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Arbitration and Conciliation History

History of Dispute Settlement

Whilst not formally regulated, India has a history of dispute resolution through mediation (known as ‘Panchayat’) conducted by village elders. Decisions were binding on them often as a token of respect to the elder. The ancient courts called Kula, Sreni and Gana served as a platform for dispute resolution. Even ancient scriptures provide unique insights into the prevalence and relevance of dispute resolution in the society. Even after the formation of a formal legal system, such village-based mediation was still used even in the settlement of complex disputes. Their popularity reflects the fact that such dispute resolution allows for the maintenance of relationships. Steps have been initiated at the government level to refurbish the system in tune to the modern times.

Arbitration And Conciliation In India

The law relating to arbitration is contained in the Arbitration and Conciliation Act, 1996. It came into existence from 25th January 1996. It extends to the whole of India except the State of Jammu and Kashmir. The Act is of consolidating and amending nature and is not exhaustive. But it goes much beyond the scope of its predecessor, the 1940 Act. Hence there is a need to analyse the old Act. The Act was said to be the Arbitration Act, 1940. The Act contained 29 Sections, which were divided into 7 Chapters and 3 Schedules. The Act did not include any provisions relating to Foreign Awards and Conventions and Protocols. There was two different Acts for Foreign Awards and Convention and Protocol on arbitration. Hence there was a need to amend the Act and the new Act came into force along with Conventions and Protocols and Foreign Awards in the same Act. It is necessary to speak about what was accurately present in the old Act, 1940. The Arbitration was enacted to know the law relating to Arbitration. Hence the following chapters were mentioned. 1. Arbitration without intervention of a Court. 2. Arbitration with intervention of a Court. 3. Arbitration in suits 4. General 5. Appeals 6. Miscellaneous The law on arbitration in India was at the time of the adoption of the new Act substantially contained in 3 enactments namely the Arbitration Act, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. It was widely felt that the 1940 Act, which contained the general law of Arbitration, had become outdated. Therefore, the Law Commission of India, several representative bodies of trade and industry and experts in the field of arbitration had proposed amendments to this Act to make it more responsive to contemporary requirements.

Sources of law

States regulate arbitration through a variety of laws. The main body of law applicable to arbitration is normally contained either in the national Private International Law Act (as is the case in Switzerland) or in a separate law on arbitration (as is the case in England). In addition to this, a number of national procedural laws may also contain provisions relating to arbitration. By far the most important international instrument on arbitration law is the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Some other relevant international instruments are: • The Geneva Protocol of 1923 • The Geneva Convention of 1927 • The European Convention of 1961 • The Washington Convention of 1965 (governing settlement of international          investment disputes) • The UNCITRAL Model Law (providing a model for a national law of arbitration) • The UNCITRAL Arbitration Rules (providing a set of rules for an ad hoc arbitration)

Regulation of Alternative Dispute Resolution Arbitration

Arbitration in India is governed by the Arbitration and Conciliation Act 1996 which incorporates the UNCITRAL Model. The purpose of arbitration is party autonomy and there is very limited scope for judicial intervention. Arbitration requires the prior existence of an arbitration agreement or an arbitration clause in the contract which is the subject of the dispute in question. Awards are binding on the parties and are considered as a decree of the courts.


Conciliation was given statutory recognition in India under the Arbitration and Conciliation Act 1996. Conciliation can be both independent and court-annexed: Part XXXIIA of the Code of Civil Procedure, 1908, allows courts to facilitate the resolution of disputes through conciliation in specific matters such as litigation by or against Government officials and family court matters such as adoption, succession and divorce. Unlike arbitration, conciliation does not require the existence of any prior agreement: conciliation can therefore be initiated by any party requesting the appointment of a conciliator. The process is very similar to the US-style of mediation. However, in India, mediation is a distinct and more informal process. Mediation has been dealt with in similar manner as conciliation under the Arbitration and Conciliation Act. However, the Supreme Court and many of the High Courts have framed mediation rules for matters where court-assisted mediation occurs.

Practice of Alternative Dispute Resolution Mediation

Mediation is a widely used ADR mechanism for a variety of disputes from commercial to family-based. Some High Courts in India have already successfully taken the initiative to refer matters before them to mediation. The High Court of Madras has taken the initiative to open the Tamil Nadu Mediation and Conciliation Centre in April 2005, in Chennai. The aim of the centre is to settle matters referred to it within 60 days. Both mediation and conciliation has been encouraged by both the judiciary and the Government as a means of countering the caseload of the Indian courts.

Lok Adalats

A variety of disputes are capable of resolution though Lok Adalats, however they are particularly effective in the settlement of financial claims. Nationalised banks frequently use Lok Adalats to recover debts from their defaulting borrowers and to recover dues classified as non-performing assets. However, Lok Adalats are not well equipped to handle cases involving heavy financial stakes. For this reason, many Government departments or public sector undertakings do not accord high importance to Lok Adalats. Moreover, major private litigation remains almost completely outside the scope of Lok Adalats including private disputes between a company and its stakeholders. Many such Adalats have been confined to motor vehicle claims and the recovery of assets.

Permanent Lok Adalat for Public Utility Services

This provides a forum for the conciliation and settlement of disputes relating to Public Utility Services prior to any litigation proceedings. The Permanent Lok Adalats for Utility Services have jurisdiction over matters where the value of the claim does not exceed rupees ten lakhs. These Permanent Lok Adalats can decide disputes relating to deficiency of service, claims for compensation, recovery of money, etc., pertaining to all utility services such as transport service for passengers or goods by air, road or water; postal, telegraph, telephone; supply of power, light, water to the public by any establishment; sanitation; service in hospitals or dispensaries; insurance, banking and other financial institutions.

Gram Panchayats and Nyaya Panchayats (village courts)

These are grass root-level dispute resolution fora, which cater to small disputes that may arise at the village level. Gram Panchayats and Nyaya Panchayats perform several functions, such as rule making, rule implementation and minor judicial functions. These have civil jurisdiction over matters of a local nature and have criminal jurisdiction over minor offences. Lawyers cannot practise in village courts.

Other ADR Mechanisms available

Negotiation – direct discussion between the parties • Hybrid ADR processes such as: Negotiation/Arbitration – where if direct negotiation fails, the parties need to take recourse to compulsory arbitration. Examples of such schemes are the Government of India Scheme for Joint Consultation and Compulsory Arbitration for Central Government Employees. • Amicable Settlement – a process where the parties retain the freedom to come to their own solution to the dispute between them. The rules of procedure are very few and as flexible as possible. • Collective Bargaining – Collective bargaining has been successfully used in India to resolve employer-employee disputes at the company, industry and national levels. Any negotiated settlement agreement is binding on the parities under the Industrial Disputes Act 1947. In India, a large number of companies encourage resolution of disputes by collective bargaining. • Accord And Satisfaction – This is a procedure prescribed under Sections 62 and 63 of the Indian Contract Act, 1872, wherein the parties to a contract may agree to an alternative solution to the bargain originally agreed upon. The accord is an agreement made after the breach by one party, whereby some other consideration other his legal remedy is accepted by the party not in fault, provided that the original contract itself was not illegal.

Consumer Disputes

Governed by the Consumer Protection Act 1986, consumer grievances are addressed through: • District Consumer Forums; • State Consumer Tribunals; and, • National Consumer Tribunals These are quasi-judicial bodies which adjudicate matters arising between consumers and product manufacturers, vendors or service providers. Orders or decisions made by these bodies are enforceable and non-compliance would be considered to be contempt of court.


Ombudsmen can hear complaints in relation to matters involving maladministration by public sector organisations. They are able to consider complaints on the basis of a public body’s incompetence, unjustifiable delay, neglect or prejudice, but do not consider the merits of decisions. In India, they are generally intended to be used as institutional anti-corruption agencies. Ombudsmen are entitled to use various alternative dispute resolution techniques such as fact finding and mediation/conciliation to determine and reach a decision on the allegations before him. There are two types of ombudsmen in India: ‘Lok Pal’ at the central level and ‘Lok Ayukta’ at the state levels. However, the Lok Pal has yet to be established although some states such as Karnataka have instituted the position of the Lok Ayukta. Some ombudsmen in India are: • Banking Ombudsman • Insurance Ombudsmen

Gram Nyayalayas

In 2008, the Indian Government made an ambitious move towards providing justice at the grassroots-level through the Gram Nyayalayas Act, 2008. Gram Nyayalaya is a grassroots-level judicial mechanism aiming to hear and decide cases in the rural areas. Dr NR Madhava Menon, noted legal luminary, described it as a “unique and realistic model to empower rural India in achieving justice”. This legislation came into effect on 2 October 2009, coinciding with the birth anniversary of Mahatma Gandhi. Nearly 6000 such courts are proposed in order to to handle disputes of the rural poor.

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