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Para 4.2 - Institutional Arbitration | KartavyaDesk

Goods Manual

Original Rule Text

4.4.2.Institutional Arbitration 1. Procuring entities are encouraged to use Institutional Arbitration of large value arbitration (say for claims more than Rs 5 Crore) on the line of, what has been legislated by the Government of Maharashtra. For this purpose, the Arbitration Clause should be modified to include this provision. 2. There are several recognised institutional arbitration centres in India that provide arbitration services under their own rules and procedures. Some of them are: a) India International Arbitration Centre (IIAC): It was created in 2019 by an Act of Parliament as an institution of national importance. It provides institutional arbitration services in India and abroad. b) Delhi International Arbitration Centre (DIAC): It was established in 2009 by the Delhi High Court and offers arbitration, mediation, and conciliation services. c) Mumbai Centre for International Arbitration (MCIA): It was launched in 2016 as a joint initiative of the Government of Maharashtra and the domestic and international business and legal communities. It aims to provide a world-class arbitration facility in India. d) Indian Council of Arbitration (ICA): It was founded in 1965 as a non-profit organisation under the aegis of the Federation of Indian Chambers of Commerce and Industry (FICCI). It administers both domestic and international arbitrations. e) Indian Institute of Arbitration & Mediation (IIAM): It was established in 2001 as an autonomous institution dedicated to the promotion and development of alternative dispute resolution (ADR) in India.

What This Means

Para 4.2 of the Manual for Procurement of Goods, 2017, encourages government departments to use 'Institutional Arbitration' for resolving disputes in large contracts, specifically those involving claims exceeding ₹5 Crore. Instead of relying solely on ad-hoc arbitration (where arbitrators are appointed specifically for each case), this rule suggests using established arbitration institutions. This is similar to the system already in place in Maharashtra. The goal is to make the dispute resolution process more efficient, transparent, and professional, leveraging the expertise and established procedures of these institutions.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •Encourages Institutional Arbitration for high-value claims (over ₹5 Crore).
  • •Aims for more efficient and transparent dispute resolution.
  • •Suggests modifying arbitration clauses in contracts to include this provision.
  • •Lists several recognized institutional arbitration centers in India.
  • •Draws inspiration from the arbitration system in Maharashtra.

Practical Example

The Ministry of Textiles is procuring specialized machinery worth ₹10 Crore from 'Textile Innovations Pvt. Ltd.' The contract includes an arbitration clause. Following Para 4.2, the Ministry amends the standard clause to specify that any dispute exceeding ₹5 Crore will be resolved through the Delhi International Arbitration Centre (DIAC). Later, a dispute arises regarding the machinery's performance, with Textile Innovations claiming ₹6 Crore in damages. Instead of appointing individual arbitrators, the case is referred to DIAC, which handles the arbitration according to its established rules and procedures, ensuring a fair and efficient resolution.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

What is Institutional Arbitration?▼
It's a process where disputes are resolved by established arbitration institutions, like IIAC or DIAC, following their own rules and procedures, rather than ad-hoc arbitrators.
Is using Institutional Arbitration mandatory under Para 4.2?▼
No, it is encouraged, not mandatory. The rule states that procuring entities are 'encouraged' to use it for large value arbitrations.
Which arbitration institution should we choose?▼
Para 4.2 lists several recognized institutions. The choice depends on factors like the nature of the dispute, the location of the parties, and the institution's expertise.
How do we modify the arbitration clause in our contracts?▼
The clause should be amended to clearly state that disputes exceeding ₹5 Crore will be referred to a specific institutional arbitration center, along with a reference to their rules and procedures.
What are the benefits of using Institutional Arbitration?▼
It offers several advantages, including access to experienced arbitrators, established rules and procedures, administrative support, and greater transparency and efficiency in the dispute resolution process.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Test Your Knowledge

Question 1 of 3

According to Para 4.4.2 of the Manual for Procurement of Goods, 2017, procuring entities are encouraged to utilize Institutional Arbitration for large value arbitration when the claim exceeds:

Related Rules

Para 9.4Manual for Procurement of Goods, 2024 - Para 9.4 - Chapter 9Para 9.5.5Manual for Procurement of Goods, 2024 - Para 9.5.5 - Chapter 9Para 1.8.2Manual for Procurement of Goods, 2024 - Para 1.8.2 - Chapter 1Para 2.2.2Manual for Procurement of Goods, 2024 - Para 2.2.2 - Chapter 2Para 2.2Manual for Procurement of Goods, 2024 - Para 2.2 - Chapter 2

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