Can Arbitration provide justice?

Project Report

Submitted to:

Dr. Parvesh Kumar Rajput

Faculty, Alternative Dispute Resolution

Submitted by:

Ashutosh Mandavi
Sem-VI

Sec-A

Roll no. 33

Date of Submission
06 March, 2018

Hidayatullah National Law University

Uparwara, Naya Raipur, Chhattisgarh
 i

Declaration
I, hereby declare that the project work entitled “Can Arbitration provide Justice”submitted
to HNLU, Raipur , is record of an original work done by me under the able guidance
of Dr. Parvesh Kumar Rajput , Faculty, Alternative Dispute Resolution , HNLU , Raipur.

Date: 06-03-2018 Ashutosh Mandavi

Place: Raipur Sem VI
Sec– A
Roll no. -33
 ii

Acknowledgements
I feel highly elated to work on the topic-“Can Arbitration provide Justice ?”

Thanks to the Almighty who gave me the strength to accomplish this project work
with sheer hard work and honesty. This research venture has been made possible
due to the generous co-operation of various people. To list them all is not possible ,
even to repay them in words is beyond my lexicon.

This practical realisation wouldn’t have been possible without the help of my teacher
Dr. Parvesh Kumar Rajput, the faculty of Alternative Dispute Resolution at HNLU. His
consistent supervision , constant inspiration and invaluable guidance have been of
immense help in understanding and carrying out the nuances of the project report.

I would like to thank my family and friends without whose support and
encouragement, this project wouldn’t have been a reality.

I also take this opportunity to thank the University and the Vice-Chancellor for
providing extensive databases resources in the library and IT lab and also the
concerned staff fraternity who were extremely helpful.

Some printing errors might have crept in, which are deeply regretted. I would be
grateful to receive comments and suggestions to further improve this project venture.

Ashutosh Mandavi
Sem – VI A
Roll no.33
 iii

Table of Contents
1. Declaration................................................................................i
2. Acknowledgements..................................................................ii

3. Introduction..............................................................................1
4. Aims and Objectives…………………………………………..2
5. Research Questions..................................................................2
6. Review of Literature.................................................................2
7. Scope and Methodology……………………………………....3
8. Mediation as a means of ADR………………………………..4
9. Legal Recognition of Mediation in India…………………….10
10. Mediation agreement and its status…………………………..15
11. Conclusion ……………….…………………………………..21
12. Bibliography………………………………………………….22

Page 1
 Introduction
The legitimacy and integrity of any system that adjudicates the rights and duties of persons would be
evaluated by reference to the standards of justice provided by it. Arbitration is becoming more
popular as a system of dispute resolution because of the exponential increase of cross-border
transactions that are a feature of globalization. Also, Arbitration has become a popular alternative to
litigation, the observance of the principles of natural justice in arbitration proceedings is an
indispensable requirement in order to preserve its legitimacy. 1

India has a proud tradition of dispute resolution based on consensus and conciliation. This
had its impact on the efficacy of the system in the maintenance of law and order in the
society. Delay in justice delivery was rampant. Inefficiency was abundantly evident. The
result was docket–explosion that continues to haunt us even today. The Indian legal system is
being criticized quite frequently because there is delay in delivering justice. Some Studies
into the reasons for this delay have indeed been done and the need for developing ADR
mechanisms was emphasized to cope up with this delay and arrears in courts.2

India despite the need could not experiment with any alternative system while other
democracies like the U.S were constrained to try several modes like plea bargaining,
arbitration etc .The need to cope with the increased volume of litigation later made India also
to experiment with ADR. The Arbitration and Conciliation Act, 1996 was enforced with all
earnestness. The Arbitration and Conciliation Act 1996 possessed the essential features of
arbitration.
Thus , the question that “can Arbitration provide justice ?” is debatable because Arbitration
has its own advantages and disadvantages. The arbitration and Conciliation Act 1996 made a
significant contribution to Arbitartion as an Alternative Dispute Resolution means and it has
remained so. However, there remain a few loopholes in the legislation; that on occasions
form a distinct part of conflict in the course of Alternative Dispute Resolution.

1
Securing Natural Justice In Arbitration Proceedings –By Austin Ignatius Pulle

2
See for example (1) 77thReport of the Law Commission on Delay's and Arrears in Trial Courts (1978); (2)
79thReport of the Law Commission on Delay and Arrears in High Courts and other Appellate Courts (1979); (3)
124thReport of the Law Commission on The High Court Arrears-A fresh Look (1988) etc.
 Aims and Objectives
 To study about Arbitration as a means of ADR.
 To analyze the pros and cons of Arbitration
 To study the amendments made in 2015

Research Questions
 How Arbitration as a means of ADR important?
 What are the pros and cons of Arbitration ?
 What is the significance of the amendment made in 2015?

Review of Literature

 Arbitration and Conciliation Act (with ADR) (Seventh Edition, 2015) by Dr. S.C.
Tripathi explain the importance of ADR. No doubt system of judiciary or
adjudication needs drastic improvement and policy makers are compelled to innovate
alternate mechanism. While considering the legal aspect the parliament in
Indiaintroduced the Legal Service Authority Act And Arbitration and Conciliation
Act. Theneed of Alternative means because amicable settlement of disputes, speedy
justice, economic settlement, time saving management, legalrecognition.
Thematrimonial issues are directlyeffect on individual and life. hencethe need of
speedy justice is very important. Every individual have not only right to justice But
also right to speedy justce.
 Scope and Methodology
The scope of this project report is limited to the concept of Arbitration and its effectiveness.
It deals with the recognition and importance of Arbitration as a means of alternative dispute
resolution.

Nature of Project Report

This project report is descriptive and analytical in nature. It deals with the concept of
Arbitration and its effectiveness. It deals with the recognition and importance of Arbitration
as a means of alternative dispute resolution.

Sources of Data
The source of collection of data is secondary data. This secondary information has been
obtained from published sources such as articles and reports as guided by the faculty of
Alternative Dispute Resolution were primarily helpful and of utmost importance in the
successful completion of the project.
 Page 4

Arbitration as a means of ADR

Arbitration in simple layman terms is a consensual procedure wherein two parties in agreement
bring or submit their grievance or dispute before a neutral arbitrator (third party person) or three
arbitrators to make a decision on the dispute that is binding on both parties. 3 It is pertinent to note
that when the matter of the third party arbitrator arises, the two arbitrators, one each from both the
parties, chooses a neutral arbitrator to help bring a binding decision on the parties to the dispute.
Per se, this manner of sorting an issue without resorting to judicial proceedings is called Arbitration.

Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution
of disputes outside the courts, where the parties to a dispute refer it to one or more persons –
arbitrators, by whose decision they agree to be bound. It is a resolutiontechnique in which a
third party reviews the evidence in the case and imposes a decision that is legally binding for
both sides and enforceable. There are limited rights of review and appeal of Arbitration
awards. Arbitration is not the same as judicial proceedings and Mediation. Arbitration can be
either voluntary or mandatory. Of course, mandatory Arbitration can only come from s
statute or from a contract that is voluntarily entered into, where the parties agree to hold all
existing or future disputes to arbitration, without necessarily knowing, specifically, what
disputes will ever occur.

Importance of Arbitration

Arbitration in this day and age is a much better alternative than a court/judicial proceeding.
Though arbitration may be a costly affair due to expensive arbitrator fees, it’s a generally
much more favored medium of conciliation.  Arbitration helps ease the burden on courts
while providing gratifying relief to the disputants to the arbitration.

Arbitration is helpful in the following cases:

3
http://www.wipo.int/amc/en/arbitration/what-is-arb.html
  It is a consensual process as it requires the specific permission to both parties of the
dispute.
 It is a confidential yet neutral procedure as it is protects the identity of the disputants,
existence of the arbitration, disclosures made during the process and the award of the
arbitration. Arbitration does not sympathize with any of the party involved; it is the
product of mutual understanding of both the parties.
 Unlike in a court proceeding, the disputants in an arbitration process have the liberty
to choose their arbitrator.
 The award to the dispute given by an arbitral tribunal is enforceable and final. These
awards can be set aside or can be challenged only in exceptional situations.

Types of arbitration in India

There are two types of arbitration in India: Ad-hoc arbitration and Institutional arbitration.

1. Ad-hoc arbitration

Ad-hoc Arbitration can be defined as a procedure of arbitration where a tribunal will conduct
arbitration between the parties, following the rules which have been agreed by the parties
beforehand or by following the rules which have been laid down by the tribunal, in case the
parties do not have any agreement between them.

2. Institutional arbitration

Institutional arbitration refers to the administration of arbitration by an institution in

accordance with its rules of procedure. The institution provides appointment of arbitrators,
case management services including oversight of the arbitral process, venues for holding
hearings, etc.
 Page 10

Arbitration:Two Sides Of The Same Coin

The Alternative Dispute Resolution (ADR) mechanisms slowly but gradually evolved to provide
justice to the persons in legal disputes. It is a process voluntary in nature and has gained legal
recognition in the contemporary world over a period of time. In India, Arbitration is an ancient
concept, finding its roots in ancient India. Panchayats are an example of such out of court dispute
resolution.4The practice is still prevalent in villages even today where senior villagers sits and
resolve disputes of fellow villagers.

As said above originally, in ancient India, ADR as we know today was the way disputes were
generally settled. The whole village by way of Gram Panchayat used to solve the problems of the
villagers by sitting together and mediating the problems faced by the two parties. 5 Since the
advent of the modern legal system, this method of dispute settlement has largely been set aside.
Today, this age old method of dispute settlement has become corporate savvy and exclusive to
big concerns.6 It is also important that if ADR has to reach the common man and not just remain
a corporate toy then it be allowed to spread out its wings and fly. Fed up with the regular
litigation in courts, business persons very smartly resorted to arbitration, as a large number of
companies in the world do, only to discover shockingly that on most of the occasions it is even
worse than litigation.7 So, as said earlier that arbitration has its own advantages and disadvantages
and same is dicussed in brief below .

The advantages of Arbitration can be summarized as follows: -

a) It is often faster than litigation in Court.
b)It can be cheaper and more flexible for businesses.
c)Arbitral proceedings and an arbitral award are generally non-public, and can be made
confidential.

“The
Report of the Expert Committee on Legal Aid: Processual Justice to the People”,
4

Government of India, Ministry of Law, Justice and Company Affairs, 1973 Report
5
K Ravi Kumar, ―Alternative Dispute Resolution in Construction Industry”, International Council
of Consultants (ICC) papers, available at www.iccindia.org, at p. 2
6
―Report on National Juridicare Equal Justice – Social Justice”, Ministry of Law, Justice and
Company Affairs, 1977 Report
7
Hernando de Soto, The Other Path, 1st ed., Harper & Row (1989)
d)In arbitral proceedings the language of arbitration may be chosen, whereas in judicial
proceedings the official language of the competent Court will be automatically applied.
e) There are very limited avenues for appeal of an arbitral award.
F) When the subject matter of the dispute is highly technical, arbitrators with an appropriate
degree of expertise can be appointed as one cannot choose judge in litigation.

However, there are some disadvantages of the Arbitration, which may be summarized as
follows: -

a)Arbitrator may be subject to pressures from the powerful parties.

b)If the Arbitration is mandatory and binding, the parties waive their rights to access the
Courts.
c)In some arbitration agreements, the parties are required to pay for the arbitrators, which add
an additional cost, especially in small consumer disputes.
d)There are very limited avenues for appeal, which means that an erroneous decision cannot
be easily overturned.
e)Although usually thought to be speedier, when thereare multiple arbitrators on the penal,
juggling their schedules for hearing dates in long cases can lead to delays.
f)Arbitration awards themselves are not directly enforceable. A party seeking to enforce
arbitration award must resort to judicial remedies.
So, above was the general discussion on the advantages and disadvantages of arbitration but
in the coming section we would dicusse the positives and negatives of both Ad-hoc and
institutional Arbitration per se:-

Positives of Ad-Hoc Arbitration

 Greater control over the arbitration process

 The flexibility to decide the procedure
 Cost-effectiveness, where the administration charges levied by an arbitral institution
constitute a significant portion of the overall costs

Negatives of Ad-Hoc Arbitration

 Tend to be protracted and costly in some cases in the absence of monitoring

 Only effective when both parties are ready to cooperate with each other
Positives of Institutional Arbitration

 A clear set of arbitration rules

 Timeline for the conduct of an arbitration
 Support from trained staff
 A panel of arbitrators to choose from
 Supervision in the form of scrutiny of awards
 If the parties are not sophisticated and do not have sufficient knowledge regarding
arbitral proceedings, institutional arbitration is preferable
 Resolve disputes efficiently and follow guidelines when conducting arbitrations

Negatives of Institutional Arbitration

 Lack of credible arbitral institutions

 Misconceptions relating to institutional arbitration related to costs
 Lack of governmental support for institutional arbitration
 Lack of legislative support for institutional arbitration
 Judicial attitudes towards arbitration in general.
 The rules and practices followed are often outdated and inadequate
 Fails to upgrade their administrative and working style as only provide hearing venues
with basic facilities and lack more advanced facilities such as multi-screen video
conferencing, sound-proof caucus rooms, audio/video recording, court recorders, etc.
 Inflexible as it takes away the exclusive autonomy of the parties over arbitration
proceedings
 Delays in Indian courts and excessive judicial involvement in arbitral proceedings
contributed to discouraging foreign parties to arbitrate in India.
 Parties often delay arbitration proceedings by initiating court proceedings before or
during arbitral proceedings, or at the enforcement stage of the arbitral award.
Amendment of Indian Arbitration Act: A Sigh of Relief
for the Indian Arbitration

The 2015 amendments tried to ensure quick enforcement of contracts, easy recovery of
monetary claims, reduce the pendency of cases in courts and hasten the process of dispute
resolution through arbitration, so as to encourage foreign investment by projecting India as an
investor friendly country having a sound legal framework and ease of doing business in India.

Considering the fact that finally amendments have been effected in the 1996 Act, after a lapse
of 19 years in 2015, it is time to celebrate. It is a sigh a relief to everyone associated with
arbitration in India. We will see some of the major changes brought about by the amendment,
which will promote the use of arbitration in India.

 Now the arbitration agreement contained in form of communication through

electronic means shall also be treated as an arbitration agreement in writing.
 Appointment of arbitrators shall be made by the Supreme Court or High Courts, as the
case may be instead of the Chief Justice of India or Chief Justice of High Court.
 In case of international arbitration, the relevant court would only be the High Court
having original ordinary jurisdiction
 To ensure neutrality of arbitrators, when a person is approached in connection with
possible appointment as arbitrator, he is required to disclose in writing, the existence
of any relationship or interest of any kind.
 Now the arbitration tribunal shall have power to grant all kinds of interim measures
which the court is empowered to grant.
 The amendment introduces a provision that requires an arbitration tribunal to make its
award within 12 months. This may be extended by a 6 months period.
 The amendment further permits parties to choose to conduct arbitration proceedings
in a fast track manner. The award would be granted within 6 months.
 In recent times, arbitration has emerged as a preferred option to settle commercial
disputes in India.
 The amendment act has brought clarity on many aspects, which were previously part
of judicial interpretation.
 With judiciary already overloaded with high pendency of cases, the amendment shall
help emerge arbitration as an effective alternative mechanism.
 Changes will also make arbitration user friendly and cost effective.
 Overall it will help conclude the arbitration process expediently and in transparent
manner.
 Each amendment made to the act will make arbitration more “user friendly” in
addition to reduction of cost. By providing speedy resolution of the disputes, the act
 will improve the “ease of doing business” in India and promote ‘Make in India’
campaign.

Indian Arbitration Act: Need to adhere to “Finality is good

but Justice is better”
The Indian Arbitration Act now contains a provision which provides that an award should be
rendered by an arbitration tribunal within 12 months from the date the dispute is referred to
arbitration.

One of the most criticised aspects of Indian arbitration is the slow pace with which arbitration
proceedings are conducted.  The recent amendments to the Indian Arbitration Act 1996 seeks
to address this problem of delay. This is a very positive and encouraging development for
promoting India as one of the leading centre for International Arbitrations.

The Indian Arbitration Act now contains a provision which provides that an award should be
rendered by an arbitration tribunal within 12 months from the date the dispute is referred to
arbitration. It provides that in the event, the arbitrator fails to makae an award within 12
months or 18 months (in cases where the parties have agreed a 6 months extension) the
mandate of the arbitrator terminates automatically unless the Courts grants an extension on
such terms and conditions, as it deems fit.

“Justice delayed is Justice denied” is a well-recognised principle and the legislators seem to
have embodied it in making this amendment. In the present context, the principle of “Finality
is good but Justice is better” has equal significance. There are likely to be occasions, such as
in cases involving complex factual matrix, where an arbitration tribunal will need
substantially more time, than provided by the Act, to carefully consider and render an award.

The principle “Finality is good but Justice is better” is commonly applied by the English
Courts, in the context of English arbitrations, to determine when and to what extent the
Courts should intervene in an arbitration proceeding.

Indian Oil Corporation v Coastal (Bermuda) Ltd [1990] 2 Lloyd's Rep. 407 is a well-known
cases in which my firm had acted and this principle was recognised and applied by the
English Court. In that case, Indian Oil Corporation had made an application to the Court
alleging that the arbitrators had misconducted themselves and therefore it requested the Court
to remit the award back to the Tribunal for further adjudication. The Judge, Mr. Justice
Evans, exercised his powers and remitted the award back to the Tribunal for further
adjudication as he considered it was necessary to do Justice between the parties.

Recently, Mr. Justice Flaux of the English Commercial held in the case of BV Scheepswerf
Damen Gorinchen v The Marine Institute [2015] EWHC 1810 (Comm) that delay in
rendering an award could amount to a breach of the arbitrator’s duty, under S.33 of English
Arbitrator Act, to avoid unnecessary delay. Hence, if a party could prove that the delay has
caused it substantial injustice then a challenge to an award may well succeed on the grounds
of serious irregularity.

The ICC International Court of Arbitration has also recently set-out a policy according to
which it can penalise arbitrators if they are unjustifiably late in rendering their awards.

The Indian Arbitration Act gives the Indian Courts a wide discretion in the event the
arbitrator are unable to conclude the arbitration proceedings within the statutory time-limits
set-out in the Act. Even though each case would stand or fall on its own facts, the application
of the principle “Finality is good but Justice is better” is likely to be central to any decision to
be made by the Indian Courts while exercising their powers under the Act. An approach
requiring strict adherence to the time limits set-out in the Act would be a wrong. Justice
would demand a degree of flexibility to ensure that arbitration proceedings are conducted in a
careful and considerate manner with a view to do Justice between the parties as opposed to
under a pressure to meet with timelines.

Conclusion
India has in place a modern, an efficient Arbitration Act. There have been some decisions
whichare not in tune with the letter or spirit of the Act. Hopefully, these would be addressed
by the judiciary in the near future and continuing popularity of arbitrations would be served
by a truly efficient ADR mechanism.

India has an effective law in place. What it now needs is inculcation of the culture of
arbitration within the bar, the bench and the arbitral community. The baggage of the past
needs to be dropped so that India, indeed, has an attractive arbitration mechanism on offer.

To, conclude the lines of Lord Hewart C.J would be aptly suited; It is of fundamental
importance that justice should not only be done but should manifestly and undoubtedly been
seen to be done.

Also, Arbitration & Conciliation (Amendment) Ordinance 2015 is a long awaited change. We
may not have the best Arbitration Act in the world, but we definitely have a better Arbitration
Act.

People may opt for Arbitration as a means of ADR instead of litigation and use these wisely
in order to get speedy and cost efficient justice. The purpose which ADR was supposed to
achieve. The legal education of today‘s India needs to take the ADR mechanisms seriously.
Today these mechanisms are taught only as part of speciality courses which primarily focus
on the deployment of these processes pertaining to areas of corporate mergers and
amalgamations.
India is a nation which epitomises a subtle mix of the modern and the ancient. The
preservation of the best of both is what Indians are best at. Keeping in mind the same spirit of
India, the common Indian of today should get the best of all the dispute resolution
mechanisms in India. The motive behind any legislation, amendment or new introduction has
and always been the welfare of the ordinary citizen of the country. Now we just need to walk
that extra mile to bring back the lost opportunity – to redeem the pride of having arbitrations
in par with any other part of the world .

Bibliography
Statutes

Arbitration and Conciliation Act, 1996

Books

Avtar Singh, Law of Arbitration and Conciliation (Eastern Book Company, Lucknow, 7th
Edn, 2005).

Bryan A. Garner (Ed.), Black’s Law Dictionary (West Publishing Company, St. Paul,
Minnesota, 8th Edn., 2004).

Ashwinie K Bansal , Arbitration : Procedure and Practice, LexisNexis India

N V Paranjape, Arbitration and Alternate Dispute Resolution, 2006

Articles

K Ravi Kumar, ―Alternative Dispute Resolution in Construction Industry”, International

Council of Consultants (ICC) papers, available at www.iccindia.org, at p. 2

Securing Natural Justice In Arbitration Proceedings –By Austin Ignatius Pulle

Report

“The Report of the Expert Committee on Legal Aid: Processual Justice to the People”,
Government of India, Ministry of Law, Justice and Company Affairs, 1973 Report

Report on National Juridicare Equal Justice – Social Justice”, Ministry of Law, Justice and
Company Affairs, 1977 Report