In the dynamic world of business, disputes are almost inevitable — whether it’s a contractual disagreement, a commercial conflict, or a cross-border issue. When such disputes arise, the method you choose to resolve them can have a significant impact on your time, cost, confidentiality, and business continuity.
Two common methods of resolving disputes are Arbitration and Litigation.
In this blog, we will explore both and help you assess: Which one is better for your business?
What is Litigation?
Litigation is the traditional method of dispute resolution through the public court system. It involves a formal legal process governed by statutory procedures, such as the Civil Procedure Code (CPC), the Indian Evidence Act, and other applicable laws.
Key Features:
- Public court process
- Presided over by a judge
- Binding judgment with appeal rights
- Follows procedural law and timelines
What is Arbitration?
Arbitration is a private dispute resolution process in which the parties agree to submit their dispute to one or more arbitrators, whose decision (called an award) is legally binding.
Key Features:
- Private and confidential
- Parties choose arbitrator(s)
- Flexible procedure and timeline
- Binding and enforceable decision
Key Differences Between Arbitration and Litigation
| Factor | Arbitration | Litigation |
| Nature | Private & confidential | Public and open to scrutiny |
| Time | Generally faster | Often delayed due to backlog |
| Cost | High upfront costs (arbitrator fees, etc.) | Lower initial cost, but may extend over time |
| Flexibility | Flexible procedures, language, and venue | Strict legal procedures |
| Finality | Limited appeal rights | Multiple levels of appeal |
| Enforceability | Arbitral awards are enforceable under the Arbitration & Conciliation Act, 1996 | Enforced by court orders |
| Control over Process | Parties select arbitrators and rules | Judge is appointed by the court |
Legal Framework in India
Litigation:
- Governed by the Civil Procedure Code, 1908
- Appeals and reviews possible
- Time-consuming due to case backlog in Indian courts
Arbitration:
- Governed by the Arbitration and Conciliation Act, 1996
- India recognizes both domestic and international commercial arbitration
- Recent amendments aim to make arbitration more efficient and globally competitive
Which One Should Your Business Choose?
Choose Arbitration if:
- You want to keep disputes private
- You deal with cross-border contracts
- You want a quick and final resolution
- You prefer flexibility over rigid legal process
Choose Litigation if:
- You need judicial powers like interim relief or injunctions
- The cost of arbitration is unaffordable
- There’s a need to create legal precedent
- You are dealing with non-cooperative parties who may ignore arbitration
Confidentiality Matters
One major advantage of arbitration is confidentiality, which is especially important in high-stakes commercial disputes, IP conflicts, and employment matters. On the other hand, litigation proceedings are public — which might risk reputational damage.
Final Thoughts
There is no one-size-fits-all approach. The right method depends on:
- Nature of your business
- Type of disputes you expect
- Jurisdictional considerations
- Time and cost constraints
Many businesses today use a hybrid clause in contracts (known as “Arbitration with litigation support”) where urgent matters (like injunctions) go to court but the main dispute is referred to arbitration.
Need help drafting an effective arbitration clause or choosing the right dispute resolution strategy for your contracts?
Contact Narendra Madhu Associates – Your trusted legal partner for corporate and commercial law solutions.
