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PPL&E

Unit 3

Introduction

Today’s world has become globalised and commercial with the advent of technology. People can
now contact each other and settle business deals and disputes when they are sitting at the
opposite ends of the world. Most people no longer have the time to go and file papers at the
courts and then wait long periods for a hearing. We are rapidly approaching a stage where
litigation is being replaced with alternative dispute resolution (ADR), due to the inefficiencies
and drawbacks of litigation. India hasn’t quite reached a stage where litigation has been
completely displaced by ADR methods, but the legal system is beginning to see the benefits of
ADR. This article shall be helpful to give you an overview of the ADR methods and how it is
beneficial.

What is alternative dispute resolution? 

Alternative dispute resolution (ADR) refers to a range of dispute settlement methods which help
the parties in the dispute to come to a settlement without going to court, or without litigating on
the said matter. These methods usually involve a third party, who helps them in settling the
disputes. In many cases, ADR methods are used alongside the litigation process as well through
court authorization.

How did the concept of ADR arise?

As stated in the 222nd Report of the Law Commission of India, the Constitution has guaranteed
access to justice for all, primarily through Article 39A, which states that everyone must have an
equal opportunity of getting justice and this must not be denied to any citizen by reason of
economic or other sort of disabilities. 

The report further states that ‘access to justice’ for the common masses in India means access to
the courts of law. But even that has been hindered, due to factors like poverty, illiteracy,
ignorance, and social and political backwardness etc. 

In a developing country like India, many people still live in poverty. When their rights get
violated, they often do not have the money to fight long battles in the Court. They do not have
the money to afford a lawyer. They do not know the legal system and procedures. Therefore,
they often think that the court system is an inconvenience. 

These kinds of inefficiencies are shared reasons among many countries, which is why ADR is
being explored. The courts also have too many pending cases and these cases keep going on for
many years which are a tremendous burden to the courts. 
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These reasons prompted the Indian Government to enact Section 89 of the Code of Civil
Procedure, 1908 and replace the earlier Arbitration Act,1940 with The Arbitration and
Conciliation Act 1996, in accordance with the mandates of the United Nations Commission on
International Trade Law (UNCITRAL).

Pros and cons of ADR

Pros of ADR

 It is less expensive.
 It is less time consuming.
 It is free from the technicalities that are present in the court system. 
 The parties are free to differ in their opinion and can discuss their opinions with each
other, without any fear of disclosure of this fact before the courts. 
 There is no feeling of enmity between the parties as there is no winning and losing
side. They also get their grievances redressed and their relationship remains as it was
before, therefore, they can conduct future business deals with each other.
 ADR is more suitable for multi party disputes, as all the parties can put forward their
opinions at the same place and in one go, rather than going to court again and again.
Also, it provides for a wider perspective of the dispute.
 The parties often have the choice of the ADR method to be used. They sometimes also
have the choice to select the individuals or bodies who will settle the dispute.
 The process is also very flexible, according to what suits the parties.
 The parties also have the option of being confidential. The ADR system also enables
the parties to put focus on practical solutions.
 A wider range of issues are considered and shared future interests of the parties are
protected.
 ADR system also allows for risk management.

Cons of ADR

 ADR is not helpful where a dispute is to be decided on the basis of a precedent.

 When there is a need for court and interim orders, ADR would not be useful.
 ADR is less suitable when there is a need for enforcement.
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 When there is a need for live and expert evidence and analysis in a case, then ADR
would not be useful.
 When there is an imbalance of power, between the parties in the dispute, then ADR
would not work.
 If the case is of a complex nature, then the adjudicating body must look into minor
details and may need expert advice and suggestions. Here, ADR would probably not
work.
History

• Arbitration has a long history in India. In ancient times, people often voluntarily submitted
their disputes to a group of wise men of a community—called the Panchayat—for a
binding resolution

• The first Arbitration law in India was the Arbitration Act 1899 which was based on the
English Arbitration Act 1899.

• Thereafter, the Arbitration Act, 1940 was enacted in India to consolidate and amend the
law relating to arbitration effective from 1 July 1940

• The Arbitration and Conciliation Act was again modified in 1996 with the aim and the
objective to give effect to the UNCITRAL Model Laws as adopted by the United Nations
Commission on International Trade Law on 21 June 1985.

Types of ADR methods

There are various ADR methods, but they differ from country to country. This article shall look
at the main ADR methods used, with special focus on India.
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Arbitration

Arbitration is a powerful means of resolving disputes between the organization and its
employees. It is a process in which an independent third party analyses the bargaining situation,
listens to both parties and collects necessary data and make recommendations which are binding
on the parties concerned.

Arbitration is proved successful in resolving disputes between labour and management. The
parties themselves establish arbitration and decision is acceptable to them. The decision taken by
the arbitrator is accompanied by a written opinion providing reasons supporting the decision.

Arbitration in India is governed by The Arbitration and Conciliation Act, 1996. It is a form of
dispute resolution where one or more parties are appointed to adjudicate the dispute. They act as
third parties. This third party should be neutral and this party is referred to as an ’arbitrator’
while the decision of the arbitrator, which is essentially a determination of merits in the case, is
known as ‘arbitration award’.

Before the arbitration process begins, an arbitration agreement is required to be formed. This
agreement lays down the terms and conditions on which the arbitration process is carried out. It
is determined through this agreement as to how the process will be made cheaper, efficient and
and how the rules of evidence would be applied etc. This agreement should be valid as per The
Indian Contract Act 1972 and the parties must have the capacity to contract under Sections
11 and 12 of the same Act.
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Arbitral decisions are final and binding on the parties, who have limited scope of objecting to the
decisions. Non binding arbitrations also exist wherein the party can request a trial if it is not
satisfied with the arbitrator’s decision. 

Objectives of the Arbitration Act

• To cover both international & domestic arbitration & conciliation
• To make provisions for an arbitral procedure which is fair,
Efficient and capable of meeting the needs of the arbitration
• To permit an arbitral tribunal to use mediation & conciliation to encourage settlement of
disputes
• To provide that a settlement reached by the parties as a result of conciliation proceedings
will have the same status and affect as an arbitral award
• To provide that the arbitral tribunal gives reasons for its arbitral award
• To provide that every arbitral award is enforced in the same manner as if it were a decree
of the court

Principal Characteristics

• Arbitration is consensual
• The parties are free to choose the arbitrator(s)
• Arbitration is neutral
• Arbitration is a confidential procedure
• The decision of the arbitral tribunal is final and easy to enforce

Advantages of Arbitration

• Choice of Decision Maker (Arbitrator)

• Cost Effective & Efficient
• Privacy
• Court intervention is minimum
• Convenience
• Strict rules of CPC and Evidence Act are not required to be followed, the Arbitrator is free
to frame his own procedure to conduct arbitration proceedings
• Finality of Decision

Disadvantages of Arbitration
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• Unenforceability of the interlocutory orders of Arbitrator

• Waiver of the right to access the court

• If there are multiple arbitrators in the arbitration tribunal, delays can happen due to
juggling of their schedules for fixing hearing dates

Scope of Arbitration

Examples of non-arbitrable disputes are:

 Disputes relating to rights and liabilities which give rise to or

 arise out of criminal offences;
 Matrimonial disputes relating to divorce, judicial separation, restitution of conjugal
rights, child custody;
 Guardianship matters;
 Insolvency and winding up matters;
 Testamentary matters (grant of probate, letters of administration and succession
certificate);
 Eviction or tenancy matters governed by special statute
Arbitration Agreement and its Essential Elements
Arbitrator

• The person who is appointed to determine the disputes is called the arbitrator.
Arbitrator(s) can be appointed by any of the following manners:
• By the parties as per agreed procedure
• Each party may appoint one arbitrator and then the third arbitrator is appointed by the two
arbitrators
• Appointment by the court
• Challenge to appointment of an Arbitrator- an appointment of the arbitrator can be
challenged on the grounds of:
• his independence or impartiality; or
• He does not possess the requisite qualifications
The appointment of the arbitrator can be challenged by submitting a written statement
before the arbitration tribunal
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Main Types of arbitral proceedings

Ad Hoc Arbitration

Under ad hoc arbitration , the parties involved in the dispute determine the conduct of the
arbitration proceedings themselves, without going to an arbitral institution. In case if the parties
are not able to settle on one arbitrator, or one of the parties is reluctant to appoint that particular
arbitrator, then Section 11 of The Arbitration and Conciliation Act 1996 will be invoked by the
other party. Under Section 11 of the Act, the arbitrator for that dispute will be appointed by
either the Chief Justice of the Supreme Court or his designate or the Chief Justice of the High
Court or his designate. 

 If it is a domestic arbitration, then the Chief Justice of the High Court or his designate
will appoint the arbitrator.
 If it is international commercial arbitration, then the Chief Justice of India or his
designate will appoint the arbitrator. In ad hoc arbitration, the fee of the arbitrator is
decided mutually by the parties and the arbitrator.

Institutional Arbitration

In this kind of arbitration, the parties decide in the agreement itself, that an arbitration institution
will administer the arbitration. The Indian institutions are International Centre for Alternative
Dispute Resolution and the Indian Council of Arbitration. These institutions formulate the rules
for arbitration owing to their experience in observing arbitral procedures and situations, therefore
they are prepared for all possible situations that may arise in future arbitration cases. 

Domestic arbitration

A mere reading of Section 2(2) can lead us to infer that domestic arbitration is when the parties had
agreed to resolve any disputes that arise in India. The proceedings must be held in the domestic
territory and must be in lieu of the procedural and substantive law in India.

International arbitration

International arbitration occurs outside the domestic territory because of either a clause inserted in
the agreement between the parties or the cause of action that arises from a foreign element relating
to the dispute or to the parties. According to the circumstances that led to a case being filed foreign
or Indian law would be applicable. 
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International commercial arbitration

According to Section 2(1)(f), international commercial arbitration can be understood as

arbitration that takes place because of a dispute arising from a commercial contract where either
one of the parties resides in a foreign country or is a foreign national; or the core management
committee of an association, company or a body of individuals is controlled by foreign
individuals

Conciliation

The process wherein the representative of both employer and employees are brought together in
front of a third party so as to persuade them to arrive at a decision by agreement between them.
Any party can request the other, for appointing the conciliation officer. The conciliation officer
or conciliator can be an individual or a group of people. There will be no conciliation if anyone
of the two parties rejects the offer to conciliate.

The primary duty of the conciliator is to mediate in and advocate settlement of industrial
disputes. Further, he/she is also responsible for holding conciliatory proceedings, investigating
disputes, sending the report of settlement to AG (Appropriate Government).

The primary difference between arbitration and conciliation is that arbitration is the process by
which parties select an independent person, who renders a decision regarding the case.
Conversely, conciliation attempts to make parties come to an agreement, about the problem at
hand. Arbitration and Conciliation are two such methods of resolving industrial disputes out of
the court.

Positives Negatives

The conciliator is usually an expert in

Not legally binding
their disputed field.

More cost-effective than taking a

No resolution guaranteed
dispute to court

Parties may not take the process

Maintains privacy
seriously
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Comparison Chart

BASIS FOR
ARBITRATION CONCILIATION
COMPARISON

Meaning Arbitration is a dispute settlement Conciliation is a method of

process in which a impartial third resolving dispute, wherein an
party is appointed to study the dispute independent person helps the
and hear both the party to arrive at a parties to arrive at negotiated
decision binding on both the parties. settlement.

Enforcement An arbitrator has the power to enforce A conciliator do not have the
his decision. power to enforce his decision.

Prior Agreement Required Not Required

Available for Existing and future disputes. Existing disputes.

Legal proceeding Yes No

Key Differences between Arbitration and Conciliation

The difference between arbitration and conciliation can be drawn clearly on the following
grounds:

1. Arbitration refers to a method of resolving industrial disputes, wherein the management

and the labour present their respective positions to the neutral third party, who takes a
decision and imposes it. Conciliation is a method of resolving the dispute, wherein an
independent person, who meet the parties jointly and severally and helps them to arrive at
negotiated settlement or resolve their differences.
2. The decision made by the arbitrator is acceptable to the parties concerned. On the other
hand, the conciliator does not have the right to enforce his decision.
3. Arbitration requires a prior agreement between parties known as arbitration agreement,
which must be in writing. As against this, the process of conciliation doesn’t require any
prior agreement.
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4. Arbitration is available for the current and future disputes whereas the conciliation can be
adopted for existing disputes only.
5. Arbitration is like a courtroom proceeding, wherein witnesses, evidence, cross-
examination, transcripts and legal counsel are used. On the contrary, Conciliation is an
informal way of resolving disputes between the management and labour.

 Mediation

In mediation, a third neutral party aims to assist two or more disputants in reaching a settlement.
This third party is referred to as the mediator. The mediator needs to properly communicate with
both the parties and use proper negotiation techniques, in order to make one party fully aware of
the other party’s perspective, through empathy and dialogue. This process is controlled by the
parties.

One of the characteristics of this type of dispute resolution is that the mediator is not allowed to
give an outcome of the dispute. The solution is given mutually, and the agreements are generally
non binding. Parties are in significant control of the mediation process and it is strictly
confidential. The parties can even go for litigation if they are not satisfied with the mediation
process. 

It must be observed that the main aim of the mediation process is to build relationships, and not
to make a decision. It is more of an amicable resolution of differences with potential form future
business between the parties.

Positives Negatives

Parties can jointly choose a mediator Not legally binding

Less expensive and faster than An incompetent mediator can hinder a

litigation resolution.

A neutral third party can help parties

More expensive than negotiation
reach a fair agreement.

To be legally binding, court

Allows privacy
enforcement is required.

Demonstrates a willingness to
Can become expensive
negotiate
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 Negotiation 

Negotiation is also a form of dispute resolution, but there is no third party to adjudicate the
matter, therefore the parties work together to find a mutually acceptable solution or a
compromise. The parties may choose to be represented by their attorneys during their
negotiations. Negotiation is not statutorily recognized in India. There are no set rules for
conducting a negotiation. 

Essentials of negotiation-

 It is a process of communication which helps to resolve conflicts.

 It can be entered into voluntarily and its outcome is non-binding. 
 The parties are benefitted here as they have control over the outcome and procedure
and the process is carried out keeping their interests in mind. 
. 

Positives Negatives

Can maintain a good relationship Not legally binding

Inexpensive Can be used as a stalling tactic

Fastest ADR process No guarantee of a resolution

Allows privacy No expert third party opinion

Difference between mediation and conciliation

In mediation, the mediator plays a more active role in the the process by proposing compromise
solutions after hearing all parties while in the case of conciliation, the conciliator has to bring the
parties into such a state of mind as to facilitate the parties to come to an acceptable compromise. 

THE ARBITRATION ACT, 1940 VS. ARBITRATION ACT, 1996

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 The basic difference in 1940 and 1996 Act was that in the former one a party could
commence proceedings in court by moving an application under Section 20 for appointment of
an arbitrator and simultaneously could also move an application for interim relief under the
Schedule read with Section 41(b) of the 1940 Act. The later one does not contain any provision
similar to Section 20 of the 1940 Act but the court can pass orders even before the
commencement of the arbitration proceedings. Another difference was that in the former act,
there was no requirement to give reasons for an award until and unless agreed by the parties to
arbitration. However, in the later Act, the award has to be given with reasons, which minimized
the Court's interpretation on its own. There were changes with respect to the award passed by the
arbitral tribunal in the 1940 and 1996 Act.

 The 1996 Act since its enactment faced many challenges and the Courts brought out what
was actually intended by the Legislation; the Courts clarified the said Act and the intention by
various landmark judgments. In particular, the landmark case of Bharat Aluminum Co., saw at
least three phases before the Hon'ble Supreme Court of India since the year 2001 till now i.e
2016 carrying from two Hon'ble Judges to the Constitution Bench.

 In the first case, the Hon'ble Supreme Court was of the view that Part I is to apply also to
international commercial arbitrations which take place out of India, unless the parties by
agreement, express or implied exclude it or any of its provisions, it was also held that the
Arbitration Act of 1996 was not a well drafted act and had some lacunas.

Lok Adalat

Lok Adalat is one of the significant components of the Alternative Dispute Resolution system.

Lok Adalat means People’s Court. It is a forum where the disputes which are pending in a court

or are at the pre-litigation stage are settled cordially.

The system of Lok Adalat is based on Gandhian Principles. The Constitution of India has defined

a common goal for its citizens to secure all the citizens of India – Justice (social, economic and

political), Liberty, Equality and Fraternity.

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Lok Adalats are organised regularly to help the parties to come to a settlement. In general, motor

accident claims, labour disputes, land acquisition cases, house finance cases, house tax cases,

cases related to the dishonour of cheques, matrimonial disputes are addressed at Lok Adalats.

Need for Lok Adalat

1. Lok Adalat delivers viable, efficient, inexpensive justice to the common person by settling

disputes.

2. The number of courts and judges are inadequate.

3. Increase inflow of cases at the courts.

4. Delay in disposal of cases as high pendency level at courts.

Organisation of Lok Adalat

Due to its increasing popularity over time, it was granted legal status under the Legal Authorities

Act, 1987, which contains provisions governing the organisation and operation of Lok Adalat.

1. The State/District/Supreme Court/High Court/Taluk Legal Service Authority may organise

Lok Adalat at such places and intervals as it thinks fit.

2. Each Lok Adalat organised for an area consists of such a number of serving or retired Judicial

Officers and other people from the area, which can be determined by the organising agency.

3. Generally, a Lok Adalat consists of a Judicial Officer as chairman, a lawyer and a social

worker as a member.

Functioning of Lok Adalat

1. A Lok Adalat shall have jurisdiction in respect of:

o a. Any dispute pending before any court.

o b. Any matter in the pre-litigation stage i.e. which is not yet brought before the court.
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2. A case that is pending before any court can be made over to Lok Adalat if:
o a. Parties agree to settle the matters at Lok Adalat.

o b. Either party makes an application regarding it to the court.

o c. The court is satisfied that the matter can be resolved through Lok Adalat.

Powers of Lok Adalat

1. Lok Adalat will have the same power as that are conferred on a civil court under the Civil

Procedure Code, 1908, regarding summons, production of a document, reception of evidence

and such other matters.

2. In addition, a Lok Adalat has the necessary powers to establish its own dispute resolution

process.

3. Each Lok Adalat is considered a civil court under the Code of Criminal Procedure, 1973.

4. The award of a Lok Adalat is considered an order of a civil court or an order from another

court.

5. Any award given by a Lok Adalat is final and binding on all parties and cannot be appealed

against.

Benefits of Lok Adalat

1. No court fees.

2. Speedy trial of disputes.

3. No strict application of procedural laws.

4. The award given by a Lok Adalat is binding and has the status of a decree of a civil court.

5. The order is capable of execution through the legal process.

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UNCITRAL model LAW

UNCITRAL model is a model that was developed in order to sort out the disputes between the
two parties. These parties can be of national or international nature. It is because of the inherent
nature of the parties that this model law was developed so that a new law is brought into working
transcending the national boundaries. The parties usually don’t accept the respective national
laws because they don’t trust them, which is a natural thing. Thus, the UNCITRAL came as a
bridge to govern the two distinct parties with common law. A beautiful aspect of this law and
why it evolved into so much of acclaim within a short span of time is because of the presence of
the “Party Autonomy” concept in it. This thing gives the parties right to choose everything from
the laws, the arbitrators and thus the desired outcomes; the awards. This paper tries to look into
the aspect of Party Autonomy from the view point of different sections of the UNCITRAL model
and its correlation with the Indian Arbitration and Conciliation Act, 1996.

ARBITRAL AGREEMENT 
An Arbitral agreement is essential point in the law of Arbitration. The particular form of arbitral
agreement is not provided under this Act. but there must be legal, valid and binding agreement
between the parties. This Act specifically provided that arbitration agreement must be in the
form of document and document must be signed by the parties to operate as an arbitration
agreement.

 Meaning of Arbitral agreement-

According to Sec.7(1) of arbitration & conciliation Act 1996 ,
"arbitration agreement” means an agreement by the parties to submit to arbitration all or certain
disputes which have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not. 

 Essential features of an "arbitral agreement"

The essential features of an arbitration agreement, as defined by clause (b) of S.2(1) read with S.
7 , are as follows

1) Valid & binding Agreement -

There should be a valid and binding agreement between the parties.

2) Such agreement may be -

  in the form of an arbitration clause in a contract or in the form of a separate agreement.

3) Written Agreement -
An arbitration agreement shall be in writing.
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4) An arbitration agreement is in writing if it is contained in—

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a
record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is
alleged by one party and not denied by the other.

5) The reference in a contract to a document containing an arbitration clause constitutes an

arbitration agreement if the contract is in writing and the reference is such as to make that
arbitration clause part of the contract 

Who can enter into arbitration agreement ?

Every person who is competent to contract can enter into arbitration agreement. In case of
partnership a partner can enter into on behalf of partnership into arbitration agreement.  The
directors or other officers of the company may enter into an arbitration agreement.
A Karta of Hindu joint family can make a valid reference to the arbitration and where he acts
Bonafide the award binds other members.

A) Minor and lunatics -

Contract by minors and lunatics are void and therefore by themselves they cannot enter into valid
agreement of arbitration. However they can enter into arbitration agreement with their natural or
legal guardian's

B) Agent -
Agent recognized agent of a party can enter into an arbitration agreement on behalf of his
principal.

C)   Manager of Hindu joint family-

A manager of Hindu joint family can refer the final dispute to arbitration. 

APPOINTMENT OF ARBITRATORS

Section 11 of the Arbitration and Conciliation Act, 1996 deals with the appointment of
arbitrators. A person of any nationality may be appointed arbitrator unless the contrary intention
is expressed by the parties. The parties are free to agree on a procedure for appointment of
arbitrator or arbitrators. Where parties fail to appoint three arbitrators, each party shall appoint
one arbitrator and the two arbitrators shall appoint the third arbitrator. Hence, appointing three
arbitrators is mandatory, with the third one being the presiding arbitrator.
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Where a party fails to appoint an arbitrator in accordance with the third arbitrator with the within
thirty days from the date of receipts of a request to do so from the other party or two appointed
arbitrators fail to agree on the third arbitrator within 30 days from the date of their appointment,
the appointment shall be made, upon a request of a party, by the Chief Justice of the High Court
or any person or institution designated by him.

In the absence of any procedure to appoint a sole arbitrator, if the parties fail to agree on the
arbitrator within 30 days from receipt on a request by one party from the other party to so agree,
the appointment shall be made upon request of a party, by the Chief Justice of the High Court or
any person or institution designated by him.

Where under an appointment procedure agreed upon by the parties:

 a party fails to act as required under that procedure; or,

 the parties or two appointed arbitrators fail to reach an agreement as required under that
procedure, or
 a person including an institution fails to perform any function as required under that
procedure, a party may request the Chief Justice of the High Court or any person or
institution designated by him to take the necessary measures in absence of an agreement
for other means of securing the appointment.
The decision of the Chief Justice of the High Court or the person or the institution designated by
him in appointing an arbitrator shall be final.

In such appointment, two considerations are to be made:

 Required qualifications of the arbitrator as provided in the agreement of the parties, and
 Independent and impartial person as an arbitrator.
These are the circumstances under which the Chief Justice of a High Court can make an
appointment.

In case of appointment of a sole or third arbitrator in international commercial arbitration, the

appointing authority is the Chief Justice of India or a person or institution designated by him.

Grounds for challenging the appointment of arbitrator

Section 12 of the Arbitration and Conciliation Act, 1996, states grounds for challenging the
appointment of the arbitrator. The Fifth Schedule of the Act enlists grounds that give rise to
justifiable doubts as to the independence or impartiality of arbitrators. Some grounds for
challenging the appointment include but are not limited to the following doubts:

 If the arbitrator has any past or present relationship or has any kind of interest in the
party; or
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 A close family member of the arbitrator has a significant financial interest in the outcome
of the dispute; or
 He does not possess the qualification agreed by the parties.

Section 12 of Arbitration and Conciliation Act, 1996: 

Grounds for challenge.—

 When a person is approached in connection with his possible appointment as an

arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable
doubts as to his independence or impartiality.
 An arbitrator, from the time of his appointment and throughout the arbitral proceedings,
shall, without delay, disclose to the parties in writing any circumstances referred to in
sub-section (1) unless they have already been informed of them by him.
 An arbitrator may be challenged only if—
o circumstances exist that give rise to justifiable doubts as to his independence or
impartiality, or
o he does not possess the qualifications agreed to by the parties.
 A party may challenge an arbitrator appointed by him, or in whose appointment he has
participated, only for reasons of which he becomes aware after the appointment has been
made.

Termination of mandate of an arbitrator and substitution of arbitrator:

Further, Section 14 of the Act provides that the mandate of an arbitrator shall
terminate and he shall be substituted by another arbitrator, if-

 He becomes de jure or de facto unable to perform his functions or for other reasons fails to act
without undue delay; and
 He withdraws from his office or the parties agree to the termination of his mandate.

Section 15 provides additional circumstances under which the mandate of an

arbitrator shall terminate. These include-

 Where the arbitrator withdraws from office for any reason; or

 By or pursuant to agreement of the parties.

It is further provided that where the mandate of an arbitrator terminates, a substitute

arbitrator shall be appointed. The same rules shall be followed in appointing a
substitute arbitrator which were applicable to the appointment of the arbitrator
being replaced. Where an arbitrator is replaced, any hearing previously held may be
repeated at the discretion of the arbitral tribunal, unless otherwise agreed by the
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parties. However, it is provided that an order or ruling of the arbitral tribunal made
prior to the replacement of an arbitrator shall not be invalid solely because there has
been a change in the composition of the arbitral tribunal, unless otherwise agreed by
the parties.

Jurisdiction of arbitral tribunals

Section 16– Competence of arbitral tribunal to rule on its jurisdiction:

The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with
respect to the existence or validity of the arbitration agreement and for this purpose,

(a) An arbitration clause which forms part of a contract shall be treated as an agreement
independent of the other terms of the contract when it’s validity is challenged before the tribunal.

(b) a decision by the arbitral tribunal that the contract is null and void shall not mean that the
arbitration clause invalid.

If there is a plea that the arbitral tribunal does not have jurisdiction, it cannot be raised after the
submission of the statement of defence. Even an arbitrator may raise such a plea. However, if
there is any delay and if such a delay is justified, the arbitral tribunal may admit a later plea
according to sub section 4 of section 16 of the Act.

A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as
the matter alleged to be beyond the scope of its authority is raised during the arbitral
proceedings. The arbitral tribunal shall decide on a plea referred to above and, where the arbitral
tribunal takes a decision rejecting the plea, it shall continue with the arbitral proceedings and
make an arbitral award. A party aggrieved by such an arbitral award may make an application for
setting aside such an arbitral award in accordance with section 34 of the Act which deals with
‘Application for setting aside arbitral award’.

Section 17– Interim measures ordered by arbitral tribunal:

A party may, during the arbitral proceedings or at any time after the making of the arbitral award
but before it is enforced apply to the arbitral tribunal for the appointment of a guardian for a
minor or person of unsound mind for the purposes of arbitral proceedings or as an interim
measure of protection in any of the following matters;

(a) The preservation, interim custody or sale of any goods which are the subject-matter of the
arbitration agreement;
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(b) Securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-matter
of the dispute in arbitration, or as to which any question may arise therein and authorizing for
any of the aforesaid purposes any person to enter upon any land or building in the possession of
any party, or authorizing any samples to be taken, or any observation to be made, or experiment
to be tried, which may be necessary or expedient for the purpose of obtaining full information or
evidence;

(d) Interim injunction or the appointment of a receiver;

(e) Such other interim measure of protection as may appear to the arbitral tribunal to be just and
convenient.

The arbitral tribunal shall have the same power for making orders, as the court has for the
purpose of, and in relation to, any proceedings before it.

Procedure of Arbitral Proceedings

Section 19 of the Act recognizes the right of the parties to agree on the procedural rules which
are applicable in conducting the arbitral proceedings. This provision establishes the procedural
autonomy of the parties. 

When the parties fail to agree on a procedure or frame the procedure, it grants the arbitral
tribunal a wide range of discretionary powers to frame the arbitral proceedings. The Act does not
prescribe any default rules regulating the arbitral proceedings. 

This provision also provides that the application of the Code of Civil Procedure, 1908 or
the Evidence Act, 1872 to the arbitral proceeding is also at the discretion of the parties.

Place of Arbitration    

Section 20 of the Act provides that the parties are free to agree on the place of arbitration and if
they fail to agree then the arbitral tribunal has to determine the place of arbitration in a judicial
manner, considering the circumstances of the case and convenience of the parties. 

Also, the place of arbitration is of paramount importance because the laws of the place of
arbitration play a fundamental role in the arbitral proceeding. It determines the substantive laws
for the time being in force in India. 
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Language to be used in Arbitral Proceedings 

Section 22  of the Act deals with the language which has to be used in arbitral proceedings. The
parties to the arbitration agreement are free to choose the language or languages which have to
be used in the arbitral proceedings. In cases where the parties fail to arrive at such an agreement
then it is the role of the arbitral tribunal to determine the language or languages to be used in the
arbitral proceedings. The language shall also apply to any written statement by a party, any
hearing and any arbitral award, decision or other communication by the arbitral tribunal.   

When the arbitral tribunal agrees on the language to be used in arbitral proceedings, it may order
that any documentary evidence shall be accompanied by a translation into the language
agreed. The arbitral tribunal must ensure that all the parties are able to follow and understand the
proceedings. 

Statement of Claim and Defence  

Section 23 of the Act provides for pleadings of the parties before the arbitral tribunal. After the
arbitral tribunal has been established, the usual practice is to exchange and file their pleadings
before the tribunal.

The claimant states the facts and other relevant matters, while the respondent opposes the facts
and the averments made in the claim statement and contests the relief claimed by the claimant.
The contents of pleading may vary from case to case depending upon the facts and circumstances
of each case. 

Within six months of the appointment of the arbitral tribunal, the statement of claim and defence
has to be completed under this section.  

Hearing and written proceedings

Section 24 of the Act discusses the manner in which arbitral proceedings are to be conducted. In
the absence of any prior agreement between the parties relating to this matter, the arbitral
tribunal has the power to decide whether the proceedings shall be held orally or on the basis of
documents and other materials.   

Default of Party

Section 25 of the Act deals with three situations where the parties are at default. 
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Firstly, the arbitral tribunal terminates the proceedings when the claimant without showing
sufficient cause, fails to communicate his statement of claim in accordance with Section 23(1).
Secondly, the arbitral tribunal continues the proceeding when the respondent fails to
communicate his statement of defence in accordance with Section 23(1).

Thirdly, if there is sufficient cause then the termination is recalled and proceeding gets
restored.      

Appointment of Experts

Section 26 of the Act gives the arbitral tribunal power to appoint one or more experts based on
the requirement or request of the parties. It requires the parties to provide relevant information to
the experts.

Also, the arbitral tribunal cannot appoint experts and delegate the duty of determination of the
dispute. 

Court Assistance

Section 27 of the Act provides the arbitral tribunal with the power to apply for the court
assistance in taking evidence. Persons can also be held guilty and tried before the court, if they
refuse to give evidence or do not cooperate.  

Termination 

The arbitral proceedings are terminated either by the final arbitral award or by an order of the
arbitral tribunal terminating the arbitral proceedings. 

The arbitral tribunal terminates the arbitral proceedings in any of these cases where:

1. the claimant withdraws the claim and respondent does not object to it,
2. both parties are in consensus and agree to terminate the arbitral proceedings, or
3. The continuation of the arbitral proceedings has become impossible or irrelevant
considering the present facts of the case.
Also, the termination of the arbitral proceedings terminates the mandate of the arbitral tribunal
and the arbitral tribunal becomes functus officio. The term “functus officio” means no longer
holding office or having official authority once a decision is rendered.
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Dispute Resolution Board

An independent panel of impartial professionals providing guidance to resolve project issues and
mitigate their impact during an active construction project.
An agreement between the owner and the party constructing the project creates the board and
describes its role and responsibilities. A separate agreement between the owner, contractor and board
members outlines the terms of the board's retention.
The members of the board are usually selected by one of two methods:
 Mutual selection of all board members by the contracting parties.
 Each party selects one board member and those board members select the third member.
Ideally the board is retained at or before the start of the construction and remains involved for the
entire project duration. It customarily meets with the project participants on a regular basis to discuss
project status and concerns.
The board provides guidance but does not act as a decision maker unless the parties' contract outlines
a procedure for the board to formally hear and resolve disputes.

What is the purpose of a Dispute Review Board?

The primary function of Dispute Review Boards is to assist the parties to a construction contract
avoid disputes by:

 facilitating and improving communication; and

 encouraging the resolution of contentious issues by the parties at the job level before they
become disputes; or
 if the issue cannot be resolved at job level, to assist the contracting parties to resolve disputes
quickly and cost effectively without the need for arbitration or litigation.

In the first instance, Dispute Review Boards can informally assist the parties (if they so require) to
resolve any disagreements which arise during the course of the contract works. The members can
make recommendations or decisions regarding issues and disputes referred to them by any of the
contracting parties.The primary advantage of a standing Dispute Review Board (as opposed to an ad
hoc appointment of an adjudicator or arbitrator) is that, whenever a dispute arises, the members of
the Dispute Review Board will have a high degree of knowledge of, and familiarity with:

the project;

 its contractual context and

 its progress,which enables the Dispute Review Board to assist the parties informally by
providing recommendations, or if required, to render a decision within a relatively short
period of time.
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Resort to arbitral or judicial proceedings

Resort to arbitral or judicial proceedings.— The parties shall not initiate, during the
conciliation proceedings, any arbitral or judicial proceedings in respect of a dispute that is
the subject-matter of the conciliation proceedings except that a party may initiate arbitral
or judicial proceedings where, in his opinion, such proceedings are necessary for preserving
his rights.