Alternativeness Of Arbitration

Author: LawSphereX

Category: Arbitration & ADR

Published: 2026-08-23T17:48:14.741Z

Updated: 2026-08-30T07:12:36.740Z

ALTERNATIVENESS OF ARBITRATION

Aayush Sharma, Delhi Metro Rail Corporation

ABSTRACT

Alternate Dispute Resolution (ADR), by the very name suggests that it is a mechanism of resolving the disputes, which does not require the parties to approach the traditional/conventional institutes of dispute resolutions like the courts or jury. ADR as a mechanism was conceptualized in early 1500s as a method which will provide speedy and cost effective remedy to the parties. Earlier, when a dispute arises, the parties to the dispute approach some responsible/ senior member of the society like a “Sarpanch” in India or a member of senate in roman empire or such other person appointed by the king for resolution their disputes without any restriction on the basis of the nature of dispute. Later as the society develops, people began to engage and interact with each more commonly and disputes among them also become more common.

Thus, a formal system for resolution of disputes is developed in the form of courts, which have a set of rules and regulations and a set mechanism for resolution of disputes. But this formal nature is also time consuming and costly, thus in early 1600s it was realized that it is a need of a dynamic society that certain kinds of disputes, majorly which are of civil or commercial nature are needed to be resolved quickly and in a less expensive manner and thus, ADR as a dispute resolution mechanism become more popularized due to its quicker and cost effective nature. And due to this popularity, recognition and formalization of ADR mechanisms also started and eventually, traditional ADR mechanisms were codified and made into formal laws.

In this article we try to analyze the present status of ADR mechanisms specifically the effectiveness and viability of arbitration as it exists, and whether present Arbitration scenario in India is such as to make it really an “alternative” method of dispute resolution.

INTRODUCTION

Alternate dispute resolution, basically means resolution of disputes by a third independent person, without the intervention of courts and parties to the dispute agrees to abide by such resolution. The earliest reference of such methods is found in Vedic Texts like “BRHADARANAYAKA UPANISHA”, where Rishi Yajnavalkya has referred to some Arbitration bodies like Sreni, Puga and Kula and they were known as Panchayat. 1. Some references of arbitration were also seen in early Roman Empire, which mentions arbitrator as a “good man called to perform settlement”2. The more formal recognition of arbitration was done by the British Empire in the later part of 16th century as the trade between different societies became more and more common thus giving rise to more and more disputes.

The first formal recognition and codification of arbitration in India was done in the year 1772 by Bengal Regulation of 1772 during the British rule. Then, Bengal regulation 1781 provided that the judge can recommend to the parties to submit to arbitration of one person to be mutually agreed upon by the parties. However there was no compulsion. Later, Legislative Council enacted the Indian Arbitration Act, 1899. It was based on model of English Act of 1899. This act applied to the cases where if subject matter submitted to arbitration was also the subject matter of suit and parties wish to submit to Arbitration, thereafter Arbitration in India was recognized as dispute resolution for the first time when India Arbitration Act, 1899 was enacted which applied to only Three presidency towns which were Madras, Bombay and Calcutta.

Then, in year 1940 arbitration act, was passed which applied to whole of India, this act was later repealed by The Arbitration and Conciliation Act, 1996. Internationally, the UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW (UNCITRAL) MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION, 1985 was adopted on June 21st, 1985, containing 36 Articles. The model law was aimed to create uniformity for arbitration related statues, enacted by the Member Countries. Some major amendments were also made in the 1996 Act, in the year 2015 and 2019 and a draft bill aiming further amendments is also published in the year 2024. In all these legislations, codifications and references of arbitration, the major purpose arbitration that is culled out is the need for an alternate method of resolving the disputes which

1 What Is History Of Arbitration In India (Indian Dispute Resolution Centre,01 May, 2025)

Accessed 03, Jun, 2025. 2Derek Roebuck, Bruno De Loynes De Fumichon, Roman Arbitration,( HOLO Books, 2004) is more cost effective and less cumbersome for the parties, than the traditional approach to formalized courts and jury. In the article we will further analyze whether the mechanism of arbitration as it exists today is sufficient enough to consider it as “alternative”, we will also analyze the provisions of the applicable legislations which may or may not be a hindrance in the “alternativeness “of arbitration, and for this we use different decisions of the HON’BLE HIGH COURTS and SUPREME COURT along with the practical examples of challenges faced by practitioners.

ALTERNATIVENESS OF ARBITRATION: “Alternativeness of Arbitration” basically means, that there are many ways of resolution of a dispute, formally two methods are recognized the most, first is resolution of dispute by a traditional courts where aggrieved party raises its dispute before a court established by a statue and other party defends the claim raised. The procedure followed by the courts is well defined and there is very scope of variation, meaning on a particular fact, there will be a particular decision which is as per the predefined law, the courts in India are bound by Civil Procedure Code (CPC), for dealing with civil disputes and by Bharatiya Nagrik Suraksha Sanhita (BNSS) while dealing with criminal matters. The procedure is defined in a vast and structured way that there is no scope of uncertainty.

But due to this structured procedure the process of dispute resolution as a whole takes a lot of time and is also not very cost effective, thus people tend to be very apprehensive regarding their dispute’s resolution. Thus, ADR mechanisms were introduced so that certain kinds of disputes are resolved with minimal intervention of courts and thus reducing the time and cost associated with dispute resolution by courts. Thereby, making it an alternative. But, due continued enactments and judicial decisions the procedure in arbitration does not satisfies this criteria, as further we will see, as to how the arbitration as it is practiced today in India is neither cost effective nor time saving neither it reduces the intervention by the courts.

The amendment made to the Act in the year 2015 were made with an intent to increase the ranking of India in ease of doing business index the original Act of 1996, was ridden with so much procedural defects that it became impractical for parties to engage in Arbitration and thereby reduced foreign investors from coming to India. Though, it is mandatory for a party to a dispute to enter in arbitration proceedings if a valid arbitration agreement exists between parties, but for enforcement of this agreement and to start proceedings in arbitration, the intervention of judicial authority is required. From the very beginning of the dispute till the utmost end, there are a lot of instances where the need for judicial intervention is required, and will see why and how much of much intervention is really important. RELEVANT PROVISIONS ON THE ARBITRATION AND CONCILIATION ACT, A.

SECTION 5:- EXTENT OF JUDICIAL INTERVENTION:- The Act, clearly bars the intervention of judicial authorities on any issue which is governed by the 1st part of the Act with exception being where such intervention is expressly allowed by the Act itself. This exception clause creates a vide lacuna to an otherwise strict provision, and ultimately, allows access to courts for intervention in arbitration related matters at various stages of arbitration. B. SECTION 9:- INTERIM MEASURES, ETC. , BY COURT:- This section allows parties to the disputes to approach the court at any time before the execution of award to seek certain specific kinds of reliefs which are interim in nature as mentioned in the section itself, so as enable them to safeguard their interest.

The need for this section arises as for providing certain reliefs, the Act does not provide enough power to the tribunal and since the nature of relief is such that immediate action is required, thus parties are required to approach court for seeking such reliefs. EFFECT:- In practical situations, when an arbitration proceeding is going on and either of the party applies for seeking a relief under this section, the tribunal usually, stays the hearing till the application under this section is decided by the court, this creates a delay is final disposal of the arbitration. Also, in an arbitration there can be more than one application filed in this section, thus becomes a reason for ultimate delay in the final disposal of the arbitration proceedings. C. SECTION 11:- APPOINTMENT OF ARBITRATORS.

:- This section provides that, if the parties fails to appoint an arbitrator or arbitrators as per agreement, then an application may be filed in this section before hon'ble High Court or Supreme Court as the case may be, seeking appointment of arbitrator/s. EFFECT:- In practical situations, parties rarely agrees on a arbitrator/s and mostly, there is an application filed in the court seeking appointment, which will again result is delay as the arbitration will commence only after appointment of arbitrator. The reason for this situation is the law in regard for appointment of arbitrators by parties is not strict enough, as parties always have an option to reject the recommendation of name given by other party and approach the court.

What needs to be done is that a separate authority may be created who will appoint arbitrators and deal with such applications instead of courts so that easy and early disposal of application is done and arbitrator is appointed to ultimately commence the arbitration proceedings. D. SECTION 12, 13 & 15:- Parties can challenge appointment of an arbitrator if they found out that the arbitrator is not partial, such application is also made before court, and ultimately arbitration may be terminated if it has already been commenced. E. SECTION 29A. TIME LIMIT FOR ARBITRAL AWARD :- This section fixes time for adjudicating the disputes and passing the award within a period of twelve months from the date the arbitral tribunal enters upon the reference, date of reference is the date when arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment.

At the outset, this provision seems to be appropriate and encompassing the spirit of ADR, which is early disposal of disputes. But, sub-section (3) of the said section gives the parties an option to increase this time by 6 months, by mutual consent. Also, sub-section (4) of the said section gives courts power to extend the time further without any limit being set. EFFECT:- In practical situations, it is very limited cases in which the arbitral award is passed in the 12 or 18 months and it has become a general practice that applications under section 29(4) are being filed in a routine manner and the mandate of the Arbitral Tribunal is extended in the same manner, thus ultimately defeating the purpose the Arbitration as a concept. F.

SECTION 33:- CORRECTION AND INTERPRETATION OF AWARD; ADDITIONAL AWARD :- This section is based on the same lines as section 152 of CPC, and gives the parties an opportunity to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award. On an application made before Arbitral Tribunal, the Tribunal may correct and pass additional award and for that Tribunal may itself extend the time for passing the award/additional award. EFFECT:- In practical situations, it has become a practice to file an application under section 33 so as to afford some time before challenging the award. This practice is however, deprecated by Supreme court, the court in the case titled State Of Arunachal Pradesh vs M/S.

Damani Construction, held that an application under section 33 disguised as a review, will not receive the benefit of condonation provided under section

34 of the Act.

G. SECTION 34:- APPLICATION FOR SETTING ASIDE ARBITRAL AWARD :-

Perhaps the most important section in the whole Act, which also becomes the most restricting provision in achieving the true potential of ADR. This section provides that when an award is passed, either party may make an application to the court for setting aside such award on certain grounds and then court may pass appropriate order regarding the award within a period of one year for date of reference3 as per terms of section 34(5). The intent behind this provision is that the challenges to the award are settled expeditiously and the award reach its finality.

But, as it is clear from bare reading of section 34(6), that there is no penalty provided in the section is there is a breach by the court in adhering to the said time line, this shows that even though the intent behind the inclusion of said timeline is expeditious disposal of section 34 petitions, but such timeline is only meant to be directive in nature and not mandatory, as otherwise a consequence for non-compliance will be provided in the section itself. Also, various High Courts have held that the said provision of only directive in nature and even the Hon’ble Supreme Court has held that section 34(6) is not mandatory, by stating that a right/claim of a party cannot be rejected in absence of non-express provision of limitation, and ultimately held that said timeline stipulated in section 34 is directive in nature. 4

3 THE ARBITRATION AND CONCILIATION ACT, 1996, section 34(6)

4 The State Of Bihar & Ors. Vs. Bihar Rajya Bhumi Vikas Bank Samiti ., CIVIL APPEAL NO. 7314 Of 2018, Supreme Court Of India.

EFFECT:- It is common practice in section 34 petitions that a matter is if not decided as per the said timeline then, as the law being settled by the Hon’ble Supreme Court, the time is automatically extended, this is used by the parties against the intent of Supreme court, as the Hon’ble Supreme court held that in common practice the matter should be decided adhering to the time limit and only in certain circumstances the limit be extended in furtherance of interest of Justice, the supreme court nowhere has made it a mandatory practice. But, it ultimately resulted in defeating the purpose of ADR as even after an award is made, the interested party still has to wait to realize its fruit.

As when an application under section 34 is filed it is as a matter of routine that it is filed with an application for stay of award and the enforcement of award is then stayed after deposit of arbitral amount is done by the applicant and award remains stayed till the application under section 34 is reached its finality. 5 H. SECTION 37:- . APPEALABLE ORDERS:- This section provides for a provision of appeal to be filed in a court from certain orders passed by the tribunal and courts during, before or after the award. These sections are section 8, 9 16, 17 and section 34. The sections and orders passed in them, which are appealable under section 37, are having such importance in an arbitral proceeding that parties to the arbitration usually resort to filing and using such sections during the proceedings and thus they also resort to using section 37.

EFFECT:- As section 34, section 37 has also become a routine practice in the practical situations in arbitral proceedings as each party against whom a order is passed, prefers an appeal under section 37 in a routine manner also, thus ultimately increasing the overall time in finally adjudicating the claim. Section 37 also leaves the scope open for a further appeal to the Hon’ble Supreme court of India, which is also used by parties in some matters where the stake of the matter involves huge financial implications.

CONCLUSION

As already discussed, the real intention of developing an effective system of dispute resolutions

5 THE ARBITRATION AND CONCILIATION ACT, 1996, section 36.

without the intervention or minimal intervention of the courts is that there should be an expeditious resolution of certain kinds of disputes which are mainly of commercial in nature and such expeditious disposal cannot be effected by regular courts due to huge pendency of cases and barrage of procedural laws, The process of Arbitration to resolve disputes is well recognized and codified in India and was introduced with the same intent, but as we have discussed above, the Act regulating the Arbitration proceedings itself has so many provisions where the parties are either required to approach the court due to the requirement of Law or can on their own approaching the court to seek one or the other relief or comply with the requirements of Law.

Even different precedents of the Hon’ble High court or Supreme Court gives the parties certain liberties in approaching the court but these liberties are with time develop into practices and then are used by parties to prolong the Arbitration proceedings. Apart from the provisions mentioned above, the parties have a final residuary hope of challenging the Award before the Hon’ble Supreme court under Article 137 of Constitution of India. Thus, from the very conception of arbitration proceeding, parties have to deal with filing formal applications before courts which ultimately increase the time taken in passing the award.

As even to begin the proceedings and appoint the Arbitrator an application is required to be filed if the parties cannot appoint by mutual consent, then for seeking interim relief, if any required the parties again have to approach the court in some cases, then if the Arbitration is not completed within the stipulated time the again parties needs to approach the court for extension of mandate of the tribunal, then when award is passed, the party in whose favor the Award is made have approach court of competent jurisdiction seeking enforcement of award and finally realize its fruits. If the party against whom an award is passed is dissatisfied with the reasoning then he can also challenge the award before the court and can also challenge the decision under such challenge.

Thus from the very beginning till the ultimate realization of award, there is no certainty as to how many times a party has to approach the court and how much time does it finally takes for resolution of dispute. There are also some situations where due to sudden amendments and consequent judicial proceedings and pronouncements the pending arbitration proceedings are reduced to redundancy, this has happened as after the amendment of the Act in the year 2015, unilateral appointments of Arbitrators have become illegal and by judicial decisions it has been applied retrospectively to all pending Arbitrations. What needs to be done is that a permanent tribunal like quasi judicial authority is to be developed for deciding all such applications which are being filed in the courts presently, as such applications are required to be filed and cannot be done away with.

But they can be shifted from regular courts to other permanent tribunal which have same jurisdiction as a High court. The other important shift which can be done is in the powers of the arbitral tribunal, as some of the provisions which require the parties to approach courts are that effective remedy is not within the power of Arbitral tribunal, thus Arbitral Tribunals may be empowered to effectively deal with all applications required to be filed during the pendency of proceedings.

Thus, from the discussion made above, it can be concluded that the Arbitration Jurisprudence in India is presently engaged with a lot of delaying hindrances and can in no way be called an “Alternative” in the true sense as ultimately the Disputes as resolved after a lot of interventions by the courts and the Award is enforced by the Courts, making Arbitration as a “Parallel rather Alternative” for of Dispute Resolution.