How does an Arbitration work?

How does an Arbitration work?

11-Aug-2021 | Article by Legal White Official

It is important to state that, since the early 90s, the Indian government along with arm of the Indian judiciary system is working to put simplify the long and complex process of resolution with regards to business disputes. After a thorough deliberation, a law was passed by the name “Arbitration and Conciliation Act” in 1996 which regulates arbitration in India. Arbitration is an alternate method to resolve dispute and this is known as Alternate Dispute Resolution (ADR) wherein an arbitrator can be appointed and the dispute resolution can happen avoiding the normal court proceeding. Arbitration and Conciliation Act has been amended in the year 2015 in order to make the process even simpler and easier to adopt in case of a dispute.

The Act is based on the United Nations Commission on International trade law (UNCITRAL) which make amendments to the law pertaining to the domestic as well as international arbitration.

Since the inception of the law, the courts in India has moved towards a pro-arbitration approach because the law states that, there will be no intervention of the courts in arbitration process. The Law has also played a significant role in enforcing legal arbitration agreements in business contracts, however the courts in India will and have to intervene in case the arbitration agreement doesn’t exist.

There can be any number of odd arbitrators which the parties can appoint. In case there is no consensus on it, the tribunal will consist of one arbitrator. If the parties fail to appoint an arbitrator even after exhausting all the efforts, either party can seek the help of either the Supreme court or the High court to appoint one for them.

The Act gives the liberty to the parties with regards to the communication with the tribunal with regards to the language, which can be agreed upon mutually, however all communication needs to be in written always.

Some of the steps with regards to the working of arbitration are listed below.

  • Arbitration Clause – As mentioned earlier, the clause must be specifically mentioned that if there is any dispute, the resolution will be through arbitration.
  • Notice of Arbitration – It is imperative that, the party against which an issue has been committed, has to send an arbitrary notice to the concerned party which will initiate the process of arbitration.
  • Arbitrator Appointment – Once the notice has been received by the concerned party, the arbitrator will be appointed in the way stated in the clause.
  • Claim Statement – The next step is to outline the claim statement which will have all the details about the dispute and related compensation in case there is any.
  • Hearing – The Arbitral tribunal will hear the arguments from both parties along with the evidences.
  • Verdict – Once the hearing is complete, the tribunal will pronounce the judgement which is called “Award”. Though the award is binding on both parties, it may still be challenged in the high court
  • Execution – The party in whose favour the award is passed will apply for the execution.


It is worth mentioning that, the process of arbitration in India does not follow the Civil Procedure Code as prescribed by the Arbitration and Conciliation Act 1996.

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