The existence of an organised society presupposes the existence of law. Human being is a state of nature that was governed by the law of nature based on reason. All human problems and disputes were then determined by moral laws. But with the transformation of natural state into a political state, law in a loose sense was applied to solve many problems of the persons composing the state. A common feature of these two states was to place the power for determination of disputes between persons in the hands of a person in whom disputants had trust. From this, it seems evident that in the early stages of evolution of human society, a person of authority was bestowed with power to decide conflicts and disputes arising between two persons or groups of people. The law of arbitration stems from this idea of mediation or conciliation.
The objectives of arbitration are speediness, cheapness, convenience, and simplicity of procedure, secrecy and the encouragement of healthy and friendly relations between the disputants. It is advantageous in the cases involving disputed questions of fact, e.g. whether goods are up to the sample or the assessment of damages or compensation is reasonable. But in complicated matters where intricate questions of law are likely to arise, legal proceedings are the better recourse. Sometimes, it appears that the object of arbitration is abused. Very often it is found to be more expensive and protracted than litigation. This is not due to the inherent defect of the arbitration machinery, but due to the technique of operation of the machinery by human agency. An honest man dreads arbitration more than he dreads a law suit.
The origin of arbitration is obscure. China, India, Italy and other countries claim to be the first countries to introduce this system. Reference of settlement of early international and private disputes would be found in Sumerian inscription dating back to 4000 B.C., Homer’s Illiad, Peace foundation Pamphlet and in various other treaties and books on the subject. The fact remains that arbitration is of a very ancient origin. It has developed with time. It has become a popular means of setting disputes in national, international and commercial spheres.
Traces of arbitration were evident to exist in the Rome and Greek states since 16th century B.C. regarding the practice prevailing then, Pound has observed. There was no struggle to establish the jurisdiction of ordinary courts as against rival tribunals in the Roman law. Accordingly, the contracts for the submission of disputes to the decision of persons were recognised, and there were rules as to their effect and enforcement.
The nature of dispute in Greece included boundary fixation, title to colonies and land, assessment of damages occurred due to hostile invasion, monetary claims between the states and religious matters.
Where ancient India had many traditions of arbitration/conciliation up to medieval period, affairs of the community were generally managed in case of disputes between members by a single headman whose office was either hereditary or elective. In some parts, this authority vested not in a single individual but in a village council. Whatever the strength of that council, it had a name “panchayat” with a standard constitution of five persons. This type of an institution can be found in India even today in the tribal communities.
Yagnavalkya refers to the 3 types of courts
Narada States that law suits may be decided by the village council (kulani) corporation (sreni) & assemblies (puga).
During the early days of British rule, The Bengal Regulation, The Madras Regulation, The Bombay Regulation remained in force until the Code of Civil Procedure, 1859 was enacted. This act was made applicable to the presidency towns of Calcutta, Madras, Bombay in 1862, when the SC and courts of Sader Dewany Adalat in the said presidency town were abolished. This code of criminal procedure Act VIII of 1859 was replaced by Act X of 1877, but with no change relating to the provision of arbitration. The same provision was introduced by the act of XIV, 1882. Under this act, there was no provision for referring a future dispute to arbitration, the arbitrator had to be either specifically named or the discretion to name the arbitrator was left to the court. Practical experiences showed the inadequacy in the working of this acts and thus led to the passing of full namely The Indian Arbitration 1899. This act provides a provision for agreement to refer a future dispute to arbitration and for reference for arbitration without the intervention of the court. The said act was more or less on the lines of English laws on the subject.
Then followed the Code of Civil Procedure, 1908 which replaced the Code of Civil Procedure 1882. The new code contained elaborate provisions relating to arbitration. In 1938, the Indian Government took up the matter and gave birth to the Arbitration Act 1940, which was basically on the lines of English Arbitration Act 1934. Finally, the Arbitration Act 1996 was passed repealing the Arbitration Act 1940 with the saving clause that the arbitrations which are commenced prior to the 1996 Act are governed under the old Law 1940 Act, unless the parties otherwise agreed.
- Dr. A.S.Raju: “The Arbitration and Conciliation Act, 1996”
- K. Roychowdhury & H.K.Saharay : “Law of Arbitration and Conciliation”