pri Alternative Disput Resolution and Arbitration Alternative Disput Resolution and Arbitration

CA Ajit C. Shah


A dispute arises as soon as a person is born and this carries out throughout his life. A small child has a dispute with his parent with regards to his choice of food he eats, games he plays. Dispute can arise between parties where they have common interest in a thing but they have different of opinion on the method of fulfilling that interest. The Oxford Dictionary defines the term Dispute as an argument or a disagreement between two people, groups or countries. This dispute can make many forms depending on the parties to the dispute and the matter in dispute.

Dispute in its background has a common interest on which parties have taken or have a difference of opinion or approach.  It is this common interest which give birth to the methods for mitigating the disputes.

What is alternative dispute resolution?

Disputes and differences in business dealings are common. The overburdened courts and judicial system of our country are proof of the same. But a dispute must be resolved. Unresolved disputes in business hinder the smooth flow and future growth on trade. A dispute is normally resolved by litigation or through Alternative Dispute Resolution (ADR) mechanism. In litigation a dispute is referred to a court of Law. Litigation is expensive, time consuming and full of complexities.

Alternative Dispute Resolution (“ADR”) refers to any means of setting disputes outside of the court room. ADR typically includes Arbitration, Mediation, Negotiation and Conciliation. The above four methods of redressal and resolution of a dispute are collectively called Alternate Dispute resolution as these are usually considered to be alterative to litigation. The number of cases to be resolved as pilling up at the courts in a maddening way. Besides, the constant rise in the costs of litigation coupled with the delays continues to plague the litigants. As a result of all these, the reliance on ADR methods is on the rise.

ARBITRATION: Arbitration is the settlement of a dispute by the decision not of the court of law but of one or more persons called arbitrators which is executable as a decree of the court.

What is Arbitration?

Arbitration is method whereby parties can resolve their disputes privately. It is known as alternative dispute resolution mechanism. Instead of filling case in a court, parties can refer their case to an arbitral tribunal, which is the forum where arbitration proceedings are conducted. The arbitral tribunal will consider the questions over which the parties are in conflict and will arrive at a decision. This decision is known as “Award”`

Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going t court. Arbitration is the private, judicial determination of a dispute, by an independent third party. An arbitration hearing may involve the use of an individual arbitrator or a tribunal. A tribunal may consist of any number of arbitrators though our legal systems insist on an odd number for obvious reason of wishing to avoid a tie. One and three are the most common numbers of arbitrators. The disputing parties hand over their power to decide the disputes to the arbitrator(s). Arbitration is an alternative to court and its decisions are final and binding.

The principal characteristics of arbitration can be summarized as:

Consensus among the parties.

Arbitration can only take place if both parties have agreed to it. In the case of future disputes arising under a contract, the parties insert an arbitration clause in the relevant contract. An existing dispute can be referred to arbitration by means of a submission agreement between the parties. In contrast to mediation, a party cannot unilaterally withdraw from arbitration.

Choice of arbitrator(s) with the parties.

Under the Arbitration and Conciliation Act, 1996 the parties can select a sole arbitrator together. If they choose to have three member arbitral tribunal, each party appoints one of the arbitrators; those two persons then agree on the presiding arbitrator. Alternatively, the Chief Justice or any person under him or his designate can suggest potential arbitrators.

Arbitration is neutral.

In addition to their selection of neutrals, parties are able to choose such important elements as the language and venue of the arbitration. This allows them to ensure that neither of the parties enjoys the undue or unfair advantage over each other. In case of international disputes the parties are independent to choose elements such as the applicable law, language and venue of the arbitration which further ensures that no party enjoys a home court advantage.

Arbitration is a confidential procedure.

The decision of the arbitral tribunal is final and easy to enforce. Section 2(1) of the Act, defines Arbitration to mean any Arbitration whether or not administered by a permanent arbitral institution. The above definition has been given to clarify that the Arbitration contemplated by the Act – embraces all arbitrations whether or not administered by permanent arbitral institutions like Indian Council of arbitration, Indian Merchants Chambers, International Chamber of Commerce etc.

Arbitration is the settlement of a dispute by decision not of a court of law but of one or more persons called arbitrators.

From the above it will appear that Arbitration is a mode of resolving disputes without the intervention of the court. However, in practice, a court may have to intervene at various stages of arbitration. The Act ensures that the court’s interference is minimum. Section 5 of the Act provides that no judicial authority shall intervene except where so provided in part I of the Act, which deals with the law relating to domestic arbitration.

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July 2021