This Article has been written by Aakriti Singh, a 3rd Year student of LLB (Hons.) from Amity Law School, Amity University Noida.
Alternative dispute resolution (ADR) methods are making waves in India. The Arbitration and Conciliation Act, 1996 is the legislation which governs two types of ADR in India, namely arbitration proceedings and conciliation. This process of arbitration is widely recognized for its benefits, both in terms of efficiently resolving legal disputes, and in terms of providing relief to the common man. In India, the legal system follows the maxim ‘Ubi jus ibi remedium’, meaning ‘where there is a right, there is a remedy’. People resort to the courts whenever their rights are violated, leading to an increase in workload and decisions pronounced years after the dispute arose. To address this, alternative dispute resolution methods such as arbitration and mediation have been used. Recently, the President of India and the Chief Justice of the Supreme Court advocated for using these methods to bring justice efficiently. There are several techniques in Alternate Dispute Resolution. They are: Arbitration Mediation Conciliation Mini trial Mediation-arbitration etc.
Arbitration is a type of out-of-court dispute resolution, usually dealing with civil matters. It is a process in which the parties to the dispute agree to have a third party, known as an arbitrator, make a determination on the dispute. This determination is not arbitrary, but is based on the appropriate laws as presented by arbitration lawyers. The arbitrator presiding over the arbitration is responsible for making the arbitration award based on the applicable laws.
Conciliation is a form of Alternative Dispute Resolution in India which helps parties to a dispute reach a settlement through negotiation. The parties must first agree to use conciliation to resolve the dispute, and then an independent and impartial conciliator is appointed by the parties. This may be a single conciliator or multiple conciliators, depending on the agreement of the parties. During the conciliation process, the conciliator considers the rights and obligations of each party, as well as principles of impartiality and justice, applicable business practices, and other relevant elements. The main goal of the conciliator is to facilitate an amicable resolution between the parties.
HISTORY OF ARBITRATION AND CONCILIATION IN INDIA
The first formal law regarding the matter of arbitration in India was the Indian Arbitration Act, 1899, which was applicable merely to the Presidency towns of Madras, Bombay and Calcutta. After the Code of Civil Procedure, 1908 came into effect, the Second Schedule of the said code provided for the regime of arbitration. The aforesaid statutes that formed the basis of arbitration in India, eventually gave rise to the detailed legislation relating to arbitrations titled the Arbitration Act, 1940.
The said Act of 1940 was mainly based on the English Arbitration Act of 1934 and stayed on the statue book for more than half a century. The Act of 1940, handled only with domestic tribunals while the enforcement of foreign awards was taken care of by the Arbitration (Protocol and Convention) Act, 1937 for Geneva Convention Awards and the Foreign Awards (Recognition and Enforcement) Act, 1961 for the New York Convention Awards.
The English Act of 1934 was then replaced twice keeping in view the changing landscape of arbitrations. However, the India Act of 1940 did not go through subsequent changes. Internationally, the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, 1985 was accepted. This model law, containing 36 Articles, was meant to generate uniformity and synonymy for arbitration related statues, which were prevailing across the world. The UNCITRAL model law was then introduced on June 21st, 1985. This model law was designed to create uniformity and synonymy for arbitration statutes across the world.
The Indian economy saw a significant transformation in 1991 with the government introducing globalization and liberalization policies. This enabled foreign investments to enter the Indian market. The investors, before committing to Indian investments, required a reliable and cost-effective dispute resolution mechanism in order to resolve any conflicts. However, the then existing Arbitration Act, 1940 was not up to the mark. With the aim of providing investors with a modern and reliable statute, India adopted the UNCITRAL Model Law on International Commercial Arbitration 1985 and passed the Arbitration and Conciliation Act, 1996. This act came into effect on 22nd August, 1996.
KEY OBJECTIVES OF ARBITRATION AND CONCILIATION ACT:
The Arbitration and Conciliation Act, 1996 consists of four main parts and three schedules. Part I (Sections 2-43) applies to the place of arbitration in India and the award granted is treated as a domestic award. Part II (Sections 44-60) deals with the enforcement of foreign awards. Part III (Sections 61-81) concerns conciliation and Part IV (Sections 82-86) covers supplementary provisions. It also contains three schedules: Schedule I – Convention on the Recognition of Foreign Awards of Arbitration, Schedule II – Protocol to be followed on arbitration clauses, and Schedule III – Convention for the Execution of Foreign Arbitral Awards.
The key objectives of the Arbitration and Conciliation Act, 1996 were:
- Minimisation of supervisory role of courts
- Providing speedy disposal of the disputes.
- Amicable, swift and cost-efficient settlement of disputes.
- Resolving the dispute by a formal award.
- Ensuring that arbitration proceedings are just, fair and effective.
- Comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation.
- Permit an arbitrator to use mediation, conciliation or other procedure during the arbitral proceedings to encourage settlement of disputes.
- Provide that every arbitral award is enforced in the same manner as if it were a decree of the court.
The Arbitration & Conciliation Act, 1996 is a powerful tool that can lead to significant reduction in the judiciary’s workload. Due to fast-track proceedings and lower costs, it is efficient for parties to dispute and preferable in business transactions. However, some people doubt the credibility of alternative dispute resolution in India and look towards the judiciary with hope. It is necessary to make them believe in alternate dispute resolution methods through their results.
The Alternate Dispute Resolution (ADR) Act provides individuals and companies with cost-effective, time-saving, and effective methods of settling disputes outside of the court system. Popular examples of ADRs include arbitration, conciliation, and mediation. This Act outlines the procedure for arbitration proceedings and provides guidance for the conduct of the tribunal that handles disputes. It also outlines the procedure for making an arbitral award, a final decision which is binding on the parties. In case of discrepancies, the Act outlines the procedure for filing an appeal with the courts.
Alternative dispute resoluton in India – legalaffairs.gov.in, https://legalaffairs.gov.in/sites/default/files/arbitration-and-mediation_0.pdf (last visited Feb 24, 2023)
Know everything about arbitration and conciliation act,1996 TaxGuru, https://taxguru.in/corporate-law/arbitration-conciliation-act-1996.html (last visited Feb 24, 2023)
Arbitration and conciliation act, 1996 iPleaders, https://blog.ipleaders.in/arbitration-and-conciliation-act-1996/#Scheme_of_the_Arbitration_and_Conciliation_Act_1996 (last visited Feb 24, 2023)
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