ALTERNATIVE DISPUTE RESOLUTION METHODS

  ARBITRATION
AND
CONCILIATION

Presentation
by
D C Tanna, Advisor (Legal)
Indian Merchants’ Chamber
IMC Marg, IMC Bldg, Churchgate, Mumbai – 400 020
On August 24, 2004
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 What is Arbitration?
It is one of the Alternative Disputes Resolution Methods (ADR)
Simply stated, “Arbitration is the business world’s own way of finding a
fair outcome of a business dispute”
It is unique as a method of dispute closure. It does not use the courts
or methods of legal systems but unlike other alternatives to court, it is
binding upon the parties and is final in disposing of the dispute.

Oxford English Dictionary defines it as, ‘The settlement of a matter at

issue by one whom the parties agree to refer the claims in order to obtain
and equitable decision’.

The key word in the definition is “ agree”. Arbitration takes place only by
an agreement. In most of the countries by law decisions of Arbitrator are
enforced more or less in the same way as judgment of the court. In India
under the Arbitration and Conciliation Act 1996 awards given by
Arbitrators are enforced like court decrees but Arbitration process starts
only if there is an agreement between the disputing the parties to refer the
dispute to Arbitrator.

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 How Is It Different From Justice Dispensation by Courts?
Arbitration Court Proceedings
 By Agreement By Law
 Freedom to Choose No such freedom
 Your own Arbitrator “
 Venue “
 Language “
 Procedure to be followed “
 Time Frame for Delivery of Award “
 Privacy is Maintained No Privacy
 No Stigma Attached Stigma is Attached
 Speedier - Civil Procedure Code & Time Consuming - Civil Procedure
Evidence Act do not apply Code & Evidence Act Strictly Apply
 Less Expensive Costly
 Award is final and binding. Grounds for Judgements are appealable.
setting aside award have been reduced
considerably.
 No Bitterness After Award Bitterness may remain in loosing party.
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 Why Arbitration
1. Former Chief Justice P N Bhagwati once observed,
“I am pained to observe that the judicial system
in the country is almost on the verge of collapse.
These are strong words I am using but it is with
considerable anguish that, I say so. Our judicial
systems is creaking under the weight of arrears”.

2. It is estimated that there are about twenty million cases

awaiting disposal in over eight thousand courts in
the country. Average period taken for disposing of
even criminal cases is not less than a decade. In civil
cases the situation is even worse. It is not
unusual that it takes at least two decades for a
civil suit to get even listed for hearing.

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continued
3. Even after the formation of various Tribunals
i.e. – Central Administrative Tribunals, Motar Accidents
Compensation Tribunals, Customs Excise and Gold Appellate
Tribunal (CEGAT) and Industrial Tribunals etc. the dispensation
of justice has not become speedy.
4. Time taken by the courts in disposing of cases, provisions of
appeal, far-ranging and protracted and often confusing evidence
and procedures, lack of confidentiality and prospect of inconsistent
judicial outcome, and expenses involved in litigation all have
contributed in making arbitration a preferred mechanism for
solving commercial disputes especially in countries like India. It
has four distinct factors to commend it – speed, finality, cheapness
and justice.
5. That is why all over the world the recent trend
is to shift from litigation to Alternative Disputes
Resolution (ADR) Methods which includes
arbitration conciliation and mediation.

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 Process of Arbitration

 Very Simple under the Rules of

Arbitration of IMC.

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Rules of Arbitration and Rules of Conciliation of IMC
 Based on the Arbitration and Conciliation Act, 1996 which in turn is
based on Model Law & Rules recommended by the general Assembly
of the United Nations.
 United Nations Commission on International Trade Law (UNCITRAL)
was established by the general Assembly of United Nations in 1966 to
remove or reduce the obstacles to the flow of international trade due to
disparities in national laws governing international trade.
 The commission amongst other things adopted Arbitration Rules in
1975, Conciliation Rules in 1980 and Model Law on International
Commercial Arbitration in 1985.
 India has adopted UNCITRAL Model Law on International
Commercial Arbitration and Rules of Conciliation and based on them
enacted Arbitration and Conciliation Act, 1996 and based on the said
Act Rules of Arbitration of IMC have been framed. Thus aspect of
globalisation is taken care of by IMC.
 Now without going deep into historical aspects I will tell you about the
process of Arbitration under Rules of Arbitration of IMC.

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 Process of Arbitration
 Very Simple under the Rules of Arbitration of IMC.
 Submit to IMC a written request for arbitration and send a
statement of claim along with all supporting documents
relating to the claim.
 IMC will send the claimant and the defendant a copy of Rules
of Arbitration along with a list of Arbitrators on its panel and
ask both the parties to appoint by mutual consent an Arbitrator
from amongst the Panel of Arbitrators of IMC.
 Simultaneously the defendant will be asked to submit his
defence statement with all the supporting documents on which
he wants to rely.
 If the parties fail to appoint Arbitrator or Arbitrators by mutual
consent, IMC proceeds to appoint an Arbitrator or Arbitrators
as the case may be depending upon terms of the contract
between the parties or the amount of claim as the case may be.

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continued

 Fees payable towards Administration and Arbitrators are also collected

in advance either fully or partially depending upon the circumstances.
 Before Arbitrator is appointed all preliminary work is completed by IMC.
Hence once Arbitrator is appointed he straight away commences
arbitration proceedings. Preliminary work like receiving statement of
claim from Claimant, defence statement from defendant counter-claim
if any reply to counter claim, documents on which parties want to rely,
etc. is completed by IMC.
 Before commencing proceedings or even during proceedings Arbitrator
also explores possibilities of settlement between the parties.
 If no settlement is reached then Depending upon amount of claim counter
claim if any number of witness to be examined, cross-examination
etc.attempt is made to finish proceedings within 6 months from the date
of appointment of the Arbitrator with the co-operation from both the
disputing parties.
 The Award given by the Arbitrator is final and binding on the parties and
can be enforced like a decree of the court.

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 Fast Track Arbitration
 IMC rules also provide for Fast Track Arbitration
 The parties may opt it for expeditious disposal of case
in a fixed time frame.
 The Arbitrator is authorised to decide the dispute on
the written pleadings, documents and written
submissions without any oral hearings.
 The Arbitrator can call for any further information and
or clarification required.
 The oral hearing only if joint request is made by both
the parties or if the Arbitrator considers it necessary in
any particular case.

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 What IMC does for Arbitration
 IMC provides infrastructure for institutional arbitration at a very
reasonable cost.
 It provides facilities for fully airconditioned venues of different sizes to
suit the different requirements of the parties.
 It provides secretarial assistance to the arbitrator for recording the
proceedings and giving the award.
 It has an updated Rules of Arbitration which are based on the provisions of
the Arbitration & Conciliation Act, 1996 with such additions as are
supplementary and are permissible.
 It has also got separate set of Rules for Conciliation.
 It has got Panel of Arbitrators consisting of eminent Retired Judges of
Supreme Court and High Court, very eminent Solicitors and Advocates,
other eminent Professional Chartered Accountants, Architects,
Businessmen, Engineers and Industrialists having very high integrity and
respect in the society.
 It also has the Panel of Conciliators consisting of expert conciliators and
businessmen.
 A Number of Cases involving large amount have been disposed of by
arbitration in a very short time.

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What Is Required to be Done To Take Advantage of
Facilities Offered
 The Parties should simply take care to ensure that an
appropriate clause is inserted in all their Contracts, Purchase
Orders etc., to the effect that any dispute or differences
arising between the parties out of or relating to the Contract
shall be referred to Arbitration in accordance with the Rules
of Arbitration of the IMC.
 The Clause recommended by IMC to be inserted in all the
Contracts is as follows:
“Any dispute or difference whatsoever arising between the
parties out of or relating to the contract or construction
meaning, scope, implementation operation or effect of this
contract or the breach thereof shall be referred to arbitration
in accordance with the Rules of Arbitration of the Indian
Merchants’ Chamber and the award made in pursuance
thereof shall be final and binding on the parties.”

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continued

“Any dispute or difference whatsoever arising between the parties

out of or relating to this contract or construction, meaning, scope,
implementation, operation or effect of this contract or the validity
or the breach thereof, shall be referred to Conciliation for amicable
settlement in accordance with the Rules of Conciliation of the
Indian Merchants’ Chamber and if not satisfactorily resolved in
conciliation shall be referred to Arbitration in accordance with the
Rules of Arbitration of the Indian Merchants’ Chamber and the
award made in pursuance thereof shall be final and binding on the
parties”.

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 Annexure:1
Arbitrator’s Fee (Revised on 1st November, 2002)
The Arbitrator’s fee (for each arbitrator) will be fixed separately with
regard to the amount in dispute in each case, as under and will be shared
equally by both the parties.

Upto Rs. 5,00,000/- Rs. 20,000/-

From Rs. 5,00,001/- to
Rs. 10,00,000/-
From Rs. 10,00,001/- to
Rs. 100,00,000/-
From Rs. 100,00,001/- to
Rs. 500,00,000/-
From Rs. 500,00,001 to
Rs. 100,000,000
Over Rs. 100,000,000
Rs. 20,000/- plus Rs. 900/- per lac of the
amount exceeding Rs. 5,00,000
Rs. 24,500/- plus Rs. 700/- per lac of the
amount exceeding Rs. 10,00,000/-
Rs. 87,500/- plus Rs. 25000/- per crore of
the amount exceeding Rs. 100,00,000/-
Rs. 1,87500 /- plus Rs. 15625/- per crore of
the amount exceeding Rs. 500,00,000/-
Rs. 2,65,625/- plus Rs. 6250/- per crore of
the amount exceeding Rs. 100,000,000/-

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continued

In addition to the above:

Each arbitrator will be entitled to receive a special Fee for
study of the pleadings, case material, writing of the award
etc. with regard to the amount in dispute in each case as
under :-

Upto Rs. 5,00,000 - Rs. 3,000/- lumpsum

Rs. 5,00,001 to Rs. 10,00,000 - Rs. 6,000/- lumpsum
Rs. 10,00,001 to Rs. 100,00,000 - Rs. 10,000/- lumpsum
Over Rs. 100,00,001 and above - Rs. 15,000/- lumpsum

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 Annexure: 2

Administrative fee (Revised from 1st November, 2002)

The administrative fee will be will be fixed separately with regard to the amount in
dispute in each, case as under and will be shared equally by both the parties.

Upto Rs. 5,00,000/- Rs. 10,000/- lumpsum

From Rs. 5,00,001 to Rs. 10,00,000 Rs. 20,000/- lumpsum
From Rs. 10,00,001 to Rs. 50,00,000 Rs. 30,000/- lumpsum
From Rs. 50,00,001 to Rs. 100,00,000 Rs. 60,000/- lumpsum
From Rs. 100,00,001 to Rs. 5,00,00,000 Rs. 1,50,000 lumpsum
From Rs. 500,00,001 to 100,000,000 Rs. 2,00,000/- lumpsum
Above Rs. 100,000,000 Rs. 2,00,000/- lumpsum

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