Alternate Dispute Resolution explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Alternate dispute resolution in Indian export practice now runs on two statutes: the Mediation Act, 2023, whose broad definition covers online dispute resolution and displaces the conciliation provisions of the 1996 Act; and the Arbitration and Conciliation Act, 1996, where the seat-versus-venue distinction decides everything.
Alternate dispute resolution by mediation — the 2023 Act
"India has enacted the Mediation Act, 2023." Section 2(h) defines mediation as a process which:
"includes a process, pre-litigation mediation, online mediation, community mediation, conciliation or an expression of similar import, whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person referred to as mediator, who does not have the authority to impose a settlement upon the parties to the dispute."
The final clause is the definitional line between mediation and arbitration. A mediator cannot impose; an arbitrator can. Everything else about the two processes follows from that.
The three takeaways
- Online dispute resolution is covered. "The definition is broad and covers technological advances in the form of online Mediation — Online Dispute Resolution (ODR)." For cross-border trade disputes where the value does not justify travel, this is the practically important one.
- Implied intent suffices. "Even if an implied intent to mediate is shown in the dispute resolution clause, parties can refer the dispute to Mediation." A clause that gestures at amicable settlement can be enough to found a mediation.
- Conciliation under the 1996 Act becomes redundant.
The handbook states the third takeaway as: "Part II of the Arbitration and Conciliation Act 1996 which deals with the provisions of Conciliation shall now become redundant." Two pages later, setting out the scheme of that Act, it says: "Part III deals with the Conciliation (after the enactment of the Mediation Act, 2023 this part has become redundant)."
Both cannot be right. The same list also describes "Part II" as dealing with international commercial arbitration, whereas the 1996 Act's Part II is titled for the enforcement of certain foreign awards, and international commercial arbitration seated in India runs under Part I.
The part numbering is reproduced as printed and is not corrected here. Read the Act's own table of contents before citing a part number in a pleading or an opinion.
Scope of the Mediation Act
"As per Section 1 of the Act, it applies to both domestic and international mediations provided these are conducted within the territorial boundaries of India." Section 2 then provides that mediations conducted in India are regulated by the Act where:
- all parties are Indian; or
- there exists a mediation agreement providing for the mediation to be conducted as per the provisions of the Act; or
- the mediation is an international mediation with at least one foreign national party.
The Singapore Convention gap
"India, no doubt, is a signatory to the Singapore Convention since 7 August 2019; however, it has still not been ratified. This essentially means that there is no recognition of cross-border Mediation Settlement Agreements."
This is the most consequential sentence in the mediation section for an exporter. A mediated settlement with a foreign buyer is, for enforcement purposes, a contract — not an instrument enforceable across borders in the way an arbitral award is under the New York Convention. Where enforceability against foreign assets matters, alternate dispute resolution by mediation alone is not sufficient, and the clause should provide for arbitration if mediation fails.
Alternate dispute resolution by arbitration — the 1996 Act
The Arbitration and Conciliation Act, 1996 is "an Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards, as also to define the law relating to conciliation."
Its preamble records that "as the UNCITRAL Model Law and Rules make significant contribution to the establishment of unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations, it is expedient to make the law respect arbitration and conciliation."
Scheme of the Act
Four parts and seven schedules:
| Schedule | Content |
|---|---|
| First | The Convention on the Recognition and Enforcement of Foreign Arbitral Awards — the New York Convention |
| Second | The Protocol on Arbitration Clauses |
| Third | The Convention on the Execution of Foreign Arbitral Awards |
| Fourth | Model fee for the arbitral tribunal |
| Fifth | Disclosures to be made by an arbitrator to ascertain independence or impartiality |
| Sixth | The form in which the Fifth Schedule disclosures are to be made |
| Seventh | Categories of relationship whose existence makes a person ineligible to be appointed as an arbitrator |
The Fifth and Seventh Schedules are the ones to read before agreeing an arbitrator. The Fifth requires disclosure; the Seventh is an absolute bar. A nominee who falls in the Seventh Schedule cannot be appointed however willing the parties are.
Seat and venue — the alternate dispute resolution distinction that decides cases
The handbook returns here to the point it flagged in the contract drafting chapter, and states it fully:
- "The 'Seat' of Arbitration is the 'situs' of arbitration. It takes care of the crucial law, the procedural law, and which courts shall exercise supervisory jurisdiction. For international arbitrations, the concept assumes much more importance, as it acts as an indicator for both curial law as well as supervisory jurisdiction."
- "The 'Venue' of an arbitration merely defines the geographical place where such arbitration is conducted and is not associated with the curial law and supervisory powers of the courts."
"Therefore, the Dispute Resolution Clause is drafted very carefully."
A clause reading "arbitration in Singapore" has not said whether Singapore is the seat — carrying Singaporean curial law and the supervisory jurisdiction of the Singapore courts — or merely the venue, a convenient location for hearings in an arbitration seated elsewhere.
The consequences that turn on it: which court hears a challenge to the award, which court grants interim relief, which procedural law governs the reference, and whether the award is domestic or foreign for enforcement purposes.
Litigating that preliminary question can take longer and cost more than the dispute the clause was written to resolve. In alternate dispute resolution drafting, one extra word — "seated at" — is the highest-value word in the contract.
The CISG, and why India stayed out
The United Nations Convention on Contracts for the International Sale of Goods, "also known as Vienna Convention, is a multilateral treaty set up in 1980. It provides a set of uniform rules governing the formation, validity and performance of contracts for the international sale of goods. As on date 97 countries have ratified this treaty."
India's position, as the handbook records it, rests on two arguments:
- Incompleteness. "India has been reluctant to sign this treaty, because it considers that the treaty is incomplete and not comprehensive. It does not take into consideration matters relating to validity of a contract, like fraud, illegality, or misrepresentation."
- Existing law suffices. "India is of the opinion that we have two well developed and established Acts: The Contract Act and Sale of Goods Act. Therefore, there is no need for a separate CISG."
The practical consequence for an exporter: an Indian sale contract is not governed by the CISG by default. Where the counterparty is in a ratifying state and the contract is silent on governing law, which law applies becomes a live question — one more reason the dispute resolution clause should also name the applicable law, as the contract drafting chapter requires.
Ad hoc and institutional alternate dispute resolution
"Arbitration is of two types, Ad hoc and Institutional. There are international institutions of repute for arbitration. These institutions have their own rules both for Mediation and Arbitration."
The handbook lists fourteen:
| ICC — International Chamber of Commerce | SIAC — Singapore International Arbitration Centre |
| PCA — Permanent Court of Arbitration | HKIAC — Hong Kong International Arbitration Centre |
| LCIA — London Court of International Arbitration | SCC — Stockholm Chamber of Commerce Arbitration Institute |
| ICDR — the international branch of the American Arbitration Association | SVAMC — Silicon Valley Arbitration & Mediation Centre |
| Mediate.com | AIAC — Asian International Arbitration Centre, Kuala Lumpur |
| Dubai International Arbitration Centre | SCAI — Swiss Chambers' Arbitration Institution |
| DIS — German Arbitration Institute | WIPO Arbitration Centre |
Choosing institutional over ad hoc buys administered appointment, a fee schedule and a rulebook — which is usually worth the administrative cost in a cross-border dispute where the parties will not agree on anything after the fact.
Drafting the alternate dispute resolution clause
Pulling the chapter together, an export dispute resolution clause should settle:
- Whether the process is multi-step — negotiation, then mediation, then arbitration;
- Mediation — institutional or ad hoc, online or in person, and what happens on failure;
- Arbitration — ad hoc or institutional, and under which rules;
- The seat, expressly described as the seat;
- The venue, if different, expressly described as the venue;
- The applicable law of the contract, given that the CISG does not apply by default to an Indian contract;
- Number and appointment of arbitrators, checked against the Seventh Schedule.
Those seven are the whole of alternate dispute resolution drafting for an export contract, and six of them are one line each.
Common mistakes
- Naming a city without saying "seat", leaving supervisory jurisdiction to be litigated.
- Relying on mediation alone against a foreign party when India has not ratified the Singapore Convention.
- Citing a part number of the 1996 Act from a secondary source rather than the Act.
- Assuming the CISG governs a contract with a counterparty in a ratifying state.
- Appointing an arbitrator without testing the Seventh Schedule ineligibility categories.
- Leaving the applicable law unstated alongside a carefully drafted arbitration clause.
Key Facts About Alternate Dispute Resolution
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
How does the Mediation Act, 2023 define mediation?
Section 2(h) defines it as a process which includes pre-litigation mediation, online mediation, community mediation, conciliation or an expression of similar import, whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person referred to as a mediator, who does not have the authority to impose a settlement upon the parties.
What are the takeaways from that definition?
It is broad and covers technological advances in the form of online mediation — online dispute resolution; parties can refer a dispute to mediation even where only an implied intent to mediate appears in the dispute resolution clause; and the conciliation provisions of the Arbitration and Conciliation Act, 1996 become redundant.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
Alternate Dispute Resolution: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.