This Article is written by Agastya Kaushik, a First-year law student of ILS Law College

Introduction:

Everyone be it individuals or organizations desires quick and affordable justice and Alternate Dispute Resolution just does that. It saves valuable time and money for the parties to the dispute and thus in recent years India has witnessed a significant shift towards an alternative Dispute Resolution (ADR) mechanism. Traditional litigation becomes expensive, and time-consuming, and increases the burden on the judiciary, ADR has emerged as an efficient and cost-effective means of resolving disputes through its various mechanisms like arbitration, conciliation mediation, etc. It is a method in which parties try to resolve their dispute privately with the help of an expert third person and this decision is binding on both the parties like the verdict of the court. The proceedings are flexible and creative and provide satisfying solutions. The globalization and liberalization of the Indian economy Highlighted the need for a robust legislative framework capable of effectively facilitating both domestic and international arbitration and conciliation. Additionally, the Law Commission of India, along with various trade and industry representative bodies and experts, have demanded for amendments to existing laws to align them with contemporary needs. Consequently, the Indian Parliament enacted the Arbitration and Conciliation Act of 1996[1], modeled after the UNCITRAL framework for International Commercial Arbitration[2] Established in 1985. This legislation has become the backbone of the arbitration and conciliation processes in India. Both governmental and judicial authorities have acknowledged the significance of Alternative Dispute Resolution (ADR) in alleviating the judicial burden, ensuring efficient dispute resolution, and fostering a more conducive business environment.

The Arbitration and Conciliation Act of 1996: Essential Features:

The Arbitration and Conciliation Act of 1996 was established to create a standardized legal framework for arbitration. This legislation comprises four parts and three schedules. Part 1 deals with arbitration in India and awards granted are treated as domestic awards. Part II deals with the enforcement of foreign awards, part III with conciliation, and part IV (Sec 82-86) with supplementary provisions.

• Key Provisions of Part I Domestic Arbitration

Section 7: An arbitration agreement must be in writing and the form of an arbitration clause or a separate agreement. This ensures both clarity and mutual consent between the parties.[3]

Section 8: If a matter falls under an arbitration agreement, courts are required to refer the dispute to arbitration, strengthening the enforceability of existing arbitration clauses in the agreement.3

Section 9: Parties also have the option to seek interim measures from the court before or during the arbitration process, thus enhancing the security of the involved parties.3

Section 11: In instances where the parties cannot reach a common ground on the selection of an arbitrator, they may approach the Supreme Court or High Court for the appointment of an arbitrator.[4]

Section 34: A party may petition with the courts to annul an arbitral award, but this is permissible only on specific grounds such as fraud, infringement of public policy, or the incapacity of a party. This provision ensures judicial oversight to safeguard against instances of unjust or biased awards.[5]

Section 37: The Act provides that if a person is not satisfied with the order of the tribunal they can appeal to the court, allowing parties another chance in case of unfairness or bias in the award however, there is no provision for a second appeal.[6]

• Key Provisions of Part II: Enforcement of Foreign Arbitral Awards

Section (44-57): These provisions deal with the recognition and enforcement of foreign arbitral awards under the New York Convention and the Geneva Convention. This ensures that India aligns with the global framework for arbitration, enhancing its credibility as an arbitration hub. Under Section 44 foreign awards are governed by the New York Convention while Section 53 covers foreign awards under the Geneva Convention. Sec 48 covers the criteria for enforcing these awards in India for the New York Convention and Section 57 for the Geneva Convention.[7]

• Key Provisions of Part III: Conciliation

It is a process in which an authorized third party called a Conciliator helps to resolve the Dispute by mutual agreement. He does it by giving his opinion regarding the dispute to help parties settle. The Act encourages conciliation however, it does not have a provision for an enforceable award unless the party’s consent to transform the settlement into an arbitral award. Sections 61-81 provide the structure for conciliation proceedings, the selection of conciliators, the management of the process, and the maintenance of confidentiality.[8]

Drawbacks of the Arbitration and Conciliation Act, 1996

Developed by the Arbitration and Conciliation Act of 1996, alternative dispute resolution (ADR) has evolved significantly in India, yet it has repeatedly faced considerable criticism. Some notable drawbacks and critiques include:

Extended Duration of Arbitral Proceedings: Although it is intended to save time, arbitration often proves to be the opposite in India. This situation is guided by factors featuring poor professional arbitrators, flawed infrastructure, and regular adjournments.

Rising expenses: Although arbitration was created to provide a less expensive option to litigation, in many instances it has developed into something similarly costly, especially in commercial disputes that are high-risk. Individuals playing a role in arbitration may confront significant financial expenses, including arbitration fees, administrative charges, and the engagement of legal experts.

Lack of Adequate Infrastructure: Even with the Arbitration and Conciliation Act of 1996 in place, it is apparent that the needed support for effective arbitration is missing. Often, the locations for arbitration hearings are quickly assembled facilities that do not possess the required infrastructure to carry out a structured process.

Limited Options for Conciliation: Even though the Act has provisions for mediation, it is less used than arbitration. The mix in the enforcement of conciliated agreements and the drop in motivation for participants to take part in conciliation have diminished its effect.

Reforms and The Way Ahead

The Indian government has implemented several reforms over the years in recognition of the shortcomings in the Arbitration and Conciliation Act of 1996. They are intended to improve arbitration making it more reliable and an efficient substitute for traditional litigation. Some important reform areas are as follows:

Amendments to Minimize Judicial Interference: The purpose of the 2015 and 2019 amendments was to limit the role of judges in arbitration proceedings. Strict deadlines for courts to handle challenges to arbitral awards have been set and the meaning of public policy under Section 34 has been clarified. Arbitration effectiveness might be greatly increased by further improving the judicial review procedures.

Promotion of Institutional Arbitration: Established by the Arbitration and Conciliation (Amendment) Act of 2019[9], the Arbitration Council of India (ACI) deals with evaluating arbitral institutions and recognizing arbitrators. The advancement of institutional arbitration, as opposed to ad hoc methods, enhances the potential for increased consistency and efficiency in dispute resolution.

Cost Reduction Strategies: To reduce the substantial expenses associated with arbitration, particularly in cases that are initiated on an as-needed basis, it is imperative to implement improved regulations governing arbitrator fees.

Emphasis on Training and Professional Standards: Possessing the necessary qualifications and experience substantially enhances the contribution of arbitration professionals to the enhancement of arbitration quality in India. A way to improve arbitrator practice standards strategically is to generate consistent training and certification programs.

Advocating for Conciliation and Mediation: The value of mediation and conciliation as an alternative to litigation and arbitration makes it important for the government to support these initiatives. Incentives such as tax breaks should be imparted to those who partake in conciliation or mediation voluntarily.

Other legislative Reforms: The goal of the Commercial Courts Act of 2015[10] Was to speed up the resolution of commercial disputes. The attempt to relieve traditional courts from stress while also enhancing the proficiency of commercial case handling is how it connects to improving arbitration and dispute resolution in India. Similarly, Legal Services Authorities Act of 1987[11] Is to supply free legal services to those who are economically challenged. Both arbitration and mediation are enhanced by improving access to justice and facilitating the pursuit of legal solutions through different alternative dispute resolution methods by participants from varied economic backgrounds.

Conclusion:

In India, the development of alternative dispute resolution (ADR), particularly in arbitration and conciliation, has been significantly supported by the Arbitration and Conciliation Act of 1996. This legislation has aligned India with international standards by establishing the same robust framework for ADR. However, it is not without its limitations. Criticisms regarding the protracted nature of arbitration, elevated costs, and occasional judicial involvement are some to name a few. In response to these challenges, the Indian government has recently implemented reforms that reflect a dedication to overcoming these obstacles. Given the continuous reforms, judicial backing, and proactive participation from all stakeholders, ADR is expected to emerge as the most favoured and widely adopted method for resolving conflicts, particularly in the realm of commercial and corporate disputes.

References:-

[1] Arbitration and Conciliation Act of 1996 (India)

[2] UNCITRAL Model Law on International Commercial Arbitration 1985

[3] Commercial Courts Act 2015 (India).

[4] Legal Services Authorities Act 1987 (India).

[5] No author, 'Arbitration and ADR' (2024) Manupatra http://student.manupatra.com/Academic/Abk/Arbitration-and-ADR/CHAPTER-1.htm accessed on 11 September 2024.

[6] PIB Delhi, 'Use of Alternate Dispute Resolution Mechanisms' (2024) Press Information Bureau https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2040661 accessed on 11 September 2024.

[7] PIB Delhi, 'Government of India at forefront to promote Alternative Dispute Resolution' (2024) (Press Information Bureau) https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2003844#:~:text=The%20enabling%20legal%20framework%20for,including%20settlement%20through%20Lok%20Adalat accessed on 11 September 2024.

[1] Arbitration and Conciliation Act of 1996 (India)

[2] UNCITRAL Model Law on International Commercial Arbitration 1985.

[3] Arbitration and Conciliation Act 1996, ss 7-9

[4] Arbitration and Conciliation Act 1996, s 11

[5] Arbitration and Conciliation Act 1996, s 34

[6] Arbitration and Conciliation Act 1996, s 37

[7] Arbitration and Conciliation Act 1996, ss 44-57

[8] Arbitration and Conciliation Act 1996, pt III.

[9] Arbitration and Conciliation (Amendment) Act 2019.

[10] Commercial Courts Act 2015 (India)

[11] Legal Services Authorities Act 1987 (India)