By Raunak Singh

Vth B.S.L., LLB, I.L.S. Law College, Pune


With the advent of high technologies and internet facilities, the nature of trade and commerce in India has witnessed tremendous change. With the transformation from a phase with limited business opportunities to this era of globalization, India has well responded to the growth in the trade and investment sector. Such trades and investments are no more limited to the boundaries of our nation, but have extended to an international level. But just looking at the whole scenario from the same angle does not give the complete picture of this new market. The expansion of the market has also led to more complexities and has given birth to many contractual disputes.


The concept of agreements and contractual disputes go hand in hand, i.e. more the agreements, more will be such disputes. Therefore the rise in the number of business transactions in the last few years has also led to a subsequent rise in the number of such disputes. Such disputes are required to be resolved and the parties to dispute are left with two options for the same - the first and the traditional one being the assistance of the court and the second one being, to go for an alternative dispute resolution. Though there are a number of branches at the root of alternative dispute resolution, the most popular one is arbitration.




Arbitration is a legal technique for the resolution of disputes, in a judicial manner, outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. In India the Arbitration and Conciliation Act, 1996 consolidates the laws relating to arbitration. Prior to this, India had the Arbitration (Protocol and Convention) Act, 1937, the Arbitration Act, 1940 and the Foreign Awards (Recognition and Enforcement) Act, 1961, which have since been subsumed by the 1996 Act. The Act of 1996 can be divided into four parts dealing with domestic arbitration, international commercial arbitration, conciliation and supplementary provisions. There are three Schedules annexed to the Act. The first schedule is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards; the second schedule is the Protocol on Arbitration Clauses; and the third schedule is the Convention on the Execution of the Foreign Arbitral Awards.




Arbitration has been a very successful technique for resolving the said disputes between parties. If the parties are willing to refer a dispute to arbitration, they must have entered into an arbitration agreement or should have included an arbitration clause in the agreement. Now one may question that why do the parties to such dispute need to go for

arbitration when they can easily avail the assistance of the court. The answer to this question has been discussed below.


The judicial wing of India has been very much overburdened with a huge number of cases which ultimately results in prolonged delays. In past there have been many examples where justice has suffered because of such delays. In the Harshad Mehta scam the court finally punished Harshad Mehta after seven years of trial and in another case Charles Shobhraj, a criminal who would have been punished within the limitation period of 20 years, managed to come to India and spent a long time at Tihar Jail including a second innings after a temporary escape to Goa. There have been many similar cases where such delays have discouraged the mass of the country to knock the doors of the courts of India. Justice delayed is justice denied. Alternative dispute resolution system is not a solution to this problem but a support to the system to get over with this problem. Thus by settling down the dispute through arbitration the parties to dispute do not only help themselves, but also take a step favourable to the judicial system. By doing so they are able to escape the delays which they could have been forced to face otherwise. At the same time they do not become a part of the pending cases of the courts and hence do not further encourage these delays.


The pending nature of litigation keeps on adding to the cost of the litigation. Other than the court fees, there are a number of other charges to be borne by the parties. Not only this, the fees being charged by the lawyers are touching sky. Thus arbitration happens to be a cheaper substitute for litigation.


When it comes to arbitration, the parties are free to choose the Arbitrator and the procedure to be followed for arbitration. The parties to dispute may choose an arbitrator or arbitrators who are experts on the matter disputed and may agree upon the language, place or rules for the conduct of arbitral proceedings in accordance with their comfort. Moreover the arbitral tribunal is not bound by the Code of Civil Procedure, 1908 and strict rules laid down by the Indian Evidence Act, 1872. The parties can, by their mutual agreement, sack the arbitrators, vary the terms of their authority and fix the procedure and issues for their decision. However the parties are not free to choose either the judge or the procedure to be followed in case of litigation, where the parties are bound by the traditional procedures. Thus the mechanism of arbitration is generally less stressful and more convenient for the parties. Aristotle wrote, "For an arbitrator goes by the equity of a case, a judge by the law, and arbitration was invented with the express purpose of securing full power for equity.”


Another advantage of arbitration over litigation is maintenance of privacy and confidentiality, which generally fails to happen in case of litigation. The public and the media are not legally entitled to participate in, observe or report on a private arbitration, without the consent of the parties unlike in the cases referred to the courts. Therefore the various facts and secrets relating to the business which are required not be opened in public for the success or proper running of the business, remains so. None of the party has to go through the allegations made by the other party in public.


The business transactions giving rise to such disputes are no longer limited to any national boundary but extend to an international level thereby stretching the scope of arbitration as well. One of the main objectives for introduction of ‘The Arbitration And Conciliation Act, 1996’ has been to cover international commercial Arbitration. ‘International Commercial Arbitration’ means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is


Thus arbitration is a sui juri institution, free form constraints and not subject to the jurisdiction of any national court and this very feature of arbitration enables both the parties to keep themselves away from the national courts of the opponent party.


Arbitration may be summed up as a speedy, cheaper, effective and a convenient mode of justice. The popularity of arbitration can be very well measured through large number of arbitration cases coming up these days. However the success of arbitration in no way is to be taken as a failure of litigation. There has never been a competing relationship between both these wings of justice. The relation between arbitration and litigation may be compared with two different branches of the same tree where both these branches are meant for the same purpose i.e. for producing the flowers of justice.