Evolution of ADR (Alternative Dispute Resolution) in India.

INTRODUCTION :-

WHAT IS ADR?

ADR is an abbreviation that stands for Alternative Dispute Resolution. It also stands for Appropriate
Dispute Resolution. ADR refers to all those methods of resolving a dispute, which are alternatives for
litigation in the courts. ADR processes are decision making processes to resolve disputes that do not
involve litigation or violence. Unlike the courts, which use adversarial processes, ADR focuses on
effective communication and negotiation.

The term “alternative dispute resolution” or “ADR” is often used to describe a wide variety of dispute
resolution mechanisms that are short of, or alternative to, full-scale court processes. The term can
refer to everything from facilitated settlement negotiations in which disputants are encouraged to
negotiate directly with each other prior to some other legal process, to arbitration systems or
minitrials that look and feel very much like a courtroom process. Processes designed to manage
community tension or facilitate community development issues can also be included within the rubric
of ADR. ADR systems may be generally categorized as negotiation, conciliation/mediation, or
arbitration systems.

ADR includes Arbitration, Mediation, Conciliation, Negotiation, Expert Determination, Early Neutral
Evaluation by third person, Mini-Trail, Dispute Resolution Board etc. the approach of judges, lawyers
and parties throughout the world is changing towards the adoption of ADR instead of court litigation.
Arbitral Institutions provide ADR services for quicker, less costly and consensual resolution of civil
disputes outside the crowded court system. ADR provides creative options to the parties to resolve
the disputes that are not available in traditional Dispute Resolution forums. ADR promotes
communication between the parties. It helps the parties to work together to solve the real concerns
underlying the conflict by focusing on the parties’ real interest instead of their positions and claims.

 CONCEPT OF ADR:-
The concept of Conflict Management through Alternative Dispute Resolution (ADR) has introduced a
new mechanism of dispute resolution that is non adversarial. A dispute is basically ‘lis inter partes’
and the justice dispensation system in India has found an alternative to Adversarial litigation in the
form of ADR Mechanism.New methods of dispute resolution such as ADR facilitate parties to deal with
the underlying issues in dispute in a more cost-effective manner and with increased efficacy. In
addition, these processes have the advantage of providing parties with the opportunity to reduce
hostility, regain a sense of control, gain acceptance of the outcome, resolve conflict in a peaceful
manner, and achieve a greater sense of justice in each individual case. The resolution of disputes takes
place usually in private and is more viable, economic, and efficient. The Alternative Dispute Resolution
Mechanism has proven to be one the most efficacious mechanisms to resolve commercial disputes of
an international nature. Transcending national boundaries it renders proportionate judgements over
the merchants’ disputes, as the Law Merchants of Medieval ages rendered justice in light of “fair
price”, good commerce, and equity. In fact, the Law merchant precepts have been reaffirmed in new
international mercantile law. Visualizing the participatory nature of such laws the ADR method is also
formulated in the similar vein.
VARIOUS ADRS:-[1]

The well-known and oldest ADR techniques are Arbitration and Conciliation/Mediation. There are
various others also which are practised in many countries like USA and other but not known to India.

 ARBITRATION:-
Arbitration is a binding dispute settlement procedure in which the dispute is submitted to an arbitral
tribunal consisting of a sole or an odd number of arbitrators which makes a decision in the form of an
award of an dispute that is binding on both the parties and thus it finally settles the dispute. For
example:- Lok-Adalats.
 MEDIATION:-
Mediation is a non-binding procedure in which an impartial and neutral third party, the mediator,
assists the parties to a dispute in reaching a mutually satisfactory and agreed settlement of disputes.
The mediation process is informal and always assisted by negotiation of a dispute settlement.
 NEGOTIATION:-
The most common form of dispute resolution is negotiation. Negotiation is a non-binding procedure
in which discussions between the parties are initiated without the intervention of the third party with
the object of arriving at a negotiated settlement of dispute. Objectivity and willingness to arrive at
negotiated settlement on the part of both the parties are essential characteristics of negotiations.
 CONCILIATION:-
Conciliation is sometimes interchangeably used with mediation. It is a non-binding procedure in which
an impartial third party, the conciliator assists the parties to a dispute in reaching a mutually
satisfactory and agreed settlement of dispute. The neutral person shall be chosen by agreement of
both the parties i.e. sometimes the family members or a mutual friend. This is the basic difference
between a mediation and a conciliator.
There are many other methods of ADRS but in general they are not practised in India.

DISPUTE RESOLUTION PRACTICES IN ANCIENT INDIA :-

A study of the ancient Hindu law on arbitration and ancient literary works of India such as Vedas,
Sutras, Epics, and Dharmashastras gives us very useful about the Dispute Resolution Institutions
prevailing in the ancient India. Reference to a village Panchayat without court intervention was one of
the natural ways for the ancient Hindus for resolution of their disputes. Village Panchayats denote
villagers mediating between contending parties in their own village. In some cases, the panchayats
mostly resembled the courts. Also apart from the courts established by the king, there were other
tribunals recognised in the ancient Smrities and texts. The Smrities refer, in particular, to three types
of popular courts. LikePuga[2], Sreni[3] & Kula[4]. These tribunals were practically arbitration
tribunals. Appeals were provided to the courts of judges appointed by the king and ultimately to the
king himself.

EARLY VEDIC AGE :-

The period in which Rigveda, the oldest literary work, was composed is known as the early Vedic age
in the history of India. The period is approximately from 1500 B.C. to 1000 B.C. We get an idea about
the conditions of the ancient Aryans in india from this literature. During this age Aryans in India lived
in small villages. The basis of their political and social organization was the family or Kula. During this
period, the seeds of regular system of administration were sown. There were two popular institutions
called Sabha[5] &Samiti[6]. The Sabha enjoyed Inter alia, certain judicial functions and acted as the
National Judiciary. In addition to these two institutions there were other institutions such as Vidhata
Assembly associated with civil, military and criminal matters. The system of Arbitration was probably
known to the people of the early Vedic age. The arbitrator/mediator of disputes was
called Madyamasi.

LATER VEDIC AGE :-

The period in which Samveda, Yajurveda, Atharvaveda, the Brahmans, the Aryanakas and the
Upanishads were composed during this age. In this period, the king took more active part in the
administration of justice. The civil cases were decided by the king himself with the help of his
assistants. Sometimes, the king delegated his power to the Adhyaksha[7]. The general tendency was
to encourage the town councils and village panchayats to try local disputes. Only serious cases were
tried in courts. There were also references of cases which were referred to the tribes for adjudication.
At the village level, petty cases were decided by Gramyavadin[8] with the help of his case. During this
period, the Sabha acted as arbitrator in certain cases. Sabhapati[9] acted as judge. The disputes
regarding boundaries of property were settled by these Sabhas.

THE SUTRAS AGE :-

The Sutras were the manuals of instructions in the brief but definite language. The Dharma Sutras
were one of the Sutra literatures. The Dharma Sutras refer to customary law and practice. The Dharma
Sutras are assigned to the period from 600 B.C. to 200 B.C. the great grammarian Panini lived during
this period. The system of Sabhas continued to prevail during the age of sutras. The Magadha dynasty
almost coincided with the Sutras age. There were Parishads[10] whose decisions on the
interpretations of the texts were binding. The method of procedure generally adopted in the tribal
meetings in the states was not by voting on a motion. The point at issue was either carried
unanimously or referred for arbitration to a committee of refrees. Besides the central assembly at the
capital, there were localParishads in all the important places in the states.

THE EPIC AGE :-

The two great epics namely, Ramayana and Mahabharata were written during this period. The epic
age is roughly estimated around 500 B.C. and 200 B.C. during the period of epics, there were large
number of states in India. The ordinary form of government was the Kingship but there were also
republics. The king respected the laws of Pugas or village communities, Srenis or guilds of a particular
occupation, Kulas or assembly of members of a clan, Jatis or castes and janapadas or regions. The
Sabhas i.e. popular courts continued to flourished in the Epic age too because their decisions were
usually upheld by the kings. The system of arbitration seems to have been popular in this period.

PERIOD OF DHARMASHATRAS:-

A study of Dharmashastras such as Manu-Smriti, Yajnavalkya, Smriti and Narada Smriti, give us useful
information about the dispute resolution institutions prevailing over that time. The period
of Dharmashastras is the ninth century A.D. the Dharamshastra of Yajnavalkya mention three types
of popular courts viz. Puga, Sreni and Kula. It may be noted that these courts tried only civil cases[11].
Against the decisions of these courts, appeals were provided to the courts of judges appointed by the
king, and ultimately to the king himself. In some cases, there was an appeal from one arbitration court
to another. There were Parishads and such other autonomous bodies also in the Dharmashastras
period.

DISPUTE RESOLUTION PRACTISES IN MEDIEVAL INDIA:-

Medieval India is a period of history of India when Muslims ruled India starting from the Arab conquest
of Sindh in 712 A.D to the death of Bahadur Shah 2 in 1857. Medieval India witnessed different judicial
administrations by different rules in different periods of time. A study of Muslim Law during the
Muslim rule and the judicial administration under Arabs, Sultans, Mughals, Vijayanagar Empire and
Marathas give us very useful information about the dispute resolution practise followed in the
medieval India.

MUSLIM LAW DURING THE MUSLIM RULE :

During the Muslim rule, all the Muslims in India were governed by the Islamic laws- The Shari’ah, as
contained in the Hedaya, commentary on the Islamic Laws. The non-Muslims continued to be
governed by their own personal laws, which have been compendiously describe as the Hindu law.
However, with respect to transactions between Muslims and non-Muslims, a hybrid system of
arbitration laws developed. The Hedaya contains provisions for tahkeem (arbitration) between the
parties. According to it, a Hakam (an arbitrator) was required to possess the qualities essential for a
kazi or kazee (an official judge presiding over a Court of law). If two parties to a dispute appointed an
arbitrator and expressed their desire to abide by his award, he would proceed with the arbritation.
Any one of the parties could retract before the award was made. That would be the end of the
arbitration. But, in the absence of such retraction, the arbitrator would proceed to hear the arbitration
and make the award. The award so made was binding on the parties who appointed arbitrator, expect
in cases where the award was invalid on account of any legal infirmity. But once the parties
acknowledge an arbitral award, they could not afterwards retract from it. Any award passed in favour
of a parent, child or wife was void ab intio. Though the Arabic language had the sanctity of a religious
language of Muslims, the court language throughout the Muslim era was Persian. The Persian word
for arbitrator is Salis and a party to arbitration is a Salisee. Arbitration agreement is Salisnama while
the word for the award is Faisla. The practise of recourse to arbitration as evolved up to the end of
the Mughal Empire continued during the British period throughout the country in one form or the
other.

JUDICIAL ADMINISTRATION UNDER ARABS :

The justice given to the people by the Arabs although ready was rough. There was no uniformity of
law or uniformity of Courts. There was a Qazi at the capital and there were similar Qazis in the district
towns. They all decided cases according to Islamic law. Punishments for the Hindus were severe. If
Hindu committed a theft, he was burnt to death. The Hindus decided their dispute regarding marriage,
inheritance and other social matters in their Panchayats.

JUDICIAL ADMINISTRATION UNDER SULTANS:

The judicial administration under the Sultan was highly centralised. The king was the fountain head of
justice and decided the most important cases personally. The Sultan was assisted in judicial
administration by the Chief Sadr and the chief Qazi. The formal official assisted the king in deciding
the religious cases in accordance with the Shara, while the latter assisted the king in deciding the cases
of secular character. In the provinces, the Governor and the Qazi decided the cases. In the villages,
the Panchayats exercised judicial functions. The dispute were decided in accordance with the Quaranic
law. Even in the cases between the Muslims and non-Muslims the Quaranic law was applied.

JUDICIAL ADMINISTRATION UNDER MUGHALS :

Mughals adopted the system of judicial administration followed by the Sultans. Babur, Humayun,
Jahangir and Shah Jahan considered it their sacred duty to do justice to all. The king was the fountain
of justice. Next to him, there were Courts of Sadr-us-Sadur (for deciding religious cases) and Qazi-ul-
Qazat (for deciding cases of secular character). The Qazi-ul-Qazat or Chief Qazi was the highest judicial
officer. Often he also held the office of Sadr-us-sadur. In the provinces, there were separate officials
to decide civil and criminal cases. However, the chief judicial authority in the provinces was the Qazi.
The Qazi was assisted by the Mufti and Miradi. While the Qazi investigated the evidence, the Mufti
expounded the law by spending his days and nights in reading books on jurisprudence and the reports
of cases from which one can learn precedents and Miradi drew up and pronounced the judgements.
At the level of the Sarkars and parganas, Qazis decided important cases. At the village level, Panchayat
decided most of the cases. The decisions of the village Panchayat were usually accepted by the people
and there were no appeals against their decisions with the higher courts.

JUDICIAL ADMINISTRATION UNDER VIJYANAGAR EMPIRE:

In Vijayanagar, the king was the fountain of justice and decided all important cases. At the provincial
level, similar powers were enjoyed by the Governors. In the villages, the cases were decided by the
village assembly. The laws applied were mainly based on customs and traditions.

JUDICIAL ADMINISTRATION UNDER THE MARATHAS:

The judicial administration under the Marathas was not that well organised and up-to-date. It was
rather simple, crude and primitive. There was no codified law, no set procedure for trail of cases. The
emphasis was on amicable settlement of disputes. The highest Court was the Court of the king known
as ‘Hazr Majlis’. Most of the important cases were decided by this Court. The Court also heard appeals
against the decisions of the lower Courts. Next to this Court was the Court of the Nyayadhish or chief
justice. It decided both civil and criminal cases and heard appeals from the lower Courts. But the day-
to-day administration of justices was carried on by the village Panchayats. The panchayat was the
main instrument of civil justice. The Panchayats were popularly called ‘Panch-Parmeshwar’ and the
Panchas were often addressed as Ma-Bap. Thi decision of the Panchayat was binding on the parties.
An appeal from the decision of the village Panchayat lay to the Mamlatdar (representative of Peshwa
in the district) could assemble a Panchayat outside the village of disputants. In such suits the
Panchayat’s decision was subject to an appeal to the Peshwa (Prime minister).

ARBITRATION LAW IN MORDEN INDIA:-

In the wake of British Rule, these traditional institutions of dispute resolution somehow started fading
expect the Panch or Panchayat the traces of which still remain and the Court system introduced by
the British began to rule on the basis of the concept of ‘omissions of rule of law and the supremacy of
law’. With the advent of the British rule, and the introduction of their legal system into India starting
from the Bengal Resolution of 1772, the traditional system of dispute resolution methods in India
gradually declined. The institution of the hierarchical Court system, the introduction of elaborate
codes of procedure, the pre-eminence given to statue law vis-à-vis customary law, the emergence of
the professional lawyer and the doctrine of precedents introduced during the British rule, all
contribute to the gradual disappearance of the system of arbitration and other similar institutions,
which prevailed in India till then. The simple and informal system of arbitration through Panchayats,
though useful, was ineffective to deal with complexities arising out of advancement in social and
economic spheres. But traditional institutions like Panchas and Panchayats have not disappeared
completely. The traces of these institutions are still found among the Backward classes, where they
exercise considerable influence in many social and caste questions.

The law of Arbitration is known to modern India owes it evolution, in phases, to the British Rule in
India. At the advent of the British Rule in India, the Panchayats which had been the usual method of
resolution of disputes since ancient times were allowed to work as such. Also the Indian Legislature,
on realising the importance of arbitration in the changed socio-economic conditions, has made a
comprehensive law on arbitration by enacting the Arbitration and Conciliation Act, 1996.

ARBITRATION FROM ANCIENT TO MODERN TIMES :-

Let’s summarize all the different methods of arbitration from ancient to modern times.

Ancient India :-

The concept of arbitration is not new in India. In fact, it has its roots from ancient times. It was
prevalent in India since Vedic times. At those times the popular village assemblies acted as arbitrators
in resolving disputes. There were also Parishads in Sutras age. The system of arbitration seemed very
popular in the Epic age and the practice of resolution of disputes between members of particular
locality by three types of arbitral bodies viz. Pugas,Srenis & Kulas, also they were in practise during
the Dharmashastras period. Thus arbitration was practised in ancient times but in different forms such
as Sabhas, Parishads, Pugas, Srenis and Kulas. They were also known as Panchayats.

Medieval India:-

Medieval India was predominantly characterised by the Muslim rule. During the Muslim rule, all the
Muslims in India were governed by the Shari’ah, the basic law of all the Muslims. The non-Muslims
were governed by their own personal laws. However, with respect to transactions between Muslims
and non-Muslims, a hybrid system of arbitrations were developed. Practice of arbitration in the form
of Panchayats continued in this period. When the Arabs ruled India, the Hindus decided their disputes
regarding the marriage, inheritance and other social matters in the Panchayats. Sultans applied
Quranic law in deciding disputes and in the villages, the Panchayats were permitted to perform judicial
functions. During Mughals Rule, Panchayats decided most of the cases at the village level. The
decisions of the village Panchayats were usually accepted by the people and there were no appeals
against its judgment in higher courts. Same was followed during the Vijaynagar Empire and also during
the Maratha rule.

Modern India:-
 In modern times during the British rule, arbitration in one form or the other was being practised by
the native Indians. Mahatma Gandhi advocated, inter alia, the encouragement of arbitration courts in
lieu of the British law courts in India. Then, with the passing of the Arbitration Act 1940, arbitration
became the main alternative dispute resolution system amongst the disputants. Most recently, the
Indian Legislature, on realising the importance of arbitration in the changed socio-economic
conditions, has made a comprehensive law on arbitration by enacting the Arbitration and Cconciliation
Act, 1996.

PANCHAYAT SYSTEM AS A SETTLEMENT OF DISPUTE:-

Panchayat system as a process of settlement of disputes has been in existence in India since ancient
times. To refer matters to a ‘Panch’ or ‘Panchayat’ has been one of the natural ways of deciding a
variety of disputes.

MEANING OF PANCHAYAT:-

In general terms panchayat means assembly of elders and respected inhabitants of a village.
Panchayats literally means a body of five persons and a pancha means a member of that body. The
head of pancha is Sarpanch.

KINDS OF PANCHAYAT:-

The panchayats were territorial such as village Panchayats and sectarian such as Panchayats of
different castes and creeds. There were three grades in Panchas. They were Puga - a board of persons
belonging to different sects and tribes but residing in same locality; Sreni – an assembly of tradesmen
and artisians belonging to different tribes but connected with each other in some way.; and Kula –
assembly of members of a clan.

POWERS OF PANCHAYATS:-

The Panchas were regarded as Panch Parmeshwar, before whom no one dared to speak falsehood.
The decisions of the Panchayts were known as Panchets. A Panchet was obeyed without any protest
because it was regarded as the voice of Almighty. However, Panchets were subjects to revision;
decision of Kula can be revised by Srni and decisions of Sreni could be revised by the Puga and the
decision of Puga was to be revised by the king or the ultimate authority or arbitrator.[12]

Advantages of Alternative disputes Resolution:-

According to P.c. Rao,Secretary-General of the International Centre

for alternative Disputes Resolution, the following are the advantages of the

Alternative Disputes Resolution.

(1) It can be used at any time, even When a case is pending before a

Court of Law, though recourse to ADR as soon as the dispute arises may

confer maximum advantages on the paries; it can be used to reduce the

number of contentious issues between the parties; and, it (except in the case

of binding arbiration) can be terminated at any stage by one of the

disputing parties.

(2) It can provide a better solution to disputes more expeitiosly and

at less cost than litigation. It helps in keeping the disput a privat matter

and promotes creative and realistic business solution, since the parties are

in control of the ADR proceedings. ADR procedures take only a day or a

few days to arrive at a settlment.

(3)ADR programmes are flexible and not afficted with rigours of rules

of procedure.

(4) The freedom of the parties to litigation is not affected by ADR

proceedings. Even a faild ADR proceeding is never a waste either in terms

of money or time spent on it, since it helps the parties to appreciate each

other’s case better.

(5) ADR can be used with or Without a lawyer, however,

plays a very useful role in identification of the contentious issuse,exposition

of the storng and weak points in a case, rendering advice during negotiations

and over-all presntation of his client’s case.

(6) ADR procedures help in the reduction of the work-load of the Courts

and thereby help them to focus attention on the cases which ought to be

decided by courts.

(7) ADR procedure permits to choose neutrals who are specicalists

in the subject-matter of the disputes. This does not mean that there will be a

diminished role for lawyers. they will continue to play a central role in ADR

processes; however, they will have to adapt their role to ADR rquirements.

(8)Alternative Dispute Resolution, through amicable settlement, enables

the parties to resolve the disput and the past; preserve the present
relationship;and paves a better future Without unnecessary confrontation and conflict and acrimony.

(9) Alternative Dispute Resolution enables the parties to overcome from

wasting time on detailed preparation of evidence and attendance at hearings

and the antagonism and crisicism inherent in adversarial proceedings against

withnesses.

(11) The time and place of hearing can be chosen by parties according

to the convenience in ADR.

(12) In ADR, the parties can choose their own rules or procedure for

dispute settlement.

Limitation of Alternative Dispute Resolution:-

The amicable settlement through ADR is not favoured in the following

circumstances.

(a) One party may be owed money and simply be looking for the final

and enforceable decision which can be obtained by resosting directly to

arbitration or litigation.

(b) A party may owe money and seek to use amicable settlement as a

delay and discovery mechanism-the other party may,therefore, be concerned

about the delay,incurring extra costs and being disadvantaged in subsequent

arbitration or litigation.

(c) Adjudicative methodes may be most appropriate for resolving some

situations, such as frivolous claims,claims which compromise a particularprinciple,cases which involve

bodily injury or alleged

criminality,claims to which there is an adequte legal defence.

Regulations:-

The East India Company framed Regulations some of which had provisions regarding arbitration. The
Regulations recognised arbitration in suits only.

1. Bengal Regulation 1772:- The Bengal Regulation of 1772 provided cases of disputed
accounts and other matters, the parties were to submit their cases to arbitration and the
award so passed shall become a decree of the Court.
 1. Bengal Regulation 1781:- Bengal Regulation 1781 imported the idea that a Panchayat
was a tribunal of the parties’ own choice. It provided that no award passed by the arbitrator
could be set aside except on full proof made by oath of two credible witness that the arbitrator
had been guilty of gross corruption of partiality while making his award. This meant that in
the absence of misconduct in conducting the arbitration, the parties were bound by the
decision given by the arbitrator.
1. Bengal Regulation 1787:- Under the Bengal Regulation 1787, the Courts were
empowered to refer certain suits to arbitration with the consent of the parties where the
value of the suit did not exceed Rs.200 and the suits were for accounts, partnership, debts,
non-performance of contracts, etc. it did not provide for any remedy in case of difference of
the opinion between the arbitrators or in the event of not delivering the award within the
prescribed period.
1. Bengal Regulation 1793:- The Bengal Regulation 1793 empowered the Courts to
submit the matters in dispute in a suit to the decision of an arbitrator mutually agreed to by
the parties, but if they could not agree as to the person to be appointed or if the person
nominated by them refused to act and the parties could not agree upon another, the Court
with the consent of the parties could appoint an arbitrator who was not interested in the
dispute. If the parties did not consent, the case was not to be referred to arbitration but was
to be tried by the Court.
1. Bengal Regulation 1813:- In the Bengal Regulation 1813, provision was made to make
the provision of Regulation of 1793 applicable even to suits with respect to rights in land.
1. Bengal Regulation 1814:- By the Bengal Regulation 1814 the restriction imposed upon
authorised vakils to act as arbitrators by earlier Regulations were withdrawn.
2. Bengal Regulation 1822:- Until 1822 the Regulations permitted references by civil
Courts only. The Bengal Regulation 1822 for the first time empowered revenue officers to
refer rent and revenue cases to inducing the parties to refer their disputes to arbitration in
like manner as the Diwani Courts were directed to do by earlier Regulations.ARBITRATION
ACT 1899
The first Indian Arbitration Act was enacted in 1899. This Act was made applicable to matters which
were not pending before a Court of law for adjudication. The scope of this Act was confined to
arbitration by agreement without the intervention of a Court. This Act recognised for the first time
reference of disputes that might arise in future to an arbitrator whether named or not. The actual
operation of the Act was confined to the Presidency Towns and was later extended to several other
commercial towns. This Act was largely based on the English Arbitration Act of 1889.
ARBITRATION (PROTOCOL AND CONVENTION) ACT 1937

India is a party to one Protocol and two Multilateral Conventions. The protocol is the Geneva Protocol
on Arbitration Clauses of 1923 and the two multilateral conventions are the Geneva Convention on
the Execution of Foreign Arbitral Awards, 1927 and the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards of 1958, commonly known as the New York Convention of
1958 because it was negotiated and concluded in New York. India has enacted implementing
legislations to give effect to the Protocol and the two Conventions. The Arbitration (Protocol and
Conventions) Act, 1937 which came into force on 4th March, 1937, gave effect to the Geneva Protocol
of 1923 (came into force on 28th July, 1924) and the Geneva Convention of 1927 (came into force
25th July, 1929). The Act provides for the enforcement of arbitral agreements to which the Protocol
applied and the enforcement of foreign arbitral awards to which the Convention of 1927 applied.

ARBITRATION ACT 1940

(i) The year 1940 is an important year in the history of the law of arbitration in British India, as in
that year was enacted the Arbitration Act, 1940. It consolidated and amended the law relating to
arbitration as contained in the Indian Arbitration Act, 1899 and the second Schedule to the Code of
Civil Procedure, 1908. It was also largely based on the English Arbitration Act of 1934 and came into
force on 1st July 1940. It extended to the whole of India expect the State of Jammu and Kashmir. The
Act dealt with broadly three kinds of arbitration viz. arbitration without intervention of a Court,
arbitration with intervention of a Court where there is no suit pending and arbitration in suits. The act
laid down the framework within which domestic arbitration was conducted in India. Save insofar as
was otherwise provided either by the Act or any other Act, it applied to all arbitrations, including
statutory arbitrations. The Salient features of the Arbitration Act 1940 may be summed up as follows:

1. 1. As has been pointed out above, on the eve of the present enactment, the general
law of arbitration in British India was contained in the Indian Arbitration Act 1899 and
Scheduled 2 of the Code of Civil Procedure of 1908 seen with its sections 89 and 104, which
have been repealed by the present Act; it now lays down the general law of arbitration for the
whole of British India.
2. 2. It made provision for – (a) arbitration without Court-intervention; (b) arbitration
in suits i.e., arbitration with Court-intervention in pending suits, and (c) arbitration with Court-
intervention, in cases where no suits was pending before the Court.
3. 3. It defined the ‘written agreement’ to mean a ‘written agreement’ to submit
present or future differences to arbitration, whether an arbitrator is named therein or
not’.[sec.2 (2)] In other words, in the absence of a ‘difference’ or an ‘agreement’ to refer the
same to arbitration, there could no ‘arbitration’ as postulated by the Act.
4. 4. The provisions in the First Scheduled are implied in every arbitration agreement
unless excluded (sec.3)
5. 5. The effect or death or insolvency of a party to an arbitration agreement on it is
now specifically provided for in sections 6 and 7
6. 6. A references to three or more arbitrators has now been specifically provided for
(sec.10)
7. 7. A Court can remove a dilatory or misconducting arbitrator or umpire (sec.11); the
Court can, in certain circumstances, fill the vacancy thus caused (sec.12)
8. 8. It conferred certain powers on the arbitrators and the umpire to facilitate the
effective discharged of their functions (sec.13)
9. 9. It empowered the Court to deal judiciary with the award after it had been filed
before it, enabling it to pass its judgment, including the discretion to modify, remit or set aside
the award. These provisions primarily applied to non-Court-intervention cases (sec.15-19)
10. in cases of arbitrators with Court-interventions, where there was no pending suit, detailed
provisions were made relating to the form and manner of making an applications to the Court for filing
the ‘agreement’ and also as to an order of references to the arbitrator appointed by the parties. The
act provided that the arbitration shall proceed in accordance with its other provisions, insofar as they
could be made applicable (sec.20)
11. In cases of arbitration with Court-intervention, where a suit was actually pending in the Court, all
the interested parties might agree to refer any matter in dispute to arbitration. The act made detailed
provisions as to the appointment of arbitrator and the order of reference. The other provisions of the
Act, insofar as they could be made applicable to the arbitration, were made applicable to such
arbitrations as well (sec.21-25)
12. The power enlarge time for making an award is given to the Court only (sec.28)

13. Section 31 deals with jurisdiction. It provides that all the matters relating to a single reference shall
be before the same Court and that where there is a choice of forum; it shall be determined by the first
applicant made to a Court in relation to a reference.

1. 14. An arbitration agreement or award can be contested only by an application and

not by suit (sec.32 and 33)
15. The effect of subsequent legal proceeding on a pending references is dealt with in (sec.35)
16. If an award be a condition precedent to the institution of a suit, and a Court pronounces an
arbitration not to be effective as regards any particular difference, it may also such condition not to
be effective (sec.36)

17. The provisions of the Limitations Act have been made applicable to arbitration just as they apply
to proceeding in Court (sec.37)

18. Court can be decide the disputes as to remuneration or costs of arbitrators or umpire (sec.38)

19. Provisions for appeals are made in (sec.39)

20. A small Cause Court has no jurisdiction under this Act expect in respect of suits pending before it
(sec.40)

21. The provisions of the Act are binding on the Government (sec.45)

22. The Act with some specified exception applies to all statutory arbitrations (sec.46)

23. The provisions of this Act apply to all arbitrations and to all proceedings there under, an
arbitrations award otherwise obtained may be treated as compromise or adjustment in a pending suit
only with the consent of all the parties interested , which puts an end to the controversy over this
point (sec.47)

24. Under the Act, all awards are to be followed up by a judgment and decree before being enforced.

SPECIFIC RELIEF ACT 1963

Sections 14 (2) of the Specific Relief Act 1963 which replaced sec.21 of the repealed Specific Relief Act
1877 provides about the enforceability of non-enforceability of the agreements to refer present or
future dispute/difference between the parties to arbitration. It says that expect as provided by the
Arbitration and Conciliation Act 1996, an agreement to refer a present or future dispute to arbitration
shall not be specifically enforced. But if any person, who has made such a agreement and has refused
to perform his part of the agreement, sues in respect of any of the subject matter about which he has
contracted in the agreement to refer, the existence of such agreement operates as a bar to filling of
the suit. This right to refer the disputes to arbitrations is a substantive right conferred by the statute.
This sub-section bars a suit pending disposal of a such reference, which bar can be removed only by
the death of the arbitrator and restores the right suit.

Section 25 of the Specific Act 1963 lays down that the provisions of the chapter 2 of the Act as to
contracts shall apply to arbitral awards to which the Arbitration Act does not apply. This is founded on
the principle that the jurisdiction of the Court in enforcing the Specific Performance of an arbitral
award rests on the ground that the award is the outcome of a contract to refer to arbitration. This
section of the Act does not have the effect of making a contract. This section only says that an award
can be enforced in the same manner as a contract.

ENACTMENT OF NEW ARBITRATION AND CONCILIATION ACT 1996

Uncritical Model law served as a model for preparing the new act. The president promulgated the
Arbitration and Conciliation Ordinance, 1996 in the 16th January 1996 which was brought into force
with the effect from the 25th January 1996. On account of the prorogation of the Parliament session,
the Ordinance could not be replaced by an Act and after six months, the Ordinance lapsed
automatically. In order to give further continued effect to the provision of the said Ordinance, the
President promulgated the Arbitration and Conciliation (Second) Ordinance 1996 on 26 (Third)
Ordinance 1996 on 21st June 1996. Meanwhile, the Arbitration and Conciliation Bill, 1996, was passed
by both the House of Parliament and the Bill received the assent of the President on 16th August 1996
and came on the statue book as the ARBITRATION and CONCILIATION ACT, 1996 (26 of 1996) on
22nd August, 1996. In other words, Arbitration and Conciliation (third) Ordinance, 1996, became the
Arbitration and Conciliation Act 1996 on 22nd August, 1996. The Supreme Court in Furest Day Lawson
Ltd. V. Jindal Export India Ltd[13]. (2001) has held that although this Act was brought into force with
effect from 22nd August 1996, it became effective from 25st January 1996, the date on which the First
Ordinance was brought into force. The Act consolidates and amends the law relating to Arbitration in
India.

DECLINE OF THE ARBITRATION ACT 1940

The Arbitration Act, 1940 containing the law of arbitration in India remained static. Though the English
Arbitration Act, 1934, on which the 1940 Act was based, had been replaced by the English Arbitration
Act, 1950, which in its turn was amended by the Arbitration Act, 1975, and the Arbitration Indian Act
of 1940 had remained static.

(1) Adverse comments of the Public Accounts Committee

The act 1940 had become increasingly outmoded and discredited. The Public Accounts Committee of
the fifth and sixth Lok Sabha commented adversely on the working of the Arbitration Act 1940. Its
complaints mainly related to the long delay that took place in the completion of Arbitral proceeding,
the number of extension of the period permitted for making the award that were obtained either by
consent of the parties of through the intervention of the Court, the several number of years taken for
completion of arbitral proceeding, and the enormous expenses incurred by way of fees payable both
to the arbitrators and council. In the light of this adverse comments, the Government of India decided
to have a second look at the provision of the Arbitration Act, 1940 and , for the purpose, referred the
matter, in 1977, to the Law Commission for its examination.

(2) Recommendation of Law Commission

The Law Commission submitted the Report of the Law Commission to the Government on
9th November 1978. The Report recommended the necessity to amend the 1940 Act to suit the felt
needs of the time including developing economy of the country. List of the recommendation in brief
were as follows:
I In Section 2 (a), an Explanation should be inserted to the effect that were the members of any
association agree to abide by the Rules of the association which contained provisions for arbitration,
the members shall be deemed to agree with each other for arbitration.

II Section 6, sub-section (1) should be revised by replacing the present the present phrase “either
as respects the deceased or as respects any other party”.

III Section 6(2) should be revised as follow: “the authority of an arbitrator shall not be terminated by
the death of any party to the agreement”.

IV A new Section – Section 8A – should be inserted to provide for the power of court to supply the
vacancy in case of arbitrator or umpire appointed by the court itself.

V Section 12 (1) should be verbally amended, as recommended.

VI In Section 13, a new clause should be inserted as follows: “Section 13 (aa). Process ex parte against
any party who, without sufficient cause and after dew notice, fails to attain personally or through
agent”.

VII In Section 14, two new sub-sections – 14 (2A) and 14 (2B) – should be interested as recommended,
to cover cases of death of the arbitrator after making the award but before filling in and similar
situations.

VIII Section 21 and the Heading of the Chapter should be revised as recommended, to included
appeals within its scope.

IX Section 24 should be revised as recommended, by the addition of the word “appeal”.

X In Section 28. A proviso should be inserted forbidding in respect of the time for making the award
an extension beyond one year, expect for special and adequate reasons to be recorded.[14]

CONCLUSION:-

ADR is a relatively new and rapidly changing field. It holds considerable promise for Corps managers
because it puts control of the process and timing of dispute resolution back in the hands of line
managers, who possess greater flexibility in resolving disputes than exists in litigation. New ADR
techniques continue to be developed, and many variations in format are being tried for existing
techniques.

ADR can decrease the load on the litigation system by ensuring that only major precedent-setting
claims go the full litigation route. ADR proceedings can lead to the parties signing a settlement
agreement ending their dispute. This agreement would be legally binding on the parties. They are free
to choose which country’s laws should apply. Alternatively, the Neutral may have been asked to do
no more than supply an evaluation. In that case, the ADR proceedings end once the opinion is
presented in writing. It is up to the parties to decide what to do with it. One of the parties may decide
to withdraw by sending notification in writing to the Neutral. This can only happen after the first
discussion among the parties and the Neutral, which is obligatory so that a reasonable assessment can
be made of ADR’s chances of success.
[1] LexisNexis Butterworths ‘Alternative Dispute Resolution’

[2] A board of persons belonging to different sects and tribes but residing in the same locality.

[3] An assembly of tradesmen and artisians belonging to different tribes but connected in some way
with each other.

[4] Assembly of members of a clan and speak of the authority of these courts to decide law suits.

[5] Sabha was a house of elders or an assembly of villages.

[6] Samati was the assembly of the whole people.

[7] Chief Justice.

[8] Village judge/ head of the village.

[9] Head of the Sabha, generally the head of village or council of elderly people.

[10] Assemblies of learned men who knew law.

[11] “The General Principles of Hindu Jurisprudence” by Dr. Priyanath Sen.

[12] P.V. Kane’s ‘History of Dharmashastras’( Vols. 5) Volume 3.

[13] ‘ A Primer on Alternative Dispute Resolution’