement can
ished om s document cigaed by the pares or an exdatoge of leien,
Sen iiegram or other means of tlocmmnication whist peeties ea
| GE. Seeement In Shaki Bhog Foods Lid v. Rota Shipping Led? ae
Spex Court held that sizing of fst page of Charter Party Agree’, won
‘denied. However, subsequent correspondence between the parton on
‘Roperted consasion regarding exten of such agreunent. tienen see,
the Act 1996 dows not potalate that lettersfaces ot mailer tar ener
cumanization should contain artitraon cause. fa abeanes of nay
(vi) Existence of arbitration agreement inference as to can be
rawn from lettersifaxes fe
‘The Apex Court in Mis. Shaki B
at
aa exchange of hog Foods Ld. Kola Shipping Li?
ction pride te
sent may be inthe form ofan arbitration
; a
1 Ate ume
> Kika 8 INTRODUCTION
RNATIVE
DISPUT)
‘UTE RESOLUTION w
nm and Nature of ADR me
ony nati ° Dupe Resolution (aD)
rte is @ term or own as
to refey external di
io. whi : : F to fo lispute
vc the tg pera ae de an
who ensiet ed their dispute by cotter eesional "third
tion, mediation, arbitration, counselling, and canc rent “operative,
{ that most common format of ADR are moans ation ete. It is to
ye no! Pa " ‘e me
oncept of "ADR" is some time more dated by te win and arbitration
jisputants try radiation before they taken their case to net renuite
e to the Court of
R) is also kn
In other words the expression "Alternative Di
j« usually used to describe a wide variety si ceee ee olution” or ADR
js indeed more economical and a time saving mechanism, oe which
abe referred to everything from felicitated settlement of dispute mary
disputing parties are employed to negotiate directly, but NOE ey in which
condition. ery strict
‘ADR’ is ordinarily used as an acronym for wie
negotiation’mediation of a dispute, which is aid
procedure other than adjudication by a presiding judge in a Court of sil
peADR, a neutral third party takes part to help rather to assist in the
f issues in controversy,’ =
resolution o}
Meaning
Alternative Dispute Resolution which is commonly known by its
standard short form ‘ADR’ is an alternative to the normal judicial s; ‘
It is usually an umbrella term for methods, other than judicial
determination, in which an impartial person (an ADR practitioner) helps
those in a dispute to resolve the issues between them, At the outset, we
must acknowledge that ADR covers all forms of dispute resolution other
than court adjudication. ADR is any method of resolving disputes without
litigation. But at the same time, it should be remembered that ADR is not
appropriate for every dispute and it is not the solution to all disputes or
conflicts,
Definition
__ Alternative Dispute Resolution or ADR is the procedure for settling the
disputes without litigation. Alternative Dispute Resolution (ADR) is a term
1. 28 U,
651 (a) supp, 1998.
CL) GREE Sp Steet Sees come ea
only liver a Judgment that ist Sat scien
ee et a ts oe
the faith of people alive in courts. ADR. mothods have "ou er aia
seercach The word “Altemative” in ADR means “the other eeu
eee ee al of ania
seon ar an alfersative court system but rather a system Whigney Se
ee ee eT ne a
Hiaimecee Dispute Retolutios, Astieala “-Disvety agi
eee re ee a teehee
ste ice ioute Management sn Decision Making
ADR in Fadia
"The Law Commission of India, in its 14th report, suggested devising ot
‘ways and means to make sure that justice should be uncomplicated, svi,
easy on the pocket, effecal and substantial. In its 77dh report Law
Commission of India’ observed that the Indian society is, predominantly an
agrarian society and is not refined enough to comprehend the technical and
awkward procedures pursued by the Courts, The three major laws tht
reflect sensitivity of Indian government towards ADR promot are
Arbitration and Conciliation Act, 1996 and Legal Services Authority Ac,
1087 accompanied by Section 89 as well os Order 10 Rule 1A to 4-Q.of Gist
Procedure Code along with stattered provisions among various other laws
like Industrial Disputes Act, 1947, Section 23(2) of the Hindu Mariage Aet
410955 and Section 9 of the Family Courts Act, 1984. We can also find sus
provisions in Section 80, Order XXIII, Rule 3, Order XXVI, Rule 6-B, Ordet
XXXILA & Order XXXVI of the Code of Civil Procedure, 1908.
‘lene
cou ine ena teh ta Sele
oy ta ny atte pene aa
oe ee
2k Ate Oe
a th as iS clade pete
Ec ey ee cpa ee te ln
‘al a0 8 Tess Unt whee a pate hae bean sere fru
‘ee Ce ran ab ome bea a
od Ea notte Lege Services Authority At 1987 (39 of 187) sa
fe proving dispute were referred to Lak Adalat une the
Seat ets th OC pres tne» Sas
of that AG mediation, the Court sal ied» emp cs
Sere een sh pote ser bee
Sa en wold pert he dopant ADR
oc dbs amie te her
“ose Se pica
Scheie
et ae ee
ve a iy eta pee ea
wa re a ee
weft chee
igi cee Ste te gereme
a epi
afi et eigned byte pats. Likewise ene
SY eee
CPC if dhe partes are not open for azn
he Da notes acme
the court hae the opin to fer the He & a8 Glows: The
£25 is under legal obligation to bef
2uture ofthe arbitration and the facts that reresce oe ete en
Sciatica he aa a te wa Sade a
{2 s0 fo the ahr, the rt soa aa Se any ting
top en socain adic page oe aa a
Be reerod tothe ction a yor Seta Be a
Gonna Ac 566: Tae rive pons owe Nees
evelintion Ae 106 wil gov he at ae oe,
a under section 89 of the Civil Procedure Code. t
Adalat (i) Median, and a Suda Setamers sae toe aes
‘are satisfied: (a) the court ie aatiafied that there ir wheel fo Gogg ta
iad ©) the partis dot ape tr arskrie or eee ne
matter like Motor Acident Cis Care mey be oe ah ae
Sceause of te to thing (o tere ao dine saan cmsme es es
RSP th Tapa ale re Soc ontsno s mocks ond
founda of negoaatons are ec, ie gre of media any tothe |
Beet etl etn. The term abe br eon! wey sv eso tr
ina the pros rei the tines oe i
aout vada ngaloStgtin te poco with th beng he
suit tho setbsono fo the ADH fas In cae toienet has en echd,
{he cour bound to examine tend mabe adores tm of tv ssl
eS fale laid down in Mule 9 of Orde 29 of Col Procedure Code It
se scllncnt inches dopates which ar net sbjct ater of the sl
ie court my drt thatthe same wife governed by appl law
(Seen hf the Arbitration and Conciatin At if i eelinion
cep nett
mediation cncrond fu 29 of the Utne Prades
= civil onli ofthe 19608 Alternative Dispute
Sore eette thr Gepaten, 9 pumber sf el ste
reid Gecrninntion and ijuses, The US. Suc
‘righ the laws rnung fm delajed justice and
tise faced with judhaal tarnver. There
‘anclaion and evotraGon soon became poplar
awh the vanety of snc becuse ADE. Reged them to
prosrure and fhe over burdened jul system. Further, the Cha
hws Acs 1861 dared that discrimination im pbc employment 08 he
sexo national eign was outlawed
Ie sto be noted that resolution rather stemest dopute outside of
Courts isnot very new conept The actin arom the world have long
on yudiil indigenous methods to reave thelr aeputs although
sha enw is a wide promotion of ADE models speicaly in the corporie
‘red ADR isa strong tel to schive fFendly setorcent of spate
Tn the United States, the ADR movement was initiated im the eaty
tots as seal movement to aetle eommunityvise cil Fights dspaten
ty means of mediation and as «legal movement to diminish inreased dlny
‘in expensive litigation arising fom an overloaded jafidal sytem. Sion,
then logal ADR moovement in the United States has witnessed rapid growth
Although with the apport of American Bar Association, sedemic Cori
the US. Congress and Stale Government, it has reached. 1
instttionalistion from experimentation For example—In response a ii
SFosice Reforms Act, 1990, requiring all Federal District Courts of USA.
Innovate plan and mechanism ta bring down the cost and Crt ogc ema gee ta te
serail St nine ADR mronent rig a
Sear a na gen ee AON eh
trong demand for ADR inthe
in Be corte wnt
gation Therese soca eet
Sent gees umber of privet uy of niin, had
trere fected by improvement and accopransens Agia iti
1 insitutionalization, Now, loro
encourage gence to use
conduction, administrative di
pute resolution und ale Pal
‘movement had ale taken ef
with he modern ADH nase
ide range of sca, loa, commertiland fitness
= in the developing world, a number of countries including Bolivia,
slob, Bangladesh, Heda he Pitpans Sas Aes Sess
sod Uropeay ar cngtpng In te ADR eect tae ee aa
{del in dhe countries made this sate to popular inthe devin
MAIN LATENT CHARACTERISTICS OF ADR
‘The presenco of various elements in ADR, such ae nopotaton
settlement, conciliation, mediation and arbitration make the mainfatent
characteristics of ADR ns tnder—
1. ADR operates with less formality.
2, Doctrine of equity
3, Direet participation
4. Communication between disputants
1. ADR operates with less formality.
Fundamentally, ADR system in less formal in comparison with the
Ceres, under the forms! lgat sytem, in goiton where a mar
ort of he popultan dena eclve any outa measure of otic he
"Comings of an ifm approach to fstice may not be em mara
st RDI aye tends to aan efientsetlament st ecnomical cnt
ee the romiting informed aytem seems unfair and ia e308 the
Hove*etggurieved putea te resto sec forma justice to tet fairness
4: Direct Participation.
"ADR ayrtem mkes a goed scope for dict patcpation of dsputants
‘Torin more. dvet dialogue and oppartualty for eanslaton between
Tee “pence is greater’ and more flexble, A higher level of
Conlidentihty He also maintained in ADR meh,
omaunieation between disputants
"ADE system provides 4 araight and direst communication butween the
isputanta, A higher degre of fleiliy snd informality makes the ADR.
lien poplar and effective which contains potontially higher level of
‘Mitement of dapute while exercising deect power of enforcement ofthe
‘Raull ot ADR proccoves, Te is submitted. that the impact, of new
Characteristics is not lic, Even in the United States of Ameria where
‘NDR method ie enormovaly used and extensively staied than in most
dveloping countries. Ahoogh, weak justice delivery aystem in considerably
reduced at advert of ADR mechanism, but some time enforement at the
terms of settlement may be kept in abeyance and disputants may
entrained to scek judial intervention regarding enforeement of terms of
Court. Notably, ADR sought to be designed to suit the conlting prtes
postion, 6 that failure of ADR ean be Kept at bay. Theat h Method ot
“8 under ¥ ADR
olementa cnet
L ADI ay
2 Ape ge
Ine
at Berane satan
oa
es system can sie
oe
Sh wb gy
nt atari re
ira are ne
judicial workloads
2. ADR Supplements Court
Wherein the prsent scenario judicial aytem ha 0 many inti
shortcomings and failure, on sean finadeute tastes eo,
and practice ete. and there is no hope in newt far wpiiog Gos
reform, ADR system may be the most sulle method to pe oe
alternative forum to redress grievances. Even complex or technical disputes
can be dealt more appropriately rather effectively hinng specialized private
ADR firms.
ADR program provides justice for the population which is not wall
served by the Courts. For example—In India, Bangladesh and South Korea
ADR programs were introdueed to by pass corrupt partial Court system th
could not provide speedy and reasonable justice for certain
Population.
ADR system may also beomne east than tne Goats fe wc
npc, mc cen eal ign AD es
‘competont. alternatives to the Caan crs thee te
ring their jotical anton in a proper cad prscind
3. Increased satisfaction of Dispatants,
"Though, increased satisfaction of Snptacte is con ofthe meta of
ADRe objectives, but study revealed thatthe cor, aca sed ley eee
in atlement of disputes, these are alse facore to Gna. ADE pope
‘Ga have positive influence on the dispstants saison. epesiealy
‘spect of personaVbusiness relationship as the ADR system io repens
{inl needed the mort to carta “‘marathos” tes of bearing i te Coma
Wen ADR system is assesed in respect of uae’ etnfction, Shey pele
{he informal method for sctlement of thir Gspstes, For exomai—ie
Sa:Lanka, satisfaction with the Medistion Beard syatem ls qte ig
‘addition to the accessibility of the system and the low cot dmpauat
‘dicate that the way they are treated the dsputant contra te ees
and the community based nature of ADR system, are al factors opm
tw achieve a high dogree of satisfaction to isputans. Mon ingest he
dgree of satisfaction is also reflected in the settlement and expan
rates. In SriLanka, approximately TO% of all ADR mandated ame
resolved and compliance rates, slthough not ascortly meee =
reported, to be quite highs
‘Like wise in Bangladesh, almost all users indicate tat they cr
eee
Soe Sens nae otoen ae
sorcery ADH ssn Banging Pe pe
Sustice for Disnavantaged Group, —
Micon to Ugation Heneees, Emah= ‘being an iterate cet Ae
Sasa NY Mend cn the fayette ct
et AG a the lve ta Ct ae Sc eae
ADR ete ma
pec baiicy oh cairn eee
eee ee
ee a ey
ea
See a a
Se a ae ed me ek
be subjected to evaporate by means of ADR programme. In Bangladesh; the
“Ser cas sds — ant and Pano, 1908
ced nt pel ye
SEAS os sane an ne de
Zetia ah tentang ee ge ea
Tie ir ADR reg a a cen mt
4 pow and
on me
eat ce ee i aay ele eae
‘ermal Tega ayia ence ely in restton of sptant, This
pecans ts be rion fhcugioat te word an uch ey afte
‘Sumber of devlopent bert, thas oun experienced that in some
{adnn delays are so exteene tn i feiely den fuses, Inthe context
Er ial maniacs te relevant at "Delay defeats fstoe, Ther are
usc! when disadvantaged geup Sd theoalven at revving end
‘Sy Saat ale to rene the shen ofthe formal legal stom, Hower
‘Beene cuca days inthe reasuion of commercial apts dbstrac the
vente devclopment and fare! undermine the efSiency of the economy
‘SeSIne Te to bo noted Gat infra pate veslution spear
‘edition and sldement program me are npleg procedures fr conical
TMulement of diopate ve. Aebtration sytem can eosierably reduce day
'inpute rescluton and indesly rms reduce the Cours bacog 6
‘Henifeantly redwing cases tht would ober enter into «fora logal
‘temas
Tm South Alin, adoption of quid reson of luboor management
isputes serve, net only anil equity objectives but als esonomieemuty
bien
‘The studios undertaken in. developing Counties, show that ADE
mechanism provide prof that Uhe mechanism have een effective in
‘raceaing ceses quietly, in comparison of the traditional forme) legal
roems, For example—in Sr-Lankny mediation boards resohved 6 of