ALTERNATIVE DISPUTE RESOLUTION (ADR)

The desire for quick and affordable justice dispensation is universal. In present times, early resolution of a dispute not only saves valuable time and money of the parties to the dispute but also promotes the environment for enforcement of contract and ease of doing business. ADR is a spectrum of less costly and more expeditious alternatives to litigation, where a neutral party assists the disputing parties in reaching a resolution. ADR allows for more creative and collaborative solutions than that of traditional litigation. ADR gives parties in dispute the opportunity to work through disputed issues with the help of a neutral third party. It is generally faster and less expensive than going to court. Alternative Dispute Resolution mechanisms like arbitration, conciliation, mediation, etc. offer a better and timely solution for the resolution of a dispute. These ADR mechanisms are less adversarial and are capable of providing an amicable outcome in comparison to conventional methods of resolving disputes.

When used appropriately, ADR can:

• save a lot of time by allowing resolution in weeks or months, compared to court, which can take years
• save a lot of money, including fees for lawyers and experts, and work time lost
• put the parties in control (instead of their lawyers or the court) by giving them an opportunity to tell their side of the story and have a say in the final decision
• focus on the issues that are important to the people in dispute instead of just their legal rights and obligations
• help the people involved come up with flexible and creative options by exploring what each of them wants to achieve and why
• preserve relationships by helping people co-operate instead of creating one winner and one loser
• produce good results, for example settlement rates of up to 85 per cent
• reduce stress from court appearances, time and cost
• keep private disputes private – only people who are invited can attend an ADR session, unlike court, where the proceedings are usually on the public record and others, including the media, can attend
• lead to more flexible remedies than court, for example by making agreements that a court could not enforce or order (for example a change in the policy or practice of a business)
• be satisfying to the participants, who often report a high degree of satisfaction with ADR processes
• give more people access to justice, because people who cannot afford court or legal fees can still access a dispute resolution mechanism.

ADR must be used in a way that is appropriate and likely to lead to the best results for all parties. There are some things to take into account when considering whether to use ADR and which type is most appropriate for you:

• ADR may not be suitable for every dispute, for example, if the dispute involves a matter of public interest, it may be more appropriate to have a court judgment to set a precedent.
• Where a binding agreement is made (for example through negotiations or use of ADR), parties normally give up the right to go back to court about the same matter. Similarly, an award made at arbitration is generally binding and cannot appealed except in limited circumstances.
• Some agreements made at ADR may not be as easy to enforce as a court or tribunal order. In some cases, this can be addressed by having the terms of an agreement made into orders by consent by a court or tribunal. You can also get legal advice or further information about other ways of making ADR agreements and decisions binding.
• If ADR is not successful and you have to go to court in the end, trying ADR first might add to your legal costs. However, in general, ADR has very high rates of success.

ALTERNATIVE DISPUTE RESOLUTION (ADR) IN INDIA

The Government has been at the forefront of promoting Alternative Dispute Resolution Systems. The enabling legal framework for the resolution of disputes through Alternative Dispute Resolution (ADR) has been provided under Section 89, Civil Procedure Code, 1908. Section 89 recognizes Arbitration, Conciliation, Mediation, and Judicial Settlement including settlement through Lok Adalat. It provides for the court to refer a dispute for settlement by either of these modes, where it appears that there exist elements of a settlement, which may be acceptable to the parties.

ARBITRATION AND CONCILIATION ACT, 1996

In India, one of the most popular modes of ADR is arbitration, conducted as per the provisions of the Arbitration and Conciliation Act, 1996.

History of Arbitration in India

The first formal statute relating to the subject of arbitration in India was the Indian Arbitration Act, 1899, applicable only to Presidency towns of Madras, Bombay and Calcutta. Subsequently, after the Code of Civil Procedure, 1908 came into force, the Second Schedule of the said code provided for the recourse to arbitration. Subsequently, above laws laid down the comprehensive legislation relating to arbitration i.e. the Arbitration Act, 1940.

The said Act of 1940 was predominantly based on the English Arbitration Act of 1934 and was in force for the next more than half a century.The Act of 1940, dealt only with domestic arbitrations while the enforcement of foreign awards

was dealt with by the Arbitration (Protocol and Convention) Act, 1937 for Geneva Convention Awards and the Foreign Awards (Recognition and Enforcement) Act, 1961 for the New York Convention Awards.

Internationally, the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, 1985 was adopted on June 21st, 1985, containing 36 Articles. The model law was aimed at creating uniformity for arbitration-related statutes, enacted by the Member Countries. The UNCITRAL model law enabled the participating nations to consider the said law while /enacting Laws pertaining to domestic arbitration in order to have uniformity across various jurisdictions as far as arbitration is concerned.

Enactment of the Arbitration and Conciliation Act, 1996

Globalization and liberalisation of the Indian economy initiated after 1991 had created the ecosystem for facilitating the entry of foreign investments in India and there was a need to make comprehensive changes in domestic laws to make them at par with other countries. The foreign investors also were looking for the availability of a vibrant and steady alternate dispute resolution mechanism for having the contractual disputes resolved in a cost-effective manner.

However, the then-prevalent provisions of the Arbitration Act, 1940 were not commensurate to the expectations of the investors, who wanted a more settled and vibrant alternate dispute resolution mechanism.

Indian Parliament, based on the UNCITRAL Model Law on International Commercial Arbitration 1985 enacted the Arbitration and Conciliation Act, 1996 to make its law consonant and consistent with the position existing in the other jurisdictions as far as arbitration is concerned.

The Arbitration and Conciliation Act, 1996 came in force on 22.08.1996.

The key objectives of the Arbitration and Conciliation Act, 1996 were:

1. Reducing Court intervention
2. Providing for speedy disposal of the disputes.
3. Amicable, swift and cost-efficient settlement of disputes.
4. Ensuring that arbitration proceedings are conducted in a just, fair and effective manner.
5. Comprehensively dealing with international commercial arbitration and conciliation as well as domestic arbitration and conciliation.
6. Facilitating arbitrator to resort to mediation, conciliation, or other procedures during the arbitral proceedings to encourage settlement of disputes.
7. Provide that every arbitral award is enforced in the same manner as if it were a decree of the court.

Arbitration is a quasi-judicial proceeding, wherein the parties in dispute appoint an arbitrator by agreement to adjudicate the said dispute, and to that extent, it differs from court proceedings. The power and functions of the arbitral tribunal are statutorily regulated.

The Arbitration and Conciliation Act, of 1996 is divided into four parts. Part I which is titled “Arbitration”;

Part II which is titled “Enforcement of Certain Foreign Awards”;

Part III is titled “Conciliation” and Part IV is “Supplementary Provisions”.

Apart from these Parts, there are Seven Schedules to the Act.

Amendments to the Arbitration and Conciliation Act, 1996.

The Arbitration and Conciliation Act, 1996 has been amended in the years 2015 and 2019, to enable the conduct of arbitration proceedings in India, to be time-bound, efficacious, and amenable to further litigation only on limited grounds.

The significant amendments include:

Grounds for challenge to arbitrators have been detailed out and specified as per prevalent international standards, to uphold independence and impartiality of arbitrators.

Statutory framework provided for time bound completion of arbitration proceedings. Interim orders that can be passed by the courts or arbitral tribunals, as the case may be, relating to arbitral proceedings have been detailed out to enable protection of the value of the subject matter of dispute during the pendency of the arbitration proceedings.

The grounds for challenge to arbitral awards are clarified to convey that the scope of the challenge is intended to be limited. This would enable finality to arbitral awards. The provision of automatic stay on the enforcement of arbitral awards, as soon as an application for setting aside an arbitral award has been done away with, and a provision included that a stay on the enforcement of an arbitral award may be granted upon imposition of certain conditions including deposit in case of monetary awards.

Proposed for establishment of Arbitration Council of India (ACI) for grading of arbitral institutes in the country.

Enactment of India International Arbitration Centre Act, 2019

The India International Arbitration Centre Act, 2019 provides for the establishment of an institution of national importance, namely the India International Arbitration Centre for creating an independent and autonomous regime for institutional arbitration. It is proposed to develop the Centre as a preferred seat for domestic and international commercial arbitration.

The India International Arbitration Centre shall, inter alia, provide facilities and administrative assistance for conciliation, mediation, and arbitral proceedings, maintaining panels of accredited arbitrators, conciliators, and mediators, both at the National and International levels or specialists such as surveyors and investigators; provide facilities and administrative assistance for conciliation,

mediation and arbitral proceedings; promote research and study, providing teaching and training, and organizing conferences and seminars in arbitration, conciliation, mediation and other alternative dispute resolution matters. The Chairperson and Part-time Members of the Centre have been appointed.

CONCILIATION

Conciliation is a less formal form of arbitration. This process does not require the existence of any prior agreement. Any party can request the other party to appoint a conciliator. One conciliator is preferred but two or three are also allowed. In the case of multiple conciliators, all must act jointly. If a party rejects an offer to conciliate, there can be no conciliation.

Parties may submit statements to the conciliator describing the general nature of the dispute and the points at issue. Each party sends a copy of the statement to the other. The conciliator may request further details, may ask to meet the parties, or communicate with the parties orally or in writing. Parties may even submit suggestions for the settlement of the dispute to the conciliator.

When it appears to the conciliator that elements of settlement exist, he may draw up the terms of the settlement and send it to the parties for their acceptance. If both parties sign the settlement document, it shall be final and binding.

This process is similar to the US practice of mediation. However, in India, mediation is different from conciliation and is a completely informal type of ADR mechanism.

LOK ADALAT

Etymologically, Lok Adalat means “people’s court”. India has had a long history of resolving disputes through the mediation of village elders. The current system of Lok Adalats is an improvement on that and is based on Gandhian principles. This is a non-adversarial system, whereby mock courts (called Lok Adalats) are held by the State Authority, District Authority, Supreme Court Legal Services Committee, High Court Legal Services Committee, or Taluk Legal Services Committee, periodically for exercising such jurisdiction as they think fit. These are usually presided by a retired judge, social activists, or members of the legal profession. It does not have jurisdiction on matters related to non-compoundable offences.

While in regular suits, the plaintiff is required to pay the prescribed court fee, in Lok Adalat, there is no court fee and no rigid procedural requirement (i.e. no need to follow the process given by [Indian] Civil Procedure Code or Indian Evidence Act), which makes the process very fast. Parties can directly interact with the judge, which is not possible in regular courts.

Cases that are pending in regular courts can be transferred to a Lok Adalat if both parties agree. A case can also be transferred to a Lok Adalat if one party applies to the court and the court sees some chance of settlement after giving an opportunity of being heard to the other party.

The focus in Lok Adalats is on compromise. When no compromise is reached, the matter goes back to the court. However, if a compromise is reached, an award is made and is binding on the parties. It is enforced as a decree of a civil court. An important aspect is that the award is final and cannot be appealed, not even under Article 226 of the Constitution of India [which empowers the litigants to file Writ Petition before High Courts] because it is a judgement by consent.

All proceedings of a Lok Adalat are deemed to be judicial proceedings and every Lok Adalat is deemed to be a Civil Court.

MEDIATION ACT 2023

Medication is another mode of ADR that is more informal and facilitates negotiations between the disputant parties, culminating in a settlement. Thus, mediation, in contrast to arbitration helps people and businesses in conflict to preserve their relationships, as the settlement arrived at in the process is on a voluntary and consensual basis.

The objective of the Mediation Act is ‘to promote and facilitate mediation, especially institutional mediation, for resolution of disputes, commercial or otherwise, enforce mediated settlement agreements, provide for a body for the registration of mediators, to encourage community mediation and to make online mediation as acceptable and cost-effective process and for matters connected therewith or incidental thereto’.

The Mediation Act has been introduced with the primary goal of establishing mediation as a recognized and acceptable mode of alternate dispute resolution and granting validity to the settlements arrived thereunder, irrespective of its nature – domestic or involving foreign parties, however, conducted in India. The key features of the Mediation Act include:

• voluntary option to parties to mediate any civil and commercial disputes before instituting any legal proceedings in court whether or not any mediation agreement exists; 
• setting out requirements of a mediation agreement, i.e., mediation agreement must be in writing, by or between parties and anyone claiming through them, to submit to mediation all or certain past, present or future disputes;

• a provision for the parties to seek interim relief in exceptional circumstances from a court or tribunal having competent jurisdiction before the commencement of, or during the continuation of the mediation proceedings;

• upholding party autonomy and giving a right to the parties to appoint a mediator and determine the procedure of appointment, qualifications, experience, and accreditation;

• allowing parties to approach a mediation service provider for appointment of the mediator, within a stipulated timeframe of seven days;

• framework to prevent conflict of interest, providing for disclosure requirements and obligating the mediator to be independent, neutral, and impartial;

• every mediation to be undertaken within the territorial jurisdiction of the court or tribunal of competent jurisdiction to decide the subject matter of the dispute, except in cases where parties mutually agree to conduct the mediation at any place outside of the territorial jurisdiction or online; 

• setting up a Mediation Council of India with functions such as registration of mediators, training and certifying mediators, and setting out standards of professional and ethical conduct of mediators;

• list of disputes that are excluded from mediation such as disputes involving criminal prosecution, serious allegations of fraud, rights of third parties, land acquisition, and proceedings before the Securities and Exchange Board of India, and the Securities Appellate Tribunal, under the Securities and Exchange Board of India Act, 1992; 

• upper time limit of 180 days for concluding the mediation proceedings;

• treating mediation agreements as final, binding, and enforceable in the same manner as a court decree; 

• limiting the grounds of challenge to a mediation agreement to fraud, corruption, impersonation, and where the mediation was conducted in disputes not fit for mediation;

• provision for community mediation that may be attempted to settle disputes likely to impact peace and harmony amongst residents of a community; (ix) obligation to maintain confidentiality; and lastly

• extending the application to international mediations (where one party is a foreign party) conducted in India, amongst several others.   

As a starting point, once the Mediation Council of India is constituted, proactive steps need to be undertaken to promote mediation. This includes the largest litigator in India, i.e., government/ public sector undertakings to include mandatory mediation in their contracts; having multi-tier dispute resolution clauses, collaborating with the business community, corporates, and in-house counsels to spread awareness; cutting through all medium and small cities in India which are business-centric and promote mediation within the micro, small and medium enterprises; and demonstrate the effectiveness of mediation with empirical data and share practical examples of success stories. The Mediation Act is a step in the right direction. It will break the unwavering perception of the business community on mediation and foster confidence to include institutional mediation in dispute resolution clauses. 

CONCLUSION

The origins of ADR methods can be traced back to establishing arbitration rules, which have evolved significantly over time. Other ADR processes began to knock on the door of the Indian Parliament throughout time, and the Parliament was wise enough to include these new dispute settlement approaches. The Commercial Courts Act of 2015 and the Micro, Small, and Medium Enterprises Development Act of 2006, for example, ensure that these procedures are employed on a case-by-case basis in specific industries. The present-day Indian government is taking additional steps to develop ADR processes, intending to make India a global destination for arbitration and other forms of conflict settlement. ADR process empowers parties to resolve disputes efficiently, collaboratively, and with potentially significant cost savings. Choosing the right ADR approach depends on the specific circumstances of the dispute and the parties’ preferences, ultimately promoting fair and effective conflict resolution.