This article is written by Mohd Sarim Khan and further updated by Prashant Prasad. This article will discuss the process of the arbitral proceedings and various provisions related to the arbitral process in the Arbitration and Conciliation Act 1996. Furthermore, the present article discusses the comparative analysis of arbitration with other forms of dispute resolution mechanisms. 

Table of Contents


 “Justice Delayed is Justice Denied”

“Justice Hurried is Justice Buried”

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We are not unaware that the current judicial system has been unable to furnish timely and cost effective relief to a party. There are more than 5 crore cases pending before the court of law. It can be reckoned that, if we stop filing fresh suits today, it’s going to take more than seven years to clear the pendency of cases. The present legal system is such that it is much more expensive and time consuming. Sometimes the cost of legal proceedings exceeds the value of the claim. The delay in the legal proceedings is one of the most disadvantageous parts of the entire litigation process. It has been generally observed that for the completion of a civil suit, it takes around 15-20 years. As a result of delay physical, mental, financial and many other kinds of harassment are faced by the parties to the dispute. With the evolution of technology, different kinds of cases appear in the court every day in which the judges might lack the expertise. It has resulted in ambiguous and irrelevant decisions and consequential appeals to the higher forum. Arbitration as a dispute resolution mechanism emerges as the most compatible option for the parties and such disputes.

The arbitration process can be faster as well as more flexible than that of litigation as there are fewer complex procedures involved in the arbitration process providing parties with the opportunity to resolve their dispute in less time. Apart from this the award that is made after the arbitral proceeding has an obligatory effect among the parties to the arbitral proceeding and is effectuated in a way as if it were the final judicial decree. Thus, it provides parties with an alternative way apart from the court proceeding in which they can resolve their dispute which has the same effect, but in an easy and flexible manner.  

In the year 1990, there was economic liberalisation in India. As a result, there was a boost in foreign investment, and many foreign companies started to invest in India. Moreover, Indian companies started to offer services and products to foreign customers. Due to all these investments, there was the need to create a dispute resolution mechanism that could cater to commercial disputes arising out of the foreign relations. There were a few subsisting laws to govern the disputes arising out of commercial relations such as the Indian Arbitration Act, 1899, the Code of Civil Procedure, 1908, The Arbitration Act, 1940 etc., but all these laws had some lacunae in them and hence the Arbitration and Conciliation Act, 1996 (hereinafter called “The Act”) was passed to fill those gaps in the previous laws.

The Act is primarily based on the model of UNCITRAL and the main objective of this Act is to integrate and bring about changes in the laws relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards. 

What is arbitration

Arbitration as a dispute resolution mechanism is a method that has emerged to prevent court litigation and resolve disputes between the parties in a timely, efficient and amicable manner. However, an amicable settlement between the parties does not mean compromising in any circumstances. The arbitration is mainly presided over by the arbitrator and the decision is given by him. The arbitrator is selected as the neutral third person who may be an expert in the field of arbitral issues. The parties are bound by the time limit and rules that are fixed by the arbitrator within which the dispute must be settled. 

Stages of the arbitral procedure

Arbitration clause or arbitration agreement

During the drafting of any contract pertaining to either insurance, partnership, any civil matter, or any other matter. The parties shall add an arbitration clause in the contract, the clause should state that in the future, if any disputes arise among the parties then, in that case, they can resolve it through the arbitration process. During the drafting of an arbitration clause in the contract, the person who is drafting needs to be very careful to make the clause in a detailed manner and ensure every possibility in which the disputes can be raised out of contract or due to the relation of the contract. In the event that the parties do not have an arbitration clause in the contract, the parties at that point can make an arbitration agreement, but it should be with their mutual consent, in order to solve the disputes arising out of the previous contract.

The case of South Delhi Municipal Corporation vs. Sms AamwTollways Pvt. Ltd. (2018) was decided by the Supreme Court of India. The present case was under Clause 16 of the agreement itself, and it was held by the court that arbitration is to be understood as the process by which the dispute is resolved by such an arbitrator which is chosen and acceptable to both sides under the arbitration agreement. 

Notice of arbitration

Section 21 of the Act states about when arbitration can commence. The dispute among the party begins on that particular date on which a request for the dispute as referred to arbitration is received by the respondent. From the date the respondent has received the legal notice to the date of completion of the fixed period given in the notice, the parties must give a reply to the notice.

Appointment of arbitrators

Section 10(1) of the Act states that the parties are free to agree on any number of arbitrators, however, the number of arbitrators should not be in the even number. Further, Section 10(2) enunciates that in case parties fail to decide arbitrators in accordance with Section 10(1), then under that circumstance the arbitral tribunal shall consist of a sole arbitrator. 

The Supreme Court of India in the case of IBI Consultancy India Pvt. Ltd. vs. DSC Limited (2018), held that it is the cardinal principle of the Arbitration and Conciliation Act that the parties are free to agree on the number of arbitrators. However, it must be an odd number. If the circumstances are as such in which the parties are unable to agree on the procedure prescribed, or are not able to form the arbitral tribunal with their mutual satisfaction. Then, either of the parties can take the remedy that is provided under Section 11, which provides the detailed procedure and additional machinery through which the arbitrator can be appointed with the intervention of the judiciary.

Parties mutually decide on the matter of the appointment of arbitrators. The parties to the arbitration agreement or clause must mention the name of the concerned arbitrator who will resolve the dispute. In case the parties fail to decide mutually on the appointment of the arbitrator then under those circumstances, Section 11 of the Act, states that the parties must move to the court and request for the appointment of an arbitrator.

Statement of claim

Section 23 of the Act, states that within the time period that is fixed by the parties, the claimant must state supporting facts about his claim, the point of issue and relief.

The parties need to submit their statement of claim which should be accompanied by all the documents that must be supported by the relevant facts and the issues of the arbitration. It is pertinent to note that the claim can be changed if the parties agree to it, then they can alter or change the claim during the arbitral proceeding or unless the arbitral tribunal considers the claim to be inappropriate. 

Hearing of parties

Steps that are involved during the process of hearing of the parties:

Preliminary hearing and exchange of information stage

After the arbitrator is appointed and is confirmed, the preliminary hearing of the arbitration proceeding begins in which the parties call their arbitrator so that the schedule can be fixed. During the preliminary meeting, primarily the issues of the dispute are addressed, and then the exchange of information is done among the parties and the next hearing date is scheduled. On the next date which was scheduled, the arbitrator will issue a written document commonly known as a ‘scheduling order.’ 

Stage of hearing 

At this stage, the case is presented to the arbitrators by the parties. This process can either take place in person, or can be over the telephone, or by submitting the written documents or arbitration agreements and applicable rules that govern the case. Parties need to submit written arguments after hearings, as directed by the arbitrator.

Award stage

After the hearing is completed, and the arbitrator determines that no more evidence will be presented, then in that condition the hearing is closed and a date is fixed when the award will be issued. 

Arbitral award

An arbitral award is considered as a final order which is given by the arbitrator. The award can either be in terms of monetary relief by one party or by other parties. Also an award can be a non-financial one such as adding the incentives of employment or stopping the business practices. 

Essentials of the award

Essentials of the award given in an arbitral proceeding –

  • The award must be in written form and duly signed either by the majority or by all.
  • The date and place of the award should be mentioned.
  • The reason for the decision must be mentioned in the award, except when parties have agreed that there is no need to give that reason or when there is a mutual settlement during the proceeding which is recorded as an award. 
  • The arbitral award should be certain and the final award must not be vague, uncertain and ambiguous. 
  • There is no such need for the registration of an award, award is like a final judicial decree and must be enforced in the same way. 

Types of arbitral awards

Interim award

This is a temporary award given by the tribunal during which the proceeding is going on. An Interim award can be made by such a tribunal which has the authority to grant a final award. Interim orders are generally given for the money payment or for property’s disposition between the parties and an order to make an interim payment is on account of the costs of the arbitration.

Interim Measures by the arbitral tribunal

During the arbitral proceeding if the parties apply to the arbitral tribunal for granting the interim relief then under that condition interim relief may be granted by the tribunal. However, the party applying for seeking the interim relief must do it during the arbitral proceeding, or any time after the arbitral award is made but before the enforcement of the arbitral award. Section 17 of the Act gives the arbitral tribunal the power to grant interim measures and it may include –

  • Directions for the appointment of a guardian for any minor person or the person of unsound mind for the purpose of arbitral proceedings.
  • The order for interim relief can be for the prevention, custody or sale of any goods that form the subject matter of the arbitration agreement.
  • Directions can be made for securing the amount of the claim.
  • Through interim measures, the tribunal can allow interim injunctions.
  • The tribunal can give the direction regarding detention, prevention, or inspection of any property or anything that is the subject matter of the dispute in arbitration. The direction can also be given for entering any land or any building which is in the possession of another party, and the order regarding taking samples, making observations, or trying any experiment can be given by the tribunal to obtain the full information.
  • Direction can be made for the appointment of a receiver.
  • Such other interim measures can be granted for the protection that appears just and convenient to the arbitral tribunal.

However, it is pertinent to note that the arbitral tribunal cannot pass such an order that might affect the rights of a third party. The courts have also been given the power to grant interim measures and the provision regarding the same is being presented under Section 9 of the Act. 

Final award

The final award is the order given by the arbitrator after the completion of the entire arbitration proceeding. The arbitrator must state the reason for the decisions made in the award. After the final award is made it must be signed by all the arbitrators and the parties. 

Challenge in court 

For challenging the award the party in whose favour the award is given by the arbitrator needs to wait for a period of 90 days and during this period, other parties have the right to challenge awards i.e. aggrieved party. 

In accordance with Section 34 of the Act, it states that the court can set aside the arbitral award if:

  • The party was under some type of incapacity.
  • The contract of arbitration wasn’t valid under the law to which the parties had been subjected.  
  • The party making an application for invoking the arbitration has not given proper opportunity to the other party for the appointment of the arbitrator.
  • The award deals with disputes that do not fall under the submission of the arbitration or contain any other matter which is beyond the scope of arbitration.

Other vital elements of arbitral procedure

Seat and venue 

In arbitration, a seat is the legal construct and it depends on the jurisdiction where the final arbitral award will be made. However, the seat has a great impact on the entire legal procedure of the arbitration. Every jurisdiction applies its own set of rules and regulations for the process of arbitration and that is why it is necessary for the parties to decide the seat of the arbitration with proper diligence. The selection of the seat for the arbitral proceedings not only determines the law governing the arbitral proceedings but also the rights pertaining to the enforcement of the arbitral awards.

The venue of arbitration is the place where parties meet, in the case the arbitration is an institutional arbitration, it is generally conducted at that place where the institution is located or at any other place that the institution deems fit. If the arbitration is ad hoc arbitration, the place of arbitration is decided by the parties and hence changes accordingly. The venue does not determine the seat of arbitration, it merely determines the geographical location where arbitration proceedings will be conducted, which is chosen on the basis of convenience. 


The cost of the entire arbitration proceeding must be borne by both parties to the arbitration. It is well settled and completely against the law that only one party bears the cost of proceeding solely, thus, the plaintiff, as well as the respondent, will have to pay the entire fees, or as decided by both parties mutually. 

Limitation to commencement of arbitration

Section 43(2) of the act, states that on the date on which the cause of arbitration occurred, the period of limitation begins to run for the claimant to invoke the arbitration clause. The needless communication or reminders cannot postpone this accrual of the cause of action nor stop the limitation period from beginning, even if there is no mention of the limitation period in the arbitration clause.

How long do arbitral proceedings last

The Limitation Act, 1963 applies to the Arbitration and Conciliation Act, 1996 unless expressly excluded by the Act. The arbitration proceedings will be time-barred if they commence after the period of three years from the particular date on which the cause of action arose. 

The parties do have the right to fix their own set of rules for the arbitral proceeding. If the parties do not agree on any procedure, the tribunal in that situation has the authority to conduct the proceeding in such a manner as it considers appropriate. However, the tribunal will not apply any provisions of the Civil Procedure Code, 1908 and the Evidence Act, 1872. In the arbitration contract, if the arbitration proceeding is to be administered by an arbitration institution then in that condition setting rules of that institution becomes a part of the arbitration clause by implication. In cases where the arbitral proceeding is governed by an ad hoc arbitration, such parties do have the liberty to make their own set of rules for the procedure.

Amendments to the Arbitration and Conciliation Act require holding oral hearings of the evidence or oral argument on a day-to-day basis and granting no adjournments unless sufficient cause is provided. The tribunal may impose exemplary costs on the party seeking frivolous adjournments or dates.

Different opinions of the arbitrator are allowed under the Act. The opinion of the arbitrators shall prepare a separate sheet of award or to give their opinion in the same document which contains the award of the majority members of the tribunal. But, this variance opinion or award does not form part of the majority decision and is not enforceable.

Local courts can intervene in the proceedings of domestic arbitration which includes the power to issue interim orders, order for the presentation of evidence directly to the tribunal and appoint arbitrators.

Enforcement of arbitral award

Once the final award is given by the arbitral tribunal, other parties have the right to challenge the arbitral award in the court by an application for setting aside such an arbitral award.

The court can set aside the arbitral award if:

  • The parties to the dispute are under some incapability.
  • If an arbitration agreement is invalid under that law in which the parties have made the contract. 
  • The party to an arbitration agreement was not given proper notice for the appointment of the arbitrator.
  • If the arbitral award is beyond the scope of the submission to arbitration.

Domestic award enforcement

On the enforcement and execution of the award given by the tribunal, an award holder shall have to wait for a period of 90 days and during this intervening period, the party has the right to challenge the award in the court. The challenge of the award shall be in accordance with Section 34 which provides for the procedure for applying for setting aside an arbitral award.

Foreign award enforcement

The foreign arbitration award enforcement must be given in a New York Convention that was adopted by the United Nations Diplomatic Conference on 10 June, 1958 to resolve those disputes which are arising out of a legal relationship. The Geneva Convention as well as the New York Convention provides that any foreign arbitral agreement needs to be in writing and there is no need for it to be in a particular format. The foreign award must be legally valid and should arise from an enforceable arbitration contract. To give effect to an award, an arbitration award must be clear, unambiguous, unbiased and must have the capability to resolve the dispute.

Case laws surrounding arbitration procedure

Cox and Kings Ltd v. SAP India Pvt Ltd. & Anr. (2023)


The brief factuality of the present case is as follows, the petitioner in this case was Cox and Kings Limited engaged into the SAP software end user licence agreement and SAP enterprises support schedule on the date of 14.12.2010. As a result, petitioners were made to licence ERP software, which was owned and developed by the SAP Private Limited i.e. respondent no. 1. This is the basic agreement that all the customers of the respondent have entered into, before utilising any software which is developed by the respondent.

In the year 2015 when the petitioner was working on the development of an e-commerce platform that was owned by him, at that time the respondents recommended to the petitioner their “Hybrid Solution” which will be 90% compatible along with the present application of the petitioner. The respondents further said that the remaining 10% would merely take the span of 10 months to be completed which would be in the best interest of the petitioner. For the proper execution of the “Hybrid Solution” the agreement was divided into three transactions namely –

  • The first agreement was the software licence and support agreement, signed between the petitioner and the respondent on 30.10.2015 for purchasing SAP Hybrid Software.
  • The second agreement was the service’s general terms and conditional agreement on 30.10.2015, this agreement had an arbitration clause.
  • The third agreement which was entered on 16.11.2015 was the agreement of customization i.e. customization agreement for the customization of software.

Till the 16th of August, the petitioner was facing several issues regarding the implementation of the hybrid solution; as a result, the contract regarding the SAP hybrid solution was rescinded on the date of 15.11.2015. Respondent after the contract was rescinded has withdrawn all the necessary resources from the petitioner. The petitioner, aggrieved by the act of the respondent, demanded a refund of rupees 45 crore which was earlier paid regarding the Implementation service, licence agreement, and annual maintenance charge.

After several discussions and meetings, the dispute couldn’t be solved between the parties by mutual communication. Due to this, notice was issued by respondent no. 1 invoking the arbitration clause with regards to the service’s general terms and conditional agreement and demanding the payment of rupees 17 crore on the ground that the contract was wrongfully terminated by the petitioner. Pursuant to this an arbitral tribunal was constituted and further the arbitration proceeding was initiated and respondent no. 2 was made part of the proceeding. Meanwhile, an application under Section 16 of the Act, was filed by the petitioner and contended that all four agreements that the parties have entered upon form a composite transaction, and must be the part of a single proceeding.

On the date 22.10.2019, the National Company Law Tribunal accepted the application that was made under Section 7 of the Insolvency and Bankruptcy Code, 2016, which was against the petitioner and has made the appointment of an Interim Resolution Professional. Further, on the date of 05.11.2019, the NCLT said that the arbitration proceeding should be adjourned by the parties and hence the corporate insolvency resolution process was initiated. 

Further, 2nd notice regarding the invocation of arbitration proceedings was sent by the petitioner to respondent no. 2 but in turn, no response was received. Aggrieved by this an application was filed by the petitioner before the Honourable Supreme Court of India under Section 11(6) and 11(12) (a) of the Act for the initiation of arbitral proceedings and the constitution of the tribunal. 


  • The main issue pertaining to this case was whether the “Group Companies Doctrine” is applicable in this arbitration proceeding to array respondent no.2 as the party to the proceeding. 
  • Whether the “Group Companies Doctrine” coexists with the alter ego principles or piercing the corporate veil principle. 

Group of Companies Doctrine 

This doctrine allows for the extension of the arbitral agreement on such entities within the corporate group, even if they’re not signatories to the agreement. 


The Judgment was delivered by the Supreme Court’s Constitutional bench in which it was held by the court that the “Group Companies Doctrine” can’t have a blanket application and further different parameters regarding the case were specified. The court of law held that for determining whether a non-signatory party is compelled by the arbitration agreement or not, then in that scenario the intention and the conduct of the parties must be taken into consideration.

The judgement lays down that arbitral agreement extension to the non-signatories must be dealt with the due diligence. Further, it was held by the court of law that the alter ego principle or piercing the corporate veil principle cannot be made the basis for the application of the “Group Companies Doctrine”. It can be inferred by the judgement that the Act and the conduct of the non-signatory party serve as an important factor in determining whether they can be bound by the arbitration agreement or not. Further, it was clarified that the decision on the issue of “Group Companies Doctrine” should be determined by the arbitral tribunal and not by the court. 

Associate Builders v. Delhi Development Authority (2014)


In the present case, the appellant was awarded with the construction work by the Delhi Development Authority (DDA, defendant), and the construction work was given on the contract to the appellant. The appellant has to build 168 Middle Income Group and 56 Lower Income Group House as per, the contract which specified the tender amount of Rs. 87,66,678/- was given to the appellant to complete the construction work. As per the contract, the construction work has to be completed within 9 months but was completed in 34 months. The contractor i.e. appellant has completed the work of only 166 Middle Income Group and 36 Lower Income Group House. The total value of work which was done by the contractor was Rs. 62,84,845/-.

It was contended by the appellant that the delay in completion of the construction was because of the defendant’s fault; around 15 claims were made by the appellant regarding the default made by the defendant. As a result, the Delhi High Court appointed a sole arbitrator to initiate an arbitral proceeding on this matter. After going through all the 15 claims, the arbitrator concluded that there are 4 claims that are most relevant. Considering these 4 claims, it was stated that the delay was indeed because of the defendant’s fault. It was further stated by the arbitrator that the respondent failed to fulfil the obligation as a result delay was caused and further the appellant has suffered a huge monetary loss.

The defendant objecting to the arbitral award appealed to the Delhi High Court, however, the learned single judge bench dismissed the appeal and sustained the award which was given by the arbitral tribunal. Thereafter, the defendant appealed the matter to the divisional bench of that particular court itself under Section 37 of the said Act against a single judge bench order. The divisional bench overruled the previous decision given by the single judge bench and also the awards of the arbitral tribunal were set aside. 

The appellant then appealed to the Apex Court by the Special Leave Petition under Article 136 of the Indian Constitution against the order of the divisional bench. 


The primary issue of this case was whether the divisional bench had surpassed its jurisdiction in setting aside the award given by the arbitral tribunal.


The court of law in this case allowed the appeal and further set aside the impugned award. It was held by the Supreme Court that under Section 34 the court must not set aside the award given by the arbitral tribunal if they don’t agree with the interpretation of the agreement which is given by the arbitral tribunal. In order to set aside the award the court must show that the decision given by the tribunal was based on the irregular or no evidence.

Konkan Railway Corporation Limited v. Chenab Bridge Project Undertaking (2023)


In the present case, the respondent was given the contract for the construction of a bridge on the Udhampur-Srinagar-Baramulla rail link in 2004. Subsequently, the dispute arose regarding the execution of the contract as a result the Standing Arbitral Tribunal was formed in the year 2012. The arbitral tribunal considered various claims (regarding- Dispute I, Dispute II, and Dispute III), and after considering all the claims of the dispute rejected the entire claim which was made and, finally, the award was given in the year 2014. The respondent aggrieved by the decision of the tribunal challenged the award under Section 34 of the Arbitration and Conciliation Act, and the Single Judge of the High Court confirmed the award. Further, the respondent appealed the award under Section 37 of the Act to the Divisional Bench of the same High Court. The Divisional Bench of the High Court partly allowed the appeal, specifically addressing Dispute III and Dispute IV. 

Dispute III deals with the claim of the reimbursement of the Entry Tax after there was the withdrawal exemption notification by the government. Dispute IV deals with the reimbursement of the Toll Tax on the machinery and materials due to an increase in taxes during the period of the contract. The judgement delivered by the Divisional Bench of the High Court led to the subsequent appeal to the Supreme Court of India. 


The main issue before the court was regarding the scope of Section 37 of the Arbitration and Conciliation Act, 1996 in examining any order, setting aside or refusing to set aside an award. 


The court in its judgement clarified that the jurisdiction of court under Section 37 is similar to that under Section 34 of the Act. The court stated that the scope of appeal under Section 37 is limited and is subjected to the same grounds as mentioned under Section 34. 

It was observed by the Hon’ble Supreme Court of India that the court should not casually intervene with the arbitral award. The court was of the view that the mere possibility of an alternative view on fact and different views that can be taken on the particular matter, does not justify reversing the decision that is given by the arbitral tribunal. 

The court finally concluded that in the present case, both the Arbitral Tribunal and the Single Judge Bench exercised their reasonable power to arrive at the judgement and it should not be considered as illogical or irrational. Therefore, the Divisional Bench must not have interfered with their order. As a result, the Supreme Court of India allowed the appeal and set aside the judgement that was given by the Divisional Bench of the High Court and restored the judgement and order that was given by the Single Judge. 

Comparative analysis with other ADR mechanisms

The Alternative Dispute Resolution mechanism helps the parties to resolve their dispute amicably without going to court. There are various forms of ADR mechanisms such as Arbitration (as discussed above), Mediation, Conciliation, Negotiation etc. These methods give parties to the dispute an opportunity to settle it with much ease without tumbling into any litigation process. The main objective of all these mechanisms is to provide the parties with speedy justice who are in dispute, although there are certain points of differentiation between these mechanisms and a comparison could be drawn on the basis of it. 

Arbitration vs. mediation

Differences between Arbitration and Mediation

DecisionIn the case of arbitration once an arbitral tribunal makes the award, then the award does have a binding effect. Even if the award which is given by the tribunal is unsatisfactory by the parties, it still would have a binding effect. However, the award which is given by the arbitral tribunal can be challenged on some specific grounds.In mediation, the decision or the settlement is binding only when it is agreed and mutually settled between both the parties. If both the parties do not mutually agree with the decision then it would have the non-binding effect.
Interaction among the partiesIn the case of arbitration parties barely communicate, it is the arbitrator who listens to the submission which is made by both the parties, and on the basis of submission the arbitral tribunal gives an award.In the mediation process, the parties can interact and communicate with each other because in mediation the parties play a pivotal role in reaching a settlement of the dispute and the mediator only acts as a bridge between the communications of both parties. However, for the communication the mediator needs to be present there and must assist the parties with the communication.
Third-party involvementIn the case of arbitration, the third party involved is known as the arbitrator/s. However, the person to be qualified as an arbitrator must have reasonable qualifications as prescribed under the Arbitration and Conciliation Act, 1996.In a mediation proceeding the third party that is involved is known as the mediator. The mediator can be appointed directly by the parties or by the court in cases of pending litigation.
Nature of proceedingIn arbitration proceedings, the arbitral tribunal is bound by the provisions of the Arbitration and Conciliation Act, 1996. Therefore the adherence of the provision of this statute is important in order to give effect to a valid arbitral proceeding.In mediation, the main procedure that the parties along with the mediator follow is the communication techniques that aim to reach an amicable settlement. Therefore, the process of mediation is not governed by specific rules and statutes, as a result the entire mediation proceeding is very flexible and not rigid.

Analysis – Mediation v. Arbitration, which is better

If a person needs to choose between arbitration and mediation, then it depends upon the specific subject matter of dispute and circumstances of the case further, the relation between the parties is also a deciding factor. If the parties are as such where they can work together diligently to reach the probable solution with the help of specialised communication techniques then in that particular situation mediation would be the best choice for the parties. But, if the case is as such wherein the parties cannot work together diligently to reach the probable solution, then in that scenario parties can approach arbitration as a dispute resolution mechanism.

Additionally, if the parties want such a mechanism in which they could resolve their dispute at a minimum cost then under these circumstances the parties could preferably choose mediation. The mediation gives parties an opportunity to solve the matter in a flexible and efficient manner. However, the process of mediation cannot be used in a scenario where there is complexity in the case and in the complex situation parties should opt for arbitration.  

Arbitration vs. conciliation

Differences between Arbitration and Conciliation

Third-party involvementIn arbitration the third party who administers the conflict is the arbitrator, the arbitrator is appointed under Section 11 of the Act. The duty of the arbitrator is to give equal and full opportunity to both parties, the arbitrator is impartial towards the decision making and based on the facts and circumstances of the case he gives the probable solution to the parties in the form of an arbitral award which is binding on the parties.The neutral third party that is involved in the conciliation proceeding is known as the conciliator. The conciliator is appointed under Section 64 of the Act. The main duty of the conciliator is to oversee the conciliation proceedings and act as a bridge between both parties to give them an effective settlement.
Prior agreementFor arbitration proceedings, both parties should agree beforehand during the time of making the “arbitration agreement”. The arbitration agreement must contain a clause stating that during any dispute or conflict the disputed matter should be referred to the arbitration. Therefore, for arbitration to happen the prior agreement must be there between the parties. In some instances parties can decide to refer matters to arbitration in real time after the dispute if consent is there of both parties.In case of conciliation the parties need not to agree about it beforehand. The parties can opt directly for the conciliation based on the situation and the nature of the conflict.
Procedure followedArbitration as a dispute resolution mechanism is a bit of a formal process, it appears as if some procedure of court is being followed while conducting arbitral proceedings. For instance the arbitrator can call witnesses or take evidence to facilitate the arbitral proceeding.Conciliation is an informal process when no complex procedure is followed between the parties and the conciliator; they can even sit on the round table to settle their dispute in an effective manner.
Mutual discussionIn the case of arbitration the arbitrators are not allowed to talk directly with the parties about the issues of their case, and about their perspective as to what can be the solution of this problem. However, the arbitrator can give parties the opportunity to keep their opinion. But, the mutual interaction between the parties and the arbitrators are least.The main objective of conciliation is to reach a settlement among the parties through effective communication techniques. Therefore, the conciliator is allowed to mutually discuss among the parties their problem and the probable solution that they are thinking can be agreed upon by both parties.
Award and EnforceabilityDuring or at the end of the arbitral proceeding if any award comes, then it is known as the arbitral award and it is enforceable against the disputing parties. For the arbitral proceeding, the award can also include an interim award i.e. the award made during the proceeding.The settlement made by the conciliator is not legally binding unless the parties voluntarily decide to formalise it into the contract.
DurationAlthough the entire process of arbitration is quicker than the litigation there are certain prescribed times for the completion of the arbitral proceeding which might even take months and years for its completion. In case of a domestic arbitration the entire arbitration proceeding needs to be done within 12 months from the date on which the pleading was completed. In case of the international commercial arbitration it needs to be completed as early as possible but it must be tried to be completed within 12 months.Conciliation can be quicker than that of arbitration as it involves the communication between the parties to resolve the matter efficiently.

Can a Conciliator Act as an Arbitrator in the matter which was conciliated by him before 

According to the UNCITRAL Model Law, it is specified that a conciliator must not act as an arbitrator in the dispute which was previously conciliated by that conciliator. Based on this provision of the UNCITRAL Model, Section 80 of the Arbitration And Conciliation Act, 1996, provides that unless otherwise agreed by the parties –

  • The conciliator must not act as a representative, arbitrator, or council of any party in any judicial or arbitral proceeding in respect of any dispute that is subject to conciliation proceedings.
  • The conciliator must not be presented by the parties in any proceeding be it a judicial or arbitral as a witness. 

However, if the parties to the dispute agree in writing that their conciliator can be appointed as an arbitrator then in that case the conciliator can be appointed as an arbitrator. For, conducting the further arbitral proceeding by the conciliator, once appointed by the parties, then in that case the conciliator then will be bound to follow such provision of substantive and procedural law which is necessary for facilitating the proper arbitral proceeding.

In the case of Welspun Corp. Ltd v. Micro and Small, Medium Enterprises Facilitation Council, Punjab and Ors (2011), it was held that the council which the state has appointed, on the termination of the conciliation proceeding, shall have the power to act as an arbitrator if the parties have agreed to it with an agreement.  

Therefore, generally, the conciliator cannot act as an arbitrator for the subsequent arbitration proceeding, but if there is an agreement between the parties as to the appointment and the arbitration clause does not provide any bar, then in that scenario the conciliator can be appointed as an arbitrator.


Arbitration and Conciliation are two excellent mechanisms that are working towards the resolution of disputes in an effective and efficient way. But, it depends on the nature of the dispute, and analysing the nature of the dispute would help us to understand whether arbitration or conciliation should be used in that dispute.

Conciliation is used majorly in situations where the parties that are in dispute are willing to work effectively toward a settlement with the help of mutual communication. If the situation is as such where the official decision is mandatory to resolve the conflict between the parties such as breach of contract, then in that case arbitration can be used. 

Arbitration vs. negotiation

Differences between Arbitration and Negotiation

Third-party involvementIn the process of arbitration, a third party is involved who is the decision maker and is known as an arbitrator. The arbitrator after hearing both the parties delivers an award known as an arbitral award.In negotiation, there is no third party involved. In negotiation the parties have full control over the decision making, negotiation is the communication process aimed at reaching a mutually accepted solution without any third party’s intervention.
Binding nature of the outcomeThe decision that comes in the arbitration is known as an arbitral award and this award does have a binding effect on the parties.The negotiation process renders the binding effect if the parties voluntarily agree to make it binding by way of agreement on the decision that the parties have finally reached.
ConfidentialityThe process of arbitration is often confidential, the arbitration proceedings are generally performed in private and the decision made by the arbitral tribunal is not disclosed to the public.In the negotiation process, confidentiality depends upon the parties. If they wish to keep their discussion private and confidential then they can sign an agreement regarding the same. However, discussion can be kept private if the parties desire to do so.
FormalityThe process of arbitration is generally more formal, in which there is adherence to the procedures and the substantive laws. The procedure is somehow similar to that of court proceedings and hence the entire arbitration process can be considered as a formal process.Negotiation is less formal, providing flexibility to the parties to solve their case without any formality, with regards to the procedures, documentation, time, and location.
Time and Cost incurredArbitration is a time consuming process as the entire process is formal and for the completion of arbitration proceedings, it might take months and years for its completion. Furthermore, arbitration is expensive, due to the formalities that are associated with the arbitration proceeding from the hiring of the arbitrator, documentation, legal representations, etc.The negotiation process is quick and less costly. Since negotiation merely involves the communication between the parties without any third person’s intervention for whom a fee might be required as in the case of the arbitration.

Is arbitration better than litigation

One of the most common questions that arise in our mind is whether arbitration is better than that of litigation, and the answer to this depends upon the different circumstances. However, it cannot be denied that arbitration offers several advantages making it a favourable option in specific circumstances. When we look and compare arbitration with that of litigation it can be noticed that arbitration is less expensive (which can vary, depending upon the complexity of the dispute and the amount of time and resources) as the procedure for arbitration is less complex and winds up the entire dispute in a favourable time period. Another aspect where the arbitration could be beneficial for the parties, is during consideration of the time period, in litigation, the dispute can take years and years to get resolved (e.g. – civil suits), but in case of arbitration, the matter is disposed of as expeditiously as possible. Moreover, in the arbitral proceeding confidentiality is mentioned, unlike the court proceeding which is a matter of public record in most cases.

Although arbitration has merits over litigation, under some circumstances litigation may be preferred, for instance, if the matter involves a complex legal issue or a large amount of money is under question, then in that scenario litigation could be the best suited option. Moreover, if the opposing parties are uncooperative and unwilling to work and engage in the arbitral proceedings then under that condition also litigation can be chosen over arbitration. Therefore, there are many factors such as cost, speed, privacy, nature of dispute etc. which should be taken into consideration when choosing between arbitration and litigation. 


From the above discussion, it can be concluded that the first and foremost important step in the arbitral process is the arbitration clause which must be framed very diligently while making the arbitration clause or arbitration agreement. Arbitration supports the party’s autonomy. During the framing of the arbitration clauses, parties have to decide the appointment of the arbitrator, the number of arbitrators, rules applicable in the arbitration. After the final arbitration award, it is enforced by the law applicable in such jurisdiction of the arbitration.

Alternative dispute resolution like arbitration is paving the way so that the dispute can be resolved in an effective manner in which both parties could benefit in the least time as opposed to the conventional way of dispute resolution mechanism such as litigation. Considering the burden on the judiciary, all forms of alternative dispute resolution are playing a crucial role in providing justice to the parties in such a way, so that the existing burden on the judiciary could be reduced. With the efficient working of all the forms of dispute resolution, the time would be near in which the disputing parties would opt to resolve their dispute amicably in a time efficient manner without tumbling into the court proceeding. At the end of the day, the goal of every dispute resolution mechanism is to provide a solution to the disputing parties and this purpose may be achieved through litigation, arbitration, mediation, negotiation, or any other form of alternative dispute resolution. 

Frequently Asked Questions(FAQs)

What is international commercial arbitration?

Section 2(1)(f) of the Arbitration and Conciliation Act, 1996 defines international commercial arbitration as the dispute that arises out of a legal relationship where one party is a foreign citizen or residing in any foreign country. The party can also be a foreign legal person or any company that is controlled outside India, or else one party to the dispute is a foreign government, in this case, the arbitration proceeding that will be conducted is known as an international commercial arbitration.

What are the different kinds of awards under this Act?

The arbitral award that is given under this Act can be of two types the first one is the “Final Award” which is given when the arbitral proceeding comes to an end and the second award is the “Interim Award” which is given during the arbitral proceeding. Furthermore, the award can either be a domestic award or a foreign award. 

What could be the number of arbitrators?

According to Section 10 of the Act, the parties can agree on any number of arbitrators, provided the number of arbitrators cannot be in even number.

When is the court’s assistance taken during the taking of evidence in an arbitration proceeding?

For facilitating the efficient conduct of the arbitral proceeding or if the arbitral tribunal desires so, or if the party wishes. An application can be made under Section 27(1) of the Act for seeking assistance, the application can either be made by the party with the tribunal’s approval or directly by the arbitral tribunal. Under Section 27(3) the court may make rules regarding taking of evidence.

When does the arbitral proceeding terminate?

As a general rule, arbitral proceedings terminate when the final award is given by the arbitral tribunal. However, there are some situations in which the tribunal can make the order for the termination these are –

  • If the claimant who has made the claim withdraws the claim and in turn respondent has no objection, then in that case arbitral proceedings can be terminated.
  • If both parties mutually agree on the termination of the proceeding. 
  • If the arbitral tribunal is of the opinion that the continuation of the proceeding may for any reason have become unnecessary or impossible. 

What is emergency arbitration? 

Speedy resolution of disputes is one of the vital and most essential features of arbitration, and because of this, the parties choose arbitration as a mechanism for dispute resolution. However, in many cases, it is not possible to complete the entire proceeding in a speedy manner such as in the case of a complex commercial dispute which might take a significant amount of time for its completion.

Therefore, under these circumstances urgent interim relief might be necessary by any of the parties, to prevent the subject matter of the dispute. Therefore, to address this issue the concept of emergency arbitration is designed. In emergency arbitration, the arbitral institution has been provided with the power to appoint an emergency arbitrator so that the emergency dispute can be resolved by granting the urgent interim relief until the constitution of the arbitral tribunal. The main aim of the emergency arbitration is to provide conservatory measures to the parties who cannot wait till the formation of the Arbitral Tribunal.

What is Med-arb?

There might be a situation where both the mediation and the arbitration are needed to reach at the outcome, therefore the process in which both the mediation and the arbitration are used to reach at the result is known as med-arb. In this process the conflicting parties first try to settle the conflict on their own with the mediator’s help. If the parties cannot come to the resolution of the dispute then in that situation the mediator transitions into the role of arbitrator and decides the outcome of the arbitration proceeding.

Note – The role of the arbitrator can only be taken by the mediator in med-arb if he’s qualified to be an arbitrator. Once the arbitral proceeding begins, the outcome will be binding among the parties.


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