Arbitration , in law, is a form of Alternative Dispute Resolution - specifically, a legal alternative to litigation, whereby the parties to a dispute agree to submit their respective positions (through agreement or hearing) to a NEUTRAL third party called the Arbitrator (s) or Arbiter (s) for resolution. The "Disputes-Settlement-Trust" plays the role of a NEUTRAL in the Arbitration conducted by the Trust.
The comprehensive nature of this Act is the result of the United Nations Commission on International Commercial Arbitration, 1985 because Geneva Assembly of the United nations had emphasised and also recommended uniform model law on arbitral among the countries
As defined under Section 2(1)(a) it covers any arbitration whether it is administered by any permanent arbitral institution or not. It also covers arbitration relied on voluntary agreement by the private parties or by operation of law.
The Arbitration and Conciliation Act does not provide definition of the word "Arbitration" but its literally recognised meaning is that "settlement" of differences or disputes by mutual understanding or agreement by the parties where the rights and liabilities of the parties are determined in judicial point of view which are binding to them, such settlement may be before the arbitral tribunal but not by the court of law.
The new Act has limited the powers of Court rather restricted the exercise of judicial powers, in other words confined the extent of judicial intervention as provided under Section 5 of the Act - "Notwithstanding anything contained in any other law for the time being in force, in matters governed by this part, no judicial authority shall intervene except where so provided in this part." Finality of Arbitral Award under Section 35 is subject to this part according to which an arbitral award shall be final and binding on the parties and persons claiming under them respectively. Thus, the Act itself provided finality of arbitral awards and its enforcement (Section 36) without intervention of the Court.
The Arbitral Tribunals are empowered to settle any objections raised in respect of jurisdiction or scope of authority of the arbitrators.
Arbitration is the reference of dispute or difference between two or more parties to a person chosen by the parties or appointed under statutory authority, for determination of the same. In a broad sense, it is substitution of ordinary judicial machinery by a mutually chosen tribunal i.e., an Arbitrator.
The first stage in arbitration is the formulation of the arbitration agreement whereby the parties agree to submit their present or future differences to arbitration. In case of any dispute, one of the parties to the contract must file a request for Arbitration and pay the required fee to an Arbitration Institution referred to in the agreement that provides Arbitration services. Often the Arbitration Institution will suggest an arbitrator or arbitrators to which the parties must agree. The arbitrator may be an attorney, judge, or business person.
After the parties have defined their dispute, there will be a hearing, often at the arbitrator's office, where the parties present evidence and witnesses in a fairly informal manner without the formal rules of evidence used in court litigation. After the evidence has been presented, the arbitrator reaches a decision and usually later sends the parties a written reasoned opinion (an award).
In our country, an award passed by an arbitration tribunal has the force of a decree. Thus, it can be executed in the same manner in which a court decree can be executed.
Major kinds of Arbitration
(1) Ad-hoc Arbitration: When a dispute or difference arises between the parties in course of commercial transaction and the same could not be settled friendly by negotiation in form fo conciliation or mediation, in such case ad-hoc arbitration may be sought by the conflicting parties. This arbitration is agreed to get justice for the balance of the un-settled part of the dispute only.
(2) Institutional Arbitration: This kind of arbitration there is prior agreement between the parties that in case of future differences or disputes arising between the parties during their commercial transactions, such differences or disputes will be settled by arbitration as per clause provide in the agreement.
(3) Statutory Arbitration: It is mandatory arbitration which is imposed on the parties by operation of law. In such a case the parties have no option as such but to abide by the law of land. It is apparent that statutory arbitration differs from the above 2 types of arbitration because (i) The consent of parties is not necessary; (ii) It is compulsory Arbitration; (iii) It is binding on the Parties as the law of land; For Example: Section 31 of the North Eastern Hill University ACt, 1973, Section 24,31 and 32 of the Defence of India Act, 1971 and Section 43(c) of The Indian Trusts Act, 1882 are the statutory provision, which deal with statutory arbitration.
(4) Domestic or International Arbitration: Arbitration which occurs in India and have all the parties within India is termed as Domestic Arbitration. An Arbitration in which any party belongs to other than India and the dispute is to be settled in India is termed as International Arbitration.
(5) Foreign Arbitration: When arbitration proceedings are conducted in a place outside India and the Award is required to be enforced in India, it is termed as Foreign Arbitration