ARBITRATION PROCESS

Presentation by: Atin Kumar

B.com LLB 5TH Sem [16611]
ALTERNATIVE DISPUTE RESOLUTION

To deal with the situation of pendency of cases in courts of India, ADR plays a
significant role in India by its diverse techniques. Alternative Dispute Resolution
mechanism provides scientifically developed techniques to Indian judiciary which
helps in reducing the burden on the courts. ADR provides various modes of
settlement including, arbitration, conciliation, mediation, negotiation and lok Adalat.
Here, negotiation means self-counseling between the parties to resolve their dispute
but it doesn’t have any statutory recognition in India.
TYPES OF ADR
Arbitration:
• The dispute is submitted to an arbitral tribunal which makes a decision (an "award") on the dispute that is
mostly binding on the parties.
• It is less formal than a trial, and the rules of evidence are often relaxed.
• Generally, there is no right to appeal an arbitrator's decision.
• Except for some interim measures, there is very little scope for judicial intervention in the arbitration
process.

Conciliation:
• A non-binding procedure in which an impartial third party, the conciliator, assists the parties to a dispute in
reaching a mutually satisfactory agreed settlement of the dispute.
• Conciliation is a less formal form of arbitration.
• The parties are free to accept or reject the recommendations of the conciliator.
• However, if both parties accept the settlement document drawn by the conciliator, it shall be final and
binding on both.
Mediation:
• In mediation, an impartial person called a "mediator" helps the parties try to reach a mutually
acceptable resolution of the dispute.
• The mediator does not decide the dispute but helps the parties communicate so they can try to
settle the dispute themselves.
• Mediation leaves control of the outcome with the parties.

Negotiation:
• A non-binding procedure in which discussions between the parties are initiated without the
intervention of any third party with the object of arriving at a negotiated settlement to the
dispute
• It is the most common method of alternative dispute resolution.
• Negotiation occurs in business, non-profit organizations, government branches, legal
proceedings, among nations and in personal situations such as marriage, divorce, parenting, and
everyday life.
WHAT IS ARBITRATION?

Arbitration is settlement of a question or dispute (whether of fact, law, or

procedure) between parties to a contract by a neutral third party (who is
known as the arbitrator), without going through the rigours of the formal
court process. Arbitration is a voluntary process, which starts only if all
parties to a dispute agree to it, and for this reason, the arbitrator's decision
(the 'award') becomes binding on all parties to the dispute.
Arbitration is a voluntary process and sets in only if ALL THE PARTIES to
the dispute agree to it.
Once agreed, the rules and procedures specified in Arbitration & Conciliation
Act sets in.
ADVANTAGE OF ARBITRATIONS
1. Parties can seek an arbitrator who is a subject expert or competent. A judge may be wholly
unfamiliar or lack expertise in the subject-matter

2. Arbitrator is often faster than litigation in court, and operates within time-limits, atleast
until the execution stage

3. Arbitration is less formal, and gives more scope for compromise or innovative solutions
outside the rigours of court

4. Arbitration is cheaper than the normal route for litigation

5. Arbitration is suited for companies and others for confidentiality. Parties can restrict access
to trade secrets or other confidential information submitted to the arbitral tribunal, whereas
such matters would have to be produced before open court.
Scenarios Where Arbitration is Appropriate
•When parties cannot agree on the appropriate jurisdiction.
•When the proceedings would be entirely too expensive or time-consuming.
•When the arbitrator should be a person with expertise in the dispute.
•Where both parties require confidentiality and privacy.
•When one or both of the parties wishes to have a final verdict with no chance of appeal.
Scenarios Where Arbitration is Appropriate
Likewise, there are many reasons why arbitration would not be the best solution to an
argument.
•If the case is too complex to be sorted out in one meeting
•If one party would like to retain the right to appeal a decision, litigation would be more
beneficial.
•If more than two parties are involved.
TYPES OF ARBITRATIONS 
Institutional arbitration
When an arbitral Institution conducts arbitration, it is called Institutional Arbitration. The parties have the
choice of specifying, in the arbitration agreement, to refer the differences to be determined in accordance
with the rules of as elected arbitral Institution. One or more arbitrators can be appointed from a pre-
selected panel by the governing body of the institution or the disputants themselves can select their panel
but it has to be restricted to the limited panel. Arbitration and Conciliation Act 1996 provides that where
in Part I except section 28, the parties are free to determine a certain issue, that liberty encompasses the
right the parties have to authorize any person including an institution, to determine that issue.

Ad-hoc arbitration
If the parties agree among themselves and arrange for arbitration, it is called Ad hoc Arbitration without
having an institutional proceeding. It can either be domestic, international or foreign arbitration.
Ad Hoc Arbitration means that the arbitration should not be conducted according to the rules of an
arbitral institution. Since, parties do not have an obligation to submit their arbitration to the rules of an
arbitral institution; they are free to state their own rules of procedure. The geographical juridiction of Ad
hoc Arbitration is of essence, since most of the issues concerning arbitration will be resolved in
accordance with the national law of the seat of arbitration.
Statutory Arbitration
A statutory arbitration is distinct from a consensual arbitration, which is the result of agreement
between the two parties.  A statute may provide that disputes of particular class shall be determined
by arbitration of a particular sort, either in every case or upon certain steps taken by the parties. 
Where such a provision applies, the arbitral tribunal laid down by the statute has exclusive
jurisdiction over such disputes. 
The matters covered by a statutory provision requiring adjudication in a particular manner cannot be
permitted to be referred to arbitrator even with the consent of parties.  There are a large number of
disputes arising out of statutory relationship.  Such statutes provide for settlement of disputes arising
under them. 
Statutory arbitration is provided in many of the Central as well as State Acts.  Among them are-
 Indian Telegraph Act, 1885;
 The Railways Act, 1890;
 The Land Acquisition Act, 1894;
 The Indian Electricity Act, 1910;
CASE STUDY: AFCONS INFRASTRUCTURE LTD V CHERIAN
VARKEY CONSTRUCTION CO (P) LTD

In Afcons Infrastructure Ltd v Cherian Varkey Construction Co (P) Ltd the Supreme Court
was faced with the question of whether the court, in the absence of an arbitration agreement
between the parties, was competent to refer the parties to arbitration under Section 89 of the
Code of Civil Procedure 1908.After an elaborate discussion on the scheme of alternate
dispute resolution enshrined within the code, the court held that unless both parties consent to
such referral, the courts cannot refer the parties to arbitration under Section 89 of the code.

Facts and issues

Cochin Port Trust contracted out the construction of a number of bridges and roads to M/s
Afcons Infrastructure Ltd, the appellant, under an agreement dated April 20 2001. The
appellant subcontracted part of the work to M/s Cherian Varkey Construction Co (P) Ltd, the
respondent, under an agreement dated August 1 2001. This agreement contained no provision
for referral of disputes to arbitration.
 When disputes arose between the appellant and the respondent, the respondent filed a suit for
recovery of around Rs21 million against the appellant and its assets or the amounts due to the
appellant from the Cochin Port Trust, with interest charged at 18% a year.
On September 15 2004 an order of attachment was made with regard to a sum of Rs22.5
million. Thereafter, in March 2005 the respondent filed an application under Section 89 of the
code before the trial court, requesting that the court formulate the terms of settlement and
refer the matter to arbitration.
The appellant opposed the application, submitting that it was not agreeable to refer the matter
to arbitration or any of the other alternative dispute resolution processes under Section 89 of
the code.
Furthermore, the appellant filed an appeal against the order of attachment. Through an order
dated September 8 2005, the Kerala High Court allowed the appeal and raised the attachment
granted by the trial court, subject to certain conditions. The high court also directed the trial
court to consider and dispose of the application filed by the respondent under Section 89 of
the code.

The trial court heard the application under Section 89 and recorded that the respondent was
agreeable to arbitration, but the appellant was not. However, the trial court allowed the
application and held that as the appellant's claim in the suit related to a work contract, it
was appropriate that the disputes be settled by arbitration.

Held:
The Supreme Court held that if there is no agreement between the parties for reference to
arbitration, the court cannot refer the matter to arbitration under Section 89, and that the
same is clear from the provisions of the Arbitration and Conciliation Act. The court
observed that a court has no power, authority or jurisdiction to refer unwilling parties to
arbitration if there is no arbitration agreement. Although the legal position in India has
consistently been that Section 89 mandates reference to alternative dispute resolution
processes, reference to arbitration under Section 89 can be made only with the consent of
both sides.
THANK YOU