HVPS Law College












ROLL NO : 40 (Batch No. 02)


Sr. No Particular Pg. No.



The Arbitration and Conciliation Act, which governs arbitration and conciliation in India, is discussed in this paper. The purpose of the Arbitration and Conciliation Act of 1996 is to facilitate the resolution of economic disputes through private arbitration. The arbitration and conciliation act of 1996 mentions the law of arbitration. It was signed into law on January 25, 1996, and went into effect on August 22, 1996. Domestic, international commercial arbitration and the enforcement of foreign arbitral judgements are all covered by this Act.

Domestic Arbitration is a unique option for resolving domestic conflicts. The Arbitration and Conciliation Act of 1996 governs both local and international arbitration in India. No proper definition of the terms “domestic” and “international commercial arbitration” in the 1996 Act, hence the following definition of the terms “domestic” and “international commercial arbitration” is recommended by the Law Commission of India in its 176th Report on Indian Arbitration and Conciliation (Amendment) Bill 2003. “It means an arbitration relating to a dispute arising out of legal relationship whether contractual or not, where none of the parties is:

  • An individual who is a nationality of, or habitually resident in, any country other than India, or
  • A body corporate which is incorporated in any country other than India, or
  • An association or a body of individuals whose central management and control is exercised in any country other than India, or
  • The government of an overseas country.

Where the place of arbitration takes place in India and shall be deemed to include international commercial arbitration. International Commercial Arbitration Section 2(1) (f) of the Arbitration and Conciliation Act,1996 defines “international commercial arbitration” as “ arbitration relating to disputes out of legal relationships, whether contractual or not, considered as a billboard under the law in force in India and where a minimum of one among the parties is:

  • An individual who is a national of, or habitually resident in or any country other than Indi;
  • A company body which is incorporated in any country other than India;
  • A company or any association or body of individuals whose central management and control is exercised in any country other than India;
  • The government of the foreign country.

In the case of Gas Authority of India v. Spie Capag9, the Delhi High Court held that a commercial arbitration agreement has an international character in which a) if one of the parties has business in another country; or b) the agreement must be performed in another country; or c) the agreement’s subject matter is located in another country; or d) one of the parties is a foreign national. According to the foregoing, the international character of commercial arbitration is determined by three factors: a) the parties, b) the subject matter, and c) the venue of arbitration.

The preamble of the ACT specifically spell out that this is an Act which is more important:

  1. To cover international commercial arbitration and also domestic arbitration and conciliation.
  2. To provide that the Arbitral Tribunal justify the award passed by it by giving reasons.
  3. The Act ensures that the arbitral tribunal would remain within the limit of its jurisdiction.
  4. To make a just and fair arbitral procedure is ready to fulfil the wants of the precise arbitration.
  5. To reduce and minimize the supervisory role of courts in the process of arbitral.
  6. To provide that every final arbitral award is enforced within the manner because it was a court decree.
  7. To permit the arbitral tribunal to use different modes of settlement of disputes like mediation and conciliation.

In the 1990s, India made significant changes to its arbitration legislation. The main reason was that prior arbitration legislation was deemed to be extremely difficult, resulting in unnecessary delay and expense.10.”International Business Arbitration has become the customary means of settling disputes in international commercial transactions. Because of the flood of foreign investments, worldwide business transactions, and wide economic policies, international disputes with India are constantly expanding. The international community has placed a large emphasis on India’s international arbitration framework as a result of this. There is no mandatory legal system controlling international commercial arbitration; instead, there is a permissive regime of conventions that a country must observe if it is a signatory to the same. The Geneva Convention, the New York Convention of 1958, and the UNCITRAL MODEL Law of 1885 are the two most important conventions in this regard. In reality, India was one of the 10 original Asian nations to sign the 1927 Convention.


In India, arbitration has a significant history. People used to voluntarily submit their issues to a body of community wise men, known as the panchayat, for a binding resolution. During British control in India, the Bengal Regulation of 1772 established modern arbitration law. The Bengal Regulations allowed a court to refer a case to arbitration with the parties’ consent in cases involving accounts, partnership deeds, and breach of contract, among other things. 14 Until 1996, India’s arbitration law was primarily comprised of three statutes: (I) the 1937 Arbitration (Protocol and Convention) Act; (ii) the Indian Arbitration Act of 1940. (iii) The Foreign Awards (Recognition and Enforcement) Act of 1961. Both the 1937 and 1961 Acts were designed to enforce foreign arbitral judgments, while the 1940 Act was the basic law governing arbitration in India, similar to the English Arbitration Act of 1934. (The1961 Act implement the New York Convention of 1958). In an effort to modernize the old 1940 Act, the government enacted the Arbitration and Conciliation Act of 1996. The 1996 Act is a comprehensive piece of legislation modelled after the Model Law of the United Nations Commission on International Trade Law. All three prior legislation (the 1937 Act, the 1961 Act, and the 1940 Act)17 were repealed by this act. Both domestic and foreign business arbitration are covered under the 1996 Act.


The 1996 act, which repealed the 1940 act, it was enacted to provide an effective and timely dispute resolution framework that would inspire confidence in the Indian dispute resolution system attract foreign investment and investors in the India legal system ability to provide a timely dispute resolution mechanism. The 1996 statute has two uncommon characteristics that set it apart from the UNCITRAL Model law. First, the 1996 act applies to both international and domestic arbitration, although the UNCITRAL Model Law was supposed to apply primarily turn to national commercial arbitration. Second in terms of reducing judicial intrusion, the 1996 act goes beyond the UNCITRAL Model Law.

The arbitration and conciliation act has following significant parts;

  • Part I- Domestic Arbitration,
  • Part II- The Enforcement of Foreign Awards,
  • Part III- The conciliation procedures,
  • Part IV- The supplementary provisions,
  • First Schedule- New York Convention (The Convention and Recognition and Enforcement of Foreign Arbitral Award)
  • Second Schedule- Arbitration clauses ( The Protocol)
  • Third Schedule- Geneva Convention(The Convention on the Execution of Foreign Arbitral Awards).

The act is based on international commercial arbitration and conciliation rule. The 1996 act defines international commercial arbitration as arbitration conducted in between an Indian and non resident India or any foreigner. And needed a written agreement, demonstrating the purpose to resolve the dispute resulting from a commercial connection through arbitration is considered a legitimate arbitration agreement under the act


In many parts of the world mediation is also known as conciliation. It has a long history in the diplomatic arena. And trust in it has risen dramatically in recent years in the commercial world. This increase in the interest has previously been attributed to Dissatisfaction with the cost, delays and length of litigation in some jurisdiction. The benefit of mediation, notably its appeal as a procedure that gives parties full control over both the process to which their dispute will be submitted and the outcome of the that process, have promoted increased interest. Mediation has a very high success rate in finding a result that is acceptable to both sides of a dispute when it is implemented. Some people are hesitant to use it since it is an unstructured method, and they are afraid of not knowing what to anticipate.

Mediation is a non binding practise first and foremost. This means that even if parties agree to submit a disagreement to mediation, they’re not obligated to continue the process after the initial meeting. In this approach, the parties are always in charge of the mediation process. The process’s continuation is contingent on the continued acceptance of it. Because mediation is non-binding, the parties cannot be forced to make a decision. In other words, in order for a settlement to be reached, both parties must agree to accept it voluntarily. The mediator unlike a court or an arbitrator does not make the decisions. Rather, the mediator’s responsibility is to assist the parties in making their own choices on a dispute resolution. Unless the parties agree differently the expense of mediation is split evenly between them.


Negotiation is said to be the process through which interested parties resolve disagreement between them, agrees on courses of action bargain for individual or collective advantage, and/or strive to construct solution that benefit their shared interests. It’s generally considered as a type of alternative dispute resolution. Further the second step in the process of negotiation is to establish whether or not the situation can be changed. As a result, one of the most essential area tools is negotiation. This is the second stage of alternate dispute resolution process. In India this method is not legally acknowledged. It prevents a confrontation between the two opposing parties.

Negotiation is a non formal method of communication. Negotiation is said to be a non binding technique that involves direct engagement between conflicting parties in which one party approaches the other with an offer of negotiating element based on an objective, appraisal of each other’s position. Negotiation is defined by both sides’ objectives and willingness to reach a negotiated agreement. This strategy is appropriate for business and partnership relationship as well as psychological feelings unlabored issues. Negotiation is also used in business, nonprofit organisation government branches, and legal proceedings, between nations and in personal situations such as marriage parenting and other, among other things. The foundation for the negotiation can be served by these two legal maxims. It is as follows:

  • Interest republicae ut sit finis lithium: (In the trust of state, there should be an end to litigation).
  • Ominia Prius verbis experiri quam armis saojentem decet: (It is the part of wisdom to exhaust negotiation before restoring to arms).


In India, Lok Adalat has been held constantly and permanently in every district centre for the past few years. Lok Adalat meetings have also proven successful in taluk centres. Lok Adalat has resolved thousands of pending cases and conflicts that had not reached the courts. Despite this, the establishment of a permanent Lok Adalat(PLA) in India is Pretty much inevitable, because of pending cases referred to Lok Adalat are not settled or compromised rather, the case will be returned to the court to which it was referred due to lack of decision-making power, even if the case involves an element of settlement. The entire process will be rendered ineffective due to one of the parties’ rigid attitude. Even if all members of the Lok Adalat believe the matter is a suitable for settlement, they cannot make a decision unless all parties agree.

However, in 2002, Parliament made changes to the Legal Services Authorities Act of 1987. The aforementioned modification added caption pre litigation conciliation and settlement to chapter VI-A. The Permanent Lok Adalat maybe established in various locations, depending upon the circumstances surrounding Public Utility Services. Before submitting a dispute about Public Utility Services to a court of law for adjudication, any party to the dispute can present an application to the PLA for the problem to be resolved. If someone files a claim against a Public Utility Services, the company that provides the service can also bring the matter to the PLA for resolution.

The sole restriction is that PLA will not have jurisdiction over a dispute involving an offence that is not punishable by law or an issue which the value of the property in question exceeds rupees 10lakhs.However, the central government might increase this restriction by issuing a proper announcement. No party to appeal may invoke the jurisdiction of any court in the same dispute once it has been submitted to PLA. The National Legal Service Authority or the State Legal Services Authority must establish a PLA. The Permanent Lok Adalat comprises of viz:

  • a Chairman who is or has been a District Judge, an additional District Judge or has held a judicial post higher in rank than that of District Judge, and ,
  • Two other members with sufficient experience in public utility service. Upon nomination by the respective government.

Such person will be appointed by the state or the central authority, as the case may be. However, such a nomination must be based on the proposal of the Central or State authority. When a dispute arises, the parties are required to present written statement accompanied by suitable documentation such as paper and other evidences. Copies of the papers generated and the parties’ statement must be kept on file and given to each other. Following that, PLA will conduct conciliation proceeding between the parties in order to reach an acceptable solution to the disagreement. While conducting such conciliation session, it is the primary responsibility of PLA members to assist the parties in reaching an acceptable conclusion will stop the parties must also cooperate with PLA in a good faith manner. If the PLA believes that there are elements of settlement in such proceeding that may be acceptable to the parties, it will formulate the terms of a possible settlement, communicate its observation to the parties, And if the party agrees, the settlement will be signed and an award will be issued in accordance with the terms of the settlement, with the copies of the award being provided to the parties.

It is also stated that in circumstances where there are aspects of settlement but the parties are unable to reach an agreement the PLA shall decide the issue if the dispute does not pertain to any offence. For the purpose of holding any determination the PLA shall have the same power as a civil court under the code of Civil Procedure 1908, while trying a suit, in terms of summoning and enforcing attendance and examining witnesses, discovery of production of document, reception of evidence on affidavit, requisitioning of public records and documents, and any other matter that the government may prescribe. PLA can set its own procedure for resolving any disagreement that comes before it, and the proceeding will be treated as judicial. The PLA award, weather given on the merit or as a result of a settlement, is final and binding on the parties, and is regarded as civil court decision. It will be carried out as if it were a decree of a civil court within jurisdiction over the matter. The award on the other hand, cannot be challenged in any initial action, application, or execution process.


Since the traditional court system is clogged with procedural obstacles and burdened with massive pending litigation, resulting in abnormal delays, no product businessmen can afford to wait an advance with a disagreement for such a lengthy. Arbitration as a private independent, and neutral institution, as well as the anticipated time and cost saving, party autonomy and peaceful dispute resolution, are all big pluses. The goal of the 1996 act was to provide a speedy and cost effective conflict resolution. In India, arbitration plays a significant role in resolving economic dispute. As an examination of workings of arbitration in India reveals that the institution is still developing and has yet not reached the level when it can successfully meet the needs that have arisen as a result of commercial expansion of a global system of international commercial arbitration. Arbitration must evolve as a means of resolving conflicts in a more efficient and specialised manner than litigation. Full stock arbitration is a useful means that can be used to settle commercial conflict in a personalised manner, and its utility is kept and expanded in this regard.


  • Lawyers should be made to realise the importance of arbitration, and parties should be encouraged to settle their dispute through arbitration. All stakeholders, including arbitrator’s, judges, and lawyers, should work to influence the public perception of arbitration. Despite the 1996 acts ban on judicial environment that is no judicial authority shall intervene unless if so provided in that part, court continues to intervene despite the parties have given consent. As a result, the arbitrator’s, judges and lawyers must be familiar with and comprehend the law.
  • The Arbitration Act of 1996 needs to define commercial arbitration and eliminate ambiguity in the meaning of public policy, which is a crucial word for enforcing the verdicts.
  • Emphasis should be made to create a separate act for the recognization an execution of arbitral award in specialised laws.
  • Travel is Necessary for resolution of commercial disputes through institutional arbitration that these institutions maintain high quality requirements in their hearings.
  • A sufficient amount of training for judges who will be conducting the procedure must be considered.


For preparing my Research Paper, have taken source from the following links and books:-

  1. legislative.gov
  2. shodhganga.inflibnet.ac.in
  3. Bare Act:- The Arbitration and Conciliation Act, 1996
  4. blog.ipleaders.in
  5. Alternative_dispute_resolution
  6. article 6. html
  7. mediate.com
  8. mondaq.com
  9. lexology.com
  10. lawcommissionofindia.nic.in

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