Arbitration is an alternative dispute resolution mechanism where parties resolve disputes outside traditional courts through a neutral arbitrator. It is governed by the Arbitration and Conciliation Act, 1996. Arbitration is commonly used in commercial, contractual, and business disputes due to its flexibility and confidentiality. Parties agree to arbitration through a clause in their contract or a separate agreement. The arbitrator hears both sides, examines evidence, and delivers an arbitral award, which is legally binding. Arbitration proceedings are generally faster and less formal than court trials. Courts play a limited role, mainly in appointment of arbitrators and enforcement of awards. Arbitration promotes efficient dispute resolution while reducing judicial burden.